Social Security (Up-rating of Benefits) Bill

Lord Freud Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Lord Freud (Con)]

My Lords, this Bill is designed to control pension spending and I am broadly in agreement with its direction. However, as the right reverend Prelate the Bishop of Durham has just pointed out, there is another pressing issue in social security: the removal of the £20 a week from universal credit at a time when pricing pressures on the poorest are intensifying.

There is a backstory here. Between 2010 and 2016, the Government were running two parallel welfare strategies. The first was from within DWP. The aim of the team was to transform the legacy systems that by then were falling apart, and the centrepiece of the reform was universal credit. The second policy emanated from the Chancellor, who was determined to cut the levels of benefit. With the Treasury acting as his enforcer, he aimed to take out £30 billion of welfare payments each year as part of an austerity strategy. That austerity was selectively targeted, with welfare recipients bearing a disproportionate burden. To summarise, our strategy in the DWP was to streamline and simplify while the Chancellor’s approach was to cut and complicate. So the £20-a-week uplift last year was not simply a response to Covid-19 but a way of dealing with the general erosion of the levels of benefit.

If we take away the Chancellor’s complexities, universal credit is one of the most important reforms, if not the most important, of the coalition Government. In its essence, it gets rid of all the separate benefits that had been trapping people in particular silos. It allows people the flexibility of life in the real world. Talk to any front-line DWP staff and they say the same thing: “At last, a system that works with the grain, not one that we have to struggle around.” That is why I think it is essential to keep it on a proper footing with an adequate basic payment; I say “adequate” because an additional £20 a week is hardly generous. In that regard, I have a single question to ask my noble friend the Minister: could she tell us the department’s central estimate, given the taper and the projections for employment, of how much the £20 uplift would cost to maintain in the next financial year?

I know this House believes in universal credit. It made herculean efforts during the passage of the original Bill and many of its best proposals were incorporated in the ensuing 2012 Act; I know that, because I made sure they were. However, speaking now to my colleagues on these Benches, I say this: universal credit is a major reform that is to the credit of the Conservative Party, and it is the height of foolishness to destroy that legacy in the name of a false austerity from a decade ago inherited by the current Chancellor. Many Conservative MPs feel exactly the same way, and, alongside my noble friend Lady Stroud, I will be endeavouring to ensure during the passage of this social security Bill that those MPs have a chance to vote their support for an adequate provision of universal credit.

Social Security (Up-rating of Benefits) Bill

Lord Freud Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

If this House stands for anything, it is to check and challenge the work of the Government. This amendment is in the public interest; we have the scope to admit it, and that is all I seek to do today. I beg to move.

[Lord Freud (Con)]

My Lords, it is with the greatest possible reluctance that I have felt compelled to join my noble friend and former colleague Lady Stroud in putting down this amendment, which is considered inadmissible by the clerks of the House.

My noble friend Lady Stroud has discussed the issue of scope. I will focus purely on why the level of universal credit payments is so important and has been such a long-running sore that it is essential that it go through some sort of democratic process. In a word, this issue is important enough that the House may wish, on this occasion, to overturn its convention of keeping within scope. This amendment simply seeks a vote in Parliament on whether the £20 a week uplift to the standard allowance of universal credit, which lapsed this month, should be reinstated.

My argument is a simple one. After a decade of cuts initiated by the Chancellor in 2010, the standard allowance of universal credit is now simply too low to expect people to live on it. According to a Commons Library briefing in April last year, the combination of 1% increases and freezes over many years has reduced the real level of allowances by 9%. That is before a plethora of other measures: cuts to housing support, benefit caps, waiting days—thankfully, later reversed—and the two-child limit. The Chancellor targeted no less than £30 billion of annual cuts from the working-age welfare budget. Within the department we fought those cuts, but we were powerless to stop them. That is the history, and it left the level of universal credit so low that it was patently inadequate for the millions of people who flowed on to it as the pandemic struck last year. In the words of the Chancellor, Rishi Sunak, we needed to “strengthen the safety net.”

The picture is worse than a simple look at the inflation-adjusted figures suggests. The standard allowance has slipped by significantly more relative to earnings over the last decade, and the relative earnings measure is a better reflection of how much the pressure on poverty has developed. We have been here before, when the Thatcher Government decided to uprate pensions by inflation rather than earnings—and look where that brought us.

What has changed that allows the strengthened safety net to be removed? Nothing has changed—in fact, the reverse. Inflation is taking off. It is already above 3%, with the Bank of England’s chief economist warning of 5% by early next year, and the goods on which the poorest people spend disproportionately—energy, food, transport—are in the firing line. My noble friend Lady Stroud has spelled out the impact on poverty of removing the £20 uplift, putting 840,000 people into poverty, and with inflation at these levels, the impact will undoubtedly be worse. This amendment is not about the removal of a temporary uplift. It is about putting universal credit on a realistic footing.

Restoring the £20 is not cheap. My noble friend the Minister told us at Second Reading that the department’s central estimate was that it would cost £6 billion per year. I do not believe that it would be so much, since 40% of the 5.9 million people receiving universal credit are working, and many of that 2.3 million will be moving further along the taper. Nevertheless, it is a substantial sum. If it is to be paid to the poorest there will have to be cuts elsewhere to afford it, which would bring with it some hard choices. However, I am not wedded to the blanket approach of the uplift, which was bizarrely targeted. It was worth 34% to singles under 25 and only 17% for couples over 25, for example. Adjusting various rates, and perhaps the taper itself, means that there is scope to maintain the benefits of the uplift for considerably less than £6 billion.

The point about universal credit is that it is seriously efficient at directing scarce funds to the poorest people—if applied by people who understand how it works. I felt genuinely sorry for my noble friend the Minister the other week when she had to defend the removal of the uplift by citing a wretched Treasury fig leaf of £500 million, to be distributed by local authorities. How are the councils meant to know who to give it to? That £500 million would be a good start to boost universal credit’s standard allowances. I read that a further £500 million is likely to be made available to support young families in tomorrow’s Budget; another bafflingly poorly targeted use of funds. I repeat that if the Chancellor wants to help the poorest, he will get the biggest bang for his buck by funnelling the funds through universal credit.

I spent 10 years of my life working to transform our welfare system. I am utterly convinced that if you want to make long-term sustainable savings, you must take a structural approach: get the taper to a level at which people are incentivised to work, for instance; help them to earn more by making skills training available; tie together the resources needed by those with multiple problems. You will not do it by making crude cuts, as George Osborne found. He cut the basic benefits and found that the levels of PIP soared. That was not a coincidence.

My concern is that this Government simply do not understand how universal credit works. If they did, they would nurture it, not trash it in the name of a past austerity inherited from a previous Chancellor; not take out £500 million and give it to local authorities to distribute; nor even provide the same crude cash boost of £20 both to couples and to singles in the pandemic. Through this amendment, we want to give MPs a chance to decide on the future of universal credit. It would give them the opportunity to show what is meant by “levelling up”. It is right that there should be a democratic process to decide something so momentous.

My noble friend Lady Stroud and I are not planning to push the amendment to a vote at this stage. We will wait to see whether the Chancellor has some measures up his sleeve tomorrow to protect universal credit recipients. If he has not, my noble friend and I will be returning to the issue on Report.

Social Security (Up-rating of Benefits) Bill

Lord Freud Excerpts

Report stage
Tuesday 2nd November 2021 Lords Chamber

I asked the Minister in Committee what has changed, other than that the Government’s record on poverty looks worse using the relative poverty measure. I would be grateful if she could answer today and undertake to look at why relative pensioner poverty is on the increase. As a first step, she could accept the modest amendment in the name of my noble friend as, like her, I found the Minister’s response in Committee unconvincing. The Minister rightly has a reputation for caring about those in vulnerable circumstances. Does she really not care about the impact of this Bill on pensioner poverty?

[Lord Freud (Con)]

I ask your Lordships’ indulgence to make a few observations following events last week, in the context of Amendment 5 on poverty, in the name of the noble Baroness, Lady Sherlock. My noble friend Lady Stroud and I are not pursuing our amendment on universal credit at this time.

I was delighted with the Chancellor's decision to improve work allowances and reduce the universal credit taper to 55%. According to my intelligence, this was very much a last-minute decision. I have always felt that there is a tipping point in terms of encouraging people to work more, and a taper of 55% is much more likely to be near that point than the 65% at which we were forced to start the new welfare system. However, I am much more concerned that the Chancellor did not feel able to improve the standard allowances, which have been eroded by 9% in real terms over the last decade, and which are now too low. There would be no point in an amendment which sought a vote on the standard allowance, since I believe that the Chancellor has done enough to eliminate any risk of rebellion among Conservative Back-Benchers on the issue. I am conscious, also, that Lady Stroud and I have tried the patience of the House by moving an amendment considered inadmissible by the Clerks.

Nevertheless, I sense that a sea change in public attitudes to welfare is now under way. In my account of the traumatic reform of the welfare system Clashing Agendas, I quote Rupert Harrison, the then-Chancellor’s chief of staff, on why the benefit cap was introduced. He told me:

“I know it didn’t make much in the way of savings but when we tested the policy it polled off the charts. We’ve never had such a popular policy.”

That was in 2010. This year, there have been a number of polls showing that most people in the country support extending the universal credit uplift. I do not believe that turn-round in attitudes has been purely because of the perceived meanness of the standard allowance. Universal credit is perceived as a fair and rationale safety net which eliminates the arbitrary nature of the legacy systems.

So, as the Chancellor contemplates the £25 billion of headroom that he is reported to have built into his Budget arithmetic, I urge him to use a small proportion of that figure to alleviate the real hardship being suffered by our very poorest citizens as soon as possible. My three-point recommendation to him is: first, restore the 9% erosion in standard allowances; secondly, tie the standard allowance to average earnings, something that we are debating in the context of pensions right now; and, thirdly, start getting rid of the excrescences such as the two-child policy and the benefit cap.

There is no need for late-night reactive decisions by a UK Chancellor on the shape of our welfare system. One of the clauses that I inserted into the Welfare Reform Act 2012 allows comprehensive trialling by the DWP of all the major elements within universal credit to discover the econometric impact of changes. For instance, the department can discover the exact optimal point of the taper, among many other aspects of the benefit. It may be that the point at which the Treasury makes the most tax and loses the least welfare revenue is a taper of 50%, for example, rather than 55%. The department can test and keep testing as society changes.

I thank my long-time colleague, my noble friend Lady Stroud, for her indefatigable efforts to find a way to help the most vulnerable in our society. Without all her energy and passion, I do not believe we would have achieved the progress that we have.

[Baroness Stroud (Con)]

My Lords, I shall speak to Amendment 5 in the name of the noble Baroness, Lady Sherlock. I thank and pay tribute to my noble friend Lord Freud, who I believe did a huge service in putting his weight behind the amendments last week.

This amendment speaks to the impact that changes to social security have on those who are in poverty, and it is that poverty impact which I want to focus on here. I want to put on record my thanks to the Minister for all that she did to work with the Chancellor to ensure that as we stand here today the universal credit taper rate is being lowered to 55% and the work allowance increased by £500. Those who are doing everything they can to ensure that they and their families work themselves out of poverty will benefit hugely from this budgetary intervention.

However, it goes without saying that, as my noble friend Lord Freud has just alluded to, there is a group who will not benefit from this change: those on the standard allowance, those who cannot work, those with sicknesses and disabilities. It is to that group that this House must now turn its attention. Testing this House with inadmissible amendments late at night is not the business for today, but we need to keep our focus on this issue.

The challenges that we and many across this House highlighted were the rising costs of inflation and rising fuel bills at the same time as the removal of the £20 uplift. The NICs increase will not impact on that group. A new Social Security (Uprating of Benefits) Bill is coming to the House shortly. It will cover universal credit and focus on the annual uprating of universal credit in line with inflation. We have an opportunity to argue that this should be in line with where inflation will be at the time when it is laid rather than where it was in September, in order to protect these households. There is also a fund of £500 million that has gone to local authorities to cover the colder months of the year. That should be ring-fenced and allocated to those who are on the standard allowance and unable to work or, better still, put through universal credit for that group.

Speaking specifically to the amendment, one of the reasons why the Government are struggling to deliver poverty impact assessments on pensioner poverty or working-age poverty is that they have yet to decide how they are going to define and measure poverty. This matters, and it is one of the key reasons why they have so frequently walked into trouble on issues of poverty. If only the Government realised that poverty measurement can be their friend and guide. It could have guided them through their decision-making during the pandemic and through the challenges of free school meals. I have heard it said that this cannot be done in real time, but with RTI we are so much closer to being able to measure real-time impacts and make informed choices to protect our most vulnerable people.

However, today is a day to say thank you to the Government for their investment in the lives of those who are in work and on low wages, but also to ask them to be watchful for the poverty impacts on those who cannot work—those with disabilities, children and pensioners—and to take action where vulnerability is visible.