Welfare Reform Bill

Paul Uppal Excerpts

Monday 13th June 2011 Commons Chamber

[Stephen Timms]

The right hon. Gentleman will find out the answer to that question in due course. We have been consistent in supporting the principle of universal credit. We think that bringing in-work and out-of-work benefits together is a good idea that has a number of attractions. The problem is that the detailed work to make that policy fly has simply not been done by the Minister and his hon. Friends. There are desperate, gaping gaps in the policy and fundamental questions that he is unable to answer or explain about how the arrangements will work. As a result, the Bill, on departing this House, will leave many households, and many working families in particular, in a very precarious position.

Having talked about a lot of things that we do not know about, let me now deal with some things that we do know about. Clause 5, which I touched on a moment ago, will badly undermine the aspirations of people who are in work on modest incomes. Under the current rules—they have been a long-standing feature of the system—people who are out of work but who have above a prescribed capital sum are expected to use it to support themselves before claiming income-related, out-of-work benefits. If somebody has more than £6,000 in savings, the Government assume an income from them, which is then subtracted from the benefit entitlements; someone with more than £16,000 in savings will not receive means-tested, out-of-work benefits at all. Those two figures were increased from £3,000 and £8,000 by the last Government to help people retain some of their savings when they lost work. For people in work, the story has been very different. There is no savings cap at all on tax credits. Clause 5 will change that fundamentally by extending the rules on savings for those who are out of work to people who are in work.

The Conservative party used to tell us that it wanted to encourage people to save. Clause 5 will not just discourage people from saving; it will make it impossible for them to save. Anyone on a modest income who decides to save for a deposit to buy a house in the future, or for the cost of university education, will suffer an extraordinary punishment under the clause. It is impossible to buy a house today, or to obtain a mortgage for shared ownership, with a deposit of less than £16,000. However, if people have savings of £16,000 towards, say, the deposit for a mortgage—if, as Ministers seem to believe, they start to get ideas above their station—they will lose all their universal credit. Typically, that might be £5,000 a year. In addition, they will lose any support that they receive for the costs of child care, and on top of that they will lose any help that they are given with housing costs.

Those measures will add up to an extraordinary punishment for saving. They will make saving literally impossible, because as soon as people have managed to save £16,000 from their earnings, the Government will drain their savings away. The problem will start as soon as they have saved £6,000. The hon. Member for Redcar (Ian Swales)—who, I am pleased to see, is present—said in Committee that the problem would not last very long because people’s savings would soon be gone, and he was absolutely right. These proposals mean that if anyone attempts to start building up a saving that would be enough for, say, a deposit on a house or a contribution towards higher education costs, the Government will take it away by withdrawing their universal credit. The message being sent to people on low incomes who are doing the right thing and working to support themselves could not be clearer: “This Government will not support you.”

Amendments 23 and 24 would change that. They would allow people to save money in an individual savings account—up to £50,000 if they are in work. Ministers have told us that it would cost just £70 million a year to exclude all working households from the savings cap, and this measure is obviously more modest than that.

Surely we should be encouraging people to save, not punishing them for saving. People work to improve their lives and the lives of their families. They are aiming not for a bit more spending money each month, but for the means to buy a house, to help their children through university, to start a business or to pay for a child’s wedding. If they are to achieve such aspirations, people need to be able to save from their earnings, but clause 5 denies them the chance to do that.

[Paul Uppal (Wolverhampton South West) (Con)]

The right hon. Gentleman has stressed the importance of aspiration. New clause 3, which concerns free school meals, is also relevant to that. Does he not find it interesting that, according to an examination of educational attainment among different ethnic groups, the most successful sub-group are Chinese students, and the second most successful are Chinese students receiving free school meals? The issue is not just money, but how Government can encourage aspiration and ambition, which is the ethos of the Bill.

[Stephen Timms]

Certainly the Bill should encourage aspiration, but if it prevents people from saving in the way that I have described, as clause 5 will, it will undermine aspiration. That is the point: we want to change the Bill so that it will allow people, even those on universal credit, to save. We believe that everyone should be encouraged to save, rather than being punished for having saved.

The Secretary of State used to agree with us. In 2008, he said that

“poverty is not just about how little you earn; it’s also about how little you own.”

If we want people to work their way out of poverty in the way in which the hon. Gentleman suggests—and I agree with him about that—we need to offer them the chance to save. I am afraid that if the Government press ahead with making saving on a low income impossible, the phrase “compassionate conservatism” will be revealed as a sham.

For similar reasons, I hope that Government Members will share my concern about the Bill’s discouragement to self-employment. Schedule 1 provides for a minimum income floor when calculating universal credit for self-employed people. Under that provision, Ministers are making the assumption that self-employed people will be earning at least the minimum wage for every hour they work, but anyone with even a passing knowledge of what is involved in starting up in self-employment will know that that is absurd. While establishing their business, many self-employed people work extraordinarily long hours and earn hardly anything at all, and their income fluctuates hugely month by month. It is absurd to assume that they will earn the minimum wage for every hour they work, and that they should therefore have their universal credit reduced accordingly. That is why the Chartered Institute of Taxation has warned that this new system will be much less supportive of self-employment than the current one.

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[Paul Uppal]

I will modify my speech to highlight some of the concerns expressed by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) on new clause 6. That will be the beef of what I will say. We spoke about this issue at great length in Committee and I spoke about it personally. Like my hon. Friend the Member for Aberconwy (Guto Bebb), I feel like we are back in Committee. I assure the hon. Member for Rutherglen and Hamilton West that it was always a pleasure to sit on that Committee, and I am sure that Opposition Members will concur.

We received representations from various groups on the merits of paying housing benefit directly to landlords, principally from Citizens Advice, Crisis, the National Landlords Association, the Residential Landlords Association, Shelter and the British Property Federation. As the hon. Member for Rutherglen and Hamilton West said, and as was said in Committee, there are persuasive arguments about paying housing benefit directly to landlords. It is perhaps ironic that it was the last Labour Government who changed the system in 2008. Before that, rental payments did go directly to landlords.

As was rightly said in an earlier exchange, the Minister has highlighted that there is provision in the Bill for paying housing benefit directly:

“We recognise that in some circumstances, direct payments to landlords may be necessary, and the Bill makes provision for that.”––[Official Report, Welfare Reform Public Bill Committee, 5 April 2011; c. 363.]

I hope that that gives the hon. Member for Rutherglen and Hamilton West some comfort on his specific concerns. I hope the Minister will forgive me if I am pre-empting his response, but we discussed this matter at length in Committee.

I think that there is a deeper point on the issue of responsibility. The Leader of the Opposition raised this issue this morning as the cornerstone of his speech. I do not want to go over what has been said too much. The essence of my point is that it is easy to talk about responsibility, but the Government are actually delivering on it. I have my concerns about the payment of housing benefit, but having sat on the Committee, looked at the findings of the reports and considered the evidence, I have come to the conclusion that if we are sincere about the aim of this Bill of getting people off benefit and into work, the first step is not only getting people into work, but individuals taking responsibility. The concerns underlying new clause 6 are addressed by the Minister’s remark that the whole essence of the Bill is to tackle the issue of responsibility.

I am sure, Madam Deputy Speaker, that you were as enthralled as I was by the exchange involving the hon. Member for Edinburgh East (Sheila Gilmore) and my hon. Friends the Members for Aberconwy, for Dover (Charlie Elphicke) and for West Worcestershire (Harriett Baldwin) about the number of people who have not worked in the past 10 years—a time of plenty compared with the situation that we face now. The point that was missed in that exchange was the pernicious nature and corrosive effect of what we have seen over the past few years; this is not just about getting people into work. We have arrived at a situation in which not only are there people who have never worked, but there are whole families who have never worked. The exchange missed that point, but it was eloquently covered by my hon. Friend the Member for Aberconwy.

[Ms Buck]

The hon. Gentleman is right that addressing worklessness that has crossed generations should be a concern on both sides of the House, and it is. However, does he agree that the number of people growing up in households where nobody has ever worked through two generations is 20,000 at the most, which is 0.1% of people on working-age benefits? That is far too many, but it is only 20,000 people.

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[Paul Uppal]

I accept the hon. Lady’s point, but I go back to the corrosive effect that that is having on society. There are people living cheek by jowl with the 20,000 families that she has mentioned, who are aware of the situation.

A constituent spoke to me who comes from one of the handful of families on her road who actually work. The rest of the families on her street have made a conscious life choice to live off benefits. [Interruption.] The hon. Member for Westminster North (Ms Buck) may nod, sigh and take a deep breath, but I am faced in my weekly surgeries by people who live in the real world—people who have to deal with the hard reality of life. My constituent had to face ridicule for going to work. That is the situation that we have.

As I have said before in this House, I have experienced poverty in my life. I have not read about it in a book or dealt with it at arm’s length from behind a desk; I have seen it with my own eyes and experienced it in my family. That is why I am passionate about it and why I was proud to sit on the Committee. Too often, the issues that we talk about are detached from the reality of life. This legislation is not about appealing to red-top newspapers or making grand-standing statements, as was said in Committee, but about tackling the issue head-on. Hon. Members have talked about the number of jobs created over the past decade that were taken by foreigners who came to these shores with an ethos of working. My hon. Friend the Member for Aberconwy mentioned eastern Europeans. My family have gone through that experience. We came to this country with an ethos of working; that was our aspiration. The idea that we could claim benefits and use the system to support us was anathema to us. That idea is what this Bill tackles.

[Matthew Hancock (West Suffolk) (Con)]

I have been listening carefully to my hon. Friend’s powerful speech. Does he agree that 20,000 families who have never worked is simply 20,000 too many?

[Paul Uppal]

Absolutely; the intervention from the hon. Member for Westminster North was very telling. It missed the point about the message that Governments send out. Let me make it absolutely clear that I am not criticising individuals and families; it is the system that is corrosive. If the system is corrosive and, to quote my constituent, rewards idleness, what do we expect of human beings? I have faith in the British public. We have budding entrepreneurs and young people who have aspirations to achieve the best that they can. However, through unintended consequences, aspiration has been undermined, particularly over the past 10 years. I have seen that so often when I meet young people. They have a choice between work and a life on benefits. They have looked me in the eye and said that a life on benefits is not such a bad option.

[Andrea Leadsom (South Northamptonshire) (Con)]

I recently met a lady in my constituency who is a health visitor, and she told me of a trip that she had paid to a family living in Northamptonshire. The mother had just had her fourth child, and her eldest child was 15 years old. As the health visitor left, the older daughter chased her out and said that her mother was trying to persuade her to have a baby to improve their income, but she did not have a boyfriend and did not really want one. She asked what the health visitor would advise that she do. That is symptomatic of some of the problems that we have in this country as a result of our welfare system.

[Paul Uppal]

I thank my hon. Friend. Sometimes we in the House have to face uncomfortable truths. We may not like them, but they are the reality that we have to face. I believe that the Bill, in its entirety, goes some way to addressing such problems. I have said before, and will say again, that it is very easy to talk the talk in opposition, but the Government are walking the walk. We are delivering something that is popular not just with Conservative voters but with Labour voters. There is consensus across the board on the issue, and it unites most voters whom I have met, whichever party they vote for. They have seen the reality of what we have done to introduce an ethos of work, aspiration and ambition.

I am glad that I am part of a Government who are taking the difficult decisions and doing the important things. This is a seminal Bill, and people will look back on it as one that changed this country for ever. I know that I may have veered away from my original comments on new clause 6, and I am sorry about that, but sometimes we have to say it as we see it. I, for one, am glad that we have introduced the Bill, and I think it will make this country a better place.

[Yvonne Fovargue]

I agree with one thing that the hon. Member for Wolverhampton South West (Paul Uppal) said, which was about taking responsibility. I therefore hope that he can support amendment 26, because it will mean that agencies can ensure that people know their rights and responsibilities following what has been described as the most fundamental change to the benefit system.

One of the first witnesses to appear before the Public Bill Committee said that although universal credit is a simplified benefit, the application for it will not be simple, because of all the different benefits that are rolled up together into it. I am old enough to remember when supplementary benefit changed to income support, and I saw the rise in demand for advice among people worried about what would happen to their income. For people who are on benefit, a small change in income means a lot.

That problem will be exacerbated in the current case, particularly given the fear of a civil penalty for a mistake or omission. People who go to advice bureaux do not want to know how to defraud the system; they want to know how to fill their form in correctly. An online application process will also worry people—particularly older people, but also some younger ones—who are concerned about filling a form out online and not seeing it until three, four or five days later. Support is needed to smooth the transition.

Universal credit will start in 2013—exactly the same time when the proposed changes to legal aid will remove help for the most complex welfare benefit cases. As my right hon. Friend the Member for East Ham (Stephen Timms) said, that is the perfect storm. Local authorities are examining every non-statutory service that they provide, and in some cases local advice agencies are losing funding. In fact, in a survey, 54% of local bureaux said that they were worried that they were unlikely to be around in 2013.

Let us scotch one myth. Local bureaux and advice agencies do not get any funding from central Government. The money goes to the central Citizens Advice, which provides a vital service in support of local bureaux. It provides information, training, support and IT services. Putting more money into local bureaux would mean that more would have to be charged for those services. It would be self-defeating. Local face-to-face advice is vital, along with the advisory telephone service. Many claimants are vulnerable, and such advice, provided locally, is of particular importance to them.

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[Paul Uppal]

As usual, my hon. Friend is making an excellent speech. Does he not highlight the fact that this is a moment for the Opposition to decide on which side of the fence they stand? They talk about reform, but it will be interesting to note how they vote today and on Wednesday.

[Charlie Elphicke]

I agree. In fact, let me use the words of the Leader of the Opposition, who said:

“Finally we will never encourage a sense of responsibility if society is becoming more and more unfair, and more and more divided.”

We know that Labour divided our country more between the rich and the poor when it was in office, and we know that giving people who have £50,000 in the bank out-of-work benefits would be deeply unfair to the ordinary working person in the street.