Universal Credit: North-West

Neil Gray Excerpts

Wednesday 13th January 2016 Westminster Hall

[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to contribute to this important debate under your chairmanship, Mr Nuttall. I pay tribute to the hon. Member for St Helens South and Whiston (Marie Rimmer) for securing this debate. It is primarily focused on the north-west of England, but as it concerns the roll-out of universal credit across the isles, the implications of what is said this morning stretch much further than the north-west. I congratulate her on her very good speech. She rightly did not shirk the opportunity to give the Government a kicking on their record on this matter. I pay tribute to other hon. Members who contributed. In particular, the hon. Member for Makerfield (Yvonne Fovargue) delivered a very powerful speech.

There are a great many issues at play around the changes to universal credit and the roll-out in the north-west and further afield. SNP Members are fundamentally concerned about the removal of the work allowance, which underpins the potential success of universal credit and the aim to support people into work and make work pay. We are also concerned about the monthly payment regime. Support for housing benefit recipients will not go directly to landlords, and payments will be made to households, rather than individuals.

[Graham Evans]

Will the hon. Gentleman give way?

[Neil Gray]

I will make some progress; I am just starting.

Pilot projects across the country have shown that those areas of concern are problematic. That has been highlighted by a raft of third-sector organisations in reports on this subject. In principle, universal credit sounds tempting. We are told that it is a smooth, streamlined system to assist low-income families. However, as has been emphasised today, in reality it is fraught with flaws, and low-income families are the casualties of the Tories’ poor economic choices and ideologically driven cuts. The ineffective and costly roll-out of the system to date highlights the need for an urgent rethink of these draconian policies.

Universal credit was first introduced as a pathfinder in Ashton-under-Lyne in April 2013. New claims were taken from single unemployed people who satisfied the gateway conditions. The pathfinder was then extended to three other areas in the north-west—Wigan, Warrington and Oldham—in July 2013, and in the summer of 2014 universal credit was expanded to a further 29 areas in the north-west for single people and couples who satisfied the gateway conditions. After a relaxation of the constraints on single people claiming between September and December 2014, universal credit was expanded to cover all parts of the north-west of England. New claims from families with children have been accepted in some areas, and since last January new claims from families with children have been accepted throughout the north-west.

The north-west was the first area in which universal credit was rolled out to all jobcentres. Of the 155,568 claimants at mid-November 2015, 77,378 were in the north-west, and of those, 26,521 were in employment and 50,855 were not in employment.

[Graham Evans]

May I go back to a point that the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) made about treating people like children? The hon. Member for Airdrie and Shotts (Neil Gray) mentioned paying housing benefit directly to the landlord. Are we not treating people like children if we do not think they are able to pay their housing benefit to their landlords? Surely people in receipt of benefits are perfectly capable of paying their landlords.

--- Later in debate ---

[Neil Gray]

Actually, I do not accept that.

[Graham Evans]

It is treating them like children.

[Neil Gray]

It is not treating people like children. I totally disagree with that. People in such circumstances often live chaotic lives. Sometimes, although not always, they do not wish to have the responsibility for managing that extra level of financial responsibility. A great many people in my constituency have told me that they would far rather know that they have a roof over their head that is secure regardless of what happens elsewhere, and that they would rather see their benefit paid directly to their landlord. People should be given the choice over that matter, and at the moment they are not. It is being paid to them, and they are being given the responsibility, which is not always welcome.

[Jonathan Reynolds]

I want to clarify for the record that my comment about treating people like children referred to people who have worked for 20 or 30 years and are forced to fill in a graph to show how many jobs they have applied for that day and that week. I do not think that is an appropriate way of treating people who have been in work for a long time and have lost their job; they should be treated with respect and dignity. On the point about paying housing benefit directly to landlords, I believe that there should be a choice. If people want to manage their money themselves, that is fine. There has been a huge increase in housing arrears in every area in which universal credit has been rolled out, which causes huge problems for everybody else because it has to be covered in some way. If that can be alleviated by paying housing benefit directly to landlords, I see no reason why that option should not be available to people.

[Neil Gray]

I appreciate the hon. Gentleman’s intervention.

The New Policy Institute’s report “The rise of sanctioning in Great Britain”, which was mentioned by the hon. Member for St Helens South and Whiston, states:

“The expansion of conditionality under Universal Credit could see a substantial increase in sanctions: if sanctioning occurred at the same rate as for JSA claimants, then the number could almost double, with an additional 600,000 sanctions.”

That is very concerning. The Institute for Public Policy Research, an independent think-thank, found that low-income families in Scotland will face an £800 a year cut in their income by 2020 following the UK Government’s cuts while the richest 40% will see their incomes rise as a result of tax cuts.

A number of National Audit Office reports have come to damning conclusions about the ongoing universal credit transition, highlighting the early setbacks, missed targets and overspending. The numbers simply do not lie: 17,850 claimants were on universal credit in October 2014, but the Government had planned to have 500,000 claimants on universal credit by April this year and 7 million by December 2019. Not only does that show that the Government are completely missing their own targets, but they are spending huge budgets, wasting vital funds that could be better spent supporting poor families who are struggling to make ends meet. Indeed, the NAO published a report in May 2015 entitled “Welfare reform—lessons learned”. Speaking about the report, Amyas Morse, head of the NAO, said that the DWP,

“has had to learn some hard lessons with significant financial and human costs.”

[Fiona Bruce]

The hon. Gentleman has reeled off reams of statistics during his speech, but the key statistic is the legacy of the previous Labour Government: nearly one in five households in our country had no one working at all. That in no way brought dignity to those households, those families or their communities. Should we not be addressing that statistic as a priority?

[Neil Gray]

Where people are capable of working, it is right that we should encourage them to do so. However, the problem with the changes that the Government are implementing through universal credit is that they are removing the work allowance, which is the only incentive to work in universal credit. It underpins the incentive to get into work and to remain there. Taking that away removes the premise that work should pay, which is a sad situation.

The DWP has said that universal credit will be simpler for claimants and will be treated like a wage for individuals, readying them for work. In reality, there are complex problems that will ultimately see less money in people’s pockets and more difficulties accessing adequate financial support. Analysis of the autumn statement by the IFS found that the benefit system is still much less generous in the long run, pointing out that universal credit now represents an additional cut on top of other changes, including the cut to benefit entitlement, of £3.7 billion a year in the long run. Some 4.5 million working families will be affected by the introduction of universal credit, and 2.6 million will lose an average of £1,600 a year.

This is where I must disagree with the hon. Member for Weaver Vale (Graham Evans) and where he missed the point in his contribution. People are being encouraged into work, which is right for those who can work, but removing the work allowance aspect of universal credit takes away the only incentive to work. He also made the point that the social security system needs to be fair for those who pay for it, but he perhaps forgets that those in receipt of the universal credit work allowance are in work.

[Graham Evans]

They are taxpayers.

[Neil Gray]

Absolutely. They are taxpayers.

Some 1.8 million non-working families will be affected by the introduction of universal credit, and 1.2 million families will lose an average of £1,000 a year. Over recent months, the focus of much discussion has been on tax credits, but changes to universal credit will also have profound effects. The Government’s so-called U-turn on tax credits is nothing more than a delay tactic, with the pain to be felt in the next few years under universal credit. Support for working households on low incomes getting universal credit was also reduced in the summer Budget. Ian Mulheirn of Oxford Economics said that,

“this may be a U-turn in April 2016, but it doesn’t look like a U-turn by 2020.”

In conclusion, the Scottish people voted in May 2015 for an end to austerity when they voted for the SNP. They deserve the leadership they voted for and not to face the social security storm that the Tories are brewing. The failures of the UK Government to give us full power over universal credit have left our country picking up the tab for the Tories’ poor economic choices and shoddy governance once again.