Welfare Reform and Work Bill

Baroness Manzoor Excerpts

Monday 14th December 2015 Lords Chamber

Moved by

[Baroness Manzoor]

59: After Clause 15, insert the following new Clause—
“Universal Credit (Work Allowance)
The Universal Credit (Work Allowance) Amendment Regulations 2015 are repealed.”

[Baroness Manzoor (LD)]

My Lords, I am delighted that in his comprehensive spending review the Chancellor bowed to pressure and agreed with my fatal Motion to scrap the proposed cuts to tax credits for working families. He was lucky to receive a £27 billion windfall to enable him to do this, but it was the right thing for him to do. However, this is little consolation to families who start claiming universal credit after April 2016. Despite George Osborne’s decision in his Autumn Statement to scrap cuts to tax credits, the new universal credit system will mean a less generous benefit entitlement for working families.

The Institute for Fiscal Studies has estimated that 2.6 million working families can expect to be, on average, £1,600 a year worse off under universal credit than they would have been under the existing system. The institute says that the transitional protection means that potentially very different amounts of benefit could be paid to people in similar circumstances depending on when their universal credit claim started.

Universal credit transitional protection is the system the Government are implementing whereby an additional amount is paid to universal credit claimants to make up the shortfall. However, it can act as a barrier to taking on higher-paid work, according to the Social Market Foundation. This is because for many family types, universal credit will be less generous than the tax credit system it replaces. The foundation states that the difference will be quite substantial for some families. An example is that a two-earner family with two children could be £2,700 better off receiving tax credits as compared with universal credit if both parents are working full time and earning £7.20 per hour. As a consequence, many families will be understandably reluctant to move from tax credits on to universal credit.

That is because the transitional protection will cease to apply if the family undergoes any change in its circumstances, such as a partner moving in or out of the household, a person moving off universal credit due to a lot of earned income in just one particular month or one or both adults leaving work, or indeed even moving home. The Social Market Foundation illustrates the problem by citing an example, stating:

“Suppose a family was receiving transitional protection as a result of being moved from tax credits to UC. One partner is offered a better-paid job, but one that would require the family moving home. The family faces a dilemma. Do they move to take up the job offer, increasing their income but losing their transitional protection payments? Or do they refuse the job offer in order to continue the receipt of their transitional protection?”—

That protection may be important for the family, particularly when moving between low-paid jobs.

“This example … illustrates precisely the kind of situation that universal credit was designed to avoid: a barrier to taking up better-paid work. The problem will be exacerbated in April 2016 when the cuts to UC create considerable differences in the generosity of tax credits as compared with universal credit”.

Another problem is that, if income levels in a household fall, the universal credit entitlement does not rise to offset that fall until the transitional protection has been exhausted. Families losing work will face the double whammy of experiencing not only worklessness, but also of being transferred on to a much less generous welfare system under universal credit.

The Universal Credit (Work Allowance) Amendment Regulations 2015 will have exactly the same impact as the cuts to tax credits for working families which may need to have work allowance as part of their universal credit from April 2016. Under universal credit, cuts will be made to work allowance and large reductions will be made to how much families can earn before benefits start to be withdrawn—called work allowance under universal credit. This will mean that tax credits start to be withdrawn once family earnings are above £3,850 rather than the current £6,420 under tax credits. The IFS states that this will weaken the incentive for families to have someone in work.

As a result of the changes, universal credit, which when originally introduced by the coalition Government was intended to see 2.7 million working claimants better off, will now mean that 2.6 million working people will be worse off by an average, as I have said, of £1,600 a year. The whole point of universal credit is to make sure that it always pays more to be in work than on benefits. The Universal Credit (Work Allowance) Amendment Regulations 2015 further undermine that vital principle. They are an attack on hard-working, low-income families.

I know that the Minister supports the framework of university credit, and I applaud him for doing so because I support the framework as well. However, this undermines some of the fundamental principles that we are working towards. I would be grateful if the Minister could give an assurance that, in light of the Chancellor’s assurance to the public and to working families that work will always pay, the Government will consider repealing these regulations, or at the very least end the anomalies presented by them—particularly given that they were introduced, again, by secondary legislation.

Can the Minister also say what effect the Chancellor’s announcement in the Autumn Statement on the minimum income floor, which is in line with the national minimum wage, will have on self-employed people, particularly as this means that universal credit claimants who have been self-employed for more than 12 months are assumed to have earnings of at least 35 hours a week at the national living wage? I understand that there are exceptions, such as for those with caring responsibilities, but claimants will receive no additional support if their income drops below this level. I beg to move.

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[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.

[Baroness Manzoor]

Will the Minister say what those changes will be? The changes in circumstances are really important. The Minister has not highlighted those issues.

[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.

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[Lord Freud]

The trouble is that one can make up particular stories and play around, but overall the position is that, as we get through to the time when the managed migrations happen and the national living wage and various other things come in, the norm will be pretty stable, as I said before.

I will move on to the next question on those people who move earlier—that is, not in the managed migration—and reconfirm that they are effectively making a new claim for universal credit. Therefore, they will not be transitionally protected. I think I have gone through those very specific questions.

[Baroness Manzoor]

In terms of the flexible element of the budget, can the Minister say, as the noble Baroness, Lady Sherlock, requested, how large that budget will be? It is not the transitional protection money but the other fund that may be available.

[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.

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[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.

[Baroness Manzoor]

I thank all noble Lords who have taken part in discussing this group of amendments, particularly the noble Baronesses, Lady Lister, Lady Sherlock and Lady Hollis, and the noble Earl, Lord Listowel. I also thank the Minister for his considered response and for allowing me to intervene when he was speaking. A number of issues have been raised. The noble Baroness, Lady Hollis, stated very clearly what happens to an individual when there is a change of circumstances. It is important that there is some guidance before Report. I have not been reassured by the answers which have been given. I have every sympathy for the Minister in terms of what he is trying to deliver, but I passionately believe that cuts are affecting people who want to work and will want to go into work under what is being proposed. I will consider what has been said, but I am likely to bring it back on Report. As the noble Baroness, Lady Lister, said, I would be grateful to receive any other information that would help us make our minds up. On that basis, I beg leave to withdraw.

Amendment 59 withdrawn.

Moved by

[Baroness Manzoor]

60: After Clause 15, insert the following new Clause—
“Housing benefit: age of entitlement
In section 130 of the Social Security Contributions and Benefits Act 1992 after subsection (1)(a) insert—“(aa) he is aged 16 or over”.”

[Baroness Manzoor]

My Lords, I am pleased that the noble Lord, Lord McKenzie, has added his name to Amendment 60. Support for housing costs for 18 to 21 year-olds is not contained in the Bill but it was announced in the Budget. From April 2017, 18 to 21 year-olds making a new claim for universal credit will not be automatically entitled to support for their housing costs. As the Bill creates no new powers for this, these measures are likely to appear in regulations, using powers already contained in the Welfare Reform Act 2012. Crisis states that it has serious concerns that removing young people’s access to support for their housing costs will lead to an increase in youth homelessness. Crisis, the Joseph Rowntree Foundation and the Homelessness Monitor state that youth homelessness is already on the rise, with 8% of 16 to 24 year-olds reporting being recently homeless.

According to the Crisis analysis of CHAIN data, in four years the number of young people sleeping rough in London has more than doubled. There are many reasons why young people may find themselves homeless, including parental relationship breakdowns; abuse and violence from family members; and leaving care. For many young people, housing benefit is all that stands between them and homelessness and is an important safety net.

My proposed new clause attempts to address this hole in support for young people. The amendment says “aged 16” in order to avoid excluding 16 year-olds already entitled to housing benefit from eligibility in the future. But the amendment is ultimately about stopping the Government’s attack on 18 to 21 year-old claimants. Some 15% of current 18 to 21 year-old claimants are in work. They need this housing benefit to subsidise their rents; one only has to look at the level of rent in cities such as London.

Housing benefit is also vital for those living in areas of low employment to enable them to move to somewhere where they will have more chance of getting a job. Does the Minister really believe that it is better for our economy, and our young people, for them to remain in the family home, away from possible employment opportunities, than to temporarily pay for their housing benefit? I recollect the “get on your bike” sentiments expressed by Norman Tebbit—now the noble Lord, Lord Tebbit. These appear to be holding little water now. I beg to move.

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I shall leave the rounder issues raised by the noble Lord, Lord Best, until we move into housing, which will be later on in the consideration of this Committee. I urge the noble Baroness to withdraw her amendment.

[Baroness Manzoor]

I thank all noble Lords who took part in discussing the two amendments. I am very grateful to the Minister for stating that there are likely to be exemptions in certain aspects of this area. Of course, my amendment referred to current entitlement—the 16 year-olds who currently are entitled to housing benefit—and I wanted to safeguard that same provision for the future, for the reasons so well articulated by noble Lords. I personally would have preferred to see what the exemption said.

On that basis, I am particularly keen to explore this area much further, because I am very concerned about those of 16-plus and the fact that they are excluded from the 18 to 21 year-old group, for their vulnerability in terms of work and where they are going out to work. I am thinking of someone living in a small village. That comes to mind when I think of two young people who may well be searching for work; they are very likely to go into low-paid work. That means that if they are going into the city, which is quite a number of miles away from them, they cannot come backwards and forwards from home. In fact, it would be very expensive for them to do so, so they would be looking for accommodation in the cities. They would be unable to do so as matters stand, under this Bill.

I feel very strongly that there needs to be a clause such as the one that I have indicated. Indeed, I take on board the other amendment—and like other noble Lords I am not sure why I did not have my name to it. I understand where the noble Lord, Lord Low, and others are coming from.

I give notice that I shall come back to this amendment on Report. On that basis, I beg leave to withdraw the amendment.

Amendment 60 withdrawn.

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[Baroness Manzoor]

My Lords, I shall speak to my Amendment 65. I recognise that my proposed new clause may be imperfectly drafted, as the word “disabled” should perhaps have been defined. As this is a probing amendment, I hope the Committee will make allowances.

My amendment is pretty self-explanatory, in that it requires the Secretary of State to,

“lay a report before Parliament annually on the progress which has been made towards halving the disability employment gap”.

It also requires that,

“the report must set out how the Secretary of State has interpreted ‘disability employment gap’ for these purposes”.

I would like the report to include,

“an assessment of the sectors in which disabled people have primarily secured jobs … an assessment of the type and level of jobs primarily secured by disabled people, and … an assessment of the progression of disabled people within the job market”.

My amendment will help to improve the transparency of employment outcomes for disabled people and allow monitoring of the Government’s target.

I am, however, rather concerned because we have asked the Minister for reviews of sanctions, conditionality criteria and so on. From my perspective, we have not had an answer that might have given us some hope. However, I hope the Minister will give this measure careful consideration because, across the Committee, I see there is some support for it.

[Baroness Lister of Burtersett]

My Lords, I shall speak briefly in support of Amendment 64 in the name of my noble friend Lady Pitkeathley, an indefatigable champion of the rights of carers. I also express my support for other amendments, particularly those concerning the disability employment gap, on which we heard very eloquent arguments from the noble Baroness, Lady Campbell of Surbiton.

It is very welcome that the constraints on labour market participation created by the care of children are much better recognised now than they were in the past, but we still have a long way to go with regard to carers, who are an increasingly important part of the labour force. I hope that the carer strategy the Government are working on will address the need for policies that make it easier to combine paid work and care, such as the statutory paid care leave for just a few days a year which many other countries provide. I have argued for this very important policy in relation to a number of Bills going through your Lordships’ House. We are becoming a laggard compared with other countries. We can learn a lot from them.

As care is such an important part of the economy, the amendment underlines the case for reporting on the position of carers and former carers in the labour market as part of any duty to report on employment trends. I suggest that it might go a bit further, so that any such report includes information on those who combine paid work and care and those who have had to give up paid work to care, as well as former carers.

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[Baroness Nye (Lab)]

Before I speak to Amendment 68A, I apologise for not being able to take part at Second Reading. I also take this opportunity to declare an interest as a trustee of the Young Women’s Trust, to which I am grateful for the briefing it provided.

My amendment calls on the Government to include in the report the number of apprentices disaggregated by protected characteristics. As I support the other amendments in this group in the name of my noble friend and others, I shall concentrate on young women and apprenticeships.

The Government’s target of 3 million apprenticeships by 2020 is to be welcomed because they can be an important route to skills development and work for all young people, but only if they are of high quality and reach those such as the under-25s who are in the most need. It is also welcome that the Government propose to report on progress each year, but it is important that the information contained in that report is useful and not just a pat on the back for numbers going through the system. The report should identify areas where more attention is needed and inform policy development, because evidence shows that apprenticeships are not working as well for young women as they are for young men.

The Young Women’s Trust aims to improve the lifelong opportunities for young women aged 16 to 30 with few or no qualifications, who might be unemployed or in precarious or insecure employment and who are on very low or no pay. Because of a lack of understanding, the Young Women’s Trust undertook a year-long inquiry into the problems of young women who are not in education, employment or training. It produced a report called Scarred for Life?, which was based on consultations with young women and other interested parties, as well as polling conducted by ComRes.

The polling showed that young women work in fewer sectors than men. Two-thirds of female apprentices work in just five sectors, while the same proportion of men work in more than 10. Female apprentices account for fewer than 2% of apprentices in construction, 4% per cent in engineering and still only 12% in IT and telecoms, but 93% of early-years childcare and beauty places are female. The IPPR has said that traditionally masculine areas may receive better-quality training and these sectors also lead to better employment and further education prospects. As young women are less likely to receive training as part of their apprenticeship, they are more likely to be out of work at the end. This is compounded by other research which shows that employment gains from further education are generally not as great for women as they are for men.

The apprenticeship wage also deters women without parental support from applying. Young women say they understand the logic of earning less before being qualified but the pay is just too low to support themselves. Young women also receive less hourly pay on average than men; they could earn £2,000 less over the course of a year. Apprentice equal pay day was marked on 28 October—for the following 64 days, female apprentices would be working for free.

Young women also recognised that when apprenticeships worked well they were a good route into employment. However, they were concerned about how to meet their current needs while training. There is insufficient flexibility to balance apprenticeships and other responsibilities such as caring. They therefore have different priorities in considering apprenticeships.

Data from the Skills Funding Agency and BIS show that 90% of apprentices are aged over 25, with a greater proportion of women in that age group. It is therefore likely that they have been recruited from the existing workforce and that opportunities are not being provided to young people who are just starting out or who are NEET. These challenges prevent thousands of young women making the most of their potential as well as meaning that the wider economy and companies miss out on a vital source of talent.

Destination data are especially important in measuring quality. Apprenticeships are worth while only if they develop skills in all young people and provide a good route into employment. Young women are three times more likely than young men to be out of work after completing an apprenticeship. University education has long been assessed against destination data. Similar measures should be applied to apprenticeships if the esteem in which they are held is to be raised.

If the figures in the Government’s proposed annual report were disaggregated, it would also give added impetus to employers to develop a diversity policy for their apprenticeship schemes; to monitor the protected characteristics of their intake; and to work with careers services, schools and others to attract a diverse workforce, which I believe would command support from all quarters. Without any measurement of the quality of the apprenticeships, the jobs that might or might not follow, or the impact on the reduction of low wages, they offer no real route out of poverty.

I will listen with interest to the Minister’s reply to the questions posed by my noble friend, but, given the lateness of the hour, I will not add to them.

[Baroness Manzoor]

My Lords, I have added my name to Amendment 68. The only thing that I wanted to add—all other noble Lords have eloquently put forward the reasons why there should be reporting obligations relating to apprenticeships—is that I note that gender is missing from the amendment. It was an oversight, rather than because we did not care passionately about this particular issue. Once again, I am pleading with the Minister: we really need to be able to differentiate between the different groups to see where apprenticeships fall and who is getting what apprenticeship. The noble Baroness, Lady Nye, made a very important argument relating to young women, but the same applies to disability, race and so forth. There are variations that we need to bottom out so that employers can then have appropriate strategies in place to address the anomalies.

[Baroness Lister of Burtersett]

My Lords, I will speak very briefly in support of my noble friend Lady Nye, who has made such a good case about gender. She made most of the points I want to make, but I have been sent information by City & Guilds, which has done research into careers advice, which shows how gender-biased careers advice is channelling young women into a very gender-biased labour market. So it is being reinforced. It is crucial that the apprenticeship system does not reinforce and aggregate that gender bias which we have heard about from my noble friend. As other noble Lords have said, it is about not just quantity but quality. From a gender perspective, quality is about the sectors within which young women and young men are being channelled.