Welfare Reform and Work Bill

Baroness Hollis of Heigham Excerpts

Monday 21st December 2015 Lords Chamber

[The Lord Bishop of Durham]

My Lords, I wish to speak specifically to Amendment 93, in the names of the noble Baroness, Lady Lister, the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel, and Amendment 94, in the names of the noble Baronesses, Lady Meacher, Lady Pitkeathley and Lady Lister.

We all agree that the welfare of children is key in our considerations. I remind the Committee that this is rooted not simply in the modern era of rights but in our Judaeo-Christian history, where the care of the orphan was paramount in Old Testament law. The failure to protect orphans was one of the core messages of the prophets of the Old Testament. Jesus himself demonstrated that welcoming and caring for children lay at the heart of what the Kingdom of God is like. We have not always demonstrated this care of the child well—I include my own church in that—which is why the need to ensure children’s welfare is in our legislation. It is there as a reminder to us all, specifically those who exercise power and authority, that children must be taken fully into consideration in decision-making.

In principle, I accept that a benefit cap is a reasonable approach, partly for the reasons which the noble Lord, Lord Lansley, has just outlined, although I am not wholly convinced by his arguments about why the reduction should be made in the way proposed. Inevitably, whichever level the benefit cap is set at will affect children, so it is surely essential that the Secretary of State is required to consider its impact on children’s welfare rather than leave this as a possible other matter that is considered relevant.

Sadly, in the busyness of economics, politics and high-level decision-making, all of us can lose sight of the child. I see it happening in the House of Bishops, in the General Synod of the Church of England, in local authority decision-making and in national decision-making. Therefore, to ensure that this does not happen unintentionally, I hope that the Minister will seriously consider Amendment 93.

Alongside this, I note the well-documented reality of increased costs for those who live with disability, and for their families and carers. I suggest that we have a slight problem with language here. One reason that many carers are not available for paid work is because, frankly, they are working very hard, caring for their family member. To suggest that they are not working is to demean them. It therefore seems entirely reasonable that since the benefit cap will impact these families, serious consideration should be given by the Secretary of State. As the noble Baroness, Lady Meacher, pointed out, this has no financial costs. It should not be left to his or her discretion.

I have three questions. The first is in relation to the point about disability and Amendment 94. Will the Minister agree to bring a suitable amendment on Report to include this in the review? In relation to Amendment 93, does the Minister accept that in the complexities of political and economic decision-making the child can be forgotten or side-lined? In the light of that, will the Minister accept that the welfare of the child must be at the top of priorities and so should be stated in the Bill?

[Baroness Hollis of Heigham (Lab)]

My Lords, I want to come back on some of the points raised by the noble Lord, Lord Lansley. His first point was about public opinion being concerned about the apparent disparity of income between those on benefits and those in work. My noble friend Lady Lister made a good point on this. She pointed out that families in work also receive additional benefits, which are not taken into account, either by any comparison that the Government make or indeed by those families receiving them. If they looked at their entire income, including not just child benefit but, possibly, child tax credits to top up their wages and housing benefit, and then compared that to the total out-of-work income that will now be received by families hit by a cap—in other words, if they were better informed, and if the noble Lord, Lord Lansley, were better informed, if I may say so—they would have a fairer comparison to make.

My second point is that, understandably, a lot of the public do not understand how social security works. The majority of people surveyed think that 40% of the benefit budget goes on JSA—on the unemployed, who should be working. That is the common perception. Actually, it is 4%. That is the size of the disparity. Therefore, our job is to make sure that people understand the facts of it, not to cloud the argument by saying that because they were misinformed we should follow where they go. That has never been the position of honourable parliamentarians. By all means, when the public are well aware of the situation, we should respect that, but we should ensure that any such views are well based on information.

That brings me to my third point. The noble Lord, Lord Lansley, referred—and I think this was echoed by the right reverend Prelate the Bishop of Durham—to the value and the ethic of work. I agree. He is absolutely right that it changes the dynamic of the household. Although I am disappointed that only 4% or so of people were incentivised into work as a result of the higher cap, the hopes the Government may have of encouraging more people into work by making the cap tougher seem remote.

In particular, I remain completely baffled by one point. I hope that the Minister will help me on this. It was raised by the noble Baroness, Lady Meacher, and by my noble friend Lady Pitkeathley. I think that we all accept that where people can work, they should. We should help them through jobcentre advisers and with appropriate benefit support for getting back into work. I do not think there is any dispute around the House that if work is there, where people can work, they should work. But the Government are quite explicit that any lone parent with a child under three is not required to work. They are expected to attend interviews when the child hits two but not to work until the child is three. Yet that lone parent with a child under three will be caught by a benefit cap which is supposed to propel her into work, even though the Government have expressly said that she is not expected or required to work—and many would think that that was very wise.

My noble friend Lady Pitkeathley made the same point about full-time carers: they are indeed working very hard. Their work is unwaged but it is full-time work. Yet they, too, are being caught, even though the Government recognise, by virtue of the payment of carer’s allowance, that they are working more than the 35 hours a week that entitle a person to get their carer’s allowance—and on top of that, they may well be supporting a second person as well. The Government have accepted that both these groups of people should not be expected to work, which is why they have the benefits. They then argue that the cap should apply to them none the less, in order to incentivise them into work. I am completely baffled by this morally, as well as politically and economically, and I hope very much that when the noble Lord, Lord Freud, comes to respond in a moment he can help me answer that question.

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[Lord Freud]

Of course I did not support it; I am on the record as not supporting it. This is not an absolute regional cap—this is a two-tier cap, London and the regions—but, the Opposition may feel that it is better late than never. I look forward, by 2018, in another three years, to the full-hearted support of the Opposition for the current proposals.

[Baroness Hollis of Heigham]

My Lords, does the Minister not also accept—I am sure that his memory stretches back this far—that the main concern of the Opposition, led by my noble friend Lady Sherlock, who will no doubt respond to this in any case, was to come in behind the Bishops’ amendment? That was to ensure that we compared like with like—not, as the Government were doing, like with unlike. They were excluding from those in work income such as child benefit and additional forms of benefit, so they were comparing income for those exclusively on benefit with earnings only, excluding benefits, for those in work. We therefore came in behind the Bishops’ amendment to try to protect children caught in that situation.

[Lord Freud]

I am delighted to have a trip down memory lane, but since we have changed the basis of the measure, as noble Lords have pointed out, we might just spend unnecessary time on it.

Let me go on to the present proposition, which is to align the cap with the circumstances of many working people throughout the country. The Bill reduces the cap to £20,000 a year for lone parents and couples and £13,400 for single people without children, except in Greater London, where it will be £23,000, with a lower rate of £15,410 for single people without children. These are still significant amounts: £20,000 is the equivalent of an annual pre-tax income of £25,000, while £23,000 is equivalent to an annual pre-tax income of £29,000. About four out of 10 households in London earn less than £23,000 a year, while approximately four out of 10 households outside of London earn less than £20,000.

[Baroness Hollis of Heigham]

Has the noble Lord assessed the figures for their income rather than their earnings?

[Lord Freud]

I do not have that to hand. As a noble Lord said, we are now reaching a judgment on how to arrive at those figures. Indeed, the debate that we had in 2012 basically looked at the same point. We are looking at the level of earnings that we feel is fair above which people should not get benefits.

[Baroness Hollis of Heigham]

My Lords, the Minister is not addressing the issue. What matters is income versus income, not income versus earnings, ignoring additional income. Therefore, if the Minister is going to run this argument, which I understand is a perfectly proper argument to run—and I think it commands a lot of support—he has to include actual income and not exclusively earnings, because those families that he is talking about will almost certainly have additional payments for their children and additional payments for their housing.

[Lord Freud]

Yes, I am just looking here at the level of earnings and that is the figure that we are taking. These levels for the cap will reinforce our message that work pays, and that it is not fair for someone on benefits to be receiving more than many working households. Having looked at the evidence, we believe it is fair to have a higher cap in London.

[Baroness Hollis of Heigham]

This question session has not got anywhere. Those families do not have an income that is higher than that for those at work. The point is that if you compare it only with earnings, you are possibly excluding a substantial portion of income that is available to those in work. I hope that the Minister will correct his statements as he goes through, otherwise he is comparing apples with oranges, and it does none of us any kindness to continue down that path.

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[Lord Freud]

The established procedures, of course, are basically to go in line with CPI; this is a much broader look than that, as I have tried to describe. While we have safeguarded those with illness or disability, we do not think it right that in undertaking a review of the level of the cap the Secretary of State should have a legislative requirement to take into account any extra impacts on specific groups.

[Baroness Hollis of Heigham]

If the Minister says—quite rightly and decently, and I am sure that the whole House will support him in this—that he will exempt people who are in the ESA support group because the Government acknowledge that they cannot be expected to work, and therefore the issue of work incentives does not apply, why does he not apply the same reasoning to lone parents with children under three or to the carers in full-time unwaged work that my noble friend Lady Pitkeathley described? The Government accept that those two groups are effectively out of the labour market in exactly the same way as the support group, yet one, decently, is exempted from the cap, while the other two, indecently, are not.

[Lord Freud]

There is a difference between having a specific provision that does not require people to work and having one that actually financially incentivises people to work. That is the difference. As the noble Baroness pointed out, we do not require anyone with a child under three to go to work, but people often go into work with a child much younger than that. When people look at this measure on balance, they may think that it is the appropriate thing for them. That is my best answer to this question.

This is a peculiar process and I am running incredibly late now, but I think that noble Lords would prefer me to finish. I have just had so much dialogue, and that is rather unusual.

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[Lord Freud]

My Lords, Amendments 75, 78, 80, 81 and 83 seek to exempt specified benefits from the list of those that are included within the cap or to exclude those benefits in the same way that pensioner benefits are. These amendments undermine the fundamental principle we established when we introduced the cap: there has to be a clear limit to the amount of benefits that an out-of-work family can receive. This is a principle that has gained very broad support across the country.

Turning to the specific proposals, after my intervention on the noble Baroness, Lady Pitkeathley, on the carer’s allowance, I re-emphasise that the Government recognise the valuable contribution that carers make, and I will come back to that issue. Amendment 78 also exempts all those claiming employment and support allowance. Those in the support group are already exempt. But the benefit cap is a work incentive. Those in the WRAG have been assessed as being able to undertake some work-related activity, with a view to moving into employment in the short to medium term, and therefore we believe it is right that the cap be applied to these people.

The same principle applies to those in receipt of IB and SDA together. The recipients of these benefits will not necessarily be unable to undertake any work-related activity, but we are reassessing them for ESA and those who are found to be entitled to the support component will become exempt from the cap. Income support is a benefit paid to claimants in an extremely wide range of circumstances. It is an income-replacement benefit and as such, it is appropriate that, like the other income-replacement benefits, it is included in the cap.

The cap increases work incentives and promotes fairness by limiting the amount that those out of work can receive in benefits. I do not think that a blanket exemption from the cap for simply everybody in receipt of income support would support either of those aims. The vast majority of capped households that have found work include parents who have managed to balance their caring responsibilities with work—as millions of working households already do up and down the country. By going out to work, parents show their children the importance of a strong work ethic and reinforce the message that work is the best route out of poverty.

Before turning to Amendments 87 to 90B, I remind noble Lords of the exemption from the cap for anyone who is a member of a household that includes somebody who is ill or disabled and is entitled to attendance allowance, DLA, PIP, industrial injuries benefits or the armed forces independence payment. Additionally, as well as war widows and widowers, those who are entitled to the support component of ESA or universal credit’s limited capability for work or work-related activity element are exempt.

In recognition of the work incentive objective of the cap, households that are entitled to working tax credit or meet the prescribed earnings threshold for universal credit are also exempt from the cap. I have already mentioned the nine-month grace period from the cap for households that have recently left sustained employment. We have committed £800 million, as I have already said, for discretionary housing payments over the next five years to provide extra support for households that may be affected by the cap, within the context of that £800 million being for all the welfare reforms. I hope that noble Lords are assured that, combined with the additional funds that we have allocated for DHPs, there are already numerous safeguards in the design of the cap which protect the most vulnerable, as well as those with a strong work history.

I have already said that I will come back on Amendment 87. Amendment 88 would exempt from the cap all those in receipt of universal credit who are not subject to all work-related requirements. There is already an exemption, as I have said, for those who have limited capability for work or work-related activity. But this amendment would extend the exemption far more widely, including to those subject to work-focused interviews and work preparation requirements, many of whom will have a relationship with their work coach focusing on what they can do to prepare positively for a return to work.

Amendment 89 also seeks to exempts all those on ESA. I will not repeat the particular arguments but will add that there is a large body of evidence showing that work is generally good for physical and mental well-being and that where their health condition permits, sick and disabled people should be encouraged and supported to remain in or re-enter work as soon as possible. I am encouraged that the noble Lord, Lord McKenzie, was happy to acknowledge that point a couple of weeks ago.

Amendment 90 would also introduce an exemption for all those in receipt of income support. Again, that is an extremely wide range of circumstances.

[Baroness Hollis of Heigham]

I accept the point about income support covering a wide category of claimants, and I know that we will come on to this later, but is the noble Lord willing to reconsider his position on attaching a benefit cap to people from whom work is not expected by virtue of, say, the age of their child?

[Lord Freud]

I have already answered that question in the first of these amendment groupings. I repeat: there is a difference between having a state expectation—and conditionality attached—for people to go to work, and a financial incentive for them to do so.

The noble Baroness, Lady Sherlock, asked whether responsible carers would be set requirements that they cannot meet. We will ensure that any work-related requirements will be tailored to individual circumstances and compatible with childcare responsibilities.

I turn to the amendment tabled by the noble Earl, Lord Listowel, on kinship carers. The Government recognise the service that kinship carers and others provide, and the Bill continues the current provisions for foster carers, kinship carers, and family and friend carers. If they, or a child for whom they are caring, are in receipt of an exempt benefit the cap will not apply. In addition, any payments received from the local authority for providing care will be disregarded from the benefit cap. Finally, there is a nine-month grace period whereby the cap may not be applied to those who have recently left sustained employment. This will give time for kinship carers who may have had to leave employment to take on additional caring responsibilities to adapt to their new circumstances. Family and friend carers are treated in the same way as parents in the benefit system, so it is only fair to ensure that this principle applies to the application of the cap, too. The benefit cap is intended to promote fairness between those in and out of work, and to increase incentives for people to move into work—principles that I believe apply in the same way for family and friends carers as for parents.

Regrettably, I am not in a position to supply the specific data requested by the noble Baroness, Lady Drake, on what is happening in London. As I said, I will come back to the matter of carers at a later date but I cannot support the other amendments and I ask noble Lords to withdraw or not press them.

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[Lord Freud]

We did apply the family test; I had better write to the noble Baroness with the details because I cannot recall what was in it. There was quite a lot of material going through in a short time.

I think that I have now dealt twice with the fact that we are looking at earnings and we are not making that comparison, even though I know that neither the noble Baroness, Lady Lister, nor the noble Baroness, Lady Hollis, like the answer. That is my answer—I do not have another answer, however much I am asked.

[Baroness Hollis of Heigham]

Forgive me, my Lords, but an assertion is not an explanation. What we are getting is an assertion from the Minister: “I am not going to compare income and income, just income with earnings, and additional income for that person on earnings which comes from benefit will not be taken into account. Why? Because I say so”.

The Government are running two arguments, over and beyond the repeated headline stuff. One is about work incentives—people are expected to move into work by virtue of this Bill. The second is the question of fairness between those currently in work and those out of work on benefit. I understand why the Minister is making these arguments, but on neither does he have a case, nor has he made one. He has simply made assertions.

On excluding people, rightly, from the support group, the Minister is still not explaining, but merely asserting: a lone parent with a child of one or two may have the choice to work; the Government do not expect them to work; most people would not necessarily want them to work; none the less, the cap will apply. When it comes to carers, a pause button has been pressed.

On the Minister’s second argument, over and beyond the work incentive whereby he is comparing those in work and those out of work, he is disregarding a chunk of people’s in-work income, which is in addition to those earnings. Why? Because he says so. The incentive into work does not apply to some of the groups we have been discussing. On the fairness between in-work and out-of-work income, the Minister has not included part of the income which would establish a reasonable basis of comparison.

What does the Minister expect us to do? He is asserting things without giving us any evidence and not engaging in the argument. His two assertions—this is why he is doing what he is doing—are not substantiated by any evidence or argument that he has offered. I am sorry, but this will not do. It is not good enough. The Committee is owed more from the noble Lord than we are getting.

[Lord Freud]

I have done my best to lay out that this is based on equivalent pre-tax incomes of £25,000 and, in London, £29,000. The comparable earnings figure is roughly at the level of four in 10. But I cannot produce any more information or justification—I cannot give what I have not got. I am afraid that that is what I am able to provide today.

[Baroness Hollis of Heigham]

I do not want to be discourteous to the Minister. He is much respected in the House, and many of us engaged with him in a very satisfactory way on universal credit. He took suggestions away, he listened, he argued, he produced new evidence which made some opposition Members change their mind. We have every respect for the fact that, as a Minister, the noble Lord is genuinely evidence based—except on this. He has produced no evidence.

What puzzles me is that the Minister has not asked for the evidence to substantiate his two drivers about getting people into work and having fairness between in-work and out-of-work claimants. We know from experience that the noble Lord respects evidence and offers it to us. He has come to the Committee, after Second Reading and three Committee sittings, knowing that we will be looking for evidence to sustain his position—and if he has it, we will respect it—but he has not come forward with it; he has simply repeated assertions. Either the evidence is not there, in which case the assertions have no substance, or the evidence is there but is not being shared with us, which suggests a level of bad faith that I do not in any way attribute to the Minister. So where are we?

[Lord Freud]

I will try one last time. If noble Lords are dissatisfied, that is the reality.

We currently have a benefit cap in operation at a single rate of £26,000, and we are taking that down. That has mainly affected London. We are now spreading it out to affect just short of 100,000 people—90,000-odd on the impact assessment, although it is interesting that, in 2012, a smaller number were involved in practice than in our original impact assessment, so let us just see.

Our experience of running that benefit cap and the reaction to it were such that the Government decided that we could safely reduce the level and put it into two tiers, so that its impact is spread through the country more evenly. We have taken it down by 12.5%. It is the experience of running it live that has led the Government to think that we could move it to these levels and get the incentive effects that we are looking for to operate. I do not have any more information to provide for the noble Baroness—much though I know that she would like more. I apologise to the extent that she is disappointed.

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[Baroness Evans of Bowes Park]

My Lords, I thank the noble Baronesses, Lady Sherlock and Lady Lister, and the noble Lord, Lord McKenzie, for these amendments. I will first set out why we believe a four-year freeze of certain social security benefits, child benefit and elements of working tax and child tax credits is necessary.

In total, measures to freeze benefits and tax credits are projected to contribute £3.5 billion of the £12 billion welfare savings the Government are committed to by 2019-20. The Government need to make these savings to reduce the deficit and to manage welfare spending. Spending on welfare increased by 54% in real terms between 1999 and 2010, and tax credit expenditure more than trebled over the same period. Despite the progress made in the last Parliament to increase incentives to work and reduce reliance on benefits, there is still more to do.

Some 7% of global expenditure on social protection is spent in the UK, despite the fact that the UK has only 1% of the world’s population. Between 2008 and 2015, average earnings rose by 12%, and the minimum wage increased by 17%. At the same time, benefits such as jobseekers’ allowance increased by 21% and the individual element of child tax credit rose by 33%. The benefit freeze will begin to reverse this trend. However, we are clear that we must continue to protect the most vulnerable. That is why we ensured that certain benefits are exempted from the freeze, such as pensioner benefits, benefits which contribute to the additional costs of disability and care, and statutory payments.

Concerns have been raised about the level of benefit rates after three years of 1% rises, to now be followed by four years of the freeze. Successive Governments have always sought to strike a balance between the needs of claimants and affordability, and I can reassure noble Lords that when introducing this freeze we have had due regard to these issues, but we believe we have struck a balance that protects certain key benefits and generates the savings I have set out.

There are no cash losers with this policy, and the continued growth in wages will help to mitigate the impact of the freeze for working families. The OBR expects wage growth to reach 3.9% by 2020. Around 30% of households will face a notional loss but, as I have said, the other things we are doing in the broader economy should go some way to mitigate it, and I will go through a couple of them in a second. We have also fully assessed the Bill’s impacts on equality and the wider budget meeting our obligations, as set out in the public sector equality duty.

The purpose of the amendments is to replace the freeze with a duty on the Secretary of State to review those benefits, having regard to inflation and the national economic situation. This Government’s overall approach is to give a level of certainty to taxpayers, employees and benefit claimants. As well as setting out the four-year freeze, we have also set out a clear plan to raise the national living wage to £9 an hour by 2020, to increase the tax-free personal allowance to £12,500 by the end of the decade and to double the free childcare available for working parents of 3 year-olds and 4 year-olds to 30 hours a week, which is worth £5,000 a year. The amendments would take away the certainty that we are attempting to implement, and for that reason we cannot support them.

The noble Baroness asked what happens after the four-year period.

[Baroness Hollis of Heigham]

The Minister has said that this is very helpful to benefit recipients because they now have certainty that their benefit will fall in real terms, as opposed to the possibility that it might keep pace with the cost of living. Would she care to correct her statement?

[Baroness Evans of Bowes Park]

I have said that we have had to make some difficult decisions.

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[Baroness Hollis of Heigham]

Difficult for whom? To use the phrase used by the noble Lord, Lord Kirkwood, I suspect that every Member of this House is protected from the difficult decisions. The difficult decisions will fall on those people who will have to choose whether to turn off their heating or pay their rent.

[Baroness Evans of Bowes Park]

As I said, by being upfront about the freeze, we are trying to ensure that people in receipt of these benefits understand that that will be the situation over the next four years. We are taking numerous other measures, including the national living wage and the childcare changes, to try to help these families in other ways. That is what we are doing with this freeze, and I urge the noble Baroness to withdraw her amendment.