Taxation: Families

Thursday 17th January 2013 Lords Chamber

Motion to Take Note

11:41

Moved by

[Baroness Hollis of Heigham]

That this House takes note of the impact on families of changes to tax and benefits.

[Baroness Hollis of Heigham]

My Lords, when in the 1830s the Tory, Lord Shaftesbury, sought to limit child labour, mill owners insisted it was essential to the economy. Shaftesbury said that he refused to accept that the prosperity of Britain must depend on the labour and pain of its poorest children. The last Government lifted more than 1 million children out of poverty. With these cuts, some 300,000 to 400,000 children by 2015, and up to 1 million children by 2020, will now slide back down the snake into absolute poverty. I refuse to accept—the whole House will refuse to accept—that poor children must be made poorer still, so that the rest of us can, in time, become more prosperous.

Individual cuts seem modest, until you add them up. Can the noble Lord, Lord Freud, tell us whether the Government have published a cumulative analysis of the cuts since 2010? In its absence, I have tried. I especially thank Sue Royston of Citizens Advice and Howard Reed of Landman Economics for working through the statistics and the weekends, although any errors are of course my own. Let us remind ourselves that the Government froze the value of tax credits and child benefit, changed the taper rate, reduced the childcare component and, for some 200,000 families, increased working tax credit hours, which may cost them £40 to £50 a week on top. Next came the benefit cap, which hit families, especially in London, although my city of Norwich has 100 families affected by it. Housing benefit was reduced from 50% to 30% of private sector rents, so many now face serious shortfalls in local housing allowance; as do those facing the bedroom tax on alleged underoccupancy. From April, perhaps a quarter to one-fifth of working-age tenants of the housing association that I chair face HB cuts of £12 to £15 a week, as they have nowhere else to go.

Also in April come the localised council tax benefit cuts. Families who had not expected to pay council tax now face a poll tax of £5 or more a week. Benefit rises are to be capped at 1%. The bottom one-third of households will lose almost £5 a week as well as £15 per week, effectively, by 2015. The change from DLA to PIP will probably remove the lower-rate care element, worth around £20 a week, as well as making changes to carers’ benefits—all this before the arrival of universal credit, which will cut disabled children’s benefit from £58 a week to £27 a week. I could go on.

What is the overall impact? In my city of Norwich, which has a population of 135,000, these cuts will take £35 million a year from our poorest citizens and out of our local economy. What is the impact on families? By 2015, the poorest one-fifth of our people will have lost up to £2,000 a year. The more vulnerable families—those with younger children, or three or more children, in poor health, in poor housing or with disabilities—will suffer even greater cuts, of £40 to £60 a week, alongside, of course, severe cuts in public services. Take a working husband—a security guard on minimum wage—his wife, two children of three and six, living in, and now defined as underoccupying, a three-bedroom, £100-a-week council house. Citizens Advice calculates that whether he is in full-time work with in-work benefits, or loses his job and is fully reliant on benefits, either way that family will, by 2015, be losing £30 to £35 a week, even taking into account the tax changes. If the younger child, say, is disabled, they will lose £40 a week by 2015. If, however, by 2015 that family is on universal credit, they will be losing £50 a week if in work, and nearer £65 a week—unbelievably—if he is unemployed.

Why are the Government doing this? The Tories think it necessary and perhaps desirable. The Liberal Democrats, I think, find it necessary but perhaps regrettable. Their argument goes—I will list it and try to address these points—first, the welfare cost is unsustainable; secondly, it is creating welfare dependency; thirdly, welfare has to be cut if we are to cut the deficit; fourthly, it is not right that pay be limited to 1% while benefits rise at CPI; and finally, in any case, the rise in tax allowances offsets all this.

A fair summary, I hope, of Government views. Every point is false; every one. First, the welfare bill is not unsustainable. According to the DWP’s former chief economist, benefits took 12.5% of GDP under John Major in 1994, with 8% going to working age households. As of January 2012, benefit spend fell to 10.5% of GDP with only 5% going to working-age people. The driver of benefit spend is simply more pensioners getting better pensions. I welcome that, but poor children should not be made poorer to pay for it.

Next, in the Telegraph a fortnight ago Mr Duncan Smith asserted that tax credits and benefits created welfare dependency, when he knows that they make it possible for families to live on the same wage as that paid to a single man. A single parent, a Telegraph reader from Amersham in Buckinghamshire, wrote back on 3 January that she had brought up 3 sons while working part-time. Two are now at university and she is about to go into full-time work. She concluded:

“I object to Iain Duncan Smith’s suggestion that tax credits have made people lazy dependants who rely on hand-outs ... the tax credit has been a life saver”.

His welfare dependency; her life saver. His smear; her experience. I know whom I believe.

Next, the Government tell us that we have to cut welfare to cut the deficit, otherwise, it will be nurses and teachers—the usual rhetorical flourish. It is a matter of policy choices. It always has been and always will be. I will offer mine, although they are not necessarily those of the Labour party. While private pensioners enjoy more than £30 billion a year of tax relief, two-thirds of which goes to the better-off, while we cap the upper earnings limit, which saves higher rate taxpayers £11 billion a year, while we refuse—as my noble friend Lord Campbell-Savours has reminded me—an ad hoc Lords committee, urged by my noble friend Lord Myners, on tax-avoiding personal service companies, and while millionaire earners see their tax rate fall to 45p at a cost of £3 billion, I think that there is money from those who can afford to pay.

Fourthly, we are told that as pay is limited to 1% so must benefits, which since 2007 are outpacing pay. Until 2007, earnings outpaced RPI benefits. Why else did pensioners demand that the state pension be linked to earnings not prices? Yes, since 2007, during the recession earnings have fallen behind inflation. Does that mean that we reduce benefits so that they do not keep pace with inflation either? In any case, it is a false contrast because many families with 1% pay increases also rely on tax credits, housing benefit or council tax benefit for a living income.

As the Child Poverty Action Group has said, this child is poor not because its mother is a lone parent but because she is a cleaner; this child is poor not because its father abuses drugs but because he is a security guard. Five million people are paid less than the living wage. Two-thirds of those benefits cited by Mr Duncan Smith go to households in work to ensure that work pays, as we all wish to see. However, to make the unemployed poorer, the Government will make all the working poor receiving benefit poorer as well. One despairs.

Finally, the Minister may say that raising the tax threshold significantly is the best way to support low-income working people—except that it really is not. Very many of the working poor are below the tax threshold, and others—the full-time cleaner or the security guard on the minimum wage—keep only 15% of that alleged gain because means-tested housing benefit and council tax benefit taper away 85% of the increase in tax allowance, and then the other cuts pile in.

Every justification used by the Government for these benefit cuts is untrue—every single one. If, in a final throw, the Government say that the public support them, that is because the Government, with the aid of some of the press—none of whom, I suspect, will experience these benefit cuts themselves—have peddled the view that the poor must become poorer to save the rest of us.

Do the Government know or care what damage they are doing as they finger the vulnerable, the fragile, the poor, the soon to be underemployed, the soon to be unemployed, the soon to be in severe debt, the soon to be evicted—and, yes, the soon to be hungry—and encourage those who are themselves just a rung or two up the ladder, also struggling, to blame not those above them, bankers and the like, but those below them for their struggle? That is ugly, cynical, and utterly indecent.

We must all refuse to use this language of welfare, with its dark shadows of handouts and dependency, stigma and scroungers, failure and fault. When we founded the NHS we also built social security—the roots of which go back to Lloyd George—the insurance of the social contract we make each with each other; a network of mutual social obligation. We pay in, and in need, we take out, as is our right.

It is social security. I calculate that two-thirds of our £205 billion social security spending is likely to come back to each of us in our own lifetime: when we have children, when we are sick and, above all, when we draw our state pension. It smoothes the volatility of our working lives, as it should.

Only a third of social security spending goes in means-tested benefits, perhaps to relieve other people’s hardship; two-thirds will come back to us, as payments on our insurance paid—exactly as you would hope and expect from a contributory social security system based on entitlement, alongside a decent safety net for those in hardship, which could so easily have been any of us in the past.

Let us reframe the debate: it should not be about welfare and dependency, strivers and shirkers—such morally ugly language. It is about social security, contribution and entitlement. When I look around my former council ward in Norwich I see children unable to go on school trips, mothers missing lunch to feed their children an evening meal, women pawning their engagement ring to pay for school shoes. I see a middle-aged couple who have not eaten for two days arriving at my local food bank. I see families fearful that as they cannot afford the rent of their council home from April they may become homeless—and the worst cuts are yet to arrive.

I ask this House today, how many of us here have suffered any cuts? As a comfortably-off pensioner I have not suffered a penny of cuts—and so I will not accept that it is right that poor children should be plunged deeper into poverty to spare all of us; that middle-aged couples should resort to food banks to spare us; that families unable to pay their rent because of underoccupancy should face eviction to spare us. We are not entitled to ask the poor and their children to carry these cuts for our benefit. It is profoundly wrong and I am ashamed.

11:55

[Baroness Jenkin of Kennington]

My Lords, rising to speak after the noble Baroness, Lady Hollis, who is so well known for her knowledge, expertise and experience in this area, I feel a bit like a young and very inexperienced First World War pilot up against the Red Baron, or perhaps the Red Baroness in this case. However, like other noble Lords, I am of course grateful to her for the opportunity to participate in this debate.

Let us take a moment to look at why the Government are having to take these steps. When the coalition came into office in 2010, the country’s tax and benefit system urgently needed reform precisely because it was failing families, especially families headed by couples, and let us remember that such families are still in the majority.

I will start by putting my remarks in context with that great reformer of the mid-20th century, the architect of the welfare state itself, William Beveridge. His blueprint for social reform anticipated the enormity of the post-war social challenges and showed a reforming Government how they could rise to them even in the hardest economic times—then, as now. It is worth remembering that his appeal to conservatives and other sceptics was to argue that welfare institutions would increase the competitiveness of British industry in the post-war period, not only by shifting labour costs like healthcare and pensions out of corporate ledgers and onto the public accounts, but also by producing healthier, wealthier and thus more motivated and productive workers who would also serve as a great source of demand for British goods.

Yet by the end of the first decade of the 21st century we had become a nation that was dependent on benefits to a degree that would have astonished and possibly horrified Beveridge, so concerned was he in his later life that the state might have replaced the welfare society where people anticipated, gave, and received mutual help. We had created a veritable tax credit culture that had been fostered by the party renowned for tax and spend. By 2011, nine out of 10 families were receiving some form of subsidy from government over and above child benefit. Families earning over £50,000 a year were able to apply for a top-up in the form of child tax credits, yet even the most numerate stock broker or accountant found themselves unable to work out exactly how they were calculated. For those families, that might have meant a degree of uncertainty about whether it was worth while for a second earner to pursue a part-time job which in turn might have meant the tax credits were all tapered away. But that is nothing in comparison to the abject fear in much lower-earning families that changes to earnings might lead to demands for massive repayments.

Our benefits system was at breaking point under the weight of the confusing complexity of 51 different benefits, withdrawn at different levels. At the end of many years of economic growth, prior to the recession, 5.4 million people were claiming out of work benefits. Many had done the sums and did not consider it worth their while to work as they would struggle to earn as much as they were entitled to on benefits. DWP figures from 2010 show that despite 2.4 million households receiving working tax credit, 35% of families stayed in poverty when a parent entered work.

A significant couple penalty was also a feature, making it much harder for single-earner couples, who might have several young children, to work their way above a somewhat arbitrary poverty line than a single parent. The level of fraud was such that lone-parent claimants exceeded actual numbers in the country by an estimated 200,000. Fathers facing a general slump in blue collar wages, a situation exacerbated by many employers understanding that the Government would top up the little they were willing to pay, often perceived that the mothers of their children would be better off living separately from them.

Researchers at the University of Essex found a spike in the divorce rate of a staggering 160% among families where working families tax credit made it distinctly financially advantageous for a woman to part company with a low-earning or non-earning husband. That is why universal credit has been designed to ensure that people will be better off in work, to make work pay, to simplify an eye-wateringly complex system and reward responsibility, with couples raising children together and sharing the daily load, fathers and mothers willing to work extra hours to improve their families’ lives, not expecting the taxpayer to do that for them. Let us face it, in most cases, they were and are the taxpayer.

Turning to the tax system, I strongly support my party’s pro-marriage credentials and the introduction of the transferable tax allowance for married couples. This would be a popular first step towards rebalancing our tax system so that it is fairer to single-earner families. The organisation Care found that the tax burden on one earner couples with two children is a staggering 42% higher than the OECD average. We are among a small minority of countries in Europe which do not recognise interdependence within families but instead tax on an individual basis.

The tax burden on couple families is why the respected Institute for Fiscal Studies found that increasing the personal tax allowance helps richer families most, where both parents are more likely to have jobs that enable them to take full advantage of tax-free earnings, while transferable tax particularly benefits families at the poorest 20% level. Enabling a low-earning or non-earning spouse to transfer some or all of their personal allowance to their other half sends the vital signal that this Government understand that it is not always desirous or in the best interests of families for both parents to be working. It is not only Conservatives who believe this. Towards the end of her time as Trade and Industry Secretary, Patricia Hewitt admitted in an interview to the Daily Telegraph that new Labour had done a disservice to families by assuming that having both parents in continuous work should be the goal. She said they had belatedly recognised that inadequate recognition had been given to what matters to people most—their families and relationships. She said:

“If I look back over the last six years I do think that we have given the impression that we think all mothers should be out to work, preferably full time as soon as their children are a few months old … We have got to move to a position where as a society and as a Government we recognise and we value the unpaid work that people do within their families. That’s mothers but also fathers and people looking after elderly relatives or people with disabilities”.

I do not suppose that my noble friend the Minister could have put it better himself.

In summing up, I must reiterate that while those who need it should of course continue to receive support, welfare reform is vital for this country so that we stay competitive and support and encourage people’s aspirations to work, setting the right example to their children by paying their own way and avoiding dependency. This Government have grasped the nettle, not despite economic hardship but because our financial circumstances highlighted how urgent was the need for reform.

Child benefit changes have not been carried out in a seamless and sensible way—there is no getting away from that charge—but again we have to face up to the realities. We are in an economic quagmire. Giving more than £1,000 to every family, however wealthy—and that is just for a first child—is unsupportable. However, it is also untenable that single-earner families on incomes a little over the threshold set by the Government quickly lose everything when they are already being hammered through the tax system.

If we really want to support families in need, we must prioritise the most vulnerable, particularly the disabled, as the Secretary of State and my noble friend the Minister have pledged to do. We should do absolutely everything possible to make work pay, recognising that, if wages are not rising, it cannot be right to keep pumping in government subsidy in a way that will let employers off the hook and make it even more difficult to imagine life without benefits.

12:04

[Lord German]

My Lords, I pay tribute to the noble Baroness, Lady Hollis, for securing this debate today. I do not think anyone in your Lordships’ House does not understand her dedication to these issues. Without wanting to trade figures with her—which is obviously a dangerous trade and I will not upset some of the interpretations she places on those figures—it is, of course, important that your Lordships hear the sort of scrutiny that she brings to these issues. The noble Baroness has secured a full debate on a very important matter for the House to consider.

I am pleased to have this debate, especially as it ranges over the benefits and tax systems together. They are inseparable in any discussion of welfare issues in our country. This Government’s actions in this area have been a mix of major policy changes—some on a very large scale—coupled with the need to reduce the budget. That is a difficult balancing act, but the Government have done well to shift the policy agenda at the same time as having to make sharp reductions in public expenditure. It is worth remembering that if you take the relevant tax and benefits expenditure together, the total welfare bill of this country represents nearly £1 in every £3 of public expenditure. That is more than the total expenditure on health, education and defence added together across the whole of our country. Therefore, it is impossible to escape the need for cost reduction in the welfare bill in our deficit-burdened country.

I wish there was greater political honesty around this matter. It was certainly not helpful when, a couple of weeks ago, the Labour Front Bench in the House of Commons outlined a new idea to divert funds from pension tax relief to a jobs guarantee. In an earlier announcement, Labour had already allocated that same money to reversing changes to tax credits. This does no credit to politicians in general or to debates on these issues. The fiscal burden is a reality that cannot be escaped.

Nevertheless, it is pleasing to note that in the Autumn Statement we were able to reduce the hit on the overall welfare bill. There was much talk of the need to make a reduction of £10 billion; indeed, it was frequently talked about in debates in your Lordships’ House. The eventual reduction figure announced was much less: £3.8 billion. Even so, it still requires tough and difficult decisions. Any reductions in the welfare bill have to be fair and proportionate. When money is tight, spreading the impact over a large number of people who lose a small amount of money is fairer than targeting specific groups for larger cuts. The average loss from the changes made in the Autumn Statement will be in the region of £3 a week.

I am pleased that the Government have reduced the hit on the bill and, in particular, avoided some of the more unpleasant proposals put forward in the lead-up to the Autumn Statement. Those aged under 25 will still be eligible for housing benefit, benefits will not be frozen and families will not have their child benefit capped if they have more than two children. It is also clear that the 1% cap is a temporary measure. However, the most beneficial change, which comes in from April this year, is the increase in the personal tax allowance. The amount earned before paying tax increases from £8,105 to £9,440. That is the largest real-terms increase in the personal allowance for 30 years. It will give the average worker an increase in their pay of nearly £600, and—of particular relevance to this debate—59% of the 2.2 million people taken out of tax altogether from April will be women. This is a much more effective and efficient way of putting money into people’s pockets than the hand-back system of tax credits.

The tax credits system is so complex that it led to more than £10 billion in fraud and error. From this April, the changes will benefit 23 million workers in our country but not the 1.8 million of our richest people who will pay more as a result of the changes. Someone working full-time on the minimum wage will see their income tax bill cut in half compared to what it was under the previous Government. It is getting fairer but I hope the Government’s ambition is that no one on the minimum wage should pay income tax at all. I very much hope that the Government will go further in this direction.

Our welfare system provides the safety net. Any decent society must do this but I believe that it should do more. It should help those people who are able to improve their lives and their life chances. Giving people a helping hand to do better is also a key role for a modern welfare system. That is why trapping people in a benefits culture is a bad idea. It offers no solutions and no way out for those who are able. The hand-back tax credit system has had the impact of increasing reliance on state support instead of providing an increase in personal confidence and self-reliance. Taking away tax first is the way that we should proceed, which is what this Government have been doing. People will not have to hand it back; they will see their money in their pocket.

The complex mix of benefits and tax credits created by the previous Government has meant that far too many people are not better off in work. Changing that aspiration and making sure that people are better off in work is the great hope that I am sure your Lordships’ House shares for universal credit. Working for just a few hours a week will mean that you are better off. I should be grateful if the Minister would give this House an update on progress towards implementation of universal credit so that we can see how all this will come into effect this year.

One of the tricky issues that universal credit brought forward was that of childcare under a universal credit system. Since universal credit will give an opportunity to bring more people into a system of balancing their tax and benefits together, it will obviously be received by more people. Spreading the same amount of money across more people could mean a reduction in the amount of childcare funding that would be provided. I was very pleased that the Government managed to find an extra £300 million in order to bridge some of that gap.

The difficulties that we face with funding mean that the levers within the future system should allow for more incentive to be provided within it. I know that the Minister shares the ambition that the taper rates should be such that people should be able to keep more in years to come. I hope that he might also comment on that when he responds to this debate.

I very much agree with the noble Baroness, Lady Hollis, about language. Care must be taken over the language that we use in all these issues. Stigmatising people by language and by the difference and distinction between those in work and those out of work does not aid encouragement and support for improvement in people’s quality of life. The fact is that the vast majority of people want to work and are working hard in order to do so. More than half the people who claim jobseeker’s allowance do so for six months or less. I am afraid that both sides of the political divide have been guilty of this sort of rhetoric. I hope today that your Lordships can agree that this distasteful practice must end.

In conclusion, I give two examples of how, if the universal credit system works as we all hope it will, it will lead to change for families in our country. A typical one-earner couple with two children who are renting will be £761 better off under universal credit if they come into the system this year. I wonder whether that is a sign that the change we bring will support families. A one-earner family with an income of £20,000 and two children will gain £223 from the personal allowance increase. They will obviously lose tax credits of £150 and child benefits of £39, but under universal credit they will still make a net gain of £34. When my noble friend sums up on the ambitions for universal credit, could he support these examples and show us that universal credit will make sure that work will always pay and families will always be better off?

12:15

[Baroness Pitkeathley]

My Lords, I feel privileged to speak in this debate introduced by my noble friend Lady Hollis, who, in a very fine speech, spoke with her customary forensic skill and passion. I am very glad to have the opportunity to focus on those families who have caring responsibilities. I believe that the cumulative impact of the changes to social security, taken together with the cuts in social care services, has not been adequately assessed.

Let us look, first, at the number of caring families. The census statistics published last week show that the number of carers has risen by 11% since the last census in 2001, bringing the total in England and Wales to 5.8 million—a rise of nearly 600,000 carers. That means that across the United Kingdom there are now an estimated 6.5 million carers, and the value of the carers’ support has been estimated by Carers UK as being £119 billion every year. I make no apology for quoting that statistic for the second time this week in this Chamber.

Carer’s allowance, the main carer’s benefit, is already the lowest of its kind. At £58.45 a week, it leaves many carers in financial hardship as a result of the reduced earning power and higher living costs associated with disability and ill-health. A survey of more than 4,000 carers in 2011 showed that 45% of carers are cutting back on essentials such as heating or food; four in 10 are in debt as a result of caring; and the stress of money worries and other stresses associated with caring mean that the health of one in two carers is severely affected. I quote one carer:

“We have suffered financial hardship so bad it is unreal. Before I became a carer I worked for many years. I believe that I paid all my dues. Today a carer is made to look like a scrounger. I feel every time you speak to one of the agencies that are supposed to help us and be understanding they somehow try to make you feel ashamed of yourself”.

According to new government impact assessments, while 510,000 people will receive a higher award following the introduction of the personal independence payment, by 2018 an estimated 607,000 fewer disabled people will be entitled to support. Given the link between carer’s allowance and DLA and the PIP, this risks a knock-on impact of 23,000 fewer carers being entitled to receive the carer’s allowance. DLA acts as a gateway to carer’s allowance but this will not be replicated in the PIP. The government impact assessment shows that by 2018 there will be a 10% reduction in the number of disabled people in the groups which act as a gateway to carer’s allowance.

The impact assessment in May 2012 said that the reforms would,

“not affect the overall size of the Carer’s Allowance population or the level of expenditure on the benefit”.

However, this appears to be inconsistent with such a substantial reduction—as I have quoted—in the number of disabled people in the carer’s allowance gateway groups concerned with the PIP and the DLA. A third of people entitled to carer’s allowance are entitled to the benefit because they care for someone on middle or higher-rate DLA.

Should the carer’s allowance caseload follow the pattern of reduction in PIP spending, we would perhaps expect to see a fall of 34,600 in the total caseload of those entitled to carer’s allowance and a fall of 23,800 in the number of those in receipt. It is very frustrating that the lack of a full impact assessment means that we cannot reconcile the apparent inconsistency between the projected fall in the DLA and PIP caseload and the suggestion by the Minister and others that the carer’s allowance will be unaffected. The latest impact assessment, I am sorry to say, simply states that the Government are,

“continuing to analyse the impact on certain passported benefits and schemes, including Carer’s Allowance”.

This is quite unacceptable given that implementation will be with us in April this year. Therefore, I must ask the Minister: when will the Government publish a full assessment of the impact on carers of the introduction of the PIP, including an assessment of the impact on the projected carer’s allowance claimant count compared with projections if DLA were to continue? This seems to be inconsistent with government policy on the benefit cap. The Government have said that the cap is intended to improve work incentives, yet carers in receipt of carer’s allowance are already caring for a minimum of 35 hours a week—many of them for 50 hours or more—so it would be impossible for many to juggle work with heavy caring responsibilities.

The benefit cap is also meant to promote behaviour change and discourage long-term benefit claims. However, in his response to an amendment at Report stage of the Bill in the Lords, the Minister said that,

“one thing we are not looking to encourage is a change in the carer's behaviour so that they stop caring. That is absolutely not where we want to go”.—[Official Report, 23/1/12; col. 892.]

I think that most of us would say amen to that.

The Secretary of State for Work and Pensions stated, when he introduced the Bill in the Commons, that the benefit cap was,

“a matter of fairness, so that those who are working hard and paying their taxes do not feel that someone else will benefit more by not playing a full part in society”.—[Official Report, Commons, 9/3/11; col. 922.]

I suggest that if this cap is designed to be fair to individuals who are working hard and playing a full part in society, it cannot be right that it applies to carers—the very epitome of the big society.

The cap is also designed to apply to workless households, a description which carers would find insulting, given the level of their workload, and inaccurate, given that carers in receipt of carer’s allowance are, as I have said, already providing a minimum of 35 hours’ care a week. Each one is saving the state an average of more than £18,000 a year with the unpaid care they provide for loved ones. Surely it is deeply unfair to apply the cap to carers, given their contribution to society. It seems to me that doing so sends out a very negative message about the value that the Government place on caring. Indeed, the cap may ultimately act to disincentivise those who willingly and lovingly take up caring for their families, and it may in the future lead to family finances collapsing and caring becoming financially untenable. It is a great pity that, in spite of the valiant efforts of many of my colleagues, the Government did not accept the amendments on this issue tabled on Report and at other stages of the Welfare Reform Bill.

I turn to the bedroom tax, which will also have a severe impact on certain groups of carers. They may be unable to cover the shortfall and be forced to move—for example, where one member of a couple has a disability and the couple cannot sleep in the same bedroom or where an extra room is needed for equipment. Families who have spent considerable amounts of their own money making suitable adaptations to their homes may also be forced to move. This would not only be distressing for families and disruptive to care arrangements but could risk a greater long-term cost as adaptations will then be needed in their new homes.

As regards changes to council tax benefit, carers will be affected differently depending on the scheme adopted by their local authority. I am happy to say that some councils are proposing to recognise carers as a vulnerable group but others are not. Carers may face substantial reductions in the support that is available to help meet council tax bills. This, again, is inconsistent with the aims of the policy to improve work incentives. The Government have made it clear that they do not wish to force carers to give up caring and return to work. I have already quoted the Minister on that. However, if carers are unable to increase their income through work, reductions in support with council tax bills will only put them under further financial pressure.

In summary, I very much fear that all the changes will seriously undermine carers’ ability to care for older and disabled loved ones and will push families to breaking point, with serious long-term consequences for family life, health and social care services and, indeed, for our wider society. That makes neither moral nor economic sense.

12:24

[The Lord Bishop of Exeter]

My Lords, I too thank the noble Baroness for securing this important debate. There is much I could say, but in the time available I shall look particularly at the experience of one-earner couple families in the context of recent child benefit changes and our tax system in general. Before doing so, I make two crucial points about one-earner families in general.

First, one-earner families are often families where a couple has made a deliberate decision to sacrifice having a second salary so that one parent can be at home for the children. The stay-at-home parent in such a family performs an important job, investing in their children’s development which can save the state significant amounts of money to the extent that it helps the children in question develop into adults who are more likely to fulfil their potential and make a net contribution to society. The social science evidence is very clear about beneficial child development outcomes by every benchmark. In the context of all the concerns about “Broken Britain”, this is an important consideration. Such families should be valued and supported rather than penalised.

Secondly, the DWP’s own figures show that most one-earner families have good reason for being one-earner couple families. Figures derived from the 2010-11 DWP family resource survey demonstrate that well over half—61%—of all one-earner couple families have either a child below five, someone who is disabled or someone with caring responsibilities. So the majority of one-earner families are one-earners out of necessity rather than by choice. This is extremely important because, as we have already heard, there are those who give the clear impression that one-earner families should not be helped because all stay-at-home parents should get paid employment. This is a deeply misguided view that has no regard for the constraints that one-earner families operate in, the sacrifices they make and their significant contribution to the national well-being.

I now turn to the recent child benefit changes that took effect last week. While no one wants to pay tax, we accept that it is necessary for the common good. For any tax to be sustainable, it is vital that it is fair and is seen to be fair. However, that is not the effect of the higher-income child benefit charge. Under the charge, a one-earner couple begins to lose its child benefit at £50,000 and loses it completely at £60,000, while the two-earner family next door has the potential to earn up to £100,000, so long as neither income rises above £50,000, and keeps all its child benefit up to nearly £120,000, so long as neither income reaches £60,000, before losing it completely. This is not a small unfairness. It is very significant.

On 6 January the Prime Minister argued on the “Andrew Marr Show” that the higher-income child benefit charge was fair because it is right to ask the top 15% of the country to make a greater contribution during difficult financial times. That would be entirely defensible if the higher income child benefit charge really were to have this impact but it does not. The social policy charity CARE has released figures that help to put the problem in focus. A one-earner couple with four children on £50,000 is already in the least well-off half of the population, with a higher net income than only 45% of the population. The removal of child benefit will push it even further down the income distribution. A one-earner couple with three children on £60,000 and in receipt of child benefit is just in the seventh decile, but will drop well into the sixth decile if child benefit is removed. Meanwhile, a two-earner couple with two children on the same wage will be well up in the eighth decile and keep its child benefit. Thus, not only will the higher income child benefit charge impact one-earner families in the lower half of the income distribution, two-earner families right towards the top of the income distribution—in the eighth decile—will keep their child benefit. If this is fair, it is a very odd definition of fairness.

The unfortunate impact of the higher income child benefit charge must also be seen in the context of an appreciation that even before the charge took effect our tax system already gave one-earner couples a very rough ride and continues to do so. As the noble Baroness, Lady Jenkin, has pointed out, the latest available OECD figures demonstrate that the tax burden on one-earner married couples on an average wage in the UK and with two children is 42% greater than the OECD average. In this context the higher income child benefit charge is particularly unfortunate. Once again, CARE has released figures that illustrate the problem. At the moment one-earner couples already pay far more tax than two-earner couples with the same income, largely because they access only one tax allowance rather than two. A one-earner couple with two children with an income of £60,000 pays income tax of £13,950. A comparable two-earner couple, each earning £30,000, pays £8,768. After the HICBC is added, the one-earner couple’s tax bill rises to £15,667. This is £6,899 more than that of the two-earner couple. Put another way, a one-earner family with two children and on an income of £60,000 already pays 60% more tax than a comparable two-earner couple, each earning £30,000. With the introduction of the HICBC, the one-earner couple will pay 80% more tax. The charge will increase the one-earner two-child family’s annual tax bill by £1,717. Over the lifetime of the children, if child benefit is claimed for each child up to the age of 18, this represents a £30,000 increase in the family’s tax bills.

There is an extraordinary irony in all this. Prior to the general election, the then Leader of the Opposition talked at great length about his commitment to helping one-earner married couples by giving them a transferable allowance. This commitment was a key part of the “Broken Britain” narrative that made it into the coalition agreement, and yet, to date, the only thing the Government have done is actually to make life much harder for one-earner couples. Some might say, “Well perhaps there has been no action because there is no money”. But that does not make sense because the Government have found literally billions of pounds to fund a huge increase in the personal allowance that the Institute for Fiscal Studies has demonstrated disproportionately benefits those in the top half of the income distribution. The transferable allowance is far more progressive as it has been shown disproportionately to benefit those in the bottom half of the income distribution.

Of course, to the extent that the introduction of transferable allowance was made as a commitment to recognise marriage, albeit only in a one-earner context, the Government’s failure to act has been rendered even more perplexing by the fact that this marriage commitment in the Prime Minister’s manifesto has received no attention, while proposals to redefine marriage that were not in any party’s manifesto are proceeding with undue haste.

I recognise that the Government’s transferable allowance commitment still stands. Given, however, that the coalition agreement pertains only to the period 2010-15, time is running out. Transferable allowances can be introduced only through Budget resolutions and it is widely appreciated that the next Budget, on 20 March, just over two months away, is the last opportunity that the Government will have to introduce a transferable allowance and have any chance of it becoming operational before the next election. I firmly hope that the Chancellor will listen and make this a priority on 20 March. I also hope that he will reflect on reforming the higher income child benefit charge so that it does indeed target only families in the top 15% of the country and that it does not discriminate against one-earner families. As I said earlier, let us not forget that most one-earner families do not have the option of becoming two-earner families, and that they make an incredibly important contribution to our national wellbeing and should not be penalised for doing so.

On 11 February 2009, Philip Hammond, the then shadow Chief Secretary to the Treasury, spoke to the Daily Express about,

“the continuing bias in the tax system against two parent families where only one adult works. No other European country penalises families in this way. If we want to end child poverty we must end this discrimination”.

12:34

[Lord Bates]

My Lords, it is a privilege to speak in this debate and I congratulate the noble Baroness, Lady Hollis, on securing it. She has an acknowledged expertise and a well deserved reputation in this area. One of the things that has been most healthy about the political debate over the past 10 years is that sometimes the debate on this whole area of welfare reform had been taking place on the left of British politics. However, the work of my right honourable friend Iain Duncan Smith, Philippa Stroud and my noble friend Lord Freud, has started a debate about a compassionate view of how welfare reform could be undertaken on the right and centre-right of British politics. That informed level of debate is overwhelmingly healthy as we wrestle with these important issues.

My first point is that the 1% benefit increase limit is the result of a desperately difficult choice that the Government have had to make in light of the macroeconomic circumstances in which we find ourselves. Had we inherited the type of economic legacy that a Government coming into office in, say, 1997, would have had, there would be absolutely no question about having this debate or being forced into a position of having to consider the types of situations that I have absolutely no doubt will bring hardship to many of the most vulnerable and poorest people in our society. Nor do I deny the veracity of the statement made by my right honourable friend the Secretary of State for Work and Pensions in the foreword to his, State of the Nation Report: Worklessness and Welfare Dependency in the UK. He said:

“Addressing poverty and inequality in Britain is at the heart of our agenda for government. It is unacceptable that, in one of the wealthiest nations in the world, millions of adults and children are living in poverty. Whole communities are existing at the margins of society, trapped in dependency and unable to progress. In these areas, aspiration and social mobility disappear, leaving disadvantaged children to become disadvantaged adults”.

That was a clear and true statement of where this Government are going. It is evidenced by one or two things.

Mention has been made by my noble friend Lord German of the macroeconomic situation. That is what is driving this review and rethinking. It is not possible for the Opposition to say with credibility that this measure is absolutely wrong when we know that welfare accounts for roughly £1 in every £3, or a third, of revenue raised. They claim that they have a credible plan for reducing borrowing and yet cannot say what they would do to reduce that level of borrowing. The noble Baroness, Lady Sherlock, is chipping in. I greatly respect her and I welcome her to her position on the Front Bench. I hope that when she responds she can give us an insight as to where in the Opposition’s view the fair way would be to apply savings to the welfare budget. We would all be interested to hear that. The veracity of the argument presented would be much stronger if those points were put forward.

It was with a great sense of irony that the current work and pensions spokesman in the other place, Liam Byrne, famously left a note on his desk in 2010, saying, “Sorry, I am afraid to say that there is nothing left”. That may well be the case. If you have nothing left, you have to make very tough choices about where savings have to be made.

There is another view that I want to challenge and that is that somehow these changes are being made in a capricious and arbitrary rather than considered way. There is no room in a society in what is one of the wealthiest nations on earth for there ever to be that type of charge levelled against a civilised government; it does not stack up. The reason is that pensions are exempt from these changes. Those pensions will be increased in line with inflation, taking the single person’s state pension to about £110 per week, which is up from about £97. We inherited that. That was a clear statement of intent. Mention has been made of carers and the importance of people who look after children, or elderly relatives. The announcement last week that there is going to be a reduction of a flat-rate state pension, at about £144 per week, is tremendously good news for those people. It is based on the principle that if people can work, they should work. In the past it has not always been the case, but it is a clear-cut choice.

A charity that I work with in the north-east of England deals with young, hard-to-reach, unemployed people. People make a calculation about benefit entitlement and whether employment will pay. Benefits may be well meant but on the matter of the cap on benefits, coming in at about £26,000 for a couple, that would require them to have an income in the region of £45,000 to be able to exist without those benefits. If that does not create dependency, I do not know what does. To say to somebody with no qualifications whatever that they ought to be able to seek a job at the level of deputy head teacher is clearly nonsense.

We must be careful about how we go about this and in saying that we do not want to create dependency. We must always make sure that work pays. That is where universal credit comes in. That says that no matter what the salary of the job that you are taking is, with a straight-line taper of 65p in the pound, you will always be better off when you work. That is a basic principle and seems to me to be good. Work is the best route out of poverty. What is most difficult in the charity is for people to get their first employment on their CV. Once they have a job they can more easily find another one and progress out of poverty. Education is a key to that and that is why education reforms are key to our drive to reduce to child poverty. These general steps can be widely welcomed.

There is room for further work to be done. This is an ongoing debate. We understand the difficult choices that have to be made, the challenges in the market and the importance of raising tax thresholds. That is another important element in making work attractive, particularly at the lowest levels—not so that people stay there but that they progress from there. Page 13, table 2A of a helpful briefing for this debate from the Institute of Fiscal Studies and provided by the Library looks at average earnings growth. Reference has been made to the historic figures, so I will not repeat them. The institute forecasts that average earnings will increase by 2% in 2012, by 3.1% in 2013, by 4.3% in 2014 and by 4.5% in 2015. That tells us that you need to make every possible effort to ensure that people get into work in order to benefit from those increases.

I leave two final thoughts for my noble friend to ponder. First, I endorse what my noble friend Lady Jenkin and the right reverend Prelate have said about recognising the importance of marriage in the tax system through a system of transferable allowances. Secondly, I remember having debates about the minimum wage. I argued vigorously that it would never work. I was absolutely wrong. The minimum wage does work. It is a very important safeguard in our society that people have a basic wage. The fact that we accept the Low Pay Commission’s increase of 1.8% is also right. When winding up, would my noble friend consider the argument that in reducing welfare dependency we need to move progressively from a minimum wage towards a living wage?

12:45

[Baroness Donaghy]

My Lords, I thank my noble friend Lady Hollis for introducing this debate and for her leadership. She keeps us all on our toes. Equally, I would like to say how pleased I am that the noble Lord, Lord Freud, is still in his place. It is nice to know that there is somebody there who understands what we are talking about, even if we do not always agree with what he says. I want to deal with the self-employed and the impact on them of draft Universal Credit Regulations 57 to 59 and 62 to 64.

Many self-employed people will not become IT moguls, business entrepreneurs or worldwide rock stars. Many are self-employed because they cannot find secure employment. They are often self-employed on building sites, because the choice is either that or no job at all. They are “white van man”. They are those who, 50 years ago, would have worked in large factories, utilities or local authorities, doing manual or craft jobs. Often, they have been failed by our education system; they are important. Many such people prefer to be independent and would never assume that they would have to turn to the state for help. It is against their natural inclinations. However, sometimes they need assistance, particularly if they have a family to support in hard times. They should be able to expect a state system that responds to their needs. I am grateful to the Low Incomes Tax Reform Group for its briefing on this subject. There have been some improvements to the rules for the deduction of expenses but the most serious objections that were raised last summer remain.

The monthly assessment requirement will mean that small businesses will draw up accounts not once but 12 times a year. The absence of any carry-forward rule will result in genuine trading losses going unrecognised. In addition, the minimum income floor does not allow enough time for a business to grow and develop. It gives no help when a business is experiencing a temporary dip in profits. It also prevents pension contributions and legitimate business expenses being fully recognised.

Under generally accepted accounting principles, a true and far statement of how a business is doing involves accounting for business receipts and expenditure over the period to which they relate. If a business buys stock for resale, it will account for the purchase price over the period in which the stock is expected to be sold. A tax bill, referable to a tax year, may be paid in two instalments but accounted for over the whole year. An insurance premium, paid in one instalment, will be spread over the period of the insurance cover, which is usually a year. Investment in essential equipment will be written down over the equipment’s expected life. If there is a deficit in one accounting period, it can be set against surpluses in other periods which give a true and fair picture of the state of the business.

This method of accounting is also followed for working tax credit, enabling claimants to draw up one set of accounts that keeps administration costs down and matches the support given by the welfare system to the actual state of the business. The universal credit regulations depart completely from these generally accepted principles. Under Regulations 57 to 59, businesses will account to the DWP month by month on the basis of amounts received in the month, minus business expenditure paid out in the month. If that produces a loss for the month, it may be not be carried forward to subsequent months. It is simply disregarded.

If it produces a result lower than the minimum income floor, or MIF, Regulation 62 will substitute a minimum income floor equal in most cases to the national minimum wage for a 35-hour working week, less a deemed amount of tax and national insurance on that level of earnings. It is almost as though someone has drafted these regulations with no experience of the fluctuations of running a business.

Although I was not self-employed myself, I ran a student union for 16 years with a turnover of about £750,000 a year. You learnt that, to get a true picture of March and April, it was better to take the figures together because Easter came at different times each year. You learnt that because of a large booking in July, you made more profit than during the rest of the year. The following month, because it was the only chance for major refurbishment projects and major expenditure, the figures would look pretty dreadful, but I still collected my salary. Unlike a person running their own business under these regulations, it did not have any consequences.

The real objections to this method of accounting are that one month is an artificially short period over which to draw up a set of accounts, and that cash-in, cash-out does not present a true and fair view as it does not relate receipts and expenses to the period over which they accrue. The failure to recognise losses further distorts the economic picture, and imposing a minimum income floor does not allow for events beyond the claimant’s control.

This particularly applies to farmers. It does not take account of the ups and downs in a normal trading cycle that are part and parcel of any self-employed business. Legitimate business expenditure is doubly limited by the denial of any carry-forward relief and by substituting the minimum income floor for the net profit figure for any month in which the net profit figure is lower.

The accounting method imposed by the regulations presents a wholly distorted picture of how the business is doing and ignores the economic reality. The minimum income floor will apply to most businesses after a start-up period of 12 months. Originally, each claimant was to be allowed one start-up period in their lifetime. Since the consultation in the summer, that has been relaxed in that a start-up period may be permitted once in every five years to accommodate a claimant who did not succeed in their first attempt at running their own business but wants to try again. This is a small improvement and should be acknowledged.

After the start-up period, the minimum income floor will apply to every claimant who is “gainfully self-employed” unless they are subject to no work-related requirements, a work-focused interview requirement or a work preparation requirement. A claimant is gainfully self-employed if the business is their main employment and is,

“organised, developed, regular and carried on in expectation of profit”.

If the claimant is not gainfully self-employed, they are not subject to the minimum income floor. Instead, they will face work-search or other requirements imposed by jobcentre staff and sanctions for non-compliance.

One change since the summer is that in calculating the minimum income floor there will be deducted,

“an amount that the Secretary of State considers appropriate to take account of any income tax or national insurance contributions for which the person would be liable in respect of the assessment period if they had earned income of that amount”.

Whether this change is good news or not will depend on what amount the Secretary of State considers appropriate for the purpose. There is a risk that the Secretary of State will assume that a self-employed person pays the same amount of tax and national insurance, over the same period, as an employed person.

In reality, the self-employed pay tax and national insurance in two instalments, in January and July, based on their earnings in the previous period. If the Secretary of State considers it appropriate to take account of the tax and national insurance actually paid by the self-employed claimant, at the time they pay it, that will give at least some measure of relief when the business needs it. Otherwise, the self-employed claimant would be earning less than an employed claimant, yet receive less by way of universal credit because of the distorting effect of the minimum income floor.

On pensions, the self-employed are responsible for their own pension provision, but they will receive no recognition for it under the minimum income floor. They will be at a disadvantage over the employed claimant, whose pension contributions will be relieved in full as and when they are paid.

I raised the issue in November 2011 about what happens when a business suffers a downturn or undergoes a period of economic difficulty. I think I used the example of a farmer who was affected by foot and mouth disease in neighbouring stock and was working twice as hard but could not move his stock for sale. I hoped that the minimum income floor could be suspended during periods when the business suffered in such a way. Assurances were given in the debate that these were,

“issues that we are looking at very closely”.—[Official Report, 1/11/11; col. GC 453.]

However, no such provision has been made by the regulations. There is no recognition in the regulations that a business may experience low or no profits.

The absence of any facility for carrying forward a loss made in one month to subsequent months remains a fundamental flaw in the design of universal credit for the self-employed. In discussion, the Government have appeared to see the need for this facility but have not made any changes because the IT system has not been designed to allow carry-forward.

The burdens that the proposed regulations impose on the smallest businesses and the disregard for the most basic principles of accountancy will seriously hamper claimants who wish to enter work via the self-employed route. In many cases, they would find themselves better off on benefits than in work, which is plainly contrary to the Government’s intention.

There are 4.5 million self-employed people in this country, any of whom may at some point need to claim universal credit due to the risk and uncertainties inherent in running one’s own business. Self-employment is a viable route out of welfare and into work. I hope that the Government will reconsider the regulations and create a system that is as responsive to the self-employed as it is to the employed and unemployed.

12:56

[Lord Greaves]

My Lords, I feel out of place on this speakers list. I looked at it and thought that almost everyone on it apart from me is an expert and they will be bandying figures and statistics around that will send my brain numb by the time I stand up to speak. That is true: they have sent my brain numb. The debate is full of experts, not least the noble Baroness, Lady Hollis, who introduced the debate, and my noble friend Lord German. I have to say that I thought the noble Baroness was kinder to the Government than I would have been had I been making her speech.

I congratulate my noble friend Lord German on introducing a number of things into his speech that would not have been there if it had not been for the presence of the Liberal Democrats in the Government. If things are bad, they are nothing like as bad as they would have been had we just had the Conservatives.

The reason why I thought that I should take part comes from my work as a local councillor, where I represent one of the poorest areas in east Lancashire. Last week, I was watching the television at home. The BBC in the north-west was doing a week-long series on food banks in the region. I thought, “Has it really come to this?”. This country is something like the sixth richest in the world. It is richer than it has ever been apart from a slight sag in the past five years—it really is slight in historical terms. Has it really come to food banks now being part of the mainstream culture of this country? I find it extraordinary.

I had made a list in preparation of all the problems that we are experiencing at the moment, but the noble Baroness, Lady Hollis, dealt with them all in far more detail and far more expertly, so I will not read them out. But I have one or two points to make. The changes can all be individually justified, particularly against the need that the Government see to cut spending, but put together the position is horrific for many people. When that is combined with benefits in kind provided by local services through local authorities and other bodies, it is made even worse.

I think that it was the noble Baroness who said that if you cut people’s benefits, there are serious effects on local economies. The fact is that benefits, as a side-effect, are an efficient way in which the Government can put money into the economy. Most of the money that people get in benefits is spent. As that money is spent, it has a direct positive impact on local economies. On the one hand we have the Government, with Mary Portas and all the rest of them, saying “Town centres are in trouble—let’s have initiatives to help them”. On the other hand, they are taking money away from the very people—certainly in small and medium-sized towns—who use the town centres most, because many of them do not have their own transport to go to the out-of-town or edge-of-town supermarkets and so on. The poorest people spend their money and so, simply from an economic point of view, it is a good idea to give more money to them.

I concur with everything that has been said about some of the quite appalling attacks on poor people that have been made, such as the comparison between strivers and skivers, which the noble Baroness, Lady Hollis, called ugly, cynical and indecent. I congratulate her on finding words for that which are appropriate to use in the House of Lords. I tried to think of words but thought that I had better not mention them, because any that I would use would be out of order.

I recommend to anybody who thinks that the answer is that people who do not have jobs should just get them that they go down to their local Jobcentre Plus, have a look at what jobs are on offer and how many of them there are. They will very quickly come to the view that that is not the immediate answer.

It is fairly clear that somewhere between 10% and 20% of the poorest people in this country are quite deliberately being made poorer by the policies of this Government. If they are not in work, their benefits are being cut; if they are in work, they are too poor to benefit from the cuts in income tax, because they do not pay it, and their benefits are also being cut.

I rely a lot on the work of Professor Danny Dorling, an incredibly energetic geographer who seems to produce a book every three weeks. He is not one of those typical geographers who simply stroll around the countryside looking at the scenery. It is fairly clear, from work that he and others have done, that the levels of economic inequality in this country declined year on year from some time shortly after the end of the Great War into the late 1970s—inequality being the spread between the richest groups of people and the poorest groups. In the 1980s it got worse; it got steadily worse during the years of Conservative government from 1979 to 1997 and it continued to get worse, year on year, through the Labour years until 2010. That is clearly still happening, partly because people at the top are getting much richer, but also because people at the bottom have not been keeping up with everybody else and are now quite clearly falling behind. We are told that the answer lies in social mobility, which I am in favour of. However, you can have social mobility in a more equal society and economy and in a less equal economy. On its own it does not alter the basic facts.

As a Liberal, I go back to William Beveridge and try to put things in the context of what he said back in the 1940s. As we all know, he put forward his five giant evils: want, disease, squalor, ignorance and idleness from lack of work, which perhaps we would now call worklessness. His remedies are interesting to read today. Everybody now says that what they want to do—wherever they stand on this argument—is based on what Beveridge thought.

Beveridge proposed that people in work pay a standard weekly payment into the social insurance fund and suggested unemployment payments for people for as long as they have not got a job. He also proposed benefits for pensioners, maternity grants, widows’ pensions, pensions for people injured at work, and so on. What was crucial was his proposal of what he called child allowances, which became family allowances and which have now mutated into child benefit. They were at a very much higher level than child benefit has now become. As part and parcel of that, he advocated the creation of a National Health Service, so that when you were poorly you got treated for free at the point of need.

The crucial part of all Beveridge’s proposals was that payments in all these cases should be at a standard, flat rate, depending on contributions, with no means tests, which he was opposed to. So many of the problems that we now have in what people call the welfare benefit system—the tax allowances and all the rest—have come about because people have tried to be too clever by means-testing this, that and the other, with all the unfortunate side-effects that means tests have. The cleverer people get, the more they try to finesse the system; the more detail they put into it, the more problems they create.

I will give two examples. Instead of subsidising property, which is what used to happen until about 20 or 30 years ago, we now have the mantra that in the area of housing the people in the houses should be subsidised. The effect of this is the present crazy housing benefit system, which takes up so much of the welfare benefit budget and yet is no more than old-fashioned out-relief for landlords. We also have the working tax credit, which is no more than a subsidy to employers who pay low wages. This is the fact of the matter and the situation that we have got into. I do not know how we will get out of it. I am quite sure, however, that we will not get out of it by making the poorest 10% or 20% of people in this country even poorer today.

13:07

[Baroness Massey of Darwen]

My Lords, I thank my noble friend Lady Hollis for securing this important and stimulating debate and for introducing it with her usual immense knowledge and commitment.

I should like to focus today on the impact of changes to tax and benefits on children. As my noble friend said in her opening remarks, government policy is likely to be detrimental to children. It is obvious to say that children are our future, but if we neglect children we will surely be burdened later with possible criminality, drug-taking, other risks and social unrest. All that is important, quite apart from the vital humane impetus to protect children and advance their well-being and educational opportunities, particularly children who are vulnerable or deprived.

I declare an interest as chair of the All-Party Parliamentary Group for Children. This year we are conducting an inquiry into what opportunities there are for children to achieve their potential and into how children see their needs. We listened to a number of children, and it is striking how so many of them place a huge emphasis on the importance of parents and families in their lives, including those children who have challenging family circumstances.

What happens to those parents and families in times of austerity must be considered, and I am dismayed at the potential disruption and depression that may be caused by government policies. Is it not surprising that Save the Children is, for the first time, focusing some efforts on children in the UK, or that, as the noble Lord, Lord Greaves, said, we are seeing food banks in unexpected places such as Guildford and, as my noble friend Lady Pitkeathley tells me, in Ross-on-Wye?

It is easy to portray people in unfortunate terms using easy soundbites which appeal to popular prejudices and which are so often inaccurate, and it is interesting to note that many of us think that 27% of all welfare is claimed fraudulently. However, the Government’s figure is 0.7%, worth around £1 billion as opposed to the £70 billion lost in tax evasion. Further, most welfare payments go to pensioners. Unemployment benefit has fallen to 11% of average earnings compared with 22% in 1979. Therefore, myths abound. The fact is that since 2010 long-term unemployment has increased by 146% and I am told that there are plans to cut local authority budgets by 30%, to the dismay of those working to deliver services. All this will impact on families and children, and the poorest will be hit the hardest.

Perhaps I may give some examples that reflect the concerns of groups in the voluntary sector which are working with children and families. They include Barnardo’s, the Children’s Society, Working Families, CARE and Save the Children. Contrary to the Government’s ambition, levels of childcare funding may lead to disincentives to work. Under universal credit, lone parents with more than one pre-school child could face losing a significant amount of any extra money they earn. I was impressed by the speech of the right reverend Prelate the Bishop of Exeter on this issue. There may well also be an impact on the provision of free school meals, which is sometimes the only good meal that a child will have in a day. Some 1.2 million children living in poverty in England miss out on free school meals. The Government seem to be set on proposing that, under universal credit, families will be entitled to free school meals only if they earn less than a certain amount, which is another disincentive to earning more. I take the point made by the noble Lord, Lord Greaves, about the administrative costs of means-testing.

The plan to cap the uprating of key benefits and tax credits for the next three years will mean that almost 20 million adults with children and 11.5 million children will be affected. This will hurt millions of families who are already finding it difficult to meet the costs of food, rent and other basic necessities. For example, by 2015, a lone parent of two young children working as a nurse and earning £530 a week will lose £424 a year. Primary and nursery schoolteachers have an average weekly income of £600. Some 150,000 of them will be affected by the cap. The charity Working Families estimates that around 205 of the 3,000 calls made to its helpline in 2012 were on the issue of benefits and tax credits. Some 41% of parents in severe poverty said that they would consider giving up work and 25% would consider reducing their hours as a result of cuts in the level of support. In times of austerity it can be difficult for parents to find extra hours of work as employers cannot afford it. This means that up to 210,000 families with 475,000 children may lose out on tax credits. Does the Minister not think that the Government’s policy is producing a negative rebound?

Parents with disabled children report difficulties due to the high cost of specialist or one-to-one care because there is no extra support in the system for the childcare costs for a disabled child. Paying for such childcare is turning out to be a huge barrier to parents going into paid work. There is also disappointment that the principle of universal child benefit has been undermined. Child benefit has been simple to administer, has a high take-up and carries no stigmas, and by and large ensures that the money reaches the right people. Some families are now going to lose out and the system has been made more complex. It would be interesting to know the administrative costs associated with the new system.

Maternity and paternity pay in real terms may encourage parents on low incomes to cut short that important time with a new baby because they cannot afford it. This may affect early bonding, which is considered by experts to be very important in child development. The 1% uprating will impact on those claiming statutory maternity and paternity pay, which is well below the national minimum wage of £135.45 a week. The benefit cap may also apply until a parent reaches the wages level set out in their claimant contract. I am aware that there are some exceptions, but it may force parents who are currently working part time on low wages to seek longer hours, thus affecting family life. The prediction is that the median income in households with children is set to fall and that child poverty is set to increase.

The tax and benefit changes are significant factors in these trends. The introduction of universal credit may offset them in some cases—for example, it has advantages for those without children and for a couple who are both seeking paid work. I again cite CARE, which has challenged the Prime Minister’s statement that the child benefit charge will apply only to the top 15% of the country. As the right reverend Prelate pointed out, the charity has figures to show that the charge is not targeted at the top 15% and will impact on many families in the middle income distribution. The policy takes child benefit from those in the lower half of income distribution while not taking it from two-earner families which are considerably richer.

I return to my original concern that the inequity in tax and benefits that makes children and families suffer is morally indefensible and may have long-term consequences that affect not only children but society. I look forward to the Minister’s response.

13:16

[Lord Alton of Liverpool]

My Lords, the noble Baroness, Lady Hollis, has a long-standing and well deserved reputation as someone who, both in office and out of office, has championed the cause of disadvantaged people. I share her basic proposition that the Welfare Benefits Up-rating Bill, to which she referred, is both poverty-producing and risks increasing both absolute and relative child poverty. I strongly believe that the Government need to become far more focused on the root causes of social security and tax credit demand and that their priority should be to make progress on full employment, living wages, affordable housing and support for children.

They also need to be much more aware of the impact of their policies on the vulnerable—a point that has been alluded to by virtually everyone who has spoken in this debate—and especially, I would argue, on people with disabilities. The Government should note a report that has been released today, The other care crisis: Making social care funding work for disabled adults in England, published jointly by Leonard Cheshire Disability, Mencap, Scope, the National Autistic Society and Sense. I would particularly refer them to the chapter headed “Turning back the clock on disabled people’s independence”.

When the Welfare Benefits Up-rating Bill was considered in another place, Sarah Teather MP, the former Minister for Children and Families, was courageous and right to vote against it. She was also right to say that it is the politics of the playground to paint a picture of scroungers versus strivers. Rather than caricatures, we need to ask how it can be right to promote policies that will lead to a couple with two children earning £26,000 a year losing more than £12 a week while 8,000 millionaires will be better off by an average of £2,000 a week. It is neither fair nor just, or equality of sacrifice or an equitable sharing of austerity, that, according to the Institute for Fiscal Studies, referred to by the right reverend Prelate in his excellent speech, some 7 million working families will be on average £165 a year poorer, while another 2.5 million families with no one in work will be £215 worse off. In this context, the new legislation is the last straw on top of escalating inflationary increases in the costs of food, travel, fuel and heating, and comes on the back of changes to housing benefit regulations, the Welfare Reform Act 2012 and the Local Government Finance Act 2012—all thrown at the poor like a series of hand grenades.

Two nights ago I chaired a Roscoe Lecture at Liverpool John Moores University, and I declare my interest as I hold a chair there. I had invited John Bird MBE, the founder and editor-in-chief of the Big Issue, to deliver the lecture. At the heart of his remarks on Tuesday was the proposition that the creation of a dependency culture has not helped the poor, but quite the reverse. He said that the Government have,

“created a new class of people who are outside society: workless, broken, and lost to ambition and social improvement”.

But he was not suggesting that the way to tackle this culture is to cut benefits before we have tackled the fundamental cause. Mr Bird suggested that 450,000 families are on long-term benefits. I invite the Minister to comment upon a statistic he gave, that only half of 1% of those on long-term benefits go to university or into higher education. If that is so, what can we do about it? Certainly, the disincentive of phenomenal indebtedness from student loans is a major disincentive for poorer families, kicking aside the ladder of educational advancement, with all the concomitant effects that has on social mobility.

Having been the first from my own family to experience higher education and having grown up in a home without a bathroom, and then a council flat—and then, as a student, being elected to represent a disadvantaged community in the heart of Liverpool, where half the homes had no inside sanitation or bathrooms—I have noticed some fundamental changes in the intervening 40 years. One is the disappearance of fathers from the lives of children and having any involvement in their upbringing. Some 800,000 children have no contact with their father, a point referred by the noble Baroness, Lady Massey of Darwen, in her excellent remarks a few moments ago. Many drift into gangs and drug culture. The Government need to take parenting much more seriously. I support entirely the recommendations made by CARE and referred to by the right reverend Prelate and by the noble Lord, Lord Bates.

The second change that I have seen concerns benefits. Before the 1980s very few people were on benefits. Working class families, like the one I came from, saw them as the Beveridge safety net. The 1980s and mass de-industrialisation changed all that, turning the working classes into workless classes and, all too often, into benefit-dependent classes—which is why, with 2.5 million unemployed and 958,000 NEETs in this country, people without opportunities for education, employment or training, job creation is crucial.

Where is the present approach taking us? Last year, the implementation of the Government’s policies saw a 44% rise in the number of families relying on emergency bed and breakfast accommodation after losing their homes, bringing the total to almost 4,000 people, and a staggering 79% increase in the number of people visiting volunteer-run food banks—we heard this referred to earlier on—with some 230,000 expected by the end of 2013.

This spectre should concentrate all our minds. It represents not only a catastrophic human cost but also stands to create profoundly negative economic and social effects in the long run. Considering the numerous studies linking unmanageable debt to crime, family breakdown, alcohol abuse and mental health difficulties, there are clear dangers stemming from the fact that more than one million people now rely upon payday loans to cover essential outgoings such as utility bills. Similarly, the hundreds of thousands of children growing up in overcrowded homes or going to school hungry face significantly increased risks of education and health problems, presenting obvious challenges further down the line.

In this context it is unsurprising that so many organisations working to support poor families have expressed deep concern at the virtually unprecedented set of restrictions on the welfare system, which threatens further to weaken the safety net, which has been badly holed. The chief executive of the Cardinal Hume Centre, which provides a vital lifeline to Londoners in poverty, recently said:

“Breaking the link between inflation and benefits before the effects of these changes”—

to the welfare system—

“have even been assessed, is a potentially disastrous move that could cause unsustainable hardship for many people who are already struggling to get by”.

I particularly want to ask the Minister about the effects on disabled people. The Welfare Benefits Up-rating Bill alone stands to impact upon the lives of some 1 million disabled people, adding to the pressures already generated by the Welfare Reform Act and associated cuts. One third of disabled people are living in poverty in the UK and the new legislation simply seems to add to their impoverishment. I particularly want to ask about the new personal independence payment, especially as it relates to mobility issues, about which I have a Question down for a reply during Oral Questions next Thursday. An alliance of disabled people’s organisations is extremely concerned about its effects. Can the Minister confirm the Government’s own prediction, made earlier this month, that 27% fewer working-age people will be eligible for the Motability scheme once PIP is fully rolled out? Disability organisations say that the new proposal means that 42% fewer disabled people of working age will be eligible—an average of 200 people in every constituency.

By changing the criteria for the “enhanced mobility rate” from 50 metres to 20 metres, many will lose a vital lifeline. Cars will simply be taken away, while those who are unable to drive, and use their mobility allowance for other means of transport, will be without the wherewithal to fund privately owned cars or taxis. It is sheer Janus-faced double-speak to tell disabled people to bring their gifts to society and to contribute by working, volunteering or being part of their community, and to take away their means of doing so.

I would also like to ask about the new regulations and the failure to include the existing qualifying phrase,

“reliably, repeatedly, safely, and in a timely manner”,

the criteria used to decide whether a person can carry out essential activities. Without those words, these guidelines will not be worth the paper they are written on when it comes to tribunals or appeals. I hope that the Minister will give this urgent reconsideration.

To conclude, overall, the impact on vulnerable people of many of these changes is going to be devastating. These changes are too deep, they are coming too fast and they are already undermining the most fundamental safety net through which no one should fall. It is unacceptable that through job loss, disability, illness or low pay, parents and children are going hungry and becoming homeless. But the facts speak for themselves and that is the reality for a rapidly growing number. With food banks and shelters increasingly overburdened, it is now urgent that we repair the damage being caused to families and to our society. That is why it was so right for the noble Baroness, Lady Hollis, to put this Motion before your Lordships’ House today. We are all indebted to her for doing so.

13:26

[Baroness Prosser]

My Lords, I join others in thanking the noble Baroness, Lady Hollis, for tabling this debate. I particularly thank her for her excellent opening speech.

I will direct my remarks towards the situation of the working poor. Back in the 1980s, at the height of Margaret Thatcher’s Government’s attack on the funding of public services, a journalist whose name I have forgotten coined the phrase, “private wealth and public squalor”. Fast-forward 30 years, and we are facing the same situation, although somehow worse. It is worse because over that period the gap between rich and poor has grown exponentially, so that we now have private wealth, public squalor, and private poverty.

Downward pressure on wages has come about for a variety of reasons. First, there is the reduced ability of trade unions to maintain, on behalf of their members, wage levels which give workers a fair share of the financial cake, which in turn in the past has provided pressure on the labour market as a whole, lifting up the pay of those at the bottom end of the scale. Organised labour reduces and low-paid, unrepresented work opportunities increase: the balance shifts towards an inexorable decline overall. The continuing use of technological solutions, and the consequent reduction in workforce numbers, within certain sectors of the economy—together with the globalisation of huge swathes of manufacturing—have also played a major part in keeping down the costs of labour.

To add insult to injury, along come the Government with the bright idea that reducing people’s incomes even further will, first, somehow help to solve the debt crisis—I am not sure how taking away the ability of large swathes of the population to have enough money to spend, even on essentials, will put money in the Government’s coffers, but that may be another story—and, secondly, will encourage lazy scroungers to get out of bed in the morning, when in fact two-thirds of the people affected by these cuts are already in work.

Those affected most by the very wide-ranging changes and reductions to benefits are working parents with dependent children. What kind of Government decide to target the poorest in society—people struggling to keep their heads above water, balancing the payment of the electricity bill against the cost of the supermarket shop? Parents are having constantly to tell their children, “No, we can’t go to the football match” or, “No, we can’t go on holiday like your friends do”. Do Ministers have any idea how soul-destroying it is never to be away from the fear of not having a penny piece, and always having to make do and mend, although you are going out to work and trying your hardest? Do the Government seriously think that the children of those families, starved as they are of the opportunity to flourish and grow, are being given the start in life that will enable them to become tomorrow’s committed and fully rounded citizens?

Noble Lords should look at the array of changes taking place. Working families are being bombarded with requirements to reduce their expenditure and/or to increase the number of hours worked each week. How easy is it for a mother, for example, to find an extra eight hours’ work each week and what does that mean for childcare arrangements and costs? These households, which are at the bottom end of the income scale, lose out particularly badly by the use of the CPI for uprating purposes, from cash freezes to child benefit and working tax credit. When replying, can the Minister please not say that it is all right because of the changes to the tax system for lower earners? Many of these families will have had an income below the personal allowance anyway.

The demonisation of the recipients of welfare has been particularly upsetting. I firmly believe that the vast majority of individuals would much prefer to be able to earn sufficient so that they do not have to get involved with “the social”, as it is known. Most folk want financial independence and want their children to have a better life than they have had. There will of course always be a small minority—the workshy and the idle. That has always been an issue, but it must be kept in perspective. They are a tiny minority. We cannot have a low-wage economy and a social system which then blames the low-paid for their own misfortune.

Finally, I think that I am probably the only Member of this House who has spent a long time reliant on welfare benefits. My husband became paralysed at the age of 28, and I spent eight and a half years looking after him and my three young children. I can tell the House that relying on welfare is not a lifestyle choice. We were what is known as “the deserving poor” and were therefore treated with a measure of respect, and probably sympathy. I also had a supportive, although far from well-off, family. However, it should be borne in mind that welfare payments are calculated to leave no space in the personal budget, so that the smallest incident becomes a crisis: the lost school coat, the broken kettle or the worn-out bed linen. How are these things dealt with when there has been no opportunity to set money aside?

The reductions in value now being proposed to the weekly incomes of both the working poor and those who have fallen on hard times through ill health, et cetera, will indeed cause a crisis—and all the rhetoric will be that it is their own fault. We need a strategy for growth, with a well educated and trained workforce and high-quality employment opportunities. That is what will deal with the country’s debt and the deficit.

13:33

[Lord Touhig]

My Lords, I join all noble Lords in thanking my noble friend Lady Hollis for securing this debate. No matter where we sit in this House or what our political affiliations are—or if we have none—I think we all agree that the noble Baroness, Lady Hollis, brings huge background knowledge and commitment to trying to solve some of the problems that we are talking about today.

On Monday, I asked the Government,

“what is their estimate of the saving to public funds as a result of the work of unpaid carers in the United Kingdom”.

In answering, the noble Earl, Lord Howe, said:

“the Government themselves have not estimated savings to public funds as a result of unpaid carers’ contribution to care and support”;

but he added that,

“there can be no doubt about its huge value to those who receive care and to the wider community”.—[Official Report, 14/1/13; col. 470.]

Why, then, when a disabled youngster in the care of his or her family becomes a disabled adult, is he or she considered a separate household from the caring parents with whom they live, making the parents subject to the housing benefit cap?

The Government have said that a family with a disabled youngster and in receipt of disability living allowance would not be subject to the cap, and to me that seems right and just. But for the life of me I cannot understand why this situation changes when the self-same disabled child becomes a disabled adult. On the Government’s own admission, around 5,000 carers in the United Kingdom will see their housing benefit capped. It will mean that the average affected caring family will see its financial support cut by £87 a week. The Work and Pensions Minister, Esther McVey, said in the other place on 10 December that families that would be exempt from the cap would be,

“those on working tax credit, all households with someone who is in receipt of a disability-related benefit, war widows and widowers, and those in receipt of war disablement pensions”.—[Official Report, Commons, 10/12/12; col. 15.]

I praise the Government for that—I think it is fair and reasonable. That is why I cannot believe that the Government really intended to penalise some 5,000 families in the way that they will do with the regulations that have been published. I urge the Minister to look again at this and accept the view from Carers UK, which says that it is,

“simply unfair to protect some carers and not others”.

I again refer the Minister to the comments from Esther McVey on 10 December, when she said:

“I will reiterate what a household is: a household is a basic family unit, and for the purposes of paying out-of-work benefits that will be a single adult or a couple and children”.

However, she added that,

“once another adult is in the house, that is a separate household”.—[Official Report, Commons, 10/12/12; cols. 15-16.]

When that adult is the disabled child whom they have cared for since birth, it is plain daft to treat that person as a separate household—frankly, it is barmy, and it is an insult. As this stands, a caring family is being penalised simply because the disabled child grows up into adulthood. That cannot be right. In fact, I believe it is a tax on disabled people growing up.

I should declare an interest as a vice-president of the National Autistic Society. Families affected by autism will be hit particularly severely because, according to National Autistic Society research, they spend longer caring and therefore have less time for employment. Across the United Kingdom, 21% of all carers spend more than 50 hours a week caring, but of those caring for someone with autism, 83% say they spend at least 50 hours caring. This was highlighted in Who Cares for the Carers?, a National Autistic Society document published in 2009. Caring for someone with autism is therefore disproportionately intense in terms of hours. In return, if the carer spends at least 35 hours a week caring, they receive the princely sum of £58.45 a week carer’s allowance. This cap will therefore disadvantage carers who spend at least as many hours caring as many people work in a week and are therefore themselves unlikely to find employment. That illustrates the reality of caring for an autistic child or adult.

Perhaps I may briefly touch on two case studies. Ann and Laurence have four sons. Two of them—Peter, 31, and Stephen, 21—have Asperger’s syndrome and ADHD and live at home with their parents. Although highly intelligent and educated to MSc level, Peter struggled for three years to get a job until his mother helped him find one as a teaching assistant. Stephen is less able to succeed academically and will never be able to live independently. His mother describes the challenge:

“When you have your children you think you will nurture them and teach them to become independent like my parents did with me. But that’s not the case.

I wouldn’t expect to be doing the things for my adult children that I’m doing. That’s a carer’s role ... My fear is that one of us will get ill and we’ll have to care for that person plus the two boys, and that will be difficult”.

Mark and Cathy have a six year-old called Malachy, who has classic autism. He is non-verbal and communicates through his own invented sign language. Caring for Malachy is exhausting and relentless. Mark often goes to work having had just three or four hours sleep. He and Cathy rarely have time to do the normal things that couples do, such as go out for an evening. Mark describes the challenge as follows:

“Malachy’s autism and difficulties [are] like a time bomb within your family. He completely dominates everyday life. It permeates my employment. Cathy had to give up work. It permeates the situation with the two younger children … he gets a lot of one-to-one attention”.

Things are already difficult for carers. A National Autistic Society survey last year showed that 74% of carers do not receive any support at all, and one in three carers under the age of 40 said that they would like to work, but cannot do so because of their caring role. Many more have had to give up paid work, reduce hours, work part-time or take lower paid jobs in order to care for someone with autism.

I think that, at this time, it is also worth remembering that with local authorities raising eligibility thresholds for social care support, and many services such as day centres closing down, many carers are likely to find themselves missing out on the services they need. Let us make sure that we do not make life even harder for family carers who, in fact, are the backbone of care in this country.

13:40

[Lord Stoneham of Droxford]

My Lords, I join in the congratulations for the noble Baroness, Lady Hollis, not only on this debate but on the leadership that she provides the House on forensic analysis and social concern. I am sad that I cannot be completely alongside her today on the issue before us. I would like to follow by setting some sort of economic and social context, following in the footsteps of my noble friend Lord Bates.

Although government is never easy, it is always exceptionally difficult when the economy is bordering on recession and there is an overspending deficit to clear up at the same time. We will never really know, but I suspect that without the formation of the coalition and a deficit-reduction strategy we could well have had turmoil in the markets and the IMF knocking on our door. Interestingly, that was precisely the scenario that our opponents in the general election said would happen with a coalition—but it has not happened.

As we look at the impact of tax and benefits changes on families, we therefore need an economic context for all the decisions being made—and the economic context has been dire. There has been a huge adjustment in living standards, with a fall of more than 7% overall since 2009. In fact there has been no growth in real income for the median income earners for a decade. This was inevitable when economic growth has been subzero. Households have not only had to bear the burden of the national debt reduction; they have also had to reduce their own personal household debt, following a decade of economic growth built on the shaky foundations provided by unsustainable huge growth in personal credit and debt.

The European meltdown and rising commodity prices, particularly energy, have compounded the economic impact of the UK recession. This has undoubtedly led to an adjustment of the Government’s deficit strategy—not to plan B, but actually to one which closely follows the strategy set out by the Labour Chancellor Alistair Darling. We will be very keen today to hear the views of the noble Baroness, Lady Sherlock, telling us where she will make the savings to replace the cuts that they oppose.

Two other points need to be made about the economic context, the first of which is on mortgages. The confidence in the Government’s deficit reduction strategy has led to the continuation of low interest rates. This has been critical to those families who otherwise would have been embroiled in debt repayment problems, negative equity and very severe impacts on family budgets. That was the scenario in the last recession in the early 1990s and it could easily have happened again if interest rates had moved up to 5% or 7%. Those with mortgages—and they are not simply the well off—have benefitted from those low interest rates. That should not be forgotten, and low interest rates must remain an important objective.

The second issue is employment. Growing unemployment is always the great fear associated with recession. We can look at the impact of benefits on family incomes but this assumes a static situation. In reality, the situation is very fluid. People move in and out of the labour market. Unemployment figures used to be explained to me as being like a bath: unemployment figures rise like water in a bath when the flow into unemployment continues; but the flow out of unemployment is plugged because the vacancies disappear in weak economic conditions.

This recession has been marked by a much better performance on employment at a time when the working age population has increased by 350,000 a year, more than we could have ever anticipated. There is nothing worse for an individual’s psyche than losing their job. Self-respect and purpose go with being in work. There will be arguments about the type of jobs being created. However, the figures show that there are 1 million more jobs in the private sector and the possibility of these jobs—whether full or part-time, permanent or agency—is encouraging and vital for families up and down the country, north as well as south.

This growth reflects incredibly well on our flexible labour markets. It has allowed adjustments to be made to keep people in jobs. It has created many new opportunities which otherwise would have been denied to people on the fringes of the labour market. It also undermines the arguments that say that our labour market is not sufficiently flexible and that there should be more attempts to increase flexibility, thereby undermining basic protection rights.

This leads to another point—that recessions are always bad things. It is why boom and bust is so damaging to the poorest and most vulnerable. They are the ones who suffer when the flows into and out of the unemployment bath move adversely. The poorest and less skilled and those who are less mobile will always bear the heaviest burden. That is fundamentally why putting the national economy on a secure path of growth is so important, and important to them. That is why sustainable growth must now be the overriding priority for the coalition.

However, despite the difficulties and the economic constraints that the coalition Government are facing they are also confounding their sceptics by a massive programme of social reform that will benefit vulnerable families. We are being, and will be, criticised for the tough decisions that we have had to make on work-related benefits. However, this criticism ignores the relative rise of benefits compared to the position for those who are reliant on earnings over recent years when real incomes have been falling. At some stage an adjustment was going to be on the agenda.

This action, however, is matched by action that will assist families. As we have heard today, the rise in the basic tax allowance by 45% in three years is unprecedented. Anyone on the minimum wage has seen their tax bill halved. The Labour Government gave a high priority to families through the growth of family credits. The coalition has prioritised pensioners, who would otherwise have been very vulnerable to energy prices going up, and whose incomes have fallen behind income growth. The triple lock meant that, last year, pensions went up by 5.2%, and will go up in April by 2.5%. It would have been much less under the previous Labour regime.

Action on current pensions is being matched by fundamental reforms on the single-tier pension and, in due course, in seeking to resolve the social care issue for the elderly which was left hanging by the previous Government. It has been a major worry and concern for growing numbers of families with elderly relatives that these issues have not been resolved. The wholesale reform of the welfare system will follow with the reform of universal credit. Who would have thought that a coalition could take on this issue—which James Purnell failed to persuade Gordon Brown’s Government to tackle because there were thought to be too many more losers than winners in a reform needed to simplify, target resources on the poor and reduce disincentives to work?

The noble Baroness, Lady Jenkin, mentioned William Beveridge. Today is the birthday of Lloyd George. I think that they would be justly proud of the scale of the reform that the coalition Government are undertaking at this very difficult time. Reform and change are always difficult. It is made even more difficult when money is short and there are insufficient funds to help oil the wheels of change. However, no one can say that the coalition Government are not seeking to combine economic competence with a social concern for fairness which is aimed at improving the outlook, security and well-being of families up and down this land.

13:49

[Lord Graham of Edmonton]

My Lords, it is a privilege and a pleasure to take part in this debate, which was so well introduced for our benefit by my noble friend Lady Hollis. I have known Patricia for many years. She is well—if not uniquely—qualified because in her city of Norwich she was the leader of the group. When we had a Labour Government she was a prominent Minister. It is the way of this House to bring together men and women who can speak from the heart. I cannot believe there is a person on the other side of the Chamber who heard the noble Baroness, Lady Hollis, who did not agree with much of what she said.

The problem is, we are where we are now and how do we get out of it, from the point of view of families? I cannot possibly enter into the finite arguments about which policies are right or wrong. I have an inclination as to where I stand, as does everyone in this House. Since we are talking about families, I thought I would mention that I am the eldest of five children. In 1930 my father was made unemployed and he did not get another job until the war started in 1939. It was tough. In 1937 he had 37 shillings a week to feed the seven of us.

When it comes to a level of poverty, it is very difficult for someone like me to believe that people are in poverty with a capital P now. Everything is relative. There are people sitting on both sides of the House who have been Members of Parliament and know what I mean when I talk about surgeries. When I attended my surgeries in Edmonton, I would meet people who had big problems, mainly to do with housing but also to do with work. Twice in my time I left the surgery, went to my car and cried because I could do nothing about it.

I very much hope that we are moving towards a stage in this argument where calling the other side names is not the solution. We are all politicians and we all have a point of view but we will not solve the problem if we build up resentment. I was born in Newcastle-upon-Tyne, not far from Jarrow, where the marchers came from. That was how they manifested themselves. We all know that at the end of the day it did not do very much to change the Government.

I say to this Government that, of course, most of the time they are the masters, but not all the time. I sense that there is resentment with a capital R building up among more and more people, many of whom voted for this Government and are now suffering from the actions they are taking. I am not even arguing about the actions because if there was a Labour Government we may very well have carried out some of the policies.

When I was a boy, I came home from school and said to my parents, “Look what I’ve got”. It was a pair of boots. My dad said, “How did you get those?”. I said, “Earlier today two policemen came into the classroom. They whispered to the teacher and the teacher called us out: Tommy, Teddy, Billy, Wilfie”. On Tyneside, you did not say Wilf or Tom; it was Wilfie and Tommy. So I went out and there were two policemen with a great big wicker basket. In the wicker basket were pairs of boots. The policeman threw a pair to me and said, “Try these on”. On Tyneside, in my station in life, your footwear was what we called sandshoes—other noble Lords might call them plimsolls. They were sixpence a pair from Woolworths and when they wore out you put a piece of cardboard in the bottom. When the cardboard wore out, you put another piece of cardboard in, until your mam could find sixpence.

So I brought the boots home and my dad said, “Where have you pinched them from?”. I said, “I haven’t pinched them, Dad, I was given them”. He hit me again and said, “Tell the truth”. Finally they realised I was telling the truth. My dad smiled; my mam cried. Years later, when I was in the Royal Marines, I came home and said to Mam, “Remember the time I brought the boots home and you cried?”. She said, “Yes”. I said, “Why did you cry, Mam?”. She said, “Because I knew that the teacher had been asked to send out of the room the children that she knew were from poor families”, and that she had cried from shame.

If anyone wants to ask me why I am Labour, why I am a socialist, it is because we lived in a society that might have done something but did not care. It is about time all the parties recognised that it is a big problem. I am not blaming one or the other, but the solution that we have had from the noble Baroness, Lady Hollis, is well worth studying.

When I was working for the Co-op, I was paying out the dividend and there was a big queue. I looked up and there was Jackie Milburn, the hero of Tyneside. He said, “Can I have some money from this passbook?”. I said, “I’m sorry, you can’t”. He said, “Why not?”. I said, “Because it is in your wife’s name. You take this form, get her to fill it in, come back and I will pay you”. He came back the next day and said, “How much can I get?”. I said, “There’s £7 and 17 shillings in the book; I can pay you £7 and 14 shillings because you must leave three shillings in the book”. He said, “That’s a week’s wages”. Playing for England and Newcastle in 1948-49, he was on the princely sum of £8 a week. We all have to try to take account of comparisons.

I mentioned the Co-op because the Co-operative movement deserves a lot of credit for starting self-help. Most people who worked in the Co-op were members of the Co-op. They would leave their dividend in the book until they had £4 or £5 and that was their nest egg. I think that the Government could do more to energise ordinary people to use the argument and the instrument of mutuality, credit unions and things of that kind. I hope the Minister will be able to recognise that there is a job of work to be done there.

In conclusion, there is no complete answer to this problem. I can understand people who think one way or the other, but in my view we should be past blaming the other side for what happened. All Governments find things that need to be done. The problem for this Government is that they are not doing what they said they were going to do. I rest my case.

13:59

[Baroness Sherlock]

My Lords, what a wonderful place to start. I would certainly not want to go back to when my noble friend Lord Graham or the children of today would have no boots, but maybe a place where Wayne Rooney got £7 a week would be a country I would think about living in.

Like other noble Lords, I am most grateful to my noble friend Lady Hollis for introducing this debate so powerfully. If I were the Minister I would be getting anxious already about how I would respond to that rather forensic opening statement. I congratulate her, too, on choosing the topic and expressing it in a way that has drawn so many powerful speeches from around the House. In a debate such as this, I am proud to be a Member of this House. I have learnt something from every speaker and having the opportunity to come into the debate at the end is really a privilege.

It is clear that there is widespread concern about the impact of tax and benefit changes on families. Given the rather forensic opening assault by my noble friend Lady Hollis, the Minister has some rather big questions to address. I was impressed that my noble friend had done so much spade work in trying to dig out the cumulative impact on families of successive tax and benefit changes since 2010. She mentioned a whole number of cuts that have been made but there are more. As well as those changes she mentioned, the Government have abolished the health in pregnancy grant and the baby element of child tax credit; they have cancelled the planned toddler element of child tax credit; the government contribution to the child trust fund has gone; the Sure Start maternity grant is not there for second and subsequent children; and the Government are introducing hefty charges for using the Child Support Agency.

All of that makes me worry about the extent of the burden being borne by women and children. This was highlighted very well by my noble friend Lady Massey of Darwen. If I were a mum of young kids, out there on a modest income, I would be starting to wonder what David Cameron thought about me and why so much of this burden seems to be borne by people like me. This is before we discuss the move to uprate benefits by just 1% for the next three years. Would the Minister like to comment on Tuesday’s admission by the Government in another place that that 1% change would increase child poverty by 200,000 more than would have been the case if benefits were uprated by CPI?

What is the Government’s strategy on tax and benefits for families? The Chancellor of the Exchequer, Mr Osborne, explained this very well. Introducing the Autumn Statement in another place on 5 December, he said:

“Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it”.—[Official Report, Commons, 5/12/12; col. 877.]

Let us test the Government’s record against that statement. First, will those who have the most contribute the most? The Government decided to reduce the top rate of income tax from 50% to 45%, a move that will give a major tax break to high earners including, as the noble Lord, Lord Alton, explained very clearly, giving 8,000 people an average tax cut of £2,000 a week. This is at the same time as introducing a Bill that would give someone on jobseeker’s allowance an increase of just 71p a week for three years.

What, then, of the personal tax allowance increase that was advocated so ably by the noble Lord, Lord German? Does that help the poor? Sadly, it does not. The nature of tax allowances is that everybody who pays tax benefits from them and the poorest do not, a point clearly made by the right reverend Prelate the Bishop of Exeter and the noble Baroness, Lady Jenkin. The Child Poverty Action Group calculated that a working family eligible for both housing and council tax benefits will gain just 13p a week from the extended personal allowances. The much quoted Institute for Fiscal Studies noted that households towards the bottom of the income distribution,

“benefit relatively little from the increase in the income tax personal allowance, as many individuals in these households would have had a personal income below the allowance (i.e. they would have paid no income tax)”.

The IFS continued,

“Households in the middle and upper-middle of the income distribution benefit the most as a percentage of income from the increase in the personal allowance”.

So, that is not so good on those with the most paying the most.

What, then, of the opportunity to consider how the Government make sure that the system is,

“fair to the working people who pay for it”?

Tax credits, and all those payments I listed at the beginning of my speech, are or were available to working parents. The Minister may argue that surely the Welfare Benefits Up-rating Bill will rebalance things by giving people on benefits only a 1% increase. Again, no. As the noble Lord, Lord Alton, noticed, although it is true that some 2.5 million workless households will find their entitlements reduced by an average of £215 a year, 7 million households, about half of those with somebody in work, will lose an average of £165 a year. As a number of noble Lords have commented, I am sure we have all seen the report from the Children’s Society which describes the kind of losses that occur. A second lieutenant loses £552 a year; a nurse or a primary school teacher lone parent loses £424. These people are not sleeping off a life on benefits but they will really pay the price.

As we heard from my noble friend Lady Hollis, in the case she cited of a Daily Telegraph reader, tax credits have made a real difference, in particular to enable people with children to move into low-paid work. Not only do they help those who cannot work full-time, they have also helped households where only one member of a couple is in work—the groups of concern to the right reverend Prelate the Bishop of Exeter and to the noble Baroness, Lady Jenkin. The Government have taken the decision to move across to universal credit, to replace all these benefits. I see the noble Lord, Lord German, has confidence that all will be well in those days and I very much hope so, although I confess that I am getting worried about the repeated reports of delays and the constant snipping away at the support within universal credit—not as worried as the Minister, perhaps, but he can tell us more of that later.

If the Government are confident and want to invest in universal credit because it will help people to move between welfare and work, why are they doing so much to undermine work incentives and cut the payments to low-income families in work? How can that make sense? When Ministers say, as they often do, that social security spending is unsustainably high but fail to be honest about the drivers for that spending, not only is that bad politics but it will cause them to make the wrong policy choices, which is even worse. One reason spending on out-of-work benefits is higher than the Government want it to be is that unemployment is higher than the Government predicted, and pursuing economic policies that make the recession worse or longer and do not promote growth are likely to make that situation worse.

The Government have made some decisions about their work programmes. They abolished Labour’s successful Future Jobs Fund and their own Work Programme has been shown to be worse than doing nothing. I regret to say that I read in the Guardian this week that the Government’s much vaunted unemployment figures include some 20% of people who are in fact on job training schemes, most of them still claiming jobseeker’s allowance. The Government need a strategy other than simply blaming people for the fact they have lost their jobs. As a country, we need a strategy to go out there to pursue growth and create jobs, as was so well described by my noble friend Lady Prosser. We also need measures to support those who are long-term unemployed. There are currently more than 130,000 adults over the age of 25 who have been out of work for two years or more. I share the view of the noble Lord, Lord Bates, that people who can work should work. Labour had said that if it was in government now, it would introduce a two-year compulsory programme; when someone had been on jobseeker’s allowance for two years, they would be in a compulsory job. That would have tackled the question of long-term youth unemployment.

I have focused on working families not because I want to demonise or marginalise those who are not in work, but to try to point out that the tendency to imply that the entire social security bill is spent on a bunch of idle layabouts and is paid for by hard-working people is at best disingenuous and at worst playing politics with the lives of struggling families who are already finding it very hard to make ends meet. My noble friends Lady Prosser and Lady Donaghy have explained how tough life can be for struggling, low-income workers, either in employment or self-employment. The last thing these people need at the moment is for the state to take away from them some of the bit of help they have which is just about helping them to make that transition.

Statements such as that from the Chancellor fail to acknowledge that when unemployment is high there are people claiming benefits who, before they were made redundant, were paying tax to fund them and will do so again. It also fails to acknowledge the disabled people who will clearly struggle, a point made very well by my noble friends Lord Touhig and Lady Pitkeathley and by the noble Lord, Lord Alton. I would be grateful if the Minister could confirm what will happen to disabled people who, even if they receive protected benefits, often get 70% of their income from benefits which will be hit by the 1% limit.

I finish where this debate started. The analysis of my noble friend Lady Hollis was very powerful. I urge the Minister to tell the House today whether he accepts her figures for the impact of the Government’s changes to tax and benefits. If he does not, will he tell us when the Government will publish their own analysis of all they have done to families in Britain? In Britain today it seems that we can afford tax breaks for millionaires but a food bank is opening every three days and a million people have resorted to a payday loan just to pay their rent or mortgage. I invite the Minister to explain those priorities to the House.

14:10

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, this has been an interesting and important debate, and I am grateful to all those who have contributed. The noble Baroness, Lady Sherlock, referred to the quality of the debate; there was something interesting in all the speeches, which is not always the case. I therefore thank the noble Baroness, Lady Hollis, for securing the debate.

I shall set some context for the debate before I try to deal with as many of the points raised as possible. The arguments for our programme of tax and welfare reform are well rehearsed. We have heard much discussion in the media, in Parliament and elsewhere on the welfare and tax policies that the Government have planned. However, I think that it is worth me touching on the rationale for our programme of reform.

We have already made significant progress in tackling the fiscal challenge that we faced when we came into office. We inherited the largest deficit in more than 60 years and, since then, welfare spending has risen from 11% of GDP in 2007-08 to more than 13% today, including pensions and working-age payments. In a constrained fiscal climate, this puts real pressure on key public services and is unsustainable. The deficit has now been reduced by a quarter, and we have created more than 1.2 million private sector jobs. Even if we play around with the small anomaly of those who are on skills training, there has been a huge increase in private sector jobs.

The noble Baroness, Lady Hollis, raised a question about cumulative impacts, and I was fascinated by her sums on this. However, I need to point out that this Government publish impacts of benefit and tax changes alongside each Budget and Autumn Statement. That is something that previous Governments did not do.

[Baroness Hollis of Heigham]

Is the Minister acknowledging that the Government have not published a cumulative analysis of the cuts, benefits and tax changes since 2010? If he is so doing, which I think is what he has said, it is still done slice by slice. Can we hope that he will do so—will he give a commitment to do so in future?

[Lord Freud]

My Lords, it is bluntly impossible to do a total cumulative assessment. I have looked at doing it, and you do not know what to put in and what to leave out. No one has done it in the past; it is not possible. Doing it year by year, as we do, is the best we can do—and it gives a fair view of what happens in a particular year.

I shall continue. While we are taking action to reduce the deficit, we have continued to support families by cutting tax for more than 24 million working people, lifting 2 million of the lowest-paid workers out of income tax altogether. Further freezes in council tax this year will help families with the cost of living by keeping the cost of council tax bills down. Here I pick up the point made by the noble Baroness, Lady Pitkeathley, about localising council tax support. That is being done because it is at the local level where the need for particular support is best understood, and we have announced additional funding of £100 million to support that process. More widely, we are investing heavily in low-income families by supporting the most disadvantaged through every stage of their education.

On the question raised by my noble friend Lady Jenkin, the right reverend Prelate the Bishop of Exeter, and my noble friend Lord Bates, the Government remain committed to recognising marriage in the tax and benefits system. That is as far as I can go today. On the point raised by the right reverend Prelate on child benefit, it will be completely removed only from families that include someone earning over £60,000, and 90% of families will continue to receive child benefit.

It is clear that decisive action is needed to control the damaged and hugely expensive welfare system that we inherited. Labour increased spending on benefits and tax credits by £75 billion and, in real terms, expenditure on all working-age benefits increased from £59 billion in 1997-98 to almost £95 billion in 2010-11, in today’s money. These increases are simply unsustainable. In tax credits, spending increased by £23 billion in real terms between the same two dates, which meant that nine out of 10 families with children became eligible for tax credits—a point made by my noble friend Lady Jenkin. In some cases, families could receive more than £70,000 in earnings and still be entitled. It is clear that, given this level of generosity, we could not protect child benefit and tax credits from the need to make welfare savings.

The Government have not shied away from acknowledging that tough decisions are needed, and we are committed to ensuring that savings measures are taken in the fairest possible way. That is why the 10% richest households will contribute most as a result of the tax and benefit changes that we are making. My noble friend Lord German inquired about that. Overall, as a result of recent changes, we may have reduced the marginal rate from 50% to 45%, but everyone in this House will be familiar with the impact of the Laffer curve. What really counts is how much total tax is taken from the richest; a quarter of all income tax is paid by the top 1% of earners, and the top 5% pay about £50,000. In practice, our changes mean that, overall, the richest will pay £1,000 a year each more in tax, not less, as has been claimed.

It is reasonable to expect the richest to pay their fair share, and it was equally important that we took action to ensure that people on benefits did not receive support that far outweighed the income received by many families who do not rely on benefits to get by. We have, for example, done away with the frighteningly high rates of housing benefit in the private rented sector, and from April this year we are applying an overall benefit cap so that households on out-of-work benefits no longer receive more in welfare payments than the average weekly wage for working households.

The year 2013 is pivotal for welfare reform. The introduction of universal credit and the personal independence payment in April will kick off the most fundamental reforms of working-age benefits for generations. I am pleased to tell my noble friend Lord German that we aim, still on time, to start universal credit on 29 April as a pilot, moving to a national basis in October. The universal credit system creates a seamless system of support to make work pay. People will be able to keep more of their income as they move into work, and it delivers a smoother and more transparent scheme that does away with the administrative difficulties created by switching between benefits and tax credits.

The noble Baroness, Lady Donaghy, made a particular point on universal credit and the self-employed. She made a point about the carry-forward, and I can tell her that I am aiming to introduce something for that to work efficiently; that will be in time for when the people who need it will be using it, so I hope that I can reassure her on that important point.

In the Autumn Statement, the Chancellor announced measures to tackle the rise in spending on benefits and tax credits by increasing the majority of working-age benefits by 1% for the next three years. The savings in that Statement amount to £2.8 billion in 2015-16. We are aiming here to strike the right balance between the support we provide and the need to tackle the spiralling cost of the welfare bill. Picking up the point made by the noble Lord, Lord Alton, on disabled people, we are protecting those elements of ESA support, the disability elements of tax credits and the main disability benefits—DLA, carer’s allowance, attendance allowance and incapacity benefit. While I am discussing the points made by the noble Lord, Lord Alton, about disability—picking up his query on PIP—I suspect we will have a chance to talk about that more next week. There is not a difference: the 50 metre to 20 metre change does not create any substantial difference in entitlement. I will be able to go into that in some more detail.

Although the Government are committed to supporting working families, it would be unrealistic to exclude that group entirely from our savings measures. Although some families will be affected by the tax credit and child benefit changes, we need to put this into context: working households will gain by an average of £125 in 2013-14. Households will, on average, gain—no matter where they sit in the income distribution.

A lot has been made of the suggestion that 81% of the £1 billion or so raised by the tax and benefit changes will come from women. However, the analysis underpinning the 81% figure misrepresents the true impact of welfare reforms on women. It assumes that because the payment of child benefit is to women, its restriction hits women; but the reality is that in many cases it goes into households. The real figure, if you do that analysis, moves from the 80% or so figure to the 60% or so figure. The Government continue to support women and their families through their tax; 80% of households with children will see their tax credits increase. The across-the-board freeze in council tax bills will help families with the cost of living.

Picking up the point made by the noble Baroness, Lady Pitkeathley, on PIP for carers, I remind her that we are committed to linking carers to receipt of either rate of the daily living component of PIP. That is the underlying reason why the impact assessment published in May 2012 showed that broadly the same number would be entitled to the carer’s allowance. Of course, continuing on her theme, where a carer lives in the same household as someone who is disabled, the benefit cap will not apply anyway, because that is one of the exclusions.

On childcare, we are spending an additional £200 million on universal credit and the focus of that is on families who work fewer than 16 hours a week. This investment will mean that 100,000 more families will be helped as they move into work. The Childcare Commission has been considering the cost of childcare in England and we expect its report to be published soon, so there will be further developments on that.

Turning to child poverty, by the relative income measure, the previous Government may have made some progress in moving children from out-of-work households out of poverty, but the effect on children from in-work families was considerably less. As my noble friend Lord Bates pointed out, work is the best route out of poverty. However, only 13% of the reduction in child poverty between 1998 and 2010, came from this fundamental route of families moving into work. That is where universal credit is so important: our estimates are that up to 300,000 more people will enter work as a result of the introduction of universal credit through improved financial incentives alone; 75% of the gainers from universal credit are in the bottom 40% of the income distribution.

Universal credit will make it easier for people to understand the level of benefit to which they are entitled—compared to the current complex system of benefits and tax credits—and significantly improve the take-up of unclaimed entitlements. That is a powerful tool in tackling poverty, because in 2009 it was estimated that 400,000 of the people living in relative income poverty were doing so because their families were not receiving all the benefits to which they were entitled.

I need to point out the importance of our White Paper on pensions, published earlier this week. The reforms will give a boost to the people who lost out on the additional state pension in the past, such as low earners and self-employed people. About 750,000 women who reach state pension age in the first 10 years after the single-tier pension is introduced will receive an average of £9 a week more in state pension because of the single-tier valuation. In response to the noble Baroness, Lady Hollis, this Government are committed to protecting pensioners—much though she may resent it. We have legislated to restore the link to earnings for the basic state pension, and are committed to the triple lock.

On the point raised by the noble Baroness, Lady Sherlock, about relative beneficiaries, the people in the middle have been squeezed quite savagely in recent years overall. I refer her to the interesting article in the Financial Times suggesting that those brackets were back at the levels of 2002-03, whereas the bottom 30% had increased their income in real terms by 3% or 4%.

Our fundamental welfare reforms will transform the welfare system by 2017. The replacement of many of the current suite of income-related benefits and tax credits with our flagship reform—universal credit—will provide a streamlined and transparent scheme that will mean that 3 million families will be better off, on average, by about £168 a month. In April this year, the largest ever increase to personal allowances will benefit 24 million people and lift 1.1 million people out of income tax altogether. Our tax measures, coupled with a modern benefit system, will demonstrate that supporting families remains an absolute priority for this Government.

14:29

[Baroness Hollis of Heigham]

My Lords, first, I thank all noble Lords who have taken part in the debate. In particular, I should like to congratulate my noble friend Lady Sherlock on her very impressive and superb debut on the Front Bench. It was an admirable wind-up speech and we are indebted to her. All our congratulations go to her. She absolutely rightly drew on the speeches of my noble friends who talked about carers, the self-employed and low earners, as well as disabled children and their families who are worried as their children become adults. My noble friends will allow me therefore not to repeat what she has already said. I want to take one or two minutes—I promise not to take any longer—to pick up on one or two points made by those sitting on Benches other than my own.

I welcome the speech of the noble Baroness, Lady Jenkin. Like her, I support universal credit and, like her, I prioritise the support that we need to give to families. I was sorry that she reiterated the point that tax credits had created welfare dependency. As my noble friend Lady Sherlock said, the whole push of tax credits was to make work pay—a philosophy that goes straight through from tax credits into universal credit. I hope we do not get that argument repeated again.

As I expected, the noble Lord, Lord German, emphasised the value of the tax allowance rise. Of course, I am pleased about that. However, I remind the House of the effect on someone working full time on a minimum wage—the security guard I quoted. That tax allowance increase is worth £1.71 a week. That is before the £30 of other benefit cuts kick in. The noble Lord, Lord Bates, drew on the argument that the economy is in such a state and the deficit is so high that poor children must be made poorer so that the rest of us can be made more prosperous. He failed to address the point that the big increase in benefit expenditure—which, pace the noble Lord, Lord Freud, I welcomed—has been driven by the increase in pensions spending, and that the amount of GDP going to those of working age on social security benefits has fallen since 1994 from 8% to 5%. It is simply false to say that that expenditure is unsustainable. It is about political and moral choices. However, he is right, and I am delighted to hear him say this, that a living wage would reduce the welfare bill. I hope that we can count on his active support for that in future.

I especially thank not only my noble friends but also the noble Lord, Lord Greaves, who made a brave, splendid and first-rate speech. He made points that I wish I had had the wit to make myself. I also thank the noble Lord, Lord Alton, from the Cross Benches, for his powerful, moral critique, which again reminded us of where our moral priorities should lie when we make these policy decisions.

The noble Lord, Lord Freud, referred to cumulative assessment. With the help of Citizens Advice and Landman Economics, we were able to work out pretty precisely—to within 10p or so—the total cumulative effect, since 2010, of the benefit cuts and tax changes. I did it for one family type—the security guard with a wife and two children. If we can do it over a weekend with wet towels and half a bottle of gin, I am quite sure that the Government can do it with the numbers of staff that they have in the Treasury. The answer is that the Government are not choosing to do it. They do not want to be shamed by us and others as to the effect of what they have done over time. There cannot be any other reason why the noble Lord, of all people, who has the utmost respect from the House for his integrity on these issues, and the Government continue to duck the consequences of their action by giving us the cumulative statistics today.

The noble Lord, Lord Freud, also mentioned the Laffer curve. At that point, the noble Lord, Lord Skidelsky, muttered into my ear, as others have done, that the Laffer curve, which says that the lower the tax rate the more you collect, has been discredited by almost every reputable economist in this country and in the United States. I am sure that the noble Lord, Lord Freud, knows that.

As to the noble Lord’s point about pensions, it is simply inappropriate of him to accuse me of not welcoming what is happening on the single state pension when before the general election I was one of those who wrote a pamphlet calling for it, in which I was fortunate enough to corral the willing consent of his right honourable friend Steve Webb to contributing for it and calling for it. I am absolutely delighted. The point I was making was not that I do not welcome the improvement in pensioner benefits. Of course, I do. I argued that it should not be paid for by making poor children poorer. That is the shame on this House.

Finally, the noble Lord, Lord Freud, sheltered behind averages, which of course fall in the middle of the third quintile. I was trying to describe the effects on the poorest quintile, particularly the poorest decile. He did not rebut one of those statistics.

A long time ago, the Reverend Thomas Chalmers, a Scottish Malthusian in 1819, said that character is the cause, comfort is the result. He had the excuse of not being able to read the early effects of an industrialising society and its profound effects on the poorest and the most vulnerable, and its children. What is our excuse? I beg to move.

Motion agreed.