Welfare Reform and Work Bill (Sixth sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateThe Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
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The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
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The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 10 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 10 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 9 / Noes: 2 - Question accordingly agreed to.
Emily Thornberry
Yes, there was an opportunity when we heard evidence. We asked the Government for evidence. We asked them again and again. I have tabled several parliamentary questions and have not had particularly good answers. We have asked questions in the House about their justification and evidence, and we got nowhere. If there is an opportunity, it would be great finally to hear from the think-tanks, which I know the Government are close to—at least some of them—and for them to come forward and give us the evidence on which the policy is based.
I was struck that, while hyperbole was in good measure, we had no evidence. We had people coming in again and again telling us the occasional story. It is as though the policy is based on the one family that was found living in Westminster with the flatscreen television and a Mercedes outside, or whatever the extraordinary example was. That is so removed from the reality of the day-to-day lives of people who are affected today by previous benefit caps and will be affected even more by further benefit caps.
The best way to make policy is on the basis of evidence. For that reason, the Labour party has made it clear what our position now is. We oppose the Tories’ reduction in the benefit cap, so we will therefore be joining the Scottish Nationalists on amendments 25 and 26. We will review Labour policy with regard to the principle of the benefit cap and we will look at evidence. It is right to say that Labour Members who represent London constituencies feel that week after week in our surgeries we see an awful lot of evidence of the adverse effect of the benefit cap and how it does not provide an incentive to get people into work, how it does not save money, and how, more than anything else, it is not fair.
We want in the next few months to put forward a good body of evidence to show, one way or the other, whether a benefit cap is right on any basis. For that reason, although we oppose the lowering of the benefit cap now, we have committed ourselves to looking carefully into the evidence, and we encourage people, including the Government, to come forward and share the evidence with us. If the Government want to give us the evidence on which they are basing this appalling policy—this cruel and nasty policy—I would be very glad to hear it and very glad to read it.
More than political whimsy is needed. If we must have a cap, we should at least make it clear that there should be an objective benchmark by which the level should be determined. I will therefore press amendment 71 to a vote.
The Minister for Employment (Priti Patel)
Good afternoon to everyone. These grouped amendments, in simple terms, are intended to counteract the changes that we are introducing to the benefit cap, as we have already heard. Amendment 25 would prevent the proposed reduction in its rate. Amendments 26 and 27 would prevent our plans to introduce a tiered structure to the cap, which will have different rates for claimants living in Greater London and for claimants living elsewhere. The two amendments would also keep the cap at its current rate with the same split between the level for lone parents and couples and the level for single people without children.
Amendment 71 would prevent us from establishing a new mechanism for reviewing the future level for the cap by maintaining the current link with average earnings. Amendment 38 is a more technical amendment that appears to attempt to direct future parliamentary procedures for introducing regulations for the cap. I will come to that amendment later. The cap was introduced in 2013 at the level of £26,000 a year with a lower rate of £18,200 a year for single people without children. Currently, the cap remains at that level.
The hon. Member for Islington South and Finsbury has mentioned why the Government introduced the cap, but I will remind the Committee that it was introduced because it was felt—and is felt—that it was not fair for out-of-work households to receive considerably more in benefits than many working households earn. That view is shared by many people across the country, with around 70% of the public supporting a cap. The cap is also a key part of the overall plan to reform not only the structure of welfare benefits but attitudes towards welfare benefits, and it was introduced to increase incentives to work and to promote fairness to those on benefits and those in work. At the time, as we recall, we were trying to address the bigger economic issues of the deficit.
Kate Green
I understand the point about work incentives. We heard from Tony Wilson that a small number of people have moved into work, but is it fair to talk about changing the attitudes of people who are too sick to work? They are caught by the benefit cap, too.
Priti Patel
This is part of the wider welfare reforms. The Government are supporting people who are sick and ill. Depending on their health conditions, they are receiving support in welfare.
Emily Thornberry
Taking that a little further, would the Minister be prepared to accept that people on employment and support allowance, who are therefore deemed not fit to work, ought to be exempted from the benefit cap if it is her policy to support those who cannot work?
Priti Patel
The hon. Lady will be perfectly aware that people who are very ill, particularly those in the support group, are supported by the Government through many, many welfare measures. That covers a range of conditions.
Kate Green
I am sorry to interrupt, but the Minister will understand that this is terribly important to people with long-term health problems. Some 80,000 people have been placed in the work-related activity group with a long-term prognosis that they are unlikely to see a change in their condition in at least the next two years. That was the finding of the Select Committee on Work and Pensions report last year. Further, 8,000 people in that group over time and, from the figures announced by the Secretary of State the other day, some 4,500 people in that group now have degenerative conditions, which means that they will never be more well than they currently are.
Priti Patel
Those in receipt of the support component of employment and support allowance are, of course, exempt from the cap. The Secretary of State has recently spoken about ESA and the additional support that can be given to individuals with particular health conditions. The Government are working on that right now, completely outside of this Bill.
Neil Coyle
On the point about disabled people being protected, there is an exemption for the support group—fair enough—but 440,000 disabled people are directly affected by the bedroom tax. The personal independence payment and disability living allowance changes will mean that, according to Government estimates, some 600,000 disabled people will lose out directly. Access to Work is supporting fewer disabled people, and there are fewer working-age disabled people in work as a proportion of the overall number than in 2010. The benefits freeze has directly affected even those in the support group of employment and support allowance, so it is incorrect to keep claiming that disabled people have been protected.
Priti Patel
Actually, we have been very clear about safeguards for vulnerable people. [Interruption.] We have. Perhaps this is just a fault line between our two political parties, as the hon. Member for Islington South and Finsbury has already said, and the Opposition intend to vote against this come what may, but we made it very clear that protecting the vulnerable is one of the key principles of our welfare reforms. [Interruption.] I appreciate that Opposition Members want to comment from a sedentary position, but there seems to be a huge area of difference between our two parties. One of the key principles of our welfare reforms is that we will put in place safeguards to protect the most vulnerable. There will be a range of measures, including discretionary housing payments, but it is wrong just to assume that we are deliberately not looking after vulnerable people when we clearly are.
Emily Thornberry
To get to the nub of the matter, perhaps the Prime Minister put it as well as it could be put at Prime Minister’s questions:
“I say that a family that chooses not to work should not be better off than one that chooses to work.”—[Official Report, 16 September 2015; Vol. 599, c. 1039.]
Is that the essence of the Minister’s position?
Priti Patel
This Government and the previous coalition Government have been clear that many of our welfare reforms include the principle of fairness, to which incentivising work is absolutely crucial. However, this comes back to a number of principles relating to welfare reforms and not just the benefit cap. It is right that the Government do the right thing and seek to support people who are long-term unemployed to help them get closer to the labour market, while, at the same time, supporting those who are unable to work for a variety of conditions, and that is exactly the safety net that the welfare state provides.
Emily Thornberry
The central difficulty facing the Minister is that the vast majority of people who are affected by the benefit cap are not those in families who choose not to work. Those on jobseeker’s allowance who do not take up a reasonable offer get sanctioned already under current legislation. For that reason, I hope that, when we get to the next group and I press amendment 68—I will now call that the “David Cameron” amendment, because it encapsulates David Cameron’s position—all hon. Members will vote for it.
The Chair
Order. That intervention was too long, and if you are referring to the Prime Minister, please do so either by his title or his constituency.
Priti Patel
If I may go back to my comments on the amendment, since the benefit cap was introduced in 2013, more than 16,000 previously capped households have entered work, and capped households are more than 41% more likely to go into work than similar uncapped households.
Hannah Bardell
I hear what the Minister is saying about families moving into work, which is good, but does she not accept that the vast majority are on low-paid zero-hours contracts? As we have already debated, she is not willing to put a definition on decent work or even look into having one.
Priti Patel
Absolutely not. I do not accept that at all. As we saw yesterday with the employment figures, over the last year, employment has increased by 400,000 and 90% of those jobs are full-time jobs.
The Bill reduces the cap, as we are discussing. Again, it comes back to the principles. Reducing the levels of the cap will reinforce a message that work pays. It brings a degree of fairness but supports the principles of work, and it works alongside what the Government are doing to support individuals to get into work as well.
The new tiered levels also recognise that housing constitutes one of the biggest costs for households. In London, housing benefit awards are, on average, £3,000 a year more than elsewhere in the country. Even in the south-east, as the average housing costs are around only half that of London, we believe that it is right for the cap to take into account those differences. We believe that the new tiered level for the cap will go further to achieve our aims of increasing the incentives to work.
The Bill also removes the current link between the level of the cap and average earnings. Back in 2011, the benefit cap was a new concept. At that time, with no benchmark, average earnings provided a basis by which to set the cap in order to achieve its aim, but times have moved on. We have evaluated the impacts of the cap, and the cap has been proven to work, as I mentioned, in terms of supporting people back into work.
Neil Coyle
Will the Minister give some evidence to back up her assertion that it has worked? What were the measures of success? How many people have moved into work? What would success look like for the Government if this measure was to go forward as it is in the Bill?
Priti Patel
I understand that the evaluation has been published, and since its introduction, more than 35,000 households who had previously been capped have moved off the cap. As I have said, the evaluation shows that the cap is working, with households 41% more likely to enter work than similar households who were just below the benefit cap. This is of course about the behavioural effects, but we have to, and should, put it into the context of incentivising work and supporting people to help them get into work, which is clearly part of what the Government are doing through their welfare reform agenda.
Kate Green
This is genuinely a request for clarification. The Minister said a moment ago that 35,000 people—I think she said this—had moved off the cap. Is she saying that those 35,000 people moved into work? Or is she saying that they stopped claiming benefits, or that they moved house? What actually happened to them?
Priti Patel
It is a combination of factors. The most common reason for people moving off the cap is a movement into work. There will be a variety in terms of the nature of work roles, depending on individual circumstances, but it is also a reflection of the fact that they have been supported into work.
The Chair
No. You have had the opportunity. The Minister is now responding to the debate, and she has been very generous with interventions.
Priti Patel
Thank you, Mr Owen. I heard the hon. Gentleman’s intervention and I know he was touching on local authorities. I will seek clarity on what he was asking and perhaps I will come back to him, if I may, with some details or some further information.
Through clause 8, we are introducing new provisions that require the Secretary of State to take into account the national economic situation and any other matters that they may consider relevant when they review the future level of the cap. The new provisions will allow the cap to be maintained at levels that better support the aims of our welfare reforms, balancing the key aims of strengthening work incentives and promoting fairness between those in work and those in receipt of out-of-work benefits.
That requires a broad assessment of the most significant long-term developments and trends that might affect our economy, which are also important to households up and down the country. Earnings and housing costs are very much a part of that assessment, as are other factors such as inflation, benefit rates, the strength of the labour market and any other matter that may be crucial and relevant at that time. That is why it is important to maintain the new provisions and allow the Secretary of State the ability to consider the context of the cap in a broad and balanced way, without being pinned by any single factor.
Amendment 38 is more of a technical amendment than one that seeks to make any changes to the structure and nature of the cap. It would omit clause 7(5) of the Bill, which omits subsection 97(3) of the Welfare Reform Act 2012. That was the part of the 2012 Act that prescribed the parliamentary procedures under which regulations, made under the benefit cap primary powers, should be subject.
The subsection in question prescribes that the first set of regulations made under section 96 of the 2012 Act should fall under the affirmative parliamentary procedure and so should be subject to debate by each House of Parliament before passing into law. That was the correct thing to do because, as was explained in the debates during the passage of the 2012 Act, the Government’s intention was to provide for a great degree of the structural detail of the cap in secondary legislation. This subsection of the 2012 Act ensured that Parliament would have a full opportunity to debate those detailed plans.
Those debates subsequently took place when the Government introduced the Benefit Cap (Housing Benefit) Regulations 2012, which were debated separately, under the affirmative procedures, in both Houses of Parliament on 6 November 2012. As the undertaking to debate those first regulations has been fulfilled, we considered it opportune to take this chance to remove from the legislation what has now become an obsolete piece of law.
I can assure the Committee that that does not mean that we will take the view that the Secretary of State should not be accountable to Parliament for any future changes to the cap, in particular to its level. Following a review of the cap, if the Secretary of State considers that the level of the cap should be amended, clause 8 provides that they can do so by regulations. It also prescribes that regulations that decrease any of the levels of the cap cannot be made unless they have been debated and approved by each House. Parliament will therefore have a full opportunity to question and debate the rationale for any future reduction in the cap. Increases to the level of the cap will also have to be introduced by regulations, but we believe it is sufficient that they are subject to the negative resolution procedure, and so a debate in the House is not required before an increase can be implemented.
In conclusion, I reiterate that our introduction of the benefit cap has been, first, to support and encourage people to look for work, which is something we will continue to build on. Secondly, introducing a reduced tiered level for the cap will create a greater incentive to work, while ensuring that the impacts of the cap are spread more evenly throughout the country. Thirdly, removing the requirement to base the level of the cap solely on the level of average earnings and replacing it with a broader measure that requires the Secretary of State to take into account the national economic situation will help to ensure that the cap remains at the most appropriate level.
These are important reforms that Members and the public will support. I urge hon. Members to withdraw their amendments.
Hannah Bardell
It is fairly simple. The Bill and the changes to the benefit cap are about taking people to the brink and pushing them over the edge into even greater poverty and, worst of all, pushing people who are severely disabled, sick and vulnerable, not to mention hundreds of thousands of children, into even greater poverty.
Our amendments would mitigate the effects of the Government’s reckless blanket cap to benefits and of the changes in the Government’s austerity measures, which are being imposed on Scottish people who did not even vote for this Government. In Scotland, we are already spending £300 million to mitigate the black hole that Westminster created with the bedroom tax. I wonder how the Minister can justify saying that she is protecting some of the most vulnerable and disabled people when even the severe disablement allowance is itself included in the cap. I can only assume that she will be supporting our amendment 34.
Ultimately, lone parents, women and the most vulnerable will be pushed into even greater poverty, which could lead many into further debt, or vulnerable people into developing mental health issues and problems, spiralling into greater problems and leaving them out of work for longer. Surely those are the very people whom we should be supporting and giving the greatest help to, rather than pushing them further over the edge and putting greater pressure on the third sector and charities. I urge all Members to support our amendments.
Emily Thornberry
I beg to move amendment 104, in clause 7, page 8, line 36, at end insert—
“( ) Regulations under this section shall not be made in relation to persons—
(a) responsible for the care of a child aged below 2;
(b) responsible for the care of and in receipt of Carers Allowance in respect of, but not living with, a person in receipt of Disability Living Allowance, Personal Independence Payment or Attendance Allowance;
(c) in temporary accommodation following an incident or incidents of domestic violence.”
To provide that the benefit cap does not apply to benefit claimants who will find it most difficult to enter work.
Neil Coyle
Briefly Mr Owen. Thank you for your generosity earlier and for preventing me from being put in the same position again.
The derogatory comments about the succinctness of my hon. Friend the Member for Islington South and Finsbury demonstrate the big difference between the Government and the Opposition. These are incredibly important issues that affect thousands of people, and they go directly to the root of the matter. The Government claim to represent working people, but many thousands of the people affected are in work. The Government are taking away fundamental parts of the support system that helps those on low incomes who are trying to work, move on and do the right thing, to use the Government’s terminology. The Government are also undermining people’s opportunity to live in central London constituencies such as mine.
I want to pre-empt something that I suspect the Minister might say about discretionary housing payments. Rather than just focusing on the few local authorities that pass back, or have passed back, some of their unspent discretionary housing payments, perhaps we could discuss the total spend of councils on discretionary housing payments, including those, such as mine, that spend more than they are provided by central Government.
Priti Patel
The amendments would introduce a new series of exemptions from the benefit cap. Largely, they would provide exemptions for the households that find it most difficult to enter work, for people who may be unable to get a job or for those who are not required to be available for work and to take up employment. I will shortly address why I do not agree with introducing the proposed additional exemptions, but I remind Members that the cap sets out the strong principle that there is a maximum level of out-of-work benefits that the Government will pay to each household. The Government have always accepted that there should be some exemptions from the benefit cap.
I will briefly recap the current exemptions. To incentivise work, the cap does not apply to households in receipt of working tax credits. To recognise the extra costs that disability can bring, households that include a member who is in receipt of attendance allowance, disability living allowance, personal independence payment or the support component of employment and support allowance are exempt. War widows and widowers are also exempt, as I am sure all Members recognise.
Neil Coyle
Has any assessment been made of the impact of the benefit cap and other changes on new applications for the supports just listed by the Minister that provide an exemption from the cap?
Priti Patel
I will have to come back to the hon. Gentleman on that point.
The exemptions best support the cap’s aims of increasing incentives to work and promoting fairness while ensuring that the vulnerable remain supported. The welfare reforms that we have discussed thus far in Committee are about transforming life chances and promoting fairness and opportunity.
Amendment 104 would introduce three new exemptions from the benefit cap. The explanatory statement that accompanied the amendment explains that its purpose is:
“To provide that the benefit cap does not apply to benefit claimants who will find it most difficult to enter work.”
The first exemption that the amendment would introduce is for persons
“responsible for the care of a child aged below 2”.
A blanket description that couples with children are those who find it most difficult to enter work is inappropriate. The vast majority of capped households who have found work include parents who have managed to balance their caring responsibilities with work, as millions of working households already do. By going out to work, parents are helping to improve their children’s life chances and are showing them the importance of a strong work ethic, reinforcing the principle that work is the best way out of poverty.
Turning to lone parents with young children, at whom I think this amendment is most likely addressed, we believe that work is the best route out of poverty for households. Children can have their life chances and opportunities damaged by living in households in which no one has worked for years and in which no one considers work as an option. Lone parents need only enter work at 16 hours a week to become eligible for working tax credits and so become exempt from the cap.
We already provide support to parents for the cost of childcare, which we are extending to help working parents further. The 30 hours of free childcare is just one measure, but there are many others, not least tax-free childcare, which will provide a great deal of support, in particular for families on universal credit, who will be able to claim back 70% of childcare costs. On funding for childcare rates, a Government funding review is currently under way, led by the Department for Education, so more is taking place in this area. Parents who receive help with childcare costs through working tax credits are exempt from the cap and childcare costs paid through UC are excluded from the cap. Since the cap was introduced in April 2013, nearly 8,500 lone parents have moved into work and started claiming working tax credits. In 2014, around 1.25 million lone parents were in employment in the UK.
The second exemption that the amendment would introduce is for people in receipt of carer’s allowance in respect of someone who is in receipt of disability living allowance, personal independence payment or attendance allowance with whom they are not living. We all acknowledge the important role that carers provide, but we do not accept that carers are unable to work. Although seeking work is not a condition for receiving carer’s allowance, many carers are nevertheless able to and combine work with caring responsibilities. Figures from February this year show that around 760,000 working-age claimants were receiving carer’s allowance. Of those, around 75,000 reported that they were doing work at some point while making their claim. It would therefore be inappropriate to introduce an exemption specifically on the grounds that somebody is in receipt of carer’s allowance. However, the vast majority—94%—of households in receipt of carer’s allowance who have a benefit income above the cap level are exempt from the cap, mainly because the person they care for is in the same household and is in receipt of an exempting disability-related benefit.
Emily Thornberry
If so few households are affected and if the justification is fairness—although I am not sure about that—why not allow the exemption? If it would save money, because it relates to so little money, why not exempt such people?
Priti Patel
I will carry on. I may pick up some of the points made later.
The final part of the amendment would exempt those living in temporary accommodation following an incident of domestic abuse. The effects of domestic abuse are awful and traumatic; no one could ever argue to the contrary. That is why we have introduced a series of measures to support those who have been subject to domestic abuse, including easements for prescribed periods of time from any requirements to look for or take work. We have special provisions within the cap to help those who have had to flee their homes and seek sanctuary in refuges.
Before the cap was implemented, we amended the regulations so that any housing support paid for people living in what was then termed exempt accommodation should be excluded from the cap. When concerns were raised that the definition of exempt accommodation was too narrow, we amended regulations to ensure that housing support paid to those living in a refuge, for example, as a consequence of domestic abuse would also be covered by the exclusion.
Amendment 67 would require an exemption for those living in temporary accommodation. We do not agree that the best way to help people in temporary accommodation is merely to exempt them from the benefit cap. We believe that the best way is to support people to overcome the barriers and issues that they might face, including the barriers to work. We cannot see why we would want to exclude all households in temporary accommodation from the positive effects of support to get back to work.
Emily Thornberry
Surely the best and in fact the only way of helping people out of temporary accommodation is to build more housing.
Priti Patel
I support the hon. Lady’s comment. That is exactly what the Government’s policy is, and we are doing so.
Although we recognise that rents in temporary accommodation can be high, local authorities have a duty under homelessness legislation to provide suitable, affordable accommodation where the applicant is deemed to be in priority need. Before the cap was implemented, we amended regulations so that any housing support paid for people living in what was termed exempt accommodation should be excluded from the cap. When concerns were raised that the definition was too narrow, we further amended regulations to ensure that housing support paid to those living in refuges would be covered by the exclusion.
Amendment 69 would exempt those in receipt of carer’s allowance. I have already set out the reasons why we do not think the exemption would be appropriate. The amendment also exempts those on employment and support allowance. As I have said, we have already exempted those on ESA who are in receipt of the support component, recognising that they have particular health conditions and are far removed from the labour market and less likely to be able to increase their income.
As discussed—I think that all Members have commented—the benefit cap is a work incentive. Those in the work-related activity group of employment and support allowance have been assessed and are being supported into work, which we believe is right. More recently, we have announced a funding package of up to £100 million a year in the Budget to provide the right incentives and support to enable those with limited capability but some potential to prepare for work. That relates to those within the work-related activity component of ESA.
We are currently in the latter stages of re-assessing recipients of severe disablement allowance and incapacity benefit who are below pension age to see whether they are entitled to employment support allowance and qualify for the work-related activity group or the support group. Those reforms will ensure that such individuals are supported in their engagement with the labour market, or given whatever support they need. More than 1.4 million of those on incapacity benefits have started the reassessment process since it began, and almost 750,000 of them are being supported to prepare or look for work as a result of the ESA process.
Amendment 72 is consequential on amendment 69, to which I have just spoken. The amendment would omit carer’s allowance, employment and support allowance, incapacity benefit, income support and severe disablement allowance from the list of welfare benefits. I have set out why we do not think that that is appropriate; I return to the principles of the benefit cap.
Amendment 70 relates to exempting those in receipt of universal credit without any work requirements. Before addressing this amendment, I remind Committee members that there is an exemption from the cap for those who are entitled to the universal credit limited capability for work or work-related activity element whose health conditions mean that they are further from the labour market and less able to increase their income through work.
Hannah Bardell
I beg to move amendment 28, in clause 7, page 9, line 9, leave out paragraph (a).
This amendment would remove bereavement allowance from the benefit cap.
Emily Thornberry
I would like to talk to amendment 76, but in doing so perhaps offer a critique of the SNP’s amendments. The important thing is that there is a difference between the amendments that have been tabled so far, which would exclude groups, so that if someone is in receipt of a particular benefit, the group would be excluded, but if a particular benefit is to be excluded from the benefit cap, the cap could still hit that group in any event. Let me explain a little better. Take, for example, the bereavement allowance to be excluded from the benefit cap. It would not mean excluding that group because if someone who was bereaved had other benefits that took them on to the other side of the benefit cap, they would still be affected by the cap, despite the bereavement allowance. For my party, it is important to look at the groups as opposed to the benefits. I will throw that into relief in relation to housing benefit.
The housing benefit amendment has been tabled as a probing amendment, but in truth the reason that the cap is even considered is because of the high cost of housing. So if any benefit was to be excluded from the benefit cap, it would be housing. It is housing that causes the so-called trouble. Some people have large families. The Government want to push the benefit gap down even further, but the issue is not even about large families. It can be families that need only two or three bedrooms in some areas, and there will not be a single area in the country that will not be affected by the benefit cap, because of the amount of money that housing costs. So if any benefit were to be excluded, it should be housing benefit, because that is the essence of the costs. If we look at fairness, it really is not the fault of someone who has a larger family who needs to live in a two, three or four-bedroom flat, or someone who lives in a more expensive area. Housing costs could be taken out of the equation when it comes to benefit caps.
The Government are always saying it is not fair for someone on benefits to be receiving more than the average earnings, but of course it is not they who get the money; it is their landlords. It is because the landlords want to be able to accept more money from the state that the rents continue to go up. That is what the amendment highlights. In the end, we are talking about there not being enough affordable housing in this country, either in London or across the country. The benefit caps that have been introduced so far have adversely affected London and large families within London, but the new benefit cap suggested in the Bill of £23,000 or £21,000 will affect families throughout the entire country.
I refer the Committee to the evidence that was given to us by Shelter, I believe. Shelter said that under the new cap a family with four children would be unable to find a home with the number of bedrooms that they need anywhere in England. That is important—nowhere in England without hitting the benefit cap.
The size of the shortfall is also remarkable. The cheapest place to rent the four-bedroom home that the family would need is Bradford, where a home at the lower end of the market costs £123 a week. Even there, a family would face a shortfall of £81 a week. The problem is not only a London one. The way in which the Government are going about introducing the benefit cap and pushing it down and down will affect families throughout the country, including in the constituencies of Conservative Members.
The issue is important. Some people might have been tempted to think that there are Londoners who believe that they should continue to live in London, even though house prices are going up, and that frankly we should leave it to the Russian oligarchs to live in central London and the rest of us ought to move somewhere else. The truth, however, is that there will be nowhere else in the country where a family can live without being affected by the benefit cap—unless we take housing costs out of the cap.
If we take housing costs out and look at the needs of families, we might find that there would not be the same regional variation as we have at the moment. The reason for the variation is the varying housing costs, so the amendment probes that issue. Perhaps the Government will consider the kernel of truth, that the poorest people in this country are being penalised by the Bill and the benefit cap for something that is not their fault; frankly, it is the fault of generations of politicians, Labour and Conservative, who have not built enough affordable housing. It is not the fault of those in my constituency with a family of two living in private rented accommodation that prices are so high. It is not the fault of the family of four in Bradford that house prices will be on the other side of the cap. It is our fault for not ensuring sufficient affordable housing.
I know that the Minister will get up and tell us that the Government are building lots of affordable housing—well get on and build it! Once they have built it, they will not need to have the benefit cap, because people will be able to live on reasonable amounts of money, which will save the country a great deal of money. The time was when Governments used to spend, for every £10 spent on building homes, £1 on benefits that would assist people to live. Now the whole thing is tipped on to its head, so that for every £1 we spend on building homes, we spend £10 on housing benefit.
The answer could be, “Let’s just cut housing benefit! Let’s not let people have enough money to pay rent.” We could do it that way, but that would be draconian, inhumane, cruel and wrong. The other way to do it would be to spend the money on building affordable homes—truly large amounts of affordable homes. We need radical solutions for such a profound problem. The solution is not to turn on the poorest and most marginalised people in this country; the solution is to build more affordable homes and to go for it. If the Government were to do that, they would have the complete support of the Opposition. That is true affordable homes, not the nonsense affordable homes dreamt up for the Greater London Authority by the Mayor of London, with 80% market rent somehow or other an affordable home. We want real affordable homes that cost a reasonable amount of money and that people can genuinely afford to live in.
That in essence is the solution to the problem and what is highlighted in the amendment. I ask the Minister to address herself to the issue raised by the amendment.
Priti Patel
I will not run through the various exemptions called for in the amendments. I will come on to housing shortly, because I will basically rerun some of the points that have been made previously.
The amendments would omit various welfare benefits from those that are currently within the benefit cap. We believe that the current exemptions are the best ones to support our aims of increasing incentives to work and fairness, and to support the most vulnerable.
In our last sitting, we spoke about support for carers and about carers balancing the needs of their care and work responsibilities. I appreciate that the hon. Lady has called for a wide range of amendments to omit child benefit, child tax credit and guardian’s allowance from the benefit cap.
Emily Thornberry
I have a question for the Minister and I would be grateful if she were able to answer it, perhaps with the assistance of her officials. I believe she said that many carers combine work with caring responsibilities, but people can claim carer’s allowance only if their caring responsibilities take up more than 35 hours a week. To work enough hours to exempt themselves from the cap, they would need effectively to work 51 hours a week. If that is right, does she accept that that would be an inappropriate amount of time for people to be working in order to be exempted from the cap?
Priti Patel
I put that in the context of the some of the other benefits within the household, which would therefore exempt the carer from the benefit cap.
The hon. Lady calls for a range of exemptions. She will not be surprised—I made the point on the previous group of amendments—that we believe that, to incentivise work, the cap does not apply to those households in receipt of working tax credits. We outlined a range of exemptions in the last sitting when we discussed the previous group of amendments.
The hon. Lady touched on the only area on which there is a degree of consensus on the Bill and in the debate: the role of housing. She spoke to amendment 76, which would remove housing benefit from the benefit cap. I understand it to mean not that households in receipt of housing benefit would be exempt from the cap, but that their housing benefit payment would be disregarded from the calculation of the total household benefits to which they are subject. The removal of housing benefit from the benefits that are subject to the cap would simply undermine the principle of the cap.
Priti Patel
As the hon. Lady and other hon. Members know, housing benefit is usually the single largest benefit, therefore the cap would no longer have the intended effect of limiting high levels of total benefits.
In addition, the amendment does not refer to housing costs in relation to universal credit. It would therefore mean different treatment for households in receipt of housing benefit and those on universal credit, which is surely not the intention. The inclusion of housing benefit in the cap is specific to the principles of the cap. Obviously the Government support it through discretionary housing payments, for example. As we discussed earlier, there is now more funding for those payments. As I said, we have announced additional funding that will continue, with £800 million being made available for discretionary housing payments over the next five years. Given that, it would not be right to exclude housing benefit from the cap.
The hon. Lady was right—I am going to make the point that more is being done on building homes. That is not for the Bill, because it is not for the Department for Work and Pensions, but building homes is about the Government working with local authorities to focus on doing more in that space. There is no doubt that we all want more affordable housing. The Government have so far committed £38 billion of both public and private investment to help to ensure that 275,000 new affordable homes are built between now and 2020.
The hon. Lady pointed out that we need to get on with it. That is exactly what we are committed to do. I ask local authorities to work with us to achieve that common aim. That is fundamental to supporting people not just in respect of housing need, but in respect of giving them a quality of life. That is right and proper. It is also fundamental to dealing with the issues of rent, housing costs in general and homes standards, which have also been aired in the debate.
Because we have touched on many of the exemptions in debates on previous clauses, I will not rehearse them. Given that we have a vast number of exemptions from the benefit cap, it would not be appropriate or right to extend them to the exemptions proposed in this group of amendments, so I urge hon. Members not to press them.
Priti Patel
I beg to move amendment 88, in clause 7, page 9, line 43, at end insert—
“(4A) Subsection (11) (benefits that regulations may not prescribe as welfare benefits) is omitted.”
This amendment to omit section 96(11) of the Welfare Reform Act 2012 is consequential on the amendment of the definition of “welfare benefit” in section 96(10) by clause 7(4).
Priti Patel
Government amendment 88 simply tidies up the existing legislation. Section 96(11) of the Welfare Reform Act 2012 refers to regulations under subsection (10). As regulations will no longer be made under subsection (10), the reference is obsolete and needs to be removed. Amendment 88 inserts a new subsection (4A) into clause 7 to achieve that.
Amendment 89 is consequential on that, removing a reference to section 96(11) of the Welfare Reform Act 2012 from schedule 12 to the Pensions Act 2014 by inserting a new subsection (5A) into clause 7. To be clear, there is no change to the benefits that are subject to the cap. Indeed, the provisions in the Bill move the list of capped benefits into primary legislation, providing greater certainty as to the extent of the cap. The benefit cap applies to working-age benefits. Retirement benefits are not subject to the cap.
Amendment 90 is a technical amendment to clause 7(6), which allows us to put in place, if needed, transitional provisions that will support a phased introduction of the changes we are making to the benefit cap. The amendment extends those transitional provisions to subsection (4) and the new subsections (4A) and (5A). It is necessary to ensure that the cap is rolled out effectively in a way that works for everybody.
We continue to develop our implementation plans for the new benefit cap, and we will work with key partners in doing so. We want to repeat the success we had when we originally rolled out the cap, so we will be working closely with Jobcentre Plus and local authorities to ensure a joined-up delivery approach, which previously provided claimants with notice and support, enabling them to respond to the cap and move into employment. The amendment will give us the flexibility to develop and deliver an implementation plan that achieves the aims of the cap, meets the needs of delivery partners and provides the appropriate supports for claimants.
Amendment 88 agreed to.
Amendments made: 89, in clause 7, page 9, line 45, at end insert—
‘(5A) Paragraph 52 of Schedule 12 to the Pensions Act 2014 is omitted.”.
This amendment provides for the repeal of provision amending section 96(11) of the Welfare Reform Act 2012 and is consequential on amendment 88.
Amendment 90, in clause 7, page 10, line 2, leave out “and (3)” and insert “to (4A) and (5A)”.—(Priti Patel.)
This amendment enables transitional provision under clause 7(6) to disregard the effect on section 96 of the Welfare Reform Act 2012 of the amendments made by clause 7(4) and clause 7(4A) and (5A), added by amendments 88 and 89.
Question put, That the clause, as amended, stand part of the Bill.
Emily Thornberry
Amendment 12 would leave out the provision that the benefit cap should be reviewed in each Parliament and instead state that it should be reviewed each year. The reason for that is obvious. We hear from the Government all the time about how well they are doing, how many people are getting into work and how well the economy is doing. If all of that is true, the level of inflation may well go up. For that reason, it seems entirely reasonable, responsible and fair to review the benefit cap every year. There has been a tradition of benefits being reviewed every year. The amendment would be consistent with what has been settled practice in terms of fairness in the past. If the benefit cap really is about fairness, surely there should be no problem with ensuring that the benefit cap is reviewed each year instead of in each Parliament.
That brings me to new clause 1, which states that the Secretary of State must report to Parliament by 31 March 2017 on the impact of the benefit cap reductions introduced in the Bill and that the report must include an assessment of the impact on each measure of child poverty, as defined by the Child Poverty Act 2010. That takes us back to the mantra that Ministers will hear throughout the parliamentary debate on this Bill, which is evidence, evidence, evidence. Not prejudice, not Daily Mail headlines but evidence.
If the alleged high-minded principles behind the Bill are a true ambition, the Government will not be frightened of an assessment to ensure that they are not being cruel, or randomly dishing out unfairness, but are truly pursuing the policies they claim to be trying to promote. If they are truly confident that their ambitions will be fulfilled as a result of the Bill, they will not run away from new clause 1 but embrace it. As they come up to the next general election, they will want to say, “Thanks to the Labour party, we have been able to measure the real success of our Bill. We have not been unfair on anyone. Everyone is back in work. Look at the way in which the streets of London flow with milk and honey.” Indeed, we will support them, and applaud them, if what they say they want to do really happens, but we will not know what has happened, other than from the weeping people coming into our surgeries, if we do not measure it properly.
The Government have resources to measure this properly, so why run away? Why not go ahead and measure the so-called success that will result from the Bill? If the Government are not prepared to measure it, those watching the debate will know that the reason they do not want to measure it is because they know what is really going to happen: the poor are going to get poorer. The Government are picking on the poorest in order to pay off the deficit, which is unfair.
Priti Patel
This group contains two proposals. As we have heard, amendment 12 would introduce a requirement for the Secretary of State to review the level of the benefit cap annually, and new clause 1 would require the Secretary of State to publish and lay before Parliament a report on the impact of the changes.
On amendment 12, the Bill requires the Secretary of State to review the level of the cap at least once in every Parliament, but it also provides him with powers to review the benefit cap at any other time he considers appropriate. That provides the most effective means of ensuring that the cap stays at the appropriate level while providing the stability that households on benefits require. The cap’s current provisions require the level to be reviewed annually, but that is specifically to review the relationship with average earnings, on which the level of the current cap is based. To date, there has been no need to change the level of the cap following those annual reviews.
Earlier, we touched on some of the evidence showing that households affected by the cap are 41% more likely to go into work. Our provisions already include powers allowing the Secretary of State, if appropriate, to review the cap at any time in the Parliament, which means that the Government will not be constrained from reviewing the cap, particularly in light of any significant economic events. The clause, as drafted, will therefore provide a sufficient safeguard, and the level of the cap remains at the appropriate level.
On new clause 1, during the passage of the Welfare Reform Act 2012, the Government committed to a full evaluation of the benefit cap to explore its effectiveness. The then Minister with responsibility for employment announced that DWP would publish a review of the cap after its first year of operation. The review was published in December 2014 and explored the progress from policy development to implementation and delivery. The report evaluated the effectiveness of three specific aims that underpinned the introduction of the benefit cap. These were to focus on work incentives, introduce greater fairness and, of course, to make the system more affordable by encouraging positive support for individuals who needed it, particularly in getting back to work.
The cap has been in place for about two years, and evidence shows that it has been successful. We intend to build on that success. Since its introduction, more than 16,000 capped households have moved into work. As I mentioned, capped households are more likely to go into work than those that are uncapped. This has been achieved without a legislative requirement for reports and evaluations. We do not feel that it is necessary to commit in legislation to delivering any future evaluations. We have not decided on approaches yet but, as before, an evaluation of the new cap would be most appropriate after implementation, when we can see the cap’s full effect and the behavioural changes it causes, and they can be reviewed accordingly.
The Government’s record on providing a review of the cap should be recognised. Also, a number of independently commissioned pieces of research and analysis, peer reviewed by a range of organisations, has been published. That, with the introduction of the life chances measures, means that, contrary to what is suggested in the amendment, we do not need legislation to report on the impact of the benefit cap. I urge the hon. Member for Islington South and Finsbury to withdraw the amendment.
Neil Coyle
I beg to move amendment 94, in clause 8, page 10, line 30, at end insert—
“(aa) the impact of the benefit cap on disabled persons and carers.”
This amendment requires the Secretary of State to consider the impact of the benefit cap on disabled people, and carers, when reviewing the level of the benefit cap.
Corri Wilson (Ayr, Carrick and Cumnock) (SNP)
The amendments in this group are intended to limit the scope of the Secretary of State’s power to adjust what is, and what is not, in the review, to ensure that the Government review the impact on disabled people and carers as well as using reports from important organisations tasked with children’s rights on the impact of the cap.
Amendment 94 would require the Secretary of State to consider the impact of the cap on disabled people and carers, because the impact assessment that accompanies the Bill contains no detail about the possible impact on disabled people who are not in receipt of disability living allowance or personal independence payment. We support the amendment, because it would ensure that the Government carry out further assessment of the impact on disabled people, carers and their families.
The disability benefits consortium has called for the Government to review the impact prior to the lowering of the cap. Those on disability benefits face daily struggles with their health, mobility and wellbeing, and the last thing they need is the prospect of financial hardship, too. I do not believe that anyone chooses to be on benefits, but for those with disabilities, they can be a lifeline, and the means to a better quality of life and independence. Many carers also face daily struggles to make ends meet, as a result of the additional costs of caring combined with the loss of income from giving up work or reducing working hours. What assessment have the Government made of the number of families who will no longer be able to care as a result of the lowering of the cap?
Amendment 73 would remove the provision allowing the Secretary of State to set the cap by reference to any other matters that he considers relevant. Clause 8 does not provide enough assurance that the Government will review the benefits cap with all due process and consideration. The national economic situation and “any other matters” are not exactly the building blocks of a robust and watertight reporting obligation on a matter that establishes the income of hundreds of thousands of people. These factors are too broad to be meaningful, and they run the risk of decision making that is based on political expediency rather than need for some of the most vulnerable households in our community.
We support amendment 13, because the Social Security Advisory Committee would be looking closely at the impact of the changes in the welfare system. Amendment 14 would require the Social Security Advisory Committee to report annually on the level of benefits, and to include an assessment of the impact of the cap on discretionary housing payment, which bridges the gaps that low-income families face because of welfare changes. We support the amendment, because it would ensure close monitoring of the impact of the cap on housing for families across the UK.
The DWP estimates that as many as 90,000 additional households across the UK are subject to the new cap, and vulnerable households, despite already being deemed to be in need of state support, could have their housing benefit substantially reduced even though they do not live in areas considered atypically expensive. Such a policy needlessly risks causing homelessness. Those affected by the cap will increasingly be ordinary-sized families in average-priced areas, who are simply struggling to make ends meet. The new cap will move those families closer to losing their homes.
We welcome amendment 105, which relates to the need for any reports on the impact of the benefit cap on children to be considered in the review of the benefit cap. With 210,000 children in Scotland living in relative poverty after housing costs, we must ensure that any review carried out by the Tory Government looks closely at the impact felt in Scotland by many families and their children. The Child Poverty Action Group has estimated that Scotland’s child poverty rate will increase by up to 100,000 by 2020 as a direct result of the UK Government’s tax and benefit policies. There is real concern that the further reduction of the benefit cap will compromise the wellbeing of more children as housing security is threatened, school life is disrupted and community links are broken. To date, twice as many children have been hurt by the current cap than adults. We do not support the benefit cap as it will cause increased hardship for people and we believe that the legislation does not come close to providing protection for our children from poverty.
Priti Patel
The clause introduces new provisions for how the Secretary of State should review the level of the cap in future and what factors he needs to take into account when undertaking such a review. The Bill prescribes that, when reviewing the level of the benefit cap, the Secretary of State must take into account the national economic situation. It also allows him to take into account any other matter he might consider relevant. The amendments would introduce a number of additional specific factors that the Secretary of State would have to take into account when undertaking that review.
On amendment 94, in the course of the debate we touched on specific aspects of support for disabled people and carers. We are mindful of the impacts of policies on those vulnerable groups, and I outlined some of the support in particular that the welfare system continues to provide to protect the poorest and most vulnerable members of society. I remind the Committee that there are exemptions from the cap for households where there is a claimant in receipt of DLA, PIP, attendance allowance or the support component of ESA. I will follow up some of the points made by the hon. Member for Bermondsey and Old Southwark and drop him a line.
Amendment 73 would require the Secretary of State, when reviewing the level of the benefit cap, to take into account the national economic situation and add average earnings, regional variations and the cost of housing. It would also omit the provision that allows him to take into account any other matters that he considers relevant. I think it is fair to say that the proposed powers drawn up are broad, but we do not think it is possible to stipulate in advance the specific economic factors and developments most suitable to set the appropriate level for the cap at the time the review is undertaken.
Emily Thornberry
The Minister admits that the powers are broad and, therefore, presumably she will concede that it is difficult for us to hold the Government to account for what they are doing. In those circumstances, it is difficult for us to be clear. For anyone who may wish to scrutinise this legislation in future, when we as Members of Parliament were scrutinising this legislation, we were unaware and not told in which circumstances the Secretary of State would change the benefit cap. I want to spell that out, because people will read the transcript and we want to be completely clear in case this matter is to go before the courts.
Priti Patel
The hon. Lady specifically mentions the benefit cap in relation to going to the courts. The Supreme Court has confirmed that the benefit cap is lawful. With regard to work required on reporting the benefit cap, the cap has been reviewed annually since its introduction as per current legislation, and those reviews found that no change was required. Obviously, a review of the national economic situation must be thorough, and regular annual reviews could result in the cap being unduly affected by a range of short-term economic fluctuations. At worst, that could lead to significant variations and cap yo-yoing, which would provide no stability for those in receipt of benefits and those who rely on that income in particular. There will be occasions when economic developments mean that a review of the cap must be undertaken more than once in a Parliament. We have seen considerable changes in recent years through changes to the economy as a whole.
Comments were made about the Social Security Advisory Committee, the long-standing and respected body that has provided an independent voice for many years and many detailed and informed reports on matters across the broad spectrum of welfare and social security. The Government value many of its opinions and the work that it undertakes. The committee already has well-established engagement with a full range of stakeholders with interests in this area on welfare reforms and it ensures that any advice that it provides encompasses a broad range of views. Obviously, we place a great deal of value on the work of the committee, but we do not necessarily think that it is right that in undertaking a review of the level of the cap, the Secretary of State has a statutory requirement to take account of the report of the committee, or that it is appropriate for the Secretary of State to be bound to consult an individual body when reviewing the cap.
Priti Patel
I beg to move amendment 91, in clause 8, page 11, line 13, at end insert—
“( ) Section 176 of the Social Security Administration Act 1992 (consultation with representative organisations) does not apply in relation to regulations under subsection (4).”
This amendment provides that regulations that change the level of the benefit cap do not require consultation with local authority associations under section 176(1) of the Social Security.
The amendment aims to replicate a similar provision that has been inserted into clause 7, carrying forward the existing arrangements under which my Department is not required to consult with local authority associations on the commencement of housing benefit regulations, specifically in this case when the revised benefit cap is introduced. Historically, commencement orders have not been consulted on and have not been caught by consultation obligations regarding housing benefit regulations. However, commencement orders in the Bill have been superseded by commencement regulations.
As mentioned, to maintain the status quo, a provision in clause 7 has been inserted into the Bill to remove any new requirement for the Department for Work and Pensions to consult with local authority associations on the commencement regulations for introducing the benefit cap. The amendment inserts a similar provision into clause 8, so that there is no obligation to consult on commencement regulations should the benefit cap be changed in future.
The Committee should be aware that any change to lower the benefit cap will be subject to debate.
Hannah Bardell
I would like clarification, if possible. Will the amendment restrict any previous consulting powers that the Government have with Scotland?
Priti Patel
I will provide the hon. Lady with full clarification on that point.
Any change to lower the benefit cap will still be subject to debate under the affirmative procedure in both Houses of Parliament.
The Department will continue to liaise with local authority associations to ensure the successful implementation of the new cap and that claimants are fully supported ahead of the introduction from around autumn next year.
Amendment 91 agreed to.
Question put, That the clause, as amended, stand part of the Bill.
Neil Coyle
Amendment 95 and 96 are in my name. In the interests of time, I will be as brief as possible. I hope there will be an opportunity to come back to these issues on Report if my questions are not answered. Fundamentally, this comes back to the same issue. Disabled people are directly affected by this measure—in particular, by ESA. This is about the full component, not just the £30 support group component. The full ESA payment needs to be taken into consideration, and we have concerns about those who are directly affected. The real question is about the Conservative manifesto commitment. Page 28 of the manifesto states:
“We will freeze working age benefits for two years from April 2016, with exemptions for disability and pensioner benefits”.
The amendments would help to ensure that that manifesto commitment is delivered. I hope to come back to this issue on Report if it is not dealt with sooner.
The Exchequer Secretary to the Treasury (Damian Hinds)
Things have accelerated, Mr Owen.
It is a pleasure to respond to this concatenated set of amendments. As these are probably the last words that will be said in this Committee before we break for the party conferences, I want to pay tribute to the hon. Member for Stretford and Urmston and the right hon. Member for East Ham, who is my cloakroom neighbour. They are both impassioned campaigners whose dedication and intentions can never be doubted. They will be very much missed from this Committee. Of course, we warmly welcome the hon. Member for Islington South and Finsbury to her new position.
This has been a full debate on a range of important issues. In responding to the amendments, I will reiterate the rationale behind our proposed changes and set out why we are not persuaded that the amendments should be accepted. However, before I do so, I want to recap the purpose of the Bill and in particular clauses 9 and 10.
The Bill seeks to move this country from a low-wage, high-tax and high-welfare society, to a higher-wage, lower-tax and less welfare-reliant one. That means ensuring that work always pays and focusing support on those on the very lowest incomes. Crucially, it means ensuring that the system is fair to those who pay for it, as well as those who benefit from it. Combined with the national living wage and the changes to the income tax personal allowance, the summer Budget ensured that a typical family working full time on the national living wage will be better off by the end of the Parliament, with eight out of 10 working households better off by 2017-18.
The Bill builds on this Government’s achievements in delivering for working people, whether that is the 1,000 jobs created every day—2 million since 2010—the 2.9% growth in wages this year, a 9% increase in total hours worked since 2010, or the fact that, according to the OBR, living standards are projected to be higher in 2015 than in any previous year. These clauses, which freeze the main rates of working-age benefits, child benefit and the majority of tax credits, are a central element of the Bill and are key to this Government’s ambition of putting welfare on a fairer and more sustainable footing. The exemptions for benefits, which help with the additional costs of disability, ensure that we continue to protect the most vulnerable.
Neil Coyle
I have one quick point about those who contribute. Some of the benefits that we are discussing, employment support allowance in particular, are paid to those who contributed to the system when they have been able to work. It is deeply unfair and unjust to suggest that this is somehow about protecting those who work and do the right thing when the very people that we seek to support have contributed and have then developed health conditions.
Damian Hinds
The hon. Gentleman is absolutely right that people in receipt of a number of benefits will have contributed to the system. It remains the case that we fund benefits out of current contributions. It remains the case that we have a budget deficit of 5% of national income. It remains the case that we need to get that down to start paying down the national debt. In order to do that, we need to find £12 billion of welfare savings.
The freeze has been extended to four years due to the current low-inflationary environment to ensure that it makes a significant contribution to the £12 billion reduction that I just mentioned. When originally announced as a two-year freeze, it was forecast to save £3 billion and to lead to a real-terms reduction in benefit rates of 4%. Due to the current environment, it would now save less than £1 billion. The Government have therefore extended the freeze to ensure that it generates at least the same level of savings, and more, than announced last autumn.
Emily Thornberry
Just to be clear, the Minister is not attempting to put forward a moral case. It is simply about saving money. It is about saving money from the poorest.
Damian Hinds
I am not quite sure how the hon. Lady managed to infer what she just said from what I just said. I was explaining—
Damian Hinds
I will be delighted to. I was explaining why what was originally a two-year freeze has been extended to a four-year freeze because of the current low-inflationary environment and the need to make the savings that form a substantial part of the £12 billion that we have been discussing.
While the Government have a clear mandate for the reforms, it is imperative that we protect the most vulnerable. We are protecting pensioners, with pension credit, the pension additions in other benefits, and the basic state pensions—they are all excluded from the freeze. We are also exempting benefits relating to the additional costs of disability, such as attendance allowance, disability living allowance, and personal independence payments. We have exempted the support group component of ESA, the limited capability for work and work-related activity component of universal credit, as well as additions and premiums in JSA, ESA and tax credits related to disability. Statutory payments, including statutory maternity, paternity and adoption pay, statutory shared parental pay and statutory sick pay are also all exempt. Those exemptions ensure that the most vulnerable in society are protected from the benefit freeze.
Let me speak directly for a moment to amendments 95 and 96, which seek to exempt disabled people from the freeze by ensuring that any of the relevant sums of working-age benefits and tax credits are increased in line with inflation, if they are claimed by a person who is disabled. In bringing forward our policy to freeze benefits and tax credits, we have been extremely mindful of the protections that we believe it is right to put in place to support the most vulnerable.
We are exempting all the benefits relating to additional costs of disability, as I just listed. Similarly, we are protecting the disability premiums and additions in working-age benefits, tax credits and pension-age benefits. The support group component in employment and support allowance and the limited capability for work and work-related activity element of universal credit are also protected. Those elements are paid to those with the most severe work-limiting health conditions in recognition of the fact that they are less likely to be able to increase their income by moving into work and may have additional needs as a result. Those are vital protections alongside the very acute need to make savings.
Neil Coyle
The Minister is accepting that the majority of the payment received by disabled people in the employment and support allowance group who are judged unfit to work—full stop—will not be protected. He is making the Prime Minister’s commitment to protect disabled people false. Of the payment of roughly £100 that those people would be expected to receive, £30 or so will be protected, whereas £70 will not. Will the Minister confirm that that is accurate?
Damian Hinds
What we have said is that those in the support group will be exempt, but not those in the work-related activity group. The main rates of working-age benefits are there to provide basic support for claimants who are not in work. Those rates are common across all claimants who receive out-of-work benefits. Introducing new higher rates of payments specifically for disabled people has the potential to discourage claimants from taking steps to get back to work where they can and would introduce significant complication into the system, leading to possible confusion for claimants.
Hannah Bardell
The Minister says he is going to be protecting disabled people. Will he explain why people on the severe disablement allowance will be included in the benefit cap? Surely that will make those most vulnerable people even poorer.
Damian Hinds
The hon. Lady will forgive me, I know, if we do not talk again at length about the benefit cap. We had a big debate about that in the earlier group of amendments that referred to the benefit cap. I repeat all the exemptions that are being made in the freeze—well, I am not going to repeat them all, but she heard them. There are all the exemptions that the Government are making for those specific benefits and elements of benefits that refer to the additional costs of disability.
The Government are committed to ensuring that disabled people are able to participate absolutely fully in society and have set out their ambition to halve the disability employment gap, which I think is something that Members on both sides of the Committee and the House would agree on.
Damian Hinds
Will the hon. Gentleman forgive me if I do not, just in the interests of time?
Most people with disabilities and health conditions want to work and we will support them to prepare them for work and to move closer to the labour market, and when they are ready, to move back into work. We believe that the freeze is a necessary and fair way of putting welfare spending on a more sustainable footing, but that it is vital to offer protection to the most vulnerable. The best way of doing that is by supporting people who can to move closer to the labour market and by continuing to protect those benefits relating to the additional costs of disability.
Neil Coyle
Let me try a different tack. Does the Minister expect this range of cuts to be as successful as the last set of cuts, which were projected to save billions on ESA and DLA but actually resulted in higher spending of £10 billion?
Damian Hinds
We are debating a group of amendments about a four-year freeze to certain benefits. Do I expect that to be successful in delivering the £3.5 billion that it is projected to? Yes, I do, and it is clearly a mathematical point about the rate of inflation and so on. We have the independent forecasts of how the economy is going to grow and of inflation, and I believe that our measure will deliver.
The Scottish National party amendments replace the freeze and the duty to review with the removal of the freeze altogether. That would remove the certainty we have about legislating directly for a freeze, and move us from the position where we have a clear plan reflecting the electoral mandate of the Government to one where the taxpayer could not be sure, year on year, as to the level of benefits.
Certainty for individuals, to help them plan ahead, is a key feature of the Government’s economic policies. It is also why we have introduced a national living wage, and pre-announced the anticipation that it will rise to £9 an hour by 2020 and the ambition to increase the tax-free personal allowance to £12,500 by the end of the decade. Legislating now to freeze for four years, along with those other measures, provides clarity to benefits recipients, giving them fair notice and the opportunity to make positive changes. Anyone supporting the amendments before us would have to spell out how they would instead give the public that certainty about the level of spend and identify where else they would make cuts.
I turn briefly to new clause 2 on the local housing allowance. The measure announced in the summer Budget to freeze local housing allowance rates for four years will contribute savings of £1 billion towards the Government’s commitment to reduce the welfare bill by the £12 billion I mentioned. It is not included in the Bill, as the Secretary of State already has the powers in primary legislation to change the way in which LHA rates are set. Those powers were included in the Welfare Reform Act 2012.
It may help, however, if I clarify how the freezing of LHA rates will work during the four-year period. The rates will still be reviewed each year and rent officers will calculate, as they have been doing previously, a rate calculated by reference to the 30th percentile value from a list of rents for properties of a given size in that area. Each list of rents must include achieved rental values from the distribution and range within each area. In line with the Government’s measure to freeze rates, they will then set the new LHA rates based on the lower of either the April 2015 rate or the 30th percentile of listed rents. The Government recognise that some areas will see particularly high increases in rents, so we have made specific provision for those areas.
Over the Parliament, 30% of the savings generated from this measure will be used to create more targeted affordability funding, building on the £140 million already distributed since 2014. Alongside that, local authorities are able to provide support to the most vulnerable claimants affected by housing benefit reform through an enhanced package of £800 million of discretionary housing payment funding, which is significantly more than was provided over the previous Parliament.
I reassure hon. Members that, alongside the LHA rates, we will continue to publish, as we have previously, the 30th percentile of market rents in each area. We believe that the freeze to the main rates of the majority of working-age benefits, child benefit and tax credits are a necessary and fair way of putting welfare spending on a more sustainable footing. I urge the hon. Member for Islington South and Finsbury to withdraw the amendment.
Hannah Bardell
We will not press our amendments, on the basis that we will be voting against the clause. I would like to make some points on those amendments. The Minister made a point about reducing the deficit. We reject that wholeheartedly. There is a huge amount of academic research that says the austerity agenda is going to fail, and that investing in people and investing in benefits will stimulate the economy. For all those reasons, we categorically reject what he is saying. Our amendments speak to the fact that the benefits system has to keep up with the economic conditions of the country, otherwise we are letting the poorest people down.
The UK Government are proposing to extend the freeze on working-age benefits from two years to four years, which will end in 2020. That would end the link with prices and earnings, effectively cutting the benefits that support those people who are most in need, and ensure that the lowest-income households continue to get poorer over the years between now and 2020. For example, child benefit is projected to lose 28% of its value, according to the Child Poverty Action Group. That will have a devastating impact on child poverty rates in Scotland.