Universal Credit and Debt

Debbie Abrahams Excerpts

Wednesday 5th June 2019 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for High Peak (Ruth George) on an absolutely outstanding opening speech. There is not much more that one can say. However, I will pick up on a few points.

To understand the rise in poverty that people are facing across the country—not in isolated areas, as some on the Government side would like to say—we need look no further than social security policies, unfortunately, and universal credit is a key aspect of that. The Child Poverty Action Group said back in 2015 that an additional 1 million children would be living in poverty. Just a couple of weeks ago, Policy in Practice estimated, on behalf of the Children’s Commissioner, that half of low-income households would lose nearly £3,500 a year, which will see child poverty double. The figure is already at 4 million—three quarters of the children living in poverty are from working families—and it is set to double. That is down to three social security policies: the two-child limit, the benefits cap and universal credit—particularly, as my hon. Friend said, the five-week wait, and the repayment not just of the advance loan but of other debts.

We recognise the intervention in last autumn’s Budget, but it is paltry compared with the £12 billion that was cut in the 2015 summer Budget. It did not go even halfway to restoring what was cut. It is still the case that 40% of people on UC will be and are worse off—this applies especially to disabled people; 1 million disabled people are worse off under universal credit—by nearly £2,000. It also applies to the self-employed and single parents; they are all worse off as a result of universal credit. We have touched on the natural migration that is happening, separately from managed migration, as a result of a change in circumstances.

The UN special rapporteur on extreme poverty and human rights, Philip Alston, said last month that the UK’s poorest people face lives that are “solitary, poor, nasty, brutish, and short”. He accused Ministers of being in a state of denial about the impact of policies, including the roll-out of universal credit, and referred to the “systematic immiseration” of a significant part of the British population. I know that his comments have caused some consternation on the Government side, but we have only to look at Westminster tube station to see our homeless people. Two thirds of those in homeless refuges are people who have issues with universal credit. We all have constituency cases—I shall mention a few if that is okay, Sir Henry—of people who are really suffering.

Sally is a single mum who moved out to escape an abusive relationship. Due to her change in circumstances, she has lost £400 from her universal credit. Katie’s employers made a mess of their returns, and she was left with £67 to live on. It was her employer’s error. She said:

“Every time I call they just say there’s nothing they can do and I just have to wait for a decision. Please help me as I’m at the end of hope!”

June was in receipt of employment and support allowance with a severe disability premium. Again due to a change in circumstances, she lost £300 a month. Karen works for the Greater Manchester police and has a two-year-old daughter. She was told by the jobcentre that universal credit would pay for 85% of her childcare. She had to pay it up front, but she was still waiting six months later. That is unacceptable, and it is happening up and down the country.

The Minister will be aware that universal credit has a bad press. In debates such as this, it is our job to draw attention to the dire circumstances that people are facing. There are also rumours, based on leaked emails, that there is a planned propaganda exercise to try to restore the public’s faith in universal credit. I would be grateful if the Minister could address that. I have gone over my time, so I will end there.

[Sir Henry Bellingham (in the Chair)]

I am afraid we will now have to move to a two-minute limit on speeches.

--- Later in debate ---

[Alok Sharma]

The hon. Gentleman will know that we inherited dire financial circumstances from the Opposition—I know that colleagues will not be happy at my mentioning that—and that is why we had to make difficult decisions. However, if Labour Members want more money introduced, then when that money is made available in Budgets, they should support those Budgets.

I will go back to the point about payments, including advance payments. I highlight that advances are interest-free.

[Debbie Abrahams]

Oh!

[Alok Sharma]

I am sorry that the hon. Lady is unhappy, but that is a statement of fact.

[Debbie Abrahams]

They are still loans.

[James Gray (in the Chair)]

Order.

--- Later in debate ---

[Alok Sharma]

I will not, as there is quite a lot to get through.

From this October, the Government will reduce the maximum rate at which deductions can be made from a universal credit award from 40% to 30% of the standard allowance. By the end of 2019-20, it is forecast that around 290,000 universal credit households will have had deductions reduced, by an average of £295 over the year. It is already possible to extend the period over which advances are repaid to 15 months in certain circumstances, and of course, as Members have acknowledged, from October 2021, the maximum period will be extended to 16 months for all claimants.

One issue not touched on in the debate was payment timeliness, but it is worth pointing out that it has been raised in previous debates, certainly during my time as a Minister. Payment timeliness has improved significantly. We now pay around 85% of new claimants of universal credit in full on time. In addition, 95% of claimants are paid in full within five weeks of their payment due date. If there are delays in making the first payment, that can be due to outstanding verification issues, such as the need to provide bank statements or proof of rent. It can also be due to a claimant not signing their claimant commitment. For ongoing claims, payment timeliness is around 98%.

The shadow Minister, the hon. Member for Weaver Vale (Mike Amesbury), raised the issue of employment. The whole point of simplifying the welfare system is to remove the cliff edges and the disincentives to take on work and extra hours that existed under the legacy benefit system. We now offer claimants one-to-one support to help them to move into work.

I hope that colleagues will acknowledge that we are seeing record rates of employment, month after month. The shadow Minister talked about zero-hours contracts, but he will know that less than 3% of people in employment in the UK are on zero-hours contracts. That figure has fallen this year. Indeed, those on zero-hours contracts are doing about 24 hours of work a week on average.

We have recognised that we need to provide a consistently high level of support to those who may have difficulties in making a universal credit claim. That is why we announced our partnership with Citizens Advice and Citizens Advice Scotland, which are now funded to provide the “help to claim” service for claimants.

In the past, a number of colleagues have spoken about debt advice. They will know that debt advice is now fully funded by the financial services levy, and that service delivery is commissioned by the Money and Pensions Service, which was launched in January this year. In 2019-20, MaPS will provide around 560,000 sessions of debt advice in England. It is also worth noting that in addition to the funding that Citizens Advice receives for the “help to claim” service, it will, like other organisations, receive additional funding from MaPS to provide debt advice.

A number of colleagues raised the issue of rent arrears. I point out that a report published in July 2018 by the National Federation of ALMOs, or arms-length management organisations, showed that over three quarters of their tenants who had started claiming universal credit were already behind with their rent prior to commencing their claim. Also, research that we have carried out shows that the proportion of universal credit claimants who were in arrears at the start of their claim fell by a third after four months. In the universal credit full service claimant survey, which was published by the DWP in June 2018, 84% of claimants said that they felt confident about managing and paying their housing costs.

My hon. Friend the Member for Gloucester raised the issue of rent arrears and asked what further work we were doing on it. I can confirm that we are carrying out further analysis with a number of housing providers to investigate and understand the true level of rent arrears among their tenants, and what is causing those arrears. Of course, when we have that information, we will publish it.

A number of colleagues raised the issue of tax credit debt. Her Majesty’s Revenue and Customs already seeks to recover overpayments of tax credit debts. When a claimant moves on to universal credit, any outstanding debt is transferred to the DWP for recovery. This does not include debt that is subject to ongoing disputes or appeals, and HMRC tells the claimant the amount of debt that is being transferred to the DWP for recovery. HMRC and the DWP continue to work closely to improve the claimant journey. This includes having a joint inquiry team to handle any issues that tax credit customers might experience during their move to universal credit. Of course, if claimants are struggling with the rate of repayment applied, they can ask the Department to review that rate.

A large number of points were made during the debate, so I say to hon. Members that if they want to meet me separately to discuss any points in more detail, I am very happy to do that, or they can write to me. However, in the remaining couple of minutes that I have, I will try to cover off some of the points made in the debate.

On the discussion about poverty, I point out that income inequality and absolute poverty are lower now than in 2010, and indeed the number of children—

[Debbie Abrahams]

Will the Minister give way?

[Alok Sharma]

I will not, because I literally have just a couple of minutes left. As I was saying, the number of children in workless households in the UK is down by 665,000 since 2010.

There was a discussion about homelessness. Since 2011, the Government have provided local authorities with about £1 billion in discretionary housing payments to protect the most vulnerable claimants. The hon. Member for High Peak raised the issue of how people know what deductions are being applied to them; that is shown in their statement, separately from the journal, and is available online. She also raised a point about deductions. I point out that if a claimant is subject to deductions to repay an overpayment, and those deductions are causing financial hardship, they can request a review of that rate by contacting the Department. Claimants have had their repayment rate lowered, temporarily suspended, or indeed both.

A number of colleagues also asked why we were not able to bring forward the 30% deduction rate on the standard allowance. The delivery date was chosen to achieve the best balance between continually improving universal credit in order to respond to claimant needs, and ensuring that the service is technically and operationally scalable as the volume of universal credit continues to rise. The hon. Member for Makerfield (Yvonne Fovargue) raised an issue about the breathing space scheme; the Department is supportive of that scheme, and officials are reviewing it to see how it could be applied to DWP debts. I would be very happy to sit down and talk with her further when more information is available.

A number of colleagues, including the shadow Minister, raised the issue of the Metro campaign. The whole point of the “Universal Credit Uncovered” campaign is to tackle common myths about universal credit. The Department has consulted the Advertising Standards Authority, and our adverts reflect its advice. To those Members who talked about the amount of money being spent on this campaign, I advise them that it is certainly not £23 million.

The issue of split payments was raised by my hon. Friend the Member for Waveney; as he knows, those are already available. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) raised the issue of Highland Council. He and I have met a number of times about this issue, and as he will know, my officials continue to engage with Highland Council about that point. Finally, the Scottish Government have themselves cut funding for Highland Council.

In conclusion, we are making changes that are benefiting claimants, but I am always happy to talk to colleagues about how we can do better.