Welfare Reform and Work Bill — House of Lords, 2016-01-27
Topic: Social Welfare
Patricia Hollis (Labour, Centre-left): My Lords, all of us in the House supported universal credit and we all recognised the absolutely key role played by the noble Lord, Lord Freud, in seeking to deliver it. Why have those of us who worked on tax credits—my noble friend in the Treasury and myself as the Minister taking the tax credits Bills through this House—none the less gone on to support universal credit? It was because tax credits did make work pay, they transformed lives, and we were and indeed are proud of them But, first, without real-time information, we could not keep pace with the changes of circumstance. Half of all lone parents experienced more than a dozen changes of circumstance every year, and the computers never caught up. We had to have end-of-year adjustments and we had the sadness of trying to recover overpayments from people who could ill afford to make them. Secondly, as has been said, we absolutely needed to simplify the benefits system so that people would know what they were entitled to. Finally, tax credits were rightly built on a work model, and work was defined as 16 hours a week. However, we know that for many lone parents a job for fewer than 16 hours a week, a mini job, is the pathway into work. Instead of the cliff-edge of 16 hours, we supported the principle that the noble Lord enunciated in universal credit of a ladder up from mini jobs right on into full-time work. Over some 17 long Committee days, we supported the noble Lord on universal credit The architecture of universal credit remains, but to repeat the image of the noble Baroness, Lady Manzoor, the key driver of making work pay is being shrivelled by the cuts, slice after slice. My heart goes out to the Minister because he must hate it. But, of course, he cannot possibly comment. Instead of universal credit being more supportive than tax credits, which is where we came from in helping people into work, as my noble friend Lady Sherlock has said, increasingly the opposite is now true Yes, last autumn we protected existing families on tax credits—not new claimants—from cuts to their existing income, given the commitments made on all sides during the general election. The Chancellor accepted that as people move from tax credits to UC as part of the migration timeline, they should not be worse off simply by virtue of that administrative change. It was the right thing to do and I believe that everyone in the House, including of course the noble Baroness, Lady Meacher, who was so key to this, was delighted by the move However, as my noble friend has said, such transitional protection may not cover situations where there has been a recognised, formal change of circumstance which, as it stands, could bring existing tax credits families immediately into UC over and beyond the migration timeframe, and at that point they will experience cuts in UC. I want the Minister to help us by clarifying the situation. What will take a person who is on tax credits now, who is not part of the planned timeline, into UC and thus experiencing immediate cuts? The reason it is uncertain is that at the moment, certain changes with tax credits must rightly be formally reported to HMRC. As my noble friend set out, that must be done when a lone parent becomes part of a couple or the couple breaks up, when there is another child or a child leaves school, and when hours of work or income change, or childcare costs change—for example, during the summer holidays. And, of course, tax credits rates are now and should continue to be properly adjusted to reflect those natural changes in circumstance. However, will such changes of circumstance, which would bring about a change in tax credits, now instead be a trigger on to UC, at which point families will find themselves caught by the UC cuts, or will they remain outside it? Or does this apply only when the tax credit claims have completely ended, so that no tax credits are in payment? For example, if a lone parent has repartnered and her partner’s income floats them off tax credits altogether and then, say, a year on, sadly, he moves out and she needs to make a fresh new claim, will that fresh claim be under tax credit rules or the more oppressive universal credit rules If the oppressive universal credit rules apply, will there none the less be a linking rule—as in the past with a well-established principle for disability benefits—so that within six months, or certainly a year, a new claim is regarded as a resumption of the old claim? In other words, the lone parent remains de facto on tax credits with the protection that that carries when, by the natural time migration, she moves over to UC. I apologise to your Lordships for being quite nerdish about this, but it is essential that the Minister clarify the position for us, which I am sure he will Finally, we supported UC over tax credits above all to incentivise people into work. My noble friend has spelt out the additional resource that the Minister was able to achieve to incentivise people into work, especially those more marginal to the labour market, by allowing them to keep more of what they earnt. We all thought that that was the right thing to do. Several years back, the Minister was absolutely right, while criticising tax credits because of the multiplicity of interlocking benefits, when he said that there was a high rate of benefit withdrawal—that is, the taper—which meant that some working people kept only pennies in the pound for every hour that they worked. Therefore, they did not However, although the universal credit regulations do not change the taper, in many cases they essentially halve the work allowance which can be earnt before the taper kicks in for many, and they withdraw it in its entirety for some. Therefore, cuts will affect people who come on to universal credit after April 2016. The cut in the standard work allowance for a lone parent working mother, from more than £8,000 to £4,764, means that she will lose half. Effectively, she will lose £2,628 a year by being on universal credit, which she would not if the work allowance had not been halved. Couple families with one partner with limited capacity to work because of disability will lose around £3,000. Single people will lose it altogether. Hence, this amendment I am concerned, as are my noble friend and others on our Benches, about the impact of these proposed cuts within universal credit, as we all are about work incentives. We need evidence. The Minister respects evidence. If it is not there it needs to be collected. If it is, I am sure the Minister would want us to address any problems that may arise. My fear is that universal credit, instead of encouraging people into work, will begin to disincentivise them. But I do not know, which is why, as my noble friend has argued, we need that report to determine how, where and with what severity those cuts will fall, and on whom. In particular, how will they affect the key significance of universal credit: to improve work incentives and, as we all wish, to make work pay Without improving work incentives, universal credit has lost its moral argument and becomes instead, I fear, a mere administrative tidying up of the current benefit system, with the added risk that we are already beginning to see of repeated cuts. There would be much upheaval for no gain for many claimants, and real, if potential, losses for many more. I hope that I am wrong but we need to know. Such a report would tell us and, if my noble friend chooses to put this to a vote, I hope this House will support her.