Welfare Reform and Work Bill

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Monday 25th January 2016 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, Amendment 25 would remove child benefit and child tax credits from the benefit cap. I return to this amendment, which raises an important point of principle together with children’s rights questions, partly because in Committee it was grouped with various other exemptions from the cap, but, more importantly, because—and at the risk of being accused of being vituperative—once again, the response from the Minister was inadequate. He was challenged a number of times to justify why these benefits should be subject to the cap for those out of work when they are received by those in work, so that the cap is premised on a comparison between earnings in work and income out of work, but he failed to do so.

The argument boils down to what we believe is fair. According to the impact assessment, the clause promotes even greater fairness between those on out-of-work benefits and taxpayers in employment. Our view is that fairness requires that old cliché of the level playing field, on which, if you ignore the child benefit received by all taxpayers in employment on wages of £20,000 to £23,000 and the child tax credits received by a good proportion of them—how many and how much the Government refuse to say—you must ignore it when calculating the income of those on out-of-work benefits.

The exchange between my noble friend Lady Hollis of Heigham and the Minister on this point could have come straight out of a pantomime: “Oh, yes, it’s earnings”, “Oh, no, it’s income”; or that old song, “Let’s Call the Whole Thing Off”: “I say income, you say earnings”. But whereas my noble friend, as you would expect, offered argument, the Minister offered only assertion. He just kept repeating:

“We are looking at the level of earnings”,

without ever saying why, other than, as my noble friend put it, “Because I say so”. Therefore, I thought it only right to give him the opportunity to offer an argument today in justification so that noble Lords can decide whether it is indeed fair to base the policy on such an uneven playing field.

Other arguments that did not get addressed properly by the Minister concerned the impact on children. How did the policy fare against the family test, which was not even mentioned in the income assessment? He assured me that the family test was applied, but, as he could not,

“recall what was in it”,—[Official Report, 21/12/15; col. 2378.]

he promised to write to me with the details. I do not believe that I have received them, so perhaps he could provide them now. What is the likely impact on child poverty? That was conveniently circumvented on the spurious ground that it is all too difficult to estimate the likely dynamic effects of the policy. There is no reply to the argument that the policy has a disproportionate impact on children.

In the judgment in the recent Supreme Court case on the cap, which we spent some time debating in Committee, Lord Justice Carnwath made the point that the inclusion of child benefit and child tax credits in the cap raises the question as to why,

“the viability of a scheme, whose avowed purpose is directed at the parents not their children, is so disproportionately dependent on child related benefits”,

and said:

“The cap has the effect that for the first time some children will lose these benefits, for reasons which have nothing to do with their own needs, but are related solely to the circumstances of their parents”.

The noble and learned Baroness, Lady Hale, observed that, as a result, the children affected,

“suffer from a situation which is none of their making and which they themselves can do nothing about”.

This brings me to the children’s and human rights implications of the policy, which, as the Equality and Human Rights Commission has complained, were dealt with inadequately in the Government’s human rights assessment and the impact assessment. What is at issue is whether the inclusion of children’s benefits in the cap is in the best interests of the child in line with Article 3 of the UN Convention on the Rights of the Child.

In the human rights memorandum, the Government note the Supreme Court’s decision and assert that they have fully considered their obligations to treat the best interests of the child as a primary consideration. However, their analysis of the,

“best interests of the child”,

seems to rest on this proposition:

“The best interests of children overall is to have parents in work and work remains the surest route out of poverty”.

As the EHRC observes, this betrays,

“a particular lack of understanding regarding compliance with the UNCRC”.

It may well be in the best interests of many children for parents to find work, but it will depend on the work available, the circumstances and the durability of any work found. Moreover, this bald statement ignores the fact that the great majority of those already subject to the cap did not find work as a result. Is it really in the best interests of their children to have their standard of living reduced even further when a survey reported in the first-year review of the operation of the cap found that over a third of those affected had already had to cut back on household essentials and many had incurred debt, which the Government identify as a root cause of poverty? In fact, the Government’s position pretty much ignores the judgment of the noble and learned Baroness, Lady Hale, echoed by the noble Lord, Lord Kerr, that they,

“misunderstand what article 3(1) of the UNCRC requires. It requires that first consideration be given to the best interests, not only of children in general, but also of the particular child or children directly affected by the decision in question. It cannot possibly be in the best interests of the children affected by the cap to deprive them of the means to provide them with adequate food, clothing, warmth and housing, the basic necessities of life. It is not enough that children in general, now or in the future, may benefit by a shift in welfare culture if these are also the consequences. Insofar as the Secretary of State relies upon this as an answer to article 3(1), he has misdirected himself”.

In his response, the Minister did not address the substance of these arguments, but took refuge behind what he called the “sterling work” of the noble Lord, Lord Blencathra, whom he described as “utterly masterful” on the legal aspects and who he said had certainly taught him a lot. I am no lawyer, and I am sure the Minister will not consider me masterful on the subject. I am diffident about getting involved in legal disputation once more, but I am assured by the CPAG’s solicitor, to whom I am grateful—I make my usual declaration as the group’s honorary president—that the interpretation by the noble Lord, Lord Blencathra, is open to challenge. The Minister’s law lesson might, therefore, need some revision. It is not the case, as the noble Lord, Lord Blencathra, asserted, that the Supreme Court found the Government to have been “perfectly correct” when they were taken to court on not implementing the UNCRC, nor that five of the noble judges ruled, in the Government’s favour, that the benefits cap was not contrary to the rights of the child. Rather, the court found, by a majority of three to two, that the benefit cap regulations are in breach of Article 3(1). It is true that they went on to find that, as the convention is not incorporated into domestic UK law, it should be for Parliament, not the courts, to decide how to remedy the breach. Lord Justice Carnwath advised that the court’s concerns about the rights of the child would need to be addressed in the political arena. In other words, the court was looking to us—to Parliament—to find a way to ensure that the Government upheld the UK’s obligations under international law with regard to the cap.

That is what the amendment seeks to do. Just because the UN convention is not directly enforceable in UK courts, the Government cannot simply ignore it when their claims to have complied with it are challenged by the Supreme Court. It must concern us that, far from responding to the Supreme Court’s ruling and to the specific recommendation of the noble and learned Baroness, Lady Hale, that the Government consider removing children’s benefits from the cap, the Government are now compounding the infringement of children’s rights by reducing the cap to below median earnings, thereby bringing many more families into its net. I suspect that it is only a matter of time before the matter is before the courts again, as this could now mean that the cap is in breach of the European Convention on Human Rights because of its disproportionate impact.

On grounds of both fairness and the rights of children, I believe there is a strong case for the exclusion of children’s benefits from the cap. I hope that today the Minister will actually engage with the arguments, rather than continue with the “because I say so” approach. Given that that approach tends to be used when there is not a valid case to be made, better still, he should accept the amendment on grounds of both fairness and children’s rights. I beg to move.

[Baroness Sherlock (Lab)]

My Lords, I thank my noble friend Lady Lister for the way she has introduced the amendment and for her persistence and expertise on this subject. My noble friend raised this issue in Committee but did not get an adequate answer. One of the things I find most depressing about the debates on the benefit cap is that Ministers increasingly lump all benefits together as just welfare payments. No distinction is made between the various kinds of benefit we have traditionally had in the British social security system: between contributory and non-contributory benefits or between income-replacement benefits and those designed to compensate for extra costs. The failure to make such distinctions tends to demonise recipients. It also muddies the policy-making waters, because Government are reduced to making fairly broad claims for the behavioural impacts of benefits the purposes of which are, in fact, quite distinct from each other.

Child benefit is a good case in point. It has traditionally been a universal benefit and is still available to all but the highest-earning households. In effect, it is a horizontal transfer from taxpayers as a whole, including those who do not have children, to those who have children. Originally, it replaced an allowance in the tax system and it is there because, as a society, we recognise that children are a public as well as a private good. We all have a stake in ensuring that parents can afford to raise the next generation healthily. Child benefit goes to parents in and out of work, of course, as does child tax credit—the two benefits that are the subject of this amendment.

Welfare Reform and Work Bill

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Monday 21st December 2015 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, I rise to speak to Amendments 98 and 99, in my name and that of my noble friend Lord Kirkwood of Kirkhope, to whom I am once again grateful for his support.

Amendment 98 would delete child benefit from the list of benefits covered by the four-year freeze. Amendment 99 applies to child benefit the triple lock that currently governs the uprating of retirement pensions, a policy promoted by CPAG—again, I declare my interest as honorary president—and End Child Poverty.

Far from a triple lock, child benefit has been the victim of a triple whammy since 2010. It was first frozen for three years and then uprated by only 1%, and now it is to be subject to a four-year freeze. The upshot is that, according to CPAG’s calculations, it will have lost 28% of its value between 2010 and 2020. In other words, it will be worth less than between a quarter and a third of what it was when Labour left office. A graph prepared for me by Professor Jonathan Bradshaw shows how the gain in value under the previous Labour Government has already been nearly wiped out. It also shows how child benefit represented a much higher percentage of average earnings in the early 1980s under another Conservative Government. However, it was then subject to similar treatment to now, until it was rescued by Sir John Major, who understood why child benefit is important and why its value should be protected. Sadly, his successors do not appear to share his understanding.

I tabled these amendments to encourage a debate about the role of child benefit. I quite accept that it is rather ambitious to argue for the extension of the triple lock to child benefit in the current context, but there is a parallel with pensions. One of the justifications for its application to pensions, and for excluding pensions from the freeze, is that pensioners are among those least able to increase their incomes through work. Leaving aside how true this still is of younger pensioners such as myself, it is in some ways even truer of children. I know the response will be that their parents can increase their income through paid work, but as the judges in the benefit cap case made clear, children’s rights cannot be sacrificed for any failing on the part of their parents.

Moreover, one of the reasons why the family allowance—the mother of child benefit—was introduced in the first place was that wages cannot and should not take account of the number of mouths a wage earner has to feed. In the jargon, child benefit enables horizontal redistribution from those without children, such as myself, to those with, and recognition that we all benefit from children being brought up as healthy, thriving citizens. It may be a bit of a cliché but children do represent our future. Of course, as most people do have children, for the majority it in any case represents redistribution over their own life course.

Child benefit thus has an important function in supplementing wages without the drawbacks associated with means testing. In particular, it cannot be accused of subsidising low-paying employers and it does not create poverty traps. CPAG’s annual research into the cost of a child carried out by my colleague at Loughborough University, Professor Donald Hirsch, shows how the benefit represents core income, not an extra for families, so perhaps it is not surprising that, despite what the noble Lord, Lord Lawson, said in our first sitting about its unpopularity, a recent poll of 1,000 parents for End Child Poverty found that only one in 10 parents thinks that child benefit and child tax credit should not keep up with inflation. As many as two-thirds thought they should be increased in line with the cost of living or more, with virtually no difference between income groups. As I said, most people are parents at some point in their lives, and many grandparents will share these concerns about decent benefits for their grandchildren.

Moreover, because it is paid to the so-called “hard-working families” beloved of politicians, child benefit can act as a work incentive. It therefore makes no sense to freeze it when one of the primary objectives of the freeze, according to the impact assessment, is to increase work incentives, and it makes every sense to uprate it in line with average earnings. There is also a strong case for uprating it in line with personal tax allowances.

Those of us who have been in the game for a long time, such as my noble friend Lord Kirkwood, will remember that child benefit replaced child tax allowances as well as family allowances. At the time, there was a cross-party consensus that they should therefore be treated as akin to personal tax allowances when it comes to uprating policy. Unfortunately, that consensus soon broke down, but it does not invalidate the argument. For a Government who purport to care about child poverty and making work pay, it makes no sense to sink huge amounts of public money into raising tax allowances while freezing child benefit. Apart from anything else, the latter reaches parents in work earning below the tax threshold who gain nothing from further increases in personal tax allowances. Also, low-income parents earning above the tax threshold lose most of any gains from an increase in the personal tax allowances through cuts in means-tested benefits—a drawback that will increase under universal credit.

A constant thread running through our deliberations these last few days and weeks—however long it has been—has been how, despite government protestations, the best interests of the child have not been a primary consideration, as required by the UN Convention on the Rights of the Child. I fear that this Bill will be used as evidence against the UK when its record is interrogated by the UN committee next year. If at the very least the Government were prepared to remove child benefit from the four-year freeze, it would represent a degree of mitigation.

[Baroness Sherlock (Lab)]

My Lords, I will not detain the Committee long as I made clear the Opposition’s approach to the uprating of benefits on the last group of amendments.

Amendment 97 would allow benefits claimed by carers to be increased in line with inflation. My noble friend Lady Pitkeathley once again outlined very powerfully the problems faced by carers. I commend her brilliant, long and persistent attempts to put these things before the public and Ministers.

As the Committee heard in previous debates, there must be a real danger that the state will start to penny-pinch its way into driving carers out of caring, leaving those for whom they care to be the responsibility of the state. Throughout this Bill there seems to be little attempt to try to assess the costs to the public purse that might accrue to other parts of government, national or local, as a result of savings in the social security budget. My noble friend Lady Lister, in moving her amendment, advocated a triple lock for child benefit. I very much appreciated the history lesson for those of us who remember going back to where that is. The CPAG warned us that during the last Parliament child benefit lost 13% of its value against CPI, and 16% against RPI. Of course, that is far from the only cut affecting children. The levels of benefits and tax credits for children have faced repeated real-terms cuts.

I am using this amendment to ask the Government to do something very specific that they keep refusing to do—namely, to provide a cumulative impact assessment of the effect on particular categories of people of the changes that they are making. Whenever we ask them to do this, they put up two defences. The first is that it is all a bit complicated because everybody’s circumstances are different, so they cannot be expected to produce a single cumulative assessment. Well, somehow the Treasury and the IFS have managed for years to assess the impacts of measures on categories of people, if necessary by modelling them in relation to different household sizes and compositions. We would be happy to get that.

The Government’s second argument is that you cannot just consider benefits, you have to consider all the other wonderful things the Government are doing, such as the national minimum wage and tax allowances. That is fine. Include those in the models as well and we can all see who will be better off and who will not as a result of the combination of all these effects. A variation on that defence is that it is too hard because of the dynamic effects of the Government’s wonderful welfare reforms. Translated, that means either the Government reckon that universal credit will make people better off or that they are going to make them so desperate that they will have to work because they will have no other choices. In neither case have the Government produced enough evidence, let alone hard evidence, that can be included in modelling and put in the impact assessment, because the evidence is not there—so they just say that it is all a bit hard.

I have tried repeatedly to get the Government to do this, as have other noble Lords, and we are getting nowhere at all. But there comes a stage where if the Government keep bringing forward legislation which repeatedly attacks the same people, and do not do this, there is a significant democratic deficit. It is hard to know how this House can begin to understand the implications of what is being done when the Government simply refuse to give us the evidence to do it. So I urge the Government to take advantage of this debate to agree at last to address the gaping hole in the evidence and commission some cumulative impact assessments.

Welfare Reform and Work Bill

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Monday 21st December 2015 Lords Chamber

[Baroness Sherlock]

My Lords, I shall also speak to Amendments 77, 79, 82, 84 and 85, which are in my name and that of my noble friend Lord McKenzie of Luton. These amendments would exclude a series of benefits from the cap which relate to families with children, and I want to say a brief word about each of them. Once again, we have tabled these as probing amendments and I therefore encourage the Minister not simply to say yes or even no. If he said yes, I would obviously fall over in shock. I am trying to use these amendments as a vehicle to get him to explain more carefully to the House what he expects people affected by the cap to do to avoid it. That is all I am asking for here, so I encourage him to respond in that vein.

Amendment 76 would exclude child benefit from the cap and Amendment 77 would exclude child tax credit. Just to be clear, the Minister mentioned in the last group that he feels that all income replacement benefits should be included. Those are specifically not income replacement benefits but extra-cost benefits. Child benefit has traditionally been a universal benefit—it is still available to all but the highest-tax bracket households—and it is designed to be the classic extra-cost benefit. It is a horizontal transfer from taxpayers as a whole to households with children, out of a recognition that children are a public as well as a private good and therefore we should all share in the costs of raising them. The parents pay the lion’s share but we all make a contribution because it is in all our interests to raise children who are happy and healthy, and who will be the next generation paying for the rest of us. Why are they therefore excluded?

Amendment 79 would exclude guardian’s allowance from the cap. You can claim guardian’s allowance only if you are caring for somebody else’s children because their parents have died, or because one has died and the other cannot look after them because, for example, they have gone missing or are in prison. What behavioural incentives are the Government seeking by including guardian’s allowance in the cap?

Amendment 82 would exclude maternity allowance from the cap. Maternity allowance is available only to those who are in work but cannot get statutory maternity pay. It enables the woman to take paid maternity leave. The Minister may mention the grace period but that applies only to people who have been in work for the last year at the point when they make an application for benefit, and that may not apply to everybody in this circumstance. Suppose that a woman finds that she hits the cap because her household benefits rise as a result of her maternity allowance. What is she to do? Let us say that she is single or that her partner is unable to work. What behavioural response does the Minister want? The two things that have traditionally been suggested are to work or to move house. Is she to work when she has a job but is going on maternity leave? Is she to move house when she is about to give birth? Neither of these seems an obvious response, although I may have missed something, and I very much hope that I have. I raised this at Second Reading or some other point during discussions on the Welfare Reform Bill in 2012, because I remember at the time I could not really believe that the Government genuinely meant to include a maternity benefit in the cap, when the way you got out of it was by working. However, I very much hope I have missed something and look forward to the Minister explaining that one.

Finally, Amendments 84 and 85 would exclude from the cap widowed mother’s allowance and widowed parent’s allowance, which are paid only to widows below state pension age who have dependent children. Those are contributory benefits, eligibility for which depends on the contribution record of the late spouse. I would be interested to hear the Minister’s reasons for including those benefits in the cap.

The impact of this on children will be quite significant. To date, more than twice as many children have been hit by the cap as adults. Children are disproportionately affected by the benefit cap, and 63% of households capped to date contain a child under five. Reducing the cap means that some families simply will not have enough income to manage. Even if they manage some weeks, there will come a time when their budgeting gets thrown off course; for example, when a winter heating bill comes in, both kids have a growth spurt, a child moves to secondary school and needs a new uniform, or the fridge breaks down. With access to hardship payments much reduced, and unable to repay loans or catalogue payments, parents will build up debts and miss rent payments simply to feed the kids and buy essential items. If the Government are going to cut benefits to families with children unless their parents take certain specified actions, the very least they can do is explain to us what those actions are and what they expect them to do about it.

[Baroness Lister of Burtersett]

My Lords, I rise to speak in support of Amendments 76 and 77, to which I have added my name. I apologise that we will be going over some of the issues raised in the first group of amendments, particularly by my noble friend Lady Hollis, but they are crucial because they go to the nub of some of the disputes among us as to what is fair and what is not.

The amendments follow on from my Amendment 93, discussed earlier, which was designed to safeguard and promote the welfare of children. In speaking to that amendment, I referred to Lord Carnwath’s judgment in the recent Supreme Court case on the cap, in which he made the point that the inclusion of child benefit and child tax credits in the cap raises,

“questions why the viability of a scheme, whose avowed purpose is directed at the parents not their children, is so disproportionately dependent on child related benefits”.

He also said:

“The cap has the effect that for the first time some children will lose these benefits, for reasons which have nothing to do with their own needs, but are related solely to the circumstances of their parents”.

This takes us to one of the “policy objectives” or “intended effects” listed in the impact assessment, namely to:

“Promote even greater fairness between those on out of work benefits and tax payers in employment (who largely support the current benefit cap), whist providing support to the most vulnerable”.

The “most vulnerable” are not defined, but in the impact assessment on the benefits freeze, the term is qualified with the phrase,

“who are least able to increase their incomes through work”.

Surely children fall into that category. Yet the justification for the way the cap is constructed and for the reduction in its level ignores this and, as Lord Carnwath observed, takes no account of children’s needs, relating instead solely to the circumstances of their parents. Moreover, it is worth repeating the observation of the noble and learned Baroness, Lady Hale:

“The children affected suffer from a situation which is none of their making and which they themselves can do nothing about”.

My noble friend Lady Hollis made the point that it is not a level playing field here—a horrible sporting metaphor—and that we are not comparing like with like when we compare in-work earnings with out-of-work incomes, although I will not go into more detail on that. I tried to find out by way of a Written Question how much the so-called hard-working families we hear so much about were likely to be receiving in benefits. This time the response I received rehashed the latest government mantra of their commitment to,

“a higher wage, lower tax, lower welfare economy”,

and referred me to the HM Revenue & Customs website. I enlisted the help of the Library to see whether it could elicit the answer from the website, but—surprise, surprise—it could not. In effect, a government Minister—in this case, the noble Lord, Lord O’Neill of Gatley—was encouraging me to waste my time by sending me to a website that would not supply me with the answer to the questions I was posing. Given that the Government were able to supply similar figures in answer to a Written Question during the passage of the Welfare Reform Bill in 2012, it is surely possible, and beneath the disproportionate cost threshold, to do so again now. I fear that, increasingly, government departments simply cannot be bothered to answer our completely legitimate questions, thereby ignoring their responsibility for parliamentary accountability.

Similarly, I tabled a Question to find out what the impact would be in terms of the total number of households capped, the number of children affected and the cost to the public purse, if children benefit and child tax credit were excluded from the cap. Once more, I was referred by the Minister to the impact assessment, as if that contained the answer. Yet again, such information was made available during the passage of the Bill in 2012, showing that nearly half the savings from the cap were being made as a result of the inclusion of children’s benefits: in other words, nearly half the savings were being made on the basis of a blatant piece of unfairness that drives a coach and horses through the Government’s claim to be creating that beloved level playing field between families in and out of paid work, giving rise to Lord Carnwath’s query about why the policy’s viability is so disproportionately dependent on child-related benefits when its avowed purpose is directed at the parents not the children. It is clear from the evaluation of the existing cap that one consequence is likely to be even greater arrears and debt, thereby aggravating what the Government themselves consider to be a root cause of child poverty.

On our first day, there was broad agreement among noble Lords who spoke that the two-child policy does not meet the Government’s own family test. Although it might not be quite so blatant here, I believe the same applies to the inclusion of children’s benefits in the children’s cap. Although the impact assessment for the cap is much more thorough than that for the two-child policy, I could not see any reference to the family test having been applied. Could the Minister confirm that it was applied and could he undertake to publish the documentation?

When we last discussed this issue, during the passage of what became the 2012 Act, as we have already heard, there was strong support in your Lordships’ House, under the leadership of the right reverend Prelate the Bishop of Ripon and Leeds, for excluding children’s benefits from the cap. I very much hope that that support will be there again now, because with a reduction in the level of the cap to an arbitrary two-tiered level below median earnings, the case for exclusion is stronger than ever.

--- Later in debate ---

[Baroness Sherlock]

My Lords, a change of subject. I am pleased to say that these amendments are not about the benefit cap. Amendments 95 and 102 are in my name and that of my noble friend Lord McKenzie of Luton, and Amendment 100 is in our names and that of my noble friend Lady Lister.

Clauses 9 and 10 provide for the freezing of certain working-age benefits for a period of four years until 2019-20. This is estimated to save the Government £3.5 billion in 2019-20 when compared to an uprating by CPI. The benefits and tax credits included in the freeze are the main working-age components of income support, jobseeker’s allowance, ESA, housing benefit and ESA WRAG, together with the key elements of working tax credit and the individual element of child tax credit, universal credit and child benefit. It does not extend to disability premiums, allowances for caring responsibilities or pension benefits.

Amendment 95 would displace the automatic freezing of those items and require a review to take into account inflation and the national economic situation. Amendment 100 would have the same effect for child benefit, and Amendment 102 for the otherwise frozen elements of universal credit.

Clearly, even if they were accepted, such amendments would not preclude the various rates remaining unchanged, but they would require some consideration of their real value and the capacity for the economy to share more fully the benefits of growth. It would give the Government the opportunity to think again in the light of changing—the Government would doubtless argue, improving—economic circumstances.

A bit of a pattern has been developing here. Previously, the retail prices index was used for uprating. Then Ministers robustly argued that CPI was the right measure. Then, in 2013, they decided to limit increases to 1% as a temporary measure. Now, whatever happens to inflation, they will not uprate benefits and tax credits for the rest of this Parliament. First RPI, then CPI, then 1% and now 0%.

Our major concern with the way that this freeze is being done is that it both cuts the link between prices and earnings and widens the gap between the income of the poorest and the living standards of the mainstream of society. It uncouples eligibility for support from need, a feature also of changes to the benefit cap and the local housing allowance.

We have been living in fairly benign inflationary times, with CPI expected to rise from 0% in quarter 3 of 2015 to near the Bank of England target of 2% by the second half of 2017—although the components of CPI do not necessarily reflect the basket of costs which most impact poorer households. We know that GDP growth is projected by the OBR to be between 2.3% and 2.4% through to 2020.

In considering these matters, we must have some regard to the financial resilience of households and their ability to cope with what will be a sustained real-terms reduction in their resources between now and the end of the Parliament. If we look at the tax and benefit changes under the coalition Government, we see that austerity was used to introduce net tax rises of £13.6 billion and net benefit cuts of £16.6 billion, including pension increases of £5 billion. The IFS analysis shows that, in terms of changes to income, the poorest two deciles did the worst over that period, with working-age households with children particularly hit. The End Child Poverty Alliance reminds us that some 4.1 million families and 7.7 million children have already been affected by below-inflation rises over the last three years. Ministers will doubtless point to the Government’s manifesto commitment to freeze benefits, but I hope that the Minister will acknowledge that that commitment covered only a two-year period, not the four-year period that the Bill proposes.

I am really interested in process. We have a long tradition according to which Ministers are required to assess what people need to live on before coming to Parliament annually to propose what should happen to the levels of benefits and tax credits. Sometimes in this House there is just the noble Lord, Lord Kirkwood, and me in the Moses Room, along with the Minister; but the point is that we got to test the Government’s case before decisions were taken affecting the lives of millions of our citizens. I therefore have two questions to ask the Minister. First, what assessment are the Government making to ensure that there is some link between benefits and tax credits and what a family needs to live on? Secondly, will the Minister assure the Committee and the country that once this Parliament is over, it is the intention of the Government to return to linking the level of benefits and tax credits with inflation and to the practice of Ministers being accountable annually to Parliament for those decisions? I beg to move.

[Baroness Lister of Burtersett]

My Lords, I will speak in support of all of the amendments in this grouping. The only reason that my name is not on the first one is that I did not spot it in the Marshalled List. The four-year freeze in most working-age benefits represents the largest of the many cuts in the Bill. Conveniently for the Government, it is an invisible cut; gradually people will find that the benefit that they rely on is able to buy less and less, but they will probably blame the cost of living, not realising that it is the result of deliberate government policy. As the Joseph Rowntree Foundation study commented a few years ago, upgrading policies have big effects over time:

“They are among the most significant decisions taken by Chancellors … Their gradual effects seem imperceptible on a year-to-year basis, yet they carry immense implications for the future”.

So let us not underestimate the significance of Clauses 9 and 10.

Benefits have already been cut in real terms due both to below-inflation increases and to the switch to the use of the CPI rather than the RPI. Moreover, as the latest JRF Monitoring Poverty and Social Exclusion report points out, essentials have risen faster than the average price index in recent years. Since low-income families spend proportionately more on essentials,

“low-income families have in effect experienced a higher rate of inflation than other families”,

meaning that their benefits have been able to buy even less than before.

This latest cut in real value has been described by the IFS as,

“highly regressive, with the bottom three deciles losing most”,

which is hardly surprising. If any noble Lord suggests that benefits are adequate, and that therefore those reliant on them can afford to take such a cut, I suggest that they try living on benefits—not for a week as a benefit tourist, but for months without savings or the kind of stocks that we all take for granted.

The briefing note that we were given spells out two main objects as the policy’s rationale, the first being to deliver savings to contribute to deficit reduction,

“while maintaining support for the most vulnerable”.

To be more accurate, it should say “some of the most vulnerable” since, for instance, children’s and some disability-related benefits will not be protected, as the EHRC points out. Nor does it protect protected groups, with women and black and minority-ethnic groups disproportionately affected. Whatever one thinks of the primacy given to deficit reduction—and eminent commentators such as Martin Wolf of the Financial Times question it and the extent to which it is to be achieved by spending cuts—it is a political choice to make those with the narrowest shoulders bear so much of the burden, particularly when others have enjoyed tax cuts. These, as it happens, were, in effect, paid for by benefit cuts under the coalition Government, according to CASE at the LSE.

As my noble friend Lady Hollis has pointed out in previous discussions, it is a myth that social security spending is out of control. As the OBR analysis shows, over the past 30 years, the real increase in spending has been broadly in line with growth in the economy, so there has been no significant change in the proportion of national income devoted to social security spending. The largest contribution to the increase in spending since 2008 has been the rise in the real value of pensions.

The other main objective given is to,

“help to reverse the trend where earnings growth has been slower than the growth in benefit rates”.

However, this is a very recent trend. Professor Jonathan Bradshaw has used the DWP abstract of statistics to show that the adult rate of unemployment benefit was worth 21% of average earnings in 1972, the earliest date for which there are consistent data. By 2008, the JSA rate had fallen to 10.5%, half of what it was in 1972. It is true that the short-term trend, to which the Government refer, means that it has increased slightly now to 11.7%, but now that wages are expected to start rising again it will no doubt fall back again, even without this freeze.

The other justification given in the impact assessment is, once again, that it will increase work incentives. It is worth pointing out that some of the benefits affected are paid to those in work in any case, a point to which I will return in the next grouping. As the famous OECD quote used by the Government to justify ESA for new WRAG claimants made clear, work incentives can be improved in a distributionally fairer way by improving in-work benefits rather than adopting this Poor Law mentality of cutting out-of-work benefits. Indeed, a cross-national study reported in the 2009 British Social Attitudes survey concluded that,

“employment commitment is stronger in countries with higher levels of welfare state generosity”.

Therefore, I really do not believe that there is any justification for freezing benefits, not just for two years, as stated in the Conservative manifesto—as my noble friend pointed out—but, in effect, for the whole of this Parliament. I accept that, at present, it looks as if inflation will remain low, but who knows what shocks might hit the world economy and with what effects? It therefore behoves a responsible Government to keep benefit levels under review and to accept these amendments.

Welfare Reform and Work Bill

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Monday 7th December 2015 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I rise—albeit a little slowly—to move Amendment 11 in my name and that of my noble friend Lord McKenzie of Luton. This is a very simple amendment which would ensure that the two-child limit applies only to children born after 6 April 2017. The impact assessment for this measure states:

“Entitlement will remain at the level for two children for households who make the choice to have more children in the knowledge of the policy”.

That simply is not true. If someone has more than two children and needs to make a claim for universal credit after 6 April 2017, and if they are not getting tax credits or UC and they have not in the past six months, this measure will apply to them. Entitlement will remain at the level of two children for those households, even though they quite clearly have not made the choice to have more children in the knowledge of the policy.

I suppose that it is just about possible that there will be those who manage to conceive and deliver a child between the passing of the Bill and April 2017, though they would have to get a move on, but most of the children affected by this will be living, breathing, existing children, conceived and born when this policy was just a glint in the eye of a cost-cutting Chancellor.

I know that various attempts have been made to get the Government to explain their rationale for this. I understand that it was indicated to Peers during a briefing session that the reason was that, if someone had not needed to claim benefit or tax credits during the past six months, they clearly have enough money to protect themselves against unforeseen events, so should not have access to the full support of the welfare state. I may be mistaken, but if I am the Minister can correct me. If that is right, however, surely that is precisely what the welfare state is for—to protect all of us against unforeseen circumstances.

Let us suppose that a couple have two primary-school children, and then they have two year-old twins. One day the husband dies or disappears or is paralysed in an accident and cannot work, and they turn to the welfare state. Those twins will be invisible for the purposes of universal credit, so you can see that the dream scheme that Ministers have boasted would swing seamlessly into action as soon as someone’s circumstances changed will not help that family feed, clothe and house the twins.

The family will potentially lose £5,560 a year every year until the twins are adults. We are talking about the best part of £90,000. How should the family have provided for that when they did not know they had to? What should they have done? Saved that much when they are raising toddlers? Maybe they should have bought a PPI policy, the cause of the biggest mis-selling scandal in modern financial history—and I should know, since I am the senior independent director of the Financial Ombudsman Service. But even if that were a good idea, why would they do it? They thought the welfare state was there to help them at such times. That was what they had been led to believe when they had those children.

As I indicated in the previous debate, I think that this whole measure is a terrible idea. But perhaps I can pass on some advice to the Minister from the greatest Cabinet Secretary of modern times, the legendary Sir Humphrey Appleby. Sir Humphrey once said to his Minister: “If you’re going to do this damn silly thing, don’t do it in this damn silly way”. If the Minister is going to reduce support for larger families on the grounds that families on universal credit will have to make the same choices as those who are not, he should at least not apply it to people who have already made their choices because their children are already here. I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I support my noble friend, who made a very powerful case. The joint briefing from the churches and faith groups that was circulated to all Peers made a very good point. It said:

“A policy designed to incentivise families to make responsible choices, becomes an unavoidable financial penalty for anyone confronted by relatively common life events”.

This amendment in particular puts that quotation into relief. The Office of the Children’s Commissioner has raised similar concerns.

I made the point at Second Reading that this provision sits oddly with the Government’s own emphasis in this and earlier legislation on the importance of a dynamic perspective on family behaviour. Indeed, in a letter of 13 October to the EHRC about impact assessments for the current Bill, the Secretary of State made as his main point the need,

“to take fully into account the dynamic nature of people’s lives”.

So why are the Government refusing to do so now, especially, as my noble friend said, in relation to existing third or subsequent children where there is a new universal credit claim? What is the justification?

As my noble friend said, when this was explained to us I think the way it was put was that there would be an unfair advantage to richer families if they were able to claim universal credit for third and subsequent children. Perhaps these families were not claiming tax credits or universal credit before, but they could still be on a low income and simply not have claimed. We know that take-up is far from perfect. I know that the Government expect take-up to be higher for universal credit, but that remains to be seen. I have been around this game for quite a long time with the expectation that take-up would be improved by various benefits and so forth. However, it remains stubbornly at less than 100% for means-tested benefits. Even if they were better off—my noble friend made a powerful point here—financial circumstances can change very quickly in the event of life events or shocks. So where is the fairness in refusing support to, say, an early teenage child who is the third in the family and who was born many years ago?

--- Later in debate ---

[Baroness Lister of Burtersett]

My Lords, in speaking in support of this amendment, I will pick up what the right reverend Prelate said about the inadequacy of the impact assessment. This point was also made by the Equality and Human Rights Commission from the perspective of equality and human rights. It argued that it does not “enable proper scrutiny” or meet the requirements of the public sector equality duty; nor is there an assessment of the “aggregate effect” of the changes on people.

In fact, the impact assessment is inadequate from any perspective. In particular, there is no assessment of the impact on child poverty, despite the Joint Committee on Human Rights recommending that the Government should assess the impact on child poverty of any new law, as child poverty is a human rights issue—I declare an interest as I was a member of the committee at that point. I asked a Written Question about the impact, only to be told to look at the impact assessment—the implication being that I had not read it, which I found rather insulting.

Not only is there no assessment of the impact on child poverty, but this is the quality of distribution analysis:

“The policy has the impact of redistributing income from Universal Credit/tax credit recipients to the Exchequer (i.e. society as a whole)”.

Actually it is not society as a whole, because when I last thought about it, universal and tax credit recipients were themselves members of society. The assessment continues:

“The policy therefore has distributional impacts”.

That is the distribution analysis—and the impact assessment on life chances is similarly risible.

I remind the Minister of what it says in the Companion—that Ministers should be as open as possible in answering questions, because this is inherent in ministerial accountability to Parliament. I therefore ask him again now: what is the department’s assessment of the impact of these clauses on the number of children living in poverty? I simply do not accept that it is not possible to make an assessment. I accept that there might have to be a fairly wide margin of error—we cannot just say that it will be exactly x thousand—but I do not accept that there is no assessment. It is not possible.

The right reverend Prelate also mentioned the family test. That is drawn up by the Department for Work and Pensions itself. It is supposed to be equivalent to the public sector equality duty. According to the DWP, its application should be documented and the relevant department should consider publishing it. Given that this clearly has a family impact, why did the department decide not to publish the family test? As part of its equality statement for reforming asylum support, the Home Office set out very clearly each of the questions that the family test is supposed to answer and gave its answer. I might not agree with those answers, but that was a model of how a department should deal with it.

Will the Minister undertake to provide noble Lords with the documentation of the application of the family test before Report? There must be documentation, according to the DWP’s own guidance. Given that the measure has a clear family focus, can he tell us what additional analysis was undertaken involving stakeholders, as is recommended in the DWP’s own guidance on the test? Finally, will the Minister tell us which other countries restrict payment of benefits for children to smaller families in this way? I am reliably informed that there is no other country, but I accept that I may be wrong. When I last looked at this, I found that countries that cared about family policy and child poverty tended to pay more to larger families, rather than less, but I would welcome elucidation on that.

[Baroness Sherlock]

My Lords, I rise to support Amendment 21 in the name of the right reverend Prelate the Bishop of Portsmouth. I fully support the requirement in the amendment to report on the impact on family relationships and functioning, for the reasons that have been articulated in the debates we have been having this evening. Until now we have not discussed in any detail the impact on faith communities, so I am going to concentrate on that.

As we have heard, larger families are strongly prevalent within some faith traditions and cultures, which leads to legitimate concerns about the differential ways this policy will be felt throughout society. There is an issue of equality for children born into families of faith. This measure will disproportionately affect families where, perhaps because of the parents’ faith, there is a devout desire to avoid contraception and abortion. As we have heard and discussed this evening, family planning is not infallible and many people of faith and other like-minded people are concerned that unexpected pregnancies could lead to a rise in the number of abortions. This point was made by the right reverend Prelate the Bishop of Portsmouth earlier.

As my noble friend Lady Lister pointed out, the most damning evidence about the differential impact of this measure on equality grounds comes from the Equality and Human Rights Commission. I declare an interest, in that I am a former commissioner of EHRC. It says:

“The proposed changes may have a disproportionate negative impact on people from particular ethnic or religious groups … The impact assessments and human rights memorandum which accompany the Bill do not assess the effect of the Bill on equality and human rights in sufficient detail to enable proper scrutiny of the legislation”.

It is not kidding.

Disgracefully, the Government have resisted all pressures to conduct cumulative impact assessments of these measures, giving impact assessments only for individual measures. Even within that, however, I was staggered to find that there had been no attempt to conduct an equality impact assessment on the two-child policy. The short section in the IA on the impact on protected groups mentions gender and disability in passing, acknowledges that ethnic minority households may be more likely to be impacted, though offers no detail, but makes no reference at all to the protected characteristic of religion and belief. Can the Minister explain why there is no such reference, when even a cursory glance at the data suggests the possibility for significantly differential impacts on the grounds of some protected characteristics, particularly religion and belief?