Labour’s Shadow Work and Pensions Secretary, Jonathan Reynolds MP, has today (23 August) promised that the next Labour government will replace Universal Credit and strengthen the social security safety net.
In a speech outlining Labour’s plan, Mr Reynolds said an “inadequate social security system is holding our economy back”, addind that the benefit system “has taken a political beating under the Conservatives.”
He added that while “the Labour Party is the party of work”, those who cannot work should be “treated with a dignity and respect” and that this means fixing the social security system.
Mr Reynolds said: “The next Labour Government will replace Universal Credit because Universal Credit, as it stands, is fatally flawed.
“But what’s remarkable is that the major problems of Universal Credit today, are still the ones first identified by constituencies like mine when they were pathfinders for the new benefit eight years ago. And the Government has never been willing to listen.
“Today Labour is making a commitment to address one of the most significant failures of Universal Credit.
“Universal Credit was sold as a way of always making work pay. Yet for some people it has reduced the incentives to work more hours.
“The taper rate, which is the rate at which benefits are withdrawn as a person earns more money, is 63p in the pound under Universal Credit. But that figure doesn’t account for National Insurance or income tax.
“The real taper rate for many people is actually 75%. That means those on low incomes pay a marginal rate of tax far higher than any other group in the country – including the Prime Minister.
“So I am pledging today that the next Labour Government, as part of our commitment for a New Deal for Working People, will reduce the taper rate when we replace Universal Credit.
“Labour is committed to a fairer system which means those who need help from the social security system are not punished for wanting to earn more and contribute more.
“I also want to say today that tackling low pay and in-work poverty cannot simply fall on the social security system alone. The OBR have forecast that by 2025 the UK will be spending £76.6bn on Universal Credit and its legacy predecessors.
“I will defend the principles of the UK’s social security system with every breath I have, but at present I look at those figures and believe too much of what we’re spending is due to the Government’s bad choices.
“Their complete mismanagement of our labour market and our housing market has created a fractured and broken system which is delivering low wage, insecure work alongside skyrocketing housing costs. And it’s only right to try and correct those failures in the labour market at source.
“The plans we have, to improve our social security system, should be considered as one seamless package alongside our New Deal for working people. That includes our ambition to give everyone full employment rights from day one and create one clear employment status for all employees.
“Increasing the minimum wage immediately to at least £10 an hour, sick pay for everyone, protection against unfair dismissal, flexible working and the right to join a trade union, are all part of our plans for a new deal for working people. But they will also mean we have far fewer problems to rectify by way of the DWP budget.
“We have a huge opportunity as we come out of the pandemic, and a responsibility, to put right what was going wrong before. We oppose the Government’s decision to cut Universal Credit from October this year. But we want to go beyond that, ensuring low paid people in the UK can work the hours they need and keep more of the money they earn.
“I firmly believe our social security system can support a labour market that works for working people. A system that gets you back on your feet, is there for you in hard times but doesn’t stop you earning or taking the hours that you want.
“We cannot build a fairer more compassionate economy without replacing Universal Credit with a system that works, and that values work.”
He concluded: “The divide between us and the Conservatives is clear. They want to take £1,000 off working families next month, Labour wants to help families earn and keep more money. Because Labour knows the value of work and what working people need to succeed.”