Universal Credit

Countess of Mar Excerpts

Tuesday 7th July 2015 Lords Chamber

[Lord Freud]

The marginal rate—the rate at which one withdraws benefit—is 65%. In practice, among the incentive effects are that all the constraints about taking temporary jobs or trying part-time jobs have disappeared, as have some of the constraints against people who may be disabled with fluctuating conditions. They would not normally dare take on a job because if their condition came back, they would have to restart the process of getting on benefits. Because universal credit is both an out-of-work and in-work benefit, it means that there is no risk element to being in work.

[The Countess of Mar (CB)]

My Lords, the Minister will no doubt have seen and heard increasing criticism of tax credits as a way of supporting profit-making companies which should be paying proper wages to their staff but are bad employers. What are Her Majesty’s Government doing to reduce the number of people claiming tax credits and incentivise employers to pay proper wages to their staff, so that they do not need to claim tax credits?

[Lord Freud]

My Lords, it is a bad day to answer that question. The real point is that as we move from the combination of the benefit and tax credit systems into one universal credit system, the incentives will be restructured to encourage people to work their way down the taper.