Universal Credit Work Allowance

Debate between Eilidh Whiteford and John Glen

Wednesday 6th January 2016 Commons Chamber

[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.

[John Glen (Salisbury) (Con)]

I have been listening carefully to the hon. Lady. She says that it is very important that the full data and the alternatives are exposed. Will she set out the cost implications of going down the route she would prefer, and explain how it would be affordable?

[Dr Whiteford]

I will happily do that. Before the general election, the Scottish National party set out in some detail its fully costed alternative to austerity. We were keen to point out that austerity is a choice. We can balance the books without austerity and release £140 billion for investment in public services. That would be a much fairer and more economically sensible way of doing business. I refer the hon. Gentleman to our manifesto.

[John Glen]

rose—

[Dr Whiteford]

I will not give way again. The hon. Gentleman might be interested to know that in our manifesto we proposed increasing work allowances by 20% to create the exact incentive that the Government say that they want to create while, at the same time, pulling out the rug from underneath it.

[John Glen]

rose—

[Dr Whiteford]

No, I will not give way again, because I want to make some progress. I may give way again a little later in my speech, but I am conscious of time.

The Commission on Social Mobility and Child Poverty also pointed out that a single parent working full-time on the minimum wage and receiving no help with housing costs would lose £50 a week. In what fantasy world does that amount to making work pay? Many parents who are working hard, and struggling to support themselves and their families, will find themselves substantially worse off.

There is enormous complexity around the impact of the cuts to the work allowance. There is a range of factors, including the number of adults in the household and whether or not housing costs are included. As has already been said, single parents and the self- employed are likely to be among those worst hit, but it really will depend on individual circumstances. However, the IFS points out that there will be more losers than winners under these changes, and the Resolution Foundation estimates that working families with children on universal credit will be, on average, £1,300 a year worse off by 2020. The IFS estimates that, overall, 2.6 million families across the UK will be worse off by an average of £1,600 a year. Let us not pretend any more—either to ourselves or to the public—that universal credit will create work incentives and tackle in-work poverty. It will not. For most of the people affected, it will make things worse.