Universal Credit and Welfare Reform

Debate between Nia Griffith and Stephen Timms

Tuesday 11th September 2012 Commons Chamber

[Stephen Timms]

My right hon. Friend is absolutely right. The money is being cut by 10%, so councils must somehow come up with a scheme that will save 10% and will be introduced on a local basis. It will be chaotic. Many councils are saying that they will not be able to do it in time, and it will certainly mean that there will be no national taper that everyone can understand.

However, that is just the start of the problems. The project is not on schedule, despite what the Secretary of State said earlier. According to paragraph 21 on page 37 of his White Paper of November 2010, between October 2013 and April 2014

“All new claims for out-of-work support are treated as claims to Universal Credit. No new Jobseeker’s Allowance, Employment and Support Allowance, Income Support and Housing Benefit claims will be accepted.”

I believe that that is what my right hon. Friend the Member for Wentworth and Dearne (John Healey) was told. It is absolutely clear, but it is no longer true. A newsletter appeared on the Department for Work and Pensions website over the summer announcing that, in fact, that timetable will apply in only one Jobcentre Plus district per region. In all the other districts, the change will take place some time after October 2013 and by summer 2014. The timetable has slipped; it has been delayed from what was stated in the White Paper—I am delighted that the Secretary of State is back in his place. On the budget, to the end of the last financial year the project was due to spend £400 million. In fact, it spent £500 million. So it is already over budget, too.

I welcome what the Secretary of State said about online claims: he told us that the Department expects that at the beginning only about half of claims will be submitted online. That is a very significant change from what has been said until now in respect of the digital-by-default proposal. It would be helpful to know what will happen to the 50% who do not apply online. How will things work for them? When people have problems, who is going to help them? As my hon. Friends the Members for Denton and Reddish (Andrew Gwynne) and for Makerfield (Yvonne Fovargue) rightly pointed out, the introduction of universal credit will coincide with a drastic reduction in the availability of advice, just when people are supposed to be grappling with these new processes.

What about people’s documents? At the moment, people applying for housing benefit present their documents to the local authority. Where will they present them in future? Will people start turning up at jobcentres with their documents or will they be expected to post them somewhere—or will we no longer have the fraud checks that are currently built into the system?

This is supposed to be all about work incentives, but large numbers of people will find that their work incentives are worse. The Government apparently plan a simple income cut-off for free school meals. If people earn less than X, their children will be entitled to free school meals, but if they earn more than X, they will not. That is a disastrous new cliff edge—far worse than anything in the current system. It means that someone with three children who earns less than X will suddenly have to start paying out over £3,000 in school meal charges per year if their income increases above X by just a pound or two. That is a massive disincentive to people to increase their income.

We have been asking how Ministers are going to tackle this issue since March last year. We asked the Secretary of State when he would make up his mind when he gave evidence to the Welfare Reform Bill Committee. He said that

“during the Committee stage we should be in a much stronger position to make it much clearer how we will do that.”––[Official Report, Welfare Reform Public Bill Committee, 24 March 2011; c. 155, Q299.]

Some 18 months have now passed, and today the Secretary of State told us he is talking to various people about it. All this is supposed to be in place within 12 months from now and Ministers still cannot tell us what they will do, but it does appear that that very damaging feature will be part of the system.

I have asked about the publication of the business case. I believe that Ministers will not publish it because it projects that there will be no increase at all in the total number of hours worked as a result of the introduction of universal credit. In other words, the whole basis on which this project is being taken forward is flawed. That is partly because of the situation for second earners, which has been mentioned. My right hon. Friend the Member for Lewisham, Deptford (Dame Joan Ruddock) asked the Secretary of State what would happen to hours worked. He did not answer, and I think I have just explained the reason why. As my hon. Friend the Member for Stretford and Urmston (Kate Green) pointed out, second earners in a couple face sharply worse work incentives than in the current system. We are going back to an outdated male breadwinner model, where the second person in the couple is not expected to work.

As my hon. Friend the Member for Glasgow North East (Mr Bain) pointed out, incentives for self-employment are terrible, too. Tax credits have encouraged self-employment, but, under universal credit, the DWP will assume after the first year that people are earning at least the minimum wage for every single hour they are working in self-employment.

[Nia Griffith (Llanelli) (Lab)]

Does my right hon. Friend share my concern that the Federation of Small Businesses is saying that this will be a disincentive to people to get up off their backsides and start their own businesses and get going? That suggests that something is fundamentally wrong.

[Stephen Timms]

My hon. Friend is absolutely right, and that is because of the design that has been chosen. In July, the chair of the Low Incomes Tax Reform Group called for a rethink. He said:

“In many cases the income of self-employed earners will fall sharply making it, in some cases, uneconomic for them to continue to work.”

That is the opposite of what everybody in this debate has said universal credit is supposed to do, but that appears to be where we are heading. It is, I am afraid, a mess.

As you know, Madam Deputy Speaker, a great deal of care was taken over the design of tax credits to ensure that mothers receive cash support for their children. All those safeguards are deliberately being removed from universal credit, which will cause serious problems.

I very much welcome what the Secretary of State said yesterday about refuges. As we know, Refuge has been saying that it will have to shut all its domestic violence shelters. I am pleased that my hon. Friend the Member for Walthamstow (Stella Creasy) was able to secure a pledge from the new Home Office Minister, the hon. Member for Taunton Deane (Mr Browne), that he will lobby DWP Ministers on that point, but how are the costs of other kinds of supported housing to be met? The Government concluded a consultation on that in October last year. Another year has passed, and nothing definite has been announced, and in one more year this is all supposed to be up and running.

As has been said, we do not know anything about how in-work conditionality will operate. I have not even mentioned Her Majesty’s Revenue and Customs’ real-time information system for pay-as-you-earn. That is supposed to start from next April. Every company in the land is due to start reporting PAYE to HMRC not, as now, once a year after the end of the financial year, but every single month. The Government say it will all happen automatically through everybody’s computerised payroll systems, but what about small firms that do not have a computerised system? The Low Incomes Tax Reform Group says:

“Businesses will have to draw up two sets of accounts—one for HMRC, the other for DWP—and the latter will have to be done monthly, thereby massively increasing bureaucratic burdens.”

This is a mess. It has not been properly worked through. Key decisions have not yet been made. It is no wonder the Treasury and No. 10 are so worried. The House should be too, and should support our motion.