Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Newmark.)
I am grateful for the opportunity to hold this debate because, over the recess, a number of studies and reports have emerged that have analysed and cast doubt on some of the central claims of the coalition Government in respect of the impact of the Budget and the differential impact that the comprehensive spending review will have on the lowest-income households. All claims about the June Budget being progressive are now being dismantled, and the theme that the pain will be shared is proving to be clearly inaccurate. The refrain has been “We’re all in this together,” and that has been explicitly stated by the Chancellor of the Exchequer. The claim that the measures in the June Budget are progressive has been widely echoed by Government Members, yet that is clearly not the case. In challenging that assertion and asking further questions of the Minister, I am hoping that the Government will, even at this late stage, see sense and acknowledge the dangers that are implicit in a number of their proposals.
I will draw heavily on the analysis carried out by Institute of Fiscal Studies, which has been challenged by defensive Ministers, and I look forward to hearing what the Minister has to say this morning. It would be wise for Ministers not to rubbish the IFS conclusions too rapidly, not least because they extensively used such research when they were in opposition. When the Chancellor was in opposition, he did not hesitate to summon IFS statistics to his aid when he was participating in pre-election economy debates, and the Conservative party policy document, “Labour’s Two Nations”, published in 2010, favourably quoted IFS research in its attack on Labour’s record on poverty, so what is sauce for the goose must surely be sauce for the gander.
Before talking a little about the content of the IFS critique of Government policy, I want to spend a moment or two challenging the two myths that are repeated so frequently: that Labour’s record on inequality was a failure and demonstrated the inability of the Labour Government to put forward progressive measures; and that the Labour Government failed to tackle the reform agenda, and particularly welfare reform.
On that latter assertion, I am sure that the hon. Lady has avidly read the books of Lord Mandelson and the erstwhile Prime Minister, Tony Blair; it is fair to point out that both would stand up and say that the reform agenda did not go through in the way in which they envisaged, and that there was insufficient planning in the run-up to May 1997 to enable them to succeed in making the reforms to the welfare system that were required. I am not suggesting for one minute that such decisions are easy. I am sure that the coalition Government will face some significant problems in the years to come, despite the quite significant long-term planning that took place in the run-up to 201. That planning is in great contrast to what happened when there was an incoming Labour Government 13 years ago.
I am grateful to the hon. Gentleman for his comments. I will not shy away from it: there was internal debate within the Labour party, both in the run-up to 1997 and subsequently, on what reform agenda was needed and how it would be carried forward. As can be traced through numerous speeches in Parliament and elsewhere, I was not always in agreement with the priorities of either Tony Blair or Peter Mandelson. It is historically inaccurate to claim that the welfare state was not subject to significant reform throughout the 13-year period. One of the earliest, and fairly controversial, proposals was on incapacity benefits; it was voted on in 1998. The first clash that took place after the 1997 Government were elected was over lone-parent benefits. Housing benefit was subject to a number of changes. My hon. Friend the Member for Bishop Auckland (Helen Goodman), who was a Minister at the time, will confirm that I beat a path to her door to exercise my concerns about what the Labour Government were proposing on housing benefit reforms, which I felt then and feel now were wrong, but which have been picked up on and exaggerated by the Government.
On the more positive side, the whole tax credits agenda was clearly designed and had an impact on work incentives. The idea that there was no reform agenda is complete nonsense. The reason why welfare reform, particularly in relation to work incentives, has not satisfied the incoming Government is that it is extremely difficult to achieve reform that both makes it easier to work and does not increase poverty. Clearly the new Government have come down on one side of that equation. The simple facts are that inequality soared under previous Conservative Governments. As measured by the Gini coefficient—I do not think that we can argue against this—there was a very sharp upward curve on inequality throughout the mid to late 1980s; it levelled off a little during the 1990s. During the first two terms of the Labour Government, real progress was made on turning the curve down again. Levels of inequality flattened out and then turned up again in the last term of the Labour Government, not least—but not solely—because of the impact of the financial crisis.
In its pre-election briefing, the IFS said:
“The tax and benefit measures implemented by Labour since 1997 have increased the incomes of poorer households and reduced those of richer ones, largely halting the rapid rise in income inequality we saw under the Conservatives.”
I will not make a similar error to that being made by the Conservatives. I will not say that absolutely everything that the Labour Government did was perfect, and that they achieved every single goal and target that they set for themselves, whether on child poverty or on reducing income inequality; they did not. However, it is also nonsense to use the hon. Gentleman’s line to make the case that the Labour Government’s investments, whether in employment growth or in tax and benefit changes, did not slow down and flatten out the rapid rise in inequality that took place throughout the 1980s and into the 1990s. That would be to claim that all the investment in tax credits, increased child benefit and the national child care strategy failed, and it absolutely, clearly and demonstrably did not.
Does this exchange not sum up the big problem in trying to assess equality or inequality? The question is whether we consider the matter in an absolute or in a relative sense. As we represent neighbouring constituencies, the hon. Lady will know that one of the effects of globalisation and the huge wealth that has come from the financial services industry in Britain over the past 20 years is that relative inequality has increased. The huge wealth of certain people in our constituencies—whether in St John’s Wood, Mayfair or Belgravia—is clear. That is not to get away from the idea that some progress was made under her Government, and I am sure that the same will be true under the coalition Government. The most vulnerable will be looked after and we will ensure that absolute levels of inequality are at the forefront of our minds.
I am not sure whether it is possible to have an absolute measure of inequality. Inequality is, almost by definition, a relative indicator. I am glad that the hon. Gentleman accepts the fact that we made progress in levelling out soaring inequality. Interestingly—he makes this point—we are talking about a global context of widening inequalities.
We are in a highly globalised economy, with fabulous increases in wealth and income at the top levels; that is very well demonstrated in the City of London in the hon. Gentleman’s constituency. The fact that, even against that backdrop, the Labour Government were able to level out inequality, broadly, after the soaring increase in inequality that we saw in the 1980s, was an extraordinary achievement. Then, on top of that achievement—as he rightly says, there is a difference between relative inequality and poverty—the Labour Government were also able to make real progress, particularly in their first two and a half terms in office, in tackling child poverty, and even more progress in tackling pensioner poverty.
However, the Labour Government’s record is not faultless, by any stretch of the imagination, and I am not here to claim that it is. Nevertheless, that does not make it any better for the coalition Government falsely to claim that there was no reform agenda, falsely to exaggerate the impact on levels of inequality between 1997 and 2010, or inaccurately to compare Labour’s record with that of previous Governments before coming out with a set of proposals that are absolutely guaranteed to make the situation dramatically worse.
Clearly, that set of proposals by the Government is the central point of this debate, because the claims that the Budget of June 2010 was progressive have been completely demolished by the IFS, and that was even before last week’s announcement that an additional £4 billion will be cut from the welfare budget. As the IFS states:
“researchers have previously cast doubt on this claim”—
the claim that the June Budget was progressive—
“noting that the main measures which will lead to losses amongst better-off households were announced by the previous government”.
They were announced by Labour, but they have subsequently been rolled into the coalition Government’s claims. The IFS says that new research that it published two weeks ago shows that the changes
are clearly regressive as, on average, they hit the poorest households more…in cash, let alone percentage, terms”.
Those who lose the least are households of working age without children in the upper half of income distribution; those who lose most are low-income households, usually with children.
I will quickly outline the key measures that will have that impact: the move to update benefits and tax credits by the consumer prices index instead of basing inflation rates on the retail prices index; a reduction in Government spending of £5.8 billion a year by 2014; cuts in the value of housing benefit for some, which will amount to a reduction of £1.8 billion a year; cuts to tax credits for low-income families—something that was flatly and explicitly denied by the Chancellor when he was the shadow Chancellor and other coalition politicians before June, and certainly before the election—and the rise in the tax threshold, which will be of little benefit to low-income families in rented accommodation, as the extra net income will result in reduced housing benefit. Those are just some of the cuts; there are many more specific cuts that will apply particularly to the poorest.
Given the criticism that was aimed at the Labour Government’s policies as they affected work incentives, it is worth reminding ourselves that, extraordinarily, the June Budget increased rather than decreased the proportion of earners facing high marginal levels of deduction. That is one of the most extraordinary and hypocritical things that has emerged from the coalition Government since May. The more aggressive mean-testing of tax credits will raise the marginal rates of deduction for all recipients with incomes above £6,420. The number of people affected by MRDs above 70% will increase from 700,000 to 2.2 million. How on earth can Ministers look themselves in the face, having said so much about the Labour Government’s failure to improve work incentives for two-income households—if not for single-parent households—and then having allowed this change to happen?
Furthermore, despite the massive investment in tax credits and other in-work benefits that the Labour Government made, we should reflect on the fact that yesterday’s report by the Institute for Public Policy Research is just the latest to confirm a large and growing problem of in-work poverty. Wage levels, sometimes—but not always—in conjunction with a sufficiency of working hours, are simply not able to carry the burden of the idea that work is always the best route out of poverty. Without improvements in pay—such improvements are my preferred strategy—and without extra work potential and even better in-work benefits, this situation will not improve and indeed may worsen.
Worryingly, that was also confirmed by an Office for Budget Responsibility document that looked at the prospects for economic recovery. That document stated that, in the view of the OBR, one of the ways that business will reduce its costs as it enters recovery will be not by shedding more jobs—in itself, that is good news—but by maintaining a downward pressure on hourly rates of pay. So, unless we do something about the way that work incentives are supported through tax credits and benefits, we are likely to see even more in-work poverty. Of course, that not only is bad in itself, because it traps people in poverty, but sends out a message that is precisely the opposite of what everybody from all parts of the House claims to support—a message that we in Labour genuinely believe in. That is the message that we do not want worklessness and that we want people to enter employment. However, that work must be made to pay.
I am sure that others will want to talk about the specific tax and benefit changes announced by the Government, and I will not go into great detail about all of those changes. However, I want to say a little more about the issues of employment support allowance and incapacity benefit. After the June Budget, cuts of £4 billion, including the £2.5 billion cuts from ESA, were bounced on to the Department for Work and Pensions last week; that was something of a surprise, not least to the Department. Yesterday, following the statement made by the hon. Member for Colchester (Bob Russell), my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Secretary of State for Work and Pensions, sought clarification on whether the savings will affect only those people whom the Government have already assessed through the work capability assessment and found not fit for work. She was unable to get an answer from Ministers yesterday, and I wonder if the Minister who is here today can confirm where those proposed savings of £2.5 billion are coming from.
Will there be a reduction in benefit for people who have already been assessed and who have failed the work capability assessment? Can the Minister also confirm that the £2.5 billion of savings come on top of savings already built into Treasury plans, based on the anticipated results of work capability assessments? About two thirds of people who have already been tested have been found fit to work. In addition, can she confirm that, if these cuts are made uniformly, each claimant will lose an average of about £1,000 a year?
Furthermore, has the Minister had a chance to reflect on the report by the Public Accounts Committee yesterday that showed that private providers of the work directions programme have managed to reach only about a third of their targets in placing people in work? That casts real doubt on the validity of a further aggressive reduction in the provision made for people who are classified as long-term sick or disabled and their ability to enter employment.
The Minister will also not be surprised to know that one of my deepest concerns has been about housing benefit. Since the recess, new research from Shelter, for example, shows that the cuts in local housing allowance will cause a huge surge in homelessness. It is estimated that well in excess of 100,000 people are unable to negotiate cheaper rents, and they will either be evicted or forced to move. Providing temporary accommodation for all of those people is likely to cost the Government up to £120 million, cancelling out—as a minimum—a fifth of the savings that the Government are hoping to achieve. Has the Department for Work and Pensions, in partnership with the Department for Communities and Local Government, been able so far to carry out a proper analysis of what the impact on homelessness will be of the cuts in the LHA?
In relation to housing benefit cuts and non-dependant deductions, can the Minister confirm that the unfreezing of non-dependant deductions also applies to council tax benefit? That would affect many low-income home owners and many pensioners. Has her Department carried out an analysis of the breakdown by age group and tenure of the number of people who will be affected by the unfreezing of non-dependant deductions and, if so, what is the average saving per household of that measure?
I could spend a great deal more time working through a number of these specific proposals and setting out the harshness of their impact on low-income groups, but I will let others speak. I will just finish with a couple of sentences on the issue of public services and how they represent benefits in kind. Although I have been focusing primarily on the June Budget, the CSR is likely to have exactly the same differential impact on low-income groups, particularly with its focus on reductions in public services.
The annual analysis by the Office for National Statistics, entitled “The effects of taxes and benefits on household incomes”, provides a vitally important piece of analysis, looking at the value of different services by quintile groups. The value of spending on health, education, transport, housing and school meals is not evenly distributed across income groups but, with the exception of transport expenditure, disproportionately benefits poorer households. Again, housing investment is especially pro-poor, benefiting the bottom quintile 15 times more than the top. A 25% reduction in the housing budget will add 300,000 people to housing waiting lists; a 40% reduction will add 500,000.
I am sure that the Minister will know from her constituency work—although the problem is not, I suspect, on the scale of that in my constituency and that of the hon. Member for Cities of London and Westminster (Mr Field)—what it is like to have constituents who are trapped in grossly overcrowded, substandard or temporary accommodation and who are unable to work due to high rents. They may be trapped at home in extremely difficult circumstances. The average age at which a young person in London will be able to afford their first home is now estimated to be 52. If we deliberately cut investment in housing, not only will it make the situation worse; as the Office for National Statistics clearly confirms, it will affect the poorest disproportionately. According to the ONS analysis of benefits in kind, when all services are taken together, the bottom quintile receives 13 times more benefit than the top. An across-the-board reduction in service expenditure of 25% will therefore, by definition, disproportionately affect poorer households. That fact has not been teased out at all in discussions of the coalition’s Budget.
The analysis by the Institute for Fiscal Studies, increasingly supplemented by work by Shelter, Citizens Advice, the TUC and many others, has driven a stake through the heart of Government claims that the coalition’s tax and spending plans are fair or progressive. In fact, they will sharply increase inequality, weaken incentives to work, cause widespread misery and hardship and almost certainly increase pressure on non-discretionary expenditure such as that on homelessness. On 17 June, the Deputy Prime Minister said:
“it makes no moral sense to abandon poorer children along the way”,
yet that is exactly what has happened. Unless the Government change course between now and the comprehensive spending review, both poverty and inequality in this country are likely to escalate.
I congratulate my constituency neighbour, the hon. Member for Westminster North (Ms Buck), on obtaining this important debate. I hope hon. Members will forgive me if I discuss issues affecting central London specifically and some of the alleviation that will take place in our local authority area. The hon. Lady is absolutely right to identify the key problem of in-work poverty. We often think of low-income households as consisting of people who are simply out of work, but in-work poverty is an important issue.
There are a range of issues that have not been dealt with over the past 20 years. Perhaps we can achieve little on some of them, such as the impact of unregulated immigration, over which we, as members of the European Union, have no control. I am not making an anti-European statement; that is simply a fact. There is no doubt that with the growth of the EU, immigration levels over the past six years have played an important part in driving down wages. Employers have perhaps been somewhat irresponsible in taking advantage of that, but it has and will continue to have a significant impact on welfare.
Understandably, the hon. Lady prayed in aid the high-profile report by the Institute for Fiscal Studies on the Budget, and its concerns about what will happen on 20 October. It is fair at least to argue that the outgoing Labour Government made it clear that they too would have had to do a lot to sort out the deficit. The erstwhile Chancellor of the Exchequer stated that their own Budget would have included £40 billion in cuts. None of those was specified, so it is slightly unfair for the hon. Lady to be accusatory, as she has not analysed where Labour’s cuts would have come into play and what impact they would have had on the lowest-income households.
I remind the hon. Gentleman of what I said in my comments. The IFS analysis says that the more progressive elements of the changes to tax and benefits, which the coalition Government now claim will balance out their other changes, were in fact among those proposed by the previous Chancellor of the Exchequer. The less progressive changes, which will hit lower-income groups disproportionately, are the ones introduced in the June Budget.
That is a fair point. To be absolutely honest, the core problem that we all face is a lack of any explicit mandate for anything that is being done on the issue. For we Conservative Members who have been warning about the deficit and levels of public debt for many years, at a time when conventional wisdom was that we would stick to the outgoing Government’s spending plans, that is obviously a matter of some concern.
During the run-up to the general election, a spurious debate took place in which all parties danced on the head of a pin. Apparently, the necessity for £6 billion in cuts was a matter of Armageddon on one hand or sunlit uplands on the other. As the political class, we all took a decision to keep the electorate away from some of the harsh choices that would have been inevitable whoever won the election. That lack of an explicit mandate will cause difficulties in making the necessary case for deficit reduction, a case that I have discussed many times in the House. It is of great importance that we reduce the deficit as responsibly and as early as possible, not just to impress the money markets.
I feel strongly that we will now face intergenerational conflict. Almost uniquely outside wartime, the children of the present middle-aged generation—I see several 40 and 50-somethings here—will have a less good financial situation than the one that we have taken for granted. In many ways, that is a terrible indictment of the debts that we are building up, and it is one reason why we need to reduce those debts. It will make this country a more acceptable place for our children to live in.
The hon. Lady and I both have sons. I worry for my son when he comes to adulthood at 20. I hope he will have the education and skills to make him a globally mobile citizen. He and many of the brightest and best of our young men and women may choose to vote with their feet. I fear that we are already seeing an element of that, given the huge levels of unemployment among our graduate population, many of whom have globally mobile skills that they may well use to go elsewhere. I took for granted the opportunities that were available to me when I left university in the 1980s. We need to bring back those opportunities as quickly as possible. Reducing the deficit and ensuring that debt is kept to a minimum will provide a level playing field for future generations.
I appreciate that others want to speak. I will say a bit about some things that are happening in central London specifically. Due to the grave financial situation inherited by the coalition Government, all of us, whether in business, in households or in local and national Government are, understandably, being forced to tighten our purse strings. My local authority, Westminster city council, is no exception. One clear priority in Westminster is the most vulnerable in our community. Hopefully, that is a benefit of having two Members of Parliament for Westminster, one on each side of the political divide, to make the case.
It is easy to characterise my constituency in particular as extremely wealthy. The hon. Member for Stretford and Urmston (Kate Green), whom I have not had a chance to meet, is an erstwhile constituent of mine, and indeed a former candidate for the Barbican in 1997. She will recognise that although the Cities of London and Westminster contain pockets of incredible wealth, there is a lot of poverty not far from the surface. An important part of my job has always been to provide a voice for the most vulnerable in my community.
I will come to that later. One issue facing us in central London is that—without wanting to be unkind about it—it will cease to be our problem. Many of those people will leave central London and end up being rehoused elsewhere, potentially in communities a long way from where they were brought up, where housing is relatively cheap but they have no connection. That is a problem we need to deal with.
I have historically had a concern that too much social housing, particularly in central London, has tended to be clogged up with people who are perhaps in long-term unemployment or who have chaotic lifestyles. There inevitably needs to be some sort of balance. As the hon. Lady says, the interests of some of the most vulnerable and voiceless people need to be properly looked after.
In Westminster, we have an innovative scheme called the family recovery programme, which provides a form of intensive intervention. That programme tries to assign resources to specific families with a track record of causing problems within the community. In 2008, Westminster council identified a small number of families with complex and entrenched social problems, who were responsible for the vast majority of the antisocial behaviour in Westminster. The social impact on the neighbourhoods in which those families were located was immeasurable. I think all hon. Members know that it takes only one or two problem families on an estate to ruin the quality of life for all who live there.
The kind of engagement that the family recovery programme has been involved in includes appointing a specific team to work with individual family members on a one-to-one basis. Such a programme is not inexpensive, but Westminster’s commitment to its family recovery programme has been unswerving and in the two years that it has been in operation the results have been encouraging. The proportion of families who remain unregistered with a local GP has fallen by more than two thirds and more than 80% of children for whom truancy had been an issue have increased their school attendance. In a study of families where crime and disorder was a major concern, the number of offences of which they were accused decreased by 69% in the 12 months following a family recovery programme engagement. The average number of suspected offences per month fell from nine in the previous year to roughly one and a half. Importantly, a survey of 100 of the families’ neighbours found that two thirds were either satisfied or very satisfied with the response from both the police and the council.
A housing renewal programme is also in place, which is integral to the city council’s plans to support households currently in employment in Westminster that are on low incomes. The strategy outlines the city council’s commitment to health and well-being. Its objectives are to increase the amount of housing, particularly family housing. Much of both the social and private housing that is being developed tends to be very small, caters for two adults and often has no more than two bedrooms.
We need more affordable homes for local workers and we need to increase the range of tenure types to help residents who wish to get on the housing ladder to do so. The hon. Lady made the stark reality of the situation very clear when she said that, without relying on help from family members, the average age at which someone gets on the housing ladder is 52. That is a pretty depressing statistic. One appreciates that in central London we are part of a global housing market. However, affordable housing is not just a central London issue; it is a problem in suburban areas and I am sure in the Solihulls and Colchesters of this world. Only a generation ago, the average person in their mid-20s could get on the housing ladder, but that is now an absolute impossibility, unless they work in a highly remunerated business. In addition, through CityWest Homes—the city council’s arm’s length management organisation for housing—the city council is committed to building some 500 new homes across our existing estates over the next four to five years. The majority of those will be available for social housing.
Returning to the housing benefit issue that the hon. Member for Colchester (Bob Russell) mentioned, we are still awaiting full details of the cap and we do not know quite how it will operate. I hope the Minister will give us a bit more detail on that, although I appreciate that she and her Department have a very busy work load that they are still working on in the run-up to 20 October. It would be helpful if we could get some indication of the cap, particularly for those authorities whose housing benefit profile means that there is likely to be a significant shift as a result of Government policy.
I know that my city council is lobbying for a significant proportion of the additional money that was announced in the emergency budget to help manage out the existing system. As part of that, a policy will be developed to clarify whom the city council will prioritise for help. Although the details will depend on the nature of the discretionary award, it is likely to focus particularly on low-income households, pensioners and, of course, disabled residents.
Local housing allowance residents will also be written to shortly to advise them of a change to the system. Obviously, in many ways, the uncertainty is the most difficult element of the situation. We have all had letters—the hon. Lady has probably had more than I have—from constituents who are worried sick about the potential changes. That has perhaps not been helped by one or two of the scare stories being put around. However, those people are legitimately worried about where their medium and long-term future will lie. I hope we will be given some concrete details as quickly as possible, so that, as I said, we can ensure that the most vulnerable in our communities are properly looked after.
I want briefly to touch on a local matter on which I have worked with the right hon. Member for Holborn and St Pancras (Frank Dobson) and the hon. Members for Islington South and Finsbury (Emily Thornberry) and for Lewisham East (Heidi Alexander). That issue is the Crown Estate’s announcement of its intention to sell properties on the Millbank estate. With Westminster city council, I have been lobbying through the Greater London authority and independently to try to ensure that we keep the key worker nominations that are on those estates. Fewer than 1% of properties in central London are currently available at intermediate rent, so it is essential that properties such as those provided by the Crown Estate remain available at their current level of subsidy. Although Westminster city council remains concerned about the sales, given that the Crown Estate has been proven a successful landlord over many decades, guarantees have been received that the intermediate rent properties will remain available at their current rate in perpetuity and that there will be no reduction in the number of intermediate rental properties.
I could say much more, but I appreciate that other hon. Members want to have their say on the matter. Such issues will be high profile for us all and I accept that the nature of representative—and perhaps argumentative—politics means that they will be utilised by the Opposition to try to make political capital with both coalition parties. As someone who feels strongly about the most vulnerable, who need a voice and must be looked after in our communities, it is important to me in my role as an inner-London Member of Parliament who feels passionately about such matters to do all I can.
These are not simple issues. Clearly, we all have to face the fact that there is a huge deficit, which we need to address for the reasons that I set out in my earlier comments. As a matter of equity for the entirety of our communities—particularly the young—we need to do so with some haste. However, it is also of great importance that the most vulnerable are looked after. I am very worried—as the hon. Member for Westminster North is—about those in work ending up in poverty. It is understood that the workless will have some poverty issues, which are equally important and must be dealt with, but we all have a great concern about the people in our communities who work extremely long hours—they often have two or three jobs—to try to make ends meet. The voice of such people is often ignored and they are often regarded in the national context as not being such high priority welfare cases. However, those cases are very close to our hearts and we will do our best to represent those interests both in the House and at local government level in the years to come.
I congratulate my hon. Friend the Member for Westminster North (Ms Buck) on securing an important debate, which has been constructive and thoughtful thus far. From the long dealings I had with the Minister before I became a Member of Parliament, I know that she will want to think about the concerns that my hon. Friends and I have raised this morning. She will want the Government’s policies to be as effective and constructive as they possibly can be in meeting the needs of the poorest and most disadvantaged in society.
I shall focus on a number of the Government’s announcements so far where there seem to be a set of policies that work against the Government’s own objectives. A number of policies reveal contradictions, inconsistencies or discrepancies between what Ministers say they want to achieve and what their policies are likely to do. I highlight, in particular, Ministers’ objectives of increasing employment, simplifying the benefits system and making work pay.
The coalition Government have repeatedly, and I think unjustly, criticised Labour’s record on reducing poverty and inequality, but they have indicated none the less that they intend to do better and reduce poverty and inequality further. Ministers have emphasised that they are keen to encourage responsibility and self-reliance by encouraging people to save for the future and addressing problems associated with high levels of personal debt. They have talked about their wish to strengthen families and communities and build a big society, and many of us are trying to understand the details of some of that.
Those objectives have much to commend them. Indeed, they are similar to the objectives that Labour sought to promote when in government. However, many of the policies that have been announced so far are likely to take matters in the opposite direction. I am keen to give the Minister an opportunity to respond to those concerns and indicate where there might be some scope for Ministers to think again. I believe that the raft of changes to benefits and tax credits that have been announced so far will make the poorest worse off and will not meet Ministers’ goals.
Let us look at one of the most significant changes, the decision to link the future operation of benefits to the consumer prices index, which I believe will increase relative income poverty, particularly in a time of rising unemployment. Ministers are keen to emphasise their long-term vision of reduced unemployment as more people move into work in the private sector, but not all their ambition is supported by the projections of bodies such as the Chartered Institute of Personnel and Development and the TUC. Therefore, it is important that we accept, while seeking to promote increased employment, that a substantial number of people will be dependent for at least some time on safety-net benefits and that linking those benefits to the CPI will inevitably make the poorer worse off.
For families with children, child benefit is important. It is simple, straightforward and has an extremely high level of take-up. It is effective in reducing poverty and, because it is not means-tested, making work pay, but Ministers have decided to freeze it. That is a perverse move for a Government who say that protecting work incentives and strength in families is top of their list of priorities. Child tax credit, which my hon. Friend the Member for Westminster North mentioned, acts as both an in-work and out-of-work benefit for families, but Ministers plan to remove the family element and sharpen the taper as income increases. That, too, is a work disincentive.
Refusing to go ahead with the free school meals pilots means a further disincentive. Many parents with low incomes say that the loss of free school meals is one of the biggest shocks to the household budget when they move into paid work. On paid employment, reducing the cushion for the recovery of tax credit overpayments from £25,000 of income to £5,000 will penalise people who return to work mid-year and add complexity to the system. Ministers are keen to reduce complexity, and rightly so.
My hon. Friend and the hon. Member for Cities of London and Westminster (Mr Field) rightly drew attention to the concerns in London about the measures relating to housing benefit that have been announced. I can assure you, Ms Clark, that they cause just as much concern in Trafford, the borough in which my constituency sits. Reducing housing benefit for those who remain on jobseeker’s allowance for more than 12 months is a particularly punitive policy for those who might be doing as much as they possibly can to get into work but who are furthest from the labour market. Of all the announcements that we have heard on housing benefit, that is one on which, across the board, we strongly urge Ministers seriously to think again.
Reducing the rent that will be received by social landlords as a result of the introduction of the cap on housing benefit, and then reducing local housing allowance to the 30th percentile, means that social landlords will have fewer funds available to devote to social and employment programmes. Several social housing providers have already indicated that the loss of a couple of hundred thousand pounds from their budgets will mean that those employment programmes will have to go. Furthermore, we can certainly see that in some parts of the country people faced with those cuts in their housing benefit will be forced to move to lower-cost housing in other parts of the country, and those lower-cost areas are the least likely to have jobs available.
We can also expect a worrying increase in homelessness. In Trafford we already have 12,000 people on the housing waiting list, and we can expect the situation to become worse, particularly for larger families. As my hon. Friend the Member for Westminster North has mentioned, the measures, far from reducing costs to the Exchequer and to local authorities, will significantly increase costs by forcing greater use of costly temporary accommodation. We can also expect to see more families falling into arrears and debt, although it is Ministers’ stated intention to reduce the personal debt burden.
We should also be concerned about the impact on mixed communities, and Ministers have rightly spoken a great deal about their wish to protect and secure community cohesion. My hon. Friend touched on non-dependant deductions. With regard to supporting families, the decision to increase non-dependant deductions is likely, for example, to put families with young people still in the family home under great pressure to keep those young people in the family home and will penalise pensioners who may have adult children still living at home.
There are many concerns about the true impact of those measures, and they seem to work against Ministers’ stated goals. None of that is simplification. For example, why are the housing benefit changes, if they have to come in, being introduced in two stages next year? That is difficult for tenants and landlords to plan for. Surely it would make more sense to do everything later in the year after there has been proper time to prepare. Housing benefit has long been seen as a potential candidate for simplification through the creation of some sort of housing credit within a broader tax credits and benefits system, but the complexity that is now being introduced is likely to make that less achievable in the medium term, not more. A further example of complexity that Ministers are unnecessarily and inappropriately introducing into the system is medical testing for disability living allowance, a benefit that has nothing to do with a claimant’s medical needs.
I will also mention the policies that have been announced that seem to damage Ministers’ wish to create a savings culture. The axing of the savings gateway and the child trust fund seems absolutely to work against their wish to see low-income households seeking to save more. There are real concerns about how all that adds up to the big society. Not only will the cuts in public service spending put great pressure on communities and public services, but charities in my constituency are already expressing concern about how they will continue to fund the support they provide to the most disadvantaged. I know that will be a concern for the Minister, and I am anxious to hear from her on that.
Our concern is not only about the impact on the most disadvantaged families and the fact that the Budget fails the fairness test, but that many of those measures, since they are at odds with Ministers’ stated intentions, call into question the Government’s competence and the direction in which they truly seek to go. I strongly urge the Minister to think again about policies that seem to be taking us in the wrong direction, before the comprehensive spending review does more damage and takes us further away. I know that she will want to respond in full to those concerns and take note of them when formulating her thinking for the comprehensive spending review. It is important that we have the fullest and most constructive debate possible on that between today and 20 October.
It is a pleasure to serve under your chairmanship for the first time, Ms Clark, and I congratulate the hon. Member for Westminster North (Ms Buck) on securing the debate. As the schools have just gone back, and as we are talking about low-income households, I would like to point out that for almost one in three families there was no holiday away from home—not even a single day trip to the seaside for one third of the nation’s children. That is the reality in the UK, one of the world’s richest countries, where the divide between rich and poor has widened over the past decade. That is where we are, and I sense that things will get worse. I am grateful to a charity called the Family Holiday Association for that information. The hon. Lady and the hon. Member for Cities of London and Westminster (Mr Field) may wish to get hold of a university of Westminster study published in April last year which can expand on it.
I intervened in respect of housing benefit because I believe that if people have to spend more money on rent—assuming that they have more money to spend on rent—they will have less money to spend on food, clothing and services. The knock-on effect—the downward spiral of less money churning through the environment—will have an impact on their local economy.
The stark fact is that, for the past 30 years, it has been impossible to tell the difference between successive Governments when it came to the provision of what we now call social housing, but which I still refer to as council housing. It is obvious that if housing stock is not provided to house the people, supply and demand will get out of kilter. That is why 30 years ago in Colchester there was no such thing as a housing crisis but there is one now. That is why local churches in my town have had to start a food parcel scheme to help desperate people who need something to eat.
A hallmark of a civilised society is that all its citizens are fed, housed and clothed, but the reality in the world’s fifth-richest economy—even in our great capital city—is that there are levels of poverty which will grow. It is to the lasting shame of the previous Government that they left office with 3.9 million children living below the official poverty line.
My role is to try to influence the coalition Government to make the situation better, not worse. The Minister will recall that we have already had a debate on this subject. On 9 June, I pointed out the high level of child poverty. According to Barnardo’s, if we take housing costs into account, 3.9 million children live in households that are below the official poverty line. I was shocked by a disturbing extract from the “Hard Times” report published by Save the Children in 2006—four years ago:
“One third of British children are forced to go without at least one of the things they need, such as three meals a day or adequate clothing.”
I raise housing benefit because, inevitably, the cuts will lead to low-income families being forced out of their neighbourhoods. That is not ethnic but economic cleansing. It has no place in civilised society, and the coalition Government must not take any measures such that they could be accused of it.
Barnardo’s stated in June, before any public spending cuts:
“The poorest families in the UK are struggling during the recent economic crisis and are very likely to bear the brunt of forthcoming spending cuts. Barnardo’s proposes pragmatic, cost-effective solutions to redistribute money to the poorest families without the Government spending a single penny extra.”
Save the Children stated:
“It makes financial sense to end child poverty—the Joseph Rowntree Foundation estimates it costs the taxpayer £25 billion a year.”
Putting to one side the obvious reasons why a civilised society should not tolerate child poverty, Save the Children made the financial case for ending it. It is obvious—“obvious” is not a word that the Treasury uses or understands—that, in the long term,
“huge amounts would be saved from not having to pick up the pieces of child poverty and associated social ills.”
I will end with the plea that I made to the Minister on 9 June, because it is probably more valid now than it was then:
“I therefore invite the Minister to have a meeting with Save the Children, Barnardo’s and the other charities that do so much work to help children, to discuss what needs to be done. Working together, as a big coalition of people with shared interests, makes sense. It would make further sense if there were a permanent standing committee, for example, involving Government and those organisations, to help with formulating policies and strategies, in the spirit of joined-up government across all Departments. I also seek a pledge from the Minister”—
for the second time—
“that there will be no delay and no dilution of the provisions set out in the Child Poverty Act 2010, including measures on the poverty reduction target and setting up the child poverty commission, which are a matter of urgency.”—[Official Report, 9 June 2010; Vol. 511, c. 31WH.]
Welcome to the Chair, Ms Clark, for your first chairmanship of a Westminster Hall debate. I am sure that you will always guide us wisely and fairly.
I congratulate the hon. Member for Westminster North (Ms Buck), who spoke with great passion. Her presentation was extremely well researched, but the facts that she presented support her case, which is exactly what one would expect. Liberal Democrats certainly do not take these issues lightly, and we heard in the passionate words of my hon. Friend the Member for Colchester (Bob Russell) that no ideological pleasure is taken from any cut made by the Government.
Liberal Democrats are in coalition because the country is in a financial pickle. We are borrowing £1 of every £4 that we spend, and if we do not do something about it, two main things would happen. First, we would lose our AAA borrowing status, which would mean that we would have to pay more to borrow, which would mean that our economic standing in the world would go down and we would go into economic meltdown, similar to Greece.
I am listening carefully to the hon. Lady, who is making important points. However, the purpose of my debate was to query the Government’s claims, and their practice of requiring a deficit reduction programme to fall disproportionately on the poorest people. I am not sure that what she is saying, important and valid though it is, actually addresses that point.
I am not sure that what I am saying is not relevant. I shall discuss the effects of the reductions that we will make, but I contest the hon. Lady’s claim that many of them are not fair. Well researched though her presentation was, there are things that she cannot know—a great deal is still to come from the Government.
Much of what has been presented has been based on speculation, and there is a great deal of scaremongering at present. Clearly, as the hon. Member for Cities of London and Westminster (Mr Field) said, people are afraid. The time to become afraid is when we see what the Government are proposing. They are trying hard to make their proposals as fair as possible.
I want to make a second point about why we are doing this—it is the legacy. The hon. Member for Cities of London and Westminster said that we must take a grip of the existing situation. That would apply whatever party were in government. I am declining the invitation of the hon. Member for Westminster North because I want to talk about the issues that she wants to me to raise. She mentioned the report of the Institute for Fiscal Studies. I do not claim to be an expert, but it was selective in what it chose to raise, and it ignores some of the major parts of the Budget, including changes to tax credits, the increase in income tax personal allowance and freezes on council tax. It does not take account of the choices on which measures in previous Labour Budgets to continue and which to reverse, or the effect of future Budgets.
The debate on the effect of Government policy is legitimate, and all parties must be prepared to discuss that, but with respect, the debate is happening too soon. The way in which the vast majority of changes to Department for Work and Pensions policy and savings in the welfare budget will be implemented will not become clear until after the departmental spending review in October. Any debate before then is bound to be based on media speculation, of which we have had sufficient.
One reason for the consultation on departmental spending is to ensure that the difficult decisions are not made lightly, and that any cuts are made in a way that protects those on the lowest incomes. Alongside the cuts is a radical programme of core Liberal Democrat policies specifically targeted at people on low incomes—the income tax pledge, the pupil premium and the re-linking of the basic state pension to earnings. However, in the coming weeks and months, the Government must ensure that they focus on ensuring that those groups most likely to be on low incomes are protected, specifically disabled people, older people, young people and people who are long-term unemployed.
It is absolutely right to want to protect the most vulnerable, and I am grateful to the hon. Lady for mentioning the disabled, but are we not already seeing increasing numbers of disabled people going through the new work capability test for employment and support allowance and being found to be ineligible for that benefit, and being pushed on to the lower level of jobseeker’s allowance? Can we expect that position to become even more of a problem as existing incapacity benefit claimants are put through the test and perhaps experience the same outcome? Is that not a cause for concern, particularly when there is an exceptionally high number of appeals against work capability tests, many of which are proving successful?
The hon. Lady makes an important point, but the issues to which she refers began under a Labour Government, which she supported. We must be sure that the tests that are imposed on people are absolutely fair.
Several hon. Members mentioned housing benefit. The proposals have not yet been fully created, and it is not yet possible to say what impact they will have on low-income households. However, any cap on maximum local housing allowance payments must ensure that those with large families are not unfairly discriminated against, and I hope the Minister will speak about that.
I shall conclude on a slightly more positive note, by mentioning some of the positive changes for low-income households. On the income tax threshold, we have increased the personal allowance by £1,000, so 880,000 people will come out of tax altogether and 23 million other taxpayers will benefit by £170 million a year.
We have discussed the child element of tax credits, and some hard decisions have been made so that the poorest families will benefit much more than those who can afford to bear the burden. In addition, the coalition Government will increase the personal allowance to £10,000 per annum, which the Liberal Democrats pledged in their manifesto, and will lift the poorest 3 million people out of income tax altogether.
The Government are consulting on the pupil premium to determine the exact figure for it. It will attach additional funding to children from low-income households and will dramatically improve the life chances of children from families that fell into a poverty cycle under the last Government.
With the re-linking of pensions to earnings, pensioners will finally receive a fair deal with no more 2p—or whatever it was—increases in their pension. Under the triple lock proposed by the Liberal Democrats, the basic state pension will rise in line with prices or inflation, or by 2.5% a year, whichever is highest.
The consultation is taking place. The theory and principle to which we adhere is that savings may be made on benefits through large-scale simplification. The consultation paper proposes a universal credit to replace the main three forms of benefit support—jobseeker’s allowance, employment support and income support—as well as other sorts of benefit. We will allow a uniform taper rate so that when people find work, benefits will be withdrawn in line with earnings. I agree that the previous Labour Government tried hard to resolve the poverty trap, and the taper may be a solution to ensure that it will always be profitable to go to work.
The division between rich and poor increased under the previous Labour Government. Throwing money at the problem has not provided the solutions that they and everyone wanted. I hope that in the dire financial straits facing the country, the present Government will be imaginative in creating a fairer way of ensuring that people achieve prosperity and work in the best possible way.
It is a pleasure, Ms Clark, to see you in the Chair this morning. I congratulate my hon. Friend the Member for Westminster North (Ms Buck) on securing this extremely important debate on an issue that concerns millions of our fellow citizens.
My hon. Friend pointed out some key facts, and I hope that the Minister will respond to some of them. The Government have made huge play of the importance of work incentives, but the Red Book, which the Chancellor of the Exchequer presented to the House, shows that 80,000 people in this country will face worse work incentives as a result of his Budget. That demonstrates the point that my hon. Friend the Member for Stretford and Urmston (Kate Green) made about the total incoherence of the policies being presented.
My hon. Friend the Member for Westminster North asked some sharp questions, and I hope that we will hear from the Minister where the extra £2.5 billion—or is it £4 billion?—will come from in the public spending cuts in the autumn, and what exactly her assessment is of the impact on homelessness of the massive cuts in housing benefit. The hon. Member for Cities of London and Westminster (Mr Field) placed great stress on the need to tackle the deficit. Of course we need to tackle the deficit; there is no question about that. The policies set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling) would have produced a debt to GDP ratio in 2014 of 75%—a high level and not one that we would want in the long term. However, over the next five years, the Government propose an additional tightening of £120 billion in public spending cuts and tax rises. The net result will be to reduce the debt to GDP ratio by 5%, so that it will be 70% rather than 75%. That is not even a 5% reduction now; it is a change in 2014. The hon. Member for Solihull (Lorely Burt) backed that point and said that we should worry about the markets. I am sorry, but I do not believe that the markets will take such a different view of a debt to GDP ratio that is 5% smaller in four years’ time, or that that will make all the difference. That is the altar on which we are told we should smash our public services.
No one supports the smashing of public services, but in defence of the assertion made by the hon. Member for Solihull (Lorely Burt) and me, the bond markets have made it clear in the aftermath of the emergency Budget that they are impressed by the resolution of the coalition Government. That is one of the reasons that the yields have relaxed, which augurs well for the long-term debt to which the hon. Member for Bishop Auckland (Helen Goodman) referred. This year, £1 in every £4 that we spend has been borrowed, and we must try to keep the cost of that borrowing to a minimum.
We have tested to destruction the theory that we should drive our politics by what bankers want. That is not what we want to do, which is why Labour Members regard this Budget as deeply ideological. It will damage the life chances of the most vulnerable people—
Not again. My hon. Friend the Member for Stretford and Urmston made an excellent forensic analysis of the policies that we have seen so far. She is right to question the competence of Ministers who say one thing but do something completely different. Some seem to be totally out of their depth.
The hon. Member for Colchester (Bob Russell) is rapidly building a reputation as one of the most effective parliamentarians in the House. I would like to point out two facts in response to his contribution. First, under the three Labour Governments, the number of children in child poverty fell by 600,000. Secondly, the number of pensioners living in poverty fell by 900,000.
On 22 June, the Chancellor put the best possible gloss on his Budget, claiming that the effects were progressive and that the richest people would bear the greatest burden. He produced tables in the Red Book which purported to demonstrate that. Since then, independent study after independent study has demonstrated the precise opposite to be the case. In every dimension of vulnerability, the poorest do worst. The Red Book tables were incomplete and did not include the effect of the benefit cuts. Moreover, the Chancellor took credit for the decisions of his predecessor.
As my hon. Friend the Member for Westminster North has said, the first major study was undertaken by the Institute for Fiscal Studies and showed that the impact of the full £11 billion of cuts to the benefits programme, taken together with the tax changes, was regressive. Next, analysis carried out by the House of Commons Library into the impact of the cuts on women, showed that women will lose £6 billion while men lose £2 billion, thereby widening a gender gap that is already too great. In part, that reflects the cuts in support for children, but even if those cuts are stripped out, women will pay two thirds of the extra revenue taken by the Chancellor, and men will pay one third. The Government have admitted that they did not carry out an equality impact assessment of the Budget beforehand. Will the Minister tell us what stage that impact assessment is at, and when we will see it?
Many hon. Members have spoken about the significance of housing benefit. The Minister’s Department carried out an impact assessment into some of the changes to housing benefit, but once again, it was an incomplete analysis because the papers produced at the end of July looked at the effect on the private rented sector only. Even that study showed that over 50,000 of the poorest pensioners will lose an average of £14 a week and that tens of thousands of severely disabled people will lose an average of £13 a week. Lone parents and people with children will lose more than adults without children.
The next major study was the analysis by Cambridge university, which showed that 134,000 families who already live in poverty will face the most cruel dilemma—whether to move or whether to cope on a lower income. When he accepted the position of Secretary of State for Work and Pensions in May, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) said that he was interested most in the poorest people. However, the Cambridge university study shows that 54,000 families will have less than £50 to live on after the cuts to housing benefit.
Research produced at the end of August by Experian and published by the BBC looked at the north-south divide. It showed that the spending cuts will hit the north-east and parts of the midlands the most. Middlesbrough is ranked as the most vulnerable place in the country and will suffer most from spending cuts. The average income in Middlesbrough is £18,000. Elmbridge in Surrey is ranked as the most resilient town; the average income there is £27,000.
Most recently, the TUC has looked into the impact on public spending. It shows that the poorest 10% of people will lose 20% of the value of their income in terms of public services, while the richest 10% will lose 1.5%. I have looked again at the work done by the TUC, and put it together with the analysis carried out by the IFS. The work done by the TUC included the impact of the strongly progressive measures introduced by my right hon. Friend the Member for Edinburgh South West in March. However, if we strip those figures from the table, we see that the impact of the measures for which the Government are responsible will be even more regressive. By 2012, the picture looks even more unfair. After tax, benefit and spending changes are taken into account, the poorest 10% of people will lose 23% of their income, while the richest people will lose 2%. That situation will get worse over time. If we put the TUC distribution of public spending together with the IFS tax and benefit figures for 2014, we see that the poorest will lose one quarter of their income in terms of the loss of value in public services, tax and benefits, while the richest will lose 2%.
All that is before we look at the impact on jobs and unemployment. The facts speak for themselves: 25% of income will be taken from the poorest people, 2% from the richest. The effects will be felt not only over the next two or three years. We all know that poverty in childhood affects a person’s opportunities throughout their lives. Of course the deficit needs to be tackled, but the speed, depth and manner of the cuts is short-sighted, unnecessary and unfair. The coalition Government are losing all credibility in their repeated claims to be concerned about fairness. The evidence shows that there is not a shred of integrity in their claims.
It is a pleasure to serve under your chairmanship, Ms Clark. I understand this is the first time that you have chaired Westminster Hall. You have done us proud and done a great job. I congratulate the hon. Member for Westminster North (Ms Buck) on securing the debate. As the hon. Member for Colchester (Bob Russell) said, this is not the first time that we have debated these issues in this Parliament, and I am sure it will not be the last. However, it does give me an opportunity to set out, in a more measured manner perhaps, the impact of the policies that we are talking about as a coalition Government.
We have had a wide-ranging debate, and in the time left, I hope that I can cover as many as possible of the points that hon. Members raised. The hon. Member for Westminster North talked about challenges in relation to the perceptions of the Labour party’s record in government, but she must acknowledge that the facts speak for themselves when it comes to the impact, or lack of impact, of Labour policies on issues of poverty. As the hon. Member for Colchester said, there are still far too many children living in poverty in this country after more than a decade of Labour Government. Labour talked a great deal about trying to reverse the problems of inequality in this country, but it failed to tackle the root causes of poverty, leaving a catalogue of entrenched social problems that the coalition Government must now deal with.
I hoped that I was being fair in stating that I did not think that the Labour Government got everything right and tackled every problem. In the interests of equivalent fairness, will the Minister accept that child poverty increased threefold during the time of the previous, Conservative Government and inequality soared?
The hon. Lady is again being selective in her recollection of the facts. When we examine the level of child poverty now, we see that it has gone up since 2004 under Labour. She can throw her hands up in horror, but unfortunately the facts speak for themselves.
There are other facts that we need to acknowledge. Levels of household debt have gone up significantly. In 2009, there were almost 160,000 personal insolvencies in this country. Those were record levels; there were 30,000 more than in the previous year. The hon. Lady must look at the whole picture when giving the facts in the debate.
Further assertions have been made that progress was made under the previous Government because of the level of investment that they put in, but as we all know, investment alone is not the answer. We need structural changes in the way in which support systems work. In relation to welfare, spending on social security and tax credits has increased by about £60 billion in real terms over the past 10 years, yet as the hon. Member for Colchester said, there has been an inability to tackle the issues of poverty, and the performance on inequality has either stalled or deteriorated.
Now we face the biggest legacy from Labour of all, which is that we have the biggest deficit of any G20 country. It is incumbent on the present Government to get that deficit under control; otherwise, stability, either in interest rates or in our ability to provide employment for people or to encourage strong business, will be undermined. It is therefore absolutely right that the Government put first and foremost trying to get the deficit under control.
The Labour party now understands the failure of its policies in this area and that keeping on spending at unsustainable levels is not the way forward. The hon. Member for Bishop Auckland (Helen Goodman) was a Minister in the Department in which I am now a Minister when that spending spiralled out of control. She will know that the cuts would have had to come anyway and that her Department was already tabling 20% cuts. The problem is that the Opposition would not tell us where those cuts were to come from. Despite their being asked repeatedly, those details were not forthcoming.
There is absolutely no truth in the suggestion that the Department for Work and Pensions was proposing to the Treasury 20% cuts. I do not know where the hon. Lady has got that from. She certainly should not have seen the papers under the previous Administration. There is no truth in it, and I can assure her of that fact.
Of course the hon. Lady will know that it was the other way round: the Treasury telling the Department for Work and Pensions that that was the case, because it was published in its detailed information about how a Labour Government would have to move forward after the last general election.
There is no option but for the present Government to be putting on the table the reform that is needed, because there is no viable alternative. We cannot proceed with the way in which the previous Government mismanaged the country. We have agreed and made it clear that we will protect the most needy and the most vulnerable. In the emergency Budget, my right hon. Friend the Chancellor of the Exchequer made it clear that the measures that he was proposing first and foremost would do that.
A number of hon. Members, including the hon. Member for Westminster North, referenced the IFS study. Obviously it is important that we examine such studies; and across Government that study will be taken seriously and examined in detail. However, as the hon. Lady will have to admit, it is not a complete analysis. There are omissions in the IFS analysis that make its findings incomplete. I am thinking particularly of the area that affects my Department the most—the impact of incentives to work, which will have a dynamic effect on all issues but were not taken into account in that study. The analysis by the hon. Member for Solihull (Lorely Burt) of the IFS report was a helpful contribution to the debate and balanced some of the other comments.
Another area that many hon. Members touched on was the impact of the Budget measures on families in general. My hon. Friend the Member for Cities of London and Westminster (Mr Field) referred to the wide-ranging impact that poverty can have on communities. I join him in applauding the work that Westminster city council does in that respect. I know about that, having met people involved in it before the election, when I was not in my current post, to hear in more detail about the family recovery plan in that area.
The Budget measures included increases in the child element of the tax credit that are well above inflation. That meant that the measures taken to freeze child benefit would be neutralised. We saw in the Budget a very effective way of protecting the poorest families by ensuring that we target the help available to us on the people who need it most.
A number of hon. Members referenced the VAT increase. I want to ensure that it is clear to hon. Members that that still does not apply to the things that children need the most: food and clothing. Therefore the increase will not have the impact that some of the scaremongers who have been talking about it might imply.
The hon. Member for Westminster North asked where the savings were coming from. I suggest to her that having 2.1 million people written off on old-style incapacity benefits is not the best and most effective way to run the country, that work is the best way out of poverty and that helping more of those people out of benefit dependency and into work will be an effective way of reducing our benefits bill.
In addition, we are working on a number of ways to ensure that families and parents benefit from work. Jobcentre Plus is now very experienced in developing employment programmes to support lone parents. The previous Government did a lot of work on that. Lone parent advisers have flexible options to enable families to get into work whenever they can, within the needs of the families and particularly their children’s need to go to school. [Interruption.] If hon. Members will forgive me, I have two minutes to try to complete my answers to an extremely long list of questions.
I want to talk directly about child poverty. The hon. Member for Colchester challenged me again on a number of issues to do with child poverty. I confirm to him that I have had meetings with both Save the Children and Barnardo’s. He talked about putting in place a cross-Government scheme to examine these issues. The Cabinet Committee considering social justice issues will be exactly the forum to debate some of these matters. Perhaps I can give him more details of that later.
The coalition Government continue to be committed to the aims of the Child Poverty Act 2010 and eradicating child poverty by 2020. The latest figures show that 2.8 million children remain in poverty. That is an increase of 100,000 since 2004 and is well off the previous Government’s targets. The Opposition need to acknowledge that fact if we are to have a reasoned debate.
There are a number of issues that I have not been able to cover in my comments. I was glad that the hon. Member for Solihull mentioned issues relating to pensioner poverty. Our policies in that respect will do a great deal to alleviate some of the problems faced by pensioners. With regard to disabled people, perhaps I can clarify one point for the hon. Member for Stretford and Urmston (Kate Green). It will not be a medical gateway that we introduce in relation to DLA. It is an objective assessment. I just wanted to put her mind at rest on that.