Universal Credit

Lord Bishop of Chester Excerpts

Tuesday 7th July 2015 Lords Chamber

[Lord Freud]

One of my purposes today is to find a forum where I can update noble Lords in this Chamber about what is happening in a somewhat more sensible atmosphere than is perhaps seen elsewhere in the Palace of Westminster. On the point about timing we have reset this programme, as I am sure all noble Lords here well remember, and will not be going on to the rather sharp upgrades in the volumes that we were initially looking at. We are now designing it in such a way that we will test different groups and make sure that we roll it out sensibly. That was what the reset was about and, interestingly, it is exactly what the NAO and MPA are saying is the way to roll out big programmes.

[The Lord Bishop of Chester]

My Lords, in his Answer the Minister referred to universal credit as incentivising people to work. Can he give a bit more detail on just what that incentivisation involves? What is the typical marginal effective tax rate for someone who is on universal credit, given that I read recently that it can be more than 70%?

[Lord Freud]

The marginal rate—the rate at which one withdraws benefit—is 65%. In practice, among the incentive effects are that all the constraints about taking temporary jobs or trying part-time jobs have disappeared, as have some of the constraints against people who may be disabled with fluctuating conditions. They would not normally dare take on a job because if their condition came back, they would have to restart the process of getting on benefits. Because universal credit is both an out-of-work and in-work benefit, it means that there is no risk element to being in work.