Universal Credit Roll-out

Ruth George Excerpts

Tuesday 24th October 2017 Commons Chamber

[Ruth George (High Peak) (Lab)]

The Government’s figures indicate that 90,000 families will be transitioned on to universal credit full service over the next 90 days. Does my hon. Friend therefore agree that while the Government delay making a decision, about 1,000 more families each day, on average, will have to wait six weeks and get further into debt?

[Debbie Abrahams]

My hon. Friend is absolutely right, and that is why this debate is so urgent—we cannot wait. Although, yes, this is still a small proportion of the full number of people who will have universal credit rolled out to them, this amounts to a 63% increase in the number of people who will be on full service over the next six months.

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[James Cartlidge]

Absolutely. Tax credits created a ceiling.

[Ruth George]

Will the hon. Gentleman give way?

[James Cartlidge]

I will not give way again. I respect the hon. Lady, but I only have a minute left.

As a mortgage broker, I had many cases where an extraordinary amount of a family’s income came from the tax credit system. That is not healthy, and it is not sustainable. I give the Government credit for having the courage—yes, the courage—to take these unpopular decisions. Sometimes, we have to back unpopular decisions, because without such decisions the country cannot move forward. We are doing the right thing, and we should be proud to be doing the right thing.

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[Julian Knight (Solihull) (Con)]

I am pleased to follow the hon. Member for East Ham (Stephen Timms), who has great experience as a former Pensions Minister. I am sure that he is aware that the idea behind universal credit is to change what has become a very dysfunctional welfare system that not only drains public finances and is very inefficient, but is a huge waste of human potential. Deeply flawed as the old welfare system was and remains, however, it is still a lifeline for many of the poorest and most vulnerable people in our society, and we have to be cognisant of that. Ministers must handle it with extreme care, even when acting with the very best of intentions.

I am sure that by now we are all familiar with the shortcomings of the old system. Not only was it very complex and difficult—both to navigate as a claimant, and for the Government and jobcentres to operate—but it created huge disincentives to work, as my hon. Friend the Member for South Suffolk (James Cartlidge) said. Many would-be jobseekers found themselves facing marginal tax rates not seen in this country since Denis Healey sat in No. 11. The idea of universal credit is that it rewards work: people can work the hours that they want, effectively. It brings in that flexibility and ensures that people will not face the very difficult decision, which has been mentioned by some hon. Members, of basically turning down work in order to keep benefits.

[Ruth George]

Does not the hon. Gentleman agree that under the last Labour Government’s tax credit system, the clawback of wages was 39%, whereas under universal credit it is 63%? The individual keeps only 37% of what they earn. If they pay tax, the clawback rises to 75%—they keep a quarter of it.

[Julian Knight]

I thank the hon. Lady for her intervention. I am about to discuss tax credits and my experience of dealing with that area as a personal finance journalist in 2003, when the credits were launched.

Work is the only long-term route to financial independence. Not only does long-term unemployment sap an individual’s self-confidence and erode their employability, but children who grow up in workless households are far more likely never to enter employment themselves. Generations of people do not get into work, and therefore poverty beds down. By acclimatising claimants to the rhythms of working life and being designed to ensure that employment always pays, universal credit not only supports today’s claimants, but is helping to steer many of the next generation away from the welfare system altogether, which is a very good thing indeed.

This is, undoubtedly, an enormous change, and Ministers have been wise to choose to proceed cautiously. The full roll-out of universal credit will not be completed until 2020, a whole nine years after the policy was first trialled and enacted. That involves many dry runs, and the process is in very stark contrast to the introduction of tax credits in 2003, when I remember very well that there was huge disruption to millions of people’s lives.

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[Stephen Kerr (Stirling) (Con)]

One of the aspects of last week’s debate—we have seen and heard it again today—was that while Opposition Front Benchers said that they supported the principles of universal credit and that their concerns were about the manner of the roll-out, what we heard from those who sit behind them was abject opposition to universal credit. It appears to me that they do not want so much to pause the roll-out as to completely abandon it.

I speak as someone who not only supports the principle of welfare reform but wishes to see its implementation go forward. Universal credit is so much better at helping people into a position where they can help themselves. I do not add my name to those calling for a pause or halt to the roll-out of universal credit because the roll-out is already planned to take nine years, and it is taking nine years because the Government are taking time to get it right. It is called check and adjust.

[Ruth George]

rose—

[Stephen Kerr]

It is about learning from experience and adapting. It is about continuous improvement. Calling for a pause or halt does not help that process one jot.

[Ruth George]

rose—

[Stephen Kerr]

It is important to tackle a change of such magnitude in that way. It is important to take the right amount of time to absorb the lessons being learned.

[Ruth George]

rose—

[Mr Speaker]

Order. The hon. Gentleman is not giving way at the moment.

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[Ruth George (High Peak) (Lab)]

Let me start by giving credit to Members in all parts of the House who have listened to their constituents and to people who are suffering under the universal credit system and who have called for changes to be made in that system.

As many Conservative Members have pointed out, we have been going through the process of universal credit for six years now, and as the previous Secretary of State said, the system seems to be “fix and learn”. I wonder what problems he was seeking to address when his Government cut £5 billion from the annual budget for tax credit, taking it from a system that helped people into work and putting it into a system that will take an average of £2,500 a year from 3 million working families. I urge all Members to look at the Library figures that state how many families in their own constituencies are currently receiving tax credit and will lose such sums. They should come as a revelation to us all; and to those of us whose constituencies have already experienced the roll-out of full service—not just to unemployed single people, but to families and people who are disabled and seeking to work—they must come as a lesson.

The Government, and other Conservative Members, keep claiming that an extra 250,000 people will move into work under universal credit. I am afraid that that claim is based on figures from 2014-15, based on a small sample of single unemployed claimants before the huge cuts in work allowances were implemented. They do not apply to people who have been claiming employment and support allowance or to families. Analysis of lone parents has shown that their work incentive is reduced by eight percentage points. As for second earners, the huge clawback in universal credit actually reduces their incentive to work and makes it more difficult for families with children to be taken out of poverty. I urge all Members to listen to Citizens Advice and the Child Poverty Action Group, which say that an extra 1 million children will be taken into poverty by universal credit. That must give us all cause for concern.

The six-week wait was not introduced at the outset; it was introduced in August 2015, along with the extra seven days of unpaid waiting time. It does not mirror the world of work. Those who move into work are paid after a month at the most, but mainly within that period, and even those who must wait for a full month can often receive an advance. So this is not mirroring the world of work; it is putting people into debt. Local authorities have found that 31% of people on legacy benefits are in rent arrears, but under universal credit that proportion more than doubles to 73%. Debt is not a way for people to start in the world of work or start on their way in life. All this means that the number of people going to food banks has more than doubled, and they can only do so when they can actually get access to a food bank. In rural areas such as mine and those of many Conservative Members, food banks are not a panacea; they cannot provide food for families across rural areas, and that will mean children going hungry.

We are urging most earnestly the Secretary of State and the Government to listen and make sure this does not affect millions more families, especially as we are coming up to Christmas, and to pause now.