Universal Credit Work Allowance

Chris Stephens Excerpts

Wednesday 6th January 2016 Commons Chamber

[Owen Smith]

We are not talking about families in receipt of £57,000; we are talking about families on low and middle wages. We are not talking about people who are in the highest tax bracket, and it is a complete misrepresentation of the facts and of this debate to try to turn this discussion to high-earning taxpayers. That is not what we are talking about.

[Chris Stephens (Glasgow South West) (SNP)]

I want to come back to the process the shadow Minister outlined at the beginning of his remarks. He said this measure was sneaked through by a statutory instrument. Has he read the many questions Opposition Members, including myself, asked at the statutory instrument Committee about the impact of this change, such as on carers, particularly young carers?

[Owen Smith]

We have repeatedly asked for any sort of impact assessment in respect of these measures, and as usual the Government signally fail to offer one. I believe that in the hon. Gentleman’s constituency 13,000 households will lose out by the end of this Parliament as a result of these cuts, and in the constituency of the hon. Member for Hertsmere (Oliver Dowden) I believe 5,000 people will lose out by an average of £950 by the end of this Parliament; perhaps he ought to reflect on that when he votes on this motion later today.

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[Justin Tomlinson]

I will extend my invitation further: I will join the hon. Gentleman if he wishes to come and see this work in action. If he is worried about going on his own, I will in effect be his work coach. We have talked about examples. Let us talk about a working lone parent with two children who is doing 35 hours on the national living wage. They will be £330 better off. We could continue to trade examples, but that would be to assume that this is a static analysis. I will address that point later.

The evidence is clear: universal credit is working. Independently reviewed statistics published at the end of last year show that under universal credit people spend 50% more time looking for work, are 8 percentage points more likely to have been in work, and when in work, they earn more and seek more hours. So, universal credit is supporting people whether they move into or out of work, and focusing on getting people not just into work but into sustainable employment where earnings increase and the number of hours they work rises.

[Chris Stephens]

The Public and Commercial Services Union has real concerns about the cuts to the work allowance, which will affect the Government’s own staff. What assessment has been made of the effect of those cuts on the employees in the Department for Work and Pensions?

[Justin Tomlinson]

As I shall explain, this is not a static analysis.

I want to focus on how we are going to support people. People will benefit from the improved support. For those directly affected by the changes to work allowances, we have been careful to put further measures in place. The affected claimants will benefit not only from additional work coach support but from access to funding through the flexible support fund. This will help people to retain work and to increase their earnings through training, travel and care, and we will support people to access those things. In the longer term, we are ensuring protection for claimants who are moved from legacy benefits to universal credit. We have always been clear that there will be no cash losers as a result of the managed migration of claimants from one system to another, as long as their circumstances remain the same.

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[Dr Whiteford]

The whole point that I am trying to make is that any progress that has been made will be undone if the Government remove the work incentive, which is the work allowance. It is the aspect of universal credit that makes it possible to earn more when they work. By cutting the work allowance, the Government are going to impose an eye-watering level of marginal taxation on people in low-paid jobs and make it harder than ever for those in low-income households to break out of the poverty trap. If the Government were serious about making work pay, if they were serious about boosting the UK’s productivity and if they actually wanted to help people get on, they would be increasing the work allowance, not reducing it. That would be a genuinely progressive measure, and it would actively help those in low-paid work.

[Chris Stephens]

Are not my hon. Friend’s arguments also supported by the Institute for Fiscal Studies, which said in a report after the Budget that the cut to the work allowance

“weakens incentives for families to have someone in work”?

[Dr Whiteford]

Lots of think-tanks and non-governmental organisations have been queuing up to point out that this measure removes work incentives. It strikes me that increasing the work allowance would be a far more progressive measure than, for example, raising the personal tax allowance, which benefits higher-rate taxpayers such as ourselves far more than anyone in low-paid work.

The cuts to the universal credit work allowances are being introduced via the Universal Credit (Work Allowance) Amendment Regulations, which a Delegated Legislation Committee considered last November under the negative resolution procedure. My hon. Friend the Member for Glasgow South West (Chris Stephens) opposed the cuts at the time, because it was clear to him, as it was to me, that reducing the amount that a household can earn before universal credit starts to be reduced would hurt low-income families in certain circumstances very badly indeed, and would remove work incentives for those households.

It causes me great concern that, instead of being fully debated here in the Chamber, the changes were enacted through delegated legislation without the scrutiny that their consequences merited. As far as I am aware, the Department for Work and Pensions has yet to produce a proper impact assessment of the changes to the work allowance, so we are very much dependent on external bodies for worked impact analyses. I would be grateful if Ministers said today that they will publish an impact assessment, particularly given that the Social Security Advisory Committee has expressed concerns about the adequacy of the evidence base for evaluating the changes. We can get up in this Chamber and spout as much hot air as we like, but if we lack the proper evidence or use the evidence so selectively to back up only our arguments, we really will fail the people who depend on the support of our social security system.

In late December, the Social Mobility and Child Poverty Commission said that

“the net impact of changes to universal credit...on work incentives is largely negative due to significant reductions in the generosity of work allowances.”

It pointed out that claimants who pay income tax will keep only 24 p in every extra pound they earn. They would need to earn an extra £210 a week to make up the losses from a reduced work allowance—a staggering rate of marginal taxation that makes a mockery of the notion that any work incentives will be left in universal credit. Incidentally, it is important to get away from the false idea, which has been creeping into today’s debate, that there are taxpayers and then there are people on benefit. Work allowances are for people who are working—the clue is in the name—in low-paid jobs.

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[Chris Stephens (Glasgow South West) (SNP)]

“A guid new year tae yin and a’ and mony may ye see.” I thank the Labour Front Bench—[Interruption.] It is okay; I will send that up to Hansard. I thank the Labour Front Bench and particularly—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The hon. Gentleman is using perfectly good language and most of us understand it perfectly.

[Chris Stephens]

Thank you, Madam Deputy Speaker.

May I thank the Labour party and the hon. Member for Pontypridd (Owen Smith) for bringing this motion to the House? I want to start, as he did, by discussing the parliamentary procedures and the concerns I had about how this change was made. My view is that the Statutory Instruments Committee should be used to address technical changes to legislation and amendments. This was not a technical amendment; this was a policy change, and this was a procedural vehicle to sneak in the most damaging legislation and avoid public scrutiny. At the SIC we were subjected to the usual sunshine and cheerful rhetoric from the Government members, so much so that if we were playing Tory buzzphrase bingo we would have won the snowball after a couple of minutes, because the reality of this change is that a lone parent who currently earns the national minimum wage can work up to 22 hours, but with this cut to working allowance they would lose that support after 12 hours.

I am still waiting for the answers to many of the questions I asked at the SIC, and I hope that those on the Government Front Bench will answer some of them. First, what assessment has been made of the effect of the changes to working families and their ability to take on part-time work? Does this disincentivise work and lead to workers reducing their hours? It seems to me that it is human nature that if there is a chance of someone losing benefit payments and they can save that benefit only by cutting their working hours, that is exactly what they will do. Will there be any mitigation of the effects on their benefits? How will carers be affected, in particular young carers? Talking about young workers, what about those aged under 25, who will not get access to the national living wage?

I also ask this question again: what impact assessment has been done in respect of Department for Work and Pensions staff, who are the lowest paid civil servants in the country—so much so that when staff from Her Majesty’s Revenue and Customs are merged into the DWP, they earn £2,000 more than those in the DWP? These are staff who are subjected to a 1% pay cap, and who are paying, and have had to pay, increased pension and national insurance contributions; and 40% of DWP staff are currently on tax credits.

We have heard so much again today about aspiration. What message does the cut to working allowance send to those who aspire? The reality is that people are increasingly aware that the ladder of social mobility is being systematically pulled up ahead of them, and that no matter how hard they work or how much they aspire to a better life for their children and themselves, they will be punished for not being born into the right sort of family. That is the reality of this cut to UC work allowance.