Welfare Reform Bill

Baroness Lister of Burtersett Excerpts

Monday 10th October 2011 Grand Committee

Moved by

[Baroness Lister of Burtersett]

25: Clause 7, page 3, line 35, leave out from “payable” to end of line 36 and insert “twice per month”

[Baroness Lister of Burtersett]

My Lords, this is the first time I have moved an amendment, so I hope your Lordships will be gentle with me if I make any mistakes.. First, I shall make a couple of apologies. I am sorry that I was not here last week. I was one of those caught out by the change in recess dates. I apologise, too, for the length of my opening remarks, but this is an issue on which I feel strongly, as do a number of organisations, such as the Women’s Budget Group and the Child Poverty Action Group, both of which I am very involved with.

The amendments are variations on a theme. The aim is not to get frequency of payment written into primary legislation, as that clearly is not appropriate, but to try to persuade the Minister to think again about the decision to make payments of universal credit monthly. In the other place, the Minister said that the Government are sufficiently open-minded to recognise the issues that monthly payments generate and that they are not ruling any option in or out.

Given that presumably this decision is being made on the balance of the argument and does not affect the fundamental architecture of universal credit, I hope that the spirit of open-mindedness will prevail today. I believe that the balance of evidence does not support monthly payments and will argue that they could undermine the universal credit architecture, the importance of which the Minister has emphasised.

The rationale for monthly payments has been set out helpfully in the second universal credit policy briefing note. There appear to be two main elements to this rationale. The first is that universal credit should mimic work and receipt of a salary so that families are able to manage their financial affairs in the manner that best reflects the demands of modern life, whether they are in or out of work, so that they will be better prepared for the reality of working life. The second is that it fits well with the overarching universal credit narrative of simplicity and preserving work incentives.

Let us consider the realities of working life. The departmental briefing note states that 75 per cent of all those in employment are paid monthly. Of course, the obverse of that is that one-quarter are not. Estimates given to me suggest that at least one in five are still paid weekly or fortnightly. According to the briefing note, as many as half those earning less than £10,000 per year are not paid monthly. I think we can safely assume that they are paid more frequently. So for many, the reality of working life is still weekly or fortnightly wages.

Moreover, where universal credit is paid on top of a monthly wage, it is not clear why it has to mimic it, nor why it has to do so for those who are not expected to seek paid work. At present, in-work tax credit recipients are able to choose between weekly and four-weekly payments—or perhaps it is two-weekly. Those who receive child tax credit above the family element—those on lower incomes—are more likely to receive it weekly.

Another reality of modern working life—I am very grateful to Richard Greenwood, who wrote to me after Second Reading, for drawing this to my attention—is payday loans. Mr Greenwood points out that a whole credit industry called payday loans has risen up on the back of predominantly low-income earners who get paid monthly. They find it hard to budget properly, so often obtain expensive, short-term credit on the pseudo-security of their next monthly income day. Mr Greenwood informs me that in 2010, Consumer Focus published a report that suggested that payday lending in the UK had quadrupled in the preceding four years, with an estimated 4.1 million loans being made in 2009-10. The report was called, Keeping the Plates Spinning. I fear that monthly payments will mean either many more plates being smashed to smithereens or—as Mr Greenwood warns—many more low-income families taking out expensive, short-term credit. Even worse, they could turn to loan sharks.

The point was made in a committee of the other place that similar concerns were raised when benefit payments were changed from weekly to fortnightly, but that the expressed fears did not materialise. In response, I point out that moving from fortnightly to monthly payments is a much greater leap. Also, according to Fran Bennett of the Women’s Budget Group, recent findings from qualitative research with low-income families carried out by Oxford University and funded by the Economic and Social Research Council and the Department for International Development suggest that we should not be too complacent about the impact of the earlier move to fortnightly payments. One respondent, a woman with a partner and four children, said:

“Before the switch to fortnightly payments I didn't have to struggle with anything … with all these changes I’m just struggling … before I never struggled … like, never”.

Another respondent, a lone mother, said that,

“two weeks is a long time … now they have put that fortnightly and all … it’s just wrong”.

More generally, the Women's Budget Group cites the 2008 Families and Children Study that states that one in four families with children runs out of money always, most often or more often than not before the end of the week or month. Among the lowest-income one-fifth, the figure is 37 per cent—nearly two in five.

This is not an exceptional problem affecting only a small minority of supposedly inadequate budgeters. Research evidence points to how well most people on low incomes manage their budgets. However, numerous studies also reveal the stress caused by budgeting on a low income, particularly for women, who still tend to have responsibility for day-to-day budgeting in low-income families and who thus act as the shock absorbers of poverty. Even if most people eventually adapt to monthly budgeting, the long-term consequences of the difficulties created in the shorter term could be immense and could undermine work incentives if people are saddled with debt. The Minister has already told us that the typical family in receipt of universal credit will have virtually no savings on which to fall back.

I am afraid that it is not good enough to make vague promises of appropriate budgeting support for those who cannot manage monthly repayments. This, we are told, might be financial advice—will the Minister please explain who will provide this advice about budgeting?—or it might be interim and bridging loans or possibly more frequent payments in exceptional circumstances. Does this panoply of special assistance, which implies that the problem lies with the claimant rather than the system, not strike noble Lords as rather sullying the narrative of simplicity that monthly payments are supposed to exemplify? Indeed, according to the Financial Times, officials have admitted that this special assistance could cost extra money but that the plans have not yet been fully worked out or costed. I ask that a fully costed plan is presented to your Lordships’ House before monthly payments are finally agreed.

--- Later in debate ---

[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.

[Baroness Lister of Burtersett]

My Lords, I am very grateful to my noble friends and noble Lords for their support. I am struck by the extent to which noble Lords throughout the Committee share my concerns and have made important points in support of these amendments. There is perhaps a slight disagreement over whether we should be pushing for fortnightly payments or for choice. My preference would be for fortnightly payments, as argued for by the noble Lord, Lord Skelmersdale. However, I tabled a menu of amendments thinking that choice would probably be more acceptable to the department than what I prefer, which is the status quo. Perhaps that is the one way in which I am a conservative. But as I have argued, and according to the Financial Times, the panoply of flexibility and special assistance which the Minister talked about will bring in complexity if we go down the route of monthly payments, and we have not heard what the costs will be. I am very disappointed with the Minister's response because he has not really engaged with the arguments that I put. Therefore, my supposed flirtation with conservatism has been very short-lived indeed.

The Minister made great play of the distinction between the assessment period and the payment period, and I understand that. However, the argument seems to support my position rather than his because paying a benefit more frequently does not affect proposals to assess it on a monthly basis. One could have a monthly payment that is paid in two tranches, which would make it easier for people to manage. The only hope that I got from the Minister was the statement that we had given him food for thought. I hope that it will not be too indigestible for him—actually, I hope that it will be indigestible, because he will then think seriously about it.

He has not answered some of the most basic questions. I know that the special assistance will not only be budgeting advice. The papers have said that it will “include” budgeting advice. However, it is still not clear who is going to provide this. Will it be officials? If I were a claimant, I am not sure that I would want officials advising me on how to budget. Or will it be the poor old voluntary sector/big society, which will be on its knees anyway because of cuts, the effects of the legal aid Bill and so forth? I am not at all reassured by vague talk about flexibility and budgeting support.

The Minister said that the Government would look at areas of flexibility after the next year or so. I am sorry, but I want to know what the position is by the Report stage. While I have made clear that I realise it is not appropriate to write into the Bill itself the frequency of payments, given the strength of feeling that has been expressed on all sides, it is not good enough that we should have to wait a year; the Bill will be an Act by then. We want to know before the Bill goes back to the other place what is going to be done to ensure that the kind of problems that I and other noble Lords have raised will be adequately addressed. One of these amendments must be the way to do it.

[Lord Newton of Braintree]

I apologise for intervening: I probably should not, as I was not here earlier. However, if the House authorities schedule at the same time on one day on the Floor of the House and in this Committee three Bills in all of which I have an interest, it presents a difficulty. The Minister should know that had I been here, I would have been rebellious. I endorse in particular the noble Baroness’s point about needing to know, not at some vague time in the future but before the Report stage, what the Government have in mind. Perhaps I might also say to the noble Baroness—craving the indulgence of the Committee—that I thought the Minister went as far as Ministers can go under these circumstances towards saying that he would think again, and that this is not the last word. I think that she should be pleased with that.

[Baroness Lister of Burtersett]

I am very grateful to the noble Lord, who perhaps I could call a noble friend from the past. Being new to this House, I perhaps do not understand the nuances of ministerial speech as well as some of my noble friends. I hope that the noble Lord, Lord Newton, is correct, but it does not change the point that people outside who are watching our proceedings also do not understand these nuances, so we need to have something much firmer before Report if we are to accept the Minister’s assurances. That said, I will withdraw the amendment.

Amendment 25 withdrawn.