Welfare Benefits Up-rating Bill

Debate between Baroness Hayter of Kentish Town and Baroness Meacher

Monday 25th February 2013 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, I beg to move Amendment 1 in the name of my noble friend Lord McKenzie of Luton.

[Baroness Meacher]

My Lords, I support Amendment 1, which seeks to ensure that the Government have flexibility to increase benefits in 2014-15 and 2015-16 taking account of the level of inflation at the time. The amendment does not seek to impose a particular percentage increase in benefits in any year. It simply seeks to avoid the straitjacket imposed by the Bill as it stands.

Amendment 1 covers all the benefits and claimant groups referred to in Schedule 1. It would therefore leave open the possibility of a Government deciding to protect a particular group, perhaps disabled people or children. This amendment has become particularly pertinent in the light of the downgrading of the British economy by the ratings agency Moody’s at the end of last week, along with the anticipation of yet more quantitative easing and the expectation that in these circumstances we will have more inflation year by year. That inflation comes on top of a level of inflation which is already above 1%, which is vital to this set of amendments and, indeed, to the Bill.

This Bill has to be considered in context. As noble Lords know very well, last year’s Welfare Reform Act has already capped benefits and imposed the bedroom tax so that an increasing percentage of everyone’s rent will be paid out of their personal allowance, leaving them with the most pathetically small amount of money to cover food, heating, clothing and other necessities. Also, the Government have already changed the basis of annual welfare benefit increases from the RPI to the CPI. This is absolutely crucial because that measure alone, before this Bill, is expected to save £5.8 billion a year. Such savings can be achieved only through imposing the most incredible hardship on many of the most vulnerable people in this country. The proposed limiting of upratings to an increase of 1% will be an increase in the consumer prices index, not the retail prices index, so it is not even going to cover an inflation rate of 1%. That is how bad it is. It is the compounding of the previous Welfare Reform Act with this Bill that is so deeply shocking to many of us.

The cumulative impact of all these changes and the proposed 1% uprating limit is not yet fully understood even by the experts in the field, let alone by its victims. But it is not surprising that there is deep concern in those organisations which have to work with vulnerable people, including the CAB service. It is worried stiff about its clients and the capacity of the bureaux to cope with what is going to be an unimaginable flood of people in desperate circumstances. The Government are breaking the long-standing link between annual incremental increases in benefits and prices. Once lost, it will be very difficult to restore it. Indeed, it is difficult to imagine that happening for decades. That is how serious this is. It is not just one little part of a Bill; it is actually historic because it changes the whole way we look at increases in welfare benefits.

Has the Minister undertaken an impact assessment on this Bill, including an estimate of the likely cost of increased mental breakdowns and the resulting impact on mental health services? Has the Minister assessed the costs arising from the result of increased crime rates and the impact on the criminal justice system, and from the impact of increased homelessness on local authorities? Also, I refer to the overall impact on communities of what I fear we will see in terms of increased unrest. It is very difficult to believe that we will not experience unrest in communities that are profoundly hit by the combination of all these changes—not just arising from this Bill, but from a combination of everything that is being done. I would be grateful if the Minister would reply to this question: has the impact of this Bill, combined with the previous Bill, been fully assessed in terms of services and costs? If these implications have not yet been estimated, does the Minister agree that that must be done before implementation of this Bill?

I want to challenge the Government’s rationale for this uprating Bill—that welfare benefit increases must take account of the public sector pay freeze and the low level of pay increases across the economy in recent years. Citizens Advice is right to argue that a 1% increase means something very different to somebody on an average wage from what it means to somebody on welfare benefits. A 20% increase in out-of-work benefits in the period 2007-12 resulted in an average annual increase in income of only £2.37 per week. A lower percentage increase, of 15%, in public sector pay during the same period provided an average increase in income for public sector workers more than five times greater. It was a lower percentage but a much greater increase in actual terms.

Welfare Reform Bill

Debate between Baroness Hayter of Kentish Town and Baroness Meacher

Wednesday 11th January 2012 Lords Chamber

[Baroness Meacher]

I accept that agreement—excellent.

[Baroness Hayter of Kentish Town]

My Lords, I think I have the right group. As we have heard, unless this Bill is amended, it will fundamentally alter discretionary payments. Budgeting loans will be replaced by payments on account as part of the universal credit. Community care grants, which help those on means-tested benefits stay in their own homes, and crisis loans, which basically do what it says on the tin —they are for a crisis and they are a loan—will both be abolished and the money handed over to local authorities.

As has been said, the problem is that there are no guarantees that similar support will be available to vulnerable people who need it; the funding will not be ring-fenced; and there will be no statutory duties attached, not even any guidance of the sort that my noble friend Lady Hollis has requested. Earlier the Government were very clear that they would not issue any guidance—we trust they may have had time to rethink that. Without guidance, which would guarantee access to certain groups or place a statutory duty on councils to provide the sort of service that has existed, or to ring-fence the money, there is a real danger that the kinds of support that have been available will simply dry up.

The lack of ring-fencing caused the biggest concern to those responding to the Government’s consultation: 42 per cent of respondents raised it, a higher proportion than on any other part of the proposals. The various charities, which know a thing or two about vulnerable people, have, I am sure, contacted the Government—they certainly contacted us about this. Crisis is,

“deeply concerned about the impact on homeless people moving into independent, settled accommodation”.

Family Action is similarly,

“seriously concerned about the abolition of the discretionary Social Fund”,

which it fears,

“will remove one of the final safety nets for some of the most vulnerable and needy members of society”.

Barnardo’s also knows a thing or two about working with vulnerable people. It feels that,

“the Social Fund is a lifeline for many”

and is therefore “seriously concerned” about its removal and the money being given to local authorities, should this not be ring-fenced. Scope is similarly,

“deeply concerned that the Government plans to devolve a vital source of support … with no intention of ring-fencing”.

I am sure that some 22 charities have been in contact because they are worried about the loss of this last safety net for the most vulnerable when they suffer from emergency situations in the form of traumatic events such as homelessness and domestic violence, which has already been referred to by the noble Lord, Lord Blair.

The lack of the ring-fence was mentioned here tonight by the noble Lord, Lord Kirkwood, and in Committee, including by the noble Lord, Lord German, who is not in his place. In response to that, the Minister, who also is not in his place, said that he was extremely concerned about what was being said about the lack of a ring-fence and that he would reflect on the issues raised. I trust that his reflection is going to be shared with us shortly. As we have heard, a third of those getting community care grants are disabled, a quarter are lone parents and one in 10 are pensioners. These moneys go to people moving out of residential or institutional care to live independently, including children moving on from care and people coming out of homeless hostels, psychiatric hospitals and women’s refuges. These are exactly the sort of people who are being helped. In the future, of course, we may rather sadly have to add those who are forced to move as a result of the Government’s so-called under-occupancy rules, should the Government insist on overturning your Lordships’ amendment. Similarly, we risk larger families being forced to move elsewhere once the benefit cap, if that is not amended, affects high-rent areas such as London and the south-east. Again, people will be forced to move and set up home anew. Community care grants also help families at risk due to exceptional pressures. We have heard about overcrowding, relationship breakdown and the examples of a house fire or flooding.

Perhaps the Minister could tell the House whether he has read Destination Unknown, a Demos report tracking the lives of disabled families through the cuts. If he has read it, does he recall the central message that, for the disabled, one unexpected event such as an added illness, a mix-up over benefits, the need for new wheels on an electric chair or longer taxi rides to medical appointments can completely blow a person’s budget out of the water? The disabled tend to have no savings, no leeway and nothing else to rely on. It is exactly this sort of money that has been available to them. Charities, which have also often stepped in, are seeing their supply of funding drying up. They are finding themselves overburdened with demands. Jobs are less available, and the traditional hiccups or slight delays in payments that are bound to occur with the introduction of new systems that we will see at a later stage can have a devastating effect on the week-to-week budgets of disabled people. They just manage, but it is these sorts of emergency funds which can make all the difference when something goes wrong.

Crisis loans are slightly different from the other elements and the DWP has claimed that this expenditure rose following the introduction of the telephone-based application scheme. However, there is no actual evidence that it was a cause rather than a correlation which showed on the figures as the rise in claims also coincided with an increase in unemployment. Also, it is important to remember that the crisis loan scheme is a loan.

Another report that the House may be aware of was published by Barnardo’s in December last year on the vicious circle and heavy burden of credit on low- income families. Families can become trapped in a cycle of debt, which can have a very persistent effect. The Social Fund offers a far better alternative to vulnerable families than home credit, payday loans and other forms of high-interest lending, including of course illegal loan sharks. It is estimated that a £100 loan from a loan shark needs repayments of £285 and takes 57 weeks to repay. The same loan from the Social Fund costs £100 and takes 15 weeks to repay. Furthermore, these are the amounts we are talking about. I think that the average award last year was just £83, so we are not talking about hundreds of thousands, but we are talking about money that makes an enormous difference to a certain number of people. These loans can be life-changing. They can be the rent for a new home; they can be the move out of institutional care and help to pay either that rent up front or for the cooker that enables one to live there.

Our concern is that a lack of ring-fencing will mean that these loans are simply not available under a new scheme. Councils, as has been heard, are already worried that the money will drift away elsewhere, and we understand the temptation for that. We have already seen 123 local authorities increase their meals-on-wheels charges, some by up to 400 per cent, while their own grants to local voluntary agencies, which used to be able to help, are drying up. We should not be surprised if local authorities were a little tempted to move this funding elsewhere.

The amendment does not seek to frustrate the Government’s intention to localise, nor does it argue with the contention that need will best be met if identified at a local level. It seeks to provide a safeguard for the many people who need the support that the Social Fund now provides to help them in a crisis. It is because of the strong concerns that we have heard expressed across the House about the vulnerability of these groups of people if this money is not available that we support the amendment.

As Barnardo’s points out, some local authorities do not yet have expertise in working with the poorest. An inner London borough may well understand how to implement the infrastructure to offer a Social Fund replacement, but this is less likely in a shire county with a smaller and more dispersed population of disadvantaged people. Indeed, localised replacement is likely to be provided through adult social services. Many people who need the support of the Social Fund, such as homeless people, will not be clients of social services, so they may struggle to access it anyway. Without ring-fencing and some guidelines about who it should go to, we have grave worries about the gap that will be left. I hope that the Minister’s period of reflection on the amendment will enable him to accept it.

Welfare Reform Bill

Debate between Baroness Hayter of Kentish Town and Baroness Meacher

Tuesday 1st November 2011 Grand Committee

[Baroness Meacher]

My Lords, I support some of the concerns that have already been raised by other noble Lords. I am not clear about the logic of ending the provision for adding disregards if a claimant falls within two categories, both of which qualify for a disregard. As I have always understood disregards, the idea is that they compensate for the costs that a claimant faces, whether those costs arise from being a lone parent, being disabled or whatever. I am sure that the Minister has a rationale for the measure but it is difficult to think what it could be. Is he going to provide a disregard for the disability side, the lone parent side or some other side? Why provide it for this bit rather than that bit? Why not provide the disregard for both sets of additional costs? It would be interesting to hear his rationale for this measure.

Given that the Government want to make swingeing cuts to the welfare bill, I completely understand that two-earner households are not a priority from that perspective. However, going back to the Government’s commitment to having incentives to work, this is another example of a part of this legislation running completely counter to that aim. I know that the Minister will correct me if I am wrong, but as I understand it the second earner will have almost no incentive to work, particularly if they have children, as they will not have the earnings disregard but they will have to pay the 30 per cent or so costs of childcare. This will almost certainly be the case if they have children. Therefore, it would be helpful if the Minister agreed with me that this is a bit of a problem in terms of incentives to work or explained the rationale behind the measure.

Regarding people with mental health problems, I envisage—I think that the Minister agrees with this—that this group will lose overwhelmingly from the shift to the new system and the reassessments for ESA. Rafts of these people will come off ESA and on to JSA with the result that, even with a disability, they will not receive any disability support because they will be on JSA. Yet people with mental health problems can have additional costs in order to go to work that others might not have. For example, somebody with severe anxiety might have to have someone accompany them on their journey to and from work, although they may be able to sit there and do the job when they get there. However, if they get no financial support at all for their disability—I understand that that is what the system sets out—how will these people have an incentive to work? They will have to pay for this support out of their tiny pockets.

The other point about people with mental health problems is that many of them can manage only a limited number of hours of work and need to build up their hours slowly. I do not know how this will work. The structure of the universal benefit is very good in this regard and should make life easier for people—at least in theory, if the two computer systems of the DWP and HMRC manage to bond together as they are supposed to do. However, the loss of disability support will cause problems in terms of incentives to work.

Sue Royston of Citizens Advice also provided me with the facts that were read out by the noble Baroness, Lady Lister. I will certainly not repeat them but I would find it helpful if the Minister could confirm for me how the two tapers of the universal credit on the one hand and the council tax benefit on the other will work together. Perhaps he has already done that when I was not here, as I have not always been here due to other commitments. I still hope that he will ultimately find a way to bring council tax benefit within universal credit, as it is such an important issue.

I am sorry to be a bore and raise this again, but it would make such a difference for so many people. If not, it seems to me that claimants working a few hours and building their employment up slowly will be dogged by a terrible complexity and lack of clarity not that dissimilar to what they have suffered in the past. That would be a great pity.

[Baroness Hayter of Kentish Town]

My Lords, the explanation that I am most looking forward to from the Minister, having taught us the difference between soon and very soon and that spring comes between winter and summer, is where on earth is the end of October if not yesterday, on Halloween night. We await that answer.

Under universal credit, the support currently obtained by a tax credit will be obtained via disregards, hence their importance. The disregards will allow some groups to earn higher amounts before benefit starts to be withdrawn, thus household income will be held to similar levels as now via tax credits. However, as has been mentioned, at present there seems to be no mention of disability in such disregards. Amendment 52B would provide an additional disregard for one aspect—carers who are currently not set to receive any disregard. We support that amendment and I shall speak to Amendment 52DB, which stands in my name and that of my noble friend Lord McKenzie. It would include a disregard for a second earner, but we will cover that issue in Amendment 52C. It is also intended to ensure that there are earnings disregards for claimants who are disabled, lone parents or the second earner—often a woman. Further to the comments just made, as each disregard recognises the impact of the particular circumstance on the earning potential of the individual, and as such impacts are cumulative, it is proposed in the amendment that the disregards should also be cumulative, as each circumstance—whether being disabled or being a lone parent—makes earning that much harder to achieve and, perhaps, more costly, with extra travel times or other expenses.

At least initially, it is foreseen that under universal credit we will have a 65 per cent taper for earned income, so a disregard improves the incentives to move into work by not applying the taper for the amount earned for the first disregard. That means that the value of the disregard for the claimant is 65 per cent of the actual amount written on paper, if you like. Someone with a £40 disregard who earns £40 can keep all their universal credit and will thus be better off by £40. Without the disregard, they would keep only 35 per cent of the £40 and so be only £14 better off. The figure of £40 that we use as the disregard is actually worth £26 in hard cash, which is the only way that I can think about these things.

There is a little complication, of course. There will be a maximum disregard for each group. Those not receiving support for housing costs will receive the maximum disregard and those getting support for their housing costs will see the maximum level of their disregard reduced by one and a half times the amount of their housing support. I trust that noble Lords are all with me. Good. Most claimants in rented accommodation will receive the minimum disregard. We know that universal credit aims to,

“allow people in work to see clearly how much support they can get”.

I just hope that they are better at doing that than I am.

The 14 October briefing note referred to by my noble friend Lady Lister on disregards set out the new higher disregard levels to try to deal with the localisation of council tax benefit. It aims to ensure that income support for council tax is effectively disregarded. Whereas single people previously would not receive any disregard, they will now get the amount mentioned, £13.50, as a disregard. Similarly, the disregards for lone parents and couples have been increased. However, as has been mentioned, Citizens Advice points out two problems. The first, elaborated by my noble friend Baroness Lister, is that those earning more than the amount will still be subject to two earnings tapers until no longer eligible for help with council tax. What plans does the Minister have to deal with this two-taper issue caused by the localisation of council tax benefit? Secondly, although the level of disregard has been increased to reflect council tax changes for single parents and couples, no such addition has been given to disabled people. Perhaps the Minister could also explain in his answer why they have been overlooked.