Welfare Reform and Work Bill

Lord McKenzie of Luton Excerpts

Tuesday 17th November 2015 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, notwithstanding the fascinating and varied content of their contributions, given the hour, I hope that the House will allow me just to offer collective congratulations to all our maiden speakers. I look forward to hearing their contributions in future.

This is a wretched Bill. I am bound to say that it is the worst I have encountered in my time in the House. As my noble friend Lady Sherlock said at the start, it will increase poverty, penalise working households and accelerate homelessness. There is more besides as the Government are pursuing further cuts in parallel, not least their ill-fated attempt to cut tax credits through secondary legislation. This is done in the name of moving to a low-tax, lower-welfare and higher-wage society but we know that tax cuts and higher wages, even when they come, do not compensate for the scale of social security cuts which the poorest will be made to endure. The national living wage is not a direct substitute for cuts to in-work support and we know that half of the cash gains flow to the wealthiest half of households and are not available to the self-employed. My noble friend Lady Donaghy made some important wider points about the self-employed, which we will need to explore in Committee.

A significant contribution to the Chancellor’s £12 billion of cuts, which the noble Baroness, Lady Manzoor, rightly claimed as a political choice, will come from across-the-board freezes in working-age benefit rates. This amounts to a 4.8% real cut, given the OBR forecast for CPI, and comes on top of three years of nominal increases under the coalition Government—presumably, also a political choice. Because of this, the IFS tells us that 13 million families will on average lose something like £260 a year. Breaking the link with prices and earnings, a growing feature of government policy, means cutting the poorest off from the mainstream of society. We argue for an annual assessment of benefit levels. My noble friend Lady Hollis reminded us to be careful of the mantra around benefits and pointed that as a percentage of GDP, the welfare bill has been pretty constant over a long time. The welfare and social security system is something which we all dip in and out of during the course of our lives.

The IFS analysis of the distributional effect of the coalition’s tax and benefit changes shows that, overall, the coalition Government raised a net £13.5 billion in taxes and cut net benefits by £16.5 billion. Who picked up the tab when measured as a percentage of income? The bottom two deciles have borne the most. How is this supporting the most vulnerable? Where are Adam Smith’s values in all that and who will bear the cost this time round? According to the IFS, it will be the poorest income decile groups.

The reporting obligations of Clauses 1 to 3 can be supported if strengthened. We heard from the noble Baronesses, Lady Stedman-Scott and Lady Eaton, the noble Lord, Lord Hodgson, and my noble friend Lord Young of Norwood Green, who was passionate about having quality apprenticeships and the importance of that government commitment. We need to be clear what employment means to the Government. I sometimes think that the impression is created that active market policies began with the Centre for Social Justice. If we need to look at a bit of history, perhaps I may take the Minister back to a report which he wrote in 2007, when he said that the Labour Government,

“has made strong, and in some respects remarkable, progress over the last ten years”.

He went on to say:

“This is a genuinely impressive record. And underneath these headlines the biggest improvements have been for areas and groups which were previously furthest behind. Nearly every disadvantaged group that the Government has targeted (e.g. lone parents, older workers, ethnic minorities and disabled people) has seen its ‘employment gap’ reduced”.

I commend the noble Lord for the excellent report which he wrote previously.

Several noble Lords talked about the troubled families programme. My noble friend Lord Smith and the noble Lord, Lord Lupton, have supported that. I think we need to make sure that reporting of the troubled families programme includes a report on resources that are made available to local government. Several noble Lords focused on the lowering to three of the age of children whose parents must undertake work search or be sanctioned.

As well as seeking an independent review of the operation of sanctions, we will look to constrain this policy in circumstances where suitable and affordable child care is not available. We agree that child poverty is multifaceted and have no problem with further reporting requirements around worklessness and educational attainment. We might think about bad housing as well, but, although we subscribe to work being the best route out of poverty, we need to acknowledge the growing reality of in-work poverty, a point made by several noble Lords during this debate. CPAG tells us that 64% of children who are now living in poverty are in working households.

Like my noble friend Lady Lister, we are vigorously opposed to the removal of the measures and targets in the Child Poverty Act. We know that the lack of adequate income is a decisive characteristic and one of the primary drivers of poor life chances. Not having to measure income or indeed develop a strategy may be convenient for the Government, but it will not change the reality, a reality where the Resolution Foundation says that we are facing, in this rich country of ours, having some 3.7 million children in poverty by 2020. This is an outcome which is spurred by cuts to working-age benefits.

We look forward to the review of the noble Lord, Lord Low, and the noble Baronesses, Lady Meacher and Lady Grey-Thompson, and to their bringing their expertise to bear on the consequences for disabled people of this legislation. We have great confidence in their deliberations.

We support the Government’s ambition to halve the disability employment gap, although their progress, as the noble Baroness, Lady Doocey, said, should be routinely measured. However, there are a number of measures in the Bill which do not help in recognising that disabled people take longer to get back to work and have challenging financial resistance. The noble Lord, Lord Patel, gave us an authoritative account of some of the challenges that disabled people face in getting back to work. Removing the uplift for individuals in the WRAG will cost them £1,500 a year and is justified on the spurious and unsubstantiated basis that it will improve work incentives, notwithstanding, of course, that people in the WRAG—this is a point made by several noble Lords—have been assessed as not currently able to work. These are individuals also who will be disproportionately affected by cuts to working-age benefits, including, for those not in receipt of DLA/PIP, the benefit cap. How is that supporting the most vulnerable? We will seek to remove Clauses 13 and 14 from the Bill.

It is said that disabled people have been failed by the benefits system. We maintain they have been failed by the Work Programme, particularly those with mental health challenges. I commend the contributions of the noble Baroness, Lady Meacher, and the noble Lord, Lord Layard.

That we have a housing crisis is not in doubt. New build is woefully short of what is required. Rents in the private sector are rising. Homelessness is increasing. Of course, one of the first decisions of the coalition Government was to cut capital spending for social housing and to put the burden of funding on so-called affordable rents. No surprise therefore that the housing benefit bill ballooned by some £30 billion, so now it is all going to go into reverse with enforced social rent reduction, amounting to an average 12% by 2020, reversing also the agreements relating to refinancing agreements for local authorities. That may be good news for some tenants, perhaps, but the benefit will overwhelmingly accrue to the Treasury in reduced housing benefit. Taking some £4 billion out of the sector by 2020 is bound to lead to fewer social homes being provided. We heard from my noble friend Lord Smith of Leigh that this problem is already beginning to bite. As was mentioned, the National Housing Federation has said that it could lead to 27,000 fewer homes by 2020.

We have received strong representations about the impact of this policy on providers of specialist housing that deliver vital services to some of the most vulnerable in our communities. The right reverend Prelate the Bishop of St Albans in particular focused on this issue. Being able to seek an exemption from the policy is all very well, but we support a statutory exemption for specialised housing and seek to require the Secretary of State to bring forward arrangements to ensure that the impact of rent reduction will not impair the ability of housing associations or councils to build new affordable homes. We know that the benefit cap has already reduced the affordability of suitable housing and increased homelessness. Further reductions will make the vast majority of the country unaffordable to couples with three or more children. Freezing local housing allowance will further put housing beyond the reach of many. Shelter advises that in two years local housing allowance will not cover the bottom one-third of rents in almost all local authorities, which is staggering. The homelessness duty placed on local authorities will become intolerable, as cuts to their budgets bite. Of course, although DHPs will help, they are not a panacea.

We will support exemption from the cap for those in high-cost temporary accommodation; we will also seek to remove carers from the scope of the cap and exclude children-related allowances from the calculation. The assertion that this is all about work incentives is bogus, as those caught by the cap are overwhelmingly not required to work. Perhaps the Minister can give us the figure of how many people that actually involves. The Secretary of State should certainly not be let loose to change the cap almost at will and without reference to clear criteria.

As for switching support for mortgage interest by grant to a loan, we will seek protection for pensioners, who comprise some 45% of claimants. Given the switch, there seems little justification for the extended wait to 39 weeks. We will probe in Committee the availability of independent advice and concerns over conflicts of interest.

We have heard fierce opposition to the two-child policy, none more powerful than that from the right reverend Prelate the Bishop of Durham and my noble friend Lady Sherlock. Their opposition and that of the faith communities generally is not only about the financial impact of the restriction on larger families, including some 2 million children—families which already have a higher risk of poverty. As their briefing makes clear, the policy will have profoundly negative effects on family life. It raises horrific images of what women may have to endure in seeking exemption. There is much that we have to challenge in this Bill, none more so than this grotesque policy. It is a line that we must ensure that the Government are not allowed to cross.