Comprehensive Spending Review

Baroness Sherlock Excerpts

Monday 1st November 2010 Lords Chamber

[Baroness Sherlock]

My Lords, I wish to focus on the impact of the spending review on families with children. Having looked through the measures, I have three broad concerns. First, it seems quite clear that the measures taken together have a disproportionate effect on families with children. There are £7 billion cuts in welfare spending in the spending review, on top of the previous £11 billion in the Budget. The charity Family Action, which works with some of the poorest families in this country, has calculated that there are 21 separate welfare cuts affecting working families. The IFS has pointed out that one key effect of the CSR is to refocus benefit spending away from families with children. That cannot be reasonable. Even the proposal to withdraw child benefit from a fairly random selection of higher-rate taxpayers is, in effect, not a redistribution from rich to poor but a movement of resources away from some families with children to society as a whole. Once again, a group of families with children is bearing the cost.

Secondly, the measures appear to add complexity and to get in the way of helping working families, as my noble friend Lady Hollis has so ably pointed out. Some of the cuts affect only families with one or more parents in work, such as the changes to working tax credit. I am particularly concerned about the decision to reduce the amount of childcare help that working families receive. That could cost up to £1,500 a year for a family. I spent some years running a charity that works with single parents. We ran schemes that helped single parents into work and I learnt two things: first, that most single parents want to work if they can find a job that they can combine with looking after children; and, secondly, that many of them live right on the edge financially. Every single penny is counted. A rise of 50p an hour in the cost of childcare can prove disastrous. Parents, who may find themselves £1,500 a year worse off in relation to childcare, could find that they simply cannot afford to pay the nursery or pay the childminder. If the childcare falls apart, so does the job. If we want lone parents to work, we have to make that possible for them.

This comes on top of the measures in the Budget that include something that sounds very technical, as my noble friend Lady Hollis has pointed out: a disregard of £2,500 in working tax credit for in-year falls in income. As the Minister will realise, this may sound technical but the results can be quite significant. Let us suppose that a mother loses a cleaning job or her husband's hours in his factory are cut and the family loses £2,400 a year in wages. This change will mean that their tax credits cannot be recalculated to take account of that fall in income. They could lose £975 a year from that one measure alone compared with the tax credits that they should be getting. That is not supporting work.

On complexity, there is also the proposal to localise and cut the funding for council tax benefit. The assumption seems to be that council tax benefit will be replaced in April 2013 by grants to local authorities, which can choose the best way of using the money to try to provide rebates for council tax bills. The budget will be £500 million a year less, so clearly poorer families will lose out, but it also means that we will end up with 100-plus local authorities deciding the best way in their authority to rebate council tax. As the IFS has pointed out, that goes directly against the principles behind the Government’s universal credit; it goes directly against a single national policy, against clarity and against simplicity. As the IFS points out, it also creates a postcode lottery in which some local authorities may choose to use the money to persuade low-income families to live somewhere else. Therefore, it fails both the fairness test and the complexity test.

Finally, I am concerned about the measures that could hit the very poorest families. Poor families with children will be disproportionately hit by many of the housing measures that the Government have proposed. The measures to cap benefits must surely affect mostly large families who live in high-rent areas, often because that is where the jobs are. Even the flat-rate measures will strike terror into the heart of families more than others. My noble friend Lord Knight of Weymouth referred to the proposal to cut 10 per cent from the housing benefit of people who have been on JSA for more than a year. I truly cannot understand what that measure is designed to achieve. It obviously cannot assume that your rent goes down if you are on the dole for a year; and it cannot presumably be to motivate you to look for a job because the JSA already does that. If you do not look for a job, your benefits can be sanctioned. If you are offered a suitable job and you do not take it, your benefits can be stopped altogether. It cannot be to motivate you to do that. What, then, can it be for? I simply do not understand it. Is it simply a punishment for having failed to find a job? Do the Government believe that it is impossible not to find a job? If the Minister thinks that, I would be very happy to take him to parts of County Durham where I could demonstrate only too readily that that is not the case.

What would be the effect of that? If you have been out of work for a year, you have probably already exhausted all your savings; you have probably already been round all your friends and family and anyone else in your network who has money, many of whom will be in a similar position in some areas. So what do you do? If, at that point, your housing benefit is cut by 10 per cent, even if that were only £15 a week, that could be an enormous amount of your disposable income. Frankly, it might as well be £1,500 a week for all the difficulty you will have in finding it. What would that do to a family with children? You are out of work, your housing benefit has been cut and your landlord will not randomly reduce the rent for those who happen to have been on JSA for more than 12 months, so you cannot make the rent and at some point your arrears build up and you are likely to be evicted. Then we have a homeless family. How is public policy advanced in any way? Even if we simply wanted to make it likely for them to get back into work, how would they do that? What are the consequences for the children? I simply cannot understand what this policy is designed to achieve.

We all accept that there must be some pain as we try to lift our country out of this global recession, but we all agree that it must be done fairly. I suggest that fairness requires two things, and I hope that the Minister will take careful note of these. First, fairness requires—a phrase I think he likes—that those with the broadest shoulders should bear most of the burden. Sadly, the IFS has already proved that the CSR is clearly regressive and that that is not happening. Fairness also requires that the most vulnerable, those with the least ability to cope, should be protected from the worst effects of the cuts that we must all bear. How could poor families with children be anything other than in that category?