Universal Credit (EAC Report)

Lord Desai Excerpts

Wednesday 23rd March 2022 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, one of the great advantages of being a non-affiliated Peer is that I am always placed last on the list. I want to take a different stance from that taken by most noble Lords. I agree with all noble Lords that this is an excellent report and I have learned a lot from reading it. I have studied poverty in various ways in the UK, India and other places for much of my career in economics. There is one unfailing thing that one can say about these things: to those who have, more shall be given, and from those who do not have, what little they have shall be taken away.

Debt recovery procedures are much tougher on the poor than they are on the rich. In 2008, when the stock market collapsed, all previous discipline of balanced budgets was abandoned and money was printed like there was no tomorrow to give the banks, which had lost money, and everybody else lots of money so that they could re-establish the value of their property. The consequence was that, when universal credit had to be implemented, there was no money, surprisingly. It was therefore created in an atmosphere where it was said, “We don’t have any more money for all this”. So the poor, as always, were the last in the queue.

I want to take a slightly different stance from that taken by most speakers. Why is the political economy of welfare, if I may so call it, so mean to the poor? This is not just about universal credit, although I would say that it is especially horrible to the poor. For a long time, we have had a tradition that the poor should be treated with suspicion. The poor will be suspected of being lazy and shiftless and if they are ever unable to prove that they are seeking work, that will immediately lead to some kind of punishment by taking their benefit away.

It is interesting that the noble Lord, Lord Forsyth, who has shared with us his committee’s great report, quoted the Theory of Moral Sentiments and cited the Chancellor. During the pandemic, I have written a book about why political economy is so misanthropic. Adam Smith was all right; he was generous in his attitude towards the poor and how the whole purpose of an economy was to create wealth not only for the few but for the many, if I may coin a phrase. It was with the Reverend Malthus and Ricardo that economics became very mean. When Malthus invented his completely fake theory of population growth, it was to make sure that the poor were not given more money because, if they were given it, they would breed more people and therefore it is useless to give people more money. David Ricardo put that in his theory of how there should be an iron law of wages. We then had the poor law reform in the 1830s and so it continued.

The logic was simple. There are so-called paupers who cannot work due to physical reasons, but they are all right. Then there are the poor, who are to be suspected because they are capable of working but likely to be lazy and shiftless, so the maximum meanness ought to be exercised in compensating the poor—you have to make them work. Finally, under the great and rational Benthamite rule, workhouses were created so that the unemployed would be in those, and nowhere else, to be strictly supervised by the poor law commissioners. Bentham wanted the children of the poor to be employed from the age of four as apprentices, so that they would learn that work was their fortune.

We have continued like this. I remember when we had the idea, before universal credit came, that if a single person was poor they would get so much but if it was a couple, they would not get twice that: they get less than twice because somehow the poor do not need as much money as the rich. That of course led to people living apart. Then people had to spied on by their local council in case they were cohabiting, which was not so much a sin as an economic crime, and so on.

We have this attitude, and it has not gone away. During the 2010 to 2015 Government, corporation tax was cut because cutting corporation tax or income tax is always good and beneficial to society. However, as far as the poor are concerned, cutting it is good for society because that is where we have to save money. This sort of logic has continued. I do not know how one can move the political and economic system from appreciating that announcing a 1p cut in tax in 2024 will get you applauded in Parliament. However, had he said that he would restore the £20 cut in universal credit, he would have done much more than was expected of him.

Anyway, I want not so much to ask questions but to make a couple of points. How does whatever minimum entitlement we have decreed for universal credit compare with the poverty levels that the European Union has laid down? The World Bank has a measurement of poverty for the third world; it is around $3.50 per day per person. The EU standard is 60% of median income; I may be wrong by a few percentage points but 60% of median income is the EU poverty level. Is the universal credit entitlement below or above the poverty line?

I should also say that, as soon as I started studying these things, I found these arrangements so complex that you need a PhD to know what is going on. I remember that there used to be a very fat book published by the Child Poverty Action Group in the 1960s to help people make their way through the variety of benefits and things, with all the conditions and exceptions and this and that. Why do we make the poor work so hard for the pittance we give them? Why can we not simplify the matter so that people get their money in a certain, predictable way? After all, as someone else said, we are not giving them much money compared with how much we have lost in fraud. It is nothing; it is a pittance. Although we were right to give money for furlough, we did not give a similar amount of money to the poor.

So we need a political rethink of why we do what we do. Why is the logic always misanthropic in our political economy, or whatever you want to call it? I hope that reports like this one will make us think that we have to change our attitude completely and not expect the poor to be more patient, more frugal and more rule-obeying. The fault, dear Brutus, is in ourselves and not in the poor.