Universal Credit and Debt

Lord Bellingham Excerpts

Wednesday 5th June 2019 Westminster Hall

[Several hon. Members rose—]

[Sir Henry Bellingham (in the Chair)]

Order. In addition to thanking the hon. Member for High Peak (Ruth George) for her exemplary and moving speech, I point out that a lot of right hon. and hon. Members are hoping to speak, so we will have a limit of between two and three minutes on speeches—voluntarily, at the moment.

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[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for High Peak (Ruth George) on an absolutely outstanding opening speech. There is not much more that one can say. However, I will pick up on a few points.

To understand the rise in poverty that people are facing across the country—not in isolated areas, as some on the Government side would like to say—we need look no further than social security policies, unfortunately, and universal credit is a key aspect of that. The Child Poverty Action Group said back in 2015 that an additional 1 million children would be living in poverty. Just a couple of weeks ago, Policy in Practice estimated, on behalf of the Children’s Commissioner, that half of low-income households would lose nearly £3,500 a year, which will see child poverty double. The figure is already at 4 million—three quarters of the children living in poverty are from working families—and it is set to double. That is down to three social security policies: the two-child limit, the benefits cap and universal credit—particularly, as my hon. Friend said, the five-week wait, and the repayment not just of the advance loan but of other debts.

We recognise the intervention in last autumn’s Budget, but it is paltry compared with the £12 billion that was cut in the 2015 summer Budget. It did not go even halfway to restoring what was cut. It is still the case that 40% of people on UC will be and are worse off—this applies especially to disabled people; 1 million disabled people are worse off under universal credit—by nearly £2,000. It also applies to the self-employed and single parents; they are all worse off as a result of universal credit. We have touched on the natural migration that is happening, separately from managed migration, as a result of a change in circumstances.

The UN special rapporteur on extreme poverty and human rights, Philip Alston, said last month that the UK’s poorest people face lives that are “solitary, poor, nasty, brutish, and short”. He accused Ministers of being in a state of denial about the impact of policies, including the roll-out of universal credit, and referred to the “systematic immiseration” of a significant part of the British population. I know that his comments have caused some consternation on the Government side, but we have only to look at Westminster tube station to see our homeless people. Two thirds of those in homeless refuges are people who have issues with universal credit. We all have constituency cases—I shall mention a few if that is okay, Sir Henry—of people who are really suffering.

Sally is a single mum who moved out to escape an abusive relationship. Due to her change in circumstances, she has lost £400 from her universal credit. Katie’s employers made a mess of their returns, and she was left with £67 to live on. It was her employer’s error. She said:

“Every time I call they just say there’s nothing they can do and I just have to wait for a decision. Please help me as I’m at the end of hope!”

June was in receipt of employment and support allowance with a severe disability premium. Again due to a change in circumstances, she lost £300 a month. Karen works for the Greater Manchester police and has a two-year-old daughter. She was told by the jobcentre that universal credit would pay for 85% of her childcare. She had to pay it up front, but she was still waiting six months later. That is unacceptable, and it is happening up and down the country.

The Minister will be aware that universal credit has a bad press. In debates such as this, it is our job to draw attention to the dire circumstances that people are facing. There are also rumours, based on leaked emails, that there is a planned propaganda exercise to try to restore the public’s faith in universal credit. I would be grateful if the Minister could address that. I have gone over my time, so I will end there.

[Sir Henry Bellingham (in the Chair)]

I am afraid we will now have to move to a two-minute limit on speeches.

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[Yvonne Fovargue (Makerfield) (Lab)]

I congratulate my hon. Friend the Member for High Peak (Ruth George) on her speech. It is a fact that more people who go on to universal credit are seeking debt advice. In my constituency, 90% of new claimants in social housing go into rent arrears. Of those, 60% go into arrears of over £600. Those who can least afford the benefits freeze have been hit the hardest by it. We have talked about the five-week wait and the advances. [Interruption.]

[Sir Henry Bellingham (in the Chair)]

Order. We have a Division. I will suspend the sitting for 15 minutes, assuming there is one Division. We can resume with the hon. Lady when we come back.

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On resuming—

[Sir Henry Bellingham (in the Chair)]

Order. The debate will now conclude at 12 minutes past 4.

[Yvonne Fovargue]

Thank you, Sir Henry. I was talking about the five-week wait and advances. Even with a 30% payment back, 65% of StepChange clients who are in debt will still have problems paying. They will still have problems paying their gas, electricity and other bills. I want to ask the Minister how advisers ensure that repayments are affordable. I believe that there are safeguards, but I have never heard what they are. Do they use a single financial statement, as most creditors do? Do they look at other debts? We know that many people on universal credit who have had the five-week wait have other debts. They have gone to high-cost lenders and owe on the gas and electricity.

I also want to ask the Minister whether the debts to Departments are included in the proposed breathing space scheme. That would be a help. At least it would give people time to work it out, but unless the DWP accepts affordable repayments, even that will not help people on universal credit who are being forced into debt. I have always said that simplifying the system was a great aim, but people’s lives are not simple, and the people I am talking about are the ones who can least afford a bump in the road. Throwing people into debt makes life more complicated. It makes more people go to the doctor with mental health problems and depression, and eventually it costs the state more.

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[Danielle Rowley (Midlothian) (Lab)]

I congratulate my hon. Friend the Member for High Peak (Ruth George) on securing this debate, on her fantastic speech, and on her fantastic, dedicated work on welfare. She is a tireless campaigner.

As many of today’s contributions and evidence from Citizens Advice Scotland have shown, debt is built into the universal credit system. My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) spoke about survivors of domestic abuse, and I too wish to focus on that important area. Survivors of domestic abuse often flee relationships with little or no resources, and often after being subjected to economic abuse. For them, the five-week wait is particularly damaging. Although advances are available, that is a loan that must be paid back.

The charity Refuge recommends that survivors of domestic abuse be exempt from repaying advances, as the initial period after fleeing an abusive relationship can be costly. People often have to buy a lot of possessions and set up a new home and a new life. If they have to repay an advance, their future income will be heavily reduced. I hope the Minister will consider that issue and tell me his thoughts.

As I have highlighted previously, single household payments can easily be used by coercive or abusive partners to trap people in an abusive relationship. Rent arrears accumulated under single payments mean that survivors have restricted options when they are fleeing, and it is common for landlords to refuse to accept tenants who have arrears, even if those arrears were accrued due to domestic abuse. That huge issue must be ironed out.

I wanted to talk about some constituency cases today, but I do not have time. The constituency cases that we raise time and again in respect of universal credit are not unique; this is happening everywhere. This issue is raised on the doorsteps, in our surgeries and with our neighbours. It is such a huge issue and I am fed up with speaking about this cruel system that does not work. The Government must take their fingers out of their ears and stop defending it. They must work with Members across the House who have spoken up about this issue, stop this system and rehaul it once and for all.

[Sir Henry Bellingham (in the Chair)]

Before I call the SNP spokesman, I thank right hon. and hon. Members for showing so much restraint. The Opposition spokesmen can now go from eight minutes to 10 minutes. I call Mr Neil Gray.

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[Neil Gray]

My hon. Friend is absolutely right. Of course, she will know that a different system is being created for that in Scotland. I ask the Minister to look at the definition of terminal illness that has been adopted by the Scottish social security agency, which I think would help to deal with some of these problems.

Currently, deductions for indebtedness can be up to 40% of the standard allowance, and the Government are looking to reduce that to 30%. If we accept that the standard allowance is barely enough for anyone to live on in the first place—figures from the Joseph Rowntree Foundation show that adults without children on UC receive only 40% of the minimum income standard, while adults with children get just 60%—reducing that by a third is just going to exacerbate indebtedness. Most people would struggle if their income was reduced by a third without warning or negotiation, but I also acknowledge that there is a debt, so some effort must be made to repay it. There should be an affordability test and discussions in advance of a deduction being applied, and the recipient should be afforded expert advice and advocacy during that process. That surely has to happen if the DWP is going to give people help and breathing space for indebtedness.

As part of the summer pilot, the Government should consult extensively with key stakeholders, the devolved Governments and the expert charities, and those in receipt of universal credit themselves, particularly disabled people, to make sure that the system is got right and that no one is further impoverished as a result of universal credit.

Speakers from across the House have demonstrated in this debate, once again, that universal credit is still not working. It is time for the Government to listen, to restore and expand the funding available to universal credit and to fix the inbuilt technical issues and flaws that have been raised today and previously, which are contributing to a rise in food bank use and the impoverishment of those both in and out of work.

[Sir Henry Bellingham (in the Chair)]

I call Mike Amesbury.