Universal Credit (Children) — House of Commons, 2016-05-10
Topic: Social Welfare
Stephen Creswell Timms (Labour, Centre-left): I am grateful to my hon. Friend for raising that point, and Citizens Advice points out that this is the biggest practical problem that arises where universal credit has already been introduced. The assumption with universal credit is that people have a monthly pay cheque that will see them through the first month, and that they will receive universal credit at the end of that. However, Citizens Advice suggests that more than half of those claiming are paid weekly, not monthly, and therefore do not have a month’s pay cheque to keep them going for those five weeks. That is causing serious problems Will the Minister update the House on what the Government now believe the effect of universal credit will be on child poverty? Given the drastic cuts that we have seen, I believe that implementing universal credit will increase child poverty, rather than decrease it as we were told it would, and as—I have no doubt—was the intention of the former Secretary of State for Work and Pensions in introducing this radical change Some information on that question has been provided by the Institute for Fiscal Studies in its February report, "Living Standards, Poverty and Inequality in the UK: 2015–16 to 2020–21", which shows relative poverty rates from 1997-98 to 2020-21. It points out that in 1997-98 relative child poverty—which was inherited by the incoming Labour Government— stood at 27%. By 2010-11 when that Government were replaced, that figure was down to between 17% and 18%. The statutory target enshrined in the Child Poverty Act 2010—which I took through the House with all-party support—was 10% by 2020, but after 2010 the level of child poverty flatlined for a number of years, and it is now starting to rise. Under the IFS projection, by 2020 it will be virtually back up to the catastrophic level inherited by the Blair Government in 1997. As the IFS states in its report "the projected increases over the next few years simply reverse the large falls seen under Labour." It is interesting to contrast that with what the IFS says about pensioner poverty. Like child poverty, pensioner poverty in 1997 was at a high level—around 27%—but the policies of the Labour Government reduced that to around 17%, and that level remained fairly stable throughout the previous Parliament from 2010 to 2015. The future trajectory for pensioner poverty suggests that it will not rise and will carry on at around 17%. By contrast, child poverty will rocket back up to the levels of 1997. Under the IFS projection, the rate of child poverty in families with more than three children will be more than 30% by 2020 The huge cuts announced to universal credit will come about by reducing the income of working families with children—a lot of families will be much worse off not only compared with what they would have received under the tax credit system, but in comparison with what they would have received if the original universal credit proposals had gone ahead. The Child Poverty Action Group highlights problems for lone parents and states that "lone parents will be hit particularly hard, and stand to lose…around £554 per year if renting, or over £2,600 per year if not…The children of single parents are already at twice the risk of living in poverty as those in couple families, and this will exacerbate their disadvantage" Cuts to universal credit will drastically reduce the income of working families, and just as big a worry is that incentives for unemployed parents to get into work will be much weaker under current proposals for universal credit than originally intended. That was spelt out by the Resolution Foundation in its report, which states: "These cuts don’t just affect incomes, they also undermine the scheme’s incentives structure… Returns to entering work are much lower than anticipated under the earlier design of UC." It warns that parents—particularly lone parents—will find the incentives to work more hours very weak, and many will reduce their hours for a very small income drop.