Autumn Statement Distributional Analysis, Universal Credit and ESA

Iain Duncan Smith Excerpts

Wednesday 16th November 2016 Commons Chamber

[Mr David Burrowes (Enfield, Southgate) (Con)]

I very much welcome the Green Paper, which many of us have been looking forward to for some time. It sets the direction of travel, providing a much more joined-up approach for this group of very vulnerable people. On the notional cash loss for new WRAG claimants, could there be support from the financial support grant in the Green Paper—

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

The flexible support fund.

[Mr Burrowes]

Yes, the flexible support fund, which could provide some flexibility and relief for those particular needy groups.

--- Later in debate ---

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I shall be as brief as possible and certainly intend to be well under that limit. I shall not follow the hon. Member for Ross, Skye and Lochaber (Ian Blackford) down a memory-lane trip involving independence or leaving the single market. I will say, however, that I am a huge admirer of him. Many of my ancestors are buried in his constituency, so I like to claim a little bit of union with him, even though he would not want to admit it. I shall visit the area as often as possible to ensure that I give the hon. Gentleman the best support I can for him to stay up there as long as possible.

I rise for the first time in, I think, nearly seven years to speak from the Back Benches, and I do so to speak on an issue that is very close to my heart. I want to explain why that is the case to my colleagues. Let me start by welcoming both Ministers to their new roles on the Front Bench, and I congratulate them on continuing to commit to the changes and reforms necessary to improve the quality of life for so many people who would otherwise be left behind.

In passing, let me note one or two figures. The number of children in workless households has fallen to record levels—down to just under 11% from the 20% that we inherited. A child in a workless household is nearly three quarters more likely to be in poverty than a child in an in-work household. That is an important point, because that dynamic is critical—a point to which I shall return. The fall in income inequality has been mentioned, and it is falling because more people at the lower end are going back into work.

There is another important issue about disability. We have committed to, want to commit to and must stay with the position of wanting to see more people with disabilities in work. We want the gap to be at least halved, which I think is feasible. I shall explain in a few moments why I think that it is feasible.

[Stephen Timms]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

In a minute, but let me finish this point first.

A lot of the work of the Green Paper was done when I was in the Department. It was a White Paper at that stage, and I hope it gets speeded up and becomes a White Paper again fairly soon. After five reviews of the inherited employment and support allowance, I would be the first to acknowledge that although we have stabilised it and it is better than it was, it is a very difficult area, as we all know. If every Member was prepared to be reasonable, we would all recognise that these things need to change.

Let me clarify that the main single thing that I wanted to see change and I still want to see changed is this artificial idea that people are either too sick to work or unable to work. There should be a greater nuancing in people’s lives, and universal credit now opens the door to a much more flexible process that allows even those diagnosed and reasonably said to be “not capable of work” to be able to work—and if they wish to work, they should be allowed to do so as far as they possibly can, with the taper used to take benefit money away gradually. I think that might improve the quality of life for many people. I know that this is a submission in the Green Paper, and I hope the Minister will bear it in mind.

Let me return to the point that when universal credit was set up by my noble Friend Lord Freud, who worked very hard on it, and me, the idea was that it was not just about money, but about human interface. The people in jobcentres now stay with individuals as they go into work to help advise them and be with them. This will be a more human interface, so that people can be helped through to gain extra hours, which opens the door for people with limited capabilities to work to be helped in a way that would not have been possible if we had stayed with the original system. All this is very good and very positive.

There are two critical elements. First, when people step into work, the barrier must be reduced by improving the amount of money that can be held from benefit before it is tapered away. The second element is the taper itself, which is the simple process by which people have their income reduced. I say to the Minister that those two elements, notwithstanding all the other stuff such as improved childcare and everything else, are at the heart of what delivers.

The Institute for Fiscal Studies and others recently looked at what the dynamic effect of universal credit might be as it rolls out. The IFS was very clear: it said that the effect was a 13% improvement in all elements—going back to work, staying in work, taking more hours and earning more money. I know from my experience in the Department that every time one benefit has been substituted for another, it has almost always been worse on arrival than the previous benefit before people engage with it and improve it. This is the first time that a benefit being rolled out is a net improvement on a previous benefit.

I therefore make this recommendation. That figure of a 13% improvement was made on the basis of the original work allowances. In the spirit of general collective view and belief, I say that if we really want to see the right thing happen to people out there who try to get into work and stay in work, the allowances are critical. I recommend and hope that my colleagues in government will think very carefully again about the decision to reduce those allowances. I recognise the problem with the deficit, and we of course want to reduce it. I am not asking for more money; I am asking for wiser spending. I wonder whether we could revisit the idea of a tax threshold allowance and look to see whether getting the money to the lower five deciles would be better served by universal credit. Some 70% of those people will be on universal credit, whereas only 25p of a tax threshold allowance will actually go to the bottom five deciles.

I urge the Minister to speak to his right hon. Friends and say, “Look, we have a very good opportunity to do something that is really bold and right for those whose lives we really want to improve—those that the Prime Minister rightly said was her target group.” It is a very Conservative thing to do to help people who are doing the right thing to improve their lives. Even if the Government cannot do it all, they should look at two elements: lone parents and those with limited capability for work. This would answer the problems surrounding the WRAG, too. I urge Ministers to do just that. It is the right thing to do, and it will be the thing to do that changes lives and improves the quality of those lives.

--- Later in debate ---

[Mr David Burrowes (Enfield, Southgate) (Con)]

I am pleased to be able to take part in the debate. The shadow Chancellor talked about econometrics; I want, like the Prime Minister, to focus on human metrics. At the outset of her premiership, she rightly said that this would be a Government who wanted to

“stand up for the weak”

and reach out to the “just managing”.

Today’s debate, like the debate that we shall have tomorrow, is about seeking to fulfil those aims.

I intend to concentrate on cuts in the universal credit work allowance today and delay most of my comments about the ESA WRAG payments until tomorrow, although I will say now that I approve of the Green Paper’s direction of travel. Its vision of integrated and personalised employment and health support is overdue, but welcome. However, we need to look out for the disabled people—some 500,000, according to a House of Commons Library estimate—who worked in April as new WRAG claimants. They will still be affected. The flexible support fund—about which I look forward to hearing from my hon. Friend the Minister for Disabled People, Health and Work—is crucial. Along with other discretionary relief, it needs to meet the wider costs of job seeking for disabled people by April. We cannot deny that those wider costs exist, and we must ensure that we meet them. My support for the Government’s admirable reform agenda for disability depends on that.

Let me now say something about low-income families, who are the main subject of the debate and, in particular, about the first few lines of the Government amendment, which

“notes the role of universal credit in ensuring that work pays”.

That is what we want to happen. It is the very basis of our welfare reforms. We must commend the Government, and previous Governments, for the fact that some 764,000 children will not wake up in workless households today because of the opportunities for work that have been provided. That is extraordinarily important. Work is obviously a primary route out of poverty, and the income tax cuts, the national living wage and the 30 hours of free childcare are all extremely welcome.

What will drive all this through, however, is universal credit that does what it was designed to do, and makes work pay. In Enfield, which rolled the scheme out early, it has been a success. Work coaches have reached out to previously unreached individuals, helping them to find work. More people are working, obtaining work more quickly, staying in work longer, and earning more. The first nine months have been very successful. Universal credit claimants are now 13% more likely than jobseeker’s allowance claimants to be employed, work 12 days more, and are more than twice as likely to try to work for more hours.

That is all extremely welcome. However, there is a risk that the cuts in the universal credit work allowances will unpick the good work of the universal credit: the work coaches, the incentives, the living wage and the free childcare. It will be like a travellator in an airport. We want the travellator to help people—especially those on low incomes—to travel into work. It will now be switched in another direction; actually, it will be going in the opposite direction, which will mean that 2.7 million working families will on average be £1,500 worse off without the benefit of work allowances. It matters greatly to these families. It also does not make sense that these families who are claiming universal credit will be worse off than families protected under legacy tax credits payments living in the same town, the same neighbourhood or even the same street. That is not fair.

There is cross-party concern about this, and a shared concern among campaign groups, which are not always on the same wavelength. Gingerbread, focusing its concerns on single parents as well as couples with children, makes the point that working single parents in the poorest fifth of households are set to lose nearly 7% of their income. A home-owning single parent working full time will be over £3,000 a year worse off without the work allowances, and if a second earner enters work he or she will lose 65p in every pound earned. CARE also made this point in relation to recognising our support for marriage in the tax system, which it says could be undermined. In particular, single-earner married couples on median incomes with two children will lose significantly without the work allowances.

[Mr Duncan Smith]

My hon. Friend is rightly dealing with the levels and the amounts, but may I take him back to one point that came out of the dynamic study, which was that if we stayed with the purposes of the original universal credit with that allowance, it would amount to a minimum of an extra 300,000 people in work over and above existing forecasts? That is a positive reason for staying with those allowances.

[Mr Burrowes]

I agree, and it helps to revolutionise things for everyone—those on low incomes and those on median incomes. A one-earner married couple on a median income with two children—those with children are particularly impacted, given the costs—will lose some £2,211.04 per year without the allowances.

This Opposition debate is plainly timely as it comes ahead of the autumn statement. Before all the universal credit is rolled out and has its full impact, we want to make sure that that impact fulfils the first line of the amendment: to ensure that work pays. Welfare reform rises and falls on this basis, and that is why I commend my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) for all the work he has done. That is the basis of our welfare reform. We want this to rise to meet the aspirations of everyone who can work—families who have been put in poverty, and vulnerable disabled people who are the subject of this debate.

I urge Ministers to take back to the Chancellor the message coming from both sides of the House and from campaign groups, who are united in their concerns for these low-income families, and to ensure that universal credit, which is doing great work across our country, is given the boost it deserves and that work allowances are regenerating it to ensure that work pays.