Iain Duncan Smith highlights importance of Universal Credit Working Allowances

16th November 2016

Iain Duncan Smith calls on the Government to consider very changes to Universal Credit Working Allowances as these allowances are critical in helping people who try to get into work stay in work.

 

 

I shall be as brief as possible and certainly intend to be well under that limit. I shall not follow the hon. Member for Ross, Skye and Lochaber (Ian Blackford) down a memory-lane trip involving independence or leaving the single market. I will say, however, that I am a huge admirer of him. Many of my ancestors are buried in his constituency, so I like to claim a little bit of union with him, even though he would not want to admit it. I shall visit the area as often as possible to ensure that I give the hon. Gentleman the best support I can for him to stay up there as long as possible.

I rise for the first time in, I think, nearly seven years to speak from the Back Benches, and I do so to speak on an issue that is very close to my heart. I want to explain why that is the case to my colleagues. Let me start by welcoming both Ministers to their new roles on the Front Bench, and I congratulate them on continuing to commit to the changes and reforms necessary to improve the quality of life for so many people who would otherwise be left behind.

In passing, let me note one or two figures. The number of children in workless households has fallen to record levels—down to just under 11% from the 20% that we inherited. A child in a workless household is nearly three quarters more likely to be in poverty than a child in an in-work household. That is an important point, because that dynamic is critical—a point to which I shall return. The fall in income inequality has been mentioned, and it is falling because more people at the lower end are going back into work.

There is another important issue about disability. We have committed to, want to commit to and must stay with the position of wanting to see more people with disabilities in work. We want the gap to be at least halved, which I think is feasible. I shall explain in a few moments why I think that it is feasible.

 

Will the right hon. Gentleman give way?

 

In a minute, but let me finish this point first.

A lot of the work of the Green Paper was done when I was in the Department. It was a White Paper at that stage, and I hope it gets speeded up and becomes a White Paper again fairly soon. After five reviews of the inherited employment and support allowance, I would be the first to acknowledge that although we have stabilised it and it is better than it was, it is a very difficult area, as we all know. If every Member was prepared to be reasonable, we would all recognise that these things need to change.

Let me clarify that the main single thing that I wanted to see change and I still want to see changed is this artificial idea that people are either too sick to work or able to work. There should be a greater nuancing in people’s lives, and universal credit now opens the door to a much more flexible process that allows even those diagnosed and reasonably said to be “not capable of work” to be able to work—and if they wish to work, they should be allowed to do so as far as they possibly can, with the taper used to take benefit money away gradually. I think that might improve the quality of life for many people. I know that this is a submission in the Green Paper, and I hope the Minister will bear it in mind.

Let me return to the point that when universal credit was set up by my noble Friend Lord Freud, who worked very hard on it, and me, the idea was that it was not just about money, but about human interface. The people in jobcentres now stay with individuals as they go into work to help advise them and be with them. This will be a more human interface, so that people can be helped through to gain extra hours, which opens the door for people with limited capabilities to work to be helped in a way that would not have been possible if we had stayed with the original system. All this is very good and very positive.

There are two critical elements. First, when people step into work, the barrier must be reduced by improving the amount of money that can be held from benefit before it is tapered away. The second element is the taper itself, which is the simple process by which people have their income reduced. I say to the Minister that those two elements, notwithstanding all the other stuff such as improved childcare and everything else, are at the heart of what delivers.

The Institute for Fiscal Studies and others recently looked at what the dynamic effect of universal credit might be as it rolls out. The IFS was very clear: it said that the effect was a 13% improvement in all elements—going back to work, staying in work, taking more hours and earning more money. I know from my experience in the Department that every time one benefit has been substituted for another, it has almost always been worse on arrival than the previous benefit before people engage with it and improve it. This is the first time that a benefit being rolled out is a net improvement on a previous benefit.

I therefore make this recommendation. That figure of a 13% improvement was made on the basis of the original work allowances. In the spirit of general collective view and belief, I say that if we really want to see the right thing happen to people out there who try to get into work and stay in work, the allowances are critical. I recommend and hope that my colleagues in government will think very carefully again about the decision to reduce those allowances. I recognise the problem with the deficit, and we of course want to reduce it. I am not asking for more money; I am asking for wiser spending. I wonder whether we could revisit the idea of a tax threshold allowance and look to see whether getting the money to the lower five deciles would be better served by universal credit. Some 70% of those people will be on universal credit, whereas only 25p of a tax threshold allowance will actually go to the bottom five deciles.

I urge the Minister to speak to his right hon. Friends and say, “Look, we have a very good opportunity to do something that is really bold and right for those whose lives we really want to improve—those that the Prime Minister rightly said was her target group.” It is a very Conservative thing to do to help people who are doing the right thing to improve their lives. Even if the Government cannot do it all, they should look at two elements: lone parents and those with limited capability for work. This would answer the problems surrounding the WRAG, too. I urge Ministers to do just that. It is the right thing to do, and it will be the thing to do that changes lives and improves the quality of those lives.

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