Hands in the papers: Harriet Harman admits we are right on welfare, why can't Labour?

Greg Hands MP, The Daily Telegraph
Tuesday 14th July 2015

Things have come to a pretty pass when Labour's acting leader Harriet Harman is the closest her party comes to a voice of reason. But that's the position in which the Opposition now finds itself. For daring to suggest that Britain's working age welfare bill is too high and she might therefore support some of George Osborne's sensible savings, Miss Harman has managed to plunge Labour into a leadership crisis without a leader.

The party's resurgent hard Left is in uproar, and one by one its lacklustre field of leadership candidates has come out to oppose some or all of our proposed reforms to the welfare system. It would be laughable were it not so serious. After Labour's 13 years in power, we inherited a society where low wage jobs were subsidised by the taxpayer, with welfare payments intended for the low paid being made to nine out of ten families with children. A tax credits system that Gordon Brown said would cost just over £1 billion in its first year ended up costing 30 times that.

Graph 1 

And so at the heart of the Budget is the introduction of a new, compulsory National Living Wage for everyone over 25. It will mean a direct pay rise for over 2.5 million people, and for someone working full time on the national minimum wage it will mean a cash boost of £5,000 a year by the end of the decade. In total, independent forecasters say six million people can expect to see a pay rise as the new living wage causes a ripple effect up the income distribution We're also increasing the personal allowance again, to £11,000, and implementing the first inflation-busting increase in the 40p income tax threshold for years, to £43,000.

Our series of welfare changes will save £12 billion a year - exactly what we said we'd save before the general election. It's about creating a welfare system that's fair to the most vulnerable, who need its support, but also fair to the taxpayers who have to pay for it.

We are protecting disabled people, pensioners and the most needy. But we are going to bring the tax credits bill under some control. Wherever possible, we've limited our reforms to future claimants rather than taking money away from people who are already receiving it. For instance, we'll limit the bonus worth up to nearly £3,000 a year for every extra child in the tax credits system to the first two children, only for those claiming in the future.

Families who earn their own money have to make difficult choices about whether they can afford to have more than two children, and it's right those relying on welfare should do the same. We're also freezing working age benefits for four years and bringing down the salary at which people will start to have tax credits phased out.

 Graph 2

The benefit cap we introduced in the last Parliament, ensuring no workless household could receive more than £26,000 a year, is being brought down to £23,000 a year in London and £20,000 a year outside.

It's a policy that's working - and has encouraged tens of thousands of households affected so far to choose work over welfare. In all, these are moderate, sensible reforms to a welfare system that Labour allowed to spiral out of control. You might think that after opposing each and every difficult decision we made on welfare in the last Parliament, Labour would have learned its lesson after seeing its position so comprehensively rejected by the working people of Britain.

At the weekend, Miss Harman suggested Labour would not oppose our key welfare savings, including the lower benefit cap and the limits on child tax credits. "We cannot simply say to the public you were wrong at the election," she said. But just 24 hours later, she appears to have been forced into a humiliating U-turn. Labour leadership candidates Yvette Cooper and Andy Burnham - both predecessors of mine as Chief Secretary when Labour was making its ruinous decisions on public spending - have defied her, as, more predictably, has the unreconstructed socialist Jeremy Corbyn. Even Liz Kendall, leader of the sad and dwindling New Labour band, appears to have opposed billions of pounds worth of savings.

None of the Labour candidates says where the money is coming from to pay for this extra benefit spending. Or their plans to reverse public sector pay restraint. Or to reverse changes to student loans. Will they put up working people's taxes? Borrow yet more money we don't have? Or slash the £10 billion a year increase we've promised for our NHS?

What we've seen so far proves Labour has learned absolutely nothing from their election defeat. They put themselves on the wrong side of the argument in 2010, and they paid the price at the election in May. It's now clear they're determined to make the same mistake again. Far be it for me to give the Labour Party advice on its leadership contest. But as things are going, perhaps it's time for them to call the whole thing off and keep Miss Harman in the job.