Universal Credit

Lord McKenzie of Luton Excerpts

Wednesday 21st December 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I start by saying that we too look forward to the maiden speech of the noble Lord, Lord Macpherson of Earl’s Court.

This debate is both our farewell to the noble Lord, Lord Freud, as well as an update on universal credit. Its dual purpose is fitting because there can be few other examples in recent times of the engagement of a Minister being so inextricably and consistently linked to a single piece of social policy, and one where the operation and policy development has been driven by that Minister—and a Minister who stuck with it while others around him have abandoned ship.

Universal credit, as we have heard, started life with a great deal of support—certainly ours—as being a single income replacement benefit for working-age families that would simplify the system, incentivise work and progression in work. The original plan was for claims to legacy benefits and tax credits to cease by April 2014 and for all existing benefit and tax credits to be transferred to universal credit by October 2017. That is now to be 2021. It interests me because, on inquiry over the months, it was always seemingly on time and on budget. It expected to lift 350,000 children and 600,000 adults out of poverty.

At Second Reading of the 2012 Bill on welfare reform, the noble Lord, Lord Freud, was dubbed Che Guevara for his revolutionary zeal, although we prefer to see him as Captain Kirk of the “Starship Enterprise” boldly going where no man had gone before, notwith-standing a few black holes and some warp factors.

A reference to warp factors brings us to the Treasury, whose malign influence has significantly changed the design of universal credit. A range of cuts has been imposed on the project since first proposed and changes to the work allowances in particular, according to the IFS, which has shaved—an interesting figure—£5 billion per year off its long-term cost. Overall, universal credit will cut benefit expenditure by £2.7 billion a year in the long run with 3.2 million households seeing a reduction in their means-tested benefits, and 2.2 million an increase. Incentives to work have been substantially watered down. The IFS projects that there will be 1.3 million more children in relative poverty in 2020-21 than in 2014-15. We have not yet had the Government’s assessment over that period.

As CPAG points out, there is continuing pain still to be inflicted by the two-child limit, removal of the first child premium, the continuing freeze on most elements of the benefit and the continuing twist of poverty being inflicted by monthly payments and waiting days—part of the original design, of course—not to mention sanctions.

However, the hope is that in the future, with a different Government, the original intent of universal credit might be restored, and for creating and embedding an architecture which would allow this, the noble Lord, Lord Freud, deserves full recognition. We wish him well earned rest.