Welfare Reform and Work Bill

Baroness Lister of Burtersett Excerpts

Monday 25th January 2016 Lords Chamber

Moved by

[Baroness Lister of Burtersett]

25: Clause 7, page 9, leave out lines 7 to 10

[Baroness Lister of Burtersett (Lab)]

My Lords, Amendment 25 would remove child benefit and child tax credits from the benefit cap. I return to this amendment, which raises an important point of principle together with children’s rights questions, partly because in Committee it was grouped with various other exemptions from the cap, but, more importantly, because—and at the risk of being accused of being vituperative—once again, the response from the Minister was inadequate. He was challenged a number of times to justify why these benefits should be subject to the cap for those out of work when they are received by those in work, so that the cap is premised on a comparison between earnings in work and income out of work, but he failed to do so.

The argument boils down to what we believe is fair. According to the impact assessment, the clause promotes even greater fairness between those on out-of-work benefits and taxpayers in employment. Our view is that fairness requires that old cliché of the level playing field, on which, if you ignore the child benefit received by all taxpayers in employment on wages of £20,000 to £23,000 and the child tax credits received by a good proportion of them—how many and how much the Government refuse to say—you must ignore it when calculating the income of those on out-of-work benefits.

The exchange between my noble friend Lady Hollis of Heigham and the Minister on this point could have come straight out of a pantomime: “Oh, yes, it’s earnings”, “Oh, no, it’s income”; or that old song, “Let’s Call the Whole Thing Off”: “I say income, you say earnings”. But whereas my noble friend, as you would expect, offered argument, the Minister offered only assertion. He just kept repeating:

“We are looking at the level of earnings”,

without ever saying why, other than, as my noble friend put it, “Because I say so”. Therefore, I thought it only right to give him the opportunity to offer an argument today in justification so that noble Lords can decide whether it is indeed fair to base the policy on such an uneven playing field.

Other arguments that did not get addressed properly by the Minister concerned the impact on children. How did the policy fare against the family test, which was not even mentioned in the income assessment? He assured me that the family test was applied, but, as he could not,

“recall what was in it”,—[Official Report, 21/12/15; col. 2378.]

he promised to write to me with the details. I do not believe that I have received them, so perhaps he could provide them now. What is the likely impact on child poverty? That was conveniently circumvented on the spurious ground that it is all too difficult to estimate the likely dynamic effects of the policy. There is no reply to the argument that the policy has a disproportionate impact on children.

In the judgment in the recent Supreme Court case on the cap, which we spent some time debating in Committee, Lord Justice Carnwath made the point that the inclusion of child benefit and child tax credits in the cap raises the question as to why,

“the viability of a scheme, whose avowed purpose is directed at the parents not their children, is so disproportionately dependent on child related benefits”,

and said:

“The cap has the effect that for the first time some children will lose these benefits, for reasons which have nothing to do with their own needs, but are related solely to the circumstances of their parents”.

The noble and learned Baroness, Lady Hale, observed that, as a result, the children affected,

“suffer from a situation which is none of their making and which they themselves can do nothing about”.

This brings me to the children’s and human rights implications of the policy, which, as the Equality and Human Rights Commission has complained, were dealt with inadequately in the Government’s human rights assessment and the impact assessment. What is at issue is whether the inclusion of children’s benefits in the cap is in the best interests of the child in line with Article 3 of the UN Convention on the Rights of the Child.

In the human rights memorandum, the Government note the Supreme Court’s decision and assert that they have fully considered their obligations to treat the best interests of the child as a primary consideration. However, their analysis of the,

“best interests of the child”,

seems to rest on this proposition:

“The best interests of children overall is to have parents in work and work remains the surest route out of poverty”.

As the EHRC observes, this betrays,

“a particular lack of understanding regarding compliance with the UNCRC”.

It may well be in the best interests of many children for parents to find work, but it will depend on the work available, the circumstances and the durability of any work found. Moreover, this bald statement ignores the fact that the great majority of those already subject to the cap did not find work as a result. Is it really in the best interests of their children to have their standard of living reduced even further when a survey reported in the first-year review of the operation of the cap found that over a third of those affected had already had to cut back on household essentials and many had incurred debt, which the Government identify as a root cause of poverty? In fact, the Government’s position pretty much ignores the judgment of the noble and learned Baroness, Lady Hale, echoed by the noble Lord, Lord Kerr, that they,

“misunderstand what article 3(1) of the UNCRC requires. It requires that first consideration be given to the best interests, not only of children in general, but also of the particular child or children directly affected by the decision in question. It cannot possibly be in the best interests of the children affected by the cap to deprive them of the means to provide them with adequate food, clothing, warmth and housing, the basic necessities of life. It is not enough that children in general, now or in the future, may benefit by a shift in welfare culture if these are also the consequences. Insofar as the Secretary of State relies upon this as an answer to article 3(1), he has misdirected himself”.

In his response, the Minister did not address the substance of these arguments, but took refuge behind what he called the “sterling work” of the noble Lord, Lord Blencathra, whom he described as “utterly masterful” on the legal aspects and who he said had certainly taught him a lot. I am no lawyer, and I am sure the Minister will not consider me masterful on the subject. I am diffident about getting involved in legal disputation once more, but I am assured by the CPAG’s solicitor, to whom I am grateful—I make my usual declaration as the group’s honorary president—that the interpretation by the noble Lord, Lord Blencathra, is open to challenge. The Minister’s law lesson might, therefore, need some revision. It is not the case, as the noble Lord, Lord Blencathra, asserted, that the Supreme Court found the Government to have been “perfectly correct” when they were taken to court on not implementing the UNCRC, nor that five of the noble judges ruled, in the Government’s favour, that the benefits cap was not contrary to the rights of the child. Rather, the court found, by a majority of three to two, that the benefit cap regulations are in breach of Article 3(1). It is true that they went on to find that, as the convention is not incorporated into domestic UK law, it should be for Parliament, not the courts, to decide how to remedy the breach. Lord Justice Carnwath advised that the court’s concerns about the rights of the child would need to be addressed in the political arena. In other words, the court was looking to us—to Parliament—to find a way to ensure that the Government upheld the UK’s obligations under international law with regard to the cap.

That is what the amendment seeks to do. Just because the UN convention is not directly enforceable in UK courts, the Government cannot simply ignore it when their claims to have complied with it are challenged by the Supreme Court. It must concern us that, far from responding to the Supreme Court’s ruling and to the specific recommendation of the noble and learned Baroness, Lady Hale, that the Government consider removing children’s benefits from the cap, the Government are now compounding the infringement of children’s rights by reducing the cap to below median earnings, thereby bringing many more families into its net. I suspect that it is only a matter of time before the matter is before the courts again, as this could now mean that the cap is in breach of the European Convention on Human Rights because of its disproportionate impact.

On grounds of both fairness and the rights of children, I believe there is a strong case for the exclusion of children’s benefits from the cap. I hope that today the Minister will actually engage with the arguments, rather than continue with the “because I say so” approach. Given that that approach tends to be used when there is not a valid case to be made, better still, he should accept the amendment on grounds of both fairness and children’s rights. I beg to move.

[Baroness Sherlock (Lab)]

My Lords, I thank my noble friend Lady Lister for the way she has introduced the amendment and for her persistence and expertise on this subject. My noble friend raised this issue in Committee but did not get an adequate answer. One of the things I find most depressing about the debates on the benefit cap is that Ministers increasingly lump all benefits together as just welfare payments. No distinction is made between the various kinds of benefit we have traditionally had in the British social security system: between contributory and non-contributory benefits or between income-replacement benefits and those designed to compensate for extra costs. The failure to make such distinctions tends to demonise recipients. It also muddies the policy-making waters, because Government are reduced to making fairly broad claims for the behavioural impacts of benefits the purposes of which are, in fact, quite distinct from each other.

Child benefit is a good case in point. It has traditionally been a universal benefit and is still available to all but the highest-earning households. In effect, it is a horizontal transfer from taxpayers as a whole, including those who do not have children, to those who have children. Originally, it replaced an allowance in the tax system and it is there because, as a society, we recognise that children are a public as well as a private good. We all have a stake in ensuring that parents can afford to raise the next generation healthily. Child benefit goes to parents in and out of work, of course, as does child tax credit—the two benefits that are the subject of this amendment.

--- Later in debate ---

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, Amendment 25 seeks to remove child benefit and child tax credit from the list of those benefits included within the benefit cap, so that they are disregarded when calculating the total amount of benefits that a household can receive before the cap is applied. This amendment undermines the fundamental principle that we established when we introduced the cap: that there has to be a clear limit to the amount of benefits that an out-of-work family can receive. This principle has gained very broad support across the country.

The benefit cap is just one part of our suite of welfare reforms, which are restoring work incentives and fairness to the benefits system. The previous system was not fair on working taxpayers, nor on claimants who were trapped in a life where it was more worthwhile claiming benefits than working. Our welfare reforms are about moving from dependence to independence and the benefit cap is helping people to take that important step into work. Indeed, the evidence shows that the cap is working, with capped households 41% more likely to go into work than similar uncapped households. In fact, more than 18,000 households have entered work since the cap was introduced.

However, we have always accepted that there should be some exemptions from the benefit cap which support the cap aims of incentivising work and bringing greater fairness to the welfare system, while supporting the most vulnerable. To incentivise work, the cap does not apply to those households which qualify for the in-work exemption in universal credit. Nor does it apply to those households in receipt of working tax credit. For lone parents, this is just 16 hours of work per week; for couples with children it is 24 hours of work per week. In recognition of the extra costs that disability can bring, households which include a member who is in receipt of attendance allowance, disability living allowance, the personal independence payment and the Armed Forces personal independence payment are exempt. Those who have limited capability for work and receive the support component of employment and support allowance, or the universal credit limited capability for work- related activity element, are exempt. Furthermore, war widows and widowers are also exempt. Noble Lords should also not forget that if the claimant, their partner or a child for whom they are caring is in receipt of an exempt benefit, the cap will not apply.

As well as promoting fairness for those families who are in work, the welfare reforms are about transforming life chances. Since the cap was introduced in April 2013, nearly 9,400 capped lone parents have moved into work and claimed working tax credits, joining the 1.26 million lone parents in employment in the UK. 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, while improving their longer-term life chances.

As to the ECHR criticism about the rights of the child, the interests of children are best served by doing everything possible to get their parents into work and providing the right support to remove the barriers to work, such as employment support, training, budgeting advice and free childcare. DHPs are available to assist in hard cases, and the Government will make £870 million available in that area over the next five years.

The noble Baroness, Lady Lister, raised the family test, and the noble Baroness, Lady Sherlock, was kind enough to remind her that I managed to get a letter to her saying that the family test had been applied when considering the benefit cap changes. The way that the test works on the whole is that the department thinks carefully how the new policy can support family relationships. We have been very clear, as I have been this evening, that it is important that children grow up in households that are in work. The cap is a key way of delivering this particular policy and this particular change.

Like other welfare benefits, child-related benefits are provided and funded by the state, and it is therefore right that they are taken into account along with other state benefits when applying the cap. It is only fair that households receiving benefits should make the same choices that families in work do. The cap levels are equivalent to annual pre-tax incomes of £29,000 and £25,000. These are still considerable incomes, with around four in 10 households earning these sums in London and the rest of the country respectively.

It is a simple matter of fairness for those families with children who are in work to set the cap at these levels and to include child-related benefits within its scope. To be clear, households who go out to work and qualify for the in-work exemption in universal credit or for working tax credits will be entirely exempt from the cap and will receive all of these benefits over the cap level. For those households who need additional support in adjusting to the cap, DHPs are available: £800 million has already been made available and a further £70 million was added to that figure in the Autumn Statement.

There is of course a nine-month grace period in which the cap may not be applied to those have recently left sustained employment. This gives households, including those people who are receiving child benefit and child tax credit and who may have had to leave employment, time to adapt to their new circumstances or find work before the cap is applied to them.

For the reasons I have explained, I do not agree that we should remove child benefit and child tax credit from the cap, as would be the result if this amendment, as drafted, was passed. I ask the noble Baroness to withdraw her amendment.

[Baroness Lister of Burtersett]

My Lords, I am grateful to my noble friend Lady Sherlock and to the Minister. I never received the letter last Thursday, although I recall there was another letter when we raised the question of the family test in relation to the policy we will be discussing on Wednesday about families with two or more children. That said exactly the same thing—I think it was almost the same sentence.

When I was preparing this over the weekend, I realised I had never received a letter about our fourth day in Committee, so I emailed the Minister’s office to ask whether there had been such a letter, and I have not had a reply yet. Perhaps the letter about our fourth day could be re-sent, because I have certainly not received it. Anyway, it sounded horribly familiar—that is, it did not tell us very much at all, as my noble friend said.

I did not really expect we would agree on this. The Minister has certainly not satisfied me that it is fair when we are not comparing like with like. That is really the nub of the argument. On the rights of the child, he simply repeated the very argument that the noble and learned Baroness, Lady Hale, had pretty much destroyed in the Supreme Court judgment. He brought up the old DHPs again—many moons ago I said this was the loaves and fishes argument. DHPs have to be extended to cover everything and they do not provide anyone with any kind of right because they are discretionary. Clearly we are not going to make progress on this but it is important that we at least keep maintaining why we believe that this is not fair. I beg leave to withdraw the amendment.

Amendment 25 withdrawn.