Universal Credit

Debate between Stephen Timms and Sharon Hodgson

Tuesday 13th March 2018 Commons Chamber

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

These regulations will affect millions of families up and down the country, so it is only right that we are able to discuss them today. The Government consulted from November to January on introducing an earnings threshold that would restrict free school meals to families with net earnings under £7,400 per annum. The consultation received 8,981 responses. However, the Government excluded 8,421 of those responses from their analysis, meaning that fewer than 4% of respondents agreed with the Government. Surely that goes against every rule of public consultations. Talk about statistics being used against vulnerable people!

In 2010, the then Secretary of State for Work and Pensions promised in the White Paper on universal credit that it would

“ensure that work always pays and is seen to pay. Universal Credit will mean that people will be consistently and transparently better off for each hour they work and every pound they earn.”

[Stephen Timms (East Ham) (Lab)]

I am glad that my hon. Friend has picked out that point. She will have heard the Secretary of State saying that jobcentres would advise people not to take extra work or to get a pay rise because they would end up worse off. Is that not absolutely contrary to the whole principle of universal credit that she has just read out?

[Mrs Hodgson]

Yes, absolutely. We know that the Government are today reneging on the former Secretary of State’s commitment.

Free school meals are worth far more to a family than £400 a year per child. That might not seem to be a lot to some hon. Members, but to those families it is an absolute lifeline. By introducing a £7,400 threshold for eligibility, the Government are forcibly creating a cliff edge that will be detrimental to families, especially children. To give just one example, someone with three children in their family who earns just below the £7,400 threshold is set to lose out on £1,200-worth of free school meals if they work only a few extra hours or get a pay rise. The Opposition’s proposal would simply remove the huge cliff edge and the work disincentive for families who most need support. It would take away the barrier to working extra hours or seeking promotion. Our proposals would therefore make work pay. The Government’s proposal is in fact the new 16 hours, which they said was a disincentive.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

I want to focus on a single point. The proposals for eligibility for free school meals are catastrophic for work incentives in the welfare system. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith)—I am sad to see that he is not in his place—used to tell us that the central point of welfare reform was to improve work incentives, but these proposals rob universal credit of its most attractive feature.

The Secretary of State for Education used to be in charge of universal credit, but this is not so much a criticism of him as a criticism of his predecessors. Ministers in the Department for Education have had seven years to solve the problem—admittedly, it is difficult and technical—of how to define eligibility for free school meals against the backdrop of universal credit. Instead of solving the problem, they have simply adopted a very lazy solution. In doing so, they are creating a very big problem for work incentives in the welfare system. One day, future Ministers will have to resolve that problem. It is disappointing that under the leadership of the Secretary of State, who understands universal credit as well as anybody, they have gone down this very lazy line.

My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) has just quoted from the universal credit White Paper, which sets out the philosophy that underpins the new benefit. I will quote another bit from chapter 2, which makes clear the principle that

“increased effort will always result in increased reward.”

That is what UC is supposed to be about, but under these proposals that will not the case. As we have heard, the Secretary of State for Work and Pensions told us that, when someone is just below the threshold, the jobcentre will advise them not to put in any more effort, not to get a pay rise and not to put in more hours. The jobcentre will recognise that, if they were to do that, they would end up worse off.

[Mrs Hodgson]

Does my right hon. Friend agree that this just reintroduces in a different guise the much maligned 16-hour threshold, which the Government said this was all to do away with?

[Stephen Timms]

My hon. Friend is absolutely right about that. The whole idea about UC was that it was supposed to get rid of cliff edges and benefit traps, but instead it is introducing a benefit trap far bigger and far worse than anything in the old benefit system. This is completely scuppering the whole purpose of UC. If it is true, as the Secretary of State told us, that jobcentre coaches are going to say to people, “No, don’t take on extra work. Don’t get a pay rise. Don’t go for more hours because if you do, you will end up worse off,” how are people supposed to progress? Surely all of us would recognise that the point about this system is to encourage progression, not to have bureaucrats telling people, “Oh no, don’t progress because if you do, you’ll end up worse off.” This is a catastrophic holing of the whole purpose of UC, and it is not as though only a few people will be affected.

The prospectus was that UC would solve all these cliff edges and benefit traps, but instead it is creating one that is much bigger. It has been calculated—I am indebted to the Children’s Society for this calculation—that more than 1 million people will be caught in the trap if these proposals go ahead. I will explain to the Education Secretary exactly why that is; he can read this in briefing the Children’s Society has provided. Some 280,000 families are affected, containing between them more than 700,000 children. Among those are 125,000 families earning below the threshold who risk being worse off if they take on extra work or get a pay rise, as the Work and Pensions Secretary recognised. In addition, there are 150,000 families earning above the threshold who would be better off if they reduced their earnings to below the threshold, so that they would then qualify for free school meals. What sort of system is that? Everybody will recognise that we do not want a welfare system that puts people in that position, but that is the system we will end up with if this statutory instrument goes through. The Children’s Society calculates that almost 21,000 families—containing more than 80,000 children aged eight to 15—who earn more than £7,400 would be better off if they cut their earnings to below the threshold to qualify for school meals. This is a catastrophic arrangement.

Unemployment (North-east)

Debate between Stephen Timms and Sharon Hodgson

Wednesday 20th June 2012 Westminster Hall

[Stephen Timms (East Ham) (Lab)]

I, too, congratulate my hon. Friend the Member for Hartlepool (Mr Wright) on securing this important debate. I also congratulate the hon. Member for Preseli Pembrokeshire (Stephen Crabb) on being hauled in to answer it. Having heard the speeches that my hon. Friends and, indeed, Lib Dem Members have made, I can well understand why the Minister responsible for employment has chosen to leave the country rather than answer the debate.

There has been some effort today to derive optimism from the unemployment figures, but the fact is that according to the figures published today, the claimant count nationally and the number of people who are long-term unemployed have gone up. My hon. Friend the Member for Sedgefield (Phil Wilson) rightly made those particularly important points. The number of people working part-time who want to work full-time is at a record level—it has never been as high as the number announced today. Youth unemployment remains above 1 million, and, as we were reminded, unemployment in the north-east has risen.

There are not many grounds for optimism in today’s figures, except that they are slightly less bad than the figures we have seen in the past few months. I am afraid the picture will not change until the Government’s economic policies change and they think again about the strategy that they have been pursuing, which has choked off demand, crushed confidence and sent us into a double-dip recession. My hon. Friend the Member for Hartlepool set out Labour’s alternative plan, and there is growing recognition—not in the Government yet, but certainly elsewhere—that we need to change course if we are to change the bleak picture of unemployment that we have heard about this afternoon.

In 1999, the unemployment rate in the north-east had risen to more than 10%, but successful initiatives reduced it to 6% in January 2008, before the global financial crisis hit. After the election, we were told by the Government that their policies would renew private sector confidence and that aggressively tackling the deficit would cause a surge in confidence, investments and new jobs. Instead, since the election confidence has collapsed and the number of unemployed in the north-east has risen by almost a quarter to 145,000. The unemployment rate is now 11.3%, including an increase of 0.5% in the past three months alone.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I apologise for not being here for the beginning of the debate, but I was in the meeting with the Dalai Lama, which was an excellent experience.

According to National Audit Office figures, the number of young people in my constituency who have been unemployed for over a year has gone up by 950% since last year. The hon. Member for Preseli Pembrokeshire (Stephen Crabb) looks confused, but the number has gone up from 20 to 210 in a year. Does my right hon. Friend not agree that that shows how damaging the double-dip recession created in Downing street is and why we need action from Ministers to create jobs and growth in the north-east?

[Stephen Timms]

Yes, I agree completely. It is long-term youth unemployment that will have the most damaging long-term effects on the economy. We know from the last time we had a lost generation how damaging it is for the life chances of the individuals affected, and now we see it happening again. We need a change of policy and a change of course to avoid the frightening figures on the rate of growth of long-term youth unemployment to which my hon. Friend draws attention.

I imagine that the hon. Member for Preseli Pembrokeshire will tell us about the Work programme and present it to us as the panacea for the problems. It struck me that the Work programme did not get a mention in either of the speeches from coalition Back Benchers, the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and the hon. Member for Redcar (Ian Swales). I suspect that that reflects the reality of the Work programme’s impact.

The hon. Member for Preseli Pembrokeshire will not be able to tell us a great deal about the Work programme, because it is a secret. Members who have been to see the Work programme prime providers in the north-east, Avanta and Ingeus, will have found out from them that they are not allowed to provide any data at all on how they are getting on—no data or numbers about their performance. The Minister responsible for employment, who we understand has left the country, imposed a contractual ban on the publication of any data on the Work programme. He said in January, under pressure in the Chamber, that he would lift the ban and would in future allow prime providers to publish some data about their own performance, as of course they all used to do—under the flexible new deal, they published the numbers on how they were doing, because they wanted to compare how they and others were getting on.

Since then, however, the Minister of State has got cold feet, so the ban remains in place. One is bound to ask: what exactly are Ministers trying to hide? Why do they not want anybody to know what is going on in the Work programme? One consequence is that Jobcentre Plus managers do not know what is going on. If one speaks to one’s Jobcentre Plus district manager, one finds that they do not have a clue what is happening in the Work programme. Nobody has told them how many people have got jobs through it. We understand that Ministers want to avoid potentially embarrassing questions being put to them, but the consequence of the ban has been a destruction of the trust on which such initiatives depend, and a reduction in performance.

We have managed to glean very limited data from the providers’ trade association, the Employment Related Services Association, and it is no surprise that the numbers suggest that the Work programme is performing no better than the flexible new deal that went before it. That is after the Government spent more than £60 million buying out all the flexible new deal contracts to introduce it. They had not tried their programme out anywhere; they just launched into it in June last year, with no piloting or testing at all. We have seen a very disappointing performance, which we will eventually get some figures on, but we should have heard about it long before now.

Youth unemployment has been an important feature of the debate. The Government’s answer to the problem has been the youth contract, but that is smaller than the future jobs fund, to which my hon. Friend the Member for Hartlepool referred, and is dependent on take-up. Given the effect on regions that suffer particularly high unemployment, I again ask the Government to reconsider their decision to put all the funding into a national pot, available on a first-come, first-served basis to those Work programme providers that ask for it. If a Work programme prime provider in an area with relatively low unemployment sees a way of getting a subsidy to push a young person who might have found a job in that area anyway into a subsidised role, it can do so, but that will be done at the expense of young people in areas such as the north-east, for whom the case for support is much stronger. Work programme providers agree. It would make much more sense to ring-fence the available youth contract funding, to ensure that it is used where it is needed, rather than squandered elsewhere.

As we have heard, we need a more active industrial strategy. That is key to reducing the problem of unemployment in the north-east. I very much agree with the tributes paid to One North East, which co-ordinated such an industrial strategy before the election. We see the benefits of it now in the announcements, which hon. Members have mentioned, on the car industry, the progress with electric vehicles and so on. That is all being lost. The RDA was scrapped in favour of the fragmented, piecemeal local enterprise partnership.

It was pleasing to hear the hon. Member for Redcar say something positive about the regional growth fund—a rare event indeed. The NAO pointed out that so far under the regional growth fund, the cost per job is more than it was with the RDAs. The whole point of the changes was supposed to be to save money; it is not working. The regional growth fund is proving to be very expensive. It is ironic that the Government accused the RDAs of being too centralised and bureaucratic, but have replaced them with one fragmented and divided scheme that does not have enough clout and another run from Whitehall, and not run very well at that.

We heard about the proposed move to regional pay bargaining, and will discuss it in on the Floor of the House this afternoon. It will certainly threaten the economy of the north-east. There have been hints of a U-turn here, and the people of the north-east would very much welcome that, if it were to be the outcome.

We need a change of course on economic policy. My hon. Friend the Member for Hartlepool set out a compelling five-point plan. We need the problems in the Work programme sorted out—frankly, we need some daylight in the Work programme. It has been secretive so far and has had a blanket thrown over it. My fear is that we will not get those changes from the Government; we need a different Government to make the changes required.