Autumn Statement Distributional Analysis, Universal Credit and ESA

David Burrowes Excerpts

Wednesday 16th November 2016 Commons Chamber

[Damian Hinds]

We are working hard on this. When my colleague the Minister for Disabled People, Health and Work sums up at the end of the debate, she will no doubt elaborate on that more. To be able to do everything we can as a Government, we need employers to do more as well, as the right hon. Gentleman will recognise. A whole-society approach is required to address this great challenge. Progress is being made but more is needed. He should have no doubt about the Government’s commitment to doing everything possible to achieve that.

One reason why so much more needs to be done is that we still have that yawning gap despite all the progress that has been made—despite the regulatory reform, the medical advances, the advances in assistive and adaptive technology, and, critically, the fact that we know that so many people with disabilities want to move into work and that so much talent is not currently being fully utilised. We know that being in work can have wider benefits for the individual, beyond the purely financial. There is clear evidence that work is linked to better physical and mental health, and to improved wellbeing. That is a key theme in our recently published Green Paper “Improving Lives”, and a driver behind the changes to the employment and support allowance and universal credit that were announced in last summer’s Budget.

ESA was originally introduced—I am happy to acknowledge the bipartisan parts of this debate—in 2008 by the then Labour Government. The expectation at that time was that the Atos-run assessment process would place the clear majority of claimants into the work-related activity group, leaving a relatively smaller number in the support group. Over time it became clear that that was not the case, with around three times as many people in the support group as in the work-related activity group. At the same time, fewer than 1% of people were leaving that benefit for work each month.

That is why we are introducing changes to encourage and support claimants to take steps back to work and to fulfil their full potential. From next April we will no longer include the work-related activity component for new ESA claims, or the equivalent element for people on universal credit with a health condition or disability. I stress that that is for new claims after April next year; there will be no cash losers among those already in receipt of ESA or its universal credit equivalent, and there will be further safeguards meaning that they will not lose the extra payments even if reassessed after April and placed in the work-related activity group.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I very much welcome the Green Paper, which many of us have been looking forward to for some time. It sets the direction of travel, providing a much more joined-up approach for this group of very vulnerable people. On the notional cash loss for new WRAG claimants, could there be support from the financial support grant in the Green Paper—

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

The flexible support fund.

[Mr Burrowes]

Yes, the flexible support fund, which could provide some flexibility and relief for those particular needy groups.

[Damian Hinds]

I am grateful to my hon. Friend, and to the former Secretary of State for Work and Pensions, to whom I pay tribute for bringing forward the universal credit system and so much else that goes with it. The flexible support fund is part of the package of support there is, through the Jobcentre Plus network and other means, to help people into work. It is the case—I will come on to this in a moment—that more money will go into those support packages to help people into work, or, as some people have very significant barriers and some distance to go, to get closer towards work. About 47% of people in the work-related activity group also receive the personal independence payment, which is, of course, exempt from the benefit freeze, and there will be no change to the support group supplement. In the Green Paper consultation, we are consulting on whether we should decouple the support group rates from the type of support people can receive, so that those in the support group can seek help that goes towards their getting work without worrying about their benefit entitlement being at risk.

The amount we are spending on disability benefits, at £50 billion, is not going down: it is going up. In real terms, it will be higher at the end of this decade than it was at the beginning. We believe that the change in the work-related activity group, working in tandem with the new employment support package announced in the Green Paper, will help to provide the right incentives and support to assist new claimants who have limited capability for work. We believe that this package—representing £60 million of funding in 2017-18, rising to £100 million a year in 2020-21 and developed with external stakeholders, including groups and charities expert in addressing the barriers that can come with disability—can have a much bigger and lasting effect on people’s prospects and their livelihoods than the work-related activity component itself. In addition to the funding package, we are introducing £15 million for the Jobcentre Plus flexible support fund in 2017-18 and 2018-19 to help claimants with limited capability for work. From next April, we are also removing the 52-week permitted work limit that exists in ESA, to allow claimants to continue to undertake up to 16 hours’ part-time paid work and, currently, earn up to £115.50 per week.

I trust that hon. Members will recognise the value in our approach. Today’s employment figures show unemployment at 4.8%—a decade low. Average wages are rising at 2.4%, which in real terms is 1.7%. Since 2010, we have seen a 2.8 million rise in the number of people in a job, 865,000 fewer workless households and 62,000 fewer households where no one has ever worked. Income inequality has fallen and average incomes are the highest on record. There are 300,000 fewer people and 100,000 fewer children in relative low income. This morning’s figures show that the rate of young people who have left full-time education and are not in work is at a new low, and the biggest drop in unemployment was among the long-term unemployed.

We introduced the national living wage—a £900 a year pay rise already for a full-time person on the previous minimum wage, with more to come. We have taken millions out of income tax. We have extended free childcare to disadvantaged two-year-olds and we are upping childcare spend by £1 billion a year. We are being ambitious on skills through school reforms and a dramatic increase in apprenticeships, so that more people can share in the opportunities of the new world economy. We are transforming social security through universal credit. We are stabilising the nation’s finances, and ensuring that low-income families and those with health conditions and disabilities have the support they need to enter and progress in work as we build an economy and a society that works for everyone.

--- Later in debate ---

[Mr David Burrowes (Enfield, Southgate) (Con)]

I am pleased to be able to take part in the debate. The shadow Chancellor talked about econometrics; I want, like the Prime Minister, to focus on human metrics. At the outset of her premiership, she rightly said that this would be a Government who wanted to

“stand up for the weak”

and reach out to the “just managing”.

Today’s debate, like the debate that we shall have tomorrow, is about seeking to fulfil those aims.

I intend to concentrate on cuts in the universal credit work allowance today and delay most of my comments about the ESA WRAG payments until tomorrow, although I will say now that I approve of the Green Paper’s direction of travel. Its vision of integrated and personalised employment and health support is overdue, but welcome. However, we need to look out for the disabled people—some 500,000, according to a House of Commons Library estimate—who worked in April as new WRAG claimants. They will still be affected. The flexible support fund—about which I look forward to hearing from my hon. Friend the Minister for Disabled People, Health and Work—is crucial. Along with other discretionary relief, it needs to meet the wider costs of job seeking for disabled people by April. We cannot deny that those wider costs exist, and we must ensure that we meet them. My support for the Government’s admirable reform agenda for disability depends on that.

Let me now say something about low-income families, who are the main subject of the debate and, in particular, about the first few lines of the Government amendment, which

“notes the role of universal credit in ensuring that work pays”.

That is what we want to happen. It is the very basis of our welfare reforms. We must commend the Government, and previous Governments, for the fact that some 764,000 children will not wake up in workless households today because of the opportunities for work that have been provided. That is extraordinarily important. Work is obviously a primary route out of poverty, and the income tax cuts, the national living wage and the 30 hours of free childcare are all extremely welcome.

What will drive all this through, however, is universal credit that does what it was designed to do, and makes work pay. In Enfield, which rolled the scheme out early, it has been a success. Work coaches have reached out to previously unreached individuals, helping them to find work. More people are working, obtaining work more quickly, staying in work longer, and earning more. The first nine months have been very successful. Universal credit claimants are now 13% more likely than jobseeker’s allowance claimants to be employed, work 12 days more, and are more than twice as likely to try to work for more hours.

That is all extremely welcome. However, there is a risk that the cuts in the universal credit work allowances will unpick the good work of the universal credit: the work coaches, the incentives, the living wage and the free childcare. It will be like a travellator in an airport. We want the travellator to help people—especially those on low incomes—to travel into work. It will now be switched in another direction; actually, it will be going in the opposite direction, which will mean that 2.7 million working families will on average be £1,500 worse off without the benefit of work allowances. It matters greatly to these families. It also does not make sense that these families who are claiming universal credit will be worse off than families protected under legacy tax credits payments living in the same town, the same neighbourhood or even the same street. That is not fair.

There is cross-party concern about this, and a shared concern among campaign groups, which are not always on the same wavelength. Gingerbread, focusing its concerns on single parents as well as couples with children, makes the point that working single parents in the poorest fifth of households are set to lose nearly 7% of their income. A home-owning single parent working full time will be over £3,000 a year worse off without the work allowances, and if a second earner enters work he or she will lose 65p in every pound earned. CARE also made this point in relation to recognising our support for marriage in the tax system, which it says could be undermined. In particular, single-earner married couples on median incomes with two children will lose significantly without the work allowances.

[Mr Duncan Smith]

My hon. Friend is rightly dealing with the levels and the amounts, but may I take him back to one point that came out of the dynamic study, which was that if we stayed with the purposes of the original universal credit with that allowance, it would amount to a minimum of an extra 300,000 people in work over and above existing forecasts? That is a positive reason for staying with those allowances.

[Mr Burrowes]

I agree, and it helps to revolutionise things for everyone—those on low incomes and those on median incomes. A one-earner married couple on a median income with two children—those with children are particularly impacted, given the costs—will lose some £2,211.04 per year without the allowances.

This Opposition debate is plainly timely as it comes ahead of the autumn statement. Before all the universal credit is rolled out and has its full impact, we want to make sure that that impact fulfils the first line of the amendment: to ensure that work pays. Welfare reform rises and falls on this basis, and that is why I commend my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) for all the work he has done. That is the basis of our welfare reform. We want this to rise to meet the aspirations of everyone who can work—families who have been put in poverty, and vulnerable disabled people who are the subject of this debate.

I urge Ministers to take back to the Chancellor the message coming from both sides of the House and from campaign groups, who are united in their concerns for these low-income families, and to ensure that universal credit, which is doing great work across our country, is given the boost it deserves and that work allowances are regenerating it to ensure that work pays.

--- Later in debate ---

[Mr Burrowes]

How much of a priority is it that we make changes ahead of this autumn statement, rather than waiting until April?

[Heidi Allen]

I think it would send a message and set the fiscal tone that this Government care and are listening to those who, as I mentioned, are running our engine. It would set the tone by saying that this country is, and will continue to be, open for business and can afford to run itself.

Turning to employment and support allowance, I am, of course, delighted that we have a Green Paper coming, and early signs from disability charities are that it is being very well received. However, it is still only a Green Paper and is still subject to consultation, so I remain uncomfortable, just as I was back in February, that the £30 per week planned cut is still in place.

With a new Prime Minister and a new Government, we have a priceless opportunity to build a system that supports and realises the aspirations of people with disabilities. That clearly and rightly is the Government’s mission, so let us not waste it by retrospectively fitting policies to savings targets agreed in a different era.