Universal Credit Work Allowance

Debbie Abrahams Excerpts

Wednesday 6th January 2016 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I congratulate everybody and thank them for their contributions to today’s debate. The list includes too many Members to mention them all, but I want just to mention my right hon. Friend the Member for East Ham (Stephen Timms) who, in his typical way, forensically analysed the implications of the cuts to work allowances for universal credit and the implications of undermining the objective of universal credit, which is to incentivise work. The Government might have been forced to row back on their proposed cuts to tax credits, but, as has been emphasised in the debate, that is not the end to their attack on hard-working people on low pay.

In his autumn statement last November, the Chancellor failed to exclude people who are currently on universal credit from any cuts in work allowances. As the Institute for Fiscal Studies has said, as everyone in receipt of tax credits now will eventually move on to UC, the long-term effects will be nil. Again according to the IFS, by 2020 2.6 million families will be £1,600 a year worse off.

Starting in April, there will be a £9.6 billion reduction in support for working families over the next five years, with £100 million of that coming in 2016-17. Those people already on UC, including my constituents, will be hit first. There are currently 155,000 people on UC, and that number is increasing every week and is expected to reach half a million by April. House of Commons Library analysis shows that the cuts will mean that a single parent of two who is working full time on the minimum wage will lose £2,400 next year. Liverpool Economics has estimated that disabled people will have their support reduced by £2,000 a year. A couple earning £20,000 a year and with two children will be £1,600 a year worse off.

The north—particularly the north-west, where UC started —will be hit first, so we go from powerhouse to workhouse. The Government first of all denied that anyone on UC would be worse off, with the Secretary of State saying on the BBC:

“Nobody will lose any money on arrival on Universal Credit from tax credits because they’re cash protected, which means there’s transitional protection.”

Well, that could not be further from the truth. As the Government finally conceded during the Christmas recess, the flexible support fund that the Secretary of State claimed would provide transitional protection for claimants is used for other purposes and last year was only £69 million, well short of the £100 million cuts for this year, let alone the £3.2 billion cuts by 2020. Will the Secretary of State now apologise, as I believe this is the first time he has had an opportunity in the Chamber to apologise for his inaccuracies and for misleading the public in this way? I will take that as a no.

The blunders and callousness do not stop there. The Government suggested that the way to avoid the cuts was just to work an extra 200 hours a year, three or four hours a week. As the hon. Member for Banff and Buchan (Dr Whiteford) said, is that what the DWP is going to do? If it is not, the Department needs to get its own house in order first.

The Minister was desperately trying to say that this was about dynamism and strengthening work incentives, but cutting universal credit work allowances will weaken, not strengthen, work incentives—a far cry from the supposed intention of universal credit. As a result of these cuts to universal credit work allowances, a single parent earning the new minimum wage and with one child will increase their income by only £40 by working an additional 12 hours. That compares with an increase of £92 for the additional 12 hours before the cuts to the work allowances were introduced.

The Government are once more making the poorest, including the working poor, bear the brunt of further cuts, as the IFS analysis of the autumn statement shows. After six years, they have done next to nothing to curb boardroom pay. The average worker’s pay of £27,645 increased by less than 2% last year, compared with pay for top executives on an average of £5 million increasing by nearly 50%. That trend is getting worse, not better. In the first five days of January, many of those top executives had already earned the equivalent of the average worker’s annual salary.

Worryingly—though sadly unsurprisingly—this Government have yet again failed to publish an impact assessment of the effects of these cuts. The Social Security Advisory Committee said of these regulations that

“the impact needs to be analysed carefully and the policy about work incentives should be derived from strong evidence.”

The Committee was concerned that

“there may be an uneven impact on individuals”

and expressed disappointment with the

“lack of statistical analysis to support the view that the abolition of the work allowance for several UC categories will not deter people from seeking work”.

In the House of Lords, the Secondary Legislation Scrutiny Committee issued a report stating that its members were

“disappointed that no impact assessment or similar statement has been provided showing how many people are likely to be affected by these changes and to what degree.”

In addition, there has to date been no cumulative impact assessment of the Department’s policies on poverty affecting disabled people and children—something I have repeatedly urged Ministers to undertake. The Social Security Advisory Committee stated in 2014 in its report on cumulative impact assessments of welfare changes that it believed

“that more can and should be done to identify and evaluate the interaction between elements in the welfare reform agenda, particularly as they affect vulnerable groups.”

Others have made such evaluations. Demos made an assessment of the cumulative effects of the 2012 welfare reforms, estimating that £23.8 billion will have been taken from 3.7 million disabled people by 2018—and that does not even take into account the potential effects of this year’s Welfare Reform and Work Bill. The Child Poverty Action Group states that the cumulative impact of welfare reforms on low-income households, the majority of which are families with children, will amount to £9.7 billion by 2020-21. A recent BMJ article highlighted the disproportionate effect that the Government’s social security cuts are having on children and on people with disabilities; another highlighted the impact on child health of the Government’s welfare cuts. This is happening at a time when this affluent country, the sixth wealthiest in the world, has the highest under-five mortality rate in northern Europe. These policies are going to make that worse.

We are calling for a full reversal of the proposed cuts to the Government’s universal credit work allowance. As we have heard throughout the debate, all the evidence shows that there is no valid reason for protecting people on low and middle incomes from the cuts to tax credits without extending the same protection to working families on universal credit, especially as the Secretary of State has said he expects no new claimants to be eligible for tax credits from 2018 as tax credits will have been replaced by universal credit for all new claimants. The cuts to the universal credit work allowance are just as unjust as the cuts to tax credits. That is why we on this side of the House are calling for a full reversal and asking Conservative Members who were brave enough to make a stand against the tax credit cuts to have the courage of their convictions and vote with us today.