Universal Credit

Baroness Sherlock Excerpts

Wednesday 21st December 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I welcome the noble Lord, Lord Macpherson, to the House. It was a real pleasure to work with him in the Treasury, albeit of course in wiser and gentler days. It was a characteristically thoughtful and measured maiden speech. Perhaps his long view enables us to look on something like the developments in social security today as evolution rather than revolution. If he is right, I fear that the students of the world will have to tear down their pictures of the noble Lord, Lord Freud, which had previously replaced the ones of Che Guevara and perhaps look at something in future that is a little more Darwinian in evolution. I cannot tell noble Lords how frustrating it is to have three minutes to talk about universal credit: I could talk for 33 minutes, but I will not. I have three brief comments and will then say a word about the noble Lord.

First, on the principles and architecture, we on these Benches have long supported the idea of universal credit and a combined benefit. It is in the end not a principle, but a delivery mechanism to get money to households based on need and circumstance. Its key advantage should be the ability to smooth transitions in and out of work, while having a single taper can be used to ensure that work pays and that claimants benefit from any increase in pay or hours. But there are some structural issues that still need addressing. The key one is that it was a real mistake to let the DCLG take council tax benefit outside universal credit. Doing that and then cutting it and localising it means not least that the DWP cannot ensure that work pays because it does not know how much council tax support any individual will get, especially if they get disability benefits. That was flagged up during the passage of the Welfare Reform Act as were other issues that are now causing problems. We have heard about paying monthly in arrears leading to six-week delays and real hardship and the decision to pay rent direct to the landlord causing real problems for tenants and some landlords. There were also significant issues for second earners for whom work is disincentivised, for self-employed people and real issues around in-work conditionality. But all of that could be changed: it is not structural, so I hope that it will be.

Secondly, the levels of UC payments are a problem. They were cut before it was even implemented and have been repeatedly since. Universal credit was meant to be more generous than the tax credits that it replaced, but it is now a net gain to the Treasury, which may explain its more recent enthusiasm for it. UC was of course designed to lift 350,000 children out of poverty, but it now cannot do that, because if levels simply are not high enough to raise people out of poverty, it cannot do that job. Crucially, it was meant to make work pay. Instead, the taper-free work allowance has been halved unlike with tax credits. Reducing the taper from 65% to 63% does not begin to compensate. The original taper was meant to be 55%, which really could have made work pay. Sadly, I am sorry to say that the Treasury axe has so damaged universal credit that at the moment it cannot do the job that it was born to do. Work is no longer the route out of poverty and simply saying it does not make it so.

UC is a great idea, but only if it is deliverable. If it cannot be delivered, it is a terrible idea, so I am afraid that I have to say a word about delivery. I feel really mean going on about this during the swansong of the noble Lord, Lord Freud, but it has to be said. I cannot allow a debate on universal credit to go through without mentioning that it is years late, that hundreds of millions of pounds have been spent on IT disasters, that there are widespread complaints about delays and errors, and that sanction rates are sky high—and all this is before current claimants with complex cases and repeat changes of circumstances move across. I fear that it could then get worse. I hope very much that the new Minister will find an opportunity for us to discuss these issues at greater length when we come back in the new year. Universal credit can and should make work pay and tackle poverty, but it will not do so without change.

But that is not for the noble Lord, Lord Freud, to worry about. His job is done and the House should acknowledge his absolute determination to get the structures of universal credit in place, including his willingness to stand his ground and to fight his own department, the Treasury and the DCLG when necessary. My friends used to report to me periodically about turning on the television to find footage of the noble Lord, Lord Freud, and I doing battle on late night Parliament TV, and they would often say, “Why do you keep shouting at that nice man?”. It is true that we have battled over various policies for many years, from the bedroom tax to disability benefits. Some issues we must flat out disagree on, but with others such as the cuts to universal credit, and I suspect the two-child policy, I always thought that the Minister’s heart was not really in his arguments.

But whatever the issue, some things may not be evident from outside the House: that the noble Lord, Lord Freud, has been unfailingly courteous to me and to all of us on these Benches. He has been generous in giving us access to his officials and he has done the House the courtesy of almost always coming here himself to defend his policies rather than sending a Whip. He usually seeks to defend his arguments by engaging with us and using evidence rather than just repeating the government line. When we convinced him in debate, he would go back to his department, push, and then sometimes return with real concessions. We may disagree on policy and I think that we will carry on doing so, but the noble Lord, Lord Freud, has been a loyal public servant of integrity. The House and the country should be grateful to him. I hope that we will see him in the House again very soon, but only after he has had a well-earned sabbatical.