Universal Credit Work Allowance

Debate between Owen Smith and Stephen Timms

Wednesday 6th January 2016 Commons Chamber

[Owen Smith]

rose—

[Stephen Timms]

rose—

Welfare Cap

Debate between Owen Smith and Stephen Timms

Wednesday 16th December 2015 Commons Chamber

[Owen Smith]

I thought I was doing rather better than that. I thought the House might enjoy a bit of Christmas spirit.

The real crime that Macavity is hiding from today is not the breach of the welfare cap, however embarrassing that may be. The real larder that has been looted is universal credit. Opening the debate, the Minister said several times that the Government would meet the welfare cap in 2019-20 and he is right that the OBR confirms that, but he signally failed to tell the House how they would do it. I suspect that that is because of the other reason that the Secretary of State did not wish to address the House today. We know precisely how he will meet the cap: through the £10 billion cut to the work allowance that we will see by 2020; a cut of £3 billion a year, nearly making up for the £3 billion that was to be taken away in tax credits, butchering the work incentives that are supposed to make universal credit worth while.

Who are the victims of this crime? The Secretary of State is for one, because he has had his budget raided once more—the seventh time, I believe. However, the true victims are the millions of constituents in Labour and Tory seats who will still lose thousands of pounds as a result of the Chancellor’s cut to universal credit. Some 500,000 people will be on UC by next April, and according to the independent Institute for Fiscal Studies, 2.6 million households will lose £1,600 by 2020. They are the victims of this crime, the people who are paying for the Chancellor’s hubris with £3 billion of their own money in 2020 and every year thereafter. They are the people being fleeced by the postcode lottery that is being created in support for low-wage workers, whereby those lucky enough to stay on tax credits will be massively better off than their neighbours on universal credit.

A single mother working full-time on the new national minimum wage with two children will be £2,981 worse off than another mother, perhaps living next door in precisely the same circumstances but still on tax credits. [Interruption.] The Secretary of State says from a sedentary position, “What about child care?” Yes, if that mother has children who are three or four, she may be better off, but if her children are one, five, seven or 12, they will not be. That is the reality and we should not be misleading the House, from a sedentary position or otherwise.

That disparity cannot be fair and cannot be right. It may not even be legal. We are seeking advice as to the legality of that move. I suspect that is not what the Chancellor told the hon. Member for South Cambridgeshire (Heidi Allen) or other Tory Back Benchers when he reassured them that he was making good the tax credit cut, even if it meant breaching the welfare cap.

[Stephen Timms (East Ham) (Lab)]

My hon. Friend is making some important points. Is it the case—I have seen the suggestion that it may well be—that the small number of people who are currently receiving universal credit will see the enormous reductions in their income that were to have been imposed on tax credit recipients? There has been a U-turn on tax credits, but is it the case that those who are getting universal credit will be hit?

[Owen Smith]

I think that is precisely the case. My right hon. Friend is right. There are currently around 140,000 recipients of tax credits, not all of whom get the work component; we do not know that precise number—it may be around 40,000. There are predicted to be 500,000 people, on the Government’s own numbers, in that circumstance by next April. When I put it to the Secretary of State at Work and Pensions questions last week that those people would lose out precisely as my right hon. Friend suggested, he said that the flexible support grant would more than make up for those losses.

I have looked at the flexible support grant and, as far as I can see, it is a £69 million grant that is available to local Jobcentre Plus managers to help people who are close to the workplace, perhaps for a new suit or a ticket to get on the bus to the interview. Even if it were permissible to use the money in that way, £69 million would in no way make up for the £100 million shortfall next year, the £1.2 billion shortfall the year after, and certainly not the £3.2 billion shortfall in 2020. It is impossible, and I fear it is also misleading for the public.

I will bet a pound to a penny that the Secretary of State and the Chancellor did not also mention that offsetting the cuts to universal credit will hit precisely the same Tory and Labour constituents just before the next election, in 2019-20. I would also wager that they still do not appreciate that the Chancellor cannot U-turn on this issue. The reverse-ferret is not available any longer, because if he does not make good his promise to make those cuts to universal credit, he will not be able to keep the promise that the Minister just made again on maintaining the welfare cap in 2020, and he will certainly not be able to deliver his other promise of a £10 billion budget surplus in the same year.

Perhaps the lesson we should all take from today’s U-turn on the welfare cap, snuck in shamefacedly at the fag end of the Parliament, is that no one should take this Chancellor’s traps and tricks, his games and gimmicks, terribly seriously any more. He can meet them or breach them—he does not mind which, because what he is really about is not sound management of the public finances but the political games of public schoolboys. That is why he cut universal credit seven times before it had even started, making a mockery of any claims to make work pay or support for the low-paid. That is why he continues with his fantastical claims, repeated by the Minister, that welfare spending is under control, even as the housing benefit bill went up by £30 billion in the previous Parliament, and even as Ministers breached £1 trillion on welfare spending for the first time.

We will back the Government in voting to secure Labour’s demand to reverse the tax credit cuts, and we will continue to press them for the same reversal for the victims of universal credit. But we should not pay too much attention to the Chancellor’s tricks and traps in future, because his flagrant breach of the welfare cap, deemed so essential just a few months ago, has exposed the true extent of his stunts. The welfare trap has caught him. Eliot’s detectives could not catch Macavity, but he has been rumbled.