Universal Credit (EAC Report)

Baroness Wilcox of Newport Excerpts

Wednesday 23rd March 2022 Grand Committee

[Baroness Wilcox of Newport (Lab)]

My Lords, I am the substitute for my noble friend Lady Sherlock. I could not even begin to match her wide knowledge and experience of these matters, but I can match her determination in wanting to put things right. I welcome the many detailed contributions from your Lordships. I was particularly struck by the opening remarks from the noble Lord, Lord Forsyth of Drumlean, who made salient point after point about the dire state of the many millions of people significantly affected by the cost of living crisis. Indeed, he gave the Government many sensible and strong points to follow, and I hope they listen to what he said. They would be wise to act upon his advice and that of his committee. His words were ably supported by the new chair of the committee, the noble Lord, Lord Bridges of Headley, who provided clear and concise key points and noted a lack of principles in this Government.

A lot has happened since the Economic Affairs Committee published the report we are debating back in July 2020. As a result, some of its content and recommendations have been superseded—in particular, retaining the £20 pandemic uplift, which has been cut, and reducing the taper rate, which went from 63% to 55% in the last Budget. I will return to these points, but let me address the content of the report itself first.

Much of the report and the issues that it found with universal credit still exist and continue to make life difficult for those eligible for it. As the name of the report says, universal credit is not working. Temporary and inadequate sticking plasters like the household support fund are no substitute for a proper social security system that offers security to families in hard times. I acknowledge that the Chancellor has doubled that fund in his Spring Statement today, but, disappointingly, he made no mention of universal credit.

Although my view and that of the Labour Benches is that universal credit should eventually be replaced, which the report does not agree with, I share the report’s overall conclusion that “substantial reform” is required in the first instance, as in its current state, the inflexible system is

“harming many, particularly the most vulnerable.”

A big part of this is about complexity. Universal credit was heralded—I remember seeing the TV documentaries with Iain Duncan Smith—as a simplified system, making it easier for claimants and the department alike. Instead, as the report notes, claimants do not know the support they will receive on a month-to-month basis, and the use of an arbitrary assessment date and pay date do the opposite.

Claimants are also on the end of significant shortfalls caused by the whole-month approach to any changes in circumstance, which in many cases will be out of their control and in no way reflects the lives of those in low-income households. A fair system would reflect the lives of those using it and be flexible enough to adapt.

As well as reflecting any changes in circumstances, the Government have said that their intention was for payments to reflect work, but this is not the reality. The report notes—as did the noble Lord, Lord Forsyth—that many new claimants have no experience of monthly pay. Having no flexibility in payment schemes different from this is detrimental to claimants, who are being forced to accommodate the system rather than the other way around. This principle extends to single household payments. As the report highlights, this simply does not reflect reality, but more pressingly it is an enabler for financial coercion and domestic abuse by making it more difficult for sufferers of these terrible situations to escape.

But the most damaging design flaw is the five-week wait. We know that the Government are aware of this as they have taken steps to mitigate it, but they have not gone far enough. Taking an advanced payment—one of the Government’s favourite tactics to make it look as if they are doing something when they are really doing nothing—means claimants choosing between a shortage now or later. This has left claimants, particularly those in vulnerable groups, disproportionately in limbo, with increasing debt, poverty and anxiety. Also, it is a minimum five-week wait. Some people are waiting even longer—and, even if everything goes to plan, in this time many people are referred to food banks as they struggle with debt, rent arrears and the mental health issues that arise from or are exacerbated by the uncertainty.

Moving on from design issues, there is of course the question of the adequacy of awards. Since the report was published, the then newly introduced £20 weekly uplift has been scrapped—in October last year. That was the second cut to benefits in six months, which, given the numerous other issues with the system and the cost of living crisis, was the last thing that claimants needed and will have achieved little beyond making the wide range of difficulties faced by claimants harder.

It is welcome that the Chancellor followed Labour’s lead and reduced the work allowance taper rate at the last Budget, but that is the equivalent of bailing water from a sinking ship with a spoon. Over one in four people on universal credit have no work requirements because they are unable to work due to a disability or a caring responsibility—a group for which lowering the taper rate provides nothing.

The committee’s report also highlighted the use of universal credit to collect other debts, which claimants are often unaware of, from recipients including

“£6 billion of historic tax credit debt”.

How can the Government look at this and think it is anything other than entirely against the principles of the system? You cannot have social security that offers no security.

Ultimately, I think that drifting away from the set of principles that would constitute a working social security is where universal credit has gone wrong, regardless of how this point has been reached. My noble friend Lady Lister expertly noted that, in the longer term, a review of the adequacy of benefits is needed. She has a detailed understanding of the causes of poverty and has provided many solutions for the Government in her academic work, if only they were willing to listen and learn.

The committee set out eight key principles that it set the report’s conclusions and recommendations against, derived from evidence taken during the inquiry, and which it considers reforms should be shaped by. I hope that very few in this place disagree with a set of principles that includes dignity and respect, providing adequate income, security and stability, reflecting lived experience, and being fair and flexible. But what is clear from both the committee’s inquiry and the experiences of claimants that we hear regularly is that the system we currently have in place does not reflect these principles closely enough. So I sincerely hope that the Government will turn to them as a guide and enact the serious reform that universal credit requires.