Welfare Benefits Up-rating Bill

Baroness Sherlock Excerpts

Tuesday 5th March 2013 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, I will make just a short intervention on this amendment so ably moved by the noble Baroness, Lady Lister. I entirely concur with her view and analysis. I want to add, however, the fact that I am now very frightened about what is happening in the short term. There is a complacent view held among policymakers generally that the Work Programme and universal credit are all that need be done. I support both, and will not cast any aspersions on any Governments or make any party political points, but both these important reforms will take at least 10 years to go into steady state and be of assistance to our most hard-pressed, low-income households in the United Kingdom.

If I am right about that, and about the prognosis for the United Kingdom’s level of economy over that period, we face a really difficult period of activity where we cannot rely safely on the Work Programme and universal credit to provide the social protection that this country needs and expects. We need to do something in the short term that seeks to understand what is going on. More than anything else, this is a plea for really rigorous and urgent monitoring of everything going on: every bit of evidence from every constituent part of the United Kingdom. We need to watch carefully what is happening. The noble Baroness is quite right: malnutrition of children will result over the next five to 10 years if we are not extremely careful.

Now, this is no one’s fault. I understand perfectly well the need to get austerity and deficit reduction properly balanced in the nation’s future policy at a financial and fiscal level. But nobody could have foreseen the difficulties or longevity of the recession, or the lack of growth that this country will have to deal with in the short term of five to 10 years. That does not seem like a long time and I do not take anything away from the long-term need to get universal credit and the Work Programme put together and rolled out, but nobody is paying enough attention to what is going on in the short term.

If you refer to the sensible policy professionals who look at this, the Joseph Rowntree Foundation is first among them and there is the work by Loughborough University, Professor Jonathan Bradshaw, and all these experts. We have better professionals in the United Kingdom than any other European country. I say that because I have worked with most of them for the best part of 25 years. The noble Baroness is one of them— she nodded at that point. This is a serious point: we have internationally recognised experts on this yet we are deaf to what they say to us. A growing body of opinion says that something different and more than what has been put in the policy framework to date needs to be done to be sure that we do not face levels of financial adversity with which the public will not be comfortable.

I know that there is a view that people are against welfare spend and we have had discussions over the Welfare Reform Act and this Bill about the language used nationally in the public discourse on this important area of public policy. It is important because £200,000 million a year is spent and it is still creating problems. We need to face up to that. We need to have a much more adult discussion about what is going on.

Certainly, concepts such as the minimum income standards need to be part of that discussion. We need to look at the cumulative effect of everything that has happened since 2010 that has made the circumstances dramatically worse. People know that I am a professional, paid-up pessimist—I accept that—but we have to be very careful about how we assess the evidence.

I want to make a couple of quick suggestions about how we might deal with that in conjunction with looking at the principles in the long and short term and how we perform the monitoring and evaluation. What is happening in the devolved legislatures of the United Kingdom is very important. There are positive responses in Wales, and in Scotland, which I know best, where the need is recognised. We must first promote the need to do things differently. That may mean financing food banks—that is not something that I want, but if the alternative is malnutrition in children, we cannot ignore that. It is easier in smaller countries which have shorter lines of communication and a smaller scale. They can move more flexibly and faster. Working with the legislatures in Cardiff and Edinburgh, I think that there are some quick wins that central Government could help to promote. I hope that we will do that and keep the channels of communication between London and the constituent legislatures throughout the rest of the United Kingdom open and dialogue promoted urgently.

As the second part of that, working with local authorities will be so important. The evidence coming back from housing authorities, particularly in local authorities, presents variable geometry—we are getting different messages from different parts of the country. There is a spatial dimension to some of these issues which we should not ignore. In the past, we have always safely relied on a centralised, unified United Kingdom social security process as the right thing to do. I have less confidence about that working in the next five to 10 years. We need to look much more carefully at how housing and labour markets are aligned in some regions of our United Kingdom and be sensitive to changes happening in those fields.

I think that we need a short-term anti-poverty strategy. The principles covered by the amendment of the noble Baroness are important and must be kept in mind for the longer term, but all my instincts tell me that the next three, five or seven years will be difficult in a way that nobody has previously been able to get a grip on. If we do not respond to that by looking at some of the ideas contained in the amendment, we will pay a heavy price in terms of child poverty, in particular. We have an important amendment coming up next on that subject, and I hope that we will think carefully about that as well.

In strongly supporting the concept behind the amendment, I would like the Committee to consider not just the longer and medium term but some of the emergency state provisions that we as a country will be forced to face over the next five to 10 years.

[Baroness Sherlock]

My Lords, this has been an interesting brief debate, introduced by my noble friend Lady Lister with her now characteristic blend of expertise and passion. I am sure that we are all grateful to her for opening up the question so well. The quotes that she shared with the Committee about children arriving hungry at school and mothers missing meals and going without themselves to protect their children from the effects of poverty were, on one level, not a surprise to any of us, but they are still shocking. They should be profoundly shocking.

I found the point made by the right reverend Prelate very interesting and I understand why he would like those assurances from both sides of the Committee. My noble friend Lord McKenzie of Luton made Labour’s position clear at the beginning of our first day in Committee. It is this: if we were in government right now, we would be uprating benefits in line with inflation. However, we cannot make a commitment at this stage for the next Parliament. My view is that that is not a good idea anyway. We are fundamentally opposed to the whole principle in the Bill of fixing the levels of uprating for a period. We have perfectly good mechanisms for uprating benefits annually in line with inflation in the light of prevailing economic circumstances. To be honest, I would not want to be tempted into anything other than maintaining that position, but I fully understand why the right reverend Prelate is pressing the concerns that he is pressing.

I also found the comments made by the noble Lord, Lord Kirkwood of Kirkhope, very interesting. He drew in the spatial dimensions of poverty and the wide-ranging regional issues. That is something that we may come back to. I particularly agreed with his point about the need to monitor what is going on. The next amendment that I shall move encourages the Government to look specifically at the impact on child poverty. I also support the noble Lord’s point about the need for a cumulative assessment of all the changes between 2010 and now—a point made very strongly by my noble friend Lady Hollis at earlier stages of debate.

Since the Bill cannot help but drive down standards of living for families, what assessment have the Government made of the likely impact on the well-being of the poorest adults and children of what is effectively a real-terms cut in benefits and tax credits, not just over the year ahead, but over the three years covered by the first uprating and the two years of this Bill? It would be very helpful to the Committee to understand what assessment the Government have made. At a time when three new food banks are opening every week and even families in work are finding it a struggle to make ends meet, the state needs to take particular care to demonstrate that resources are gathered and distributed in a way that is fair to everyone. In the light of that, I shall be very interested to hear what the Minister has to say.

[Baroness Stowell of Beeston]

My Lords, I am grateful to the noble Baroness, Lady Lister, for moving this amendment and explaining her thinking. Of course, I recognise the serious issues that she and other noble Lords have raised during the course of this debate. I would not claim first-hand experience of living on benefits, so I do not bring to this debate any presumption about those on benefits finding what we are doing anything other than difficult, but is an inescapable fact that when setting benefit levels successive Governments have sought to strike a balance between the needs of claimants, maintaining work incentives and affordability.

Indeed, the current uprating legislation recognises this explicitly. The Social Security Administration Act 1992 requires the Secretary of State to make his annual review of benefit levels based on the increase in prices. He is then given discretion as to how to uprate certain benefits, having regard to the national economic situation and any other matters that he considers relevant. Parliament therefore requires the Secretary of State to take certain issues into account when considering the level at which the benefits in question are set. In bringing forward this Bill, we have considered these issues carefully and struck a balance between providing a cash increase, protecting certain key benefits and making necessary savings.

Benefit levels also have a significant bearing on work incentives. The complexity of the current system largely arises from successive Governments’ attempts to balance benefit income against work incentives. That is why universal credit is such an important measure as it applies a single set of rules focused on maintaining the incentive to take up work or more work. In response to some of the points made in this debate, I shall say something that I know is shared around the Committee. This Government believe that work is the best route out of poverty, and that is why we are focused on making sure that work pays.

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[Baroness Hollis of Heigham]

Would the Minister agree that the last increase she mentioned has come about by increasing the additional cuts that people will have to face as a result of the bedroom tax?

[Baroness Sherlock]

I am sure the Minister is aware that the IFS analysed the distributional impact of tax and benefit changes between January 2010 and April 2015 as if universal credit were fully in place. It modelled the real-terms changes in household income at today’s prices with all the measures announced and UC fully implemented. It suggests that a one-earner couple with children will be £64 a week worse off. How does that equate to what she is saying?

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Moved by

[Baroness Sherlock]

12: After Clause 2, insert the following new Clause—
“Assessment of impact on child poverty
The Secretary of State shall, in making the orders referred to in sections 1(1) and 2(1), publish and lay before Parliament a report assessing the impact of the order on the number of children living in—(a) relative low income;(b) combined low income and material deprivation;(c) absolute low income;(d) persistent poverty;as defined in the Child Poverty Act 2010.”

[Baroness Sherlock]

My Lords, Amendment 12 is in my name and that of my noble friend Lord McKenzie of Luton. This amendment would require the Secretary of State to publish and lay before Parliament a report assessing the impact of the order on the number of children living in the four measures of child poverty set out in the Child Poverty Act; namely, relative low income, combined low income and material deprivation, absolute low income, and persistent poverty. The aim is very simple. It is to force the Government to face up to the consequences of their actions and to come clean about the impact of these measures on child poverty.

I am sure that the Minister is closely familiar with the coalition agreement. I know that I read it regularly, so I expect no less of him. My favourite bit is paragraph 14, the first bullet point of which reads:

“We will maintain the goal of ending child poverty in the UK by 2020”.

That is rather lovely and has a beauty in its simplicity. I will repeat it:

“We will maintain the goal of ending child poverty in the UK by 2020”.

In keeping with that commitment, the Government have previously published the effect on child poverty of Budgets, spending reviews and Autumn Statements. But in the last Autumn Statement we did not get the kind of detail that we were expecting. Why could that be? We got a hint in a Written Answer in another place from the honourable Esther McVey when she said:

“We estimate that the uprating measures in 2013-14, 2014-15 and 2015-16 will result in around an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI”.—[Official Report, 15/1/13; col. 716W.]

It probably is important to look at the backdrop to this. Since the goal of ending child poverty by 2020 was first announced in 1999, the UK has made real progress. Some 1.1 million children were taken out of relative child poverty between 1998-99 and 2010-11, and 2.1 million children were taken out of absolute child poverty between 1998-99 and 2010-11. But now we are going into reverse. The rise in child poverty likely to be caused by these measures is on top of a net rise in child poverty of 400,000 by 2015 and 800,000 by 2020, resulting from the Government’s current fiscal policies, as seen in the IFS analysis of 2011.

If that is right—the Institute for Fiscal Studies has a pretty good record on these things—that means a rise in child poverty of at least 1 million children under the relative low-income measure is now likely by 2020. However, the relative low-income measure is just one of the four poverty measures in the Child Poverty Act. I should like to ask the Government why Ministers have not given any figures on the number of children who will be pushed into absolute poverty by the Bill, despite the fact that the Government have the same capacity to produce an estimate on that measure as on the relative low-income measure. I look forward to hearing the answer because, as the Minister will realise, the Government have a statutory duty to reduce absolute child poverty under the Child Poverty Act. Therefore, they presumably must be able to measure it to know if they have fulfilled that statutory duty.

Similarly, the Government have given no assessment of the likely impact of the Bill on material deprivation, despite again having a statutory duty to reduce material deprivation under the Child Poverty Act. Even if Ministers did not feel able to produce a numerical estimate, I cannot see any reason why they could not produce a narrative assessment, a point made repeatedly by the Child Poverty Action Group. Finally, and at the risk of being repetitive, we have seen no assessment, not even a narrative one, of the impact of the Bill on persistent poverty, despite the fact that yet again the Government have a statutory duty to reduce persistent child poverty under the Child Poverty Act.

This really is a disgrace after all the careful progress that has been made. The reason the previous Government took child poverty so seriously was that it had risen so dramatically under the previous Conservative Government. The researcher, Jonathan Bradshaw, who has already been mentioned today, found that child poverty increased nearly threefold in the 1980s alone and that the well-being of British children compared unfavourably with that of children in most developed nations. That was the reason the Labour Government acted. It was also the reason why, by the time of the last election, there was apparently cross-party support for that goal of tackling child poverty in Britain. We are now in the position of having to ask what it means for the Government to say that they will maintain the goal of ending child poverty in the UK by 2020.

This is perhaps a philosophical point, but what does it mean to have a goal if one takes no steps towards it? I may say that I have a goal of being a concert pianist, but if I do not take lessons to learn to play the piano and I never practise, no matter how many times I say it, the odds of my becoming a concert pianist must be seen to be slim. In that case, on what basis can Ministers say they are committed to eradicating child poverty in the UK if they keep bringing forward Bills that drive it ever higher? It may be time for them to come forward and say that they do not in fact have any intention of eradicating child poverty and perhaps never did.

The amendment really is for the Government’s own good. If they are committed to the goal of ending child poverty by 2020, they need to understand the impact of their policies on child poverty. Otherwise, they cannot possibly achieve that. If they are not committed to that goal, the nation has a right to know that and still to understand what the impact of these measures would be. That is all the amendment does. It requires the Secretary of State to tell Parliament and the nation what the effect would be of these measures before he implements them. What could be more reasonable than that? I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I hope to make an even shorter contribution to this important debate. I agree that the amendment relating to child poverty is apposite and important. I want to confine myself to seeking further clarification from the Minister, if she has the information to hand. It would be to the Committee’s advantage if we knew more about what we can expect from the Social Mobility and Child Poverty Commission, because it relates directly to the substance of this amendment.

I was pleased that there was a recent change to the membership of the commission and that our very own noble Baroness, Lady Shephard of Northwold, has joined it. I am pleased about that because she is an experienced hand and I trust her judgment. I look forward to seeing the fruits of her work within that commission. It is important to us all. However, I was disappointed to learn recently that the first annual report of the Social Mobility and Child Poverty Commission is not now to be with us before 26 September this year. We were expecting it in May. I make that observation because it is a sign of drift, potentially. If I am wrong about that, I hope that I will be put right.

I was very uneasy about adding social mobility to child poverty. The original terms of reference of the 2010 Bill as put forward by the noble Lord, Lord McKenzie, were the correct ones. The Deputy Prime Minister, of whom I am a great fan, as I am sure people understand, was wrong. Social mobility is a different subject altogether. It is much longer term and in the short term, we are dealing with a situation that is more of an emergency than the aspiration of social mobility, which of course we all accept. We really need to understand what contribution to child poverty this commission will make. If the Front Bench can tell us anything about that in the course of this amendment, that would be very useful.

My second point is that of course we know that there is a consultation on child poverty measurement. I am taxing my memory here, but I think we were expecting the end of the consultation to be earlier this year—some time in February. If that is the case and my memory is correct, I hope we can be told that the Government’s contribution to the further development of child poverty measurement will be vouchsafed to us sometime soon. It will certainly be important to get hold of this around the time of the Budget, if we can. Some of the Office for Budget Responsibility’s assessments of future policy in terms of the Budget should be seen against the background of the Government’s view about how they will treat child poverty measurement in the future.

I am slightly nervous about some of the things that I have been hearing are being factored into the measurement of child poverty in the future. It may be that I am misreading signals but I hope that we do not lose focus on the fact that, at the end of the day, child poverty can be addressed only with money. Regarding any attempt to dress that up and expand the measurements too widely, while I am in favour of having all the data and metrics that we can access, for the reasons I explained on the last amendment we are facing an emergency situation the extent of which I did not anticipate.

The difficulties are mounting up, as we heard earlier. The decisions to be taken by the Government in the near future on measuring the data on child poverty are very important. If the Minister can help us to understand when we might expect information of that kind, it would help the Committee’s consideration of this Bill not just today but over the rest of its proceedings.

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[Baroness Sherlock]

My Lords, I thank all noble Lords who have spoken in this debate, which may be an interesting precursor to the kind of debate we may have when the commission finally reports. I am particularly and genuinely pleased to hear the Minister say two things—first, that the Government remain committed to eradicating child poverty and, secondly, that income matters. They are both important statements, and I welcome them and am very pleased to have them on the record. I thank the Minister for making them so clearly.

The noble Lord, Lord Bates, with whom it is always a pleasure to do battle, took me to task for saying that I did not somehow accept that the Government made clear their commitment to eradicating child poverty. What I was challenging was not that commitment but whether or not the actions were being taken that would make it a reality. That was the point that I was trying to make, and I apologise if that was not clear. My question was really about what one does to make a difference.

A lot has been said about the nature of the measure. I have never thought that the well-being of children was about only money. However, the reason why this amendment is about money is because the Bill is about money; the amendment is about the impact of the Bill, and the Bill is solely about what happens to the tax credits and benefits that go out to people—in this case, children. So it makes no sense for it to be any broader than that.

The second thing that is worth saying is that I made it clear that the relative income measure was, deliberately, only one of four income measures in the Child Poverty Act, and that was for a reason. The Government of the day recognised that we had to take a 3D approach to understanding what poverty was, and no single measure alone would be able to give us all we needed. However, those four points of perspective between them give a pretty good idea of what is happening to incomes across the UK. That is something that we need to understand.

The noble Lord, Lord Bates, commented on the regional variation of median income. That is true, but the cost of living also varies. As he and I both know, the cost of living in Durham is significantly different from the cost of living in London. So although wages may be different, so too is income—and the measure relates to median incomes.

It is also worth reminding ourselves that the Child Poverty Act does not—

[Lord Bates]

That is quite an interesting point, if the noble Baroness is prepared to expand on it on the record. I think that she accepts that it is true in Durham, a city that we both love greatly, that median incomes—or, rather, average incomes—are significantly lower, by 44% according to my figures, and that the cost of living is different and lower. So in those circumstances —putting the two together by using a national measure and putting 60% of median income—you would perhaps overstate the level of child poverty in Durham. Does she accept that?

[Baroness Sherlock]

It might be worth the noble Lord and me sitting down together with the Child Poverty Act. He might find that many answers to his questions are in there. As well as giving the Secretary of State a specific duty to address income measures, because tax and benefits are in the gift of central not local government, with the exception—reprehensible in my view—of the recent move to localising council tax support, the strategy places a duty on local authorities and other players to engage in issues around child poverty, specifically because they have competence in those areas. So if the noble Lord goes back to read it, he will find that there is an awful lot more in it than he perhaps remembers. We may have to come back to that.

It is also worth coming back to the idea that it is not just about money—but it is also not not about money, a point made very clearly by my noble friend Lady Farrington. The noble Lord, Lord Bates, said that the fact that the Labour Government did not meet their target for child poverty reduction means that the measure does not work. I do not think that it means that at all. I pick up again a point that the Minister made. I fully accept that no forecast is a precise measure and no measure is precise, but one reason for keeping a long-term target of 2020 is that what really matters is direction of travel. Over time, how does the income of the poorest relate to the income of the country as a whole? On that, I am proud that our Government lifted 1.1 million children out of poverty. If I had to stand up and say that we had pushed 1 million children into poverty, I would be ashamed of that, and I am very glad that I am not in that position.

If the Government come forward with other measures, we will happily debate them. I am always open to any conversation that focuses the attention of this House and the nation on the well-being of the poorest families, and I am very happy to have the conversation when the commission reports about what that means and what the best means is to assess the impact of policies on that. However, at the moment, the Child Poverty Act is law, and it puts an obligation on the Government—a statutory duty—to address child poverty in all these areas. Unless they measure that, I simply do not see how it is possible to satisfy themselves that they have done it.

The Government’s defence has also partly been that the measure is meaningless. It may be worth reminding ourselves even of the relative income measure. The Child Poverty Action Group reminds us that a relative low-income poverty line is, typically, around £12 per family member per day for all spending needs after housing costs. It notes that many families in poverty will be far below that—because that is where the line is, and many families are way below the line. The point of having four measures is to try to understand the impact of policies such as this on all those measures. I accept that other measures are going on. I accept the point that the noble Lord, Lord Bates, made—and he has engaged with the arguments from this side of the Committee most comprehensibly—that other measures are happening and that there are time lags. However, it is impossible to ignore the fact that a Bill that sets out deliberately to cut in real terms the incomes of poor and middle-income families will do anything other than increase child poverty in real terms. That is a real increase—it is not a statistical anomaly.

I do not want to delay the Committee much more, but I remind noble Lords that the amendment simply invites the Government to report before they enact this Bill on what the impact will be on child poverty, using measures already in statute to reflect a duty that the Government already have in statute. That is all that it does; it could hardly be less radical. However, as I am interested in returning to this at a later stage, I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

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This Bill cuts not just a hole, but a chasm in the fight against child poverty. I ask again: are the Government listening to those who work with children and, importantly, have the Government considered the long-term effects of child poverty, such as underachievement at school, with all the consequences, potential drop out from education and lack of social mobility? Measures in the Bill are potentially hugely costly, much more than the potential savings proposed, and I hope the Government will think again.

[Baroness Sherlock]

My Lords, we have heard yet again some very powerful and persuasive speeches and it is a very interesting argument. I commend the right reverend Prelate the Bishop of Ripon and Leeds for provoking such a good debate on so important an issue. As we have heard, this amendment would remove child benefit, child tax credit, and the child addition to universal credit from the scope of the Bill. Since we on these Benches would like to remove all benefits and tax credits from the scope of this Bill, we are pleased to support it

As we have heard from the right reverend Prelate, the noble Baroness, Lady Grey-Thompson, and others, the Bill has a disproportionate impact on children and families. The Government’s own impact assessment shows that two-thirds of affected households are families with children. As the noble Lord, Lord Low, noted in a very powerful speech, the Children’s Society says that while 30% of all households are affected, 87% of families with children are hit.

On one level this is because families with children receive more in state support—of course they do. As the noble Baroness, Lady Grey-Thompson, pointed out, a household without children is rather cheaper to run than one with children; not to mention a great deal quieter. However, while most parents rightly bear the lion’s share of the cost of raising their children, the state has always contributed—not just in extreme cases to try to protect children from the misfortunes that befall their parents but also because, in general, it is always recognised that children are a public as well as a private good. We all have a stake in seeing the next generation thrive.

Many noble Lords have rehearsed—and I will not repeat them—the concerns expressed to all of us about the impact of these measures on families with children. We have all had briefings from Save the Children, the Child Poverty Action Group, the Children’s Society and others making those points. These are very difficult times to be raising children, as my noble friend Lord Touhig noted in a very powerful speech. As the costs of food and energy have soared, more and more parents are struggling to make ends meet as they spend more of their money on these basic costs.

The right reverend Prelate made a telling point, I thought, when he reminded us that, unlike other areas, we do not have people in here with direct expertise of the matters under consideration. To that end, I liked the quote from Rosemary Keenan, the chief executive of Catholic Children’s Society (Westminster), when she said:

“It is hard for many of us to imagine what it is like for a mother to only have £1 left and know she still has to feed her children before the next payday. Families facing in-work poverty rely upon Working Tax Credits and other benefits to help make ends meet, and will face serious hardship as a result of these restrictions”.

Indeed they will. As we have heard from a number of noble Lords, the Bill comes on top of a series of cuts in the value of other tax credits and benefits. As well as the headline cuts, there have been a series of hidden cuts affecting, for example, tax credits for families with children by changes to taper rates, the treatment of income and the freezing of allowances, all of which sound technical but have in fact saved billions. However, it is not of course money that has been saved, but money that has been taken way from low-income families with children.

I seem to recall that the Government suggested at earlier stages that one of the reasons that so many families are affected is that tax credits go too high up the income scale. The implication, I suppose, is that people would not miss the money. However, the noble Baroness, Lady Grey-Thompson, described some figures from Citizens Advice. It has given us case studies showing that a couple with two children, where one parent is working full-time on just over minimum wage—getting £13,000 a year—will gain just 76 pence from the personal allowance. As a result, however, they will lose £3.46 a week net. By April 2015, that family on £13,000 a year with two kids will be £12.79 a week worse off. Even if we go nearer to average earnings, Citizens Advice suggests that a family earning £26,000 in similar circumstances will be over £12 a week worse off by April 2015. The sums may not sound like a lot, but they are significant to families on those kinds of incomes.

The Bill, as we have heard, will affect primarily working families with children. I was pleased to hear my noble friend Lady Massey of Darwen reiterate the impact of the Bill on child poverty, although I hope to hear something specific about this. I feel that I have probably done it to death, so I shall stop saying it now.

To come back to our core concerns, the Bill is a completely inappropriate way to address the up-rating of state support for families. We have perfectly good mechanisms in place to do that on an annual basis in the light of prevailing economic conditions. To come to the specifics, in trying to circumvent those annual mechanisms, the Government have left me slightly confused. I therefore have two questions for the Minister. First, can he tell the Committee what plans are in place for the up-rating of those benefits, tax credits and allowances which are not included within the scope of the Bill? This was raised at an earlier stage, but I do not think that we got a full answer; if we did, I apologise and will look it up. If the Minister does not know, would he mind writing to me before Report stage?

Secondly, other than those mentioned in the schedule and the universal credit work allowance mentioned in the Autumn Statement, are there any other benefits or allowances which the Government intend to up-rate by 1%? Those two questions together sound quite boring but, in fact, their answers will enable us to understand the parameters of the Bill’s impact. Unless we can get that detail, the Committee cannot properly understand its consequences.

Coming back to our core objections, these are poor choices for the Government to be making. The families who will be hit are not responsible for the economic situation, for the banking crisis or for the failure of the Government to get the economy growing again. They are just doing their best to manage in difficult times. Yet the Government are planning to cut the value of the help they get from the state in order to fund a tax cut for nearly 13,000 people earning £1 million a year. We should not be doing this and are pleased to support the amendment.

[Lord Newby]

My Lords, I absolutely understand and appreciate the desire of the right reverend Prelate and other noble Lords who have spoken on these amendments to protect and support children; of course, we all want to do that. However, our view is that supporting children is not just about increasing benefit levels. One of the most important things that we as a country can do to support children is to tackle the deficit and restore economic growth. In doing so, we create a future of prosperity, opportunity and jobs for the parents of those children in the short-term and for those children as they grow up. Taking benefits out of the Bill, as proposed by the right reverend Prelate, would take away some of what we consider to be the vital savings required to do this.

The amendments which we are debating now would remove from the Bill the child element of tax credit, child benefit and the lower rate of disabled child addition in universal credit. I assume that the right reverend Prelate’s intention in removing those elements is that they would be up-rated with prices, as was the case previously. If that were the case, I need to remind the House that the savings delivered by the Bill would be reduced by nearly £1 billion. In our view, those savings simply have to be found. If we did not do it through the Bill, they would have to be found from somewhere.

I was extremely grateful to the right reverend Prelate for the fact that, unlike the Opposition, he at least set out how he would raise the money. It was a long and credible list. However, it is not a list with which the Government agree. The Government’s view is that tax credits and child benefit account for over 40% of working-age welfare expenditure. It is not realistic to think that they can be excluded from the need to make savings.

We are attempting to prioritise resources into reforms which can help children in a variety of ways. To repeat some of the points which I made in my earlier speech, I hope not too tediously, we have since September 2010 entitled all three and four year-olds to 15 hours per week of free early education. This is being delivered flexibly to meet parents’ needs. It will be extended to 260,000 disadvantaged two year-olds from September 2013. We are also helping 100,000 more working families with their childcare costs by spending an extra £200 million in universal credit.

To deal with a point made by the noble Lord, Lord Touhig, we are taking action to deal with exorbitant practices by payday loan companies and loan sharks. One thing that we are grappling with, with which any Government would grapple, is that many families on low incomes have got very high levels of personal debt. This is not new. When I was Treasury spokesman for the Liberal Democrats about seven or eight years ago I appeared, somewhat implausibly, on the steps of the Treasury with my right honourable friend Vince Cable, bearing an outsized cheque at the point when personal debt in the country reached £1 trillion. Most of this, I accept, was mortgage debt; it is not the debt that we are talking about today. However, some of the biggest increases in personal debt over the past decade have been among people on low incomes. This growth in personal debt was not effectively recognised or tackled in the past. Indeed, our appearance bearing this cheque just guaranteed a huge amount of ridicule for Vince Cable and myself, rather than anybody, including the previous Government, taking the slightest notice of it, which was deeply distressing—or, more importantly, taking the slightest action to deal with the culture with which we are now grappling.

However, both in terms of loan sharks and payday lenders, I hope that we are taking more effective measures, not least through the amendments during the passage of the Financial Services Act, to ensure that people requiring access to short-term loans can, at the very least, do so with companies which will treat them half-decently. The other area which we protected, which is vital to families and benefits those at the poorer end at least as much as those at the upper end, is the support they get through the schools system and the NHS, where the budgets are protected.

The right reverend Prelate spoke about child benefit, which he is anxious to protect. I remind the House that, even after the changes that have been made to child benefit, nine out of 10 households are still covered by it. We are taking the entitlement away only right at the top end. Child benefit continues to be paid to many households which are by no means on low income.

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Moved by

[Baroness Sherlock]

15: The Schedule, page 4, line 10, at end insert “with the exception of statutory maternity pay”

[Baroness Sherlock]

My Lords, this amendment is in my name and that of my noble friend Lord McKenzie of Luton.

The Telegraph online ran a story on 6 December 2012 headed “Autumn Statement: Osborne Attacked over ‘Mummy Tax’”. The article stated:

“Hundreds of thousands of new mothers will be almost £240 worse off after George Osborne announced cuts to maternity pay”.

A similar story was run in the Mail in January under the headline “True Cost of ‘Mummy tax’”. It is fair to say that the inclusion of statutory maternity pay in the scope of this Bill has not been universally well received. The Telegraph story quoted the founder of Mumsnet and I think it is fair to say that she was pretty unhappy with it. Why are the Government including statutory maternity pay in the Bill? The Telegraph had an explanation. It said:

“The Prime Minister’s official spokesman said it was ‘a personal choice’ for parents to decide whether to return to work after having a child or to stay at home”.

So there you have it—it is a personal choice; at least, presumably it is if you can afford it. But surely it is slightly more than that. Do we not all have an interest in making sure that people have a real choice when they have a baby? Is not one of the reasons the state pays statutory maternity pay that it is seen to be good for babies to have their mothers at home, breastfeeding them where possible and bonding with the child? Therefore, is there not a genuine public policy interest in making sure that we do not unnecessarily make it any harder for women who want to stay at home when they have a new baby?

The growing concern about this and other cuts affecting new mothers prompted this amendment, which seeks simply to remove statutory maternity pay from the scope of the Bill. It is worth rehearsing very briefly how SMP works. SMP is payable only to women who have just had or adopted a baby, or who will do so shortly. They must be in paid work. Indeed, they must have been continuously employed by an employer liable to pay national insurance contributions for them for six months before the 15th week before their expected date of confinement. They must have had average gross weekly earnings at least at the level of the lower earnings limit for national insurance and they must have stopped work in order to have or care for the baby. In other words, this is a contributory benefit paid to working women who have stopped work only to give birth or to care for a new baby. SMP gives them 90% of their average weekly earnings for the first six weeks and then, at the current rate, £135.45 a week for the next 33 weeks.

According to a Written Answer from the right honourable Maria Miller in another place on 30 April 2012, at col. WA 1322, the Government estimate that some 232,000 families will claim SMP in 2012-13. Those families could find themselves being seriously short-changed. Using the Government’s own inflation forecasts, the Children’s Society calculates that in 2015-16, SMP will be £145.15, if inflated by CPI. However, the impact assessment indicates that the likely rate is just £139.58—a difference of £5.57 per week. To put that in context, if a woman were on maternity leave now with her first child and had her second child in 2015, she would find that she got about £184 less in real terms during her next maternity leave than she would during this maternity leave. If her earnings were below the flat rate level for SMP, that figure rises to £217.

The period after a birth is a particularly tough time for parents. The Money Advice Service estimates the average cost of essentials for a new baby as some £3,700 over their first year. Of course, just as costs rise, income falls because of maternity leave, and parents are time-poor as well. The £200 may not be much to some people but it is enough to buy a cot and bedding and 17 value packs of newborn nappies.

This amendment focuses on SMP for two reasons. First, I simply do not think we can allow this Bill to go through the House without noting all the impacts on mums of new babies that have happened since 2010. Just since 2010, the Government have done the following: abolished the health in pregnancy grant; abolished the Sure Start maternity grant for all but the first child; abolished the baby element of child tax credit; cancelled the planned toddler element of child tax credit; abolished the Government’s contribution to the Child Trust Fund; frozen child benefit for three years and removed it from higher rate taxpayers; cut the percentage of childcare costs parents can get back through working tax credit; and legislated to introduce hefty charges for using the CSA. Some of those cuts are very severe. House of Commons Library research shows that low-paid new mums are losing £1,300 during pregnancy and the baby’s first year just from cuts to maternity pay, pregnancy support and tax credits, and are losing more from child benefit.

The second reason for tabling this amendment is that during the Second Reading debate, I raised the issue of SMP. I did it specifically to try to find out how that fitted with the Chancellor’s claim that the reason this Bill is needed is to ensure the welfare state is fair to working people, not, you may recall, to those who lie in bed with their blinds down, sleeping off a life on benefit, while others go out to work. However, on the face of it, it is hard to see how targeting a payment made to someone who has just had a baby after being in continuous employment for the requisite period at a level which triggers national insurance contributions fits with that narrative. Indeed, I am sure that the Government have a good reason, and I hope it is better than simply saying, “It’s a choice”. However, given that we are in Committee and this amendment is about SMP only, I look forward to hearing the Minister share that reason with us. I beg to move.

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[Baroness Sherlock]

My Lords, I thank the Minister for her reply and my noble friend Lady Hollis for her telling interventions. I cannot help noticing that the Minister did not answer one of my two main charges. She began to answer the first charge, where I had listed a whole series of benefits and payments—specifically for mothers of children—that had been cut. I was grateful to her for at least recognising that offering up in her defence a benefit that the Government have decided to withdraw for second or subsequent children was at least slightly less effective than it might otherwise have been.

I am more concerned that she simply has not addressed my second charge at all. One reason why I put this amendment down was because of the words from the Chancellor of the Exchequer when he introduced the Autumn Statement, explaining specifically why this Bill was needed. I read them out at Second Reading but to remind noble Lords, he said that the Bill mattered because,

“we have to have a welfare system that is fair to the working people who pay for it”.—[Official Report, Commons, 5/12/2012; col. 877.]

According to the Guardian, he told the “Today” programme:

“It is unfair that people listening to this programme going out to work see the neighbour next door with their blinds down because they are on benefits”.

It is clear that the Bill was intended to penalise those out of work to be fair to working people. Why, then, is there included in the scope of the Bill a benefit that is payable only to women who have given up work to have a child or look after a child? The Government do not have an answer to that. I suspect that the noble Baroness would not have expressed it in those terms and therefore is not in a position to defend it.

Finally, in relation to the charge being thrown back at us, I was trying to avoid rehearsing the whole Second Reading, but we have made it very clear that we simply would not have made the choices that the Government have made. We would not have set out to give a tax cut to people earning £150,000 a year or more, which will be worth £100,000 to those who earn more than £1 million a year in order to be able to ensure that they benefited, and to cut benefits to the poorest families to do that. I fully accept and understand that she takes a different view. However, it is not reasonable to say that we have not explained where the money would come from. We have clearly made our case; these are not the choices that we would have made. I very much hope the Government will think again, specifically in relation to statutory maternity pay. In the light of those comments, I beg leave to withdraw the amendment.

Amendment 15 withdrawn.