Universal credit and better incomes

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Universal credit and better incomes

Labour’s continued pillaring of Universal Credit is counterproductive, argues John Redwood.    

The opposition recently organised yet another debate on Universal Credit.

The idea behind the reform is to simplify the complex benefits system, ensure financial support for those who need it, and to make it easier to get into work. Labour used to support the general aims of the reform, but they now want to slow down its implementation.

The government reports that people find faster routes into work from Universal Credit which is designed to make it always worthwhile working. They estimate another 250,000 getting into work as Universal Credit is rolled out.

Universal Credit provides a basic income for those out of work, and tops up incomes of those in lower paid work. It gives people more if they have children, if they are disabled, and if they need help with housing costs. The aim is no-one in our society should be unable to afford normal living costs, ending up homeless or cold or hungry.

Promoting work helps people achieve higher incomes. Benefit is withdrawn in a way which leaves people better off as they work more hours or take on better paid work. There is every incentive to get a job, get a better job and move to full time working from part time employment. Labour are right to speak out for people who are stuck in low pay employment or in underemployment. The government shares their wish to help people move into something better, and supports the aim of giving them benefit to top up inadequate incomes.

The best way to raise living standards is to help, mentor and train people so they can get into better paid work. Quite often it is easier to get into better paid work from less well-paid work, or into a full time job from a part or contract job. That is why we need a benefit top up system that is flexible and helps people when they have need of financial support. A growing economy, and an economy that is thriving with growing companies in new and advanced areas of work, is the best ally of getting people higher living standards.

Meanwhile there have been some welcome improvements in the scheme following lobbying and consultation. More money will be made available earlier for claimants, with the 7 day waiting period going in February. Claimants will be told the housing component in any benefit they receive can be paid directly to landlords if they wish. Interest free advances of credit will be available to new claimants, as it is paid monthly in arrears.

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  • John Redwood MP
    John Redwood MP
    John Redwood is the Member of Parliament for Wokingham in Berkshire. He was formerly Secretary of State for Wales in Prime Minister John Major's Cabinet. He is currently Co-Chairman of the Conservative Party's Policy Review Group on Economic Competitiveness.
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    • forgotten_man

      I expect this b***t from a leftie but cant get my head around the idea that interfering with the labour market is going to fix anything from someone who either should know better..or is in the wrong party!.
      This distortion isn’t new, the Speenhamland system in the 1790s paid subsidies to ‘the poor’ and their employers simply paid them less as the subsidies paid the difference between what was earned and what was needed.

      Much is the fanfare that more people are in work now than ever before…but the bloody welfare bill is as high, if not higher than it has ever been!

      That sort of tells you that quite a bit of this ’employment’ isn’t real.

      Bearing in mind that welfare bill is about the same as the income tax from the lower 50% of the earners, the obvious thing is to move the tax threshold to £30k , which removes the whole gaming the system and will leave people to ‘go for it’ without the issue of taper.

      While you are at it, junk the whole unemployment ‘benefits’ and simply make the government the default employer and pay the ‘benefits’ as an income via a normal wage slip.

      Since I have a better idea what needs doing, can I have an overpaid SPAD job please Mr. Redwood?

      • Puzrish Dagan

        “This distortion isn’t new, the Speenhamland system in the 1790s paid subsidies to ‘the poor’ and their employers simply paid them less as the subsidies paid the difference between what was earned and what was needed.”
        There’s an excellent description here in Frank Wilkinson’s 2001 article for Radical Statistics: The theory and practice of wage subsidisation: some historical reflections

        “The effect of the fall in wages was therefore to transform the wage supplementation into a direct subsidy to employers. They also became dependent on Parish Relief to make up the difference between what they paid their workers and what the latter needed to live on. Any employer that failed to take advantage of this subsidy was put at a competitive disadvantage in the product market, in much the same way that independent workers were in the labour market. However, any advantage of cheap labour to the employer was offset, at least in part, by the increased local poor rate they had to pay. This net advantage varied between employers to a degree determined by the rateable value of their properties compared with the size of their workforce. It therefore tended to favour large scale producers with many employees and discriminate against those who relied on their own and their family’s labour. These advantages were increased by the political power exercised in the parishes by the large employers and landowners. And, the system was further corrupted by its lay administrators who could turn the levying of the rate, the provision of relief and the allocation of the labour of the parish poor to their own and their friends’ advantage.”

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