Universal Credit and Welfare Reform

Steve Webb Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Byrne]

Members on both sides of the House want this to work, but if the hon. Lady looks at the evidence submitted by the CBI and the Chartered Institute for Taxation to the Work and Pensions Committee on Friday, she will see that there is now a real worry that this is going to be a catastrophe for the many entrepreneurs who rely on tax credits for help to balance the books at the end of the month. What I want from the Secretary of State is clarity about how this is going to work in practice.

This is the start of a whole series of risks that have been brought to the attention of hon. Members here and in the Select Committee. Flagged up in the evidence submitted on Friday was the decision to deny people a choice about who receives the money. I hope that the Secretary of State will reform this before implementation of universal credit, because many people who run women’s refuges say that the system is so badly thought through that refuges for women fleeing from domestic violence will have to close. In fact, Refuge tells us—[Interruption.] This is not scaremongering by me; it is evidence submitted to the Select Committee by Refuge, which says that the idea is so badly thought through that unless changes are made, 297 refuges will have to close. This is not scaremongering; it is bringing to the House’s attention information and arguments provided by one of the most important charities in the country.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Yesterday in oral questions, at which I think the right hon. Gentleman was present, the Secretary of State gave categorical assurances about refuges, so to repeat the smear after receiving those assurances is scaremongering.

[Mr Byrne]

If the Minister is accusing Refuge and Women’s Aid of a smear, I am afraid that he has got his facts seriously wrong. This element was not in the original design. Yesterday we finally extracted from the Secretary of State a commitment to change; now we want to know how it, along with a host of other things, will work in practice.

Some of these issues are now bedevilling local authorities. There is a serious risk that direct payments of universal credit, which includes housing benefit going to the individual, will result in local councils’ arrears bills and eviction rates beginning to rise. We are still no clearer about what will happen to the 20,000 housing benefit staff who work for local councils and will no longer have to process housing benefit claims once the DWP takes over the task. Are they going to be sacked or made redundant? Who will pick up the bill? Is it yet another bill that will fall on the shoulders of hard-pressed council tax payers?

--- Later in debate ---

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Almost 20 Members took part in the debate, and we are grateful to all of them. The high point was when my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) suggested that the contribution of my right hon. Friend the Secretary of State had been so definitive that we should have a parliamentary procedure under which the debate simply ceases and applause follows.

We have heard some powerful contributions. I was particularly struck by what Members had to say about the attitudes to work that they had encountered and the experiences of some of their constituents, as well as about the barriers to work. My hon. Friend the Member for Gloucester (Richard Graham) mentioned a letter he received before being elected to the House from someone who said she was demoralised by the fact that it did not pay to work. My hon. Friend said he came to this House wanting to do something about that, and he can be proud to be a part of a coalition that is doing something about it. My hon. Friend the Member for Battersea (Jane Ellison) mentioned the experience of a nurse who was heckled on her way to work for being stupid for going to work at all, because why would she bother? We have to end that situation. Although Opposition Front Benchers say they think work should always pay, they failed to deliver that when in office.

We must not lose sight of the big picture of this reform. We are bringing together separate strands into a single integrated system so that people do not have to go for their housing benefit to the council, for their jobseeker’s allowance to the DWP, and for their tax credits to HMRC. That will be good for tackling poverty, as it will lift many families and children out of poverty. It will also be good for tackling benefit take-up, because instead of having to claim several separate benefits, people will make a single claim. The suggestion that somehow the previous tax credits system was used as a model is absolutely extraordinary.

Someone said, “We all remember how terrible it was when people had their tax credits overpaid or under-claimed, or underpaid and claimed back.” That will come to an end because people will get the money when they need it. Under the real-time information, when their wage goes down, their tax credits—now their universal credit—will increase. They will not have to wait three years for a reassessment to claw back an underpayment; it will happen when they need the money. That is the way to tackle poverty.

[Huw Irranca-Davies]

The Government have justified their refusal to reveal the business case and, following an earlier intervention by my right hon. Friend the Member for Lewisham, Deptford (Dame Joan Ruddock), have declined to answer how many additional hours of work will be generated as a result of these changes. May I make things simpler? I ask the Minister: will these changes in the business case result in an increase in hours worked?

[Steve Webb]

I am grateful to the hon. Gentleman for bringing me to the issue of work incentives. It was central to this debate, so let me address the point directly. Two separate work incentives have been muddled together in this debate, including, I regret, by the right hon. Member for Birkenhead (Mr Field). The first is the incentive to take a job and the second is the incentive for those in work to work more hours. My right hon. Friend the Secretary of State, in introducing this debate, identified the fact that universal credit significantly improves the incentive to take a job. That is fundamental in order to move from a situation where, as we have heard, millions of people are in workless households where nobody is working. Of course the incentives for the second earner are important, but those for the first earner are even more important. We make no apology for prioritising them; we want far more households to have someone in work, which is why we have structured this as we have. We are therefore putting £2.5 billion extra per year, at a time when we are having to save on welfare, into in-work benefits, thereby improving the return to work. It must be the case that if we are spending more on in-work benefits, we are improving the incentive to work.

[Mr Frank Field]

Either the hon. Gentleman misrepresents me or I did not make myself clear. I said that, crudely, we are talking about three groups. The first is those who are unemployed and desperate to get back to work. The idea about incentives does not occur to them, as work is part of their DNA. We do not need to have reforms for them; we need jobs for them. The second group is those who regard their benefit as a pension, and no marginal increase in income is going to get them back to work. The third group is those in work who are deciding whether they will work longer, whether they will work harder and whether they will get new jobs. Will a scheme that puts their marginal tax rate up, as this one does for many people, actually be a work inducement?

[Steve Webb]

Let me deal with that point directly. Under the current system, people who are below the tax and national insurance threshold and get tax credits and housing benefit lose 79p in the pound—that will fall to 65p. Under the current system, people who are above the tax and NI threshold and get tax credits and housing benefit lose 91p in the pound—that will fall to 76p. Under the new system, there will be almost no one who loses more than 80p in the pound, compared with 500,000 people who do so now. What is not to like about that? This is good news for work incentives.

[Stephen Timms]

What is the Department’s assessment of the effect of the introduction of universal credit on the number of hours worked in the UK economy?

[Steve Webb]

As the right hon. Gentleman well understands, the impact on every individual will be different, so we have not used a specific figure for the number of hours worked. However, what I have demonstrated is that the people who face the biggest barriers to working more hours will see cuts in their marginal rates and the people who face the biggest barriers to working at all will get more return for working. So this is good news for work incentives. The right hon. Member for Birkenhead referred to the people facing an increase in their marginal rate, but that increase is by four percentage points, from a median of 41 to 45. That is the trade-off. We give people an incentive to take work and we tackle the most severe marginal rates, while some people face a four percentage point increase. That seems to me to be a good trade-off.

Quite properly, a lot of hon. Members raised the issue of internet access. We want to make it absolutely clear that the proposition is digital by default, so if we can get people in on the internet and online, we will do so. However, as the Secretary of State said at the start, we fully recognise that not everybody is online and not everybody will be, so the core planning for the universal credit contains provision for people who will not be online.

Some of the figures we have heard grossly distort the extent to which people of working age in the benefit population are online these days. The evidence suggests that 74% of claimants—not of the whole population, but of claimants—have home broadband and that 41% of claimants do internet banking. To hear the speeches we have heard in this debate, one would not think that these people even knew what a computer looked like. It has been suggested in this debate that we have to avoid patronising people on benefits, and that is absolutely right. We want to support people who are not online—jobcentres will play a part in that and we are talking to local authorities about it—but let us see this as an opportunity to get more people to be internet savvy, online and more employable. Let us not condemn people; let us give them opportunities and training.

The impact of this measure is very important, and the hon. Member for Stretford and Urmston (Kate Green) asked about the equalities impact. We will publish an updated equalities impact assessment with the final regulations after the autumn statement.

The hon. Member for Glasgow North East (Mr Bain) gave some bizarre figures about the impact of this reform on lone parents, and I do not know where he got them from. Lone parents gain from universal credit: 400,000 lone parents who rent will gain, as opposed to 200,000 who will have lower entitlement; there will be twice as many gainers as losers in that category. This reform will reduce child poverty, because we are spending huge sums of additional money at a time when money is tight. We are doing so because of our priority of making work pay.

We have heard discussion of the real-time information system, the fact that people’s benefit will be based on their current situation and the impact on business. This approach has been assessed as saving businesses £300 million a year. Those figures are signed off not by us, but by the Regulatory Policy Committee, which is a business-led organisation; they have been validated by business. Businesses are doing a lot of these calculations anyway, with the software doing it for them in most cases, but the streamlining of the system will save businesses cost overall. We are working closely with our colleagues at Her Majesty’s Revenue and Customs; there has been close working between the two Departments. The Department for Work and Pensions is represented in the governance of HMRC’s real-time information programme at every level, and the DWP and HMRC have jointly presented to Parliament.

The right hon. Member for Birkenhead, in another bizarre, overstated allegation, said that there has been a mass exodus of senior civil servants on the programme. That is completely untrue. The senior responsible officer, Terry Moran, whom he will know from years gone by, has held that role since November 2010. The programme director has been in place since August 2011. At HMRC, the senior responsible officer for the real-time information service has retired—we still allow people to retire, even under our policies—but has been replaced by someone from the DWP. So the suggestion that people are just walking out the door is nonsense and is scaremongering.

[Naomi Long]

rose—

[Steve Webb]

I have got only two minutes, so I had better not give way.

We were asked about the position on domestic violence, an important issue raised by my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood). It is an important issue in respect of provision for splitting payments, for example. The Government are absolutely committed to protecting those who are subject to domestic violence. For example, under universal credit, victims of domestic violence will be exempt from things such as work search requirements for a three-month period. Although shared payments would normally be appropriate, because we know that most households budget together, clearly we will make alternative arrangements in exceptional cases. We have therefore retained powers to split payments between members of a couple, for example, in cases of domestic violence. Details of those exemptions will be included in guidance.

We heard a large number of contributions and I cannot do justice to them all, but the key theme from Government Members has been a unified view that we must make work pay and that we should not listen to the naysayers. Frankly, it is always possible to get a newspaper headline by saying “Big Government IT project bound not to work”, because if it does work nobody will ever remember. That is always the way in which the Opposition conduct themselves, but we are in the business of making things happen. When my right hon. Friend the Secretary of State explained how closely he monitors the programme, he was not exaggerating. This project has probably had more hours of testing, evolution and making things work than any other with which I have been associated.

The hon. Member for Makerfield (Yvonne Fovargue) mentioned the 1988 benefit changes, which were a “big bang” change. Income support, supplementary benefit, family credit, the family income supplement and housing benefit were reformed all on a single day. This is a roll out over four to five years and we will get it right by doing it gradually, testing it, having pathfinders and bringing in groups one step at a time. We all saw what happened under the previous Government to the tax credit system when the changes were done in a “big bang”, but we will make this change gradually, get it right and make work pay, so we should reject the naysayers and reject the motion.

Question put.

The House proceeded to a Division.

[Madam Deputy Speaker (Dawn Primarolo)]

I ask the Serjeant at Arms to investigate the delay in the No Lobby.