2017 11 – Parliamentary Notes

Parliament Notes

by Dick Barry

Universal Credit Roll-out.  18 October.

Universal Credit was first introduced in 2012 by Ian Duncan-Smith when Secretary of State for Work and Pensions.  It replaces six welfare payments for working age people in and out of work with a single payment.  It is being introduced gradually across the country.  In those areas where UC is operating, it has been heavily criticised for serious delays in payment and the financial shortfall in the payments themselves.  There is abundant evidence that UC is creating more poverty and increasing anxiety among its recipients.  Labour’s Opposition Day motion moved by Debbie Abrahams highlights these problems and offers a practical solution.  The motion was carried by 299 votes to 0, the government having told Conservative members to abstain.  There is no record of who voted but it is believed that one Conservative member voted for Labour’s motion.  The motion does not bind the government to act upon its content but it is normally advisable for it to take account of the feelings of the House of Commons.

Debbie Abrahams (Oldham East and Saddleworth) (Lab) I beg to move, That this House calls on the Government to pause the roll-out of Universal Credit full service.

I am delighted that we have secured this vital debate on universal credit, given the concerns across the country and among Members on both sides of the House.  I am aware that some 90 people have put in to speak, so I will take only a few interventions from both sides of the House.  I will try to get through my key points as quickly as I can.

Our motion calls on the Government to pause the roll-out of universal credit while the issues associated with this key social security programme are fixed.  I genuinely offer to work with the Secretary of State for Work and Pensions to fix the many and varied issues associated with universal credit.  To understand what needs fixing, we need to understand how we got here.  When universal credit was first introduced in 2012, it had the underpinning principles that it would simplify the social security system, bringing together six payments for working-age people in and out of work, and that it would make work pay.

Nick Thomas-Symonds (Torfaen) (Lab) My hon.  Friend talks about the underpinning principles.  Surely, one of those should be that our social security system should not drive people into debt, yet that is precisely what is happening to my constituents who are waiting months for payments.

Debbie Abrahams Absolutely, and I will go on to make those points in a moment.  Getting back to the principles, we supported those then and we support them now.  The Government wanted to pilot the implementation of UC, so they introduced a number of pathfinder areas, including my Oldham constituency, and planned a phased roll-out between 2013 and 2017.

Mark Pawsey (Rugby) (Con) My constituency was also a pathfinder, and since the introduction of UC in 2012, the claimant count in my constituency has halved.  Does the hon.  Lady think the two issues are connected?

Debbie Abrahams There may be many and varied reasons why the claimant count is down, not least the system of punitive sanctions the Government also introduced in 2012.

Chi Onwurah (Newcastle upon Tyne Central) (Lab) Newcastle was also a pathfinder constituency.  As the local MP, I have seen at first hand the absolute misery and destitution that this system has forced many of my constituents into.  Our Newcastle food bank was already the largest in the country, and now it regularly runs out of food as a direct consequence of this system.  Does my hon.  Friend agree that the Prime Minister’s attitude at questions earlier today showed a total lack of understanding of the impact and of the destitution and suffering of so many of her citizens?

Debbie Abrahams This is a real test for the Government; if there is a genuine desire to make life better for everybody across the country, UC is a key way in which we can respond.  I am so sorry to hear about the issues in Newcastle as a consequence of the introduction of UC.

Ms Angela Eagle (Wallasey) (Lab) I can report to my hon.  Friend that I have had exactly the same experience in my constituency, where people are being driven into destitution by the waits for UC.  The local food bank, alongside the citizens advice bureau, has estimated that if this full roll-out goes ahead just six weeks before Christmas, leaving everybody destitute for Christmas day, it will have to collect 15 tonnes of extra food to deal with the demand that will be generated by these changes.

Debbie Abrahams This is the reality that people are facing; this is happening in the areas my colleagues have mentioned, and our concern is that, as this is rolled out to 55 areas this month, the situation will get even worse.

Simon Hoare (North Dorset) (Con) The motion calls for a pause in the roll-out.  Is she going to tell us what the Labour party would do during that pause period?

Debbie Abrahams The hon.  Gentleman is pre-empting my speech, but I will happily propose exactly what we would like to do in conjunction with the current Government, whose programme this is.

From the start, there were a number of serious design flaws, which the Work and Pensions Committee, of which I was a member, raised in 2012.  They included, first, the fact that UC applications would be “digital by default”; in other words, applications could only be made online.  There are still several issues with that, not least the assumption that everyone is computer-literate or has ready access to getting online.  We all remember the scene in “I, Daniel Blake” where somebody who had not used a computer before was trying to do so, and we saw the real stress and difficulties he found.

Secondly, there were concerns that UC payments would be made monthly, in arrears, and paid only to the main earner of each household, so women, as second earners, are automatically discriminated against in this process; it was also quite a radical change, with rental payments going directly to the household and not the landlord.

Thirdly, there were considerable doubts about the use of so-called real-time information, which was meant to ensure that information from employers to Her Majesty’s Revenue and Customs would allow the Department for Work and Pensions to calculate quickly what people in low-paid employment would be entitled to from UC.  The reliability and validity of this data exchange was another key concern.  I believe there is a DWP RTI issues group, so there are clearly still problems.

Finally, the Government said that disabled people would not be financially worse off under UC, but because the severe disability premium payment has not been incorporated into UC, it is an effective loss of up to £62.45 a week for a single person—more than £3,200 a year.

All that was in 2012, but a number of other issues emerged in the following couple of years—universal jobmatch, ballooning costs and of course several delays.  One of the most worrying issues revealed in the January 2015 UC regulations was that people in low-paid work on UC will now be subject to in-work conditionality.  So, for example, someone who is one of 1 million or so people working on a low-paid, zero hours contract, with different hours from one week to the next, will have to demonstrate to their Jobcentre Plus adviser that they are trying to work 35 hours a week and if they fail to do that to that person’s satisfaction, they can and will be sanctioned.  For Members who are unfamiliar with this concept, those people will have their social security payments stopped for a minimum of a month.

Fast forwarding to the 2015 summer Budget, the then Chancellor announced that cuts would be made to the so-called universal credit work allowances, which are how much someone can earn before UC support starts to be reduced.  For example, a couple with two children claiming housing costs had their work allowances cut from £222 a month to £192 a month.  In addition, approximately 900,000 families with more than two children could not receive support for third or subsequent children.

The UC equivalent of the family element in tax credits was also abolished.  The Government’s equality analysis showed that women and people from black, Asian and minority ethnic communities will be most adversely affected by these work allowances cuts.  Let us recall what the principles of UC were and then consider that the Institute for Fiscal Studies stated at the time that the cuts to work allowances meant the principle of making sure work always pays was lost.  The Government’s claim that UC is leading to more people getting into work is misleading, as it is based on 2015 data, before the work allowance cuts came into effect.

The current Chancellor’s attempt to redress some of the damage of these cuts by reducing the UC taper rate in last year’s autumn statement has had a marginal effect.  Members may recall that he reduced the rate from 65% to 63%, so that for every £1 earned over the work allowance, 63p of UC support is withdrawn.  That is a far cry from the 55p rate envisaged when UC was first being developed.  On that basis, the Resolution Foundation estimated that some families will lose £2,600 a year because of these cuts.

This summer, the Library analysis that I commissioned showed the real-terms impacts on different family structures and for different income groups.  It found that a single parent with two children working as a full-time teacher will be about £3,700 a year worse off in 2018-19 compared with 2011-12.

So where are we are up to now?  The most recent statistics show that there are currently about 600,000 people claiming UC, over a third of whom are receiving support via the full service.  The roll-out of UC over the next six months will see the overall case load rise to just under 1 million, which is a 63% increase.  On average, 63,000 people a month may start a new UC claim before January 2018, and by 2022 we expect about 7 million people to be seeking support from the programme.  We are at a turning point in the Government’s flagship programme, the roll-out of which is currently being ramped up dramatically.

On top of the design flaws and cuts that I have just mentioned, several other issues have emerged.  Perhaps the most pressing is the Government’s decision to make new claimants wait six weeks before they receive any support.  Four weeks of that is to allow universal credit to be backdated, plus there is an additional week, as policy, and then a further week waiting for payment to arrive.  This “long hello”, as some have called it, is believed to be one of the primary drivers of the rising debt and arrears we are now seeing.  Citizens Advice reports that 79% of indebted claimants “have priority debts such as rent or council tax, putting them at greater risk of eviction, visits from bailiffs, being cut off from energy supplies and even prison”.

Half those in rent arrears under universal credit report that they entered into arrears after they made their claim.  What is worse is that many claimants do not even receive support within the Government’s lengthy six-week deadline: one in four are waiting for longer than six weeks and one in 10 are waiting for more than 10 weeks.  The Government’s so-called advance payment, which is meant to be available to those in need, is in fact a loan that has to be paid back within six months out of future social security payments.  I recognise and welcome the Secretary of State’s announcement about speeding that up, but I will explain later in my speech exactly what we might need to tweak.

As we have heard, the measures I have outlined are pushing people into debt, rent arrears and even homelessness.  Last year, the National Housing Federation warned that approximately 80% of tenants on universal credit were in rent arrears, with the six-week delay being attributed as the key cause.  A few weeks ago, a nurse came into my surgery.  She was a single mum who had transferred from tax credits to universal credit.  She had the six-week wait, and as a result the arrears racked up.  When she came to see me, she had just been served an eviction notice.  As universal credit is rolled out, such stories will become more and more common.

The Mayor of Greater Manchester has warned that rough sleeping will double over the winter if the universal credit roll-out continues without its fundamental flaws being addressed.  This is not scaremongering; it is based on estimates by local authorities in which universal credit has already been rolled out.  Throughout Greater Manchester, the average arrears for people on UC in social housing is £824, compared with £451 for non-UC tenants.  It is already having an impact on rising evictions and homelessness—and that is without even going into what is happening in the private rented sector.  In addition, the increase in rent arrears for social housing landlords means that less money is available for investment in housing-stock maintenance or the building of new social housing, thereby adding to the existing housing crisis.

The increase in food bank use is another consequence of universal credit delays.  Earlier this year, the Trussell Trust reported that referrals for emergency food parcels were significantly higher in a UC area, at nearly 17%, compared with the national average of just under 7%.  The trust’s report also highlighted the impacts on the mental health of people on UC, who were described as stressed, anxious or depressed, as they worried about being unable to pay bills and falling into debt.

Who is most likely to be affected and why?  Single parents are particularly vulnerable under universal credit.  There are now 65,000 single parents on UC.  Gingerbread has described how, through “error in administration and the structure of the system itself, single parents have been threatened with eviction and jobs have been put at risk”.

Gingerbread told me about Laura, who lives with her two sons, one of whom is severely disabled.  Laura had to apply for universal credit when her temporary contract at work ended.  She had to wait eight weeks for support, and visited a food bank to feed her children.  She was not told about advance payments and was struggling with rent arrears.  Reflecting on her experience, Laura said: “it’s very stressful, single parents quite often have enough stress and worry about money; and other things, bringing up your children to start with and it’s exacerbated by this very unfair, very unjust system”.

With child poverty among single parents forecast to increase sharply to 63% by the end of the Parliament, it is vital that we fix the social security system to ensure that it is working.  In a forthcoming Child Poverty Action Group report analysing the cumulative effects of social security changes on child poverty since 2010, the section on universal credit highlights its design issues and, in particular, the detrimental impact on single parents.  It states: “Universal credit was designed to be more generous to couples than single people, with lone parents in particular expected to lose out compared with tax credits.  This was a deliberate reaction to the decision, within tax credits, to boost support for lone parents in comparison with couples because of their higher risk of poverty and the greater difficulty of increasing earnings from work if you are a lone parent.”

The report goes on to say: “Since its initial design, universal credit has been subject to a succession of changes and cuts which have substantially reduced its adequacy overall… As a result, it is now less generous than the system it is replacing, and no longer offers the promise of reducing poverty.”

Universal credit is not just affecting single parents; young families and families with more than two children will also fare much worse under UC.  Young families going on to universal credit will be affected by the decision to introduce a lower under-25 rate of the standard allowance in universal credit, even for parents with children.  As a result, young families will be at increasing risk of poverty, especially if they have a single earner or a second earner working part time.  Of course, among other cuts, limiting the child element of support to only two children leaves families with more than three children worse off as well.  The report reiterates that as well as being less generous and actually cutting family income, UC fails to incentivise people into work or to progress in work, which are fundamental principles of UC.  Shockingly, it has been calculated that, because of the cuts, universal credit will push a million more children into poverty by 2020, with 300,000 of them under five.  Some 900,000 working-age adults will be pushed into poverty, while 900,000 children and 800,000 adults will be living in severe poverty.

Earlier, I mentioned the design issues that are affecting disabled people.  This week, I heard from someone who has lost nearly £80 a week—a week—because of their transfer to universal credit after they moved house, ending their ESA claim.  When UC was first launched, the Government said they wanted to “simplify the current complex rules which have been prone to error and complex and confusing for disabled people” and to replace “seven different premiums with a simpler, two-tier system that focuses support on the most severely disabled people who are least able to work”.

However, subsequent social security changes, particularly the abolition of the UC limited-capability-for-work element from April 2017, have meant that, instead of a net gain, it is likely that there will be a net reduction of support for people with health conditions and disabilities.

Under this Government, we are seeing unprecedented cuts in support to disabled people, with the consequence that more and more disabled people are living in poverty.  The number currently stands at more than 4.2 million; this cannot go on.  This is exactly what the UN Committee on the Rights of Persons with Disabilities said is causing a “human catastrophe”.

The self-employed are another group who are adversely affected by the Government’s changes to universal credit.  We have seen a dramatic increase in self-employed people in recent years: they now make up 15% of the workforce—5 million in total—and account for 80% of the increase in employment since 2008.  But 45% of them pay themselves less than the living wage.

As I have said many times, it is absolutely right that we try to design a social security system that can properly support self-employed people and that recognises the fluctuating nature of the labour market for those workers.  Sadly, universal credit no longer does so, after the introduction of the minimum income floor, which is an assumed income for self-employed people, found by multiplying the minimum wage on the assumption that self-employed people are working 35 hours a week.  One self-employed recipient who contacted me said: “This system does not allow for the fluctuations in income that are experienced by the self-employed.  Surely an assessment made on a year’s profits would be much fairer.” They went on to say that universal credit will close down enterprise as a route to employment.

Importantly, the Department for Work and Pensions does not average incomes over a year, which leads to issues around holidays, such as Christmas, when the self-employed may take time off.  They will be punished for doing so under the Government’s universal credit system.  The Federation of Small Businesses has also expressed concerns, saying that it expects major problems for low-income self-employed people to set in at Christmas.

We need to build a social security system fit for the 21st century and to make sure that all workers, employed or self-employed, are afforded dignity and security as work demands fluctuate.  We cannot allow the devastating impacts of universal credit roll-out to happen.  I reiterate my genuine offer to work with the Government to address the very real concerns about universal credit, particularly its design flaws, the administrative issues and the cuts.

I welcome the Government’s announcement this morning that the so-called helpline will now be a Freephone line.  Given Serco’s appalling performance over the past few years and the profit that it has made from the Government contract, it should be paying for the Freephone lines.  It is unacceptable that people on the lowest incomes have been paying money that they do not have on phone calls to find out about their claims.

Action must be taken to improve call handler capacity and competence, so that people making inquiries on their claim are not kept on hold or passed from pillar to post.  Another key ask is for alternative payment arrangements to be offered to all claimants at the time of their claims.  That includes ending the one-week wait and enabling people to have fortnightly, instead of monthly, payments where appropriate with the option of the housing element to go directly to the landlord.  Alternative arrangements have already been made available in Northern Ireland and will be introduced in Scotland, so there is no reason why they also should not be available to people in England and Wales.  We need to look at the advanced payments and make them more manageable.  A repayment over six months is still creating huge issues for people on the lowest income.

These are relatively straightforward suggestions.  I recognise that reinstating the original level of work allowances and reducing taper rates are less so, but if the Government and the Prime Minister are sincere about tackling injustice in this country and making sure that work pays, they must act.  Once again, I commit to working with them on this.  We must address the poverty and discrimination that universal credit is causing women, children, disabled people and black, Asian and minority ethnic communities now.  This will only get worse as universal credit is rolled out.

This country is at a crossroads.  Brexit must not blind this Government to other obligations to their citizens.  We must all work together in the national interest to avert the disaster that is about to unfold if universal credit is rolled out without fixings its failings.  I urge all MPs to vote with their conscience, stand with us and their constituents and pause and fix universal credit.