Universal Credit (Children)

Karen Buck Excerpts

Tuesday 10th May 2016 Commons Chamber

[Kate Osamor (Edmonton) (Lab/Co-op)]

I thank my right hon. Friend the Member for East Ham (Stephen Timms) for his eloquent introduction to the debate and the Backbench Business Committee for bringing it to the main Chamber.

This debate is of particular concern in my constituency, where there is a high proportion of people claiming welfare benefits. As of April 2015, there were 14,500 people on tax credits, and it is estimated that, by 2020-21, 19,000 people will be on universal credit. According to figures from Child Poverty Action Group, reductions in work allowance under universal credit, introduced in April 2016, will result in a working single parent in rental accommodation losing up to £554 per year and in a working single parent who owns their home losing up to £2,000 per year. In both cases, this is more than double the loss suffered by working couples. The majority of these single parents are women. Once again, this is a cut that comes at the expense of women, who account for 86% of cuts to benefits and tax savings. This figure has increased, not decreased, as a result of the Chancellor’s latest Budget.

A single parent already working full time on the national living wage will have to work an extra 46 days each year—more than two additional working months—to make up what they have lost. While the Government may paint these reductions in income as an incentive to work, for single parents already in full-time work, extra hours are not realistic. Support for childcare might have increased from 70% to 85%, but this will not compensate families for the losses they will suffer as a result of the changes in universal credit. End Child Poverty estimates that 42% of children in my constituency live in relative poverty, which makes it the constituency with the sixth-highest level of child poverty. The four-year freeze on support for children under universal credit is expected to reduce the value of key children’s benefits by 12% by the end of the decade, when creeping inflation will also have added to the cost of living.

In 2011, the Government forecast that universal credit would lift up to 350,000 children out of poverty. In 2013, this figure was amended to 150,000 and the Government today refuse to give a figure. There remain significant gaps between the Government’s aim of making work pay through the new universal credit regime and the reality of families facing huge cuts to their income. I would like to ask the Minister two questions. First, will the Government review the impact of work allowance reductions on working families, particularly working single families? Secondly, will they agree to review annually the decision to freeze most key children’s benefits for four years?

As I have stated, the impact of changing tax credits to universal credits will affect families in my constituency. I am here representing them and trying to get their voices heard in the Chamber, so I ask that the Government take very seriously the effect the changes will have on families and women.

[Ms Karen Buck (Westminster North) (Lab)]

My hon. Friend is making a powerful case. Does she agree that we should be particularly concerned about the plight of the self-employed—an increasingly large group of income-insecure people? Does she share my concern that about 800,000 self-employed people are likely to lose £1,000 a year as a result of the cuts to universal credit?

[Kate Osamor]

I totally agree with my hon. Friend. There are many lone workers and people who have their own businesses in my constituency, and they have come to see me in my office to say that they are very concerned because they need to use benefits to top up their salaries. This is an issue that I hope the Government will take into account.

I conclude by asking the Minister to review the impact that work allowance reductions are having on working families, particularly single families. Secondly, will the Government agree to review annually the decision to freeze most key children’s benefits for four years?

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

I am very grateful to you, Madam Deputy Speaker.

Today’s debate comes at an interesting time. The right hon. Member for East Ham (Stephen Timms) introduced it with his usual reasonableness on an issue of concern to everybody here. There are two or three points that I would like to highlight in a brief contribution. The first is the biggest strategic challenge for the right hon. Gentleman and his colleagues, which is where the balance of the strategy that Labour Members are trying to pursue will lead the country. I offer two thoughts. The first is that Labour Members have still not told us what reforms to welfare benefits they would make to reduce the budget deficit that we and all our constituents still face. At a time when the country is spending more on the interest of our debt than on the education of our children, it has to be wrong to ignore this part of the equation.

I think I am right in saying that Labour opposed every one of the welfare reforms pushed through by the coalition Government in the last Parliament, which amounted to some £20 billion of reductions in expenditure, and indeed have opposed everything in this Parliament as well. This comes at the same time as consistently opposing in this Parliament measures that the Government have taken to improve conditions for businesses that generate, directly and indirectly, 75% of all the tax that pays for the services, the welfare and the pensions that we all know are so important to our constituents.

[Ms Buck]

rose—

[Richard Graham]

I give way to my colleague on the Select Committee.

[Ms Buck]

Does the hon. Gentleman believe that giving a tax cut to the richest people in society and introducing the married person’s tax allowance are a better use of public money than investment in universal credit?

[Richard Graham]

I have two points in response to that. First, when it comes to generating more tax, I subscribe to the philosophy of the former Chinese leader, Deng Xiaoping, who said:

“It matters not whether the cat is white or black so long as it catches mice.”

On this occasion, when we lowered the top tax rate from 50% to 45%, the additional tax revenue was £8 billion. My question to the hon. Lady and her colleagues is this, “Would you rather have an extra £8 billion of tax revenue to spend on our vital services, or enjoy the ideological thrill of raising the top tax rate and collecting less tax revenue with less to spend on services?” I know what I would go for; I am not sure about her.

[Ms Buck]

indicated dissent.

[Richard Graham]

The hon. Lady is shaking her head, which suggests to me that my colleague on the Select Committee on Work and Pensions is still from the school of thought that prefers to raise taxes and get less tax revenue. I would have thought that the period of Reaganomics and Thatcheromics had made it very clear that we incentivise businesses to grow, to generate more revenue and to employ more people by creating a business-friendly environment rather than the opposite. It is something that the hon. Lady and her party will have to work out.

The hon. Lady’s second question was on the married person’s tax allowance. All the evidence from research done over a period of years shows that we have happier families and less dysfunctional behaviour when we have closer families, and marriage plays a key part in that. I recognise that not all Members subscribe to the importance of marriage as a contributing factor to a happy society, but we should probably leave that debate for another day.

My second main point relates to what the right hon. Member for East Ham said about universal credit, in particular the part of the motion that states that

“many may struggle with elements of the new approaches to payment and administration”.

There is a philosophical issue here, too. Originally, the current Minister for Welfare Reform, Lord Freud, acted as an adviser to the last Labour Government, and he recommended many solutions to the problem of tax credits, which he has now implemented in government with our party. I once asked him what the difference was between the work he had done for the previous Labour Government and our own Government. He said that the difference was simply that we would implement it.

The former Labour Chancellor of the Exchequer and Member for Edinburgh South West, now Lord Darling, said in this House that Labour had not implemented universal credit simply because it was “too difficult”. His party has always struggled with the fact that we are implementing something that it had decided was too difficult. Labour Members have not been able to work out whether to oppose it all in principle, which would be odd, given that they had looked at it, or whether to attack it in detail on the basis that it is too complicated to do. As universal credit continues to move forward on its journey across the country, affecting a growing number of people, I suspect that that challenge is going to be more and more difficult, and those on the Labour Front Bench are going to have to reconcile these problems.

The assumption behind what the right hon. Member for East Ham said today is that universal credit is basically all too complicated, with the twist that it now cannot be understood by those who are going on to it. I do not know how many Members have actually been to their Jobcentre Plus and spoken to people working there about the implementation of universal credit, as well as to their customers, namely our constituents who are receiving it. I suspect that those who have done so, as I have, will find that people working in Jobcentre Plus find universal credit to be a huge step forward. More than one officer working there described it to me as a quiet revolution, while those receiving it find it much easier to understand than the plethora of often contradictory benefit systems that our country built up over a long period of time.

I fundamentally disagree with the right hon. Member for East Ham—reluctantly, because I agree with him on several things—on the notion that universal credit cannot be understood by those either receiving it or responsible for administering it. He claimed that there were “long delays” to universal credit claims, and that the Trussell Trust had said once again, having said it several times before, that the increase in demand for food banks was largely down to the delays in benefits. Because I had heard that argument for quite a long time, last year I set up with my local citizens advice bureau a service agreement that obliged it to refer to me any instance of any of my constituents who are waiting longer to receive benefits due to them than the accepted norm set by the DWP. That covered any situation. In the last six months, how many people had been referred to my office for unnecessary delays to their benefits? One—one single constituent. It could be argued that there is not a complete correlation between people referred to the food bank by the CAB and those who go to the food bank. That could be true. A number of organisations in the city of Gloucester, including my own office, refer people to our food bank. None the less, the CAB is probably—I do not have the precise statistics—the biggest single organisation handling the welfare difficulties of my constituents. It is, I think, telling that over the last six months there has been only one case of unnecessary delays in the receipt of benefits.