Universal Credit (Wales)

Debate between Hywel Williams and Mark Hoban

Tuesday 5th February 2013 Westminster Hall

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on securing the debate. He raised some important issues, but I counsel some caution. It is easy to create uncertainty among constituents by mentioning such stories in a way that is not balanced and does not reflect the support that will be in place. He actually identified the answer to his problems in one of the quotes he gave from a housing association about the additional work that it will do to help to support its tenants, such as jam jar bank accounts and additional support for budgeting, both of which we intend to deliver. The support around the introduction of universal credit will not only make the transition easier but improve families’ quality of life and financial stability. He should not overlook the beneficial impact that the proposal will have in improving financial capability.

[Hywel Williams]

Will the Minister give way?

[Mr Hoban]

I have 12 minutes and many questions to answer in that time, and I want to correct some of the misapprehensions and misunderstandings that have been raised in the debate.

Universal credit is a cornerstone of the Government’s welfare reform programme, and it will simplify the benefit system and tackle welfare dependency by making work pay. Our aim is to offer seamless support for people making the transition into work. No longer will people find themselves in the absurd position where their benefit is disrupted the moment that they start work. Our reforms will ensure that people are better off in work than they are on benefits.

In Wales, we estimate that once universal credit is fully up and running some 200,000 households will be eligible for higher payments under it, typically seeing an increase of almost £160 per month, and we also estimate that the proportion of people in Wales who would stand to lose more than 70% of their increased earnings by moving into work for 10 hours a week will reduce under universal credit from 32%—as it is under the system we have inherited from the previous Government —to 3%. That is why delivering this reform is important for the people of Wales. It will make people better off in work, it will make work pay and it will reduce the risks involved in taking up work or doing more work.

Let me deal with some of the specific concerns that have been expressed. The hon. Member for Cardiff South and Penarth raised the issue about benefits being paid in arrears on a monthly basis. It is important that the new system is designed around the patterns of modern working life. Given that three quarters of the employed population are already paid on a monthly basis, receiving payments monthly will be something that people are familiar with when we move to universal credit.

Of course we recognise that some people may struggle to budget, and we are making provision to ensure that they do not fall through the cracks. We are working with banks and credit unions, such as the ones the hon. Gentleman quoted, to explore suitable financial products that may help people to budget and to put money by each month to fulfil their responsibilities to pay their rent and other household bills. Around 4.2 million Department for Work and Pensions claimants already have a bank account. We know that historically some people on a low income have experienced difficulties in accessing and using banking products. We want to ensure that claimants have access to a basic bank account with safe and secure standing order and direct debit facilities.

Let me move on to the point that was made about online services. As the hon. Gentleman indicated, the service will be online. We want people to be able to make a claim and to report changes, as they would with online banking. If people are going to participate effectively in today’s modern labour market, they will have to be conversant with digital tools. In the words of Lord Freud, digitisation is a “social imperative”. Of course we can and must do more to ensure that people can access services online. We do not want the digital divide in his constituency and others to persist. We must tackle it and this process is a very good way of tackling it. I am surprised that Opposition Members are so resistant to the actions that we can take to help tackle that digital divide and improve social inclusion.

We are already looking at some of the local authority pilots that have been carried out. Two of them are in Wales, with one in Caerphilly and one in Newport. The pilots are helping us to understand what support we need to give to help people to move into universal credit. We will use the pilots to learn the lessons, and we will apply them as we develop future stages of delivering universal credit, because we have ambitious targets for digital take-up of our services.