Welfare Reform Bill

Baroness Sherlock Excerpts

Thursday 3rd November 2011 Grand Committee

[Baroness Hollis of Heigham]

My Lords, I deliberately did not follow my noble friend after such a full, strong and powerful speech; however, my name is also on the amendment. I appreciate the dilemma that the Minister is in: there is a cash constraint and he is making policy choices. The last thing I would wish to see is a diminution in the earnings disregard for the first earner in order to vire it across to a second earner because you are trying to see which poor people would be most hurt in that situation. It is a dilemma and I would not wish to go down that road.

The Minister is right to say that under universal credit the position of women improves for the most part. However, the position of partnered women does not. The distinction my noble friend was drawing was about the situation of partnered women, not women overall. All the moves between in-work and out-of-work benefits, the 16 hours and the extra disregards for lone parents are welcomed, but we are now talking about partnered women and much of the noble Lord’s response dealt with questions that we did not raise.

Let me refer the Minister to page 6 of his own document. This is what happens if Bhavna also starts work for 10 hours a week at the national minimum wage of £6 an hour: she brings in an income of just over £60 a week, and the household has a net gain of just over £20 a week. So she earns £60 and the two specific examples given by the Minister show that she has a gain of £20. As my noble friend emphasised repeatedly, this excludes any childcare costs. I have been doing some sums. If her children are not of school age and she is using a child minder at £2.40 an hour per child—which she may well do—and allowing an hour for travel at each end of the 10 hours that she is working part time over the course of two days, I reckon that, out of that £20 gain—her 30 per cent—her childcare costs would take up £19. So she is left with £1, out of which she has to pay her travel costs, let alone extras such as lunches, food at work, different clothes and so on. Some £19 of that £20 could go on the existing childcare costs, leaving £1 for travel—in other words, she would be out of pocket if she worked. That is based on the Minister’s own figures, and that is what concerns us.

My noble friend was surely spot on when she said that to have a second earner in the family is protective of all family forms. This is what matters; it protects the existing family. We know a larger family will still remain below the poverty line on minimum wage unless you have a second earner in play—and it is the second earner who takes a working family out of poverty. It protects the family and it also protects the woman, should anything happen to her in future.

While I accept the fact that the Minister is up against cost ceilings—I certainly do not wish him to stop viring earnings disregards between the two members of the family—it would help the Committee if he was able to give an undertaking that this will be a priority and that any additional resource would be aimed towards readdressing the issue of the earnings disregard for the second earner. Believe me, all the gains that he is offering, in terms of mini-jobs and so on, are going to be wiped out because of the tougher treatment of childcare costs and the fact that, as a result, it will not be worth your working, even though the Government claim it is.

[Baroness Sherlock]

My Lords, I want to save the Minister getting up twice, as I want to ask him a question on a similar point. I have been trying to wrestle with some of the briefing that has come in on this issue. Can he answer two simple questions? Is it possible for somebody to face MDRs of higher than 100 per cent if they are, for example, a second earner with childcare costs? Secondly, if somebody would actually be worse off in work, would they still be sanctioned for failing to do it?

[Lord Beecham]

My Lords, may I ask what I hope is a final question? The Minister rightly referred to the fact that there would be no income tax income to the Treasury to offset the cost. However, has the Minister considered the likelihood of much of the income of a second earner being spent in a way which would incur VAT? Is that not a material consideration in terms of what would be offset against the cost?

[Lord Freud]

My Lords, let me try to pick up some of those points. Picking up the point of the noble Baroness, Lady Hollis, I hope that she is hearing that I am sympathetic to this point. I hope that noble Lords have heard that this is about money. We do not have this money. We have a very sharp choice to make, about whether to reduce workless households or to look after second earners with a disregard. We have taken this decision, and we have also taken a decision, when we do find some more money, to do something about childcare, which is another issue that I know greatly concerns noble Lords.

There are two clear issues when we look to improve this system, as we see dynamic effects coming through which are provable. We had a debate the other day on why we need to test things. Two of the obvious things to test will be second earner disregards and taper. Those are the first two things that everyone in this Room, I think, would like to know about as we get the system under way. Therefore, to the extent to which I am being asked “Will we look at it?”, yes, we will be looking at this. I am not going to make any assurances, because we should find the answers, but that is exactly the kind of question we want to have answered.

I shall take up the points of the noble Baroness, Lady Sherlock, on MDRs. You can freight all kinds of things on to MDRs if you want to, with different costs, and I am sure that you can create a position where the overall costs come up to high MDRs. The simple point that I would like to make is that with the universal credit itself, the MDRs come down.

On whether we will force people to take a job which leaves the household poorer, we made the point when we discussed this that we take these things into account when we set up the obligations of claimants.

[Baroness Sherlock]

My Lords, I am grateful to the Minister. I hear very clearly his sympathy for this issue. If it is simply a question of money and therefore timing, one of the things he could do, to put everyone’s minds at ease, is to say, “Until we can afford it, we will not force a household to be worse off by forcing them into work or sanctioning them”. He could then review the situation when he found the money down the back of the sofa next time.

[Lord Freud]

I will not give that kind of assurance to noble Lords. This is clearly—