Universal Credit

Baroness Sherlock Excerpts

Wednesday 21st December 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I welcome the noble Lord, Lord Macpherson, to the House. It was a real pleasure to work with him in the Treasury, albeit of course in wiser and gentler days. It was a characteristically thoughtful and measured maiden speech. Perhaps his long view enables us to look on something like the developments in social security today as evolution rather than revolution. If he is right, I fear that the students of the world will have to tear down their pictures of the noble Lord, Lord Freud, which had previously replaced the ones of Che Guevara and perhaps look at something in future that is a little more Darwinian in evolution. I cannot tell noble Lords how frustrating it is to have three minutes to talk about universal credit: I could talk for 33 minutes, but I will not. I have three brief comments and will then say a word about the noble Lord.

First, on the principles and architecture, we on these Benches have long supported the idea of universal credit and a combined benefit. It is in the end not a principle, but a delivery mechanism to get money to households based on need and circumstance. Its key advantage should be the ability to smooth transitions in and out of work, while having a single taper can be used to ensure that work pays and that claimants benefit from any increase in pay or hours. But there are some structural issues that still need addressing. The key one is that it was a real mistake to let the DCLG take council tax benefit outside universal credit. Doing that and then cutting it and localising it means not least that the DWP cannot ensure that work pays because it does not know how much council tax support any individual will get, especially if they get disability benefits. That was flagged up during the passage of the Welfare Reform Act as were other issues that are now causing problems. We have heard about paying monthly in arrears leading to six-week delays and real hardship and the decision to pay rent direct to the landlord causing real problems for tenants and some landlords. There were also significant issues for second earners for whom work is disincentivised, for self-employed people and real issues around in-work conditionality. But all of that could be changed: it is not structural, so I hope that it will be.

Secondly, the levels of UC payments are a problem. They were cut before it was even implemented and have been repeatedly since. Universal credit was meant to be more generous than the tax credits that it replaced, but it is now a net gain to the Treasury, which may explain its more recent enthusiasm for it. UC was of course designed to lift 350,000 children out of poverty, but it now cannot do that, because if levels simply are not high enough to raise people out of poverty, it cannot do that job. Crucially, it was meant to make work pay. Instead, the taper-free work allowance has been halved unlike with tax credits. Reducing the taper from 65% to 63% does not begin to compensate. The original taper was meant to be 55%, which really could have made work pay. Sadly, I am sorry to say that the Treasury axe has so damaged universal credit that at the moment it cannot do the job that it was born to do. Work is no longer the route out of poverty and simply saying it does not make it so.

UC is a great idea, but only if it is deliverable. If it cannot be delivered, it is a terrible idea, so I am afraid that I have to say a word about delivery. I feel really mean going on about this during the swansong of the noble Lord, Lord Freud, but it has to be said. I cannot allow a debate on universal credit to go through without mentioning that it is years late, that hundreds of millions of pounds have been spent on IT disasters, that there are widespread complaints about delays and errors, and that sanction rates are sky high—and all this is before current claimants with complex cases and repeat changes of circumstances move across. I fear that it could then get worse. I hope very much that the new Minister will find an opportunity for us to discuss these issues at greater length when we come back in the new year. Universal credit can and should make work pay and tackle poverty, but it will not do so without change.

But that is not for the noble Lord, Lord Freud, to worry about. His job is done and the House should acknowledge his absolute determination to get the structures of universal credit in place, including his willingness to stand his ground and to fight his own department, the Treasury and the DCLG when necessary. My friends used to report to me periodically about turning on the television to find footage of the noble Lord, Lord Freud, and I doing battle on late night Parliament TV, and they would often say, “Why do you keep shouting at that nice man?”. It is true that we have battled over various policies for many years, from the bedroom tax to disability benefits. Some issues we must flat out disagree on, but with others such as the cuts to universal credit, and I suspect the two-child policy, I always thought that the Minister’s heart was not really in his arguments.

But whatever the issue, some things may not be evident from outside the House: that the noble Lord, Lord Freud, has been unfailingly courteous to me and to all of us on these Benches. He has been generous in giving us access to his officials and he has done the House the courtesy of almost always coming here himself to defend his policies rather than sending a Whip. He usually seeks to defend his arguments by engaging with us and using evidence rather than just repeating the government line. When we convinced him in debate, he would go back to his department, push, and then sometimes return with real concessions. We may disagree on policy and I think that we will carry on doing so, but the noble Lord, Lord Freud, has been a loyal public servant of integrity. The House and the country should be grateful to him. I hope that we will see him in the House again very soon, but only after he has had a well-earned sabbatical.

Social Security: Claimants

Baroness Sherlock Excerpts

Wednesday 30th November 2016 Lords Chamber

[Lord Freud]

I thank the noble Countess for that question. We have been working on this issue with her and her group for some years now, and I am under the impression that we have made a lot of progress on ensuring that the illness is thoroughly recognised.

[Baroness Sherlock (Lab)]

My Lords, the film shows people being sanctioned for a number of reasons which are clearly not serious. For example Katie, a single mum, is moved to Newcastle when she is made homeless and because she is a few minutes late in getting to the jobcentre, because she cannot find it in a new city, her benefits are sanctioned. Can the Minister tell the House that that would not happen in real life? He normally comes here and tells us that sanctions are very rare and a last resort but we discovered from today’s NAO report that over the last five years, 24% of all JSA claimants were sanctioned. Is it any wonder that our food banks are filling up with people using them who are sanctioned for trivial or unjust reasons? Is this not a disgrace?

[Lord Freud]

There were a whole load of statements there that are simply not true. In the example which the noble Baroness uses, there would clearly be a good reason for someone not being able to fathom the transport in a new place. There are an enormous number of protections for people in the sanctioning process, which has about seven or eight steps: there is a check by the work coach; it goes to the decision-maker; there is provision of information back to the person, who can challenge it with the decision-maker; it can go to dispute resolution, mandatory consideration and then the tribunal. This is not the easy process that is implied. Sanctions are treated very seriously. They are an integral part of the system and are treated with all due seriousness.

Child Poverty

Baroness Sherlock Excerpts

Thursday 17th November 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Lord, Lord Bird, for tabling this debate and all noble Lords for their contributions. As I listened to the debate, I was struck not only by how many interesting ideas we have about poverty but by how many of those who spoke are directly involved in doing something. The noble Lords, Lord Bird and Lord Mawson, with their social enterprises and the noble Earl, Lord Arran, who is reaching out by giving holidays to poorer children. The noble Earl, Lord Listowel, is a braver man than I in teaching people to ski and to skate, which is amazing, and there is the work of the noble Baroness, Lady Pinnock, in her council. I am very inspired by this and I am grateful to noble Lords for sharing their experience.

As we have heard, the context of today’s debate is that child poverty in Britain is simply far too high. Whatever measure we use—I am old-fashioned and go with the international standard of 60% of median household income—we are talking about 3.9 million children living in poverty in the UK in 2014-15, and as the right reverend Prelate the Bishop of St Albans mentioned, the figure is rising by 200,000 year on year. Some two-thirds of children growing up in poverty live in a family where an adult is in work. That is one of the key things I want to talk about today. We heard from the noble Earl, Lord Arran, and others about the scarring effect in later life of poverty and I have been reminded by the North East Child Poverty Commission about the critical state of the damage being caused at the moment by, for example, food poverty and food insecurity.

In September the Joseph Rowntree Foundation published a detailed report entitled UK Poverty: Causes, Costs and Solutions. In her foreword, CEO Julia Unwin said:

“You can blame individuals for the bad decisions they make, and fool yourself into believing it could never happen to you. Or you can blame national structures—if only the system of tax and benefits could be fundamentally redesigned, and structural inequality abolished, then poverty could be ended”.

She goes on to point out that neither of these is the answer and that structures and choices must be considered together for policy to be effective. I am absolutely with all those noble Lords who talked about the importance of learning from people living in poor communities, looking at the assets they have and working with those assets—but I also think that there are structural questions which cannot be ignored. The JRF report highlighted five key causes that need priority action: low wages, insecure jobs and unemployment; a lack of skills; family problems; an inadequate benefits system; and high costs, including housing.

The Government’s strategy identifies—sort of—two and a half of those. They want to address educational attainment and family breakdown, although I do not think that they map fully on to these drivers, and they want to deal with workless households. They also highlight problem debt and addiction. All of those are important. But I worry that the Government’s strategy refuses to address the other half of the picture because they are the dimensions that relate to the structural causes of poverty and they cannot be ignored.

The JRF report highlights the changes to the kinds of jobs available to many people in the UK, including the problems caused by firms,

“whose commercial strategies depend on low-paid, low-skilled, insecure work that does not provide a stepping stone to something better”.

If work cannot lift a family out of poverty, just tackling worklessness will not solve the problem. We have to accept that before we go any further.

The report then notes that the benefits system does not make work easy or safe and states:

“The level of welfare benefits for some—those in work, seeking work or unable to work because of health or care issues—is simply not high enough to avoid poverty, when combined with other resources and high costs”.

It is not surprising, given what has happened. Billions of pounds have been taken away from the pockets of low-income families. The Welfare Reform and Work Act alone, by reducing the benefit cap, has hit almost 250,000 children in low-income families and it has frozen the level of most benefits and tax credits for four years, which the Children’s Society estimates will affect some 7.5 million children in 4 million families, nearly two-thirds of them in work.

Then there are the high costs. The JRF report points out that between 2008 and 2014 the cost of essentials increased three times faster than average wages, adding to a widespread sense of insecurity. This is a toxic cocktail of high costs and rents, low wages, unpredictable and insecure jobs, unaffordable childcare and cuts to in-work benefits. Those are government failures. Ministers cannot just blame individuals for their poverty when they have set them up to fail by refusing to address these structural shortcomings.

I have no doubt that these benefit cuts were forced on a reluctant DWP by George Osborne’s Treasury, but now that we are living under a new dispensation I encourage the Minister to beat a well-worn path to the Treasury and urge his Government, as the right reverend Prelate said, immediately to reverse the drastic and counterproductive cuts to the work allowance and to universal credit which have stopped making work pay in the way it should. They should also return to increasing benefits and tax credits by the rate of inflation so that poor families do not simply get poorer year on year.

The other key change in the Act was to shift the Government’s focus from poverty to social mobility and life chances. I have read a great book on life chances published yesterday by the CPAG which makes some brilliant connections between money and non-financial issues in policy. I declare an interest as one of those terrible advisers to government whom the noble Lord, Lord Bird, berates, but when the Labour Government increased the spending capacity of low-income families in the early 2000s, they found that as income rose, spending patterns changed. Families spent more on fruit and vegetables, children’s clothes, toys and books, and less on alcohol and cigarettes.

Kitty Stewart and Kerris Cooper have looked at the impact of household income on children’s outcomes and found out, as the right reverend Prelate said, how much of a difference is made to educational attainment when income is increased. That means not only staying on at school but attainment levels in maths and reading, and in examination results. All of this improves as income improves. Likewise, parenting and family environment: there is very clear evidence of much stronger parenting where income can be increased.

The problem with social mobility is that, done properly in our economy, it is a game of snakes and ladders. If more poor kids do well, some rich kids will have to do less well. We cannot have a board with only ladders. We cannot all be QCs and surgeons; someone has got to be at the bottom and I am so grateful that they are because in our current environment we have people out there caring for disabled and older people, sweeping the streets and working as teaching assistants who are often being paid the minimum wage. That means that I do not just want social mobility. I do not want a country where our children are better equipped to fight each other for a spot at the top. I want one where all of our children can flourish wherever they end up on the board. They deserve no less.

Benefit Cap (Housing Benefit and Universal Credit) (Amendment) Regulations 2016

Baroness Sherlock Excerpts

Tuesday 8th November 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, this has been an interesting debate, and I am grateful to the noble Lord, Lord Kirkwood, for his introduction to it and to all noble Lords who have contributed.

First, the good news. I am certainly glad to welcome the good bit of the regulations. As one of a number of concessions won by hard work in this House across the Benches, the regulations exempt from the benefit cap people claiming guardian’s allowance, carer’s allowance and the carer’s element of universal credit.

I have a couple of practical questions for the Minister before I move on. I understand that, because the regulations took effect yesterday, anyone in receipt of one of those benefits will be automatically exempted from the cap. That means that any such person who is already capped will have it automatically lifted, and their next payment will reflect that fact. Similarly, anyone whose case is flagged up as otherwise being caught by the new lower cap but who is in receipt of, or entitled to, one of those benefits will automatically be exempt. Can the Minister confirm that that automatic exemption is the case, and that the claimant will not have to do anything to ensure that they are exempted when they should be? Will he also confirm that his department has communicated with those claimants to let them know what is happening, so that they will understand the change in their circumstances?

On to the bad news. I will not rehearse the arguments made eloquently by many noble Lords about the impact on housing and homelessness—points made very well by the noble Lords, Lord Best and Lord Shipley—and on children, a point made by my noble friend Lady Lister and the right reverend Prelate the Bishop of Leeds. His predecessor the Bishop of Ripon and Leeds and I made an attempt right at the beginning to exempt child benefit from the cap. Sadly, we were unsuccessful, but I am glad to see the right reverend Prelate keeping up a fine tradition of speaking up for the children of Leeds; I hope that one day, he will not have to. If his sermons are as commendable, pointed and brief as his speeches here, may people flock to his cathedral in time to come.

As has been pointed out, the cap will change significantly. We heard about the large number of people who have been brought into it, but there is also the size of the losses. Households already capped could lose another £3,000 a year in London, or £6,000 elsewhere. The Government estimate that newly capped households will lose an average of £2,000 a year. The profile will change dramatically. No longer can Ministers pretend that the problem is people living in Mayfair or having 17 children; the problem will now be right across the country, a point made by the noble Lord, Lord Kirkwood. That was never really the issue, but in future, just 22% of affected households will be in London, whereas the figure had been 42%.

For me, the telling point is that in the north-east, where I live, the number of households affected will jump from 600 to 4,000. There are not that many very expensive properties in the north-east—certainly not that benefits pay for. This is now being spread right across the country. Nor can the Minister complain that it is just about large families. Under the new cap, a single mum with two young children sharing a room will be capped if she is living, not in Mayfair, but in 19% of areas in the country, including Basingstoke or Reading. If those two children are in different rooms, we are talking about a third of the areas in England. This is becoming really significant.

What is it about? Is it about saving money? Points were made by a number of noble Lords. I have been through the impact assessment again, and it is now clear that the savings from these regulations will be £540 million in total over five years. Over that period the Government will spend £870 million in discretionary housing payments. Clearly, not all of that will go on the benefit cap. It also has to cover the impact of the bedroom tax, LHA cuts and the general misery caused by the Government’s social security policy. In the current year, more than a quarter of DHP money went on the benefit cap victims, and we know that the number will go up significantly—more than threefold. Can the Minister tell us how much the Government expect to save from these regulations after deducting an appropriate proportion of the costs of discretionary housing payment money?

We have heard that the options for somebody who is capped are to accept the cut, move somewhere cheaper or get a job for at least 16 hours a week. Let me run through those very briefly. These are cash cuts and they come in overnight. If a family faces an annual benefit cut of £6,000 a year, can the Minister say whether that means it is possible that someone’s housing benefit could be cut by £115 a week from one housing benefit payment to the next? If that is the case, how could anyone absorb that kind of cut?

Another option is to move somewhere cheaper. But where can they move to? The cap spreads right across the country, so what will happen? There are no cheaper places to move to, and the only reason for the handful of places that are cheaper is that they are the kind of areas where there are no jobs and there is no transport to get there even if there were jobs. What is the point of sending people to live there?

The third option is to get a job. The Secretary of State for Work and Pensions, Damian Green, has said that the benefit cap is a real success. Based on the fact that the IFS found only 5% of people in the past who had got a job, the Minister may have to work on defining his terms. Let us look at what happens now. The Government think that if they cut it far enough, eventually people will get a job, but let us see who is being affected. I am particularly concerned about the effect on parents with young children. The benefit cap has already particularly affected single parents with very young kids. Most of those capped have a child aged nought to four. DWP statistics show that 11% of households affected by the current cap are single parents with a child under one. I want to look at that a bit more.

Let us imagine a single mother with young twins who are six months old, living in Basingstoke on basic out-of-work benefits. Let us call her Susan. Susan will be hit by this new cap. If she cannot find a cheaper flat—and she will not, because the housing benefit limits have been pushed down so far that she is already at rock bottom—the only way to escape the cap is to work 16 hours a week. The Government have been getting tougher and tougher on conditionality on single parents, but even they do not require parents of babies to work If you have children of that age you would not be required by the DWP to work.

Even if Susan wanted to leave the babies and go out to work, she would have to find a suitable job. She is not eligible for any of the job search programmes because she is not required to work. I understand that government guidelines to local authorities on the implementation of the benefit cap is that someone who is already capped and will be hit again by the lower cap will be entitled to 40 minutes in total with a work coach to help them to find a job. Can the Minister tell me if that is correct? What help will be provided to a single parent being capped for the first time?

Secondly, where will Susan get childcare from to be able to go out to work? A survey just out from the Family and Childcare Trust found a huge problem of insufficient childcare in many local authority areas. Fewer than half of local authorities in Great Britain reported having sufficient childcare for nought to two year-olds. The Minister will probably talk about the Government’s free childcare offer, but let us remember that that is only for three and four year-olds. It is only 15 hours a week which is not enough to enable parents to get the kids to a nursery, get to a job for 16 hours and back again. The much-vaunted extension of that will not come until next April whereas the cap is already in place. Evidence shows that there is not enough childcare provision now, never mind when it is extended.

Parents like Susan, with children under three, have no entitlement to free childcare at all. They could claim help within tax credits or universal credit, but the limit of how much you can get is so small now, as it has not been raised for so long, that it falls way short of actual childcare costs. The Family and Childcare Trust says,

“there are 11 local authorities where the average cost of part-time childcare exceeds”,

the working tax support cap completely,

“leaving the poorest working parents having to pay an average of”,

£81 a week out of their own pocket. Where is Susan going to get that kind of money? Care for babies is especially expensive. Even if she could find somewhere suitable and a suitable job, she may not even be able to afford the deposit on the first month’s nursery fees, which are usually required upfront. Can the Minister at least assure the House that any parent of young children, who has to take a job because they are capped, can claim the full costs of the deposit for childcare from the flexible support fund his department operates? I ask that because Gingerbread has been getting reports that job centres do not want to use this fund, which is meant to remove barriers to work for childcare, even though childcare is a really obvious barrier. Can he reassure us on that point?

However, let us remember that these are parents whom the DWP does not normally require to work. The only reason that that mum is having to go to work—despite the fact she has only two kids, does not live in an expensive area and her only income is basic benefits and tax credits—is because her rent, as the noble Lord, Lord Best, has said, is at a level where she cannot reasonably pay it without help from benefits. There are Susans all over the country.

As the IFS has pointed out:

“It is possible for the benefit cap to quickly affect many more out-of-work families in an area, once its level falls below the sum of the HB cap in that area for the family type in question and the other (nationally-set) benefit entitlements”.

Once it happens, all those families are going to be chasing the handful of cheaper accommodation and none of them will be able to cope. What do the Government think will happen? Where are these families going to live? The point made by the noble Lord, Lord Best, is that this is driven primarily by a housing crisis. Is not the problem that the Government have failed to invest in housing and are therefore simply trying effectively to shift the problem on to the poor, who are the victims of the rent rise which they have not been able to address?

I am sure the Minister does not want to see parents of young children plunged into crisis. He knows that discretionary housing payments cannot be relied upon because they are discretionary and councils have too many demands on them for help. At the very least, will the Minister pledge to look at how his department can protect parents of young children from the impact of the reduction in the cap? I very much back my noble friend Lady Lister who is pressing the Government to address the question of the family test. Perhaps in doing that, the Minister could also guarantee to report back to Parliament on the impact of this change on families with young children. That is the very least we can expect.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, this Government believe that those out of work should not receive more in benefits than many working families are able to earn. We introduced a benefit cap to encourage people to find work and that is exactly what has happened. The new benefit cap levels continue to provide a clear incentive to work, helping to reduce long-term welfare dependency and ensuring fairness for working households.

Since the original benefit cap was introduced in April 2013, 23,500 capped households have found work. Evaluation has found—this is in response to the query of the noble Baroness, Lady Bakewell—that capped households are 41% more likely to go into work than similar uncapped households, and that 38% of those capped said they were doing more to find work. A number of noble Lords have argued that the benefit cap is flawed, but it was a manifesto commitment and was extensively debated in this House and in another House.

One aspect that I would like to point out to noble Lords is that there has been a culture change around the importance of going to work. Whatever particular policy has been driving that is difficult to assess, but the figures are astonishingly dramatic. The number of children in workless households now stands at 1.35 million. That is the lowest ever since these statistics started to be collected in 1996. It compares well with the figure at the height of the boom: it is more than 400,000 lower. It was 1.79 million in 2008. It is much lower—almost 1 million lower than it was in 1997.

So there has been a dramatic change in attitudes. We see it in various statistics, including the number of people in social housing now going back to work, which they never did. So there is a structural change. I do not pin it directly on this policy. But I do say that there seems to have been a real change, and that is one of the aspects of it.

The Motion of the noble Lord, Lord Kirkwood, expresses concern that we have not,

“made additional support available to those individuals affected by the benefit cap to find work”.

Actually, there is quite a lot of evidence that the success that the cap has had in helping people into work is partly a reflection of the strong support offer we have in place in both jobcentres and local authorities, which we continue to improve. We have contacted claimants potentially affected by the cap well in advance, giving them an idea what the impact might be on their household income and offering them support to adjust their circumstances. We have also ensured that jobcentres and local authorities are equipped and funded to provide that support.

--- Later in debate ---

The noble Baroness also asked a question about carer’s allowance. The new exemptions apply from 7 November. We run scans every month of all the relevant IT systems and use the information to calculate the overall amount of benefit in payment. Claimants in receipt of a benefit which will exempt them from the cap, including carer’s allowance, the carer’s element of universal credit and guardian’s allowance are excluded at source and are therefore not capped. They are excluded at source so they do not have an issue. There is no point in telling someone that nothing is going to happen to them.

[Baroness Sherlock]

If you introduce this, there will be a change for somebody who is already capped; or they may have previously been told and made a decision not to make an application because they knew of the impact of the cap. I presume the Government have communicated at some point. It was a serious point.

[Lord Freud]

I am sorry. I did not mean not to be serious. My best understanding of this is that where someone has been capped and will no longer be capped then we will inform them of the change. If that is not the case, I will write to the noble Baroness; if it is, I will not. However, I am pretty sure that it is the case.

To pick up on the concern expressed by the noble Lord, Lord Kirkwood, regarding the point made by the Secondary Legislation Scrutiny Committee, the committee wrote to my colleague the Minister for Welfare Delivery to express concern about the equality analysis. I imagine that the noble Lord saw that letter. Ministers fully considered the equality analysis at the same time as the regulations were made but there was simply a delay in publishing it. Perhaps noble Lords can cast their minds back to the peculiar period in our history following the June referendum, when the machinery of government perhaps was not working quite as smooth as it usually—or always—is.

On evaluation and the Ipsos MORI survey that the noble Lord talked about, the numbers came about because it was a longitudinal survey to understand what was happening; a lot of different levels of analysis went on, which looked at different outcomes, some of which were done on a quantitative basis, others on a qualitative basis; that was a qualitative one. We are committed to go on evaluating it and now we are developing the plans to understand behaviours and attitudes. The quarterly benefit cap statistics will continue to be produced, and the May 2017 release will be the first to show the impact of the lower levels.

I hope I have reassured the House that the Government have put in place measures that provide significant additional support to claimants affected by this policy to help them adjust, and wherever possible to move into work.

Universal Credit

Baroness Sherlock Excerpts

Tuesday 19th July 2016 Lords Chamber

[Lord Freud]

We do publicise them. In UC, we probably do not publicise the advances available enough, and I am looking at making that information more available on screen and automatic, rather than through a conversation—so that is a good point.

[Baroness Sherlock (Lab)]

You certainly do not publish them very well. In 2010-11, more than 1 million people applied for crisis loans. In the year to September 2015, that was down to 140,000 people applying for the equivalent advances.

Did the Minister see the research out today by the IFS which showed what the House has been telling him for a long time: two-thirds of the poor are now in households where somebody is in work? If those people are paid weekly, they are already poor. If they lose their job and apply for universal credit, they have to wait six weeks before they get a penny. As my noble friend said, they get nothing for the first week. Can the Minister not see that that is setting them up to fail?

[Lord Freud]

As I said, I am looking at this area. It is not as simple as some of the figures might make you think. I, too, read the IFS research with great interest. Inequality among children has fallen very steeply since the mid-1990s, most of it post the recession. Whenever the IFS says anything nice, I really appreciate it. It said that the important reason was a remarkable fall in the share of children in workless households. Indeed, we have half a million fewer since 2010.

Universal Credit: Rent Arrears

Baroness Sherlock Excerpts

Wednesday 13th July 2016 Lords Chamber

[Lord Freud]

I congratulate the noble Baroness on her timing with that question. I will not answer it. I am not in a position, however, to commission major research on mental health today.

[Baroness Sherlock (Lab)]

My Lords, exactly a year ago today this House voted for a Motion in my name, urging the Government to delay the enactment of the Universal Credit (Waiting Days) (Amendment) Regulations until UC was rolled out. The Government ignored that, enacted the regulations and, as a result, 79% of people are now in arrears, because when you make a claim for UC, you wait six weeks to get any money and now the first week is missed completely, without any payment at all. On that day, the Minister refused to make a statement but he said that,

“I will come back to the House at the appropriate time”.—[Official Report, 13/7/15; col. 438.]

A year down the road, does he feel that that time has now arrived, and what is he going to do about it?

[Lord Freud]

I have said to the House that I am looking at this, and I hope that later this year we will have some data. I urge the House not to expect too much certainty on this. This is quite a complicated situation—there is a lot happening under this—and I am hopeful that I will be able to explain some of this to noble Lords to their satisfaction.

Poverty

Baroness Sherlock Excerpts

Wednesday 29th June 2016 Lords Chamber

[Lord Freud]

That is one of the topics that I and the Schools Minister are talking about. We now have, as a potential option for future use, far more specific measures of real levels of poverty in universal credit which we can use to record poverty, rather than the much cruder measures that we used in the legacy system.

[Baroness Sherlock (Lab)]

My Lords, if the Minister wants to measure poverty he could perhaps look at the official figures that came out this week. They show that while average household incomes are finally back to their pre-crash levels, child poverty has actually gone up by 200,000. It is the first rise for a decade, the largest single rise in one year since 1996, and even more of those poor kids are in working families. Ministers were warned by people around this House that this would be a consequence of government policy but the Minister kept telling us that we were crying wolf. I have rarely been sorrier to be wrong. But now that the warning signs are clear, what will the Government do about it? We have not yet had the effect of the cut in universal credit help or benefits for large families. Will he please urge his new Secretary of State, if he genuinely wants a one-nation country, to go back and reverse that catastrophic decision to cut help for working families on universal credit?

[Lord Freud]

Regrettably, the cry of wolf is wrong in this case. As the noble Baroness knows perfectly well, these statistics are fairly odd on a year-by-year basis. We have had quite a substantial rise in the median income, so the relative figure has gone down—although, I am told, it is genuinely not statistically significant. At the same time, there has been a decline in the number of children living in absolute poverty, with 100,000 fewer. These figures can be pretty odd, and this is another good example of it.

Personal Independence Payment

Baroness Sherlock Excerpts

Monday 6th June 2016 Lords Chamber

[Baroness Altmann]

The noble Lord rightly cites that Motability offers a support package. It has volunteered to do so given its financial position, and very generously offered to help those who lose their Motability car. I stress that although some people lost their cars, overall some 22,000 more people now have a Motability car under the PIP scheme.

[Baroness Sherlock (Lab)]

My Lords, when the Minister wrote to me to put the record straight after the debate in the name of the noble Baroness, Lady Thomas, she conceded that her original statement that there was not a 20-metre rule was wrong. In fact, somebody who could walk 20 metres but not 50 metres could get the enhanced rate of PIP only if there was something else going on; for example, they might have a learning disability and struggle to plan a journey. When we come back to basics, this means that somebody who can walk only a very short distance, the length of two buses, will lose their Motability car simply because they will now fail a test they would once have passed. This test has been used for 35 years, is based on research evidence, and is used for the blue badge, the guidance on the built environment and lots of other tests. The Government got this one wrong. Will they not accept that now?

[Baroness Altmann]

The noble Baroness has significant expertise in this area. Once again, I apologise for the incorrect statement that I read out during the debate. However, I am assured that it is not a strict 20-metre rule and that some people who cannot walk more than 20 metres—of course, the reliability criterion is also important here—will receive the higher rate. I repeat that the aim was to ensure that we support at the highest rate people who are unable or virtually unable to walk. There is no one particular test—the 50-metre test is not a recognised one, either—for someone who is unable or virtually unable to walk. We are keeping this closely under review. It is widely accepted by stakeholders that PIP is now in a settled and improving state.

Life Chances Strategy

Baroness Sherlock Excerpts

Wednesday 11th May 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank all noble Lords who have contributed to this very interesting short debate. I thank the noble Lord, Lord Farmer, in particular, for the very gracious way in which he introduced the debate and for his commitment and evident sincerity about the importance of this issue.

The depressing thing about having only five minutes is that I would love to take up every point that was mentioned. When the life chances strategy comes out, I think I will sit in the Bishops’ Bar and wait for people to come along and buy me coffee. I would like to have conversations about each of the points made—there is something I agree with in each contribution.

I agree with the noble Lord, Lord Holmes, about the importance of character and opportunity, and with the noble Baroness, Lady Tyler, about relationships. The noble Baroness, Lady Jenkin, referred to ambition and culture, which are essential to the chance to move on. Like the right reverend Prelate the Bishop of Truro, I feel very strongly about the dangers of food insecurity and what we can do for families who worry about the most fundamental of things: putting food on the table for their children.

The noble Lord, Lord Fink, made some very important points about health, work and worklessness, which I will come back to. I agree with the comments of the noble Lord, Lord Lupton, on early intervention, although I confess that I disagreed a bit at that point. He runs the risk of one of those irregular verbs, which is that I have common sense and you have party-political propaganda—I may come back to that as well.

The noble Lord, Lord Hodgson of Astley Abbots, made some very important points about the voluntary sector and commissioning to which I would love to come back. The noble Lord, Lord Shinkwin, in a very moving speech about disability, gave some real cause for thought, and I hope his noble friend the Minister is taking very good care of that. I very much thank him for that. The noble Baroness, Lady Stroud, who knows so much about this area, gave us much to think about, as did the noble Lord, Lord Young of Cookham. To the person I am bound to have missed out, I apologise at this point.

I shall focus briefly on just one of those because I do not have much time. I want to talk about work, because a number of us could share the importance of work in trying to tackle the issue of work and life chances. I shall not reprise the occasionally quarrelsome debates we had on the Welfare Reform and Work Bill—for which I take at least half the responsibility, being occasionally a quarrelsome person myself—but one of the questions that came out quite strongly from all sides was concern about the issues of working poverty and work incentives. I want to flag up to the Minister the importance of this and what is happening to universal credit. I do this intentionally in a spirit of friendship. If around this House we support the principles of universal credit, it falls responsibly on all of us to make sure that we protect it from the ravages of the Treasury which, too often, sees it as being a little piggy bank it can raid for other things. So we need to protect it from that.

I should declare an interest, as I was an adviser in the Treasury when Gordon Brown introduced tax credits. The reason why we introduced tax credits was specifically to enable those who wanted to work but who were struggling to afford it to do so. We kept finding people who wanted to work, especially people with children or maybe a disability, who could not earn enough in the hours they could supply to be able to do the essentials, plus deal with the extra costs of disability or childcare. Tax credits were specifically designed to address that problem. I say to the noble Lord, Lord Lupton, that one of the reasons why the tax credit bill rose is because at the same time the bill for welfare benefits for those out of work fell. Money was being transferred from one to the other.

One thing we must do is address making work pay. The Resolution Foundation’s recent report on universal credit did a lot of detailed work on modelling this. It flags up that there is a real danger that universal credit, because of the last round of cuts, will succeed in merging benefits but destroy the very point of UC, which was to make work pay and make progression through work possible. It said that quite specifically. It also said that,

“even some of the welcome progress made over the last 15 years under the tax credit system in reducing worklessness—particularly among single parents—is at risk of being dismantled. Improving financial incentives to start work alongside gradual labour market reform over the last two decades have underpinned the strength of recent employment performance”.

Those are the Government’s stated aims, with which we agree. We want to increase employment, cut the disability employment gap, reduce the number of workless households and make work pay. Universal credit has a real contribution to make but can only do so if properly funded. It was originally going to be able to do that job; I fear it no longer will.

Normally when I raise this, somebody will get up and point to tax cuts or the national living wage, but the Resolution Foundation modelled those as well, looking at those changes alongside universal credit. It found that 3 million working families who get tax credits now, or can do, will not get any help in future. They will lose about £42 a week. Another 1.2 million families will still get universal credit but will lose about £40 a week. Crucially, only around 200,000 families who lose universal credit will still be better off as a result of the tax cuts and increased national living wage. These things are welcome but do not compensate for the cuts and we should not kid ourselves that they do. It really matters, and families notice the difference.

We are tackling problems with the incentives to enter and progress in work. The results are that the gains from work are much lower than anticipated when UC was designed. That is especially true for second earners. Because of the loss of the work allowance in universal credit, if you are the second earner and you are a parent who goes into work and earns £5,000, you will keep only £1,750 of that—and that is before you pay your childcare. It is not worth it. What are we doing?

Some noble Lords might say, “Don’t worry, one parent can choose to stay at home if they have kids”. That is true, but it is only a choice if you can afford to do both. I work with single parents. A lot of them wanted to work part-time when the kids were young and to keep a hand in the labour market so that, when the kids were older, they were able to get back to work. Pre tax credits, I met lots of single parents who, when they got divorced or separated, had to give up their job and then really struggled to get back into work because they did not have recent work experience. I urge the Government to look carefully at this.

The last Budget cut down things specifically aimed at working families. This House persuaded the Chancellor to reverse the cuts in tax credits, but they were not reversed in universal credit. I ask the Minister just two questions. First, what urgent action has her department taken to address specifically work incentives within universal credit? Secondly, will she in due course respond to the Resolution Foundation recommendations? There is a lot of very sensible, thoughtful work in there.

I am sorry I have been able to focus only on one aspect of poverty but it is incredibly important. If work is not a route out of poverty, frankly we are offering a hollow victory to those people who manage to obtain it.

Poverty Programmes: Audit

Baroness Sherlock Excerpts

Wednesday 4th May 2016 Lords Chamber

[Lord Freud]

I am really pleased to confirm that universal credit is now a national programme right across the country. We have real evidence that it achieves its aims: 13% are more likely to be in work at the nine-month point than if they were on JSA. It is already a good benefit by international comparisons. Many more of those in work are looking to do more hours, and many more are looking to increase their earnings than would be the case if they were on JSA.

[Baroness Sherlock (Lab)]

My Lords, I wonder whether the Minister has read the report just out by the Resolution Foundation, which is chaired by the noble Lord, Lord Willetts. Universal credit was meant to tackle working poverty by making work pay. However, the report found that more than 1 million working families will lose all in-work support, and that that will not be made up by tax cuts, living wage rates or childcare. The report said that the cuts,

“risk leaving UC as little more than a vehicle for rationalising benefit administration and cutting costs to the exchequer. Any ambition for supporting and rewarding work and progression looks very hard to achieve”.

It is now rolled out around the country. It has cost billions, and wasted billions. Was it worth it?

[Lord Freud]

I am absolutely confident that the core architecture of universal credit is doing what it is designed to do, which is to encourage people to move towards greater independence. I simply do not agree with many of the conclusions of the Resolution Foundation.