Universal Credit and Debt

Philippa Whitford Excerpts

Wednesday 5th June 2019 Westminster Hall

[Neil Gray (Airdrie and Shotts) (SNP)]

Thank you, Sir Henry. It is a pleasure to serve under your astute chairmanship, which has allowed a bit of latitude in the debate and for so many voices to be heard. I am very grateful to the hon. Member for High Peak (Ruth George) for securing the debate. She covered a lot of ground in her speech and I will try my best to sum up her contribution and the other important contributions that have been made.

The hon. Lady spoke about deductions being taken, apparently at random. I totally agree. She also mentioned carer’s allowance. She may not be aware that in Scotland we have looked to do something different on carer’s allowance. We are uprating carer’s allowance to better acknowledge, in some small way, the great work that carers do in our society. I encourage her to look at that.

The hon. Lady was right to say that universal credit has improved. There have been some improvements of late, and I am sure she would agree that the changes appear to acknowledge some of the problems that we have all been campaigning on, but do not go the full distance in terms of resolving the problems that are clearly still there—for instance, the two-child policy, the benefit freeze and the five-week wait. I will come back to some of those. She was also right to highlight the so-called major budget interventions that were made by the Government on universal credit. They do not come close to making up for the cuts that were made to it in the 2015 Budget, which made it almost unrecognisable from what was originally envisaged. I commend the hon. Lady on her speech.

The hon. Members for Waveney (Peter Aldous) and for Midlothian (Danielle Rowley) touched on the issue of separate payments. The Scottish Government and the previous Administration in Northern Ireland have looked to try to resolve that, and I would encourage the UK Government to look at that again and to stop insisting on charging for that.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) is an authoritative voice on the subject, and it was good to see her here. She was right to draw on the evidence put forward by Philip Alston, the UN special rapporteur on extreme poverty. The UK Government have chosen to attack him personally, rather than to address the issues that he has quite legitimately raised.

My hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) has possibly the greatest experience of us all on the impact of universal credit. He was right to raise the issue of the £2.5 million debt that Highland Council now finds itself in, and the £600,000 in administration costs that the UK Government should be paying up for. Of course, it is a triple whammy: UK Government austerity on public finances, UK Government austerity on personal finances and now the local authorities have that added burden on their services.

As the hon. Member for Strangford (Jim Shannon) did, I commend DWP staff, who try to resolve the issues we raise with them. They do their best to deal with those issues within the stringent policies implemented by UK Ministers.

The hon. Member for Great Grimsby (Melanie Onn) was absolutely right about advanced childcare costs—I have had many similar cases. I find it incredible that universal credit is paid in arrears, yet the bills that people have to pay on childcare must largely be paid in advance.

The hon. Member for Gloucester (Richard Graham) looked to paint a particular picture on universal credit. I encourage him to look at the Citizens Advice Scotland report and briefing that was available ahead of the debate. I think it would contradict and enlighten him greatly.

My hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) pre-empted much of what I have to say on the five-week wait. I appreciate her intervention. My hon. Friend the Member for Glasgow South West (Chris Stephens) dissected the DWP’s propaganda regarding universal credit that has been out of late.

I also commend the hon. Members for Easington (Grahame Morris), Bristol South (Karin Smyth), Makerfield (Yvonne Fovargue), Leigh (Jo Platt) and Merthyr Tydfil and Rhymney (Gerald Jones). This has been a very broad debate, with many good contributions.

As has already been highlighted, there are a number of issues at play on universal credit and debt. I am grateful to Scope, Shelter, the Child Poverty Action Group, StepChange and Citizens Advice Scotland for their briefings.

The first issue is the five-week wait. I appreciate that the Government have at least partially acknowledged that there is a problem, by looking to extend certain legacy benefits and to expand advance payments. However, much of the run-on for legacy benefits will not happen until next year, and no run-on help is available for those who are in touch with universal credit for the first time. Those fixes are not in themselves going to solve the problem, as the evidence from CPAG and Citizens Advice Scotland confirms. That is why I have asked Ministers to look at making what is now the assessment for an advance the first UC assessment, and making the advance essentially the first payment. If the recipient is shown to need the money at that point, why would the Government deny them that as part of universal credit, rather than financially penalising them for months after? I do not think there would be a major cost implication, other than to shift payments to the front end of the claim instead of further down the line.

Payment of housing costs to landlords is a major issue for both tenants and landlords. My local authority, North Lanarkshire Council, is having serious problems with the inflexibility of the current system on when rent payments are made. That means that I have received loads of cases where council tenants are getting chased for rent arrears, when the delay is in fact caused by the DWP. The DWP has acknowledged that issue, but there is no date for when it will move from a four-weekly to a monthly payment system. I encourage the DWP to work with local authorities and other housing providers to establish a more flexible system that enables them to know for certain when rent is to be paid.

The benefit freeze has already been raised. It is having a major impact on indebtedness as part of universal credit. While most working-age benefits have been frozen for four years, living costs have risen sharply with higher than anticipated levels of inflation. There is not an expectation that the freeze will continue beyond this financial year, but the Treasury is going to more than recoup its estimated savings from the policy this year. Quite frankly, low-income families have paid more than their fair share towards this Government’s policies and the benefit freeze should have ended this year. What estimate have the Government made of the impact that their benefit freeze has had on low-income families and poverty levels? What other detrimental impacts has it had?

Direct deduction rates must be looked at again. The hon. Member for High Peak was right to focus on that issue. If only DWP policy were to match that of the Cabinet Office, as my hon. Friend the Member for Glasgow South West said, which advocates fairness in debt collection and an understanding of the impact that debt collection processes have on people. As the hon. Member for High Peak said, that could start with the DWP understanding what debt repayments are actually for, so as to better understand the circumstances that the DWP Ministers should have a duty of care to support.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

Does my hon. Friend not think it absolutely shocking that if a terminal patient accrues debt, that passes on to their family? People should be defined by their medical definition and not the arbitrary six months that exists at the moment.

[Neil Gray]

My hon. Friend is absolutely right. Of course, she will know that a different system is being created for that in Scotland. I ask the Minister to look at the definition of terminal illness that has been adopted by the Scottish social security agency, which I think would help to deal with some of these problems.

Currently, deductions for indebtedness can be up to 40% of the standard allowance, and the Government are looking to reduce that to 30%. If we accept that the standard allowance is barely enough for anyone to live on in the first place—figures from the Joseph Rowntree Foundation show that adults without children on UC receive only 40% of the minimum income standard, while adults with children get just 60%—reducing that by a third is just going to exacerbate indebtedness. Most people would struggle if their income was reduced by a third without warning or negotiation, but I also acknowledge that there is a debt, so some effort must be made to repay it. There should be an affordability test and discussions in advance of a deduction being applied, and the recipient should be afforded expert advice and advocacy during that process. That surely has to happen if the DWP is going to give people help and breathing space for indebtedness.

As part of the summer pilot, the Government should consult extensively with key stakeholders, the devolved Governments and the expert charities, and those in receipt of universal credit themselves, particularly disabled people, to make sure that the system is got right and that no one is further impoverished as a result of universal credit.

Speakers from across the House have demonstrated in this debate, once again, that universal credit is still not working. It is time for the Government to listen, to restore and expand the funding available to universal credit and to fix the inbuilt technical issues and flaws that have been raised today and previously, which are contributing to a rise in food bank use and the impoverishment of those both in and out of work.