Welfare Spending: Economic Impact

1. What discussions he has had with the Chancellor of the Exchequer on the potential impact of future welfare spending on the economy.

21. What discussions he has had with the Chancellor of the Exchequer on the potential impact of future welfare spending on the economy.

We inherited from the Conservative party a welfare system that forced too many people out of work and on to long-term benefits, while leaving millions of children in poverty. We have begun to address that through reforms to universal credit, increased employment support, more help for children in poverty and, now, a youth guarantee to offer work and training to young people who are unemployed.

The oldest law in economics is that if we tax something more, we get less of it. The inverse is also true: if we subsidise something more, we get more of it. Why do this Government believe that subsidising unemployment through huge increases to the welfare bill will not lead to more unemployment? Will the Secretary of State accept that those changes disincentivise work, and will he tell the House how much the Budget is expected to increase unemployment?

The Conservative party watched the number of those who are not in education, employment or training grow year by year and did nothing about it. The hon. Lady will find that, at the Budget a couple of weeks ago, the Office for Budget Responsibility projected that the levels of people in employment will rise in every year of the forecast.

In their first Budget, the Government hiked taxes on employers, leading to a sustained increase in unemployment. Earlier this year, we saw a botched attempt to reform welfare, which is now going to cost us more in welfare spending, and in the Chancellor’s “Nightmare before Christmas” Budget, she hammered hard-working families with yet more tax rises. Why do the Government loathe aspiration and hard work in favour of an economy based on welfare and state dependency?

The hon. Gentleman will find that the welfare budget had risen three times as fast as a proportion of GDP as it is projected to rise under this Government. We have begun to make changes through the reform to universal credit—that is more change in the system than his party introduced in many years—and, critically, to employment support for both the long-term sick and disabled and the young unemployed.

Around 600 young people in Rochester and Strood are claiming unemployment benefits; many more are NEETs—not in education, employment or training—and are not known to the Department for Work and Pensions. Does the Minister agree that the best way to improve their futures and reduce the welfare bill in the long term is through targeted support programmes, such as the youth guarantee, which will get them into good, stable jobs and off benefits?

We have a very different approach to the issue of NEETs from the Conservative party. We are not going to sit and look at the graph rise year by year without offering young people hope and aspiration for the future. That is why we brought forward a package, with £800 million of backing, to offer training or work to the young unemployed, and ensure that they have options in life rather than a life on benefits.

I welcome the child poverty strategy published on Friday. Will the Secretary of State outline what more needs to be done to end child poverty for good?

It is estimated that the child poverty strategy we published on Friday will lift more than 500,000 children out of poverty by the end of this Parliament. Critically, most of the children in poverty are living in households where someone works, so setting up the working against the non-working is completely contrary to the facts on child poverty.

I call the shadow Secretary of State.

In the Budget last month, the Chancellor put up taxes in order to spend £16 billion more on welfare. The Government chose to make working people worse off in order to spend more on benefits. The sickness benefit bill is now set to skyrocket to more than £100 billion by the end of this decade. The Secretary of State likes to blame us, but his predecessor, the right hon. Member for Leicester West (Liz Kendall), cancelled our reforms, and Labour Back Benchers stymied the Government’s. Working people are saying to me, “Why bother? I’d be better off on benefits.” The country cannot afford that. The Secretary of State must know this—he is no fool—so when is he going to come up with some welfare savings?

The Conservatives’ zeal for change is very touching; it is just a pity that they only discovered it the day they stopped having any responsibility for running the welfare system. Let me remind the hon. Lady that this is the system that they created, and these are the gateways to benefits that they created. The reform that they put forward was struck down by the courts, and the incentives in the system that she attacks are the ones that they legislated for. Now we have begun to change the system, with the first change in universal credit incentives for years, more support for the long-term sick and disabled, and a youth guarantee that offers hope where previously there was only neglect.