In-work Poverty

Carolyn Harris Excerpts

Thursday 28th January 2016 Westminster Hall

[Carolyn Harris (Swansea East) (Lab)]

I beg to move,

That this House has considered in-work poverty.

It is a pleasure to serve under your excellent chairmanship, Mr Turner. This Government are failing to make work pay, and their cuts to in-work support risk increasing the number of working families in poverty even further. Over the previous Parliament, average real wages fell by more than £1,000 a year. Furthermore, 2010 to 2020 will be the worst decade for pay growth in almost a century and the third worst since 1860.

Cuts to universal credit that begin in April will make 2.6 million working families £1,600 a year worse off by 2020, making it almost impossible for families to work their way out of poverty. The Government’s advice to working families set to be hit by those cuts is to work an additional 200 hours a year to recoup the losses. That is neither fair nor practical for millions of low-paid families who are already working full time. I am delighted to have secured this debate, so that we in the Opposition can bring forward the reality of those in our constituencies who are experiencing high levels of in-work poverty and to call on the Government to scrap their cuts to universal credit before the cuts take hold in April.

We know from the Social Mobility and Child Poverty Commission that 1.5 million children are in poverty because their working parents do not earn enough to secure a basic standard of living. Four out of 10 children in working poor households live in families where parents might be expected to enter work or work more hours. Owing to high levels of in-work poverty, the commission has warned that the cuts to universal credit will—in its words, not mine—

“make many working families significantly worse off.”

The commission has recommended that the Government reverse their cuts to universal credit, saying:

“These changes would have resulted in millions of families in low-paid work who are ‘doing the right thing’ and working as much as society expects them to, seeing their annual income fall by thousands of pounds on 1 April 2016.”

Despite the fears, the cuts to universal credit are still going ahead. It will be very difficult for many affected families to increase their hours of work and hourly pay to avoid big cuts to their incomes.

[Christina Rees (Neath) (Lab)]

Does my hon. Friend know that 167,400 working families in Wales will be impacted by these cuts and that 134,600 of them are families with children?

[Carolyn Harris]

I do, and not only Wales is affected; this affects every constituency in the country.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

Would it surprise my hon. Friend to hear that, under universal credit plans, some 116,000 disabled people who are in work—and therefore doing the right thing, according to the Government’s narrative—will be £40 a week worse off under the Government’s proposal?

[Carolyn Harris]

That is a shocking indictment of the low consideration the Government have for people in need. For example, a lone parent working full time on the minimum wage who receives no support for their housing costs will experience a reduction of £2,600 a year—that is £50 a week. Nobody can afford to lose £50 a week.

The combined effect of income tax, national insurance and the universal credit taper will mean that universal credit claimants who pay income tax will keep only 24% of any increase in their earnings. They will have to increase their earnings by £210 a week—or, to put it in percentage terms, 72%—to make up the income loss they will face as a result of the reduction in support.

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Turner, and I congratulate my hon. Friend on securing the debate. She has given some figures about single parents, and this shows the full extent of the policy: for a single parent—say, a mother with one or more children—the work allowance of universal credit will be halved from this April, going from £8,808 to £4,764. In cash terms, that is a loss of £2,628 a year. Does that not show the stark reality of this policy?

[Carolyn Harris]

I thank my hon. Friend for his intervention, and I agree. That is a reality people face every day, and it can only get worse.

The short-term effect for current claimants of universal credit is that they face huge losses to income come April 2016. There are currently 155,000 recipients of universal credit, and the number is increasing every week, with an aim of there being 500,000 recipients by April this year.

During Work and Pensions questions recently, the Secretary of State claimed that the flexible support fund will act as transitional protection for current claimants and said that

“those who are on universal credit at present will be fully supported through the flexible support fund, which will provide all the resources necessary to ensure that their situation remains exactly the same as it is today.”—[Official Report, 7 December 2015; Vol. 603, c. 688.]

However, that existing fund is used for a different purpose. Its budget last year was £69 million, but the Office for Budget Responsibility estimates cuts to working families of £100 million next year, rising every year until they reach £3.2 billion in 2020.

[Neil Coyle]

I apologise for not thanking my hon. Friend for securing the debate in my previous intervention or saying what a pleasure it is to serve under your chairmanship, Mr Turner. The Secretary of State was referring to the number of people currently receiving universal credit who will be protected by some measure, but is that not a little disingenuous given that the Government are about 1,000 years behind schedule on delivering universal credit? They had expected some 2 million people to be on it by now. Should the Government not be a bit more embarrassed about mentioning the small number who are already receiving universal credit?

--- Later in debate ---

[Carolyn Harris]

I agree entirely, and I will touch on that later in my speech.

When transitional protection is introduced for current tax credit recipients, the Government will bring in regulations to put that protection into law. Opposition Members are calling for the same guarantees—full transitional protection—to be put on a legal footing for current universal credit claimants. The medium-term effects of the cuts to universal credit will effectively create a postcode lottery or, as my hon. Friend the Member for Pontypridd (Owen Smith), the shadow Secretary of State for Work and Pensions, quite accurately described it, an “IDS lottery”. I doubt, however, whether those ticket holders will have a magic washing machine and end up as big winners. New and existing claimants of tax credits will receive far greater support than new and existing claimants of universal credit.

The longer-term effect by 2020 will be massively reduced support for working families. The Institute for Fiscal Studies estimates that by 2020, due to the £3.2 billion cut to the work allowance having been fully phased in, 2.6 million working families will be an average of £1,600 a year worse off. The Resolution Foundation found that when these cuts fully take effect by 2020, low and middle-income working families will lose an average of £1,000 a year, rising to £1,300 a year for those with children.

This is a political choice by this Government—a deliberate act to reduce drastically support for working families, at a time when the Government are cutting inheritance tax for homes worth more than £1 million. The contradictions in that comparison are frightening, to say the least. How can it be right to offer enhanced protection for those with wealth and catastrophic consequences for those who currently eke out a living on low pay? It cannot be right to reduce in-work support.

In my constituency office, we act as an agent for both the Trussell Trust food bank and the local Eastside food bank in Bonymaen, Swansea. We receive donations but also give out parcels in emergencies. Some 85% of the parcels given out are to families who are in work but struggling to make ends meet.

Further examples of the impact on working families from a detailed analysis by the Library show that a single parent of two children with gross earnings of £18,000 a year will experience a net reduction in their income of £2,601 next year, as a result of measures announced in the summer Budget that are still due to take effect in April 2016. For example, a single parent of one child who is earning the living wage will only increase their income by £40 for working an additional 12 hours. That compares with an increase of £92 for an additional 12 hours before the cuts to the work allowance were introduced.

It is time for the Secretary of State to stop playing cat and mouse with the real people of this country. The lack of Government Members here today indicates that they have bought into the Government’s rhetoric that in-work poverty is a myth and that they support the Government’s propaganda that it is of no real concern. However, the reality is that ordinary working people are continually playing catch-up, and all the Government want to do for them is to watch them run around chasing their own tails. It is immoral, irresponsible and reprehensible.

I am very proud to represent real people who are paying the cost of this Government’s arrogance, and I will fight to ensure that their voice gets heard. We are led to believe that the Secretary of State for Work and Pensions has threated to resign if his masterplan is not followed through. If cuts to universal credit really were an issue to resign over, he would be long gone, and if he was, many thousands of decent, hard-working people across the UK would be celebrating both his resignation and the moral victory.

--- Later in debate ---

[Carolyn Harris]

Will the Minister give way?

[Priti Patel]

Let me finish my sentence and I will. Wages have been growing faster than inflation for 14 consecutive months and, as much as the Labour party has been utterly disparaging about the introduction of the national living wage, which says a great deal about its attitude to pay increases, we know for a fact that when the national living wage is introduced later this year, we will see an enormous—

[Carolyn Harris]

Will the Minister give way?

[Gerald Jones]

It is a long sentence.

[Priti Patel]

I will give way in a moment. I have been very respectful by listening to and not intervening in the contributions of Opposition Members. More people will benefit when the national living wage is introduced in April.

[Carolyn Harris]

I feel suitably chastised. The Minister gave a list of job increases but she left off Tata Steel, where there have just been 750 job losses very close to my constituency.

[Priti Patel]

Tata is not a particular case study for Wales or the United Kingdom. I hope that the hon. Lady recognises that the steel industry faces huge challenges around the world. In China, people are also losing their jobs because of what has happened in the steel industry. Jobcentre Plus and the Department for Work and Pensions have been there from the outset to support people who have lost their jobs in the steel industry by helping their families at this very difficult time and supporting them to find work. The marketplace is challenging, but the hon. Lady is the Member of Parliament for a Welsh constituency and she has a duty to acknowledge the support that is being given—the work that Jobcentre Plus staff in her constituency are providing—to individuals and families who have lost their jobs.

--- Later in debate ---

[Carolyn Harris]

Thank you for your excellent chairmanship, Mr Turner. I sincerely thank all Opposition colleagues for attending this debate on a day when they could be at the coalface addressing the problems caused by this Government’s policies. I thank the Minister for her response, and I would have liked to thank her for her warm words, but “condescending” and “passionless” are probably better descriptions. I leave here no wiser than I was coming in, except now I know that there is a total lack of understanding and passion for what is really happening in the UK in 2016. I urge the Government to rethink.

Question put and agreed to.

Resolved,

That this House has considered in-work poverty.