Welfare Reform Bill

Baroness Hollis of Heigham Excerpts

Monday 10th October 2011 Grand Committee

[Baroness Hollis of Heigham]

My Lords, I wonder whether the noble Lord can help me with some stats. It was interesting that in his reply he told us that the current percentage of people who have savings above £16,000 is 13 per cent. However, when you start netting the figure and taking into account the notional income derived from that tariff, and given that something like 85 per cent of people on JSA expect to get back to work within nine months to a year, what does he think the real savings, or loss of savings, would be were he in a broader sense to accept that, with the integration of the two benefits, one should go for the tax credit system rather than the JSA system? Can he help us on that? In the light of that, we can perhaps press him further, but what real savings is he expecting to generate, given that most people who come on to JSA will be back in work within the year? In their first six months their benefit is contributory, so they are not affected and they will go back to work very quickly within the next six months. Therefore, if they have those savings and you say that because they are over £16,000 they will get not a penny of JSA, in real terms what net savings do you expect to garner? I would like to press the Minister on a further point, if I may.

[Lord Freud]

My Lords, I have to confess to the noble Baroness that I do not have my hands on that particular figure. I am not sure that I can find it out. We have other figures around the costs, but I am not convinced that I have that particular figure readily to hand. Can I leave it that I will try to find it out and supply it in the fullness of time?

[Baroness Hollis of Heigham]

My Lords, I do not want “the fullness of time”; I want very soon, just as with childcare—the day after, if the Minister would be so kind. This is the key figure. The key stat is the real net cost of going for the more generous alignment with tax credits rather than bringing people down to the harsher alignment with JSA. That is the pivotal figure. I am surprised that this has not been brought into play in the Minister’s response. People coming out of work on to JSA are desperate to get back into work. Anything we do to make it difficult for them to get back into work is counterproductive. Anything that runs down their savings and that they are worried about, or anything that risks them when they go from work to benefit as opposed to from benefit to work is surely to be deplored. I suggest to the Minister that this is very unwise social policy.

[Lord Freud]

My Lords, I withdraw my previous reluctance to provide a figure. In much less time than I thought, I am now in a position to let noble Lords know that if we removed the cap limit entirely, the cost would be £500 million per annum.

[Baroness Hollis of Heigham]

Forgive me, but that is the net cost. If you removed the cap entirely and instead took into account notional income from those savings, given the stat of 13 per cent being over £16,000, as the noble Lord said, as well as people being in a range of between £6,000 and £16,000, and taking into account that they will have their benefit cut by virtue of their notional income, I take it that the £500 million includes that figure. It seems unlikely on the face of it, but it may well be the case. I suspect that it is a gross figure, not a net figure. I could be wrong, but we need to know the cost in effect of substituting one system over the other, not simply the cost of not having any savings rules at all.

[Lord Freud]

My Lords, I can clarify. That is a gross figure. Behavioural changes, clearly—

[Baroness Hollis of Heigham]

No, they are not behavioural.

[The Deputy Chairman of Committees]

My Lords, I hesitate to interrupt but noble Lords will see that there is a Division in the Chamber, so the Committee will adjourn now and resume in 10 minutes.

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[Lord Freud]

My Lords, I will complete my response to the questions. If we were to take a £50,000 limit with the tariff rules—in other words, starting at £6,000 and moving up on the tariff rules from £1 for every £250—the cost would be £90 million; so if we were to take the cap off completely, it would be a little, but probably not a lot, more. The £16,000 cap that we propose will affect 200,000 people in total. However, currently only 100,000 are on tax credits. That is the universe that we are talking about. I point out the political choices that we are making. We are designing universal credit to be for the poorest people and putting constraints higher up the income scale. That is entirely deliberate.

[Baroness Hollis of Heigham]

I am grateful to the Minister for giving us the figures. Perhaps he could make it clear that embedded in them is the scatter of JSA claimants who will return to work at different intervals. The first six months will be contributory. Thereafter, most of those coming on to JSA for the first time in that year will be back to work within three months or so on average after their contributory benefit has ended. Has the distributional factor of how long people stay on JSA been taken into account? I am talking not about existing JSA claimants but new claimants. What will the implications be?

[Lord Freud]

Yes, my Lords, a careful assessment has been done of how it will work in practice, which incorporates those kinds of effects.

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[Baroness Campbell of Surbiton]

My Lords, I would like briefly to support this amendment by reminding Members of what happened when there was an assault on savings of disabled people who are reliant on social care. Over the past 10 years, one who is in receipt of social care support has significantly not been able to retain savings above and beyond £14,000. The consequence is that these people have not been able to develop their careers, buy a house, buy a car, save for a family and feel an equal member of society to a non-disabled member. I think we sometimes forget how the inability to save beyond £14,000 can erode one’s sense of self and of equality. I therefore support this amendment; I think it is admirable, and I will continue to raise the issue in the area of social care. Andrew Dilnot raised this in his recent commission report as being one of the greatest barriers to the life chances of people who rely on benefits, especially social care benefits and support, so I am very pleased that this has been raised by the noble Baroness, Lady Drake, and I support it.

[Baroness Hollis of Heigham]

My Lords, I, too, support my noble friend’s amendment, which was so impressively and eloquently moved. I thought she had an unarguable case, but we will see in a moment whether the Minister thinks differently. The Minister has been very responsive, rightly in my view, not only to the issue of rewarding the move into work but to the issue of reducing the risk of moving into work. One thing I must welcome about universal credit is precisely that it takes into account the risk for people on very low and narrow incomes. I do not doubt we shall come back to the very high risks that people on very low incomes face when trying to manage on a frankly very tiny budget when we discuss an amendment on payment methods tabled by my noble friend Lady Lister.

There is another risk. You are in work, you may be receiving tax credits or may be self-employed, and you try to build up savings, through ISAs or whatever, because you need to replace a white van for your business to move things or because you are a self-employed carpenter with tools because you can no longer get a job as an employee, or because you are associated with a garden centre and are taking stuff around; or you might need a car, particularly one that is big enough to take your elderly parents out from their residential care, and that will cost you substantial savings; or, as my noble friend mentioned, you might be an older person in your 40s or 50s, with children approaching university age, who has been saving hard to make it possible for them to go to university without facing a massive fear of subsequent debt.

All these are expenditures which I am sure the Minister would regard as reasonable, and all require saving—in some cases, if possible, beyond the £16,000 figure. You may have several demands. A rollercoaster of demands might hit you, and you have over the years providently built up your savings to £20,000, £25,000, or whatever, so that you can lay off that risk. I know the Minister understands the point about risk if one is going from benefit to work.

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[Lord Freud]

I will have to write to the noble Lord on ISA income in tax credits. I do not know the exact position. I hope that that explains why we cannot support Amendments 22B and 22F. I ask the noble Lord to withdraw his amendment.

[Baroness Hollis of Heigham]

My Lords, the noble Lord started off with a question that I suspect was meant to be rhetorical, but I think he is entitled to an answer. Is it right for the taxpayer to support someone who has £50,000 in savings? That was the noble Lord’s opening sentence. I agree with him that that is the key question. However, given the responses that he has heard today, the answer should be, “Yes, in certain circumstances”. The key question is, “What are the circumstances?”. There is no absolute yes or no answer.

The circumstances mentioned so far include whether this will help sustain savings and the savings habit. The answer is yes. Would it help people get back to work earlier than they otherwise would, and therefore depend less on benefits? Possibly, yes. Would it help families avoid falling into debt and thus lose even the tariff income that they would otherwise expect to enjoy between £6,000 and £16,000? Possibly. Should it be for a limited time so that it is not an unending commitment? Certainly. That is surely the way in which we should approach the question. It should not be, “£50K or not?”, but, “What are the circumstances in which it is reasonable to support people?”. Otherwise, we will make short-term savings at the expense of longer-term losses, which will come from keeping people on benefits longer than they need to be because they have gone into debt by having run down their savings. Surely that is the right question to ask rather than the bald one that does not take into account the very different situation of people who are marginal, who are in and out of the labour market but who hope to stay there with the help of savings to smooth out these movements.

[Baroness Drake]

The Minister opened by asking whether the taxpayer should support someone with £50,000 in savings. My initial reaction to that is that the taxpayer supports people on £500,000 because there is 40 per cent to 50 per cent tax relief up to the value of £1.8 million and £50,000 per annum for pension savings. Actually, the taxpayer supports people on much higher levels of income, and we can think of lots of other incentivised examples. There is no limit on the ability to use the advantageous tax opportunities of ISAs year on year depending on what capital is held in other places. I am not sure that that would withstand the test of rigorous intellectual analysis.

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[Lord Freud]

My Lords, I need not write to the noble Lord on this matter because I am trustful that the impact assessment that holds these figures will be on its way—

[Baroness Hollis of Heigham]

Very soon?

[Lord Freud]

I was going to say today. In fact, I can say more. I have copies in the Room. I can do better; I can ceremoniously deliver the impact assessment to the noble Lord with that figure explained.

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[Baroness Howe of Idlicote]

My Lords, I congratulate the noble Baroness, Lady Lister, on her excellent exposition of the case and the passion with which she presented it to us. Like my noble friend Lord Northbourne, for many years I have been and still am involved with the Peckham Settlement charity. I know that there was considerable concern when the money that the women had charge of ran out for one reason or another.

I am very impressed by the range of options here, but I would really like to support the one identified by the noble Lord, Lord Kirkwood of Kirkhope, because I think that really said it all. It is a question of choice, and that should be what we give individuals in this situation. We know the number of times families have gone hungry when women have not had control of the money, for all the reasons that have been explained previously. This particular option is the one that we should all consolidate behind. More than anything else, I say this because the more people who speak in favour not just of this amendment but of what is being said in all these amendments, the more likely we are to persuade the Minister to have another look at this, and above all to take it back to his colleagues, who may have rather different views, and to try and persuade them.

[Baroness Hollis of Heigham]

My Lords, I support the amendment of my noble friend Lady Lister, which she moved so powerfully, and I certainly hope it will cause the Minister to reflect on the issues she has raised. I want to speak to a related issue that could be raised under Clause 29, but I raise it now because I think it will make worse the situation that my noble friend has described, and I am fearful. This issue is the payment methods for housing benefits—not to whom they are paid, which we will come on to later, but how they are paid. I hope the Minister can give us reassurances on that, and if not, that we can follow this up in the discussion afterwards.

Your Lordships will know that HB is very complicated to assess and to administer. Local authorities will often not allow a member of staff to fly solo on handling HB claims until they have had some six months—I repeat six months—training and chaperoning. This is almost as much as a police officer. The reason, of course, is that it involves checking entitlement, rents, family size, the non-dependence in the home, property size, the landlord’s veracity, any disability, backdating, separating out service charges—including fuel, water rates and energy bills—and careful checking against fraud, because it is a big-ticket item. It takes a good local authority with intimate knowledge of its locality an average of between seven and 10 days to process a housing benefit claim. Crawley Borough Council, for example, which is a very high performer, processes about 40 per cent of new claims in one day and the rest in under 10. None the less, do we think that universal credit staff can deliver a benefit as complicated as HB?

In future, this will be done online by a family in Exeter, with queries, I understand, to a call centre in Warrington. That call centre will be handling over 30,000 new HB claims a week: nearly 7,000 a day. Families competent in financial management may be able to cope; we calculate that perhaps 40 per cent of families are ready to use the online process. Those who are most dependent on HB are the same group who are most dependent upon and in need of weekly and fortnightly payments: people with, say, mental health problems or learning difficulties, or other people who for whatever reason lead chaotic lives. These are the people who find that their paperwork is lost, that landlords are unhelpful, that call backs go missing, that deadlines pass. I understand that there is a 63-page form to fill in: one mistake, and no money gets paid. I hope the call centre line is free. Is it? The lines will be jammed, callers will have to call back repeatedly, and they will have to hang on for long periods of time while their call is transferred to someone who knows something about HB—that is, if the call has not been cut off in the mean time through the handing-on process and they have to start all over again.

All that is handled now with skill, patience, good will and huge experience by local authority and housing authority offices. Local government officers find that 66 per cent of all those on housing benefit need the face-to-face service they offer. The Government are assuming that only 10 per cent will do so, and that that 10 per cent will be serviced by Jobcentre Plus offices, whose staff are not only not experienced in housing matters but in physical terms are often inconveniently located. For example, one district in Kent with 100,000 people has no Jobcentre Plus in its area. Claimants needing a face-to-face service in the north of the district have a £9 bus ride to get to and from the Jobcentre Plus offices, while those in the south have a £7 bus ride—a day’s allowance for the claimant gone on a day’s travelling costs.

At the moment, the only experience that DWP staff have of housing issues is from 200,000 home owners nationwide, less than 5 per cent of the jobseeker’s allowance caseload. Housing cost assessments will go up from 200,000 to 4.83 million. So I have some questions for the Minister, and I apologise for not giving him advance warning of them, but they are absolutely integral to the whole issue of how payments are made.

Will claimants get an itemised statement of the elements making up their universal credit so that they can see what they should get in housing benefit and thus, what is often the trickiest and most difficult to compute, be able to compare it with previous awards? Will claims get slowed down to the slowest part of the process? If there is delay over housing benefit, will the claimant know that that is where the difficulty lies, and will they none the less receive the rest of their universal credit, which may be more open to real-time assessment? At the moment, if a claimant gets their jobseeker’s allowance paid, the landlord can be pretty confident that they will get their housing benefit. Will that happen in the future?

If a claim has to be investigated further, perhaps because the family needs an extra bedroom because of disability, and it takes a fortnight or more to get the required information back from GPs, will the entire universal credit payment be held up until it is resolved? What, as my noble friend so eloquently argued, will the family live on in the meanwhile? What plan B does the Minister have in mind for the individual living on the breadline, especially since that same individual may want the housing benefit to be paid directly to the landlord? However, the Minister wants it paid directly to the tenant, who will now be far more exposed to the vagaries of administration as well as to the temptation of fraud.

Perhaps I can suggest a plan B to him: get local authority staff who are highly experienced, skilled and swift to do the housing benefit calculation for the DWP and—given that central and local government computers already communicate with each other on these issues and the whole system is online—get them to feed their data into the central universal credit processing centre. After all, the ATLAS project means that local authorities have a direct link into JSA, ESA and IS. On top of that, they can access electoral records, they can verify residency, they have knowledge of local HMOs, and they have street knowledge. No call centre 200 miles away can identify a contrived tenancy, or whether too many individuals all appear to be claiming housing benefit for a shared property, or whether rent arrears are beginning to mount up and intervention is necessary. Local housing benefit staff can and do, and they act on it. Having a local contact point would also stop the phones being jammed by worried landlords wanting to know whether their tenant is going to get housing benefit, which is essential if we assume that most tenants will in future get their housing benefit paid direct to them. Landlords want the security of a paid rent, and hence their demand that rents be paid directly to them, but they also rely on cash flow. Cumbersome administration that makes the timing of their payment from the tenant unpredictable is at least as significant.

Claimants who have steady circumstances and basic competence will cope with an online system supported by a call centre and may very well be able to cope with monthly payments. However, the claimants about whom so many of us around this Table, as well as local authorities and housing associations, are most worried, are vulnerable, chaotic and prone to error. They may have literacy difficulties, they are in constant flux and they will not cope. Many of the most vulnerable are also clients of other statutory services. No call centre can deal with them or will interface with them. The local HB office does this each and every day.

Tax credits are relatively easy because they are based on the previous year's income, with fixed periods of claim. Yet even here, as I know to my pain, the computer nearly toppled over and the backlogs were huge because no one had appreciated the rollercoaster nature of the lives of so many lone parents. Half of them had more than a dozen changes of circumstance per year, many connected to childcare. The computer was often three changes behind. HB is far more complicated than tax credit. It exposes the tenant to the much greater risk of homelessness, and no unemployed tenant facing homelessness will concern himself with looking for a job rather than trying to secure his home, which is the outcome that we want him to seek.

We will strengthen UC and protect some of the clients of UC most at risk by developing a partnership with local authorities, particularly as they will be holding and distributing the discretionary housing allowance to soften the difficulties that will follow from the tough new HB changes that we will no doubt debate in a later session. For the Government, local authorities represent a back-up resource that it would be foolish to squander. I realise that I have sprung some questions on the Minister. I hope that, if necessary, we can follow this up with a meeting. They were triggered by the concerns raised by my noble friend’s amendment, and by the additional difficulties inherent in the complexity of the nature of HB, which the system as presently constructed cannot begin to address.

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[Lord Freud]

My Lords, in the spirit of developing a system together, which we seem to have moved into, we can look at a greater amount of flexibility. Some things are not that expensive to do, but others are. Payment systems are not necessarily hugely difficult. I do not have my computer gurus sitting around me whispering how much things cost, but my feeling is that there are areas of flexibility here which we are going to explore in great detail in the next year or so in order to get this right. We can be flexible and make changes if we feel that things are not right.

I turn now to the series of questions raised by the noble Baroness, Lady Hollis, on the relationship with housing benefit. I will try to deal with them one by one. The universal credit will be an itemised statement. It is being developed and at the moment comprises three layers. You will see the summary on the top sheet, so to speak, and a somewhat more elaborated thing when you hit the button for the next level, and then you see pages of the stuff at the third level, which we do not think a lot of people will go to. However, we give them the option to do that. The statement is simple; it itemises the intention. The structure that we have arrived at has been the subject of a lot of toing and froing with the customer insight people. A couple of weeks ago I sat on one side of a piece of glass watching how people were using the system. That is where we have ended up in that particular bit.

I was asked whether this process would be slowed down to the rate of the slowest element. Where you have some decided elements, the JSA rate and so on, we should be able to get that going straight away without tying it up. We will be able to separate out elements with new claims involving big new changes rather than the whole claim waiting for the last little bit of evidence on, say, housing to come through. We are looking at tackling this matter much more flexibly.

[Baroness Hollis of Heigham]

I am very grateful for the care and attention that the Minister has given to the questions. However, oddly enough, if you can fragment that way, you can certainly fragment in terms of payment rhythms.

[Lord Freud]

My Lords, I thought I had delicately hinted that there could be some flexibility around that. In future, I will be less delicate in making my points.

We have discussed the other elements. The noble Baroness, Lady Hollis, directed a bit of abuse at the Warrington call centre. We are developing the system in Warrington, but that does not mean that the call centre in Warrington will do it all. We will have a much more sophisticated system. Indeed, the noble Baroness’s thoughts on using ATLAS, and the experience of housing benefit staff around the country in that regard, are very good. We are talking to local authorities to get the detail of this right. It would not make sense to lose the expertise of housing benefit staff, so we are involving them as we develop the process. It is too early to describe the system because it is not yet developed. However, the noble Baroness’s advice chimes with the way we are going about this, and we are grateful for it.

Amendment 28 would require the Secretary of State to conduct an annual review into the impact on claimants of monthly payments. I have already set out our firm commitment to safeguards, such as providing budgeting support and the facility to make more frequent payments where necessary or appropriate. I can assure noble Lords that in addition to this we will continue to monitor the impact of these policies after they are introduced. I urge noble Lords not to press these amendments.

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[Lord Newton of Braintree]

It is all right; I am not going to say any more.

[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—