Universal Credit (EAC Report)

Viscount Chandos Excerpts

Wednesday 23rd March 2022 Grand Committee

[Viscount Chandos (Lab)]

My Lords, I am delighted to follow the noble Lord, Lord Bridges, who, as he has just demonstrated, is an excellent successor to the noble Lord, Lord Forsyth, as chairman of the Economic Affairs Committee.

We are finally able to debate our report on universal credit, in the bijou location of the Moses Room, 20 months after its publication. Other noble Lords, not least the noble Lord, Lord Shipley, have remarked on this unacceptable delay—if not necessarily the relegation of the debate to the Moses Room. For me, there is perhaps one silver lining to this cloud, which is that I find myself the only speaker this afternoon, apart from the noble Lord, Lord Forsyth, who was an EAC member when the inquiry was held, so I feel that I can be permitted to say a few words about the chairman as well as echoing his tribute to the work of the staff, special advisers and witnesses who guided us through this exceptionally complex and difficult subject.

The noble Lord, Lord Forsyth, led the committee from the front and none of us could match the burning sense of injustice about the Government’s policies that he articulated in the meetings and subsequently, as his introduction today has demonstrated. It is a little-known secret that to commemorate Sir Bernard Ingham’s description of the late Lord Biffen as a “semi-detached” member of the Thatcher Cabinet, the Conservative Whips in your Lordships’ House vote annually on the Bernard Ingham award for semi-detachment. I am told that the noble Lord, Lord Forsyth, has won this so many times in recent years that he may well own the trophy in perpetuity, although I think that there are promising signs that the noble Lord, Lord Bridges, may give him a run for his money.

It would not be right to thank the many witnesses who gave oral or written evidence without noting the particular contribution of Sir John Hills, professor of social policy at the LSE, who very sadly died not long after the report’s publication.

I will concentrate my remarks on a couple of big-picture questions; other speakers have already raised highly effectively many of the specific recommendations in the report and the universally disappointing response from the Government. First, is it right to see universal credit as the basis of in and out of work benefits for the foreseeable future? The report’s summary states that

“we received overwhelming evidence that Universal Credit should not be replaced with a new system, not least because of the severe disruption that this would cause for millions of people.”

Although I continue to feel a nagging worry that this could be an example of sunk cost fallacy after 10 years of tortuous migration from legacy benefits—still not completed—I at least tentatively support this conclusion. My suspicion is that the digital platform on which universal credit is based should and will survive but that, by the time the reforms advocated in the committee’s report and others from different sources have been implemented by possibly a more enlightened Government than this one, the system will be largely unrecognisable from that which currently prevails.

One of the recommendations of the report was that childcare should be taken out of universal credit. Picking up on the remarks of the noble Baroness, Lady Valentine, we had a vigorous debate about whether housing benefit really fitted within universal credit. In the end, we concluded that it should not be moved, but I think that a universal credit system would still work effectively with four or five of the legacy benefits incorporated, not the current six.

I turn now to my second main question. Can any system give the support that the noble Lord, Lord Forsyth, so eloquently argued that we, as a civilised society, should give to those in financial distress? I vehemently support the noble Lord’s condemnation of the Government’s decision not indefinitely to continue the £20 per week uplift that was introduced for the period of lockdown when many households’ outgoings may have decreased.

However, as every psychotherapist might say, “Maybe we should move on”. I will move on and ask the fundamental question: what amount is necessary and fair for any household to live on? Professor Jonathan Portes, who was the chief economist at the Department for Work and Pensions from 2002 to 2008, wrote last year:

“The overwhelming case against cutting Universal Credit: not the pandemic, but the extraordinary cuts to unemployment-related benefits over the last four decades.”


In the period from 1979 to 2019, average out-of-work benefits fell from 25% of average earnings—hardly a licence for luxurious living—to less than 15%. Even if the temporary uplift in universal credit in 2020-21 and the suppression of some earnings may have reversed that trend in those years, the relative normalisation of the economy now will inevitably see new lows tested.

The furlough measures introduced by the Government in response to the pandemic and related working restrictions were rightly and generally praised. These provided for furloughed employees to receive 80% of their previous earnings, capped at £30,000 per annum. Can the Minister explain to your Lordships why she thinks that, if 80% was the right level of income support under the furlough scheme, 15% of average earnings is a justifiable level of support for unemployed people in normal economic conditions? I am not saying that 80% is a sustainable level in the long term, but surely 15% is far too low.

It may or may not be a coincidence that today’s debate coincides with the Chancellor’s Spring Statement, with what I can only regard as a stunt of an income tax cut in two years’ time—and I admit that perhaps the inventor of stunts of that sort was my right honourable friend Gordon Brown. The general tone of today’s Spring Statement seemed to be, “I’m all right, Jack”. Unless and until the Government reform the system of universal credit in the way in which the committee has advocated, we will face a period, to adapt JK Galbraith, of

“private affluence and public poverty”.