Universal Credit (Removal of Two Child Limit) Bill [HL]

(Limited Text - Ministerial Extracts only)

2nd reading
Friday 8th July 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

I thank the right reverend Prelate the Bishop of Durham for introducing this Bill and for the opportunity to debate again a subject dear to his heart and to those of others in the House.

My department is committed to supporting families and helping parents into work. This requires a balanced system that provides strong work incentives and support for those who need it, but also ensures a sense of fairness to the taxpayer and to the many working families who do not see their incomes rise when they have more children. We judge that the policy to support a maximum of two children is a proportionate way to achieve these objectives. Our overall approach is working, as evidenced by the fact that, between 2016 and 2021, the number of couples in employment who have children increased by 460,000—a 2.3 percentage point increase in the employment rate for this group.

The two-child policy was introduced five years ago and, since 6 April 2017, families have been able to claim support for up to two children. There may be further entitlement for other children if they were born before that 6 April or if an exception applies. The child element of universal credit is worth £290 for the first child born before 6 April 2017. It is worth a standard rate of £244.58 per child for the second and any other eligible children. Child benefit continues to be paid for all children, plus the additional element in child tax credit or universal credit for any disabled children. Additional help for eligible childcare costs through working tax credit and universal credit are also available, regardless of the total number of children in the household.

We recognise that some claimants are not able to make the same choices about the number of children in their family. That is why exceptions have been put in place to protect certain groups. Exceptions apply to third and subsequent children who are: additional children in a multiple birth, where an extra amount is payable for all children other than the first child; or likely to have been born as a result of non-consensual conception, which for this purpose includes rape or where a claimant was in a controlling or coercive relationship with the child’s other biological parent at the time of conception. An exception also applies to any children in a household who are: adopted when they would otherwise be in local authority care; living long-term with friends or family and would otherwise be at risk of entering the care system; or where a child under 16 living with their parents or carers has a child of their own, until they make a separate claim upon turning 16.

Statistics from the Office for National Statistics show that in 2020, of all families with dependent children, 85% had a maximum of two in their family. For lone parents, this was 83%. On the latest figures, 62% of households with a third or subsequent child who are in receipt of universal credit or child tax credit are not affected by the two-child policy.

This Government have always believed, and continue to believe, that the most sustainable way to lift children out of poverty is by supporting parents into work and, importantly, to progress in it, wherever possible. As I said, there has been a significant rise in the number of couples with children in employment between 2016 and 2021. I take the point the noble Baroness made that many of these people are in work, but one of the ways that we can help them is by them getting a better job and earning more income. That is a policy of this Government and one that we will be pursuing vigorously.

With 1.3 million vacancies across the United Kingdom, our focus remains on continuing to support parents into work and to progress in work, as I have already said. This approach is based on clear evidence about the importance of parental employment, particularly where it is full-time, in substantially reducing the risks of poverty and improving long-term outcomes for children.

[Baroness Sherlock (Lab)]

Does the Minister accept that encouraging parents to get better jobs and allowing them to have benefits for all their children are not mutually exclusive?

[Baroness Stedman-Scott (Con)]

I think it is fair to say that the Government have a differing view from that of the noble Baroness and people on the Opposition Benches. It is exactly that our helping people to get a better job, if they can, and more income—plus all the support that we are putting through the welfare system—is the policy that the Government are pursuing. We want everybody to be able to find a job, progress in work and thrive in the labour market, whoever they are and wherever they live. Our support for people out of work is tailored—

[Baroness Bennett of Manor Castle (GP)]

The Minister just said “wherever they live”. Does she agree that the two-child benefit policy has different impacts in different parts of the country, and that there are parts that are supposed to be subject to the government’s levelling up agenda where it is much more difficult to get a higher paying job?

[Baroness Stedman-Scott (Con)]

Of course we accept that there are regional variations, which is why, with the levelling-up agenda, we are doing our very best to improve the work opportunities for people in those areas and to support them. That is, again, another policy of this Government that we are actively pursuing. Our support for people out of work is tailored to individual circumstances, recognising the different issues that people face in the labour market, notwithstanding the points that the noble Baroness, Lady Bennett, made about the regional differences.

Improving work incentives was a key design criterion for universal credit. We have cut the universal credit taper rate from 63% to 55%—a major step forward—and increased the universal credit work allowance by £500 per year. These two measures mean that 1.7 million households will keep, on average, an extra £1,000 a year. These changes represent an effective tax cut for low-income working households in receipt of universal credit worth £1.9 billion a year in 2022-23. This will allow working households to keep more of what they earn and strengthen incentives to move into, and progress in, work.

The noble Baroness, Lady Brinton, raised the issue of the cost of living, which is a subject on all our hearts and minds. Millions of households across the UK are struggling to make their incomes stretch to cover the cost of living. The Government have stepped up to the plate in order to make sure that we support people, providing £37 billion, which includes the £650 payment, as I have regularly repeated in the House—I do not intend to do today, as I want to get on to some of the other issues that noble Lords have raised.

The right reverend Prelate the Bishop of Durham raised the issue of poverty increasing due to policy choices. Again, providing £22 billion of funding in 2022-23 to help families with the cost of living, including through universal credit changes, means that working families and households are much better off, as I have already said.

The delicate subject of abortion has been raised, which I completely understand. Research from the Nuffield Foundation larger families consortium of researchers published this month has outlined that fertility rates for those claiming or eligible to claim benefits have changed very little since the introduction of this policy. This evidence refutes earlier evidence from the British Pregnancy Advisory Service, which suggested that people were having abortions in response to the policy. The report argues that this was in fact a small and self-selected sample. This wider, more robust study takes evidence from administrative data on births and the annual population survey and uses a difference-in-differences approach to compare before and after the policy for different groups. It concludes that, while fertility rates have fallen, this has been the case for all socioeconomic groups.

The right reverend Prelate asked if I could commit to carrying out an impact assessment and to taking all this back to the Government. To be truthful and straightforward, I cannot commit to an impact assessment. I do not believe, with what I know, that the Government would welcome from me the request that he has made; however, having said that, I will make sure that they understand that it is in Hansard.

The right reverend Prelate also asked about policy exemptions not accounting for those from ethnic backgrounds. The Government’s published impact assessment noted that ethnic minority households may be more likely to be impacted by the policy. This is because they are, on average, more likely to be in receipt of tax credits and universal credit and, on average, have larger families.

The noble Baroness, Lady Brinton, raised the issue of half of all children living in lone-parent households living in relative poverty. The latest available data on in-work poverty shows that, in 2019-20, children in households where all adults were in work were around six times less likely to be in absolute poverty, before housing costs. Through our plan for jobs campaign, the department is providing broad-ranging support for all jobseekers with our sector-based work academy programme and job entry targeted support scheme.

The right reverend Prelate the Bishop of Durham and the noble Baroness, Lady Brinton, raised the important point, as did others, about claimants being aware of the policy. There is information on the GOV.UK website, but this is something I am absolutely content to take back to the department to review how we communicate it and see if there are other things we can do to promote it. The noble Baroness, Lady Sherlock, and the right reverend Prelate the Bishop of Durham talked about paying childcare costs up-front being a barrier to moving into and progressing in work. Where people need up-front childcare costs on universal credit, the flexible support scheme is used and will continue to be so; if anybody knows of anybody who has been denied that, let me know and I will sort that out.

The noble Baroness, Lady Sherlock, asked me what level of spending on benefits is sustainable. I can only tell her that in 2021-22 we spent around £244 billion on welfare, with £41 billion on UC specifically. On the exam question, “How did the Government decide on two children?”—for which I thank her—I will need to write to her. She made a point about the two-child limit increasing policy and punishing families, so I say that the Government have a range of policies which support children and families across the tax and benefit system and public services. We remain committed to supporting families on low incomes and will spend around £108 billion through the welfare system, as I have already said.

In conclusion, the most sustainable way to lift children out of poverty—I keep going on and on about this, but it is government policy—is by supporting people and parents to progress in work wherever possible. This Government have a range of policies to support children and families across the tax and benefits system and public services. The policy to support a maximum of two children must strike a balance between providing support for those who need it and ensuring a sense of fairness to taxpayers, which I know noble Lords have already raised. I am quite sure that the answers I have given today have not been well received, but I am sure the debate will continue.