(8 years, 4 months ago)
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Lord Freud
That the House do now resolve itself into a Committee upon the Bill.
Baroness Hayman (CB)
My Lords, on a business point, perhaps I can help the noble Baroness, Lady Anelay, as I noticed that other Members of the House wished to come in on the Question, but we had only 10 minutes in which to do so rather than the 20 minutes that we would have had on a Statement.
It was not a prime ministerial Statement, but I well remember making a proper ministerial Statement to this House when the other place was not sitting when the first case of foot and mouth disease was discovered in February 2001. As I say, the House of Commons was not sitting. Although the noble Baroness is not the Prime Minister, she has the respect of this House and I simply recommend to the Government Front Bench that it would be possible to have a ministerial Statement in those circumstances; there is precedent for that.
Lord Cormack (Con)
My Lords, in considering that, I urge my noble friend to consider also how inconvenient it is when the two Houses sit at different times. It would have been so much more sensible if both Houses had risen on the same day and were to come back on the same day.
Baroness Sherlock
“( ) A report prepared under this section must include information regarding the adequacy of resources given to local authorities to fund the support provided for troubled families.”
Baroness Sherlock (Lab)
My Lords, in moving Amendment 70 in my name and that of my noble friend Lord McKenzie of Luton, I will speak in support of Amendment 71 in the name of the noble Baroness, Lady Manzoor.
We are supportive of the recognition by successive Governments of the need to invest intensively in co-ordinated support for families facing multiple challenges, many of whom are involved with a number of agencies. Labour began work in this area, and in 2012 the coalition Government launched the first phase of what they called the troubled families programme. The Prime Minister, David Cameron, was reported as saying that he would put “rocket boosters” under efforts to turn around the 120,000 troubled families in the wake of the riots of 2011. I declare an interest as one of the four members of the Riots Communities and Victims Panel set up by the Prime Minister in the wake of those riots.
My experience as a member of the panel really stays with me. The panel was unpersuaded that there was much overlap between the rioters and the surprisingly precise number of 120,000 families who were then the target of the troubled families programme. In a poll we conducted of 80 local authorities, only 5% felt that there was much overlap between the rioters and the troubled families. One of our concerns was how we should support the roughly 500,000 forgotten families, who would not be reached by the government programme because things were not bad enough. They were bumping along the bottom, not coping but not doing badly enough to get help.
Those families need our help. I have never felt that the challenges families face are just about money, although its absence can be and often is a significant or at least aggravating factor. I will be interested to see the evaluation of the various programmes local authorities set up under the banner and funding regime of troubled families. I welcome the proposal in Clause 3 to require the Secretary of State for Communities and Local Government to report annually to Parliament on the progress of families supported by the troubled families programme. Amendment 70 would require that report to include information,
“regarding the adequacy of resources given to local authorities to fund the support provided for troubled families”.
I find it hard to work out the detail from the published financial framework so I hope the Minister can help. Can she say for the record what the longer-term funding proposals are, now that the Autumn Statement is out? Councils are being asked to design their own programmes to work with an agreed number of families, using criteria set out by central government. I understand that the original troubled families programme offered £4,000 per family. The financial framework says there will be a £1,000 attachment fee when an authority first works with a family, then an extra £800 on a payment-by-results basis depending on certain outcomes. Satisfactory outcomes are either “continuous employment” or “significant and sustained progress” over the five-year period.
I have some questions for the Minister. First, what work have the Government done with local authorities to ensure that that is an appropriate amount to incentivise them to choose the right outcomes for each family, rather than the ones that are the easiest to evidence, to make sure that they get the money that they are going to depend on to be able to run the provision? Secondly, are the Government talking to local authorities to make sure that the reporting requirements are not so onerous that they drain valuable resources or create incentives to focus on more readily documentable activity or more easily evidenced outcomes?
On the reporting point, one local authority representative said in the evidence session on the Bill in another place that the troubled families programme is addressing behaviours built up over decades or even generations. It is not,
“a 12-month, quick-fix, dip-in dip-out programme”.—[Official Report, Commons, Welfare Reform and Work Bill Committee, 10/9/15; col. 17.]
How will the Government ensure that annual reports reflect the need for longer-term interventions?
Have the Government considered the extent to which other proposals in the Bill may obstruct the success of the troubled families programme and, if so, how they might mitigate that? The reduced benefit cap and the two-child limit are likely to force some families to move in pursuit of cheaper housing. One Member of Parliament reported that 1,000 families had already moved from her inner London borough to cheaper areas. But as the cap is reduced, they could end up moving again. Losing track of families who move has been a recognised problem for social services for years and it features quite often in serious case reviews, including some very well-known and damaging child protection cases.
Having to move is worrying because after families have been given support for the first time, when they move they can simply drop out of sight. They also lose access to community support services such as preschool activities, parenting classes, health visitors or support workers in mental health. I am particularly worried about children having to move schools—I will return to this on a later group—when a lot of work could have been done to get that child and school working together and keep them in school.
The family will also lose their troubled families support worker and that is a relationship based on trust, which can take a long time to establish. On the assumption that the worker will not move to the new boundary, how can the programme ensure that the work that has been invested in that relationship of trust is not lost? That relationship between the worker and the family is not the icing on the cake; it is the cake. Louise Casey, who runs this programme, has talked movingly about the missing ingredient in these settings often being love. This is based on relationships. My concern is that a significant investment in those families, both emotional and financial—as taxpayers’ money—will be thrown away if that relationship is broken. Can the Minister tell the Committee what arrangements have been made for transferring support for families if they end up moving across boundaries, especially as a result of the Government’s own policies? I beg to move.
Baroness Manzoor (LD)
My Lords, I shall speak to Amendments 70 and 71. I do not want to repeat what has already been so well put by the noble Baroness, Lady Sherlock, concerning Clause 3 and reporting obligations. I want briefly to summarise something that the Guardian found under a freedom of information request in November 2015. That request showed that in the 120 councils that responded, only 79,000 families were turned around through a family intervention, which is meant to be an integral part of the troubled families programme. The research also found that more than 8,000 families in more than 40 local authorities had not received any kind of family intervention but had instead been turned around solely on the basis of data-matching exercises. The research found that councils might, for example, trawl through employment, youth crime and truancy data to identify a family that would have been eligible for the programme and which, without receiving any help from the troubled families programme, fulfilled the criteria for being turned around because school attendance had improved or one of the parents had found a job.
My Amendment 71 is an attempt to prevent this. It asks that a report prepared under this section must include an assessment of,
“the types of interventions provided by local authorities in the previous financial year, and … the success or failure of the types of interventions provided by local authorities in the previous financial year”.
I hope that the Minister will feel that this amendment would enable an improved assessment of the interventions provided by local authorities and will accept it because without this kind of data, we are not going to get underneath exactly which services local authorities are providing. I believe that the Government believe they must have an evidence-based approach, and this amendment will enable them to do so.
Lord Kirkwood of Kirkhope (LD)
My Lords, I want to make a short intervention in support of the two excellent speeches that have been made in introducing Amendments 70 and 71. I agree with everything that has been said, and I think we need another name for this programme as “troubled families” is a terrible name for it. I do not know whether we should have a competition for it—it might be too late. However, those families are certainly more troubled for being called troubled, so we need to think carefully about this. I hope that these suggested annual reports will not just be analytical and statistical but will come up with some policy advice and dynamics about change, to make these programmes better for the future.
I have had a bit of experience of working with a troubled families programme indirectly as a non-executive director of the Wise Group in Glasgow. It had a pay-as-you-go performance contract in the north-east of England, which was very interesting. I am in favour of the multiagency approach, but it is still in its early days and needs to be developed. I hope that these annual reports will look at a snapshot year by year and look across the different experiences and the different programmes mounted by the different local authorities to try and get best practice established and shared. That would be really useful.
Lord Farmer (Con)
My Lords, I am sure I speak for many in your Lordships’ House when I say how pleased I was that funding for the troubled families programme was extended into this Parliament and that the Bill will create a statutory duty to report on our progress in supporting these families with multiple, highly complex problems.
In more than one in 10 of the original troubled families on the programme, an adult moved off benefits and into continuous employment, which was a huge achievement since, on average, troubled families in the first programme had nine serious problems to overcome. Surely I am not being too optimistic in assuming that this reporting obligation signals an intent on the part of this Government to keep helping such families in the most effective ways possible and to renew the necessary funding.
Although ongoing accountability and financial commitment are obviously essential, I have to confess to a nervousness about the wording of Amendment 70, which talks about,
“the adequacy of resources given to local authorities”.
My understanding of when and why troubled families programmes have worked best is that one crucial common factor has been the wider system reform that the funds have helped to effect. In early speeches about the intent of the programme, a recurring theme was that if social services were to help families turn themselves around, this would require the service landscape in a local authority area to be no less transformed itself.
The Government never intended to foot the bill for business as usual but to make a contribution on a payment-by-results basis to the bigger prize of system reform. Local authorities would not get the results they needed on the per-family spend alone—indeed, the first financial framework document published in 2012 was explicit that they would get only up to 40% of the unit cost of the intensive interventions that work with this group of families. Government were priming a pump, not signing a blank cheque. This should remain the guiding principle: a level of funding that incentivises services such as the police, health and social services to work more closely together to reduce costs, not a level of funding that is adequate in isolation to fund the support provided for troubled families.
This brings me to Amendment 71 in the name of the noble Baroness, Lady Manzoor. She argues that the report should specify which types of interventions were used and which were a success or failure. But this seems to ignore the evidence that a whole system has to become relentlessly focused on supporting families across the spectrum of need if a local authority can truly be deemed to be successful. Taking an intervention-level approach runs the risk of ignoring the importance of synergy and the whole-system emphasis also seen, for example, in the way in which Ofsted is now examining the entirety of a council’s services to support children, using the single inspection framework.
Local authorities, such as the Isle of Wight, which have gone through profound reform, have integrated their troubled families work and funding with early years obligations, delivered through children’s centres, by forming family hubs. These help families with children right up the age range and across the spectrum of need, so are able to offer early help as well as the more intensive help typically associated with troubled families. This is highly relevant, given the Prime Minister’s recent announcement that local authorities which fail to safeguard children adequately will be taken into special measures, because that is what happened to the Isle of Wight. It was taken over by Hampshire, forced to rethink all its children’s services and make prevention of harm the watchword. It is now modelling a better offer for all families.
Increasingly, family hubs are the visible manifestation of a system that integrates troubled families work with full-spectrum support in a sustainable financial envelope. Surely the future lies in evidence-based interventions being locally tailored into better functioning systems. I am not convinced that reporting at the level of interventions would capture the most important learning, which is surely the priority.
Lord Beecham (Lab)
I spoke today to the officer in Newcastle who is responsible for the programme. We do not call it the troubled families programme in Newcastle; we call it the families programme. The noble Lord, Lord Kirkwood, is right to say that we need a title that does not imply some kind of stigma.
Newcastle has been extremely successful in the way in which the present scheme has been working. However, it was interesting to learn in a little more detail from the officer in question—I declare my interest as a member of the city council—what is occurring on the financial front and with progress on the ground.
In moving her amendment—I support both amendments in this group—my noble friend Lady Sherlock referred to the financial basis that was initially for a grant of £3,900 or £4,000. Two-thirds went on a fee for mounting the programme, while the other third went on a success fee. That has been turned around so that the larger proportion is spent on the success fee. Now, of course, the amounts have been reduced by roughly a third, so the total figure is in the order of £2,600 although, as I have said, the proportions have been reversed. That may in itself be a source of some difficulty.
However, other issues need to be considered. One of the criteria is getting people into employment. Of course, that is important and makes a significant difference, but those criteria will not necessarily apply evenly across all the relevant authorities. It will, frankly, be more difficult to get someone into a job in Newcastle and other parts of the north-east than in some other parts of the country, simply because of the state of the local economy. Too much weighting on that one factor could be regressive. That needs to be considered.
Then there is the question of what outcome we are looking for from the programme and, in particular, whether we are looking over a sufficiently long period to be able to judge what is happening and what is successful. I hope that, in any kind of survey of what is going on, we can take that long-term view—over several years rather than only two or three—to see what approaches have paid a dividend.
Another aspect that occurs to me is that the Labour Government made a mistake, frankly, in dividing children’s services from adult social care. I was chairman of the social services committee in Newcastle in the early 1970s, when the two services had been brought together. Dividing them, particularly in the context of families, is potentially difficult. It means that you are working across departmental boundaries, possibly less efficiently than would otherwise be the case. It is time—not only from the perspective of troubled families but generally, given the pressures on social care and children’s services collectively—to reopen that issue. It is worth revisiting whether that decision is now applicable.
The noble Lord, Lord Farmer, referred to changes and savings that might be made. We must bear in mind that at the moment—I speak with some unfortunate knowledge of what is likely to happen in Newcastle—financial pressures are such that we will see significant cuts in both adult social care and children’s services. We will lose experienced staff because we are facing a reduction of some £32 million in the resources available to the authority. I suspect that, to a greater or lesser extent, that will be the case across much of local government, particularly in the areas with greatest need.
Although it is obviously right to bring people together as far as possible, so that we do not have a succession of different bodies or individuals working with the families in question, it will stretch the capacity of local authorities to be able to cope with this without depriving some other potential or current recipients of the support they also need. We need to look at the totality of funding across the range of services provided by local authorities and their partners in the health service and elsewhere to deal with these issues.
Both amendments encapsulate the correct approach: we should regularly be taking a significant look at what will be a long-term programme. I return to the point made by the noble Lord, Lord Kirkwood, and encourage the Government to change the name, because it implies a certain stigma and it would be better if more neutral terminology were applied.
The Earl of Listowel (CB)
My Lords, I urge that, whatever approach is taken, we are better at supporting families, particularly vulnerable families. In recent years, we have seen a steady increase in the number of young people being taken into care from their families and a flood of new-born children being taken into care. In some ways, that suggests that we are intervening better to take children out of damaging families, but we should really be trying our level best to support families so that they can keep their children.
Whichever approach one takes—I suspect that it will be a mixture of the two—one needs adequately to fund the general services of local authorities, and I am grateful to the Chancellor for ensuring that there is some limiting of the cuts expected by local authorities. At the same time, approaches such as the troubled families initiative—I express my admiration for Louise Casey, having watched her work in the past—which recognise the need to stick with the family over time, and the importance of loving that family until it can look after itself, are very welcome.
Baroness Evans of Bowes Park (Con)
My Lords, Amendment 70, tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, seeks to require the Government to report on the adequacy of the funds provided to local authorities to support troubled families. We believe that the best way to judge the adequacy of the funding will be in the outcomes that the programme achieves. Our report will ensure that the Government remain transparent in publishing the progress made by families supported by the programme. This amendment, therefore, is not necessary.
The Government have committed to funding the new, expanded troubled families programme. In the spending review 2015, funding of £720 million was allocated for the remaining four years. Of course, the new programme also aims to incentivise local authorities to reprioritise existing resources to achieve better outcomes for families with multiple problems. These families are known to local services and money is already spent on them.
As the noble Lord, Lord Beecham, said, there is pressure on funding for children’s services, but we have actually seen local authorities maintaining relatively stable funding in these areas. However, we completely understand that there is pressure, and that is why we are also providing additional resources to change the way services respond to these families to achieve better outcomes.
As a number of noble Lords have said, funding for the new troubled families programme is available to local authorities in three ways. They are provided with a service transformation grant to transform their services and collect evidence for the national evaluation; they receive attachment fees of £1,000, as mentioned, for each family that they agree to work with; and they are able to claim an £800 results payment once one of these families achieves significant and sustained progress.
Of course, noble Lords will be well aware that the real financial prize, as a number of noble Lords have said, is the long-term change that we make to these families’ lives. It is not the money provided by central government, but the cost savings that can be delivered through redesigning their services to deliver better results for complex families with multiple problems and to see those families take control of their lives and move forward. We would certainly expect, as the noble Baroness suggested, local authorities to work together when a family moves from one area to another. It is both in the local authorities’ interest and in the family’s interest, so we would expect the sharing of information.
The programme has been designed to incentivise local services to reprioritise their money and front-line resources away from reactive services towards more integrated, targeted interventions to offer better outcomes for families with high-cost, multiple problems. By responding more effectively to the issues that these families face, the burden placed on local services can be reduced for the long term.
It is also important to remember that we are talking about a programme that has a track record of success. As the noble Baroness said, the original programme achieved success with about 116,000 families struggling with a multitude of problems. This could not have been achieved if the right services had not been in place. As with the original programme, the Government have asked local authorities to provide information that will enable us to assess its impact. This includes understanding what is being spent on families and the savings that are being achieved through local cost-benefit analysis. The noble Baroness, Lady Sherlock, asked whether this would increase the burden on local authorities. We do not believe that it will, because local authorities have already agreed to supply this information as part of the national evaluation of the expanded programme. Furthermore, they themselves receive valuable analyses of the programmes to help them drive improvement to their services.
Amendment 71, tabled by the noble Baroness, Lady Manzoor, seeks to require the report of the Secretary of State for Communities and Local Government to include information on the types of interventions families receive and whether they are successful. DCLG has always recommended that families should be supported through a whole-family approach to achieve positive outcomes, but it does not mandate a specific type of intervention. This is because we believe that, to work effectively, local authorities need the flexibility to adapt their approach to their local area and to each family they work with. There are no set or standard interventions that are universally applied by or across local authorities: each intervention is specific to each family. Given this necessary flexibility, the effectiveness of the programme will be measured through the outcomes it achieves with families rather than the individual intervention that it uses.
The duty to report, as it stands, already ensures that the Government are held to account on the effectiveness of the programme through publishing annual information on the progress made by families. To make progress, families will have received effective support from local authorities and their partners. The report will include information on this.
It may also be worth noble Lords noting that the report Parliament will receive annually on the troubled families programme will be based on the national evaluation of the expanded programme and the payment by results achieved by local authorities. The national evaluation will provide information about the progress of families against the six headline problems that the programme seeks to address.
The noble Baroness, Lady Manzoor, asked about data matching, which was used by local authorities in the original programme in relation to outcomes. They used data sets to track and monitor the progress of families. However, the fact that they used data in this way should not imply a lack of support for families. Every family that it was claimed had been turned around made real progress following support from local services. This is checked through the councils’ internal audit process before they can claim a results payment.
On the Guardian report that the noble Baroness mentioned, that was based on something of a misunderstanding of the programme. The programme certainly encourages services to join up and offer better support for families with multiple problems through redesigning their approach to providing support, and we advocated a family-style intervention approach, but that is not the only approach. The Guardian looked only at a certain subsection of families who achieved support through the programme in this particular way, rather than the large number of families helped through a whole variety of different approaches.
On the basis of the information I have provided, I ask noble Lords to withdraw Amendment 70 and not move Amendment 71.
Lord Beecham
Could the noble Baroness indicate whether it is intended to have longitudinal studies of the programme and, if so, what kind of period we might look at? Secondly, are the Government encouraging—perhaps they are; I ask out of ignorance—peer review between different authorities carrying out projects of this kind? That would seem particularly helpful given the range of problems faced.
Baroness Evans of Bowes Park
I believe that the full scope of the reports has yet to be decided. I am certainly happy to take back those two suggestions to the department.
Baroness Sherlock
My Lords, I thank all noble Lords who contributed to this short debate. I thank the noble Baroness, Lady Manzoor, the noble Lord, Lord Kirkwood, and my noble friend Lord Beecham for their support.
We heard a lot of emphasis on evaluation. When the Minister takes this back to the department, I urge her to reflect a bit more carefully on that. I was a little concerned that, towards the end of her remarks, she seemed to imply that we do not need to assess either quality or funding because if the outcomes work it must have been okay. The question I would raise is that of causality. We are dealing here with very complex situations. Essentially, a family that is already engaged with lots of agencies and that may have multiple problems is an organic and dynamic unit—coming in and going out all the time. To assume, because it started at X and ended at Y, that what happened must have been the right thing is a very central government assumption and a slightly risky one in the circumstances.
I ask her to take that back, along with the suggestion of my noble friend Lord Beecham about longitudinal studies and peer review, to try to think very carefully about how we can capture the learning. With respect to the noble Lord, Lord Farmer, the point of these programmes is that what one authority does may not be the best thing for another authority. It depends on the circumstances, as my noble friend Lord Beecham described.
I also take the point made by the noble Lord, Lord Kirkwood, about terminology. Certainly, when I was on the riots panel I talked to a number of families who felt that being stigmatised got in the way of their trying to deal with things. It was not that they did not know they had problems; it was just that everybody constantly telling them that they had problems did not help. They wanted help to get themselves out of those problems, not to be branded. We need to find a way to ensure that that does not happen. I encourage the Government to think some more on that.
I am also grateful to my noble friend Lord Beecham for pointing out to the noble Lord, Lord Farmer—whose interest in this subject I recognise—how many local authorities are struggling with funding, especially in the poorest areas where so many of these families will be. We need to be aware of that. I am grateful for the subject having been aired in this debate and I hope that the Government will come back to us on this on a regular basis. Given that, I beg leave to withdraw this amendment.
Lord Elton (Con)
My Lords, I would like to express appreciation for the troubled families programme as a whole, since we are now leaving it. Whatever the questions about causality, things have changed very considerably in the course of its existence and very many families have benefited from it. Moreover, it is the result of the Prime Minister leaving a Minister in the place where he knows the job for long enough to do it. I reckon this is a very important occasion and a very great benefit of which we should all be grateful.
Baroness Sherlock
Baroness Sherlock
My Lords, I shall speak also to Amendment 92. These amendments were tabled in my name and that of my noble friend Lord McKenzie of Luton. I shall also speak to the other amendments in this group. In doing so, I thank the many organisations which supplied briefing on this subject, including CPAG, Gingerbread and Shelter.
When the benefit cap was introduced, the Government made much of the fact that they were setting it at the level of average earnings. In May 2011, the then Minister, Chris Grayling, sought to defend the rationale for the cap by saying in another place:
“Our policy approach, and the Government’s clear intent, is to have a cap that bears reference to average earnings. That is necessary for the credibility of our benefit system. It is the right place to set the cap”.––[Official Report, Commons, Welfare Reform Bill Committee, 17/5/11; col. 952.]
We in this House debated at length whether the test was fair, and we voted to exclude child benefit from the cap—a move that was overturned in another place. Now the Government have simply abandoned any such rationale and have plucked figures out of the air. The Bill reduces the cap to £23,000 a year in London and £20,000 elsewhere.
Even more worryingly, in future the Secretary of State can review the cap whenever he wishes without reference to any external benchmark and change the level simply by regulation. This could become a vehicle for Ministers to ratchet down the amount of help given to needy families without adequate parliamentary scrutiny. Our amendments seek to remove the subsection which would enable a reduction in the benefit cap. The effect would be to leave the cap at its current level.
Now that the Government have abandoned any external benchmark, it is hard to understand their rationale for choosing these levels. The impact assessment sheds little light. The nearest it comes to justifying the lower rate outside London is on the grounds that one in four households in London earns less than £23,000 a year while one in four households outside London earns less than £20,000. Is that the new benchmark? Is it to be set at a level equivalent to 40% of median earnings or is this, as I suspect, a post hoc rationalisation of an arbitrarily chosen figure? Once again, the rationale is misleading by referring only to household earnings rather than to income and in doing so failing to acknowledge that many households earning below the cap will also be receiving benefits covered by the cap, such as child benefit, child tax credit or housing benefit.
The new threshold will drastically change the impact of the cap. It will more than quadruple the number of capped households. The DWP estimates that as many as 90,000 additional households will be affected, and they could see their housing benefit reduced substantially. Rather than hitting large families in expensive areas, it will hit small families right across the country. For example, Shelter says that the new cap would affect a family with one child living in Guildford, a family with two children in Leeds or Plymouth or a single-parent family with two children sharing a room in almost one in five areas in England.
As the Government’s evaluation shows, relatively few households have been able to move into cheaper accommodation to escape the benefit cap. The lower thresholds will make it even harder for families to move to cheaper accommodation as ever-lower rents must be found. Without the availability of cheaper housing in areas where there are also suitable jobs and childcare, families are going to be put in an impossible position. If they find it hard to escape the benefit cap, their only choice is to become poorer.
Once again the people most affected by this policy are poor families with children. The impact assessment says that 330,000 children will be hit further by the reduced cap, 24,000 for the first time, and the benefits of the rest, who are already in capped households, will be cut further still. They will include families who have been forced to move to cheaper houses or areas only to find that they are now above the new cap and could have to move again, with the children having to move to new schools.
Can the Minister reassure the Committee that it is not the Government’s intention to keep cutting the cap repeatedly? Otherwise, these families, some of whom will have very good reasons for being unable to work, as we will hear in the next couple of debates, could face being shunted around the country, moving repeatedly, damaging their children’s education and destroying family stability in the process. How will that help the Government’s desire to focus on improving educational outcomes for poor children?
Baroness Lister of Burtersett (Lab)
My Lords, I shall speak to Amendments 74 and 93. I am grateful to the noble Lord, Lord Kirkwood, for his support for both, and the noble Earl, Lord Listowel, for his support for Amendment 93. The aim here is to ensure that we debate the human rights implications of the cap, particularly regarding children and women. I am grateful to CPAG for its help with these amendments, and I declare an interest as its honorary president. I also support the other amendments in this group.
Amendment 74 would require the exemption of households from the benefit cap where necessary to avoid a breach of convention rights within the meaning of the Human Rights Act 1998. It would send a clear message that Parliament intends a cap to be implemented in a human rights-compliant way. It would enable tribunals and courts to exempt families from the operation from the cap so as to avoid a breach of human rights without having to make a declaration of incompatibility. This is necessary because by incorporating the list of benefits included in the cap in primary legislation in Clause 7, which was not the case before, rather than leaving them in regulations as now, it appears that the Government are trying to avoid legal challenge under the Human Rights Act other than by way of such a declaration.
Amendment 93 would require the Secretary of State’s review of the cap to take into account the need to safeguard and promote the welfare of children. The phraseology echoes that in Section 11 of the Children Act 2004 and Section 55 of the Borders, Citizenship and Immigration Act 2009. In ZH (Tanzania) the noble and learned Baroness, Lady Hale, found that this effectively incorporated Article 3 of the UN Convention on the Rights of the Child, which requires the welfare of the child to be treated as “a primary consideration”.
Lord Blencathra (Con)
The noble Baroness quoted the noble and learned Baroness, Lady Hale, which I presume was from the Supreme Court case which ruled just a few months ago. However, the noble Baroness will be aware that the Government were taken to court on this very point of not implementing the UNCRC, the court ruled by three to two against Lady Hale and the judgment was that the Government were perfectly correct. The court went on to say, quoting some other distinguished noble Lords in this House, that it would be quite inconceivable for an unincorporated charter like the UNCRC to be given force in English law.
Baroness Lister of Burtersett
I am grateful to the noble Lord. I will come on to that case; I was talking about an earlier case that the noble and learned Baroness, Lady Hale, was involved in. I am quite aware of the outcome of the case heard earlier this year, but I thank the noble Lord for providing a trailer for what I will say later.
These amendments are prompted in part by the inadequacy of the Government’s own assessment of the human rights implication of the cap and in part by the judgment in the Supreme Court case that the noble Lord mentioned on the cap earlier this year. Both the Joint Committee on Human Rights, of which I was then a member, and the Office of the Children’s Commissioner have emphasised that child poverty is a human rights/children’s rights issue. Lowering the benefit cap clearly has implications for the number of children living in poverty. An internal assessment leaked to the Guardian in May suggested that if parents are unable to avoid the cap through paid work, it could plunge a further 40,000 children into poverty.
The impact assessment says nothing on the subject of child poverty, yet when I tabled a Written Question to ask what the impact on the number of children in poverty would be, I was referred to that impact assessment. As I said in our first session, I consider that rather insulting, as the implication was that I had not read it. I remind the Minister that the Companion makes it clear that Ministers should be as,
“‘open as possible’ in answering questions”,
as this is,
“inherent in ministerial accountability to Parliament”.
I therefore ask the Minister now, what is the department’s estimate of the impact on child poverty of reducing the cap, given that we know from the Guardian that such an estimate exists? I am quite happy to accept any provisos about possible behavioural responses but this is not a good enough reason for refusing to provide Parliament with such a crucial piece of information. Also, can the Minister tell us how the Government responded to the questions from the UN Committee on the Rights of the Child on whether a proper child rights impact assessment had been conducted and,
“the measures being taken to mitigate negative impact on the enjoyment of the rights of children, particularly those in vulnerable situations”?
The impact assessment has a section entitled “What are we doing in mitigation?”. I could summarise the contents by saying, “Not very much”. It says nothing at all about mitigation of the negative impact on the rights of children, despite the request from the UN committee. The Equality and Human Rights Commission, too, has criticised the impact assessments and the human rights memorandum which accompany the Bill for failing fully to assess the impact on equality and human rights. It warns that there is a risk to the UK’s compliance with its obligations under national and international human rights law, particularly with reference to children, women and disabled people, and therefore it gives its firm support to these amendments.
The impact assessment does at least acknowledge that women are more likely to be affected than men, as 64% of claimants who have their benefit reduced are likely to be single females—mainly lone parents. Sixty-three per cent of households capped to date have contained a child under five, and in total more than twice as many children as adults have been hit by the cap.
In the human rights memorandum, the Government note the Supreme Court’s decision, which I shall come to now. They assert that they have fully considered their obligations under the UNCRC—in particular, Article 3, which concerns the duty to treat the best interests of the child as a primary consideration. However, their analysis of the best interests of the child seems to rest on the proposition that it is in the best interests of children overall to have parents in work and that work remains the surest route out of poverty.
That would be laughably inadequate if it were not for what is at stake. As the EHRC observes, it betrays a particular lack of understanding regarding compliance with the UNCRC. It may well be in the best interests of many children for parents to find work but it will depend on the work available and on the circumstances—as has already been discussed on earlier amendments, work can represent a cul-de-sac rather than a route out of poverty. Moreover, this bald statement ignores the fact that, as my noble friend said, the great majority of those who were already subject to the cap did not find work as a result. Is it really in the best interests of children to have their standard of living reduced even further when a survey, reported in the first-year review of the operation of the cap, found that more than a third of those affected had already had to cut back on household essentials and many had incurred debt?
In fact, the Government’s position pretty much ignores the judgment of the noble and learned Baroness, Lady Hale—echoed by the noble Lord, Lord Kerr— that it,
“misunderstand[s] what article 3(1) of the UNCRC requires”.
The final decision does not alter that fact. She continues:
“It requires that first consideration be given to the best interests, not only of children in general, but also of the particular child or children directly affected by the decision in question. It cannot possibly be in the best interests of the children affected by the cap to deprive them of the means to provide them with adequate food, clothing, warmth and housing, the basic necessities of life. It is not enough that children in general, now or in the future, may benefit by a shift in welfare culture if these are also the consequences. Insofar as the Secretary of State relies upon this as an answer to article 3(1), he has misdirected himself”.
She also pointed out that the children affected suffer from a situation which is none of their making and which they themselves can do nothing about. Can the Minister now give a more convincing response to the weighty charge that the cap, and therefore these clauses, are not in the best interests of children? As it is, the failure to give proper consideration to the best interests of the child could leave this measure vulnerable to a further future legal challenge.
In his judgment, Lord Carnwath referred to a point—mentioned by my noble friend—made during the passage through this House of the Welfare Reform Bill, which became an Act in 2012. That point was that most of the savings from the cap resulted from the inclusion of child benefits and child tax credits, even though these will be received by the great majority of those on median earnings. I shall return to this when I speak to Amendments 76 and 77. Although ultimately, Lord Carnwath sided with the judges who did not allow the appeal, he still considered that the cap did not comply with the UNCRC, and he expressed the hope that the Government would address the implications of this when it came to reviewing the cap. Even Lord Reed, who spoke for the majority in disallowing the appeal, linked the proportionality assessment to the fact that the cap was set at median earnings. Now that, as my noble friend has made clear, there is no clear rationale for the level of the cap, as it is pushed to be below median earnings, that proportionality judgment might start to look rather different.
I have focused mainly on the implications for children’s human rights, but, as I said, the human rights of women and disabled people are also at issue. I am sure we will hear more about the more recent High Court case that found indirect discrimination against disabled people through the impact on carers, but I will not go into that now. These wider implications are another reason for my amendment to Clause 7, which requires general human rights compatibility.
I believe that these amendments should be uncontroversial. After all, if the Government are so confident that the cap is compliant with human rights instruments, they have nothing to fear from them. I hope, therefore, that the Minister will be willing to take them away and consider them.
Baroness Manzoor
My Lords, I shall speak to Amendments 72 and 92 in the names of the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, which I support. As I said at Second Reading, although we on these Benches agree on the need for a cap, we do not see the logic in reducing it to £23,000 a year for households in Greater London and to £20,000 for those in the rest of the country. Nor do we see the logic behind breaking the link between average earnings and the cap, as has already been said. I agree with the Child Poverty Action Group, which states that:
“The reduction in the level of the benefit cap severs the link with median earnings, and instead is based on an arbitrary figure, leaving it unclear what the fairness test is now”.
The Government’s rationale is that the benefit cap will deliver strong work incentives. However, the real concern here is that the requirement to find housing at an affordable level may force families away from areas where there are high levels of work opportunities, such as in London, to places of high unemployment. This would undermine the ultimate aim of getting people off benefits.
Although the Government demonstrate that the existing benefit cap successfully strengthens work incentives, as evidenced by the greater proportion of those capped moving into employment as compared to those under the cap, in-depth interviews conducted by DWP itself in 2014 show that many households responded to the cap by,
“being willing to accept low-skilled, low-paid jobs, rather than pursuing further qualifications which they hoped would help them get a better job in the future”.
As the noble Baroness, Lady Sherlock, has already said, the Institute for Fiscal Studies, which undertook a peer review of the DWP research, concluded that its analysis told us:
“that the large majority of affected claimants responded neither by moving into work nor by moving house”.
Forfeiting further education and training for low-skilled, low-paid jobs limits an individual’s long-term human capital and earning prospects, which lowers potential tax revenues paid to the Government and, on an aggregated level, hinders economic productivity and potential output.
Long-term reductions in welfare spending will be realised only by increasing people’s income through employment and by reducing their outgoings, primarily through improving access to affordable housing. I urge the Minister to maintain the benefit cap as currently set.
At Second Reading, I asked whether the Government intended to undertake a distribution analysis of the levels of housing benefit that the average person hit by the benefit cap would receive and where they might be able to secure suitable housing. I wonder whether the Minister is in a position to answer this question more fully on this occasion. Will he also say what impact the further lowering of the benefit cap will have on single parents and how the rights of children will be protected? This has been very clearly highlighted by the noble Baroness, Lady Lister. Gingerbread quite rightly is concerned. Lowering the benefit cap will continue disproportionately to affect single parents, of which as many as 70%—I think that the noble Baroness, Lady Lister, quoted 69%—will have a child under the age of five. That cannot be acceptable.
Baroness Meacher (CB)
My Lords, I speak to Amendment 94—I emphasise that it is a probing amendment. I do so in the hope that we can highlight the need for a comprehensive and regular review of the impact of the totality of the benefit cuts on specific groups—who are the most vulnerable—applied during the past few years, including those in the Welfare Reform Act 2012, in more recent legislation and in this Bill. The amendment requires that in carrying out a review of the benefit cap, the Secretary of State must include an assessment of the impact of the benefit cap on disabled people, their families and carers. I for one have not fully grasped the full impact of the multitude of cuts. At the very least, I believe that the Government have a moral obligation to understand the implications of their policies for the most vulnerable citizens in this country and to make public that information. That is what this amendment is about.
The benefit cap applies even to benefits designed to compensate for the extra costs of disability or caring for disabled people, including ESA WRAG, incapacity benefit, severe disablement allowance and carer’s allowance. We know that one-third of disabled people—fully 3.7 million—live below the poverty line already. The benefit cap combined with the freezes and cuts to employment and support allowance for those in the WRAG group will see disabled people’s incomes reduced significantly again. This significant reduction is from a level which is already below the poverty line.
The Government argue that the new lower, tiered cap has been designed to strengthen the work incentives for those on benefits. When I met the Minister from the other place, he said, “The whole point of this is to encourage people to work for more hours”. I find that so cynical, when most of these people simply cannot work more hours for a range of reasons. However, as we have argued previously in Committee, the Government have provided no evidence to back up the claim that cutting benefits that disabled people receive will incentivise them to work. As I have already indicated, the Government’s reference to an OECD study failed to point out that the study did not even refer to disability throughout, and rightly so—of course, people who are disabled are in an entirely different position from those who are healthy and able bodied. We have evidence that reducing disabled people’s incomes will make it harder and not easier for them to move into work.
In addition, the impact assessment provides no detail on the impact of lowering the cap on disabled people who are in receipt of DLA/PIP—those who are severely disabled and cannot do much about their situation. This amendment has no financial consequences. I hope that the Minister will take this matter away with a view to bringing back a government amendment on Report.
I support Amendment 93 tabled in the names of the noble Baroness, Lady Lister, the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel. The case for the amendment has been eloquently spelt out and, fortunately, I do not need to add to that. I hope that the Minister will assure the Committee that this crucial issue will be dealt with on Report.
Baroness Pitkeathley (Lab)
I add support to the amendment just spoken to by the noble Baroness, Lady Meacher, to which my name is added. While an exemption for households including a DLA or personal independence payment claimant exists, this does not protect all families affected by disability or all carers from the cap. That is because of the way in which “household” is defined in the benefits system. For the purposes of the benefits system, a household is considered to be an adult, their partner if they have one and any children they have under the age of 18. If any other adult relatives—for example, older parents, brothers or sisters, or even adult children—live in the same house, they are considered to be part of a different benefits household even though they all live together. This means that while carers looking after disabled partners and disabled children aged under 18 are exempt from the cap, those caring for adult disabled children, siblings or elderly parents are subject to it.
The Government’s impact assessment for the introduction of the benefit cap estimates that 5,000 households containing carers would be affected by it. That seems to be completely contrary to the Government’s policy on supporting carers. In its 2015 manifesto, the Conservative Party committed to provide more support for full-time carers. The fact that the benefit cap continues to apply to carers and the further lowering of the cap are entirely contrary to that commitment. The inclusion of the carer’s allowance in the list of capped benefits also goes against the commitment to protect vulnerable families that are coping with the extra costs of disability and ill-health. I will have more to say about the inclusion of carer’s allowance and the recent judgment in a later set of amendments.
Carers struggle every day with the extra costs of caring and it is clear, as the noble Baroness said, that many carers are absolutely unable to work as a result of heavy caring responsibilities. Therefore they cannot afford any reduction in their income at all, and yet the Government continue to cap their benefits, with those carers who fall within the scope of the cap losing up to an estimated £169 a week under the new cap compared with the position before the introduction of the policy. The benefit cap places an increasing financial and emotion strain on families, pushing carers to breaking point and ultimately threatening the sustainability of those caring relationships. Surely the Government must be prepared, at the very minimum, to assess the impact of these changes.
The Earl of Listowel
I rise to support the noble Baroness in these amendments. Relevant to this is the question of responsibility. It is clear that children are not responsible because they are not in charge, as it were. When we think about the difficult decisions we are making today, surely an important part of it was the greed of a few bankers some years ago that went unchecked. They are responsible to a large degree for the debates that we are having today. We should also think about the failure of successive Governments to build sufficient housing. The most important part of the benefits bill is housing benefit, and the reason that it is so high is that there is such a shortage of housing that we are paying over the odds for it in this country. It is not the fault of these children that they are in this position; it is due to successive failures by various people who were responsible in the past. I support the amendments because it is paramount that we keep the interests of the child at the very forefront of our minds as we make these decisions. We will simply be shooting ourselves in the foot if we neglect these children.
Lord Lansley (Con)
My Lords, I rise briefly to contribute to the debate in respect of Amendment 72, which seeks to remove subsection (2) from Clause 7, and to say that I think it would be a mistake on the part of your Lordships’ House to accept it. The noble Baroness, Lady Sherlock, was looking for the reasons why the benefit cap had been introduced and why it is being adjusted in the way it is. Coming here recently from another place, I think that the reason for introducing the benefit cap in the first place is at least as valid now as it was then. It is to ensure that we create a disparity between what people are able to live on through work and what they can live on in an accumulated way through benefits so as to heighten the incentive to seek work. Doing this at a time when job vacancies in the economy are at their highest level seems to me to be exceptionally important because it gives people a route out of poverty through work, which I had imagined we were all agreed is the most effective way to reduce poverty. I was surprised and disappointed to hear the noble Baroness, Lady Lister, say that work is often a cul-de-sac. It is not.
Baroness Lister of Burtersett
Perhaps I can explain. Unfortunately all the evidence shows that far too many people get stuck in low-paid work which does not take their children out of poverty. A very large proportion of children in poverty have a parent in work. One of the points made by the Joseph Rowntree Foundation against the cap is that, even in that minority of cases where the result has been for someone to move into work—it is a very small minority, as we have heard—the danger is that in the long term it is counterproductive because it pushes them into unsuitable, insecure and low-paid work.
Lord Lansley
I understand the point that the noble Baroness is making, but I am afraid that I do not agree with it, for two reasons. The first is by virtue of the other measures that this Government are taking in relation to availability of childcare, the further extension of personal tax allowances and the increase in the national minimum wage, leading to a national living wage. All of these enable people who are in work to achieve more of a living income through being in work. The second and most important reason is that work in itself changes the character of a household; it changes the character of people’s lives. Frankly, in the long run, it changes people’s employability.
Baroness Meacher
The noble Lord, Lord Lansley, is making an incentives argument, which I accept completely. Does he accept that, when people are unable to work more or at all because they are carers or severely disabled, the incentive argument really falls down?
Lord Lansley
The point I was answering was in relation to people in work, so that is a slightly different point. In relation to that point, too, as the noble Baroness has brought it up, the structure of the benefit cap is designed to ensure that people who are in a support group under the employment and support allowance, those in receipt of personal independence payments, and so on—there are number of exceptions—are not covered by the benefit cap. Those households are not covered by the benefit cap. We are focused, to a large extent, on those who have a capability for work even if that capability may be restricted in some ways.
I did not complete the point I was making in response to the noble Baroness, Lady Lister. Many years ago I was deputy director-general of the British Chambers of Commerce— and I do not think it has changed in the slightest—and I know that what matters to employers is that people have been in work and have all the attributes of somebody who has been in work. The longer one is out of work the less likely one is, as we know, to have those attributes. Therefore, the entry into work, even if it might not necessarily be the right job or be regarded as suitable or appropriate, will by its very nature make someone more likely to have those attributes necessary for work.
That is just one of the reasons why the benefit cap is needed. It is also needed because of a sense of the fairness between those who are in work and those who are not. The noble Baroness, Lady Sherlock, said there was a relationship with average earnings. That was true when the benefit cap was introduced, but to assert that it is some kind of mechanistic or scientific relationship is misleading. It is a judgment. A judgment was made, when there was previously no benefit cap to try and establish a benefit cap at a level that was regarded as fair.
I have to tell noble Lords—again coming from recent experience of fighting elections and being in the other place—that the public support the benefit cap. They regard it as still generous—too generous in many respects. When one looks at the relationship with those who are in work—the four in 10 households, broadly speaking, as was mentioned—who are not earning any more from their work than would be available through the benefit cap by the accumulation of benefits, they do not regard it as fair or reasonable for people to accumulate more by way of benefits than they are able to access by work.
Lord Blencathra
My noble friend has just said that from his recent experience in the other place he found that large numbers of the public supported the benefits cap. Can he tell us what Members of the Labour Front Bench in the other place were saying about the benefit cap, until quite recently?
Lord Lansley
Until recently—I do not know what the most recent experience is, but certainly until September this year—the Opposition Front Bench in the other place said that they supported the principle of the cap. I suppose they would say that they support the principle of the cap but at the level that it is currently set.
That brings me to the third reason why we have a benefit cap—namely, that we have to decide our priorities for distributing any given level of public expenditure. Of course, we know that Parliament has supported an overall cap on the welfare budget. Frankly, it is better for it to be distributed in relation to specific need than for some households to accumulate it to a greater extent.
If one were to seek to sustain the benefit cap at the level at which it currently applies, rather than apply it at the level proposed in the Bill—I hope that this House would not go down that path—that begs the question of where that money is to come from. Where else in the welfare budget can that saving be made because this step is still part of a necessary process of reducing the deficit over this Parliament? Where there is public support for this measure, where jobs are available in the economy and where there is scope to deliver an additional step towards reducing the deficit and heightening incentives for work while at the same time focusing the available resources on giving support—as we debated earlier in Committee—to those who we want to assist into work, and giving specific targeted support to the maximum extent we can where people have identified specific needs, Ministers are right to say that we should be doing that rather than allowing this benefit to be accumulated by some households to a greater extent.
The Lord Bishop of Durham
My Lords, I wish to speak specifically to Amendment 93, in the names of the noble Baroness, Lady Lister, the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel, and Amendment 94, in the names of the noble Baronesses, Lady Meacher, Lady Pitkeathley and Lady Lister.
We all agree that the welfare of children is key in our considerations. I remind the Committee that this is rooted not simply in the modern era of rights but in our Judaeo-Christian history, where the care of the orphan was paramount in Old Testament law. The failure to protect orphans was one of the core messages of the prophets of the Old Testament. Jesus himself demonstrated that welcoming and caring for children lay at the heart of what the Kingdom of God is like. We have not always demonstrated this care of the child well—I include my own church in that—which is why the need to ensure children’s welfare is in our legislation. It is there as a reminder to us all, specifically those who exercise power and authority, that children must be taken fully into consideration in decision-making.
In principle, I accept that a benefit cap is a reasonable approach, partly for the reasons which the noble Lord, Lord Lansley, has just outlined, although I am not wholly convinced by his arguments about why the reduction should be made in the way proposed. Inevitably, whichever level the benefit cap is set at will affect children, so it is surely essential that the Secretary of State is required to consider its impact on children’s welfare rather than leave this as a possible other matter that is considered relevant.
Sadly, in the busyness of economics, politics and high-level decision-making, all of us can lose sight of the child. I see it happening in the House of Bishops, in the General Synod of the Church of England, in local authority decision-making and in national decision-making. Therefore, to ensure that this does not happen unintentionally, I hope that the Minister will seriously consider Amendment 93.
Alongside this, I note the well-documented reality of increased costs for those who live with disability, and for their families and carers. I suggest that we have a slight problem with language here. One reason that many carers are not available for paid work is because, frankly, they are working very hard, caring for their family member. To suggest that they are not working is to demean them. It therefore seems entirely reasonable that since the benefit cap will impact these families, serious consideration should be given by the Secretary of State. As the noble Baroness, Lady Meacher, pointed out, this has no financial costs. It should not be left to his or her discretion.
I have three questions. The first is in relation to the point about disability and Amendment 94. Will the Minister agree to bring a suitable amendment on Report to include this in the review? In relation to Amendment 93, does the Minister accept that in the complexities of political and economic decision-making the child can be forgotten or side-lined? In the light of that, will the Minister accept that the welfare of the child must be at the top of priorities and so should be stated in the Bill?
Baroness Hollis of Heigham (Lab)
My Lords, I want to come back on some of the points raised by the noble Lord, Lord Lansley. His first point was about public opinion being concerned about the apparent disparity of income between those on benefits and those in work. My noble friend Lady Lister made a good point on this. She pointed out that families in work also receive additional benefits, which are not taken into account, either by any comparison that the Government make or indeed by those families receiving them. If they looked at their entire income, including not just child benefit but, possibly, child tax credits to top up their wages and housing benefit, and then compared that to the total out-of-work income that will now be received by families hit by a cap—in other words, if they were better informed, and if the noble Lord, Lord Lansley, were better informed, if I may say so—they would have a fairer comparison to make.
My second point is that, understandably, a lot of the public do not understand how social security works. The majority of people surveyed think that 40% of the benefit budget goes on JSA—on the unemployed, who should be working. That is the common perception. Actually, it is 4%. That is the size of the disparity. Therefore, our job is to make sure that people understand the facts of it, not to cloud the argument by saying that because they were misinformed we should follow where they go. That has never been the position of honourable parliamentarians. By all means, when the public are well aware of the situation, we should respect that, but we should ensure that any such views are well based on information.
That brings me to my third point. The noble Lord, Lord Lansley, referred—and I think this was echoed by the right reverend Prelate the Bishop of Durham—to the value and the ethic of work. I agree. He is absolutely right that it changes the dynamic of the household. Although I am disappointed that only 4% or so of people were incentivised into work as a result of the higher cap, the hopes the Government may have of encouraging more people into work by making the cap tougher seem remote.
In particular, I remain completely baffled by one point. I hope that the Minister will help me on this. It was raised by the noble Baroness, Lady Meacher, and by my noble friend Lady Pitkeathley. I think that we all accept that where people can work, they should. We should help them through jobcentre advisers and with appropriate benefit support for getting back into work. I do not think there is any dispute around the House that if work is there, where people can work, they should work. But the Government are quite explicit that any lone parent with a child under three is not required to work. They are expected to attend interviews when the child hits two but not to work until the child is three. Yet that lone parent with a child under three will be caught by a benefit cap which is supposed to propel her into work, even though the Government have expressly said that she is not expected or required to work—and many would think that that was very wise.
My noble friend Lady Pitkeathley made the same point about full-time carers: they are indeed working very hard. Their work is unwaged but it is full-time work. Yet they, too, are being caught, even though the Government recognise, by virtue of the payment of carer’s allowance, that they are working more than the 35 hours a week that entitle a person to get their carer’s allowance—and on top of that, they may well be supporting a second person as well. The Government have accepted that both these groups of people should not be expected to work, which is why they have the benefits. They then argue that the cap should apply to them none the less, in order to incentivise them into work. I am completely baffled by this morally, as well as politically and economically, and I hope very much that when the noble Lord, Lord Freud, comes to respond in a moment he can help me answer that question.
Lord Blencathra
My Lords, it is a pleasure to follow the noble Baroness, Lady Hollis. She said at one point that the public do not understand how social security works. That is very true; I spent many years as a Member of Parliament and understood only a fraction of it, and I believe that very few people understand the details of the 70,000 regulations. However, what the public do understand is that when they have to move to another part of the country and cannot afford a mortgage on £26,000, or if they have to live in a house which they would ideally like to be bigger, better or different, or in a better street, and they cannot afford that, but then they see someone else or a family getting £26,000 or more in benefits, they feel it is unfair. You do not have to know how the regulations work to have that instinctive feeling. That is why all parties strongly supported the benefits cap when it was introduced by the previous Government. I appreciate that the Labour Party now has some reservations about it and I will comment on that later.
I had intended to talk only about the level of the cap and how it was fair. However, in view of the comments of the noble Baroness, Lady Lister, on the UNCRC, which I thought I would be dealing with on another amendment, perhaps I could make those comments in this speech in answer to her and I will not speak again on UNCRC matters. On the level of the benefits cap, as politicians we have different views but this was part of a case before the Supreme Court last year. It was just decided a few months ago and five of the noble judges ruled in the Government’s favour that the benefits cap was not contrary to the rights of the child and not in breach of the ECHR.
In looking at the level of the cap, Lord Reed for the court said that:
“In relation to the related criticism that children in households affected by the cap are deprived of the basic necessities of life, that argument was rejected by the courts below, and I see no basis for reaching a different conclusion. As I have explained, the cap for a household with children is equivalent to a gross salary of £35,000 per annum, higher than the earnings of half the working population in the UK, almost three times the national minimum wage, and not far below the point at which higher rate tax becomes payable”.
That was of course in relation to the level of the cap then and we are now talking about a reduction of 12.5%—but, based on the strong views of the court, I can see no reason why it would come to a different conclusion if the cap were lowered by 12.5%.
In looking at how families had been forced to move, the learned judge went on to say:
“In relation to the argument that households with children cannot reasonably be expected to move house … Millions of parents in this country have moved house with their children, for a variety of reasons, including economic reasons. It is, in particular, not uncommon for working households to move out of London in order to find more affordable property elsewhere. It is also necessary to recognise that transitional financial assistance is available for households affected by the cap who cannot move until suitable arrangements have been made in relation to the children, as I have explained”.
Those views were taken from a 95-page report of the Supreme Court, having heard days and days of argument.
Baroness Lister of Burtersett
I may have misheard, but I think that I heard the noble Lord say that all five judges said that the cap complied with the UNCRC on the rights of the child. Is that right or did I mishear?
Lord Blencathra
If I said that, I misspoke. It was three out of five: a majority verdict of the Supreme Court.
Baroness Lister of Burtersett
So some of the five said that it did not comply but the fact is that the UNCRC is not incorporated into UK law, and therefore that was not sufficient for the appeal to be allowed.
Lord Blencathra
I take the noble Baroness’s point but that was not the view of Lord Reed, which I read. I can see nowhere in his judgment where he said that we did not comply with the UNCRC but that nevertheless, because it was not incorporated, he was going to find in the Government’s favour. That is not my interpretation of reading those pages whatever.
Let me move on to the UNCRC, since we have got there. First, the judge made the point:
“As an unincorporated international treaty, the UNCRC is not part of the law of the United Kingdom (nor, it is scarcely necessary to add, are the comments upon it of the UN Committee on the Rights of the Child)”.
Then comes the crucial point:
“‘The spirit, if not the precise language’, of article 3(1) has been translated into our law in particular contexts through section 11(2) of the Children Act 2004 and section 55 of the Citizenship, Borders and Immigration Act 2009”.
The judge was making it very clear that although the exact wording of the UNCRC was not applicable in the UK, the Government, through legislation, had incorporated the principles of it and were therefore complicit.
The judge went on to say that,
“it is therefore inappropriate for the courts to purport to decide whether or not the Executive has correctly understood an unincorporated treaty obligation”.
He then quoted Lord Bingham of Cornhill’s comments from a famous judgment, which I will leave aside, before noting:
“Lord Brown of Eaton-under-Heywood expressed himself more emphatically … ‘It simply cannot be the law that, provided only a public officer asserts that his decision accords with the state’s international obligations, the courts will entertain a challenge to the decision based upon his arguable misunderstanding of that obligation and then itself decide the point of international law at issue’”.
The noble Baroness, who I greatly respect and who is very knowledgeable in this matter, quoted extensively I think from the noble and learned Baroness, Lady Hale, who took a rather more fundamentalist view of incorporating the UNCRC into English law. She has held that position for some time, but it was not the view that the court collectively took.
I will conclude taking extracts from these turgid 95 pages shortly. The judge went on to say:
“Finally, it has been explained many times that the Human Rights Act entails some adjustment of the respective constitutional roles of the courts, the executive and the legislature, but does not eliminate the differences between them: differences, for example, in relation to their composition, their expertise, their accountability and their legitimacy. It therefore does not alter the fact that certain matters are by their nature more suitable for determination by Government or Parliament than by the courts. In so far as matters of that nature have to be considered by the courts when deciding whether executive action or legislation is compatible with Convention rights, that is something which the courts can and do properly take into account, by giving weight to the determination of those matters by the primary decision-maker”.
That decision is,
“relevant to these appeals, since the question of proportionality involves controversial issues of social and economic policy, with major implications for public expenditure. The determination of those issues is pre-eminently the function of democratically elected institutions. It is therefore necessary for the court to give due weight to the considered assessment made by those institutions. Unless manifestly without reasonable foundation, their assessment should be respected”.
In conclusion, the judge says:
“Many of the issues discussed in this appeal were considered by Parliament prior to its approving the Regulations … Furthermore, that consideration followed detailed consideration of clause 93 of the Bill, which became section 96 of the 2012 Act. It is true that the details of the cap scheme were not contained in the Bill which Parliament was debating, but the Government’s proposals had been made clear, they were challenged by means of proposed amendments to the Bill, and they were the subject of full and intense democratic debate. That is an important consideration. As Lord Bingham of Cornhill observed in R (Countryside Alliance) v Attorney General … ‘The democratic process is liable to be subverted if, on a question of moral and political judgment, opponents of the Act achieve through the courts what they could not achieve in Parliament’”.
He went on to say:
“The same is true of questions of economic and political judgment”.
I apologise for quoting extensively from those bits of the judgment. I shall not speak again on UNCRC issues, but the noble Baroness provoked me in the sense that she relied heavily on the UNCRC to somehow suggest that the Government were acting improperly or illegally and had something to fear from the Human Rights Act. That was not the view of the majority of the court.
Baroness Lister of Burtersett
I do not want to provoke the noble Lord any further, but would he not accept that Lord Carnwath, in accepting that the appeal was unfounded—whatever the legal term is—and that the issue was one for Parliament, specifically asked the Government when they reviewed the benefit cap to consider what the judges had said about Article 3.1 of the UNCRC? That was my point—the Government have reviewed the benefit cap, and it will be even less in the interests of children than it was at the higher level.
Lord Blencathra
I thank the noble Baroness. I think that the comments of Lord Justice Carnwath are what the lawyers would call obiter dicta—they did not go to the heart of the judgment. He was making an observation that it might be nice if the Government considered it, but there was no suggestion that the Government’s action in imposing the benefits cap was somehow contrary to the European Human Rights Act because we had failed to look after the interests of the child, as set down in the UNCRC.
Lord Beecham
The noble Lord, Lord Lansley, prayed in aid the state of public opinion about the benefits system. My noble friend Lady Hollis rightly corrected that. In addition to opinion polls, which have proved less than infallible in recent times, we should have a fact poll. We could then gauge what people really know about the issues that the country and individuals face. As my noble friend pointed out, there is a wide misapprehension about this issue as well as many others affecting the benefits system.
We are moving from a position in which the cap was related to average earnings to a different system. By sheer coincidence, perhaps, that move is taking place at a time when, after a long period in which average earnings have not risen, they have at last begun to rise. I suspect that this overdue rise in incomes, which would otherwise have affected benefits, has triggered the change that the Government are proposing. As other noble Lords have pointed out, and as we shall no doubt hear again during the Bill’s proceedings, one of the principal problems that families face is the very high level of rents in the private sector and the difficulty of obtaining alternative accommodation at a reasonable rent. So these incomes are very much under pressure, with or without benefits. We are not talking about excessive amounts of money; £20,000 for couples and lone parents outside London is not the kind of money that enables people to live a life of luxury—far from it.
These amendments do not destroy the system but try to impose some criteria by which the benefits cap should be assessed. What on earth can be wrong with the suggestion in Amendment 92 that the Secretary of State must take into account,
“the relationship between the level of benefit cap and median household income”,
the impact of the cap on households, local and public authorities and registered social landlords? What is there to object to in that proposal being a matter for consideration?
Lord Elton (Con)
May I tell the noble Lord my view, which is appropriate on occasions such as this? The longer a list, the more clear it is that things that are not included are not to be considered. That is counterproductive. The shorter the list, the more flexible it is.
Lord Beecham
If I may say so, that takes for granted the propensity of Governments in general, and this Government in particular, to look at a wide range of issues. Frankly, on the evidence of the last few years, I do not think that that is a plausible argument. Why should it not be on the record, as proposed in Amendment 93, that the Secretary of State should take into account,
“the need to safeguard and promote the welfare of children”,
in his review of the benefit cap? Similarly, Amendment 94 proposes that the Secretary of State must take into account,
“the impact of the benefit cap on disabled people, their families and carers”.
If these issues are taken into account, the Government lose nothing by it, but if they are not, or if there is a risk that they will not be, then they should surely be part of the process.
If the Minister is going to resist the amendments, I cannot understand why. They do not dispense with the possibility of having a cap. In this context, and in others, I repeat: one of the principal problems is the cost of private rented housing, in which very many people who rely on benefits are found. We will return to that later, but we should not forget it even as we look at these amendments, which I commend and support.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, Amendment 72, tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, would retain the benefit cap at its current levels and have those levels apply across Great Britain. We introduced the benefit cap to increase incentives to work, to promote fairness between those in work and those on benefits and to help address the deficit, and it is clear from the evidence that the cap is working. Since it was introduced in 2013, more than 18,000 previously capped households have moved into work.
The evaluation evidence shows that capped households are 41% more likely to go into work than similar uncapped households. This is even more marked in London alone, where households were 70% more likely to go into work than similar uncapped households.
I am heartened to hear from the noble Baroness, Lady Sherlock, that she now supports the existing benefit cap. I happen to remember that that was not necessarily the position on the Opposition Benches in 2012. Indeed, I seem to remember that the counter proposition from them was that we should have a regional cap, so I hope that the Opposition are now delighted that we are beginning to move in the direction suggested. Perhaps in another three years, in 2018, the Opposition—
Lord McKenzie of Luton (Lab)
When we debated the regional cap at that time, did the noble Lord support it?
Lord Freud
Of course I did not support it; I am on the record as not supporting it. This is not an absolute regional cap—this is a two-tier cap, London and the regions—but, the Opposition may feel that it is better late than never. I look forward, by 2018, in another three years, to the full-hearted support of the Opposition for the current proposals.
Baroness Hollis of Heigham
My Lords, does the Minister not also accept—I am sure that his memory stretches back this far—that the main concern of the Opposition, led by my noble friend Lady Sherlock, who will no doubt respond to this in any case, was to come in behind the Bishops’ amendment? That was to ensure that we compared like with like—not, as the Government were doing, like with unlike. They were excluding from those in work income such as child benefit and additional forms of benefit, so they were comparing income for those exclusively on benefit with earnings only, excluding benefits, for those in work. We therefore came in behind the Bishops’ amendment to try to protect children caught in that situation.
Lord Freud
I am delighted to have a trip down memory lane, but since we have changed the basis of the measure, as noble Lords have pointed out, we might just spend unnecessary time on it.
Let me go on to the present proposition, which is to align the cap with the circumstances of many working people throughout the country. The Bill reduces the cap to £20,000 a year for lone parents and couples and £13,400 for single people without children, except in Greater London, where it will be £23,000, with a lower rate of £15,410 for single people without children. These are still significant amounts: £20,000 is the equivalent of an annual pre-tax income of £25,000, while £23,000 is equivalent to an annual pre-tax income of £29,000. About four out of 10 households in London earn less than £23,000 a year, while approximately four out of 10 households outside of London earn less than £20,000.
Baroness Hollis of Heigham
Has the noble Lord assessed the figures for their income rather than their earnings?
Lord Freud
I do not have that to hand. As a noble Lord said, we are now reaching a judgment on how to arrive at those figures. Indeed, the debate that we had in 2012 basically looked at the same point. We are looking at the level of earnings that we feel is fair above which people should not get benefits.
Baroness Hollis of Heigham
My Lords, the Minister is not addressing the issue. What matters is income versus income, not income versus earnings, ignoring additional income. Therefore, if the Minister is going to run this argument, which I understand is a perfectly proper argument to run—and I think it commands a lot of support—he has to include actual income and not exclusively earnings, because those families that he is talking about will almost certainly have additional payments for their children and additional payments for their housing.
Lord Freud
Yes, I am just looking here at the level of earnings and that is the figure that we are taking. These levels for the cap will reinforce our message that work pays, and that it is not fair for someone on benefits to be receiving more than many working households. Having looked at the evidence, we believe it is fair to have a higher cap in London.
Baroness Hollis of Heigham
This question session has not got anywhere. Those families do not have an income that is higher than that for those at work. The point is that if you compare it only with earnings, you are possibly excluding a substantial portion of income that is available to those in work. I hope that the Minister will correct his statements as he goes through, otherwise he is comparing apples with oranges, and it does none of us any kindness to continue down that path.
Lord Freud
I have tried to make it as clear as I can that we are looking at the level of earnings here. It is not a matter of direct comparisons between earnings and income: we are looking at the level of earnings.
Lord Kirkwood of Kirkhope
May I try to make sense of this? I do not think that the Government know what the disposable income per head is of the families that are subject to the benefit cap. That is my objection, because big families obviously have a disposable income that is divided by the number of people in the house. I do not think that these metrics exist, and therefore the noble Baroness is absolutely correct: it is not safe to rely on earnings, because you are not comparing like for like. The really important question for me is: how do we know, in relation to the impact it has on children, what the disposable income per head is in those families that are subject to the cap?
Lord Freud
I accept that that is a point about which noble Lords opposite are concerned, but I can only reiterate that we have reached these levels by using the basis of earnings. That is the basis.
Lord Oates (LD)
Is the Minister not, then, concerned about disposable income and the impact on children? He said that these Benches were concerned: are he and the Government not concerned?
Lord Freud
We are very concerned about the interests of children, and I will come on to that. Let me summarise the point that I will make later. The reason for this is that it is in the interests of children to be in a household where one or two adults are in work. All of the measures that we have suggest that they do better in life when that is the case.
The tiered element of the cap means that we estimate that roughly three-quarters of capped households will live outside of London, with around 24% in London. It has been set at a level that also recognises that housing constitutes one of the biggest costs for households. For example, in London, housing benefit awards are on average £3,000 a year more than they are elsewhere in the country. Even in the south-east, the average housing costs are only around half those for London, so we think it right that the benefit cap take those differences into account. I say to the noble Lord, Lord McKenzie, that that might account for the difference between the regional proposal and this two-tier proposal.
On the question from the noble Baroness, Lady Sherlock, on savings versus costs, the Treasury-led scoring process and the estimated savings are agreed by both the Treasury and the Office for Budget Responsibility, which felt them to be a robust and fair estimate of the policy change. On the question from the noble Baroness, Lady Manzoor, about where people would go, interestingly, under the current cap—if that is an indicator—very few capped households have moved house and generally those who moved did so only a short distance, so the double hit that concerned the noble Baroness is a relatively small issue. Again in answer to her, the impact assessment sets out that 59% of capped households will be those of female lone parents. There are about 1.25 million lone parents in employment in the UK, so combining parenting with childcare is possible. Those doing 16 hours work a week and receiving working tax credits will be exempt from the cap. Later, under UC, the measure will be 16 hours at minimum wage.
We believe that introducing this tiered level will build on the success of the cap and do more to improve work incentives throughout the country while promoting greater fairness. Again in answer to a question from the noble Baroness, we set out the impact of the cap on protected groups in our impact assessment. On the question from the noble Baroness, Lady Lister, I am not utterly convinced that she believes in what the Opposition Front Bench says: that work is the solution for people. However, work remains the best route out of poverty. We know that around 75% of poor people left poverty altogether where the parents moved into employment. One of the genuine points that I agree with is the danger of a cul-de-sac. The present legacy system has that wrinkle in it because it traps people at the 16-hour point. One thing we are now beginning to see in universal credit in the north-west is the freeing of benefit recipients from that particular cul-de-sac.
Amendment 74, tabled by the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, provides that the application of the cap may not reduce any welfare benefit where that would result in a breach of a person’s convention rights within the meaning of the Human Rights Act 1998. I will not go through the sterling work of my noble friend Lord Blencathra, who was utterly masterful on the legal aspects and certainly taught me a lot. However, I can say that the Government are of the view that the Bill is compliant with the European Convention on Human Rights, so this amendment is unnecessary.
On the question from the noble Baroness, Lady Lister, on the poverty impact, clearly we do not comment on leaked internal documents which may or may not be part of the iterative policy process. One of the real issues behind that is that any assessment of child poverty must not be purely static but should take into account the dynamic effects of the cap.
Baroness Lister of Burtersett
I said to the Minister that I am quite happy for any estimates of the impact on child poverty to be qualified with reference to possible dynamic effects. Has the department assessed the likely impact on child poverty, taking account of the dynamic effects it hopes to see as a result of the cap?
Lord Freud
I am clearly not in a position to comment on the work that we do, but I can say that estimating dynamic effects is extraordinarily difficult. We are working on improving how we do that. One of the reasons why we can often get into sterile debates is that getting hold of the real figures and the real behavioural impacts is very difficult. I quoted our child poverty experience. The latest Universal credit at work, in which we outlined theses new approaches, set out big behavioural changes. Many more people—13% more—are going into work, compared with the comparable JSA. That is an example of behavioural effects that is very difficult for us to pre-estimate.
Amendments 92, 93 and 94 are tabled by the noble Baronesses, Lady Meacher, Lady Sherlock, Lady Pitkeathley and Lady Lister, the noble Lords, Lord McKenzie and Lord Kirkwood, and the Earl of Listowel. These amendments would require the Secretary of State, when reviewing the level of the benefit cap, to have regard to any impacts on disabled people, their families and carers; the relationship between the level of the cap and median household income; the promotion of the welfare of children in the United Kingdom; households affected by the cap; and public authorities, local authorities and registered social landlords.
The noble Baroness, Lady Sherlock, asked whether we will go on reducing the cap. The Bill requires the Secretary of State to review the level of the cap at least once during a Parliament and provides him with the power to review it at any other time if he considers it appropriate. We believe that this provides the most effective means of ensuring that the cap stays at the appropriate level, while also providing the stability that households on benefits require. Any changes to the benefit cap level will be sensitive to its key principles of maximising work incentives, bringing fairness for working households and providing a reasonable level of support for capped households.
The noble Baroness, Lady Pitkeathley, spoke about carers. I emphasise that the Government recognise the contribution carers make to society. I will deal with carers when discussing the amendment that appears in a later grouping.
The power to review the level of the cap is necessarily broad and has been drafted to allow the Secretary of State to take into account any matters he sees relevant—for example, the wider impacts on families and children. I do not think it right to prescribe in legislation any particular factor which must be considered as part of this review.
Amendment 94 requires the Secretary of State when reviewing the level of the benefit cap to take into account the impact on disabled people, their families and carers. As I mentioned, there are exemptions from the cap for people who are a member of a household that includes somebody who is entitled to attendance allowance, disability living allowance and PIP.
That has been in place since the cap’s introduction and reflects the fact that these benefits are paid in recognition of the extra costs that disability can bring. There is also an exemption for those who are entitled to the support component, and the equivalent in UC, whose health conditions mean that they are unable to undertake any work-related activities. Those exemptions are not changing.
The new provisions will allow the Secretary of State the ability to consider the context of the cap and its level in a broad and balanced way. For example, he may take into account, although he is not limited to these, factors such as: earnings, housing costs and the wider impact on disabled people, families and carers.
Lord Kirkwood of Kirkhope
How does this fit into the annual uprating statement? The Minister has just said that the Secretary of State, who has this power, must do it once in every five-year period. There is an annual social security uprating where all these things are considered. Surely we are not going to have, at random in the middle of the year, the Government coming up with a judgment on the cap that is in isolation from the rest of the established procedures for uprating benefits.
Lord Freud
The established procedures, of course, are basically to go in line with CPI; this is a much broader look than that, as I have tried to describe. While we have safeguarded those with illness or disability, we do not think it right that in undertaking a review of the level of the cap the Secretary of State should have a legislative requirement to take into account any extra impacts on specific groups.
Baroness Hollis of Heigham
If the Minister says—quite rightly and decently, and I am sure that the whole House will support him in this—that he will exempt people who are in the ESA support group because the Government acknowledge that they cannot be expected to work, and therefore the issue of work incentives does not apply, why does he not apply the same reasoning to lone parents with children under three or to the carers in full-time unwaged work that my noble friend Lady Pitkeathley described? The Government accept that those two groups are effectively out of the labour market in exactly the same way as the support group, yet one, decently, is exempted from the cap, while the other two, indecently, are not.
Lord Freud
There is a difference between having a specific provision that does not require people to work and having one that actually financially incentivises people to work. That is the difference. As the noble Baroness pointed out, we do not require anyone with a child under three to go to work, but people often go into work with a child much younger than that. When people look at this measure on balance, they may think that it is the appropriate thing for them. That is my best answer to this question.
This is a peculiar process and I am running incredibly late now, but I think that noble Lords would prefer me to finish. I have just had so much dialogue, and that is rather unusual.
The Lord Bishop of Durham
Will the Minister accept that he has just proved my point that children get ignored? I asked him a specific question about whether or not that happens, and he has not answered it.
Lord Freud
I apologise to the right reverend Prelate. The only reason why I have not answered by now is that I am taking an intolerably long time to get through this speech. I will come to his point. I crave noble Lords’ indulgence to let me get through and then, right at the end, if they have some outstanding questions, we will have another—
Lord Freud
Thank you.
The revised cap levels are being set to create a strong work incentive to ensure fairness for both working households and those receiving out-of-work benefits, while providing a safety net of support for the most vulnerable. Amendment 92 would require the Secretary of State to have regard to the relationship between the level of the cap and median household income—a point reinforced by the noble Lord, Lord Beecham. Additionally, it would require that the impact on households affected by the cap was considered along with the financial impact on public authorities, local authorities and registered social landlords.
In future, when reviewing the levels of the cap, the Secretary of State must take into account the national economic situation and, where necessary, he will be able to consider any other matters that he might consider appropriate. Earnings and housing costs may be very much a part of this, but other factors also may be, such as inflation, benefit rates, the strength of the labour market and any other matters that may be crucial and relevant at the right time. Any decision when taken in the round will balance these factors with the impacts of the cap on its principal aims: to incentivise work and bring greater fairness to those in work while maintaining support for the most vulnerable.
Reinstating any direct link between future cap levels and the median household income undermines the changes we are introducing. Many working families earn less than the level of average earnings of £26,000 a year. It is important that relevant matters are looked at in the round. We want the Secretary of State to have the flexibility to consider a broad range of social and economic factors when reviewing the level of the cap in the future. Legislating for these specific factors to be considered unnecessarily reduces the scope for that.
Amendment 93, tabled by the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, would require the Secretary of State to take into account the need to safeguard and promote the welfare of children when reviewing the cap. I reiterate that we consider the impacts with regard to all relevant legal obligations when formulating the provisions of the Bill.
Now I move, at last, to the point made by the right reverend Prelate the Bishop of Durham. The welfare of children is at the heart of our reforms. It is important that children grow up recognising the value of work. Work provides purpose, responsibility and role models for children. The evidence shows that, for families responding to work incentives, the cap provided clear positive impacts on children and family lives through additional income and from the long-term positive role model effect provided by parents being in employment. There is clear evidence that children in workless families suffer worse educational outcomes compared to those in working families. That is why, as we discussed earlier, we are introducing new measures of worklessness and educational attainment.
The benefit cap is a key part of our aim to reduce long-term welfare dependency. The revised cap levels are being set to create a strong work incentive, ensuring fairness for working households and those receiving out-of-work benefits. These principles will guide a review of the cap levels in the future. It means the Government will be able to review the level of the cap in the light of any significant economic events that occur. The clause as drafted provides the best approach to allow for any future review to set the cap at the most appropriate level.
Before I ask the noble Baroness to withdraw her amendment, I await to be intervened upon.
Baroness Lister of Burtersett
My Lords, I will do so on the question of the welfare of children. First, there is no difference between myself and my Front Bench on this issue—there may be on some issues but not on this one. The noble Lord has not dealt with the point I made when I referred to what the noble and learned Baroness, Lady Hale, said, although I did not do so simply because she said it. Noble Lords have quoted from the IFS peer review, which showed that the great majority of those affected by the cap did not move into paid work; indeed, the House of Commons Library said:
“There is no general consensus that the … cap … is proving an effective means of moving claimants into work”.
My noble friend also made a point about those who are not expected to move into paid work anyway. The point is: what happens to the welfare of children in those households which are still out of work? It cannot be in their best interest, which is supposed to be a primary consideration, to reduce the incomes of their parents further and further below the poverty line.
I also quite accept what was said about role models and the value of work, and so forth, but I remind the Minister that in one of our earlier debates I referred to some research from the University of Bath. That showed that where a lone mother goes into work then cannot maintain that job for whatever reason in an insecure labour market and falls out of work again, it raises big questions in those children’s minds about the value of work, and that it can be totally counterproductive if you push people into paid work in a way that is not helpful to them and their families.
Lord Freud
On the last point, there are always particular cases such as those referred to by the noble Baroness, but the broad evidence shows that on balance children gain from their parents going to work. One other point is that noble Lords may not have clocked how the benefit cap works. Quite a lot of people have rather small amounts—£50 or so—capped. In many cases, if you do a small amount of work and earn £50 over a week, we cannot take the money away from you twice—we have capped you at that level—and those extra earnings are not then withdrawn, as they would be in many cases under the legacy system. We do not have data on that as they are very hard to get, but it would not surprise me if quite a lot of people earn small amounts of money which, in most cases, is 100% in their pocket.
The Earl of Listowel
My Lords, I am grateful to the Minister for the care with which he is responding to these concerns, particularly about children. He will be aware of a recent small study dated November 2015 from the University of Manchester on the impact of the bedroom tax. It found that children were hungry and were having difficulty in concentrating at school. The response from the Minister’s department was that this was a small study which did not fit the larger picture. I would be grateful if, before Report, he could send a letter setting out what research will be undertaken in the 12 months following the implementation of this provision. What research will be commissioned to look carefully into the impact on children? I take his point that many children will benefit from their parents going into work but I am worried about those who do not.
Lord Freud
It was a small report on, I think, 14 children, and we aim to look at things on a much safer basis. I ask the noble Baroness to withdraw her amendment.
Baroness Sherlock
My Lords, I thank all noble Lords who have contributed to this extensive debate. There are three more groups to come on the same subject, so we are going to do it very good justice. Given the extent of the debate, I will not try to respond to all the many points that were made. I am grateful to all those who have contributed, particularly in trying to highlight the impact of this lower benefit cap on a number of different groups: on single parents, as the noble Baroness, Lady Manzoor, said; on disabled people, as the noble Baroness, Lady Meacher, said; on carers, as the right reverend Prelate the Bishop of Durham and my noble friend Lady Pitkeathley pointed out; and on children.
I decline to rise to the noble Lord, Lord Blencathra, and engage in political debates about who said what and when, but I confirm that it is the policy of the Labour Front Bench in both this House and another place that we oppose the reduction in the benefit cap to the new levels. I was hoping to respond to the noble Lord, Lord Lansley, but, sadly, he is not in his place. Perhaps when he comes to read this debate he will start to reflect that it is important for us as a House to understand what the Government are trying to do here. They have always offered two arguments for this measure: one is that it is related to work incentives; the second is that it is fair.
On work incentives, the noble Lord may not be aware that significant work incentives are already built into the system. In fact, the CPAG did a report on this very recently showing how much better off families with children already are if they work. The point is that this is comparing individual wages and household income. Someone may earn a certain amount in wages but how much the household needs depends on where they live, how many children there are, whether they have a disability and whether they are carers. As my noble friend Lord Beecham said, this is primarily driven by high housing costs in the private sector. Most people do not get anything like these amounts of money in benefits. Where they do, it is almost always because they have very high rents. That is not their fault; it is the fault of the state, which has failed to get a grip on the housing market, have enough supply and make sure that people can afford to rent in places where there are jobs without driving themselves into this situation. I urge the Government to consider that very carefully.
The point about the comparator really matters. Whether or not the Government are going to set it at 50% or something else, there needs to be a way of understanding at what point the Government would do this. I can create brilliant work incentives tomorrow: I will abolish all benefits. That would be a fantastic work incentive but it would not be reasonable. The point of a social security system is to support people who cannot work—to enable them to meet their needs and feed their children—and then, where appropriate, to support them in work. We have to get an appropriate balance between, on the one hand, the needs of families, and particularly of children and vulnerable people, and the ability of the state to afford it; and, on the other hand, work incentives.
It is not unreasonable for this House to want to understand how the Government reach that judgment. Once you take away any external benchmark, it can simply become an annual whim. That is not appropriate, but it is completely appropriate for this House not to get into the micropolitics but to say, “We want to understand the impact on individual families, and we press the Government to make clear their thinking so that each year we can judge what is a fair amount of money to give to families”, as the noble Lord, Lord Kirkwood, pointed out.
In this country we have a very long tradition of Parliament looking carefully at what families need to survive and building up components of a social security system to address the different sets of needs. The benefit cap overrides all that, so it matters very much how it is constructed and it matters very much that the Government are transparent and accountable in the way that they go about creating it.
I shall not go into the other areas as we have a number of different debates coming up, but on the question of work incentives I point out that 85% of those who are capped at the moment are not in categories required to work, as we will come on to look at in two of the next three groups. Given all that has gone before and given all that we have yet to come, I beg leave to withdraw the amendment.
“(5C) Regulations under this section shall provide for an exception to the benefit cap for a person or couple who have been placed in temporary accommodation by a local housing authority in pursuance of its duties under section 188, 190, 193 or 195 of the Housing Act 1996.
(5D) The period for which the exception in subsection (5C) applies shall not exceed 39 weeks beginning with the date on which accommodation was first provided under any of the duties specified.”
Lord Best (CB)
My Lords, the noble Earl, Lord Listowel, and the noble Baroness, Lady Manzoor, have added their names to Amendment 73, which covers similar ground to Amendments 86 and 90A in the same group. I am grateful to both Shelter, which has just released an important report on the alarming rise in homelessness, and the Local Government Association—I declare my interest as a vice-president of the LGA—for their input.
The amendment addresses one specific housing aspect of the proposed new benefit cap. Of course, it is because of the high level of housing costs that, in so many cases, the benefits to which some families are currently entitled will exceed the Government’s new cap, as several noble Lords have already remarked. If the cap is set at £385 per week outside London, then the family in south Wales paying £65 per week for their council house is unlikely to be adversely affected. However, where an identical family lives in private rented accommodation in the south-east with a rent of £250 per week—and for a family with more than two children rents can sometimes be appreciably higher—they are in big trouble.
Earlier pleas for local, not national, caps have led to a differential for London, as we heard in our earlier discussion, but one level for London and one for every other region is pretty crude. The position is in fact rather worse in much of London, where a family may face a rent of £350 per week, as against a proposed new cap of £440 per week for all support—that is, leaving the family with just £90 per week to cover everything else after paying their rent. It is high housing costs that so often cause the problem of high benefit costs. This is an overarching problem facing the cap and it is going to cause huge problems for tenants, landlords and the Government.
This amendment covers only a narrow aspect of the problem but it is a highly significant one. It covers families and individuals placed in temporary accommodation by their local authority. Families accepted as homeless by local authorities under the Housing Act 1996 have to be found somewhere to live. To meet their statutory duty to house these homeless households, councils make use of temporary accommodation, which is usually provided in the private sector via a housing association or directly by a private landlord. Not only will the rent for this temporary accommodation be relatively high because of the high turnover and high management costs but councils have to add an administrative charge on top. The total rent, therefore, is likely to mean that the family’s requirement for support takes them well over the new cap.
However, the family cannot go anywhere else—they are homeless, or just about to be so—and must accept the temporary accommodation on offer. They cannot negotiate over the rent: it is predetermined for them. They are stuck, but often only temporarily. Hopefully, in due course, with help from the local authority and often from one of the homelessness charities, the family will find its way into somewhere more permanent and at a more reasonable rent. However, while in the temporary accommodation, there is no option but for the rent to be paid, even though this would absorb almost all available support within the cap.
This amendment, therefore, looks at an exemption for those in temporary accommodation for a fixed period of 39 weeks. This is the same period of grace as for those who have lost their job. Those who are made redundant or whose employer goes bust, or those who lose their job for other reasons, need time to get a new job. It would be counterproductive to penalise a tenant by imposing an immediate benefit cap with the likely outcome of them incurring debt and/or having to move away from work opportunities. In just the same way, those who lose their home require a few weeks, at least, to secure a new place to live.
The Minister will well remember the amendment I proposed to the previous Welfare Reform Bill for a period of grace from the benefit cap for those who lost their job. On that occasion, the Minister generously decided to improve upon my suggestion of a 26-week period of grace, substituting a 39-week period. I now look forward to the same treatment for those who have lost their home and had to move to temporary accommodation. These people too need a period of grace to get back on track. The 39-week grace period would apply when a council accepts a household as homeless or about to become so. This would enable the rent to be covered in their temporary accommodation for a sufficient period, and in many cases enable them to secure new employment and/or find a proper home, hopefully at a more reasonable rent.
I am familiar with one case where a family lost their shorthold tenancy in Hillingdon. The landlord decided not to renew their tenancy—I guess because he was planning to raise the rent above the level for which housing benefit and local housing allowance has been available. The family became homeless and were housed in temporary accommodation in Slough. The two children remained at their schools in Hillingdon by getting up extremely early and getting home very late, with their mother also travelling daily from Slough to desperately try to retain links to job opportunities in Hillingdon. She succeeded, somewhat against the odds, and the family is settled, albeit paying a higher rent, back in their home borough.
A period of grace prevents drastic decisions being taken to move families to a low-cost area miles away, far from work opportunities, schools and networks of family and friends. The 39-week grace period makes complete sense, as the Minister’s earlier amendment did, which provides this same period of grace for those who lose their job. A precedent exists already for exempting a family that has to move in dire circumstances. This is the exemption for households supported in temporary accommodation because they are fleeing domestic violence. There are precedents, therefore, both for a 39-week grace period and for exempting vulnerable groups that have to go into temporary accommodation.
I am rather nervous the Minister may respond that, as with other cases where a household has difficulties with support for housing costs, the allocation of funds to local authorities for discretionary housing payments, or DHPs, could take the strain. I know that the noble Lord, Lord Kerslake, will pick up on this point, with particular reference to the difficulties of stretching the rationed DHPs in London. Picking up the cost of rent for families in temporary accommodation whose benefits are capped already absorbs up to 60% of the discretionary housing payments in some London boroughs. The lower cap will mean an additional call on DHPs that will be positively overwhelming in the hardest-pressed places, bearing in mind that these discretionary payments are meant to fill so many other gaps, not least where all are agreed that the so-called bedroom tax should not be payable. Moreover, it is hugely increasing the administrative burden on councils to ask them to exercise discretion on a case-by-case basis on a much bigger scale.
The other grounds on which the Minister might suggest that this amendment is not a good idea is that the new lower cap will coerce councils into negotiating lower rents with landlords. But local authorities are already finding it extremely difficult to persuade landlords to enter into these temporary accommodation agreements, and the existing financial system—quite properly aiming to keep families out of bed-and-breakfast hotels—already strongly incentivises councils to get the rents down. Therefore, I do not think that there is mileage in this argument.
Would there be a cost to government in allowing a period of exemption from the cap for those placed in temporary accommodation? Yes, but this is time-limited and a concession that represents a trifling expenditure in the wider context and saves huge costs—perhaps lasting a lifetime—if councils, in fulfilling their statutory duties, feel compelled to dispatch families to the cheapest areas of the country where their employment prospects are much lower, children are likely to be badly hit by changing schools and all the family will miss local networks of friends and family. I hope very much that this amendment appeals to the Minister. I beg to move.
Lord Kerslake (CB)
My Lords, I declare my interests as chair of Peabody and president of the Local Government Association.
My amendment is very similar to the other two amendments in this group, and I will not repeat what I think was a very compelling argument made by my noble friend Lord Best. What I would like to do this evening is focus on three key reasons why I think that the Government should reconsider their approach to this issue. The first reason is the rising level of homelessness, the second is the quadrupling of the number of people who will be caught by the cap and the third is the inadequacy, as my noble friend Lord Best has said, of the discretionary housing payments fund.
Let me deal with the issue of rising homelessness first. My noble friend Lord Best referred to the recent report by Shelter. This report found that the number of children in temporary accommodation is at a seven-year high. The total number of people in temporary accommodation from the period of July to September 2015 was 68,500. That was a 12.5% increase on the year before. So we are clearly experiencing a significant rise in the levels of homelessness. The effect of this will be that, this Christmas, Shelter estimates that some 103,000 families will be in either bed and breakfasts, hostels or temporary rented accommodation. That will be a very grim Christmas for those families. Of those families, something like one in four are living in a different area from the area that they previously lived in. That means that they are away from their children’s schools and family support. In London, that figure is one in three. This is a very significant issue that is growing in its scale and impact.
The second issue I referred to is the number of people who will be caught by the cap. As has already been said, that number is likely to quadruple, adding an extra 90,000 people. Therefore, there will be two effects on the issue that we are speaking about, and that in turn will impact on the financial consequences for local government. It is important to say that the people involved here do not have any real choices. The circumstances they face—losing their shorthold tenancies or family break-up—will undoubtedly lead them to a position where they need to move and move quickly. Similarly, local authorities will have little choice, given the limited accommodation that they have available to them to put people into temporary accommodation, even though the management costs of that accommodation are higher. So we face the situation where there is likely to be rising homelessness, a quadrupling of the numbers caught by the cap and people, through having no great choices of their own, needing to go into temporary accommodation with higher costs.
In the past, the response has been that the discretionary housing payments fund will cover this. The evidence produced, again by Shelter, suggests that that is unlikely to be the case. We know that, in London, the scale of the costs through the DHP funding is already around £4 million. It has been calculated by Shelter that for one local authority alone, Tower Hamlets, this could add a further £2 million per annum in terms of costs. I do not believe that the discretionary housing payments fund will be the answer to this issue. It will squeeze out the other reasons why local authorities need to use this fund. They will therefore be faced with a choice of either compelling families to move further away so that the cost is lower or, alternatively, dipping into resources that they have for other purposes. We will face an increasing squeeze on those local authorities that they will not be able to cope with.
The Minister may say that DHP funding is rising. Indeed, it is. It will rise from £165 million this year to £185 million in 2017-18. However, it falls to £140 million in 2021. Therefore, this fund goes up, but it goes down again, whereas the pressures that I have spoken about are inexorably rising. A simple way out of this issue is to exempt families in temporary accommodation, as has been proposed. This recognises the reality that there is little choice and that, if we ignore this issue, we will increase the pressure on local authorities to a point where it will damage the finances of those authorities and the prospects of those families.
Lord McKenzie of Luton
My Lords, I speak to Amendment 86, which is in my name and that of my noble friend Lady Sherlock. I also speak in support of Amendment 73 moved by the noble Lord, Lord Best, and Amendment 90A in the name of the noble Lord, Lord Kerslake. As we have heard, regardless of whether the benefit cap has played a role, local authorities remain legally obliged to rehouse families who are demonstrably homeless through no fault of their own, are vulnerable in some way or are in priority need for rehousing.
Families will be placed in temporary accommodation while a council decides whether it owes them a rehousing duty and then until a settled home can be found. For some families, the wait for rehousing can be considerable. I note that the noble Lord, Lord Best, has a 39-week grace period. I understand that that is likely to be sufficient in the overwhelming majority of cases but not in all cases, particularly in London. While in temporary accommodation, councils charge families rent to cover their own costs and expenses, and this is commonly paid for by housing benefit. In some cases, councils have to top up additional costs out of their own funds or, as we have heard, the limited pot of discretionary housing payments.
Temporary accommodation is generally leased by local authorities from the private sector at a premium, placing a considerable burden on them. Councils are already struggling to secure enough temporary accommodation as a result of the combined effect of limited funding and a shortage of self-contained accommodation. This is already leading to an increase in bed-and-breakfast use or people being rehoused away from their local area. The lower benefit cap will increase demand for homelessness services and exacerbate the pressure on the local authority supply of temporary accommodation. With more homeless families affected by the cap, local authorities are likely to be forced into further subsidising the cost of temporary accommodation. This will be difficult for cash-strapped councils, increasing the incentive to place families in the cheapest areas far away from their support networks.
It will also make it harder to permanently rehouse homeless families, as the benefit cap will make alternative housing options unaffordable. For larger families, even social housing will be subject to the cap. The policy therefore risks the perverse scenario in which families are made homeless because of the benefit cap and trapped in the limbo of temporary accommodation by the benefit cap at the expense of the public purse. The amount that can be reimbursed through the local housing allowance is limited to £500 a week, which means that other costs over and above that amount must be met by local authorities. In some cases, this will come from funding for discretionary housing payments, but often the necessary funds will have to come from elsewhere, given that DHP funds are in such short supply in the context of seemingly insatiable demand.
We know that the Government have declined to collect statistics which might help them measure the extent to which any purported savings from capping household benefits are simply being shifted on to local authorities in the form of additional homelessness costs. Our honourable friend Emily Thornberry MP sent freedom of information requests to every local authority in London over the summer and the findings throw doubt on the idea of the cap as a savings measure.
In the first year following the introduction of the cap, London councils spent a combined total of £19.2 million supporting households which had been hit by it. In the second year, this rose to £23.3 million altogether. Some boroughs spend more than 80% of their total DHP allocations on supporting capped households, and in most boroughs the proportion is increasing each year. To date, local authorities in the capital have spent almost £47 million in DHP funding as a direct result of the benefit cap and it is likely that this is just the tip of the iceberg in terms of the overall costs involved. Reliance on temporary accommodation is a significant driver of these additional costs.
As we have heard, across London more than a quarter of households currently affected by the benefit cap are living in temporary accommodation and in some boroughs it is much higher. In Waltham Forest, apparently a staggering 58% of capped households live in temporary accommodation. This compares with less than 1.5% of the overall population of people claiming housing benefit. The disproportionate presence of families in temporary accommodation among households affected by the cap is a huge issue for local authority spending. It is also a real source of human misery as, increasingly, councils are having to house homeless families in temporary accommodation outside their area, and sometimes many miles away from their support networks and their children’s schools.
Our amendment would exempt newly homeless households from the benefit cap. This would allow councils to continue to procure nearby temporary accommodation and make it easier for them to move households into affordable accommodation. It will also help councils focus their DHPs and their own budgets on homelessness prevention. If the Government are serious about cutting back on public expenditure associated with the benefit system, and in targeting the benefit cap at families in a position to make choices about where they can afford to live, it is hard to see why they should argue against exempting homeless families being housed in temporary accommodation.
Lord Freud
My Lords, these amendments seek to exempt people in temporary accommodation from the benefit cap. I cannot agree that it is appropriate to have a blanket exemption from the cap for all those living in temporary accommodation, even if it is time limited in the case of Amendment 73. Rather, I believe that the best approach is to provide support so that people may better address their barriers to work. My challenge to the noble Lord, Lord Best, is: if there were to be a 39-week exemption, how would that not have a perverse incentive on people staying in temporary accommodation longer term if it is likely that the cap will apply to them when they move? That is the reason for our approach.
Discretionary housing payments are available from local authorities for those households who need additional support in adjusting to the cap. We have made £800 million available over the next five years for all the welfare reforms. However, in particular areas, one of which is London, this will be a substantial element. In the Autumn Statement, it was announced that further DHP funding will be made available for the most vulnerable people, including those who may be in supported accommodation. In 2016-17 it will go up from the current level to £150 million, and the allocation of those funds reflects the new measures we are bringing in, as does the timing of their introduction.
We have already made provision to support the most vulnerable people who might be affected by the cap. Housing benefit paid to households in specified accommodation is disregarded from the benefit cap and we have included refuges within the definition of “specified accommodation”. The disregard applies to benefit cap cases under both housing benefit and universal credit. While this does not mean that these households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these vulnerable cases will not be affected by the benefit cap.
Finally, from April 2017 the weekly management fee, currently £40 in London and £60 elsewhere, will be abolished and replaced with a grant that devolves this funding to local authorities. Unlike the existing management fee, the new grant will not count towards the benefit cap and will help local authorities tackle homelessness more effectively. I would therefore ask the noble Lord to withdraw his amendment.
The Earl of Listowel
My Lords, I would be grateful if the Minister provided a little detail on the research that will be coming forward after the Bill is enacted so that I and we can see its impact on children. For instance, for some time now the University of East London has been researching the issue of family homelessness. Is the Minister thinking of talking to such institutions? Going back to the previous debate, it is important to get some high quality research that goes into the detail and granularity of the impacts of these measures.
Lord Freud
The noble Earl will be aware that an enormous amount of research is conducted in this area. I will write to him with anything specific that I can on our research proposals.
Lord Best
I thank all noble Lords who have participated in this mini debate, and particularly the noble Lords, Lord McKenzie of Luton and Lord Kerslake, for their contributions to one of the key housing aspects of the wider debate on the benefit cap. The noble Lord has found a fundamental flaw, as he sees it, in the argument in favour of temporary accommodation being exempted: that there will be no incentive for those who are placed in such accommodation to move for the full 39 weeks, because as soon as they do they will no longer be exempt from the cap. This is a consideration I shall have to ponder in some depth, and I am grateful to the noble Lord for explaining it. I fear that the position already is not that the vast majority of people will not be affected by this arrangement, because we know that an awful lot of families are being moved well away from the place where they are most likely to get a job, where their children go to school and where they have their family and friends close by to help them. A high proportion of families are now having to move a long way away because of the need to keep down the cost of temporary accommodation. We will have to think some more about this issue, but in the mean time, I beg leave to withdraw the amendment.
Baroness Meacher
Baroness Meacher
My Lords, in moving Amendment 75 I shall speak also to Amendments 78, 80, 81 and 83. The amendments seek to exempt those in receipt of carer’s allowance or disability benefits from the cap. I shall talk about the two groups, carers and disabled claimants.
As Carers UK has pointed out, unpaid carers save the state an estimated £132 billion per year. Clause 7 includes just one of a number of measures which will have a damaging impact on the finances of the 6.5 million carers in the UK. The lives of carers are already extremely hard. A Carers UK survey of 4,500 unpaid carers, mostly caring for 50 or more hours a week, shows that almost half of them, some 41%, are cutting back on essentials such as food and heating—one wonders what else they could cut back—while 45% said that financial worries are affecting their health. I want to draw to noble Lords’ attention the fact that Clause 7 breaches a Government election manifesto commitment to increase support for full-time unpaid carers. The cuts set out in Clause 7 and elsewhere in the Bill come on top of previous changes which Carers UK estimates will result in a cut to carers’ incomes of more than £1 billion between 2011 and 2018. I would be grateful if the Minister responded to this point.
The Government’s impact assessment identifies that 6% of carer’s allowance recipients will be subject to the cap. Those who have had their benefits capped at £26,000 will lose an average of a further £64 per week. The figure of 6% may seem small, but for every one of those families it will be devastating. The cumulative impact of the cuts, together with the cut to WRAG benefits and further reductions in local government funding, will inevitably undermine the capacity of many carers to continue their invaluable caring work. I know that carers looking after disabled partners and disabled children aged under 18 are exempt from the cap, but why are those who care for adult disabled children, siblings or elderly relatives not also exempt? I would be grateful if the Minister explained this. Why should one group of carers be given preference over another group? Surely that is an anomaly.
The Minister will be aware that on 26 November 2015 the High Court ruled that carers in receipt of carer’s allowance should be exempt from the benefit cap following a judicial review challenge to the policy and its impact on carers and the disabled, seriously ill or older loved ones they support. The judge’s comments will be known to the Minister, but I want to quote one short passage in which he concluded that, “With carers being unable to mitigate the cap, this endangers the sustainability of the caring role and indirectly discriminates against the disabled person, who will no longer be able to receive care”. What do the Government plan to do in response to this ruling? I hope the Minister will clarify the position for noble Lords.
Recent DWP research shows that households containing carer’s allowance claimants subjected to the cap are more likely to move into work than those not capped. To what extent has the cap already led claimants to abandon their caring responsibilities in order to return to work? How many disabled people have moved into residential accommodation as a result? The implications for social care services and costs to the public purse may be considerable. Does the Minister have information on this point? In fact, will the cap save money as far as it affects carers, or will it cost the Exchequer a great deal?
I will say a brief word about the amendments aimed at excluding disabled people’s benefits from the calculation of the cap for any household. We have already discussed the severe consequences of this Bill for disabled people, particularly if all the cuts go through unmodified. I want to say in the context of Clause 7 only that disability benefits were introduced to compensate disabled people for the additional expenditure they incur because of their disability. If these benefits are included in calculating the cap, families with a disabled member will be poorer than able-bodied families. They do not benefit in material terms from their disability benefits, because all those benefits do is compensate for the higher costs of travel, heating and so on than able-bodied families incur. Is it the Government’s intention to hit disabled people particularly hard with this legislation? If they wish to treat disabled people on an equal basis with others, disability benefits should indeed be excluded from the cap calculations. I would welcome the Minister’s comments on this point. I beg to move.
Baroness Pitkeathley
My Lords, I rise to strongly support the amendment moved by the noble Baroness, Lady Meacher. We have said already that the cap is applied unequally to carers. While I welcome the exemption for households in receipt of PIP or DLA, it means that carers who are considered to be not in the same household as the person they care for will be penalised.
Lord Freud
In the interests of saving time, it may be worth me saying one of the key things that I will say as I close. Clearly, noble Lords will be aware of the High Court judgment in the case of Hurley and others. The Government are considering this closely. Can I ask noble Lords to allow me to come back to them on this important issue at a later date? By that I am hopeful that it will be on Report. I am hopeful but I cannot guarantee it—well, it must be at Report stage. I will come back with the Government’s decision on that, which might help to truncate some of our deliberations. That is all I can say at this stage.
Baroness Pitkeathley
I am grateful to the Minister and will happily truncate and wait with bated breath for his response on Report. Meanwhile I simply support the amendments of the noble Baroness, Lady Meacher.
The Earl of Listowel
I rise to speak to my Amendment 90B which would exempt kinship carers from the benefit cap. I am most grateful to the noble Baroness, Lady Drake, for adding her name to the amendment.
I will be brief as the Committee has already discussed kinship care and the Minister has knowledge of it through his charitable work. One does not need to believe in an afterlife to know that there is a hell. One need only hear some care-experienced adults speak of their experience. The experience of too many is: to grow up without love; to be betrayed by those they trust; to be left in that position for years before the state intervenes; to experience rootlessness in care often; to look to alcohol or drugs for respite from guilt and the inability to relate to others; and to give birth to child after child only to have each baby removed by the state.
Our amendment increases the chance that these souls will know heaven rather than hell, and increases the chance that they may know love and security and then go on to love and be loved themselves. The best rehabilitation we can offer children taken for their protection from their parents who cannot love them is the chance that these children can find love themselves and go on to be adults who will start healthy families and have children they can love and who love them.
We know that 30% of kinship carers are on housing benefit and 36% of the larger of these families are on HB. There is a concentration of kinship care in London, with 1.7% of children in this city cared for under kinship care arrangements. Brent has 2.8% of its children in kinship care—the highest level in England. Failure to amend this Bill will put more of these families into poverty and, I fear, uproot others.
What kind of choice is it that the state is forcing families to make when in order that an aunt or uncle should do right by their niece and/or nephew, they must uproot their own children from their home, friends and school, leaving behind their own support network, to live in poverty somewhere they may not know? A grandmother carer said of the Bill as it stands, “I had a really well-paid job and now I worry constantly about money. I always listen to what the Government are doing as the changes with universal credit will affect me and my little one. I am scared of losing my home and being homeless”. I beg the Minister to accept our amendment and ensure that this Bill makes the welfare of these particular children paramount.
Baroness Lister of Burtersett
I shall be very brief. I support what the noble Earl, Lord Listowel, said about kinship carers. I am delighted that the Minister will come back before Report on the question of carers. I remind him of something he said during the passage of the 2012 Act. He said that one thing the Government were not looking to encourage was a change in the carer’s behaviour so that they stopped caring.
I hope that he will remember that statement—and what he has heard about how strongly Members of this House feel about the inappropriateness or “indecency”, as my noble friend put it, of applying the cap to carers—when he makes these considerations about how to respond to the High Court case.
Baroness Pitkeathley
Perhaps I might just add to that. I ask the Minister to bear in mind that we have already heard that many carers are working more than 50 hours a week. That is more than any full-time job and we need to keep that in mind when we consider pushing carers into work.
Lord Blencathra
I rise briefly to oppose the noble Baroness, Lady Meacher, because her amendment would remove the ESA part in Clause 7(4)(e). I do not think that removing it will serve people with disabilities well. To be fair, when the Labour Government introduced the ESA back in 2008, they had a noble aim: to help support many people with disabilities into work. I commend them on that. The work-related activity group—WRAG—within ESA was originally intended to act as an incentive to encourage people to participate in work-related activity and therefore return to work quicker.
Previously in Committee, noble Lords suggested that people in the WRAG have been declared not fit for work, but that is not the case. They have been declared to have “limited capacity for work”, which is not the same thing, as most noble Lords will understand. That is an important distinction, for the purpose of this group is to encourage people into work. Indeed, when the Labour Government introduced the benefit White Paper, Raising Expectations and Increasing Support: Reforming Welfare for the Future, published in 2008, they stated that they aimed to reduce the number of people on incapacity benefits by 1 million by 2015. I am making no criticism or political comment. It was a wise and noble aim, yet the reality is that we have failed and only 1% of people in the WRAG leave the benefits system each month.
It is good that the Department for Work and Pensions is currently looking to reform this area and I look forward to seeing my noble friend’s White Paper in the new year. It would be a backward step to remove the ESA. We have already discussed this, and my noble friend has already stated today the tremendous success that the cap has in getting people into work. Removing the ESA would be slightly counterproductive.
Baroness Meacher
Very quickly, I just want to raise the question of whether the noble Lord, Lord Blencathra, thinks that there is a problem with the work capability assessment or with the ESA WRAG. I am aware that people with Parkinson’s are already assessed as having limited capacity for work. The idea that their capacity will grow is frankly inconceivable.
Lord Blencathra
The noble Baroness makes an interesting point. We addressed the capacity for work test at an earlier stage. There are concerns and it may not be perfect. It is very difficult to assess. We can have 100,000 people with MS and every single one is different, so it is very difficult to come to a firm conclusion. I know that the Government are continually improving it. Labour improved it. The coalition improved it and the current Government are trying to improve that test. I hope that my noble friend will continue with that.
Baroness Sherlock
My Lords, I rise to speak to Amendments 87 to 90 in our name, and to comment briefly on the other amendments in the group. Ours are probing amendments designed to encourage the Minister to talk to the Committee a bit more openly than he has been able to do so far. What behavioural responses are being sought from some of the groups of people affected by the cap?
I thank the noble Earl, Lord Listowel, for talking about kinship carers so powerfully. I shall be listening very carefully to what the Minister says at the end, and I hope to hear him engage rather more substantially with the issue than I feel he did when this came up in earlier stages, particularly in relation to the two-child policy.
Amendment 87 would exclude from the cap anyone claiming carer’s allowance. I am very happy to press pause on that and come back to it on Report. The Minister should be aware that expectations are now running exceedingly high in this House. I am sure that what he has to say when he comes back will be a delight to all of us, and I very much look forward to that.
There are two things from the judgment that he might still take, even if the Government decide to accede to the very small number of people who were there. The first goes to a point made by the right reverend Prelate the Bishop of Durham. At the opening part of the judgment Mr Justice Collins said that,
“to describe a household where care was being provided for at least 35 hours a week as ‘workless’ was somewhat offensive”.
That was a very good point and one we could all do well to remember.
The other point that Mr Justice Collins made, which is of wider relevance, was that what often seemed small capped sums for the DWP could be such a loss to these families as to “tip them into destitution”. One of the cases he gave as an example was of somebody who was losing £11 a week. These may seem small sums to the department but they can make the difference in Dickensian terms between happiness and misery to individual families. I hope that we will all bear that in mind.
Amendment 88 would exempt from the cap those who are claiming universal credit and are not subject to all work-related requirements. Amendment 89 would exempt people in receipt of ESA in the WRAG group, which was just addressed by the noble Lord, Lord Blencathra. Amendment 90 would exempt claimants of income support. In the impact assessment, the Government talk about reducing the levels of the cap for those not making a “behavioural response” by an average of £63 a week. That is a lot of money.
These amendments require the Government to explain what behavioural responses are being sought. The Minister says that this is hugely successful in getting people into work. In fact, as we have already heard from the IFS, the majority of people affected are not responding by either moving house or moving into work because 85% of them are not required to work as a condition of receiving benefits. Therefore, the cap will try to push into work certain people who would otherwise not be required to do so because they are on ESA, or they are the parents of very young children, or they are carers—a point made very strongly by my noble friend Lady Hollis on an earlier amendment.
The only ways to escape the cap are to move into work of at least 16 hours a week—to open a working tax credit claim, or be on the minimum wage while on UC—or move home. In the case of people on ESA—the point made by the noble Lord, Lord Blencathra, notwithstanding—does the Minister accept that some people in the ESA WRAG group will either not be capable of working at the moment, or will not be able to sustain 16 hours’ work a week, or will not be able to work consistently because of the nature or their illness or disability? If that is the case, can he explain to the Committee what behavioural responses he wants from them and, if they are not capable of making any of the available responses—working or moving house—does he think it fair that they should simply have their income cut because they are incapable of doing the thing he wants them to do?
In the case of parents who are capped, the normal work requirements do not apply, so a single parent or main carer could have two children, including a very young baby, and be expected to work if the cap means that they could not otherwise afford to pay their rent. Whenever we talk about single parents or parents working, the Minister tells the House that the Government are putting lots of extra money into childcare and that parents of three and four year-olds will have extra childcare, as will disadvantaged parents of two year-olds, but here we are talking about children who could be one or two years old. There is no free entitlement to childcare when a child is under two. Even the provision of childcare for disadvantaged two year-olds is for only 15 hours in term time, which would not match the requirements of someone moving into a job for 16 hours a week throughout the year to escape the benefit cap.
Research undertaken by the Family and Childcare Trust found significant gaps in provision for young children in 136 local authorities surveyed in England and Wales. The evidence bears this out. It shows that single parents with younger children are already less likely to move off the cap than other groups, presumably because they are struggling to find suitable flexible jobs and suitable childcare while combining them with minding very young children.
The impact assessment also talks about the aim being to improve work incentives, but I wonder whether the Minister has read the report from the Child Poverty Action Group, which showed just how strong work incentives were, even for families who might be getting significant amounts of benefit. It gives the example of a very rare occurrence of a lone parent with four children, who would be better off by £105 a week working just 16 hours a week on the minimum wage. Therefore, work incentives already exist so, if parents are not working, something else may be going on.
When the Minister responds, I hope that he will address these probing amendments by talking about individual cases. He has talked a lot about how he wants to move to a much more personalised situation so that advisers can engage with individuals and understand that their circumstances differ, yet this measure feels like a very blunt tool, indeed. Therefore, could he tell us a little more about what it might mean in practice?
The Lord Bishop of Southwark
My Lords, I rise to express my support for the intention behind the amendment in the name of the noble Earl, Lord Listowel, which makes sound social and economic sense. If a child can be cared for within the family network, and that is not to be parents or step-parents, that is in most cases preferable for the emotional, physical and spiritual well-being of the child. Churches have watched and participated for centuries in the patterns of such relationships and know that while they can hide dangers, they provide in the main the best setting for the formation of life. Better that than the anxiety, grief and hardship imposed by benefit rules not designed for such scenarios, and that a proportion of such children be an economic charge on local authorities and reap the emotional deficit that will all too often occur.
We have heard that there are an estimated 200,000 children raised by kinship carers across the UK. Some 50% are grandparents and a little under a quarter are siblings bringing up younger brothers and sisters. If 95% of children living in kinship care arrangements are not looked after by the local authority, can we imagine what the cost would be if there were any sort of shift in that figure—yet we expect the carer to bear that cost? It is a cost often undertaken at short notice and in an emergency. Kinship carers face significant additional costs in terms of both equipment needed and maintenance costs. Their family size increases and can even double overnight. Unlike adopters, they are not entitled to a period of paid leave for the children to settle in. The largest survey of kinship carers in the UK, conducted by the Kinship Care Alliance, found that 49% of respondents had to give up work permanently as a result of taking on the kin children, a further 18% had to give up work temporarily, and 23% had to reduce their hours temporarily or permanently. In many cases, this plunged the household into poverty and debt. One grandmother carer responding to the survey said:
“We are struggling to buy food and pay our bills. We have to get food vouchers every three months”.
The Kinship Care Alliance survey found that 30% of kinship carers’ households were currently receiving housing benefit. The figure rose to 36% among larger kinship care households with three or more children—kinship care households such as that headed by Rachel, a grandmother in her 50s who lives near my diocese in south London. She took on the care of her three young grandchildren when her daughter died in a car accident last year. The children’s father is in prison. She has had to give up work to raise the oldest grandson, who is six years old and her two youngest granddaughters, who are three and one years old. She is also grieving the loss of her daughter, just as the children are grieving the loss of their mother.
I would be grateful to the Minister if he could tell me whether the Department for Work and Pensions has undertaken an assessment of the likely impact of this measure on kinship care households and, if so, whether he could provide the detailed figures. Furthermore, if the Government do not favour this amendment, will they bring forward their own amendment to address the points I have raised? Is the Minister not concerned—as I am—that the numbers in care may rise if action is not taken?
Many of the children arrive to live with kinship carers following a crisis and are deeply traumatised. Many have severe needs and some have suffered prior abuse. The survey to which I have referred found that kinship carers reported that a staggering 43% of the children had emotional and behavioural problems. Forcing carers into work cannot always be a just and appropriate response.
The right reverend Prelate the Bishop of Portsmouth, who spoke earlier in these debates, dearly wished that he could have spoken today, and I pay tribute to his endeavours in this regard. I welcome the focus of the Government’s own family test on stable and strong family relationships and the explicit reference to kinship carers in the test. This amendment is entirely consistent with the application of the family test and I hope that the Minister will accept it.
Baroness Drake (Lab)
My Lords, I, too, support Amendment 90B, which seeks to exclude kinship carers from the benefit cap. The amendment is, indeed, a logical extension of our discussion on the first day of Committee on kinship carers and their exemption from the two-child limit. To reiterate, care proceedings cost an average of £25,000 and foster care £40,000 a year, yet most kinship care arrangements can be fixed without recourse to the courts, with dramatic savings to the public purse as well as significantly improving outcomes for the children. However, much of the financial cost of raising the child typically falls directly on the carers themselves.
When we discussed this issue on 7 December, I found the Minister’s response on kinship care profoundly worrying. He was pressed on his failure to acknowledge that a family taking in other people’s children is not doing so through some concept of voluntary freedom of choice, as normally understood, but is choosing to take on the responsibility of vulnerable children rather than abandon them. The Minister responded:
“Clearly there is a difference between the voluntary and involuntary taking on of children, whether they are your own or anyone else’s. That is what our exemptions are for. We are seeking to try to draw the line between where it is involuntary, as in the case of rape, and where it is not”.—[Official Report, 7/12/15; col. 1332.]
That statement shocked many in this House because in effect the Minister was saying that if a kinship carer takes on responsibility for vulnerable and distressed children, that decision is voluntary and therefore not worthy of state support if it means that there are more than two children in the household. I find that reasoning quite extraordinary and, indeed, quite dreadful.
Lord Freud
My Lords, Amendments 75, 78, 80, 81 and 83 seek to exempt specified benefits from the list of those that are included within the cap or to exclude those benefits in the same way that pensioner benefits are. These amendments undermine the fundamental principle we established when we introduced the cap: there has to be a clear limit to the amount of benefits that an out-of-work family can receive. This is a principle that has gained very broad support across the country.
Turning to the specific proposals, after my intervention on the noble Baroness, Lady Pitkeathley, on the carer’s allowance, I re-emphasise that the Government recognise the valuable contribution that carers make, and I will come back to that issue. Amendment 78 also exempts all those claiming employment and support allowance. Those in the support group are already exempt. But the benefit cap is a work incentive. Those in the WRAG have been assessed as being able to undertake some work-related activity, with a view to moving into employment in the short to medium term, and therefore we believe it is right that the cap be applied to these people.
The same principle applies to those in receipt of IB and SDA together. The recipients of these benefits will not necessarily be unable to undertake any work-related activity, but we are reassessing them for ESA and those who are found to be entitled to the support component will become exempt from the cap. Income support is a benefit paid to claimants in an extremely wide range of circumstances. It is an income-replacement benefit and as such, it is appropriate that, like the other income-replacement benefits, it is included in the cap.
The cap increases work incentives and promotes fairness by limiting the amount that those out of work can receive in benefits. I do not think that a blanket exemption from the cap for simply everybody in receipt of income support would support either of those aims. The vast majority of capped households that have found work include parents who have managed to balance their caring responsibilities with work—as millions of working households already do up and down the country. By going out to work, parents show their children the importance of a strong work ethic and reinforce the message that work is the best route out of poverty.
Before turning to Amendments 87 to 90B, I remind noble Lords of the exemption from the cap for anyone who is a member of a household that includes somebody who is ill or disabled and is entitled to attendance allowance, DLA, PIP, industrial injuries benefits or the armed forces independence payment. Additionally, as well as war widows and widowers, those who are entitled to the support component of ESA or universal credit’s limited capability for work or work-related activity element are exempt.
In recognition of the work incentive objective of the cap, households that are entitled to working tax credit or meet the prescribed earnings threshold for universal credit are also exempt from the cap. I have already mentioned the nine-month grace period from the cap for households that have recently left sustained employment. We have committed £800 million, as I have already said, for discretionary housing payments over the next five years to provide extra support for households that may be affected by the cap, within the context of that £800 million being for all the welfare reforms. I hope that noble Lords are assured that, combined with the additional funds that we have allocated for DHPs, there are already numerous safeguards in the design of the cap which protect the most vulnerable, as well as those with a strong work history.
I have already said that I will come back on Amendment 87. Amendment 88 would exempt from the cap all those in receipt of universal credit who are not subject to all work-related requirements. There is already an exemption, as I have said, for those who have limited capability for work or work-related activity. But this amendment would extend the exemption far more widely, including to those subject to work-focused interviews and work preparation requirements, many of whom will have a relationship with their work coach focusing on what they can do to prepare positively for a return to work.
Amendment 89 also seeks to exempts all those on ESA. I will not repeat the particular arguments but will add that there is a large body of evidence showing that work is generally good for physical and mental well-being and that where their health condition permits, sick and disabled people should be encouraged and supported to remain in or re-enter work as soon as possible. I am encouraged that the noble Lord, Lord McKenzie, was happy to acknowledge that point a couple of weeks ago.
Amendment 90 would also introduce an exemption for all those in receipt of income support. Again, that is an extremely wide range of circumstances.
Baroness Hollis of Heigham
I accept the point about income support covering a wide category of claimants, and I know that we will come on to this later, but is the noble Lord willing to reconsider his position on attaching a benefit cap to people from whom work is not expected by virtue of, say, the age of their child?
Lord Freud
I have already answered that question in the first of these amendment groupings. I repeat: there is a difference between having a state expectation—and conditionality attached—for people to go to work, and a financial incentive for them to do so.
The noble Baroness, Lady Sherlock, asked whether responsible carers would be set requirements that they cannot meet. We will ensure that any work-related requirements will be tailored to individual circumstances and compatible with childcare responsibilities.
I turn to the amendment tabled by the noble Earl, Lord Listowel, on kinship carers. The Government recognise the service that kinship carers and others provide, and the Bill continues the current provisions for foster carers, kinship carers, and family and friend carers. If they, or a child for whom they are caring, are in receipt of an exempt benefit the cap will not apply. In addition, any payments received from the local authority for providing care will be disregarded from the benefit cap. Finally, there is a nine-month grace period whereby the cap may not be applied to those who have recently left sustained employment. This will give time for kinship carers who may have had to leave employment to take on additional caring responsibilities to adapt to their new circumstances. Family and friend carers are treated in the same way as parents in the benefit system, so it is only fair to ensure that this principle applies to the application of the cap, too. The benefit cap is intended to promote fairness between those in and out of work, and to increase incentives for people to move into work—principles that I believe apply in the same way for family and friends carers as for parents.
Regrettably, I am not in a position to supply the specific data requested by the noble Baroness, Lady Drake, on what is happening in London. As I said, I will come back to the matter of carers at a later date but I cannot support the other amendments and I ask noble Lords to withdraw or not press them.
Baroness Meacher
My Lords, I thank all noble Lords who have spoken very powerfully in support of these incredibly reasonable amendments. My understanding is that what we are all about is seeking that the cap does not apply where it is completely inappropriate and unfair to expect that person to work. In the case of kinship carers as well as other carers, the impact on the disabled child or relatives is likely to be extremely serious. The impact on the Exchequer or the taxpayer is also likely to be extremely costly.
I thank the Minister for informing the House that Ministers will be returning to the issue of carers, but surely the arguments of the High Court and the judge in relation to carers in general apply equally to kinship carers. I cannot see any possible argument that they do not—they just have to—so I ask the Minister to take away that point and consider the relevance of the High Court judgment and comments on kinship carers, and the need for some consistency. I also ask him to think further about the importance of people who cannot work for whatever reason, whether they have a one year-old child or are disabled to such an extent that they simply will not get better. Those people should be exempt from the cap and I ask the Minister not just to put that issue away and think “Job done”, but to think seriously and say, “Now hang on—surely we should be doing something about this”.
Baroness Sherlock
Baroness Sherlock
My Lords, I shall also speak to Amendments 77, 79, 82, 84 and 85, which are in my name and that of my noble friend Lord McKenzie of Luton. These amendments would exclude a series of benefits from the cap which relate to families with children, and I want to say a brief word about each of them. Once again, we have tabled these as probing amendments and I therefore encourage the Minister not simply to say yes or even no. If he said yes, I would obviously fall over in shock. I am trying to use these amendments as a vehicle to get him to explain more carefully to the House what he expects people affected by the cap to do to avoid it. That is all I am asking for here, so I encourage him to respond in that vein.
Amendment 76 would exclude child benefit from the cap and Amendment 77 would exclude child tax credit. Just to be clear, the Minister mentioned in the last group that he feels that all income replacement benefits should be included. Those are specifically not income replacement benefits but extra-cost benefits. Child benefit has traditionally been a universal benefit—it is still available to all but the highest-tax bracket households—and it is designed to be the classic extra-cost benefit. It is a horizontal transfer from taxpayers as a whole to households with children, out of a recognition that children are a public as well as a private good and therefore we should all share in the costs of raising them. The parents pay the lion’s share but we all make a contribution because it is in all our interests to raise children who are happy and healthy, and who will be the next generation paying for the rest of us. Why are they therefore excluded?
Amendment 79 would exclude guardian’s allowance from the cap. You can claim guardian’s allowance only if you are caring for somebody else’s children because their parents have died, or because one has died and the other cannot look after them because, for example, they have gone missing or are in prison. What behavioural incentives are the Government seeking by including guardian’s allowance in the cap?
Amendment 82 would exclude maternity allowance from the cap. Maternity allowance is available only to those who are in work but cannot get statutory maternity pay. It enables the woman to take paid maternity leave. The Minister may mention the grace period but that applies only to people who have been in work for the last year at the point when they make an application for benefit, and that may not apply to everybody in this circumstance. Suppose that a woman finds that she hits the cap because her household benefits rise as a result of her maternity allowance. What is she to do? Let us say that she is single or that her partner is unable to work. What behavioural response does the Minister want? The two things that have traditionally been suggested are to work or to move house. Is she to work when she has a job but is going on maternity leave? Is she to move house when she is about to give birth? Neither of these seems an obvious response, although I may have missed something, and I very much hope that I have. I raised this at Second Reading or some other point during discussions on the Welfare Reform Bill in 2012, because I remember at the time I could not really believe that the Government genuinely meant to include a maternity benefit in the cap, when the way you got out of it was by working. However, I very much hope I have missed something and look forward to the Minister explaining that one.
Finally, Amendments 84 and 85 would exclude from the cap widowed mother’s allowance and widowed parent’s allowance, which are paid only to widows below state pension age who have dependent children. Those are contributory benefits, eligibility for which depends on the contribution record of the late spouse. I would be interested to hear the Minister’s reasons for including those benefits in the cap.
The impact of this on children will be quite significant. To date, more than twice as many children have been hit by the cap as adults. Children are disproportionately affected by the benefit cap, and 63% of households capped to date contain a child under five. Reducing the cap means that some families simply will not have enough income to manage. Even if they manage some weeks, there will come a time when their budgeting gets thrown off course; for example, when a winter heating bill comes in, both kids have a growth spurt, a child moves to secondary school and needs a new uniform, or the fridge breaks down. With access to hardship payments much reduced, and unable to repay loans or catalogue payments, parents will build up debts and miss rent payments simply to feed the kids and buy essential items. If the Government are going to cut benefits to families with children unless their parents take certain specified actions, the very least they can do is explain to us what those actions are and what they expect them to do about it.
Baroness Lister of Burtersett
My Lords, I rise to speak in support of Amendments 76 and 77, to which I have added my name. I apologise that we will be going over some of the issues raised in the first group of amendments, particularly by my noble friend Lady Hollis, but they are crucial because they go to the nub of some of the disputes among us as to what is fair and what is not.
The amendments follow on from my Amendment 93, discussed earlier, which was designed to safeguard and promote the welfare of children. In speaking to that amendment, I referred to Lord Carnwath’s judgment in the recent Supreme Court case on the cap, in which he made the point that the inclusion of child benefit and child tax credits in the cap raises,
“questions why the viability of a scheme, whose avowed purpose is directed at the parents not their children, is so disproportionately dependent on child related benefits”.
He also said:
“The cap has the effect that for the first time some children will lose these benefits, for reasons which have nothing to do with their own needs, but are related solely to the circumstances of their parents”.
This takes us to one of the “policy objectives” or “intended effects” listed in the impact assessment, namely to:
“Promote even greater fairness between those on out of work benefits and tax payers in employment (who largely support the current benefit cap), whist providing support to the most vulnerable”.
The “most vulnerable” are not defined, but in the impact assessment on the benefits freeze, the term is qualified with the phrase,
“who are least able to increase their incomes through work”.
Surely children fall into that category. Yet the justification for the way the cap is constructed and for the reduction in its level ignores this and, as Lord Carnwath observed, takes no account of children’s needs, relating instead solely to the circumstances of their parents. Moreover, it is worth repeating the observation of the noble and learned Baroness, Lady Hale:
“The children affected suffer from a situation which is none of their making and which they themselves can do nothing about”.
My noble friend Lady Hollis made the point that it is not a level playing field here—a horrible sporting metaphor—and that we are not comparing like with like when we compare in-work earnings with out-of-work incomes, although I will not go into more detail on that. I tried to find out by way of a Written Question how much the so-called hard-working families we hear so much about were likely to be receiving in benefits. This time the response I received rehashed the latest government mantra of their commitment to,
“a higher wage, lower tax, lower welfare economy”,
and referred me to the HM Revenue & Customs website. I enlisted the help of the Library to see whether it could elicit the answer from the website, but—surprise, surprise—it could not. In effect, a government Minister—in this case, the noble Lord, Lord O’Neill of Gatley—was encouraging me to waste my time by sending me to a website that would not supply me with the answer to the questions I was posing. Given that the Government were able to supply similar figures in answer to a Written Question during the passage of the Welfare Reform Bill in 2012, it is surely possible, and beneath the disproportionate cost threshold, to do so again now. I fear that, increasingly, government departments simply cannot be bothered to answer our completely legitimate questions, thereby ignoring their responsibility for parliamentary accountability.
Similarly, I tabled a Question to find out what the impact would be in terms of the total number of households capped, the number of children affected and the cost to the public purse, if children benefit and child tax credit were excluded from the cap. Once more, I was referred by the Minister to the impact assessment, as if that contained the answer. Yet again, such information was made available during the passage of the Bill in 2012, showing that nearly half the savings from the cap were being made as a result of the inclusion of children’s benefits: in other words, nearly half the savings were being made on the basis of a blatant piece of unfairness that drives a coach and horses through the Government’s claim to be creating that beloved level playing field between families in and out of paid work, giving rise to Lord Carnwath’s query about why the policy’s viability is so disproportionately dependent on child-related benefits when its avowed purpose is directed at the parents not the children. It is clear from the evaluation of the existing cap that one consequence is likely to be even greater arrears and debt, thereby aggravating what the Government themselves consider to be a root cause of child poverty.
On our first day, there was broad agreement among noble Lords who spoke that the two-child policy does not meet the Government’s own family test. Although it might not be quite so blatant here, I believe the same applies to the inclusion of children’s benefits in the children’s cap. Although the impact assessment for the cap is much more thorough than that for the two-child policy, I could not see any reference to the family test having been applied. Could the Minister confirm that it was applied and could he undertake to publish the documentation?
When we last discussed this issue, during the passage of what became the 2012 Act, as we have already heard, there was strong support in your Lordships’ House, under the leadership of the right reverend Prelate the Bishop of Ripon and Leeds, for excluding children’s benefits from the cap. I very much hope that that support will be there again now, because with a reduction in the level of the cap to an arbitrary two-tiered level below median earnings, the case for exclusion is stronger than ever.
Lord Freud
My Lords, this group of amendments seeks to exclude specified benefits payable for children and widowed parents from the list of those included within the cap. As I mentioned in relation to the other amendments, these amendments would undermine the fundamental principle that was established when the benefit cap was introduced: that there has to be a clear limit to the amount of benefits that a family can receive. That is a principle that has gained very broad support across the country and indeed from the Opposition.
The benefit cap is one part of our suite of welfare reforms which are restoring work incentives and fairness to the benefits system. That previous system was not fair on working taxpayers; nor was it fair on claimants, trapped in a life where it was more worth while claiming benefits than working. Our welfare reforms are about moving from dependence to independence, and the benefit cap is helping people take that important step into work.
We have always accepted that there should be some exemptions from the benefit cap. To incentivise work, the cap does not apply to those households in receipt of working tax credit, which, for lone parents, requires 16 hours of work a week. To recognise the extra costs that disability can bring, households which include a member who is in receipt of AA, DLA, PIP or Armed Forces independence payment are exempt. Those who have limited capability for work and are in receipt of the support component of ESA or the equivalent in universal credit are exempt. War widows and widowers are also exempt.
Baroness Lister of Burtersett
I am very sorry to intervene. I may have missed it, but I do not think that the Minister addressed my argument, also made by my noble friend Lady Hollis, about the fact that the comparator families in work will be receiving child benefit and almost certainly child tax credit, so why are they being included in the cap as we are not comparing like with like? I also asked a specific question about the application of the family test, to which the noble Lord did not give an answer.
Lord Freud
We did apply the family test; I had better write to the noble Baroness with the details because I cannot recall what was in it. There was quite a lot of material going through in a short time.
I think that I have now dealt twice with the fact that we are looking at earnings and we are not making that comparison, even though I know that neither the noble Baroness, Lady Lister, nor the noble Baroness, Lady Hollis, like the answer. That is my answer—I do not have another answer, however much I am asked.
Baroness Hollis of Heigham
Forgive me, my Lords, but an assertion is not an explanation. What we are getting is an assertion from the Minister: “I am not going to compare income and income, just income with earnings, and additional income for that person on earnings which comes from benefit will not be taken into account. Why? Because I say so”.
The Government are running two arguments, over and beyond the repeated headline stuff. One is about work incentives—people are expected to move into work by virtue of this Bill. The second is the question of fairness between those currently in work and those out of work on benefit. I understand why the Minister is making these arguments, but on neither does he have a case, nor has he made one. He has simply made assertions.
On excluding people, rightly, from the support group, the Minister is still not explaining, but merely asserting: a lone parent with a child of one or two may have the choice to work; the Government do not expect them to work; most people would not necessarily want them to work; none the less, the cap will apply. When it comes to carers, a pause button has been pressed.
On the Minister’s second argument, over and beyond the work incentive whereby he is comparing those in work and those out of work, he is disregarding a chunk of people’s in-work income, which is in addition to those earnings. Why? Because he says so. The incentive into work does not apply to some of the groups we have been discussing. On the fairness between in-work and out-of-work income, the Minister has not included part of the income which would establish a reasonable basis of comparison.
What does the Minister expect us to do? He is asserting things without giving us any evidence and not engaging in the argument. His two assertions—this is why he is doing what he is doing—are not substantiated by any evidence or argument that he has offered. I am sorry, but this will not do. It is not good enough. The Committee is owed more from the noble Lord than we are getting.
Lord Freud
I have done my best to lay out that this is based on equivalent pre-tax incomes of £25,000 and, in London, £29,000. The comparable earnings figure is roughly at the level of four in 10. But I cannot produce any more information or justification—I cannot give what I have not got. I am afraid that that is what I am able to provide today.
Baroness Hollis of Heigham
I do not want to be discourteous to the Minister. He is much respected in the House, and many of us engaged with him in a very satisfactory way on universal credit. He took suggestions away, he listened, he argued, he produced new evidence which made some opposition Members change their mind. We have every respect for the fact that, as a Minister, the noble Lord is genuinely evidence based—except on this. He has produced no evidence.
What puzzles me is that the Minister has not asked for the evidence to substantiate his two drivers about getting people into work and having fairness between in-work and out-of-work claimants. We know from experience that the noble Lord respects evidence and offers it to us. He has come to the Committee, after Second Reading and three Committee sittings, knowing that we will be looking for evidence to sustain his position—and if he has it, we will respect it—but he has not come forward with it; he has simply repeated assertions. Either the evidence is not there, in which case the assertions have no substance, or the evidence is there but is not being shared with us, which suggests a level of bad faith that I do not in any way attribute to the Minister. So where are we?
Lord Freud
I will try one last time. If noble Lords are dissatisfied, that is the reality.
We currently have a benefit cap in operation at a single rate of £26,000, and we are taking that down. That has mainly affected London. We are now spreading it out to affect just short of 100,000 people—90,000-odd on the impact assessment, although it is interesting that, in 2012, a smaller number were involved in practice than in our original impact assessment, so let us just see.
Our experience of running that benefit cap and the reaction to it were such that the Government decided that we could safely reduce the level and put it into two tiers, so that its impact is spread through the country more evenly. We have taken it down by 12.5%. It is the experience of running it live that has led the Government to think that we could move it to these levels and get the incentive effects that we are looking for to operate. I do not have any more information to provide for the noble Baroness—much though I know that she would like more. I apologise to the extent that she is disappointed.
Baroness Sherlock
My Lords, I thank the Minister for trying, if not succeeding, to answer the questions. He must appreciate that we had some very good discussions during the passage of the Welfare Reform Act, which brought in the cap in the first place. One reason that they were good was because a lot of evidence was around. He was asked some searching questions from Peers from all Benches, he engaged with the argument, we had some good debates and I would like to think that the system that we now have in universal credit is better than it would have been had it not been for them. In fact, I think he was kind enough to say so at the time.
One reason why I have always enjoyed participating in debates in this House in this area is precisely because we have been able not just to trade in political slogans but get into detail and understand how we might improve current policy—which is the whole purpose of this Chamber as a revising Chamber.
Lord Freud
I say only that I remember with some fondness—not entire fondness, because 17 Sittings in Committee is too much for anyone—that we had some very valuable dialogues then. One of the most important was about universal credit and led directly to the creation of universal support, which is becoming a valuable tool that we are developing. I remember equally vividly that the benefit cap area was one where at least equivalent frustration was expressed by noble Lords about what I was saying. I remember that very distinctly. There were some very punchy discussions. I will say no more than that, but it was not an area where we had the most sweetness and light on that Bill.
Baroness Sherlock
I thank the Minister for reminding me of that joyous period; I think of it often.
The Minister mentioned that a lone parent could avoid the cap by going into work for 16 hours on working tax credit. He did not pick up the point that I made on the previous amendment, which was that, on universal credit, he always said that lone parents would be expected to work only if they could find a suitable job where they could get childcare. He has not responded to the fact that a lone parent with a baby would have to go to work. The offer of childcare for three and four year-olds does not apply to babies. The offer of childcare for disadvantaged two year-olds does not apply all year round. There is a real issue. Someone might find that the only response was to take jobs which either might not be available or for which they could not find suitable childcare.
I am sorry to say that I did not find the Minister’s response on maternity allowance persuasive at all. I think this is one of these oddities, and I think the Government just got it wrong and should have just put their hands up. These are generally probing amendments, but I think that that is just genuinely bizarre. The impact assessment says that, if people do the right thing and move into work, they will not be capped. How is it possible for a woman who is about to give birth to do the right thing and move into work? That just does not work. However, I fully accept that I am not getting any more than I have.
Finally, during Committee, my noble friend Lady Lister has given two or three examples of Written Questions that she has asked, the Answers to which have been, frankly, unsatisfactory. They have mostly referred her to another document or website in which the answer was not found—as she has established with the help of the Library. That is a very bad trend in which legitimate questions are being asked for information which would help to inform deliberations in Committee on a Bill, but the department, via its Minister, is not providing them. We will keep a close watch on this and, if it comes up again, we will raise it again on the Floor of this House.
In the mean time, I beg leave to withdraw the amendment.
Baroness Sherlock
“(a) the rate of inflation, and(b) the national economic situation.”
Baroness Sherlock
My Lords, a change of subject. I am pleased to say that these amendments are not about the benefit cap. Amendments 95 and 102 are in my name and that of my noble friend Lord McKenzie of Luton, and Amendment 100 is in our names and that of my noble friend Lady Lister.
Clauses 9 and 10 provide for the freezing of certain working-age benefits for a period of four years until 2019-20. This is estimated to save the Government £3.5 billion in 2019-20 when compared to an uprating by CPI. The benefits and tax credits included in the freeze are the main working-age components of income support, jobseeker’s allowance, ESA, housing benefit and ESA WRAG, together with the key elements of working tax credit and the individual element of child tax credit, universal credit and child benefit. It does not extend to disability premiums, allowances for caring responsibilities or pension benefits.
Amendment 95 would displace the automatic freezing of those items and require a review to take into account inflation and the national economic situation. Amendment 100 would have the same effect for child benefit, and Amendment 102 for the otherwise frozen elements of universal credit.
Clearly, even if they were accepted, such amendments would not preclude the various rates remaining unchanged, but they would require some consideration of their real value and the capacity for the economy to share more fully the benefits of growth. It would give the Government the opportunity to think again in the light of changing—the Government would doubtless argue, improving—economic circumstances.
A bit of a pattern has been developing here. Previously, the retail prices index was used for uprating. Then Ministers robustly argued that CPI was the right measure. Then, in 2013, they decided to limit increases to 1% as a temporary measure. Now, whatever happens to inflation, they will not uprate benefits and tax credits for the rest of this Parliament. First RPI, then CPI, then 1% and now 0%.
Our major concern with the way that this freeze is being done is that it both cuts the link between prices and earnings and widens the gap between the income of the poorest and the living standards of the mainstream of society. It uncouples eligibility for support from need, a feature also of changes to the benefit cap and the local housing allowance.
We have been living in fairly benign inflationary times, with CPI expected to rise from 0% in quarter 3 of 2015 to near the Bank of England target of 2% by the second half of 2017—although the components of CPI do not necessarily reflect the basket of costs which most impact poorer households. We know that GDP growth is projected by the OBR to be between 2.3% and 2.4% through to 2020.
In considering these matters, we must have some regard to the financial resilience of households and their ability to cope with what will be a sustained real-terms reduction in their resources between now and the end of the Parliament. If we look at the tax and benefit changes under the coalition Government, we see that austerity was used to introduce net tax rises of £13.6 billion and net benefit cuts of £16.6 billion, including pension increases of £5 billion. The IFS analysis shows that, in terms of changes to income, the poorest two deciles did the worst over that period, with working-age households with children particularly hit. The End Child Poverty Alliance reminds us that some 4.1 million families and 7.7 million children have already been affected by below-inflation rises over the last three years. Ministers will doubtless point to the Government’s manifesto commitment to freeze benefits, but I hope that the Minister will acknowledge that that commitment covered only a two-year period, not the four-year period that the Bill proposes.
I am really interested in process. We have a long tradition according to which Ministers are required to assess what people need to live on before coming to Parliament annually to propose what should happen to the levels of benefits and tax credits. Sometimes in this House there is just the noble Lord, Lord Kirkwood, and me in the Moses Room, along with the Minister; but the point is that we got to test the Government’s case before decisions were taken affecting the lives of millions of our citizens. I therefore have two questions to ask the Minister. First, what assessment are the Government making to ensure that there is some link between benefits and tax credits and what a family needs to live on? Secondly, will the Minister assure the Committee and the country that once this Parliament is over, it is the intention of the Government to return to linking the level of benefits and tax credits with inflation and to the practice of Ministers being accountable annually to Parliament for those decisions? I beg to move.
Baroness Lister of Burtersett
My Lords, I will speak in support of all of the amendments in this grouping. The only reason that my name is not on the first one is that I did not spot it in the Marshalled List. The four-year freeze in most working-age benefits represents the largest of the many cuts in the Bill. Conveniently for the Government, it is an invisible cut; gradually people will find that the benefit that they rely on is able to buy less and less, but they will probably blame the cost of living, not realising that it is the result of deliberate government policy. As the Joseph Rowntree Foundation study commented a few years ago, upgrading policies have big effects over time:
“They are among the most significant decisions taken by Chancellors … Their gradual effects seem imperceptible on a year-to-year basis, yet they carry immense implications for the future”.
So let us not underestimate the significance of Clauses 9 and 10.
Benefits have already been cut in real terms due both to below-inflation increases and to the switch to the use of the CPI rather than the RPI. Moreover, as the latest JRF Monitoring Poverty and Social Exclusion report points out, essentials have risen faster than the average price index in recent years. Since low-income families spend proportionately more on essentials,
“low-income families have in effect experienced a higher rate of inflation than other families”,
meaning that their benefits have been able to buy even less than before.
This latest cut in real value has been described by the IFS as,
“highly regressive, with the bottom three deciles losing most”,
which is hardly surprising. If any noble Lord suggests that benefits are adequate, and that therefore those reliant on them can afford to take such a cut, I suggest that they try living on benefits—not for a week as a benefit tourist, but for months without savings or the kind of stocks that we all take for granted.
The briefing note that we were given spells out two main objects as the policy’s rationale, the first being to deliver savings to contribute to deficit reduction,
“while maintaining support for the most vulnerable”.
To be more accurate, it should say “some of the most vulnerable” since, for instance, children’s and some disability-related benefits will not be protected, as the EHRC points out. Nor does it protect protected groups, with women and black and minority-ethnic groups disproportionately affected. Whatever one thinks of the primacy given to deficit reduction—and eminent commentators such as Martin Wolf of the Financial Times question it and the extent to which it is to be achieved by spending cuts—it is a political choice to make those with the narrowest shoulders bear so much of the burden, particularly when others have enjoyed tax cuts. These, as it happens, were, in effect, paid for by benefit cuts under the coalition Government, according to CASE at the LSE.
As my noble friend Lady Hollis has pointed out in previous discussions, it is a myth that social security spending is out of control. As the OBR analysis shows, over the past 30 years, the real increase in spending has been broadly in line with growth in the economy, so there has been no significant change in the proportion of national income devoted to social security spending. The largest contribution to the increase in spending since 2008 has been the rise in the real value of pensions.
The other main objective given is to,
“help to reverse the trend where earnings growth has been slower than the growth in benefit rates”.
However, this is a very recent trend. Professor Jonathan Bradshaw has used the DWP abstract of statistics to show that the adult rate of unemployment benefit was worth 21% of average earnings in 1972, the earliest date for which there are consistent data. By 2008, the JSA rate had fallen to 10.5%, half of what it was in 1972. It is true that the short-term trend, to which the Government refer, means that it has increased slightly now to 11.7%, but now that wages are expected to start rising again it will no doubt fall back again, even without this freeze.
The other justification given in the impact assessment is, once again, that it will increase work incentives. It is worth pointing out that some of the benefits affected are paid to those in work in any case, a point to which I will return in the next grouping. As the famous OECD quote used by the Government to justify ESA for new WRAG claimants made clear, work incentives can be improved in a distributionally fairer way by improving in-work benefits rather than adopting this Poor Law mentality of cutting out-of-work benefits. Indeed, a cross-national study reported in the 2009 British Social Attitudes survey concluded that,
“employment commitment is stronger in countries with higher levels of welfare state generosity”.
Therefore, I really do not believe that there is any justification for freezing benefits, not just for two years, as stated in the Conservative manifesto—as my noble friend pointed out—but, in effect, for the whole of this Parliament. I accept that, at present, it looks as if inflation will remain low, but who knows what shocks might hit the world economy and with what effects? It therefore behoves a responsible Government to keep benefit levels under review and to accept these amendments.
Lord Kirkwood of Kirkhope
My Lords, I will add a few comments to what has already been said. I think that Clauses 9 and 10 are terrible. I object in principle, as did the noble Baroness, Lady Lister, to the idea that we can forecast need. I am speaking for myself: I do not know what my party position is or will be, but I am convinced that nothing is more emblematic of the approach of this Government of attacking the working poor and dealing with austerity disproportionately.
That does not mean to say that austerity does not mean to be addressed. The low-income households in this country—in or out of work—will suffer; thankfully, that distinction will become less relevant as universal credit rolls out. I do not think universal credit will come on stream fast enough to help everybody. We have been waiting for the rollout; there are around 155,000 in full compliance with the universal credit system. That will be a much better place to be once the whole country is there but, in the interim, these four years in which we will be freezing these benefits will cost low-income families dear. Why? It is because it is on top of everything else, and I have said that before. One of the biggest disappointments—and I have said this before as well—in the coalition government days was the fact that we did not evaluate the results of the totality of the integrated cuts that were made. That applies to services as well. Now, we are having another four years’ freeze, which is £3 billion or more on top of everything else, without any metrics that begin to contemplate what that might mean for people caught in different, unforeseeable ways by a combination of the cuts.
I have been looking at this area of policy for as long as anybody here, and I am not sure that we will be able to look as far ahead as 2018, 2019 or 2020 with any confidence whatsoever about the conditions that some of these households will face. That is disgraceful and completely unjustified. Of course, the Government are able to found this on the fact that there was a mandate, as it is called, for these measures. Well, there was certainly not in Scotland—the evidence for that is pretty clear. I have said before in this Committee that I worry about the political aspects of this Bill and some of the consequences that will be felt in the coming weeks and months of the Scottish elections for the next Holyrood Parliament. This Bill will not have escaped the notice of some of the more hard-line nationalists north of the border, which is not in the long-terms interests of the United Kingdom. I am sure about that and feel really cut off at the knees in trying to explain to people north of the border what is going in.
The Lord Bishop of Durham
My Lords, I support these three amendments. I do not wish to repeat what has already been said but the passion of the noble Lord, Lord Kirkwood, echoes in my heart because I, too, am deeply concerned by the impact these freezes will have on the poorest.
Most of us were delighted when the Chancellor of the Exchequer decided in the spending review that the national economic situation meant that we could, after all, as a nation afford not to make the previously determined cuts in tax credits. If this House had not voted the way it did, I presume he would not necessarily have been given the opportunity so to reassess in the light of the national economic situation. If the Bill is passed as it stands, the Chancellor has no option but to enact a freeze for the next four years.
While accepting that welfare spending must be controlled, we need to look very seriously at the impact on the poorest. I do not want to see the Chancellor’s hands tied to a freeze if the national economic situation continues to improve as forecast, or perhaps even more significantly. Suppose it does: who should be the beneficiaries? Surely, it should be the poorest. If the economic situation improves in 2017 and the Chancellor realises that actually, the nation could afford a slightly higher rate of child benefit or other benefits, that is what he should allow—not give it to people already perfectly well off because we earn enough. As the noble Lord, Lord Kirkwood, said, austerity, frankly, is not hitting large numbers of us. Surely, then, the Chancellor should value the freedom to once again say, “Well, we didn’t think we would be able to afford this but the national economic situation is better than expected so we are delighted to be able to offer a small—or perhaps large—amount of extra support for the well-being of children and the most needy in our country”. Does the Minister not think that would be a good position for the Chancellor to be in, rather than having to stick with a freeze without exception?
Baroness Evans of Bowes Park
My Lords, I thank the noble Baronesses, Lady Sherlock and Lady Lister, and the noble Lord, Lord McKenzie, for these amendments. I will first set out why we believe a four-year freeze of certain social security benefits, child benefit and elements of working tax and child tax credits is necessary.
In total, measures to freeze benefits and tax credits are projected to contribute £3.5 billion of the £12 billion welfare savings the Government are committed to by 2019-20. The Government need to make these savings to reduce the deficit and to manage welfare spending. Spending on welfare increased by 54% in real terms between 1999 and 2010, and tax credit expenditure more than trebled over the same period. Despite the progress made in the last Parliament to increase incentives to work and reduce reliance on benefits, there is still more to do.
Some 7% of global expenditure on social protection is spent in the UK, despite the fact that the UK has only 1% of the world’s population. Between 2008 and 2015, average earnings rose by 12%, and the minimum wage increased by 17%. At the same time, benefits such as jobseekers’ allowance increased by 21% and the individual element of child tax credit rose by 33%. The benefit freeze will begin to reverse this trend. However, we are clear that we must continue to protect the most vulnerable. That is why we ensured that certain benefits are exempted from the freeze, such as pensioner benefits, benefits which contribute to the additional costs of disability and care, and statutory payments.
Concerns have been raised about the level of benefit rates after three years of 1% rises, to now be followed by four years of the freeze. Successive Governments have always sought to strike a balance between the needs of claimants and affordability, and I can reassure noble Lords that when introducing this freeze we have had due regard to these issues, but we believe we have struck a balance that protects certain key benefits and generates the savings I have set out.
There are no cash losers with this policy, and the continued growth in wages will help to mitigate the impact of the freeze for working families. The OBR expects wage growth to reach 3.9% by 2020. Around 30% of households will face a notional loss but, as I have said, the other things we are doing in the broader economy should go some way to mitigate it, and I will go through a couple of them in a second. We have also fully assessed the Bill’s impacts on equality and the wider budget meeting our obligations, as set out in the public sector equality duty.
The purpose of the amendments is to replace the freeze with a duty on the Secretary of State to review those benefits, having regard to inflation and the national economic situation. This Government’s overall approach is to give a level of certainty to taxpayers, employees and benefit claimants. As well as setting out the four-year freeze, we have also set out a clear plan to raise the national living wage to £9 an hour by 2020, to increase the tax-free personal allowance to £12,500 by the end of the decade and to double the free childcare available for working parents of 3 year-olds and 4 year-olds to 30 hours a week, which is worth £5,000 a year. The amendments would take away the certainty that we are attempting to implement, and for that reason we cannot support them.
The noble Baroness asked what happens after the four-year period.
Baroness Hollis of Heigham
The Minister has said that this is very helpful to benefit recipients because they now have certainty that their benefit will fall in real terms, as opposed to the possibility that it might keep pace with the cost of living. Would she care to correct her statement?
Baroness Evans of Bowes Park
I have said that we have had to make some difficult decisions.
Baroness Hollis of Heigham
Difficult for whom? To use the phrase used by the noble Lord, Lord Kirkwood, I suspect that every Member of this House is protected from the difficult decisions. The difficult decisions will fall on those people who will have to choose whether to turn off their heating or pay their rent.
Baroness Evans of Bowes Park
As I said, by being upfront about the freeze, we are trying to ensure that people in receipt of these benefits understand that that will be the situation over the next four years. We are taking numerous other measures, including the national living wage and the childcare changes, to try to help these families in other ways. That is what we are doing with this freeze, and I urge the noble Baroness to withdraw her amendment.
Baroness Sherlock
My Lords, I thank all noble Lords who have spoken in this short debate. I thank my noble friend Lady Lister and the noble Lord, Lord Kirkwood, for highlighting the difficulties that the Government must have in understanding the implications of their decisions, since looking forward four years they have no way of knowing what economic conditions will prevail and what will happen to inflation.
I particularly want to thank the right reverend Prelate the Bishop of Durham for making a very obvious point: that when this House voted on tax credits, the Chancellor was in position to make a difference. The reason why he was able to overturn that decision was that he found £27 billion down the back of the sofa. It is not impossible that there might be some more money down the sofa, if he shakes it hard enough. It is not impossible that, if all the boasts the Government make about the marvellous things happening to the economy come to pass, a couple of years down the line he may find the economic situation is looking good. If the economy is growing again, he may want to reconsider his decision not to share the proceeds of that growth with the poorest in our country. Why on earth would he want to tie his hands?
I would put money on it that if I asked the poorest people affected by this whether they would rather have the certainty of benefits falling in real terms year on year, or keep open the possibility that they will rise if the economy improves, most would be willing to take a chance—unless the Government are suggesting they would in fact cut them. All this amendment does is to allow the Government, if they wish to do so, to have exactly the same savings in four years’ time, but it would make them do two things. Every year, they would have to come back and look the country in the face, via this House, look at what people have to live on and explain their decision, and they would have to account for it. All they would have to do is to put it to both Houses of Parliament every year. What are they afraid of? People out there have suffered enough. The very least the Government can do is stand up for themselves. Given that we are in Committee, I beg leave to withdraw the amendment.