Welfare Reform Bill

Baroness Sherlock Excerpts

Tuesday 18th October 2011 Grand Committee

[Lord Kirkwood of Kirkhope]

My Lords, I am provoked into joining this discussion, which I was going to leave until the next group of amendments.

First, underoccupation is one of the most serious concerns in this Bill, and I think that those concerns are shared across the Committee. I do not think that it helps to start picking away at the positions of individual members of the Committee at this time. What I think we are trying to do is to make it clear to the Government that the current proposals are unacceptable. They are unacceptable to me for two reasons. One is process—and we touched on the discussion about transition. On 1 April 2013, between 5 per cent and 10 per cent of the case load, which is arguably 67,000 working-age families, will be tipped into debt. It is a brick wall that they cannot avoid. It is very unusual for a social policy change of this magnitude not to have built in a transitional provision.

With a little bit of application and consideration, we might be able to address the issue of overoccupation, which it would be sensible to do in the long term. Speaking for myself, I think that Amendment 44 is close to doing that, although Amendment 40 is not far away. I got a very interesting note from Moat housing the other day, which suggested that:

“Two bedroom properties or below should never be regarded as ‘under-occupied’”.

It is as simple as that. That is another way of expressing it. I do not know what it would cost, but the Committee is right to explore some of these circumstances, which have ramifications for social landlords as well as everyone else. What worries me more than anything else is that on 1 April—that may be an appropriate date—in 2013, that change will be made, and people have very little protection or room for manoeuvre.

The other very interesting suggestion that Moat housing made to me, which I had never heard before, was that a “soft start” could be adopted when people were demonstrating that they were taking steps to address the underoccupation that they were allegedly facing at the time. They could continue to get the full support until they had made the appropriate arrangements. It would probably take 18 months or two years to work out in the wash; that may be too tight a period—it might take longer than that to do safely. As a Committee, we are looking for a safe transition process and a way of limiting the brick wall of debt that 670,000 of our social tenants in the United Kingdom will face on 1 April 2013. That is a matter of concern across the Committee, which I think we should represent to the Government in a way that will occasion constructive change on Report.

[Baroness Sherlock]

My Lords, there is very little left to say, particularly after the astonishingly impressive opening speech of my noble friend Lady Hollis. If I were a Minister facing that speech across the Table I would have run the white flag up and gone to the pub, but the Minister is clearly made of sterner stuff than me, which is probably just as well.

I have two questions, the first specific and the second general. First, what discussions has the Minister had with colleagues in other departments about the position of children in relation to the implementation of these provisions? Like many other noble Lords, I have had a number of cases raised with me on the position of disabled children, to which we may return, and children with health problems, as discussed by my noble friend Lady Lister. Also, Barnardo’s, for example, raised with me the position of families in which a child or children are in temporary care. For example, they may live temporarily under a residence order with their grandparent, and while the family is trying to get the children back it may look as though they are underoccupying when they are not. There is a whole series of exceptions. I am interested in the specifics, but more generally has the Minister talked to colleagues in other departments about the impact on child welfare, safeguarding and well-being or child poverty when this policy is implemented?

The second question is one the answer to which I would be very interested to hear. We have talked a lot about modelling and transition, but the noble Baroness, Lady Hollis, talked about what seemed to me to be an astonishingly simple amendment. She said that somebody should not be required to do something that they are incapable of doing. What is the Minister’s philosophical reply to that?

[Baroness Hayter of Kentish Town]

My Lords, I start by saying that it was good to hear a defence of the noble Lord, Lord German, who arrived in the House at the same time as I did. However, I thought that being asked questions and dealing with them was a wonderful preparation for being Minister, and I hope that the government Whip has taken note of that.

It is difficult to add to the words of the noble Baroness, Lady Hollis, who, as the Guardian said last week—and only the Guardian could use these words—gave a “frankly beautiful speech”, and an astonishing one today, as it was described by my noble friend Lady Sherlock. I hope only to add a few remarks in support of what she said. First, I remind us, as did my noble friend Lady Turner, of the special nature of a home. We know the importance of feeling secure in one’s home and that one of the biggest causes of stress is a house move. It affects all of us, whether we are owner-occupiers or renters, old or young, rich or poor. As the noble Lord, Lord German, said, it is one of the worst things that we have to do.

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[Baroness Sherlock]

May I press the Minister on one more point? I understood that his argument in response to the amendments up to Amendment 83 was that he could not accept such a broad exclusion because it would encompass people who would otherwise have paid the shortfall. That is probably the dead weight argument. I was in the Treasury. Dead weight is much loved as an argument by the Treasury and despised by pretty much everyone outside it. You can see that it makes perfect sense, if you are in the Treasury, to think, “You are already paying this, why on earth would I want to do it?”. If you are on the other end of the telescope, it looks rather different.

Does the Minister accept that the fact that a claimant may stay put and pay the difference does not necessarily mean that they can afford to pay it? That point was made by the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel. Someone who can see no alternative suitable accommodation may stay put, pay the difference—or at least accept that they must pay the difference and get into debt, with all the consequences that has for the family. Does the Minister accept that point and, if so, how will he address it?

[Lord Freud]

My Lords, it was interesting that there was a range of responses to our survey. Different people will do different things depending on the circumstances. That is the point. That is the problem with all the broadly defined exemptions that we have discussed today, which we have explored in great detail in the department: none of them works to define eloquently and adequately the people whom we want to protect. We need other ways to do that. I know that people like to attack the Treasury on every conceivable opportunity—

[Baroness Sherlock]

The Treasury employed me for many years; I would do no such thing.

[Lord Freud]

It did not sound like that.

Some people will choose to pay £11 and £12 extra for an extra bedroom perfectly rationally and other people will make other responses; a wide range of response is likely. A lot of people would regard it as a bargain to spend that amount on an extra bedroom. As noble Lords will be aware, spending to get that extra accommodation in the outside world—whether through a mortgage or through renting—would cost a lot more.

[Baroness Sherlock]

Forgive me, in the interests of levity, I was not being clear enough. The people I am concerned about are not those who could afford it but declined to stay, or those who are staying put and are happy to pay the money. The Minister mentioned statistics earlier about the number of people who would move, downsize or stay put and pay the difference. I am concerned about the rump who remain, which I think is sizeable—perhaps he will remind us of the percentage. I tease him about dead weight only because that argument works only if the Government are willing to accept that the price is borne by those who are not capable of making the difference. I am trying to tease out exactly how big is that price, who is paying it and what price the Minister would regard as acceptable for people who are forced into debt in order to make it work for everyone else.

[Lord Freud]

My Lords, I said earlier that we are working on the detailed implementation of this. It would be premature to make judgments on that. We need to develop strategies to ensure that those problems do not arise.

Welfare Reform Bill

Baroness Sherlock Excerpts

Monday 10th October 2011 Grand Committee

[Baroness Howe of Idlicote]

My Lords, having listened to the detailed arguments, which were extremely well put, if I may say so, the message to me is definitely that all this looks as though it is going to discourage people from saving. If the Minister cannot reply to what we have heard, that is a very worrying message to be sending out.

[Baroness Sherlock]

My Lords, I would like to add one final word. Could the Minister reflect for us briefly on one of the wider consequences of this move? When tax credits were set up, they were, as he will know, designed to replicate work in many ways and to replicate the tax system, so it is not the case that having savings is not taken into account at all. Under tax credits, genuine income from savings is taken into account, and that is the way it should be, but under this new system it is not just the very richest who are affected. Once people reach £6,000 worth of savings, they will face, as my noble friend Lady Drake described, a heavily punitive rate of effective taxation on that. I wonder what the effect of that is on the marginal deduction rates as they move into work.

I ask the noble Lord to do two things. One is to comment on how he has factored that into the effective incentives to move into work in a whole variety of situations. Secondly, could he say whether he is not worried at all that it might push people back into an approach of dependency on the state as opposed to their trying to share that responsibility between themselves and the state, which the tax credits system encourages them to do?

[Lord Freud]

My Lords, Amendments 22B and 22F would exclude from the calculation of capital any savings placed into an individual savings account or other prescribed accounts of a claimant who is in work, or who has been in work in the past 12 months, up to a maximum limit to be set no lower than £50,000. It begs a really very simple question: should the taxpayer support someone who has savings of £50,000? That is the question that is being asked here, and I think it is a question about amounts. The figures we are using were taken over from the existing benefits system, and they were raised a little over five years ago in April 2006. Those figures were doubled from £8,000 at the top to £16,000, and the starting rate from £3,000 to £6,000, so those figures do move around. I accept that determining what the right figure is here is not an exact science. Indeed, one of the things I am keen to have is a responsive system that starts to get research and understand judgments such as what the right figure is here.

I understand exactly the motivation of the two amendments, which is to encourage low-income workers to save. The argument comes down to how much we and the taxpayer can afford. I gave some figures when we debated the previous group of amendments. I will remind noble Lords that if we had an upper capital limit of £50,000, it would cost £90 million a year, which we simply do not have. Under our proposals, only when a claimant, or joint claimants, has £16,000 or more will the entitlement to universal credit cease; and only 13 per cent of households have this much in savings. That is why the figure is not as arbitrary as some noble Lords indicated.

I was asked a series of questions. I will have to add to my letter to the noble Earl, Lord Listowel, to get right the position of children leaving care. Clearly, a child's income and capital are wholly disregarded in the system. The noble Lord, Lord McKenzie, asked about the treatment of ISA interest. Universal credit will replicate the capital rules for means-tested benefits by using a tariff income. It is not possible to read across from the tax credit system. As noble Lords know, tariff income is not—and is not meant to be—the equivalent of the actual income that you might earn on that amount of capital. The figure includes an estimate of how much you should be prepared to run down your capital while you look for support from the state.

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[Lord Wigley]

My Lords, I support this amendment very warmly indeed, and put to the Minister circumstances that arose frequently in the area that I used to represent in the other place and that still arise in rural areas, not only in Wales but also in areas such as the Lake District and Cornwall, where it is very difficult for young people to buy a first home. Indeed, it is so difficult that unless a parent is in a position to make some contribution towards a deposit, it is next to impossible to buy a first home. The question that goes through my mind is: if a parent has money allocated for this purpose, is he or she going to pass it to their offspring to buy a house, knowing that if it stands in their offspring’s name in a bank it may prevent that person from getting benefits?

In areas such as those to which I have referred, the major industry is often tourism, which is highly seasonal. This means that people are moving in and out of work frequently. If one takes the combination of ultra-high property values, which have often arisen because of the pressure of second homes, the relatively low income levels that obtain within the economy, and the seasonal nature of the employment available, particularly for young people looking for their first job—and one wants to encourage them to take every job opportunity there is—one surely has to make sure that the rules and regulations do not militate against them getting their foot on the first rung of the ladder in order to be the owner of their home. I put it to the Minister that somehow or other that has to be safeguarded within the system.

[Baroness Sherlock]

I would like to make one brief point about the sums of money that are increasingly needed to save for a house. It was reported in the Guardian on 17 September this year that the average deposit has gone up tenfold in the last 20 years, from £6,793 in 1990 to over £65,000 now. The same article went on to quote a banker from First Direct, which I presume must know these things, who said:

“The average deposit … has actually risen more than twice as fast as house prices and almost four times as fast as income”.

Could the Minister therefore think for a moment about whether the inflation in the savings limit properly takes account of the specific house-related inflation, and within that the specific deposit-related inflation, that we are seeing?

[Lord Freud]

My Lords, Amendments 22C and 22D would exclude from the calculation of capital prescribed amounts saved for a deposit on the purchase of accommodation for personal use where the claimant is in work or has been in work in the previous 12 months. I can of course see the benefits of encouraging low-earning families to become homeowners, but at present these amendments would be difficult if not impossible to implement efficiently in practice. As the noble Baroness, Lady Drake, pre-empted my argumentation, I will not go into this in depth, but I must say that one would need both the provision of a savings vehicle, which would in effect be exclusively for the purchase of a house, as well as adequate numbers of people wanting to save in this particular way, for that market to work. I do not think there is any necessary block on creating a vehicle like that at some stage in the future, and it would be up to a Government to look at that in the future. Right now, given our constraints, I do not think we are in a position to do it. As noble Lords have heard and as the noble Baroness suggested, these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. I remind noble Lords that we have obtained an envelope of £4 billion per annum to give to people in receipt of universal credit. I am not netting it off against other changes, but that is what the universal credit does. Finding extra money for this, that and the other cannot be done just by a wave of the hand. It will be tough to get extra money for desirable things.

It is essential that we get the architecture of a structure that we can use to help and motivate people. If we cannot afford particular things or it would be desirable to develop particular processes, that is fine and we can do it, but right now we do not have those resources. For that core reason, I hope noble Lords will appreciate why we do not support these amendments, and I ask the noble Baroness to withdraw her amendment.

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[Lord Northbourne]

My Lords, I do not want to delay the Committee. I am sure there are many people in this room who have more experience of these issues than I do. However, during 16 years chairing the youth department of Toynbee Hall down in Tower Hamlets we came across quite a lot of problems with moneylenders in particular. I strongly support fortnightly payment. Monthly payment will give much more opportunity for unscrupulous traders to profit from budgeters who are perhaps not very experienced.

[Baroness Sherlock]

My Lords, I have little to add to the rather remarkable contribution made by my noble friend Lady Lister, but I want to address a couple of points.

First, I was delighted to see the DWP research report, Perceptions of Welfare Reform and Universal Credit, and I commend the Minister and the department for taking this kind of research so seriously. The foreword to that report says:

“The Department for Work and Pensions … is committed to involving users throughout the development of Universal Credit, from setting out the criteria for a good experience to detailed design decisions. This user involvement helps ensure issues are known, understood and mitigated as the Universal Credit system is being built”.

I want to commend that. I thought it was a very good decision. However, it means that if you ask people and they give you answers, it really is wise to listen to them. Having sought the opinion of those who are going to be using the system, and having been told so clearly that only a small minority appreciated monthly payments as a route and the majority clearly felt it was a problem, is the Minister at all persuaded by that?

I have two other points to add. I am particularly concerned about the impact on those who are in that territory between work and out of work. The most compelling argument made today was the fact that if only half those people are paid monthly at the moment, the whole idea that moving to monthly payments mimics work simply falls flat. If people are currently paid weekly or fortnightly, they could be in the bizarre position of having their wages paid weekly or monthly and their universal credit paid monthly, which seems ridiculous. At the moment with tax credits people can opt to be paid weekly.

I declare an interest as having been involved in advising Ministers on the design of tax credits, as noble Lords will know. I can understand the desire of the centre to want to simplify this. I really understand why having everybody on monthly payments would be an awful lot easier for the process, as well as the design problems in terms of processing capacity of having people opt into a variety of options. However, this feels so important that if the noble Lord is so committed—and I know he is—to the aims of universal credit in supporting people in work and to getting the architecture right, it would seem that this is a fairly fundamental piece of the architecture, and we get it wrong at our peril.

I have one final point. I spent some years working with single parents. Most of them had come out of relationships or marriages. One of the things that they always said they liked about being single—there were many things they did not like that were very hard—was that they could control the money. I heard many of them describe the struggles that they had had to protect the money coming into the household and to have it spent on the children. They described a whole range of situations that I am not in any way suggesting are typical, but they are none the less not invisible or irrelevant either. Some said that they quite often had a situation where their partners would periodically go out on a binge and spend the money. There were people who had quite a bit of money who would say: “I fed the children on child benefit till they got back”.

One thing about credits being paid directly to them and coming in weekly was that at least they knew there was another payment coming along soon. If in this situation one partner spends the money unwisely, it is an awful long wait until the next payment comes in. Would the Minister consider that alongside some of the later issues we are going to discuss about the Social Fund and single payments being made only to one partner or to a joint account? This is an area of which the Minister would be well advised to take careful consideration.

[Baroness Campbell of Surbiton]

My Lords, I would also like to support the amendment of the noble Baroness, Lady Lister, and congratulate her on her first amendment. What a good first amendment. Disability charities, including the full membership of the Disability Benefits Consortium, have expressed grave concerns to me that many disabled claimants, particularly those with mental health problems or learning disabilities, will struggle to manage their budgeting over monthly intervals. With the proposed replacement of the discretionary Social Fund and by confusing an unpredictable plethora of local schemes, accessing crisis payment when budgeting problems arise will be very hard for this group of people also.

I support a man with mild learning and behavioural difficulties. He can just about manage his two-weekly payments and often, at the end of the two weeks, it is up to his friends—normally me—to sub him until the end of that two-week period. I have no idea how he will manage on a monthly basis. He falls under the radar of most help and I know that he would not seek it anywhere but me. So it also puts a burden on families, friends and other poor relatives who are often in the same situation to make up the shortfall. I support the noble Baroness and would like to know what the Minister has in mind for this particular group of people to cope with a monthly payment.

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[Lord Freud]

My Lords, Amendment 29 specifies that deductions from the claimant’s maximum amount of universal credit should include an amount in respect of prescribed types of unearned income calculated in the same way as the deductions made in respect of earnings. As drafted, Clause 8 allows for a reduction in respect of unearned income to be calculated “in the prescribed manner”. The Bill therefore already allows for the manner of such reductions to be specified in regulations. This could include, where appropriate, the same calculation as for earnings.

As we set out in the White Paper, claimants will have their universal credit withdrawn according to a single taper rate after appropriate disregards. The latest assumptions on the earnings disregard have been set out in a new policy briefing note which was published today. Further analysis is provided in an updated version of the impact assessment for universal credit, which was published not very soon, but this afternoon.

With regard to income other than earnings, we have today released a new policy briefing note which confirms that statutory sick pay and statutory maternity, paternity and adoption pay will be treated as earnings. We do not intend to treat either ESA—or ESA equivalent—or maternity allowance as earnings. They are not treated as earnings in the current system; they are benefits and are treated as such. Nor do we propose to alter the current treatment of maternity allowance in the benefits system, where it is taken into account in full. This is because maternity allowance is one of a number of benefits which exist to replace income for people who are out of work. It therefore addresses the same need as universal credit for mothers who cannot work because they are giving birth to their children. We do not believe it is right for the Government to pay twice to meet the same need.

The income briefing note also explains our wider approach. In general, where a claimant has income at their disposal to meet their living costs, such as spousal maintenance or payouts from an occupational pension, these payments will be taken fully into account. However, we need to make exceptions to this general rule while ensuring that the system is kept as simple as possible. We will therefore disregard certain income types in full where they are paid due to additional costs or expenses that a claimant has. This would apply to additional payments due to being disabled, such as DLA or various local authority payments, or for looking after children, including child benefit and fostering allowances. We will also disregard in full certain payments which would be disproportionately costly to take into account. These will include the value of payments in kind or charitable payments.

I turn now to the proposed subsections in Amendment 30 which would require the Secretary of State to carry out and publish a review of the impact of a taper rate on universal credit claimants and their work incentives one year after the Act comes into force. As the revised impact assessment sets out, we expect the single taper together with the earnings disregards to improve work incentives significantly. With regard to the participation tax rate, the number of households who lose between 70 per cent and all their earnings through taxation and benefit withdrawal on moving into 10 hours of work will fall by 1.2 million under universal credit. Under the current system, around half a million individuals in low-paid work would lose more than 80 per cent of an increase in their earnings because of higher tax or withdrawn benefits. Virtually no households would lose 80 per cent under universal credit. On reasonable assumptions, the combined impact of take-up and entitlements will lift around 900,000 individuals out of poverty, including more than 350,000 children and 550,000 working-age adults.

These are significant outcomes and we will be monitoring and evaluating universal credit to confirm that they are achieved. However, this is an ongoing process and we expect that it will take longer than a year to develop a sufficient body of evidence on which to draw firm conclusions. As a result, we do not think it appropriate—

[Baroness Sherlock]

I thank the Minister. I am trying to look through the revised impact assessment, as I am sure will other noble Lords. I hope he has had the opportunity to read it before I have; I would be very disappointed if he had not. I wonder, therefore, if he would give us the benefit of that experience. Regarding the figure he has just cited of 200,000 children being lifted out of poverty by entitlement alone—and I see he has had to resort to modelling take-up which he has always previously refused to do on the grounds that it was not necessary—could he remind us what the previous estimate was of the number of children being lifted out of poverty?

[Lord Freud]

Yes, I can help noble Lords. There is a small decline for adults in this impact assessment compared with the last one. It is down from 600,000 to 550,000. However, the figure for children is unchanged at 350,000.

[Baroness Sherlock]

Is it unchanged?

[Lord Freud]

Yes, for children lifted out of poverty, the figure 350,000 is unchanged. I am sorry; I can only tell noble Lords what is in the document, which I confirm that I did read over the weekend. Let me nail down the reason why I do not want a formal annual review process. I do not think that that is the right way to go when we have something as sophisticated as the universal credit, given the impact of the different delivery mechanisms, taper rates, disregards and conditionality. I will be talking to the Committee quite soon about how we could assess the system most effectively. I accept assessment and regular assessment, and I am looking for support from this Committee in that process.

[Baroness Sherlock]

I thank the Minister. I wanted to phrase my question more precisely because I think I may have confused him. The improvised impact assessment says on page 18 that changes in modelled entitlements will lift approximately 200,000 children out of poverty. The figure of 350,000 children that he quoted included take-up modelling. My understanding is that previously he has given us figures that did not include take-up modelling. I am trying to contrast the current steady state figure without any assumed change in take-up compared to the previous steady state figure.

[Lord Freud]

I can absolutely confirm that the figures included take-up and are the same figures, so there is no change there.

[Baroness Sherlock]

I am so sorry. What was the previous figure, not including take-up modelling?

[Lord Freud]

They are exactly the same—200,000 and 400,000 adults. Those figures have not changed. Let me come back to the issue raised by the noble Baroness, Lady Hayter, on the target rate of the taper. I do not think it is right to have a target rate of what the optimum figure is, and I will not talk about the iron triangle today. I will spare the Committee. A lot of factors are involved in what the optimum rate will be. We do not know, so it would be foolish to set a target, whether it is 55 or 65 per cent. If noble Lords want my opinion, I think 65 per cent is too high and a future Government—when they have some money—would be smart to lower it. But by then I would hope that we would know exactly what the optimum figures were. When we know that, a smart Government would move to it. It would be wrong to set a target when we do not know what the optimum figure is. I agree that we need to be very sophisticated in our understanding of how people behave and the impacts of universal credit. I take on board the spirit of this amendment in the sense that we do need to assess it. I do not think this is the right way and I hope to be able to discuss with this Committee better ways of assessing it. I am hoping for some real enthusiasm behind those ways as well.

I hope that these answers have helped to clarify our intentions in these areas. They are really important areas, and I urge noble Lords not to press their amendments.

Welfare Reform Bill

Baroness Sherlock Excerpts

Tuesday 13th September 2011 Lords Chamber

[Baroness Sherlock]

My Lords, I want to examine the extent to which the Bill meets its objectives, particularly for families with children. My interests are in the register but I was a non-executive director of the Child Maintenance and Enforcement Commission and I was an adviser in the Treasury during the development of tax credits.

The Bill describes a revolution in the benefits system. The Minister might look an unlikely revolutionary, but he said today that this is the most radical reform of the welfare system since its invention. So a revolutionary he certainly is. I wonder whether there is a poster of Che Guevara tucked away in his office somewhere in Richmond House.

This is going to be the biggest change we have ever seen in the welfare system. The White Paper said:

“The Universal Credit will have a simple structure designed to provide a basic income for people out of work … make work pay ... and help lift people out of poverty”.

I will back a system that does those things, as will many noble Lords, but we must test whether it will. First, will universal credit be simple? No. It will be unified but not simple. By bringing together so many benefits, the process of applying for universal credit may be more complicated for some people who want access only to limited parts. I understand that. It may be inevitable as simplicity in the benefits system is often bought at the expense of fairness. Child benefit is simple but not fair, certainly if that is all there is. Tax credits are fair but even I would concede that they are not simple. Finding a single system that brings together fairness and simplicity is a great challenge. In particular, it puts a premium on smooth implementation to balance the inevitable structural complexity. Having been involved with the development of tax credits, I freely offer the Minister some advice that was hard-won by me during my time in the Treasury. Each front on which you pursue reform in a major structural change increases the chances of one of them failing and the whole thing falling over. I would urge the Minister to take that to heart and counsel him to stagger the reforms. Start, if you must, with universal credit, but get that sorted first before even contemplating moving on to the CSA or abolishing the Social Fund or introducing in-work conditionality, otherwise we risk jeopardising the entire system.

Secondly, will universal credit make work pay and support people in work? Tax credits were designed to do just that. Working tax credit was designed around people in work. It was meant to look like work. It was run by the Revenue, paid through the wage packet, based on prior year earnings, with no conditionality other than a minimum hours rule. The treatment of savings was fair, like in the tax system. Nobody was debarred for having savings but income from savings was taken into account. In merging these two systems, as my noble friend Lady Hollis pointed out so eloquently, too often the lowest common denominator has won out.

Will a father saving for a deposit on a house who is eligible for tax credits be denied any universal credit once his savings reach £16,000? What about a mother who is getting a divorce and gets some of the proceeds from the sale of the marital home but not enough to buy again any time soon? She will be expected to run down those savings, feeding her family from them, and so never getting back on the housing ladder unless she marries someone else. She had better make sure he does not have any kids or the benefit cap will kick in. What of a couple who both work part-time to share childcare. Will they face in-work conditionality when they might not have set foot in a benefits office for years? I worry about the characteristics of this system and how worker friendly they are going to be.

Will work pay? I was pleased that the Secretary of State for Work and Pensions gave a clear pledge that,

“people will be consistently and transparently better off for each hour they work and every pound they earn”.

Let me highlight two worries. Many noble Lords have mentioned childcare costs. The options that the Government have canvassed are fairly unattractive because all reduce the maximum amount of childcare help that can be claimed. The Minister may correct me, but if either option is implemented, some parents could be worse off if they increase their hours. They could be trapped in part-time work, making it hard to lift the family out of poverty and some could even find that work does not pay at all. We need specific assurances from the Minister that work will continue to pay at least as well as now, even if you have high childcare costs, and that no one will be put into the position of being forced to work more hours without being given the money to pay for the childcare they will need in order to do that.

The second area I worry about is the proposal to leave help with council tax to the discretion of local authorities. If the DWP cannot control how much council tax help is offered, how quickly it is withdrawn or how it is means tested, how will it be possible for the Secretary of State’s guarantee to be met? I should be grateful if the Minister could explain that to the House.

Will these reforms lift people out of poverty? Many noble Lords know that this week an IFS report has predicted that the people who will suffer most from tax and benefit changes are families, especially poor families with children, with the poorest decile suffering income losses of more than 8 per cent over the next three years. I want to look particularly at the effect of the benefit cap, so eloquently explained to us by the right reverend Prelate the Bishop of Leicester and by the noble Baroness, Lady Tyler. The charity Family Action has said that the cap is likely to push more families into poverty. The Children’s Society has said that it will affect nine times as many children as adults, so it is clearly a measure aimed directly at families with children. I have heard this explained as being necessary to stop, for example, a benefits scrounger living in the kind of house that no decent working family could ever afford to live in. But if we think about that for a moment, it makes no sense. There are already limits in the housing legislation on how much housing help can be given, just as there are limits on every other individual benefit. So an overall benefit cap will have a particularly unfortunate effect on those who happen to catch more than one of those tripwires. If you happen to have more than two children and live in an expensive urban area, you are the kind of person who will be hit. A Parliamentary Answer in another place revealed ministerial estimates that around 70 per cent of those who will be affected by this are already living in social housing; they are already in the cheapest accommodation. Where are those families meant to go?

Finally, I want to comment on the proposal to change dramatically the child support arrangements. The Bill and the response by the Government to their earlier consultation document make it clear that the intention is to put significant barriers in the way of any single parent who wants to make a claim through the statutory system. Those who do make it through the gateway will have to pay a fee just to be allowed to apply for the money to which they are entitled in law. If they get through and the money is then paid through the statutory system, both parents have to pay a fairly hefty proportion of that money—private money—to the DWP for the privilege of getting what is meant to be paid by one parent to the other. The noble and learned Lord, Lord Mackay of Clashfern, made a clear argument on this. There is nothing the parent with care can do to influence the other party to pay directly or to co-operate other than going through the state. Why is she then to be penalised? This is money that currently she receives directly to feed, clothe and buy shoes for her children. Why should some of that money be handed over to the state, potentially up to 32 per cent of the total amount, simply because the other party will not co-operate? That seems to be dramatically unfair.

There are many other questions that are yet unanswered, and the hour is getting late. However, I want to flag some issues that will come up during the Committee stage. What will happen to passported benefits such as free school meals? What will be the effect of stopping the automatic payment of money for children to the main carer, usually the mother? What about disabled children—potentially as many as 187,000 of them, so the charities tell us—who could lose up to £1,400 a year? What of the impact on 17 and 18 year-olds?

I understand that we cannot get all the detail right and I heard the persuasive appeal made by the noble Lord, Lord Brooke of Sutton Mandeville, that we should ensure that we do not allow the best to be the enemy of the good. I have heard the Minister say in previous briefings that we must focus on the structure, not on the detail, and that there may be more jam tomorrow. But children growing up now will be affected in the future by the incomes of their parents today. The very least we must ask of the Minister is that he should demonstrate to the House how the Government will achieve their own goals of simplicity, making work pay and tackling poverty. If he cannot do that, we are entitled to ask whether the revolution is justified. Perhaps the poster of Che Guevara should come down.

Social Mobility and Child Poverty Commission

Baroness Sherlock Excerpts

Thursday 23rd June 2011 Lords Chamber

[Lord Freud]

My Lords, the job of the commission will be to hold the Government to account for their strategy. It is the job of the Government to set the strategy and we will look at all the areas in which we need to improve performance.

[Baroness Sherlock]

My Lords, I am sure that noble Lords who saw the recent BBC documentary “Poor Kids” will have been moved by the brutal reality of child poverty in Britain that was portrayed. Will the Minister assure the House that the Government will commit themselves to tackling poverty at the very bottom and not just social mobility? Is he aware of the concerns expressed by charities that the Government’s approach to the commission may undermine its independence and will he meet the End Child Poverty group to discuss this?

[Lord Freud]

My Lords, one of the things that we are doing to expand the measures of accountability is to look precisely at severe poverty, which is a combination of very low incomes and material deprivation. That is an area on which we want to focus. One of the problems with targets is that they encourage Governments to tuck people just above an arbitrary line, which we do not want to do. I am sorry, but I have forgotten the second part of the noble Baroness’s question.

[Baroness Sherlock]

Will the Minister meet the End Child Poverty group to discuss its concerns that the Government may be weakening the commission’s independence?

[Lord Freud]

We are not weakening the commission’s independence in any way; we are strengthening it by requiring the commission to hold the Government to account. The fact that we are not insisting that the commission sets the strategy for the Government means that the Government now have that responsibility and the commission can then hold them to account. I shall of course meet the group at any stage; I am sure that it is in my diary anyway.

Child Poverty

Baroness Sherlock Excerpts

Tuesday 17th May 2011 Lords Chamber

[Baroness Sherlock]

My Lords, returning to the matter of targets, even if the Government are correct, as the Minister said, and 350,000 children are lifted out of poverty by the welfare reforms, the IFS has said that that will be wiped out by the numbers falling into poverty before reforms even take place. I am sure that everyone in the House wants to build on the achievements in raising children out of poverty. Would targets not be the best way to do that?

[Lord Freud]

My Lords, it is important to look at what the figures have shown us. Last year we put an enormous amount of money into tax credits and the benefits system. The amount increased by 6.7 per cent and is the sole reason that we had income growth in this country in that year. It is not sustainable to do this by income transfers. Our aim is to try to transform the lives of people, and that must mean a renewed emphasis on getting people back into work, making them independent and leading their own lives. That is our strategy and that is how we have reformulated our poverty policy.

Housing Benefit (Amendment) Regulations 2010

Baroness Sherlock Excerpts

Monday 24th January 2011 Lords Chamber

In conclusion, I recognise the wisdom of the proposal and am grateful for it, and I hope that it will find favour because it will help us to address complex issues. We must let our judgment be driven not just by the finances but by the family and social needs, and we must emphasise the need for an increase in the supply of housing.

[Baroness Sherlock]

I shall pick up precisely where the right reverend Prelate the Bishop of Hereford left off in looking at the impact on children and communities. In preparing for this debate, in common with other noble Lords I read briefings from a wide range of charities and was very grateful for them. I also read the excellent report from the Social Security Advisory Committee, but probably the single most informative document that I have read so far has been the impact assessment from the DWP. I even thought of simply reading out sections of it in place of a speech, until it occurred to me that noble Lords might have read it already, but it is probably the most damning impact assessment that I have ever read.

Rather than repeating the comments that other noble Lords have made far more eloquently—my noble friend Lord Knight did a beautiful job of setting out the detail on this—I want only to look at what that might mean for a family, because it is very easy for us to consider the policies without understanding the impact on individual families.

I spent some time running a charity that worked with single parents. A lot of the single parents who came through the door would phone up when their world had suddenly fallen apart. Perhaps the husband had left, or something had happened and the marriage or family had broken up. Often, a pattern would follow from that. Usually, the mother would end up with the children. She would often have been working, as would the father. When she had to do the childcare alone she would find that she could not manage it and do the same job, because that simply did not work, so she would often then give up the job. The pattern would be that she would often move to be closer to her own family—perhaps her own mother or father—who would help to share the childcare. Over time, she would rebuild her life and often end up getting a part-time job with childcare and being helped by the family and friends in the neighbourhood. She was usually able to do that only because of tax credits and housing benefit. Suddenly, the family would begin to be back together again.

Imagine what happens to that lone parent in that situation if she suddenly finds that the rent on the family home which she has managed to establish can no longer be met by the local housing allowance. What does she do? The landlord might be kind enough to drop her rent, but what if he does not? She then has two choices. Should she try to stay put and make up the difference, when we already know from Crisis that 48 per cent of people on the local housing allowance already face a shortfall? She might already be trying to top up the rent as it is. Even if the difference is only the £12 a week which the noble Lord, Lord German, mentioned, that is a lot of money to someone on that kind of income. If you shop around, £12 a week can buy a pair of children's shoes or put a lot of food on the children’s table. At that level, £12 a week might simply be beyond her reach; it might as well be £1,200.

What does that lone parent do? Does she decide to move to a different area? In doing so, if she moves from inner to outer London, for example, the children will certainly have to change schools, if they can find a place. In doing that, their schooling is disrupted and they lose contact with their friends. In many cases, the woman loses contact with her family. She might then not be able to travel back to the job. The travel costs might be too great or her own mother cannot mind the children, which means that she cannot risk being late back as she has to be there in time to pick the children up from school. We can end up in a situation where the children's lives have been disrupted, the mother might be forced back on to income support, the family has been fractured and the children will suffer. The consequences are potentially significant.

I do not want to wave a shroud; that is not my intention. I want to try to dismantle a policy from its larger scale to see what the impacts might be on an individual set of families. In fact, the impact assessment makes it very clear what the consequences are of some of that dislocation. It talks about the evidence of what happens to the educational attainment of children who are moved—about the impact on the GCSE points of those who are moved at key stages. It talks about the dangers of overcrowding, because the alternative for our lone parent is to stay put or perhaps to go to a smaller house, squeezing a family into a tiny flat. But then where do the children do their homework, as the impact assessment points out? What are the consequences for that family?

The other issue is the other wider impacts of a choice such as this. What happens to the families who have traditionally lived in a very mixed area, in the way that the right reverend Prelate described? I visit people who live in Islington—I went to a church there—and have always been hugely impressed that in so much of London there are such areas, where rich and poor live side by side. But where do they mix in practice? I remember the vicar of Islington walking me down a street to show me a beautiful Georgian terrace on one side and an interesting and challenging 1960s council block on the other. He said, “You know, the joy is that the people in the Georgian terrace look out on the council block and the people in the council block look out on the Georgian terrace”. The real joy was in fact that their bins were emptied by the same council service, that they went to the same GPs and that they shopped in the same local neighbourhood stores when they needed to. In other words, they shared local services. One thing that has long been observed is that services for poor people become poor services, while one thing about having people in mixed areas is that you have what I think a government Minister memorably described as the sharp-elbowed middle classes, who are there to make sure that those shared services are available to all and are protected and developed.

The case that I have described might be just one family, but the impact assessment says that 450,000 of the households affected contain children. If 450,000 households with children are affected by these changes, I very much hope that the Minister will be able to consider the sensible suggestion from the noble Lord, Lord Best, and take his time to consider the impact of two things. First, what will the impact be on families with children? He should track what has happened to some of those families and look at how their lives have changed. Secondly, I strongly urge him to consider how this interacts with the many other measures that the Government have taken through.

That single parent will already be facing cuts from the Government in her childcare help and in the amount of money that she is allowed to earn on her tax credits. She could already be facing a range of other cuts and benefits. She is already in a context in which inflation is rising and the local housing allowance will be uprated only in line with the CPI, while VAT and fuel bills have just gone up. These families are much squeezed already. The very least we owe them is to make sure that we do not take a step such as this without properly understanding the implications.

Housing Benefit

Baroness Sherlock Excerpts

Monday 6th December 2010 Lords Chamber

[Lord Freud]

My Lords, I thank my noble friend for that question, which gets to the heart of the issue. There are three reasons why we think there will be an adjustment in the marketplace. First, we as taxpayers represent 40 per cent of the private rental market. Secondly, there have been some surveys of landlord attitudes; roughly half say that they are prepared to reduce rates. Obviously, they are sending a message back to the main buyer. Thirdly, last week we put in place a mechanism to help that adjustment process. We are prepared to pay direct rents to landlords where they are prepared to show flexibility in helping people to stay in their homes.

[Baroness Sherlock]

Will the Minister comment on the concern expressed by charities that families may be forced to move repeatedly? In particular, can he comment on the fact that all the evidence shows that families at risk who move repeatedly can be put out of the reach of the social services? What steps will the Government take to protect vulnerable families in that situation?

[Lord Freud]

My Lords, one of the points that was raised by SSAC, the advisory committee, was that by having two sets of changes in April and October we were potentially making people make two sets of adjustments. That is why we fine-tuned our arrangements, as we announced last week, so that they come into effect in April, but there is a nine-month period for people to make an adjustment. We have also put in £50 million to help local authorities deal with the transition—some of which will be difficult—to make sure that it goes as smoothly as possible.