Labour Dreams

Labour Dreams

I recently spoke in the Budget debate. Waiting around 5 hours to be called and not knowing whether you will get in before the debate closes is one of the aspects of Parliament that I least enjoy. But it does have the advantage of giving you a very good understanding of where the opposition is coming from which is that Labour have now moved to a position where they do not accept that their profligacy in government made a scintilla’s worth of difference to the economic position that we now find ourselves in – opposition speaker after opposition speaker lined up to effectively claim that our difficulties were solely due to the banks or the American sub-prime mortgage market. This, ‘anyone but us’ mantra is deeply disingenuous. There is no doubt that the issues Labour highlights played a part in the UK’s economic trials but to suggest that the previous government’s ‘spend spend spend’ played no role is frankly ridiculous. Testament to that is that we are now paying more in interest alone on our national debt than we spend on education or on defence, the foreign office and overseas development combined. That interest figure is £120 million a day – yes a day – think of the healthcare, education or policing that could be provided for that extra cash if we weren’t having to pay it over to creditors.

As I waited on the green benches I was hoping for at least one of the members opposite to provide us with some alternative to the savings that the government is making to get us out of our malaise but nothing came - just a monotonous mantra of denial and objections to cuts. Labour have to be careful here as I do not believe that the public will ultimately buy this position – most of us recognise that savings are going to have to be made.

Labour’s actual position as far as we know it is in fact confused – on the one hand they state that they are anti this cut and that cut (which is actually another way of saying that they would in consequence increase the deficit or taxes or both) but on the other hand they espouse the rhetoric of fiscal responsibility (they will make cuts of at least 80% of the level being pursued by the government). This conflict of positioning was only added to when Leader of the Opposition was happy to address and offer his support to a recent TUC rally with a speech in Hyde Park where many of those who cheered him held placards calling for no cuts whatsoever. So where does Labour stand? As Ed Miliband strutted his stuff in the fresh spring air he invoked to his cause the mantle of Martin Luther King – it was great theatre but I could not help but feel that whilst he was quick to sell the dream there was little substance behind it.

You can view my speech at http://www.parliamentlive.tv/Main/Player.aspx?meetingId=8049 (Scroll on to 08:49pm).

Welfare Reform

The Welfare Reform Bill has now had its Second Reading. Iain Duncan Smith’s quest to understand how best to deliver social justice has been a long and worthy journey working alongside politicians right across the political spectrum including Labour MP Frank Field, a man I admire greatly. The background is stark. 5 million people are on out of work benefits. 1.4 million have been so for over a decade. Expenditure on these benefits has risen from £52 billion in 1996/97 to £74 billion today.

The arguments for welfare reform are not simply about cost they are about making changes that ensure that the system is fair and works. Current perverse incentives include the fact that for many, the loss of benefits on going into employment means that they are simply better off not working. For some the effective marginal tax rate involved (taking into account benefit loss) can be as high as 96%. And that does not take into account the cost of getting to and from work. Another issue is the complexity of the benefits system – it is often impossible for someone to even work out if it is worth their while getting a job. The result is that people get stuck on benefits when they would otherwise be working. This can be especially tough on those children who grow up in workless households (around 1.9 million at present).

The Government is simplifying the benefits system by creating an easier to understand Universal Credit that will replace the current myriad of benefits. This new approach will ensure that those taking work are always financially better off by doing so. This will be achieved by withdrawing the Universal Credit gradually through time rather than as soon as someone takes up a job. A vitally important change.

Other columns by Mel Stride