Welfare Reform and Work Bill

Baroness Sherlock Excerpts

Wednesday 27th January 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I rise to speak to Amendment 40, in my name and that of my noble friend Lady Drake, and to support the other amendments in this group in the name of the right reverend Prelate the Bishop of Portsmouth, to which I have added my name. I thank him for introducing this group of amendments with what we are coming to see as characteristic clarity and compassion.

I shall say a word first about the two-child policy, which I regard as a regressive piece of social policy. In Committee, we found it hard to get Ministers to put up any kind of cogent argument for the policy as a whole, so why is it being done? Whatever one may hear behind the scenes, this is not about the small number of unemployed parents with lots of children. They would already have been caught by the benefit cap, which we now know would hit a couple with two children living in a modest house in Leeds or Plymouth. This is about a family with three children who are working but struggling anyway. It is about all those who had children confident that they could provide for them until, as the right reverend Prelate pointed out, something went wrong. Perhaps their spouse died, they got sick and could not work, a parent lost their job and so on. Those are all the things that the welfare state is meant to protect against. The nearest we got to a case was in the impact assessment, which states that it is about,

“ensuring those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work”.

So it is about choice, and my suggestion is that we should use that as a yardstick by which we test these amendments.

Let us take first disabled children. Parents may have felt that they could manage a third child, but then they find that the child is born, or becomes, severely disabled. The disabled child element of tax credits will still be paid, but it does not begin to cover the extra costs. The charity Contact a Family states that it costs three times as much to raise a disabled child as one who is not. It is also much harder for the parents of a disabled child to raise their income through working, because it is difficult to find suitable childcare and more expensive if you can. Did the parents really make a choice to be in that situation?

What about the situation, described so powerfully by the right reverend Prelate, where a family is happily married or settled and the very worst happens, in that one of the parents dies? He described clearly what would happen to that family. As well as the trauma, the finances are going to get worse, especially if the deceased parent had been the main earner. This is almost a classic example of a family that probably did not need benefits or tax credits before, but suddenly finds that it is catapulted into a position where it needs to rely on the welfare state. This is exactly the kind of thing that the welfare state is meant to protect families against. Where was the choice there?

The right reverend Prelate mentioned stepfamilies. Perhaps it is not so dramatic, but what if the relationship breaks up? If the children deserved support when they were living apart, why do they stop deserving it because they are living in the same house?

Then there are the people who literally did not make a choice at all—cases of domestic abuse. Sadly, a child may have been conceived under duress rather than as a clear choice. Abuse can include the refusal to allow a woman to use contraception. It can include pregnancy as the result of rape, which may never have been reported to the authorities because of fear of the partner. Moreover, the fear must be there that the two-child limit will make it harder for a parent to leave an abusive relationship. Too often, they end up fleeing in the clothes they are standing up in. They are homeless and they have to hide from the former spouse, which means moving to a new area, away from jobs, schools and families. It is tough enough anyway to rebuild a life without added financial pressures.

On the subject of rape more generally, I hope that the Minister is now able to explain how the proposed exemption for women who have been raped will work. I hope that he can address the questions I asked in Committee. Will the exemption apply only when a woman has made a complaint to the police, or when someone has been charged or convicted? If not, will she have to give evidence to the DWP, to whom and what kind of evidence, and can the Minister assure us that this process will remain confidential?

We come now to the subject of my Amendment 40, which would exempt children who enter a household as the result of adoption, kinship care or private fostering. I hope very much that the Minister can accept this amendment, as the arguments are completely compelling. Children raised by kinship carers are typically unable to live with their parents because of parental abuse or neglect, perhaps due to alcohol or drug problems, or because the parents are in prison or indeed have died. A grandparent, and sometimes an aunt or a sibling, will then step in and take the children in, often in a case of emergency. There is clear evidence that children in kinship care settings do better than those in unrelated care, even though they have often had similarly adverse experiences in early life.

But kinship carers pay a huge price for their kindness. They face significant additional costs when their family size increases, and sometimes it can double in size overnight. A Family Rights Group survey found that almost half of kinship carers had to give up work permanently to take on the children, thus pushing them into reliance on benefits. The state should not be putting financial barriers in the way of families willing to take on often vulnerable children. It also makes no financial sense. The average child tax credit claimed by families with three or more children is £3,670 a year; it costs £40,000 a year to keep one child in foster care.

A similar argument applies to adoption, particularly of sibling groups. It is the Government’s policy, and I welcome it, to increase the number of children being placed for adoption and to remove any unnecessary barriers to the speed of the process, but this measure will directly undermine that policy objective. Adoptive parents often already have a child or children, so there is a clear disincentive to adopt if it would mean that they would not get payments for each child, and a particular disincentive to adopt sibling groups. There is already a shortage of parents who are willing to take on sibling groups, and this will only make that situation worse. If it delays adoptions, that becomes a vicious cycle. Children grow older and it is harder to place them, and therefore it is even less likely that they will be adopted at all. The only alternative is to break up sibling groups, which damages the children because that is often the only remaining bond they have. I hope that the Minister will consider this carefully.

If we judge the Government by their own yardstick, have they passed or have they failed? Have the families we have described today, who are covered in the amendments tabled by the right reverend Prelate and myself, been reckless in having children or taking on additional children without understanding the consequences? I do not think they have. Even if we accept the premise behind the two-child policy—and I confess that I do not—the Government’s own rationale simply does not work. These amendments make absolute sense both financially and in terms of the Government’s policies, and above all they are right for the people affected.

[Baroness Manzoor (LD)]

My Lords, we on these Benches have added our name to Amendments 36 to 38. We also support Amendment 40. The amendment is similar to the one that we put down in Committee when it was debated at great length. Noble Lords will be pleased to know that I do not intend to rehearse that contribution again today. Excellent reasons have already been given by the right reverend Prelate the Bishop of Portsmouth and the noble Baroness, Lady Sherlock, as to why exceptions should be made to the two-child limit on receipt of tax credits and the child element of universal credit.

I want to pose a few questions. For those who did not sit through Committee stage, I will read out the exemptions we seek. Under Amendment 38, we seek an exemption if,

“the claimant responsible for children in the household is a single claimant as a result of being bereaved of their partner”—

I ask the Government, where is the choice in that?—

“the claimant has fled their previous partner as a result of domestic abuse”—

where is the choice in that?—

“the child or qualifying young person has a disability”—

where is the choice in that?—

“the child or qualifying young person is in the household as a result of a kinship care arrangement, private fostering arrangement, or adoption”—

where is the choice in that?—

“or … the claimant was previously entitled to an award for the child or qualifying young person and has re-partnered creating a household with more than two children”.

Of course, there is a little bit of choice in that. It is love, which we can believe in or not, but sometimes we do not choose who we want to partner.

Effectively, these circumstances are beyond the control of the claimants. This amendment attempts to demonstrate that the first responsibility is to the child. It must be so, otherwise what kind of society are we really creating? I was, and I remain, particularly concerned that, despite the Government’s laudable commitment to exclude women who have had a child as a result of rape from the two-child limit policy, the Minister did not explain to my satisfaction how this exemption would operate. I will not go into that debate again. It is such a sensitive area. Perhaps he will explain today. Should this amendment be voted on, we on these Benches will wholeheartedly support it.

--- Later in debate ---

[Baroness Sherlock]

My Lords, Amendment 46A, in my name and that of my noble friend Lady Hollis, would require the Government to produce and lay before Parliament a report assessing the impact on work incentives of the Universal Credit (Work Allowance) Amendment Regulations 2015, which passed through Parliament last year. In particular it would require the Government to analyse data on income and hours worked by household type, and the impact of the regulations on the levels of awards of in-work support payable to claimants who have moved, or will move before 2018, from tax credits to universal credit as a result of changed circumstances.

I shall address the matter of substance first and then move on to the politics of the matter. I raised these matters in Committee to get the Minister to tell the House what would happen to people who were moving across from tax credits to universal credit. The answers were deeply worrying. It is now clear that two big and distinct problems are emerging in relation to universal credit. First, the incentives to enter and progress in work have been severely damaged by a succession of changes made by the Government. As the director of the Resolution Foundation observed, universal credit was set to be £2.3 billion more expensive than the six benefits it replaced. Indeed, versions of the policy early in the last Parliament were even more expensive than that. No wonder the Treasury was nervous about a fast rollout—not, I suspect, the chief concern facing it at the moment. But after repeated chipping away, it seems that universal credit will now actually save the Treasury money—more than £2 billion a year once it is fully in place. Of course, if it saves the Treasury money, it costs claimants money, so universal credit is no longer going to do the job it was meant to.

The final straw was the reduction in the work allowances that went through Parliament last autumn. After weeks of pressure from all quarters and being asked to think again by this House through the Motion of my noble friend Lady Hollis, the Chancellor announced that he was scrapping the equivalent planned cuts to tax credits. I unreservedly welcomed that change. However, the Government decided to press ahead with comparable changes to universal credit. These various changes have done serious damage to work incentives, and, furthermore, the way that universal credit is now structured means that there is a significant problem with lack of work incentives for second earners and the position of self-employed people is a major problem.

Then we have the second problem: transitional protection. Iain Duncan Smith declared on “The Andrew Marr Show” in the wake of the tax credits change that no one would lose a penny from universal credit cuts. That is by no means clearly so. We know that if you take two working families with children in identical circumstances, but one on tax credits and the other on UC, the one on UC could be almost £3,000 a year worse off. How can nobody be a penny worse off? It depends on the transitional arrangements. Evidence given to Members of another place by the department suggests that there are two ways that people could end up moving from tax credits to UC. The first is “managed migration”, as the jargon has it. These are people who are moved over en bloc by the department, but that will not happen until 2018. They will get transitional protection.

The second way is by what is slightly oddly called “natural migration”. This happens when someone who is getting tax credits has a change in circumstances and is forced by the department to move across to universal credit. We now know that this can happen through all kinds of changes, some of which were alluded to by the noble Baroness, Lady Manzoor: if someone loses their job; has a baby or adopts a child; if a lone parents gets remarried or repartnered; if a couple splits up; if someone becomes a carer or ceases to be a carer; or even, slightly oddly, if a lone parent’s child reaches the age of five.

As I understand it, in all of those circumstances and indeed in more, a tax credit recipient will be forced on to universal credit and overnight could see their entitlement fall by up to £3,000 a year. Can the Minister confirm that that is the case? Further, can he tell the House whether any transitional protection will be forthcoming for the group of people in the category called “natural migration”? How many people does his department anticipate will be in that position during the first year of the new work allowance regime? We have a problem of transition and a problem of seriously damaged work incentives. Above all, there is an unacceptable lack of clarity about the impact on low-income working families.

I should probably have declared an interest as I was an adviser to Gordon Brown as Chancellor of the Exchequer when tax credits were invented. He hired me away from the single-parent charity where I was toiling to support him in trying to work out what to do about the fact that we had the second-highest child poverty rate in the developed world. Child poverty had trebled under the previous Tory Government. We also had significant problems around lone parents not working. I worked with Gordon Brown to work out how the Government should tackle what was then a very low rate of single-parent employment. Tax credits made a massive difference. They helped to lift millions of British children out of poverty and led to the most dramatic rise I know of in the proportion of single parents in work. To see this Government damage work incentives that were so hard won breaks my heart.

I fully accept that the noble Baroness, Lady Manzoor, truly cares about the plight of working families, but I do not think that those families are helped by leading them to believe that this House can do things for them that it cannot do. It is clear to me, and I am sure it is really clear to Liberal Democrat Peers—I understand that we have to go with the politics of the age—that there is a distinction between opposing something and feeling that this House should vote it down. I oppose this entire Bill, but I did not vote against it at Second Reading because as a revising Chamber it is not our place to do so. As I say, we are a revising Chamber, and, if that is the case, we should do our job properly.

Rather than using primary legislation retrospectively to repeal regulations which have only recently passed through both Houses of Parliament, and are not even regulations flowing from this Bill, let us focus instead on taking appropriate action to hold the Executive to account. Let us not let the Government off the hook by playing politics with this issue. Let us not pretend that we all take the same view on tactics, but that does not mean we have different views on substance.

I understand that during the tax credits debate, the noble Baroness, Lady Manzoor, wanted to run a fatal Motion against all the conventions of the House. We did not back that; we backed my noble friend Lady Hollis in running a delay Motion which had exactly the right result but in an appropriate constitutional manner. That is the position we are in today. The Chancellor’s cuts are going to do significant damage to working families in Britain. Those people and this House have a right to know what that damage is. That is what we are pushing for today and that is what we on these Benches will be voting for.

--- Later in debate ---

Moved by

[Baroness Sherlock]

46A: After Clause 15, insert the following new Clause—
“Universal Credit (Work Allowance) (No. 2)
(1) Within one year of the coming into effect of the Universal Credit (Work Allowance) Amendment Regulations 2015, the Secretary of State shall publish, and lay before each House of Parliament, a report assessing the impact of those Regulations on work incentives.
(2) The report prepared under subsection (1) must contain data analysis of—
(a) income and hours worked, by household type, and(b) the impact of the regulations on the levels of awards of in-work support payable to claimants who have moved from tax credits to universal credit as a result of a change of circumstances, or claimants who will move from tax credits to universal credit as a result of a change of circumstances before 2018.”

[Baroness Sherlock]

My Lords, I thank the Minister for his commitment to evaluation, but I regret that it is not enough. I therefore wish to test the opinion of the House.