Welfare Reform Bill

Baroness Hayter of Kentish Town Excerpts

Monday 10th October 2011 Grand Committee

[Lord Freud]

My Lords, I start by congratulating the noble Baroness, Lady Lister, on her first amendment, and I hope that she does not have too many like it. I was very impressed when she said that she was a conservative, which was obviously supported because my noble friend Lord Kirkwood called her his noble friend. Clearly we have some cross-dressing going on.

In the policy briefing note published on 12 September, we confirmed that the universal credit will be paid monthly. However, we do not intend to specify the payment frequency in primary legislation. As with all existing benefits, this will be dealt with in regulations made under the existing powers in the Social Security Administration Act 1992. That approach gave us the flexibility, for example, to increase payment periods from weekly to two-weekly for most out-of-work benefits. The amended provision would require the Government to pay universal credit more frequently than monthly. Amendment 27, for instance, goes on to provide that in some cases payments would be made twice monthly.

I need to make the point about the difference between assessment periods and payment periods, which is important to bear in mind. Currently, existing out-of-work benefits are made on an assessment period of a week, with a fortnightly payment cycle. That is fairly typical. The universal credit benefit represents a new approach focused clearly on work, which encourages out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life. The figures have already been used. Currently, 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year receive earnings monthly. In addition, monthly direct debits for household bills are often cheaper than more frequent billing options.

Many noble Lords raised the evidence base. As noble Lords know, we are conducting qualitative and quantitative research with claimants on many issues but particularly on the payment frequency issue. As some noble Lords have pointed out, on 7 October we published a report, Perceptions of welfare reform and Universal Credit. This outlines findings from research we conducted with claimants, the public, employers and staff in December 2010 and January 2011. There were critical findings in that piece of research that we are looking at with great attention.

I understand that many people on low incomes will be used to managing the fortnightly payment of benefits, and I am determined to ensure that there will be appropriate budgeting support to meet the needs of claimants. We want families to be able to manage their financial affairs in a manner that best reflects the demands of modern life, whether they are in work or out of work, and we are working with stakeholders and benefit experts to that end. We are setting up a series of demonstrator projects, as they are called, with housing associations and local authorities to look at how to structure the payment of rents to landlords. These demonstrator projects will look at a wide range of budgeting support. We need to make sure that budgeting advice and support is available for those who need it in order to help them manage the change.

We also need to consider those exceptional circumstances where more frequent payments will be required. To pick up the point made by the noble Baroness, Lady Campbell, people with mental health problems are an example of a group that may need an exceptional service. To pick up the point made by the noble Earl, Lord Listowel, where there is proven abuse or risk to other members of the family, one would have to look at the payment arrangements.

If you separate assessment from payment, the monthly assessment is intended to reduce the burden on claimants and reduce the risk of overpayments compared with a system where benefits are reassessed on a weekly basis, so there is a separation between the assessment period and the payment period. To pick up a question from my noble friend Lord Kirkwood on the impact assessment—

[Baroness Hayter of Kentish Town]

My Lords, the Minister suggested that payments for those with mental health problems, for example, could be looked at. Could he address how that might stigmatise a certain group; that is, when not everyone can choose to be paid fortnightly, just those with mental health problems?

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Moved by

[Baroness Hayter of Kentish Town]

29: Clause 8, page 4, line 12, at end insert—
“( ) an amount in respect of prescribed unearned income calculated as in paragraph (a),”

[Baroness Hayter of Kentish Town]

My Lords, depending on how the Minister responds, Amendment 29 is, I hope, a probing amendment. It deals with the treatment of income in universal credit. As drafted, paragraph (a) of subsection (3) deals with earned income, while paragraph (b) deals with unearned income. Amendment 29 would insert a new category of income; that is, unearned income which is to be treated as earned income. It seeks to replicate existing provisions within tax credit legislation whereby certain types of unearned income are treated in the same way as wages, including sick pay and maternity pay. We welcome the DWP briefing note on universal credit, which states that:

“The powers in the Bill permit us to make regulations to treat unearned income in the same way as earnings. These powers may be used, for example, in the case of Statutory Sick Pay”—

I have emphasised the word “may”—I hope that it is more of a “shall” than a “may”. However, perhaps we could have some clarification on that. Statutory payments such as statutory sick pay and statutory maternity pay are paid through wages and it would therefore be difficult not to treat them as earnings. We welcome that indication, but again, some clarification of the word “may” would be a nice assurance.

However, although there is no policy reason why those who receive maternity allowance or ESA during the first six months of illness should be treated differently, we seek an assurance from the Minister that these benefits will be treated in the same way; that is, as earnings. By way of example, the Minister will know what I am referring to when I speak of two groups of people who get ESA in the first six months of sick leave rather than SSP. These two groups are those who have been working until they become ill, but are likely to receive ESA rather than SSP. One group is the self-employed, who will have to claim ESA as they have no entitlement to SSP, and the second group is that of people who work for a small employer and become so ill or disabled that it is clear they will be unable to return to their current job. People in this group often give in their notice because they feel it is unfair that their employer is unable to replace them while they are claiming SSP. In monetary terms the difference is fairly obvious. For example, in the case of a home owner during the first three months of sickness, under the current scheme they get in addition to their ESA of £65 a week a payment of up to £52 working tax credit provided that they were working for at least 30 hours a week. That gives them a total of £117. They would have to pay their mortgage out of this because they would not have help with the mortgage repayment.

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[Baroness Hollis of Heigham]

I think that “um” would be a very good response from the Minister.

[Baroness Hayter of Kentish Town]

Some of my comments will not be appreciated but I thank the Minister for his response. Clearly, I have not received the same response as did my noble friend Lady Lister. I will take it back and think about it. She does not know when she is ahead. However, I am afraid that I have to express some regret. A lot of us have done a lot of work in preparing for the Bill although I am sure that we have done much less than the Minister. I blame my noble friend Lady Sherlock in that when I asked her what I should do she advised me to read everything that was said in the Commons. I thank her for that. What I found again and again were promises from Ministers in the other House that by the time the Bill reached Committee stage there the relevant information would be available. Again and again I am afraid I read that our friends in the other place found that that was not the case. They nevertheless were given absolute assurances that the relevant information would be available before the Bill reached Committee stage in this place. To have something published today concerning a debate that is taking place today is simply not good enough. We cannot work that way; “before” ought to mean before. Anything that is relevant to what we are talking about should be with us in time to enable us to read it and think about it.

I welcome the remarks about our being involved in the debates about how this process is going to work. I think that those remarks were probably genuine. However, that means that we have to have the relevant information available, especially as we are trying to discuss the Bill without a wonderful array of staff to help us.

I also regret the remarks about ESA, maternity allowance and earnings. The women who will be getting this who have been in work may simply not qualify for a statutory payment because they have changed employers. However, they could well have been working full time before that. In that sense it is not a benefit but something that they earned and are entitled to. Therefore, to treat it as unearned income—as if a sugar daddy had given it to them—would not be the right approach. It has been earned, albeit in a different way.

Similarly, the Minister did not respond to the question of whether ESA affected the self-employed. They are another group of people who have paid contributions into a system. If they then discover that what they get when they are possibly very seriously ill with cancer is seen not as something that they have earned but something from a very kindly Government, that will not be the right way to ensure that people see the system as enabling them to get something for what they have put in, which is what many of us want. I am sorry about that and I hope that, even if the Minister does not respond orally now, he will think about those groups of people, and in particular about women whose circumstances may have changed and who may have moved to a better job. On the whole it is young women who get pregnant. They may be moving up in a career and may have moved to a different employer and therefore may not qualify.

I have two further brief points. We are obviously delighted about any monitoring and assessment. If there is to be no formal review, I will have to accept that that is the best way of doing it. Nevertheless, it would be very nice if the Minister or his successor will bring those reports to the House, where they can be debated in the same way as we are able to now.

Finally, I accept that the Minister may not want to set a target rate for a taper. He said that perhaps 65 per cent was too high but that a future Government could perhaps do something about it. I look forward to sitting next to my noble friend Lord McKenzie when he is the Minister in a future Government—

[Lord McKenzie of Luton]

Do not wish that on me.

[Baroness Hayter of Kentish Town]

—and can announce a different taper rate. With those comments, I beg leave to withdraw the amendment.

Amendment 29 withdrawn.