Council Tax: Support Schemes
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham
Baroness Stowell of Beeston
My Lords, I understand that certain parts of the country have faced greater challenges than others. Individual local authorities have much greater capacity to raise revenue through their tax-collecting regimes. Certainly, local authorities are starting to build up reserves at a rate that is quite staggering. They are now collectively sitting on £19 billion. I would therefore urge local authorities to look to what measures they can take before requiring further money from central government.
Baroness Hollis of Heigham (Lab)
My Lords, is the Minister aware that the same families who are being hit by the new council tax scheme and are having to contribute 20% or even 40% to their council tax, where in the past, because they were disabled, they did not, are very often the same families who are also being hit by the bedroom tax? They are being hit twice over. Is the Minister aware that the Resolution Foundation has now told us that more than 870,000 families are spending more than 50% of their disposable income in debt repayments, and a further 3 million are paying more than a quarter of their disposable income in debt repayments? How is she addressing that problem of inequality and the quagmire of debt?
Baroness Stowell of Beeston
In the context of this scheme, it is important for me to make clear to the House that when we went from a national scheme to the one that is operated now by local authorities, all councils applied the same approach to how they would support those who are vulnerable. A good proportion of them, about 43%, have actually offered additional protection to vulnerable groups. The most important thing I would say to the noble Baroness is that we have to have a strong economy that creates jobs, and that is what we are doing and that is the priority that we are focusing on.
Children: Temporary Accommodation
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham
Baroness Stowell of Beeston
My noble friend is right. In the efforts that we are making under the heading of prevention, certainly some of the money is used to ensure that families stay together so that as few children as possible are disrupted and moved out of their families to any other kind of home.
Baroness Hollis of Heigham (Lab)
Does the Minister agree with local authorities and with me that the number of children in temporary accommodation, and the length of time that they spend there, will both rise as a direct result of the Government’s policies—that is, the bedroom tax?
Baroness Stowell of Beeston
There is no evidence at this time to suggest that what the noble Baroness asserts is the case. I emphasise the amount of funding that has been specifically set aside both for the areas where rent increases are causing a shortage of affordable housing and for all areas to help people transition and deal with the different welfare reform changes.
Housing: Affordability and the Underoccupancy Charge
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham
Baroness Stowell of Beeston
I will come on in a moment to transitional arrangements and what is in place to support people affected by the removal of the spare room subsidy.
As my noble friend Lady Seccombe reminded us, pensioners are not affected by this measure, and I am happy to reassure the noble Baroness, Lady Dean, that there is no question of that position changing. The focus is on working-age people who are better able to improve their financial position and make up any shortfalls, and there are a number of other exemptions in addition to pensioners.
Baroness Hollis of Heigham
The noble Baroness implied that working-age people are able to work but she will know that two-thirds of those affected are disabled families for whom the option of increasing their income is minimal.
Baroness Stowell of Beeston
If I may, I will move on in a moment to how we are helping those who require special support.
Removal of the spare room subsidy is also in part helping us get to grips with the housing benefit bill, which has grown to £24 billion this year and nearly doubled under the previous Government. I promise that I will come back to the remarks of the noble Baronesses, Lady Hollis and Lady Quin, on savings estimates. While it gives me no pleasure to say this, given the spiralling housing benefit bill it cannot be right, as my noble friend Lord Howard of Rising said, that the taxpayer should continue to pay for homes that are too large for the household’s needs. Before we made the change, up to 1 million spare bedrooms in working-age households in England were being paid for by housing benefit.
As I have acknowledged, we are in a transitional period, with both landlords and tenants facing change. The Government are investing heavily in new affordable homes and we have to get that supply coming through. Over time we think that there will be more efficient use of social homes, with the spread of accommodation being more appropriate for the area as a result of the measures we are introducing. However, getting there will take time, which is why we have made available £405 million of discretionary housing payments over this spending review period. The noble Baroness, Lady Blackstone, said that that is not enough, but we have trebled the DHP budget to £190 million this year. I think that it was my noble friend Lord True who talked about how his council is drawing on that fund and how other areas are adjusting to the new situation.
It is early days but I can report in general terms that councils are using the fund to give awards where it is clear that the claimant is unable to make up the shortfall. This includes longer-term awards, including, as the noble Baroness mentioned, to disabled claimants living in significantly adapted homes, and short-term support—for example, to help people who have been off work due to illness but are due to return soon, and people engaging with their landlord in attempting to downsize.
However, many people are of course already managing the change. Among those who are out of work, some are finding work for the first time, some people already in work are able to increase their hours and others are able to move to smaller accommodation. In the two and a half years between the policy being announced and it being implemented, local authorities, landlords and tenants in some areas started to prepare for this change. Because time is limited I shall not go into the detail but Westminster, for example, has used a scheme to ensure that support is available for those who want to downsize. Likewise, the council in Salford is running schemes to help to bring together tenants who may be interested in swapping their homes. My noble friend Lady Seccombe referred to HomeSwap Direct. Through this scheme, for the first time, social tenants who want to swap their homes can now see every available property, thus boosting their chances of moving. More than 10 million searches have been made on that website since it was launched a couple of years ago.
My noble friend Lady Seccombe mentioned some other schemes which support pensioners who, although they are not required to move, might want to downsize. My noble friend Lord Stoneham made an important point when he highlighted the effort made by some responsible local authorities and housing associations to advise tenants on financial management to avoid getting into arrears.
We are taking proper steps to make sure that we understand how the removal of the spare room subsidy is working. We have commissioned extensive research, which will provide evidence of how this and other welfare reforms are working in practice. I can reassure my noble friend Lord Shipley that the interim evidence on the removal of the spare room subsidy is due to be published next spring. In the mean time—I mean this absolutely sincerely—I acknowledge that it is inevitable that we will hear stories, which, albeit anecdotal, will be concerning and upsetting, about whether this is a policy that we support in principle or oppose. However, we believe that it is too early to draw conclusive evidence from the emerging data on how the policy is operating at the moment. We want to make sure that sufficient time is allowed to pass so that we can reach a fully informed view on the impacts on both landlords and claimants. As I have said already, I make it clear that we are committed to giving proper consideration to all that evidence. We will publish it, and be held to account for it, next year.
In conclusion, as I said at the start, this Government are committed to building more new affordable housing and we have made a strong start in putting right the previous decline. We are committed to making the best use of the existing stock of housing and have changed the law so that local authorities and housing associations have more freedom. We are also committed to supporting people who are not yet able to buy or rent on the open market but who, in time and with the kind of support that we are offering across the board, could realise their aspiration to do so.
As always, I have learnt a great deal today. The noble Lord is about to stand up and ask me a question, so before I sit down I shall give way.
Jobseekers (Back to Work Schemes) Bill
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 7 months ago)
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Baroness Stowell of Beeston
It is Committee, but the Companion guides us by stating that, during any stages:
“Lengthy or frequent interventions should not be made, even with the consent of the member speaking”.
My noble friend is very tolerant and I know that he will keep responding to interventions. However, the hour is late and there have been several interventions.
Welfare Benefits Up-rating Bill
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 8 months ago)
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Baroness Stowell of Beeston
My Lords, I must say to noble Lords on the Benches opposite that we have had a number of debates about the economic context in which we are making these changes, and I have been disappointed that more noble Lords have not found themselves moved to contribute to them so far. I am glad that there have been more contributions to this debate.
Baroness Hollis of Heigham
My Lords, I thought that we had discussed this already. Can the noble Baroness help me by describing how we could have made our contributions? As she knows, four or five of us have regularly taken part in social security debates—including my noble friends Lady Lister and Lady Donaghy, and me, among others. If we had made our contributions, does she think that we would have got to the important debates on disability and the 3% trigger amendment before dinner? If not, does she think that it would have been fair to disabled people to exclude them from the possibility of Parliament reconsidering a foolish decision?
Baroness Stowell of Beeston
In my short time in this House, we tend to sit until about 10 pm and have debates on amendments at all times that we are sitting. I did not realise that we were expected to have debates before a certain time at night.
Let us focus on statutory maternity pay. I remind the House that the UK has a strong and effective maternity and parental regime. The UK is significantly more generous than the requirements of the EU pregnant workers directive. The directive states that a woman should benefit from 14 weeks paid maternity leave; we provide 39 weeks. The directive states that a woman should receive at least the amount that would be paid for sickness; our standard rate of maternity pay and maternity allowance is £135.45 per week. That compares to the statutory sick pay rate of £85.85 per week. In addition, the latest available data from the OECD show that the proportion of our GDP spent on maternity and parental pay is higher than that in Germany or France.
It is also worth reflecting on the fact that in the past decade, the length of time for which statutory maternity pay was payable more than doubled. Under the previous Government, it was doubled. It is important to be aware of the baseline that we are starting from.
Yes, the decisions that we have to take on statutory maternity pay will mean a slightly smaller increase for people over the next few years, but that is in the context of a strong and effective maternity architecture in our country which will remain firmly in place. Indeed, the Government are committed to make this architecture even stronger. Noble Lords will soon be debating provisions in the Children and Families Bill which allow working parents to choose which parent takes parental leave and parental pay to care for their child in the early years.
It is also important to understand these changes in the context of other government reforms that support women, families and children and help make positive changes to their lives. I said this in Committee, but it is important, so I will repeat it. For example, a woman working full time at the national minimum wage for six months of the tax year who then receives statutory maternity pay for the next six months will still be better off overall as a result of changes to the income tax personal allowance.
We have debated universal credit many times before, and it is acknowledged that its purpose is to make it worth while for people to move back into work. Once universal credit is introduced, some 800,000 out-of-work lone parents would benefit significantly if they started to work just 10 hours per week. In nearly all such cases, these parents would see at least £40 more in their pocket per week than they would have done under the current system. Also as part of universal credit, £200 million extra is being spent to support families with childcare costs. For the first time, this support will be made available for families who work fewer than 16 hours per week. That means 100,000 more working families will be helped with their childcare costs.
Looking ahead, as my noble friend Lord Newby mentioned in one of the earlier debates today, we have set out changes that will increase eligibility of support to five times as many families as currently is the case through a new tax-free childcare scheme. As part of these changes, we have also announced today a further £200 million additional support in universal credit that will provide working families with the equivalent of 85% of their childcare costs where the lone parent or both parents pay income tax.
When referring to various different payments to families, the noble Baroness, Lady Sherlock, said that she could go on; so could I. There are other things that the Government are doing to support families and women. The support for families that the Government provide is about more than income transfers. I do not deny that families value them and they can make an important difference, but money is often better invested in interventions that really can change lives. In demonstrating this today, I have tried to explain what the Government are doing in addition to the comprehensive support that we provide to new mothers and to show how much there is in providing for families in the right way.
This amendment would reduce savings from the Bill by around £50 million in 2015-16. As I have said, we have taken none of the decisions in this Bill lightly, but we have to recognise that if the savings do not come from the measures set out in the Bill, that could clearly put additional pressures on to public services. The noble Lord, Lord McKenzie, mentioned alternatives that he would like to propose. They are not ones that I would point to because these amendments are part of a Bill that is about reducing by a smaller amount the increase that we pay in benefits.
To answer the noble Baroness’s question about why we are including statutory maternity pay, we have sought to address the very significant welfare bill, which I am afraid is unsustainable, but doing so in way to protect the most vulnerable. We discussed and debated that at length earlier today. Regrettable as it is to have to make any reductions or cap any of the increases in the way that we have, the infrastructure and architecture there for women and families are strong. They provide sound support that will make a real change to people’s lives. While I recognise that these are difficult decisions, I hope that I have provided enough assurance to the House to show that the Government take their obligations to parents seriously and that we will continue to provide a supportive environment for new mothers in the years to come. I hope therefore that the noble Baroness can withdraw her amendment.
Welfare Benefits Up-rating Bill
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 8 months ago)
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Baroness Hollis of Heigham
My Lords, to add to my noble friend’s point, my obviously localised and limited experience of food banks has been that before about 2010, in so far as they were in play, food banks were mostly drawn upon by young people. These were very often young men aged under 25 who were getting the shared rate for housing benefit in the private rented sector and found, as Shelter and others have told us over the years, that it did not match the rent they were required to pay; it was a very discrete group. They, in my localised experience, often had to turn to food banks to cope. Now the Government have extended that limitation on housing benefit from 25 to 35, while producing additional pressures right across the benefits spectrum, as my noble friend Lady Farrington has said. It is a disgraceful aspect of the fifth-richest nation in the world that so many of our people have to make recourse to food banks because our benefit system does not sustain them in the way it should.
Baroness Stowell of Beeston
My Lords, I do not for one moment suggest that food banks are something on which anybody would want to have to rely. I completely agree with the noble Baroness in that regard. My point is simply that the fact they exist—
Baroness Hollis of Heigham
My Lords, the Minister seems to imply throughout her speeches that there is a distinction between those receiving benefits and those who are in work, and that you have to maintain that gap to produce work incentives. That seems to be her argument. However, she knows that two-thirds of the current expenditure on housing benefit and tax credits goes to people in work on the minimum wage to make that wage adequate to enable them and their families to survive. Therefore, will she please refrain from talking about the need to maintain work incentives when the only way that there is an incentive to work is when it is underpinned by benefits?
Baroness Stowell of Beeston
With the introduction of universal credit, we will make sure that that is always the case. Therefore, I do not disagree with the noble Baroness at all.
The noble Baroness, Lady Lister, referred to the Government’s decision to move from RPI to CPI as the appropriate index of inflation. The Government believe that CPI is a more appropriate measure than RPI when considering the impact of inflation on benefits and pensions. It is worth saying that the judicial review of the switch from RPI to CPI found in the Government’s favour and we continue to believe that CPI is a more appropriate index. As an example of the costs involved, uprating the benefits and payments in this Bill by earnings would reduce the savings by £1.8 billion of the total of £1.9 billion in 2015-16 and, if we did so by RPI, would wipe out all the savings and cost an additional £700 million in 2015-16.
As regards paragraph (b) of the amendment, while I cannot predict the decisions that will be made by future Governments, once the provisions in the current Bill cease to have effect, the default position will be for uprating decisions to be made in line with pre-existing legislation.
In referring noble Lords to the comments made by the noble Lord, Lord McKenzie, during last week’s debate, I was going to mention his reluctance to say what his party would do if it was in government. Indeed, he was even more than reluctant; he refused to say what it would do. However, the noble Baroness, Lady Sherlock, has commented on that point today.
For social security benefits and statutory payments, the default position will be for uprating decisions to be made under Section 150 of the Social Security Administration Act 1992, meaning that the Secretary of State will make an annual review of benefit levels to see whether they have kept pace with the increase in the general level of prices. If prices have increased, he will then make a decision about how he should uprate the benefits covered by the Bill, based on the national economic situation and other factors he considers relevant. For tax credits, the default position is that the Treasury is required under Section 41 of the Tax Credits Act 2002 to review the amounts of certain elements of tax credits each year to determine whether they have retained their value in relation to the general level of prices.
Before I conclude, I refer to the question put by the noble Baroness, Lady Sherlock, about an assessment of the changes that we are making via this Bill on the well-being of adults and children. In response—and it was a point that I made in Committee last week—this Government publish cumulative impacts of government policy at every major fiscal event. We did so at the time of the Autumn Statement last year. Those assessments include the effects of any changes in welfare and ensure that the other positive measures being introduced in relation to tax rates and so on are taken into account. That represents an increase in transparency when compared with what was in place hitherto. The assessments are publicly available on the Treasury’s website.
This has clearly been a serious debate and I am grateful for the opportunity to respond. I hope that in future debates I am able to expand a little further on some of my comments because I am concerned that in some of my points I was not as clear as I intended to be. I will ensure that when I speak in later debates I am much clearer about the importance we place on ensuring that proper consideration and monitoring are taking place in the implementation of all these changes. If any additional measures are required to support people who are affected in a way that goes beyond that which we are expecting, we will make sure that they have the support they need.
Baroness Lister of Burtersett
I accept that, but I wrote down what the noble Baroness said. She said: “It has never been the intention to alleviate poverty through benefit payment”. I wrote it down. If she wants to retract that statement, I would be delighted.
Baroness Hollis of Heigham
I think it was at the point when the Minister said that unemployment benefits were only intended to be temporary while people were in between work, and that therefore they were never expected to address poverty as such. That is the problem that we are worried about.
Baroness Stowell of Beeston
This is a debate about the adequacy of benefit rates, not about benefits in a package of what people receive. The difference here is that if somebody is in receipt of a combination of different benefits—housing benefit, jobseeker’s allowance and so on—I can absolutely see the point that the noble Baroness is making. What I am saying in the context of a debate about how to set the rate of a benefit is that benefits alone do not alleviate poverty.
Baroness Stowell of Beeston
That is a fair point. The people who were posting on the internet at that time were responding to the comments of Rachel Reeves about the proposals having a disproportionate impact on women, and only women.
Away from the debate on Mumsnet, the Government are committed to make this architecture for women stronger. The provisions in the Children and Families Bill, which had its Second Reading in another place last week, will allow working parents to choose which parent takes parental leave and pay to care for their child in the early years. This will give mothers real choice over when and whether they return to work. This is helpful in two big ways—where the woman is the higher earner and in starting to chip away at the inequality that some women face at work just because it is assumed that they and only they will take a break in their careers to have children. Our proposals will start to make a big difference.
It is also important to remember that the Government have introduced other reforms that will help to offset the impacts of these changes. For example, a woman working full time at national minimum wage for six months of the tax year, who then receives statutory maternity pay for the next six months, will still be better off overall as a result of changes to the income tax personal allowance. The introduction of universal credit will also provide a big boost for many mothers and lone parents, with 2.6 million women and 700,000 lone parents expected to gain through increased take-up and improved financial incentives to work. In addition, as part of the introduction of universal credit, £200 million extra is being spent to support families with childcare costs. For the first time, this support will be made available for families who work less than 16 hours a week. This will mean that 100,000 more working families will be helped with their childcare costs. That is important, because it means that even if someone is able to take on only a small amount of work, they will get that support for childcare costs to which they previously would not have had access. In another move that will be helpful to mothers and parents, as my noble friend Lord Newby mentioned, we have committed to introduce 15 hours a week of early education for 40% of two year-olds, starting with the most disadvantaged.
The Government will also continue to make extra support available for mothers on low incomes to buy the basic goods that they need. We have a programme called Healthy Start, and the Sure Start maternity grant—a lump sum payment of £500—is available to help parents with the costs of having a new child. I know that the noble Baroness, Lady Sherlock, said that this is now available only to parents who have a child and no other child under the age of 16. However, this support is additional to the money that parents receive through their statutory maternity pay. Bear in mind that if there is another child in the home, some of the initial substantial expenses of having a family often are not repeated if they have a second child.
The amendment would reduce savings from the Bill by around £50 million in 2015-16. None of the decisions contained in the Bill are easy. I recognise that the noble Baroness, Lady Sherlock, would prefer that we did not include statutory maternity pay in the Bill. I would like that, too. I would love it if we could say, “Let’s exclude this or that”. However, as my noble friend said in our previous debates, every time we say that we will not include something in the Bill, we have to look somewhere else for the money. That £50 million is not a small sum and is equivalent to more than 20,000 part-time nursery places for three to four year-olds. This is money that will cover substantial support that rightly we provide to mothers and families in other ways.
I hope that I have been able to demonstrate that there is a strong architecture to support women when they have children. I therefore hope that the noble Baroness feels able to withdraw her amendment.
Baroness Hollis of Heigham
My Lords, the Minister regularly makes the point that if we do not have these savings the money must come from somewhere else, such as nurses’ salaries, teachers, the NHS, schools or whatever. I hope that she appreciates that most of us on this side believe that the Government are making a political policy choice. It does not have to fall on children, disabled children or statutory maternity pay. As some of us argued at Second Reading—there were different shopping lists—we are spending £32 billion on tax relief for private pensions, of which £8 billion goes to subsidise the tax relief that higher-rate taxpayers currently enjoy. To continue that is a political policy choice. The money would pay for most of these cuts twice over.
Baroness Stowell of Beeston
As I have said on several occasions, these cuts are necessary because of the financial situation that we found ourselves in. They are not something that we want to have to do, but we believe that these are the right cuts to make because we have made sure that we have, wherever possible, protected those who are least able to increase their income by different means. While these are not cuts that we want to introduce at all, we think that we have done so sensibly and by addressing people in the right way, as anybody would expect us to do. That is the situation that we have found ourselves in and the decision that we have made.
Baroness Hollis of Heigham
My Lords, I do not think that anyone doubts the Minister’s good will, integrity or concern about these issues. That is not the issue. All that I am saying—and she has not answered this—is that those cuts could fall elsewhere, and she, on behalf of the Government, is choosing for them not to fall elsewhere on people who could afford to pay for them.
Baroness Stowell of Beeston
I would say to the noble Baroness that while she and the right reverend Prelate are willing to put forward their alternatives on where they would target cuts if they were in a position to make those decisions—and I respect them for doing that—her colleagues on her own Front Bench have so far refused to do so. We have made these decisions in this area. We have done so in a way whereby we have protected those who are most vulnerable. We would much rather not have to do this but we believe that it is necessary because of the economic situation that we find ourselves in and because we think that this is, in the end, the right thing to do to secure a strong economy for the future.
Welfare Benefits Up-rating Bill
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 8 months ago)
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Baroness Stowell of Beeston
I think I am right in saying that the noble Baroness was not here at Second Reading when I laid out the purpose of the Bill and its wider context. In response to her question, my point is that this proposal is about certainty, so that in the long-term it will result in a better future for everyone. It is also about taking measures now which are difficult and will affect people but which have the sole purpose of helping us to achieve a stronger economy so that in future years all of us will benefit. That is what I mean when I talk about certainty.
Baroness Hollis of Heigham
My Lords, as the Minister will recall, that is not exactly what the impact analysis said nor exactly what she said at the pre-meeting on this Bill, which was very helpful. I am sure that we all appreciated it. She made the point that it was about certainty for the markets, certainty for the Government and certainty for the claimants. Many of us pressed her on the fact that certainty for the Government, the markets or the claimants depended not just on what the level of inflation would be but also on what the number of claimants would be in order to get some estimate of what spending would be. The Government had no way at all of forecasting two out of the three factors that went into giving themselves some comfort about their uncertainty.
Baroness Stowell of Beeston
The point that I was making at Second Reading and continue to make is that certainty is a means to an end. It is through certainty for the Government, certainty for the markets and certainty in these measures that we will achieve a stronger economy. That is what I am talking about.
Baroness Hollis of Heigham
My Lords, this simply will not give you certainty. The whole of the impact analysis brief was a set of mythological language. This will not do what the Government claim. I understand that they are seeking to cut possible expenditure demands but to say that this is about certainty is simply an abuse of language, if I may say so.
Baroness Hollis of Heigham
When the Minister talks about housing benefit, does she include local housing allowance? I think not.
Baroness Stowell of Beeston
No, I do not. The Bill relates to the personal allowance element of housing benefit. The noble Baroness refers to another announcement in the Autumn Statement. This Bill concerns the personal allowance component of housing benefit.
Baroness Hollis of Heigham
What about the personal allowance in local housing allowance?
Baroness Stowell of Beeston
I think I am clear that the Bill refers just to the personal allowance for housing benefit. If I am wrong, I will of course correct that.
As I said, if we were to change the personal allowance for housing benefit, we would introduce inconsistency to the way in which this part of in-work benefit is calculated. There would no longer be consistency between the different kinds of personal allowances that apply to different benefits. In addition to increasing the complexity of the system, this would lead to additional costs.
Before I conclude, I will respond to a question from my noble friend Lord Kirkwood, who asked about costing methodology. I confirm that costs have been modelled and presented in a way that is consistent with the Autumn Statement. I will be happy to provide further details to the noble Lord before Report.
The Government are supporting working households. One of the key ways in which we are doing that is by taking tough decisions to reduce public spending, reduce the deficit and restore economic growth. The amendments tabled by the right reverend Prelate the Bishop of Leicester, including Amendment 13, would reduce the savings of the Bill by about 40%—or £800 million—in 2015-16 alone. Not including in-work benefits in the Bill would be simply unaffordable. Therefore, I ask the right reverend Prelate to withdraw his amendment.
Baroness Stowell of Beeston
I thank noble Lords very much for this debate. I should say at the start that although Amendment 13 is caught in this group, as I covered quite a bit of it in the previous discussion I will not go over it again, except to say that since the noble Lord, Lord Best, referred to the personal allowance of housing benefit, it is worth me repeating this for clarity’s sake. First, eligible rent will continue to be wholly covered by housing benefit for those who continue to satisfy the income test for all income-related benefits, including housing benefit. Secondly, renters in low-paid work will still be better off than they would be on out-of-work benefits. Work will continue to pay. Although that relates to the previous discussion, I wanted to say that again because the noble Lord, Lord Best, had raised it.
I turn to Amendment 7, tabled by the noble Baroness, Lady Hollis, and Amendment 12A, tabled by the noble Lord, Lord Best. As they have explained, their amendments seek to specify how the Government should monitor and review the uprating of local housing allowance. It is probably worth my saying from the outset that, as noble Lords know, I am new to this policy area and on housing I very much bow to the long-term experience and expertise of the noble Baroness and the noble Lord. I know that they have a huge amount of knowledge in this area.
Noble Lords should be aware that the uprating of local housing allowance is not covered by this Bill. Reference has been made to that; it is made under separate secondary legislation, providing independent rent officers with a remit to set rates under specified rules. None the less, I will try to respond fully to the issues that these amendments cover. Now might be a good point for me to reconfirm a point that I made in response to the noble Baroness, Lady Hollis, about personal allowance in LHA. What I said to her in response to the previous debate is correct: the local housing allowance simply sets the local maximum for eligible rents, and calculation of housing benefit to meet that eligible rent is not part of the Bill.
Baroness Hollis of Heigham
Can the Minister help me on the point that she made slightly before saying that it was not covered by the Bill, et cetera? It is certainly the case, is it not, that housing benefit and local housing allowance in the forthcoming year will rise by CPI? It is not caught by the 1% figure that other benefits are but thereafter, for the following two years, it will be capped by 1%. Is the Minister saying that that will not happen, or that it will but that it will done through the route of looping it through advice or instructions to rent officers by regulations?
Baroness Stowell of Beeston
Absolutely; it is the second. I am not disputing the fact that it will be capped at 1% for 2014-15 and 2015-16, but that will not be done via this Bill. That is just a point of process.
As noble Lords will know, the total bill for housing benefit has doubled in cash terms over the past decade and if unreformed by 2014-15, it would cost us more than £25 billion. This is why we are taking a number of measures to reduce housing benefit expenditure, including limiting increases in the local housing allowance to 1% for two years from 2014-15, as we have just discussed. This change will make a crucial contribution to the essential deficit reduction strategy but it will do more than that. As the Government are a major player in the private rented market, it will also exert downward pressure on rents—a point made by my noble friend Lord Bates. Where rents are increasing rapidly, there should be no presumption that the taxpayer should pick up the bill.
Noble Lords referred to the need to monitor affordability of accommodation for benefit claimants during the period where the limits are in place. The noble Baroness, Lady Hollis, paid tribute to my noble friend Lord Freud and his response when this matter was discussed during the passage of the Welfare Reform Bill. I certainly agree with what she described; I also agree with his decision. That is why we have already put in place a strong monitoring and evaluation plan. I reassure noble Lords that this is in place in light of that discussion that took place during the passage of the Welfare Reform Bill. My noble friend has honoured his commitment made at that time.
The Government have introduced a number of changes to the way that local housing allowance rates are calculated, including a cap on rates.
Baroness Hollis of Heigham
I am sorry to interrupt the Minister again but, before she goes on, she is saying that she confirms that the noble Lord, Lord Freud, made the commitment and that that commitment is now in the process of being delivered by a current review. Is she referring to the original review that was established by the noble Lord, Lord Best, is she saying that the terms of reference of that original review have been extended or, thirdly, is she saying that there is a further review for this particular aspect in order to deliver the pledge made by the noble Lord, Lord Freud, that he would keep under review any possibility of significant divergence between market trends and housing benefit?
Baroness Stowell of Beeston
I hope that as I continue to respond to the debate I will answer the question that the noble Baroness has just asked.
We have commissioned a consortium, led by Ian Cole of Sheffield University, to carry out an independent review of these changes. The interim report is due to be published in spring this year and the final report in early 2014. In addition, to monitor the specific effects of LHA uprating we have put in place a process for publishing on an annual basis a comparison of local housing allowance rates and the 30th percentile of market rents.
The first annual publication of these data took place in November last year and was carried out independently by the rent officers who set LHA rates and collect the most authoritative data on market rents. The noble Baroness, Lady Hollis, asked for some evidence. The published data show that only one-quarter of LHA rates have been subject to the CPI limit and more than one in 10 rates have actually fallen in line with local rents, to answer the point that my noble friend Lord Bates raised. At this moment we are not seeing a general divergence between LHA rates and market rents.
The noble Lord, Lord Best, and the noble Baroness, Lady Hollis, referred to several different potential outcomes from the changes that we have made. A couple of things were proposed, suggested or estimated during the passage of the Welfare Reform Act, one of them being a suggestion that 42% of landlords would scale back on housing benefit tenants. The reality is that the housing benefit caseload has actually risen in London by 5% in, I think, the past year.
The noble Baroness, Lady Hollis, suggested that no properties would be available to benefit claimants. Private sector landlords are not turning away housing benefit claimants. Since April 2011, when we introduced our first reforms of the LHA, the PRS caseload, as I just said, increased, and that includes London and the south-east.
The noble Baroness also made reference to rent control and suggested that that might be the way forward. We absolutely dispute that; we say that it would not make more homes available at rents that people could afford. We experienced regulated rents in the private sector some decades ago and they shrank from 55% of households in 1939 to 8% by the late 1980s.
Baroness Hollis of Heigham
I was not recommending rent control. I was merely saying that if you are not going to increase the supply and rents continue to rise—and all the evidence is that they are—then that is one possibility. It is not one that I support because I would much prefer the Government increasing the supply of stock.
Baroness Stowell of Beeston
I think that I have just provided the noble Baroness with some evidence to show that rents are not actually increasing in light of the changes that we have made. Rents are actually coming down. We are having some success in downward pressure on rents.
We have taken care to retain some flexibility to react if problems with affordability emerge along with the need to take action should significant divergences emerge between LHA rates and market rents. We have set aside £140 million over two years from 2014-15 to help people most affected by the new 1% limit. The noble Lord, Lord Best, referred specifically to effects in London, and I can confirm that the funding that has been set aside will be there to address areas precisely such as London and the south-east. Our intention is to increase the local housing allowance rates by more than 1% in areas where rent increases are causing a shortage of affordable accommodation. Rather than specifying the details in legislation now, however, we plan to develop our approach in spring this year before making final details available in the autumn so that we can reflect the views of key stakeholders and take account of the most up-to-date evidence before making decisions.
Welfare Benefits Up-rating Bill
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 8 months ago)
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Baroness Stowell of Beeston
My Lords, I am grateful to all noble Lords who have contributed to this debate. In responding, first, I will address the points that I have put under the heading of “uprating” and then come to issues linked specifically to Motability and PIP. I want to make it clear, as I think the noble Lord, Lord Alton, acknowledged, that this Bill, which is about capping the annual increases of certain benefits to 1%, does not include DLA or personal independence payments. It is really important that that is properly understood by everyone when we are discussing this matter.
If I understood the noble Lord, Lord Alton, correctly, having acknowledged that PIP is not part of this Bill, his amendment would seek to require the Secretary of State to consult Motability every year before he sets the annual rate of increase on PIP. However, I do not think that that is necessary. As I have said, PIP is excluded from this Bill and would be subject to a CPI increase. If there were any shortfall in the benefits over the course of a three-year lease and if the PIP annual uprating was to affect the level of benefit that a person was due to receive, any change in the rate of the enhanced mobility component would not impact on a claimant with a Motability lease directly because that would be borne by Motability as part of the risk to it of operating the lease.
Governments have worked with Motability for more than 30 years and, as I understand it, thus far we have never required protection for Motability leaseholders in the way that the amendment suggests. As noble Lords are well aware, the Motability lease is a private agreement between the claimant and Motability. It is entered into without any influence from the department. As the noble Baroness, Lady Hollis, said, just under one-third of eligible claimants uses Motability.
That being said, I absolutely understand the points made in this debate about how those who take advantage of the Motability scheme value the vehicle provided. Therefore, it is essential that Motability remains available to those deemed eligible to receive it. Sometimes, as regards the way in which noble Lords talk about the changes that are being made, the impression could be given that the Motability scheme is coming to an end for everyone. We absolutely understand the importance of Motability. It is an important scheme and people must continue to have access to it, albeit that fewer numbers will have access than up to now.
Baroness Hollis of Heigham
This is the Committee stage, not Report. The Minister said that we were suggesting in the way we talked about the numbers that this was in some sense a catastrophic activity—that the Motability scheme might come to a close, and so on. But on the figures that she has more or less confirmed for us, something like 600,000 people currently getting a higher rate of DLA will not get the enhanced rate of PIP. Just under 30% of all those on higher rate DLA turn that into a vehicle; that is just under one-third. So of the 600,000 people who lose the benefit, something like 185,000 or thereabouts of people who currently have a car will lose their car. That is not small beer.
Baroness Stowell of Beeston
I do not think that the noble Baroness heard me say that it was small beer. That is not the point that I am making at all; I am making the point that Motability is incredibly important to people, but it will still continue. Yes, some people will not be eligible for it in future, and I know that those who will be affected will feel it very strongly. However, I want to make the point that sometimes in the way in which this is talked about the impression can be given that we are removing Motability from everyone. That is clearly not what is happening.
Baroness Hollis of Heigham
On the point about the cost of purchasing, all the evidence suggests that a Motability car in effect acquires through its VAT exemptions and tax exemptions something like a 40% discount on what it would cost to hire a similar car in the private market, and that is before any adaptations. Given the level of income of disabled people and the poverty that we know so many of them face by being out of the labour market and having the additional costs of heating and so on associated with their disability, I cannot see how that would be a realistic option for all but a very few of them.
Baroness Stowell of Beeston
All I am able to add to what I have already said is that the department is continuing its discussions with Motability to see what arrangements can be put in place to ease this burden on people as the process of replacing DLA with PIP comes on board. We expect Motability to have some measures in place by the autumn of this year. However, on the basis of this debate, I will certainly go back to the department and obtain further information about where we are with those discussions and what evidence is being examined as part of that process.
The noble Baroness, Lady Grey-Thompson, asked about advance payments that people make when leasing an expensive car with specialist adaptations and whether they lose that money if they lose eligibility, even if they are successful on appeal, as they will have lost the car. If someone loses their car as a result of PIP reassessment, any advance payment outstanding will be returned on a pro rata basis. I realise that that does not address the whole point, but I hope that it goes at least some way to addressing it.
The noble Lord, Lord McKenzie, and the noble Baroness, Lady Grey-Thompson, asked about the use of Motability cars for work and whether people who might not have access to a Motability car might be affected by this and lose their jobs. The noble Lord, Lord McKenzie, said that in any case he thought that what my noble friend Lord Freud had said about the possibility of the use of access to work as a way of addressing some of these measures might not be an adequate response.
Although my noble friend had said that discussions were going on to see whether access to work was one way of addressing the concerns of some people who would lose Motability under PIP but who might be able to use access to work as a way of funding a car for use for work, if I understood the noble Lord, Lord McKenzie correctly I think he said that this was not satisfactory because it would not address social issues. I understand what he is saying, but I think that none the less while not addressing all the issues he has raised this is an important facility that is available to disabled people to apply for. If there is a way of using that facility to help people to fund their Motability vehicles in the future, I hope it could be made possible. I would not want it to be diminished just because it does not address everything.
Finally, my noble friend Lady Grey-Thompson, if I may call her my noble friend, also raised the issue of public transport, particularly outside London. I will not go into any great detail, but I am aware that the Department for Transport as recently as December published an accessibility action plan for public transport, particularly focusing on transport outside of London, and outlined what measures could be taken to improve facilities on public transport. If she would like more information on that, I will happily give it to her and put her in direct contact with the Department for Transport if she would find that helpful. I am sure the department would welcome hearing about the experiences she faces regularly on her extensive travel up and down the country.
I absolutely appreciate the concern that has been raised by noble Lords in the debate tonight that people want to see Motability remaining available for disabled people as an affordable scheme. The benefits in question are not part of this Bill, as I have already said, and I do not believe that there will be a shortfall between these benefit rates and the obligations that people have as part of an outstanding lease in the years in question. However, even if such a shortfall were to arise, Motability would absorb the cost, so the impact would not fall on the claimant. I hope that the noble Lord and the noble Baroness feel able not to press their amendments.
Baroness Hollis of Heigham
As we are in Committee, we can come back to the Minister as many times as we wish on this. I just want to pick her up on this, if I may. She has said nothing at all—unless I am being unfair to her, and I certainly do not mean to be—about the main thrust of all the arguments put by my noble friend Lord McKenzie, myself, the noble Baroness, Lady Grey-Thompson, the noble Lord, Lord Low, and, above all, the noble Lord, Lord Alton: that what is needed, at the very least, is a decent transitional period of grace. All that the noble Baroness has offered is the existing 28 days. That applies now, so there is no change. What movement, if any, is the Minister willing to offer us on the key point about having a transitional period of grace for those who will lose? Some 100,000 people—or 185,000, which is my crude estimate—could lose their cars in a relatively small space of time. Without a transitional period, there will be huge problems. What can the Minister tell us about that transitional period?
Baroness Stowell of Beeston
I regret that in the context of this Bill I am not in a position to be able to offer the noble Baroness the kind of response that I know she is looking for. I will, as I have promised, go back to the department and discuss further with colleagues and Ministers the issues that have been raised in the debate tonight. They are clearly important issues. I can see why people wanted to raise these concerns in the context of this Bill and I do not have any problem with the fact that this has been debated and discussed tonight. However, I am not in a position to offer the kind of assurance that the noble Baroness is looking for, but I will go back to the department and follow up in writing with further information, as I am able to, after I have had those discussions.
Personal Independence Payment
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 11 months ago)
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Small Pension Funds
Debate between Baroness Stowell of Beeston and Baroness Hollis of Heigham(11 years, 11 months ago)
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Baroness Stowell of Beeston
My Lords, one of the great advantages of being a Government Whip is that we get to learn about lots of new areas of policy that we may not have been exposed to before. However, it also brings the great responsibility of sometimes having to respond to debates where those who have participated are far more experienced and provide greater expertise on the matter than the Minister in charge. That is particularly so in this debate. I congratulate the noble Baroness, Lady Greengross, on securing this debate and pay tribute to her for all her work in the world of pensions for so many years.
I reinforce and share the views of my noble friend Lord Patten. I, too, am very concerned about people who have done the right thing and saved hard for their pensions. This is one of the reasons why I am pleased to be here tonight and to participate in this debate. I also note the important point made by the noble Lord, Lord Lipsey: we are talking about people with small pots and, to many people, the small amounts of money that we are talking about make big differences. Like the noble Lord, Lord Kirkwood, I acknowledge that the topic of pensions does not lend itself to politics, and nor should it. However, the Government want people to be able to get the maximum benefit from their pension savings and we recognise that people can, understandably, find making decisions about their pension and the process of securing an income in retirement complicated.
We need to be clear that professional financial advice is not, and never has been, free, as has been acknowledged by many noble Lords tonight. Even though many people may have thought in the past that the advice that they were receiving was free, the cost of paying for advice may outweigh the benefit of receiving it. This is particularly important for those with small pension pots and we should not assume that paying for financial advice is the right option for everyone. It is important that consumers can make a decision about whether approaching a financial adviser represents good value for money. To do this, they need to understand how much it will cost and that the adviser’s interests are aligned with their own. The Government support the Financial Services Authority’s retail distribution review—or the RDR as it is commonly called—which seeks to bring transparency to consumers on these issues. In response to the point made by the noble Lord, Lord Lipsey, and repeated by the noble Lord, Lord McKenzie, that poor people should not receive poor advice, one of the added benefits of the RDR is that financial advisers will be required to have a higher level of qualification to ensure that the quality of their advice is better.
We also need to bear in mind the basics of what people need to know to make these decisions. As has been mentioned, understanding the options available and the language alone can be overwhelming. That is why, as the noble Baroness, Lady Hollis, made clear, the free, generic information and advice offered by the Money Advice Service and the Pensions Advisory Service are so valuable. The advice that is available from those two services, and particularly the Money Advice Service, includes helping people to think about whether professional advice is appropriate for them, because it may not necessarily be necessary.
Clearly it is important that professional financial advice is available for those who have decided that it is appropriate for them. However, we should be wary of overstating the problem about access for those with small pension pots. A recent survey by the FSA revealed that 63% of advisers are planning to continue to offer advice to those with savings and investments of between £20,000 and £75,000. A further 38% of advisers plan to continue offering advice to those with less than £20,000. I will come back a little later to the point made by my noble friend Lord Patten about pooling and whether it is possible to pool in order to access advice.
People have big decisions to make at retirement. I am pleased to say that this Government have already taken steps to ensure that people have more flexibility and better information to support those decisions. Of course those with pension savings below £18,000 have an additional flexibility in their options, which is that they can take their savings as a lump sum. For those who want to be able to guarantee an income for life, from 1 March next year the process of buying an annuity from an ABI member will include making customers consider their options for both the type of annuity that they need and which provider to purchase it from. This is what is known in the jargon as the “open market option”, which, as several noble Lords have said, is all about helping consumers to shop around.
The new ABI code of conduct, as part of the package of measures announced by the OMO review group in March, provides a real step change in the requirements placed on providers and in assistance to annuitants. The package has been developed to ensure that people approaching retirement will receive much greater support to get the best possible retirement income.
The noble Baroness, Lady Greengross, asked whether the Government would set up a forum to discuss the issues that have been raised in this debate. The noble Lord, Lord Kirkwood, in his usual colourful way, wanted me to be sure that there was cross-party working on this area. There is already a group similar to that described by the noble Baroness, which is alive to the issues raised. That is the aforementioned jointly led DWP-Treasury open market option review group. The group includes representatives from industry, consumer organisations, regulators and the Government and has met to discuss these issues since 2007. That has prompted a laugh from the noble Baroness, Lady Hollis. I have noted that.
The group has collaborated to deliver a number of key outcomes over the past five years, including the package of measures announced in March. It was responsible for the joint letter that was sent to the ILC on these matters earlier in the year. The OMO review group is now in the process of agreeing an evaluation strategy for this package. This will include assessing both the impact and success of the new measures but will also aim to consider the extent to which there are issues that remain to be addressed.
Of course, the decisions that someone can make at retirement will always be limited by what they have done and how much they have saved before retirement. That is why the Government have taken steps to encourage a culture of saving. The introduction of automatic enrolment will hopefully see between 6 million and 9 million people newly saving or saving more into a pension. The Government have also established NEST, which has been referred to, as a high-quality, low-cost pension scheme to support this. However, our work continues.
For example—the noble Baroness, Lady Hollis, spoke very passionately about this—people change jobs and will tend to leave small dormant pots behind them in their former employers’ schemes. The Government believe that as individuals move jobs their pension pots should follow them, as far as is possible. Consolidating pension pots helps to drive down administrative costs and boosts engagement with saving for retirement. The DWP is working with the pensions industry to develop an automatic transfer system for these small dormant pension pots. The aim is to develop an efficient and cost-effective system that minimises the risks to individuals and works to drive down charges.
This is probably an appropriate point at which to respond to the idea put forward by my noble friend Lord Patten about whether the Government would support an industry initiative to pool pensioners’ assets and increase purchasing powers. The Government welcome innovations to the industry that meet the needs of consumers, so my noble friend’s idea is certainly one that we would want to consider further.
The noble Baroness, Lady Hollis, and the noble Lord, Lord McKenzie, asked in relation to small pots whether legacy pots are yet in the scope of automatic transfer. They are not at this time, but we have not ruled out the option that they will be brought into scope in future. In addition, as of April 2012, up to two small personal pension pots of £2,000 or less can be taken as a lump sum by those aged 60 or over, even where people have other savings.
Baroness Hollis of Heigham
I was looking earlier today at the 2009 regulations, which may be what the noble Baroness is referring to. She may wish to follow this up by letter, but my understanding is that those pots have to have been earned in the previous three years. The problem with legacy pots is that they could have been earned 20 or 30 years before. I realise that this is a policy issue currently under discussion and that the noble Baroness will almost certainly wish to take advice from colleagues, but it would be hugely helpful to all of us if the Government could find a way to bring those legacy pots that are not covered by the 2009 changes into any future system, so that people do not find that some of their smaller pots remain inaccessible.
Baroness Stowell of Beeston
On a matter such as that, I will have to write to the noble Baroness.