Friday 26 October 2018

I agree with Vince

Vince Cable recently spoke to the Joseph Rowntree Foundation on the subject of tackling poverty. In it, he addressed the attacks on Universal Credit (UC):

in scrapping the whole project in relation to UC there is a danger of throwing out the baby with the bathwater. The fact that UC is becoming loathed and is being implemented incompetently and harshly does not invalidate the reasoning behind it. I strongly repudiate the Labour Party’s suggestion that Universal Credit should be scrapped without being clear what the replacement is: a classic case of soundbites taking precedence over thought-through policies (at the risk of being too partisan, the problem is that Messrs Corbyn and McDonnell are giving spending priority to subsidising well paid university graduates over people in poverty, which may be politically smart but isn’t socially progressive).

It makes a lot of sense to combine benefits to get rid of the complexity and perverse incentives, in particular the disincentive to work under current arrangements. The OECD has acknowledged the force of these arguments. Unfortunately, UC is being undermined by the problems I have summarised above, by the sanctions and testing regime built around it; by faulty IT; by unjustifiably long waiting times; and, above all, the way in which the Treasury has used its introduction to cut large sums, perhaps £5bn, from the benefits system.

There are three specific changes my party are arguing for in financial terms over and above the reforms in the way UC operates:

: · A reversal of the cuts to the work allowance worth around £3bn a year, which JRF analysis suggests would boost the budgets of 9.6 million parents and children, 4.9 million of them in working poverty, and take 300,000 people out of poverty

· Improvements to Universal Credit for the 800,000 self-employed who will eventually claim the benefit: by extending the period before the “minimum income floor” cap kicks in from 12 to 24 months; and averaging income over several months so that people are not penalised for fluctuating incomes (all at a cost of around £400m)

· Ending the benefits freeze a year early so that benefits are inflation proofed again (at an estimated annual cost of £1.6bn in 2019/20)

The overall cost is around £5bn and we have suggested how this can be funded by returning the corporation tax rate to 20% and by taxing wealth more fairly (by making pension tax relief more progressive, and taxing unearned gifts and capital gains more like income). There is a wide range of revenue possibilities if there were the political will to address the problem of funding UC properly. The Government must pause the roll-out of Universal Credit and urgently review both its design flaws and lack of funding.


We now have leaders both in Wales and at the federal level who are emphasising the Liberal Democrats' commitment - at the top of our constitution - to ensure that noone is enslaved by poverty.

No comments: