Families: Work Incentives

Lord Freud Excerpts

Tuesday 27th October 2015 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what progress is being made on work incentives for families with children.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

Universal credit improves incentives to enter into and progress in work. Early results show that current UC claimants do more to look for work, enter work quicker and earn more than current JSA claimants. Childcare costs are a key issue for working families, which is why we are increasing support and provision.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister. I appear to be inadvertently topical, for which I apologise.

As well as the tax credit cuts of recent celebrity, the Government have announced that they are reducing the work allowances in universal credit. The Work and Pensions Select Committee in the Commons heard yesterday that when the minimum wage is fully rolled out in 2020 a single parent, who is now able to work 22 hours a week before losing universal credit, because of these changes will be able to work only 10 hours a week before losing universal credit.

Increasingly, commentators are worried that the Government’s vision that universal credit would make work pay is getting eroded by a series of changes, so I shall ask the Minister’s for reassurance on two points. First, can he assure the House that when universal credit comes in fully the gains to work will be as strong as the Government promised us when the Welfare Reform Bill went through? Secondly, would he consider running a briefing session—perhaps after the CSR—to unpick some of the detail about how work incentives work in practice with all the changes that are going on? I am aware of the complexity with which many noble Lords have wrestled in recent debates, and that might be a useful way forward.

[Lord Freud]

Universal credit is a wide-ranging transformation of the welfare system, so it is difficult to pick isolated elements. It is now rolling out rapidly. At the same time, we are building a support network incorporating, among other things, universal support delivered locally. One of the key factors is that it delivers a gross value to this society of £7 billion every year. One reason it does that is that it directs its support far more efficiently at the people who need it most. The other thing it does is to make sure that it is always worth working and it is always worth working more. Finally, I try to keep the House up to date with universal credit developments because it is a really important transformation. I commit again to do that. I would like to find a way to do that in the Chamber, as I did a couple of months ago.

[Lord Flight (Con)]

My Lords, does the Minister agree that 30 hours of free childcare is one of the biggest incentives available? A huge disincentive has been where working mothers have to pay for childcare out of after-tax earnings and what is left over is scarcely worth having, so for mothers with children, free childcare is fundamental.

[Lord Freud]

Clearly one thing that has happened in universal credit is that the work allowances, as the noble Baroness pointed out, have come down. On the other hand, we have increased some of the costs that are directly tied to work incentives around childcare. As my noble friend pointed out, the effect of doubling free childcare from 15 hours to 30 hours is worth £2,500 per child per year. Another element of universal credit—childcare support going up from 70% to 85%—is worth in excess of £1,000 per child per year. There are real supports coming in for parents who need them.

[Baroness Manzoor (LD)]

My Lords, fewer than one in 10 people with learning disabilities are in work. The Government’s welcome objective is to halve the disability employment gap. Will the Minister say what progress the Government are making in order to hit their target?

[Lord Freud]

The target to halve the disability employment gap implies that we need to find work for 1 million more people in this category. We are currently working pretty hard on the strategy for that. It was announced by the Secretary of State in August, and we are now consulting with the various interest groups to find out the optimal way of achieving it. One group that is particularly important is people with learning disabilities; they have had a tough time in the work market.

[Baroness Lister of Burtersett (Lab)]

The Minister acknowledged that work allowances have “come down” as if that was somehow an act of God. The fact is that the Government first froze them and are now abolishing them for non-disabled workless households and reducing them for most other households. Yet when the Welfare Reform Bill was going through this House, the Minister constantly told us that the new improved work allowances were absolutely key to making work pay. Will he explain why they have been cut back so drastically?

[Lord Freud]

As the noble Baroness will know, a reduction and a cost saving are going on in this part of the benefits system. We had to make a decision about how to structure that. We decided that the taper was critical because it moved people right the way down at 65%. We have maintained that level. We have taken it out and reduced the work allowances in other areas. In particular, in our experience, for singles the removal has meant that people move straight through the work allowance out of UC. We have tested people carefully and seen a significant, measurable increase in the amount of work that they do and in their earnings. The work allowance impact seems to be less in those areas.

[Baroness Walmsley (LD)]

My Lords, in some disadvantaged areas parents are finding it difficult to access 15 hours of good quality childcare. Can the Minister guarantee that all parents, in all areas, will receive 30 hours of free, good quality childcare, to enable them to go to work confident that their children will be very well looked after?

[Lord Freud]

It is clear that when you put up people’s rights, the provision has to catch up. It has been doing so, but there is some way further to go and we will be working on that.

[Baroness O'Cathain (Con)]

My Lords, my noble friend is surely right. You cannot just manufacture people from the ground and say, “you will be a childcare assistant”. If this 30 hours of free childcare is to be a new thing—and it seems to be—it will be an incentive for people to go into childcare. However, you cannot ask the Government to guarantee it.

[Lord Freud]

It is important that we have a dynamic economy with real work incentives. That is what we are trying to create, and childcare is part of it. My noble friend is right; we need to set up the incentives to make sure that that part of the market grows. In a dynamic economy, guarantees are something that you cannot necessarily time.