Universal Credit Work Allowance

Oliver Dowden Excerpts

Wednesday 6th January 2016 Commons Chamber

[Owen Smith]

Let me be very clear: under the Tory Governments in the 1980s I remember the right hon. Member for Wokingham (John Redwood) being dragged through the newspapers in this country for damaging the reputation of working mothers almost irreparably after comments he made about the St Mellons estate in Cardiff, and the Tories are back on the same track. In their sights are single mothers. They are the biggest single group of losers from all these changes to tax credits and UC, and it is an absolute disgrace that the Tories are undoing all the good work the last Labour Government did.

[Oliver Dowden (Hertsmere) (Con)]

The hon. Gentleman talks about examples; can he confirm that without these reforms a family with a net household income of £57,513 would be in receipt of benefits? Does he think that is in any way sustainable?

[Owen Smith]

We are not talking about families in receipt of £57,000; we are talking about families on low and middle wages. We are not talking about people who are in the highest tax bracket, and it is a complete misrepresentation of the facts and of this debate to try to turn this discussion to high-earning taxpayers. That is not what we are talking about.

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[Owen Smith]

My advice to single parents is absolutely clear: do not believe a single word that the Government say in response to today’s debate, or what they are telling the country about making work pay and about universal credit. Each and every promise is being broken.

[Oliver Dowden]

Will the hon. Gentleman give way?

[Owen Smith]

No, I have given way to the hon. Gentleman once.

The Secretary of State used to say that universal credit was a watershed benefit. Indeed, he used to say that it would

“ensure that work pays, and more work pays, for everyone”.

The cuts to the universal credit work allowance have holed that argument below the waterline. The House of Commons Library briefing, which was produced yesterday evening and circulated to every Member, makes it clear that a single mother will have to work an extra 12 hours each week to earn an extra forty quid, at £3.30 an hour, after these changes. Before the changes, she would have got £92 for those extra 12 hours at £7.66 an hour. How on earth is this meant to increase her incentives to go out and work harder and work longer? It is absolute nonsense.

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[Oliver Dowden (Hertsmere) (Con)]

The Opposition motion is a very simple one. Once again, the Opposition are asking us to duck a difficult decision. I would like to speak very briefly—I hopeful we will make up some time—about why such an approach is simply unsustainable.

As a nation, we have two very major problems. First, we continue to live beyond our means. When the Conservatives first came into government in 2010, we were spending £4 for every £3 we were earning. That meant we had the biggest budget deficit in our peacetime history. We have made progress. The Government have more than halved the budget deficit, but there is still a tremendous distance to go. Secondly, as a nation we have the persistent problem of a high tax, low wage and high welfare economy. At the root of this lies the situation we inherited in 2010, whereby people on the minimum wage were working very hard and still having to pay tax and then having their wages subsidised through the welfare system. As a result, nine out of 10 working families were receiving some sort of benefit payment. Despite all the additional spending, it was not working. As we have heard repeatedly, in-work poverty rose by 20%.

The level of borrowing and welfare spending was simply unsustainable. Under the previous Government, an extra £3,000 was spent for every single household in the country. That is burdening our children and our grandchildren with additional borrowing simply to pay for current welfare spending. This is happening at a time when countries around the world are taking difficult decisions and we are facing rising competition from countries such as South Korea and China. Living with the burden of welfare spending paid for by our children and grandchildren is simply not sustainable.

When we came to power, we produced a plan to deal with the problem. First, we said that part of the reduction in the deficit had to be funded by £12 billion of welfare savings. Labour Members can say we should not achieve those savings, but I have yet to hear a single alternative suggestion.

[Jess Phillips]

indicated dissent.

[Oliver Dowden]

Would the hon. Lady like to make an intervention?

[Jess Phillips]

As admirable as the hon. Gentleman’s party might feel his efforts are in stating that we have to cut welfare, the problem is that under this Government, welfare spending has persistently gone up. One would suggest, therefore, that your tactics do not work in the real world.

[Madam Deputy Speaker]

Order. I think the hon. Lady meant the hon. Gentleman’s tactics, not mine.

[Oliver Dowden]

I would ask the hon. Lady to consider the facts. I believe that the OBR is projecting a decline in the proportion of our national income spent on welfare over this Parliament, so the plan is actually working. If Labour Members do not wish to reduce welfare spending, there are only three alternatives. First, they could choose to cut spending on public services, but I have heard nobody suggest that, instead of making this reform, we should cut spending on the NHS or education. Alternatively, they could advocate an increase in personal or any other form of taxation, but I happen to think that in this country we already have unsustainably high levels of taxation. The third alternative is that Labour Members—

[Nick Thomas-Symonds (Torfaen) (Lab)]

Will the hon. Gentleman give way?

[Oliver Dowden]

Yes, of course.

[Nick Thomas-Symonds]

What would the hon. Gentleman say to the 7,000 people in Hertsmere on universal credit who will be worse off by 2020 about the nearly £1 billion that his party is spending on cutting inheritance tax for houses worth between £600,000 and £1 million? How will he excuse that?

[Oliver Dowden]

I do not recognise the hon. Gentleman’s figures, but I do recognise the following figures: in my constituency, 5,000 people have been lifted out of tax altogether, unemployment is down by 11%, and, as a result of tax cuts introduced by this Government, 47,624 people have seen a reduction in the tax they pay. This is the Government’s plan in action. We are moving from a low wage, high welfare, high tax economy to a higher wage, lower welfare, lower tax economy, and the net result is that unemployment continues to fall at a record pace. Since we came to power, an additional 2.2 million people have acquired the stability and security of a regular pay packet and a job to provide for themselves and their families. That is a record of which we on the Conservative Benches can all be proud.

If Labour does not have an alternative plan on spending, does it have one on welfare reform? Once again, we have a clear plan. First, we will introduce universal credit to remove the perverse incentives, discussed extensively during this debate, whereby employees are refusing a pay rise because they fear that the reduction in their benefits will be greater than the benefit they receive from the additional pay. Secondly, we are increasing the personal allowance. Under this Government, by the end of the Parliament the tax-free personal allowance will be £12,500, which will lift those working 35 hours a week on the minimum wage out of tax altogether. This will end the absurd situation in which people on the minimum wage pay tax and then have it recycled back to them through the welfare system. Thirdly and most importantly, we are introducing a national living wage, made possible only because we have been so successful in reducing unemployment, meaning that employers can bear the burden of that higher national living wage. As a result, we will cease to subsidise low-paid jobs, such as in supermarkets and the cleaning industry, with welfare payments.

This is a sensible plan that, when combined with help for childcare and other Government measures, offers a route to the higher pay, lower welfare, lower tax economy we desire. The House has a choice. Do we stick with a plan that has given 2.2 million more people the stability and security of a job and that will eliminate the deficit in this Parliament, meaning we finally run a surplus and start spending less than we earn—so that when the next crisis inevitably hits, we are cushioned against it—and do we start reforming the welfare system through the excellent measures introduced by my right hon. Friend the Secretary of State for Work and Pensions and his Ministers? Or do we take the approach advocated in Labour’s motion and bury our heads in the sand, pretend the problem does not exist and carry on borrowing forever, thereby burdening our children and our grandchildren with what the Labour party, when led by the likes of Mr Blair and Mr Brown, described as the bills of social failure? We are finally tackling those bills of social failure, and I am proud of the approach taken by the Conservative party.

[Several hon. Members rose—]

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[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

Thank you, Madam Deputy Speaker, for giving me the opportunity to speak in today’s debate. I promise that I will try to be brief.

In his autumn statement on 25 November, the Chancellor trumpeted that he was reversing the proposed cuts to tax credits in full, stating that he had abandoned plans to impose £4.4 billion of cuts from this April. It now appears that he is doing a U-turn on his U-turn, because in the short time since the autumn statement it has transpired that he has lined up similar cuts affecting many of the same working families, this time to universal credit. It seems that he is ushering in a new postcode lottery by pushing ahead with cuts to universal credit, which will leave some families up to £3,000 a year worse off than others in exactly the same circumstances.

We have heard the example of a single mother of two, working full time on the minimum wage and claiming universal credit, whose net income next year will be £2,981 lower than that of someone in the same circumstances who is claiming tax credits. Meanwhile, a single parent of two on a salary of £18,000 a year will see their overall income fall by £2,601 next year if they are on universal credit. As my hon. Friend the shadow Secretary of State indicated, analysis shows that from April, cuts to the work allowance will also mean an annual reduction of £2,000 a year in support for disabled people in work, which is clearly a particular concern.

My constituency will be hit hard by the proposals, with 2,000 families being affected in 2017, 5,000 in 2018, 8,000 in 2019 and 10,000 by 2020. Across our country, the need for food banks is increasing. I mention that because in many cases, food bank support is provided more to people in work than to those out of work. Perhaps if the Minister and the Secretary of State took the time to visit food banks and talk to the many thousands of volunteers, they would get a better appreciation of the hardship that is being endured. The proposals to cut tax credits will make matters much worse for people and hit working families—people the Government say they want to help and are committed to helping.

I say to Conservative Members that these measures will cause great hardship to many vulnerable families across our country, in all constituencies. The Tory Government have choices. We have seen announcements of billions being allocated to the most well-off by cutting inheritance tax and further support being handed to big businesses by cutting corporation tax.

[Oliver Dowden]

There is a repeated assertion on the inheritance tax cut. Even by 2021, the inheritance tax cut will cost less than £1 billion, which is in no way comparable to the savings that are achieved through the welfare reforms. We cannot magic up the savings by not proceeding with the inheritance tax cut alone.

[Gerald Jones]

That is one example of the wrong choices being made by the Government but there are others. They have given further support to big businesses by cutting corporation tax. They have chosen to continue the cut in the top rate of income tax from 50% to 45%, allowing someone earning £2 million a year to continue to pay £250,000 a year less in income tax. Those are clearly wrong choices, and they are made on the backs of ordinary working families. Against that background, the decision to penalise working families who are already struggling to make ends meet is wrong in so many ways.

The changes will cause worry and undue stress to millions of families. I therefore urge Conservative Members to support the Labour motion today, and not to turn their backs on working families.