Low pay

Universal Credit is just a plaster for the deep problems of our economy - Labour has a long-term vision to get welfare spending down fairly

Last week Iain Duncan Smith triumphantly announced that his much-delayed Universal Credit system would finally roll-out fully to 7million claimants by 2019.

Now that's 2 years later than planned and the system has been beset by constant problems with the IT required to operate it properly but all in all I do support the laudable aims of the UC. The idea of merging a number of benefits and tax credits into a single system whereby claimants must only enter their information once (ensuring benefits to which people are entitled to aren't missed out on), a system that is flexible enough to respond to the fluctuating weekly incomes of claimants (a increasing commonality in the low-pay end of our labour market) and one that tapers benefits away as people earn more (rather than creating cliff-edges like the old 16 hours a week rule) are all measures that have my total support. 

My issue is that simply improving the benefits system is like sticking a plaster on the problem rather than tackling the root causes of growing demand for welfare. It can't be right that 7million people need benefits (bearing in mind that disabled benefits and child benefit are outside the remit of Universal Credit) and especially considering that unemployment is reducing - the vast majority of these 7million claimants are in work! It says everything about our economy's failure to produce good jobs with fair wages for far too few.

Iain Duncan Smith's prognosis is that people have been made idle by the system and he will tell you that by tapering benefits away UC increases the 'incentives' to work more  hours, thus paying for the system as people will now work more and claim less. The system will certainly remove some of the aforementioned silly disincentives but the fundamental problem he and this Government refuse to accept is that too many jobs are paying too little for people to live on, too many landlords charge rents that are too high for people to afford and childcare costs are spiralling out of control.

Let's clear the party political air here. The last Labour government introduced a myriad of tax credits designed to redistribute income from the more wealthy to the low-paid. This, again, was laudable and combined with a new National Minimum Wage it improved the lives of millions who had suffered under the previous 18 years of Conservative rule. However we did too little to tackle low pay - real pay rates stagnated over our latter years in power - and far too little was done on house building where the sell off of millions of council homes under Thatcher had, quite rightly, created homeowners of many working class families for the first time but, criminally, the revenue was never ring-fenced to build a new generation of social homes thus resulting in huge waiting lists for social housing and an increasing reliance on the private rented sector.

So even under Universal Credit the Government will continue to subsidise subsistence wages from big employers and high rents charged by property magnates such as our own local MP, Richard Benyon who is estimated to have made £120,000+ a year from housing benefit.

Labour has made it a priority to reduce welfare spending in the long-term. Not through the cruel freezing of benefits so that their real value falls as inflation rises nor through simply cutting away at entitlements. No, instead Labour will tackle the root causes of poverty. 

In the immediate short-term we will:

- Raise the Minimum Wage to £8 by 2020 at the very latest.

- Cut business rates for small firms and freeze energy prices for 20 months to further help small businesses thus freeing up some cash for potential pay rises or taking on new workers.

- Introduce a one-off Living Wage Contract that will reward firms who agree to pay all their staff the living wage by giving them  some of the additional income tax and National Insurance revenue / benefit
savings generated by them paying higher wages. 

- Force employers who use 'zero hours contracts' to offer a permanent contract after 3 months.

- Increase fines for employers who aren't paying the minimum wage and focusing HMRC resources on finding and tackling such businesses.

- Introduce a Jobs Guarantee - funded by a tax on bankers bonuses - that will mean any young person out of work for more than a year, or anyone over 25 out of work for more than 2, will be given a paid job placement to help them back into the labour market.

- Reform tenancy agreements so that people renting in the private sector are able to secure 3 year fixed tenancies with rents not able to rise by more than inflation during those tenancies - thus helping keep Housing Benefit in check. 

- Reduce demand for the childcare element of Universal Credit by increasing the free entitlement for 3 and 4 year olds from 15 hours a week to 25 hours a week and also introducing a Primary School Guarantee where local primary schools will be open and offering activities from 8am-6pm.


And we'll take action for the longer term too, including:

- Better careers advice in schools and a far better vocational route to help those who don't want to go to university to enable them to acquire degree-level skills and move into well paid careers. 

- Get annual housebuilding rates up to 200,000 or more by 2020 and continue at that pace thereafter so as to meet housing demand, reduce social housing waiting lists and make the dream of home ownership a more likely reality for the many not just the few. 

- Introduce a new goal for the Low Pay Commission to ensure the Minimum Wage at least keeps pace with rises in average earnings.


This is a plan to reduce welfare spending but to do so in a way that improves livelihoods rather than shattering them. It's an example of our wider vision too, of how Labour would reduce the deficit in a fairer way than the Conservatives and at the same time begin to build a better, fairer economy that works for ordinary people not just a privileged few at the top.