Universal Credit and Working Tax Credits

Part of the debate – in the House of Commons at 2:07 pm on 15th September 2021.

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Photo of Stephen Crabb Stephen Crabb Chair, Welsh Affairs Committee, Chair, Welsh Affairs Committee 2:07 pm, 15th September 2021

I will keep my remarks fairly short. My views have not really changed since the last time we debated and voted on this issue. On that occasion I voted against the Government for the first time ever, because I felt so strongly about the course of action that we were intending to follow and the impact that it would have on workers on low incomes and their families up and down the country.

The truth about the pandemic is that it has not been a time of increased hardship for everyone. For the lucky few, it has been something of a gold rush; for large numbers of other people, it has been a period of reduced household expenditure and increased household savings. Many people have become richer during the pandemic. However, those are not the people we are talking about this afternoon. Many of the people we are talking about this afternoon carried on working throughout the pandemic. They did not enjoy furlough, or some of the comforts of working from home. Typically, these were people working in supermarkets, doing cleaning jobs or working in the care sector. I believe that as the modern Conservative party, we should be standing on the side of people like that: people who go out to work, who choose to work, and who want to improve their circumstances.

I was surprised when the standard allowance was increased by £20 a week; I had not seen it coming. I was delighted when it was increased, but I was surprised that it had been increased by that amount, and it was not immediately clear to me why the amount in question had been chosen. I must confess that I am not sure that the Government have been very clear about why they picked it, unless it constitutes a recognition that the standard allowance in March 2020 was too low to provide anything like a decent, respectable level of income replacement as an out-of-work benefit. It is that question of adequacy to which I think we will return time and again during the remainder of this Parliament.

I came to the view a while ago that the level of universal credit in March 2020 was too low. One of the key reasons that it was too low involved decisions that I was part of in 2015 to begin freezing that benefit and seeing the value of it eroded at the time. I used some of the exact same language and arguments when I was doing her job that my right hon. Friend the Secretary of State used this afternoon at the Dispatch Box. The assumption at the time was that we were in a time of almost full employment, and we assumed that there would be a virtuous cycle of wage increases and that people would be living demonstrations that work was the very best route out of poverty. That did not happen. Instead, we saw an increase in in-work poverty, and that fact should be profoundly troubling to those of us on this side who really believe that work is the best route out of poverty. I fear that we are in danger of repeating the same cycle of assumptions that were proved incorrect last time.

One reason that in-work poverty increased in the years leading up to the pandemic was, I am afraid, directly related to the fact that we had frozen the main rate of working-age benefits that supported families on low incomes. If we look at the data and the evidence, that conclusion is unavoidable. Anyone who thinks that we have generous benefits in this country is wrong. If we look at this internationally or historically, there is no way we can describe UK benefits as generous. We do not have generous benefits. I do worry—this has come across a bit in the debate this afternoon—about the view that if we can only make welfare just that bit tougher and more uncomfortable for the families who rely on it, we will get better engagement with the labour market and see more people going out to work. The evidence does not point to that either. It shows that a family living in destitution and with anxiety and mental health problems that are a direct result of their financial circumstances is less well able to engage with the labour market productively or to increase its earnings or its hours.

I know that the views of No. 10 and the Treasury are firmly locked down on this, but this is not going to be the end of the matter. We are going to keep coming back to talk about this issue for the remainder of this Parliament.