Welfare Benefits Up-rating Bill

Lord Bates Excerpts

Tuesday 5th March 2013 Lords Chamber

Given that leading poverty researchers and statisticians are endorsing the indicators enshrined in the Child Poverty Act and reproduced in this amendment, the Government should think very hard before changing the measure of child poverty. That is not to say that there is not scope for complementing it with indicators of risk factors and consequences, which is what many of the indicators suggested in the consultation are and which the previous Government published. I hope that in responding the Minister will not take refuge in a measurement consultation, which would appear to have received a pretty resounding thumbs-down, but will address the substantive question of the impact of this nasty Bill on the numbers of children living in poverty and the implications of that for their obligations under the Child Poverty Act 2010.

[Lord Bates]

My Lords, I rise with trepidation following the noble Baroness, who has immense expertise in this area. Even if I had not intended to speak on the technical aspects of this amendment, the claim by the noble Baroness, Lady Sherlock, whose approach is always sharp and pointed in proposing such matters, that this Government is not serious about tackling child poverty would demand a response. Not only is it there for us to read repeatedly in government statements that this Government, as with their predecessor, are committed to the eradication of child poverty, but when we are tempted to get a little too high and mighty about that, one might look at the targets which the previous Government set in respect of halving child poverty by 2010 and how they performed against that measure—they did not tackle it. The commitment is real and is what is driving the whole argument towards universal credit, the raising of tax thresholds, the freeing up of the economy to create 1 million new jobs—which is a pathway out of poverty—the troubled families programme and the pupil premium. This is an immense drive across all departments within government to tackle what we accept is a shame on a country which is still the seventh-richest nation on earth—that 2.3 million children should be in poverty. I just make that point initially.

[Baroness Hollis of Heigham]

Given the Minister’s very welcome and obviously understandable sympathies and sensitivities towards the issue of child poverty, does that mean that we can expect the noble Lord to table an amendment at Report stage to protect child benefits, including the child benefits within tax credits, from this Bill altogether?

[Lord Bates]

I will come to that point in a minute because it is an interesting one about the effectiveness of the cash measure alone in eradicating child poverty. The previous Government failed to meet their target of reducing child poverty by the level they set themselves, despite spending £171 billion between 2003 and 2010. Here, in a sense, is something that almost makes the case for the Opposition, were they to take it. Those of us on the government Benches could stand here and point to the fact that, in 2010-11, 300,000 children were taken out of relative poverty. We could say that, but of course we realise that that is not actually happening on the ground. We recognise that those immense pressures are there. I do not dispute the quotes that the noble Baroness has used in introducing this but the Institute for Fiscal Studies, in its helpful analysis, points to the fact that all that happened with that 300,000 was that you had private sector incomes—predominantly—being repressed or flat-lining. I am trying to follow the gestures of the noble Baroness but being a man I can do only one thing at a time. Private sector incomes increased by 10% over the years 2007 to 2012 while benefit levels increased by 20%. That is one of the arguments that is put. Because it is pitched at median income, you then find that, as the Institute for Fiscal Studies shows in its graph, the measure comes down, the benefits go up and effectively you say, almost like a card trick, “We have reduced child poverty by 300,000”. In fact, you have done nothing of the sort. All that has happened is that, during a recession, private sector incomes have fallen and therefore, as the IFS says:

“If earnings fall relative to benefit levels, then being in work becomes less financially attractive”.

Those are the IFS’s words, not mine.

[Baroness Farrington of Ribbleton]

My Lords, I apologise to the Committee. I was unable to be present for the beginning and I have obviously missed the explanation of a phrase that I cannot understand. The noble Lord has just repeated that the answer to child poverty is not money. I do not know the explanation for the Government’s view that you do not eradicate child poverty by providing money. I wonder whether the noble Lord could refresh my memory.

Secondly, the noble Lord comes from a different northern region from mine. The biggest problem that people face is poverty when they are struggling to go to work. They are struggling to get extra hours, which the Government are insisting that people have to try to do, when their employers will not give them extra hours; when the only extra hours they can get may be two hours further away from their home and the cost of travel there is impossible. I think that noble Lords opposite are not living in the same world as I am. My only reassurance is that the right reverend Prelate appears to be living in my world.

[Baroness Hollis of Heigham]

My Lords, perhaps I may add to my noble friend’s comments. The noble Lord perfectly accurately described what was happening to the 300,000 children who were lifted out of poverty because the median income line fell by virtue of the recession and the downward pressure on incomes. Of course, he is completely right, but the other way of stating that was that as a result of what the previous Government did, the incomes of those children—the poorest of the poor—were protected against the effects of the recession, for which most of us are grateful and appreciative, including the noble Lord, I am sure.

[Lord Bates]

I accept that point. On the first point made by the noble Baroness, Lady Farrington, of course I am not saying that child poverty has got nothing to do with money. It is vastly to do with money, but is that the only thing that impacts on child poverty? If we want to impact on child poverty, do not the quality of housing, the quality of education and the opportunity to work have some bearing on the fact? Does the fact that the parents are in debt or are drug-dependent or alcohol-dependent have any bearing on it? Does living in a one-parent family or with two parents make any difference to the life chances of the child in poverty? One would probably have to say: yes, to a degree. I am simply saying that there is more to this.

That fact is borne out by international comparisons. I found a report card of child well-being, which was produced while the previous Government were in power. It was undertaken by UNICEF and it is an international comparison. Yes, it looks at cash, although interestingly it looks at 50% of the median, not 60%; it also looks at health and safety, educational opportunities, work opportunities, family and peer relationships, behaviours and risks, and subjective well-being—a broad range of indicators in a basket of trying to assess international child well-being. By the way, if the party opposite is interested, it actually came last: 18.2 was that Government’s average ranking position out of the most advanced countries in the world, but that is not my point.

My point is that we must come back to the median income. The median income is worth looking at in itself because that is the test that we are using to measure all benefits. It relates to a level of income—not an average income but a median income, the most frequent across the distribution. The latest figures I could find on the ONS website showed that median incomes vary quite substantially across the United Kingdom—nothing unusual there; you would expect that to happen. For example, in London the median gross wage is £651.80 per week, but in the north-east the figure is £451.80 per week. These are the latest figures; I accept that there might be a shift slightly in one direction—well, upwards only.

There is a difference of 44% across the range. Therefore, when we are applying a national target of 60% of the median, we need to examine whether that is giving us an accurate reflection of child poverty levels in all parts of the country. It might be that we are understating it in parts of the north, Wales and the south-west; it may be that we are overstating it in London—I do not know. None the less, using that as the sole measure to test median income across a national rating by which we actually assess those in child poverty is worth taking a more careful look at.

[Lord McKenzie of Luton]

Does the noble Lord accept that the Child Poverty Act was not looking at just the metrics of the targets? Section 9(2)(b) talks about ensuring that,

“as far as possible that children in the United Kingdom do not experience socio-economic disadvantage”.

We had big debates about that. The Act requires strategies for,

“the promotion and facilitation of the employment of parents or of the development of the skills of parents … the provision of financial support for children and parents … the provision of information, advice and assistance to parents and the promotion of parenting skills … physical and mental health, education, childcare and social services, and … housing, the built or natural environment”.

It was not looking at just those targets; there is a whole range of strategies that this Government should be adopting if they are signing up to this Act.

[Lord Bates]

That is a more reflective point; it is just not exactly what the amendment before us today actually refers to. It refers to the financial measures of “absolute low income”. Is that the one that is based on 1998-99 and uprated for inflation in a direct line?

My point is that there is an absolute crying need, of which we are all absolutely aware. There is child poverty out there and we need to strain every sinew to ensure that we tackle it. Also, we have no doubt that on the current measure there is no question that it is going to increase. The Office for Budget Responsibility’s figures forecast that as the recovery gets under way, private sector earnings will increase by 4.6% per annum. It does not take a great mathematical mind—which is fortunate for me—to figure out that with what we are dealing with today, as well as the likely increase in private sector incomes, we are going to see the gap rising and almost an inversion of what has happened over the past few years happening in the future. But there are more indicators that need to be examined to give us a holistic picture and to ensure that we target scarce resources where they are needed most.

[Lord Newby]

My Lords, this proposed new clause would require the Secretary of State to lay a report in each of the years in question, assessing the impact of that year’s uprating order on child poverty based on the different measures contained in the Child Poverty Act. I absolutely understand noble Lords’ concern to ensure that we are tracking progress and impacts on child poverty. However, I do not believe that this new clause is necessary to do that.

The Government already publish child poverty figures every year using the households below average income series, which is usually published in May or June and includes details on the areas listed in the amendment: namely, the number of children,

“living in relative low income … combined low income and material deprivation … absolute low income … persistent poverty”.

Moreover, later this year, we will see the first of what will become an annual report from the Social Mobility and Child Poverty Commission, chaired by Alan Milburn. It will report on the Government’s progress towards reducing child poverty, in particular meeting the targets in the Act and implementing the most recent UK strategy.

The noble Lord, Lord Kirkwood, asked a number of questions about that commission. He asked where it had got to and what it was going to say. The answer is that the Government do not know what it is going to say because it is an independent commission. We await its report eagerly, but we are not attempting to pull it up by the roots to find out what it is going say as it is in the process of undertaking its work. I can reassure my noble friend that there is no drift in the work of the commission. It is a very substantive piece of work and it is therefore not surprising that it cannot do it very quickly. We expect that its report will be available in the late summer. It will report to Parliament and I am sure that we will give considerable scrutiny to it in your Lordships’ House when the time comes—we are already looking forward to it on these Benches, I can tell you.

I strongly believe that it is only through such comprehensive reporting, looking at poverty issues in the round, that we can have a meaningful debate about child poverty. As noble Lords have mentioned, we published in response to a Parliamentary Question in another place the expected impacts on child poverty of the uprating measures that we have announced. An additional 200,000 children will be in that category by the end of the period covered by the Bill as a result of the measures in it.

The noble Baroness, Lady Sherlock, asked whether we would publish other impacts of the measure. We do not think that it is possible to derive estimates of all the measures in the Bill. For example, impacts cannot be modelled for the persistent low income poverty measure because impact assessments are based on cross-sectional data rather than longitudinal data. In addition, measures based on an estimate of material deprivation are technically complex to model because material deprivation relies on more factors than just income, so impacts have not been modelled for these measures. The noble Baroness asked also about the absolute poverty figure. If she will forgive me, I shall write to her on that separately.

As we have said previously, we believe that we need to be cautious about setting too much store by such individual assessments of impact. These are not predictions of how the child poverty figures will change in the future, as they do not take into account all the other variables which exist. For example, our estimates will change as forecasts of economic growth and average earnings change, and they do not take account of policies which cause child poverty figures to move in the other direction such as universal credit. Universal credit, which has not played much of a part in our debate today, is of course expected to lift up to 250,000 children out of poverty depending on the effect of the minimum income floor. I believe that we can have a meaningful debate about poverty, as we have started to do in the latter part of this debate, only when we accept that poverty goes wider than the measures contained within the Child Poverty Act.

The noble Baroness, Lady Lister, asked a number of questions about the work that we are doing on defining poverty and on the consultation. The consultation is finished. She is quite right that a number of people have been very critical of what the Government are proposing and we are now considering how we respond to those criticisms. It is not the case that the Government have made up their mind about the outcome and are going to ignore everything that has been said—that would be ridiculous. I can give the noble Baroness an assurance that we are analysing all the submissions, of which there have been a number, and we will produce our response to the consultation in the summer.

--- Later in debate ---

[Baroness Sherlock]

My Lords, I thank all noble Lords who have spoken in this debate, which may be an interesting precursor to the kind of debate we may have when the commission finally reports. I am particularly and genuinely pleased to hear the Minister say two things—first, that the Government remain committed to eradicating child poverty and, secondly, that income matters. They are both important statements, and I welcome them and am very pleased to have them on the record. I thank the Minister for making them so clearly.

The noble Lord, Lord Bates, with whom it is always a pleasure to do battle, took me to task for saying that I did not somehow accept that the Government made clear their commitment to eradicating child poverty. What I was challenging was not that commitment but whether or not the actions were being taken that would make it a reality. That was the point that I was trying to make, and I apologise if that was not clear. My question was really about what one does to make a difference.

A lot has been said about the nature of the measure. I have never thought that the well-being of children was about only money. However, the reason why this amendment is about money is because the Bill is about money; the amendment is about the impact of the Bill, and the Bill is solely about what happens to the tax credits and benefits that go out to people—in this case, children. So it makes no sense for it to be any broader than that.

The second thing that is worth saying is that I made it clear that the relative income measure was, deliberately, only one of four income measures in the Child Poverty Act, and that was for a reason. The Government of the day recognised that we had to take a 3D approach to understanding what poverty was, and no single measure alone would be able to give us all we needed. However, those four points of perspective between them give a pretty good idea of what is happening to incomes across the UK. That is something that we need to understand.

The noble Lord, Lord Bates, commented on the regional variation of median income. That is true, but the cost of living also varies. As he and I both know, the cost of living in Durham is significantly different from the cost of living in London. So although wages may be different, so too is income—and the measure relates to median incomes.

It is also worth reminding ourselves that the Child Poverty Act does not—

[Lord Bates]

That is quite an interesting point, if the noble Baroness is prepared to expand on it on the record. I think that she accepts that it is true in Durham, a city that we both love greatly, that median incomes—or, rather, average incomes—are significantly lower, by 44% according to my figures, and that the cost of living is different and lower. So in those circumstances —putting the two together by using a national measure and putting 60% of median income—you would perhaps overstate the level of child poverty in Durham. Does she accept that?

[Baroness Sherlock]

It might be worth the noble Lord and me sitting down together with the Child Poverty Act. He might find that many answers to his questions are in there. As well as giving the Secretary of State a specific duty to address income measures, because tax and benefits are in the gift of central not local government, with the exception—reprehensible in my view—of the recent move to localising council tax support, the strategy places a duty on local authorities and other players to engage in issues around child poverty, specifically because they have competence in those areas. So if the noble Lord goes back to read it, he will find that there is an awful lot more in it than he perhaps remembers. We may have to come back to that.

It is also worth coming back to the idea that it is not just about money—but it is also not not about money, a point made very clearly by my noble friend Lady Farrington. The noble Lord, Lord Bates, said that the fact that the Labour Government did not meet their target for child poverty reduction means that the measure does not work. I do not think that it means that at all. I pick up again a point that the Minister made. I fully accept that no forecast is a precise measure and no measure is precise, but one reason for keeping a long-term target of 2020 is that what really matters is direction of travel. Over time, how does the income of the poorest relate to the income of the country as a whole? On that, I am proud that our Government lifted 1.1 million children out of poverty. If I had to stand up and say that we had pushed 1 million children into poverty, I would be ashamed of that, and I am very glad that I am not in that position.

If the Government come forward with other measures, we will happily debate them. I am always open to any conversation that focuses the attention of this House and the nation on the well-being of the poorest families, and I am very happy to have the conversation when the commission reports about what that means and what the best means is to assess the impact of policies on that. However, at the moment, the Child Poverty Act is law, and it puts an obligation on the Government—a statutory duty—to address child poverty in all these areas. Unless they measure that, I simply do not see how it is possible to satisfy themselves that they have done it.

The Government’s defence has also partly been that the measure is meaningless. It may be worth reminding ourselves even of the relative income measure. The Child Poverty Action Group reminds us that a relative low-income poverty line is, typically, around £12 per family member per day for all spending needs after housing costs. It notes that many families in poverty will be far below that—because that is where the line is, and many families are way below the line. The point of having four measures is to try to understand the impact of policies such as this on all those measures. I accept that other measures are going on. I accept the point that the noble Lord, Lord Bates, made—and he has engaged with the arguments from this side of the Committee most comprehensibly—that other measures are happening and that there are time lags. However, it is impossible to ignore the fact that a Bill that sets out deliberately to cut in real terms the incomes of poor and middle-income families will do anything other than increase child poverty in real terms. That is a real increase—it is not a statistical anomaly.

I do not want to delay the Committee much more, but I remind noble Lords that the amendment simply invites the Government to report before they enact this Bill on what the impact will be on child poverty, using measures already in statute to reflect a duty that the Government already have in statute. That is all that it does; it could hardly be less radical. However, as I am interested in returning to this at a later stage, I beg leave to withdraw the amendment.

Welfare Benefits Up-rating Bill

Lord Bates Excerpts

Monday 25th February 2013 Lords Chamber

I am sure that we should take note when landlord groups and tenants’ groups are unanimous, and I look forward to hearing from the Minister on whether her department, not just to save tenants but to prevent further diminution in supply of accommodation, with its costly consequences, will be able to respond positively to my amendment.

[Lord Bates]

My Lords, I wish to comment on the amendment, in which I find a lot to support, particularly the idea of a review. Before I do so, I owe the noble Lord, Lord McKenzie, an apology because in my earlier intervention I made a point about higher-rate tax and said that it had decreased, when of course it had increased. I apologise for impugning his tax-raising credentials. It was a low blow that was not intended. I take this opportunity to correct the record and hope that he might accept my apology.

This is an interesting amendment to consider because we are dealing with a significant crisis. There is no doubt that housing benefit itself needs to be focused on: how it has increased from roughly £11 billion, circa 1997, to a predicted £25 billion in 2015. Clearly, no one could sit in the Treasury, not have a view on that trend and not say that it needs to be looked at carefully.

My second point is that private rents have been increasing at an alarming rate when compared with the rest of the housing market. One needs to consider the increases, which, according to the National Housing Federation, have been something like 35% over the past three years. Over that same period, we have seen an 86% increase in the number of those claiming housing benefit, from 485,000 to 905,000. This is happening at a time when, outside certain sections of the London property market, house prices are actually falling. This is happening when interest rates are at historically low levels, and mortgage rates are at levels whereby 1.99%, two-year fixed rates are being offered. There are very low mortgage rates while house prices are falling, yet at the same time private rents are increasing by not only the rate of inflation but in many cases by twice the rate of inflation. It does not take a great economist—and I note that there are some in the Chamber—to work out that there might be some correlation between housing benefit and a potential inflationary effect on the private sector. I therefore understand that that is one of the issues that my noble friends would look at with some care.

I also note that one of the solutions to the problem is to ensure that there is a greater housing supply through housebuilding. This is an area on which I would pitch to my honourable friend in his pre-Budget purdah and ask him to reflect on how additional funds could be made available. I do not say that the Government have done nothing in that regard. They have put up £10 billion in guaranteed loans to try to stimulate the market, and they have introduced shared ownership schemes through FirstBuy and NewBuy to try and increase house purchase. That is an important element. We do not want, as a society and for the health of our society, to divert people into a life in private rented housing. We want to encourage people to have an ownership stake in society and to own their own home. For them to do that, there need to be enough homes coming on to the market.

There is a competition because, as people are coming on to the market and wanting to own their own home, investors who are experiencing low rates of return in other asset classes are finding, according to Rightmove, that there is a yield of 5.8% on private rented properties—the figure is 6.5% in London—which represents extraordinarily good value in the present market. Capital is therefore flowing into the buy-to-let market, rather than the build-to-buy market. There needs to be some step back from this approach and one needs to ask what is actually happening and how it all connects with changes in benefits.

We are, I assume, taking an approach whereby we believe that capping the local housing allowance and housing benefit will lead to a slowing down of the increases in rents. The noble Baroness is shaking her head, but that is the assumption. We have certainly seen how rents have increased when housing benefit and local housing allowance have increased. Perhaps we should test this out, but that is difficult because we are talking about affecting lots of very vulnerable people. However, there is a case to be looked at. Some annual or periodic review of how this is working and impacting on the housing market would be welcome, and I encourage that part of the amendment. I am delighted to note that my noble friend Lord Freud had been supportive of the idea, and I very much hope that my colleagues on the Front Bench will also be supportive.

Finally, perhaps I may take this opportunity to raise one further question about the way in which benefits are to be paid to the tenant rather than to the landlord. I know that various demonstration projects are undergoing trial in Edinburgh, Oxford, Shropshire, Southwark and Wakefield involving direct payment, and that they have some time to run, but I should be grateful if my noble friend in her response can provide some assessment of how they are going. There are some concerns that paying benefits directly to tenants, particularly when that may represent the largest component of their income, might put them in an invidious position, and some people might get into greater debt as a result. I know that such schemes are being trialled and I should be grateful for some comment from my noble friend on the Front Bench in her winding-up speech.

[Lord McKenzie of Luton]

My Lords, this has been a good but short debate, as any debate around amendments of my noble friend Lady Hollis and the noble Lord, Lord Best, on housing would be. You cannot do better than that in your Lordships’ House. I am grateful to the noble Lord, Lord Bates, for his earlier comments. I thought that he had got it the wrong way round but was not quite sure whether I had misheard. I think that my problem is that I am not confident to challenge him; however, I am grateful for his clarification.

My noble friend and the noble Lord, Lord Best, are on the same page on this matter and we are happy to support the amendment, which calls for a review of housing welfare benefit, especially regarding the affordability of private sector housing. My noble friend and the noble Lord made a particularly powerful case in their analysis of the consequences of a growing divergence between levels of private sector rents and levels of support. We know and recognise why there is a growing divergence—the 30th percentile, the individual cap, CPI uprating, and now the proposed 1% cap. It will be made worse by direct payments when universal credit comes in. There are certainly causes of the pressure on rents, with growing numbers of households and insufficient new builds, but no evidence—indeed, quite the reverse—that the restrictions on housing support are driving rents in the opposite direction. It remains to be seen, as the noble Lord, Lord Bates, suggested, whether there will be any slowing down with the further ratcheting down of housing support.

Welfare Benefits Up-rating Bill

Lord Bates Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Bates]

My Lords, as I listened to the right reverend Prelate, I struggled to think of one point in this Bill on which this House might be unanimous, but I venture that it is this: that the provisions of the Bill are unwelcome. However, the question was never whether they were welcome; it was always whether they were necessary.

The roots of this Bill in this Parliament lie in the bill for the previous Parliament: the doubling of the national debt and the biggest budget deficit in the developed world and in our own peace-time history. From 2003 to 2010, the previous Government spent £171 billion on tax credits, contributing to a 60% rise in the welfare bill, which was unsustainable. I have never quite been able to get to grips with the idea that profligacy is compassionate and that sound management of your finances is somehow hard-hearted and uncaring.

Other myths that have been put forward surround language. “Shirkers”, for example, is an expression that I would never use, having grown up on Tyneside with many people who found it degrading to be in receipt of government aid through welfare rather than having the dignity of earning a salary. I never use that phrase, but, of course, it was never this Government who started its use; it was Mr Liam Byrne—to whom I shall refer a couple of times in this speech. He said at the Labour Party conference in September 2011:

“Let’s face the tough truth—that many people on the doorstep at the last general election felt that too often we were for shirkers not workers”.

That was not a Conservative statement. In a speech given by Mr Byrne at the London School of Economics in January last year, he said:

“Labour is the party of hard workers not free-riders. The clue is in the name. We are the Labour Party. The party that said that idleness is an evil. The party of workers, not shirkers”.

It is important when we have a debate of this nature, which is clearly highly charged and emotive, that we correctly ascribe the language being used.

Let us place the proposed savings that this measure will bring about in some sort of context. We are talking here about proposed savings in 2014-15 of £1.1 billion, rising to £1.9 billion in 2015-16. That is 1% of the £117 billion bill for social welfare, excluding pensions and sickness. Another argument used is that this is somehow a pernicious measure which seeks to attack the poor while helping the rich, yet the argument used about higher-rate tax cuts is worth further examination. Higher-rate taxpayers will pay more tax to the Government in every single year of this Parliament than they paid in any single year of the previous Parliament. The increase of the higher rate of tax to 50p in the pound came into effect on 6 April 2010. If ever there was deathbed conversion on the part of the previous Government, that was it. In 13 years, they did not put up the higher rate of tax; it came into effect two days before the Dissolution of the previous Parliament. We are moving forward and saying that you will pay more through capital gains tax, more through the reduction in the pension tax relief threshold, more through the freezing of inheritance tax, which will come later, and in a number of other ways.

Therefore, the point that the Government are focusing on fairness in restoring the public finances is an important one. For example, changes in child benefit will mean that those who earn salaries over £50,000 will progressively lose their child benefit, which has widespread support as being fair. The raising of the personal allowance has halved the tax bill of someone who is on the minimum wage and taken 2.2 million of the poorest working families out of tax altogether. The state pension has risen from £97.65 in 2010 to £110 per week in the current year, including one of the largest rises in the level of the state pension ever in 2011.

There is another crucial element, which is reducing the welfare dependency culture in the UK, which has trapped millions on welfare and is a huge waste of human potential. Between 1997-98 and 2010, while average earnings increased by 30%, tax credit spending increased by 340%. The result was that by 2010, 90% of all workers were eligible for some form of welfare.

That leads me to another point on which I should like to press my noble friends on the Front Bench a little further. Given the opportunity, I will return to it in Committee. With the introduction of universal credit, we will have a system where, no matter what the salary of the job, you will always be better off in work by a straight line table of 65p in the £1. It is very important that people should always be better off in work. That is one of the principles at the heart of this reform. However, in the debate on 17 January led by the noble Baroness, Lady Hollis, which I guess was a bit of a forerunner of this debate, one of the issues that I raised was the living wage. I should like to explore it further.

I followed it up in a Question for Written Answer, in which I asked what would be the effect on the bill for social security benefits of raising the minimum wage to the living wage. If the argument, which I fully support, is that we want to reduce welfare dependency, then whether that welfare dependency comes through levels of benefits or inadequate levels of income, it needs to be treated exactly the same. The Answer was:

“The Government support the idea of a living wage and they encourage businesses to participate. However, requiring employers to pay a living wage higher than the national minimum wage could be burdensome to business and damage the employment prospects of low-paid workers … In the absence of evidence on the living wage’s adoption by employers and the resulting effect on employment levels and patterns, it is not possible to estimate the net effect on income tax and national insurance receipts, or on social security benefits”.—[Official Report, 29/1/13; col. WA 315.]

On the first part of the Answer, I would say that if it was the case that the minimum wage destroyed jobs, why have we continued to increase it from £5.93 in 2010 to £6.08 in 2011 and then to £6.19 per hour in 2012? Presumably, we accept that it does not destroy jobs.

When it comes to calculating the cost, Her Majesty’s Treasury seems unable to estimate it, but the Resolution Foundation has estimated that the living wage would introduce gross savings of £3.6 billion in increased tax revenues and a reduction of £1.1 billion in tax credits and means-tested benefits—a not insignificant sum, as it is the same as would be yielded by the 1% cap on welfare increases over the next three years.

I therefore encourage my noble friend to reconsider the issue of the living wage. As a Conservative, I think that we should help companies to create wealth and jobs through lower taxes, not by subsidising low pay. That is worth looking at. It would be entirely in keeping with the principles of the Secretary of State for Social Security and, I am sure, the Chancellor of the Exchequer, and I would support it. That would show that we are on the side of low-paid employees who are struggling to get on in life and whose contribution and effort we respect and admire.

Taxation: Families

Lord Bates Excerpts

Thursday 17th January 2013 Lords Chamber

[Lord Bates]

My Lords, it is a privilege to speak in this debate and I congratulate the noble Baroness, Lady Hollis, on securing it. She has an acknowledged expertise and a well deserved reputation in this area. One of the things that has been most healthy about the political debate over the past 10 years is that sometimes the debate on this whole area of welfare reform had been taking place on the left of British politics. However, the work of my right honourable friend Iain Duncan Smith, Philippa Stroud and my noble friend Lord Freud, has started a debate about a compassionate view of how welfare reform could be undertaken on the right and centre-right of British politics. That informed level of debate is overwhelmingly healthy as we wrestle with these important issues.

My first point is that the 1% benefit increase limit is the result of a desperately difficult choice that the Government have had to make in light of the macroeconomic circumstances in which we find ourselves. Had we inherited the type of economic legacy that a Government coming into office in, say, 1997, would have had, there would be absolutely no question about having this debate or being forced into a position of having to consider the types of situations that I have absolutely no doubt will bring hardship to many of the most vulnerable and poorest people in our society. Nor do I deny the veracity of the statement made by my right honourable friend the Secretary of State for Work and Pensions in the foreword to his, State of the Nation Report: Worklessness and Welfare Dependency in the UK. He said:

“Addressing poverty and inequality in Britain is at the heart of our agenda for government. It is unacceptable that, in one of the wealthiest nations in the world, millions of adults and children are living in poverty. Whole communities are existing at the margins of society, trapped in dependency and unable to progress. In these areas, aspiration and social mobility disappear, leaving disadvantaged children to become disadvantaged adults”.

That was a clear and true statement of where this Government are going. It is evidenced by one or two things.

Mention has been made by my noble friend Lord German of the macroeconomic situation. That is what is driving this review and rethinking. It is not possible for the Opposition to say with credibility that this measure is absolutely wrong when we know that welfare accounts for roughly £1 in every £3, or a third, of revenue raised. They claim that they have a credible plan for reducing borrowing and yet cannot say what they would do to reduce that level of borrowing. The noble Baroness, Lady Sherlock, is chipping in. I greatly respect her and I welcome her to her position on the Front Bench. I hope that when she responds she can give us an insight as to where in the Opposition’s view the fair way would be to apply savings to the welfare budget. We would all be interested to hear that. The veracity of the argument presented would be much stronger if those points were put forward.

It was with a great sense of irony that the current work and pensions spokesman in the other place, Liam Byrne, famously left a note on his desk in 2010, saying, “Sorry, I am afraid to say that there is nothing left”. That may well be the case. If you have nothing left, you have to make very tough choices about where savings have to be made.

There is another view that I want to challenge and that is that somehow these changes are being made in a capricious and arbitrary rather than considered way. There is no room in a society in what is one of the wealthiest nations on earth for there ever to be that type of charge levelled against a civilised government; it does not stack up. The reason is that pensions are exempt from these changes. Those pensions will be increased in line with inflation, taking the single person’s state pension to about £110 per week, which is up from about £97. We inherited that. That was a clear statement of intent. Mention has been made of carers and the importance of people who look after children, or elderly relatives. The announcement last week that there is going to be a reduction of a flat-rate state pension, at about £144 per week, is tremendously good news for those people. It is based on the principle that if people can work, they should work. In the past it has not always been the case, but it is a clear-cut choice.

A charity that I work with in the north-east of England deals with young, hard-to-reach, unemployed people. People make a calculation about benefit entitlement and whether employment will pay. Benefits may be well meant but on the matter of the cap on benefits, coming in at about £26,000 for a couple, that would require them to have an income in the region of £45,000 to be able to exist without those benefits. If that does not create dependency, I do not know what does. To say to somebody with no qualifications whatever that they ought to be able to seek a job at the level of deputy head teacher is clearly nonsense.

We must be careful about how we go about this and in saying that we do not want to create dependency. We must always make sure that work pays. That is where universal credit comes in. That says that no matter what the salary of the job that you are taking is, with a straight-line taper of 65p in the pound, you will always be better off when you work. That is a basic principle and seems to me to be good. Work is the best route out of poverty. What is most difficult in the charity is for people to get their first employment on their CV. Once they have a job they can more easily find another one and progress out of poverty. Education is a key to that and that is why education reforms are key to our drive to reduce to child poverty. These general steps can be widely welcomed.

There is room for further work to be done. This is an ongoing debate. We understand the difficult choices that have to be made, the challenges in the market and the importance of raising tax thresholds. That is another important element in making work attractive, particularly at the lowest levels—not so that people stay there but that they progress from there. Page 13, table 2A of a helpful briefing for this debate from the Institute of Fiscal Studies and provided by the Library looks at average earnings growth. Reference has been made to the historic figures, so I will not repeat them. The institute forecasts that average earnings will increase by 2% in 2012, by 3.1% in 2013, by 4.3% in 2014 and by 4.5% in 2015. That tells us that you need to make every possible effort to ensure that people get into work in order to benefit from those increases.

I leave two final thoughts for my noble friend to ponder. First, I endorse what my noble friend Lady Jenkin and the right reverend Prelate have said about recognising the importance of marriage in the tax system through a system of transferable allowances. Secondly, I remember having debates about the minimum wage. I argued vigorously that it would never work. I was absolutely wrong. The minimum wage does work. It is a very important safeguard in our society that people have a basic wage. The fact that we accept the Low Pay Commission’s increase of 1.8% is also right. When winding up, would my noble friend consider the argument that in reducing welfare dependency we need to move progressively from a minimum wage towards a living wage?

Leveson Inquiry

Lord Bates Excerpts

Friday 11th January 2013 Lords Chamber

[Lord Bates]

My Lords, the debate has been framed as a question between those who prefer some kind of limited statutory regulation and those who wish to resist that. However, I contend that, essentially, the debate is not about the relationship between politicians and the press and the police and the press but about the relationship and the level of trust that exists between the press and the public in whose interests it claims to act. The basis of that relationship has come under strain because of abuses of power by some journalists, resulting in a breach of trust and a sense that inadequate balance of power has been exposed in seeking redress.

It used to be the case that the press would “shine a light”, but all too often it is so strong that it now scorches the lives and the truths upon which it focuses its attention. It used to illuminate but often, as it sensationalises and joins in a voyeuristic celebrity obsession, it now trivialises the news and obscures the truth from view.

The press should not separate that reality from its falling circulation levels as a potential cause and effect. It is a part of the reason why my right honourable friend the Prime Minister set up the Leveson inquiry. On 8 July 2011, he said:

“The Press Complaints Commission has failed. In this case, the hacking case, frankly it was pretty much absent. Therefore we have to conclude that it’s ineffective and lacking rigour. There is a strong case for saying that it is institutionally conflicted because competing newspapers judge each other. As a result it lacks public confidence. I believe we need a new system entirely”.

I would argue that if the Rubicon has been crossed, it was not crossed with a potential Bill but with that statement of intent.

And so Lord Justice Leveson began his work. Not on his own: he conducted his work with six independent assessors, whose contributions should be acknowledged, in Sir David Bell, the former chairman of the Financial Times; Shami Chakrabarti, director of Liberty; the noble Lord, Lord Currie, a former Ofcom director; Elinor Goodman, former political editor of Channel 4; George Jones, the former political editor of the Daily Telegraph; and Sir Paul Scott-Lee, a former chief constable with the West Midlands Police. The sum of their efforts together was the report we are now considering.

It was a courageous decision by the Prime Minister to set up the inquiry but it enjoyed overwhelming public support at the time. It still merits overwhelming public support if we are to judge by the opinion polls. The public had a sense that there was something fundamentally wrong with the system at the heart of journalism and that something needed to change. If they felt that at the beginning of the inquiry, then as the details emerged of the treatment of Sally Dowler, Kate and Gerry McCann, Margaret Watson and Chris Jefferies, that position was surely strengthened as we were horrified by the evidence it revealed.

What makes the system far worse, and the need for action far more urgent, is that we have never had an inquiry at this level—there have been six or seven—with the strength of the internet in play, an issue to which other noble Lords have referred. It used to be said that newspapers were tomorrow’s fish and chip papers but, because of the internet, they are today’s reheated fish and chips. On the internet, lies can be circulated around cyberspace and constantly move in advance of any correction. There was evidence from Gerry McCann on this when he spoke about his fear, as a father, of the time when his children will be old enough to start searching the internet engines and come across articles which allege that their mother and father were complicit in their sister’s murder.

Of course we cannot control what is on the internet, but if we want to live in a civilised society, it behoves us to do all we can to regulate the veracity of what goes on the internet in the first place. We are reminded that democracy is not just an event, but a process, and that distils down to a duty to keep a check on power. We must make sure that the regulatory system keeps pace with the shifting contours of power in our society. It used to be said that it was the role of journalists to speak truth to power. Through the Leveson inquiry we have heard from victims of the press, and it is their courage in re-entering the public square and sharing their accounts which has turned and spoken truth to the power of the press. We must remember that the object of all our freedoms is not the preservation of a free press, but the protection of a free people.

Unemployment: Young People

Lord Bates Excerpts

Wednesday 24th October 2012 Lords Chamber

Asked By

[Lord Bates]

To ask Her Majesty’s Government what further steps they will take to reduce the level of unemployment, particularly among young people.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

The recent rises in employment and falls in unemployment, including among young people, are encouraging. We are committed to providing support to young people to give them the work experience and skills they need to find sustained employment. This includes the youth contract, which will provide nearly half a million new opportunities to young unemployed people over the next three years, as well as the Jobcentre Plus offer and the Work Programme.

[Lord Bates]

I am very grateful to my noble friend for a very encouraging answer. It is wonderful to see more young people getting a job, but would he agree with me that there is one thing better than getting a job, and that is creating a job? Would he therefore consider bringing in new measures to encourage more young people—be they unemployed, school leavers or graduates—to set up their own businesses and thereby unlock the vast creative capital among our young unemployed?

[Lord Freud]

Yes, my Lords, my noble friend makes a most valuable point. We are expanding the New Enterprise Allowance to encourage more people—in particular young people—to start up businesses. While this includes financial aspects such as offering loans and financial support, it is the mentoring tied up with that process that helps the youngster, or indeed anyone taking part, in actually making that business a success.

Young Offenders: Employment and Training

Lord Bates Excerpts

Wednesday 17th October 2012 Lords Chamber

[Lord Bates]

My Lords, it is a privilege to follow the noble Baroness. On behalf of all who will take part in this debate, I thank her for securing this time for this very important issue to be aired and discussed. I also thank her for the way in which she introduced the debate, which was very even-handed and fair, and reflected the fact that this is not a situation that developed in May 2010 but is something that all Governments have been wrestling with for many years, and needs to be approached as such.

There are a number of speakers who I am looking forward to hearing, particularly my noble friend Lady Stedman-Scott, who, through her wonderful organisation, Tomorrow’s People, has shown how even the most hard-to-reach young people can be picked up, have a future and a job, and work their way out of the problems they have found themselves in early in life. My own contribution comes through growing up on Tyneside, being involved in a church youth group and meeting lots of young people and seeing the problems that they encountered at that time; then through a long involvement in secondary education, and also having visited many young offender institutions, particularly in the north-east of England.

I want to put down one marker before moving on to some of the suggestions and analysis. There is nothing intrinsically different about the young people who enter the criminal justice system. They could be any child—and anyone’s child—but for the environment in which they spend their formative years and the choices that they make. I have no doubt that had a young offender had the good fortune to be born into a home where they were loved and affirmed by their mother and father, had attended one of our outstanding public schools, where expectations of life success were set at a very high level and where they mixed with similarly motivated and secure students, their life choices would have been different, their peer group very different and the outcomes profoundly different. In short, for better or worse, we are all the products of our environment but also of the personal choices that we make in responding to the circumstances in which we find ourselves.

We live in a very unforgiving world. That may seem like a strange thing to say at a time when we are supposed to all be very liberal, but in many ways it is a very dismissive world and culture, in which people are written off, whether they are young people or people in senior positions in public life or sport. It is far too easy for people to be caricatured and written off as problems, particularly in the media. Therefore, it is very important to see these young people as having the same potential and gifts of any young people and to approach the situation in that respect.

This subject is a statistician’s dream. There are statistics everywhere, including those in the excellent briefing pack prepared for this debate by the House of Lords Library. The noble Baroness has highlighted some of those statistics. If she will forgive me, I will repeat one or two because they so clearly point out where the problem lies.

Reference has been made to the fact that 54% of males and 71% of females have no qualifications, which reflects the fact that these young people do not just arrive in the criminal justice system. They arrive there having been excluded from school, having been sent to pupil referral units and having probably been in local authority care at some stage. It is difficult enough to get a job these days when you have a degree. When you have no qualifications and a criminal record, it is challenging to make your way into the jobs market. Again, that is where the work of Tomorrow’s People is so utterly inspirational for me.

We know that often people have mental health disorders. We know—I think this is a key element—that many are involved in drug or alcohol misuse. It is a common denominator throughout. Sometimes there is a tendency to take a soft approach to this and say that people need simply to control their habits. I have visited, an initiative called the Betel Trust. These Betel places say to young offenders who have come out, “What we will do is have a contract. We will offer you a bed, we will give you a job but there is absolutely no alcohol or drugs. It is zero tolerance”. Sometimes that can be a bit harsh because it means that if there is one transgression, the person has to leave the home. However, for those who remain the success rate is quite astonishing, showing drug or alcohol misuse to be a particular cause of offending.

We know that people get drawn into the criminal justice system and therefore it behoves us to do everything we can to keep them out of it. Some 70% highlighted the fact that the major driver for crime was that their peer group consisted of criminals. If you can stop them going into that environment that would seem to be eminently sensible. The costs of this, financially and socially, are dreadful for society but I would argue that they are worse for the young people themselves. The most important thing we can do is to battle for a culture in which we allow people to make a fresh start and tell them that their future is not determined by where they started in life but that their worth is determined by where they finish.

Examples such as the competitors at the Paralympic Games show how people can overcome all manner of difficulties in their early life to achieve incredible success. They are the kind of inspirations and role models that we need. We do not need self-pity. We need to inspire these young people to realise their full potential and full worth.

Youth Unemployment

Lord Bates Excerpts

Thursday 14th June 2012 Lords Chamber

[Lord Bates]

My Lords, it is a pleasure to follow the noble Lord. I congratulate him on securing this very important and timely debate. His moving story of how he secured his first employment reminded me of the vital importance of human intervention. We often deal in schemes, numbers and bureaucracy and forget that these are real people who can be excited and motivated.

My interest in the unemployed is exercised in a practical sense through my role as a patron of Tomorrow’s People in the north-east of England, which works with hard-to-reach young unemployed people and tries to inspire them to get into work. There is no doubt that it can make a profound difference to young people to interact with people who believe in them—perhaps they are the first people to do so—tell them that they can achieve things and that they are a solution rather than a problem. Work is going on as we speak in that body’s Working It Out programme, which is taking hard-to-reach young unemployed people in the north-east of England, who often come from households who have been unemployed for generations, and is getting 75% of them into employment or training. Given that those people often have no qualifications, I find that inspiring, as is the transformational effect on their self-confidence of starting employment or training, which the noble Lord also spoke of.

I also completely agree with the noble Lord’s analysis of the vital importance of education in this area and applaud the work that he did when he was an education Minister to promote the academies programme. I know he will find it every bit as frustrating as do current Ministers that often areas where there is greatest need are the last to get the quality of education that they require. It is all well and good saying, “Wouldn’t it be great if more free schools and academies went to the areas where they are most needed?”, but, having tried to set up an academy and a free school in an area where they are most needed in the north-east of England, I found that they were fought tooth and nail every inch of the way by dog-in-the-manger local education authorities and trade unions, which blocked their paths. I find it deeply frustrating to see people wring their hands while talking about the young unemployed but then deny them the education which could provide them with a pathway into employment.

I also very much respect the way that the debate was introduced because it recognised that youth unemployment has been a long-term trend, as was set out in the helpful briefing pack that we received for this debate from the House of Lords Library. Youth unemployment was not invented in May 2010; it has been rising steadily. As Demos says:

“Before the financial crisis hit, youth unemployment had already been on the rise. In fact, UK youth unemployment has risen … as a share of total unemployment for the past 20 years”.

It also observes that from January to March this year the rate was 1.7% lower than the previous year. That is an important point. Although 1.02 million young people being unemployed is a tragedy, we must remember that before the last election the figure was 923,000 and on a rising track. Thankfully, that figure is now beginning to come down just a little, although of course not fast enough.

I want to devote my contribution to what is happening in the north-east of England. I think that there is something else missing from the debate here. It is more than a scheme or a government grant; it is telling young people that there are opportunities out there if they search for them and are willing to push for them. Before the last election, the north-east suffered a series of blows to employment, with the job losses at Nissan and the shelving of the Hitachi trains order. I know that the noble Lord, as Secretary of State, argued vigorously with his friends at the Treasury over that order, but it was shelved. That was followed by the closure of the Corus steel plant. However, over the past couple of years, we have seen the reopening of the plant; we have seen Nissan recruit 2,000 people directly or through the supply chain, and we have seen the £4.5 billion Hitachi trains order go ahead, and that will create 1,000 jobs in Newton Aycliffe. In recent weeks, we have seen Offshore Group Newcastle announce 1,000 new jobs building foundations for wind farms. Moreover, over the past year the number of jobs in the accommodation and food services sector in the north-east has increased by 9,000, up by 12.8%; jobs in science and technology in the north-east have increased by 8,000, or 13.6%; and the number of jobs in the arts and entertainment have increased by 22.4%.

I make those points not in any way to diminish the fact that there is a very serious problem but to stress that if we drum into young people that there are no opportunities, the situation is absolutely dire and there is no hope, we should not be surprised to find that that is the world view they take, asking themselves, “What is the point of applying?”. There are things happening.

Government have a role in this. It is not just about what the private sector is doing; the Government have a role and a social responsibility, and that is referred to in the title of this debate. I would argue that they are exercising that role in a number of ways. As the ACEVO report mentioned, what we need more than anything else is job opportunities—we need businesses to create more jobs. Therefore, it is very important that we see things such as corporation tax being reduced from 26% to 24% and then to 22%, and the freezing of business rates, and it is important that new start-up companies will not have to pay national insurance contributions for the first year when taking young people out of unemployment. These things make a difference. We have seen £1 billion going into the Youth Contract. In addition, the regional growth fund has invested £157 million in the north-east of England, with 33% of the projects that the fund has committed to being in the north-east. Get Britain Building was a programme announced in the Budget, with £28 million invested in the north-east, delivering 750 homes and supporting more than 1,500 jobs in the construction industry.

The north-east is home to two of the enterprise zones. Of course, there is also the element of making work opportunities—particularly low-paid work opportunities—attractive to young people. Raising the tax thresholds, which has taken 84,000 north-east people out of paying tax altogether, is making those positions more competitive and giving people a better wage than was the case before those thresholds were raised. We have seen the number of apprenticeships in the north-east rise by 87% in the previous year—up from 18,510 to 34,550. There is absolutely no doubt that more can be done, but my argument is that a lot is being done and the picture is not as dark as it is sometimes painted in the media. There are opportunities out there and we ought to encourage people to realise their dreams and use the full talents that they have been given.

[Lord De Mauley]

My Lords, I draw noble Lords’ attention to the fact that Back-Bench contributions are time-limited to 7 minutes.