I beg to move,
That this House calls on the Government to reverse its decision to cut the universal credit work allowance, which is due to come into effect in April 2016.
I start by wishing you a happy new year, Mr Speaker. I wish the same to Ministers, Members on both sides and all in this House, and especially to the Secretary of State for Work and Pensions, who has just joined us. I am disappointed that it will not be the Secretary of State who responds to the Opposition day debate in the name of my right hon. Friend the Leader of the Opposition. This is the second time that the Secretary of State has failed to address the House when questions have been asked of his Department. I am not sure what his excuse is today, but it is a shame that he is shirking his duty to speak to the House today.
Perhaps we ought to take a lesson out of the playbook of the right hon. Gentleman’s Department and think about sanctioning the Secretary of State if he continues to shirk work in this way. Some 600,000 people in the UK were sanctioned by him last year, some for failing to turn up to a job interview, some because they were selling poppies, some because they were attending their father’s funeral, and one because they had had a heart attack. Someone suggested to me that an appropriate punishment for the Secretary of State—a sanction—might be to ban him from the House of Commons canteens for a month or so, thereby forcing him to go and visit a food bank at last.
It is extraordinary that the Secretary of State cannot be bothered to defend his pet project, universal credit, today. Perhaps it is because he thinks he is above answering questions from Members in the House of Commons, or perhaps he now agrees that universal credit is indefensible. The changes that we are debating today are among the most radical ever undertaken to social security; they are changes that should have done what the Secretary of State originally intended and made work pay for working people on benefit—on in-work support—and should have made millions of people in this country better off, but after the recent cuts I fear they are set to make millions of people worse off.
My constituency was one of the first places in Britain to pilot universal credit. Analysis by the House of Commons Library shows a single mother of two working full-time in my constituency on the minimum wage and on UC will have a net income loss of £2,981 next year. My constituents will be the first of millions of people in the country to be hit by these cuts, because they were the first in the country to be put on UC. Does my hon. Friend agree that this is just not fair and another example of Tory broken promises?
I agree wholeheartedly. In fact I believe that in my hon. Friend’s constituency 12,000 people will by 2020 be subject to far lower incomes as a result of the cuts to UC. That is 12,000 people—less the northern powerhouse than a northern workhouse.
Let me be clear about what we are talking about, because this is complicated; UC is a bit of a black box and I think many people out in the country—and many on the Tory Benches—do not quite yet appreciate what is going on and have believed the smoke and mirrors from this Government. The changes that were snuck out—mentioned in passing in last summer’s Budget and then leaked out piecemeal in a statutory instrument subject to negative resolution that we had to pray against in order to get it even debated in this House—will halve the value of the work allowance under UC, which is the piece of UC that is essential to making work pay.
Let me illustrate exactly the nature of those changes to the work allowance by giving a few examples. For a single mother with one or more children, the work allowance will be halved from April of this year from £8,808 to £4,764, a reduction of £4,044. In cash terms, that working mother will lose £2,628 next year. That is the nature of the loss to a single mother. For a joint couple living and working together, one or both with limited capacity to work as they are disabled, their budget —the work allowance—will be cut from £7,700 to £4,700, a loss of £3,000 in their income. A single individual in receipt of UC will lose everything—a £1,332 reduction; a net loss to their income of £865.
I am so glad my hon. Friend has mentioned single parents and how they are going to be hit. The last Labour Government did us all proud with the new deal for lone parents. Does my hon. Friend agree that the fate that now befalls single parents in this country is an absolute reversal of what past Governments did to help them work?
Let me be very clear: under the Tory Governments in the 1980s I remember the right hon. Member for Wokingham (John Redwood) being dragged through the newspapers in this country for damaging the reputation of working mothers almost irreparably after comments he made about the St Mellons estate in Cardiff, and the Tories are back on the same track. In their sights are single mothers. They are the biggest single group of losers from all these changes to tax credits and UC, and it is an absolute disgrace that the Tories are undoing all the good work the last Labour Government did.
We are not talking about families in receipt of £57,000; we are talking about families on low and middle wages. We are not talking about people who are in the highest tax bracket, and it is a complete misrepresentation of the facts and of this debate to try to turn this discussion to high-earning taxpayers. That is not what we are talking about.
I want to come back to the process the shadow Minister outlined at the beginning of his remarks. He said this measure was sneaked through by a statutory instrument. Has he read the many questions Opposition Members, including myself, asked at the statutory instrument Committee about the impact of this change, such as on carers, particularly young carers?
We have repeatedly asked for any sort of impact assessment in respect of these measures, and as usual the Government signally fail to offer one. I believe that in the hon. Gentleman’s constituency 13,000 households will lose out by the end of this Parliament as a result of these cuts, and in the constituency of the hon. Member for Hertsmere (Oliver Dowden) I believe 5,000 people will lose out by an average of £950 by the end of this Parliament; perhaps he ought to reflect on that when he votes on this motion later today.
I commend my hon. Friend on bringing this motion to the House today, because the impact of these changes will be devastating to a very great number of my constituents in Tameside who, because they go through the Ashton-under-Lyne jobcentre, were part of the pilot for UC. Does my hon. Friend agree that there is another con here in that the Secretary of State has indicated that the £69 million support fund will help to bring in transitional arrangements, but that fund is used for myriad other purposes, and we already know the impact of the cuts to working families of UC changes this year alone will be £100 million?
My hon. Friend is absolutely right as usual, and I think 10,000 of his constituents will eventually be affected with lower incomes as a result of these changes. He is also right about the transitional protections and the way in which the Secretary of State has, I think, sought to misrepresent those as covering the losses; I will come to that later in my speech.
That is kind—and inaccurate. Like many Opposition colleagues I was besieged by constituents concerned about their tax credit cuts in the run-up to the spending review. They were horrified that a Government who said making work pay was going to be their mantra should do this to working people. Does my hon. Friend think the 600,000 Londoners on tax credits—7,000 in my constituency—will be equally horrified to know the sting is still in the tail and working people are going to lose out dramatically as UC is rolled out?
I think that, more than that, they will be absolutely cheesed off to the back teeth that this Government have tried to pull the wool over their eyes, because the truth is these are precisely the same cuts that were proposed through tax credits—almost exactly the same amount of money will be saved through these cuts to the work allowances as was previously proposed.
I have just a minor detail: every penny paid out in benefits has to be raised in tax out of working people’s taxes. The money paid out in tax credits is not wages; it is means-tested benefits. Does the hon. Gentleman not recognise that the great advantage of UC is that it reduces the harsh impact of means-tested withdrawal of income?
Where do I start? I start by telling the hon. Gentleman that 7,000 of his constituents will be hit by this by the time he next stands before them at the election, and he ought to reflect on that. More importantly, I tell him that it is precisely people in work paying tax—working hard, long hours, many on the minimum wage, working every hour they get—who are getting hit by his Government. That is what these cuts are doing. This is not a different set of people—they are not the scroungers that the Government like to talk about; they are the strivers, and they are being hit by the Government. The truth, as the Institute for Fiscal Studies has said, is that there is no difference between these cuts and the ones to tax credits that the Government proposed, on which they U-turned. According to the IFS, the U-turn makes “no difference”. The Government will end up saving the same £5 billion, at the end of the Parliament as opposed to the beginning, and they will strip £10 billion out of the pockets of working families. They should be ashamed of themselves.
Order. The hon. Gentleman’s mellifluous eloquence has to be interrupted for a moment for me to make this obvious point. Whatever their dissimilarities, the hon. Members for Elmet and Rothwell (Alec Shelbrooke) and for Birmingham, Yardley (Jess Phillips) have one thing in common: they are extremely excitable. They need to calm down a little bit, not least so that we can hear the flow of the shadow Secretary of State’s eloquence and the eloquence of his flow.
Disabled workers will lose £2,000 a year, and as my hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) reminded the House, the worst affected group will be single mothers. A single mother working full time on the new, shiny national living wage will be £3,000 worse off. How have the Government justified that? They have made a series of attempts to defend it. The first was to refer to their manifesto and say, “We said we were going to deliver £12 billion of cuts from welfare, and here we go.” What they did not say at the election, as I recall, was that they would be stripping the money from working families. I do not recall them talking about nursery nurses, security guards or shop workers on the minimum wage as the sort of wage scroungers they now seek to vilify, yet those are the very people who will be scragged by the change.
My hon. Friend was asked whether he would find alternative ways of raising money instead of taking it from the disabled, single parents, carers and working families. Would it not be more appropriate to collect tax from the many top companies in the UK that are avoiding paying their tax, rather than to steal from low-paid families as the Government propose?
I found it interesting to learn, as part of the massive data dump before Christmas, that some of our largest banks such as J. P. Morgan and Merrill Lynch paid absolutely no corporation tax in the UK last year, in the same week when we learned that there would not be an investigation of the practices of our banks. Others can draw conclusions from that; I will stick to the subject at hand, which is universal credit.
I turn to transitional protection for those affected. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the Government keep telling us that there will be transitional protection, and I will go so far as to concede that that is true—sort of—for some of the 350,000 people who will be on universal credit by April.
Two hundred and fifty thousand.
The Minister says it is 250,000, but 350,000 is the latest estimate that I have seen from the Office for Budget Responsibility. Perhaps it is wrong—it could be wrong about other things in future, as well. However, there will not be transitional protection for the 5.8 million people who will eventually be on universal credit. Even for the 350,000 who are currently on it or will be on it by March, there will not really be transitional protection if they undergo anything that constitutes what the Government call a “serious change of circumstances”. In that case, the maintenance of their in-work support at tax credit levels will stop. It will interest the House, especially given the Secretary of State’s interest in marriage as an institution, that getting married will constitute a serious change of circumstances. If someone who is on tax credits and enjoying transitional protection gets married, the Secretary of State for Work and Pensions will take that money away from them.
There will be no protection whatever for any of the millions of new claimants by 2020. The Secretary of State has implied on several occasions that there will be transitional protections. Indeed, when he intervened on me in the debate before Christmas—he was not leading for the Government in that debate—he said explicitly:
“We are transitionally protecting those who are moving on to universal credit.”—[Official Report, 7 December 2015; Vol. 603, c. 696.]
Unfortunately, the Minister for Welfare Reform, Lord Freud, had to correct him in the House of Lords, saying:
“It is not the same as transitional protection…it might be some more work or it might be upskilling”.—[Official Report, House of Lords, 14 December 2015; Vol. 767, c. 1910.]
In truth, the £69 million fund that the Secretary of State has prayed in aid as transitional funding will in no way make up for the £3.2 billion loss over this Parliament.
The truth came out in the infamous data dump of documents snuck out in Christmas week. Responding to criticism by the Government’s own Social Security Advisory Committee, Ministers had to admit that the only way to recoup the losses would be to work an additional three to four hours a week. That is right—the House heard me correctly. The Government are now saying to a single mother who is working full time on the national minimum wage and looking after her children in the evening and who will lose £3,000 that she has to get another job working an extra three or four hours a week—approximately 200 hours a year—to make sure that she is no worse off. Tell me, Mr Speaker—I cannot see it—how that single mother who has a child at home and who is working full time will, even on the new national minimum wage, be able to work an extra three to four hours a week or 200 hours a year. Is she meant to get a job after work in a bar, in a garage or serving coffee? Is she meant to get a job in addition to the full-time job she is doing during the day and in addition to looking after her children—for example, cleaning in the mornings—to earn an extra few quid?
What on earth is the incentive for that mother to undertake that extra work? I ask that because the other massively damaging effect of the cuts is that they fundamentally undermine and destroy the very premise of universal credit—to make work pay.
I thank my hon. Friend for being so generous and giving way again. I remind him that when the Chancellor announced his so-called living wage, he assumed a rising personal allowance in his calculations in the Budget book that suggested that work would pay. Given the Government’s broken promises left, right and centre, why should any single parent believe what they say?
My advice to single parents is absolutely clear: do not believe a single word that the Government say in response to today’s debate, or what they are telling the country about making work pay and about universal credit. Each and every promise is being broken.
No, I have given way to the hon. Gentleman once.
The Secretary of State used to say that universal credit was a watershed benefit. Indeed, he used to say that it would
“ensure that work pays, and more work pays, for everyone”.
The cuts to the universal credit work allowance have holed that argument below the waterline. The House of Commons Library briefing, which was produced yesterday evening and circulated to every Member, makes it clear that a single mother will have to work an extra 12 hours each week to earn an extra forty quid, at £3.30 an hour, after these changes. Before the changes, she would have got £92 for those extra 12 hours at £7.66 an hour. How on earth is this meant to increase her incentives to go out and work harder and work longer? It is absolute nonsense.
I wonder whether there is something in the integrity of the people the hon. Gentleman speaks about, and whether they will raise their heads high enough to say, “Okay. It’s not great and it’s not the end result, but I am lifting myself and my children off a life of welfare dependency.” In that is a pride. I would like us to talk a little more in those terms and that language.
I have a great deal of respect for the way in which the hon. Lady stood up for her constituents and spoke out against her party and Government Front Benchers on the tax credits changes because many thousands of people would be affected in her constituency. I point her to the document commissioned and chaired by the Secretary of State when he first conceived of universal credit: in his introduction, he demolished the argument she has just made. He effectively said that we could not expect people to work harder simply out of responsibility and moral obligation, and that we needed to introduce incentives. That was the underpinning rationale of universal credit. Unfortunately, these changes—the cuts to the taper rate, the cuts to the work allowance and the cuts to the childcare provision—are fundamentally undermining the initial premise. They are destroying universal credit. In 2020, 5,000 of the hon. Lady’s constituents will suffer lower incomes as a result of the changes to universal credit.
I completely agree, and my hon. Friend’s personal experience ought to be listened to by the Secretary of State and Members on both sides of the House. She will know that 17,000 of her constituents will be hit by the changes in 2020—an extraordinary number of families will have lower incomes as a result of the changes.
The truth is that the changes cannot increase work incentives and will not increase outcomes. They cannot. That is why successive independent experts have come out and told the Government to think again, as they did on tax credits. The Social Security Advisory Committee—the Government’s own advisory committee—tells them to reverse their plans. The Resolution Foundation, chaired by a former Tory Minister, tells them the same. Most recently, and most importantly of all, on 17 December the Government’s social mobility commission, deputy-chaired by a Tory peer, Baroness Shephard, said with great clarity to the Secretary of State in its “State of the Nation 2015: Social Mobility and Child Poverty” report:
“The immediate priority must be taking action to ensure that the introduction of Universal Credit does not make families with children who ‘do the right thing’ (in terms of working as much as society expects them to) worse off than they would be under the current system. That means reversing the cuts to Universal Credit work allowances enacted through the Universal Credit (Work Allowance) Amendment Regulations”.
The commission is right and the Opposition agree, just as we agreed when the hon. Member for South Cambridgeshire (Heidi Allen) and her colleagues urged the Government to go into reverse last time.
In a deft but somewhat selective speech, is the hon. Gentleman not missing the point that universal credit, with a single rate of taper, will make it invariably clear to people that if they work more, they will earn more? Under the current system, taper rates go up to 90%. It is incredibly confusing and many people do not risk taking on extra work because they will have to re-apply for benefits and may be worse off. Universal credit has a beautiful simplicity and will encourage people to work.
I congratulate the hon. Gentleman on his equally deft selectivity. Dare I say that my point is that universal credit might have done all those things? If we had, as was originally envisaged, a 55% taper rate, or even if we had the current 65% taper rate, and if we had work allowances that were double what are now proposed, as was originally intended, universal credit would have made work pay and it would have been an incentive for people to work those extra hours. I have made that plain in my speech. However, with the cuts—the seven successive cuts that have been made since 2012—it will not deliver what was promised. The hon. Gentleman and the country are being sold a pup by the Secretary of State. It was not what was written on the tin when he first brandished it. Conservative Members need to understand that, because thousands of families in their respective constituencies will be affected by those cuts. Many of them will lose as much or more than they would have lost under the tax credit cuts. I say to all Tory Members: join us or tell me how these cuts are different from those they stood against last time around, other than that Tory Members might not quite have the time to realise that these cuts are being made before they next stand in an election. So far as I can see, that is the only plausible reason for their failure to follow their consciences this time and rail against the cuts.
No I did not. I referred to the original document commissioned and chaired by the Secretary of State, in which it was recommended that there be a 55% taper rate. I might also refer to the social mobility commission, which is telling him to go into reverse. It argues that he needs to get back to a 55% taper rate.
The Secretary of State can chunter all he wants, but if he really wants to make an argument in favour of his pet project, he ought to get off his rear end and speak from the Dispatch Box. I would be more than grateful any time he wants to intervene and talk to me about it. As I have said before to our effectively absent Secretary of State—he was very bold to brief the press before the Budget that he would resign if his pet project was touched by the Chancellor—now is the time to go. The Secretary of State’s plans have been shredded by No. 11 since 2012. He said universal credit would be more generous than the benefits it replaced, but it will be £5.7 billion less generous than he promised. It will be £4 billion less supportive of working families than the current system, thanks to the Chancellor’s raids on the Secretary of State’s budget. He said it would make work pay, but as I have shown today, after the cuts the policy is tantamount to asking single mothers to pay to work.
As ever, my hon. Friend is completely right. Nine thousand of her constituents will be worse off. Those among them who are disabled or who are part of a couple in which one or more of them are disabled will lose £2,000 under the cuts. That is a disgrace.
Under this Government, people are working in a period of wage restraint and austerity that we have not seen since the 1920s. This Tory decade promises the lowest 10-year period of wage growth in a century, with gains to workers half those they had under the Labour Government—6% wage growth versus 12%. That includes all the fancy promises about a national living wage.
The living wage will make up just 22% of the losses that working people will incur under the changes. It is misleading to the country and the House to suggest otherwise. Under this Secretary of State, we have a bedroom tax that leaves people without money to pay for food or heating. We have a sanctions regime that has driven some to suicide. Now we have universal credit, which will reduce security and rewards for people doing the right thing and working hard for their families and our society. The Secretary of State should have addressed those questions today and spoken to the House. He should consider his position.
I join the shadow Secretary of State in wishing everybody a happy new year. I am sorry that I am not the person with whom he wished to have this exchange, but this is a real area of passion for me. My background, my school, my work and starting my own business mean that I understand opportunity, which all too often is not a given in society. The changes that have helped shape my journey into politics are integral to why we need to reform the welfare state. That is absolutely key.
Given the background that the Minister has set out, he will well understand why it would have been a mistake to go ahead with the tax credit cuts that were U-turned before Christmas. Why then are the Government going ahead with precisely those cuts for people whose only mistake is to have the misfortune of receiving universal credit instead of tax credits?
That was a very early intervention and, to be fair, I need a little time to expand my argument, which will address those points. An element of patience is needed; I know that we all needed it last night with the late sitting and the reshuffle news. A key point about tax credits was that people argued that all the changes needed to be phased in, and I will set that out.
The welfare system we inherited was simply not working. It was not supporting people to get into work, to stay in work and to progress in work. People were left with unfulfilled potential, languishing on benefits, with little or no incentive to work or to progress in work, and opportunity was stifled. Opportunity should be a given; it should not be stifled.
The truth is that our welfare system had become distorted and complex, as we all know from our casework with residents. Too often, residents were missing out on the benefits they were entitled to because they could not navigate something so complex. All too often, the system firmly shut the door on opportunity, because it paid more to be on benefits than to be in work. We all know that, and the electorate—hard-working families—were quick to remind us of it.
Let me be clear that I say that with no disapproval for those who claim benefits. The system itself was to blame, which is why we undertook to reform it. Our aim was and continues to be to create a system that extends opportunity and ensures that work always pays, moving Britain from a low wage, high welfare, high tax society to a higher wage, lower welfare, lower tax society. It is a common-sense approach, creating a system that is fairer to the taxpayers who face an ever-increasing bill and delivering a welfare system that is sustainable for our country but that, crucially, protects the most vulnerable.
Let me remind the House that welfare spending on people in work rose from £6 billion in 1998 to almost £28 billion in 2010.
It might help the debate if the Minister and his colleagues on the Front Bench had an accurate definition of transitional protection. My hon. Friend the Member for Pontypridd (Owen Smith) made an excellent speech from the Front Bench outlining Labour’s calls for transitional protection, but it seems that that is something that Conservative Members just do not understand. We are having a similar debate tomorrow concerning the state pension equalisation for women. People should not lose out in achieving the principles the Minister is outlining. Why should certain families on universal credit lose out compared with families on tax credit and why will the Government not protect those people so that they do not lose out?
I thank my hon. Friend, who I know has worked incredibly hard in his constituency to help more people get into work. Across the country, more than 2 million more people are in work—record numbers—with record low numbers of people out of work.
Welfare spending overall went up by almost 60% in real terms, costing every household an extra £3,000 a year in 2010. What was the result of all that spending? The number of working people in poverty actually went up by around 20% and nearly one in five households had no one working. That was too often the norm.
Everybody understands the rationale for having a welfare system that incentivises people to work, but I would like the Minister to explain how these proposals, which mean that people have to work longer hours for the same money, will achieve that purpose.
I will now try to make some progress so that I can set that out.
The old approach of taking money from people’s wages and recycling it back to them in handouts was not transforming lives, it was trapping them. Why? It did not provide the right incentives or support for people to get on and realise their ambitions. Our central approach is therefore about ensuring people are better off in work and better off working more.
The Minister is being a little too charitable to the Opposition. I might be being a bit cynical, but did not their policy seek to create a hinterland constituency of people wedded to welfare and therefore reliant on the Labour party? The voters saw through that in May and they are not going back to that again.
There is no need for my hon. Friend to feel that he is being cynical, as the statistics make that very clear.
Through universal credit people can support their families and have the dignity and independence that comes with having a job. We have already made huge progress through our reforms. Employment is at a record high, up by more than 2 million since 2010. Unemployment is down by more than 750,000 since 2010. The claimant count rate is at its lowest level since 1975. The number of people claiming the main out-of-work benefits has fallen by 1 million since 2010. Wages are rising—for 13 months consecutively—higher than inflation. I know that the shadow Secretary of State started talking about the 1920s—an easy mistake to make, perhaps, forgetting about inflation. That is why living standards are up. Business confidence is underpinning all this progress, which the Opposition are—
I will take some more interventions, but let me make a little more progress because they might be on subjects that are coming up.
Against that backdrop, universal credit is removing the barriers to work that existed in the old system. The major reforms that are needed to our welfare system after 13 years of Labour’s culture of dependency are not without difficult choices, but universal credit is designed to provide certainty for claimants and provide the right incentives and support to find work and, crucially, progress in work. That has always been at the heart of universal credit, and it continues to be so. Universal credit policy remains unchanged since the summer Budget, despite attempts by the Opposition to suggest the contrary. The improved public finances allow us to reach the same goal of achieving a surplus while cutting less in the earlier years. We are smoothing the path to the same destination. That is a welcome move and the point I made in response to an earlier intervention.
I want to remind the House of the incentives that universal credit creates and the support it provides.
A single taper of 65% means that financial support is withdrawn at a consistent and predictable rate, helping claimants clearly to understand the advantages of work. Universal credit also extends financial incentives to people working fewer than 16 hours per week and removes the limit to the number of hours someone can work each week. Nobody can understand why we had a welfare system that created those artificial barriers.
I am grateful to the Minister for giving way. Although we all understand how universal credit is intended to work, does he not understand that there is an inbuilt disadvantage for those areas that were universal credit pilots, such as the Tameside part of my constituency? As universal credit is phased in across the country, these cuts will hit the areas that were the early entrants to the programme much harder than other parts of the country.
I gently remind the right hon. Gentleman that I shall be going into those details later, so he needs to have just a little more patience.
Crucially and uniquely, universal credit stays with claimants when they enter work until their earnings reach a certain level or until they can support themselves. That gives them the confidence to start a job without having to go through the bureaucracy of changing their benefit claim. Universal credit is not just about IT or streamlining bureaucracy, as it is often portrayed. It is about people having a single point of contact with a work coach who provides personalised support, advice and guidance. This is where universal credit comes into its own, and this is the bit that I am really passionate about.
In life, we are all confident individuals and when we are faced with challenges it is a given that we can normally take them on, but that is not the case for everybody. We are now giving people a named personal contact to help them to deal with their individual case when they are navigating complicated benefit systems. That work coach will be by their side helping them to develop their role when they first get their foot in the door. They will not simply say, “We wish you all the best now you’ve got a job”. They will help them to make progress and develop their role. They will help them to seek and secure more hours, and to develop the skills and confidence to progress through the grades. In other words, universal credit will not only support people to move into a job; it will also help them to build a career. It will break the cycle of dependency and create opportunities.
Does the Minister not accept that we are really talking about people who are doing the hours but whose rate of pay is very low? Is not this really about productivity? The fact is that the Government are not creating higher level jobs. We are far too dependent on the service sector, which essentially involves low-paid jobs rather than jobs that offer a higher rate of pay for the hours worked.
My hon. Friend has been talking about the benefits of universal credit. I have spoken to two jobcentres that serve my constituents and that are piloting universal credit, and I have heard very good feedback, both from the job coaches and from the jobseekers themselves, who say that it is giving them more flexibility to work. Please will my hon. Friend confirm that the roll-out will continue, because those jobcentres want to be able to give more jobseekers the opportunity to be on universal credit?
My hon. Friend highlights the importance of that personalised support, which people find absolutely vital. We have seen this in our casework, in our experience of life and through friends who have navigated through the system. My hon. Friend has taken the time to visit her jobcentres, and I would gently encourage the shadow Secretary of State to go and visit one of the universal credit sites and to see it at first hand.
I spoke to one of the people piloting universal credit just two weeks ago. Is the Minister seriously telling the single mother I mentioned earlier, who is working full time on the new national minimum wage, that she should not worry about the £3,000 drop in her income that will result from these cuts? Is he saying that she should not worry because she will have a personal work coach who will encourage her and give her greater confidence to get another job, maybe in management? Is he seriously saying that to the country?
I will extend my invitation further: I will join the hon. Gentleman if he wishes to come and see this work in action. If he is worried about going on his own, I will in effect be his work coach. We have talked about examples. Let us talk about a working lone parent with two children who is doing 35 hours on the national living wage. They will be £330 better off. We could continue to trade examples, but that would be to assume that this is a static analysis. I will address that point later.
The evidence is clear: universal credit is working. Independently reviewed statistics published at the end of last year show that under universal credit people spend 50% more time looking for work, are 8 percentage points more likely to have been in work, and when in work, they earn more and seek more hours. So, universal credit is supporting people whether they move into or out of work, and focusing on getting people not just into work but into sustainable employment where earnings increase and the number of hours they work rises.
The Public and Commercial Services Union has real concerns about the cuts to the work allowance, which will affect the Government’s own staff. What assessment has been made of the effect of those cuts on the employees in the Department for Work and Pensions?
As I shall explain, this is not a static analysis.
I want to focus on how we are going to support people. People will benefit from the improved support. For those directly affected by the changes to work allowances, we have been careful to put further measures in place. The affected claimants will benefit not only from additional work coach support but from access to funding through the flexible support fund. This will help people to retain work and to increase their earnings through training, travel and care, and we will support people to access those things. In the longer term, we are ensuring protection for claimants who are moved from legacy benefits to universal credit. We have always been clear that there will be no cash losers as a result of the managed migration of claimants from one system to another, as long as their circumstances remain the same.
This will be the last time I intervene on the Minister, I promise. Is he seriously telling the House that the £69 million flexible support fund that he has just prayed in aid once again will in any way make up for the £3.2 billion loss to working families?
I want to return to the Minister’s point about work coaches. The mapping exercise that was undertaken in my constituency and across the borough of North East Lincolnshire was out by 150%, and the local authorities there cannot meet the needs of the work coaches who are needed to support people on universal credit. That task has now been passed on to the citizens advice bureau, which also cannot manage the load because the figures that it was initially given were incorrect.
This is actually delivered through the jobcentres and the universal service, so I think we will have to discuss that a bit further.
Figures have been bandied about, and I want to make it clear that they were wildly inaccurate. They were based on a fundamental misunderstanding of universal credit, which is why I am so keen to arrange a visit for the hon. Member for Pontypridd (Owen Smith). The vast majority of those on the universal credit caseload will not lose out as a result of the changes. That is because the measure affects only those people who are in work, most of whom would have received nothing under tax credits. I have not seen the Opposition campaigning on this issue before. Unlike tax credits, universal credit is a dynamic benefit.
I will come on to those specific people—[Interruption.] In the overall numbers, it is the vast majority—[Interruption.] I am going to make some progress.
We have to see the bigger picture. A lot of the analysis that has gone on is static. Even the Institute for Fiscal Studies, which I know a lot of hon. Members will refer to, acknowledges that it is a static analysis. Universal credit is not a stand-alone measure. It is part of our wider, dynamic package of reforms to support families in work and to make sure work pays. We are raising the personal allowance to £11,000 for the next tax year, saving the typical taxpayer over £900 a year, and we have pledged to raise it to £12,500 by the end of this Parliament. The national living wage will come into effect from April. That will directly benefit 2.75 million people and it is forecast to reach over £9 an hour by 2020. That might upset Opposition Members who campaigned for £8 an hour, but we felt that that did not go far enough.
The House of Commons Library has given me some figures; I wonder whether the Minister will say that they are wrong. They show that a single parent working full time on the minimum wage will be nearly £3,000 a year worse off than they would have been on tax credits. I would appreciate some clarification on this from the Minister.
I thank the hon. Lady for her question. I worked closely with her on our commitment to halving the disability employment gap, and I have a lot of respect for the work she does. In this case, the person—again, presuming it is a static analysis and that they are already in—will be cash protected as they are transferred to universal credit, so they will not be cash worse-off.
We have rising wages and near zero inflation. We have had 13 months—[Interruption.] We have strong economic growth, delivering record jobs and creating opportunities for people to get into work and to increase their hours. We have simplified the benefits system, reducing the potential for claimants to miss out on money to which they are entitled and, crucially, allowing them the time to focus on actually finding work, rather than on navigating the complex, chaotic system. We have already seen from the independent investigation that we are talking about 50% more time. We also have work coaches to support people in work, which is vital.
I will make a bit more progress and then take a few more interventions.
Finally, and importantly, we are increasing the childcare offering. Universal credit currently covers up to 70% of eligible childcare costs, but from April we will increase that to 85%. That will make a huge difference to people’s lives, with the increase worth up to £1,368 per year for every child. We are also doubling free childcare to 30 hours a week for working parents of three and four-year-olds, which is worth up to £5,000 per child per year to working parents. Tax-free childcare from early 2017 will give working parents who are not in receipt of universal credit or tax credits up to another £2,000 per child per year, or up to £4,000 for a disabled child. All those measures are designed to help families keep more of the money they earn and support them in work. Therefore, our combined package of measures will make a real difference to real people’s lives.
I wish briefly to divert the Minister’s attention to homelessness and, in particular, its rise in London. A network of charities have said that the rise is a result of not only the chronic housing shortage, but cuts to welfare reform and social security, particularly universal credit. I do not know now whether the Minister is aware that last year the level of homelessness rose to a point where 7,500 people were sleeping rough on the streets of London. Does he recognise that universal credit will exacerbate that problem? Can he say how the rolling out—
That is why it is key that this Government are committed to building and delivering more affordable housing, particularly in London. I welcome the measures that the Chancellor set out to make that happen. [Interruption.] The hon. Member for Birmingham, Yardley (Jess Phillips) may laugh, but we saw record low house building under the last Labour Government, robbing people again of opportunity.
That shows why we have to create opportunities, so that people can get into work, increase their hours—[Interruption.] Again, the hon. Member for Birmingham, Yardley does not like creating opportunity. We can all play top trumps on trading backgrounds, but we have to create those opportunities for people, regardless of the challenges they face. My party values the prospect of the potential for people to have home ownership.
Does the Minister agree that under Labour the welfare system spiralled completely out of control? Crucially, in the words of the former Chancellor Alistair Darling, it ended up
“subsidising lower wages in a way that was never intended”.
Will these reforms not address that?
I thank my hon. Friend for raising that point. Not only did we see that under the last Labour Government we were talking about £3,000 per hard-working family, but the decision to reverse all these dynamic changes will have to be paid for—we cannot magically print money. I know that promising that would help in a potential future reshuffle, but back in the real world it will mean painful, expensive tax rises for hard-working people.
Universal credit is a significant welfare reform that is transforming lives. At its heart, this is about putting work first and ensuring everyone can realise their ambitions and improve their quality of life. It is part of our wider commitment to return welfare spending to a sustainable level and deliver fairness to the taxpayer. That will be delivered through reform, support and, crucially, creating opportunities.
Thank you, Madam Deputy Speaker, for calling me, and may I wish you and other Members of the House a good new year?
I begin by thanking the Opposition and the hon. Member for Pontypridd (Owen Smith) for tabling today’s motion, which the Scottish National party will be happy to support. However, today feels a wee bit like groundhog day, because, once again, we are here debating the adverse impact of the Government’s social security changes on people in low-paid work. Once again, SNP Members are asking why low-income families are being asked to pay the heaviest price for austerity. Why are low-paid workers, in particular, once again finding themselves on the front line?
A few weeks ago, when the Government were forced into their tax credits U-turn, I described it as a “stay of execution”, because it was quickly apparent that the sword of Damocles was still hanging over many of the low-paid households that were set to be hammered by tax credit cuts. It has been a short reprieve, because in April this year the reductions to the work allowance in universal credit are set to come into effect. They will hit many of the same low-income families who would have lost out under tax credits.
When universal credit was first introduced, early in the last Parliament, some lofty and rather extravagant claims were made for it, some of which we have heard reiterated today: universal credit was going to simplify and streamline our benefits system; it was going to be much more flexible, making it easier for people to move in and out of work, reflecting the reality of the modern labour market; and, above all, it was going to remove the benefit trap, by tackling the financial disincentives to entering the workforce. Instead, it was going not only to create better work incentives and make work pay, but to improve the incentives to move into better-paid work over time. Oh, it was a grand plan! The reality has been very different. I need not dwell too long today on the technical and management problems that have beset the universal credit project from its beginning, except to say that it has been subject to repeated and prolonged delays. It has had to be rebooted several times, and, even now, it is unlikely to be fully implemented until 2021 at the earliest.
Far more telling is how far the whole project of universal credit has strayed from its original objectives. The cornerstone of this ailing policy initiative was that it would improve work incentives and help tackle poverty, but that cornerstone has crumbled under the weight of a misconceived, ideologically driven and quite unnecessary austerity agenda, through which this Government have consistently chosen to penalise low-income families and make them pay a disproportionate price for the economic failures of past and present Governments. The thing is that by cutting the work allowance, the Government are cutting the very aspect of universal credit that creates a work incentive, so all the good progress that has been made is going to be undone very quickly after April.
Does the hon. Lady appreciate that one reason why I get so passionate about this issue, as do Members such as my hon. Friend the Member for Birmingham, Yardley (Jess Phillips), is that we have previously been recipients of benefits, we have aspired to be able to do better things, and we now pay our taxes and are not on benefits? That is fantastic, but it happened because of a Labour Government. This Government are pulling that ladder up from under people who need and deserve that help.
I am conscious of the fact that the hon. Lady represents one of the areas that has been at the forefront of the pilot scheme and I hope that I will have the opportunity later to address some of the issues raised there. She makes a valid point that the economic recession hit people very hard indeed, and the people who were hit the hardest were those already in vulnerable employment—those in the most insecure jobs. Unfortunately, recovery just has not given them the job security that they might have hoped for.
The hon. Lady is making interesting points, but the facts do not quite support some of what she is saying. Is it not a fact that the universal credit system is incentivising people to get into work? The figures speak for themselves: 71% of universal credit claimants in the first nine months moved from welfare into work. It is working.
The whole point that I am trying to make is that any progress that has been made will be undone if the Government remove the work incentive, which is the work allowance. It is the aspect of universal credit that makes it possible to earn more when they work. By cutting the work allowance, the Government are going to impose an eye-watering level of marginal taxation on people in low-paid jobs and make it harder than ever for those in low-income households to break out of the poverty trap. If the Government were serious about making work pay, if they were serious about boosting the UK’s productivity and if they actually wanted to help people get on, they would be increasing the work allowance, not reducing it. That would be a genuinely progressive measure, and it would actively help those in low-paid work.
Lots of think-tanks and non-governmental organisations have been queuing up to point out that this measure removes work incentives. It strikes me that increasing the work allowance would be a far more progressive measure than, for example, raising the personal tax allowance, which benefits higher-rate taxpayers such as ourselves far more than anyone in low-paid work.
The cuts to the universal credit work allowances are being introduced via the Universal Credit (Work Allowance) Amendment Regulations, which a Delegated Legislation Committee considered last November under the negative resolution procedure. My hon. Friend the Member for Glasgow South West (Chris Stephens) opposed the cuts at the time, because it was clear to him, as it was to me, that reducing the amount that a household can earn before universal credit starts to be reduced would hurt low-income families in certain circumstances very badly indeed, and would remove work incentives for those households.
It causes me great concern that, instead of being fully debated here in the Chamber, the changes were enacted through delegated legislation without the scrutiny that their consequences merited. As far as I am aware, the Department for Work and Pensions has yet to produce a proper impact assessment of the changes to the work allowance, so we are very much dependent on external bodies for worked impact analyses. I would be grateful if Ministers said today that they will publish an impact assessment, particularly given that the Social Security Advisory Committee has expressed concerns about the adequacy of the evidence base for evaluating the changes. We can get up in this Chamber and spout as much hot air as we like, but if we lack the proper evidence or use the evidence so selectively to back up only our arguments, we really will fail the people who depend on the support of our social security system.
In late December, the Social Mobility and Child Poverty Commission said that
“the net impact of changes to universal credit...on work incentives is largely negative due to significant reductions in the generosity of work allowances.”
It pointed out that claimants who pay income tax will keep only 24 p in every extra pound they earn. They would need to earn an extra £210 a week to make up the losses from a reduced work allowance—a staggering rate of marginal taxation that makes a mockery of the notion that any work incentives will be left in universal credit. Incidentally, it is important to get away from the false idea, which has been creeping into today’s debate, that there are taxpayers and then there are people on benefit. Work allowances are for people who are working—the clue is in the name—in low-paid jobs.
I have been listening carefully to the hon. Lady. She says that it is very important that the full data and the alternatives are exposed. Will she set out the cost implications of going down the route she would prefer, and explain how it would be affordable?
I will happily do that. Before the general election, the Scottish National party set out in some detail its fully costed alternative to austerity. We were keen to point out that austerity is a choice. We can balance the books without austerity and release £140 billion for investment in public services. That would be a much fairer and more economically sensible way of doing business. I refer the hon. Gentleman to our manifesto.
I will not give way again. The hon. Gentleman might be interested to know that in our manifesto we proposed increasing work allowances by 20% to create the exact incentive that the Government say that they want to create while, at the same time, pulling out the rug from underneath it.
No, I will not give way again, because I want to make some progress. I may give way again a little later in my speech, but I am conscious of time.
The Commission on Social Mobility and Child Poverty also pointed out that a single parent working full-time on the minimum wage and receiving no help with housing costs would lose £50 a week. In what fantasy world does that amount to making work pay? Many parents who are working hard, and struggling to support themselves and their families, will find themselves substantially worse off.
There is enormous complexity around the impact of the cuts to the work allowance. There is a range of factors, including the number of adults in the household and whether or not housing costs are included. As has already been said, single parents and the self- employed are likely to be among those worst hit, but it really will depend on individual circumstances. However, the IFS points out that there will be more losers than winners under these changes, and the Resolution Foundation estimates that working families with children on universal credit will be, on average, £1,300 a year worse off by 2020. The IFS estimates that, overall, 2.6 million families across the UK will be worse off by an average of £1,600 a year. Let us not pretend any more—either to ourselves or to the public—that universal credit will create work incentives and tackle in-work poverty. It will not. For most of the people affected, it will make things worse.
I have made that point already. We are talking about a change that is due to come in in April that will undercut work incentives. It will take the work incentive out of universal credit. The work allowance helps universal credit make work pay. It is the cornerstone of the system. If we take out that allowance, all we will have is another benefit trap like the one that it is trying to replace.
I wish to pick up on an issue raised by the hon. Member for Pontypridd (Owen Smith) earlier in the debate. In the Government’s response to the Social Security Advisory Committee’s “Occasional Paper 15” on universal credit, they said that they expect claimants to respond to cuts in the work allowance by “actively seeking more work.” From what we have already heard about the disincentives caused by high marginal rates of taxation, that is simply wishful thinking. The Secretary of State and Members on the Government Benches seem to be labouring under the misapprehension that people in low-paid jobs do not work as hard as people in highly paid jobs, and that somehow it is easy to pick up extra work—whether that is in the form of another wee job, or of more hours—but the reality is that low-paid jobs are often the most physically demanding, the most insecure, and the most exhausting.
Early yesterday morning, at the crack of dawn, when I was leaving Aberdeenshire, I passed roadworks where men were already trauchlin in the cold and the dark and the pouring rain—it has been raining incessantly—setting up their temporary traffic lights. Although they will not be on the minimum wage, they are certainly not high earners, and, doubtlessly, some of them will be part of families receiving tax credits or universal credit. I could not help but think how lucky I was to be able to work indoors at this time of year. Those manual workers are exactly the sort of folk who will be asked to find an additional job, or work extra hours after a long day outside.
The hon. Lady is making an excellent speech. Does she agree that it is fundamentally offensive to those workers, and to all workers on a low wage, for the Secretary of State and his Ministers constantly to refer to the “dynamic” effects that will be introduced by this new system? Are these people who are working full time in the pouring rain undynamic?
They were certainly showing a fair bit of dynamism yesterday morning. I was really glad that I did not have to work with them. I partly agree with the hon. Gentleman. The insecurity of the modern labour market means that people move in and out of part-time work more often that they did in the past. It is important that we create a system that responds to that. My problem is that the Government are undermining their own process with their transitional arrangements, but I will say more about that in a second or two.
There are people all over my constituency—and in everybody’s constituency—who work extremely hard already in low-paid, tiring and not exactly pleasant jobs that are neither interesting nor glamorous. They are often doing that while they are juggling family responsibilities, looking after children or, increasingly, elderly and infirm relatives. For many of them, taking on extra hours depends on that work not just being available, but being available at a time when they have access to childcare. Let us face it, young children cannot get themselves out to school in the morning. They may not be able to walk there safely on their own. They cannot just be left unattended at home for several hours after school or get their own tea. Many working parents have to juggle work and family commitments. Indeed, one reason why so many women are trapped in low-paid, low-skilled jobs, even when they have high-level skills and qualifications, is that they are the primary carer in their household and they are trying to fit work around their family responsibilities. The Catch-22, of course, is that it is a lot easier to do that juggling if they are in a well-paid job.
I have a very serious question for the Government that echoes the question posed by my hon. Friend the Member for Glasgow South West. Many of those who work in low-paid jobs in Government Departments, including in the DWP, receive tax credits or universal credit. Will their employer offer them a few wee extra hours to compensate them for the loss of their work allowance? Will the DWP specifically—I hope that Ministers can answer this one—offer extra hours to its own staff who are set to lose out, or will it impose in-work conditionality on them instead? If the Government cannot or will not commit today to supporting their own staff, they have no business putting the onus on other employers to miraculously conjure up extra work for people.
No—I have moved on, so I am going to keep making progress.
It is important that we understand that new claimants for universal credit will be significantly disadvantaged compared with those still claiming under the old tax credits regime. We have been told that there will be transitional protections for those being migrated from the old system to the new, but my understanding is that the transitional protections for existing claimants will evaporate if there is a significant change to their circumstances such as a new job, having a baby, or the breakdown of a relationship. The difference will be enormous. In the coming financial year, a one-earner couple with two children will take home nearly £800 a year more on the old tax credit system than they will if they have been moved on to universal credit. That is a huge disincentive to change one’s circumstances. People who are already on very tight budgets will be very reluctant to increase their hours or take a promotion if it might leave them worse off. Once again, this undermines work incentives, and it will make people reluctant to take promotion, change their hours, or move to a different employer. To come back to the point raised earlier, it will erode the dynamism of the system by which the Government have set such store today.
I think these disparities are going to cause real ill feeling in our communities. Co-workers who are doing the same job alongside each other, earning the same salary and living in similar family circumstances, could be receiving wildly differing levels of support. I do not know how the Government plan to sell that to people in low-paid work. I certainly would not want to have to try to justify it to my constituents; it is manifestly unfair. What is also deeply problematic is that some parts of the UK have been transitioning to universal credit before others, so there will inevitably be regional disparities in the areas where a higher proportion of claimants have been migrated. Why should people living in Hammersmith, Rugby, Inverness, Harrogate, Bath and Shotton—the areas where universal credit has been rolled out first—receive less support, on average, than those in the towns and cities that are last in the queue? The Government admit that at least 700,000 people will still be on the old system by the end of next year. That is a recipe for discontent among those who have served as the guinea pigs.
Cutting work allowances will not achieve the outcomes the Government claim. The way to reduce social security spending is to fix the economy—to create jobs and boost productivity. That reduces the need for spending on social security and raises tax receipts. We need to name the cuts to the work allowance as what they are—an assault on people in low-paid work as part of a failed, needless, ideologically driven austerity programme that has held back economic recovery and stifled productivity. The Government have made the wrong choice. They have a chance today to rethink these cuts, which will reduce work incentives and trap low-paid families in poverty. There is an alternative to austerity. Their short-sighted, counter-productive cutting of work allowances will hurt working people. I hope that the Conservative Members who expressed reservations about the tax credit proposals will understand that this cut will hit many of the same people in much the same way as they move on to universal credit, and that they will join us in the Lobby this afternoon.
Order. It will be obvious to the House that a great many Members wish to speak in the debate and that we have limited time because there is another pressing debate following this one. I hope that in the spirit of the happiness of the new year, I will not have to impose a formal time limit, but that Members will, out of respect for other Members and other points of view, take six minutes or less to complete their contributions. We will see how the experiment works. If it does not work, we will go back to the bad, old year way of me telling you that you have got to stop.
Thank you, Madam Deputy Speaker. I join other hon. Members in wishing everyone a happy new year. I will do my best to keep my speech under six minutes.
I rise to support the Government and welcome universal credit. Universal credit is one of this Government’s key reforms, and one that I am very proud to associate myself with. At the very heart of this policy is our desire to ensure that it always pays to go out and work. Families around the country will be better off at the end of this Parliament, with more of their income coming from their own earnings rather than the taxpayer. The Government are determined to set our welfare system on an even footing. The previous system did not work in terms of providing those who were willing to work with incentives to help them find it. It often paid more to be on benefits than on work, and that is simply not sustainable. As my hon. Friend the Minister set out, we are trying to move Britain on from that low wage, high welfare, high tax society to a higher wage, low welfare and lower tax society. That is the prism through which all this should be seen. We need to ensure that our system is sustainable and helps to protect the most vulnerable.
It is important to provide a bit of context given what we have heard from Opposition Members. Under the previous Labour Government, 1.4 million people spent most of the previous decade trapped on out-of-work benefits, the number of households where no member had ever worked nearly doubled, and the number of working-age people in poverty rose by about 20%. Not only did it not pay to be in work, but those who wanted to work found themselves either trapped on benefits or worse off. The Government’s reforms have already seen an improvement in employment statistics, with employment now at over 31 million—an increase of over 2 million on 2010. Wages are rising and living standards are up. For this reason, we feel that it is the right time to ensure that the barriers to work that previously existed are no longer a factor in employment.
Universal credit is designed to provide certainty in that regard. As a member of the Work and Pensions Committee, I am very impressed with the phasing in of universal credit and the Department’s attitude towards it. Some people have criticised the slowness of the process, but the willingness to pilot, to phase in, to pause, to reflect, to change and to start again is a massive testament to the Department. I encourage it to continue and not to be rushed by people, because it is a huge transformational change. I am very proud of what this Government are doing, which will really help people and create opportunities.
It is worth reiterating that the single taper rate of 65% means that financial support is withdrawn at a consistent and predictable rate, helping claimants to clearly understand the advantages of work. The taper is the big difference between tax credits and these changes. I think that the smoke and mirrors from Opposition Members on this will be seen through.
I do not accept that. The shadow Secretary of State would have a lot more credibility if he came here with an idea of how to change the system and practical approaches rather than just opposing everything that this Government try to do. The previous Labour Government failed this country and failed constituents in Cardiff North. We are creating the opportunities. We need only look at the Labour Welsh Government to see their track record at creating opportunities. I stand by this Government and these changes.
Thanks to the UK Conservative Government—I thank the hon. Gentleman.
Not only does the universal credit system encourage people into work, it supports them through the process, staying with them and working with organisations such as Reed in Partnership, to which I pay tribute. Just before Christmas, it produced a survey of young people about the barriers to getting into work. The main things they said were about the importance of consistent career advice and the effects of receiving poor advice. These work coaches will really change things round for youth opportunities because someone will be dedicated to looking after people throughout the whole journey. I really welcome that. The Opposition should not be quite as jovial about this concept, which is a game changer.
The new system gives claimants the confidence to start a job without having to go through the bureaucracy of changing their benefit claim. We need to appreciate the transformational element of universal credit. Ninety per cent. of people who have already signed on did so online. This is a massive change in the way that we operate our welfare system, and it is extremely welcome. As I said, it is being rolled out in a very careful, safe and controlled manner. The Minister touched on that, but it is worth dwelling on. The findings from the December 2015 “Universal Credit at Work” report show us that, as we have heard, 71% of universal credit claimants moved into work in the first nine months of their claim. That compares with 63% of jobseeker’s allowance claimants. Universal credit claimants work on average 12 days more than comparable jobseeker’s allowance claimants. We need to recognise that and work on it, and provide proper support to ensure that people can achieve their ambitions and do not remain trapped in an unfair system, which is what the previous system was.
As part of that, we have put in place further measures that are directly related to the changes to the work allowance. The transitional arrangements are in place and they ensure that the benefit entitlements of claimants who are migrated on to universal credit by the Department for Work and Pensions—it is worth emphasising this again—do not fall in cash terms.
As I have hinted at, I want to dwell on the tapered relief for universal credit, which remains at 65%. I want to say that over and over again, because the shadow Secretary of State gave us smoke and mirrors. Unlike the planned tax credit changes, which would have resulted in an increased taper, the savings are achieved without increasing the effective marginal loss of benefit for every pound earned as a claimant moves into work or takes more hours. That means that work incentives are not adversely affected.
I am aware that you want to get everyone in, Madam Deputy Speaker, so I will conclude on that point. This really is a massive transition from the system that the last Labour Government presided over, which is not fit for purpose, sustainable or affordable for this country. I welcome the changes and the universal credit roll-out. As a member of the Work and Pensions Committee, I will pay particular interest to the issue and be a critical friend, but I welcome the roll-out so far.
I think that universal credit is a sensible idea. It has potential to make the system simpler and in particular to make it clearer to people what their financial position will be if they move from unemployment into work. We have always said that the idea is sensible. It is not a panacea—Ministers frequently tell us it is a solution to the problems, even though it is not—but it is a helpful step.
The delivery of universal credit, however, has been a shambles. It went very badly wrong right at the start. Ministers accepted terrible advice about how long it was going to take. Page 34 of the July 2010 Green Paper, “21st Century Welfare”, stated:
“The IT changes that would be necessary to deliver”
“would not constitute a major IT project”.
How anybody persuaded themselves that replacing the entire benefits system was not going to constitute a major IT project is beyond me, but that was the naivety that underpinned the leadership of the project at the outset.
Warnings from Labour Members and others were cheerily waived aside and it was not until September 2013, when the National Audit Office first reported on the issue, that some shafts of light were trained on what was really going on. The NAO said that
“the programme suffered from weak management, ineffective control and poor governance”,
and it was absolutely right.
Does not the right hon. Gentleman agree that, during his distinguished spell in government, a considerable amount of taxpayers’ money was wasted on IT projects and that, as of now, those lessons have been applied and significant, incremental progress is being made in the delivery of this important reform?
Unfortunately, we were told in 2010 that the lessons from all those problems had been learned and that things were going to be different, and that is true, because now we have not one, but two major IT projects for universal credit—the live service and the digital service—both under way in parallel. No one has yet told us when those two different systems will be brought together, and undoubtedly large sums of money are being wasted.
I want to spend a couple of minutes addressing the question of just how far behind schedule universal credit is now. If the Secretary of State had spoken at the beginning of this debate—as he should have done, as my hon. Friend the Member for Pontypridd (Owen Smith) correctly pointed out—he would have told us that it was on track, because that is what he always says. The Office for Budget Responsibility, however, pointed out at the time of the autumn statement that the project has been
“substantively delayed on at least three separate occasions”,
so just how far behind is it?
When the project started, we were told that transition to universal credit would be complete by 2017—an absurd claim, but that is what was said. Back in 2012, the belief was that transition would take five years from that point. Having failed to deliver on that date, Ministers have refused to announce a revised date; it is a question, I think, of once bitten, twice shy. The autumn statement, however, indicated that the Government now expect—the hon. Member for Banff and Buchan (Dr Whiteford) was correct to make this point in her speech—the roll-out to be completed by 2021. Therefore, exactly as in 2012, the Government in 2016 now expect the roll-out of universal credit to take another five years from that date. The completion date has gone back four years in the last four years.
Is it unfair to allege, therefore, that universal credit is running four years late? Let us look at a couple of other milestones, not just the completion date. On 1 November 2011, the Secretary of State published a press release that said:
“Over one million people will be claiming Universal Credit by April 2014 Work and Pensions Secretary…announced today”.
April 2014 was nearly two years ago and 1 million people are not receiving universal credit; the latest figure is 155,000. The OBR now expects that the figure will be 1 million by April 2018, so that milestone is also four years late.
Let us look at another example. On 24 May 2012, the Secretary of State announced in another press release— I always used to read them avidly—that
“all new claims to the current benefits and credits will be entirely phased out”
by April 2014. Again, the Department has not been willing to announce when it now expects all new claims to the existing benefits and credits to be phased out, but in a very helpful note, to which my hon. Friend the Member for Pontypridd referred in his opening speech, the House of Commons Library has worked out, by reading between the lines of opaque statements by Ministers, that new claims for legacy benefits are expected to be closed down by June 2018. That milestone is a bit more than four years late compared with what we were originally told. We can confidently say, therefore, that universal credit is at least four years late. It will undoubtedly slip further and I am equally certain that the Secretary of State will continue to tell us that it is on track.
The management has been a shambles and we have still not been told about key outstanding policy issues. Which recipients and claimants of universal credit will be entitled to free school meals for their children? We have been waiting for an answer to that question for more than five years, but we still have not been told. It makes an enormous difference, because the answer we expect the Government to give will introduce a huge new cliff edge to the social security system. It will be far worse than anything in the prior system, even though the whole point of universal credit was to get rid of such disincentives.
I want to pick up on the points so well made by my hon. Friend in his opening speech about the way in which the changes to universal credit since it was first announced are undermining so fatally its objectives. In the early debates, the Secretary of State used to make a lot of the fact that universal credit was going to cost more than £2 billion more than the previous system, but that is not true anymore—it is now going to cost £3.7 billion a year less. That has been done by eroding the work incentives that were supposed to be the whole point of doing it in the first place.
The whole House has accepted that it would have been wrong to go ahead with the tax credit cuts, which would have had a huge impact on and reduced the incomes of working families on modest incomes. There would have been a reduction of £1,000, £2,000 or £3,000 a year for those with a household income of £20,000 a year. The whole House accepts that that would have been wrong, and yet the Government are going ahead with precisely those cuts for the relatively small number of people—there are, I think, 50,000 of them at the moment—who are in work and claiming universal credit. If we have all accepted that it is wrong to impose such draconian cuts on the incomes of working families who are claiming tax credits, why is it right to go ahead with precisely the same cuts, which will have a huge impact, to the incomes of working families in receipt of universal credit? I intervened to ask the Minister that question three times. Each time he told us that he would come to it later in his speech. Unfortunately, he never got there. If he is able to explain to us how that can be right, I hope that he will do so.
My hon. Friend the Member for Pontypridd is right to say that all the way through the process of universal credit, we have been told that there would be transitional protection, yet this group of 50,000 working people, who are already receiving universal credit, will suffer enormous cuts in their incomes in April because of the changes to the universal credit work allowance. That cannot be right and the Government need to change their mind.
We seem to have had endless debates on universal credit over the past five and a half to six years, and I am sure that we will have many more.
This Opposition day debate was opened with a call from the shadow Secretary of State to reverse the work allowance changes in universal credit. I sensed that he really wanted to reverse every welfare cut that has been made by this Government and their predecessor. After all, he and his colleagues opposed every penny of savings put forward by the coalition Government. However, he cannot do that, partly because he stood on a manifesto that would have reversed only the smallest welfare savings, such as the spare bedroom subsidy, and partly because he signed up to £12 billion of welfare savings. He did not tell us today that his party would reverse all the changes if it were elected into government, nor how he would find the £12 billion of savings.
We will keep his windy eloquence for a moment, if that is all right. He had quite a long go earlier.
The reason the hon. Gentleman said nothing about that is that if there are no changes to tax credits or housing benefit, he will not find £12 billion of welfare savings. I suspect that either he has no policy at all, because none was announced today, or that he has something pretty horrific to say on housing benefit that the House needs to hear.
After the windy eloquence of the hon. Member for Pontypridd (Owen Smith), we heard the relative still small voice of calm of the right hon. Member for East Ham (Stephen Timms), who described universal credit as a sensible idea whose implementation was a shambles. I would describe universal credit as an inspired idea, but it is one that the former Labour Chancellor, the former Member for Edinburgh South West, described as too complicated to be taken up by his party. I agree that the implementation has been over-optimistic so far, but it is happening and I have seen it happening. I will come on to that, because I am not sure how many Opposition Members have gone to their Jobcentre Plus to find out how it is working. It is already delivering positive change to the lives of my constituents and many other people. One can criticise a project that is delayed, but that is happening and successfully so, when one said that it was impossible to do it at all, but it risks looking like carping, which is not really worthy of the right hon. Member for East Ham.
The truth is that Labour Members cannot make up their mind whether to say that universal credit was a bad idea, full stop; that it is a complete or partial shambles; or that it was a good idea, but they are not sure whether it will be a shambles. They half hope that universal credit will collapse, so that they can criticise it more and call again and again for my right hon. Friend the Secretary of State for Work and Pensions to resign, but they know in their heart of hearts that they must support universal credit because it is the right thing to do and it will completely transform the working opportunities of so many people in this country.
The reason why universal credit is right is absolutely clear to all of us. When tax credits were introduced, they were a modest cost to the taxpayer, but that cost ballooned from £6 billion in 1998 to £28 billion by 2010. As I have hinted, the former Chancellor and former right hon. Member for Edinburgh South West has described more eloquently than any of us here today could how that project ran miles away from its original intention. Something that was launched with the best of intentions—to help people on low wages—became a massive cost. It was not just a cost in itself, but generated huge interest costs that were simply unsustainable for this country, particularly after the great recession of 2007 to 2009.
In their heart of hearts, everybody in this House must recognise that universal credit is the way forward. I cannot believe that anyone here today who has been a Member for more than a few years has not received letters from constituents describing how their life on welfare makes it impossible for them to want to go to work, because they would be worse off working. I also cannot believe that Members here have not had meetings with employers in their constituencies at which they have described the number of times they have offered people who work for them promotions or a higher salary, only to be told, “Sorry, I don’t want that promotion. I would be worse off because I would lose more in benefits than I would gain from the promotion.”
Tax credits ended up as a disincentive to aspiration and achievement. Scottish National party Members may shake their heads, but that is the truth. What is also true, unfortunately, is that the welfare programmes that were introduced by the last Labour Government ended up, during the great recession, when 6,000 people in my constituency lost their jobs, many of them low-paid, trapping people on welfare with no incentive to go back to work. That is the background to the debate on universal credit. It is vital to our country that it works properly.
Those of us who have been to our Jobcentre Pluses where universal credit is being rolled out know that it is in place and working very well for single people. In Gloucestershire, it has not yet been introduced for families with children where there are two people who are in and out of work or in low-paid jobs. That is the more complicated element of universal credit. If my hon. Friends on the Front Bench are able to add more about the success of the rollout of universal credit to more complicated families with children, it would be reassuring for everyone. I have seen it in place in London and it seems to be working well.
I am conscious that there are time limits on us, so I will bring my contribution hastily to a conclusion. There are 156,000 people on universal credit who are receiving their benefits effectively. As I say, the people I have met in my constituency are definitely in a better place than they were. It is vital that universal credit continues to move forward as quickly as possible. I suspect that the figure of 156,000 will advance rapidly during this Parliament. We should all wish universal credit well. The changes that we are debating today are all part of a move towards a higher wage, lower tax, lower welfare society and away from what we were left in 2010, which was wages that were too low, taxes that were too high, unsustainable welfare and a system that was no longer working.
Let me finish by saying that I understand the emotional appeal of the speech by the hon. Member for Pontypridd, but it is vital that we reduce the cost of tax credits and the cost of welfare, and that we provide people with a system that incentivises them to work through universal credit.
I would like to start by reassuring the hon. Member for Gloucester (Richard Graham) that I think universal credit is a total and utter shambles. I invite him to my constituency to speak to my constituents who are claiming benefits, because all of them are already in work. Tax credits did not stop them from going to work; tax credits incentivised them to go to work. He needs to visit constituencies in London to find out the truth and to dispel the myth that people claiming benefits are just scroungers. They are working hard; it is just that work does not pay.
The hon. Gentleman certainly implied that in my opinion.
In January 2012, a considerable period of time before I entered the House, I listened to the Secretary of State tell the House in departmental questions:
“Universal credit is on track and on budget.”
Several years later and several billions of pounds of expense to the taxpayer later, his claim that
“I am not complacent about delivery”—[Official Report, 23 January 2012; Vol. 539, c. 8.]—
has not stood the test of time. Millions of families across the country, and especially in my constituency of Hampstead and Kilburn, have faced periods of relentless anxiety over the future of their welfare support. The year 2015 did not bring any fresh hope.
The Work and Pensions Committee’s report in December revealed that the roll-out of universal credit, from Royal Assent to resolving the final outstanding legacy payments, could stretch beyond a decade. The Government promised that universal credit would reach 4.5 million people by the 2015 general election. This has not happened. The Secretary of State may be content for his Department to cruise through endless periods of trial and error, but the delays to the roll-out have been at a significant cost to the taxpayer, with the Major Projects Authority revealing an increase of £3 billion in the past two years. The bill now stands at a staggering £15.8 billion. If the Secretary of State truly understands the pressures faced by claimants, he will apologise for the years of anxiety his delays have subjected them to.
The autumn statement fundamentally contradicts the Secretary of State’s ridiculous claim on “The Andrew Marr Show” that “nobody loses a penny” through the changes. They also mark the end of the Chancellor’s ludicrous claim at the Conservative party conference that the Tories are the new workers’ party. Nothing could be further from the truth. Cuts to the work allowance are so severe they will mean that single people and couples with no dependent children will lose out the moment they start working. Just listen to the facts: the poorest 20% are on average set to lose between 6% and 8% of their income. Just listen to Paul Johnson, the director of the Institute for Fiscal Studies, who stated that 2.6 million families will on average be £1,600 a year worse off. Further to that—this point was made eloquently by my right hon. Friend the Member for East Ham (Stephen Timms)— we know that transitional protections for claimants moving from the old system to universal credit will provide only £200 million against a background of £3 billion of cuts. Transitional protections are dropped when a claimant’s circumstances change. We know that new claimants will have no protection whatever.
I have not seen that. What I have seen from the IFS is what I have just reiterated: it shows very clearly that 2.6 million working families will on average be £1,600 worse off. The hon. Gentleman just needs to look at the statistics for inner London constituencies to see that that will be true.
Given the prevalence of part-time, low-paid jobs created by the Government and the well-established impossibility of the so-called national living wage to mitigate cuts to the work allowance, the Secretary of State must update the House urgently on whether he stands by his claims that “nobody loses a penny” through these changes. We need a Government who work towards an economy where employers, city leaders and central Government work together to make sure that economic growth creates new opportunities and high quality jobs. Instead, the Government are embracing cuts that will simply worsen the bleak picture of deprivation that is rampant across the country, and especially in inner London constituencies. Earlier in the debate, I made a point about the rise of homelessness and I did not get an answer from the Minister. Does he acknowledge that the changes to welfare will increase the number of people sleeping rough on the streets of London?
As a London MP, I have real fears that the significant growth in homelessness and destitution in the capital will only be made worse by the changes to welfare. Independent analysis by the IFS and the Resolution Foundation, and the Select Committee’s report, all acknowledge the consequences of the cuts to work allowance on the lowest paid, when they are eventually signed up to receive universal credit. I have a real fear that the decisions being pushed through will ensure that many people in Hampstead and Kilburn, who are already making the choice between eating and putting on the heating, will reach breaking point. Some 8,000 of my constituents are expected to be on universal credit by the time it is rolled out properly. It is not too late for the Government to rethink the cuts to the work allowance if they have any ambition to increase earnings. Higher and more stable levels of pay are the only way to improve financial security and move people out of poverty for good.
We saw the Secretary of State celebrate in this House when the so-called national living wage was announced, but he must reflect on cheerleading in the face of the stark reality that Britain’s low and middle-income families stand to lose thousands of pounds under the flagship policy. I ask him to carefully reconsider where he thinks his legacy lies, and whether he wants to put low and middle-income families through this trial when universal credit is rolled out.
The Opposition motion is a very simple one. Once again, the Opposition are asking us to duck a difficult decision. I would like to speak very briefly—I hopeful we will make up some time—about why such an approach is simply unsustainable.
As a nation, we have two very major problems. First, we continue to live beyond our means. When the Conservatives first came into government in 2010, we were spending £4 for every £3 we were earning. That meant we had the biggest budget deficit in our peacetime history. We have made progress. The Government have more than halved the budget deficit, but there is still a tremendous distance to go. Secondly, as a nation we have the persistent problem of a high tax, low wage and high welfare economy. At the root of this lies the situation we inherited in 2010, whereby people on the minimum wage were working very hard and still having to pay tax and then having their wages subsidised through the welfare system. As a result, nine out of 10 working families were receiving some sort of benefit payment. Despite all the additional spending, it was not working. As we have heard repeatedly, in-work poverty rose by 20%.
The level of borrowing and welfare spending was simply unsustainable. Under the previous Government, an extra £3,000 was spent for every single household in the country. That is burdening our children and our grandchildren with additional borrowing simply to pay for current welfare spending. This is happening at a time when countries around the world are taking difficult decisions and we are facing rising competition from countries such as South Korea and China. Living with the burden of welfare spending paid for by our children and grandchildren is simply not sustainable.
When we came to power, we produced a plan to deal with the problem. First, we said that part of the reduction in the deficit had to be funded by £12 billion of welfare savings. Labour Members can say we should not achieve those savings, but I have yet to hear a single alternative suggestion.
As admirable as the hon. Gentleman’s party might feel his efforts are in stating that we have to cut welfare, the problem is that under this Government, welfare spending has persistently gone up. One would suggest, therefore, that your tactics do not work in the real world.
I would ask the hon. Lady to consider the facts. I believe that the OBR is projecting a decline in the proportion of our national income spent on welfare over this Parliament, so the plan is actually working. If Labour Members do not wish to reduce welfare spending, there are only three alternatives. First, they could choose to cut spending on public services, but I have heard nobody suggest that, instead of making this reform, we should cut spending on the NHS or education. Alternatively, they could advocate an increase in personal or any other form of taxation, but I happen to think that in this country we already have unsustainably high levels of taxation. The third alternative is that Labour Members—
What would the hon. Gentleman say to the 7,000 people in Hertsmere on universal credit who will be worse off by 2020 about the nearly £1 billion that his party is spending on cutting inheritance tax for houses worth between £600,000 and £1 million? How will he excuse that?
I do not recognise the hon. Gentleman’s figures, but I do recognise the following figures: in my constituency, 5,000 people have been lifted out of tax altogether, unemployment is down by 11%, and, as a result of tax cuts introduced by this Government, 47,624 people have seen a reduction in the tax they pay. This is the Government’s plan in action. We are moving from a low wage, high welfare, high tax economy to a higher wage, lower welfare, lower tax economy, and the net result is that unemployment continues to fall at a record pace. Since we came to power, an additional 2.2 million people have acquired the stability and security of a regular pay packet and a job to provide for themselves and their families. That is a record of which we on the Conservative Benches can all be proud.
If Labour does not have an alternative plan on spending, does it have one on welfare reform? Once again, we have a clear plan. First, we will introduce universal credit to remove the perverse incentives, discussed extensively during this debate, whereby employees are refusing a pay rise because they fear that the reduction in their benefits will be greater than the benefit they receive from the additional pay. Secondly, we are increasing the personal allowance. Under this Government, by the end of the Parliament the tax-free personal allowance will be £12,500, which will lift those working 35 hours a week on the minimum wage out of tax altogether. This will end the absurd situation in which people on the minimum wage pay tax and then have it recycled back to them through the welfare system. Thirdly and most importantly, we are introducing a national living wage, made possible only because we have been so successful in reducing unemployment, meaning that employers can bear the burden of that higher national living wage. As a result, we will cease to subsidise low-paid jobs, such as in supermarkets and the cleaning industry, with welfare payments.
This is a sensible plan that, when combined with help for childcare and other Government measures, offers a route to the higher pay, lower welfare, lower tax economy we desire. The House has a choice. Do we stick with a plan that has given 2.2 million more people the stability and security of a job and that will eliminate the deficit in this Parliament, meaning we finally run a surplus and start spending less than we earn—so that when the next crisis inevitably hits, we are cushioned against it—and do we start reforming the welfare system through the excellent measures introduced by my right hon. Friend the Secretary of State for Work and Pensions and his Ministers? Or do we take the approach advocated in Labour’s motion and bury our heads in the sand, pretend the problem does not exist and carry on borrowing forever, thereby burdening our children and our grandchildren with what the Labour party, when led by the likes of Mr Blair and Mr Brown, described as the bills of social failure? We are finally tackling those bills of social failure, and I am proud of the approach taken by the Conservative party.
Order. I have to reduce the time limit to five minutes. I also remind the House, because perhaps newer Members have forgotten, having been away for Christmas, that if one makes a speech in the Chamber, it is courteous and required by the rules of the House that one stays in the Chamber certainly for the following speech and usually for at least two speeches thereafter. The people who have not done so today know who they are.
Thank you for calling me, Madam Deputy Speaker. It is an absolute delight to follow the hon. Member for Hertsmere (Oliver Dowden).
I am grateful that this debate is taking place. My constituency was included in the pilot roll-out of the universal scheme and will be feeling the full force of the dreadful cuts that have come along with its implementation. I remain wholly committed to getting as many people out of the benefits system as possible, and I readily accept the need to reduce the burden on the welfare bill and to do all we can to get people into regular, well-paid work, but to do so at such a high price for those least fortunate is not the way to do it. We must be clear that these cuts will affect hard-working people—these are not people who are work shy—who are the very people we should and must be supporting.
The Chancellor was right to do a U-turn on the proposed cuts to tax credits. They were an abhorrent attack on the financial wellbeing of millions of hard-working people in Britain, including more than 7,000 in my constituency. However, here we are, faced with the same work penalty, albeit with a different name. The cuts are the same, and once again it will be hard-working families who will suffer. The only difference is the name: this time it is universal credit rather than tax credits. The 140,000 people on the pilot scheme will be the first to fall victim to the cuts, and, as we have seen too often under this Government and the last, the north will suffer first too—75,000 people in the north-east are part of the roll-out. In my constituency, just over 1,400 people claiming universal credit will see their household budgets cut, will face increasing pressure when they need to pay their rents, will increasingly struggle to put food on the table and will find it harder to support their children.
This is not just about those currently on the pilot scheme, however; in time, the cuts will affect many more. After the initial cuts in 2016 to the 140,000, it will become a postcode lottery as to whom the roll-out will affect. In the longer term, up to 2.6 million working families could be worse off by 2020 to the tune of about £1,600. A single mother of two, working full time and on universal credit in 2016-17, will be worse off to the tune of £2,981, compared with someone on tax credits. These cuts will also see a sharp decline in the reward for people taking on more work.
The House of Commons Library has shown that a single parent earning a living wage and with one child will increase their wage packet by only £40 by working an extra 12 hours, whereas before the cuts this would have amounted to an increase of £92. The Conservatives continue to perpetuate the rhetoric that they reward those who want to get on. This is simply not true, as is proved simply by their proposed cuts to tax credits and the imposed cuts to the work element of universal credit.
Finally, let me say that only this week wage growth under the Conservatives will be the worst for 100 years. From 2010 to 2020, wage growth is expected to be only 6.2%. Faced with cuts to their work element of the universal credit, the lowest paid in society will suffer massively at the hands of this Government. I urge the Conservatives to reverse these cuts to universal credit for current and future claimants to protect these hard-working people.
It is privilege to contribute to this debate, which I think goes to the heart of this Government’s approach to reform of our society. Universal credit will, I believe, be the critical measure of success for this Government. In the wake of the debate on tax credits, it would be easy to be distracted by how significant universal credit is. Time and again, it has been shown that well-worn problems with our current welfare system cannot be solved by tinkering at the edges of the previous welfare system. As a member of the Select Committee on Work and Pensions, I have listened to representations about benefit delivery, welfare to work and tax credits, and I believe it makes absolute sense to have radical reform across the benefits system.
Universal credit achieves three core aims. The first is making benefits more like being in work through monthly payments, getting rid of the distinction between benefits such as working tax credits and jobseeker’s allowance and removing the need for reapplication. Secondly, piggy-backing on PAYE via real-time information will deal with a vast number of benefit delivery issues that successive Work and Pensions Committees have addressed. Finally, there is benefit simplification by addressing benefit delivery and helping claimants, who quite reasonably find it difficult, to work out what they are entitled to. This effort has been launched by this Government and particularly by the Secretary of State for Work and Pensions who has been in post determinedly for five and a half years, battling those who have been cynical about the necessary adjustments he has had to make.
In my previous employment, before I became a Member, I worked in an IT consultancy firm. I recall it winning a contract under the previous Government to deliver a significant project for the NHS. A few years later, however, I saw several billion pounds being written off because that project was not run properly. However, I do not particularly want to make a party political point about this issue because it is incredibly difficult for any Government to deliver complex IT systems.
This Secretary of State has shown admirable determination in the face of great cynicism and a lack of clarity from the Opposition about what exactly should be delivered. Are the Opposition in favour of universal credit? Are they in favour of it only if it works within a timescale that they think is politically expedient; or do they have a credible, well thought through alternative that will deliver the quantum of savings to which they committed in their manifesto?
I listened carefully to the speech by the hon. Member for Banff and Buchan (Dr Whiteford), who quite reasonably said that we must look at the detail and not make grand statements. We must, however, also recognise, as my hon. Friend the Member for Hertsmere (Oliver Dowden) pointed out, that there would be major consequences of not making the changes that we have set out and not delivering the savings on which this Government have based their projections for our public finances.
We do not need to be distracted by the speed of universal credit delivery; we can be positive about the progress that has now been made. The DWP announced before Christmas that universal credit is now in three quarters of jobcentres. It is my expectation, based on the evidence I have seen, that everything is moving in the right direction towards full delivery of universal credit within the timescale that has been set out.
This Government’s legacy will be enhanced by the fact that universal credit is not a stand-alone measure. The reforms of the personal allowance, the national living wage, rising wages, economic growth delivering record numbers of jobs, the simplified benefit system and the detail of work coaches helping those who need assistance will provide a compelling legacy. I regret the fact that the Opposition have brought this motion before the House today; it is misguided, and I shall vote against it.
Obviously I echo the sentiments of all my hon. Friends about how these changes will affect working families throughout the country. I am especially concerned about the effects on single parents. The changes to universal credit are complex and difficult to decipher for people who are not yet receiving the benefit, so there is understandably much less buzz than there was for the tax credit changes, but make no mistake, the same uproar will come.
In the debate on tax credits, I spoke of the 24,000 children in Birmingham, Yardley who would be worse off because of those changes. By contrast, on the same date I could find only four properties in my constituency that would benefit from the inheritance tax changes. Thanks to the fact that universal credit has been record-breakingly slow, by April 2016 the changes will potentially affect only 760 households in my constituency. That is still 756 more families hit hard than the number that will benefit from the inheritance tax changes. I think it safe to say that, perhaps other than for those four families—and let us not forget that they have to be dead first—the residents in my constituency can see the same old Tory Government protecting and rewarding the richest.
In honour of the Tories keeping to their type, I shall do the same and raise issues of domestic and sexual violence victims. I wish to pick up two problems with the whole universal credit experiment. The first is that it all gets paid to one person in a household. I have met countless women who have kept small bits of money, saved up and used the funds to help set them and their children free. I have met too many women for whom financial control was the worst and most limiting part of their abuse. Walking away from violence and threat is never easy. It is nearly impossible if you have nothing.
I recognise that the DWP has bowed to pressure and accepted that split payments are available in cases of domestic violence when they are reported to the benefits adviser or the work person we have been talking about today—but there is a real problem with that scheme. It is the same problem I have with the two-child policy coming down the line for the very same families when considering children born of rape.
The Government expect women who are terrified, who have been told every day that they are nothing and no one, to rock up at the local jobcentre and tell the staff that they have been raped or that their husband beats and controls them—“Please, sir, can we have split payments?” What do we think their violent partners are going to do when they find half of their funds gone? I could be wrong and I am willing to be proven so. I have tabled some parliamentary questions about how many people have asked for split payments in the pilot areas. Perhaps all my years of experience are wrong and people in domestic violence relationships are skipping into neighbourhood offices, happy to disclose their worst fears.
I understand the power of the important points that the hon. Lady is raising, but one subtle change is that for the first time such women will have a named contact, who will get to know and understand them, and if they can spot signs that have been highlighted, they will be able to signpost support. That might encourage people for the first time to have that conversation. I know it is difficult, but this provides another opportunity for people to get the support that they absolutely need.
I shall respond to the Minister’s point by saying what I was about to say anyway. I hope that these issues will be considered as the roll-out continues, as he has said that they will. When domestic violence victims had to prove to legal aid services in cases of family law that they were victims, they initially had to provide proof from either the police or a doctor, and some were charged for the pleasure of producing a letter proving that they were indeed victims. Demanding that victims of domestic violence skip around telling anyone who will listen that they are victims before the Government will recognise them as such is inhumane.
I thank the hon. Lady for raising this issue again, because it is extremely important. Does she share my concern about the fact that no details have been given of how the system will work, what the burden of proof will be, and how women are expected to go about this?
I absolutely share the hon. Lady’s concern, and I commend her for all the work that she is trying to do in this regard. As we have seen in the past, at a time of limited services and limited legal aid provision for victims of domestic and sexual violence, just a woman’s word should be enough. It has always been enough for me, I never made people prove that they were victims when they came to me and said that they wanted to come into a refuge. What burden of proof will the Government require? I leave that thought with the Minister.
I understand that the Government have a drive to bring down welfare spending, although, as I think I have already said, they have repeatedly failed in that this task. There is a desire—and I wish that we could draw a line today, and stop this—to pitch people who take against people who give. The truth that the Government fail to realise, again and again, is that we are all taxpayers. There is no distinct group of people who pay nothing. Moreover, I will wager that everyone in the Chamber has been, or will be, on some sort of state benefit. I bet that all our mums and dads had their family allowance, as we called it when I was a kid. Even the Chancellor himself, a man who I believe has a bob or two, admitted that he claimed child benefit for his own children. What a scrounger!
Everyone contributes, and everyone takes. The single parents on low wages who will be hit by these changes are no better or worse than any of us here, and in my opinion they deserve to be treated better than a dead person with a posh house.
I am delighted that we are debating universal credit, because Conservative speakers have already eloquently quashed the myths and rumours that have been put about by Opposition Members.
My constituents probably come to my advice surgeries most frequently when their tax credit payments are in a mess and they owe, in many cases, thousands of pounds. The system that we inherited in 2010 is broken and not fit for purpose. Yet again, the Government are sorting out a mess left behind by the Labour party: a mess created by a tax credit system that did not encourage, financially, people who wanted to work to actually go to work. Universal credit is at the heart of the Government’s welfare reforms, ensuring that everyone who can work is encouraged to do so. By combining six benefits in one, it ensures that work always pays. That is definitely the right approach.
Universal credit is being rolled out in my constituency, and on Friday I plan to attend a meeting at Ilkeston jobcentre to be given an update on the progress of the roll-out. Earlier this year, at a business meeting, I met a member of staff from the jobcentre, who delighted in telling me just how good universal credit was. Indeed, he wanted it to be rolled out even more quickly, although I am sure that the measured roll-out will be of long-term benefit.
According to the latest data available to me, in November 2015 the total number of unemployed claimants in Erewash was 1,058. That figure represents just 2.2% of the economically active population aged 16 to 24. It includes 943 people claiming jobseeker’s allowance, and 115 claiming universal credit. The good news is that that represents a reduction of 245 since November 2014, and a fall of 59% since November 2010.
I am sure that the 115 people who are already receiving universal credit are appreciating its benefits, and that many are now in work. People claiming universal credit are 13% more likely to be in work than those claiming jobseeker’s allowance. They are earning more money, and they are more willing to take jobs. No one wants to be dependent on benefits, and I believe that universal credit goes a long way towards helping people to be independent from them. Let’s face it, self-esteem and dignity are so much higher when income comes from earnings rather than from the taxpayer.
So far the debate has revolved around benefits. I want to expand that into the question of job opportunities, and how we can help people return to work and help those who are in work to aspire to different jobs. It was my right hon. Friend the Prime Minister who, before the 2010 election, encouraged both Members of Parliament and candidates to set up voluntary job clubs. Since 2010, many MPs have organised successful job fairs. I am extending the tradition that was established in Erewash by my predecessor by organising a job and communities fair, which will be held in March. It will promote not just job vacancies but the power of volunteering, because it has been proved that people who volunteer are more likely to obtain jobs and to stay in them long term.
Like tax credits, which we have debated recently, universal credit cannot be seen in isolation and should not be debated in this way. The Government are committed to welfare reform as a whole. As the Minister said earlier, welfare changes must be seen as part of an overall package of measures. The introduction of a national living wage will mean a pay rise of more than £4,700 by 2020 for people over 25 who are working full time. Changes in the income tax personal allowance will also make a difference. In the coming year, people will have £80 more in their pockets. Increasing childcare support will help people move from part-time to full-time employment. There are various other measures that should be looked at in total.
I am disappointed that the Labour party does not back the Government’s measures, which will enable us to become a nation with low welfare, low tax and high wages, and will create a secure economy and a secure future for my constituents and for our country.
I wish you and everyone in the House a very happy new year, Madam Deputy Speaker. Unfortunately, it will not be a very happy new year for many people out there on universal credit.
I am very proud of where I come from in the north-west—the St Helens and Knowsley constituencies. We were at the very centre of the powerhouse during the industrial revolution, but sadly we have lived through deindustrialisation. We have struggled to provide new jobs for our constituents, who received good pay in manufacturing. Unfortunately, most jobs are now in services. Many are insecure, involving zero-hours contracts and agency and part-time work, and those that are secure provide very low pay.
The people in my constituency want to work. They are hard workers. They want to be respected, and they want the dignity of providing a home for their families, clothing them and putting food on the table; but they struggle. Many of them go to food banks, and that is not right; it is unfair.
If the Department for Work and Pensions were part of local government, someone’s feet would not touch the ground. For the Department not to carry out an assessment of the impact of taking billions of pounds in benefit away from the poorest people is totally unacceptable. No one would get away with it in local government, but this is central Government, and there has been no impact assessment. Did the Secretary of State not want one? He repeatedly insisted that people would not be worse off under universal credit because of the “into work” benefit changes that were announced in the summer Budget, but now the Government have admitted that that is not the case.
At the beginning, universal credit was sold on the basis that it would encourage people into work. Some went along with that, thinking that perhaps it was right, but they were warned by all the IT experts that it simply was not practical to expect the roll-out to take place in the existing timeframe, and it has repeatedly been delayed. Unfortunately, however, my constituency has had its roll-out. We are on universal credit at the moment—not all of us, but the latest assessment is that there are 1,586 families on universal credit. [Interruption.] That was the estimate in November 2015 and it came from the House of Commons Library. I am sorry but I would rather take the Library’s word than the Government’s. If you have a problem, go and sort it. Of those 1,586 claimants in November 2015, 510 were in work; 510 will be affected. The facts are from the House of Commons Library. They have not been proven wrong to me as yet. Lone parents—adults who are not disabled—will lose £2,400 in net income in April next year. A single person or a couple, where one or more are disabled, will lose £2,000 in April this year. A single mother of two working full time on the minimum wage will lose £2,400.
Too many of the jobs in my constituency are low-paid and insecure. We have many agency workers and the Government have done nothing about agency working. Agency workers turn up for work, they are sent home from work. They could have a week’s work now, a week’s work in a fortnight or work for three months. One agency even offered two week’s work for free for the employer, after which they would guarantee that person an interview for a permanent job—for 12 months. Not many of them got a permanent job. We had people who were told they if they worked at Tata and Jaguar through the agency for 12 months they would get full-time jobs. But it did not happen; they finished just a few weeks before. Seven weeks later, some of them were called back for three weeks. That is what is going on in the real world out there where I live.
The reason benefits have gone up is that the Government of the day’s economic strategy has failed miserably. Do not talk to me about debt in this country, because that has a lot to do with it. We paid off more debt than any Government on record. What is more, we got up to 1% of GDP and we paid £38 billion of the debt. We had to borrow money to save the banks and working-class people’s savings. So do not talk to me about that. We are only up to 0.4% of GDP now. Benefits have soared because you have not produced the jobs that you said would be produced—
Thank you, Madam Deputy Speaker. I will be brief.
I want to pick up on a couple of points made in the debate. First, I want to address the economic aspect of the issue. I have pressed the shadow Minister on the matter this afternoon. We have had many debates on this issue and on tax credits. Labour Members have said that they are committed to reducing the deficit and debt in this country, and the shadow Minister has said that he is committed to reducing welfare spending by £12 billion, but yet again today we have not had any answers as to how that would happen. To give credit to the SNP, the effective Opposition in this House, while I disagree with its alternatives, at least it has some. Perhaps the shadow Minister in his winding-up speech will acknowledge how he would tackle the welfare saving that needs to be made. If it is not through savings on universal credit, how would he propose to make it?
I agree with my hon. Friends the Members for Cardiff North (Craig Williams) and for Gloucester (Richard Graham). They produced figures that show that those moving to universal credit, with the tapering and transitional arrangements, will not be worse off in cash terms. They have shone a light on the smoke and mirrors from Labour Members.
With all the changes that are happening during this Parliament, and with the introduction of the national living wage, someone working full time on the current minimum wage will be £5,000 a year better off. With the free childcare being introduced for three to five-year-olds, a family will benefit by about £5,000 a year. The rise in tax thresholds—the threshold is currently £11,000 a year and the proposal is to increase it to £12,500 by the end of this Parliament—will benefit low-wage families. That is not to mention the increase in employment, a significant percentage of which is full-time work.
On my second and more important point, I have been disappointed by the patronising and insulting laughter from the shadow Minister when we suggested single parents could get back into work and life coaches would be helpful in that regard. He laughed that off as if that were something that we could only dream about.
I will tell him why I believe so passionately in this. I grew up in a working-class family. I went to school in the socialist state of Lambeth in London, where there was little or no hope or aspiration for working-class kids such as me. We got no careers advice. My careers advice was the housing office number if I got pregnant at 16. It was about how to claim my first benefits. There was no sixth-form advice or advice on how to go to university, so I never got there. There was just benefits advice, but that is the socialist way, because there is no hope or aspiration for people on a low income.
This universal credit debate is more than just about pounds and pence in people’s pockets. It is about a fundamental shift to where people can work and those who do work are paid well for doing so. I will support the Government in their move to universal credit. I urge Opposition Members to do the same.
I make it clear that I welcome the principles behind universal credit. Any scheme that simplifies the welfare system, provides additional support to those who have to use it and incentivises people into work, which ultimately is the best route out of poverty, has to be encouraged. However, the problem is, because of the Chancellor’s failure to reach his deficit reduction target, the original totally laudable objectives of universal credit have been subsumed by the Government’s need to cut the cost of it.
I applaud those Conservative Members who lobbied hard for the removal of the Chancellor’s proposals to cut working tax credit. They recognised the false logic of what he was doing. Indeed, in the autumn statement he said:
“I have had representations that the changes to tax credits should be phased in…I hear and understand them... the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as we introduce universal credit.”—[Official Report, 25 November 2015; Vol. 602, c. 1360.]
The overwhelming impression at that point was that his policy had been abandoned. But it has not been abandoned. He did not mention that it was effectively being rebranded and recycled through the universal credit system. I cannot understand why those people who lobbied him beforehand on working tax credits seem to be accepting those same proposals being recycled through universal credit.
The Chancellor was the one involved in smoke and mirrors. He compounded that with another trick. He suddenly found, for the funding of that, £27 billion that seemed to be in the accounts in the autumn that had not been there in July. That does credit to that well-known comedian and illusionist, the late Tommy Cooper—the Chancellor found it “Just like that.” All I can hope is that, for the state of the nation’s finances, the £27 billion is not as illusory as the benefits that the Chancellor claimed would accrue to those who move on to universal credit. Not only do I object to the way the proposals were introduced in the House, but the underlying philosophy is a contradiction of everything the Government have said about making work pay, taking people off benefits and incentivising them into work. The theme has been well developed by other contributors to this debate, so I will not take it further.
In the context of the cuts to inheritance tax, the universal credit system in effect penalises those who are working hard to produce the goods and services and pay the taxes that will reduce the deficit and benefit those who inherit capital, who will be better off. The policy is incoherent and contradictory, sends the wrong message and ultimately will be self-defeating.
It must surely be a fact that Members in all parts of the House want to see more people in good jobs. This must be a central focus of any Government. There is a pragmatic economic argument for this, as well as a social and moral argument. Labour’s policies in this area were no doubt well intentioned, but proved to be expensive, bureaucratic and in some cases—too many cases—counterproductive.
The growth in job vacancies in the UK economy today is a reflection of the success of this Government’s policies and provides opportunities for people currently out of work and people who want a better job. Some 2 million more people are now in work, which means that we are creating 1,000 jobs every day. Estimates vary, but there are between 750,000 and 1.2 million more vacancies in the economy than before the recession. On a parochial note, I welcome the latest figures showing that the number of people in my constituency, Braintree, claiming jobseeker’s allowance or universal credit fell by 110 in 2015. There has been a staggering 59% drop since the economic and welfare reforms that the Government introduced in 2010.
However, looking forward, we have to ask why we have so many vacancies, yet so many people under-employed. Surely the past welfare system must be a contributory factor. We can recognise the impact of perverse incentives without vilifying the unemployed or the under-employed. At no point in this debate have I heard the word “scroungers” uttered from the Government Benches, but many times from the Opposition Benches. That is unfortunate.
We have all had people in our surgeries saying something along the lines of “I am working my 16 hours.” How on earth have we come to this? If taking more work brings extra paperwork, extra uncertainty but little extra money, is it any wonder that so many people decide not to do it? This is fundamentally wrong and must be rectified if we are serious about dealing with long-term under-employment.
Universal credit extends financial incentives to people working less than 16 hours per week and removes the limit on the number of hours that some people can work. The single 65% taper helps claimants clearly understand the advantages of working and planning for the long term. As a Conservative, I want to give people real choices in life. A life trapped on welfare is a life without choices. It is our duty to change this and give people a well-deserved chance to make the very best of themselves and their families. The financial imperative is important, but just as important is the fact that universal credit is a means of getting more people into work and more people into good work.
I have listened to the contributions from Opposition Members. Their arguments are all based on people not changing their circumstances. This fundamentally misses the point of universal credit. I want people to change their circumstances. If they are trapped in low-paid part-time jobs, I want them to change their circumstances. If their employers will not invest in their training because they are only on 16 hours a week, I want them to change their circumstances. If they are stuck on the minimum wage, I want to see them able and confident to get better jobs and therefore change their circumstances. Universal credit will be a game changer. I welcome it and I commend it to the House.
Thank you, Madam Deputy Speaker, and happy new year.
The apparent tax credit cut U-turn performed by the Chancellor at the autumn statement appeared at the time to be a victory for common sense and the vigorous campaign fought by my colleagues in this place and in Holyrood, and by Labour, Plaid and the Greens. But as the dust settled on the much-hyped U-turn, it appears now that all the Chancellor did was delay the pain of those tax credit cuts and transfer much of them into universal credit, specifically the work allowance. The House of Commons Library briefing on the subject states:
“The work allowance reductions announced in the Summer Budget will ultimately have a similar impact to the changes to tax credits which are not now going ahead”.
So low income working households in Airdrie and Shotts and across these isles are still going to suffer painful cuts from this austerity-obsessed Government, and those low income families are again going to be asked to pay the price for economic failures not of their making. The cuts have just been deferred, deflected and dished out by other means.
Yet again we must ask how these cuts can possibly chime with the Government’s claim that they want to make work pay or with the aim of universal credit—that “work pays and more work pays for everyone”. Well, work will not pay for those on universal credit who are due to see their incomes cut by up to £3,000 a year, according to the House of Commons Library—£3,000 less for a single parent or a family before housing costs are considered, where one or both adults are disabled. These people are working hard, paying their taxes and are now to be hammered yet again.
The Minister said that he wanted a change to the cycle of taking money from low income workers and giving it back through social security. He is achieving that change, but now the Treasury will just take and not give back. Government Members may well suggest that the shortfall can be made up by working extra hours. The Work and Pensions Secretary has already suggested that, but for those with a disability which makes it possible to work but impossible to work full-time, or for someone with caring responsibilities who can work only part-time, or for those whose employer cannot afford to give them extra hours, this cut will be an unfair punishment for this Government’s flawed and reckless obsession with austerity at any cost.
The despicable suggestion that all those who are about to have their incomes cut can just pick up some overtime here and there goes to show how desperately out of touch Tory Ministers and, on the evidence of this debate, a great many Government Back-Benchers are. They do not have a clue about how people on low incomes get by or how devastating an impact these cuts will have.
If the Government were serious about reducing welfare spending, they would be creating more job opportunities and truly dealing with barriers to employment, particularly for the disabled and mentally unwell. Instead, we see savage cuts to social security support directed at those finding it most difficult to get into work—the universal credit work allowance and the employment support allowance work-related activity group are perfect examples. These benefits, which help those in need of extra support to get back into work or to stay in work are being slashed to ribbons by this Government. I hope the Government will heed the call from my hon. Friend the Member for Banff and Buchan (Dr Whiteford) in her excellent speech and publish an impact assessment.
We must remember that these cuts are being made out of choice, not necessity. The Tory Government should be refocusing their priorities for spending cuts elsewhere, not on poor and low-income families.
I hope we will see a similar rear-guard action from the Tory Back Benchers who spoke out against the tax credit cuts and that they will oppose these cuts to the universal credit work allowance. The House of Commons Library says the cuts to work allowance will have the same impact as the cuts to tax credits.
Thank you, Madam Deputy Speaker.
May I thank the Labour party and the hon. Member for Pontypridd (Owen Smith) for bringing this motion to the House? I want to start, as he did, by discussing the parliamentary procedures and the concerns I had about how this change was made. My view is that the Statutory Instruments Committee should be used to address technical changes to legislation and amendments. This was not a technical amendment; this was a policy change, and this was a procedural vehicle to sneak in the most damaging legislation and avoid public scrutiny. At the SIC we were subjected to the usual sunshine and cheerful rhetoric from the Government members, so much so that if we were playing Tory buzzphrase bingo we would have won the snowball after a couple of minutes, because the reality of this change is that a lone parent who currently earns the national minimum wage can work up to 22 hours, but with this cut to working allowance they would lose that support after 12 hours.
I am still waiting for the answers to many of the questions I asked at the SIC, and I hope that those on the Government Front Bench will answer some of them. First, what assessment has been made of the effect of the changes to working families and their ability to take on part-time work? Does this disincentivise work and lead to workers reducing their hours? It seems to me that it is human nature that if there is a chance of someone losing benefit payments and they can save that benefit only by cutting their working hours, that is exactly what they will do. Will there be any mitigation of the effects on their benefits? How will carers be affected, in particular young carers? Talking about young workers, what about those aged under 25, who will not get access to the national living wage?
I also ask this question again: what impact assessment has been done in respect of Department for Work and Pensions staff, who are the lowest paid civil servants in the country—so much so that when staff from Her Majesty’s Revenue and Customs are merged into the DWP, they earn £2,000 more than those in the DWP? These are staff who are subjected to a 1% pay cap, and who are paying, and have had to pay, increased pension and national insurance contributions; and 40% of DWP staff are currently on tax credits.
We have heard so much again today about aspiration. What message does the cut to working allowance send to those who aspire? The reality is that people are increasingly aware that the ladder of social mobility is being systematically pulled up ahead of them, and that no matter how hard they work or how much they aspire to a better life for their children and themselves, they will be punished for not being born into the right sort of family. That is the reality of this cut to UC work allowance.
It is a pleasure to follow the hon. Member for Glasgow South West (Chris Stephens) in actually debating the motion, which is about the Government’s cut to UC work allowance. This debate has been like a silent disco experience; it seems like the other side are tuned into a debate about their vision of UC and some of the issues and arguments around its roll-out, whereas this side of the House seems to be tuned into the right debate, which is about the cut to UC work allowance.
We have heard spurious arguments across the Chamber. The hon. Member for Braintree (James Cleverly) told us he wants his constituents to be able to improve their choices, but he has not told us how the cut to the UC work allowance is going to improve anybody’s choices; it certainly is not going to improve choices for people in my constituency when the effects of this change reach them in time to come.
We have also heard some other nonsense arguments. The hon. Member for Gloucester (Richard Graham) said the Institute for Fiscal Studies was telling us that nobody will lose out from the changes. That is not what the IFS has said in relation to these specific changes to UC, and not just the change to the work allowance. The IFS estimates that, taking into account all the announced changes to universal credit, there will be a reduction of £3.7 billion in entitlement, and that there will be an aggregate loss of £1.5 billion a year for working families.
As the hon. Member for Banff and Buchan (Dr Whiteford) pointed out, some people are billed as losers and some as winners, and we can look at what the various analyses and appraisals show. According to the IFS, 2.6 million families are due to lose an average of £1,600 a year, whereas 1.9 million are scheduled to gain an average of £1,400 a year. Of course, we do not know whether those who are currently projected as winners will stay as winners, because the Government have already melted and bent all their promises and assurances on universal credit. They said that work would pay, and that more work would pay, for everyone, but that promise has been eroded and corroded by the Government’s measures over the past year.
In the spring, the Government produced a Budget in which they announced one figure for the welfare cap, but then in the summer Budget they reduced the cap by £46.5 billion over the following four financial years. That shows us that we cannot depend on any of the Government’s projections or assurances. Of course, when the Chancellor announced his U-turn on tax credits, it was clear that he still intended to make both the near-term and longer-term changes to universal credit. He said that he would achieve by other means the savings that he was giving up through his U-turn on tax credits. Will those savings come through other changes to universal credit, including the work allowance? Will those who are currently billed as potential winners from the work allowance have their terms and conditions changed in years to come? Government Members have made no argument about the change to the universal credit work allowance that they could not equally give in response to any future cut affecting other universal credit claimants.
Quite apart from the question of whether the roll-out of the project will work in IT terms, individuals know they cannot rely on any of the assurances and promises that have been given about what universal credit will mean for them. It is all very well for Tory MPs to say what it means to them when they turn up in their constituencies, but it will be a different story around kitchen tables when the budgets of hard-working families are affected.
Thank you, Madam Deputy Speaker, for giving me the opportunity to speak in today’s debate. I promise that I will try to be brief.
In his autumn statement on 25 November, the Chancellor trumpeted that he was reversing the proposed cuts to tax credits in full, stating that he had abandoned plans to impose £4.4 billion of cuts from this April. It now appears that he is doing a U-turn on his U-turn, because in the short time since the autumn statement it has transpired that he has lined up similar cuts affecting many of the same working families, this time to universal credit. It seems that he is ushering in a new postcode lottery by pushing ahead with cuts to universal credit, which will leave some families up to £3,000 a year worse off than others in exactly the same circumstances.
We have heard the example of a single mother of two, working full time on the minimum wage and claiming universal credit, whose net income next year will be £2,981 lower than that of someone in the same circumstances who is claiming tax credits. Meanwhile, a single parent of two on a salary of £18,000 a year will see their overall income fall by £2,601 next year if they are on universal credit. As my hon. Friend the shadow Secretary of State indicated, analysis shows that from April, cuts to the work allowance will also mean an annual reduction of £2,000 a year in support for disabled people in work, which is clearly a particular concern.
My constituency will be hit hard by the proposals, with 2,000 families being affected in 2017, 5,000 in 2018, 8,000 in 2019 and 10,000 by 2020. Across our country, the need for food banks is increasing. I mention that because in many cases, food bank support is provided more to people in work than to those out of work. Perhaps if the Minister and the Secretary of State took the time to visit food banks and talk to the many thousands of volunteers, they would get a better appreciation of the hardship that is being endured. The proposals to cut tax credits will make matters much worse for people and hit working families—people the Government say they want to help and are committed to helping.
I say to Conservative Members that these measures will cause great hardship to many vulnerable families across our country, in all constituencies. The Tory Government have choices. We have seen announcements of billions being allocated to the most well-off by cutting inheritance tax and further support being handed to big businesses by cutting corporation tax.
There is a repeated assertion on the inheritance tax cut. Even by 2021, the inheritance tax cut will cost less than £1 billion, which is in no way comparable to the savings that are achieved through the welfare reforms. We cannot magic up the savings by not proceeding with the inheritance tax cut alone.
That is one example of the wrong choices being made by the Government but there are others. They have given further support to big businesses by cutting corporation tax. They have chosen to continue the cut in the top rate of income tax from 50% to 45%, allowing someone earning £2 million a year to continue to pay £250,000 a year less in income tax. Those are clearly wrong choices, and they are made on the backs of ordinary working families. Against that background, the decision to penalise working families who are already struggling to make ends meet is wrong in so many ways.
The changes will cause worry and undue stress to millions of families. I therefore urge Conservative Members to support the Labour motion today, and not to turn their backs on working families.
I welcomed the Chancellor’s U-turn on tax credits and praised him for it. It was the right and courageous thing to do. I pay tribute to colleagues on both sides of the House who worked together to achieve it, and colleagues in the other place. I particularly pay tribute to colleagues on the Government Benches who had the courage to tell the Government that they were wrong and that the measure would hit hard-working families.
Imagine the dismay of those people—many of the very same people who thought they had escaped a £1,400 cut in their low income from next April—who now find that, through a different mechanism, they will suffer in exactly the same way. That decision was merely a delay and a temporary reprieve. Those people will feel duped and betrayed. I serve notice on the Government today that the Liberal Democrats will table an amendment in the House of Lords and seek co-operation from other parties and Cross Benchers to seek to bring the Government’s measure down, to show them that they cannot introduce the tax credit change by the back door, which is exactly—disgracefully—what the measure is about.
The reality of the figures is worrying, but the reality of the people affected is disgraceful. According to Liverpool Economics, the net effect on the income of lone parents will be a reduction of £2,600. Disabled people will see a net reduction in income of £2,000. The net effect on couples with children will be a reduction of £1,000. Some 2.6 million working families will lose out if the cut to universal credit goes through. A couple on £20,000 a year with two children were looking forward to being £160 better off due to changes in the personal allowance in April after the tax credit cuts were scrapped. They would have welcomed that very strongly, but that same couple now face a cut from April—in just a few weeks’ time—of £1,030.
The Social Mobility and Child Poverty Commission—the Government’s own advisory body—has said that
“there is a risk that incentives to progress in work for many families could end up being worse than they were…The immediate priority must be…reversing the”
“cuts to work allowances…before they are implemented”.
Despite the reversal on income tax credits, the proposals merely delay the impact on those relying on state-funded wage top-ups. Why, therefore, have we heard not one word from those who had the courage to oppose tax credit cuts when exactly the same cuts in a different guise are here today? Asking people to work 200 more hours a year simply shows a Conservative Front Bench and a Government who are out of touch.
My question for the Chancellor and the Secretary of State for Work and Pensions in the short term is why there has not been a proper impact assessment of the change. Will they now do one? What do they have to hide? Will they also respond to the view of the statutory body, the Social Mobility and Child Poverty Commission, which they have not done so far? Let me be clear that the Liberal Democrats will seek to overturn this measure in the House of Lords. They are right to do so. Let us hope that once again we will see a U-turn from this Government, because this is not acceptable and hits the people who they purport to be seeking to help.
I congratulate everybody and thank them for their contributions to today’s debate. The list includes too many Members to mention them all, but I want just to mention my right hon. Friend the Member for East Ham (Stephen Timms) who, in his typical way, forensically analysed the implications of the cuts to work allowances for universal credit and the implications of undermining the objective of universal credit, which is to incentivise work. The Government might have been forced to row back on their proposed cuts to tax credits, but, as has been emphasised in the debate, that is not the end to their attack on hard-working people on low pay.
In his autumn statement last November, the Chancellor failed to exclude people who are currently on universal credit from any cuts in work allowances. As the Institute for Fiscal Studies has said, as everyone in receipt of tax credits now will eventually move on to UC, the long-term effects will be nil. Again according to the IFS, by 2020 2.6 million families will be £1,600 a year worse off.
Starting in April, there will be a £9.6 billion reduction in support for working families over the next five years, with £100 million of that coming in 2016-17. Those people already on UC, including my constituents, will be hit first. There are currently 155,000 people on UC, and that number is increasing every week and is expected to reach half a million by April. House of Commons Library analysis shows that the cuts will mean that a single parent of two who is working full time on the minimum wage will lose £2,400 next year. Liverpool Economics has estimated that disabled people will have their support reduced by £2,000 a year. A couple earning £20,000 a year and with two children will be £1,600 a year worse off.
The north—particularly the north-west, where UC started —will be hit first, so we go from powerhouse to workhouse. The Government first of all denied that anyone on UC would be worse off, with the Secretary of State saying on the BBC:
“Nobody will lose any money on arrival on Universal Credit from tax credits because they’re cash protected, which means there’s transitional protection.”
Well, that could not be further from the truth. As the Government finally conceded during the Christmas recess, the flexible support fund that the Secretary of State claimed would provide transitional protection for claimants is used for other purposes and last year was only £69 million, well short of the £100 million cuts for this year, let alone the £3.2 billion cuts by 2020. Will the Secretary of State now apologise, as I believe this is the first time he has had an opportunity in the Chamber to apologise for his inaccuracies and for misleading the public in this way? I will take that as a no.
The blunders and callousness do not stop there. The Government suggested that the way to avoid the cuts was just to work an extra 200 hours a year, three or four hours a week. As the hon. Member for Banff and Buchan (Dr Whiteford) said, is that what the DWP is going to do? If it is not, the Department needs to get its own house in order first.
The Minister was desperately trying to say that this was about dynamism and strengthening work incentives, but cutting universal credit work allowances will weaken, not strengthen, work incentives—a far cry from the supposed intention of universal credit. As a result of these cuts to universal credit work allowances, a single parent earning the new minimum wage and with one child will increase their income by only £40 by working an additional 12 hours. That compares with an increase of £92 for the additional 12 hours before the cuts to the work allowances were introduced.
The Government are once more making the poorest, including the working poor, bear the brunt of further cuts, as the IFS analysis of the autumn statement shows. After six years, they have done next to nothing to curb boardroom pay. The average worker’s pay of £27,645 increased by less than 2% last year, compared with pay for top executives on an average of £5 million increasing by nearly 50%. That trend is getting worse, not better. In the first five days of January, many of those top executives had already earned the equivalent of the average worker’s annual salary.
Worryingly—though sadly unsurprisingly—this Government have yet again failed to publish an impact assessment of the effects of these cuts. The Social Security Advisory Committee said of these regulations that
“the impact needs to be analysed carefully and the policy about work incentives should be derived from strong evidence.”
The Committee was concerned that
“there may be an uneven impact on individuals”
and expressed disappointment with the
“lack of statistical analysis to support the view that the abolition of the work allowance for several UC categories will not deter people from seeking work”.
In the House of Lords, the Secondary Legislation Scrutiny Committee issued a report stating that its members were
“disappointed that no impact assessment or similar statement has been provided showing how many people are likely to be affected by these changes and to what degree.”
In addition, there has to date been no cumulative impact assessment of the Department’s policies on poverty affecting disabled people and children—something I have repeatedly urged Ministers to undertake. The Social Security Advisory Committee stated in 2014 in its report on cumulative impact assessments of welfare changes that it believed
“that more can and should be done to identify and evaluate the interaction between elements in the welfare reform agenda, particularly as they affect vulnerable groups.”
Others have made such evaluations. Demos made an assessment of the cumulative effects of the 2012 welfare reforms, estimating that £23.8 billion will have been taken from 3.7 million disabled people by 2018—and that does not even take into account the potential effects of this year’s Welfare Reform and Work Bill. The Child Poverty Action Group states that the cumulative impact of welfare reforms on low-income households, the majority of which are families with children, will amount to £9.7 billion by 2020-21. A recent BMJ article highlighted the disproportionate effect that the Government’s social security cuts are having on children and on people with disabilities; another highlighted the impact on child health of the Government’s welfare cuts. This is happening at a time when this affluent country, the sixth wealthiest in the world, has the highest under-five mortality rate in northern Europe. These policies are going to make that worse.
We are calling for a full reversal of the proposed cuts to the Government’s universal credit work allowance. As we have heard throughout the debate, all the evidence shows that there is no valid reason for protecting people on low and middle incomes from the cuts to tax credits without extending the same protection to working families on universal credit, especially as the Secretary of State has said he expects no new claimants to be eligible for tax credits from 2018 as tax credits will have been replaced by universal credit for all new claimants. The cuts to the universal credit work allowance are just as unjust as the cuts to tax credits. That is why we on this side of the House are calling for a full reversal and asking Conservative Members who were brave enough to make a stand against the tax credit cuts to have the courage of their convictions and vote with us today.
I should like to thank all those who have spoken in today’s debate. On a Labour Opposition day, however, it is rather regrettable to find more Scottish National party Members than Labour Members present for most of the debate. Labour Members have demonstrated a poor showing on their Opposition day.
Let me make one thing absolutely clear at the outset: universal credit is transforming people’s lives. After years of Labour’s dependency culture, this Government are continuing to reform the welfare system and the labour market.
It is worth reminding the House of the broken welfare system and labour market that were left to us, a legacy that hon. Members have recognised during today’s debate: nearly one in five households had nobody in them working; the number of households where nobody had ever worked had nearly doubled; 1.4 million people had been on benefits for most of the previous decade; and close to half of all households in the social rented sector had nobody in work.
I will not give way, as I have limited time available and I am keen to address as many of the points raised as possible. We have turned that situation around. Our reforms, the centrepiece of which is universal credit, are working and are getting people back into work.
It is important that the right hon. Gentleman and others take into account the need to consider the broader perspective: the raising of personal allowances; the introduction of the new living wage; the doubling of free childcare to 30 hours; tax-free childcare from early 2017; and, let us not forget, the fact that every time we fill up our tank with petrol there is a saving of £10 because of the freezing of the fuel duty. It is important to consider everything in a broader perspective, not the narrow perspective that we have heard from so many Opposition Members.
A number of speeches have been made today and, unfortunately, time simply does not allow me to address them all. I shall simply say that the right hon. Gentleman made a passionate contribution. I have huge respect for him and I am sorry that he is no longer on his party’s Front Bench. May I also pay tribute to my hon. Friend the Member for Hertsmere (Oliver Dowden), who made a learned contribution, clearly setting out the reasons why Labour’s proposals are simply not sustainable? My hon. Friend the Member for Lewes (Maria Caulfield) made a powerful contribution, telling us of her experiences growing up, which had the whole House in agreement with her.
This is an important subject and we need to recognise that the IFS has pointed out that no one on existing benefits or tax credits whose circumstances remain the same will lose out in cash terms as a direct result of being moved on to universal credit. These claimants will get transitional protection to avoid cash loss at the point of change. It is important to note that the only people who will be directly affected by the change to work allowances in April will be those already in work, the majority of whom will be single claimants without dependants. [Interruption.] The shadow Work and Pensions Secretary chunters away, but we have checked the Hansard record and found that he was wrong and we were right. Conservative Members await a withdrawal of his earlier comments, which we debated. We have checked Hansard and he should do likewise. For those people who are affected, we have been careful to put measures in place to ensure that they are fully supported. As well as the additional work coach support that these claimants will receive, we have increased the amount available through the flexible support fund to help people progress in work and increase their earnings.
Universal credit is a major reform of welfare that is designed to make sure that work always pays. Through the removal of the requirement to work 16 hours per week that exists in the tax credits system, people will see a financial benefit from every extra hour they work. The universal credit taper means that financial support is withdrawn at a consistent and predictable rate, helping claimants to understand clearly the advantages of work. The IFS has said that anyone being moved on to universal credit from tax credits will be protected—they will not be cash losers. Opposition Members need to take that on board—that comes from the IFS.
I will not give way.
It is also worth noting that universal credit is working: for every 100 jobseeker’s allowance claimants who find work, there are 113 universal credit claimants who do so. It is important to look at the bigger picture. This Government are moving Britain to a higher wage, lower tax and lower welfare society. Universal credit is fundamentally different to the legacy systems it replaces, and it must be recognised that there is no meaningful way of comparing an unreformed tax credit system with universal credit.
As my hon. Friend the Under-Secretary of State for Disabled People highlighted at the start of the debate, Labour’s spending on in-work benefits went up by £22 billion, but the number of working people in poverty actually rose. The system we inherited from Labour was one where, for millions of people, being on welfare was a more attractive option than working or taking on more work.
Under Labour, there was a complete abdication of responsibility for managing working taxpayers’ money. Labour’s shambolic welfare policies led to a colossal welfare budget that was simply out of control, and the party has not changed. Page 47 of the 2015 Labour party manifesto said:
“To guarantee a decent social security system for the next generation, we need to keep costs under control.”
Yet when the shadow Work and Pensions Secretary was on the “Daily Politics” programme in December he said:
“We are campaigning for a…full reversal of universal credit...we will put that money back in if we were in power…I’m crystal clear about that.”
The presenter Jo Coburn challenged him—she had to challenge him three times. She said:
“Where will you get the money? The bill would go up under your proposal.”
The shadow Secretary’s reply was:
“Had I been Chancellor…I would have taken the extra £27 billion tax receipts.”
There we have it: the party that wants to continue taxing. That is why it is the party of welfare—it is the welfare party, not the labour party.
Welfare is much more than simply giving money to people and writing blank cheques; it is about removing the barriers that prevent people from finding work and progressing in work. It is about giving people the support they need to stand on their own two feet and live independently of the state. It is about creating the right incentives for people so that they can make the right choices for themselves and their families. That is what universal credit does, and it is working. It is incentivising work, renewing personal responsibility, and rewarding positive choices. Under this Government—this one nation Government—we will continue to deliver for all our citizens.