The Minister for Employment (Damian Hinds)
I congratulate the right hon. Member for Birkenhead (Frank Field) on securing this important debate today and also thank Members from across the House for such a good and constructive debate. Unfortunately, my time is now extremely short, but I will try to respond to as many points as I can.
In particular, I wish to mention the absolutely outstanding maiden speech from my hon. Friend the Member for Banff and Buchan (David Duguid). He paid generous tribute to his predecessor and spoke about how he was focused on securing the best Brexit for businesses in his constituency, particularly those around fishing and farming. He talked about some of the other opportunities for the future around oil and gas and tourism. Overall, he painted a colourful picture of his constituency and what a wonderful place it would be in which to live. Clearly, he will be a great asset to this House and to our democracy. The accents from his part of Scotland are always rich and characterful, but they sound so much better when they come from this side of the House.
Universal credit has been the subject of a number of debates over recent weeks, but it remains important not to lose sight of why this vital reform is needed, and the key principles behind it, which my hon. Friend the Member for Brentwood and Ongar (Alex Burghart) outlined effectively. Today on the main out-of-work benefits, someone who does more than a minimal amount of work would have to go through the upheaval of changing to a different benefits system. That can deter some people on jobseeker’s allowance from taking on seasonal work, for example, or a trial position. The obstacles to starting work can act even more strongly for people with disabilities who are on ESA. On ESA, people can only do so-called “permitted work” of up to £120 a week. There is no “permitted work” under universal credit, because work is permitted full stop. People do not have to make a choice between starting a career and getting support through the benefits system.
As my hon. Friend the Member for Torbay (Kevin Foster) said, universal credit simplifies the system, merging six benefits into one, and asking people to deal only with one part of Government, not three. It is paid monthly in arrears, like most jobs these days, allowing claimants to structure their expenditure around a monthly fixed payment day. My hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) asked me to outline how many people in work are paid fortnightly these days. The answer is about 3%. The majority of people are paid monthly, a sizeable minority are paid four-weekly and, of course, quite a lot of people are still paid weekly. Overall, about 70% of people in work are paid either monthly or four-weekly.
The month-long assessment period starts straightaway for people transferring from another benefit, and for members of certain vulnerable groups. For newly unemployed people, eligibility—and, therefore, the assessment period—starts seven days later. These waiting days reflect the principle that benefit support is not intended to cover very short periods of unemployment. Of course, they also exist in jobseeker’s allowance. The monthly in-arrears payment cycle is fundamental to the design of universal credit, meaning that an individual’s benefit payment each month can reflect what they earned in that month, and can take account of all the different patterns in which different people are paid.
Beyond the month-long assessment period, there is a further time of up to a week for final calculation, verification and making the payments. All DWP benefit payments, including universal credit, are made using the BACS system, which takes three working days to process. A claimant’s first universal credit payment due date will be seven calendar days after the end of their initial assessment period, and subsequent pay days will be on the same date each month thereafter. If the UC pay day falls on a weekend or bank holiday, it will be brought forward to the nearest working day. That is what the seven days after the monthly assessment period are for: three days for calculation, data verification and BACS processing; and four days to allow for the fact that the payment due date may come on a Saturday, Sunday or bank holiday, to then allow us to pay claimants ahead of that due date.
If someone is leaving a job, they normally have a final pay packet, and some may also have redundancy pay. If people are moving on to universal credit from another benefit such as ESA, JSA or income support, paid fortnightly in arrears, they will have their final payment from that benefit. We do realise that different people’s circumstances vary, so advances are therefore available.
My hon. Friends the Members for Redditch (Rachel Maclean) and for West Aberdeenshire and Kincardine (Andrew Bowie) reminded us that no one need go five or six weeks without money. People can get an advance payment of up to half of their indicative award, recouped over six months or, as we were reminded, in some cases longer. Advances are available and paid within five working days. In an emergency, they can be paid on that same day. These advances are not like a loan in the sense that no interest is payable, and they are not like a wage advance in the sense that they do not just get taken fully out of the first wage packet.
I must stress—it is worth repeating—that the universal credit payment cycle is then monthly, with the payment made on the same date each month, unless that date falls on a Saturday, a Sunday or a bank holiday, in which case the payment would be advanced to the nearest working day.
This monthly assessment is a much better system than the tax credits system, which works on estimates and often involves big adjustments at the end of the year, including requiring people to pay back sometimes large sums, which they might, of course, already have spent, as my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst) rightly reminded us.
So UC erases the binary distinction between in work and out, and removes the need to flip in that way from one benefit to another and then back again. Three separate peer-reviewed studies show that people are more likely to be in work after six months if they are on UC than if they are on JSA. Those are matched samples comparing people who are similar in other respects, apart from the benefits they were on.
My hon. Friend the Member for Stirling (Stephen Kerr) asked about the direct payment of rent. Since the then Labour Government’s reform of 2008, the default position has been that people in the private rented sector handle their own rent. Universal credit extends that principle to people renting from a council or housing association, but we can pay rents direct to landlords, and a sizeable minority of social sector tenants on universal credit have that arrangement right now. We are further improving the set-up process to make rent payment direct, where appropriate, for the social sector—through the trusted partner status—and for private rentals.
We are also able—the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) asked about this—to make payments more frequently than monthly. That can be fortnightly or, indeed, weekly, when that is necessary, and we can split payments between members of a couple.
Universal credit is a vital reform that changes how we support people out of work and in work and how we help them progress from one to the other. It is a lot of change—a new benefit, a new IT system, a new operational system and new ways of working with partners—and, yes, that does bring with it some challenges. We will continue to work with claimants, stakeholders, partners, and hon. and right hon. Members on both sides of the House to resolve those challenges as they arise and to improve universal credit as it is introduced across the country. However, it is important that we continue with universal credit in order to realise the benefits that it brings, including boosting employment by an estimated quarter of a million when fully rolled out.
Universal credit is being introduced at a measured pace over nine years. Between last month and January, it will go from covering 8% of the benefits-claiming population to 10%. This gradual, careful approach, with planned pauses in the roll-out to learn and to respond to issues as they arise, means we can continually adjust and evolve the programme.
Universal credit is the biggest modernisation of the welfare state in a generation. Already, it is transforming lives, and we are determined to see this reform through.