Universal Credit Work Allowance

Adrian Bailey Excerpts

Wednesday 6th January 2016 Commons Chamber

[Justin Tomlinson]

In percentage terms, it is now back to 2008-09 levels. These reforms are key to that. Having an open blank chequebook is simply not an approach that we or hard-working taxpayers would take.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Everybody understands the rationale for having a welfare system that incentivises people to work, but I would like the Minister to explain how these proposals, which mean that people have to work longer hours for the same money, will achieve that purpose.

[Justin Tomlinson]

I will now try to make some progress so that I can set that out.

The old approach of taking money from people’s wages and recycling it back to them in handouts was not transforming lives, it was trapping them. Why? It did not provide the right incentives or support for people to get on and realise their ambitions. Our central approach is therefore about ensuring people are better off in work and better off working more.

--- Later in debate ---

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I make it clear that I welcome the principles behind universal credit. Any scheme that simplifies the welfare system, provides additional support to those who have to use it and incentivises people into work, which ultimately is the best route out of poverty, has to be encouraged. However, the problem is, because of the Chancellor’s failure to reach his deficit reduction target, the original totally laudable objectives of universal credit have been subsumed by the Government’s need to cut the cost of it.

I applaud those Conservative Members who lobbied hard for the removal of the Chancellor’s proposals to cut working tax credit. They recognised the false logic of what he was doing. Indeed, in the autumn statement he said:

“I have had representations that the changes to tax credits should be phased in…I hear and understand them... the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as we introduce universal credit.”—[Official Report, 25 November 2015; Vol. 602, c. 1360.]

The overwhelming impression at that point was that his policy had been abandoned. But it has not been abandoned. He did not mention that it was effectively being rebranded and recycled through the universal credit system. I cannot understand why those people who lobbied him beforehand on working tax credits seem to be accepting those same proposals being recycled through universal credit.

The Chancellor was the one involved in smoke and mirrors. He compounded that with another trick. He suddenly found, for the funding of that, £27 billion that seemed to be in the accounts in the autumn that had not been there in July. That does credit to that well-known comedian and illusionist, the late Tommy Cooper—the Chancellor found it “Just like that.” All I can hope is that, for the state of the nation’s finances, the £27 billion is not as illusory as the benefits that the Chancellor claimed would accrue to those who move on to universal credit. Not only do I object to the way the proposals were introduced in the House, but the underlying philosophy is a contradiction of everything the Government have said about making work pay, taking people off benefits and incentivising them into work. The theme has been well developed by other contributors to this debate, so I will not take it further.

In the context of the cuts to inheritance tax, the universal credit system in effect penalises those who are working hard to produce the goods and services and pay the taxes that will reduce the deficit and benefit those who inherit capital, who will be better off. The policy is incoherent and contradictory, sends the wrong message and ultimately will be self-defeating.