Universal Credit (EAC Report)

Lord Shipley Excerpts

Wednesday 23rd March 2022 Grand Committee

[Lord Shipley (LD)]

My Lords, I am very grateful for the opportunity to discuss this report from the Economic Affairs Committee. The contributions we have heard from the former chair of the committee, the noble Lord, Lord Forsyth, and the noble Baroness, Lady Lister, have explained the detail of what has actually gone wrong with the universal credit system.

First, I am very concerned that the report was issued in July 2020 and that we are discussing it in this Chamber only in March 2022. Given that the Government’s formal response was sent 18 months ago, it is very hard to see what has held up such a debate—and, inevitably, some facts and figures have changed. When the Minister replies, perhaps she might just explain why we have had to wait this extraordinary length of time to have a debate on this absolutely vital matter for so many.

However, we should be very grateful to the noble Lord, Lord Forsyth, for enabling a Private Notice Question to be placed on the Order Paper of your Lordships’ House on the very day of the Spring Statement. Doing so has drawn out a number of facts. One is that, as I interpreted the Minister’s response in the Chamber a few minutes ago, the Government have done no affordability assessment, and nor has anything been done as an impact assessment more generally. That is very serious, as in most cases impact assessments are part and parcel of what the House of Lords is asked to consider.

Many responders to the committee’s inquiry said that universal credit was not necessarily broken. The noble Lord, Lord Forsyth—indeed, the report—says that it commands broad support in principle as a structure, but it does need reform. It is hardly surprising to me that some things went wrong, simply because it was such a major change to the benefits system. Inevitably, some things do not work as well as you want them to. However, as the noble Lord, Lord Forsyth, identified in his introduction, the rise in the use of food banks is a direct consequence of what has happened with universal credit. The noble Lord was absolutely right in his initial remarks to comment on why the Government said that they were surprised by the recommendations in the report—because so many of those recommendations are absolutely justifiable. So I will add my own surprise that the Government were surprised in their response to the committee’s recommendations.

As the committee said, universal credit should not undermine

“the security and wellbeing of the poorest in our society.”

I understand, as I guess we all do, that the report was issued at a very worrying time for a lot of people as the pandemic threatened their livelihoods. Like the noble Lord, Lord Forsyth, I recognise that the Government produced temporary and permanent welfare measures to the value of around £9 billion during the pandemic. In the Budget last October, low earners were able to keep 8p more for every £1 earned, and the work allowance increased by £500—and the pressure on the taper issue did have an impact.

The report congratulates DWP on its response to the pandemic and the huge increase in workload that the department had to manage, helped by digital working and automated processes. However, as the committee said, the underlying problems with universal credit remain. Some new claimants are not used to monthly pay. A fortnightly payment option would help them. The five-week wait for new claimants is too long and creates insecurity. The committee’s two-week grant recommendation seemed to me to be a very wise and helpful proposal, but the Government have turned it down. I still do not fully understand the audit reasons they have for so doing, because there are ways around that, which the committee proposed.

The Government say that an applicant may be able to get a universal credit advance if they are unable to manage during this five week-period. I hope that the Minister might be able to tell us in her reply what evidence from research undertaken by the DWP the Government have that that advance system is working fairly and reasonably for those who receive universal credit. As the committee rightly identified, the principle at stake is that the system should not cause shortfalls in income for individuals. As the noble Lord, Lord Forsyth, said, sanctions should be applied only as a last resort. The DWP should do affordability assessments before making deductions from awards. As a principle, someone’s income should never be lower than their essential needs.

We have heard about the cut of £20 per week; there has been a huge amount of debate around it. In my view, it was a gross error. I was hoping that something further might be done about it today, but I fear that that has not happened. More than 5 million low-income families lost just over £1,000 from their annual income, creating severe financial hardship for many people. What this revealed was that the real problem with universal credit is low incomes; that issue is fundamental to understanding the crisis around universal credit. With the current inflation rate heading towards 10%, an uplift under CPI of 3.1%—the Minister will recall our discussion of that uplift in Grand Committee a couple of weeks ago—simply will not do.

Crisis seems an appropriate word to use in this situation. Rent costs, housing costs, energy costs, food prices and transport costs are all rising. Food bank use has been rising and is clearly going to rise further and further. Household finances are much more difficult for the low paid because they have so little money. We need a real living wage, not the national living wage. The Government talk of the national living wage, but they have to talk about the need for a real living wage. It is true that many universal credit recipients are in work, but many people see adjustments being made to their hours of contract. It does not help when people get their hours cut, never mind a low hourly rate; in the end, this is about the income they receive.

I repeat that the five-week wait is the primary cause of insecurity in universal credit as it

“entrenches debt, increases … poverty and harms vulnerable groups disproportionately.”

Those were the words used by the committee, so there is an opportunity for the Government here. We will not get more than a few months into 2022 without needing to do something further.

In that respect, I ask the Minister about the proposal to close so many DWP offices. I seek an assurance from her that this will not in any way impact the support of clients who need help. A few days ago, there was an announcement that 42 DWP offices were to be closed across the UK. Apparently, 13 will be full closures while 29 are to be closed and relocated. There are offices being closed in Stoke, Southend, Peterborough, Chesterfield, Aberdeen, Kirkcaldy, Barrow, Bishop Auckland, Doncaster and Burnley—taking jobs out of these communities.

The Minister, David Rutley, said that the closures

“will not impact on jobcentres and the customer-facing interactions”.—[Official Report, Commons, 17/3/22; col. 1032.]

Can the Minister explain exactly what a customer-facing interaction is? What are the implications for the agreement and contract that the Government have with Citizens Advice, which comes to an end a year from now, in March 2023? Under the help to claim system that has been running since 2019, Citizens Advice in partnership with Citizens Advice Scotland has given people independent advice. I understand there has been an investment in that of £21.3 million. If it would be helpful for the Minister to write later, rather than respond in detail now, I want to be reassured about the impact on people for whom digital or telephone contact may be very difficult. If they were able to go to a local office, will they be able to continue to go to that office to secure help?

That is all I want to say at this stage, but I think we will come back to this matter several times this year. I hope the Government and the Chancellor understand that this issue is profoundly serious. I said that two weeks ago, when we talked about the use of CPI at 3.1% for the benefit uplift, when inflation is heading towards 10% this year. For those on low incomes, that position is simply unsustainable.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

I will cover that in winding up; I am conscious of the time.

The noble Lord, Lord Shipley, raised food banks. Food banks are independent charitable organisations and the DWP does not have any role in their operation. There is no consistent and accurate measure of food bank usage at constituency or national level.

On third-party deductions, benefit debts and social fund loans can see deductions reduced or deferred as the creditor, DWP, will always try to ensure that government debt is recovered effectively without causing undue hardship.

The noble Lord, Lord Shipley, talked about an impact assessment. The Government recognise that the public sector equality duty set out in Section 149 of the Equality Act 2010 is ongoing. As such, a full equality impact assessment was completed prior to the introduction of the uplift to UC, and it was reviewed and updated prior to the implementation of the temporary six-month extension announced by the Chancellor at the Budget on 3 March 2021.

I have already covered cost of living issues, fully cognisant of the difficulties that people are facing. I have heaps of information here. I try to answer all your Lordships’ questions and to treat the Grand Committee with respect. I do not want anyone to think that I am not prepared to answer questions; I will go through Hansard and through all these questions. I will write, and all noble Lords will get a copy of that. I thank your Lordships for the time you have spent listening to me.

[Lord Shipley (LD)]

Before the Minister sits down, I would be happy if she would write very specifically on the closure of DWP offices, some of which are clearly closing and not being replaced by alternatives.