Department for Work and Pensions

Baroness Laing of Elderslie Excerpts

Tuesday 4th July 2023 Commons Chamber

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the Chair of the Work and Pensions Committee to open the debate.

[Sir Stephen Timms (East Ham) (Lab)]

I am very grateful to have been granted today’s debate about DWP spending.

I will focus in particular on universal credit, whose roll-out started 10 years ago in 2013. The DWP is forecast to have, by some considerable margin, the highest expenditure of any Government Department, at £279.3 billion in this financial year, followed by the Department of Health and Social Care, at £201 billion. DWP spending is the largest by a considerable distance.

Of course, the DWP forecast is uncertain. Almost all its funding counts as annually managed expenditure; it is hard to forecast demand-led spending. DWP’s admin spending—departmental expenditure limits—is 27% lower in real terms this year than in 2010-11. Universal credit spending is forecast to be £50.8 billion this financial year, which is £8.8 billion higher than forecast in these estimates last year, reflecting the recent much-needed uprating and a higher case load. In February, 4.5 million households were receiving universal credit payments.

A key argument in the business case for universal credit was the prospect of reducing fraud and error. Nearly a quarter of the £34 billion net present value gain expected over 10 years from introducing universal credit was due to come from lower fraud and error. In fact, fraud and error have been much worse than they were for legacy benefits. The Department’s statistics show that the universal credit overpayment rate decreased, but from an astronomical 14.7% in May 2021 to 12.8% last year. I know that the Department is setting out to address that problem, and that it has obtained resources from the Treasury to do so. Underpayments were at their highest-ever recorded rate last year, at 1.6%. I hope the Minister will be able to tell us about plans for tackling those problems.

An additional reason that it is so important to get decisions right at the moment is that universal credit is a passport to cost of living support payments. There was a strong case for merging the various benefits into universal credit, and the success of the system in getting urgently needed support out effectively during the pandemic was very important and very impressive. However, there are some big problems—above all, the problem of the five-week wait between applying for the benefit and receiving the first payment. With legacy benefits, the first payment would usually arrive a week and a half or so after applying. With universal credit, having spent hundreds of millions of pounds on what we were always assured was agile technology, the same thing now takes five weeks. That is a fundamental and unnecessary flaw; the security is absent from social security.

In January 2021, the Government rejected the Select Committee’s recommendations to eliminate the wait and instead pay all first-time claimants of universal credit a starter payment equivalent to three weeks of the standard allowance, just to tide people over. The Government response pointed out that claimants can access advances, but of course, those are loans. Repayments reduce the already low monthly awards, and repaying advances is a major driver of the explosive growth in food bank demand that we have seen. Our colleagues in the other place, those on the Lords Economic Affairs Committee—with its Conservative Chair—succinctly highlighted the consequences of the five-week wait in July last year:

“the five-week wait for the first payment…drives many people into rent arrears, reliance on foodbanks and debt.”

As such, I ask the Minister once again whether the Government will reconsider our recommendations, or whether we have to wait for a different Government for that fundamental flaw to be addressed.

I am very pleased to say that one area in which the Government have listened to the Committee is reimbursement of childcare costs for people claiming universal credit. I warmly welcome the lifting of the cap and up-front payments for childcare announced in the Budget, and I hope that our future reports will have comparable levels of success. Those changes will support people to be in work in future.

Last week, the Child Poverty Action Group published a fascinating report called “You reap what you code”, highlighting areas where the universal credit computer system does not deliver what it should. It gave the example that legislation and guidance allow some groups to submit a universal credit claim up to a month in advance, but the system does not allow that, nor is there an adequate workaround outside the digital system. As such, some care leavers and prisoners expecting release can miss out on an entitlement that they are due. For all its success in the pandemic—I am unstinting in my recognition of that success—the rigidity of the digital system is a problem. Can the Minister tell us whether a fix is planned for that problem of early claims, which the Child Poverty Action Group highlighted last week?

Does the level of benefits meet need in the way it is supposed to? Do benefits represent value for the taxpayer? The Committee is conducting an important inquiry into benefit levels in the UK, and will report in the first half of next year. Benefit levels are very low. The Joseph Rowntree Foundation and the Trussell Trust told the Committee that

“the basic rate of Universal Credit—its standard allowance (or equivalents in previous systems)—is now at its lowest level in real terms in almost 40 years (CPI-adjusted) and its lowest ever level as a proportion of average earnings.”

They estimate from pretty careful research that a single adult needs £120 per week to cover essentials: food, utilities, vital household items and travel. That is excluding rent and council tax. Universal credit’s standard allowance is £85 per week for a single adult over 25. That is a shortfall of at least £35 per week, and deductions—for advance payments, for example—often pull actual support well below the headline rate.

The Joseph Rowntree Foundation and the Trussell Trust call for an essentials guarantee. They make the point—which has been suggested this week in the press—that we might get a below-inflation uprating of benefits next year, making those problems even worse. I would be grateful if the Minister gave an assurance on that front, because that would be very bad news indeed.

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

It is a pleasure to follow the hon. Member for North East Fife (Wendy Chamberlain). I find myself resonating with her comments on carers and the lack of support that exists in so many different ways, but particularly through the social security system, and the billions—multiple billions—that are provided in equivalent support to this country that we sadly do not adequately recognise.

I also pay tribute to the Chair of the Work and Pensions Committee, my right hon. Friend the Member for East Ham (Sir Stephen Timms), for all that he does in the plethora of different inquiries that the Committee has held over the past few years. I am particularly pleased about the work that we are doing on the adequacy, or inadequacy, of the social security system, and the important things that will reveal when it is published early next year.

This debate is about DWP spending. Associated with that is what it means for the priorities of the Department and, in particular, the Government’s priorities for social security as a whole. I will focus my remarks on the fall in support for working-age adults. We need to recognise that particular group and the impact that fall is having on so many different families across the country.

We have had two major welfare reform Acts, in 2012 and 2016. I will refer to the latter in a moment, but the cumulative impact of those up to the pandemic was the equivalent of a 17% reduction in working-age support, which in cash terms is about £33 billion. That was only slightly offset by the temporary increase in universal credit during the pandemic. Although I welcome the uprating last year, and I support what my right hon. Friend the Member for East Ham said about that, it does not at all make up for the last 10 or 11 years of significant cuts. That has had an impact on relative poverty across the UK.

Just under one in three children in the UK are growing up in poverty, and in my constituency the figure is nearly one in two. We also know that just under two thirds of children growing up in poverty live in families where at least one adult is working. The implications of these cuts for those children are not insignificant. We now have the highest ever level of in-work poverty. What on earth does that say about this country? It is shocking.

Many people who know me will know how strongly I feel about the impact of these cuts on disabled people. One in three disabled people are living in poverty, which is twice the rate for non-disabled people. It is totally unacceptable. These are the most vulnerable people in our society, and we are failing to recognise their needs and support them.

I know that the Minister will come back and say, “Actually, poverty has reduced.” The Joseph Rowntree Foundation reflected that in its annual report, which came out at the beginning of the year. Yes, poverty levels have gone down, but that reflected the fact that during the pandemic we saw reductions in overall incomes, and with relative poverty that is the position. Importantly, the Joseph Rowntree Foundation said that it was also about different choices that the Government made at the time. As much as we are talking about now, we must recognise that that £20 a week of additional support made a difference to those poverty levels. Poverty is not inevitable; it is about political choices. Again, I hope we can reflect on that.

When I speak to my constituents in Oldham East and Saddleworth, and indeed people across the country, they tell me that they feel our current system no longer provides the safety net that it was set up to provide in the post-war settlement with the British people, and they are right; it is inadequate. Following on from their first-hand experience during the pandemic, polling shows that two thirds of Britons think that universal credit is too low.

Not only has the adequacy of the UK’s social security system diminished over time—in terms of average weekly incomes, it is approximately half of what was provided after world war two—but it is also lower than most of our European neighbours, with data from 2018 showing that our social security spending as a percentage of GDP was below EU27 and OECD averages.

We must never forget that the post-war Labour Government created the NHS and the welfare state. As we mark the remarkable achievement of our NHS with its 75th anniversary tomorrow, we must reflect on the principles of universality and access for all, which I would like to see reflected in our social security system, too. Like our NHS, our social security system should be there for all of us in our time of need, whether that is a result of illness or disability, of being unable to work anymore because we have reached retirement age, or for any other reason. It should provide basic financial support and should be valued for the safety net it provides. That is not the case now, and that is why I am advocating for a new social contract that defines the future of our social security system. A good starting point would be the essentials guarantee that my right hon. Friend talked about. That has been proposed by the Trussell Trust and the Joseph Rowntree Foundation, but a wide coalition of charities have advocated for it. They found that 90% of low-income households on universal credit are going without essentials such as food, electricity and clothes.

That inadequacy is the main driver of food bank need, with almost 1.3 million food parcels distributed between April and September 2022. That is just unacceptable in the fifth richest country in the world. An essentials guarantee would ensure that the universal credit standard allowance met a level that provided basic security for a family’s need. The charities calculated that at £120 a week for a single person and £200 a week for a couple. The guarantee would bring us in line with our European neighbours and provide a safety net in the same vein as our NHS. It would also reduce the poverty that too many are experiencing and which has a lifelong impact on children.

Some Members will know that I chair the all-party parliamentary group on health in all policies and have done so for a number of years. In 2020, just before the pandemic, we commissioned a review of the Welfare Reform and Work Act 2016 to analyse the impacts it was having on children and disabled people. Anybody watching or listening is welcome to have a look at that on my website. One of the biggest and most worrying figures that we found was that:

“Each 1% increase in child poverty was significantly associated with an extra 5.8 infant deaths per 100 000 live births…about a third of the increases in infant mortality between 2014 and 2017 can be attributed to rising child poverty”.

That was published in one of the peer-reviewed medical journals. Understanding the impact that that has had on so many families is devastating. It is yet further evidence that far more needs to be done to provide an essentials guarantee.

The flipside of that is that we have one of the highest tax burdens in 40 years, but I was heartened to see members of Patriotic Millionaires—they are all multi-millionaires—come out and say, “We recognise the impact that not having a wealth tax on us is having on the fabric of our society. We do not want our children growing up in a society where there is not the fairness that we grew up with in our country.” It has come up with the proposal of a wealth tax that would fund the essentials guarantee. For me, that group espouses what we as a nation can be.

In contrast—this takes me back to what other hon. Members have said—there has been a rather nasty element in the media. When we look at DWP spending, we must remember that half of it, rightly, goes on the state pension; that is the biggest slice of the spending. The next biggest is on housing benefit. We need to recognise that. Nobody would criticise DWP spending on our pensioners. I urge responsible journalists to recognise that we should not criticise social security spending on people who are disabled or not able to work because of illness. We must be better than that.

As I conclude, Madam Deputy Speaker, because I did promise that I would be very brief, I repeat that poverty—

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. For clarification, I am not putting the hon. Lady under any pressure. As far as I am concerned, she has all the time in the world.

[Debbie Abrahams]

Well, that is an offer that I definitely will refuse this time. As I said, poverty and inequality are not inevitable—they are political choices—and I believe that, like our NHS, our social security system should be there for all of us in our time of need.

[Madam Deputy Speaker]

I call the SNP spokesman.

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[David Linden]

I am proud that the Scottish Government invest in things such as the best start grant, the baby box and free school meals, to ensure that young people get the best possible start in life. My local authority in Glasgow is spending millions of pounds on holiday hunger programmes, to ensure that children who receive free school meals during school term time are still being fed. It is a damning indictment on the state that we have to spend money from local authority budgets feeding children because their parents do not have enough money. That is the situation we are in, in the fifth richest economy in the world.

Remarkably, as I am sure we will hear when the Minister responds to the debate, Ministers are still forcing more people into the sanctions regime, which further demonstrates the fundamental issue with the British Government’s attitude to those on low incomes: preventing vulnerable families from receiving the social security they are entitled to and, most importantly, when they need it the most.

Before I draw my remarks to a close, I want to turn to the local housing allowance. The freeze of LHA rates for three consecutive years is placing additional and needless pressure on tenants and housing associations, and is likely to increase poverty and inequality. That is why Ministers should protect household incomes and support renters by restoring LHA rates to the 30th percentile as a minimum. The SNP has long called for the British Government to fix those fundamental flaws in our social security system but, as is so often the case, it falls on deaf ears each and every time, to the extent that every time I take part in one of these debates, it feels like groundhog day.

The blunt truth is that the Scottish Government cannot change those policies while 85% of welfare expenditure and income replacement benefits remain reserved to this institution here in London. That includes universal credit. By all means, I am happy to take part in debates and make suggestions about how we repair the social security system, but it is difficult to conclude anything other than Westminster—whether the Tories or the pro-Brexit Labour party—has zero appetite to genuinely step in and sew up a system that is failing some of the most vulnerable people in society. For that reason, the only way genuinely to bring about that compassionate, fair and dignified social security system in Scotland is with the full powers of independence. Frankly, that cannot come soon enough.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the shadow Minister.

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[Guy Opperman]

Because the right hon. Gentleman and I have worked together for many years—and I emphasise “together”—he will know that I have been a humble junior functionary at the Department for Work and Pensions for a very long time, never to rise any higher. Let me also say to the hon. Member for North East Fife (Wendy Chamberlain) that I have had the privilege of serving under three female Secretaries of State before the present Secretary of State. I think I am now on my seventh Secretary of State.

These matters are monumentally above my pay grade, and, as I am sure the right hon. Gentleman knows, having done my job and many other jobs in the Government, they will be decided by the Chancellor and the Prime Minister at some stage over the course of the coming year. [Interruption.] I have much to be modest about, to be honest. As I have said, these matters are above my pay grade and beyond my knowledge, but they will be considered. There will be an autumn statement in November, which will be the obvious time for decisions to be telegraphed, if not made.

The right hon. Gentleman raised a number of points, and I will try to answer some of them in the time that I have. He mentioned prison leavers. The Department recognises the need for prisoners and carers to be able to make advance claims for universal credit, and there is a working process in place to support that. I have met the prisons Minister, my right hon. Friend the Member for East Hampshire (Damian Hinds), who will welcome any questions that will follow during the justice debate, and the social mobility Minister, my hon. Friend the Member for Mid Sussex (Mims Davies), who looks after most aspects of matters relating to prisoners, on several occasions to try to drive forward universal credit take-up. However, it requires the individual to desire to do that, and that is clearly complicated and not easy. It is a work in progress, but it is very much something that we are aware of.

I know that the social mobility Minister is giving evidence to the Select Committee tomorrow, so I will not address in too much detail the issues the right hon. Member for East Ham raised on the Health and Safety Executive, which is one of the few briefs I have not held in the last few years. He rightly raised the issue of transparency, and I would respectfully say that I agree with him. The present Secretary of State has transformed the position in that regard. The right hon. Gentleman knows my strong view that, save where we have to provide data on a monthly basis under labour market statistics, we should have six-monthly provision of the vast plethora of data, linked to the two fiscal events of the year, but that is a work in progress. The Department is definitely reviewing all aspects of those things.

The right hon. Gentleman raised the flexible support fund and particular issues about people taking buses to work. I want to take issue with that, because there is absolutely no doubt that a jobcentre can use the flexible support fund to support bus or other transport fares for agreed work-related activity. If it is for a work-related activity, that support can be provided as it is in other contexts—childcare being the one of which he will be particularly aware. I would certainly very much hope that the individual jobcentre that he referred to would be aware of that.

On fraud and error, the right hon. Gentleman will be aware that huge amounts of effort are being made by the Minister for Disabled People, Health and Work, who takes control of that particular part of the portfolio, and by the Secretary of State in a multitude of different ways. We have a large number of extra staff who have been brought in to address fraud and error. According to the latest national statistics, it has fallen to 3.6% from 4%, and overpayments from fraud are down to 2.7% compared with 3% in 2021-22. Universal credit losses have fallen by nearly 2% over a similar period. Bluntly, we are trying to crack down on those who are exploiting the benefit system, and we want to make it very clear that we are coming after those people. We want to ensure that the maximum amount of support goes to the people who need it.

The targeted support includes support for people on means-tested benefits such as universal credit, with up to three cost of living payments totalling up to £900. We have delivered the first £301 payment to 8.3 million households in support worth £2.5 billion. The two further payments of £300 and £299 will be made in the autumn and next spring. To help with additional costs, we have paid the disability cost of living payment to 6 million people as well as paying the winter fuel support payment. A huge amount is being done in jobcentres, whether that is through the in-work progression offer, the support of extra work coaches, the over-50s support, the administrative earnings threshold support or the 37 new district progression leads who are working with key partners, including local government, employers and skilled providers, to identify and develop local opportunities and to overcome barriers that limit progression.

The hon. Member for North East Fife raised a number of pension matters. Clearly, I continue to defend the actions of the Labour Government and the coalition Government on the rise in state pension age. She referred to both the LEAP exercise and what has happened at HMRC, and they are both works in progress. I do not believe there is any fundamental change to that of which she has been previously advised. On pension credit, she will be aware that there has been an increase in excess of, I think, 170% in applications. There is a slight backlog, but that is coming down dramatically. On the gender pensions gap, she will be aware of the changes to the new state pension, which are massively advantageous to women, and of the fact that successive Governments—starting with the Labour Government and the Turner commission, and then the coalition—have brought in automatic enrolment specifically to address that particular issue.

The hon. Lady raised a final point about those who change jobs in later life. I cannot overstate the importance of the project for which I have been pressing for only five and a half years now, which is the mid-life MOT. I am delighted to say it is now being rolled out across the country, whether that is online, in jobcentres up and down the country or, more particularly, in the three private sector bodies that are trialling particular processes. If she is not yet acquainted with that, I would strongly urge her to become so, particularly because in her area of Scotland in North East Fife there are, I know, providers that are offering that process. I can provide her with the details. Aviva and others are doing very good stuff there.

I am conscious that I have been speaking for some time, but the practical reality is that we believe we are removing the barriers that prevent people from working. We believe that we are reducing the number of people who are economically inactive, with a fifth consecutive month when inactivity has declined. I accept that there is more to do, and I am determined to leave no stone unturned in taking the decisive action needed across Government to see that downward trend continue.

In conclusion, I believe that we are tackling inflation to help manage the cost of living. We are providing extra support. The economic trends, as shown by the labour market statistics, are heading in the right direction and, with the Government’s ongoing significant package of cost of living support, that is worth over £94 billion in excess of the rises to state pension and benefits. We are protecting those most in need from the worst impact of rising prices by putting more pounds in people’s pockets, and I commend these estimates to the House.

[Madam Deputy Speaker (Dame Eleanor Laing)]

To conclude, I call Sir Stephen Timms.