Clause 24 — Universal credit: costs of claimants who rent accommodation

Part of Scotland Bill – in the House of Commons at 3:45 pm on 30th June 2015.

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Photo of Patricia Gibson Patricia Gibson Scottish National Party, North Ayrshire and Arran 3:45 pm, 30th June 2015

I am delighted to speak in favour of amendment 118 and new clause 45, which call for the removal of the requirement for the Scottish Government to obtain consent from the UK Secretary of State in relation to universal credit and the cost of claimants who rent accommodation.

In the light of our mandate from the Scottish people, and the lack of democratic mandate that the Conservatives —indeed, any of the other parties—have in Scotland, we urge all in the Committee to support the amendment. We set it out unequivocally in our manifesto that, as part of our welfare priorities, there should be an immediate scrapping of the bedroom tax and a halt to the roll-out of universal credit and PIP payments. We said that we would support an increase in the work allowance. Those policies were supported by both the people of Scotland and civic Scotland and we have a clear democratic mandate for that demand, given the result of the general election.

We are particularly concerned about the work allowance element of universal credit—the amount of income that a household can earn before their universal credit entitlement is reduced. We demand that the work allowance be devolved to the Scottish Government as part of new clause 45, and democratic integrity requires that that demand be met. We support increases in the personal tax allowance, but we also back an increase in the work allowance. In this, we are in keeping with a Resolution Foundation policy proposal paper, which pointed out:

“if we really want to help working families on low and middle incomes, boosting the Work Allowance would be more effective and better value for money than any tax cuts”.

For a lone parent with housing costs, for example, the work allowance is currently set at just over £3,000 per year. After that point benefits start to be withdrawn. For example, those on universal credit lose £65 of benefit for every £100 of post-allowance salary. Of course we need to put in place some sort of tapering system to make work pay, but the complexity of the system allows—indeed, encourages—the Government to focus on simpler measures, even if those simpler measures are far less effective. Take the personal allowance. People begin paying tax at 20% after earning £10,000 a year, but we pay less attention to the fact that a sole working parent faces a 65% deduction rate when they earn over £3,000 a year.

For people who receive universal credit and pay income tax, the Chancellor’s £600 a year increase to their personal allowance is welcome. That would boost their income by £42, but the same increase in work allowance would increase their income by £390.

Even the Institute for Fiscal Studies has weighed into this debate, arguing:

“In-work benefits provide a more precise and cost-effective way of supporting low-earning working families than changes to direct taxes.”

The freezing of work allowance is profoundly misguided and effectively cuts the benefits of workers on low incomes. What happened to making work pay? What we need is a work allowance to help to ensure that those in work have a better chance of lifting themselves and their families out of poverty. We need the power in Scotland to change work allowances in Scotland, so that we can help families to help themselves out of poverty as they go out every day to earn a living through increasingly difficult times.

Universal credit does not help some of our poorest households, but much could be done by increasing work allowance and making work pay. This could be one—only one—of the tools that could help to combat the scandal of those in work having to rely on food banks to put food on their tables and feed themselves and their families. Scotland needs powers over the work allowance element of universal credit—no ifs, no buts.

I draw the Committee’s attention to the letter in The Herald today, which has already been mentioned by my hon. Friend Dr Whiteford. It is a letter from the third sector in Scotland protesting against the socially divisive and damaging impact of the UK Government’s cuts of a further £12 billion in social security spending—cuts which, despite attempts to rewrite history, the Labour party signed up to prior to the general election. [Interruption.] These cuts—[Interruption.] Let me put the cuts in context. In the pre-election debate Rachel Reeves said that the Labour party was not the party of people on benefits. I notice that there is no retort to that. These cuts first and foremost—