Housing: Spare Room Subsidy
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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Lord Freud
Yes, we have seen a substantial number of people downsizing—45,000 people have downsized within the social rented sector and another 12,000 have moved into the private rented sector. The number of people who have registered for downsizing is now running at 16%. Noble Lords may remember that when this policy started it was estimated from the surveys that about 20% of people would want to do so. We are well on the way to people making this adjustment. Other people, however, are looking to earn more money and to work. That is one of the factors, but not a major one, in some of the record employment levels we are now seeing.
Baroness Hollis of Heigham (Lab)
My Lords, nearly 500,000 families are affected. Two-thirds of them are disabled, just 8% have been able to downsize and just 10% have received a discretionary housing payment to help them, so, as my noble friend said, 76% have cut back on food. Does the Minister consider this a success and, if so, what would he consider a failure?
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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Baroness Hollis of Heigham (Lab)
My Lords, I will just ask a few questions slightly wider than the amendments tabled. The Minister will know that we have coming towards us a Housing and Planning Bill that will extend extensively the right to buy, treat starter homes as part of affordable housing and seek to both extend owner-occupation and push it further down the income scale to people who, at the moment, are not able to access it in terms of both deposit and repayments. The result of that will almost certainly be greater risk of default and problems in maintaining mortgage payments, a more precarious relationship to the world of work, and periods therefore where these people do not have reliable income.
The questions are very simple. Has the Minister talked to his colleagues in the DCLG about this? Is he aware that the demand for this sort of support will almost certainly increase substantially in years to come? What assumptions is he making about the implications of that money which must be made available, perhaps for long-term loans, to sustain people such as those who are fairly marginal to the owner-occupied market coming into it—possibly with the best of reasons, but none the less they will struggle to sustain their repayments? How much connection is there between this policy of the DWP and the work being pushed by the Minister’s colleague Greg Clark in the other place through the DCLG?
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, I start by responding to Amendment 103A, which would keep the waiting period at 13 weeks. The background to this is well known. Claimants receiving income-related benefits may claim help towards the cost of their mortgage interest payments. Apart from those receiving state pension credit, claimants must serve a waiting period before entitlement to help with mortgage interest begins. Before 2009, the waiting period for the majority of working-age claimants was 39 weeks. In January 2009, temporary arrangements were introduced that reduced this period to 13 weeks. This was to provide additional protection to those who lost their jobs during the recession. At the same time, the maximum value of mortgage for which support is available, known as the capital limit, was doubled to £200,000. In the summer Budget, it was announced that from April 2016 the waiting period will return to the pre-recession length of 39 weeks although the capital limit of £200,000 will be maintained.
This amendment would remove the current broad powers in the Bill that allow the waiting period for support for mortgage interest to be set out in regulations, replacing them with a narrowly defined 13-week waiting period, but I suspect it is a probing amendment. We wish to retain the ability to act quickly in different circumstances, and putting this in primary legislation would prevent that.
Let me be clear about why we help owner-occupiers with mortgage interest payments. The purpose is not to secure their asset or to reduce any outstanding payments owed to lenders. The purpose is simply to mitigate the risk of repossession. The CML now says that it believes the 39-week waiting period will drive repossessions, but it is unable to quantify the number of repossessions. We will work with the CML to assess any such impacts in terms of repossessions, but we do not believe that they will be significant, particularly at the current level of house prices. There is no evidence to suggest that lenders will do anything other than exercise the same degree of forbearance that they did prior to 2009 when the 39-week waiting period was last applied, particularly as we are maintaining the higher capital limit.
Amendment 104 seeks to change the way in which SMI loans are recovered from the equity in the claimant’s home. The intention is that a charge registered by a local authority to reclaim deferred payments for social care would always take precedence over a charge registered by the DWP to recover an SMI loan. As the Bill stands, the Government can require that a loan be secured by a charge over the claimant’s property. Under provisions in the Land Registration Act 2002, charges are recovered in the order in which they are registered. If the SMI charge was registered on the property before any deferred payment arrangement, it will have prior claim to any equity when the property is sold. The legal charge will therefore be subordinate to any existing charges on the property, including the mortgage. That answers one of the questions asked by the noble Baroness, Lady Sherlock.
We envisage that advice would normally be given via a telephone conversation and would cover the following areas: the claimant’s financial position now and in future, their understanding of the terms of the loan, and encouragement for them to engage with any heirs they might have. The delivery of that financial advice will be outsourced to a third-party provider.
Section 34 of the Care Act 2014 obliges local authorities, in prescribed circumstances, to offer DPAs. The intention is that people should not be forced to sell their home in their lifetime to pay for their care. If there is no equity in the property—a subject raised by the noble Baroness, Lady Sherlock—the family would be able to apply for a funeral payment from the Social Fund.
I pick up on the question asked by my noble friend Lord Young. Local authorities are not required to make such an offer where there is a pre-existing charge on the property. Recipients of SMI loans by definition have a pre-existing charge—their mortgage—so in such cases there is no obligation to offer deferred payments. The registering of a charge in respect of an SMI loan does not, therefore, directly interfere with the policy intent of the Care Act.
The noble Baroness, Lady Manzoor, asked about the types of property on which it is possible to secure a loan. Charges can be secured on the claimant’s equity share in shared ownership and on leasehold properties.
I turn back to local authority provision. Local authorities are not precluded from offering DPAs where there is an existing charge so long as they are satisfied that there is adequate security. This means that they may still consider offering deferred payments if, after taking account of the outstanding mortgage, the remaining equity would be sufficient to cover an individual’s likely care costs. It is arguable that in some circumstances the existence of a charge in respect of an SMI may make authorities less inclined to agree to defer payments in such cases. However, it is important to note that deferred payments are available only where the person enters residential care. In such circumstances, payments of income-related benefits cease, including payments of SMI. As the claimant will have no means to meet their mortgage payments, it is probable that the property would have to be sold anyway. I should be clear that the position as I have just described it is not a consequence of changing SMI into a loan; it is inherent in the current system.
Amendment 104A is intended to exempt disabled claimants from the provision that introduces SMI loans and allow them to continue to receive this help in the form of a non-recoverable benefit. The purpose of providing SMI is to protect owner-occupiers from the risk of repossession and allow them to remain in their homes. In almost all cases, these payments are sent direct to lenders rather than to the claimant. When Clause 16 comes into effect, the level of support will remain the same as now—the point made by my noble friend Lord Young—and payments will continue to be sent direct to lenders. Neither lenders nor claimants will see any difference in the way the system works, so exempting any particular group would not have any impact on the level of protection they were afforded. The difference is that under the loans scheme the payments will be recoverable, but recovery will not be sought until the property is sold. So the day-to-day income of disabled people will not be affected.
SMI supports individuals in the accrual of a significant asset. Many taxpayers who are providing that support cannot afford to buy their own homes. It is only fair that this support is recouped where equity is available when the property is sold. I do not believe there is a sustainable argument that people with disabilities should be exempted from refunding some of the equity that the taxpayer helped them to accrue, while other people supported during periods of financial need should not.
The amendment is defective, in that it does not make a consequential amendment that would continue existing SMI entitlement for the group that the amendment is designed to protect—but let us leave technical issues aside.
Lastly, Amendment 104AZA would prevent the Government from changing support for mortgage interest into a loan for those on state pension credit, and allow them to continue to receive help with their mortgage interest as a benefit rather than a loan indefinitely. This would be unsustainable and unfair on the taxpayer. As I have previously said, it is not right that taxpayers, many of whom cannot afford to buy their own home, are subsidising the acquisition of a substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides, and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not them but the beneficiaries of their will.
Pensioners will have the same access to support that the current system provides, and the Government will seek to recover the debt only up to the level of available equity when the property is sold. In response to questions from the noble Baronesses, Lady Sherlock and Lady Manzoor, I say that any outstanding debt at that point will be written off. Owner-occupation involves the acquisition of a potentially valuable asset that often increases in value over time. It is right and sustainable that the taxpayer reclaims their contribution to this asset.
The amendment would also introduce a waiting period for pensioners before they could receive help with their mortgage interest payments. There is currently no waiting period for help with mortgage interest for pensioner claimants, and it is not the Government’s intention to introduce one.
I cannot go into great detail on the questions from the noble Baroness, Lady Hollis, but to the extent that more support will be required for people, this is a far more sustainable way for the state to provide it than through grants. We are still considering our response to the DPRRC line on whether the procedure is negative or affirmative. With these explanations, I urge noble Lords not to press their amendments.
Earl Cathcart (Con)
My Lords, the three amendments in this group all relate to private landlords, who now account for 4.2 million properties for rent and more than half of all rented properties. However, as of August, less than a third of all housing benefit claimants lived in private rented accommodation. Why so few? Why is there this bottleneck deterring private landlords from taking on benefit claimants? As a landlord, I have claimants in my properties, but it is not made easy. Given the choice of a couple in work or a couple on benefits, for the landlord it is a no-brainer. Why take the risk, the hassle and the uncertainty of renting to the couple on benefits?
As the rental market tightens due to increased demand, it is important to encourage and support private landlords to house those in receipt of universal credit so that they can access accommodation, otherwise they will find themselves at the back of the queue. These amendments explore ways to do just that.
The first amendment is about giving the power to give the relevant universal credit information to the landlord. Landlords need assurances that tenants have the funds available to pay their rent. Without these, renting to them becomes a risky business. Currently, the private landlord can get no information about the amount of universal credit and when it will be paid. For those tenants in work, landlords will always ask for references from employers to establish their income to ensure that the funds are available to cover the rent. Surely it must be common sense for landlords to be able to do likewise for those in receipt of benefits. I understand that social landlords are able to gain such information, so why not private landlords? Surely what is good for the goose must be good for the gander. I acknowledge that it is quite difficult to find out how much benefit will be available before the tenant moves in, but it is not beyond the wit of man to publish a ready reckoner to help everyone see where they stand, according to each local housing area’s allowances.
Amendment 104B would insert a new clause to ensure that there is a legal power, where the tenant provides written consent, for the Department for Work and Pensions to disclose to all landlords information on the housing element of the tenant’s universal credit, including the amount, or approximate amount, and when it will get paid.
The second amendment relates to rent arrears. As benefit claimants may often move home, including to seek work, landlords need the security of knowing that tenants in receipt of benefit cannot simply stop paying their rent and leave their property. Currently, rent arrears can be recouped where a benefit claimant is still living in the house to which the arrears apply. There is, however, little or no opportunity for the landlord to recoup when such tenants move house, unless they are prepared to go through a lengthy and costly court process.
I cannot see the logic in allowing the landlord to recoup the arrears if a tenant is still in the landlord’s property, but not if the tenant has moved. I realise that there will probably be a hierarchy of deductions that can be made from future universal credit—no doubt future rents, council tax, utility bills, et cetera, would come first—but if even only a percentage of the arrears was paid each month, it would act as a disincentive to tenants to rack up the arrears in the first place and ensure that the landlord was not left high and dry once the tenant had jumped ship. Amendment 104BA would insert a new clause requiring the Secretary of State to make regulations to ensure that rent arrears follow a tenant in receipt of universal credit and that landlords affected have a clear route to reclaim lost rent in such circumstances.
The third amendment concerns making payment of the housing element of universal credit direct to the landlord, with the written consent of the tenant. It is vital that landlords have full confidence that they will be paid in full and on time if vulnerable tenants are to have access to the rented homes they need. This is especially important since the Government took away the option for tenants to ask that the housing element of universal credit be paid directly to the landlord, as was formerly allowed under housing benefit. At first, I thought that that omission was an oversight, but I now understand that the Secretary of State wants all the money to be paid to the tenants so that they learn to become responsible for managing their money—a great idea but, sadly, I do not think it is working.
A survey conducted this year by the Residential Landlords Association found that of those private sector landlords who had tenants on universal credit, 63% had tenants in arrears on their rent. Of this group of landlords, 85% had contacted the Department for Work and Pensions to have a tenants’ housing element of universal credit paid directly to them after eight weeks of arrears, as is their entitlement. More than 57% of this group said that it had taken the department more than five weeks to respond to the request, with all the consequent difficulties this caused the landlords in not getting paid.
I understand that the problem is even worse when one looks at social housing. A survey carried out by the National Federation of ALMOs and ARCH—the Association of Retained Council Housing—found that nearly 90% of council house tenants in receipt of universal credit are in arrears. I had to look that up again: I could not believe it, but apparently it is so.
Baroness Hollis of Heigham
I declare an interest as a former chair of both a local housing committee and a housing association. Given that universal credit is paid at the end of the month and this might not be coterminous with housing associations or social housing, what does the noble Lord regard as an arrears? Is he talking about more than eight weeks’ failure to pay the rent, because five to six weeks might simply be the failure to co-ordinate payments, given the move, unfortunately, to monthly payments?
Earl Cathcart
I think that I caught the noble Baroness’s question. I do not think it is after eight weeks: I think it is in arrears—that is, they have not paid the monthly rent on time and they have not paid the next month’s rent on time, et cetera. I hope that that answers the noble Baroness’s question.
Baroness Hollis of Heigham
I meant that the arrears might simply be a technical cash-flow issue, and not a legitimate arrear, because if, for example, the rent is due before the payment of universal credit, there will be a period when there will be arrears. The noble Earl will understand my point, but the arrears that matter are the arrears that become irrecoverable, which usually, in my experience, means eight weeks.
Lord Freud
Half of those arrears were accrued in the first four-week period. We discovered in the direct payment project that there is genuinely an issue about moving people over in the first three months, and we are spending an enormous amount of energy and effort on pinpointing that. Indeed, we are doing a lot of work now with social landlords to get the problem under control.
I should point out that this proposition would be of greatest value to private landlords, as the social sector is much less volatile. It is not unrealistic to suppose that commercial landlords, like any other small business people, should make a certain amount of provision for bad debt. Rent payments can be made direct to landlords once arrears reach the equivalent of two months, which limits the degree of their exposure.
Amendment 104BB would allow universal credit claimants to request that the Secretary of State pay their housing costs element to their landlord. The Secretary of State already has powers to pay all or some of a claimant’s universal credit entitlement to a third party where it would be in the claimant’s or their family’s interests. In practice, these powers are used to protect vulnerable claimants or claimants in rent arrears by paying the universal credit housing costs element direct to the landlord. However, as I have already said, the default position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent. The direct payment project showed that after 18 months the rent payment rate was 99%, which was comparable to now. Where there are problems, the department can manage payments and look to use the arrears option.
The amendment would also go further than the current arrangements for housing benefit, whereby the majority of private sector tenants are paid their housing benefit direct. To allow claimants to opt out of managing their own budgets while receiving universal credit would be a step backwards for them and a step away from claimants being job-ready.
I will need to answer the questions from the noble Baroness, Lady Sherlock, in writing, so I will cover those later.
Finally, my noble friend asked a question about Scotland. The Scotland Bill grants powers to Ministers to decide how to make payments but this is not a straightforward thing to do, because universal credit covers people who are in work and out of work and presumably you would not want to make payments to in-work people because perhaps the payments do not cover their rental elements. Therefore, it is a much more complicated issue than people realise when they do not understand completely how universal credit works.
The Government believe that work is the best route out of poverty and that universal credit should help, not hinder, claimants on their journey into employment so that they do not fluctuate in and out of work or go up and down the taper. Paying universal credit as a single monthly payment will ensure that claimants are best prepared for the transition to work and for staying in work. I hope that, on the basis of the explanations and reasons I have provided, my noble friend will withdraw his amendment.
Baroness Hollis of Heigham
My Lords, can the Minister help us? It would be very useful to have this information before we come to Report. The evaluation of the bedroom tax—obviously the Minister will be familiar with it— has just come out in the last three days or so. It shows that over 55% of tenants affected by the bedroom tax were in arrears in autumn 2014, although of course many of them had already been in arrears. Does the Minister have any figures to try to separate out the effect of the bedroom tax on the arrears issue from the move to universal credit and its payment methods? What information does the department have, and is it collecting any? It will be quite hard now, because problems in paying your rent are beginning to layer on top of each other. We will need to disentangle these, if not for this Bill then for the Bill to come.
Lord Freud
I will not resist the temptation of pointing out that there is no such thing as a bedroom tax; it is the removal of the spare room subsidy, and I will be answering a Question on that tomorrow. Interestingly, the direct payments project provided a lot of insight into this issue. It started off with direct payments and then people started taking on the removal of the spare room subsidy as well. I will try to find the precise figures for the noble Baroness, as I am speaking slightly from memory. We found that the people who had learned how to go through the direct payment process were able to handle the removal of the spare room subsidy more efficiently than others. I will aim to get the noble Baroness chapter and verse on that.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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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 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
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.
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.
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 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.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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Lord Hodgson of Astley Abbotts (Con)
My Lords, I do not object to reviews in principle. I have done some for the Government and I am now doing the official review of Part 2 of the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act, which covers the impact on non-party political campaigning. They have a useful role and, in light of the work I have done for the Government, it would be strange if I objected in principle to what the noble Baroness and the other noble Lords proposing these amendments are saying. I leave aside the question of whether there is a real purpose here: the noble Baroness rather disregarded the Oakley review and other things as being of little value. If reviews are to have worthwhile purposes, they need to meet certain tests. Other noble Lords will have their own tests, but I will share three with the Committee this afternoon.
First is the question of timing. The full impact of legislation takes time to emerge. In these circumstances, we are obviously seeking to change people’s behaviour. Their first reaction may not be their last and further reactions—good or bad—may emerge over the months and years after the legislation comes into effect. The amendment suggests 31 March 2016 as the date by which the review must be set up into whether sanctions are an,
“effective and proportionate means of meeting the Government’s objectives”.
I doubt whether it is possible to adhere to that timescale and reach meaningful outcomes, given the complexity of the subjects we are discussing and the likely evolution of events and behaviours. I am therefore concerned about the timing.
The second question is about the remit, which is too narrow. Each statute contains a number of pieces, as in a jigsaw. If one piece of the jigsaw is moved, all the other pieces have to move as well. The amendment looks at just one piece and does not pay enough attention to the wider implications, strategic aims and objectives of the Bill as a whole. Its benefits and value suffer as a result of its proposers making it so narrow.
The third question is the terms of the review. To be worth while, a review has to be reasonably even-handed as it sets out. I notice that the word “sanctions” is used four times in the amendment. By no stretch of the imagination can “sanctions” be said to be a neutral word: it is a pejorative term. The review sets out with these terms in order to arrive at, and find, a particular outcome.
Baroness Hollis of Heigham (Lab)
My Lords, does the noble Lord not agree that the word “sanctions” is employed in my noble friend’s amendment because that is the word the Government choose to use?
Lord Hodgson of Astley Abbotts
In these circumstances, a word such as “provisions” would be a better and more even-handed way of looking at the measure.
From my point of view, the timing proposed in the amendment is too soon, the remit is too narrow and the terms of reference are designed to achieve only one result. Therefore, I hope that my noble friend will reject it.
Lord Kirkwood of Kirkhope (LD)
My Lords, perhaps I may make two points on this very important subject, which will become more important as universal credit comes to be rolled out. That will happen significantly over the coming months and it is causing fear and anxiety that the sanctions regime, which at the moment affects individual benefits, as colleagues know, will start to be applied on a much wider scale on a wrapper which contains within it six benefits. The stakes are therefore a lot higher and, as I said last week and as the noble Baroness, Lady Lister, mentioned, I am getting strong signals that people are worried about universal credit, in a way that I hoped they would not be because of the extra 1 million people who will be embraced on full rollout. In steady state, universal credit will bring that new degree of conditionality, so we need to be careful to answer some of the questions that have been raised.
Some of the casework that we have heard about obviously needs to be thoroughly investigated, and we need to try to deal with that as much as we can. However, the issue for me is about working with interest groups, such as Gingerbread and others, to try to bridge the gulf—and it is a gulf at the moment—with what the Government say is actually happening. The noble Baroness, Lady Evans, did a valiant job against the clock last week in trying to set out what the Government believe to be the circumstances. I would just report that that explanation, while done in good faith, was met with incredulity by some of the specialists working in this field. It may be that they are dealing with families which are predisposed to the risk of the sanction effect, particularly in the lone-parent client category. But we really need to try to bridge the gap between what the Government think is happening and what the pressure groups, which we have all worked with for years and whose judgment I trust, feel is happening before universal credit gets too much further rolled out.
I am in favour of a review of the generic kind suggested by the noble Baroness, Lady Lister. Speaking for myself, what really needs to happen concerns decision-makers, particularly skilled and experienced decision-makers. The problem is that the people who I get access to in Jobcentre Plus offices are more likely to be experienced because, if I was the departmental manager, I would want visitors such as me to see experienced hands and I have been doing that for a long while, so I have factored that in. I am presupposing that the training and guidance have been rolled out properly; the departmental expenditure limit makes that harder and harder but the explanation of the noble Lord, Lord Freud, last week, which I accepted, was that you can front-load the staff because you save money on administration with the technology. But I am absolutely convinced that these decision-makers with experience are skilled and savvy enough to know whether a case in front of them is missing essential evidence. I do not think that they have enough discretion at the moment about freezing the application until they are satisfied that they have the information in front of them.
The trouble is that these cases are visited on them through the technology system, so they are not able to see the case all the way through in the way that case officers could in the old days. Jobs get passed around the system, which is technologically clever and efficient, but that deprives the decision-makers of being able to say “Look, there’s something missing here. I want this attended to, and within two weeks I need this other information. If it is absent, their sanction will be applied but if we can find it, I’d be much happier”. I do not think that that flexibility exists.
I know that the guidance is all online and people can see it, and that it all makes sense when read in a cold situation. But in a hot family situation, an experienced decision-maker should be given more latitude in looking at the papers which they have and estimating what other evidence, which because of their experience is likely to exist somewhere else, would make a difference. That would save a lot of money in successful appeals, which would be spawned once the evidence was received, and make the client’s experience a whole lot better. There are things that could and should be done, but my plea, as it is all through the Bill, is that we have to get these things straightened out to the best of our possible ability before universal credit is rolled out to 7.7 million households across the country by 2020 or thereabouts.
Baroness Hollis of Heigham
My Lords, I would like to ask the Minister a question. Concerns have been expressed to me by legal advice centres and the local equivalents of CABs and so on. Anybody who is threatened with a sanction can obviously appeal or ask for a second opinion, and that would then go to an independent decision-maker. How long will that independent decision-maker take to arrive at their judgment? The advice I have been getting is that that is where it is being held up and that there are sometimes waits of six, eight, 10 or 12 weeks before a decision is made. As a result, there is a long queue for the independent decision-maker.
However, you cannot go to appeal, where the original decision may quite possibly be overturned, until it has been reviewed by the independent decision-maker. I am in favour of the department reviewing its own internal decision-making before we go through to the tribunal appeal process, but only if that is done speedily and competently, as well as fairly. Can we be reminded of those statistics, because I am advised in case after case that it is being used as a narrow gateway? It puts a lot of delay in and doubles the difficulties of the sanction procedure.
Then there is an entirely different question, not connected with that at all, which goes back to the Minister’s words towards the end of the last Committee day on work conditionality and sanctions and on the preparation for work interviews for those with a toddler aged two years or more—although the requirement to work does not bite until the toddler is three. Are people required to attend such work interviews or work preparation without their toddler? Consider a situation in which a lone parent has recently had to move, perhaps six months before, from a privately rented, mouldy property on an insecure tenancy to another property, and there is no support system in place. The little two year-old boy still does not speak, although he perhaps has the beginnings of a bit a temper. That child still needs to be fed and to have his nappies changed, but there is no local support network in place and the little boy has never been looked after by anyone other than his mother. Given that we are not talking about a work placement or continuous employment, as would happen when that toddler is three years old, but about attending, often on quite short notice, a work interview or work preparation training, may I have the Minister’s assurance that the lone parent may bring her two year-old toddler with her? In that case, are the jobcentres appropriately staffed and do they have provision for nappy-changing facilities and the like for such small infants?
The Earl of Listowel
May I correct something I said earlier? On my visit to the food bank in Tower Hamlets on Friday, the principal reasons given for people coming to food banks were mistakes in benefits and their own lack of knowledge about their entitlements; it was not to do with sanctions brought against them. I have checked my notes and apologise for my mistake.
Baroness Evans of Bowes Park (Con)
My Lords, the amendment, moved by the noble Baroness, Lady Lister, and supported by the noble Baroness, Lady Manzoor, the noble Lord, Lord McKenzie, and the noble Earl, Lord Listowel, would put into statute an independent review of the sanctions system. However, we are not sure that that is necessary, as the Government already keep the operation of the sanctions system under constant review to ensure that it continues to function fairly and effectively.
There is clear evidence that sanctions are effective with more than 70% of JSA and more than 60% of ESA recipients saying that sanctions make it more likely that they will follow the rules, but, where we identify that there is an issue, we act to put it right. This is clearly shown in the improvements already made to the JSA and ESA sanction system following the recommendations of Matthew Oakley’s independent review last year. However, as I said, we do not stop reviewing the process to ensure that it is fair and effective. That is why we have accepted, or accepted in principle, many of the recommendations made by the Work and Pensions Select Committee’s recent report into sanctions.
The chair of the Work and Pensions Select Committee, the right honourable Member for Birkenhead, has welcomed our response and our willingness to work with the committee to ensure that the conditionality system works as it should. In our response to the committee, we announced that we will trial a sanctions warning system giving claimants a further two weeks to provide evidence of good reason before a decision is made. We believe that this will help to strike the right balance between conditionality and fairness.
I can confirm to the House that it is our intention that the trial will operate in Scotland from March 2016, running for approximately five months. A full evaluation of the trial will be undertaken, and findings will be available from autumn 2016.
The noble Baroness, Lady Lister, asked about the monitoring of the destinations of sanctioned claimants. DWP officials are currently quality-assuring the data for universal credit official statistics. As part of this review process, we will carefully consider the option of including destination data. We are not yet in a position to confirm which statistics will be provided in future.
We are also considering extending the list of JSA vulnerable groups for hardship payment purposes to include those with mental health conditions and those who are homeless. This will mean that these claimants can receive hardship payments from day one of their sanction, provided that they also meet the other criteria.
The noble Baroness, Lady Lister, also asked about sanctions being applied fairly. Any decision to sanction a claimant is not taken lightly, and there is a full and proper process that includes the claimant from the start. At the start of the claim, as noble Lords will know, all claimants receive a tailored claimant commitment, and the requirements take into account mental health conditions, disabilities or caring responsibilities. Any failure to meet a requirement is always thoroughly considered and claimants are given the opportunity to provide good reason for not complying before any decision to sanction is made by the decision-maker, but I will need to come back to the noble Baroness, Lady Hollis, on the timescales that she asked about, because I do not have that information to hand.
The noble Baroness, Lady Lister, also mentioned the Crisis report. We absolutely understand that homelessness is a complex issue, and our priority is to ensure that individuals affected get the right support. That is why we have made more than £1 billion available to prevent and tackle homelessness and support vulnerable households since 2010, and we will continue to work closely with organisations such as Crisis to make sure that support is provided where it is needed most.
On the question of the noble Baroness, Lady Hollis, about lone parents being required to come to jobcentres without a toddler, no, requirements to attend appointments at the jobcentre should be tailored to take into account individual claimants’ caring responsibilities, and work coaches should be able to help to make appropriate arrangements, including helping to arrange appointments around childcare. I cannot speak about the range of facilities within jobcentres, but it is within the gift of the work coaches to be flexible in working with lone parents.
Baroness Hollis of Heigham
So I have the Minister’s assurance that any lone parent who turns up with a toddler in tow will not as a result be sanctioned?
Baroness Evans of Bowes Park
I have already said that I cannot speak to all the facilities, but as I am writing to the noble Baroness on a previous issue I will include that in that response.
It is important that we focus on ensuring that all the agreed recommendations proposed by the Work and Pensions Select Committee are delivered and can be embedded in the design and delivery of universal credit. To clarify for the noble Lord, Lord Kirkwood, I say that universal credit sanctions are just on the standard element, not on the whole amount. We believe that a call for a further independent review is unnecessary to embed this in legislation.
Baroness Evans of Bowes Park
JSA sanctions continue to decrease, and the JSA monthly sanctions rate has slightly fallen—by 15%—over the past year. Each month, on average, 95% of JSA claimants comply with the reasonable requirements placed on them. On average, 5% of JSA claimants were sanctioned each month of last year. We can provide those figures; I will write to the noble Lord.
The noble Lord, Lord Kirkwood, asked about the gulf between the department and what charities say about sanctions. I can only attempt to reassure him that officials are working closely with charities to investigate concerns. For instance, we have worked closely with Crisis and Gingerbread on improving communicating sanctions and will continue to do so. I will take the issues raised by the noble Lord, Lord Beecham, back to the department, because I do not have some of the more detailed information that he was asking about.
On the basis of those responses, I hope that the noble Baroness will withdraw her amendment.
Baroness Hollis of Heigham
I realise that this is a sensitive issue, but the amendment in the name of my noble friend has been tabled for some time on sanctions, time, efficaciousness and the need for a review. I would have expected in the Minister’s brief the detail of how many sanctions for how long, how long the decision-making is taking, the number of people going through as a result to appeal, and the results of the appeals. I would have expected two or three pages in her brief giving her the statistical detail which would empower her to answer many of the questions which, understandably, she is taking away today. I am surprised at that, because the amendment has been tabled for some time. The department will have the statistics, and they should have been made available to us in Committee, so that we have that material here today before we consider what we—and my noble friend in particular—may or may not do on Report.
I am in no sense criticising the Minister, but Ministers are coming to this House woefully underprepared with the information they need, which is of a detailed sort, to deal with the amendments being discussed. Members on the Opposition Benches have a right to expect Ministers to have that at their fingertips.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, that was an unnecessary intervention. Most of the information that was asked for is available on public websites—in particular, on the question about the three-year sanctions. I will ensure that noble Lords have the address of that website to check.
Baroness Hollis of Heigham
It should not be a question of going to a website. If a question is asked on the Floor of the House, and it is on a website, I would expect the Minister to have that detail in the briefing from the Box. That is their function—that is their job. I do not blame or criticise the Minister in any respect, but I would have expected a higher level of appropriate technical briefing for her, with which to equip her to answer what are obviously technical questions.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, the amendment proposed by the noble Baroness, Lady Manzoor, would repeal the Universal Credit (Work Allowance) Amendment Regulations 2015, which were laid before Parliament on 10 September 2015 and come into force next April. The amendment tabled by the noble Earl, Lord Listowel, and the noble Baroness, Lady Armstrong, would increase the standard UC allowance payable for lone parents who are also care leavers. Both amendments refer to issues recently considered by this House. The work allowance regulations were lying before the House as recently as last month and we have already discussed care leavers in debates on the Bill, most recently last Wednesday.
The Bill does not make any changes to the standard allowances in universal credit, which are set out in the Universal Credit Regulations 2013, debated in this House in February of that year.
The Government set out in the summer Budget measures to transform Britain from a low-wage, high-tax, high-welfare society to a higher-wage, low-tax and low-welfare society. This package of measures included changes to UC and tax credit allowances but also the introduction of the national living wage and further increases to the personal tax allowance. Noble Lords will be aware that the Chancellor has subsequently announced changes to the tax credit element of this plan in response to concerns raised mainly by noble Lords about the timetable for implementation. However, the overall strategy remains unchanged. The welfare system needs to be brought under control to make it fair to the taxpayer and support economic growth.
This is perhaps a reasonable time to pick up the point made by the noble Baroness, Lady Lister, about all the improvements that there might be to universal credit. I acknowledge that there may well be improvements. One of the opportunities that we have, uniquely in universal credit, is to start doing randomised control trials to discover how we might improve it. Some of those suggestions may well work when we have discovered the dynamic effect of making those changes. We do not know at this moment, but we and future Governments will have the opportunity to test some of those propositions.
Doubtless noble Lords will have seen analyses published by various organisations assessing the impact of these changes on claimants and are clearly concerned about the possible impact on families. As I start trying to explain the impacts, it is important to explain why those analyses tell only part of the story. First, they fail to reflect that the summer Budget measures are a package. The comparator, which excludes work allowance changes but includes all other summer Budget measures, reflects the Government’s policies to deliver low taxes but not those to deliver low welfare. If we are to deliver our commitment to stable public finances, we cannot deliver one without the other.
Secondly, they fail to take account of all elements of government policy that will have an impact on families between now and 2020, including spending on vital public services such as the NHS and schools, on which so many families rely. If you take the sort of analysis that has been carried out by the IFS and the Resolution Foundation but instead compare the net incomes of those on tax credits in 2015 with what they would get under UC in 2020, taking into account the national living wage, increases in the personal allowance, better provision for childcare and economic growth, the cash position would look broadly similar in 2020.
Thirdly, and perhaps most importantly, the analyses fail to take account of the dynamic impact of universal credit, or indeed of any changes in behaviour as a result of the measures in the Bill. We are introducing universal credit precisely to give people more choice and opportunity to get into and progress in the labour market. The early impact is already documented, but static analyses cannot help showing claimants as passive recipients of welfare, unresponsive to the new possibilities that this Government are opening up with these reforms. This is particularly important when we consider universal credit claimants directly affected by this change when it comes into effect next April. The overall numbers are of course small, given the controlled rollout. They are also made up primarily of childless singles.
Let us be clear about the group we are talking about. They are a group with no barriers to full-time work. Indeed, many of them already move off universal credit altogether by finding full-time employment. Those with residual universal credit awards in work are normally working part-time and would therefore have got absolutely nothing under the tax credits system. The changes in April will reduce that generosity but will still leave this group better off than under the previous system.
I recognise that there are some more complex cases in the current caseloads, with higher entitlements and greater barriers to increasing earnings. To respond to the first question asked by the noble Baroness, Lady Sherlock, I can say that the Secretary of State has announced that we will use adviser support and the flexible support fund to ensure that each of those families is supported through the change.
Baroness Hollis of Heigham (Lab)
Would the noble Lord expand on that answer? How many lone-parent families? How much will they be supported by in terms of their finance—is he saying that it would be as though the cuts had not affected them—and for how long?
Lord Freud
It would be a small number of families; I do not have the precise number.
Lord Freud
It is a small number. It is probably towards the lower end of that, but I do not have the precise number. We will use the flexible support fund—the measures the Secretary of State was talking about—to help them to make the transition, so that they manage the change.
Baroness Hollis of Heigham
Does that mean that they will not be worse off in cash terms during their transition by virtue of the support system?
Lord Freud
It is not the same as transitional protection, as I was indicating. It is our means of helping people adjust to the change we are seeing in universal credit for those groups.
Lord Freud
We will help them make the transition. It will vary for each of those families: it might be some more work or it might be upskilling to earn more. The numbers are very particular and specific but they are clearly a focus of our obligation to those groups to help them to manage their position. We will put the resource in to help them to do that. That is what we are talking about. Helping those on lower income towards financial independence requires a tax and welfare system that encourages and rewards work, and one which provides people with the right support to progress in the labour market and provide their families with long-lasting security.
The next question asked by the noble Baroness, Lady Sherlock, was about how the transitional protection works. The people who get transitional protection are only those whom we have managed migration for, which, as the noble Baroness pointed out, will start in 2018. It is not designed to provide indefinite financial protection. Over time, transitional protection will be eroded as claimant circumstances change. It will be appropriate to end it when circumstances underlying the award are no longer recognisable as those on which the legacy calculation was made. We have not yet regulated for transitional protection, but we have described its principles. We will bring forward those regulations in due course.
Lord Freud
We put them out at the time of the Bill. They were reasonably large changes. There is a list of them: re-partnering would trigger one, as would a new member of the household. Other changes might be a sustained drop in earnings—an equivalent almost to moving out of work—or one or both members stopping work. As I said, those are all indicated. We will set out those changes in due course.
Baroness Hollis of Heigham
Can the noble Lord envisage a situation in which a couple—a family—received this, he moved out and she became poorer, but the result was a change in circumstances, so her reduced income was made worse because she no longer had transitional protection?
Lord Freud
I do not have the precise figures here so it is quite hard for me to know how much of that flexible support fund will need to be diverted, but it is a mixture of support and funding. It is a question of how that is combined. We do not anticipate a large amount because the numbers are not very large. We have not isolated the precise numbers. It is too difficult—we just have not done that—but our anticipation is that it is not a substantial amount.
Let me pick up the point from the noble Baroness, Lady Lister, on incentives to work. There are only two ways of reducing the cost of universal credit: looking at either the taper or the work allowances. The taper is what maintains the incentives to work and to work more. Keeping it at a steady rate so that people can understand exactly where they are, so that if they change their work hours they can understand exactly what happens in a way that they cannot with the present system, was something that we saw as a priority, particularly at a time when the economy is strong and there is work available. There may be a different dynamic at different stages of the cycle, but that is the position we are in now.
On the question from the noble Baroness, Lady Manzoor, the minimum income floor will continue to be calculated by reference to the national minimum wage, which includes the national living wage.
I turn now to Amendment 62D, tabled by the noble Earl, Lord Listowel. In the current system there is considerable complexity around the rates for young people, with some differences between benefits. The structure of age-related rates in universal credit is much simpler than the benefits it replaces, with just four rates of the standard allowance: two for singles, two for couples. That compares with 15 in employment and support allowance, for example.
The age-related rates are now established in universal credit and the Bill does not make changes in this area. Doing so would start to replicate some of the complexity that we are looking to remove and noble Lords have heard me grumble about “carbuncleising” enough to know what I mean. However, the Government do recognise the challenges which these young people face. We should be supporting vulnerable young people and parents to stabilise their lives and find work and we have a number of measures within the context of universal credit. We will ensure that care leavers claiming universal credit who need help managing their money and paying bills on time will have access to personal budgeting support. Care leavers are exempt from serving waiting days in universal credit to ensure a smooth financial transition, and single care leavers aged 18 to 21 are exempted from the shared accommodation rate for LHA housing costs. I ask the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
I am still trying to make sense of the responses which the noble Lord very helpfully gave to my noble friend Lady Sherlock. I know that the Minister does not like hypothetical questions, but if we want a dynamic—to use his word—situation, we have to look at it in those terms. A lone parent with two children is currently on tax credits. Let us say that, in 2018, she re-partners. Her partner moves in and the tax credit transitional protection ends because his income floats it off. Within a year, he leaves her: does she then have to make a new claim to universal credit? Putting aside any question of the level of the national minimum wage, would that be at a lower rate, in cash terms, than she would have received on tax credits? In other words, what sort of linking would there be? If he moved out in less than six months, would she be able to resume her previous tax credit claim or will the cuts kick in at any point when there is a change in circumstance—even if it effectively only lasts for a fortnight—that takes her on to UC?
Lord Freud
We have not yet put out the detail of the transitional regulations and that is where one would expect to see them. We will be producing some precision in how the regulations will work.
Baroness Lister of Burtersett
Will the Minister say when, roughly, he expects to be publishing the transitional regulations? Will he, in his normal helpful way, commit to publishing a draft of the likely contents first, so noble Lords can discuss them, rather than just be presented with the actual regulations?
Lord Freud
I will take that request in the helpful way that it was offered. I will write to the noble Baroness to see if I can give her any comfort.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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The Lord Bishop of Durham
My Lords, I will speak in support of Amendments 24, 25 and 26. I know that everyone in this House, and indeed in the other place, is committed to protecting those children in our society who are vulnerable to suffering the worst effects of poverty. Indeed, I know that there is a broad recognition across the House that some form of statutory reporting on the issues of child poverty and children’s life chances is an important tool in driving initiatives that will combat that poverty. The questions about what should be included in Clause 4 are questions of best practice, rather than questions of best intention.
I welcome the Government’s commitment to tackling the disadvantage that can arise from worklessness and poor educational attainment. It is certainly true that children growing up in long-term workless households are placed at a significant disadvantage to their peers when it comes to their future working lives, as are those who leave school with low educational attainment. A thorough reporting on these indicators should help drive initiatives to combat these two factors, which can be so detrimental to the life chances of children. I welcome the Government’s focus on these two priorities.
However, it is my belief—and the belief of the vast majority of organisations working in this area, as we have already heard—that measuring workless households and educational attainment alone is insufficient as a method of measuring a child’s life chances and exposure to poverty. There are, of course, all sorts of other factors that can influence the future prospects of children: problem debt, substance abuse, family breakdown and substandard housing. The list of life-chance indicators should be extended to include these. We also know that children’s life chances are shaped very early on in their lives, so we need to be looking at cognitive and social development at a younger age.
Most significantly, however, the current set of life-chance indicators completely fails to capture income poverty and material deprivation, particularly in relation to in-work poverty. I think that we have to keep on repeating this: some 64% of the children defined as living in poverty under the current measures are in working households. This should give us cause to stop and think about how effective these new measures will be when no assessment of in-work poverty is facilitated. It is particularly problematic given the well-established body of evidence demonstrating the strong link between material deprivation and the wider life chances of the child.
The Government talk confidently about focusing on the root causes of poverty rather than the symptoms, but I think that the reality is a little more chicken and egg than perhaps they would like to admit. Let us take as an example educational attainment. Does poor educational attainment make it more likely that children will experience poverty and deprivation in later life? Yes, of course it does, but income poverty and deprivation also make it far more likely that children will do less well at school, lacking the resources they require to compete with their peers on an even footing.
As it stands, Clause 4 is inadequate. In the right desire to move away from an overly simplistic definition of child poverty rooted in money alone to a broader-based, root-cause understanding, I fear that a tap-root cause is being lopped off, and that will make the other roots less stable. We all know that if you take out the tap-root, the danger is that the whole tree will fall. We must retain some assessment of income poverty, and particularly in-work poverty, in the life-chances measures. Given that at Second Reading the Minister, the noble Lord, Lord Freud, committed the Government to the continued publication of the HBAI measures that are currently enshrined within the Child Poverty Act 2010, it seems odd that the Government are so reluctant to include those measures on a statutory basis in this Bill, which would cost almost nothing. I and most organisations working in the area of child poverty would like to see this happen. At the very least, a report of in-work poverty that draws on those figures must be included within the reporting obligations, as has been suggested by the noble Baroness, Lady Lister. A failure to report on in-work poverty would be a real failure by a Government who have prided themselves on combating low pay and making work pay.
Baroness Hollis of Heigham (Lab)
My Lords, I am keen to follow up on the speech of the noble Baroness, Lady Stroud. She has asked the right questions, if I may say so, but I do not go with her on some of her responses. First, she criticised relative poverty as a measure for assessing income poverty and is therefore throwing it out and retaining only worklessness and the educational attainment of children at the age of 16 as her main drivers. She did not remind the Committee that relative poverty is one of four indicators that include persistent poverty, absolute poverty and material deprivation. She is right to say that relative poverty reflects what is happening to the broader economy, but you need the other considerations and measurements as well, which we have. Taken in the round, they—particularly persistent poverty—are an appropriate, proper and dynamic snapshot of what is happening to families. I think that she will recognise that.
Secondly, the noble Baroness asked exactly the right question, which is this: why is it that half of people in poverty come out of it the following year but the other half are stuck, and how do we get to those who are stuck? If we look at what the Government are proposing in this Bill, and have been proposing through the summer, we will see that the reasons people are going to be stuck in poverty and therefore move into persistent poverty are being made worse on almost every count. People in work and in poverty who have poor skills certainly need job progression; that is well established. However, the primary reason why people are in work and have low pay and therefore are in poverty is because their work is part-time, insecure, or based on zero-hour contracts where from one week to the next they do not know whether they will be working for 10 hours or 30 hours, or they have young children. Most of us would not wish to see lone parents being forced, against their judgment of what is best for their family, to leave a two or three year-old in professional childcare while they work on a supermarket till when they feel that they should be trying to balance their work and life responsibilities—rightly so in terms of working part-time, but also in terms of bringing up their children so that those children can respond to the fact that simultaneously they have a parent at work and a parent at home. It can be hard for children, so we should not make it harder. That is a debate which I do not doubt we shall return to.
Baroness Hollis of Heigham
And low earnings, my Lords. It says, in brackets, “low earnings”.
Lord Freud
It referred to “low earnings” out of worklessness; that is why the brackets are there.
Baroness Hollis of Heigham
My Lords, that is one reading of it. I am sorry to trouble the Committee with this but the review makes it clear that while worklessness with both parents out of work is obviously a primary driver, if only one parent is in work there is still a very substantial risk of in-work poverty, as has been explained time and again. That is why in the Government’s own research they are brigaded together.
Lord Freud
I will come to the point about the in-work and the workless in a little while. Let me go on.
Clause 4 will remove the existing measures and targets in the old Child Poverty Act and provide a statutory basis for much-needed reform to drive real change to improve children’s life chances and tackle the root causes. It introduces a new duty on the Secretary of State to report annually on children living in workless households and children’s educational attainment in England at the end of key stage 4. In response to the point made by the right reverend Prelate the Bishop of Durham about the other indicators, alongside these statutory measures we will develop a range of non-statutory indicators to measure progress against the other root causes of child poverty, which include but are not limited to family breakdown, addiction and problem debt. Anyone will be able to assess the Government’s progress here. The Government are saying, “Judge us on that progress”.
I turn to Amendments 24 and 26. With Amendment 24, the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, seek to expand the duty placed on the Secretary of State to publish and lay before Parliament a report containing data on children living in low-income families,
“where one or both parents are in work”.
I think I can add the name of the noble Baroness, Lady Hollis, to that amendment in practice. Amendment 26 would add “low income” and “in work” to the list of terms to be defined in the annual report.
It is important to pick up the point raised by a number of noble Lords, including the noble Baronesses, Lady Lister, Lady Blackstone and Lady Hollis, and the right reverend Prelate, about two-thirds of children in relative poverty being from working families. It is correct that the HBAI figures show that 64% of children in relative poverty are from a family where at least one adult is in work. But this situation has developed over the past couple of decades due to the improved progress in tackling poverty in workless families. In 1996-97, the earliest period for which data are available, around 2 million children in relative poverty—around 60% of them—were from workless families, and around 1.5 million, or 40%, were in working families. During the 2000s, progress was indeed made in reducing the number of children in poverty from workless families by focusing spending on income transfers. Unfortunately, this had the unintended consequence of weakening work incentives and has resulted in hardly any change in the number of children in poverty from working families, which stood at 1.4 million in 2009-10. In other words, it was down by only 100,000.
This illustrates why we are transforming the benefits system and introducing the combination of out-of-work and in-work benefits in universal credit: it is to get rid of the position where you do income transfers one way and undermine the incentives for people to work. I ask noble Lords to think about this issue carefully. With the income transfer process under the old policy, which was not in the Act before, we drove straight into this conundrum of where the incentives were to get people into work.
As for the evidence we have on work being the best route out of poverty, according to the latest statistics, the risk of a child from a working family being in relative poverty is 13%, which compares to the risk for a child from a workless family of 37%. It is clear that a child in a workless family is almost three times more likely to be in poverty than a child who lives in a family where at least one adult works, meaning that the risk of a child being poor is dramatically reduced if at least one parent works.
Furthermore, earlier this year we published analysis on the transition into and out of poverty. This showed that 74% of children who are in poor, workless families will leave poverty altogether if their parents move into full employment. It also made clear that the more work parents do, the more likely they are to leave poverty, with 75% of children from poor families that are partly employed leaving poverty if their parents enter full employment.
Baroness Hollis of Heigham
We are putting a lot of emphasis on full-time employment, but children in persistent or recurrent poverty will usually be the children of lone parents, who by definition, because they are bringing up children, have limits on the hours they can work. Another such group would be disabled people. It is the combination of low pay in work and limited hours that keeps them in poverty, although they are in work. To say they must go into full-time work when they have young children shows no understanding —if I may say this—of what it is like to be a single parent bringing up several children on your own.
Lord Freud
I can only provide the noble Baroness with these relative statistics on what is happening—where the risks for being in poverty are much higher when you are entirely workless. Clearly, as we look at our statistics for the workless, we will have quite a lot of analysis behind what is really happening there.
Baroness Hollis of Heigham
Would the noble Lord agree that the Department for Work and Pensions has always understood that dilemma and therefore, particularly for disabled people, has sought to reduce the risk of going into work, in terms of both the claimant’s health and the viability of the job, by having extensive linking rules? The linking rule that if you cannot sustain a job, you can go back on to your previous level of benefit allowed a lot of disabled people, under the New Deal for Disabled People, to springboard into work.
Lord Lansley
The noble Baroness is drawing me into a debate that I was not intending to enter into. My point was not about whether having a structure in which those who are currently on ESA WRAG and then go into employment and come off it should lose the benefit after 2017. My point is that within the terms of the review, contrary to the argument that is being presented that there is no incentive effect of the level of benefits relative to work, people are arguing that that is not true and that there is a disincentive effect in going into work if the level of benefits is higher.
I shall conclude on that point. It seems to me that we need to be operating on each of these areas. As a Government and a country, we are doing well in providing opportunities for employment. If we do the right thing in terms of support, we can give people with disabilities greater access to those employment opportunities that are increasingly available and, most importantly, give people access to the support. The review gives very good material for the Government to continue the process of thinking towards what that structure of support should be to be of the greatest possible benefit for people with disabilities.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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The Earl of Listowel (CB)
Briefly, my Lords, I welcome the introduction by the previous Government of the family test. It was good to see in a recent Bill—it might have been the Education and Adoption Bill—that, just as the European Convention on Human Rights is written down, it was stipulated on the Bill itself that the family test had been gone through as the Bill had passed. I am sorry to hear that the results of the family test have not been published, because that test is very welcome.
The right honourable Iain Duncan Smith, the Secretary of State, did good work with Graham Allen MP in looking at early years interventions to begin thinking in this country about how important it is to support families so that their children do well from the very start of their lives, because more and more evidence shows that supportive families, good relationships and bonding early in life have huge and beneficial impacts on society, and that is hugely important. That was really wonderful work but I am afraid that it may be getting lost somehow. I would like to be reassured that that focus has not been lost and that the Secretary of State is still worried about “broken Britain” and broken families, and is still putting that right at the top of his priorities. I wonder if the Minister can say whether it is intended in future, as I gather has been the case in the past, for the Bill to say that it has passed the family test.
Baroness Hollis of Heigham (Lab)
Can the Minister help me? I was just checking, and as far as I can see from handbooks, we continue to support various partners in polygamous marriages and we do not say, “After two partners you won’t get any more support for your third, fourth or fifth member of a polygamous marriage”. Why is it okay to have several spouses who are financed by benefit, but if you have more than two children they are not?
Lord Freud
I thank the right reverend Prelate the Bishop of Portsmouth and the noble Earl, Lord Listowel, for this amendment. On the ECHR point, the Government set out their assessment of the impacts of the policies in the Bill on 20 July, as I think I have already said. It is important to ensure that the dynamic behavioural effects of the changes are considered within that. Many of these analyses suffer from the fact that they are too static when considering gains and losses and too focused on notional changes.
On the question posed by the noble Baroness, Lady Lister, on child poverty impacts, I say that the intended impact of our reforms is to incentivise work, ensure that it always pays, and to allow people to keep more of what they earn. That is why, as we will go on to discuss, we are moving towards a life-chances analysis of poverty as our approach.
Lord Freud
This amendment is asking us to do an analysis over the next six months. In practice, that is what will be happening on a dynamic basis, because we have introduced as part of universal credit a test-and-learn approach in which we are able to assess what happens to families and learn the lessons in order to roll out universal credit. That is a pretty public process and we publish what we learn. So, in practice, we have a process that incorporates the dynamic effect of these changes in its overall impact, rather than taking individual bits and pieces of the policy. That is the best answer that I can give to the question. On that basis, I urge the right reverend Prelate to withdraw this amendment.
Baroness Hollis of Heigham
I want to come back at the Minister. I was not trying to make a cheap jibe but, unless I am misreading a handbook that I have used over the years, if you are in a polygamous marriage and your spouse is married to someone else, you may claim as a single person within it, which is an allowance for you, including if the other person still lives in the same household with you. In other words, under UC—this is on page 154—there is continued financial support for other partners in a polygamous marriage. If that is so, why is it acceptable to apply that to adults but not to children?
Lord Freud
The noble Baroness has a long memory. Polygamous marriages were recognised in JSA, income support and ESA. We took a decision not to recognise those marriages in UC. Only the first marriage is recognised for universal credit purposes.
Baroness Hollis of Heigham
Except that financial support will, presumably, continue to be given to the other women who are in a polygamous marriage by virtue of their polygamous status.
Lord Freud
No. If there is a third person in that household they would be treated as a single person.
Baroness Hollis of Heigham
The point I am making is that they may be treated as a single person but they are getting financial support by virtue of that polygamous marriage, whereas the third or fourth child will get nothing.
Lord Freud
This is really becoming arcane. We have said that we do not recognise polygamous marriage in universal credit. But clearly there is an individual there, and we will treat them as a single person. It is actually, ironically, a little more expensive than treating them as a wife.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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Baroness Hollis of Heigham (Lab)
I was not going to add to the very powerful opening speech by the noble Baroness, Lady Meacher, but I will just say to the Minister that, when he faced a similar problem with housing and the cut in benefit to those with a so-called spare bedroom—I refer to the bedroom tax—the Minister understood the degree of disquiet around the House and invested in discretionary housing payments, which he increased and increased. In other words, there was a recognition that there needed to be some head space in the system for dealing with difficult issues, many of which we have discussed today. I suggest to him that we have had so many of those in the previous amendments and most powerfully again on the issue of disabled children that he should seek a similar discretion which then the Government can come back with in proposed draft regulations which the House can discuss before they then become part of the legislative process by the time we get to Report.
The Earl of Listowel (CB)
My Lords, I support my noble friend Lady Meacher in her amendment, which she so eloquently moved. A couple of years ago a woman called Stacie visited Parliament to talk to your Lordships in preparation for a childcare Bill. She talked about her difficulty, as a mother of a disabled child, in finding appropriate childcare. I think she went through more than 20 childcare providers who just said, “Look, we cannot deal with the needs of your child”. Eventually she found a very good provider that was prepared to go the extra mile. I know that this is an issue we have to take seriously and are looking to improve in terms of making childcare more easily accessible. It continues to be a problem. So there is that additional issue that I would highlight to your Lordships.
My noble friend also highlighted the fact that so many of these women are bringing up disabled children on their own. I invite your Lordships, women and men, to think about trying to bring up a child on your own when that child has a disability. The risks of isolation, of being overwhelmed—all those things must be exacerbated.
The Minister, in the early discussion about popular feeling with regard to taxation, made his response. It made me reflect a little that perhaps part of the way the public sees these issues is mediated by how the Government present them. I encourage the Government to be very careful, and I hope that this will not be taken the wrong way. On Saturday morning I was speaking to a mother with a two week-old baby, and she was speaking with another mother. The other mother, perhaps a little unkindly, because this two week-old baby had an elder sister, who was three, said, “Has the older sister started trying to kill her yet?”. What this highlighted for me is that it is such a basic element of human nature to be envious, to resent something that somebody else has, that one has to think through very carefully how one presents sharing resources with somebody else, or giving resources to somebody else and not giving it to another person. I am afraid that that may not come across very well. I say to the Government that I hope they are being very careful about how they present these things.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
I thank noble Lords for this debate and, particularly, I heard the point made by the noble Baroness, Lady Meacher, about how the lone parent—the mother—is so often left on her own with a disabled child. That is a very moving point and clearly rings true.
Perhaps I may look at the technical position. Amendment 3 would exempt those families who have at least one disabled child from the policy which limits support to two children. The intention of this amendment is to allow families with a disabled child to claim the child element of child tax credit for an unlimited number of children. Under Amendment 19, that intention would apply to both tax credit and universal credit. I should point out, as a matter of information, that the difference in having the child element allowed for a third child is not actually that great, if you look at the statistics. That is because the number of parents who go on to have more children is actually very few, as the noble Baroness, Lady Meacher, will probably know, so there is not a lot of difference in the cost. I know that she will appreciate the thinking behind that point. Amendment 8, meanwhile, which goes on to the point about paying the child element, is technically a bit misdrafted, but I know that the intention of the amendment is to allow that child element to be paid.
The noble Baroness, Lady Sherlock, drew on the issue of whether a choice has been made. Clearly, we have considered the issue of disabled children carefully and looked at the challenges which these families face. We are committed to supporting those families with disabled children by paying the disability element of child tax credit and the equivalent in universal credit. That is true for all disabled children, although there are in practice rather few—I mean that there will be some, but relatively few—so, however many there are, it will be for not just the first disabled child but all of them. From what I am hearing, I think that the debate is now around the child element as well as the disability element and that that is where the differences lie in practical terms.
I acknowledge broadly the figures to which the noble Baroness, Lady Meacher, drew attention in regard to the reduction without the child element. When that is in UC as a unified benefit, it will be only one part of the total payment. On the amount that the family gets, the reduction will be much less than the “down to a quarter” figure to which she was referring. On top of the disability element that we are exempting, we are exempting from the benefit freeze all those benefits which relate to the additional costs of disability, including PIP and DLA.
On Amendment 19, which would create a duty for an appeals process, I repeat the point that I made earlier: we already have comprehensive appeal arrangements and therefore do not need this amendment.
The noble Baroness, Lady Lister, made a point about what happens to HBAI figures. As we have found out year after year, it is impossible to predict with accuracy future HBAI figures. As is customary, the noble Baroness, Lady Hollis, has a solution to it all, but I am not convinced that the discretionary approach would be the optimum one in this area. Whatever happens, I do not think that any kind of solution would come from that.
Baroness Hollis of Heigham
Given the amendments that we have debated so far—in the first group, the second group and now this one—what proportion of the estimated £1.3 billion in savings that I think the Government were expecting to make from this would therefore be lost to the Government?
Lord Freud
I am simply not in a position to deal with what are entirely hypothetical issues. I am not in a position today to offer very much satisfaction in these areas, as noble Lords know.
Baroness Hollis of Heigham
Can I push the Minister on this? In earlier debates, he was saying that the two main drivers for these proposals on the two-child policy were, first, the need to get financial control—he quoted very large figures that he expressed great concern about—and, secondly, the need to produce a level playing field between working families and non-working families. He must know the cost of all these amendments, because he will have had the briefing from the Box about them, but I have not heard him tell us that. How much would the cost be of the previous exemptions and, in addition, the exemptions referred to so powerfully by my noble friend Lady Pitkeathley and the noble Baroness, Lady Meacher? How much of those savings would the Government lose if they were to meet the exceptions that all the Committee has, so far, argued for today?
Lord Freud
I am not in a position to answer those questions because I have had all kinds of amendments tabled—including one from the noble Baroness, which would remove the policy and lose all of the £1.3 billion. I am not in a position to go through the exemptions at this stage like that.
Baroness Hollis of Heigham
So are the Government really saying, “We are opposing amendments because we can’t afford them”, but do not know what they will cost?
Lord Freud
I have given out as much information as I can on the questions at this stage and indicated what the relative positions are. On this amendment in particular, I was careful to make it clear that there is not a huge difference in cost terms—and I will double-check this—between allowing a child element for the disabled and exempting the family which has a disabled child. That is the main cost implication which I have been able to provide today.
Lord Freud
Can I look at that? I am not sure quite how much of this is in my own purview. If I can, I will.
Baroness Hollis of Heigham
I am amazed this information was not available at the Commons stage of this Bill, given it has been discussed in Parliament for several months— I think it was back in July that Second Reading took place—and to still not to know these figures surprises me enormously. While the Minister is being helpful in producing information, given that we know that 85% of the welfare cuts proposed by the Chancellor will fall on women and given we know that nearly all the “victims”—the recipients of concern in the exempted groups that we were talking about in previous amendments—are women, will he also do us a gender breakdown? He is absolutely right, as other noble Lords have also said, that it is usually the mother who is left caring for disabled children. I remember meeting vaccine-damaged children—part of the Minister’s responsibility, I think—and every parent there with a disabled child was a woman. Can I ask the Minister if he will add a gender analysis to the financial analysis of where some of these cuts fall and who the exemptions, therefore, would help to protect?
Baroness Hollis of Heigham
My Lords, this is a Bill that my noble friend Lord McKenzie has gone on record as saying—and I certainly support him in this—is one of the most wretched that he has known in this House. Most of it deals with cuts that many of us find objectionable because they fall on the poorest and most vulnerable in our society. We will oppose those, and on Report we will try to persuade the Minister to make some mitigation if that is possible.
However, the two-child policy is of a different order from the issue of cuts, primarily because it is saying to those families who have a third child, “We are hugely increasing the odds that you as a family will descend into poverty, that your poverty will be persistent, that you will not be able to get out of it and that your children will carry that poverty into the next generation”. We know this to be the case, yet the Government, and the Minister on their behalf—I cannot believe that his heart is in this—are actually willing to go down a policy route that knowingly sends poor children into longer, deeper and more persistent poverty, not only for their childhood but for a substantial chunk of their adulthood as well. We know that the children of poor parents are twice as likely to be poor at the age of 30 as others of the same age, yet the Government are going down a route that, to me, is deeply morally offensive. As opposed to the cuts, over which we have argued and will continue to argue, this seems to be a knowing castigation of poor children into permanent poverty for sums of money that we do not even have any evidence for. I say to the Government that they really should not go down this path: it is a damned path to go down.
The Lord Bishop of Portsmouth
My Lords, I express my strong concern about these clauses remaining part of the Bill. I offer three straightforward and, I hope, succinct comments: first, about the implications of these clauses; secondly, about the motivation of parents that is implied; and, thirdly, about where responsibility lies.
First, the Government place great emphasis on choice and personal responsibility for family size. I have to say that that assumes a remarkable assumption about the fail-safe effectiveness of contraception—or, if not, an apparent willingness for abortion to be appropriate as a sort of emergency contraception to keep family size to two children. I doubt the assumption, and would deeply regret driving people to seek termination on economic grounds. Is that really what the Government wish?
Secondly, over 35 years now I have played some part alongside others in preparing engaged couples for marriage and have often heard myself saying, “If you wait until you are sure you can afford children, you will never have them”. Religious traditions other than my own go further and specifically enjoin the blessing of children and family life. Are the Government aware of how these clauses will be received?
Thirdly, as I mentioned earlier in Committee, we—that is, a number of faith groups and organisations—made clear, in a letter circulated to all Members of the House prior to Second Reading, our belief that children are a blessing and not burdensome, a problem or a difficulty. To consign a child to being a financial problem over which the child himself or herself has had, and has, no control is indeed a singular responsibility—a responsibility for the mother and father indeed but, if these clauses go forward, it is a responsibility in which we shall all share. How sad it will be that a child growing up, becoming increasingly aware, will one day hear or discover that he or she is responsible in part for the family’s level of income simply by having been born. Although the Government seem to place that responsibility wholly on parents, I fear that the responsibility for this change would rest with us all. Is that what the Government want, and are we all prepared to accept that responsibility?
Lord Freud
My Lords, Clauses 11 and 12 introduce the Government’s reform to the child element of child tax credit and universal credit, which was announced by the then Chancellor in the Summer Budget of 2005. The purpose of child tax credit is to provide support to low-income families to help them with the cost of raising children, while universal credit, which replaces the child tax credit, is a unified benefit that provides support to low-income families both in and out of work. As it is being rolled out across the country it is providing a clearer and simpler system of support for families and provides real incentives for work. However, it is important that universal credit is kept on a sustainable basis and encourages families to make similar decisions to those who support themselves fully through work. The Government believe that child tax credit has become unsustainable, with expenditure trebling in real terms between 1999 and 2010, and going up the income scale to a level where a family with three children earning up to £40,000 will still be eligible for support. Last year the Government spent almost £30 billion on tax credits.
I will deal with the issue raised by the noble Baroness, Lady Sherlock, on the dependency ratio. In recent decades Britain has had a higher total fertility rate than the average of the older EU member states. Most families will not be affected by this measure. The mean number of dependent children per family is 1.7, and 86% of families have one or two dependent children. In fact, those families with two or fewer children are remarkably stable, whether they are lone parents, at 88%; opposite-sex cohabiting couples, at 87%; or married couples, at 84%.
Baroness Hollis of Heigham
My Lords, the point my noble friend was making was not just about replacement fertility rates. Given the time all of us hope to live longer, one of the responses of government has been to say that unless we can improve the worker-to-pensioner ratio we have to defer the age at which people begin to draw their state pensions, even if they have had hard lives previously. We do not have the resources to pay for it from existing workers as we do not have enough of them to sustain that pensioner support in the future. Nothing the Minister has said has challenged that.
Lord Freud
We are going way off the core issues by looking at the times people retire. A lot of things are changing, and it is almost impossible to fine-tune for that.
I will address the challenge set by the noble Baroness, Lady Sherlock, on what our rationale for this is. It is very simple: the Government want to ensure that the system is fair to those who pay for it as well as those who benefit from it. That is the government position. I should add that the Bill should not be taken in isolation. We are introducing a number of measures to support households in work by reducing income tax through increasing personal allowances, increasing wages and increasing free childcare.
The right reverend Prelate the Bishop of Portsmouth and the noble Baroness, Lady Sherlock, raised the issue of those areas where there is a cultural disposition for larger families. To that, we make the point that all families need to think carefully and ensure that they can afford to provide for a new child in their household.
I make it clear that these changes will not mean a reduction in entitlement for those families already receiving child tax credit for children born before the 6 April 2017. In universal credit, for families already receiving the child element of universal credit, the changes will apply only to children joining the household on or after that date. I think that we have another amendment on which we can go into that in more detail.
Families moving to universal credit from child tax credit and receiving child tax credit for more than two children, and families claiming universal credit within six months of a previous universal credit or child tax credit claim that included the child element, will continue to be able to receive the child element for those children.
On the point raised by the noble Baroness, Lady Lister, on the EHRC, as she knows, the Government set out their assessment of the impacts of the policies in the Bill on 20 July, and the memorandum to the Joint Committee on Human Rights was published on 8 September. Ministers have considered impacts with regard to all the relevant legal obligations when formulating the welfare policies announced in the Bill. The intended impact of these reforms is to incentivise work and ensure that work always pays.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(8 years, 11 months ago)
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The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
I thank noble Lords for some very good speeches. To pick up the point made by the noble Lord, Lord Kirkwood, I have listened to those speeches very carefully, although I am not in a position today to provide much satisfaction as I stand here. Let me begin by setting the context for the policy.
Baroness Hollis of Heigham (Lab)
Does that mean that the Minister will give satisfaction to us before Report?
Lord Freud
No, it means that I am not in a position to provide any satisfaction and, by definition, that position does not change.
Let me begin by setting the context for the policy, which will remain relevant for the other amendments on these clauses. At the 2015 summer Budget, the Government announced their plans to move from a low-wage, high-tax and high-welfare economy to a higher-wage, lower-tax and lower-welfare society. This is part of the Government’s plan to deliver a new deal for working families, which also includes incentives to ensure that those who are in work are rewarded fairly. As part of this, we announced reforms to child tax credit and universal credit to help put welfare spending back on to a sustainable footing.
The tax credits system has become too generous. As introduced by the last Labour Government, it was originally forecast to cost £11 billion in its first year. In fact, tax credit expenditure more than trebled in real terms between 1999 and 2010; and increased by £9.6 billion in real terms between 2004-05 and 2014-15. Currently, the benefit system adjusts automatically to family size, while many families supporting themselves solely through work do not see their budgets rise in the same way when they have more children. The average number of dependent children in families in the UK in 2012 was 1.7, so the Government feel that it is fair and proportionate to limit additional support provided by the taxpayer through child tax credit and the child element of universal credit to two children.
Baroness Hollis of Heigham
My Lords, the Minister made much of the financial probity argument and said that tax credit expenditure had raced away out of control, with a threefold increase between its first year and today, at £30 billion. Will he confirm that, at the same time, the bill for income support has fallen from nearly £16 billion in 1996-97, when we inherited it from the noble Lord, Lord Fowler, to £2.9 billion now, because tax credits have helped people who depended on out-of-work benefits to come into work, as we all wanted? Will he also confirm what the OBR has told us: that welfare expenditure, including pensions, was 12% of GDP in 1983-84, was 12% of GDP in 1993-94 and today is 12% of GDP? So the untrue cliché that expenditure is racing away and out of control is not supported by the facts.
Lord Freud
I think the facts that the noble Baroness is comparing are somewhat spurious. Working age IS was £15.8 billion in 1996-97 in real terms, but when you apply that to lone parents—which the noble Baroness was, I think—the figure was only £6.4 billion. The best way to do this comparison is to take all the figures for tax credits and their predecessors—family credit, disability working allowance, child allowance, IS and JSA—and see where they have gone. Those figures have gone up from £7.1 billion in 1997-98 to £30.8 billion in 2010-11. It is really important, when we get into the figures in this area, that we look at like for like.
Baroness Hollis of Heigham
Would the Minister like also to give us the figures for the number of self-employed people who have been able to move into the labour market, alongside those for lone parents, whose median income is £10,000 a year, who are also dependent on tax credits and who, 10 or 15 years ago, were among the unemployed?
Lord Freud
Of course, one of the most interesting things about the way tax credit has moved is that people who might have gone into the benefits system may well have gone into the self-employed tax credit system, but the figures I have just provided are the best comparison and include the self-employed on tax credits. They show an enormous increase in the overall figure. Because this is clearly a complex set of figures, I am very happy to write formally to the noble Baroness setting out the true figures on this important matter.
Baroness Hollis of Heigham
My Lords, I think the Minister must by now be feeling pretty miserable at the wretched nature of this two-child policy. It is quite striking that there has not been a single voice in support of these propositions from his own Benches. There are Members here with the expertise to offer that, but they are not giving the Minister the support one would normally expect. We all understand how wretched this policy will be as it plays out—and I am sure the Minister, who is a good man, also understands that.
This is a broad set of amendments, so I will pick up something which perhaps covers almost all the people who have been mentioned as exemptions so far in these amendments today. Poverty has been well researched by the DWP itself, in its evidence review of January 2014. Has the Minister read—I am sure he has—and accepted his department’s Evidence Review of the Drivers of Child Poverty for Families in Poverty Now and for Poor Children Growing up to be Poor Adults, which is at the centre of these child-related policies in the Bill? If so, would he explain to us why not one of the 323 pieces of research that this review analyses supports his policy? Indeed, in my view, they destroy it. Are we dealing with evidence-based public policy or private ideology offered as moral and financial rectitude?
The Minister knows better than anyone—but I will remind him—who are most at risk of serious long-term poverty. They are the third and subsequent children of lone parents. Three-quarters of such children will be in either persistent or recurrent poverty for four out of any seven years. One family in seven has three or more children; within that group, lone parents are twice as likely as couple families to be in poverty, and three-quarters of their children will be in persistent or recurrent poverty.
It is not temporary or transient poverty, deeply unwelcome though that is, which scars families. After all, one-third of the UK’s population falls into poverty at some point over a four-year period, usually when they have lost their job, their health or, desperately, a partner. Many will leave poverty within a year, perhaps to enter work. But the poverty that comes with additional children is not temporary or transient poverty; it is persistent poverty, because those children, for whatever reason, do not conveniently disappear. Yet it is long-term poverty that most damages families. Poverty builds upon itself: the longer you are in poverty, the harder it is to escape from it—and if you do, you have one or, at most, two deciles, and too often, with a year or two, you fall back to the bottom. Any mobility is short-distanced and short-lived. Such children, because they are in larger families, and thus even now facing long-term poverty, have unhappy childhoods, more strained relations with their parents, are more likely to be in contact with the police, and so on.
What does the review last year by the DWP tell us about the drivers of poverty, and how consistent is this Bill with its research? The answer is: not at all. The DWP report says on page 19 that the strongest driver is worklessness, which I am sure we all accept; though even that is a diminishing problem, and of course conceals the unwaged work of caring. Yes, two-thirds of poor children are in a working household, which is a shocking statistic. That is of course because most children are in working families. Proportionately three times as many children in workless families are in poverty as children in working families, so we need to address poverty both in and out of work.
After worklessness, what is the second biggest driver of poverty, according to the DWP? According to the Government in this Bill, it is educational attainment. But that is not so: it is family size. Some 25% of all children are in families of three children or more, and 38%—nearly 40%—of those children in poverty live in larger families. According to the review, other drivers include family instability, parental ill health and lower parental qualifications, but none of those matters anywhere near as much as family size. The DWP’s review concludes on page 30 that other possible drivers—much quoted by the Secretary of State—such as substance abuse and child educational attainment have only limited, indeed marginal, effect.
I repeat: what counts, from the DWP’s own research, are worklessness and a family size of three or more children. Obviously, poverty results from a combination of too low income and family need. Larger families are hit on both counts, because additional and younger children take the single parent or the potential second earner out of the labour market at just the point when family need increases. Research shows that families not in poverty are more likely to enter poverty when they have a third child and not be able to climb out of it.
That is not rocket science, but is recognised across the whole of the OECD—except in this country. Many countries rightly increase financial support for additional children: the rates go up with three, four or five children. Any Government who cared about child poverty, and therefore child life chances, would do the same. Instead, the Government are going to do exactly the opposite, making each child in that family poorer, because the money for two children will now have to be spread over three or four, making their poverty cumulative and inescapable. What a dowry to give to a child: not only are you as a third child not going to be financially supported or helped by tax credits, but your very existence will make your brothers and sisters poorer as a result. You will bring them sliding down the slope of poverty with you.
Every child matters except to the DWP, yet the DWP’s own research shows that families with more than two children, whether through kinship care, through reformation or more generally, will be locked into persistent poverty from which many will never escape, and which will play out for some of them, alas, in troubled lives. The DWP will then piously moralise at them about the very situation that it has itself constructed in this Bill, along the lines of the Reverend Thomas Chalmers in 1819, almost 200 years ago, who said that,
“character is the cause, and … comfort is the effect”.
Today the DWP, just like the Reverends Malthus and Chalmers before it, bleats about poor, large families’ lack of moral or financial continence. This policy is no better than early 19th-century class-superior sermonising, and with little respect for the facts as evidenced in the DWP’s own report. But Malthus and Chalmers, clergymen both, at least had the excuse that they did not have the evidence of statistics, which were not collected then. The Government have no such excuse. They have nowhere to hide. The Minister’s policy today—I cannot believe he wants this at all—is the exact opposite of his department’s own research findings, and will lock large families into persistent poverty.
We know whom the Bill will hit. I have no doubt that it will, directly or indirectly, discriminate against faith and ethnic minority groups. One last thought: we are all living longer, with fewer workers to support pensioners who are living much longer. We need children and, if they are not born British, we will be encouraging Mrs May to bring in immigrants instead.
I ask the Minister again: has he read his own department’s research of last year? If so, or indeed if not, why is the DWP so flagrantly ignoring it? It is abundantly clear that removing financial support, not just from these exempted groups but from the third child and beyond, is the single most powerful way for the Government to increase child poverty and to increase persistent poverty. It is the very worst thing that the Government can do, and they are doing it. Why?
Lord Lawson of Blaby (Con)
My Lords, I had not intended to take part in this debate but it seems to me, listening to the noble Baroness who has just sat down, who spoke with her usual eloquence, that she has given only one-half of the story. Government is a matter of making difficult choices. There are always good points on both sides, so it is right that another point of view should be expressed. I speak, incidentally, as the father of a very large number of children.
The late Dick Crossman was a friend of mine; he was Secretary of State for Health and Social Security, as I think it was called then, in the 1960s. He told me how surprised he was when he discovered that the family allowance, which was the precursor of child benefit, was unpopular. Whenever he increased family allowance he expected it to be very popular, but it was not. He set out to discover why. The reason why it was unpopular, so he told me, was that the great majority of people in this country felt it was unfair to those parents who had decided to limit the number of their children—having children is an expensive business, what with clothing them and looking after them and so on—that improvident large families were getting all this family allowance. That sense of fairness is very acute among the people of this country, and that has to be weighed in the balance on the other side of the totally one-sided evidence that the noble Baroness presented.
Baroness Stroud (Con)
My Lords, I thought the House might just like an issue to be clarified. I have the document with me which the noble Baroness, Lady Hollis, referred to. While nobody in the Committee would want any child to be brought up in poverty, the evidence clearly displays that the two key main drivers for poverty in the UK are, first, long-term worklessness and low earning and, secondly, low parental qualifications. Therefore the first key driver is current poverty and the second is a clear indicator of future poverty.
Baroness Hollis of Heigham
My Lords, I hesitate to challenge the noble Baroness, but if she looks on pages 19 and following she will see that that is not the case.
Baroness Stroud
I can clarify that again but it is here, quite clearly. Perhaps we can discuss this later.
Welfare Reform and Work Bill
Baroness Hollis of Heigham Excerpts(9 years ago)
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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.
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.