Universal Credit Roll-out

Debate between Ruth George and Julian Knight

Tuesday 24th October 2017 Commons Chamber

[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.