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23 June 2015

The government should be tackling low pay, not hitting the lowest paid

The government's plans to cut £12bn from the welfare bill are aiming at the wrong target, say Chris Leslie and Stephen Timms.

By stephen timms

For over two years, the Government has been saying it will make £12 billion of cuts to the social security budget. Ministers make grand pronouncements about the justification for cuts, but refuse to tell us what the cuts are going to be. It’s high time we were told.

The global financial crisis caused a big deficit in the UK.  Ministers are right that that deficit should be fixed.  They said in 2010 they would eradicate the deficit in the last Parliament.  In fact, they barely halved it.  Failure in the last Parliament lies behind their plans now.

Everyone agrees that you should be better off in work than unemployed.  That was the reason for Labour introducing tax credits – and they have proved very successful.  It was also supposed to be the reason for introducing Universal Credit – announced five years ago, but now running about four years behind schedule.  We have not been short of grand pronouncements from this Government. It is on delivery that they have utterly failed.

The Tories said they’d cut benefit spending in the last parliament. But according to the Institute for Fiscal Studies, they left it at exactly the same level, in real terms, as they inherited: £220 billion per year. That’s not because they didn’t cut enough.  It’s because the changes they made failed to tackle the root causes – in particular, high youth unemployment, low pay, high rents and too few homes.

Even though unemployment is falling there are still almost three quarters of a million young people out of work and the number of people on incapacity benefits has been going up for the past year. The number earning less than a Living Wage has risen by 45 per cent from 3.4 million in 2009 to 4.9 million today. Low pay has led to rising spending housing benefit for people in work (up 50 per cent since 2010) and on tax credits.  The Government should be tackling low pay, not attacking the low paid.

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Media reports suggest we will find out at least some of the £12 billion cuts in the emergency budget on 8 July.  We shall be studying the proposals very carefully.  The government say they are committed to reducing child poverty and the Prime Minister has said there will be no change to Child Benefit.  The government also say they will protect pensioners and disabled people.  Labour will hold them to the promises they have made.

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Asked by a member of the public in the televised debate on 30 April: “Will you put to bed rumours that you plan to cut child tax credit?”, the Prime Minister replied: “No I don’t want to do that … I reject it again today.”  But there are widespread rumours that that is exactly what they plan to do

It’s clear the government’s plans will undermine the security of working families.  It is called “social security” for a reason.  A recent study has shown that – over a twenty year period – about half the working age population has been in a household claiming working age benefits.  Any of us may need help from the social security system at some point in our lives.  In our view, we should continue to support working families and ensure there’s a strong safety net for people who lose their jobs.  

We want the government to be fair to all, not just to hit people on average incomes or below.  Cuts that hit people who do the right thing, work hard and contribute will undermines the Tories’ claim to be the ‘workers party’.

It’s time for the government to spell out who’ll be hit by their cuts plan.

We will welcome proposals to encourage people into work and make sure work always pays. That’s why it was Labour who called for businesses who pay a Living Wage to be given tax breaks. But we shall also be demanding that the Government keep the clear promises it has made to pensioners, to children and to disabled people.  And we shall fiercely oppose changes which simply undermine the security of working families.

Chris Leslie is shadow chancellor of the exchequer. Stephen Timms is acting shadow secretary of state for work and pensions.