Philippa Stroud responds to the 2018 Budget

Our CEO Baroness Philippa Stroud welcomes the Chancellor’s reinvestment in Universal Credit which will help over 2.4 million families up and down the U.K.

A commentary for the Social Metrics Commission programme by Baroness Philippa Stroud

Published 4 Nov 2018

As I write this, I think back over the last few years to all the arguments, attacks and disputes over Universal Credit. UC was introduced as a major reform with cross party support that would ensure that work would always pay. But almost immediately, it was caught in the cross hairs of an austerity agenda. Yesterday, though, common sense and good Government finally prevailed and much of the money that had been cut from Universal Credit, in what could only be described as a pitch battle, was restored.

All that personal pain for claimants, all that anxiety of families, and all the political pain was so unnecessary. In 2016, I wrote that the cuts to Universal Credit Work Allowances were not necessary and that the Treasury had the budget headspace to pause and hold back from implementing the proposed cuts. It has taken until 2018 for everyone to see sense and realise that penalising those who are doing everything right, who are in work, is not the place anyone should be in. It should never have been possible to play political football with people’s lives in this way. It is for this reason that I founded the Social Metrics Commission – as a way of making the impacts of Treasury decision-making visible and to ensure that Government decision making for the most vulnerable was always held to account.

I wrote last week to underline the need for the Chancellor to be bold and take action on Universal Credit in his 2018 Budget. Two of our main priorities at the Legatum Institute were for the Chancellor to reverse the cuts that had previously been made to Work Allowances in Universal Credit and to ensure that historic tax credit debt did not consign people to poverty once they made the move to Universal Credit.

So, hats off to Theresa May and Philip Hammond, who yesterday, at least in part, delivered:

  • By putting £1.7bn back into Universal Credit Work Allowances, they have ensured that one of the central goals of Universal Credit – to ensure that work always pays – will be delivered. In doing so, the problem of rising in-work poverty that the Social Metrics Commission’s recent report highlighted is likely to be stabilised, if not reduced; and
  • A less well-publicised measure to reduce the Universal Credit debt reduction rate from 40% to 30% will also provide vital relief to many families being kept in poverty by their debt repayments.

Admittedly, this was not the £3 billion in making work pay that I had called for and more action could have been taken on legacy HMRC debt. Our research also shows that there are 750,000 people in childless families who are working full time but are still living in in poverty and will not benefit from these increases in Work Allowances. However, these measures stand to benefit many low-income families who are struggling to make ends meet and we hope that more will come in future fiscal events.

There was also other good news for improving the lived experience of those families living in poverty. This was particularly true for people living in families that include a disabled person. Here, the Chancellor’s focus was on supporting those with mental health conditions; with a £2bn announcement as part of the NHS’s 70th birthday package; an increase in transitional protection for the severely disabled moving on to Universal Credit; and the announced extension of the Independent Placement Support programme to help those with a severe mental illness find and retain employment.

Again, these are relatively small steps in the face of the significant challenge the government faces in reducing the disability employment gap by 1 million, and tackling poverty among families where someone is disabled; the IPS scheme is set to help 55,000 people by 2023/24, but it is a welcome signal of intent.

It is this signal of intent that Legatum is most pleased about. Our work shows that, as well as considering incomes, tackling poverty is about:

  • Helping families to navigate the inescapable costs of life that mean they struggle to make ends meet;
  • Closing the resilience gap faced by many individuals and families in poverty and, in doing so, reducing the likelihood of poverty in the future and
  • Ensuring that work really can be the pathway out of poverty, and that anyone who experiences poverty is supported to move out as quickly as possible

Many of the Chancellor’s announcements supported this approach and are likely to feed through to tangible, if modest, impacts on poverty in future. The challenge is now to build on this start, be more ambitious and commit future fiscal events (including next year’s Spending Review) to ensuring that the challenge of poverty is met head on. At the Legatum Institute we will continue to hold the Government to account; using and developing the Social Metrics Commission’s approach to poverty measurement to ensure that each Budget, policy announcement and Spending Review are judged on their poverty-tackling merits, rather than just their fiscal credentials so that the pathways from poverty to prosperity can be genuinely shared by all.