Hansard

As the convener of the Parliament’s Social Security Committee, I am pleased to open the debate on the committee’s report “Social Security and In-Work Poverty”. I put on record my thanks to everyone who gave evidence to the committee or supported its visits, our clerking team, the Scottish Parliament Information Centre and our former convener, Clare Adamson, who helped to instigate the inquiry.

The committee embarked on the inquiry against the backdrop of the United Kingdom Government’s continued roll-out of universal credit, together with its plans to migrate to that benefit many thousands of people who are currently in work and in receipt of working tax credits. Alongside that, the committee was aware of the rising number of people, including working families, who are accessing food banks. Research shows a clear link between that rise and the roll-out of universal credit. We know that the rate of employment is at a record high, but research by the Joseph Rowntree Foundation has shown that the number of people who are in work but living in poverty is the highest on record. The committee heard that that trend disproportionately affects women, disabled people and black and minority ethnic individuals.

At the same time as the number of workless families has fallen, there has been weak growth in men’s earnings and the number of women who work has increased. In Scotland, 18 per cent of workers are paid less than the living wage, 6 per cent are on temporary contracts and around 63,000 are on zero-hours contracts. The number of workers who live in poverty is increasing at a faster rate than the number of people who are in employment. Put simply, that means that people who are in work are increasingly likely to find themselves in poverty, which is a very worrying trend indeed.

Of course, in-work poverty is not just about social security. I have already alluded to some of the other issues. Research shows that in-work poverty is a product of the economy more widely and that factors such as affordable childcare and housing and delineating the barriers and additional costs that are faced by disabled people are all key. Although such issues go beyond the remit of the Social Security Committee, their consideration is crucial to forming an overall picture.

The committee focused on the role of the social security system and, in particular, how universal credit might impact low-paid workers. The Scottish ministers have some social security powers, but, other than the flexibilities that are provided by Scottish choices, the policy and rules on universal credit remain firmly with UK ministers. In the main, responsibility for benefits for people of working age is reserved to the UK Government at Westminster.

In 2016, the Social Security Committee of the time undertook an inquiry into universal credit and made a series of recommendations. Despite there having been some welcome changes since then, some fundamental issues are still a problem today. The lack of progress is perhaps best captured in a conclusion that the current committee put on the record this year:

“it is unacceptable to make any claimant wait a minimum of five weeks before receiving the financial support they are entitled to under Universal Credit. We urge the UK Government to urgently reform this design feature to ensure payments are made within two weeks of an application being made, as was the case under legacy benefits such as Job Seekers Allowance.”

An obvious and clear mechanism by which in-work poverty can, in part, be tackled within the social security system is ending the benefits freeze. According to Scottish Government research, welfare spending in Scotland in 2020-21 will be £3.7 billion lower than it would have been had the welfare reform measures not been implemented. The biggest reduction is due to the UK Government’s benefits freeze, which disproportionately impacts the poorest and weakest in society. It is the view of the Social Security Committee that the UK Government’s freeze on benefits must be lifted. It is not realistic to expect a Scottish Government of any political colour to top up or mitigate every UK Government welfare policy to ensure that the incomes of Scottish claimants do not drop in real terms.

We were also disappointed that were not able to get a UK minister to accept our invitation to give evidence during, or since, our inquiry. We are still pressing for a UK Government minister to speak to the committee. I am sure that the Parliament agrees that that lack of engagement is unacceptable and disappointing.

During our inquiry, we visited Dundee and heard from people with lived experience of in-work poverty who receive universal credit. I encourage members to read their testimonies, which are in our committee report, but I will highlight one in particular. A man who was in work was encouraged to move on to universal credit and was advised—wrongly—that he would be better off. As he waited to receive his first UC payment, he applied for an advance. He managed the repayment of that advance and the change to how his rent was paid. His local jobcentre then told him to approach his boss about getting more hours, but no further hours were available. He was told that he should spend four hours a day looking for work, but all the sites listed the same limited number of jobs.

Our committee wants to secure improvements for that individual and for the more than 50,000 people in work in Scotland who are already receiving universal credit, as well as for the estimated 170,000 families in Scotland who receive working tax credit and will be migrated over to universal credit. From summer 2019, they will be migrated from the HM Revenue and Customs tax credits system to the Department for Work and Pensions universal credit regime, and they will be required to make a fresh application for universal credit.

Being moved on to universal credit represents a significant change for claimants. It is not just a significant cultural change, but a radical change of regime. The ethos of UC is very different from that of tax credits, and the relationship that people are required to have with the DWP is very different from the relationship that they currently have with HMRC.

The committee agrees that the managed migration should not proceed unless there is more clarity about what it will mean for those who are expected to move over. It is the committee’s view that priority should be given to addressing the existing concerns about universal credit before the UK Government seeks to move on to it up to 3 million people who are currently on legacy benefits.

Although it is not being applied at present, a policy intention is that someone who is in receipt of universal credit could be subject to conditionality and, potentially, sanctions, which could mean losing money despite working more than 16 hours a week. A claimant who is already in work will be required to take active steps to increase their earnings as an on-going condition of receiving UC. According to the Organisation for Economic Co-operation and Development, that is unprecedented internationally.

In-work conditionality was the second-most raised concern in the written submissions that we received. Russell Gunson of the Institute for Public Policy Research Scotland told us:

“Conditionality for universal credit includes in-work requirements, so the onus is on the claimant to increase their earnings or hours.”

He went on to say:

“The idea that it is the sole responsibility of the claimant to increase their hours or earnings to satisfy the universal credit system bears no relation to reality.”—[Official Report, Social Security Committee, 13 September 2018; c10.]

Pete Searle from the DWP acknowledged that there is no meaningful evidence of the efficacy of in-work conditionality. He told us:

“We do not have evidence at the moment about what could work and about the best way of interacting with people in work”.—[Official Report, Social Security Committee, 8 November 2018; c 6.]

Given that the DWP has no evidence to support the development of in-work conditionality and, more fundamentally, that the committee is opposed to the principle of imposing punitive conditions on those who are already in work, the committee does not support any extension of in-work conditionality.

Furthermore, as tax credits that are administered by HMRC are not subject to conditionality or sanction, there is a strong case not only for halting further migration of people in receipt of tax credits to universal credit but for considering the removal of tax credit support from universal credit altogether and continuing to use HMRC unless the threat of conditionality and sanctions is removed.

The committee heard the recurring theme that the relationship between the jobcentre work coach and claimants is crucial. That relationship can be extremely positive, but building it requires an important investment of time and the development of trust. The Public and Commercial Services Union, which represents many DWP front-line staff who deliver universal credit, has expressed serious concerns to DWP managers, including about in-work conditionality, and does not feel that those concerns are being listened to. The committee suggests that the DWP should pay much closer attention to the concerns that the PCS has raised.

The committee believes that the dramatic reduction in the number of jobcentres, at a time when universal credit is being rolled out across Scotland, was a serious error of judgment by the DWP. I know, from my experience of the closure of Maryhill jobcentre in my constituency, the impact that jobcentre closures have had on hard-fought relationships that had been built up between work coaches and claimants. In some places, those relationships have simply been terminated. The committee concluded that jobcentre closures have

“impacted on service and compounded the disconnect between many service users and the DWP. We believe there is a case to be made to review local access to DWP and other forms of employment support across Scotland to allow for more localised and community-focussed support, in place of an increasingly remote and digital by default support system.”

All of that is far preferable to the threat of sanctioning the working poor. Supporting career progression for those in work without the threat of penalty is not only right but is likely to be far more productive.

Universal credit is paid monthly in arrears on the basis of earnings during what is known as a monthly assessment period. Circumstances are assessed on the last day of that assessment period, and earnings within the monthly assessment period are taken into account in that month’s UC award. UC tops up earnings that are received during the assessment period. In that way it is intended to smooth out fluctuations in income. However, there are issues with that. For example, incomes fluctuating from month to month becomes a budgeting issue, and when pay cycles differ significantly from UC cycles—for example, when people are paid four-weekly or on the last Friday of the month—and UC assessment periods and the job pay cycle are out of sync, the UC award can end up taking two pay cheques into account in one month and none in the following month. The committee has significant concerns about universal credit assessment dates not aligning with paydays, although we acknowledge that the UK Government is said to be looking urgently at the matter. We agree that it must be urgently addressed, and we have requested an update from the UK Government ministers following their considerations.

When I sum up, I will raise a variety of other matters that are important in relation to the working poor and universal credit. For the time being, let me say that it is essential that the UK Government and the Scottish Government work together meaningfully and constructively while acknowledging their respective policy differences. On that point, the committee made a case for reviewing local access to DWP and other forms of support across Scotland to allow for more localised, community-focused support. The Scottish Government must be able to demonstrate how it is seeking to work meaningfully in a strategic way with the UK Government to offer community-focused employability support, and I ask the cabinet secretary for details of that.

The Scottish Government is introducing proposals for a new income supplement that must take account of in-work poverty. We await details of that supplement and the eligibility criteria. I invite the cabinet secretary to outline what progress has been made on what we expect will be a new social security benefit.

I look forward to hearing the contributions and suggestions of my parliamentary colleagues this afternoon, and I have the privilege of moving the motion.

I move,

That the Parliament notes the conclusions and recommendations contained in the Social Security Committee’s 2nd Report, 2019 (Session 5), Social Security and In-Work Poverty (SP Paper 466).