A report on the House of Lords debate on Universal Credit which took place on Thursday 16 November 2017. Much of the debate was spent by peers illustrating the problems with UC but there were some practical suggestions (including some cited from the Low Incomes Tax Reform Group). Most speakers were from Labour, which along with other opposition parties wants a pause to the roll out of UC because of unintended consequences on claimants.
Baroness Hollis of Heigham said the problems with UC are down to the DWP fighting Treasury cuts and losing. “Now that UC is far meaner in its payments, nastier in its sanctions and harsher in its delivery than tax credits, the Treasury is suddenly anxious to roll it out ever faster—10 times faster.” The IFS says that three million working families will, on average, be £2,500 a year worse off, she added. A lone parent with one child now has to work 25 hours a week on UC to get the same income as working 16 hours a week under tax credits. Second earners, mostly partnered women, are even worse hit, with no work allowance, she said. CPAG, drawing on DWP and IFS stats a fortnight ago, said the Treasury’s repeated cuts to UC will send one million more children into poverty by 2021. Plymouth Community Homes has 14,000 tenants; 75 per cent of its claimants are paid weekly, fortnightly, or have limited hours, so payment delays sink those claimants deeper into the quagmire of debt. She added that more than a quarter of claimants in the UK are waiting more than six weeks for their initial payment; one in 10 is waiting for more than 10 weeks. The Baroness suggested that a fortnight’s UC grant at the beginning of a UC claim—with no clawback, just a fortnight’s grant until first full payment as now—would keep many families afloat.
Lord Livermore, who worked in the Treasury during the introduction of tax credits, said the steady accumulation of cuts means UC will now be £3 billion a year less generous than the tax credit system it replaces. Some 3.2 million working families will be worse off, with an average loss of £48 a week. Some 600,000 of these will no longer be entitled to any support at all. Families with children will be hardest hit, with lone parents losing an average of £26 a week. The blame is with the previous Chancellor’s ‘ideological’ decision to tighten his fiscal rules more than was needed to simply reduce the deficit, and his decision on how to allocate resources within the ‘fiscal straitjacket’ (he cited the decision to cut £8 billion from inheritance tax).
UC was designed to focus on reducing worklessness, which is now at an all-time low, so in-work poverty is now the increasing challenge, said Baroness Drake. Baroness Armstrong of Hill Top was worried about the problems arising with the two-child limit and its effect on kinship carers. Baroness Andrews supports the Citizens Advice Bureau’s shortlist of three items to improve UC: remove the seven waiting days at the start of a claim; allow people to adjust to UC by offering everyone a choice of how they would like the benefit to be paid; and ensure that the people who need it get a first payment within two weeks. Baroness Howells of St Davids said there is quite a lot that is good about UC, but it has to be distributed fairly and quickly. Lord McKenzie of Luton said more landlords are joining those who are already reluctant to accommodate tenants on UC. Lord Beecham said there are particular problems for those residents for whom English is not a first language and with free school meals. The Peabody Trust estimates that the mandatory six-week wait for a first payment will put more than 23,000 low-income families at risk of destitution, said Lord Morris of Handsworth.
To tackle the autism employment gap, the National Autistic Society wants all work coaches fully trained and the Government to produce an autism-specific employment pathway with end-to-end specialist support, said Lord Touhig. The Low Incomes Tax Reform Group of the Chartered Institute of Taxation has suggested a number of measures that would help to mitigate the worst impacts of the current system, and ‘I am grateful to Robin Williamson, Victoria Todd and Claire Thackaberry for their briefing and excellent report’, said Baroness Donaghy (she then went on to list some of them).
The frontbench Labour speaker was Baroness Sherlock, who summed up: “We have heard descriptions of chaos, failing systems and problems. This has to stop.” She concluded: “I urge the Government to take a deep breath now and stop. As my noble friend Lord Cashman said, leadership is not about ploughing on regardless; it is about stopping, pausing, listening to every word said here today, reading 650 pages of evidence given to the Select Committee and getting the system right before pressing on. That is the very least that this country demands.”
UC was promoted by the Conservatives as being good at getting people into work. Lord Farmer said ‘there will be a projected £70 billion in savings to the public purse as a result of the shift away from the legacy benefit system, not because of parsimony, but because of people moving into work’. Baroness O'Cathain said the project has a large learning curve for those who are not ‘exactly financially literate’. Lord Shinkwin said there needs to be prompt help for those in real difficulty. Lord Fink said UC has definitely created clear incentives to work by removing the poverty traps.
Lord Suri praised the increasing of the share of advance payments to more than 50 per cent of the estimated first UC payment and would like more flexibility to let that rate be raised or banded for different kinds of claimants. Baroness Stroud said: “if you are on a higher income outside UC, you can claim the tax-free childcare offer for as many children as you have. That is not the case for UC claimants. An investment of around £50 million could change that.”
Baroness Meacher said claimants whose most recent employer just happens to make a final payment, maybe of statutory sick pay, a day or so after the claimant’s assessment period begins will receive ‘precisely zero in their first so-called UC payment’. They will get nothing at the end of six or even 10 weeks’. Lord Low of Dalston said the online application process must be made accessible, including the provision of information that is easy to understand. Disabled people should also be given the opportunity to make their claim in person and have access to appropriate support. Lord Kerslake said a comprehensive support package to help with the application process is needed and ‘let the claimant make the decision on whether they want their rent paid direct, not have the state decide what is good for them’.
Lib Dem Lord Shipley said it is unreasonable to make people wait for six weeks and ‘how many monthly-paid employees would be happy to wait for their money until at least seven days into the next month?’ He also chided the Government for assuming that everyone has the capacity to fill in the forms themselves. The Lord Bishop of Durham said the decision not to uprate the main elements of UC in line with inflation means that around 400,000 more children will be in poverty, according to estimates by the Joseph Rowntree Foundation. Lord Kirkwood of Kirkhope (Lib Dem) said ‘we are in danger of risking future collapse in public confidence in this very important policy’ as it stands.
Summing up the debate, Parliamentary Under-Secretary of State, DWP, Baroness Buscombe said UC applies a consistent taper rate to earnings above a claimant’s work allowance, meaning that people are no longer penalised for taking on more work and 5,000 more work coaches will be hired, so that people have a personalised support system. Of the current tax credits population, nearly 70 per cent are paid monthly or four-weekly, she added. The DWP is not reducing the level of support it provides to claimants through the reduction in the number of jobcentres, instead just ‘streamlining’ the system. UC offers parents unprecedented personalised support, including paying up to 85 per cent of childcare costs. “If a claimant already has two children in their household and takes on responsibility for an additional child through kinship care, the Government do not wish to dissuade this from happening in the interests of the child, and an exception is provided.”
The full two hour debate can be read here.
House of Commons Work and Pensions Committee – letter to Work and Pensions Secretary
Separate from the debate above, the Chair of the Commons Work and Pensions Committee, has written to the Secretary of State for Work and Pensions calling for the Government to move in the Budget to stop Universal Credit (UC) penalising self-employment. Frank Field (Lab) cited the latest report from the Low Incomes Tax Reform Group (LITRG) in his letter, which calls on the Government to fix a flaw in the design of UC which can leave the self-employed far worse off than employees earning exactly the same annual pay.
In a statement issued alongside the letter Field states: “A family could be left several thousand pounds worse off over the course of a year, compared to one in otherwise identical circumstances, simply because their earnings rely on the often volatile returns of self-employment. It has taken the Government six months and counting to respond to our recommendation of reform. I can only hope and assume that there will be some good news on this front in the Budget."
In his letter Field spells out these concerns, supplementing evidence from individual entrepreneurs who have stressed that Universal Credit can work against the self-employed or even push them out of business.
The letter cites a recent Low Incomes Tax Reform Group report found that ‘there is a very real possibility that people will be discouraged from starting self-employment and existing claimants may be forced to give up their work’.
Back in May, The WP Committee said the Minimum Income Floor should not apply to self-employed UC claimants until the policy had been independently reviewed, and set out various possible options for MIF reform.
See the letter here.
External Relations Officer, CIOT