Welfare Reform and Work Bill

Baroness Hollis of Heigham Excerpts

Tuesday 17th November 2015 Lords Chamber

[Baroness Hollis of Heigham (Lab)]

My Lords, the wind-up speech on Third Reading of this Bill by the Minister of State at the Department for Work and Pensions, Priti Patel, in the other place on 27 October was remarkable. Much of it was echoed today by the noble Lord, Lord Freud. I believe that almost all her assertions were false, apart from the fact that she supported the Bill. Priti Patel said that welfare spending was out of control; she said it was “unaffordable” and that we needed to make cuts which were “fair to taxpayers”.

That is false. Tax credits did not rise from £1 billion to £30 billion, as was parroted down the other end, but they built on the almost £5 billion base we inherited from the admirable family credit of the noble Lord, Lord Fowler. Some 50% more lone parents entered work with the help of tax credits, and the income support bill fell from £15.7 billion to £2.9 billion between 1996-97 and 2012-13 as women transferred from out-of-work benefits to in-work benefits—tax credits. Add the fact that more than two-thirds of the jobs created between 2008 and 2013 were for people in self-employment with a median income of £10,000, who needed tax credits to survive, and that broadly explains the cash rise. Have we been told that at any point? Oh no, my Lords.

None the less, is the welfare bill unaffordable? No, my Lords, false again. The Office for Budget Responsibility report, Welfare trends, of October 2014, shows that welfare benefits, including pensions, as a share of national income —GDP—which is surely the true test, were 12% in 1983-84 and 12% in 1993-94, and are 12% now. They have not raced away, but have been broadly steady, fluctuating only a little in times of recession. Have Ministers told us that either? Oh no, my Lords.

The Minister in the other place says that we must be “fair to taxpayers”. This assumes that there are two tribes—benefit recipients and taxpayers. We heard something about this today. Professor Sir John Hills’ research shows that even the poorest pay for half the benefits they get back through their national insurance and taxes, especially indirect taxes. The mirror-opposite is true: most of us get back most of what we pay in over our lifetime. As my noble friend Lady Sherlock said, social security smooths out and supports us. This happens if we have children, through child benefit; if we experience a broken marriage, unemployment or under-employment, disability, caring responsibilities, bereavement or old age. Speaking personally, while paying taxes every year, I have also received benefits to help smooth five of those seven life-changing circumstances. That will be true for many of us here. Indeed, over the course of 18 years, half the population has needed and received a means-tested benefit. There are not two tribes of taxpayers and benefit takers. It is a fact that almost all of us are both, often at the same time, one with another. Shame on those who deliberately inflame social hatreds with such malevolent fictions.

The Minister in the other place also claimed that she was part of the “one nation Government”. Equally, the Prime Minister has talked about “compassionate Conservatism”. Really, then why are we loading these expenditure cuts on the backs of the poor? Why push the poor into debt to help the Government out of it? Compassionate Conservatism? We have heard about ESA. Disabled people want to work, but DWP work programmes have failed, so now the Government are going to press them into work by cutting their benefit by £30 a week to JSA levels. Most of them will not work because they cannot. Instead, they will appeal, as nearly 40% of them do now, and more than half will win those appeals. They will move further away from work into the long-term support group of ESA instead.

Compassionate Conservatism? Let us take the benefits cap. Half the 120,000 affected families, larger families living in the private rented sector, will lose more than £50 a week. The Government cut local housing allowance because a couple of years ago the noble Lord, Lord Freud, believed, against all the evidence, that this would bring down private sector rents. He was wrong; it has not and it will not. Only an increase in the building of new social and affordable rented homes will check rents. Instead, with its 1% cut, the Bill does exactly the opposite. You could not make it up. It will remove around 19,000 prospective local authority homes and probably even more housing association homes from potential construction. Norwich, Milton Keynes and Cambridge are cities with high housing demand, but they will cut back their supply. From next April, a capped family of four will not get enough housing benefit to pay for any private rented home in London. I am told that a capped family of five will not be able to pay for a three-bedroom housing association property anywhere in the country. One nation? There is not even one city as the poor are moved on and out, destabilising the very family life that Mr Duncan Smith calls for.

Finally, in the name of compassionate Conservatism, let us take children. The Prime Minister and the Chief Whip told the country during the election that child tax credits would not be cut, but in fact they will be. In addition, the Government will remove funding of £3,325 from the family element for the third child and more, even if that child is disabled—from Catholic, Jewish and BME children; from families who have offered kinship care; from one in seven families. We do not refuse the third child his school place or her hospital visit because every child matters—except to the DWP. We do not even deny better-off families child benefit for the third child. Most European countries actually increase support for larger families because they care about child poverty, but not this Government. Suffer the little children in larger families—and they will indeed suffer, to our shame.

The Minister, Priti Patel, went on to say:

“This Government are committed to working to eliminate child poverty and to improving life chances”.—[Official Report, Commons, 27/10/15; col. 305.]

That is impossible. Every measure in this Bill will increase, not eliminate, child poverty. No doubt that is why the Government will no longer count the numbers; it is too awkward. Instead, we get “life chances”, allegedly determined by worklessness and educational attainment, along with addiction and other issues thrown in. This is grotesque.

Worklessness? Some two-thirds of children in workless families are not in poverty, while two-thirds of children in poverty are in working families. The research is unambiguous. Life chances are determined by income, not, as the Secretary of State seems to believe, the other way around. In the 19th century there was a belief that if you could only remoralise the poor, there would be fewer of them, or possibly none of them. A few sentences later in the same debate, the Commons Minister insists that the Government,

“are absolutely committed to protecting the most vulnerable in society”.—[Official Report, Commons, 27/10/15; col. 306.]

Unless, of course, they are disabled and in a WRAG, or vulnerable children.

That brings me to the Government’s final claim: that they are the workers’ party. It is a pity, then, that working families on tax credits and UC will be poorer in the future. MPs swagger down at the other end, telling them to work longer and harder, but for what? After tax, national insurance, and HB and council tax tapers, low-income families on tax credits will lose 96p in the pound for every extra hour they work. They will keep 4p. Even with UC, which I support, the same family will keep just 19p in the pound. Does 4p in the pound per hour really make work pay? Would any lone parent, mother or indeed any of us trade an hour caring for our children to earn 4p an hour? I would not. Or does the DWP propose to sanction her into it? As the Spectator said, these are battles of choice by the Government, not battles of necessity. They do not need to do it. Please spare us unctuous phrases like, “difficult decisions” and “hard choices”. For whom, exactly? They are not for Government Ministers. The hard choices and harder lives will fall on the working poor, on disabled people in WRAG and on children as people struggle to avoid debt, arrears and eviction, as their health deteriorates and their families break up. That is the offer in this Bill from a self-professed one-nation Government. We can surely do better than this.

--- Later in debate ---

[Baroness Hollis of Heigham]

How is the Minister going to account for poverty among children of working families?

[Lord Freud]

The HBAI measures are still there. We will have all the measures that we normally have.

The noble Baronesses, Lady Hollis, Lady Sherlock and Lady Lister, were concerned about the impact of this on the Budget. Our reforms are designed to incentivise work and ensure that it always pays, and then to allow people to keep more of what they earn. The new life- chance measures will drive continued action on work and education, which will make the biggest differences to disadvantaged children now and in the future.

Numerous noble Lords argued that we should keep income-based measures and measure in-work poverty, as the noble Baroness has just reinforced. The existing statutory framework set around the four income-related targets is unfit for purpose. The framework does not drive the right action, so instead we will focus on the root causes such as worklessness and educational failure. The income measures led Governments to spend their finite resources on action that did not produce the best results for our children, and that is the reason for our new approach. As I just said, though, and in response to the noble Lord, Lord Kirkwood, we will still be publishing all the income measures and the HBAI report. I remind him that no other country in the world uses those measures as a target as opposed to a measure.

I am flattered by the vigorous quoting by the noble Lord, Lord McKenzie, from that small piece of work. I should point out that when I say there were some remarkable changes, there were no remarkable changes in the number of NEETs, which went up through the longest boom in history, nor in the amount of worklessness or social housing, which plateaued whether one was at the top or the bottom of the cycle, and I recommended a major effort to pull the disabled back into the labour market and into society. Of course some of the figures that I was so pleased with then fell straight off a cliff when we had a rather remarkable recession—probably the worst recession that this country has had since the 1920s. However, we took £60 billion out of the welfare bill over the last coalition Government, and up until the time for when we have the latest data, the relative measure of people in poverty had declined in that period by 800,000 people. So it is wise to use not people’s forecasts of income but what has actually happened.

I turn to the benefit cap. It is not fair for someone on benefits to receive more than many people in work; reducing the benefit cap to £23,000 in London and £20,000 elsewhere better aligns the level with the circumstances of hard-working families across the country. On the question raised by a number of noble Lords—the noble Baronesses, Lady Sherlock, Lady Hollis, Lady Lister and Lady Warwick—about whether the level was too low, we originally set the cap at £26,000 but we want to balance the key aims of strengthening work incentives and promoting fairness between those in work and those in receipt of out-of-work benefits.

Any changes to the cap level will require the passage of regulations. I can assure the noble Baroness, Lady Sherlock, who was concerned about this, that the regulations which lower the level of the cap will follow the affirmative parliamentary process. In response to the question from the noble Baroness, Lady Lister, and the noble Lord, Lord McKenzie, carer’s allowance is included in the cap. The Government fully acknowledge and value the very important role that carers provide to society but 94% of households in receipt of carer’s allowance will have a benefit income above the new cap level. They are, anyway, exempt from the cap.

The benefits freeze is a vital part of the Government’s welfare reforms, providing £3.5 billion of savings by 2019-20—without any cash losers—which would otherwise need to be found elsewhere. The noble Lord, Lord Low, asked about the impact of the freeze on the disabled. We have exempted the benefits which contribute to the additional cost of disability and care from the working-age benefit freeze. The noble Baronesses, Lady Hollis and Lady Bakewell, raised the issue of the two-child limit. Families on benefits should make the same financial decisions as those families supporting themselves solely through work. Families on lower incomes will continue to receive child benefit for all children in the household, including a higher rate paid for the eldest qualifying child or young person. The noble Baronesses, Lady Sherlock and Lady Manzoor, both raised questions about involuntary two-child families. The Government will look at the important issues around exemption through secondary legislation and will provide more detail in due course. The situation with kinship carers is similar.

The noble Baroness, Lady Sherlock, raised the point of the impact on disabled children. Parents of disabled children will continue to receive the disabled child element and severely disabled child element in child tax credit and, in UC, the additional amount of the child element in respect of all disabled children, regardless of the total number of children in the household. The noble Baroness, Lady Manzoor, asked for assurance that the architecture of UC will not be lost. I appreciate her support on that and give credit to the Liberal Democrats, who were utterly supportive of universal credit and our efforts to bring it into reality under the previous Government. I am delighted to see that they maintain that level of support.

I turn now to the clauses which remove the work-related activity component in ESA, and its equivalent in universal credit, for new claimants from April 2017. The noble Baronesses, Lady Sherlock, Lady Manzoor, Lady Doocey, Lady Browning, Lady Meacher, Lady Howe and Lady Gale, asked for evidence that the WRAG component is a disincentive. A report by the OECD in 2005 argued that:

“Financial incentives to work can be improved by either cutting welfare benefit levels, or introducing in-work benefits while leaving benefit levels unchanged”.

On the other hand, employment support provides an opportunity to begin talking to ESA claimants about their ability to work. A positive relationship with a work coach, combined with evidence-based methods for goal-setting and striving, offers a promising way towards moving ESA claimants back into work. We will be increasing the practical support with new funding. The noble Baronesses, Lady Sherlock, Lady Manzoor, Lady Doocey, Lady Browning, Lady Meacher and Lady Gale, the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Patel, argued that these claimants have been found unfit for work. The ESA claimants in the work-related activity group have been found to have limited capability for work. This is very different from being unfit for any work and, although they are not required to look for work, ESA explicitly recognises that claimants may be able to undertake some work via the permitted work rules. This change, combined with the new funding, is about providing the right incentives and support to encourage more people to move closer to the labour market.

The noble Lord, Lord Patel, made a point about those with cancer. The vast majority of those with cancer claiming ESA are actually in the support group, a point that he himself made. This includes anyone who is preparing for, receiving or recovering from chemotherapy or radiotherapy that will significantly limit their ability to work. Only a small proportion of individuals whose initial diagnosis is cancer will be placed in a work-related activity group.

On mental health conditions, raised by the noble Baronesses, Lady Manzoor and Lady Howe, and the noble Lord, Lord Layard, it was clearly acknowledged that returning to work can improve mental health, which is why we are committed to ensuring that as many people with mental health conditions as possible receive effective support to return to and remain in work. We will actually be investing £43 million over the next three years in trialling ways to provide specialist support for people with common health conditions to get back into the workplace.

On conditionality for parents, raised by the noble Baroness, Lady Sherlock, we believe that more can be done to support parents with young children to prepare and look for work. Where childcare is not available, requirements will be tailored around caring responsibilities.

On the clauses to turn support for mortgage interest into a loan, the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, raised issues around pensioners. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides. This will be provided via a loan, but that will not have to be repaid until the individual’s property has been sold—which often, in the case of pensioners, will be on their death, so the people who actually pay are the inheritors; that is not something the party opposite would have a huge problem with, I would have thought.

A large number of noble Lords talked about social housing rents. The answer to the noble Lord, Lord Smith, is that the Government were elected with a mandate to put welfare spending on a sustainable footing to reduce the deficit. We are confident that housing associations and local authorities will be able to find and make efficiencies to accommodate the new settlement.

On specialist supported accommodation, which a large number of noble Lords brought up, we are proposing that there will be some exceptions from the rent reductions. We have set out some of those in the Bill and we will be setting out further exceptions in regulations. Our intention is to align exceptions with the equivalent provisions of the rent standard. At present these include specialised supported accommodation, residential care homes and nursing homes, and intermediate rent and private finance initiative housing. We will work with the sector to ensure that the most vulnerable people are not adversely affected—indeed, I am planning to meet St Mungo’s.

Regrettably, I cannot deal with all the questions and must draw to a close. I thank all noble Lords again for their contributions. Welfare reform is about much more than simply money. Our reforms seek to change the state of the nation, break the cycle of dependency, create the right kinds of incentives, have a fair welfare system, provide the best possible start in life for children, and bring lasting change that directly affects attitudes and behaviours. This Bill is a real opportunity to make a difference to the lives of some of the poorest, the neediest and the most vulnerable people in our society. It is an important and necessary piece of legislation. I commend this Bill to the House and ask for it to be given a Second Reading.