Welfare Reform Bill

Lord German Excerpts

Tuesday 13th September 2011 Lords Chamber

[Lord German]

My Lords, your Lordships might expect me to take a slightly different tone about a Bill which has at its heart a universal benefits structure designed to help those who are trapped by no work and a dependency on benefits. Alongside the work programme, this is a transformational Bill—one where an alternative cannot wait. There are those who would argue that it is not an appropriate time because of the state of the economy to introduce such a Bill and to enact such changes. However, there is never a right time to make changes, but there is always a right time to ensure that better principles are put in place.

The DWP describes the current system in the documents that it has circulated as “Byzantine”. I reckon that that is a bit of an insult to Byzantium, which was, by comparison, a well ordered society. For example, there are currently seven different parts to the benefits and tax credits associated with disability. Each of those seven parts is paid at a different rate, has different qualifying conditions and is for different purposes. That is why I welcome the transformational elements of the Bill. We have a very complex system at present and we aim to make work always pay. Those are the Bill’s laudable objectives.

I congratulate the Minister on securing, at a time of great financial hardship, extra new money from the Treasury to ensure that universal credit is put in place. That is a real accomplishment in a tough economic climate. However, the question is whether the Bill provides an architecture that works, and will work for the future, to provide levers that can be pulled to improve the financial envelope as times get better.

As we change a complex system such as this, we need to be wary of two things. First, the end objective must never be forgotten. It is to reduce poverty, as the Minister said—he has given us the figures—and to increase hope and aspiration and to provide opportunity. We should not forget that those are the challenges at the basis of the Bill. Secondly, it is worth remembering that, in a complex structure, changing one part of a system could have negative effects on other parts of the system, and there are many places where that could happen. Shaping a system architecture that will stand the test of time, meet the demands of the modern economy and be a basis for a sound, compassionate and caring society is the challenge that we face.

One of the levers that I would like to see pulled as the economic system improves is the 65 per cent taper rate. That would make it even better for people to work and would be an even better challenge for them. People have suggested 60 per cent or 55 per cent—all very laudable objectives—and when the time is right that should be the first lever to be pulled.

The Bill covers a wide range of issues and touches so many individuals and families across the country. I do not recall the exact figure, but I think about 18 million people will be affected directly by the decisions that we make. It is rather like the most complex signal box that can be imagined, where you have 18 million people travelling on a journey, virtually all at the same time, with about 8.5 million places to which they can go.

A fundamental test of the Bill will be whether it can actually deliver the end goods. That is why I ask the Minister to reassure us about the technology, which is the biggest transformation of the IT system that any Government have seen and one that engages with the private sector payments structure in a way that has not been seen before. Will it really deliver the goods? Nothing could be worse for people than if they find at the end that they have not got the payments that they deserve.

Fundamentally, the Bill must support the broader, gender equality, children and family policies of the Government. That is a test that we will be making during the course of its passage through the House. Arising from that is one of the questions about the payments to households that my noble friend the Minister has already mentioned. I am grateful that he is considering this issue. One of the things that we did during the passage of the regulations on the local housing allowance was to extract a concession from the Government that they would seek to pay some tenants’ rent directly to the landlords. There will be circumstances in which rents should be paid directly. We made that commitment already once, and I hope that the Minister can assure us that that will happen in the future.

As well as looking forward to the Minister’s review of that issue, I look forward to the review of the mobility element. I believe that there is nothing wrong with the mobility element except that there may be some overlap. If there is overlap between two payments for the same thing, that should be eradicated, but we do not want to see that part of the measure lost altogether. That is why there is a need for the draft regulations, guidance and notes. I am grateful to the Minister for providing us with a great deal already, and I look forward during the scrutiny of the Bill to seeing far more.

One key issue at the heart of the family and gender equality issue must be that of childcare. I am glad to see that we will end the cliff-edge of the 16-hour working rule, which has bedevilled many people who could work for a few hours but no more. But we will need to find additional resource. The benefit of a universal credit and benefits system is that universally it becomes available to anyone without having to ask for it. There will be a bigger take-up from people who will have this element at their disposal. So far, we have had to make the current envelope of money stretch further. If we are now going to have to pay it to more people, we will need more money in the pot to make that happen. I would be grateful if the Minister could explain what he expects the additional gap to be between the current financial envelope for childcare and the extended financial envelope once universal credit is in place.

The Minister has confirmed that work will always pay, so the transitional support will be essential as well. My understanding is that “no cash losers” means that people will hold their cash benefit until it is overtaken by the increasing rate of benefit under the new system. I wonder whether there has been any modelling by the department on how long it will take for those “no cash losers” to become beneficiaries of the new system as the benefits increase.

It will be of no surprise to noble Lords that those of us on these Benches are very concerned about Clause 93(7), on the benefit cap. This is one of the examples of intended, or maybe unintended, consequences. It is clear that the clause has a sense of the vague about it. It just says that it is up to the Secretary of State to determine what the cap figure might be. Of course, I do not have any problem with the cap; the principle is fine, providing the cap fits. The problem is that the figure of £26,000 is taken as the median.

The latest data from the Family Resources Survey are as follows: the median income for households without children is £21,320 per annum; for households with children it is £30,680 per annum; and for all households the average is £27,300 per annum, whereas the Government have said £26,000. I would be grateful for an explanation from the Minister about where the figure of £26,000 has come from. What should be apparent from those figures is that £30,680 is the median income for households with children and yet we are likely to affect those families by some £3,380 if we take the £27,300 figure, which is in the Family Resources Survey data.

Of course, the differences between households are very varied across the country. Depending on where you live, there is a gap between the highest and the lowest of £12,000 per annum, which is an enormous gap between family incomes. If there is to be a move to allow people to move on to the new system, we need a cap which fits and one which is properly established and allows a period of transition. I hope that the Minister can confirm that that is his intention.

I move on to issues relating to council tax benefit and housing benefit. The Calman commission, which was the underpinning for the Scotland Bill which is before the House at the moment, says that social security benefits are the social glue which holds together a compassionate nation. I am an ardent supporter of devolution, as one might imagine, but is our social security system the one which should be universally available across all parts of our land, including Scotland, Wales, and Northern Ireland? If it is, you have to question the devolution proposal in the Bill, which is to local authorities in England, over whom this Government and this Parliament have some influence as regards the purposes for which that money might be spent. If these moneys are simply to be handed over, as the Bill suggests, to Wales and Scotland as part of the Barnett formula, for them to do with as they wish, they will have no obligations to the purposes of the Social Fund or council tax benefits, and this Government cannot insist upon them and neither can this Parliament. I believe that there is a fundamental point here about what holds our United Kingdom together. If you believe that these aspects of our system should be universally available across our country, the Government will have to find appropriate and perhaps alternative mechanisms—I might even suggest leaving them as they are.

A linked issue is the prospective changes to the housebuilding programme and household provision in our social housing sector. The new housing benefit regime outlined in the Bill presumes a change to the payments of households based upon the level of occupancy. Claimants who are in accommodation which is too large will have only three alternatives: first, to pay the extra above what the bill would be for a smaller property; secondly, to fill the spare space with a family member or a lodger; or, thirdly, to move either to the social housing sector elsewhere or into the private sector. However, housing associations have not geared up for this third choice. They have focused on providing two and three-bedroom properties. If the result of these changes is an increased demand on housing associations for smaller units of accommodation, they will need time to adjust. I would be grateful if the Minister would explain what modelling has been done on the changes to our housing stock for the social housing sector that will be needed as a result of the Bill.

I started by saying that this was a transformational Bill. The desired outcome is the lifting out of poverty of a significant proportion of our society. For me, that is an ambition worth pursuing. That is why I support the principles of the Bill: they are much needed. What we now need is to make the principles work.