Welfare Reform Bill

I thank the noble Baroness. I will leave that till a little later; a number of noble Lords have raised concerns about the IT infrastructure. To return to the structure of the universal credit itself, the single taper on earnings means that claimants will clearly see how the universal credit award decreases as income from earnings rises, making work financially rewarding for everyone. Alongside the work programme, universal credit will ensure that claimants have a route out of poverty through work rather than a lifetime on benefits—or on social security, depending on language; I will touch on language in a minute as well. I hope, and I hear from noble Lords in terms of principle, that there is general support for this approach. The participation tax rate assesses the proportion of earnings that are effectively lost through tax and benefits on starting work. The dynamic effect of universal credit means that over 1 million fewer households will face participation tax rates over 70 per cent. We will also tackle the issue of high marginal deduction rates, which undermine the incentive to increase earnings or hours once someone is working. Under the current welfare system, people in work can gain as little as a 4p increase in their take-home pay for every £1 increase in earnings, and people on out-of-work benefits could see a pound-for-pound reduction on their benefit. On the questions raised in this area by the noble Lord, Lord McKenzie, regarding the numbers of people who face higher and lower marginal deduction rates, the impact assessment confirmed that 2.1 million individuals will have higher rates under universal credit but that the median increase will be comparatively small, at about 4 percentage points, and many of those will be households with above-average income for universal credit claimants, moving from a marginal deduction rate of 73 per cent to 76.2 per cent. Some 330,000 second earners will face higher rates, compared with 140,000 with reduced rates. The median increase is higher for this group, reflecting the fact that second earners already tend to have lower marginal deduction rates. As the Committee will know, the impact assessment also addressed the issue that some second earners might move out of work, but we are still expecting the net effect to be a large reduction in those who are workless. On my noble friend Lord Newton’s concern about child benefit and the debate around that, the best that I can do today is to commit to taking that up with Treasury colleagues and find out what the process is. Again, I will revert. I return to the universal credit. The way that it will tackle the problem of very high marginal deduction and participation rates is to have a consistent taper of 65 per cent. Overall, this produces substantial improvement in those marginal deduction rates. About 700,000 people who currently have rates above 80 per cent will benefit from it. I turn to IT.