Benefits: Reductions

Baroness Donaghy Excerpts

Thursday 1st November 2018 Lords Chamber

[Baroness Donaghy (Lab)]

My Lords, I thank my noble friend Lord Bassam for initiating this timely debate. When the Welfare Reform Bill was being taken through this House, Baroness Hollis asked me what contribution I could make. I explained that I had worked for 40 years, so I knew nothing of welfare benefits. “That’s fine”, she said. “You can cover the self-employed”, and I did. It did not occur to me that I had a choice; that is how compelling and charismatic Patricia Hollis was. I mugged up on the subject, with the help of the Low Pay Unit, and spoke several times.

I learned enough to realise that the proposed universal credit system was unsuitable for the self-employed. It is rigid and mean. It does not take sufficient account of fluctuating earnings or seasonal variations. The Budget announcement only extends the 12-month grace period, so it will change nothing. When I last spoke on this subject, the Minister made no reference whatever to the self-employed. My first question therefore has to be: is she able to say what improvements will be made to the universal credit system to help the self-employed?

When what became the Welfare Reform Act was going through the House my party, as has been said, supported the general thrust. It was accepted that the current system needed to change and there was a hope that a comprehensive system would assist those who needed help the most.

The shadow Secretary of State for Work and Pensions, Margaret Greenwood, said on 17 October that,

“universal credit was designed to lift people out of poverty”.—[Official Report, Commons, 17/10/18; col. 648.]

I do not believe that was the intention. It was designed to save money and force people into low-paid jobs. I believe that people should be incentivised into work, but universal credit gives a Hobson’s choice of bumping along the bottom of the economy.

I always had reservations about the universal credit system, not just because of the self-employed but because it was not universal—it left out a number of important areas and meant that most families with a disabled child would be worse off. Combined with the cuts in disabled living allowances for most people with disabilities it meant that the disabled would not be lifted out of poverty. Changing the definition of poverty does not change the experience of poverty.

I was concerned about putting housing benefit into universal credit. I felt that local authorities were best placed to administer that scheme. I may be wrong, but it was a genuine concern that I still hold. Is the housing benefit bill too big? Of course it is. However, if there was a major shift—as my noble friend Lady Warwick has said—in the development of social housing, that bill could be brought down. Indeed, social housing is diminishing under this Government, despite successive announcements.

My major concern about universal credit was its complexity, and the fact that it would be hugely difficult and expensive to administer properly. I am an administrator by trade, and I think that the project is doomed to failure unless there are radical changes. I am not talking about the difficulties faced by claimants; the Child Poverty Action Group has already set those out very clearly. I am talking about the administration of the universal credit system itself.

This is the calm before the storm, as everyone knows. Only 9% of families with children are on universal credit. The Budget provided some small ameliorations but no equivalence between universal credit and legacy benefits. There is still a single claim for everyone in the household, despite our warnings of the danger of that in violent and controlling situations. The third child still gets nothing. Single women with young children will still be the hardest hit.

The National Audit Office and the Resolution Foundation have questioned the feasibility of the current switchover plans. Will the Minister say whether these organisations are wrong? It is important to remember that local authorities deliver over 800 services to their communities—they are best placed to understand family circumstances and bring services together. They need additional funding to enable them to deliver these services, and the Local Government Association points to the interaction between homelessness, the reduction in support for housing costs and the increase in the number of households in temporary accommodation.

We hear that the extreme right wing of the Conservative Party is calling for more money for universal credit—not because they have suddenly discovered poor people but to make a political point about Brexit savings. Beware, therefore, the big, bad wolf in grandmother’s clothing. It is the personal experience that counts: a young woman who volunteers in a food bank and has lost all faith in government; a friend who fell behind with her rent because of the bedroom tax; having to clothe your baby from a baby care bank; or feeling powerless, hopeless and done to. This is the real impact.