Universal Credit

Debate between Sharon Hodgson and Stephen Timms

Tuesday 13th March 2018 Commons Chamber

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

These regulations will affect millions of families up and down the country, so it is only right that we are able to discuss them today. The Government consulted from November to January on introducing an earnings threshold that would restrict free school meals to families with net earnings under £7,400 per annum. The consultation received 8,981 responses. However, the Government excluded 8,421 of those responses from their analysis, meaning that fewer than 4% of respondents agreed with the Government. Surely that goes against every rule of public consultations. Talk about statistics being used against vulnerable people!

In 2010, the then Secretary of State for Work and Pensions promised in the White Paper on universal credit that it would

“ensure that work always pays and is seen to pay. Universal Credit will mean that people will be consistently and transparently better off for each hour they work and every pound they earn.”

[Stephen Timms (East Ham) (Lab)]

I am glad that my hon. Friend has picked out that point. She will have heard the Secretary of State saying that jobcentres would advise people not to take extra work or to get a pay rise because they would end up worse off. Is that not absolutely contrary to the whole principle of universal credit that she has just read out?

[Mrs Hodgson]

Yes, absolutely. We know that the Government are today reneging on the former Secretary of State’s commitment.

Free school meals are worth far more to a family than £400 a year per child. That might not seem to be a lot to some hon. Members, but to those families it is an absolute lifeline. By introducing a £7,400 threshold for eligibility, the Government are forcibly creating a cliff edge that will be detrimental to families, especially children. To give just one example, someone with three children in their family who earns just below the £7,400 threshold is set to lose out on £1,200-worth of free school meals if they work only a few extra hours or get a pay rise. The Opposition’s proposal would simply remove the huge cliff edge and the work disincentive for families who most need support. It would take away the barrier to working extra hours or seeking promotion. Our proposals would therefore make work pay. The Government’s proposal is in fact the new 16 hours, which they said was a disincentive.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

I want to focus on a single point. The proposals for eligibility for free school meals are catastrophic for work incentives in the welfare system. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith)—I am sad to see that he is not in his place—used to tell us that the central point of welfare reform was to improve work incentives, but these proposals rob universal credit of its most attractive feature.

The Secretary of State for Education used to be in charge of universal credit, but this is not so much a criticism of him as a criticism of his predecessors. Ministers in the Department for Education have had seven years to solve the problem—admittedly, it is difficult and technical—of how to define eligibility for free school meals against the backdrop of universal credit. Instead of solving the problem, they have simply adopted a very lazy solution. In doing so, they are creating a very big problem for work incentives in the welfare system. One day, future Ministers will have to resolve that problem. It is disappointing that under the leadership of the Secretary of State, who understands universal credit as well as anybody, they have gone down this very lazy line.

My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) has just quoted from the universal credit White Paper, which sets out the philosophy that underpins the new benefit. I will quote another bit from chapter 2, which makes clear the principle that

“increased effort will always result in increased reward.”

That is what UC is supposed to be about, but under these proposals that will not the case. As we have heard, the Secretary of State for Work and Pensions told us that, when someone is just below the threshold, the jobcentre will advise them not to put in any more effort, not to get a pay rise and not to put in more hours. The jobcentre will recognise that, if they were to do that, they would end up worse off.

[Mrs Hodgson]

Does my right hon. Friend agree that this just reintroduces in a different guise the much maligned 16-hour threshold, which the Government said this was all to do away with?

[Stephen Timms]

My hon. Friend is absolutely right about that. The whole idea about UC was that it was supposed to get rid of cliff edges and benefit traps, but instead it is introducing a benefit trap far bigger and far worse than anything in the old benefit system. This is completely scuppering the whole purpose of UC. If it is true, as the Secretary of State told us, that jobcentre coaches are going to say to people, “No, don’t take on extra work. Don’t get a pay rise. Don’t go for more hours because if you do, you will end up worse off,” how are people supposed to progress? Surely all of us would recognise that the point about this system is to encourage progression, not to have bureaucrats telling people, “Oh no, don’t progress because if you do, you’ll end up worse off.” This is a catastrophic holing of the whole purpose of UC, and it is not as though only a few people will be affected.

The prospectus was that UC would solve all these cliff edges and benefit traps, but instead it is creating one that is much bigger. It has been calculated—I am indebted to the Children’s Society for this calculation—that more than 1 million people will be caught in the trap if these proposals go ahead. I will explain to the Education Secretary exactly why that is; he can read this in briefing the Children’s Society has provided. Some 280,000 families are affected, containing between them more than 700,000 children. Among those are 125,000 families earning below the threshold who risk being worse off if they take on extra work or get a pay rise, as the Work and Pensions Secretary recognised. In addition, there are 150,000 families earning above the threshold who would be better off if they reduced their earnings to below the threshold, so that they would then qualify for free school meals. What sort of system is that? Everybody will recognise that we do not want a welfare system that puts people in that position, but that is the system we will end up with if this statutory instrument goes through. The Children’s Society calculates that almost 21,000 families—containing more than 80,000 children aged eight to 15—who earn more than £7,400 would be better off if they cut their earnings to below the threshold to qualify for school meals. This is a catastrophic arrangement.