Universal Credit and Working Tax Credits

Stephen Timms Excerpts

Wednesday 15th September 2021 Commons Chamber

[The Secretary of State for Work and Pensions (Dr Thérèse Coffey)]

Just this week, the official jobs statistics showed that more people are getting back into work and there is a record number of vacancies. That is a tribute to the British people and businesses. It shows that our plan for jobs is working. It shows that our comprehensive and unprecedented support for citizens and corporations as well as the NHS, in trying to protect lives and livelihoods, has worked. After the terrible personal and economic impact of covid, boosted by the successful vaccination roll-out, Britain is now rebounding.

It was right that we took prompt and decisive action to support our nation during this challenging time. We had the job retention scheme, the self-employment grants, the VAT changes, the business rates relief, the suspension of evictions for people and businesses who were renting—I could go on. We could only do that, though, because we went into the global pandemic with strong economic foundations built as a result of 10 years of Conservative measures to restore the nation’s finances after the financial crisis on Labour’s watch, when, memorably, there was no money left. Those measures included a sustained focus on supporting people to move into and progress in work through universal credit, with the highest level of employment ever seen in this country just before covid hit.

[Stephen Timms (East Ham) (Lab)]

If this cut goes ahead, with £20 a week taken off universal credit, it will reduce the support for an unemployed family to the lowest level as a proportion of average earnings at any time since the welfare state was established after the second world war. How can that possibly be justified?

[Dr Coffey]

As I will probably say a bit later as well, this was indeed a temporary uplift, recognising the financial impact on people newly unemployed and that the uplift would be somewhat of a cushion for their financial circumstances. However, do bear in mind all the other support that we have given to help families get back on their feet, all the other elements that we have used to help people manage the cost of living, as well as the extra welfare grants that we targeted specifically through local councils. They have all been actions to help people, and we are helping people back into work, and better-paid work.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

I very much welcome the argument that the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) has just set out, and I am grateful to him for reaffirming his support for the £20 a week rise. Like him, I want to focus on the question of adequacy.

If this cut goes ahead, it will reduce real-terms support for an out-of-work family to the lowest level since Margaret Thatcher was Prime Minister. The economy has grown by more than 50% in real terms since then, but the Government’s proposal is that support for unemployed families should not have grown at all over those 30 years. That support will be about one seventh of average earnings, which is, as I said in my intervention on the Secretary of State, the lowest proportion of average earnings it has been since 1948. The Secretary of State made no attempt to justify why it was so low. I invited her to do so, but she did not, and of course it cannot be justified. The House of Commons Library tells us that, if we go back to 1911 when unemployment benefit was introduced, it was set at a higher level as a proportion of average earnings than the system will deliver if this cut goes ahead. The cut will take effect just as we are seeing prices surge, including food prices, as we have seen in today’s inflation figures, and energy bills, with the Ofgem price cap lifted.

The Work and Pensions Committee heard last week from a lone father of two children who told us what this was going to mean for him:

“The uplift sent some relief and for that to be removed is going to leave us with that big question again: do I go hungry, do my kids go hungry or do we keep the house warm?”

Somebody worrying about how to buy their next meal is not going to be able to focus on finding a decent job. Taking away £20 a week will leave the level of support below the basic minimum that is needed and that we require the system to provide.

The cut will hit working families hard as well. The Committee heard from working lone parents who will lose £86 a month from their income. One of them told us that

“if one of the children gets a party invite—which some weeks is my worst nightmare because then I have to find the money for them to be able to do that—it is kind of a case of robbing Peter to pay Paul all of the time anyway. There have been months where I have to decide which bill I am not going to pay this month...you are constantly playing catch-up on utilities particularly...The extra £86 a month has allowed for us not to be doing that so much.”

And that is a parent who is in full-time employment. If this cut goes ahead, it will reduce support for working parents and unemployed parents below the basic minimum that we all want people to have to enable them to look for a job, or for a better job, and to care for their children—things we all want them to do. We will instead be imposing grinding hardship on a very large number of people at a time of surging costs and inflation. Taking away the £20 a week now will mean that the level of support provided will be less in real terms, given today’s inflation figures, than the support that was available going into the pandemic.

The Government have lost touch with what people are having to deal with. The Secretary of State’s claim that people could make up the extra £20 a week by working an extra two hours is simply wrong. Governments do lose touch, but this House must not. We must retain a recognition of the realities that people are dealing with. We need to grasp what this will do to families, even though Ministers do not. It is not just about numbers on a spreadsheet. Half of those claiming universal credit only started doing so during the pandemic. They are not returning to their former level of support. Many will have to get used to a lower income than they have ever had to cope with, and that will come as a rude shock to those who were convinced at the 2019 election, maybe for the first time, that the Conservative party understood what they were dealing with. Every former Work and Pensions Secretary since 2010 opposes the cut, as the right hon. Member for Preseli Pembrokeshire reminded us. It will leave the system unable to do the job we need it to do, and the House must reject this cut.