Welfare Reform Bill

Baroness Lister of Burtersett Excerpts

Monday 21st November 2011 Grand Committee

[Baroness Lister of Burtersett]

Perhaps I may intervene. I can tell the Committee off the cuff that all of them with children will be receiving child benefit, which has a 99 per cent take-up rate. They will be receiving exactly the same amount in child benefit as people out of work, and one of the amendments in the next group will address this matter.

[Lord Skelmersdale]

My Lords, as I understand it, everyone with children gets child benefit, so you can cut that out quite regularly because you know that it is going to come under subsection (4)(c)—that is inevitable. As I said at the beginning, we will find out from my noble friend what exceptions the Government are currently planning in order to change what the noble Baroness, Lady Hollis, calls apples and pears into apples and apples or perhaps pears and pears.

--- Later in debate ---

[Lord McKenzie of Luton]

That would certainly be satisfactory but even if that 10 per cent estimate is roughly right, it means that 90 per cent of the people who will be affected by this cap are under no obligation, under the Government's policies, to have full work conditionality. How does that square with the big thrust of this being about work incentives? I should also like to follow up on another point which the Minister did not touch upon: the profile of those, again within that 50,000, who would be tenants and paying rent of one sort or another. Is it the case that a significant proportion of that 50,000 are tenants of social landlords, RSLs or councils?

[Baroness Lister of Burtersett]

While the noble Lord is conferring, can he perhaps explain to the Committee what behavioural effects the Government are trying to achieve in the case of those who are not required to seek work?

[Lord Freud]

On the figures, one reason why I am slightly betwixt and between is that we are looking at that impact assessment, which is now somewhat dated, with a view to updating it and providing fresher figures when we can. That work is in progress and we are getting some more detail. All that I can do is to offer to provide some of that extra detail as soon as we get it. I am not completely sure yet of its timetable but there is ongoing work there, which is why I am slightly hazy about exactly what some of these figures will end up being, for which I apologise.

--- Later in debate ---

These amendments continue to explore that protection of children to which we all aspire and which we have been discussing for the past hour or so. I hope that we in this Committee can do something to achieve this. I beg to move.

[Baroness Lister of Burtersett]

My Lords, I rise to speak in support of Amendment 99AD and to oppose the questions that Clauses 93 and 94 stand part of the Bill. I want to make clear that I also support other amendments, both the more ambitious and the more limited ones. I see Amendment 99AD as something of a bottom line, particularly its exclusion of child benefit from the cap. However, first I shall say a few words about why Clause 93 should not stand part of the Bill.

Unlike some other noble Lords who have spoken, I do not support the principle of the benefit cap. Despite ministerial invocations of fairness, it is unfair. It deliberately reduces the amount of money that some families will receive to well below the amount that Parliament has determined is the minimum that is required to meet their needs—a minimum that is itself well below minimum income standards, as we discussed earlier in our proceedings. We have heard that the average loss will be £93. Nearly half the families affected will lose between £50 and £150, and 15 per cent will lose more than £150. Black and minority ethnic families will be disproportionately affected. It simply is not good enough for Ministers to say, as they have, that the state can no longer afford to pay this minimum. We are a rich society despite current economic difficulties. What the state can afford to pay is a matter of political choice.

In applying such a cap, the Government are arguably reducing income to below what constitute decency levels in a modern, industrialised society—below the level required to ensure human dignity. Therefore, it does not surprise me that legal advice received by the Equality and Human Rights Commission stated that,

“there must be a real concern … that the cap on benefits, which will disproportionately impact on larger families”,

will result in a violation of the Human Rights Act. Some of the likely consequences have already been spelt out by other noble Lords. My noble friend Lord McKenzie has already cited the Centre for Social Justice, which warned that the impact was “likely to be devastating” for some families, so how can this be justified?

The justification put forward by Ministers is another example of how the Bill is designed to try to influence behaviour and send out signals—so many signals that we should nickname this the “semaphore Bill”. Once again, the spectre of welfare dependency raises its head and people are to be incentivised to find work, although I thought that the main point of universal credit was to do just this, insofar as incentives are inadequate at present.

We have already heard how the incentives argument is not that convincing. As my noble friend Lord McKenzie has already observed, some groups affected by the cap are not expected to seek work—the right reverend Prelate the Bishop of Ripon and Leeds made this point—such as carers and lone parents of children aged under five. I was disappointed that the Minister could not explain to the Committee what behavioural effects the Government were trying to achieve in the case of those who are not expected to seek work. I hope that, having had more time to think about this, he might be able to do so when he speaks.

Could the Minister also address the issue that I raised at the last sitting, which the right reverend Prelate has also raised, about impact of the six-month qualifying period for PIP? How many are likely to be affected, and would it be possible to backdate the money that they lose as a result of the cap, when they then become eligible? It should also be noted that, to the extent that fewer people qualify for PIP than for DLA, so will fewer disabled people be exempt from the cap.

As has already been noted, the cap will also apply to some who are in paid work. Again, I was disappointed that the Minister could not explain at this stage how it is planned to determine at what point those in paid work will be free of the cap under universal credit. It is a very important question. As was pointed out in CPAG’s Welfare Rights Bulletin, the danger is that a threshold is created that people in low-paid work could frequently cross, resulting in wild fluctuations in their entitlement and complex better-off calculations. A small drop in earnings over which the claimant might have no control could leave to a massive drop in income if the cap is triggered.

Ferret Information Systems comments that the cap will create just the kind of cliff edge that universal credit was intended to remove. It gives an example of how a difference of 1p an hour for someone working 24 hours at the minimum wage level could generate a net income increase or loss of £98.23. This is surely nonsensical. The greater security of income promised with universal credit would be undermined if people on very low earnings are living in constant fear of the cap being triggered.

I am also unclear as to how work incentives are promoted if, as predicted, one effect of the cap is that families have to move house to find cheaper accommodation, which we have already talked about and could be difficult, given that a majority of those affected—although perhaps not quite as big a majority as originally thought—will be in social housing. Is there not a danger that in search of affordable accommodation they will end up moving to an area where job opportunities are even poorer?

At Second Reading and in response to previous amendments, the Minister argued that:

“The introduction of a benefit cap will mean that households on out-of-work benefits will have to make the same decisions as families in work with regard to the lives they lead and the areas they can live in”.—[Official Report, 13/9/11; col. 739.]

It is still unclear to me, having listened to everything that the Minister said earlier and the debate so far, what decisions people are supposed to take if they cannot find work or affordable housing. The answer is that they simply have to live below the level set by Parliament. In response to a Written Answer about the implications for homelessness, the Minister said that if they became at risk of homelessness then our old friend, the loaves and fishes of the discretionary housing payment, would come to the rescue.

For lone parents in particular, the loss of social networks that can help with childcare could serve to make it harder for them to enter into paid work if they have to move area. The loss of such networks surely goes against the aspirations of the big society. Moreover, as the noble Baroness, Lady Tyler of Enfield, and my noble friend Lord McKenzie have already said, the cap will create a significant new couple penalty. So it is difficult to square the cap with key elements of the Government’s own philosophy.

The Minister of State told the Public Bill Committee in the other place that the clause is not primarily a “cost-saving measure”. Instead, he claimed that,

“fundamentally it is about creating a more credible welfare system … We do not believe that it is reasonable or fair that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households. That is the core principle that we are seeking to put in place here”.—[Official Report, Commons, Welfare Reform Bill Committee, 17/5/11; col. 985.]

We have heard that again from the Minister this evening. Is it not the case that the Government themselves are undermining the credibility of the so-called welfare system by sending out a signal that people on average wages are receiving significantly less money than some people on benefits, when the proposition is based on the false assumption that people on average—or, more accurately, median—wages are not themselves receiving welfare in various forms? That this is the case is demonstrated by parliamentary Answers, which show that, if the benefits and tax credits received by working families on median earnings were taken into account, hardly any of them would be worse off than out-of-work families. The Government could do much more for the credibility of the system if it sent out more accurate signals.

This brings me to Amendment 99AD, which is about protecting children, who are the main victims of the cap, as other noble Lords have underlined. They are victims who cannot respond to the Bill’s signals. I am grateful to Barnardo’s for circulating a briefing in support of the amendment. It is designed in particular to stop the cap penalising larger families—thereby failing the Prime Minister’s family test—and to create the level playing field that the Minister of State claimed for the cap in the other place. We have already heard—and I apologise for repeating it, but it seems like the message needs repeating because it has not been heard loud and clear by some members of the Committee—that one important reason why the playing field is far from level is that child credit and child tax credit received by families of median earnings are not included in the income level at which the cap is set, but are included in the out-of-work income to be taken into account. I could not believe it at first when I discovered that child benefit is being treated in this way, because it is so patently unjust. As I said earlier, take-up of child benefit is virtually 100 per cent, so there is not an issue as to whether families with median earnings are or are not getting it. They are getting exactly the same amount as families out of work: it just depends on the size of the family.

According to a Written Answer, the median level of child benefit received by families with median earnings is estimated to be £33.70 a week. If the child benefit of out-of-work families were ignored when applying the cap—and this is also the purpose of the amendment moved by the right reverend prelate the Bishop of Ripon and Leeds—it would reduce the numbers affected by 40 to 50 per cent. This would reduce the savings from £270 million to £140 million in 2014-15. Therefore, nearly half the savings from the cap are being made on the basis of a blatant piece of unfairness which drives a coach and horses through the Government’s claim to be creating a level playing field between those in and out of work. Given that the Minister of State has said that it is not primarily a cost-saving measure, I hope that the Minister will not use the cost as an argument for rejecting the amendment.

The amendment would also exclude childcare costs. If I understood the Minister correctly, he has told the Committee that those costs will not be treated as income for someone out of work. That is correct, so we have that again clearly on the record. I very much welcome that, because previously it had been suggested that they would be. That is an important step; it would have been nonsensical had it been, so perhaps we have achieved something here today.

I oppose the cap in principle, and would support more ambitious amendments than the one in my name and the names of the noble Lords, Lord Kirkwood of Kirkhope and Lord Adebowale. As I said, I particularly see the exclusion of child benefit from the income taken into account in applying the cap as a bottom line below which the Government’s claim to fairness is so patently unfounded that they should be embarrassed even to try to justify its inclusion. In the Public Bill Committee in the other place, the Minister of State had no real answer to this and kept evading the question of child benefit received by working families. I would therefore be grateful in the Minister could explain to your Lordships how in fact the Government justify the inclusion of child benefit in the cap when it is not included in the comparator incomes of working families. Better still—given that, according to the Minister of State, the cap is not primarily a cost-saving measure but purports to be about fairness, and given the strength of the opposition which we have already heard—I hope the Government will think again.