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.