Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Colwyn)
My Lords, welcome to Committee Room 4A. I think it is time we started—you can hear Big Ben from the Moses Room, so it is very easy to know when to start. If there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes and resume after that.
Lord Foulkes of Cumnock
I wonder whether I could raise a point in relation to that. If there are disabled people in wheelchairs present in the Committee in large numbers—that could be three, four, five or six Members of the Committee when we are discussing the Welfare Reform Bill—how are they are going to get down to the Chamber to cast their votes?
The Deputy Chairman of Committees
I understand that the usual channels are discussing that and it is something that will probably be in place for future Committee meetings. However, this afternoon it has not yet been agreed so if there are wheelchair users, on this occasion they will have to get down to the Chamber discussed.
Baroness Garden of Frognal
I wonder whether the noble Lord would bear with me for one minute.
Baroness Garden of Frognal
I know, but it is in order to answer the noble Lord’s question and perhaps save a bit of time. There are discussions about whether anybody in a wheelchair may have their vote taken here rather than having to go down to the Chamber. That is what is currently being proposed and we will wait to hear the results of that, if it is agreed by the usual channels. It is under consideration.
Lord Foulkes of Cumnock
I appreciate that, Lord Chairman, but we are here this afternoon and the Welfare Reform Bill is on the agenda as soon as we have finished the Education Bill. It is quite possible there could be Division in the Chamber when the Committee is sitting later. It is quite possible that a number of Members who are in wheelchairs will wish to vote. No agreement has yet been made through the usual channels and I think there may be some problems with any agreement that is made. What is going to happen this afternoon if there is a Division and we have four or five Members of the House of Lords in wheelchairs in this room? I would appreciate a response.
Baroness Garden of Frognal
My Lords, might I point out that for this session there are not people in wheelchairs to whom that might apply? By the time we start the Welfare Reform Bill, when it might apply, we will have had confirmation of what the system will be. We perfectly understand that it would not be possible for people in wheelchairs to get down from this room to vote should a vote be called.
Lord Peston
My Lords, might I raise a further question? I am not quite yet in a wheelchair but I have a badly damaged knee. I could easily not manage to get down there, particularly if the lift was not working. When these discussions take place could you not confine it just to people in wheelchairs but include people who are hampered in other ways?
The Deputy Chairman of Committees
I add that I am able to make the temporary recess while we go down to vote a little longer if I feel it is necessary, so I shall keep an eye on that.
Education Bill
(13 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“Assessment on effect of tuition fees on over 19s seeking to reskill
Prior to the implementation of increased tuition fees for persons aged 19 or over the Secretary of State will assess the impact on adults seeking to reskill, with special regard to disability and gender.”
Lord Young of Norwood Green
My Lords, this is one of those amendments that speaks for itself so I do not intend to detain noble Lords long on this particular issue. Nevertheless, it is an important issue these days given the levels of redundancy and the need for people to retrain and reskill throughout their working lives. It is important that there is an assessment of the impact. It is difficult enough for people with disabilities to gain employment without any further impediments. Of course, there is the impact on women as well. I would welcome a response from the Minister.
Lord Peston
My Lords, I support my noble friend’s amendment. I do so with a certain degree of sadness. It is just under 50 years since I wrote the first paper ever written in the Treasury on loan schemes, and it would never have occurred to me then that we would end up discussing this sort of thing 50 years later. It would never have occurred to any of us who were among the first to think that loan schemes were the right way into student support that we would live in a world in which tuition fees were charged in higher education. That is why I say that there is a certain sadness here.
It may well be that the economy is so dire and so many people want to benefit from higher education that we have to have tuition fees, but it has always seemed quite awful to me. I assume that this amendment has been tabled so that the Minister can tell us exactly what preparations the Government looked at before deciding to go along the path that they have chosen.
I would like to hear what the research is that tells us that those who are disabled will not suffer from extreme disincentives because of these fee increases, and that there is no gender bias in them. I find it very hard to believe that there is no gender bias in what is happening here; quite the contrary. My noble friend has not told us this, but I assume this is why the amendment was tabled. This is all in preparation for the next stage, and for how we analyse these things. I look forward to a lecture from the Minister answering everything implicit in this amendment.
Baroness Turner of Camden
My Lords, I support the amendment. It is an amendment that the Government should welcome, because they are always telling us that we do not have a skilled workforce, and that the workforce needs to be skilled. Here is a specific recommendation for reskilling people who are disabled. I would have thought it would have been welcomed by the Government as being well in line with their policies; the policies they are always telling us about, anyway. Therefore I am very happy to support my noble friend’s amendment.
Baroness Sharp of Guildford
My Lords, I have some sympathy with this amendment. However, one issue in particular concerns me: the fact that not only degree courses but access courses are subject to loans.
As members of the Committee will know, those who have not gone through the normal route of taking GCSEs and A-levels and entering university by that route, but instead apply to university later, often take courses which are regarded as being the equivalent of A-levels—they are called access courses—at colleges for education. These are normally two-year courses. Many of these students initially do GCSE courses and go on to an access course, so they often have between two and three years at the college of further education. Because these are level 3 courses, and because the people concerned are often over the age of 24, these are regarded as loan courses, and consequently many people will have five years of loans rather than three. Since, almost by definition, most of these people come from disadvantaged backgrounds, the whole problem of debt aversion is one of some difficulty. I am particularly concerned about the build-up of debt in these circumstances.
The accumulation of debt from having to take on debt to put themselves through access courses, and then more debt on top of that to do degree courses, is going to be a major disincentive to using this route to those from disadvantaged backgrounds. Considerable numbers use this route at present. Could the Government look at this? It would be good to have some good news. I know that my right honourable friend Simon Hughes, when he was looking at the issue of access, picked this up, but I do not think anything has yet been done about it.
Baroness Verma
My Lords, I would like to respond to the amendment of the noble Lord, Lord Young, and also, I hope, reassure other noble Lords that the Government are committed to supporting protected groups. I can assure noble Lords that before we undertake any reforms we carefully consider the impact on protected groups. Our reforms to higher education funding and student finance are no exception. Work undertaken as part of our impact and equalities impact assessments, published in November 2010, and the Government’s skills strategy indicated that changes to funding priorities were unlikely to have a negative impact on protected groups, including disabled people and women. We will continue to monitor the impact of our reforms as we move to implementation.
We want to do more to encourage protected groups to participate fully in higher education. The provision for the first time of loans to eligible part-time students to cover the full cost of their tuition will provide a more viable route into higher education for anyone who does not wish to follow the more traditional full-time route. This should provide more opportunities to work alongside higher education; for example, to maintain caring or other responsibilities. We will also continue to provide dedicated support to help disabled students participate and succeed in higher education. The Government provide funding to HE institutions, through the Higher Education Funding Council for England, to help them recruit and support disabled students; £13 million is being provided for 2011-12.
The Government are also providing a comprehensive package of financial support directly to students, with additional support targeted at those who, through a range of circumstances, need it most. Eligible disabled students studying in higher education are able to access the disabled students’ allowance to enable them to study on an equal basis with their non-disabled counterparts. DSAs are available to both full-time and part-time students. They are paid in addition to the existing standard student support package and are not means-tested and therefore will not need to be repaid.
The Government also make additional support available to eligible full-time students with adult or child dependants. The adult dependants grant, the childcare grant and the parents’ learning allowance are non-repayable. They are means-tested, so that those on the lowest incomes benefit most.
I hope that the noble Lord, Lord Young, and other noble Lords are reassured that the Government have already made an assessment of the impact of tuition fees and I would therefore urge him to withdraw his amendment. To answer the questions of my noble friend Lady Sharp about access courses, I will have to take them away and write to her in detail about what we propose, so I do hope that the noble Lord withdraws his amendment.
The Earl of Listowel
My Lords, what specific support is given to lone parents? They may, perhaps, be in the situation that the noble Baroness, Lady Sharp, spoke of. She spoke of childcare support. Can the Minister provide more detail about what incentives are provided to lone parents to engage in education of this kind? I am sure that it must seem also to the noble Baroness that it is extremely important to encourage such people into education.
Baroness Verma
The noble Earl, Lord Listowel, raises a really important point and I hope that he will allow me to write to him in greater detail with that response.
Lord Young of Norwood Green
My Lords, I welcome the reassurances that we have received from the noble Baroness, Lady Verma. I trust that she will circulate to everybody details about the points that have been raised about access courses and the lone parent scenarios. I think that we will study the detail in Hansard in order to assure ourselves that there has been a full assessment of the impact. I beg leave to withdraw the amendment.
“( ) not in excess of the average cost of borrowing borne by the Government in the preceding financial year.”
Lord Stevenson of Balmacara
My Lords, Clause 72 amends the powers given to the Secretary of State in the Teaching and Higher Education Act 1998 to make regulations setting interest rates for student loans. As the legislation currently stands, Section 22 of the 1998 Act effectively provides that the interest rates set must be no higher than the rate required to maintain the value of the loan in real terms. So the fee and maintenance loans of students who study at English universities attract interest while individuals are students and when they graduate.
This is charged in line with a predetermined measure of inflation, and if no repayments are made, the size of the loan increases in cash terms but remains fixed in value terms. This means that the value of the money borrowed by students has the same value as the money we paid.
Lord Peston
My Lords, I am very puzzled by what the Government want to do. I thought they wanted people to “stand on their own two feet”—I think that is an exact quote from the Chancellor. The effect of raising the real cost of repaying loans must act for some people as a disincentive to going into the labour force. Otherwise, in my favourite remark, economics makes no sense at all—you may think economics makes no sense at all, but that is another matter. That is one bit that puzzles me. What do the Government think they are doing? Should they not be pursuing exactly the opposite policy and trying to encourage people where they can to re-enter the labour force?
The second thing, which goes back to the earlier amendment that we did not debate at great length but will on Report, is the gender bias question. Is it part of the Government’s view that they want women not to take out loans and go into higher education so they do not have this burden and therefore it does not act as a disincentive to marriage and family life? After all, if they go into higher education and carry this implicit cost with them, their ability to find a suitable partner, who may have to bear this cost at some point, might go down.
I thought the Government favoured families instead of the reverse. Equally, maybe it is much more subtle than that. Where there are lone parents, for example, who are graduates, maybe we do not want them to stand on their own two feet and take a job and hire a babysitter. Maybe we want them to stay at home, driving themselves round the bend trying to cope with the children, and so forth. My general point from all that, is that I can see no rationality in what the Government are doing, other than: “If we can get some more money from any route that we can find we will take it”. That is not a rational way to produce economic policy.
If I can revert to my 1960s Treasury experience, one of my thoughts listening to my noble friend’s speech was about when I wrote a hotshot paper on student loan schemes—nothing to do with fees, but about maintenance. One question that never occurred to me in what must have been a really bad paper—in those days you did not take home your work so I have no idea precisely what I wrote—was the rate of interest. It never came up in my mind. I just took it for granted that it would be the Treasury bill rate.
Lord Sutherland of Houndwood
My Lords, the noble Lord, Lord Stevenson, has made a powerful and cogent case, and I look forward with more than usual interest to the Minister’s response because there are some issues of real principle. I would add two points. One is that much of the odium for charging fees is falling on universities. I still remember sufficiently far back when that would have fallen on me, and it looks like there is an extra 3 per cent of odium being added. That is not a good principle.
More to the point, I have supported the principle of student fees on the basis that students pay for what they get in educational terms, not for an additional premium for whatever accounting reasons seem necessary to the Government at the time.
Lord Knight of Weymouth
My Lords, I wanted in part to make a contribution so that anyone reading the proceedings of this Committee did not feel there were one or two isolated voices concerned about these proposals. The strength with which the arguments were made by my noble friend Lord Stevenson in particular do not need many words to be added and I know that the Committee is keen to move on.
I would fully endorse what my noble friend said and emphasise two points. One is this move around RPI and CPI. The Chancellor was perfectly clear in his Budget of 2011 that the Government were moving to use CPI in respect of benefits and pensions uprating and it is certainly something that has been around for some time. I remember appearing before the STRB and arguing the use of CPI over RPI. I was very glad to have Ed Balls alongside me making the technical aspect of that argument when giving evidence on behalf of the Government against, I think, the teaching unions, who wanted RPI. I would be really interested in the Minister’s response about why we have gone with something different in this case. The second point is the final point that my noble friend Lord Stevenson made around the Students Loans Company. I ask for a direct answer whether in conversations about the Student Loan Company, it has been a condition of being able to sell it off that a commercial rate of interest is chargeable. A direct answer would be helpful.
Baroness Sharp of Guildford
My Lords, as many people round the Table will know, I opposed the imposition of student fees and student loans even when the Opposition were in power. I continue to have considerable reservations about the system that they introduced in terms of student financing.
I have three points to make in relation to the debate. One is to pick up the point just made by the noble Lord, Lord Knight. Given that the Government have shown that on the whole they prefer the CPI to the RPI in relation to welfare upgrading and pensions, it would seem obvious that they should use the CPI on this occasion rather than the RPI, which tends to be rather higher than the CPI anyhow.
Secondly, I continue to worry about the cost. As the noble Lord, Lord Stevenson of Balmacara, mentioned, something like 60 per cent of students are never going to be able to repay their loans and therefore will have the debt hanging around them for a considerable period of time.
The consequence is that the real cost of these loans is enormous. The Government are making loans. The Government say, rightly, that they are putting a lot of money into this because they are putting the loans forward, and they have to provide the loans in the first place. If something like 50 per cent or 60 per cent of students never repay them, the cost of providing those loans is probably at least as great as the £3 billion that they have taken out of the higher education budget.
The only advantage is that it is off the books, because the Student Loans Company is not regarded as part of the national debt. It does not come back onto the books until 30 years hence. This is one of the issues that I disagree with the Government on, because I feel we are putting a disproportionate amount of debt on the current generation. They have to repay their debt at a rate of 9 per cent. Those who earn only between £20,000 and £30,000 will be repaying that debt for 30 years at 9 per cent. There will be a 9 per cent surcharge on income tax unless, of course, you have parents who are well off enough to be able to pay it off in the first place. Again, the disadvantaged are the people who do not benefit. It comes back on to the books in 30 years’ time so the Government will then have to pay extra interest on the national debt. I said this when we talked about these regulations and I say it again. It means that it is a very expensive system for the Government.
I have a specific point that I ask the Minister to respond on. There is concern about what happens if the Government succeed in selling this debt on. The aim of the coalition Government, as much as the aim of the Labour Government, is that the student loans debt should be regarded as an asset by the Government and packaged up and sold on. Under the Bill as we put it through originally, if the debt were sold on, those who took it on were not allowed to vary the rate of interest on the debt. Does it still apply that anyone who buys the debt and carries it on will have to maintain the same rate of interest as the Government were charging?
Baroness Verma
My Lords, I understand noble Lords’ desire to ensure parity between the rate of interest charged to students and that which is borne by the Government. However, I would be reluctant to introduce the stringent cut suggested by the noble Lord.
Let me first respond to why RPI and not CPI. We have always taken the view that there is no single measure of inflation that is appropriate for all purposes, but the RPI is commonly used in private contracts for uprating of living costs, payments and housing rents, so it is more appropriate than CPI for student loan interest as it takes account of, among other things, changes in mortgage interest and council tax—typical expenses for graduates that are not included in the calculation of the CPI.
Historically, RPI has always been used for calculating interest on student loans. This means that over a period of years the rate of interest on student loans has been consistently applied on a widely recognised and adopted measure of inflation.
Lord Foulkes of Cumnock
I am getting very confused. Why is it that RPI is appropriate for repayment of student loans but CPI is appropriate for increases in pensions for retired people? Could the Minister explain that? I do not quite understand, from her explanation, why there are differences between the two.
Baroness Verma
My Lords, the costs for older people are different. It has always been the case that most measures have been taken under RPI. If the noble Lord is not satisfied, I am quite happy to meet him outside the Chamber to further the discussion, but I think I can offer him this one response only. If he is not satisfied, I am quite happy to take the question outside the Chamber with other noble Lords. We can discuss it in further detail and, hopefully, come back with a more detailed response. I do not think I can offer the noble Lord anything other than what I have just offered him: that it is normally the case that it is measured by RPI.
Lord Foulkes of Cumnock
The purpose of us coming along here today is to discuss this and get explanations from the Minister, who presumably had a very extensive briefing before coming along, and presumably inquired of her officials these kinds of questions. She must have anticipated that they would come up.
RPI is being charged to the student when they have to pay the Government, but CPI is being applied when the Government pay me and other retired people. So it is all right that when you take money from other people you charge RPI but, when you give increases to people to pay for all the extra costs of energy and everything else, it is only CPI. Would the Minister take a minute to explain?
Lord Knight of Weymouth
Before the Minister stands up, perhaps I could try to be helpful. This is a key question. My understanding is that the only circumstance in which RPI is lower than CPI is when mortgage interest rates are falling and that is relatively unusual, although we have experienced a bit of that recently.
When the Chancellor made his announcement about making the shift from Rossi to CPI, he was honest enough to say that it was to save money—it would save £6 billion to the Exchequer. Would it not be easier for the Minister to have the same sort of honesty as her right honourable friend in the Government and say, “It’s to save money”?
Baroness Verma
I remind the noble Lord, as he was in Government, that they also used RPI as a measure. It is a commonly used measure. My right honourable friend the Chancellor, of course, is the Chancellor, and has to find all means of reducing the debt that unfortunately we inherited from noble Lords opposite.
We should remember that the changes to the rate of interest on student loans are part of a new student finance package that creates a progressive repayment system and is designed to protect lower earning graduates, as well as balancing the financial demands of universities with the interests of students and future graduates by delivering necessary savings without cutting the quality of higher education or student numbers.
Under the new system, students from lower income households will receive more support than they do now—I hope that that satisfies the noble Lord, Lord Foulkes—although many will pay back for longer than they do now. Their monthly repayments will be less than now, and the variable interest rate we propose will mean that they will also pay back less overall. If we accepted this amendment and capped the rate of interest that we could charge on student loans, we simply could not deliver this new system, nor would it create a suitable or worthy alternative. A cap would have little or no positive effect on borrowers who did not repay in full, nor would it afford greater financial protection.
This amendment would mean that higher earners would be charged a lower rate of interest than under the Government’s proposals. Higher earners would therefore benefit the most from this amendment, since the interest rate that they are now charged would reduce typically from RPI plus 3 per cent to RPI plus 2.2 per cent, while lower earners would not benefit at all as their interest rate would already be less than the Government’s cost of borrowing.
The system of student support would be much less progressive as a result. The Government remain committed to delivering a progressive system whereby those who benefit the most from higher education contribute the most. Would the noble Lord really favour a package that meant that the highest earners did not contribute to the cost of their higher education in net terms, or one that would inhibit our ability to protect lower earners?
Lord Peston
What the noble Baroness has said is not quite right. Is it not the case that those very much higher earners whose parents pay off the loan immediately will not bear a higher cost? It is only those whose parents have not paid off the loan immediately who will do so.
Equally, while I am on my feet, I say to the Minister that there is no ideal index number at all. I do not use either of those—I always use the GDP deflator as the correct measure of inflation—but that is another matter; it is not what this debate is about. It is not about an ideal index number, it is about who pays what, and that is all it is about. My noble friends, particularly the noble Lord and I, have made it very clear: all that we are discussing is, who are we going to take the money from? Am I right that the plus 3 per cent is definitely decided?
Baroness Verma
Yes. And the noble Lord knows that I would be the last person here to make sure that people of low incomes could not get fair access. That is why it is so important that those who can afford to pay more do so, because they benefit more from higher education. Those families on low incomes will actually be able to be better protected. That is the key to this.
I am sorry that the noble Lord shakes his head. There will never be an ideal measure, but we have to have a measure. The previous Government did it and we are carrying on doing it. Anything to do with higher education will be coming up in the higher education White Paper, which we are consulting on at the moment, and of course that will be a wonderful opportunity to get the sort of questions posed by the noble Lord asked and responded to.
Lord Foulkes of Cumnock
It would help us to understand it better if the Minister could reply to the question put by my noble friend Lord Stevenson of Balmacara about the threshold. Is his calculation right, that the payment would begin at about £15,000, which I think my noble friend said? If that is the case then that is at a very low level of income, and it would be very interesting to know what the Government calculate the threshold income to be.
Baroness Verma
I should like the noble Lord to allow me to make a little progress, but it is £21,000 and not £15,000. It is higher—if the noble Lord will allow me—
Lord Stevenson of Balmacara
On that technical point, and I am sorry to interrupt, no—£21,500 currently cannot possibly deflate over five years to £21,000. I simply cannot accept that.
Baroness Verma
If the noble Lord will allow me to continue, I am hoping that I will be able to respond to the questions that he has raised.
The system of student support would be much less progressive as a result of the noble Lord’s amendment. The Government remain committed to delivering a progressive system whereby those who benefit most from higher education contribute the most. With regard to imposing the cap, the noble Lord asked if the current £15,000 threshold would have risen in 2016 compared with the £21,000 threshold proposed by the Government. Of course he knows that the previous Government did not raise the threshold annually, which is why we are proposing from 2016-17, as part of the progressive system, that it be introduced.
The noble Lord, Lord Peston, asked about the impact on women. It is important to consider the package in the round. The amount that borrowers repay in a year is strictly linked to income. Borrowers whose income drops below the threshold, for example, when moving to part-time work or seeking downgrade posts at the end of their career, or who leave employment for whatever reason, will be protected because their repayments will cease immediately.
Baroness Verma
But the repayments are written off after 30 years.
My noble friend Lady Sharp asked about the sale of student loans. The student loans Act makes clear that the borrower will not be affected by the sale. Their loans will be subject to the same terms as those that remain unsold. Nothing in the Bill changes that position.
I would like to finish on Sharia law. In relation to issues around Sharia compliance, the noble Lord mentioned the meeting between the Minister for Universities and Science, my honourable friend David Willetts, the Federation of Student Islamic Societies—a body that represents students from the Muslim faith—and the National Union of Students to discuss the issue. We accept the importance of the concerns raised by those organisations and have an ongoing dialogue to see how we can best ensure that student finance is not impacted on through the systems that we are bringing in. However, it would be better for me to write to the noble Lord on the outcomes after we have made sure that the consultations have been fully gone through.
Lord Foulkes of Cumnock
There is one point that the noble Baroness has not dealt with in relation to my noble friend Lord Stevenson’s introductory speech, which said that the Deputy Prime Minister—who we know is well versed in the issue of student fees—reckons that about 60 per cent of the loans will not be repaid. Is that an official statistic on behalf of the Government? Is that the estimate? Is that how much will not be repaid out of all of this expenditure?
Baroness Verma
My Lords, it is not 60 per cent. The estimate is about 40 per cent.
Lord Foulkes of Cumnock
How can the Deputy Prime Minister get it so wrong? Has he got a different brief from the Minister?
Baroness Verma
No, the Deputy Prime Minister has not got it wrong; maybe the noble Lord has got it wrong. It is 40 per cent. This is why the threshold for repayment is being increased to £21,000 and why repayments will be taken at 9 per cent above that level. This, hopefully, will mean that individuals will repay less. There will be less opportunity for them not to pay their loans off because we have made it easier for them to repay their loans. The noble Lord makes faces. I am sorry that I am not satisfying him. But I think he will agree, when he reads Hansard tomorrow, that I am laying out a very clear, comprehensive way of making sure that we are protecting most those on the lowest incomes and giving them an easier way of repaying so that there will be less opportunity for them to default and hopefully more students, rather than fewer, repaying the loans that have been taken out.
Lord Knight of Weymouth
Before the Minister sits down, could she answer the question that I asked quite directly about whether it is a condition of being able to sell the Student Loans Company book that this arrangement around interest rates is applied?
Baroness Verma
I am sorry if the noble Lord did not hear my response. I thought I had answered his question, but I will answer it again. The Sale of Student Loans Act makes it clear that the borrower will not be affected by the sale. Their loans will be subject to the same terms as those that remain unsold.
Lord Knight of Weymouth
That is not the question. The question was: as part of the Government’s desire to be able to sell off the student loan book, is being able to shift to this more commercial arrangement around interest rates one of the conditions of being able to do so?
Baroness Verma
I suspect that my answer will not satisfy the noble Lord, because I am not satisfied with it either. However, I will read it out, then look at my civil servants to give me a better response at some point. Looking at the existing loan portfolio now, I do not think that we can give the response that the noble Lord wants.
Lord Stevenson of Balmacara
That has been interesting. A relatively small point at the end of a Bill that is about something else has revealed an interesting range of issues that we may have to come back to at Report. I thank the noble Lords, Lord Peston, Lord Sutherland, Lord Knight and Lord Foulkes, and the noble Baroness, Lady Sharp, for their comments and for illuminating and extending some of my points. As the noble Lord, Lord Foulkes, said, the purpose of discussions at this stage of a Bill is to discuss some of the underlying issues and principles and, if possible, get some illumination on the thinking behind the Government’s plans and understand better the consequences of what they are doing.
I am afraid we did not really get much illumination, and we tended towards the end to run into a sort of blame game. If it was not our fault for having been in Government when the first arrangements were made, it was our fault for not having supported what is currently proposed. Indeed, at one point I heard the Minister say that we should not be discussing this now but should wait for the Higher Education Bill soon to come into this House.
Baroness Verma
No, what I said was that there are issues coming up in the Higher Education White Paper that is under consultation. That is a good forum for concerns such as those raised by the noble Lord, Lord Peston. That is the place where that would be discussed far more fruitfully than here today.
Lord Stevenson of Balmacara
We beg to differ on that. Actually, I agree on the essence—that a lot of what has been raised today needs to be discussed in a wider context. It is a great pity that we are not able to do that because of the strange way in which the Government have been developing policy in this area. We had an announcement about the funding system detached from the student loan system which is in this Bill. We had a White Paper at the very end of the previous Session but we do not yet know when the Bill that will follow is due, and we are therefore not able to tie all these things together. That is the point I was trying to make.
I do not think we disagree in principle on what any Government would have to do in these situations. We want to fund our universities to the best level possible and we accept the principle that those who benefit from that should contribute to it. The problem is that I do not think the system that is coming out is the right one. The noble Lords, Lord Foulkes and Lord Knight, put a fairly precise finger on the first of my questions, about the difference between RPI and CPI, and I am afraid that I did not think that the answer that the Government came up with was at all credible. We will need to return to this on Report.
On the social inclusion points, I heard the Minister and I admire her aspirations. However, I think that there will be severe problems for women, particularly those in lower-paid occupations, and for mature students. Although I understand that negotiations are continuing about Sharia law compliance, I am worried about this and I hope it will be taken back and discussed seriously. If it turns out this is not a Sharia-compliant issue or is sufficiently close to problems that will cause the Government to reflect on it, we perhaps need an early decision; we are moving quite fast with this Bill and it would be difficult to change it later on, even this month.
On the question of why 3 per cent, I do not think that the Minister gave us much; 2.2 per cent from 3 per cent may not sound a lot but it would make a huge difference in terms of whether loans are keeping pace in value or are increasing in an overall race to the bottom.
On the question of the student loan sell-off, there is more to make of this, and we will need to return to it because I think it is driving some of the policy here. Unless we can get an absolutely clear answer on that, we will have to return to it. However, this is Committee and we have had a very good discussion so I beg leave to withdraw the amendment.
Baroness Brinton
I speak to Amendment 148, which is very different in approach to Amendment 145G, but I believe there are some similarities, as it is essential that we truly believe that part-time students have access to loans to cover fees, and should be on a par with full-time students, pro rated of course to give them the same opportunities that full-time students have had for years. I am delighted that the coalition Government are offering loans for fees for part-time undergraduates for the first time.
After fees were introduced for the first time in 1997, it was always iniquitous that the previous Government did not provide any access to loans for fees for part-time students, many of whom came from backgrounds where they were often the first person in their family to go to university, and came from a low-income background; exactly the sort of group that we should be encouraging. With over 40 per cent of undergraduate students in the UK studying part-time, this is not just a small group of students being disenfranchised from the previous system; it is close to half of them.
The current BIS adverts are rightly trying to set out the real financial arrangements for the new student finance system. They have the snappy phrase, “Start to repay when you graduate”, which is a very important message about the new system that many do not understand. I am very grateful to the noble Lord, Lord Henley, who wrote to me on 3 September setting out the details of the thinking behind the two issues that we raise in our amendment.
First, it does seem extraordinary that part-time students might be charged a different rate of interest from full-time students, and therefore I am grateful to the noble Lord for making it clear in his letter that it is the present Government’s intention that rates of interest for part-time and full-time students will be the same. This is good news. My amendment would make this plain in the Bill, and I am happy with the Minister’s assurance.
The second part of the amendment, though, addresses an anomaly which remains. The proposal to implement part-time fee loans risks undermining the principle of equity which I thought the coalition Government agreement had aimed to achieve. It should be noted, however, as has already been raised, that this equity is only on fee loans, because part-time students are still not eligible for means-tested maintenance loans and grants. The real difficulty with the Government’s proposals is that part-time students should start to repay their loans from the April three years after they commence studying, if their earnings reach £21,000.
While I think this is probably a fairly small group of students, I do know from my experience in higher education that mature students often make the decision to study while working either part-time or full-time, and while an income of £21,000 sounds like a good deal for a 21 year-old, it is not necessarily a high salary for someone in their thirties or forties with home and family responsibilities to juggle alongside their study. In particular for single parents, often but not always mothers, it can be a very fine decision about whether they can afford to study alongside work.
But there is also the fundamental question of equity. A full-time student undergraduate on a four-year course, whether an engineer or a linguist, for example, will not start to repay until they finish their course—four and a half years. Part-time students, though, are asked to start repaying at three and a half years, regardless of the number of modules they are taking, and over what period. Simply by virtue of being part-time students, none of them will have concluded their course by three and a half years.
The noble Lord, Lord Henley, expressed some concern to me about an open-ended commitment if we change the arrangements to ensure that no part-time students start to repay until they finish their course, which might be 10 or even 15 years on, which is unlikely. I accept the point that the noble Lord, Lord Stevenson of Balmacara made about six years, but that is also unusual. I understand that the vast majority of part-time students have completed their course by the fifth year.
I am not arguing for a complete deferral, but a move to defer the repayment starting at four and a half years has the merit of including the majority of part-time students concluding by that time, with only a very few going on beyond five years of study.
Additionally, this arrangement may also impact on those adults taking Level 3 courses part time, who are now eligible for loans for fees. These part-time students are 84 per cent of the total currently taking Level 3 courses. I ask the Minister for reassurance that these students would also not start repaying before they complete in the same way that I am arguing for part-time undergraduates.
I have recently received a copy of a letter that the Minister for Universities and Skills has written to million+, responding to another problem in the arrangements for regulating fees for part-time students in universities. Because it is so recent, and because it is highly technical, I am not asking the Minister to respond today, but would be grateful for a written response in due course. Because it is a highly technical one, my view is that it is not appropriate to have it on the face of the Bill, but it does need to be aired, because it is in the regulations, and may cause some chaos.
The proposal aims to restrict part-time fee loans on 75 per cent of a £9,000 fee in an academic year. This is a completely arbitrary cap, and I worry that to have drafted it shows little understanding of the academic framework, or that part-time and full-time study alike is based on the 120 credits required for a full-time course, rather than on a percentage of intensity.
In practice, there is a good deal of flexibility, which reflects the differing circumstances of part-time students, for instance in terms of work and family commitments and the number of modules that students have been able to study in previous years. It is not 25 per cent, 25 per cent, 25 per cent, 25 per cent; it can often be 20 per cent, 50 per cent, 20 per cent, 10 per cent. Students simply do not study in modules which are nicely linked with percentage intensity, and the proposal will create unnecessary and avoidable administrative complexity in universities, with the potential for part-time students to be levied different charges, part of which the noble Lord, Lord Stevenson, referred to earlier.
The BIS proposal is not even linked with the 75 per cent of the full-time fee charged, but with 75 per cent of a £9,000 fee—the higher fee cap. This has the effect of undermining the principle of equity of treatment for full-time and part-time students, and allows part-time students to be charged proportionally more that their full-time peers, according to the full-time fee levied in the university. It will also undoubtedly restrict the potential to incentivise more flexible learning opportunities in the context of part-time study.
This is not only a Government aspiration, but is also in the Exchequer’s interest, because part-time students, unlike their full-time counterparts, are not eligible to claim means-tested maintenance grants or loans.
In the letter to million+ from the Minister, David Willetts, he talks about regulation, but there is no reason to regulate part-time fees, other than to ensure that fee loans are available on a basis which does not exceed pro rata of the full-time fee. I fear that the real reason why this system is being proposed is made clear in the last paragraph, which reveals that officials have already given a brief to the Student Loans Company to design a system that fits within the 75 per cent proposal set out by BIS. The letter says,
“The Student Loans Company is also now sufficiently advanced in its systems design that a change of this size could not be implemented without putting the launch of the service at risk. We will though, of course, monitor the rollout of this new system, and respond as necessary if clear evidence of needs emerges”.
These proposals are perpetuating policies and funding regimes which treat flexible and part-time learning as a percentage of full-time, missing the opportunity to align flexible learning with the credit system and the needs of students—all before the legislation has been passed or the debate on the primary legislation has concluded in Parliament. I repeat: given the short notice and the technical nature of this issue, I do not expect the Minister to reply today, but I hope that she can help with a written reply in due course.
Let us give a cheer that at last the Government propose equity of experience for part-time students, but the interest rate, the time when students start to repay or the financial arrangements for taking modules are all at risk because of some of the detailed small print that sits behind the Bill. I hope that the Minister will be able to help us provide that equality of access that the coalition Government seek and which those of us on these Benches wholeheartedly support.
Lord Sutherland of Houndwood
I wish to support Amendment 148. I am afraid that I cannot support Amendment 145G, for reasons that I think are fairly obvious. If you have students in this position and you want a degree of equity they should be contributing pro rata to their colleagues in full-time education. However, I congratulate the Government on moving on this issue and moving part-time students into the arena of those who will be given loans against fees.
The arguments already put in favour of Amendment 148 are strong and powerful. I suspect there has been some oversight here; there is a much broader discussion to be had about the place and funding of part-time students, but that will come perhaps after the consultation on the White Paper is finished and it is brought back here. For the moment, we need as near an equitable position as we can and four and a half years as the period at which repayment is required seems to me a reasonable compromise for the moment.
Baroness Howe of Idlicote
I would also very much like to support Amendment 148. As has already been said, not only does it address the important move of part-timers into access to loans, which is crucial, but for me it also sets out in parts 1 and 2 the right way in which it can be sorted out so that students can have completed their studies. I am also aware from my own experience and from what the noble Lord, Lord Stevenson, has said that there will be a huge number of women in this situation. For those reasons too it is very important that they have this new opportunity to study at a later stage in life; to catch up after what was often bad or lack of the right information about the courses they might have thought of studying when they were younger.
So I hope very much that the Government will see the sense in Amendment 148 and will be able to accept it in its entirety. It certainly takes me back to the many occasions when I have discussed this, particularly with the noble Baroness, Lady Sharp. I will not go any further than that, but I hope the amendment can be supported.
Baroness Sharp of Guildford
Very briefly, I entirely endorse what my noble friend Lady Brinton has said about Amendment 148. It is a very good compromise and I hope that the coalition Government will listen to what we have been saying here. As the noble Baroness, Lady Howe, has just mentioned, I have fought for a long time for equity for part-timers and it is splendid that we are almost seeing equity now. It would be very nice if it were rather fuller equity. I hope we shall see this.
The Earl of Listowel
My Lords, may I ask for an assurance from the Minister on a small detail? Many social work students will be studying part-time and if they are doing a degree-level qualification, that fee will be waived. It is very welcome that the Government are raising the threshold of entry into social work and it is now becoming more expected that students will have Level 3 qualifications, so I would appreciate a reassurance that they will not be charged when they are at further education college doing their Level 3 qualifications. It is a point of detail; maybe the Minister could write to me on that.
Baroness Verma
My Lords, I would like to respond to the amendments of the noble Lord, Lord Stevenson, and of my noble friends Lady Brinton and Lady Sharp, in turn. I know that many noble Lords, like me, welcome the extension of loans to eligible part-time students studying at publicly funded institutions to cover the full cost of their tuition. Upfront tuition costs were identified by Lord Browne in his independent review of higher education as the primary barrier to students who want to study on a part-time basis and we have removed that barrier.
I thank the noble Lord, Lord Stevenson for introducing his amendment, which raised a debate in this Room about the extension of loans to part-time students. The introduction of caps on tuition charges for part-time courses is an important part of our higher education reform. It will enable the Government to provide, for the first time, loans to eligible part-time students to cover the full cost of their tuition at publicly funded institutions, just as it does for full-time students. The Government agree with the overarching principle of Lord Browne’s independent review that those who benefit most from higher education should make a larger contribution to its costs. This holds true for those who choose to study part-time as much as those who pursue it full-time.
The Government’s reforms mean that while the teaching grant for the Higher Education Funding Council for England is being reduced or stopped completely for some subjects, universities will have access to a steady income stream from subsidised tuition loans and will get the future of sustainable funding that they need. We would be reluctant to limit to £1,000 per year the amount that institutions can charge for part-time courses. Such a limit would pose a serious risk to the financial sustainability of the part-time sector, as it would restrict a now primary source of funding. This would place part-time students at a significant disadvantage to their full-time counterparts and I am sure that the noble Lord is not advocating that.
Amendment 148 seeks to ensure that the amount of interest that could be charged on loans for part-time students should not be higher than the rate charged for full-time students. My noble friends raise an important point and one with which I agree wholeheartedly. Part-time students should be treated in exactly the same way as full-time students in the way in which interest is applied to their loans. We have never intended that full-time and part-time students should be treated differently in this respect. I hope that the indicative regulation published when this clause was in the Commons will also reassure my noble friends on this point. The regulation showed that student loans will bear interest at RPI plus 3 per cent until the individual becomes liable to repay. From this point, we will introduce a progressive system whereby low earners—again, regardless of whether they studied full-time or part-time—will be protected and accrue interest only at the rate of inflation. Those with an income of £21,000 or less—below the repayment threshold—will not need to make any repayments and will accrue interest at RPI only, which will maintain the value of the loan in real terms. For anyone with income greater than this, the rate of interest applied will increase gradually with their income, reaching a maximum of RPI plus 3 per cent at an income of £41,000. Those with incomes of £41,000 or more will accrue interest at a rate of RPI plus 3 per cent.
I hope that that has reassured my noble friends on those points. As it is our intention to apply our proposals to both full-time and part-time students and the individual’s mode of study has no impact on how the rate is calculated, it is therefore unnecessary to set this out in primary legislation.
Moving to the second point in this amendment, I understand the concern about the date that part-time students become liable to repay, though it is important to remember that whether they will actually have to begin to repay will depend on their income. Under our current proposals, part-time students become due to repay on 6 April following the third anniversary of the start date of their course, even if they continue to study. We have chosen this date as an equivalent to the time when a full-time borrower studying a three-year degree course would reach their repayment date. However, it is important to remember that no one will have to repay if their income is below £21,000. The added benefit for those part-time students who have incomes less than £41,000 is that they will at this point see a reduction in the interest that they are charged. Once part-time students become liable to repay, their interest will be dependent on their income, whereas students who have not yet reached their statutory repayment due date will be charged interest at RPI plus three per cent.
I know that some higher education institutions feel that delaying the repayment point by a further year would benefit their students, particularly those studying the equivalent of a three-year course part time over four years. I can see that this might be the case at least for those part-time students earning more than £21,000. However, the converse would be true for many other part-time students, particularly those earning under £21,000. They would be charged a higher interest rate for a further year but would not be required to repay during that year. However, I have listened to the argument very closely and I think that it would be prudent of me to go back to my right honourable friend David Willetts and raise these points with him again and commit to writing to noble Lords about these concerns. This is a very valid point and one that we need to consider very seriously.
Lord Foulkes of Cumnock
On that particular point, the Minister has been very helpful. But I am not absolutely clear about whether she will go back to the Minister with a view to accepting this amendment. What I understood by the very eloquent speech of the noble Baroness, Lady Brinton, was that the administrative scheme that has already been promulgated anticipates the legislation even though the legislation has not yet gone through this House, which is a very serious situation. There is no point in going back to David Willetts if this has already been decided by an administrative scheme.
Baroness Verma
I can reassure the noble Lord that it has not been set in stone. I have listened very carefully to the argument today. It is a very valid argument. It would be a great benefit to go back to my right honourable friend and raise with him genuine concerns. While I cannot commit to the exact amendment as it is, it is worthy of a revisit with my right honourable friend.
I would like to finish by responding to a couple of the points made by the noble Lord, Lord Stevenson, about the loans available to part-time students. I think I have covered it in my presentation. I will reiterate in case it has not been made clear. Part-time students will meet the amount charged subject to the passage of this clause. The introduction of regulations to cap fees at the level the noble Lord has indicated means that there may be institutions that do not choose to raise fee-charging to the maximum level. We are making an assumption that that is what is going to happen, but we must not because there may be institutions that do not follow that path. For equivalent and lower qualifications, my right honourable friend the Minister for Universities and Skills has in the past indicated his regret that loans cannot be offered for a second qualification.
I am sure that, when the noble Lord’s party was in Government, they also had the same regret. But, unfortunately, budgets are limited. We have to work within our means so that those who have not got a first-time qualification are given that opportunity. The noble Lord’s Government agreed with that principle; we are following it through. I hope that the noble Lord will be reassured—as my noble friends are—that we have taken this very seriously. I have promised to take away what my noble friend Lady Brinton has raised. We hope to come back to it on Report with some findings.
Baroness Brinton
Before the noble Baroness concludes, I thank her very much for the response and for taking the matter back to the Minister for Universities and Skills. We would be very grateful if we could participate in that meeting, particularly on the two technical points that I raised, that I said I did not need answers to today, because obviously it will take a lot of time to write back on them.
Baroness Verma
Absolutely, and I would encourage any other noble Lord who would wish to be at that meeting to indicate that they would like to be present, so that we can offer an invitation to whoever wishes to be there.
Lord Stevenson of Balmacara
My Lords, me too. I would like to come to that. It would be fascinating. I am sure the noble Lord, Lord Foulkes would be present in spirit even if his considerable bulk was not present in fact at the occasion. We will bear in mind his useful and helpful interjections during the debate on these two amendments.
Lord Stevenson of Balmacara
I thank the noble Baronesses, Lady Brinton and Lady Sharp, for their amendment, which has won the day. The speech of the noble Baroness, Lady Brinton, was indeed very eloquent, as has already been said. One point which I would like to finesse back to the Minister was that in considering the question of the timing for which loans should be available for part-time equivalent to full-time study for degrees, she also made the point—which I tried to make, but did not make it so well—that institutions have a long and distinguished history of setting good levels of fees for part-time courses. It is not clear at all to me why the Government feel they need to regulate.
The documentation I have seen suggests that there is a fear that if the new loan system comes in, institutions cannot be trusted to restrict the level of fee, when it comes down to it. Again, that might be worth waiting for, to see, and to have the power to intervene if necessary. As the Minister said, there may be a number of institutions who, for good and persuasive reasons, decide to cap fees much lower down the scale, in which case the figure of 75 per cent of £9,000 is otiose, and we should bear that in mind as we go forward.
I also thank the other speakers in this debate, because although mine was a probing amendment, I did want to raise the points that have been raised. I think they were picked up. I am delighted that the Minister has reassured the Committee about the equivalence of interest payments between full-time and part-time students; that is important. I am delighted that she is going to take back the arguments we made today, and I hope that at Report or earlier, we will be able to have some good news. On that basis I would like to withdraw my amendment.
Lord Lucas
“Disclaimer of eligibility for student support
(1) Any student over the age of 18 (or if under that age, with the consent of the student’s parents or guardian) may disclaim the right to such financial support or arrangements as may from time to time be offered by or on behalf of the Secretary of State to such students.
(2) Such a student may then apply to be admitted to a university as if he or she were a candidate from outside the European Union, and shall for all purposes be considered to be such a candidate.
(3) A student who has made such a disclaimer may withdraw it at any time, but not in respect of any course to which he or she has been admitted as if he or she were from outside the European Union.”
Lord Lucas
I beg to move Amendment 146 and speak to Amendment 147A. My objective is to nudge the Government gently in the direction of common sense and fairness in these two amendments. One of the effects of the Government’s policies over the last year or two, particularly with regard to the Office for Fair Access, which looks set to reduce the number of students going from high-performing English schools to Oxford and Cambridge by about 500 a year, and as an effect of the fees increase, has seen a very considerable rise in interest in the prospect of going to university overseas.
At the cheaper level, it costs about a couple of thousand pounds plus living expenses to get a very decent university education in the Netherlands. That is becoming an increasingly popular destination, notably for the leafier end of the state school system. I thoroughly recommend Maastricht as a university, begging the pardon of my more sensitive colleagues on these Benches. It is actually a very fine and innovative university, and for those parents who would intend anyway to repay their children’s debt, and not leave them with that hanging over them, it represents a very considerable saving.
To have our children going abroad anyway is probably quite a good thing for this country, and over the long term it should increase our understanding of the world outside our shores, and bring us added understanding, if not prosperity. At the higher end, principally affected by the changes being made in OFFA, we are seeing very substantial increases in numbers of students interested in going to the United States. The rate of application is up by about 30 per cent this year. Fees in the US are extremely substantial. There are some good scholarships available. Some of the brighter state comprehensives have been picking up one or two of them, and long may that continue. However, a lot of this outflow will be children who have gone to independent schools, whose parents see that they have the qualifications that would formerly have taken them to top universities, but who have now been squeezed out—so they are off to America, Canada, Australia or, indeed, China. You can get to some very high-ranking universities in Hong Kong for not much more than the cost of a British degree. Indeed, one of them is a subsidiary of Nottingham University. So you can pay to go to a British university overseas. It seems a bit daft to me that our own universities, which are strapped for cash enough as it is, should see this flow of students going out to pay high fees overseas and not be able to bring them back and have those fees for themselves. Why should we deny our universities that benefit? Why should our students find that the only universities in the world that they cannot pay a fee for are our own universities and why should our universities find that a natural flow of students is denied to them? So I hope, while not expecting any immediate comfort today, that the Government will think along those lines.
I would like to see some progress today on Amendment 147A. It has long been the practice of universities, when students were largely funded by the Government, to rob Peter to pay Paul—to take money that was notionally allocated to students studying humanities degrees and use it to fund courses being pursued by those studying science degrees, in particular. That is all very well when it is just reallocating government money, but when you are taking money that a student has invested themselves and transferring it away from that student to some other student’s course, I think that that becomes morally indefensible. I would very much like to see any such activity done openly and with a proper disclosure of what a student is receiving in return for their fees and where the money is being spent by the university. Then a student who is looking to go on what has been traditionally a rather underprovided course with few contact hours can see whether or not they are being offered a reasonable bargain in return for their £9,000 a year. I beg to move.
Baroness Perry of Southwark
My name is also on Amendment 146 and I very much support what my noble friend has said. I shall add one or two other arguments to the powerful arguments that he has already made.
My noble friend said that losing some of our good students to go abroad for their studies might be a good thing. Yes, it would be good for a few. International education, whether at undergraduate or graduate level, is a well established tradition among the brighter and best students, and that is a good thing. But it is a very foolish country that stands aside and watches a very large number of its brightest and best students being lost, particularly since those who go to the United States tend to stay. There are good statistics showing this. We lose some of our best talent if we allow them to go and finish their undergraduate and postgraduate study there and then be snapped up by American companies.
The other argument that has always seemed to me quite powerful is that we have and recognise in this country, without much debate, that we have private schools as well as state schools. We know perfectly well the way in which private school fees have been accelerating in recent years. Many parents are now paying £12,000 or £13,000 per year for day schools, if they are lucky—some more than that—and, for boarding schools, at least double that. It has always seemed very strange that those same parents whose children go on to higher education are suddenly released from what many of us see as the burden of school fees to a very much reduced sum of money. I have many times dwelt with friends on one anecdote from my time as head of a Cambridge college. One of my fresher students came bouncing up to me in the first week of term and said, “Oh, come and look at what my daddy has given me as a present for coming up to university”. It was a brand new BMW 7 Series, which would have accounted for at least three years of fees at £9,000 a year plus, or her maintenance. I thought, yes, Daddy is celebrating because he does not have to pay your very high school fees any longer. I am sure that my college and university could have done with that money and made good use of it.
It seems quite extraordinary that we do not allow parents—who could very well afford to continue to pay the fees—simply to opt their children out of the entire loans company system and, therefore, to have their children treated like overseas students, where the university can set their fees and they are outwith the quota for those eligible for loans. Putting these very bright students off-quota and giving them the encouragement and opportunity to go to our best universities would be to their benefit and hugely to the benefit of the country. Therefore, I wholly hope that the Government will seriously consider this possibility of having private students who would be off-quota but who of course would have exactly the same entry requirements as those who are eligible for loans. As my noble friend says, we do not expect an answer today. This is not a backdoor route for people to buy their way into higher education. Their access arrangements and entry requirements would have to be exactly the same. But it would enable us to keep some of those very bright young people here in British universities.
Lord Foulkes of Cumnock
My Lords, I was hoping that the noble Lord, Lord Lucas, was going to refer to what has been the most discriminatory and unfair decision in relation to student fees ever, anywhere in the United Kingdom. This is the decision by the Scottish Government to charge students domiciled in England, Wales or Northern Ireland who choose to study at Scottish universities fees of up to £9,000 a year. As the professor, my old principal, will know—though he was not principal when I was a student; he is not that old—if the Scottish Government are allowed to go ahead with what they are planning, English, Welsh and Northern Irish students will have to pay £36,000 for a four-year degree course at a Scottish university. It is really outrageous. It is particularly outrageous because of the rules of the European Union, whereby students coming from other countries in the European Union—whether it be Lithuania, Poland or any other country in the European Union—will get a free education just like Scottish students. I do not understand how anyone in England can sit back and accept this. I do not know why people are not rioting in the streets at this kind of discriminatory decision.
However, there will be an opportunity to put it right. I have tabled an amendment to the Scotland Bill, which means that this sovereign United Kingdom Parliament would make it illegal for the Scottish Administration to charge discriminatory fees. We are still the supreme Parliament. The Scottish Parliament is a devolved Parliament. I hope that all noble Lords will talk to their colleagues and that, for once, I might get support from all sides of the House—that would be a novelty—so that we can end the discrimination that is being proposed by the SNP in the Scottish Parliament.
Lord Sutherland of Houndwood
My Lords, I am not rising to the bait of the noble Lord, Lord Foulkes, other than to add a fact that he may find interesting and so may the Committee. The Scottish Government’s budget presented roughly two weeks ago requires the universities to raise roughly £60 million in fees from students from the rest of the United Kingdom. On my own estimate, two years ago the cost of students from the European Union was £85 million a year. These are frightening figures and they raise a quite separate issue, but this is not the place to do it. I want to speak to the two amendments.
I appreciate the spirit of Amendment 147A: the spirit is openness and reassuring students that the money they pay for their education is actually being used for their education. That is absolutely right; as well as funding universities, that was the whole point of fees introduction. I support the principle, but I think the mechanism and the detail in subsection (2) would frighten the wits out of anyone running a university to provide that degree of information for every student.
I feel more strongly in support of Amendment 146. I simply want to add the fact that this is already in practice in a very select group of cases. The select group is of students who are taking a second degree, having already had the benefit of the first degree. The obvious case is veterinary studies, which was well represented in the university of which we have been speaking. The university found it possible to admit additional full-paying students on non state-funded places. Therefore, it seems the principle has been operating and has been conceded. In which case, there is a way of pushing it forward as in Clause 146.
Lord Stevenson of Balmacara
My Lords, these are two slightly different amendments, raising different points, which are slightly oddly grouped together. However, they raise good points and I look forward to hearing what the Minister will say about them. On the first point, following the noble Lord, Lord Sutherland, and stepping sideways around the noble Lord, Lord Foulkes—a difficult task I know—architecture is another subject where you would have the benefit of having done a first qualification and then come back in and done further study, for which again these would not count.
Lord Sutherland of Houndwood
On a point of information, it is not because veterinary studies required an earlier qualification, it is because many students want to take it, whose parents can afford to pay the extra fee. They take it, if they are admitted, whatever their background.
Lord Stevenson of Balmacara
Which is the point I was about to make. The sheer serendipity of being able to do this does not make it right. Earlier points on other amendments, which were about the need of the whole country to work out how we pay for higher education, and to make sure that those who benefit from it also contribute back, do not get caught by this amendment. However, it may be worth further discussion, and I look forward to hearing what the Minister says.
On Amendment 147A, as has already been said, this is presumably the first of a number of points to be discussed as we get more to the market that the students will be dominating in future places, because in order to do that they will need this sort of information. I agree with the noble Lord, Lord Sutherland, that this is a tad more difficult and complex than any standard university secretary would be able to respond to. However, it gets the right message across, which is that there is not very much information available for students to judge what sort of university they are going to. The courses are beyond their experience by their very definition, but as for the way in which they are taught and the amount of student contact, there is already enough circulating to make this an interesting area, which we will track with interest.
There has been a report in the papers today that comments from students that have been surveyed about what they thought about university courses in relation to fee levels of £9,000 were distinctly unflattering. If that is the way this is going, then this sort of amendment may well be something we need to discuss later.
Baroness Verma
My Lords, the recently published Higher Education White Paper places students at the very heart of the higher education system. Our goal is a system that offers students better information and opportunity, is more responsive to student choice and helps to improve social mobility. We will ensure funding follows the student, is progressive and fair, and better responds to their situation and choices.
The amendment of my noble friend, Amendment 146, seeks to allow home and EU students to opt out of their eligibility for student support. First, let me make it clear that there is no requirement for students who have already been offered a place in higher education to draw down their entitlement to student support. At the moment, we have to control student numbers overall because we must control the costs to the public purse.
This amendment would mean that students who could afford to pay up front the full cost of their courses would then be at an advantage because they could pay. In effect, it has bypassed our student number controls. On the face of it this may appear attractive, but there would be a strong perception that wealthier students or their families would be able to buy a university place.
The Prime Minister has made the Government’s position absolutely clear on this. University access is about the ability to learn and not the ability to pay. There is no question of people being able to buy their way into university, however attractive that proposal looks. The Government are interested in expanding employer or charity sponsored places outside the quota system and are committed to freeing up the controls on student numbers in general.
In the Higher Education White Paper, we have committed to increasing such opportunities, provided that they do not create a cost liability for Government and that they meet three key principles: there should be fair access for all students applying, regardless of their ability to pay; the places must be genuinely additional; and there must be no reduction in academic standards in recruitment. The Higher Education Funding Council for England is looking at options to incentivise more sponsorship and will include this in its consultation this winter. This is a sensitive issue and we will consider carefully the outcomes of both these consultations before introducing further changes to the system.
On Amendment 147, I absolutely agree with my noble friend Lord Lucas that students need accessible, accurate and reliable information that clearly shows what they expect from their courses, helping them to make informed choices. We are doing a great deal of work in this area. It is our intention that by September 2012 all higher education institutions will publish key information sets for each course on their website. These sets will provide the information that students request the most, together with information about course charges.
The White Paper encourages good practice in institutions to allow students to become more discerning in understanding how their tuition charge is spent. It recommends that institutions provide the sort of material that local councils offer their residents to demonstrate where council tax is being spent. We have therefore asked the Higher Education Public Information Steering Group to consider whether this sort of data should form part of the future wider set of information we ask institutions to provide for prospective students.
I hope that I have reassured noble Lords, but before I conclude I would like to respond to the question of the noble Lord, Lord Sutherland. He mentioned that students taking their second first degrees would be outside the student number controls and would be able to pay for their courses. He is correct, but the Government, like the previous one, is regulating students’ first degrees. I hope that answers the noble Lord.
Lord Sutherland of Houndwood
May I just ask what the point of the regulation is? Is it to save money, because the students in question will not cover the full cost of the fees; or is it because the Government have a pre-set notion on, for example, how many vets we need and how many should be eligible to take a veterinary studies degree?
Baroness Verma
I think the bottom line is, of course, that it is all down to affordability. We need to be clear on that. Universities have a finite budget too.
I will not fall into the eloquent spider’s web of the noble Lord, Lord Foulkes. I shall just say to him that Scotland has a devolved Administration and therefore sets its own agenda. Steering neatly away from that, I take this opportunity to thank all noble Lords for their contributions on this Bill today, given that this was my first outing in higher education. It has been quite a baptism, but I am hoping that when I come in on higher education matters in the future, I will be there from the beginning and will understand a little more clearly the temperaments of noble Lords.
This is the final group of amendments, but I understand very clearly that there will still be questions that remain outstanding. Therefore I am happy to meet noble Lords, be it after this meeting in Room 16 on the Principal Floor, or in future. I have very much an open-door approach to the way I do my business in the House.
I give this opportunity to all noble Lords to come and speak to us. We want to make sure that the legislation, when it goes from this House, is in its best form, and noble Lords are there to ensure that with me. The Welfare Reform Bill is about to commence, so on that note I will sit down and allow the noble Lord to withdraw.
Lord Lucas
My Lords, I thank my noble friend for that answer. To be disappointed by my noble friend, and encouraged by the noble Lord, Lord Foulkes, is indeed unusual. I hope that we will have at least the second part of that again. I shall now take an interest in the Scotland Bill.
I am grateful for what my noble friend said on Amendment 147A. I will read it carefully and come back to her on that. Because there is so much past practice in this area, this is something we need to take carefully.
As for Amendment 146, I find this an odd position for us to be taking. There are an awful lot of people in this country who pay for education from the ages of five to 18, and indeed before that. To suddenly cut that off at 18, as if it was in some way dirty, seems to me to be odd. If we are conducting things so that we are not displacing poorer children from the education they might otherwise receive, but are increasing the amount of money which is available to the institutions which are educating those poorer children, then that seems to me to be a sensible and constructive way to go.
I do not know how my right honourable friend the Prime Minister’s dictum should be applied to his alma mater, but perhaps one day I will be able to listen to him on that. For the moment I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Viscount Ullswater)
My Lords, the Grand Committee will now adjourn until 17.42, when the Committee will begin consideration of the Welfare Reform Bill.
Welfare Reform Bill
(13 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Deputy Chairman of Committees (Viscount Ullswater)
If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung, and resume after 10 minutes.
Lord Foulkes of Cumnock
I was hoping that I was not going to have to get up and that the Whips would immediately get up. I raised at the beginning of the Committee the problems that will be faced by Members of the House with severe disabilities getting down to vote in the Division Lobby if there is a Division in the House. I was assured by the Whip that there would be an indication that some arrangements had been made through the usual channels to ensure that that could be dealt with appropriately.
Lord Shutt of Greetland
My Lords, this looks like two bites at the same cherry, because I believe that this has been dealt with. There will be 10 minutes, and the Chairman has discretion to extend that time. I understand that there has been a usual-channels agreement that there will not be voting downstairs today, but who knows—things can change. That, I understand, is the agreement for today. However, if ultimately there were to be a Division, there is the 10 minutes, and there is discretion to extend that.
This would be an extreme position for today only. A paper is about to be brought to the House, prior to the next meeting of this Committee on Thursday, saying that Members with mobility problems who are in this Room will be able to vote in the Room, and the votes will be taken downstairs. But because that paper has not yet gone to the House, today is different. If there were to be a vote today, and there is real need, that 10-minute period would be extended if Members had difficulty in getting down to vote.
Lord Foulkes of Cumnock
I am grateful to the Whip for that explanation. I had heard through what I should probably call unusual channels that these discussions were taking place. There are a lot of questions arising from it. Is it just for the consideration of the Welfare Reform Bill in Grand Committee, or will it apply for every Grand Committee taken up here in the future? A number of other questions also arise.
I think it is very difficult to have started the Welfare Reform Bill Grand Committee in this totally inadequate Room, dealing with something that is so important when it should have been dealt with much more appropriately on the Floor of the House, and it is going to create tremendous difficulties not only for people with mobility problems but for all of us with regard to 10-minute Divisions and a number of other things. The Whips, particularly the Chief Whip, who propelled us into these arrangements, should have thought rather more carefully about how it is going to be dealt with in practice before making such statements to the House.
Lord Shutt of Greetland
My Lords, this is not the first time that a Grand Committee has taken place in this Room. I recall meeting here on a Northern Ireland Bill, when a Minister accepted an amendment of mine, as it happens. So it is not the first time that we have met here. It is sufficient to the day. I have spoken about what will happen today. Later we will have a paper which I believe will refer to subsequent sessions in this Room. It will be up to the House to consider whether these arrangements apply to other Bills in this Room—I suppose that that is quite likely—but, as I say, it is sufficient to the day as far as that is concerned. As for the general position of using this Room, do not forget that this is a matter that was taken to the House and the House decided that we would meet in a Grand Committee and not in the Chamber.
As it happens, there are 62 places for Members in this Room. I think, unless some more people have crept in, that there are fewer Members in the Room than there were at the end of the Education Committee, which I just witnessed. There is certainly more space for people who need to use wheelchairs and, indeed, more space for members of the public. So as for Grand Committee being held in this Room as opposed to the Moses Room, the general belief among all those who have been consulted and who have seen the position here is that this is a better Room for these meetings. I hope that we can now proceed with the arrangements in this Room.
Amendment 1
Lord Kirkwood of Kirkhope
Lord Kirkwood of Kirkhope
My Lords, I preface my remarks in the slightly Foulkesian vein of exhibiting some displeasure, not about the logistics of the Committee Room—I understand that there are arguments about that—but because I certainly did not find it easy to prepare amendments, talk to colleagues and pressure groups and get here today to start what is one of the most significant pieces of social security legislation that I have ever come across in this way. Starting at the fag-end of an afternoon is not the best way of making progress. There are colleagues, also, at the Conservative Party conference on bona fide political business that denies them access to the first two sessions on the Bill, and I do not think that that is correct. There are also pressure groups at the party conference at Manchester who would like to be here but cannot because they have commitments, and I have found this very difficult.
I was dealing with very helpful duty Clerks trying to table amendments from afar; admittedly, we were all afar because we were on Recess last week, so tabling amendments by Friday was very difficult. I say to my noble friend the Deputy Chief Whip that the usual channels—the blame is not all pointed at the Government and I am not expecting him to respond to this—need to give some consideration to how Members approach their work, particularly with a recess coming before the start of this Bill. For my money, it would have been much more convenient to start this proceeding on Thursday at the least, if not the week after, which was when it was originally booked to start. We need a little consideration for those of us who are technically engaged in this important legislation. I hope that that will be borne in mind. It is completely out of order so I will say it quickly, but this is a consequence of far too much legislation. The usual channels should get themselves together and get this sorted out, otherwise we will all struggle to devote the appropriate level of time and depth of analysis to what we are being invited to look at.
I shall explain what I hope will be for the convenience of the Committee. I have spoken at length to the Government Whips Office from afar, some of the conversations being more successful than others. I got some pretty tart replies in the early stages but at last I got some sense out of them. This is what I propose to do. Colleagues will notice that I have tabled a big group of amendments. Group 3 consists of a whole range of amendments. That was during a phase when I thought: “Golly, if everybody else is having the trouble that I am having, there will be no amendments to Clause 1”. Dilatory tactics are an honourable parliamentary tradition, so in 10 minutes I amended Clause 1 in every way I could. That is what the group beginning with Amendment 3 is all about.
However, having calmed down and talked to the Government Whips Office, I had it suggested to me that we begin with a broad-ranging debate on clause stand part. To some, that might appear to be putting the cart before the horse, but in this situation I am convinced that if we have a general discussion—we have some important amendments about the inclusion of council tax which I hope we come to on Thursday—then we can spend what is left of the day inviting colleagues to look at clause stand part and Amendment 1.
That would give us the broadest attempt at understanding some of the Second Reading-ish areas, or areas not contained at all in the first 30 clauses. Universal credit, the first clause, opens the gate to Chapters 1 and 2. The first 30 clauses are all about universal credit. The consolation that I can offer colleagues, to whom I apologise, and who have done a lot of research and homework on the group beginning with Amendment 3, is that they are all perfectly admissible by definition in a clause stand part debate because they are all amendments to Clause 1. So it is not for me to encourage anybody to do anything, but I wanted to make clear that I did not want to sell people short and feel they had been short-changed. That is what I think is best for the Committee, and I hope that colleagues find it acceptable.
I want to mention two things about what I hope to get out of this Committee stage. Amendments need to be made to the Bill, as I said at Second Reading. This Bill is not perfect. I am particularly concerned about the level of Treasury claw-back in the benefits section. It is absolutely true to say that universal credit will produce new income for low-income households, particularly those going into many jobs and the like. We all understand that, but there will be a reduction of existing levels of benefit, particularly in areas like housing and the universal household cap, which will really, really hurt the households that it affects.
My mission in this Committee is to robustly press the Government on the 10-ish or 12-ish issues where that particular concern applies. I understand that this is a long and technical Bill, and I want to make a point about regulations in a moment, but for me, politically, I say this to pressure groups and others outside this place who have been informing and advising us so well: they should concentrate their fire. We need priorities, and we can get changes if we are clear and if this Committee sends a signal to the department. That signal might also get noticed by the Treasury, and it would be a perfect circle if we could make that join and get some improvements by Report in a way that would make people like me more comfortable and think of supporting the changes.
I mentioned regulations. Obviously regulations are at the cutting edge of the implementation of the Bill. In passing I want to pay tribute to the Minister of State and the Bill team for making themselves endlessly available and offering us all kilograms of paper, some of which are informative, some of which are just heavy. Whatever you might think about their other approaches to the Bill, the accessibility of the Minister and the Bill team has been exemplary. I hope that that will continue.
Maybe the Minister could say something about how he proposes—subject to the availability of the information—to make draft regulations available. Obviously, some of the areas under discussion cannot be dealt with. For example, passported benefits are currently under consultation by the Social Security Advisory Committee. That is perfectly sensible but the committee will not report until later. I am not asking for every draft regulation before we can make sense and see the universal credit come into focus, but I am still struggling with what is quite a fundamental change in the way that we do these kinds of things.
What’s in a name? It just occurred to me that “universal credit” does not mean anything very much. It is certainly not universal to any social security advocate or specialist, because “universal” is something that is not means-tested and no one can say that universal credit will not be means-tested. “Universal” is not the right word—and it is not a credit. Credits were all stolen by the former Prime Minister when he was Chancellor. He took them away from the department and created tax credits. It was a successful policy—until it all fell into very difficult administrative difficulties—but the department did not have any say over it. Credits went to the Treasury. Universal credit is coming back to the department, which I am in favour of, but there will be confusion about what a benefit is and what a credit is. I notice that some of the titles in the Bill mention working-age benefits in Part 2.
So, the name is very important because it sends a signal about what the benefit is for. I am not seriously suggesting at this stage that we change the name, because I am sure that thousands of pounds have been paid to consultants to craft the artwork around universal credit. But this is a working-age entitlement, which is what I understand it to be, what it should be and what I hope that it is. We are stuck now with “universal credit”, which I think came from dynamic benefits and the Council for Social Justice report that informed a lot of the philosophy behind universal credits. We need to think carefully and clearly. There was a big attempt when tax credits came in to differentiate working tax credits, which were for work, and child tax credits, which were for family support. That did not work. Thinking more clearly about the name in the future would be helpful.
I want to make a couple of other quick points under the clause stand part debate. The one thing that does not appear in the first 30 clauses is the word “employer”. For this new administrative system to work, employers have to engage and to contract employment with employees. We are concentrating here on the supply side, all the time trying to get employees into a better situation. I am in favour of that and I understand it, but—I am a board member of the Wise Group in Glasgow, so I know this—you cannot do that successfully unless you are working really hard, extensively and sustainably with employers. If you do not encourage them to take on people who, prima facie, are not ideal employees, they will run a mile. You have to get a close relationship with employers. I know that the Government have done some work at a high level with some of the big employment confederations and on a regional basis, where they were getting people to sign up. That is very welcome, but we need to think about small-scale employment as well. I was going to refer to the omission, although it is not really an omission because it would not really fit the legislation. I just make the point that the elephant in the room for the first 30 clauses is going to be employers, and we must not forget that.
Lord McKenzie of Luton
My Lords, I think that the noble Lord, Lord Kirkwood, has got us off to a really good start to our considerations on this important Bill. I do not want to dwell on the issues of the Room and where we are meeting. It is a matter for other channels: the usual channels. I think the Government made a mistake in putting everything in Grand Committee, but having done that I think they have worked quite hard to configure this Room so that hopefully we can have sensible debate on this important measure.
We have added our name to the noble Lord’s clause stand part debate, but let me start with his Amendment 1. We have a great deal of sympathy with this, because he is technically correct in saying that this is not a universal credit. It is not a universal benefit; it is a means-tested benefit. It is not universal in the sense that it is a substitute for all other means-tested benefits, either. Council tax sits outside it, as does the partially means-tested child benefit. Other non-means tested benefits rightly sit outside it—DLA and its replacement, the personal independence payment, in particular.
As the noble Lord said, though, “What’s in a name?”. What we are dealing with is the integration of a number of benefits through this system. I agree with what he said about the use of language and how careful we need to be. One of my questions to the Minister is: since we read in the newspapers that Secretaries of State are scurrying around Manchester and other places at the moment trying to dream up ever-more draconian conditionality to the welfare benefit system, is there anything in particular that the noble Lord anticipates bringing forward in that respect, as amendments to this Bill?
As I said at Second Reading, we always seem to end up in a place where those on benefits are benchmarked—in an adverse way—against a hard-working family who pay their taxes, not recognising that that hard-working family themselves could, next week, be availing themselves of the benefits system, because they have lost their jobs, or there has been an accident, or they have suffered ill health. We need to get away from that. I exonerate the Minister, who I have never heard adopt that language, but frankly some in his party do, pandering to the tabloids, which is, sadly, what this is about.
Universal credit is something which we, in principle, support. It covers those in work and those out of work, and therefore potentially removes the fear that entering work will cut away a support system. The prospect of one source of support rather than fragmented sources, from HMRC, DWP, and local councils, is broadly to be welcomed. The clear and significant income disregards and a common taper add to its attractions for improving work incentives. But this is not a panacea.
It is still going to be complicated, and there are problems with work incentives, for example for second earners in a couple. There are still very significant unknowns, more detail about which we will seek to elicit in the upcoming weeks, as we scrutinise the clauses in the Bill. Whether the universal credit can lay claim to making all people better off in work depends crucially, of course, on support for childcare costs. We will press for clarity on this matter, as we know others will as well.
There are gaps around passported benefits, treatment of the self-employed, and payment of rents. The SSAC, referred to in the presentation by the noble Lord, Lord Kirkwood, published a response to the White Paper on the universal credit, and highlighted issues such as, for example, whether the DWP has modelled the potential impact of second earners moving out of work. Perhaps the Minister can let us know on that issue. It makes reference to MDRs actually increasing for working households paying income tax and national insurance but which do not receive housing benefit or council tax benefit. Perhaps the Minister can also say something about the other complexities that have been pointed out about how the universal credit will deal with situations where, for example, one member of a couple is employed, the other self-employed; or a household comprising persons employed by a number of different employers.
Of course, the overriding issue is the deliverability of proposals. If the Telegraph is to be believed, Treasury officials have told Ministers that these reforms are,
“in serious danger of arriving late and billions of pounds over budget”.
Can the Minister please tell us whether a team of senior Whitehall officials and industry experts has been assigned to investigate the development of the universal credit? Is it true that the DWP rather than the MoD is now at the top of the Treasury’s risk register? I accept it might be the HMRC’s bit that is causing this to happen and not the DWP, but is it true? It seems that we are being asked to rush through a Bill where there are major gaps in how it is intended to work and concerns at the very top of government about the timing and costs of its delivery.
I refer the noble Lord to HMRC’s Improving the Operation of Pay As You Earn: Collecting Real Time Information, the summary of responses that was issued on 30 September. The ability for these systems to deliver that is crucial to the universal credit and in a number of places both employers and software providers have raised real concerns about the challenging timetable for introducing it. In particular, they say in paragraph 3.13 that:
“Of those respondents who expressed a view on the proposed timescale for the introduction of RTI, as set out in the consultation document, 75 per cent thought it unachievable. Views from those attending consultation meetings echoed this. The timetable for the introduction of universal credit means there is no flexibility in terms of the ultimate go-live date of RTI. HMRC’s priority is therefore to migrate the largest number of employments into RTI as quickly as possible—a necessity for the introduction of universal credit—whilst putting in place a migration approach which will protect the overall robustness of the system”.
We will come back to this issue with subsequent clauses in the Bill but at this juncture, at the start of our deliberations, we really ought to have an update on what is happening on deliverability in light of these particular comments and publications of HMRC.
I agree with the noble Lord, Lord Kirkwood, that this is not a perfect Bill. We will certainly have common cause with those who wish to press on some of the issues, not particularly around universal credit but some of the other issues around housing benefit and benefits caps generally, and under-occupation, which frankly I see as wicked in some respects. I hope that we can have common cause not only in having a rhetoric which we would support but actually translating that into voting to change this measure.
To conclude, I echo what the noble Lord said about thanking the Minister and the Bill team for being available on a very consistent basis so that we can actually get fully to grips with what is a very significant change to the system. I hope that in the next amendment we will open up this issue of what the universal credit should be for. Perhaps I should deal with my comments there rather than in response to this first group of amendments, but we also need to reflect on the process that everything is driven by work incentives and everybody who is on benefits lacks a motivation to work. I do not believe that to be true but I will seek to expand on that when we consider the next amendment. Having said that, if the thrust of the universal credit could be made to work and deal with the issues about which we have concerns, I think that would be a real gain for our country, but we are a long way from that and there are too many unanswered questions. I hope that during our deliberations we can get some further information on at least some of those very vital points.
Baroness Campbell of Surbiton
My Lords, I do not wish to comment on the overarching universal credit and associated issues, but I commend the noble Lord, Lord Kirkwood, on raising the issue of language. Language is absolutely essential not only to the dignity and self-worth of people who receive benefits, but also to what our message is to the world about those who survive because of the support they receive from what will be these welfare reforms. I remember writing about three years ago a very important article entitled Sticks and Stones, But Words are Hurting! It was about the issue of language as it pertains to disabled people. I remind noble Lords that disabled people have spent the last 25 years trying to get away from welfare and talk about rights. I would like us to think about this as we go forward.
I, too, will be raising the issue of language when we come to personal independence payments. Noble Lords will recall from the Second Reading debate that I have questioned the term, because it does not fit with what we perceive to be the original and, what we thought would be the enduring, intention of disability living allowance. So language is important and I thank the noble Lord, Lord Kirkwood, for raising the issue at this point. Welfare versus rights is something that we disabled people talk about all the time.
Baroness Hollis of Heigham
My Lords, like others, I thank the Minister and his Bill team for being so accessible and helpful; I genuinely congratulate them. When we can get the material in hardcover rather than on e-mail, I shall be even more enthusiastic and enduring in singing the Minister’s praises, which I am sure we all want to do.
I want to make two points, both of them triggered by the remarks of the noble Lord, Lord Kirkwood, and my noble friend Lord McKenzie, which I thought were spot on. First, the main thing is to talk about language. The noble Baroness, Lady Campbell, is exactly right. Until recently, when we introduced a Bill like this, it would not have been a welfare reform Bill; it would have been a social security Bill. The gap between social security and welfare is precisely the gap between entitlement and stigma. We forget, when using words like “welfare reform”, what is the structure of who pays and who gains in our welfare state. We all know that a very substantial part of “benefit expenditure” is actually a redistribution of resources through people’s lifetimes, particularly from the working years to retirement. Our pension work falls into that.
A second key group of redistribution is what we would call the category benefits. They go to children and to disabled people. There are more methods of redistribution than merely from rich to poor. Instead, they go from those without children to those with children; they go from those who are in good health to those in poor health. That is something that all civilised societies would sign up to. Only the third category of benefits, those which are means tested, reflect a straightforward redistribution from rich to poor. They have been allowed to dominate and cloud the language and to stereotype claimants in ways that portray them as dependent on handouts and the goodwill of others. We should return instead to the more appropriate, all-inclusive language of social security. Apart from the very lucky few, who are probably white millionaires, male and in very good health indeed, all the rest of us will need recourse to the welfare state, to the social security state. We should all hold that firmly in mind and refuse to engage, wherever it is spoken, in language that seeks to make distinctions between the deserving and the undeserving poor—or, as the Victorians would have said, God’s poor, poor devils and the devil’s poor.
The second point I want to make, which follows that, is the point made rightly by the noble Lord, Lord Kirkwood. I strongly support the principles and much of the structure of the Bill, although, like others, I have real concerns about what I regard as the pressure points. In dealing with the Bill, we must not only be concerned with the question of language, but we must encourage the Minister to respond to those adjustments we need to make, particularly where the language of the amendments run by the Minister, or his replies, may suggest what I call the econometric model of the Treasury, which is that people have to be pained or punished into work, because the only stimulus that they will respond to is an economic one.
What many of us said in our Second Reading speeches, and what I hope we will all remember, is that when we ask people to move from being on benefit to coming into work, whether they have a disability, whether they have been a lone parent, whether they have struggled for a long time with being chronically unemployed because of the demography and the economic structure of their region, the issue for them is not just about whether they are better off; it is primarily about risk. Unless people understand—and I fear that too often the Treasury does not—the issue of risk and the abatement of risk that needs to go on, we are not going to make a success of the Bill. I think that the Minister understands this perfectly well. I think and I hope that he will accept arguments and that where, in future amendments, we seek to abate risk as well as reward work, he will understand that this is in order to make a philosophy that so many of us sign up to to work today.
Lord Wigley
My Lords, I pick up that point, which is very relevant to the debates we will be having regarding the concept of risk. I suppose there is never a right time to introduce legislation such as this, and everybody agrees that legislation and changes are needed, but we are having this legislation at a time of considerable economic uncertainty. There is interplay of social security, as I still prefer to call it, with not just those who are out of work, people who are disabled and all the rest, but those who are in work and who have to face a question of risk if they are going to be mobile in terms of their labour contribution. My fear is that the uncertainty that comes along with the Bill—uncertainty to some extent is inevitable in the structure of a Bill where so much of the detail is to be provided by regulation at a later stage—will dampen down labour mobility at the very time when the economy wants to maximise labour mobility in order to get things moving.
A person who is in work who is uncertain as to his or her future and whether, if they move to another job, there is a safety net there, will not take the risk. They will batten down and stick with what they have. Therefore, in our discussion of this legislation it is immensely important that it becomes as transparent as is possible to people outside, within the restrictions of legislation that is so dependent on regulation, so that they understand that there is still a safety net there to provide security in some of the decisions that they have to take for themselves and on behalf of their families.
Lord Newton of Braintree
My Lords, since I appear to be one of a relatively small band of Conservatives in the Room, I think one of us ought to say something. I intend to do so briefly. I was grateful to my noble friend Lord Kirkwood for recognising that some of us might have been in Manchester. If anyone wants to know why I am not, I think I have been to 40 party conferences, and have done my time.
On the main points, I join in the thanks to the Minister and the Bill team who have been great. I support the approach of my noble friend to a debate that comes at the end of a recess, and his suggestion about how we should handle it, which seems to have been tacitly accepted. I endorse his point about the doubtfulness of trying to use withdrawal of social security benefits as a punishment for offences that have nothing to do with social security. I can see that if you have been in benefit fraud then withdrawal of benefit might be appropriate. If your kids do not go to school or even if they burn down warehouses, I am not sure that it is an appropriate punishment to withdraw benefit from the family.
I share the concerns about the language in various ways, both on the use of welfare rather than social security and on the universal credit terminology. We probably cannot do anything about the latter, but the fact is that tax credits in their terminology were always a bit of a con, in my humble opinion. This was reflected in the fact that, although they were classified as tax, it was agreed that appeals should continue to go to social security tribunals not to tax tribunals because the tax tribunals knew nothing about it. That really gave the game away. Whether or not we can change the language, the thought is an important one.
Concerning the remarks of the noble Lord, Lord McKenzie, I emphasise the importance of childcare costs in the whole debate about making it practical for families to work. I hope we shall hear something about that.
I share concerns, in light of some of the reports in the press, that if the IT does not work then to judge from our experience—for example, with the Child Support Agency—you have a potentially difficult situation on your hands. If there is not complete confidence that the IT systems necessary to make this system work will be delivered in time, then the Government should slow down until they are sure that the IT will work.
I have two more points, which will probably be a bit less welcome to my noble friend. I still want to know more about the interaction between the proposals in the Bill and the Legal Aid Bill, which we have yet to come to, and the Localism Bill, all of which have important ingredients, which impact on the same people. I am not clear that there has been joined-up government in considering the combined impact of these proposals.
Lastly—and here I get on very dangerous ground—there was a brief reference in the remarks of the noble Lord, Lord McKenzie, to child benefit. I have already indicated to the Minister in a less formal way that I would like to know how the child benefit changes are going to be dealt with, because I had thought they were going to be in this Bill, and they are not. As I understand it, although I am not sure about this, they are likely to be treated as being in a Finance Bill, which will, of course, severely restrict the ability of this House to say or do anything about them. If that is to be the case, I think we need to know fairly soon.
Equally, we need to recognise that the proposals on child benefit—which I notice the press has suggested that Ministers may be reconsidering, but that is no more than speculation—could be subject to change. I hope that they will be for reasons that I do not wish to go into and it would be wrong for me to develop at length. However, I should flag up that the child benefit proposals, in combination with everything else in the Bill, are one of the things that worry me about an overall policy which I otherwise strongly support.
The Earl of Listowel
My Lords, I would like to join my thanks to those made this afternoon, and to speak briefly about the importance of involving employers, about the governance of Jobcentre Plus, and briefly about housing.
I thank the Minister for the help of the civil servants. There were a number of very helpful briefing meetings which were most welcome, and I am sure this will continue.
The noble Lord, Lord Kirkwood, raised the issue of involving employers, and if I might I will give an example of how effective that can be in terms of reaching the most hard to reach people out there.
There is a programme, started by the National Grid utility about 10 years ago, led by their chairman, Sir John Parker, which employs young people from within the criminal justice system, and has reduced the reoffending rates among those young people from 70 per cent to below 7 per cent. National Grid has brought in a number of other partners, such as the engineering firm Skanska and another engineering firm Morrisons, and other businesses have been joining in such as software businesses. Because this has come from businesses they have been able to build trust among other employees, and while it would seem most unlikely that many of these companies would wish to employ people from the criminal justice system, in fact they found that because they have made the effort to recruit these young men—they have given them the training and the promise of employing them if they complete the training—those young men have become loyal employees, and have actually risen quickly up the managerial ladders of these companies. They are filling a gap, because these companies have an aging workforce and they need young people to enter their firms.
That is a very important point, and it brings me again to think about whether employers are firmly enough plugged in to the governance of Jobcentre Plus. I hope to table an amendment later in the Bill which will look at how one might perhaps involve more of the stakeholders in the running of Jobcentre Plus. I will not expand too much on this now, but if you look at the example of the Youth Justice Board, which has proved so successful since its introduction about 10 years ago you will see that, its chairman is a former chief executive of a local authority, so she can go to chief executives and directors of children’s services in local authorities and explain to them how important it is that they provide employment and find housing for young people who leave young offender institutions if they are not to reoffend, cost the taxpayer huge sums of money, and ruin their own lives. So I will bring that amendment later.
I am certainly very concerned about housing, but I am grateful for the signals from the Government, who listen very carefully to concerns, and I look forward to that debate. I will sit down at this point, but I am very grateful to the noble Lord, Lord Kirkwood, for allowing this opportunity for a broader debate at the beginning of the Bill.
Baroness Howe of Idlicote
My Lords, I shall comment briefly on a couple of the speeches that have been made. The way the noble Lord, Lord Kirkwood, introduced the whole of this absolutely explained my frustration and irritation at the short amount of time any of us have been given to do anything at all with this Bill. The noble Lord’s hard look at the use of language was very illustrative too, and that has of course been added to as far as things like social tax are concerned and other points that have already been made.
Above all, I hope that it will help us, because the atmosphere has not been particularly good regarding the whole of the way in which this has been arrived at between the usual channels. To have a little debate like this, setting the scene, will I hope influence how we all approach what we are going to be dealing with. I will leave it at that, but I have been very impressed, let me put it like that, particularly by what the noble Lord, Lord Kirkwood has said, and by the way he set the scene for the opening.
Baroness Campbell of Surbiton
I am sorry, my Lords, I wish to make an addition to my comments. In my eagerness to thank the noble Lord, Lord Kirkwood, I forgot two very important things. One was that I wanted to thank the Bill team and the noble Lord, Lord Freud, for all their help that they have given to me personally and to people who I have been working with in trying to get my head around this very complex Bill. I am sorry that I forgot my thank-yous.
The other is that the Committee will know that I was one of the people who complained bitterly about coming into this Room. I am afraid that I am not happy that we are here. Yes, I love this lovely desk and the fact that my PA is able to help me to drink, but three important things were forgotten. First, no one asked me what it was going to be like for me to participate in this Room. No one came to us, and that is the lack of consultation that we often complain about outside this building to local authorities. In the Disability Discrimination Act, the number one rule is that you must consult, but no one consulted me personally.
Secondly, it is a good job that I have an Olympian, the noble Baroness, Lady Grey-Thompson, next to me, because she can reach to push the button on this microphone. There is no way that I can do that. No one asked me, and I do not particularly like having to ask every time that a thought comes into my head and I wish to intervene.
Thirdly, the reason why I have that office on the Principal Floor, probably three minutes away from the Chamber, is that at any moment I may have to leave the Chamber and go to my room where I might be assisted to breathe properly. It is dangerous in this Room.
I wanted Members to think about that and remember that consulting the person who experiences impairment is the number one rule. I do not want to shame noble Lords, but I have to tell them this because it is important that we in this House remember equality for all. Sorry about that.
Lord McKenzie of Luton
I am very disturbed to hear what the noble Baroness, Lady Campbell, has just said about lack of consultation. In our dealings with the Whips Office we made it clear that what might be satisfactory to us would have to be also satisfactory to the noble Baroness and her colleagues. We made it clear that we could settle on an alternative room only if it had the noble Baroness’s agreement. If that has not happened, it is a real failing. Perhaps we cannot do anything about it now, but I ask the Minister to take that issue back, as we had assurances to the contrary.
Baroness Thomas of Winchester
My Lords, I would like to add a brief word. I hope that the Committee does not mind if I do not rise to my feet, as it would take rather a long time. I, too, am disturbed by what the noble Baroness, Lady Campbell, has said, but I think that the people who have done the work in this Room have done a terrific job and I commend them. They have worked extremely hard to make the Room as comfortable as they possibly could, and they have done a much better job than a lot of us thought they would be able to do. I am sorry that the noble Baroness, Lady Campbell, was not consulted but they have done a good job in making the Room comfortable.
Baroness Morgan of Drefelin
My Lords, it is important that we in this Room remember that we are being observed by the world outside. How we respond to the needs of disabled Members of our House reflects more widely the respect that we show to disabled people in our society. Getting this Committee right is important, not just for noble Lords who wish to participate but for building confidence among communities outside this House that they are being taken seriously and that their concerns have been raised and heard within this House too. I am sure that the Minister is well aware of that. I know that there have been concerns about the way that we are conducting this Committee, and we are doing that in public, rightly so.
The Earl of Listowel
I hope that the Committee will forgive me; I omitted to declare my interest when I spoke about the work of National Grid Transco. I have received hospitality from them on a number of occasions and I have declared that.
Baroness Grey-Thompson
I was asked yesterday morning to come into this room and check for accessibility. I came in at 2.15 pm to check that there was enough room and we are fortunate that a huge amount of work had gone on to make sure that there was enough space for wheelchair users who might come to speak or to deal with various colleagues’ needs. On the point about voting, my personal view is that it is incredibly important that if I take part in a vote, I actually walk, or push, through the Lobby. As much as being able to see my name in a list, it is important to me that Members of your Lordships’ House see which way I push. If there is a Division—I hope not today—I will be going to vote and that is something important that we should all have the opportunity to do.
I know that not all my fellow Peers feel as strongly about walking down one of the Lobbies as I do, but it is very important in terms of democracy.
Baroness O'Loan
I have a brief point in support of the noble Baroness, Lady Campbell. As we later consider the disability living allowance and the PIP which will replace it, we need to bear in mind that our understanding of the consequences of living with disability is limited. We demonstrate that by the way in which we conduct our business. People will judge the extent of our understanding in the discussion we have about social security arrangements for them. It is a hugely important issue.
Baroness Meacher
I support that strongly. If one of our Members is actually at risk, maybe the usual channels need to reconsider whether this Committee can be held in this Room. I do not believe that any work can be done by this House if a Member is at risk and feels that they may not be able to breathe. I urge the usual channels to revisit that issue.
Could I ask the Minister three quick questions. One is strongly in support of the point made by the noble Baroness, Lady Hollis, that risk is more important than the idea of getting an additional 24p in the pound—or whatever it is—for every pound one might earn in employment. I know the Minister is as conscious as I am about the special needs of people with mental health problems in relation to risk.
This is a group who may desperately want to work, but who are locked out of employment because of the understandable concerns of employers about taking them on. I know this is much in the Minister’s mind. Has a real assessment been made about the impact of this Bill, geared to economic incentives, on that large group of claimants, particularly on ESA, in terms of the risk that they face? I have been talking about this Bill to a lot of service users, patients, in east London and they all refer to being terrified. Understandably, this might not have been fully taken on board by the drafters of the Bill, the Bill team and all the other people involved. Is the Minister satisfied that the depth of that issue and its importance to a very large group, something like a third or more of claimants in the employment service, on ESA, has been taken on board? That is the first question.
The second one concerns the point raised by the noble Lord behind me about the IT system. We all know about the NHS IT system: it was all going to be wonderful and we were looking forward to it. It was about integrating databases, computers and suchlike. It failed and failed and failed and cost billions. Does the Minister have an estimate of the timeframe for the integration of the Inland Revenue and DWP computer systems? I think that that is the project: obviously he will correct me if I am wrong. Also, what confidence does he have in that estimated timeframe and what is the evidence for his confidence if he has it?
My third point concerns DWP staff training. Can the Minister, again at this early stage of the Bill, give some assurance to the Committee about the level of funding going into the training of DWP and other relevant staff to ensure that they can understand the complex issues around capacity to get into employment? I have mentioned this story before. In conversation with a Jobcentre Plus manager, I asked how they dealt with people with mental health problems. The answer was: “We don’t”. I asked what happened and the answer was: “They become homeless and go back into hospital”. As somebody responsible for a mental health trust, I would be interested to know whether the Minister is satisfied that in future DWP staff and others will be adequately trained. Our trust and others will not be able to finance large numbers of people coming into hospital who at the moment do not do so.
Baroness Campbell of Surbiton
I should like to intervene quickly to put noble Lords’ minds at rest. On a point of information, I am not putting myself at great risk, so noble Lords should feel quite relaxed. I promise that I will not ask them to perform CPR. I will just make the point that it is a risk I am happy to take, and my responsibility. I take it every time I attend a meeting that is quite far away from my room. My issue was that I was never asked personally: that is all. It is a simple point.
The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)
My Lords, before we continue, perhaps I may explain something to noble Lords that may help our sound broadcaster. The Room has been set up so that nobody needs to touch anything. Noble Lords do not have to switch anything on or off. The Room has been set up so that we can all speak without anybody having to touch anything. I offer that explanation to noble Lords.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, before I deal with the amendment, the stand part debate and the clause, I have to take on board what the noble Baroness, Lady Campbell, said, and her expression of concern. I do not have an answer for her now, but I will go back and get one and make sure that her concerns are addressed in the most thorough way possible. If things have not gone appropriately, I apologise unreservedly.
Before I turn to the amendment in the name of my noble friend Lord Kirkwood, let me talk a bit about the universal credit. Clause 1 establishes universal credit as a new benefit under the provisions of Part 1 of the Bill. This is a modern, simplified benefit, available both to people who are in work and those who are out of work, instead of claiming a number of benefits and tax credits from different sources, as happens currently.
As the Committee will know, the Government are determined to reform the welfare system to make it fairer and more affordable while addressing the problems of poverty and dependency on welfare. Universal credit is at the heart of this strategy. I welcome the support from the noble Lord, Lord McKenzie, for the principle of universal credit. While I am on that point, a number of noble Lords have thanked my Bill team for their accessibility and requested that that continue and I can again give an assurance that we will lean over backwards to continue that accessible approach. The reason is entirely one of self-interest, and when I say self-interest, I mean the interest of the governance of this country. It is vital that we have a proper debate on this very important Bill. A number of noble Lords have pointed out that this is a really important, transformative Bill and it is important that we address the issues properly and with full knowledge. That is why we have this very accessible approach.
We are currently updating the impact assessment—we have been working with a rather out-of-date one—and I am hopeful that we will be publishing that soon.
Baroness Hollis of Heigham
Could the noble Lord help us a little more? Some of us, in our amendments, are relying quite heavily on the impact assessment figures and we would not want to mislead the Committee by using figures that will be replaced quite quickly.
Lord Freud
Yes, I think that they will be replaced quite quickly. I cannot give the actual date or time now, but I think I am safe to say, “Soon”.
Lord Freud
We will get a code. But even the current impact assessment shows the transformative effect of universal credit when it is fully implemented. The combined impact of take-up and entitlements may lift hundreds of thousands of individuals out of poverty, including as many as 350,000 children. The vast majority of gains from universal credit will go straight to the poorest households.
I shall pick up the point made by the noble Lord, Lord Wigley, and the noble Baroness, Lady Meacher, on risk. By combining, effectively, out-of-work benefits and in-work tax credits, we effectively de-risk moving from one category to the other and that is a very powerful incentive for the poorest people to take a risk. One other aspect of it which I have been very conscious of as we develop the whole approach is that it is the best way of dealing with fluctuating conditions. You can move, take a risk and work for some months without being terrified that, if it does not work out, you have lost your benefit support structure, because you are just moving up and down the taper. So, from the aspect of risk, universal credit has huge advantages and it is one of the main drivers of our expectation to see many fewer workless households.
Baroness Meacher
I agree with the Minister that that is one of the great things about the universal credit—on the assumption, and this is the second point that I made, that the systems are properly integrated. As I understand it, this wonderful moving in and out of work, with your benefit going up and down as your earnings do the opposite, depends on the integration of those computer systems. My concern is that if the Bill goes through and the universal credit comes in but the IT systems are not ready, then I would have thought that the whole thing would be undermined. I would be interested to know the Minister’s response.
Lord Freud
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.
Lord McKenzie of Luton
On the impact of the taper rates, does the Minister agree that, if you have council tax benefit or its replacement outside the system, you simply cannot be sure what the effect of the withdrawal and taper rates will be? Can you include that benefit?
Baroness Hollis of Heigham
I reinforce my noble friend’s point. As every council tax taper will differ from district to district, and there are some 300 to 400 of them, it will be impossible for anyone to predict who gets what.
Lord Freud
We will have a debate on this matter rather soon, but maybe not today. The only way I can respond is to point out that, depending on how we adjust the system to have what is effectively a tax rebate system outside the universal credit, we could see different effects. Rather than prejudging this, I will reserve that information for another day. We will have plenty of time to deal with it.
I have been asked about IT by a number of noble Lords, including my noble friend Lord Newton, the noble Lord, Lord McKenzie, and the noble Baroness, Lady Meacher, among a few others who have some concerns. We have gone through a huge process of external assessment by the Major Projects Authority, which is a continuous process in stages. The most recent independent review stated a high level of confidence that the expert teams that we have assembled will see us deliver the programme. The review team said that we had made an impressively strong start.
The programme is on time and on budget. It is being developed in a radically new way to government programmes. The difference is that in a traditional government programme the whole system is built, trialled for a few months and then introduced. This system is being built in layers so that we can trial each layer as it develops and test it with customer insight. That process is happening. One of the things that we can do today is take some particular claimant types through the system. I am planning a demonstration for noble Lords later this month to take them through this process, because when they start to see the different elements coming together there will be a much better basis for understanding.
In my confidence, I can quote only these external sources; my own views are perhaps less relevant. The external sources are holding the programme up as an exemplar of how the Government should develop IT. We will be getting these external reviews regularly at each of the difference gateways, so it will be monitored externally very carefully. I have no knowledge of where this is on anyone’s risk register, so I cannot answer that particular question put by the noble Lord, Lord McKenzie. Obviously, though, any big programme is going to be looked at to ensure that it is being done to time and to budget. That is just governance.
I think there is a lot of confusion in the external world between what is an appropriate level of governance and external monitoring of an important, big programme, and the fact that there are always risks involved in developing it. I responded to the article in the Telegraph, saying that this was a programme on time and on budget. Basically, the article was misleading and I stand by that letter.
Baroness Meacher
I wanted to turn the question around another way. The Minister rightly says that there are always risks in these things. If, in fact, the IT system is not ready when the plan is for this Bill to be implemented, will the Minister give an assurance that there will then be a delay in the implementation of the Bill until the IT system is ready? If not, I go back to my other point about the risks, fears and so on. If there is a lot of change and reassessment, which we know are going on anyway, it would be helpful to have an assurance that, as he says, they would then have a system that would deal with a lot of the problems of the current system. It would be extremely helpful if the Minister could give us that assurance.
Lord Freud
I thank the noble Baroness, Lady Meacher, for that. I am at a slight loss at how to respond, in case it is an “Am I beating my wife?” question. I am getting some help from the Box. The universal credit will be built on a computer system, or rather a pair of medium-sized computer systems. We have a careful introduction process. One of the options we had, if I can explain it in layman’s terms, was that we could have picked everyone up electronically out of current systems, moved them over and dropped them into the universal credit, with effectively a Big Bang approach—go for it.
That would have been the conceptual framework in which the noble Baroness asked her question. We are not doing that. We are moving people into the system over an extended period. We will start with the flow in October 2013, and then as we get the system working we will have some managed migrations over a four-year period. It is not the Big Bang approach—where you wait for the thing to go, and then you throw everyone in—that one might envisage. It is a much more considered, steady, incremental approach. Indeed, we are developing the actual IT by using elements and units of what we have much more incrementally than it might seem from outside. That is one of the things that I will try to show noble Lords when we have the presentation; indeed, it will be a wider presentation for all parliamentarians. I see that a few in the Room may be very interested.
Baroness Howe of Idlicote
I am trying to visualise in my mind what you are doing with your groups. What worries me is the older group, who may not be quite as alert to the modern methods of IT and may find it not as easy to move around and get the right information via an IT system. It would be helpful if you could answer that point, or take it into account when setting up your demonstration.
Lord Freud
Yes. Picking up on that point from the noble Baroness, Lady Howe, one of the most complicated areas in practice is not the development of the IT system; it is the interface between the user and that system. We must develop, and are developing, a sophisticated set of gateways. There are a lot of issues to get right surrounding identity assurance, ease of use—which we are doing a lot of work on—and where you go to get access when you do not have broadband in your home or do not necessarily understand how to use programs. Getting that help right and balanced is something that we are spending a lot of time and energy on. I accept the noble Baroness’s point: that is one of the key issues to get right.
Lord McKenzie of Luton
The noble Lord is clearly impressively knowledgeable around all this. He said that the systems were being built in layers, and that he would be able to demonstrate to us that some of them are actually working now. Are they working on the basis of collecting real-time information for the individuals represented in those layers?
Lord Freud
No. I shall explain to the noble Lord, Lord McKenzie, exactly how this works. We are building a system so that certain types of people can apply and run their universal credit. That is not a small trial; that is the mainframe system equivalent. The first type is a simple claim; I think he is personified as “Tom”—I forget his surname. We have pulled in a lot of Toms and run a customer insight with them to run through how they would interrelate with the system. The next stage has been to work out how we have a joint claim. Yasmin and Liam are the two joint applicants. They are both committing as a joint claim because it is a household claim.
Noble Lords who are interested in this area—I suspect that quite a few are—will find this fascinating as we run through it. I am waving my hands to try to give the Committee an image, but I cannot do it. I much prefer to have a screen to run through things on.
I want to leave noble Lords with a reassurance that this is happening. The programme is going to time, and it is going to budget.
Lord Newton of Braintree
I wonder if I could intervene from a sedentary position. I think all that the noble Baroness, Lady Meacher, was seeking was a simple assurance: if at some stage it becomes clear that the next bit will not work, will Ministers change the timetable? That is not a “beating your wife” question. It is simple and straightforward.
Lord Freud
It is never that black and white. When you build a system in stages, the issue is how partial or complete the system is. There is a decision to be taken around the level of partiality. If there were to be a delay—and as I say, there is not—clearly, one would have to be realistic. If there were some other problem and it did not work at all, again one would have to be realistic.
Lord Freud
I am most grateful to my noble friend. I shall continue dealing with the questions. My noble friend Lord Kirkwood was interested in the interrelationship with the Social Security Advisory Committee, which, as he pointed out, has a statutory duty to examine all social security regulations. Any regulations for universal credit that rely on existing legislation—for example, those relating to claims, and awards and payments to joint claimants—will therefore be subject to full SSAC examination. I accept that there are large parts of the Bill that introduce new regulation-making powers. In these areas, the committee may not have its former role, but I assure noble Lords that we will continue to talk to the committee and use the arrangements currently in place allowing us to provide it with information on new powers and the regulations made, within six months of the commencement of those powers.
On the question raised by the noble Lord, Lord McKenzie, on how the system will cope with, for instance, a self-employed and an employed member of a household, any earnings received through the PAYE system will automatically be taken into account even though they may be from one or more PAYE sources. We will clearly need to take assessment of non-PAYE earnings through some other tool, and we are looking at developing a self-reporting tool to provide us with earnings information.
A number of noble Lords raised the issue of language, including my noble friends Lord Kirkwood and Lord Newton and the noble Baronesses, Lady Hollis and Lady Campbell. I have to agree that language is extremely important. There are quite a few issues around it; some involve European legislation on exportability, so sometimes there are some constrictions. I see universal credit as a support for those who need it, whether they are unemployed, disabled, a lone parent or working for a relatively low income. We want universal credit to support as many people into work as possible.
I will come to the language issue around the name “universal credit”. One of the things about the word “credit” is that it carries with it a sense of entitlement, and I know that a lot of noble Lords are concerned about that. There is some language around that, and that is why the term was chosen in the case of tax credits. There is a sense in which it is a credit; there is an entitlement there.
I was asked by the noble Baroness, Lady Meacher, about allowances for training of staff—clearly, one does not have a transformative project such as this without having properly trained staff. The total budget that has been set aside to fund the transition, including administration costs, is £2 billion. Training is a crucial element of that.
Amendment 1, raised by my noble friend Lord Kirkwood, would rename universal credit. His title, “working age entitlement”, is a straw man, as he said. It is fair to ask where “universal credit” comes from. It has its origins in the financial dynamics paper, although the noble Lord will know if he remembers that paper well that there were two different credits. In this case, they were boiled down into a single credit for all people on working-age, means-tested benefit. That is where its universality resides: it captures everyone in that category.
One of the attractions of having one word to capture all working-age benefits is that we have two systems today, an out-of-work benefit system and an in-work tax credit system, and the differentiation between them has made it harder to move from one to the other. That is where the discrimination and the differentiation are; that is where the apartheid—if one wants to use an ugly word—lies. That is the gap that we are trying to remove. There is not a real gap, as noble Lords have pointed out today, between those who are unfortunate enough to be out of work, or those who have a disability or fluctuating condition that means that they cannot reliably go into work, and those in work. There is no hard line between the two, nor do we want there to be. We want people to be able to flow across easily. It is because we have two different systems that we have made it so much harder. That is what we are doing with the universal credit, and that is what lies behind our reason for calling it that. As the noble Lord said, what’s in a name? It may seem rather a wide name—“universal”—but it reflects the fact that a whole range of needs will now be met through a single payment rather than by a piecemeal and confusing jumble of benefits and credits. I therefore urge the noble Lord to withdraw his amendment.
Baroness Hayter of Kentish Town
I have two questions arising from what the Minister has said. The first is on the current impact assessment—we look forward to the new one soon—of the number of children who will be helped. I think that the figure was 350,000. Was that figure reached before other changes to the benefits system were taken into account, given that the IFS has estimated that child poverty will rise in 2013? The second question, briefly, is on IT. I was involved with some of the IT systems for automatic enrolment with NEST. I should like the comfort of knowing that these two will also be well connected.
Lord Newton of Braintree
Before the Minister responds to that, may I chip in? The one thing that has not been touched on—I noticed that the noble Baroness, Lady Howe, was a bit agitated about this as well—is childcare costs. There was no comment on this.
Lord Freud
The noble Baroness, Lady Hayter, asked two questions. The child poverty impact that I cited from the impact assessment refers to the universal credit alone. It does not incorporate the other changes that there may be. On IT, we are working very hard to make these systems work together smoothly. The third issue, raised by my noble friend Lord Newton, was on childcare. I have had a supportive word from the Box, which I shall seize and use: I hope to be able to inform him and other noble Lords soon about our childcare arrangements.
Lord Freud
I think we have developed a code for “soon”, which I need not go on about again.
Lord Newton of Braintree
On this occasion I will accept not just realism but good will.
Lord Kirkwood of Kirkhope
I am grateful to all colleagues who have taken part in this debate. I hope it has fulfilled its purpose of scoping out exactly where the Committee is going. I understand that colleagues want to finish at 7.30 pm. I cannot but welcome my mentor, the noble Lord, Lord Newton, who was Secretary of State for Health and Social Security under Margaret Thatcher and succeeded in spite of all these things. It is a particular delight. I should like the Minister of State to pay particular attention to what the noble Lord says because he knows what he is talking about. I know this because I have followed his career for many years.
We obviously need a code for this. An Enigma machine might be purchased so that we can understand what “soon” really means, and issues of that kind. That will help the Committee. I certainly want to sign up for the demonstration of Yasmin and Liam when it comes. Apart from anything else, I have a drink riding on this. If this system works, I owe the Minister of State at least a double whisky or whatever his poison is. I want to be deeply involved in all these processes related to IT.
I have two other very quick points. It is true to say, and reassuring to hear, that SSAC has that role, and that the Minister clearly understands its importance in this process. He will know that it has never had the same formal process of review over tax credits that it had over the benefits system. We need to be careful about that. If the Government are not careful and start hiding behind that technicality, it may be more difficult for SSAC to look at the successor benefits to tax credits and working tax credit, which would be a shame. I would not mind some reassurance on that.
Just for amusement, I discovered that the word “regulations” appears 380 times in the Bill.
Lord Freud
My noble friend asked for some reassurance in the area of tax credits. Under the universal credit, it will effectively become part of the responsibility of the DWP and therefore become overviewable and reviewable by SSAC. Whereas I might have been a little coy in giving some other assurances today, I can be absolutely uncoy about this one.
Lord Kirkwood of Kirkhope
There is no need for code for “coy”. In the last minute available to me, the one thing I want to say is that if we are getting this level of co-operation from the Bill team, I am willing to do more work. We do not normally do it this way. With new, technical social security Bills, the default position is to table amendments to clarify and bring the thing into focus. Speaking for myself—I speak for nobody else—I am willing to do more of that work with the Bill team if they are available. As the noble Lord, Lord McKenzie, said, we often share rhetoric but we should, as a Committee, try to drill into the dozen issues that are the real hot spots. I think that is what the pressure groups are hoping for with this Bill. I am certainly up for that. That is a much better way to proceed than splattering amendments, as I did with Clause 1 and for which I apologise; I will not do that again. We will take the length of time that we need to take, but if we get the hot spots ironed out sensibly it will be to the benefit of not just the Committee but the whole House and the implementation of this policy, which it is so important that we get right.
Again, I am grateful to colleagues who have taken part and to the Minister for being so generous in responding. We are now a minute late. I now withdraw the amendment.
Lord De Mauley
My Lords, perhaps this might be an appropriate moment for the Committee to adjourn until 2 pm on Thursday.