Benefits: Reductions

Lord Young of Norwood Green Excerpts

Thursday 1st November 2018 Lords Chamber

[Lord Young of Norwood Green (Lab)]

My Lords, I too congratulate my noble friend Lord Bassam on introducing this debate, and I echo the tributes that have been paid to Lady Hollis.

I want to focus on a couple of aspects, and start by quoting from the Times on 15 October. Paul Johnson is director of the Institute for Fiscal Studies—not exactly a left-wing organisation, so a reputable source, I trust the Minister will agree. He focused on the allegation that universal credit is a poll tax moment. At the end of the article, he says:

“The same point pertains here as to the recent two-child limit in means-tested benefits. The idea is that nobody will lose in cash terms as they transition on to universal credit They will be protected. Again, only new claimants, or people who have a change in circumstances, will lose relative to the existing system.


Whatever one thinks of the long-term effects, that doesn’t look like it will create a poll tax moment What might create such a moment, though, is the third issue—the administration of the system. That is already creating some problems when new claimants move on to universal credit. There are all sorts of risks here, but perhaps the biggest are likely to arise as up to two million families presently receiving tax credits and benefits transfer across to the new system”.


I trust the Minister is listening. The article continues:

“Under current proposals, they will actively have to reapply. The transfer won’t happen automatically. If they don’t reapply, they will lose their benefits, including any transitional protection. The scope for large numbers of people to end up losing benefits in unintended ways is clearly huge. That is what should be keeping ministers awake at night.

It is hard to overstate just how big a change universal credit will be. It will create millions of winners and losers. Any poll tax moment, though, is most likely to occur for administrative reasons. The first priority for avoiding such a moment should be to ensure that existing claimants transfer as easily and seamlessly as possible”.


That is what I want to focus on, because it is fundamentally important. I am not one of those who is calling for the scrappage of universal credit; to be honest, that way lies madness. I do not believe that going back to the previous system would be feasible. I could not help reflecting that, if there was someone else who I would have liked to be in the Chamber, it would be the noble Lord, Lord Freud—who, after all, was one of the main architects. It would have been interesting to hear his reflections.

Like many people, I welcome the cash injections in the Budget: I have to say that they were necessary. Not only Members on this side of the House, but those on the other side, were saying how much they were needed and that the Osborne formula had gone too far. I would like confirmation from the Minister about the waiting time—it was once six weeks, was reduced to five weeks and now is going to be reduced to three weeks. I am sure I read about that somewhere, but could not find it.

Politics is about the language of priorities and choices. I cannot help reflecting on something in the Budget that is important. Raising the tax threshold is good; it is hard to argue against that. It was interesting to hear the analysis, which has been referred to by a number of noble Lords today—namely, that it benefits more people at the middle and top end, and those at the lowest end benefit the least. If the Government really want to help those people—and I think that they probably do; I am going to give them the benefit of the doubt, although I am probably out of keeping with many of my comrades here—then the best thing they could have done was to raise the national insurance threshold. That would have had a bigger impact.

I will turn briefly to the Library briefing—another superb document. Sometimes they are so weighty that they overwhelm you, but with this one they have obviously discovered that less is more, and it is really helpful. The briefing quotes from a report by the Resolution Foundation, which points out that once universal credit is in a,

“steady state we expect working families to be, on average, £625 a year worse off”.

The report continues that this means that, overall, universal credit is set to be,

“almost £3 billion a year less generous than the tax credit system it replaces”.

I am sure that the Resolution Foundation is not making that up, and it is a concern.

To return to the question of transition, the noble Baroness, Lady Jenkin, said at the beginning of the debate—and it was not a throwaway remark—that DWP staff need more training. They might do; I am sure that they would benefit, but that is not the problem and the challenge that they face. I happen to be in contact with somebody who actually works for the DWP, and I recommend that the Minister goes and talks to the staff—not the job coaches, but the staff who are dealing with claimants on a day-to-day basis. They are under enormous pressure. They want to do the best they can; they are dealing with complex cases, but often find that they have to give a small amount of time to those cases because they have to go on and deal with the others. It is a really serious problem: people sometimes literally break down in tears because of the pressures they face. I could not help smiling when I heard recently that a regional manager came round and thanked them. That was it. What the regional manager ought to have done was sit down with them for half an hour and ask them what challenges they were facing.

The most important thing that the Government need to do, if they do not want universal credit to be seen as universal discredit, is to ensure that that transition takes place in an orderly way, so that people feel confident about the change to universal credit. So much of the analysis by the noble Lord, Lord Shinkwin, who is not now in the Chamber, was ideological and unfair, in my view; but that is a debate for another time. He said that there was going to be some kind of a pause. There should be, because you need to give time to ensure that the DWP staff are ready to cope with that enormous workload. I would welcome the Minister’s response to that point.

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[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I join all other noble Lords in congratulating the noble Lord, Lord Bassam, on securing this debate. It gives me great pleasure to respond. Once again, I pay tribute to the life of Lady Hollis. I have already said once before that she and I were opponents back at the beginning of this century. That said, I will never forget the hug that she gave me when I was appointed to this position. The noble Lord suggested an annual debate in her honour. No doubt he will take that matter up with the usual channels.

This is a Government who support families. Our welfare system supports those who are vulnerable and helps people into work. Let me dispel the idea that we are not providing financial support for families: this country spends more than any other developed nation on family benefits. Through our employment success—with 1,000 more people in work on average each and every day since 2010—we are creating a great working nation. Let us not forget that, under the last Labour Government, the number of households in which no one had ever worked almost doubled. Every time Labour is in government, it leaves office with unemployment higher than when it entered office, so ripping the heart out of families across the country, denying people the dignity of work, and removing aspiration from a generation. This was a consequence of the Labour Party’s mismanagement of the economy and its perverse welfare system. It was a system that, through a complicated mix of benefits and tax credits, created effective tax rates of more than 90% for some and cliff edges at 16, 24 and 30 hours, thereby discouraging further work and punishing families for doing the right thing. This was a broken system that did not support families: rather it trapped people out of work.

As noble Lords will know, under the last Labour Government, 1.4 million people spent the best part of Labour’s last decade on unemployment benefits. This resulted in the benefits bill soaring by £84 billion in today’s prices, a rise of more than 60% in real terms. As my noble friend Lady Jenkin said, vast sums of money were being spent, while people were being locked into a life on welfare. This was why we had to introduce a benefits freeze. The system was simply not sustainable. We even had people claiming more than £100,000 a year in housing benefit. This meant that households were contributing £8,350 a year—up by nearly £3,000 from 1997-98—to fund the welfare system. How does that help families and how is it fair?

In stark contrast, this Government have helped more than 3.3 million more people into work since 2010. On average, that is 1,000 more jobs each and every day, and the vast majority of these are full-time, permanent roles. I want to stress that: they are not zero-hours contracts and they are not part-time. We have created more new jobs in the UK since 2010 than France, Spain, Ireland, Netherlands, Austria, and Norway combined. Youth unemployment has more than halved under this Government. There are now 964,000 fewer workless households in the UK since 2010, close to a record low. This means there are 637,000 fewer children growing up in workless households since 2010. This is the best support that we can provide for families, because—I say this to the noble Lord, Lord Bassam—work is the best route out of poverty, including getting people out of in-work poverty. Children in households where all adults are working are around five times less likely to be in poverty than those in workless households. Compared with 2010, there are now 1 million fewer people in absolute poverty, including 500,000 fewer working-age adults and 300,000 fewer children.

Work sets children up for the future. Children who grow up in workless families are more likely to be workless themselves as adults, compared to children with working parents. I say to the right reverend Prelate the Bishop of Portsmouth and the noble Baroness, Lady Lister of Burtersett, that it is a tough choice, but the same considerations and choices faced by people not in receipt of benefits should also be faced by those claiming benefits—those able to work.

We are not complacent and I do not accept any reference to us being a department in denial. I find that a shocking statement, referencing the 83,000 people who work tirelessly in the Department for Work and Pensions. I thank the noble Lord, Lord Young of Norwood Green, for his reference to those brilliant people. We do all we can to support them, and we must do more, because they do an amazing job throughout the United Kingdom. While there are almost a million fewer workless households than in 2010, there are still 3 million where no member of the household is in employment. We want to help those people.

The two-child policy has been referenced as a reason why many people are in poverty. That policy was brought in only in April 2017. It is important to stress that it is not retrospective and that we have child benefit, which continues for each and every child. While there are almost 1 million fewer workless households, the department has great ambitions to return many more people to work, such as our target to increase the number of disabled people in work by 1 million. It can be done. We currently have more than 800,000 job vacancies across the country. These great ambitions are the reason why we created universal credit, in recognition that the punitive legacy system took opportunities from families, creating—I repeat that extraordinary quote from my noble friend Lord Farmer’s brilliant speech—

“a shadowland of complete welfare dependency, with some saying, ‘I cannot afford to work’”.

Instead, we want to give people the dignity of work and we have changed the welfare system to give people a hand up rather than a handout.

As we have heard, universal credit is an up-to-date system that replaces six benefits with one monthly payment and ensures that work pays. The taper system means that people can take on more hours and part-time seasonal work, as the benefit adjusts to their earnings. There are no cliff edges. I am proud that work transforms lives, because it helps to improve the well-being of families—their health, and their children’s prospects and preparation for later life. Of course, it improves their chances of building a pension through, for example, automatic enrolment. We will help an extra 200,000 people in work and empower people to work an extra 113 million hours a week. Those in work under universal credit earn on average £600 extra a year. That is how we will deliver a sustainable welfare system.

Make no mistake, we are supporting families that need support. This country spends more than any other developed nation on family benefits. Through universal credit, around 1 million disabled households will receive an extra £110 on average per month through more generous support. Universal credit pays up to 85% of childcare costs, compared with 70% under legacy, regardless of the number of hours worked, unlike tax credits. This provides the extra cash boost to pay for childcare and allows people to work extra hours.

Working families in England can also claim up to 30 hours’ free childcare for three and four year-olds from support from other government departments. This has helped drive profound cultural change in this country, with 1.6 million more women in work since 2010. As a working mother, I know so well that most women really want to work and stay connected. I agree with my noble friend Lady Pidding that universal credit unlocks work opportunities for everyone, unlike the legacy system—and, yes, we will not stop the rollout of UC.

We know that work does not just pay financially—it does much more than that, it provides people with a sense of purpose, identity and personal achievement—all those things that we in your Lordships’ House experience and perhaps sometimes take for granted in our own lives. It also helps with physical and mental health as it tackles loneliness head-on. It allows people to develop their skills and transform their lives. That is what this Conservative Government are doing, and we are doing it through universal credit.

We will make a success of universal credit by being an open department that listens. In response to my noble friend Lord Sherbourne, who is so right, it is important that we listen. We are travelling the country to speak to experts, workers and those on UC to understand where the system can be improved. That is quite right. As the noble Lord, Lord Young, said, we need to keep listening and travelling the country. This year, my ministerial colleagues and I have met with over 500 colleagues, charities and stakeholders; visited over 50 jobcentres, service centres and pension centres; tabled 35 Written Ministerial Statements and appeared 15 times in front of Select Committees.

As a Government we have listened to concerns and responded. This week, the Chancellor announced significant changes in the Budget that will make a huge difference to working families and those moving to universal credit. For those in work, we have put an extra £1.7 billion a year into work allowances, increasing the amount that hard-working families can earn before universal credit is tapered away. This provides 2.4 million families with an extra £630 a year. This is a pay rise of 7% or more for these workers, showing that hard work pays off. This measure will increase the incentive to enter work and focuses support on some of the most vulnerable—parents, disabled people and carers, as referenced by the noble Baroness, Lady Pitkeathley—who may face greater barriers to entering employment.

We will also support those moving to universal credit, especially the vulnerable. My noble friend Lord Farmer asked about the £1 billion package announced by the Chancellor in his Budget. This will provide two additional weeks of legacy out-of-work benefits for people moving on to universal credit, providing claimants with extra money during the five-week period before receiving their universal credit payment. I think that is possibly where the noble Lord, Lord Young of Norwood Green, suggested three weeks. People will receive an extra two weeks of benefits to help them with a more seamless transition from legacy on to universal credit. This is extra money that does not have to be paid back. It will provide 1.1 million people with an average one-off additional payment of £200, on top of the two additional weeks of housing benefit announced in autumn 2017 and put into place this year.

We think that about 700,000 people have been missing out on their benefits under legacy. We have worked that out to be to the value of about £2.4 billion. There will be a significant change in how people find out about what they can receive, because they will have constant contact with, and will work together with, their work coach.

We have gone further in the Budget to support families. We will support those in debt by reducing the normal maximum deduction rates from 40% to 30% of a person’s standard allowance. This will have a huge impact, helping over 600,000 families at any one point when rollout is complete. It will provide them with on average £295 extra a year as their debts are repaid over a longer period.

With particular respect to the self-employed, I say to the noble Baroness, Lady Donaghy, that we will support new businesses by opening up a 12-month grace period before the minimum income floor comes into effect. In 2023-24, around 130,000 self-employed households will benefit from exemptions from the minimum income floor, giving them the opportunity to grow a successful business. This is alongside extending new enterprise allowance contracts, which provide support for those out of work to set up a business and become self-employed. This will add to the 45 new businesses a day that have been created since the introduction of the scheme in 2011. We have listened, we have acted and we continue to listen.

Next month, universal credit will be in place in every jobcentre in the country, and this autumn we will bring forward regulations to deliver the managed migration phase of universal credit, to move people without a change of circumstances. These are positive regulations which allow us to protect 500,000 people’s severe disability premium at the point of migration; and deliver transitional protection for those we move, to ensure that at the point of moving those who are manage-migrated do not lose a penny. We will take a measured approach to delivering managed migration. It will start later: this is not a pause but we will be taking longer to introduce the managed migration, because we need to do test and learn to make sure that we get the system right. The process will start later in 2019.

[Lord Young of Norwood Green]

The Minister says, “It is not a pause, we will take a little longer”. Will she just clarify that? What does she mean exactly?

[Baroness Buscombe]

Let me clarify: we are not stopping the rollout. The rollout for all people coming on to universal credit will be completed by the end of December 2018, and they will continue on universal credit. The system will carry on and all those new people will come on, but we are not going to start moving people from legacy benefit over to the universal credit system until July 2019. We want to spend the first six months of next year building a system that works, through a process of test and learn, to make sure we get it right for those people. I promise that we will work with all our stakeholders to make sure that people do not fall through the cracks. I think the noble Lord has a family interest in this, in terms of jobcentres. The reality is that everybody is working hard to make this enormous change we have undertaken work to the best of our ability. I hope that that explains it.

In response to my noble friend Lady Wyld, I say that our migration processes will be co-designed with stakeholders, as I just said, to ensure that we have listened and understood claimants’ experiences. That obviously relates very particularly to people with disabilities—we want a process that works well for everyone. We are focusing on building safeguards for vulnerable claimants and ensuring we have all the necessary information to ensure a smooth transition with uninterrupted support. We will target support to the most vulnerable, as referenced by my noble friend Lord Shinkwin, and will focus on working to support those with mental difficulties. To ensure that the most vulnerable claimants are supported, we have improved the learning journey for our work coaches, which includes training to work with people who suffer from mental health issues. We have also increased the number of disability employment advisers who can provide additional support.

It is important to add that we are working holistically across government, including the Department of Health, the Department for Education and the ministry of housing. It is very important that all our systems work together for the benefit of all, so no more than 10,000 people will be moved in the first six months of the preparation phase for the managed migration. Let me say that this side of the House will not play politics with these regulations, as I am sorry to say we all know the Labour Party did earlier this year when they voted against the £1.5 billion of support we announced at the 2017 Budget. I confirm for the noble Lord, Lord Kirkwood, that we will lay the managed migration regulations very shortly. Pausing or scrapping universal credit—whichever is the Labour Party’s policy; we are not quite sure at the moment—will not support the families that Labour purports to stand for.

I hear what the noble Lord, Lord Kirkwood, said about universal support. We are working hard on universal support—our new partnership arrangement with Citizens Advice is an example of that—and we continue to work with local authorities. In terms of affordable credit, we will work with stakeholders on a feasibility study on a no-interest loan scheme—something that was announced in the Budget.

I will try in the last moments to answer one or two more questions. Her Majesty’s Treasury published a cumulative distributional analysis alongside the Budget in October 2018, which shows that government policy continues to be highly redistributive. In 2019-20, the 10% of households with the lowest incomes will receive over four times as much support in public spending as they contribute in tax on average, while the 10% of households with the highest incomes contribute over five times as much in tax as they receive in public spending. I listened to the noble Lord, Lord Livermore, and the noble Baroness, Lady Drake, and their analysis was wrong. There has been no sudden increase in in-work poverty. The chances of a working family being in poverty are broadly the same as they were in 1997.

In terms of housing support, we are working hard. A number of noble Lords referenced housing. We are working closely with the department of housing to improve what we can do to support new builds, as well as supporting those in social housing.

We spend £50 billion on benefits to support disabled people and those with health conditions—a record high—and £9 billion in real terms since 2010, so I do not recognise all the references to cuts. We are doing an extraordinarily difficult job. My noble friend Lord Sherbourne referenced the word “hard”. It is very hard to get this right, because we are working with millions of people on a daily basis across the United Kingdom to support them.

We stand to provide opportunities for families across the country, through the opportunity to work, and through a sustainable, fair welfare system—fair to those claiming through it and those paying for it, fair because we support vulnerable families as compassionate Conservatives, and fair to those who can work by rewarding hard work.