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.