Universal Credit and Debt

Paul Sweeney Excerpts

Wednesday 5th June 2019 Westminster Hall

[Mike Amesbury]

Very briefly.

I thank my hon. Friend the Member for High Peak (Ruth George) for securing this vital debate on universal credit, and for all that she does. The debate’s importance has been powerfully illustrated by the presence of 26 Members in this Chamber.

As my hon. Friend rightly pointed out, universal credit was supposedly designed to be the flagship policy of a reformed welfare system that would protect the most vulnerable in our society, support people into work and act as a safety net for those who needed it most. However, as hon. Members’ speeches today have shown, the experience for hundreds of thousands of our constituents has been chaos and hardship, sometimes resulting in tragic circumstances.

What was once hailed as a simplified, holistic and supportive social security reform has become nothing more than a vehicle for cuts. The political choice of austerity has taken more than £37 billion from the welfare state, while giving more than £110 billion of tax cuts to the wealthiest individuals and rich corporations. While the Chancellor looks around and claims to be blind to the poverty that many of us witnessed as we walked into Westminster this morning, the record 1.6 million emergency food parcels that were given out last year alone and the 4.1 million children who are in poverty tell a different story—one that should shame every single one of us in this House.

Riverside, a major social housing provider nationally and in my constituency, has provided me with a case study that illustrates the systemic failure of universal credit on the frontline. The couple involved, who do not wish to give their names because of the sensitive circumstances, said:

“Me and my partner have had so much Universal Credit taken off us, that we are struggling to get gas, electric and food, on a monthly basis, we have tried weekly and that was even worse, the money that we are on makes having a home difficult…so we are having to visit the food bank more regularly.”

That is just one among many cases that have been highlighted in this Chamber today. The changes and cuts to the local housing allowance have helped to drive rent arrears up to alarming levels. According to Shelter, two in five renters in the private sector are having to borrow money. Minister, that needs to change.

It would be easy for the Government to try to dismiss such cases and statistics as cherry-picking from Opposition MPs; in fact, a previous Secretary of State referred to them as “fake news”. But what about the findings of the United Nations rapporteur on extreme poverty and human rights, who last month published his third and perhaps most damning view of the Government’s welfare policies, stating that our country’s poorest residents face lives that are “solitary, poor, nasty, brutish, and short”? What about the independent End Child Poverty coalition’s finding that child poverty is the “new normal” in some of the most deprived parts of Britain, with half a million more children living in poverty now than in 2010?

The Trussell Trust has found that when universal credit goes live in an area, food bank demand increases by a massive 52%. The trust’s figures show that a fifth of all referrals to food banks last year were linked to delays in receiving benefits, almost half of which related directly to universal credit. The Minister will claim that advance payments are available to universal credit claimants, so no one should go hungry for lack of cash. However, it has rightly been pointed out in this debate that those are loans that have to be paid back, which means debt on top of debt for the 60% of claimants who are forced down that route.

The five-week delay in payments must end. The system must be reformed. Will the Minister listen to the plethora of organisations that hon. Members have cited today, such as Shelter, Mind, the Child Poverty Action Group and the Riverside housing association? The monthly payments design of universal credit does not reflect the reality of many people’s lives or how they manage their money. A Resolution Foundation study found that most people moving from employment were paid either fortnightly or weekly in their previous job. The research highlighted the fact that people who claim universal credit are often not made aware of alternative payment arrangements to help people who are struggling to manage their own money, and do not always receive them when they apply.

In January, the Secretary of State announced her intention to improve the provision of alternative payment arrangements, make it easier for private renters to have payments made directly to landlords, and test ways to make more frequent payments to more people who struggle with monthly budgeting. Will the Minister tell us what progress has been made on that?

As we have heard today, it is not just advance payments that can lead to deductions from universal credit, but other bills too. Indeed, up to 40% of the universal credit monthly standard allowance can currently be deducted for repayment of advances, utility bill debts and rent and council tax arrears. More than half of universal credit claims had a deduction; as my hon. Friend the Member for High Peak pointed out, that is 844,000 people. What assessment has the Minister made of the impact of debt repayments on levels of hardship among universal credit claimants?

According to Citizens Advice, a single person over 25 who claims universal credit can see £127 deducted from their benefits every month to repay existing debts. If the Government are determined to help people to manage their debts, why is their own Department making deductions that often push claimants into hardship?

[Mr Sweeney]

My hon. Friend makes an incredibly important point. In a recent roving surgery, I visited a constituent who was suffering so much with mental health problems that he was unable even to face opening the letters that he received. He therefore did not receive the information about his situation and was subject to severe sanctions and reductions. He could have challenged them because of his situation, but the DWP was unable even to engage with him to assess the risk that he faced. As a result, he was suicidal. It is absolutely shocking what is going on.

[Mike Amesbury]

My hon. Friend makes a very powerful contribution that shows the need for more compassion and flexibility in the system. It is clear from the evidence and from this debate that initial decisions to apply deductions follow rigid rules and rates and do not include an affordability test. Will the Minister introduce an affordability test for deductions, particularly multiple deductions, to ensure that nobody is pushed into poverty or destitution?

The Government’s stock response to criticism of their welfare policies is to deny that there is even a problem, but their talk of a jobs miracle is nothing more than a mirage to many people who struggle on zero-hours contracts or in low-paid and part-time employment, with wages not even at 2008 levels. The same attitude is on display again in the new “Universal credit uncovered” propaganda campaign, with newspaper ads—seemingly designed to look like journalism—that aim to explode what are perceived to be media myths about universal credit and set the record straight, as my hon. Friend the Member for Easington (Grahame Morris) pointed out. It is perhaps telling that one charity has already reported the campaign to the Advertising Standards Authority. As we have heard today, these are not myths. They are facts, which illustrate a social security system that is failing—a system hollowed out by cruel cuts.

In conclusion, I call on the Minister to halt managed migration in its entirety, end the five-week wait, stop punitive sanctions, introduce split payments, restore the local housing allowance to at least the bottom 30th percentile, pay 85% of childcare support up front, stop the benefits freeze and the immoral two-child limit, and properly fund a compassionate social security system.