My Lords, before I begin my contribution I ought first to declare my interest as a member of the CPAG board; I am a trustee. I also offer a disclaimer: there are no jokes in this script and there are a lot of statistics. Labour Peers have tabled today’s debate to enable a focus on the impact of cumulative cuts to a multiple range of benefits. During the debate I am sure that many colleagues will wish to join me in paying tribute to Baroness Hollis, who recently passed away. Patricia was a big figure nationally and locally in her home town of Norwich. She was greatly respected for her work, championing measures that attacked poverty and promoting the interests of women in the social security and pension system. She also pioneered moves to bring greater equality to pensions. She was a first-class DWP Minister. When she became a Peer in 1990, she had already made a name for herself as a councillor in Norwich and had completed a five-year term as leader of the council. She had integrity and a fine intellect.
When Patricia made an argument everyone listened, even when they did not want to hear it. She was one of those who, early on, saw the harm and long-term damage that council house sales would do to the social fabric of our communities. From the time of her elevation she became a highly effective spokeswoman for the Labour Party on housing, local government, disability and social security. During her time in opposition in the 1990s she led moves to ensure pension sharing when couples divorce. This later became law. Again in opposition she led—indeed rose—from the Privy Council Benches to oppose cuts to tax credits, which, if carried through, would have devastated the household budgets of the working poor. When she wound up that debate, you could literally have heard a pin drop, and you could certainly see and feel the discomfort her argument generated on Benches all around the Chamber. So today I intend to invite the Government to instigate an annual “Hollis Debate” to be held in her memory, to consider what best can be done to tackle poverty and its causes.
Patricia’s passion in tackling poverty was borne of personal experience—something both she and I shared, and which helped hone her arguments. Her father was a farm labourer and her mother worked in service—which, curiously, were jobs which my mother undertook in raising me in rural Essex during hard times. More importantly, Patricia Hollis argued rightly that we need to stop looking at the cuts to benefits in isolation, instead looking holistically at the impact of multiple cuts. Too often, opposition has focused on the singularity of a cut—say to child benefit or housing support. Consequently, Labour will insist today that we look across the range of income support measures which the Government have systematically reduced over the last eight years. Only then will we have an accurate picture of how the Government have increased poverty.
It is worth just reminding ourselves of the legacy left by the last Labour Government in terms of poverty reduction. We invested substantially in health, education and particularly childcare. Both child and pensioner poverty rates were falling when we left office, and the economy was growing. We tried to cement these gains in countering child poverty through the Child Poverty Act, which set targets and defined needs. During our time in government we attacked poverty by using tax credits to make work pay, and by increasing the value of key benefits like child benefit, which had the double benefit of putting more money in the pockets of the poor—but usually of mothers. This enabled Labour to take over 1.1 million out of child poverty. Many of these measures have now been reversed, so it is estimated that 5.1 million children will be in families below the accepted poverty threshold by 2021. Why?
Most commentators would argue that it is because of the way in which, since 2010, many of the income support cuts have been loaded. The dual reduction in child benefit through freezes in value and the two-child cap will mean that, by 2021, the value of the benefit will be 23% lower than in 2010. The austerity budgets of Chancellors Osborne and Hammond have loaded deficit reduction on to cuts in spending at about 80% as opposed to increased taxation at roughly 20%. This policy continues, and is clear when we look at the detail of the Budget. The Resolution Foundation found that social security cuts will continue to hit the poorest hardest. It calculates that the richest fifth of households will gain £390 a year by 2023-24, whereas the poorest will lose an average of £400. With the increase in the higher tax band rising to £50,000 next April yielding a net gain of £540, those on benefits will lose out because of the continuing freeze on benefits, leading to a loss of a further £200 a year.
Coupled to these cuts have been reductions brought about by the overall benefit cap, set at £20,000— £23,000 in London—and the changes in tax credits. These latter changes have been particularly damaging, because they impact on families of “just about managing” parents in work. It is thought that roughly two-thirds of children in poverty are in families where parents are working. The problem for them is the combination of income support cuts linked to pay pegged at national minimum wage levels, and insecure work and zero-hours contracts.
The CPAG has undertaken research into the cumulative impact of social security cuts on family incomes. The losses are dramatic. Lone parents with children will be £1,940 a year worse off on average as a result of cuts in the legacy benefit system, and £2,380 worse off as a result of universal credit cuts. Of particular concern is the breaking of the link between need and entitlement—a fundamental principle in a means-tested social security system. Two examples of this are of course the benefit cap and the two-child limit, and a third the bedroom tax.
We know that working-age benefits have been hit hardest, with some benefits simply abolished, and many frozen or uprated at rates lower than inflation. The Child Poverty Act was abolished, and when Iain Duncan Smith was Secretary of State he famously even tried to get rid of a definition of poverty. Studies by the IFS, the Resolution Foundation and the Human Rights Commission show that the cumulative distributional effect of these measures has fallen on those on the lowest incomes in work and with children, and that lone parents in particular have been the biggest losers, making George Osborne’s claim that “we’re are all in this together” a cynical lie.
What depresses me most is that, despite Mr Hammond’s claims that “austerity is almost over” this week as he announced modest reversals of the universal credit cuts, there are more to come. The IFS has demonstrated that 75% of the cuts announced in 2015 are yet to arrive. By 2020, £40 billion will have disappeared from social benefits. Compare that with the £2.7 billion the Chancellor claimed to be putting back. Current plans are projected to remove a further £15 billion-worth of support.
All this comes at a cost: an insecure family life, an increased reliance on food banks, access only to poorer-quality housing, and reduced childcare support such as Sure Start—some 600 centres have closed to date. We have hungry children using breakfast clubs often funded by the schools themselves, at precisely the same time that free school meals are cut. We can see the effects. Our streets house more homeless people, elderly people are neglected, and our social care system is creaking. The IFS estimates that all the gains made by Labour in reducing poverty will be undone by 2020.
It does not have to be this way. We know how to tackle poverty, and especially child poverty. During Labour’s last time in government the UK was the best-performing OECD country at taking children out of low-income households and providing good wraparound childcare through Sure Start. We used the national minimum wage, along with tax credits, to help lift working families out of poverty. We protected pensioner incomes and obliged enrolment in workplace pension schemes to ensure universal coverage. Earlier Labour Governments promoted equal pay and tackled wage discrimination in the workplace. Taken together with the founding of the welfare state, Labour has historically put in place measures that lifted working people out of poverty. That is a record to be truly proud of.
We need as a nation to reinvigorate interest in ending poverty. One way to achieve this is to better inform the public debate and ensure that, at a time when we have close to full employment, there is an understanding that it comes with people in work who are poor. Zero-hours contracts, part-time working, the operation of the gig economy and reduced rights at work are all features of modern working life. But if we develop the conversation about poverty, poverty pay, the poverty of the workplace and the poverty of work experience, we will at least have gone some way towards Patricia Hollis’s belief that, if people understood the arguments about poverty and social justice, they would want to bring that poverty to an end. That is a legacy worth following. Let Baroness Hollis’s insights and example of fighting poverty during her long years in public service be our inspiration and our guide, and let us name that debate in her honour.
My Lords, I start by putting the current benefits system in context. Welfare spending has increased fourfold in cash terms over the past 30 years and has more than doubled in real terms after adjusting for inflation. In 2016-17 about 25% of GDP—around £484 billion—was spent on the welfare state, which includes health, education, social services and housing as well as social security and tax credits. Some £217 billion of this was spent on benefit payments, equivalent to 28% of total public spending. At any one time, over half of all families receive income from at least one benefit; most people will receive one or more welfare payments for well over a third of their lives, including child benefit when young and the state pension when retired.
These are vast sums of money. The Government have a duty to the taxpayer to ensure that the money is well spent and properly targeted, and provides support to those most in need; this is what the welfare reforms are designed to do. Since 2010, the minimum wage has risen and we have seen the introduction of the living wage. Thanks to the national living wage, full-time minimum-wage workers have had an annual boost of £2,000 since 2016. Seven years ago the personal allowance—the amount people can earn before paying income tax—was £6,965. Since 20l5, 1.7 million people have been taken out of paying tax altogether and taxes have been reduced for 32 million people. The typical basic rate taxpayer now pays £1,075 less in income tax than in 2010. People have been helped to keep more of the money they earn.
The key to all this is jobs. The UK is currently experiencing record employment levels—3.3 million jobs have been created since 2010, three-quarters of which are full-time and permanent—and wages are set to rise above inflation for each of the next five years. Fewer than 3% of current jobs are on zero-hours contracts. The number of women in work has broken records to reach 15.26 million and youth unemployment has fallen by over 40% since 2010.
I am sure other noble Lords will talk in greater detail about universal credit, which is designed to make work pay; once fully rolled out, it will pay more than £60 billion a year to around 7 million claimants—again, a very substantial amount of money. Any massive change of this kind leads to rollout problems, as we experienced with the introduction of tax credits, but those calling to dismantle UC risk throwing the baby out with the bathwater. I have asked colleagues in the other place about their constituents’ experiences and they tell me that many of the teething problems are due to human error—a work coach has not offered an advance or a claimant has forgotten to sign the claimant commitment.
For the most disadvantaged, financial support is available through UC on day one; we need to invest in better training for jobcentre and DWP staff, as well as organisations like Citizens Advice, who offer support to claimants. Noble Lords will welcome the additional support announced in the Budget. As the chief executive of the Trussell Trust said:
“These are significant improvements that will make a real difference to many people supported by universal credit in the future”.
Although UC pays up to 85% of childcare costs regardless of the number of hours worked—compared to 70% under the legacy system—the cost of childcare is still too high and the provisions within UC do not go far enough to cover that cost. So when a parent who has childcare costs gets a job and increases their hours, the cost of childcare eats into their income. This problem is particularly acute for single parents.
The best way to support families is to reduce the number of households where no one works. Children living in couple households where no adult works have a more than 64% chance of living in poverty, compared with just a 1% chance for those living with two adults in full-time work. Having one parent in work compared to no parents in work is linked to better educational outcomes and a higher probability of employment for children in the long term. Unemployment can lead to family breakdown, which can mean dire consequences for family finances and increased risk that a child grows up in economic hardship.
My final point is on the couple penalty. Under UC, as under the legacy system, parents are better off separated rather than married or cohabiting as a couple under the same roof. This is madness. Women are 40% more likely to enter poverty if they divorce than if they remain married. Lone-parent families are twice as likely to be in the bottom income quintile as two-parent families. Children in lone-parent households are twice as likely to be in the bottom 20% of child outcomes as children in married families. I urge the Government to focus on policies which ensure that families are supported and that there is no disincentive to creating and maintaining a strong family unit.
My Lords, I am grateful for the opportunity to debate this important issue and to pay tribute once again to my noble friend Baroness Hollis—Patricia—whose forensic analysis and passion held the Government to account so effectively, particularly in their treatment of disadvantaged women. Women are disproportionately affected by the cuts we are debating today. Still the main carers and managers of poverty, it is women who bear the brunt of the social security cuts on family life, especially as they try to protect their children.
Looming over the debate, and more importantly over low-income families, is the so-called managed migration of universal credit. Welcome as the Budget changes are, they do nothing to rectify UC’s fundamental design flaws, which become increasingly apparent as families suffer the consequences. One such flaw is payment —including money for children—into one account, which has been widely condemned for facilitating economic abuse and potentially aggravating domestic violence. Women subject to domestic violence are also being put at risk by two other cuts, which are especially harmful to larger and some minority-ethnic families: the two-child limit and the benefit cap. Both break the long-standing principle that entitlement to safety- net benefits should reflect a family’s needs. Over 70,000 families, two-thirds of whom were in work, lost up to £2,780 in the first year of the two-child limit. It is difficult to see how such a crude cut, directed at children, can support family life. The Government have refused to publish their family test assessment, despite an FOI request which was turned town on utterly flimsy grounds. I wonder why.
One reason the majority of those affected are in work is that larger families out of work will be caught by the benefit cap. A Policy in Practice study revealed “significant human costs” and questioned its application to lone parents of very young children, who are not required to undertake work-related activities. What assessment have the Government made of the impact of the cap on the family life of this group, for whom paid work is often simply not feasible? According to the Chartered Institute of Housing, the lowered benefit cap is hurting children and causing stress and,
“significant hardship to households who have no realistic prospect of escaping it”.
As we have heard, aggravating the effect of these and other specific cuts is the steady erosion of the real value of most working-age benefits, paid in and out of work. The Resolution Foundation calculates that the freeze has meant a real cut in benefits of over 6%; child benefit, a bedrock of family finances, will by next April be worth 14% less for second and subsequent children than when introduced in the late 1970s. The Prime Minister recently identified as a key challenge,
“helping people with the cost of living”.—[
Could the Minister explain how freezing benefits helps people on the lowest incomes with the cost of living, which since last year has risen faster than anticipated when the freeze was first announced? Why, if there is money to cut taxes, which will provide low-income families with little or no help, is there no money to lift the freeze?
The Government have also devolved responsibility for the crisis support provided by the national Social Fund to local authorities, without ring-fencing the inadequate devolved resources. According to Church Action on Poverty, at least 28 authorities have closed their provisions completely and many more have cut them back significantly. The ultimate safety net is being shredded, yet the Government simply wash their hands of all responsibility—an example of the institutional indifference they show towards the impact of their policies on vulnerable and marginalised groups.
While the evidence shows that parents living in poverty typically demonstrate great resourcefulness and resilience in struggling to get by and protect their children, it also shows just how damaging the impact of poverty and homelessness can be on family life.
“demonstrates the salience of stress within families experiencing poverty, and in particular maternal mental ill-health, couple relationship quality and levels of conflict”.
Government policy is deliberately increasing the pressure on these families.
I wish that the Minister could have heard at a Women’s Institute meeting here last week the primary head teacher from an area where UC has been in operation for two years, with, she reported, a huge impact. She said that poverty was worse in her community than she could remember, and she talked about children complaining of hunger stomach pains, sometimes taking food out of rubbish bins, and some with shoes with holes or kept together with elastic bands.
I call on the Government to think again and to stop penalising families who already have so little. There is growing criticism of the DWP’s culture of denial and indifference towards the effects of its policies. In the words of George Bernard Shaw, indifference towards our fellow human beings is “the essence of inhumanity”.
My Lords, I thank the noble Lord, Lord Bassam, for giving us the opportunity to talk again about the benefits that will accrue to families and society as we test, learn about and, crucially, invest our way into developing a world-class benefits system. Although the implementation of universal credit has been a bumpy ride, tellingly, civil servants and politicians from other countries want to learn how we have gone from having one of the highest levels of workless households in Europe to one of the highest levels of employment in Europe.
Any nostalgia about the tax credits system that universal credit seeks to replace ignores the very real difficulties that it presented to claimants and society. Instead of providing a safe runway into employment, it trapped many families in a shadowland of complete welfare dependency, with some saying, “I cannot afford to work”. Cliff edges and high marginal tax rates severely sapped any ambition or incentive to progress in work. Couple penalties made it financially foolish to live with—or to admit to living with—the father of one’s children. Fraudulently claiming as a single parent was incentivised to the extent that a 2006 analysis by the Institute for Fiscal Studies concluded that the Government were paying benefits to around 200,000 more lone parents than lived in the UK. Claimants found themselves in £5.86 billion of debt because of overpayment and other errors in the legacy system. Despite a sustained period of economic growth and job creation between 1992 and 2008, a sizeable group of working-age people were left behind, locked out of the benefits of prosperity. I will not labour those points because there was consensus among politicians of all colours that change was essential and that a new approach which made work pay was urgently needed.
Yet delivering that was always going to be an epic feat requiring grit and perseverance. Nick Timmins called it,
“the mother and father of all challenges”,
an earlier and less ambitious version of which Gordon Brown’s Government had decisively ducked. On the technological front, the senior responsible owner for the universal credit project in August 2015 told Civil Service World:
“If you spool the world back to 2010, we [in government] didn’t even have things like smartphones and iPads then, so it was just a very bad time, I think, to start developing an IT project”.
Reading that reminded me of the gutsiness and almost insuperable difficulties of getting a man on the moon before the end of the 1960s. Signage in the Kennedy Space Center reveals:
“A million mysteries had to be solved if we were to get astronauts to the moon and back in safety ... we had to invent everything from scratch ... with … computers the size of boxcars, slide rulers instead of calculators, and communications systems not much better than jungle drums – at least in the beginning”.
Unwavering political leadership was decisive. President Kennedy said:
“We choose to”,
do these things,
“not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one we are willing to accept, one we are unwilling to postpone, and one which we intend to win”.
He said that failure was not an option. The same could be said today about why we must collaborate to overcome the difficulties of UC.
Many on the Opposition Benches seem to want to throw in the towel, possibly for reasons of political opportunism. Perhaps they have not had first-hand experience of the calibre and dedication of work coaches like the ones I met on a recent visit to a London Jobcentre Plus. Two things were impressed upon me: first, the freedom that UC gave work coaches to do whatever it took to help someone get into work; and, secondly, how utterly demoralising it is for them and how terrifying it is for prospective claimants when the media are saturated with negativity about the new system. More money has been allocated, so the scaremongering must stop, and solutions must be found. In the debate in the other place last month, two Conservative MPs described how they had pulled together new local support partnerships to ensure that no one was left behind. Sadly, no Labour speakers described doing anything so constructive. Most just criticised without suggesting any improvements.
Now that we have an extra £l billion to help welfare claimants transfer to UC, we should all work together to ensure that this precious public money is used wisely. Therefore, I ask my noble friend the Minister to apprise the House as to how this fund will be disbursed and how she will avail herself of front-line experience and wisdom to that end.
My Lords, I thank my noble friend Lord Bassam for securing this debate and I endorse his tribute to our late noble friend Baroness Hollis. I was grateful to her personally when I came into this House for her advice and for the expert tutorials that she generously provided to me. Beyond that, her support for the carers issue in opposition and in government was of great importance, both in the campaigning that we did for legislative change that supported carers and in establishing the place of carers in the social security policy agenda. The United Kingdom’s 6.5 million carers owe her a huge debt of gratitude. Noble Lords will remember that she spoke on many an occasion during her time in the House about carers’ incomes and benefits, pressing for positive change. She would not be pleased—and neither am I—about the position in which carers find themselves today.
Carers have directly seen the impact of reductions on their households. Although the carer’s allowance has continued to rise every year in line with the consumer prices index, which has been welcomed, wider household benefits have been frozen, meaning that the overall context in which carers are managing in their households is significantly worse. According to the New Policy Institute, 2.1 million carers are in poverty. Carers UK’s State of Caring survey this year found that 37% of all carers who responded were struggling to make ends meet in very challenging caring situations, 20% said that they were in debt as a direct result of caring and 45% of all respondents said that they could not meet their bills without struggling. This group said they were cutting back on food and heating to make ends meet. This could be potentially detrimental not only to their own health and well-being but to that of the person for whom they are caring.
Those most likely to be struggling financially were parents of disabled children; sandwich carers—those who were caring for both children and older parents; and those caring for someone towards the end of their life. Those hardest pressed were on benefits One said:
“My biggest worry is government changes to benefits, and not knowing what the future holds and whether everything we have now will be taken away”.
“I spend my time terrified about benefits and benefit cuts and how we will live if things get any worse for us”.
This is in the context of the reductions in the vital care on which families rely—the social care provided to disabled children and adults. Since 2010, over £6 billion has been taken from local authority budgets, more than one-third of their spending.
Carers UK has measured the reduction in increased costs to families who can ill afford such changes. This amounted to one in seven families who have seen a cut, closure or increased costs of services. This is not a one-off. It has been a year-on-year trend where families have had little choice but to go without. It is not surprising that the rates of ill health are high: 72% of carers report having a mental health problem and 67% say they are in poor physical health. Last year, Carers UK found that 40% of carers had not had a single day off in a year. Very often, if they get a carer’s assessment—which is rare nowadays because you are assessed only if your needs are seen as critical and you are in need of respite care—the care is not available because of local authority problems with their budgets.
In opening his Budget Statement the other day, the Chancellor promised a budget for the strivers, the grafters and the carers. There are some measures that will ease the pressure on some families, and these are to be welcomed, but the Chancellor has failed to make the spending commitments to improve financial support for unpaid carers or the investment in the care services which are absolutely crucial for them and their families. The challenges that carers have faced with universal credit are similar to other groups, except that they have the challenge of caring on top of the other stresses and worries to do with the benefit.
I would like to hear the Minister’s comments on the issues with carer’s allowance when she winds up the debate. Carer’s allowance—the specific benefit for carers—is still the lowest of all benefits. In the Budget, it was announced that the national living wage will increase to £8.21—a welcome measure—but it will place low-wage workers even more out of kilter with the benefits system. Carers cannot earn sufficient to benefit from tax credits if they are then to keep below the earnings threshold of £120 a week. If you fall foul of that rule as a carer, you lose 100% of your carer’s allowance. You also lose credit towards your state pension, thus building up poverty for the future.
Baroness Hollis fought this all her life. She understood the situation well and always advocated for better pension rights, including for carers. This situation needs to be addressed.
Carers make a huge contribution to society—I never tire of telling your Lordships that it is estimated at £132 billion a year—and the least we can do is ensure that they do not make that contribution in poverty.
My Lords, one of the pleasures of your Lordships’ House is the range of views we hear and the expertise of those who express them with integrity and conviction—among them Baroness Hollis speaking from the Bench opposite ours.
The same is true of the Church. In one recent elegant, erudite theological treatise, the noble and right reverend Lord, Lord Williams of Oystermouth, wrote of how the words of an act of worship are pregnant with meaning, but greater significance is often discerned in the silence in between. The same is true in relation to this debate of Monday’s Budget. Its silences were just as significant as the words of the Chancellor, especially for families with children, as they are disproportionately represented among those in poverty.
The Chancellor was virtually silent on some measures that merit praise. He gave only a cursory nod to the pilot loan scheme for low-income families—although the Red Book is more forthcoming. This excellent initiative deserves proclamation. It is of particular interest to these Benches as it is based on an Australian scheme in which the churches and community groups are much involved. New money for universal credit deserves a couple of cheers. It would be churlish not to acknowledge and congratulate the Chancellor on raising the work allowance, but it would be negligent not to point out that this is less new money and more about returning towards where we were before cuts in 2015—in fact, somewhere behind.
It would also be negligent not to express anxiety about the likely impacts of other welfare cuts coming down the tracks—notably on low-income families with children and on families with disabled children in particular. They face a dramatic, unjust, shameful reduction in the additional support they currently receive and continue to need.
The silence I most regret was on the two-child limit. I accept that people should be encouraged to make informed, responsible choices about their lives and families, but we are faced with the undeniable, irreducible fact that the two-child limit will tip and trap low-income families into poverty. We are left with the utter perversity of the system making it harder for them to work their way out of poverty, however much they try. I cannot accept the Government’s rationale. Ministers argue that people should make their choices informed by whether they can afford to have a child. Indeed they should, but people’s lives are unpredictable. The blessing of a child now cannot anticipate future redundancy or relationship breakdown. It is also manifestly unjust that from next February, children born before this policy saw the light of day will bear the brunt of it. Families were not able to make an informed choice because they could not have known that there was a choice to make. Above all, we are left with the shocking fact that children already in need will be in greater need and the state will be saying that it is acceptable to withdraw a lifeline for those children and their families.
I also draw your Lordships’ attention to the heavy burden that the two-child limit is likely to place on some faith communities. During the passage of the Bill, we were told that the Government, “looked through people’s faith” to the choices that they made. I beg to differ. Faith is not something transparent to look through: it is the lens through which many people make choices. For some faith groups, having more than two children is the cultural and religion norm, even expectation. That might be the Roman Catholic community; it might be the Muslim and Jewish communities. It is also likely to have an even more disproportionate impact on such communities when many within them already live in poverty.
This House has been far from silent on the two-child limit and we should not be silent now. It takes no account of life’s inevitable ups and downs and it is detrimental to family life, tipping and trapping families and children in poverty, making it harder for them to work their way out. It makes vulnerable children even more vulnerable. I ask the Government to think again, and, as a bare minimum, to not extend the limit to families with three or more children before this policy was implemented. They should—and must—act more widely if they are to avoid damaging the family life of hundreds of thousands of low-income families and so blighting the welfare and chances in life of a whole generation of vulnerable children.
My Lords, I thank my noble friend Lord Bassam for raising this important and timely issue for debate. I joined this House too late to actually know Patricia, but her work was well known outside this House and very much appreciated.
The debate is particularly timely for me because universal credit was rolled out in my own local area of Partick in Glasgow just yesterday: yes, frighteningly on Halloween. After the horror stories about how the introduction has gone elsewhere—it was not scaremongering—many people have been dreading this moment. Thanks to devolution in Scotland, there have been some mitigations. For example, claimants can choose to have their benefit paid twice a month, rather than monthly, and they can opt to have their housing element paid directly to their landlord. Will the Minister consider the benefits of adopting similar policies? However, as universal credit is a reserved issue, most of the problems identified can affect people in Scotland as much as anywhere else.
Many parents are aware than the transfer can be chaotic. The Resolution Foundation reports that 20% of new claims are not being paid on time or in full. I am sure that the Minister would agree that the financial impact of mistakes during the transfer should be borne by the Government rather than the individuals affected by it. Most analysis has shown that, overall, universal credit is less generous than the benefits it replaces. There is a consensus that the impact on children’s health and well-being, educational attainment and life chances is considerable.
I very much appreciated the briefing papers from the House of Lords Library and the Children’s Commissioner. Both those pieces of independent research paint a dismal picture of the impact this process has had; as we know, the cuts in benefits experienced by many families are not confined to those on universal credit but have been felt across the whole benefit system. In fact, it feels as though there has been a tidal wave of attacks on family life. As has been mentioned, these include the bedroom tax; the reduction and removal of the family element for in-work benefits; the pernicious two-child limit with its special circumstances clause, which is commonly called the rape clause; and the sanctions system, which has had such a damaging impact on claimants’ morale and self-esteem, often leaving them at the lowest ebb in their lives and sometimes even suicidal.
The Child Poverty Action Group has pointed out that this week’s Budget was a missed opportunity. It stated:
“This should have been the Budget to bring families in from the cold”.
As my noble friend Lord Bassam said, child benefit has lost 23% of its real value since 2010. The CPAG states:
“If there is substance to the claim that austerity is ending, ending the freeze and allowing family benefits to rise again with rents and inflation must be a priority”.
The result of these ongoing cuts is that we live in a society where poverty rates among children are higher than in any other group. Unfortunately, some politicians focus so much on the bottom line that they can forget that these are real families and real children. In justifying the two-child limit recently, a Member of the Scottish Parliament said:
“It is fair that people on benefits cannot have as many children as they like”,
while those in work “have to make decisions” on this. It must have slipped her mind that most people on benefits are in work, but regardless I do not believe that even the most hard-hearted would justify pushing a family into poverty because a couple who thought they were financially secure enough to have a third child found that their circumstances had changed, or believe that someone with an unplanned pregnancy should have to choose between an abortion or hardship for their family, or that a woman who had been raped or is in an abusive relationship should have to justify herself to the DWP. I am sure that noble Lords agree that we forget the reality of people’s lives at our peril.
My Lords, I thank the noble Lord, Lord Bassam, for introducing this debate, particularly for framing it in the context of family life. He probably will not be surprised to hear that I do not agree with all his points, but too often work and benefits are talked about in terms of systems and processes rather than people’s experience. He also made a very moving tribute to Baroness Hollis, who I did not meet but clearly made a huge contribution to this House.
We have come to the point in the debate where we start to echo people, but I am afraid that I want to echo noble Lords by talking about jobs. It is a natural place to start, because they are ultimately what the vast majority of people want. Every child I have ever met, from any background and environment, talked and wrote about their dream jobs when they were at school. It is the duty of any Government to deliver an economic and social climate that enables those who can to achieve their economic potential. I sometimes think it is a bit too easy to take for granted the record employment levels we have heard about and forget the dark days of the great recession of the late 2000s.
Of course, there is definitely more to do to break particular cycles of unemployment and deprivation. I have spoken in this House before about social mobility and the importance of knowing how to open the door to opportunity. Still too many times school leaders, when I meet them, speak of children and young people growing up in houses where they have never seen anyone go to work. They have no sense of the benefits of working life, or even how to make a first step into work. Of course there are complex reasons behind this—I fully understand and know from my own family experience that there are times when people simply cannot go to work because of disability or ill health—but there is also evidence that some people need more active support to make the move into or back into the workplace. The Government would be failing them and their families if they did not continue to make this their driving ambition.
I want to ask my noble friend the Minister about a specific group of people: those who have been diagnosed with a mental illness. This is something we have experience of in my family. It came out of the blue. We found ourselves having to navigate the benefits system 20 years ago. It was confusing, faceless and frankly pretty patronising to somebody who had worked for over 25 years. They just wanted to be helped to get through the day and, in time, to get back on their feet. In times of crisis or illness the world is a frightening enough place. People must have confidence that they will not be even more disadvantaged due to problems with implementation or bureaucracy.
I want to be clear that I support the Government’s determination to simplify the system. I completely agree with the points that my noble friend Lord Farmer made. Realistically, rollout of such major reforms will always require the Government to take stock at regular intervals along the way, but can my noble friend the Minister please tell the House what safeguards the Government have in place to help those with mental illnesses as they navigate the system and move over to universal credit?
In addition, what steps are the Government taking to ensure that people who have been diagnosed with a mental health problem are considered with sensitivity and understanding as they navigate their working lives? Many of those with mental illnesses walk a fine line between wanting to and being able to work. This situation is not static, but let us start from the premise that those with a mental illness deserve the same opportunity to work as anyone else and should not face barriers or discrimination in the workplace or on the road into the workplace. Like everyone else, they should live in a country where work pays and contributes to self-esteem and well-being. Like everyone else, when they are unable to work they should have confidence that the state will support their individual needs.
My noble friend Lord Farmer talked compellingly about the job coaches he met on a visit to a jobcentre. He told your Lordships’ House about their sterling work to provide much-needed continuity of support to individuals. Can my noble friend the Minister say whether these job coaches will be trained so that they have the additional understanding and sensitivity to help people with mental health needs?
Finally, I welcome the raft of measures the Government are introducing to support children and young people who experience mental health problems. However, it is essential that the Government join these up to support these people during major transition periods in their lives. We know that a real danger point for young people with mental health problems is when they reach adulthood and either move into adult services or try to navigate the world of work or of financial support and benefits.
Does my noble friend the Minister agree that the DWP should work more closely with the DfE and the DHSC to help young people with mental health problems figure out their path to adulthood? I firmly believe that this Government are committed to helping all to reach their potential. The noble Baroness, Lady Lister, used the word “indifference” and I respectfully say to her that that is unfair and goes too far. It is only through genuine joined-up thinking that this can be achieved.
My Lords, I congratulate my noble friend Lord Bassam on securing this debate and on his powerful opening speech. I did not know Lady Hollis nearly as well as many other noble Lords speaking today, but I know—both from her formidable reputation and from having had the pleasure of hearing her speak—that she was a consistent, eloquent and uniquely powerful voice for so many who too often have no voice of their own and I greatly admired her for it. How desperately do so many in our country need that powerful voice today. I know that many of my noble friends, in speaking up for the most vulnerable in society, will continue the work and maintain the legacy of Lady Hollis.
During the last Labour Government, I worked for 10 years in the Treasury. Welfare reform was central to the mission of the then Chancellor. The principles underpinning his reforms remain both relevant and right today: to ensure work always pays more than welfare and to prioritise support on to children and, in so doing, to reduce child poverty. It is a tragedy then—for so many families’ prospects, for our nation’s prosperity and for the fabric of our society—that over the past eight years successive cuts to the UK’s social security system have undermined every one of those principles.
Since 2010, we have repeatedly been told that those cuts were an economic necessity. The Government’s policy of austerity—of not just reducing the deficit but of aiming to run a surplus—was used to justify over £12 billion of cuts to the welfare system. Yet in his Budget speech on Monday the Chancellor announced that austerity is coming to an end. He abandoned his fiscal objective of running a budget surplus in the next decade and instead embarked on a £55 billion giveaway. If there is so much money to spend and austerity really is over, any cuts that the Chancellor now imposes must surely be a matter not of economic necessity but of political choice.
Let us look at the choices that this Government have made. We should, of course, begin by welcoming the £1,000 increase in universal credit work allowances, which, while it does not address some of the underlying design flaws, puts back some three-quarters of the cuts made to universal credit by George Osborne. However, more than 75% of the benefit cuts that the former Chancellor announced in 2015 remain government policy, with the freeze in working-age benefits still continuing next year. Of the £12 billion of planned welfare cuts by the end of this decade, only a quarter have now been reversed and over £4 billion of further working-age benefit cuts are due over the next five years.
Even with the new universal credit measures, those in the bottom 30% of the income distribution will still gain less from the increase in work allowances than they will lose from the continued benefits freeze. As a result, a couple with children in the bottom half of the income distribution will lose £200 a year, while a single parent working full-time on the minimum wage will still be £1,940 a year worse off. To reverse these cuts would cost the Exchequer £1.5 billion, but clearly this was not a choice that the Chancellor was willing to make.
Instead, the Chancellor chose to announce tax cuts costing £2.8 billion, 90% of which benefit the top half of the income distribution. Nearly half the gain goes to the top 10% alone. Looking at the overall effect of the Budget, the richest 10% of households will gain 14 times more than the poorest 10%. The IFS has calculated the distributional impact of changes to tax and benefits since 2015. It is strongly regressive. The poorest decile loses £1,100 a year, while the richest decile gains £400 a year. While some of the richest working-age families with children gain £1,000 a year, the poorest lose £3,000 every year—15% of their income. These are quite some choices that the Government have made.
These are not the inevitable consequences of reducing the deficit. No longer are they the necessary result of austerity; rather, they are deliberate policy choices reflecting the Government’s values. Their choice is to continue to cut ever deeper into working families’ incomes, not out of economic necessity, but out of ideological determination. The choice to spend £2.8 billion on tax cuts, half of which benefits the richest 10%, while it is still their policy to cut £1.5 billion from low-income and middle-income families, is a bad one. It is a bad choice for the Government to make and a bad choice for the Opposition to support.
Look back at the distributional impact of Labour Budgets over the 10 years that Gordon Brown was Chancellor and you will see a 12% increase in net income for the poorest 10% of families and a 5% decrease for the very richest. That is what progressive tax and benefit reform looks like and those who now claim to be more progressive could learn much from it. The reality is that austerity may have ended for a few at the top, but it is far from over for many hard-working lower-income and middle-income families. By cutting support to them, this Government break the promise that work will always pay more than welfare. By their choices, they betray a generation of children and, by their actions, they expose a Government deliberately targeting the very poorest in society while handing billions back to the better-off.
My Lords, I congratulate my noble friend Lord Bassam on securing this debate and on his words about Lady Hollis. I wanted to speak in this debate as a tribute to our wonderful colleague, who died just a couple of weeks ago and who always fought to bring justice to our social security and pensions systems. Had she still been here, she would be leading this debate, forensically focusing on the facts so graphically and soberly presented in the Library briefing, while forcing us to face up to their human costs. I want to look at those costs in terms of housing. I declare an interest as chair of the National Housing Federation, the trade body for housing associations in England.
Patricia was a very effective member of the federation’s Peers network. She fought hard to amend the housing benefit impact of the social sector size criteria—the bedroom tax—to ensure that a bereaved family was not affected in the first year after a child’s death. She pressed for people who have just lost their job not to be immediately affected. It is disappointing to see that this level of sensitivity has not been carried through to universal credit: under universal credit the exemption for a bereaved family is just three months and there is no exception for people who have just lost their job. Since 2010, social security reform, restriction on access to benefits and the reduction in entitlements have made life more difficult and have left those on the lowest income with less money.
The housing sector’s ability to continue to facilitate access to good-quality affordable housing has become increasingly difficult, with many of our members citing the impact of some social security changes as a barrier. The impact of these reforms, combined with an acute shortage of socially rented homes, has seen numbers, costs and pressures rise in the private rented sector. Now, more money goes to private landlords in the form of housing benefit than is invested in the root cause—a lack of truly affordable housing. We now see cases where low-income households are struggling to access the private rented sector.
A report by Shelter and the National Housing Federation found that five of England’s leading letting agents actively discriminate against tenants on housing benefit. As of May 2018, 1,092,000 claimants rely on housing benefit to help with expensive housing rents. The majority are women, especially single mothers with childcare responsibilities. People who receive disability benefits are also three times more likely to need a housing benefit top-up. Homelessness has increased dramatically, as has rough sleeping, and 123,000 children are living in temporary accommodation. The Minister told the House, in response to my question on the rough sleeping strategy, that the model to assess the effects of government policy would be ready in December. Can the Minister today confirm that this is on track?
Housing associations’ experience of universal credit so far has shown that the five-week waiting time, payment delays, mistakes made by the system and a lack of support and information are causing considerable distress and financial difficulties for many tenants. Housing associations invest a great deal of their own resources in supporting people to make and manage a universal credit claim. Yet our evidence shows higher levels of arrears for those in receipt of universal credit, compared to those on housing benefit. There needs to be a far more effective partnership between DWP and social landlords so that this support for vulnerable people can be provided more effectively.
I support the original aim of universal credit, of providing an adequate income for all households whether in work or not—Lady Hollis supported it, too—but to ensure that universal credit meets its original aim there needs to be real improvement in the design and the administration of the system.
The £1 billion promised in Monday’s Budget must be used urgently to resolve these problems, although I fear that it will not be enough. The promises to increase work allowances by £1,000 is welcome, but the Government must ensure that people receive the money that they desperately need, when they need it, before even more people are moved on to the system. There must be an understanding of how DWP policies, or those from the Treasury, align with the Government’s housing ambitions. I echo my noble friend Lord Bassam’s comment about cross-departmental policies. Housing policy must be co-ordinated across all departments and over a longer period of time. The only way to sustainably bring down housing costs and cut homelessness is to increase capital investment in social housing, alongside creating a social security system that is fair and delivers for those on low incomes. That is the only way to create a secure environment for tenants and families.
My Lords, it a pleasure to follow the noble Baroness, whose speeches I always listen to with great interest. She has great expertise in housing, about which she has been speaking this afternoon.
This debate is about the impact of government policy on family life. I want to focus my remarks on the way in which this Government, and their reforms, are making life better for families by increasing social mobility and improving life chances. It is worth remembering that to be successful in this regard, all Governments must do three fundamental things. First, they must continue to manage the nation’s finances in a prudent way in order to avoid the financial crash which we know can cause huge social damage. Secondly, they must go on ensuring that we have an enterprising economy, because that is only way to generate the jobs that give people the wages and salaries they need. It is the only way to generate the taxation which sustains our vital public services. Thirdly, we need a welfare system which protects those who cannot protect themselves and those who need additional help, but it must be a system which does not blunt incentives. As Lord Beveridge said in his report:
“The State … should not stifle incentive, opportunity, responsibility”.
It should be a welfare system which is financially robust and viable for the long-term.
That brings me to universal credit, which I strongly support because, I am afraid, Labour’s system of tax credits turned out to be something of a shambles. Tax credits were impossibly complicated. Hopeless computer systems left people out of pocket and, tragically, they kept millions of people trapped on out-of-work benefits.
Last week the Economist magazine, which is no uncritical supporter of universal credit, wrote:
“Universal credit has a lot going for it. Streamlining benefits into one monthly payment will eventually make the system easier to administer. It removes perverse incentives whereby somebody moving from welfare to work can lose about as much in benefits as they earn. Allowing people to make a single application for all their benefits should improve take-up, and so reduce poverty.”
That was before the improvements and enhancements announced in Monday’s Budget, which have been welcomed by many charities such as the Trussell Trust, the Resolution Foundation, the Joseph Rowntree Foundation and the CPAG.
Is universal credit a perfect system? No, of course not. It is a major reform and there were bound to be problems—I readily admit that—so people in this House are right to be eagle-eyed and vigilant, as they should be. Those people include the noble Baroness, Lady Lister, and of course the late Baroness Hollis, who many colleagues have mentioned and who is a real loss to this House. The Government should listen to their criticisms; the Budget has shown that the Government are listening and responding. The Government are now providing increased funding to give additional protection to existing welfare claimants as they move on to universal credit. In addition, work allowances are being increased.
Perhaps I might make one additional point, because the responsibility of the Government goes beyond the welfare system. I want to talk about the provision now being made by the Government for health and the National Health Service. Many noble Lords have talked about the impact on people with mental health issues, so I very much welcome the increase in spending on the NHS by over £20 billion a year by 2023-24. I welcome in particular the fact that mental health will take an increasing share of the NHS budget. For all these reasons, I welcome and support everything the Government are doing to help families.
My Lords, I thank my noble friend Lord Bassam for initiating this timely debate. When the Welfare Reform Bill was being taken through this House, Baroness Hollis asked me what contribution I could make. I explained that I had worked for 40 years, so I knew nothing of welfare benefits. “That’s fine”, she said. “You can cover the self-employed”, and I did. It did not occur to me that I had a choice; that is how compelling and charismatic Patricia Hollis was. I mugged up on the subject, with the help of the Low Pay Unit, and spoke several times.
I learned enough to realise that the proposed universal credit system was unsuitable for the self-employed. It is rigid and mean. It does not take sufficient account of fluctuating earnings or seasonal variations. The Budget announcement only extends the 12-month grace period, so it will change nothing. When I last spoke on this subject, the Minister made no reference whatever to the self-employed. My first question therefore has to be: is she able to say what improvements will be made to the universal credit system to help the self-employed?
When what became the Welfare Reform Act was going through the House my party, as has been said, supported the general thrust. It was accepted that the current system needed to change and there was a hope that a comprehensive system would assist those who needed help the most.
“universal credit was designed to lift people out of poverty”.—[
I do not believe that was the intention. It was designed to save money and force people into low-paid jobs. I believe that people should be incentivised into work, but universal credit gives a Hobson’s choice of bumping along the bottom of the economy.
I always had reservations about the universal credit system, not just because of the self-employed but because it was not universal—it left out a number of important areas and meant that most families with a disabled child would be worse off. Combined with the cuts in disabled living allowances for most people with disabilities it meant that the disabled would not be lifted out of poverty. Changing the definition of poverty does not change the experience of poverty.
I was concerned about putting housing benefit into universal credit. I felt that local authorities were best placed to administer that scheme. I may be wrong, but it was a genuine concern that I still hold. Is the housing benefit bill too big? Of course it is. However, if there was a major shift—as my noble friend Lady Warwick has said—in the development of social housing, that bill could be brought down. Indeed, social housing is diminishing under this Government, despite successive announcements.
My major concern about universal credit was its complexity, and the fact that it would be hugely difficult and expensive to administer properly. I am an administrator by trade, and I think that the project is doomed to failure unless there are radical changes. I am not talking about the difficulties faced by claimants; the Child Poverty Action Group has already set those out very clearly. I am talking about the administration of the universal credit system itself.
This is the calm before the storm, as everyone knows. Only 9% of families with children are on universal credit. The Budget provided some small ameliorations but no equivalence between universal credit and legacy benefits. There is still a single claim for everyone in the household, despite our warnings of the danger of that in violent and controlling situations. The third child still gets nothing. Single women with young children will still be the hardest hit.
The National Audit Office and the Resolution Foundation have questioned the feasibility of the current switchover plans. Will the Minister say whether these organisations are wrong? It is important to remember that local authorities deliver over 800 services to their communities—they are best placed to understand family circumstances and bring services together. They need additional funding to enable them to deliver these services, and the Local Government Association points to the interaction between homelessness, the reduction in support for housing costs and the increase in the number of households in temporary accommodation.
We hear that the extreme right wing of the Conservative Party is calling for more money for universal credit—not because they have suddenly discovered poor people but to make a political point about Brexit savings. Beware, therefore, the big, bad wolf in grandmother’s clothing. It is the personal experience that counts: a young woman who volunteers in a food bank and has lost all faith in government; a friend who fell behind with her rent because of the bedroom tax; having to clothe your baby from a baby care bank; or feeling powerless, hopeless and done to. This is the real impact.
My Lords, I too thank the noble Lord, Lord Bassam, for securing this debate. I will focus my remarks on universal credit as it affects disabled people. However, first I join other noble Lords in paying warm tribute to Baroness Hollis of Heigham. No one could doubt her passionate commitment and her expert knowledge of the system. I think the House misses her deeply.
More than one-third of claimants moving on to universal credit—UC as it is more generally known—through a process of managed migration will be disabled people, so it is crucial that the Government get the regulations governing managed migration right, and I look forward to seeing the recommendations of the Social Security Advisory Committee on the regulations and the Government’s response shortly.
Notwithstanding that, it is important to reassure disabled claimants that the Government are determined not only that UC should be a success, but that UC should help most those who need most help. That is why I welcome the fact that around 1 million disabled people will gain, on average, £110 more a month through UC. I also welcome the fact that the severe disability premium transitional payment rates reflect the extra financial support provided through the more generous limited capability for work-related activity component. Indeed, the rate for these UC claimants is significantly higher, at £328.32 a month, than £163.15 per month on the equivalent employment and support allowance support group. Targeting support to the most vulnerable through the severe disability premium will benefit 500,000 people.
I also take comfort from the way the Government are listening and acting in response to issues raised by colleagues in the other place, such as the well-respected champion of social justice Iain Duncan Smith, who has publicly welcomed the Budget announcements on UC. The Government’s “test and learn” approach is surely wise because it allows them to make improvements to the system as it gradually rolls out. Changing the start date of the process of managed migration from January to July 2019 and focusing initially on a limited number of claimants should also provide reassurance to those who may be under the misleading impression that change will happen overnight. It is not.
As I spent nearly all of my working life in the charity sector before I entered your Lordships’ House, I have seen first-hand the excellent work that it does. I was therefore pleased to learn that the DWP is going to fund Citizens Advice to provide universal support to help those claimants who find the transition to UC challenging—for example, if they struggle to use online services. This is an excellent idea, and I encourage my noble friend and her fellow Ministers at the DWP to explore how other charities with a recognisable, trusted brand can help mitigate disabled people’s concerns about transition—for example, by contacting those who have not responded to successive communications, whether written or by phone, from the DWP.
I shall finish with a general point, which I have arrived at having listened to various contributions from the Benches opposite which I found really depressing because they were made in a vacuum of ideological deficit denial and a total inability to accept responsibility for the high level of debt that the profligacy of Gordon Brown visited upon this country as an enduring legacy of his spending. I simply say that that would become so much worse under the Marxist McDonnell Chancellor if Labour were to win the next general election.
My final point is that a failure to tackle that and to reduce the deficit poses the single greatest threat to disabled people’s security. When the welfare system becomes unsustainable, those who need the most help are the most vulnerable. Disabled people like me do not have the most to gain from reckless debt-creating spending. We have the most to lose.
My Lords, like every other noble Lord who has spoken, I am very grateful to my noble friend Lord Bassam for initiating this debate. It is a poignant debate as well as a timely one because we are remembering our dear friend Patricia. One of Patricia’s favourite words was “decency”, and we know exactly what she meant by that. I was her Whip for some time when I was a social security specialist in this House. I do not think that a Whip has ever learned more or done less. Sitting beside Patricia for the pension and social security debates, I was enormously impressed. I used to pray that she would stay in good health so that I would never have to take over from her. We will miss her hugely all around the House.
Patricia and I both grew up in a society that had the benefit of the post-war social contract defined by national insurance, the National Health Service and free secondary education—the elements of a decent life. It laid the foundation for a family life that was free from fear. The tragedy is that we could have predicted in the past 10 years that fear would return, and indeed it has. I very much regret the way that the noble Lord, Lord Shinkwin, finished his contribution; I was very appreciative of it until that point. The point is that we have seen the return of fear: not just being unable to envisage owning your own home, but the immediate day-to-day fear that comes from not being able to pay your rent or bills, or to buy food.
How did we ever come to this point? Patricia was an accomplished historian, and it is worth reflecting on the years between 1997 and 2010 when we are now certain, by irrefutable measures, that child poverty fell by one-third due to a combination of more affordable childcare, the minimum wage, access to jobs, better benefits and better services—years in which family incomes grew. The years between 1997 and 2010 proved that when Governments are serious about reducing child and family poverty, they can do it, and Patricia was part of that Labour Government.
The past eight years have shown how very easy those measures are to undo, even things that you think are certain and deep in the system. Year-on-year cuts in public spending have removed vital services, such as children’s services, that have an immediate impact on how people live and work. There was a real cut of £12 billion in welfare benefits in 2015, £3 billion of which were cuts to work allowances in universal credit, a scheme predicated on “making work pay”—one of the many paradoxes to be exposed; the rest was an accumulation of cuts in working benefits, tax credits, housing benefits, council tax benefits and of course child benefits. Of course I welcome the £1.7 billion that the Chancellor announced yesterday to increase working allowances, but there is a limit to how grateful we can be to a Government who are simply trying to repair the damage that they themselves have deliberately inflicted with calculated policies. And, as we have been told by many people around the House, there is indeed more to come.
We have heard a lot about jobs in this debate so far. The changing picture of family and child poverty is not about unemployment; it is more about the deregulated, insecure and unstable workplace that so many families are now in thrall to. In the middle of that massive economic change has come universal credit, the biggest and riskiest change in social security for decades and the biggest IT project, with all that that implies.
UC may well be defensible in principle, but it simply fails to acknowledge the realities of working life. It is a system based on an assumption of what is average, on monthly assessment, on erratic payments determined by arbitrary dates and calculated delays in payment, with a total reliance on IT. Families are flummoxed by how much or how little they receive. Many of them are for the first time in their lives in debt, in housing arrears, dependent on food banks.
The PAC said that universal credit is taking too long to pay people the money they need to live on. The Select Committee on Work and Pensions said that the universal support system needs to be completely overhauled if it is not to threaten not only the well-being of claimants, but the scheme itself. Every expert— and I include two ex-Prime Ministers—has said the same. The time for patching up is long gone. Another delay will solve nothing. It is imperative to embark on fundamental redesign to remove the structural disincentives, absurdities and perversities in the system. Does the Minister—who is not in her place— agree with that analysis and that there should be no mass migration until that is sorted? Does she also agree with the Resolution Foundation, which states:
“Reforming while cutting is reckless, and doing so on the back of a catastrophic decade for low-to-middle income families’ living standards is plain wrong”?
The effects are nationwide and in every community. I live in what looks like a very affluent community in Lewes, but there are pockets of poverty. We have three food banks. The wonderful volunteers who run the Fitzjohn’s Food Bank tell me that food bank usage has doubled over the past year. It has provided 43,000 meals. A mother came in the other day in total distress, having lost half her universal credit without warning. It is extremely anxious about the move to universal credit. That is just one food bank.
The rise of food banks is ascribable not just to universal credit. That is the problem: the causes go much deeper. That is why the damage relief Budget this week, which prioritised an increase in tax relief for top earners, is a disgrace. It simply puts the country on a faster track to even greater inequality.
In conclusion, we are witnessing fundamental changes in the welfare state that are dismantling the idea of the social contract and the notion of an unconditional social citizenship which included all families in the prospect of a decent life. Universal credit overrides the real choices that people face and attaches conditions to accessing and keeping work. Risk is no longer pooled; resources are no longer fairly shared. The burden is being borne by poorer families with fewer means to change their circumstances.
Patricia Hollis would never have been silent on that. She would never have stopped until she had persuaded the Government that they had to change. That is her legacy, and that is our duty.
My Lords, first, I join all other noble Lords in congratulating the noble Lord, Lord Bassam of Brighton, on securing this important and timely debate and in paying tribute to the tireless work of the late Baroness Hollis.
For too long, the benefits system has been a Byzantine nightmare: a complicated arrangement of six different benefits coming from three different government departments. This complexity created obstacles for claimants entering the workplace. Under the previous Labour Government, our benefit system created a poverty and dependency trap for claimants and their families where, ironically, it could be more worthwhile to claim benefits from the state than to work.
The old system disincentivised work through cliff edges at 16, 24 and 30 hours worked per week. Workers claiming benefits could increase their hours but gain essentially no financial benefit from doing so. That meant that those choosing to work could have an effective tax rate of more than 90% on their income.
Universal credit changes that. It makes work pay. Because universal credit incentivises work and does away with the old system of cliff edges, 86% of people on universal credit are trying to increase their working hours. They are doing so because they can be sure that, the more money they earn, the more money they will get to keep for themselves. Indeed, analysis shows that people in work and claiming universal credit are on average £600 a year better off as a result.
Universal credit is projected to help an additional 200,000 people into work, adding £8 billion per year to the economy when fully rolled out. That is more money for the Government to spend on our public services and infrastructure. But, more crucially, those 200,000 more people in work are 200,000 more people taking pride in earning for themselves and their families. In turn, that means many more children growing up in homes with working parents, rather than in workless households. We know from research that children do worse in workless households. Children in workless families are almost twice as likely to fail at all stages of their education as those in households with at least one parent working.
However, no system is perfect, and I welcome the Chancellor’s commitment to spend an additional £4.5 billion to help with the full rollout. The Economist argued recently that universal credit was a policy worth implementing, and suggested that, if done properly, this reform could be a “shining example for others”.
The Government have committed £51 million pounds to Citizen’s Advice centres to deliver support for new claimants. They have provided online guidance—immediate access to work coaches—to support claimants, and have trained 1,800 universal credit work coaches to support claimants with mental health issues. The end result is worth it. We must have a benefits system that is easier for claimants to navigate, and that supports and incentivises working. We need a benefits system that encourages those that are structurally unemployed into employment, so that their children do not fall victim to the same fate. The previous benefits system—which incentivised claiming from the state over work—is not fair to those claiming it, to their families, and to hard-working UK taxpayers who ultimately finance it.
Because of this Government’s commitment to get Britain back to work, there are thousands of families where children grow up seeing their parents coming home from work every day. We cannot overestimate the positive effect of this: such behaviour sends an immensely powerful message to the next generation. We need a benefits system that supports this, not one that actively discourages claimants from seeking work.
In closing, I pose two questions to my noble friend the Minister. Does she agree that, whereas the legacy system stifled work opportunities, universal credit unlocks them, and that it is crucial to continue to roll out universal credit to extend opportunities to work to all?
My Lords, I too congratulate my noble friend Lord Bassam on introducing this debate, and I echo the tributes that have been paid to Lady Hollis.
I want to focus on a couple of aspects, and start by quoting from the Times on
“The same point pertains here as to the recent two-child limit in means-tested benefits. The idea is that nobody will lose in cash terms as they transition on to universal credit They will be protected. Again, only new claimants, or people who have a change in circumstances, will lose relative to the existing system.
Whatever one thinks of the long-term effects, that doesn’t look like it will create a poll tax moment What might create such a moment, though, is the third issue—the administration of the system. That is already creating some problems when new claimants move on to universal credit. There are all sorts of risks here, but perhaps the biggest are likely to arise as up to two million families presently receiving tax credits and benefits transfer across to the new system”.
I trust the Minister is listening. The article continues:
“Under current proposals, they will actively have to reapply. The transfer won’t happen automatically. If they don’t reapply, they will lose their benefits, including any transitional protection. The scope for large numbers of people to end up losing benefits in unintended ways is clearly huge. That is what should be keeping ministers awake at night.
It is hard to overstate just how big a change universal credit will be. It will create millions of winners and losers. Any poll tax moment, though, is most likely to occur for administrative reasons. The first priority for avoiding such a moment should be to ensure that existing claimants transfer as easily and seamlessly as possible”.
That is what I want to focus on, because it is fundamentally important. I am not one of those who is calling for the scrappage of universal credit; to be honest, that way lies madness. I do not believe that going back to the previous system would be feasible. I could not help reflecting that, if there was someone else who I would have liked to be in the Chamber, it would be the noble Lord, Lord Freud—who, after all, was one of the main architects. It would have been interesting to hear his reflections.
Like many people, I welcome the cash injections in the Budget: I have to say that they were necessary. Not only Members on this side of the House, but those on the other side, were saying how much they were needed and that the Osborne formula had gone too far. I would like confirmation from the Minister about the waiting time—it was once six weeks, was reduced to five weeks and now is going to be reduced to three weeks. I am sure I read about that somewhere, but could not find it.
Politics is about the language of priorities and choices. I cannot help reflecting on something in the Budget that is important. Raising the tax threshold is good; it is hard to argue against that. It was interesting to hear the analysis, which has been referred to by a number of noble Lords today—namely, that it benefits more people at the middle and top end, and those at the lowest end benefit the least. If the Government really want to help those people—and I think that they probably do; I am going to give them the benefit of the doubt, although I am probably out of keeping with many of my comrades here—then the best thing they could have done was to raise the national insurance threshold. That would have had a bigger impact.
I will turn briefly to the Library briefing—another superb document. Sometimes they are so weighty that they overwhelm you, but with this one they have obviously discovered that less is more, and it is really helpful. The briefing quotes from a report by the Resolution Foundation, which points out that once universal credit is in a,
“steady state we expect working families to be, on average, £625 a year worse off”.
The report continues that this means that, overall, universal credit is set to be,
“almost £3 billion a year less generous than the tax credit system it replaces”.
I am sure that the Resolution Foundation is not making that up, and it is a concern.
To return to the question of transition, the noble Baroness, Lady Jenkin, said at the beginning of the debate—and it was not a throwaway remark—that DWP staff need more training. They might do; I am sure that they would benefit, but that is not the problem and the challenge that they face. I happen to be in contact with somebody who actually works for the DWP, and I recommend that the Minister goes and talks to the staff—not the job coaches, but the staff who are dealing with claimants on a day-to-day basis. They are under enormous pressure. They want to do the best they can; they are dealing with complex cases, but often find that they have to give a small amount of time to those cases because they have to go on and deal with the others. It is a really serious problem: people sometimes literally break down in tears because of the pressures they face. I could not help smiling when I heard recently that a regional manager came round and thanked them. That was it. What the regional manager ought to have done was sit down with them for half an hour and ask them what challenges they were facing.
The most important thing that the Government need to do, if they do not want universal credit to be seen as universal discredit, is to ensure that that transition takes place in an orderly way, so that people feel confident about the change to universal credit. So much of the analysis by the noble Lord, Lord Shinkwin, who is not now in the Chamber today was ideological and unfair, in my view; but that is a debate for another time. He said that there was going to be some kind of a pause. There should be, because you need to give time to ensure that the DWP staff are ready to cope with that enormous workload. I would welcome the Minister’s response to that point.
My Lords, it is a pleasure to follow the noble Lord, Lord Young of Norwood Green. I particularly like his idea that it would be useful to hear what the noble Lord, Lord Freud, thought about Patricia Hollis. I think that through gritted teeth, he would give a generous appreciation of the experience he had in Committee in 2012 during the passage of the Welfare Reform Act, where she took the noble Lord to pieces and put him back together again. I must say that I had something of the same treatment. In 2003, when I was chairman of a Select Committee, we went to the extreme of requiring the then Minister, Lady Hollis, who was in charge of reform of the child support systems, to give evidence during the Summer Recess. We invited her twice; she came, and got a bit fed up with all of that. At the end, it seemed that it was me, as chairman, not her, who was answering the questions. I hope the House will understand if I say that on that occasion, I was pleased to see the back of her. She was a very effective Minister, and we will miss her. I will certainly sign up for the annual debate—I want to put in an application in perpetuity to recognise her work.
This has been a valuable debate, and we can take some positives out of it. I take the view generally that we are in some difficulty, particularly in the economic context, in spite of some of the advantages of the Budget that we saw on Monday. We face uncertain times as we withdraw from Europe—or not, as the case may be. I wonder whether we are properly prepared to help vulnerable families.
The systems we have in place work perfectly well for people like me and, indeed, for other Members who took part in the debate this afternoon who were defending universal credit. I defend the architecture of universal credit; I have been arguing for a working-age benefit that is blind to work for 35 years, and that is what the architecture provides. Before 2008, the noble Lord, Lord Farmer, who has distinguished experience in this area that I respect, did valuable work constructing a report called Dynamic Benefits. However, that was a very different proposition. Because of the levels at which the taper rates and working allowances were set, it was a poverty reduction measure that did not have as many of the behavioural nonsenses we are suffering from, which were added in the implementation. The noble Baroness, Lady Lister, knows better than anybody about the ways in which the money is allocated, the periodicity of payment and some of the other flaws that will need to be ironed out—and which can be. Our Conservative colleagues do not therefore need to be defensive about the architecture of universal credit. We just want the original version, and want the money put back into it.
I beg the noble Lord’s pardon. I had understood from the way he was making his argument that he was involved in the Centre for Social Justice work that led to—
It sounds as if the noble Lord is being a bit defensive about the results of the work, but I will move on.
There was a theme in the debate: that all this is doable not just by the DWP, and that is correct. We need to work with local government colleagues much more; indeed, there was a very good Local Government Association briefing on this. The noble Baroness, Lady Wyld, talked about the need to put more effort into mental health; we need the Department of Health to assist with that.
The noble Baroness, Lady Warwick, spoke about housing, which is absolutely critical. We are handing huge amounts of money to private landlords at the moment, and that is destined to get worse. A recent Centre for Social Justice report suggests that we will be paying £75 billion by 2050 if we go on at current rates. That is clearly impossible. There is a welcome understanding across the House that the DWP needs to use its important influence within government to get more cross-departmental support for the development of these policies. It may seem that there is enough to do at the moment, but that is important.
I keep saying that the arguments across the House leave us talking past one another. Members of the Government, perhaps understandably, say that reasonable people should be able to work their way through the complications of applying for benefits and so on. But universal credit has some real complexities, an example being digital access. “Digital by default” is a real problem for many families. It will lessen as the system develops, because more people will be educated at school to use technology, but people are frightened. A couple of noble Lords mentioned fear; the noble Baroness, Lady Pitkeathley, for example, mentioned the real fear that people have when making applications.
The Government are saying that for people like me, should I need to apply for universal credit, it is a breeze. I know it is because I have been to the centres and listened to applications being made. The system works, and there are other advantages too. Indeed, in theory, in future nobody should miss out on benefits because take-up is accounted for under universal credit. It can be massively beneficial for people like me; but for those with big household debts, two or three credit cards that they do not know how to pay off, a disability, a lack of digital skills or family problems, it can be very difficult.
The Government need to fix this, and I guess the best vehicle for doing so is universal support. I welcome the extra £1 billion that is coming in. We will talk about that in more detail when we get the managed migration regulations, because that is where this sits. It would be helpful to get an idea of when the regulations will be coming, together with the SSAC report to which the noble Lord, Lord Shinkwin, rightly referred.
If people on the Government side are trying to defend the situation and are frightened that universal credit will be swept away, the one thing they can do is ask for more support, because it works. They got more money from the Chancellor—I did not expect that package. It was down to Conservative Members of Parliament saying, “We need to do something about this”. They now need to go back and say, “We need more put into universal support” to help the 10% to 15% of households who will really struggle to find a way through the difficulties, in addition to the sanctions that they face. There are things we need to do to guarantee the future of universal credit as a successor to the legacy benefits that the noble Lord, Lord Bassam, has rightly raised in his Motion.
Between now and next November’s comprehensive spending review, we need to put more support into universal credit so that it can be guaranteed to work. If I were to get the assurance of extra resources, I would become a stout defender—subject to dealing with the behavioural issues that still need to be fixed. I would be much more encouraged to defend the architecture of universal credit if it had a more effective system of universal support attached to it.
The noble Lord, Lord Livermore, was absolutely correct to mention the real mistake that was made. The decision to put money into tax allowance increases as opposed to unfreezing benefits was unconscionable. It was a political choice and, at this stage in the game, when we face uncertainty over Europe and everything else, flatly wrong. It was a big mistake. It was a choice that the Government made and they will be held to account for it, and rightly so.
Finally, I was encouraged by reference in the Red Book to providing better access to affordable credit. A lot of the families that I am talking about, and continue to be concerned about, are at the mercy of loan sharks day in, day out. Using assets from dormant bank accounts can help to deal with that. It is not a huge amount of money but if it works, it could be extended. I hope the Government will take that forward, because it would be a very positive move.
This has been a very good debate. Such a debate should be held annually, but we need not just to “take note” of things; we need to get them fixed.
My Lords, I too congratulate my noble friend Lord Bassam on securing today’s debate and on his powerful contribution. The debate, with so many excellent contributions, has drawn out very clearly the need to look at social security as a whole and at the impact that it has on the day-to-day life that people and families in the UK lead, not just as a spreadsheet of discrete numbers.
In the recent Public Accounts Committee report on universal credit, some of the most striking criticisms were that the department has “persistently dismissed evidence” and,
“refuses to measure what it does not want to see”.
I am sure that the Minister has listened carefully to every contribution today, even where it has been of a nature that the Government might not wish to hear. Discussing what a system aspires to achieve is but one element; assessing the evidence of actual outcomes is quite another.
Four million children—30%—live in poverty in England according to the Child Poverty Action Group. In Wales, the figure is 200,000. The Institute for Fiscal Studies predicts a further increase of 400,000 by 2021. The Equality and Human Rights Commission estimates a higher number, at 5.5 million children. One can vary the data source, but that does not vary the message: levels of child poverty are rising. Falling state support for those on low incomes, cuts to benefits and tax credits, rising household debt, rising private sector rents, a labour market with more part-time or self-employed workers or workers on insecure contracts are pushing children into poverty. Most of the projected increase in absolute poverty is due to the two-child limit on child benefits.
Child protection inquiries have risen by over 150% and the number of children in care is the highest since the advent of the Children Act 1989. Perhaps I may quote from the Children’s Commissioner briefing, which states that the,
“biggest losers under universal credit are …families with children, especially single parents. The Government have never fully justified this. When presented with … IFS and Resolution Foundation research, the …Secretary of State … said there would be ‘winners and losers’. There is no clear rationale for making children the losers when they already have higher levels of poverty”.
“as part of the impact assessment for all domestic policies … that means every single domestic policy that government comes up with will be examined for its impact on the family”.
Few family test results have been published.
The Care Crisis Review was facilitated by the Family Rights Group and funded by the Nuffield Foundation. It captures the complex contributions at play and recommends that the DWP and DfE should lead a review into the impact of benefit rules and policies, and the projected effect of benefit changes on children entering or remaining in care. The Child Poverty Action Group calls for a root-and-branch review of universal credit, echoing concerns expressed by the Children’s Commissioner, the Resolution Foundation and many others.
The funding announcement in the Budget this week for some claimants of universal credit is welcome, but it is a kind of recognition by the Government that their flagship scheme is not working in all parts. What is missing is an admission that much more has to change. There are flaws in the design and the delivery of universal credit. Unacceptable and unrealistic waiting times, rent arrears, single household payments and the impact on domestic abuse victims are just a few of the issues that people are facing. This is a system that is causing anxiety and hardship wherever it is rolled out. Can the Minister tell the House what plans the Government have to recognise these issues and overhaul universal credit to make it fit for purpose?
The Budget was a missed opportunity to bring children in from the cold. Child benefit—core money for struggling families in and out of work—will have lost nearly a quarter of its real value by 2020. I agree that jobs and enterprise are important, but increases in employment cannot conceal that two-thirds of poor children have parents in work. The noble Lord, Lord Livermore, demonstrated so ably that higher personal tax allowances are not pro poor children. The increases in the Budget are very small against cuts introduced since 2015 and still to come. The benefit freeze continues. Since 2010, £37 billion of funding has gone from social security.
I would like to take a little time to refer to the 200,000 children in kinship care. The Care Crisis Review concludes that,
“a significant untapped resource … exists for some children in and on the edge of care, namely, their wider family and community. … supporting this resource could safely avert more children needing to come into care or could help them thrive in the care system”.
Kinship carers try to provide stable homes with little or no financial support, often giving up their jobs for often traumatised children who would otherwise go into the care system. A recent survey by Family Rights Group and Grandparents Plus found that for 94% of such carers, caring had caused financial hardship, despite keeping children out of care and saving the state millions of pounds; and 41% of those receiving some form of local authority allowance have had it reduced or removed.
Notwithstanding the commitment that children in kinship care would be exempt from the two-child limit on benefits and tax credits, the Government still penalise some kinship carers, including siblings who were raising their younger brothers and sisters and who subsequently had a child of their own. Child Poverty Action Group had to go to the High Court to win the declaration that government policy was perverse and unlawful. The Budget rectifies that unfairness from November 2018, but I ask the Minister whether it will be retrospective to when the two-child limit was introduced.
For some families, exempting kinship care children from the two-child limit provides little relief if the additional benefits are restricted by the benefit cap. Kinship care and adoptive households should be exempt from the benefit cap. In keeping with the Care Crisis Review, the Government should at least discount income received from tax credits and child benefit for kinship care children from the benefit cap and add it to the list of benefits that are not treated as income when the cap is calculated.
Finally, I too wish to pay tribute to the amazing Baroness Hollis, her wonderful achievements and unquenchable commitment to those less well off—from supporting black workers at Selma when a young undergraduate, to winning literary prizes and taking on the Government over cuts in tax credits. My noble friend Lady Sherlock and I were privileged to be her roommates for eight years and to witness her extraordinary mental and physical resilience and generosity of spirit in the face of what became an overwhelming illness. Patricia rooted her contribution in the reality of people’s experience. Her benchmarks always included what it would like to the single mum in Norwich, her beloved city. The single mums of Norwich and across the UK had a doughty fighter in Patricia. O that she were here today to do justice—far more than I can do—to the issues that she cared about. My noble friend Lady Sherlock and I were ringside as she prepared for the battle with George Osborne on the statutory instrument on tax credits. Her determination, eloquence and intellect were awesome, even though she was so unwell. We were proud of her. We had had many private and moving conversations in the sanctuary of our little office. She was an extraordinary woman.
My Lords, I join all other noble Lords in congratulating the noble Lord, Lord Bassam, on securing this debate. It gives me great pleasure to respond. Once again, I pay tribute to the life of Lady Hollis. I have already said once before that she and I were opponents back at the beginning of this century. That said, I will never forget the hug that she gave me when I was appointed to this position. The noble Lord suggested an annual debate in her honour. No doubt he will take that matter up with the usual channels.
This is a Government who support families. Our welfare system supports those who are vulnerable and helps people into work. Let me dispel the idea that we are not providing financial support for families: this country spends more than any other developed nation on family benefits. Through our employment success—with 1,000 more people in work on average each and every day since 2010—we are creating a great working nation. Let us not forget that, under the last Labour Government, the number of households in which no one had ever worked almost doubled. Every time Labour is in government, it leaves office with unemployment higher than when it entered office, so ripping the heart out of families across the country, denying people the dignity of work, and removing aspiration from a generation. This was a consequence of the Labour Party’s mismanagement of the economy and its perverse welfare system. It was a system that, through a complicated mix of benefits and tax credits, created effective tax rates of more than 90% for some and cliff edges at 16, 24 and 30 hours, thereby discouraging further work and punishing families for doing the right thing. This was a broken system that did not support families: rather it trapped people out of work.
As noble Lords will know, under the last Labour Government, 1.4 million people spent the best part of Labour’s last decade on unemployment benefits. This resulted in the benefits bill soaring by £84 billion in today’s prices, a rise of more than 60% in real terms. As my noble friend Lady Jenkin said, vast sums of money were being spent, while people were being locked into a life on welfare. This was why we had to introduce a benefits freeze. The system was simply not sustainable. We even had people claiming more than £100,000 a year in housing benefit. This meant that households were contributing £8,350 a year—up by nearly £3,000 from 1997-98—to fund the welfare system. How does that help families and how is it fair?
In stark contrast, this Government have helped more than 3.3 million more people into work since 2010. On average, that is 1,000 more jobs each and every day, and the vast majority of these are full-time permanent roles. I want to stress that: they are not zero-hours contracts and they are not part-time. We have created more new jobs in the UK since 2010 than France, Spain, Ireland, Netherlands, Austria, and Norway combined. Youth unemployment has more than halved under this Government. There are now 964,000 fewer workless households in the UK since 2010, close to a record low. This means there are 637,000 fewer children growing up in workless households since 2010. This is the best support that we can provide for families, because—I say this to the noble Lord, Lord Bassam—work is the best route out of poverty, including getting people out of in-work poverty. Children in households where all adults are working are around five times less likely to be in poverty than those in workless households. Compared with 2010, there are now 1 million fewer people in absolute poverty, including 500,000 fewer working-age adults and 300,000 fewer children.
Work sets children up for the future. Children who grow up in workless families are more likely to be workless themselves as adults, compared to children with working parents. I say to the right reverend Prelate the Bishop of Portsmouth and the noble Baroness, Lady Lister of Burtersett, that it is a tough choice, but the same considerations and choices faced by people not in receipt of benefits should also be faced by those claiming benefits—those able to work.
We are not complacent and I do not accept any reference to us being a department in denial. I find that a shocking statement, referencing the 83,000 people who work tirelessly in the Department for Work and Pensions. I thank the noble Lord, Lord Young of Norwood Green, for his reference to those brilliant people. We do all we can to support them, and we must do more, because they do an amazing job throughout the United Kingdom. While there are almost a million fewer workless households than in 2010, there are still 3 million where no member of the household is in employment. We want to help those people.
The two-child policy has been referenced as a reason why many people are in poverty. That policy was brought in only in April 2017. It is important to stress that it is not retrospective and that we have child benefit, which continues for each and every child. While there are almost 1 million fewer workless households, the department has great ambitions to return many more people to work, such as our target to increase the number of disabled people in work by 1 million. It can be done. We currently have more than 800,000 job vacancies across the country. These great ambitions are the reason why we created universal credit, in recognition that the punitive legacy system took opportunities from families, creating—I repeat that extraordinary quote from my noble friend Lord Farmer’s brilliant speech—
“a shadowland of complete welfare dependency, with some saying, ‘I cannot afford to work’”.
Instead, we want to give people the dignity of work and we have changed the welfare system to give people a hand up rather than a handout.
As we have heard, universal credit is an up-to-date system that replaces six benefits with one monthly payment and ensures that work pays. The taper system means that people can take on more hours and part-time seasonal work, as the benefit adjusts to their earnings. There are no cliff edges. I am proud that work transforms lives, because it helps to improve the well-being of families—their health, and their children’s prospects and preparation for later life. Of course, it improves their chances of building a pension through, for example, automatic enrolment. We will help an extra 200,000 people in work and empower people to work an extra 113 million hours a week. Those in work under universal credit earn on average £600 extra a year. That is how we will deliver a sustainable welfare system.
Make no mistake, we are supporting families that need support. This country spends more than any other developed nation on family benefits. Through universal credit, around 1 million disabled households will receive an extra £110 on average per month through more generous support. Universal credit pays up to 85% of childcare costs, compared with 70% under legacy, regardless of the number of hours worked, unlike tax credits. This provides the extra cash boost to pay for childcare and allows people to work extra hours.
Working families in England can also claim up to 30 hours’ free childcare for three and four year-olds from support from other government departments. This has helped drive profound cultural change in this country, with 1.6 million more women in work since 2010. As a working mother, I know so well that most women really want to work and stay connected. I agree with my noble friend Lady Pidding that universal credit unlocks work opportunities for everyone, unlike the legacy system—and, yes, we will not stop the rollout of UC.
We know that work does not just pay financially—it does much more than that. It provides people with a sense of purpose, identity and personal achievement—all those things that we in your Lordships’ House experience and perhaps sometimes take for granted in our own lives. It also helps with physical and mental health as it tackles loneliness head-on. It allows people to develop their skills and transform their lives. That is what this Conservative Government are doing, and we are doing it through universal credit.
We will make a success of universal credit by being an open department that listens. In response to my noble friend Lord Sherbourne, who is so right, it is important that we listen. We are travelling the country to speak to experts, workers and those on UC to understand where the system can be improved. That is quite right. As the noble Lord, Lord Young, said, we need to keep listening and travelling the country. This year, my ministerial colleagues and I have met with over 500 colleagues, charities and stakeholders; visited over 50 jobcentres, service centres and pension centres; tabled 35 Written Ministerial Statements and appeared 15 times in front of Select Committees.
As a Government we have listened to concerns and responded. This week, the Chancellor announced significant changes in the Budget that will make a huge difference to working families and those moving to universal credit. For those in work, we have put an extra £1.7 billion a year into work allowances, increasing the amount that hard-working families can earn before universal credit is tapered away. This provides 2.4 million families with an extra £630 a year. This is a pay rise of 7% or more for these workers, showing that hard work pays off. This measure will increase the incentive to enter work and focuses support on some of the most vulnerable—parents, disabled people and carers, as referenced by the noble Baroness, Lady Pitkeathley—who may face greater barriers to entering employment.
We will also support those moving to universal credit, especially the vulnerable. My noble friend Lord Farmer asked about the £1 billion package announced by the Chancellor in his Budget. This will provide two additional weeks of legacy out-of-work benefits for people moving on to universal credit, providing claimants with extra money during the five-week period before receiving their universal credit payment. I think that is possibly where the noble Lord, Lord Young of Norwood Green, suggested three weeks. People will receive an extra two weeks of benefits to help them with a more seamless transition from legacy on to universal credit. This is extra money that does not have to be paid back. This will provide 1.1 million people with an average one-off additional payment of £200, on top of the two additional weeks of housing benefit announced in autumn 2017 and put into place this year.
We think that about 700,000 people have been missing out on their benefits under legacy. We have worked that out to be to the value of about £2.4 billion. There will be a significant change in how people find out about what they can receive, because they will have constant contact with, and will work together with, their work coach.
We have gone further in the Budget to support families. We will support those in debt by reducing the normal maximum deduction rates from 40% to 30% of a person’s standard allowance. This will have a huge impact, helping over 600,000 families at any one point when rollout is complete. It will provide them with on average £295 extra a year as their debts are repaid over a longer period.
With particular respect to the self-employed, I say to the noble Baroness, Lady Donaghy, that we will support new businesses by opening up a 12-month grace period before the minimum income floor comes into effect. In 2023-24, around 130,000 self-employed households will benefit from exemptions from the minimum income floor, giving them the opportunity to grow a successful business. This is alongside extending new enterprise allowance contracts, which provide support for those out of work to set up a business and become self-employed. This will add to the 45 new businesses a day that have been created since the introduction of the scheme in 2011. We have listened, we have acted and we continue to listen.
Next month, universal credit will be in place in every jobcentre in the country, and this autumn we will bring forward regulations to deliver the managed migration phase of universal credit, to move people without a change of circumstances. These are positive regulations which allow us to protect 500,000 people’s severe disability premium at the point of migration; and deliver transitional protection for those we move, to ensure that at the point of moving those who are manage-migrated do not lose a penny. We will take a measured approach to delivering managed migration. It will start later: this is not a pause but we will be taking longer to introduce the managed migration, because we need to do test and learn to make sure that we get the system right. The process will start later in 2019.
Let me clarify: we are not stopping the rollout. The rollout for all people coming on to universal credit will be completed by the end of December 2018, and they will continue on universal credit. The system will carry on and all those new people will come on, but we are not going to start moving people from legacy benefit over to the universal credit system until July 2019. We want to spend the first six months of next year building a system that works, through a process of test and learn, to make sure we get it right for those people. I promise that we will work with all our stakeholders to make sure that people do not fall through the cracks. I think the noble Lord has a family interest in this, in terms of jobcentres. The reality is that everybody is working hard to make this enormous change we have undertaken work to the best of our ability. I hope that that explains it.
In response to my noble friend Lady Wyld, I say that our migration processes will be co-designed with stakeholders, as I just said, to ensure that we have listened and understood claimants’ experiences. That obviously relates very particularly to people with disabilities—we want a process that works well for everyone. We are focusing on building safeguards for vulnerable claimants and ensuring we have all the necessary information to ensure a smooth transition with uninterrupted support. We will target support to the most vulnerable, as referenced by my noble friend Lord Shinkwin, and will focus on working to support those with mental difficulties. To ensure that the most vulnerable claimants are supported, we have improved the learning journey for our work coaches, which includes training to work with people who suffer from mental health issues. We have also increased the number of disability employment advisers who can provide additional support.
It is important to add that we are working holistically across government, including the Department of Health, the Department for Education and the ministry of housing. It is very important that all our systems work together for the benefit of all, so no more than 10,000 people will be moved in the first six months of the preparation phase for the managed migration. Let me say that this side of the House will not play politics with these regulations, as I am sorry to say we all know the Labour Party did earlier this year when they voted against the £1.5 billion of support we announced at the 2017 Budget. I confirm for the noble Lord, Lord Kirkwood, that we will lay the managed migration regulations very shortly. Pausing or scrapping universal credit—whichever is the Labour Party’s policy; we are not quite sure at the moment—will not support the families that Labour purports to stand for.
I hear what the noble Lord, Lord Kirkwood, said about universal support. We are working hard on universal support—our new partnership agreement with Citizens Advice is an example of that—and we continue to work with local authorities. In terms of affordable credit, we will work with stakeholders on a feasibility study on a no-interest loan scheme—something that was announced in the Budget.
I will try in the last moments to answer one or two more questions. Her Majesty’s Treasury published a cumulative distributional analysis alongside the Budget in October 2018, which shows that government policy continues to be highly redistributive. In 2019-20, the 10% of households with the lowest incomes will receive over four times as much support in public spending as they contribute in tax on average, while the 10% of households with the highest incomes contribute over five times as much in tax as they receive in public spending. I listened to the noble Lord, Lord Livermore, and the noble Baroness, Lady Drake, and their analysis was wrong. There has been no sudden increase in in-work poverty. The chances of a working family being in poverty are broadly the same as they were in 1997.
In terms of housing support, we are working hard. A number of noble Lords referenced housing. We are working closely with the department of housing to improve what we can do to support new builds, as well as supporting those in social housing.
We spend £50 billion on benefits to support disabled people and those with health conditions—a record high—and £9 billion in real terms since 2010, so I do not recognise all the references to cuts. We are doing an extraordinarily difficult job. My noble friend Lord Sherbourne referenced the word “hard”. It is very hard to get this right, because we are working with millions of people on a daily basis across the United Kingdom to support them.
We stand to provide opportunities for families across the country, through the opportunity to work, and through a sustainable, fair welfare system—fair to those claiming through it and those paying for it, fair because we support vulnerable families as compassionate Conservatives, and fair to those who can work by rewarding hard work.
My Lords, I thank everybody for their participation in this debate. The quality of it has proven the need that I identified at the outset: that we ought to have an annual Hollis debate on poverty and the best way to tackle it. I was greatly heartened by the warm words from all sides of the House about our late friend Baroness Patricia Hollis and her legacy. I recognise from some of the contributions—particularly those of the noble Lord, Lord Kirkwood, and my noble friend Lady Andrews—the way in which Patricia worked and her generosity of spirit. You often felt that she was there to make the case and advocate the case, even when she was being briefed by her civil servants. I well remember coming out of a meeting where she and I were being briefed for some future debate, and the civil servants were thanking her for the briefing she had just given them. That was a testament to her knowledge, and concentration on the detail of her brief.
There have been some common threads in this debate, although it has not always sounded quite like that. Colleagues on the Conservative Benches have been critical in part of the way in which universal credit has been rolled out. They recognised and acknowledged some of the problems with the system. The noble Baroness, Lady Buscombe, made an aggressive defence of the Government’s policy and I expect no less from her. The welter of statistics that she delivered this evening bear some close inspection and, on our side, we will want to reflect on some of the points she made. I think there was agreement, too, on both sides of the House that it is important that we place work at the centre of ensuring that people have an opportunity to work their way out of poverty, and that the relationship between the benefits system and the world of work is extraordinarily important, particularly for people on low incomes. Getting that right is very difficult. Our Government made strides and progressed in that direction; it is right that the current Government do the same.
However, it remains the case that there are losers from the introduction of universal credit. Almost two in five households will lose an average of more than £50 a week and 2.8 million households will see their income cut. A million home owners will see tax credits disappear, losing £43 a week on average, while 600,000 working single parents—I stress: working single parents—will lose money as well and 750,000 households on disability benefit will lose an average of £76 a week. There are more losers from this scheme than there are winners but getting it right is most important and, on our side, while we recognise that universal credit is a valuable system, we also recognise that it has flaws and that this Government have much to do to put those flaws right.
I thought that the Chancellor’s Statement this week was in one sense an admission of mistakes made in the past and an acknowledgement that more needs to be done in the future. We on our side of the House will argue that case because the impact on family life of these changes is profound. Anybody who doubts that should attend a surgery run by an MP, or go to a CAB or a law centre, and listen to some of the stories that come forward. They do not paint a happy picture.
That said, I am grateful to the House for its forbearance. I have learned a lot from this debate and I am sure that other colleagues have as well. It was a very fitting legacy to our friend Patricia Hollis, who was not just an inspiration but a great mentor to us all. Her passing will be greatly missed.