Parliament Notes
by Dick Barry.
Transatlantic Trade And Investment Partnership
The Scottish National Party initiated a debate on the Transatlantic Trade and Investment Partnership on 7 July. It was introduced by Tasmina Ahmed-Sheikh. Some interjections and a brief part of the Minister’s reply have been ommitted.
Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP):
I am grateful for the opportunity to discuss this important issue here today. While the public debate around the Transatlantic Trade and Investment Partnership, or TTIP, seemed to quieten down after the white hot heat of the general election, the issue is once again in the spotlight following the debate on the Lange report in the European Parliament this week. It is right that, at this important moment in the development of this agreement, the House considers the deal and its possible implications for our public services, especially in light of yesterday’s vote—although it is an indicative vote, and therefore non-binding.
After two years of negotiations, TTIP remains a highly controversial issue across Europe. To date, almost 2.5 million people have signed a Europe-wide petition in opposition to the proposals. It is clear from that, and from the high degree of public participation in consultations on the issues, that many people remain highly sceptical about the detail of those complex negotiations. That mobilisation of public opinion is a credit to the tireless campaigning work carried out by organisations such as War on Want and other campaigns, including that of 38 Degrees, which plays a valuable role in helping to inform the debate on a range of issues and in affording people the opportunity to make their voice heard.
Before I move to the areas of most concern to my constituents and me, I should state that some parts of the current proposals, despite their faults, have widespread support. I agree with the fundamental principle that has underpinned the negotiations. Europe and the US should work together to increase trade across the Atlantic. Trade is good for jobs. Scotland alone enjoyed £3.9 billion of exports to the US in 2013, making the US our single biggest market outside the EU. The US remains the largest inward investor in Scotland, with investment supporting some 100,000 jobs. I support measures that would grow the market for Scottish products in the US, and back any plans that will attract new investment to Scotland to support our growing economy. Our export potential is huge, and we must do all we can to support Scottish firms in maximising that.
It is in that context that I support a reduction in tariffs that would allow Scottish firms to compete on a level playing field with US manufacturers, because that would be good news for Scottish jobs. Despite these potential benefits, however, several key aspects of the proposals serve to undermine the whole process as things stand. The lack of transparency around the negotiations has prevented proper scrutiny and diminished public confidence. It is unacceptable that Members of the House and the European Parliament have been prevented from properly examining the documents in the process. At one stage, Members of the European Parliament were only allowed to see the documents relating to the treaty in a secret room and could not even remove them. It is self-defeating to act in the public good but prevent the public from properly examining the work that is being carried out on their behalf.
It is also of great concern to many that, in order to standardise the rules governing markets in the US and the EU, TTIP will lead to the lowest common standard of regulations. The European Union in particular has been a force for good in the creation of world-leading safety standards, which protect the best interests of workers and consumers. It is one of the many benefits of retaining membership of the European Union. We should celebrate those successes, not seek to undermine them. However, my main point is that the Transatlantic Trade and Investment Partnership has the potential to undermine public services in my constituency and across Scotland and the UK. We need to take decisive action now to prevent this outcome. The Scottish Government have already made a number of representations to the UK Government and the European Commission about the possible implications of TTIP for Scottish public services, in particular the Scottish NHS and Scottish Water. I welcome the tone of the responses to date, which have contained encouraging words about how TTIP does not pose any threat to the NHS. In particular, I welcome the statement by the European Commission Director General for Trade that
“the net effect of the EU’s approach is that nothing in TTIP will lead to privatisation of the NHS”. However, the fact remains that both the Scottish public and the Scottish Government must be able to see the final legal text of any agreement to be fully assured on this vital issue.
Peter Grant (Glenrothes) (SNP):
I have been contacted by a number of people who work in the NHS and a number whose lives depend on a successful NHS. Their concern is that TTIP may be the first step along a road towards the kind of health service that we see in parts of north America, where the first thing they do with a casualty coming into hospital is check their credit rating before checking for a pulse. I hear what my hon. Friend is saying about the assurances we have had from the European Commission. Does she believe that the people of Scotland have had sufficient reassurances to take the Commission’s words at face value?
Ms Ahmed-Sheikh:
I do not think we have had sufficient reassurances, but the people of Scotland can be absolutely assured that every one of my hon. Friends will be here to ensure that we continue to represent their best interests and protect the public services that are dear to our heart and, indeed, to the people of Scotland, whom we represent. The lack of transparency on the detail continues to undermine the public statements made by Ministers and European officials. I am disappointed that yesterday the European Parliament failed to take the opportunity to amend the Lange report to explicitly protect public services such as the NHS and water.
What is demanded, and what we require, is a clear and unambiguous exemption from the deal that guarantees that democratically elected Governments in Scotland and beyond cannot be forced to privatise services and that any attempts to roll back previous privatisation will not be open to challenge under the new rules. These conditions must be explicit.
We come now to one of the areas of greatest concern: the process known as investor-state dispute settlement, or ISDS. Including this type of measure in the agreement potentially undermines the right of European Governments to regulate effectively on a range of issues. As the Minister will be aware, the most relevant example of that is the recent action by the Uruguayan Government to legislate to increase the size of the health warnings on cigarette packs, in an attempt to reduce the number of people smoking and improve public health.
In response, the multinational tobacco giant, Philip Morris, used a similar process to sue the Uruguayan Government. The concern of many of us, including the Scottish Government and our trade unions, is that similar measures could be used by private organisations here to limit our democratically elected Government’s powers in a range of important areas. My right hon. Friend the Member for Gordon (Alex Salmond) has considerable experience in this area, Madam Deputy Speaker, and I understand that if he catches your eye he hopes to raise it before the Minister replies.
In February this year, SNP Members of the Scottish Parliament, led by our First Minster, signed up to a pledge proposed by Unite, which stated, amongst other clauses, that “TTIP must not give current or future US investors new rights that they could use to sue any level of government, public authority or NHS organisation because of their policies or actions relating to public healthcare.”
My colleagues and I absolutely support that pledge. Of course we welcome the recent developments announced by the Commission in May, but there is still some distance to travel if the final agreement is to gain our full support. This Government must clearly state to our European partners that the UK will veto TTIP unless we receive an explicit exemption for the NHS and Scottish Water as part of a general public sector exemption. We are very proud of our public services. Governments in Scotland, the UK and beyond must therefore be able to manage those services for the greater good without fear that their democratic mandate might be overruled in the courts.
I hope that the Minister can start to set out today how this Government are making progress in delivering the kind of deal that Scottish MPs and the Scottish Government can support and the current timetable for agreement and ratification. In particular, I hope he takes this opportunity to set out how Parliament will be able to scrutinise the final proposal before it is ratified. We must have a full debate on this important matter. The Transatlantic Trade and Investment Partnership undoubtedly has great potential to help grow the Scottish economy. We must ensure that that is not undermined by unwarranted and damaging provisions that put our public services at risk.
The Minister for Skills (Nick Boles):
It is a pleasure to respond to this Adjournment debate. I know that you, Madam Deputy Speaker, and the right hon. Member for Gordon (Alex Salmond) are disappointed that I am replying to the debate rather than his new friend the Minister for Small Business, Industry and Enterprise. She was due to be here, but is on her way to “Question Time”, where she may well meet the right hon. Gentleman again. I shall do my best to respond to the debate on her behalf. If I do not adequately answer any of the detailed questions that have been posed, I will make sure that she writes to hon. Members with all the details.
I congratulate the hon. Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) on securing this debate on an important subject that has been raised with me by constituents in a number of emails and letters over the past few months. I am glad she acknowledged that this is a once-in-a-generation opportunity to create a very beneficial free-trade area, and that her fine country and the entire United Kingdom rely on trade and have benefited from trade over centuries and generations. Indeed, we think that we are quite good at it and that we usually benefit more even than our trading partners from its expansion.
The Government are confident that the agreement will produce huge economic benefits on both sides of the Atlantic. Outside the EU, the US is the largest export market for British goods and services, and a successful deal could eventually boost our economy by as much as £10 billion each year. That is a large and abstract number, but it translates into additional disposable income of about £400 a year for the households that the hon. Lady and I represent. More money in people’s pockets, cheaper goods and services, more jobs, and new markets for small and growing businesses—those are the things that we are talking about when we talk about this agreement. It is not an abstract or technical process established by elites; it is an opportunity for people up and down the land to benefit.
Ian Blackford (Ross, Skye and Lochaber) (SNP):
The Minister made an interesting point about a £10 billion benefit to the United Kingdom economy. Where did that figure came from, and what analysis was undertaken to produce it?
Nick Boles:
I do not have that information in my pack, but I shall be happy to provide it. As I have said, my right hon. Friend the Minister for Small Business, Industry and Enterprise will reply in writing to any detailed questions that Members may have. The hon. Member for Ochil and South Perthshire referred to concerns, which have certainly been expressed to me, about the potential impact—or the alleged potential impact—on our national health service. All of us in the House have a responsibility to provide our constituents with the facts as we best understand them, and not to fuel scare stories. I therefore think it important to say that absolutely nothing in the proposed deal would threaten the public nature of our public services, and, in particular, our national health service.
The hon. Lady referred to, and I will now repeat, some of the words of the European Commissioner for Trade, Cecilia Malmström, who wrote to a Minister in January about the NHS. She said: “member states do not have to open public health services to competition from private providers, nor do they have to outsource services to private providers”.
She also said: “member states are free to change their policies and bring back outsourced services back into the public sector whenever they choose to do so, in a manner respecting property rights… it makes no difference whether a member state already allows some services to be outsourced to private providers, or not”.
The European Union negotiating position for the TTIP deal is to ensure that EU countries will be free to decide how they run their public health systems. The NHS—our NHS: the Scottish NHS, the English NHS, and the NHS in all parts of the United Kingdom—is not at risk from this agreement.
Ms Ahmed-Sheikh:
The Minister will have noted that the proposal for a specific opt-out was defeated in yesterday’s vote. How can he be so sure that we will be protected in any future agreement, and can we be assured that we will have an opportunity to debate it?
Nick Boles:
I shall come to the point about debating it, but let me first deal with the hon. Lady’s point about an opt-out. Of course it would always be great for the text of any agreement to contain all the reassurances that are required, but, even before yesterday’s vote, the Government were entirely satisfied that the position regarding TTIP would not threaten the public status of our NHS or other public services. We were entirely satisfied that there was absolutely no intention on the part of the Commission in negotiating the agreement, or on the part of any other EU member state, to allow the status of either our public services or theirs to be threatened. We are satisfied with the substance, although I acknowledge that more reassurance for our constituents would be welcome if it could possibly be provided. I fear that, to some extent, the hon. Lady praised 38 Degrees, but I would not be so kind. I think that, all too often, that organisation whips up a great many ungrounded fears. It is important for us, as Members of Parliament, to try to reassure our constituents.
The hon. Lady referred to—and the right hon. Member for Gordon also dwelt on—some of the questions relating to the ability that corporate interests might be given to challenge regulations. I want to be very clear about what will be involved. The ISDS tribunals will be able to grant compensation for actions and decisions by Governments according to regulations that investors can show to have been unfair or conducted in an undue way. They will not be able to overturn, amend or eradicate any regulations that Governments bring in legitimately.
I want to move on to the important question raised by the hon. Member for Ochil and South Perthshire about whether Parliament will have an opportunity to consider the Bill. I want to be clear so, if hon. Members will forgive me, I will read a little from the text in front of me. The agreement is expected to be a mixed agreement to which the UK is individually a party. It will therefore be subject to agreement by member states’ Parliaments—including that of the UK—the EU Council and the European Parliament. As part of this process the UK Parliament will receive the complete draft text of the agreement to scrutinise in debates in both Houses.
I hope that provides the reassurance that the hon. Lady seeks. I note that the party that currently governs Scotland is now very adequately represented in this House and I note the level of interest shown by her party late on a Thursday afternoon, so I am sure that she and her colleagues will provide the level of scrutiny that she seeks.
In conclusion, I am certain that this agreement could have enormous benefit for the people of Scotland and the people of the United Kingdom. I am satisfied that the agreement will not threaten the public services that we hold dear and that we want in large measure to remain public—there is nothing in it that will do that. I am also satisfied that there is no process in it that will usurp Parliaments or democratic processes for changing regulations or laws, but I endorse and support the desire for proper scrutiny of an agreement that will be a very substantial commitment by all member states of the EU. I congratulate the hon. Lady for starting that process here this afternoon. I have no doubt that she will continue it over the months to come.
Question put and agreed to.
Comment:
The Minister confessed that he did not have the information at hand to support his contention that the UK economy would benefit from TTIP to the tune of £10 billion each year. That being so, he is, as Clem Attlee would have said, “not up to the job!” The £10 billion is a figure plucked from a report by the Centre For Economic Policy Research (CEPR) for the European Commission, (EC), of which Boles must have been aware, and is the UK’s share of an estimated 119 billion euros benefit for the EU as a whole. The figure has, however, been deemed erroneous by independent resaearch.
A Keep Our NHS Public Briefing Paper, ‘The questionable economic gains from the Transatlantic Trade and Investment Partnership (TTIP), published last year, argued that “it is clear that the figure of 119 billion euros relates to a projected 2027 economy—in other words to the potential impact of TTIP 10 years after its implementation. This means that the figures in the key findings are erroneous—that 119 billion euros is not the extra extra gain that TTIP would bring each year but the cumulative benefit that might be accrued by 2027…”
Note: The Briefing Paper also says that “the EC describes the CEPR as an independent reasearch organisation. However, CEPR’s website shows that it recieves financial support from central banks and ‘corporate members’, including HM Treasury, while Platinum Membership is available for those who want ‘an active influence on CEPR’s research and policy direction’” In fact, the number of central banks providing CEPR with financial support is in excess of forty.
One would expect Keep Our NHS Public to pick holes in the TTIP, but it is also questioned by the Heritage Foundation (HF) a right wing researh body based in the United States. In September 2014, research into the TTIP for the HF by Theodore R. Bromund Ph.D., Luke Coffey and Bryan Riley, examining the CEPR report, argued that the benefits of the TTIP “have been oversold by some of its proponents.” The research paper, ‘The Transatlantic Trade and Investment Partnership (TTIP): Economic Benefits and Potential Risks’,said, inter alia, “No U.S.–EU agreement, however, can do all that has been claimed of the TTIP, and there are reasons to believe that the TTIP’s economic and broader geopolitical benefits have been oversold by some of its proponents.”
It went on to say: “A number of efforts have been made to model the economic benefits of a TTIP agreement. Such estimates are speculative and will remain so until—and, to an extent, even after—an agreement is negotiated and put into effect.” And confirming that the economic benefits will be spread over ten years, the paper says, “Moreover, trade agreements do not work like pay increases: The gains do not come all at once. They arrive slowly as the agreement is implemented and the market adapts to these changes…..in the case of TTIP, most Americans and Europeans would barely notice them. If, as the CEPR assumes, the gains would not fully materialize until 2027…”
Welfare Reform Bill
MPs debated the Second Reading of the Welfare Reform Bill on 20 July, a day before they went into summer recess. Parliament returns on 7 September. Labour’s Stephen Timms moved an amendment to the Bill which supported some of its contents. Timms is the member for East Ham, a constituency, one imagines, with a high level of poverty. Harriet Harman, Labour’s acting leader, insisted on a policy of abstention on Second Reading, rather than opposition. In a Guardian interview on 10 August she regretted her decision for Labour to abstain. In the interests of space some interjections have been omitted from the debate.
Stephen Timms (East Ham) (Lab):I beg to move,
That this House, whilst affirming its belief that there should be controls on and reforms to the overall costs of social security, that reporting obligations on full employment, apprenticeships and troubled families are welcome, and that a benefits cap and loans for mortgage interest support are necessary changes to the welfare system, declines to give a Second Reading to the Welfare Reform and Work Bill because the Bill will prevent the Government from continuing to pursue an ambition to reduce child poverty in both absolute and relative terms, it effectively repeals the Child Poverty Act 2010 which provides important measures and accountability of government policy in relation to child poverty, and it includes a proposal for the work-related activity component of employment and support allowance which is an unfair approach to people who are sick and disabled.
In government we addressed all the challenges set out by the Secretary of State. We stand for the right to work and the responsibility to work. We believe the Government have a responsibility to ensure full and fulfilling employment. We believe in making work pay so that people are always better off in work, and that work is the best route out of poverty. The deficit has to be eliminated. We believe in controlling the costs of social security so that it is fair on the working people who pay for it and so that it is there for people who need it because they cannot work or earn enough to live.
We support a number of measures in the Bill. We welcome the reporting obligations on full employment, apprenticeships and troubled families. We are committed to a cap on household benefits to help make families better off in work. We support reforms to mortgage interest support that will strengthen work incentives and deliver savings. But this Bill does some very bad things as well. It abolishes the duty of Government to tackle or even to report on child poverty, it breaks promises that the Conservative party made before the election to protect sick and disabled people, and it comes alongside a ruthless reduction in the support to working families through tax credits that will reduce work incentives and undermine the goals of universal credit. Universal credit is a reform which, even though it is running four years late, we still want to succeed.
Because we support some measures in the Bill, oppose others and want to change yet others to make them workable, we ask the House to support the reasoned amendment in my name and those of my right hon. and hon. Friends.
Mr Duncan Smith:
I want to establish clarity for those on the Government Benches as well as those on the Opposition Benches. Putting aside the fact that in Committee he may want to table amendments to make changes, do the official Opposition support the principle that those with more than two children should not receive further child tax credits? Is that the principled position they support? That is missing from the right hon. Gentleman’s reasoned amendment.
Stephen Timms:
The Secretary of State does not need to wait until the Committee because we will table a raft of amendments tonight: if our reasoned amendment fails and the Bill receives a Second reading, we will table our amendments. He will see in that list of amendments a series of amendments to deal with the unfairness in that part of the Bill. Those amendments will give him the answer that he seeks. They will appear on the Order Paper tomorrow so that the House can consider them over the weeks ahead.
Barbara Keeley (Worsley and Eccles South) (Lab):
My right hon. Friend is right to talk about removing unfairnesses. There are a number of unfairnesses in the Bill that affect carers. The Conservatives seem blind to the impact of their measures on carers. Can my right hon. Friend say whether we will table an amendment to exempt carers from the benefit cap? Carers should not be affected by the benefit cap and they should never have been affected by the bedroom tax, but the Government would not listen about that either.
Stephen Timms:
My hon. Friend is absolutely right. That will indeed be the subject of one of our amendments, because at the moment carers who do not live with the person they are caring for are caught by the cap, and they should not be.
I want to turn to the impact of the Budget changes on tax credits and on universal credit, some of which are in the Bill and some not. Of course the increase in the minimum wage is welcome, but it does not make up for the measures in the Budget, though mostly not in the Bill, that cut tax credits for working families. The claim that they do make up for it—the Secretary of State repeated it in his speech—is, according to the Institute for Fiscal Studies, “arithmetically impossible”. The problem will be especially bad in the next couple of years. The increase in the national minimum wage is phased in over five years, but big tax credit cuts hit immediately next year. Over 3 million working families will lose over £1,000 a year on average, and work incentives will be cut. That is the reason we voted against the Budget. When the Government bring forward the statutory instruments to implement those huge cuts to the incomes of working families, we will vigorously and fiercely oppose them.
James Cleverly (Braintree) (Con):
Do Labour Members not understand the fundamental idea that being in work should always make people better off than being out of work? If so, will the right hon. Gentleman lead his party through the Lobby in support of the proposals in this Bill that make people better off for being in work?
Stephen Timms:
I fear that the hon. Gentleman did not understand the Budget. According to the Institute for Fiscal Studies, the Budget reduced the income of 3 million working families by over £1,000 a year on average, and in many cases it lessens the incentive for the first person in a household to go into work. He need only read the very clear analysis of that point by the IFS.
Huw Irranca-Davies (Ogmore) (Lab):
My right hon. Friend goes right to the heart of one of the difficulties involved. I support the idea of getting away from taxpayer-funded poverty pay to a situation where people are paid a genuine living wage. The IFS analysis shows clearly that the people most affected by this change are working families in the second lowest decile. If it goes through, together with the other changes, I will have to go back to my constituents and explain why I have made them poorer in work.
Stephen Timms:
My hon. Friend is absolutely right to highlight this, because the IFS is absolutely clear that the cuts in tax credits target working families. Those people will lose out from the changes not in this Bill but in the Budget—that is why we voted against them. This is not about making work pay; it is about making working families pay. As the party of working families, we will be fighting those changes tooth and nail in the period ahead.
Ms Karen Buck (Westminster North) (Lab):
Returning to my right hon. Friend’s commitment to amend unfairnesses in the Bill, will he confirm that one of his amendments might tackle the obscenity of a woman who has been raped having to prove to the Department for Work and Pensions that she has been raped in order to be able to claim tax credits in future?
Stephen Timms:
We will have to hear from the Government how they envisage that part of their proposal working, but I can well understand the concern that my hon. Friend raises. Let me turn to the individual measures in the Bill, starting with the benefit cap. We support the principle that work should always pay and that people should be better off in work than on benefits. That is why our manifesto supported a household benefit cap and the idea that it should be lower in areas where there are lower housing costs.
Lyn Brown (West Ham) (Lab):
Does my right hon. Friend accept that Conservative Members do not seem to understand that two out of three children growing up in poverty are in working households?
Stephen Timms:
My hon. Friend is absolutely right. For the first time, the majority of children below the poverty line—quite a significant majority, as she says—are in working families. That is a reflection of how things have gone over the past few years. To avoid hardship and unfairness with the reduction of the benefit cap, we will press for some people to be protected from the cap. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) referred to the position of carers. Under the current cap, carers who live with the person for whom they are caring are exempt, yet 8% of those affected by the cap are carers. That is because carers who do not live with the person they are caring for are included in the cap. We want that to change. We think that those with the very youngest children should not be affected by the cap. We also want protection for those affected by domestic violence. As it stands, those who have been affected by domestic violence can be exempted from job-seeking requirements at the jobcentre, but if they are living in supported accommodation a cap will apply. The amendments that we will publish tonight would exempt them along the same lines as the current exemption in jobcentres.
It is absolutely vital to keep the implementation and the impact of the benefit cap policy under scrutiny. There must be jobs for people to move into and childcare available to help them. We need to be vigilant against increases in homelessness and child poverty. We also need to make sure that the policy does not have knock-on consequences for councils and others which mean that it ends up costing more than it saves. If the Bill goes ahead, we will seek to add a requirement for the Secretary of State to report to Parliament within a year on the impact of the policy.
There do need to be some safeguards in place, as I have been spelling out. Indeed, the Government themselves have recognised the need for a fund to protect people in exceptional circumstances. We welcome the extra £150 million for the fund for discretionary housing payments to help mitigate the worst impacts, but it will not be enough. Many local authorities have already exhausted their funds, which are vital in preventing those affected from becoming homeless. With the cap now lower, there will be more demand for discretionary help. We will therefore want to amend the Bill to require the Social Security Advisory Committee to review the funding for discretionary housing payments each year to make sure that sufficient resources are available.
Caroline Lucas:
The right hon. Gentleman has talked a lot about child poverty. The benefit cap, according to the Government’s own figures, will push a further 40,000 extra children into poverty, yet he is talking about some amendments around the edges. Will he explain how much extra child poverty is acceptable to Labour Front Benchers?
Stephen Timms:
As the hon. Lady well knows, the big impact on child poverty will come from the huge cuts in working tax credits and other changes not in this Bill but elsewhere. I hope that she will join us in fighting very strongly against those changes when the House has the chance to do so.
Andrew Bridgen:
The shadow Secretary of State is making a brave effort to defend whatever his party’s policy is on this, but he has very little credibility because the country knows that under the previous Labour Government the number of workless households doubled, so Labour policies not only trap people in welfare but trap people in poverty.
Stephen Timms:
Child poverty fell dramatically under the previous Government; now it has plateaued. I fear that because of measures announced in the Budget, it is going to rocket, and we are determined to stop that happening if we can.
Another reform in the Bill that we support in principle is the provision to turn support for mortgage interest into a repayable loan. That is a sensible step, in principle, given that the benefit enables homeowners to retain an asset and potentially gain substantially from rising house prices. However, it must not make affordability problems worse for people struggling to stay in their homes. Repayments must not tip people into repossession and homelessness. The Secretary of State did not tell us what arrangements are proposed for repaying these loans. We will argue that those who access that support should be able to defer repayment until they sell the property without pressure from the Government to do so. The Budget announced an increase in the waiting period for support for mortgage interest from 13 weeks to 39 weeks. That is too long. As it is a loan scheme, why make people wait, particularly as that could force them into the hands of loan sharks? With support for mortgage interest becoming, in effect, a form of low-risk consumer credit, it should be readily available without nine months of delay to those struggling to make repayments.
We welcome the plans to reduce social rents, which will save 1.2 million households £700 a year, but we have grave concerns about the impact on housing associations and local authorities. They will face a huge reduction in rent revenue, drastically undermining their capacity to borrow and to build. The Office for Budget Responsibility says that many fewer homes will be built; the National Housing Federation puts the figure at 27,000. We will table amendments to address that.
Catherine West (Hornsey and Wood Green) (Lab):
Is my right hon. Friend aware that anything up to billions of pounds will go missing from local authorities? If we lifted the cap, they could build more homes and thereby help address the terrible housing crisis, particularly in London and the south-east?
Stephen Timms:
My hon. Friend is absolutely right. Affordable home building is already at a historic low, and the Government need to stop making things worse. We will table an amendment requiring the Secretary of State to produce a plan to make up the shortfall in house building funds that will result from this change.
Jeremy Corbyn:
Obviously, a reduction in local authority rents is good for tenants—I fully understand that—but does my right hon. Friend know whether the Government have given any consideration to the effect that a consistent drop in rental income over five years will have on the housing revenue account; on housing maintenance, including of the common areas of estates; and, of course, on any future building programme that could have been funded by the housing revenue account?
Stephen Timms:
My hon. Friend is absolutely right. The proposal will affect not only new house building funds, but funds for maintaining existing stock. The Secretary of State needs to explain how that shortfall will be met.
We support the aim to provide 3 million apprenticeships, but the Government need to do more than just publish a target in a Bill. We want quality apprenticeships. There is deep concern among businesses and others that the quality of apprenticeships is being watered down in order to increase their numbers, so we will table an amendment to require that the UK Commission for Employment and Skills should provide an independent assessment of whether quality is being delivered.
Matthew Pennycook (Greenwich and Woolwich) (Lab):
Does my right hon. Friend agree that the concern about the impact of the changes to housing rental income relates not just to the immediate shortfall in funding, but to the uncertainty they will create among registered providers, whose business plans are drawn up five, 10 or 15 years in advance?
Stephen Timms:
My hon. Friend is absolutely right. Attention has been drawn to that issue, not least by the Financial Times, which has reported that housing associations’ business plans and their loan covenants and agreements with lenders could be at risk, and that even some big associations could go bust. The implications are very serious.
Richard Graham (Gloucester) (Con):
The right hon. Gentleman is a reasonable man, so I am surprised that he cannot see the advantages of the housing policy in, first, reducing rents for large numbers of tenants who are among the poorest people in the land; secondly, obliging housing associations to make a 1% productivity saving each year, which is very small compared with other parts of the public sector; and thirdly, reducing the welfare spend and therefore the budget deficit. Surely they are all advantages.
Stephen Timms:
I think the hon. Gentleman was momentarily distracted, because I have welcomed both his first and third points. We welcome the fact that rents are being reduced, but he needs to recognise the impact that the changes will have. As I am sure he will be aware, housing associations do not share his rather sanguine view of what the changes will mean, particularly for new house building at a time when we all recognise the need for substantial new socially rented housing, which is not being delivered at the moment.
The Bill does not provide a definition of “full employment”. In line with recent research and the previous Labour Government’s definition, our amendment will set the full employment target at 80% of the working-age population. To pick up on a point rightly made in an intervention by the hon. Member for Enfield, Southgate (Mr Burrowes), in our view the annual report on progress to full employment must also set out progress on the target to halve the disability employment gap.
We will support policies that make work pay and increase opportunity, but where the Government are wrong we will not hesitate to say so. The Conservative party promised in its manifesto that it would “work to eliminate child poverty” It is now absolutely clear that it did not mean it: the Bill abandons any pretence that it did. Instead of eliminating the scandal of child poverty, the Bill attempts to eliminate the term. Labour in government was committed to reducing the appalling levels of child poverty left behind by the Thatcher and Major Governments, and we did so. We introduced the Child Poverty Act 2010, with cross-party support, including from the Secretary of State when he was in opposition and the Conservative party. It contained clear targets to reduce absolute and relative poverty, persistent poverty and material deprivation.
We have known for some time about the debate in the Conservative party about the validity of the relative poverty measure, but now it is not just changing the definition. It is interested not in stopping child poverty, only in stopping people talking about it. It is exactly the same with food banks: the Tories want to stop people discussing them. Clause 6(9) tells us that we should not refer any more to the Child Poverty Act and that instead it is to be known as the life chances Act, but there are fewer life chances for a child growing up in poverty, and poverty needs to be reduced. Getting rid of the targets and measures leaves the Government with no commitment to tackle child poverty at all, just a requirement to publish a mix of loosely connected statistics. Instead of removing child poverty, the Bill seeks simply to remove it from the lexicon.
John McDonnell (Hayes and Harlington) (Lab):
My right hon. Friend is, like me, a London MP. The driver of child poverty in my constituency is a combination of low pay and high private rents. When the cap was introduced, the Prime Minister advocated—there was an element of logic in this—the idea that it would reduce rents in the private rented sector. That has failed in my area and right across London; rents have increased significantly. Have the Government produced any evidence to prove that the cap reduced rents in the private sector at all?
Stephen Timms:
I certainly have not seen such evidence. We have just seen the impact assessment, and the figures are in there, so we will have to see what information they provide. I am worried about the proposal—it was made in the Budget, but it is not in the Bill—of a cash freeze in local housing allowance for the next four years, irrespective of what is happening to rents in London and elsewhere. The child poverty changes are a shameful attempt to brush under the carpet what should be right at the forefront of Ministers’ minds as they make policy and manage the economy. It is, I am afraid, the final nail in the coffin for compassionate conservatism.
Chloe Smith (Norwich North) (Con):
It is always a mystery to me why more Labour Members do not agree with the right hon. Member for Birkenhead (Frank Field) and, indeed, Alan Milburn, who think that the Government’s proposal to measure the root causes of child poverty is an improvement on what went before. Why does not the right hon. Member for East Ham (Stephen Timms) agree with them, or indeed with another 50 of his colleagues? Is it not the case that Labour is a shambles?
Stephen Timms:
I have no doubt that my right hon. Friend the Member for Birkenhead (Frank Field) will contribute to the debate, but I can tell the hon. Lady that he feels very strongly, as we all do, that this huge hit on 3 million working families—it will take more than £1,000 a year from them, with tax credit changes coming in next year—is a very bad thing to do. It will let down working families, and all Labour Members will fight hard against the iniquitous change being made by the hon. Lady and her colleagues.
Before the election, the Government promised to protect those with disabilities from welfare cuts, but that promise has been broken. As has already been discussed, Parkinson’s UK reckons that there are currently 8,000 people in the work-related activity group with progressive and incurable conditions such as Parkinson’s and multiple sclerosis. Macmillan, in opposing the provision, points out that “thousands…will experience a significant drop in support at some point during their cancer journey.”
As my hon. Friend the Member for Easington (Grahame M. Morris) said in an intervention, that group includes people with learning disabilities and many with mental health problems. The Bill reduces the level of support for new claimants by nearly £30 a week, from £101 to £73. That change introduces a new perverse incentive, because it increases the incentive for people with health problems to get into the support group by providing a higher payment, meaning that even more people will not get help to return to work.
The recent marked increase in the ESA case load, at a time when unemployment has come down, has been sharpest in the support group. Anyone in the support group will be seriously deterred from taking the risk of trying employment, for fear that it will result in their receiving a much lower level of support if they are then reallocated to the work-related activity group. I say to the Secretary of State that a particular worry is that young people with mental health problems, who ought to be getting help to return to work, are being abandoned in the support group at the moment. We therefore want the ESA measures removed from the Bill.
The Bill seeks to restrict support provided through tax credits and universal credit to families with more than two children. We will aim to amend the Bill in Committee, for example to protect families with multiple births or those whose claim arises because of exceptional circumstances. We do not support locking in a cash freeze for four years for tax credits and benefits. We recognise that reducing the deficit will require savings on indexation, but those decisions should be made annually so that actual inflation can be taken into account. We do not support the accompanying sharp reductions in income thresholds for tax credits and the corresponding cuts to work allowances announced in the Budget, which will be legislated for outside this Bill. They will be a huge setback to work incentives. The whole point of universal credit was supposed to be to improve work incentives; now it is being hobbled even before it has properly got started.
We want progress towards full employment. We want demanding targets for apprenticeships and help for troubled families. We want a household benefit cap, and to make sure that families are always better off in work. We want support for mortgage interest and reductions in social rents that will deliver savings to the taxpayer. We want better economic opportunities, and we want social security to be fairer and more affordable.
However, children who are growing up in poverty—as we have heard, the growing majority of them are in working households—need a Government committed to improving their position. People who because of illness and disability are found by the Government’s own tests to be not fit to work, as can happen to anybody, need social security to assure them of a decent basic standard of living. Families who are doing the right thing and going out to work, often when they are already struggling with low or stagnant wages and increasing insecurity and uncertainty about their future, need a Government who are on their side, not one who will pull the rug out from under them, as the tax credits announcements in the Budget will do.
These are not just matters of morality and social justice, although they most certainly are; this is also about how we secure our future prosperity and stability, ensuring that everybody in Britain can play their part, make the most of their talents and make the most of the ambitions of all.
Labour’s amendment was lost by 308 votes to 208. The Second Reading was passed by 308 votes to 124, with 48 Labour MPs defying the official line to abstain (Labour’s Kelvin Hopkins was a Teller for the Noes, but included among those recorded as opposing the Bill.) UKIP MP Douglas Carswell voted with the Tories against the amendment and in support of the Bill.
In addition to the 48 Labour MPs, those who also voted against the Bill were 55 SNP (SNP’s Owen Thompson was a Teller for the Noes), 7 Lib Dems, 7 DUP, 3 Plaid Cymru, 3 SDLP, 1 Green, and 1 Ulster Unionist (UUP). Of the 48 Labour MPs who voted against the Bill, 34 supported the amemdment.
The 13 Labour MPs who abstained on the amendment and also voted against the Bill were: Diane Abbott, David Anderson, Richard Burgon, Jeremy Corbyn, Margaret Greenwood, Imran Hussain, Sir Gerald Kaufman, Ian Lavery, John McDonnell, Michael Meacher, Ian Mearns, Grahame M. Morris, David Winnick.
Labour Affairs Magazine 