Universal Credit

Catherine McKinnell Excerpts

Wednesday 19th April 2017 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I beg to move,

That this House has considered the roll-out of universal credit.

It is a pleasure to serve under your chairmanship, Mr Davies, not least because I have been attempting to hold a debate on this issue for several weeks, if not months, because of the sheer volume of universal credit-related problems raised with me by constituents. I originally secured the debate for 22 March, but it was understandably cut short following the appalling attack on Westminster that afternoon, so I would like to take this opportunity to place on the record my eternal gratitude for the selfless and incredible bravery of PC Keith Palmer on that day. My thoughts very much remain with his family and with the families of those from around the world who were killed or injured as a result of that sickening incident.

Before I expose the myriad issues that my constituents have faced in dealing with this Government policy, and at the risk of repeating what I said on 22 March, I want to set out the context for this debate. As all hon. Members are aware, universal credit is a new benefit that is being introduced to replace means-tested social security benefits and tax credits for working-age individuals and families, including working tax credit, child tax credit, income-based jobseeker’s allowance, income support, income-related employment and support allowance, and housing benefit. According to the Government, the aim of universal credit, using real-time information on claimants’ circumstances, is

“to simplify and streamline the benefits system for claimants and administrators, to improve work incentives, to tackle poverty among low income families, and to reduce the scope for fraud and error.”

Following years of repeated delays and false starts, the infamous reset in 2013 after the Major Projects Authority told the Government to go back to the drawing board, and concerns expressed by the National Audit Office that delivery of universal credit had been beset by

“weak management, ineffective control and poor governance”,

the new benefit is finally, but very painfully, being rolled out across the country. As the Library briefing note helpfully produced for the debate highlights, since the 2013 reset, the Department for Work and Pensions has been developing and rolling out universal credit using a twin-track approach. The briefing note states:

“This involves rolling out Universal Credit using IT systems developed prior to the 2013 reset (the ‘Live Service’) while, simultaneously, DWP develops the Digital Service (now known as the ‘Full Service’) from which Universal Credit will eventually be operated”—

I hope everyone is still following me. That means that, since spring 2016, universal credit has been available in all jobcentres across the country, but in most areas it is available only for new claims from people with relatively simple circumstances—single unemployed people, or people with very low earnings, who satisfy the gateway conditions. In the small but increasing number of areas that have full service universal credit, all new eligible claimants will receive universal credit, as will existing claimants of legacy benefits who report a change in their circumstances that results in their being “naturally migrated” to universal credit.

Following the “reshaping” of the next phase of universal credit’s roll-out announced in a written statement on 20 July 2016, the Secretary of State confirmed that the DWP intended to continue the roll-out of full service universal credit to five jobcentres a month until June 2017 and expand that to 30 a month from July 2017. There will be a break over the summer of 2017. The Government hope to scale up full service roll-out to 55 jobcentres a month between October and December 2017 and accelerate that to 65 a month by February 2018, with roll-out to the final 57 being completed in September 2018.

As a consequence, under the Government’s current plans, universal credit should be available across the country to all new claimants and existing claimants with changed circumstances by September 2018, and the final stage of the roll-out of universal credit, the “managed migration” of existing benefit claimants with no change in their circumstances, will commence in July 2019 and be completed by March 2022—some five years later than the original target. Quite how that complicated timetable now fits alongside the DWP’s proposals, published in January, to close an estimated one in 10 jobcentres and merge or co-locate many others is something on which it would be helpful to receive confirmation from the Minister when he responds to the debate.

It is clear that the roll-out of universal credit is a hugely complex task and that hard-working jobcentre staff are being placed in an incredibly challenging situation. The Library briefing note states that it involves

“not simply the creation of a new benefit but development of entirely new administrative systems to support it. This includes development of the Digital Service, the online IT system via which claimants and DWP will manage awards, and training staff to administer a new conditionality and sanctions regime that imposes requirements on in-work as well as out-of-work claimants.”

As universal credit requires a broader span of people to look for work than is the case with legacy benefits—for example, by including those in receipt of housing benefit or child tax credits and, indeed, the partners of universal credit claimants—there has been a marked effect on the claimant count in areas that have full service universal credit. In the year to January 2017, there was a 25.5% increase in the claimant count in full service areas, compared with an increase of 0.1% across the UK as a whole.

There are numerous concerns about the impact of universal credit on existing claimants, particularly families with disabled children whose caring responsibilities prevent them from working. The charity Contact a Family estimates that those families could be up to £1,600 a year worse off after being transferred to universal credit. We also still have the disturbing two-child limit for the child element of universal credit for all families making a new claim, regardless of when their third child was born, and the totally unacceptable situation in which women will be forced to prove that any third child was born as a result of rape. Serious concerns remain about the cuts to work allowances introduced from April 2016 for universal credit claimants. The Children’s Society highlights that they mean that

“Universal Credit support for most working families was considerably reduced”.

The Government have pressed ahead with their potentially deeply damaging decision to remove entitlement to the housing benefit element of universal credit for 18 to 21-year-olds, subject to certain exemptions—a move that has been roundly condemned by homelessness charities including Centrepoint and Crisis. Meanwhile, organisations including the Federation of Small Businesses and the Low Incomes Tax Reform Group are pressing the Government to think again about the minimum income floor, given its potential impact on many genuinely self-employed people with incomes that fluctuate from month to month.

There is, of course, the fact that the change in the universal credit taper rate from 65% to 63%, as announced in the 2016 autumn statement, does not come close to outweighing the cuts to work allowances. The general secretary of the Union of Shop, Distributive and Allied Workers recently commented:

“The very modest reduction in the high clawback rate of 65% of net earnings to 63% is a tiny step in the right direction, but is worth less than £300 for most working parents. It goes nowhere near offsetting the enormous £2,000 to £3,000 annual cuts that Universal Credit represents or taking the taper back to the 55% rate that was originally intended. Universal Credit is a ticking time bomb that will plunge far more working families into poverty, when they are transferred on to it. We supported the initial intentions of Universal Credit, to simplify benefits and improve incentives to work. However, severe cost cutting has turned Universal Credit into a real threat to the incomes of low-paid working families.”

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I thank my hon. Friend and neighbour for securing this important debate and for ensuring that it took place today. She knows that I have raised the issue of the increase in housing debt for those on universal credit, and that in Newcastle the proportion of tenants in debt has increased greatly. The Minister said that that increase had not actually occurred; however, I have figures showing that the average debt for non-universal credit tenants in council housing is £300, whereas for universal credit tenants it is £636. Does my hon. Friend agree that that is a huge increase for working and non-working families?

[Catherine McKinnell]

I thank my hon. Friend and constituency neighbour for her insightful intervention, which highlights one of the major issues caused by the roll-out of universal credit when combined with the impact of the cuts agenda. This is a ticking time bomb and it is of particular concern to areas such as ours—Newcastle—given recent analysis by the TUC highlighting that while employment in the north-east grew by 60,000 between 2011 and 2016, a staggering 40,000 of those new jobs were without guaranteed hours or baseline employment rights. That means that some 124,000 people in our region—the equivalent of one in nine workers—now work in insecure jobs. Given that the north-east has the highest rate of insecure employment of anywhere in the UK, those people need a universal credit system that functions.

That leads me to the reason I have been trying to secure this debate. I want to focus on the actual experience of people in Newcastle upon Tyne North attempting to claim universal credit, in the hope that the Minister will acknowledge the clear failings in the system, do something to address the situation and commit to putting the failings right before universal credit is rolled out elsewhere.

To put this into context, the universal credit live service was rolled out to three jobcentres in Newcastle in April 2015, following which full service universal credit was introduced to Newcastle’s Cathedral Square city centre jobcentre in May 2016, the Newcastle East Jobcentre Plus in February 2017 and finally the Newcastle West Jobcentre Plus on 15 March. To return to the written ministerial statement of 20 July, the Secretary of State clearly said:

“It is essential that the Universal Credit rollout for all claimant types is delivered in an orderly and successful manner; that claimants receive the support they need in a timely fashion; and that welfare reforms are delivered safely as the roll out continues.”—[Official Report, 20 July 2016; Vol. 613, c. 23WS.]

I welcome that aim, but I have to tell the Minister that it simply is not happening in Newcastle. Indeed, it is fair to say that my office has been deluged with complaints from constituents about a universal credit system that is clearly struggling to cope and failing to deliver the support that claimants need in anything like an orderly or timely fashion.

Those concerns include a universal credit verification process that requires claimants to produce photographic identification such as a passport or driving licence, which many simply do not possess and certainly cannot afford, even though some have been in receipt of benefits for several years. Deciding that universal credit must be digital by default has also created significant difficulties for many, making it extremely difficult to obtain information about their claim from a human being. Constituents face long and expensive telephone queues, and when they do get through, they are told to report any concerns or queries via their online journal, following which they have to wait for increasingly long periods to receive a response. The fact that universal credit is centred on an online journal system assumes that all claimants have access to the internet or are computer literate. That is certainly not the case for many people across Newcastle, and it can make it very hard for people to verify updates on their claims or post information about their work activity, which is necessary to prevent their claims from being suspended.

I also have numerous examples of universal credit claims being shut down before they should be; of documentation being provided to the DWP, at the constituent’s cost, and repeatedly being lost or even destroyed; and of totally conflicting, often incorrect, information being provided to constituents about their claims. That is because of a clear lack of understanding about universal credit by the staff who are trying to administer it, and it also results in incorrect payments being made. Indeed, one of the cases I have been handling involves a constituent who received a £600 universal credit payment, while no one at the DWP is able to explain what it is for. There are significant inconsistencies in payment dates and amounts paid, even for people who work regular hours and have regular incomes, leading to overpayments of universal credit that the introduction of real-time information was supposed to prevent.

Claimants are waiting significantly longer than the commonly advertised six-week period to have their universal credit payments processed. That leads to many finding themselves in very serious financial difficulties as they wait for the DWP to get its act together—hardly surprising when all their benefits are rolled into one payment, which, if delayed, can make just about managing feel like an aspiration.

[Peter Grant (Glenrothes) (SNP)]

I am listening with considerable concern to the hon. Lady’s account of what the universal credit roll-out is doing to her constituents. My constituents are due to suffer the same fate in December 2017, which means that, with the six-week non-payment period, a lot of them will face the entire Christmas and new year period with no source of income at all. Does she agree that at the very least the roll-out should be suspended, and that the best result would be to follow the Scottish Government’s request to stop this process immediately, fix the problems and then continue with expanding it or rolling it out, if that is the right thing to do?

[Catherine McKinnell]

I take on board the hon. Gentleman’s serious concerns and, indeed, implore the Government to get this process right before they roll it out across the country.

There are also some fundamental flaws in the system. The fact that payments are made monthly and in arrears effectively embeds debt into the system—as landlords awaiting receipt of the housing benefit element of universal credit know all too well—and requires repeated applications for advance payments from DWP and/or budgeting skills, which many people sadly do not have. Indeed, the Joseph Rowntree Foundation recently commented:

“People risk debt, destitution and eviction while they wait…to receive their first UC payment”—

a description that surely belongs in the world of Charles Dickens, rather than in the modern, fit-for-purpose and efficient social welfare system that we should have in 21st-century Britain.

So what was the DWP’s initial response to the increasing number of complaints about universal credit claims? In a letter dated 20 January 2017 and addressed to

“Colleagues working in the welfare advice sector”,

MPs in full service universal credit areas were informed that they could not receive any information about a constituent’s case unless the constituent in question had provided online explicit consent directly to the DWP. The letter stated that such consent

“must be given freely, unambiguously and in an informed way. The claimant must be clear on the information that they want to be disclosed and who the information can be disclosed to…Consent does not last indefinitely, but covers a particular query or piece of business.”

Even when I had been sent an email by a constituent that provided me with all the details of their case and that specifically asked me to intervene on their behalf—usually because they had reached the end of their tether —that was not deemed sufficient proof for the DWP to provide me with information about the case. I am, of course, pleased that that ridiculous situation has now been reviewed, after complaints by many hon. Members and an intervention by the Leader of the House, but I must emphasise that it caused weeks of additional challenge for my constituents and for my caseworkers in Newcastle, who were deluged with universal credit cases but could not receive any sensible information about them.

The Minister need not take my word for the problems that people face in Newcastle. He can come and visit the Newcastle citizens advice bureau, for which the DWP’s explicit consent edict remains in place. He can hear about the 85 universal credit clients from Newcastle upon Tyne North alone that the bureau has supported in the last year, who have faced severely delayed payments and, in the bureau’s words,

“unnecessary hardship through no fault of their own”.

They face that hardship because of difficulties in finding or accessing a computer, failure of jobcentre staff to provide information about advance payments, incorrect information held on claimants’ records, incorrect advice being provided by jobcentre staff, and incorrect payments being made.

Alternatively, the Minister can come and meet staff from Your Homes Newcastle, the arm’s length management organisation responsible for managing Newcastle’s council housing stock, to discuss the significant level of support that they are having to provide to tenants through the universal credit process. Indeed, Your Homes Newcastle has highlighted that it and Newcastle City Council have so far provided support to 506 people,

“specifically to help those who may be unable to manage monthly payments or don’t understand UC and need explanations at the very start of their claims. The time taken to support customers in personal budgeting varies between 2 and 15 hours of support, although there are some exceptional cases where this can take considerably longer. The average time per case is currently 3.5 hours and this is carried out by staff co-located at Jobcentres. The cost of placing three staff in Newcastle Jobcentres to provide this service is £93,651 annually.”

That support is above and beyond the 25 minutes to two hours that it can take Your Homes Newcastle staff to assist tenants through the initial universal credit claim process. Some of the more complex cases can take significantly longer. Indeed, Your Homes Newcastle staff have highlighted the case of one tenant whose universal credit application has taken them approximately 100 hours to progress. Throughout that time, the woman has seen a significant decline in her health and wellbeing, as well as real financial hardship because of the severe delays and mistakes on the DWP’s part. If this represents a simplification and streamlining of the benefits system, I dread to think what a more complicated system would look like.

Of particular concern to Your Homes Newcastle is the significant impact on rent arrears of the roll-out of universal credit and the associated delays. I know that the Minister has repeatedly claimed—no doubt he will do so again this afternoon—that a large number of cases that enter universal credit have existing rent arrears. However, Your Homes Newcastle has made it clear to me that its current income collection rate is 93.9% of the rent due from tenants who are on universal credit, compared with 99.8% of the rent owed by other tenants. As a result, there was a reduced income collection of £220,000 for customers on universal credit at the end of the financial year. Your Homes Newcastle went on to state that tenants on universal credit owe a total of £784,000 in rent arrears, of which some £381,000—just under 50%—are solely as a result of universal credit. As Newcastle City Council has informed the Select Committee on Work and Pensions, of the 1,380 Your Homes Newcastle tenants claiming universal credit on 10 March, some 1,186—more than 85%—were in rent arrears. The average level of those rent arrears was £686, more than double the average of £300 for YHN tenants in rent arrears. Clearly the situation is completely unsustainable.

Housing-related concerns about universal credit are shared by the homelessness charity Crisis, which clearly states that, as it currently operates, universal credit

“is causing rent arrears, threats of eviction and homelessness for our clients”.

Meanwhile, the Residential Landlords Association has raised concerns that

“as it currently operates, Universal Credit is causing rent arrears problems for a considerable number of tenants. Changes are needed to provide tenants and landlords with greater confidence that rent can be paid on time and in full.”

All three organisations—Your Homes Newcastle, Crisis and the RLA—are pressing the Government to make alternative payment arrangements much easier to set up.

It is clear to me and to many other hon. Members that the roll-out of universal credit is having a significant detrimental impact on far too many of our constituents. These issues are not unique to Newcastle; they are being replicated across the country, as other parliamentary debates—including one recently secured by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry)—have made all too clear. Indeed, some of the concerns that I have highlighted this afternoon recently caused the Work and Pensions Committee to reopen its inquiry into the impact of universal credit. The Chair of the Committee, my right hon. Friend the Member for Birkenhead (Frank Field), commented:

“Despite a growing body of evidence about the very real hardship the rollout of Universal Credit is creating for some, often the most vulnerable, claimants—and the struggles it is creating for local authorities trying to fulfil their responsibilities—it is flabbergasting that the Government continues to keep its head in the sand.”

I agree.

On behalf of my constituents, of people in other areas in which universal credit has been fully rolled out, and of people in the rest of the country who will still have to endure this process, I strongly urge the Minister to take his head out of the sand and start addressing the very real issues that the roll-out of universal credit—the Government’s flagship policy—is causing. We must ask ourselves: how many times, from how many people and organisations across how many parts of the country must the Minister hear that universal credit is not working before he finally accepts that it is time to act?

[Geraint Davies (in the Chair)]

I will call the Front Benchers at 3.42 pm, half an hour before the end of the debate at 4.12 pm. I ask hon. Members to speak for between five and six minutes, so that everyone gets an equal share.

--- Later in debate ---

[Damian Hinds]

If the right hon. Gentleman will forgive me, I will not, or I will run out of time.

Let me assure the House that I recognise what a complex and important issue housing arrears are. Many different factors are at play. As colleagues know, UC pays housing costs directly to the claimants and they pay rent to their landlord. That mirrors the world of work, which is an important part of the fundamental culture change I mentioned. That of course has been the case for some time, since the Labour Government rolled out the local housing allowance in the private rented sector in April 2008.

[Catherine McKinnell]

Will the Minister give way?

[Damian Hinds]

I will give way to the hon. Lady, because it is her debate, but I am also conscious that I am running out of time and will not be able to cover everything.

[Catherine McKinnell]

The Minister made reference to housing payments mirroring the world of work, but I am aware of no workplace in which the employee is expected to wait six weeks or more for payment.

[Damian Hinds]

I am grateful to the hon. Lady for making the important point about the timing of payments to individuals. No one should wait more than 45 days for their first UC payments, unless they are exempt from waiting days, which the hon. Member for Strangford (Jim Shannon) mentioned. Various exemptions include those for prison leavers and for people coming across from other benefits, such as income-related JSA or ESA. For those exempt from the waiting days, the wait is no more than 38 days. A claimant who cannot wait that long, however, may apply for an advance of up to 50% of the total award to provide support through to the UC payment being made. That is an important facility, and we continue to work on raising awareness of its availability.

There have been some delays in the payment of the UC housing element, largely because of, for example, mismatches between what claimants tell us and what landlords tell us is the rent due. We continue to work on process improvements around that. The pre-existing system was itself far from perfect, and we believe the processing times for the UC housing element are about the same as those for local authorities paying housing benefit. According to research by the national organisation for ALMOs—arm’s length management organisations—three quarters of tenants on universal credit were already in arrears before coming on to UC. Nevertheless, we continue to address those issues and we recognise that further improvements can still be made. That includes a dedicated team to handle the processing of rental information for both claimants and landlords.

In Newcastle upon Tyne North, the claimant count has come down by 36% since 2010, but of course we have to continue to support more and more people into work as they fulfil their potential and ambitions. Colleagues will know that implicit consent has been restored to MPs. There are particular sensitivities and difficulties about the breadth with which implicit consent can be granted, given the depth of personal and sensitive information within universal credit to which the individual claimant holds the key, but claimants are able to give explicit consent to advice agencies and so on as appropriate.

I fear that I am out of time. I conclude by saying that we must continue to work together to resolve issues as they arise and ensure a successful roll-out. We are standing on the cusp of historic change in our welfare state—a dynamic and fundamental change that is already transforming lives for the better and will improve many more. This is welfare reform in action—changing the dynamics in the system, making things simpler and ensuring that work always pays, to the benefit of millions.

[Catherine McKinnell]

I am sorry to say that I am not reassured by the Minister’s response to the significant issues with the current system. We are not talking about the principles or the aims of universal credit; we are talking about the serious reality on the ground for people trying to access the support that they are entitled to. The Minister appears still to have his head in the sand. I hope that that is simply because he has not had time properly to address the issues that several hon. Members outlined and he will go away and look at them. These are not just glitches in the system. The consequences are disastrous for the individuals concerned. The Minister did not address the issue of embedding debt in the system and has not taken seriously the impact of the issues that people are experiencing. I am also not convinced about his commitment not to reduce jobcentre staff, given that two of the jobcentres in Newcastle are set to close. This debate will continue.

Motion lapsed (Standing Order No. 10(6)).