Social Security (Disability Living Allowance, Attendance Allowance and Carer’s Allowance) (Amendment) Regulations 2013

Baroness Sherlock Excerpts

Monday 24th June 2013 Lords Chamber

[Baroness Masham of Ilton]

My Lords, I thank my noble friend Lord Alton of Liverpool for tabling this regret Motion. He has spoken so clearly and fully on the worrying situation that the Regulations 2013 may result in the loss of mobility for many disabled people.

The mobility scheme has been a great assistance to many disabled people who would not have otherwise been able to afford a car or an electric wheelchair. This scheme is headed by Her Majesty the Queen. It has given mobility and independence to many people. Can the Minister tell me whether it is really a possibility that many people will lose their cars and the ability to run them?

I would add a few words about the vital need for a car if one lives in a rural area, as I do—even more so if one is disabled. A car enables a disabled person independence to take part in everyday life, getting to a job if they can work, taking children to school, shopping, going to the doctor, and just getting around. Making people mobile is so important. There is very limited public transport, if any, in some rural areas. I cannot understand that the Government are going backwards in penalising disabled people.

Before the mobility scheme existed there were small three-wheeler cars which were maintained by the Government. They were not ideal as a disabled person could not take a passenger, but they were better than nothing. I cannot think the Government could be so cruel to take mobility away from people whose lives are changed when they have it and are isolated if they do not.

[Baroness Sherlock]

My Lords, I should begin by acknowledging all the work done by the noble Lord, Lord Alton, in bringing to the attention of the House, not just today but repeatedly, the concerns of people who are in receipt of mobility payments and who are worried about the effect of these changes and the way they are being implemented.

This debate this evening has made very clear just how important Motability cars and other mobility schemes are to so many disabled people. I was very moved by the account just given by the noble Baroness, Lady Masham, who explained so well the consequences for so many people; of how important it has been to have access to these cars and the fears that would accompany their departure.

The scheme, as Motability itself puts it, gives disabled people,

“the freedom to get to work or college, meet up with friends, enjoy a day trip out with their families, attend a medical appointment, or go shopping; to enjoy the independence that so many of us take for granted.”.

Yes, quite so. One of the things that we have struggled to get to tonight is the game of numbers—a point made by the noble Lord, Lord Alton, the noble Baroness, Lady Thomas, my noble friend Lady Hollis and others. It has proved very difficult to get a clear picture of just how many people will be affected by these changes since the Government have so far been unable to give us precise figures for those who might lose their cars or adapted vehicles. My noble friend Lady Hollis offered up 180,000. In the absence of anything from the Government, I suggest we all adopt that figure tonight. If the Minister will not accept that, please could he give us his own figure?

In past debates, the Minister has contended that because the decision to lease a vehicle is an individual one and the contract between the individual and Motability is a private one, it is not a matter for the Government. In response to that, first, the noble and learned Lord, Lord Hardie, made the very interesting point that if direct payments are made, the Government must know that information. Even if they do not, irrespective of the fact that a number of people will choose no longer to lease a vehicle, a number will automatically lose theirs simply by virtue of the fact that they will no longer be entitled to the enhanced rate when they transfer to PIP. The Government surely must have at least an estimate of what those numbers will be. Could they please share those numbers with us? Could the Minister tell us his best estimate tonight?

Secondly, if the Government intend to press ahead in the way they have announced, those affected will clearly need to make plans about how to manage the effects of the changes. What are the Government doing to publicise the changes and inform people who will be affected? The noble Lord, Lord Alton, and my noble friend Lady Hollis asked what transitional arrangements would be put in place for people losing their cars. The Government have told the House previously that they were in discussions with Motability but could not then give further detail. The noble Lord, Lord Freud, has said previously that he had sympathy with the concerns of the noble Lord, Lord Alton, and he was keen to find a way of supporting people during the transitional period. In the debate on 13 February, the noble Lord, Lord Freud, said in response to my noble friend Lord McKenzie of Luton:

“We are actively exploring what extra support we can give to disabled people to ensure that they can still get to work. We are looking at whether we can use access to work as that particular vehicle. We want to ensure that mobility support remains in place during any transition between the Motability scheme and access to work”.—[Official Report, 13/2/13; col. 740.]

What is the position on Access to Work, an issue also raised by my noble friend Lady Wilkins? Will it be possible to use Access to Work for this? What will happen with transitions? Will the sums of money available be enough to deal with the kinds of things described by my noble friend? Where have the Minister’s conversations got to? Also, where have his discussions with Motability reached? Will he provide more information as to what transitional measures might be put in place? In particular, what opportunities will be given to claimants to either buy or continue to lease adapted vehicles, and at what price? Will he clarify the position of in-patients in hospitals? That point was raised by the noble and learned Lord, Lord Hardie, the noble Baroness, Lady Thomas, and others.

This would also be a good time for the Minister to give the House some more information about the new consultation on PIP criteria and how that will link in with the inception of this new scheme—a point made by many noble Lords, understandably. It might help if the House understood more of the Government’s thinking on questions such as the 20/50 rule and the issues on which other campaigners have been pushing the Government to consult. How will this affect people in receipt of the higher rate of DLA who use Motability cars? What advice would he give them at this stage, looking ahead and trying to plan?

There is then the question of geography, raised by the noble Lord, Lord Wigley, and that of people in rural areas, raised by my noble friend Lady Hollis and the noble Baroness, Lady Masham. Have the Government done any assessment of the variable impact around the country? Can we even have a sense of impact by region, or the difference between urban and rural impact? I am sure that the Government would not have made a change on this scale without having considered that. Will the Minister share that with us?

Finally, at the risk of running slightly wide of the Motion, has the Minister given any thought to the context in which these changes are taking place? We know that support for disabled people wanting to move into work has been in trouble. The Work Programme is struggling generally and is clearly failing to help disabled people into work. The latest report from the Employment Related Services Association suggests that the numbers of people on ESA getting a job start as a result of referral to the Work Programme are terribly low: just 6% of referrals in the ESA flow payment group had a job start, 5% of those in the ESA volunteers group, and just 2% of referrals in the ESA ex-IB group. Given that, will the Minister take this opportunity to give the House some reassurance that the Government are concentrating in a cohesive and integrated way on the kind of support needed to help disabled people into work and to support them when they are there?

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, I have some difficulty in framing this answer because the debate was very wide but the regulations we are discussing are actually extremely narrow. What we are actually discussing is bringing the treatment of patients in hospital into line between those who receive Motability and those who stop receiving it after a certain period. There was an exemption for the Motability element and we are just bringing the two into line. I acknowledge that there has been a very wide debate on the whole area but we are talking about something that is actually much narrower. I hope noble Lords will understand as I try to juggle the two. I will try to deal with some of the wider issues but I will deal with the actual issue first.

I will set a little bit of context by saying that even in these hard economic times this Government continue to spend around £50 billion a year on disabled people and services to enable those who face the greatest barriers to participate fully in society. That figure compares well internationally. We spend almost double the OECD average as a percentage of GDP—2.4% against the OECD average of 1.3%. Only two out of the 34 OECD countries spend more. Through the reforms of DLA and the introduction of PIP, we will make sure that the billions we spend provide more targeted support to those who need it most. Three million people will continue to get DLA or PIP and half a million will actually get more under the new system.

While I am on figures, to answer the question from the noble Lord, Lord Alton, about the money flow to Motability, £1.6 billion went through to it in terms of transfer of benefit. My noble friend Lady Thomas asked what happens to the transfer. Clearly we recognise that some people will lose out but we have sought to ensure that those who lose out are those whose disabilities have the least impact on their participation in society. On our sampling of this, many people—more than half a million—will be winners under PIP.

The UK has a proud history in furthering the rights of disabled people and we want to ensure that all people are treated fairly. The provisions under debate, which also apply to claimants of PIP, are a case in hand. They ensure that everyone receiving the mobility component of DLA or PIP in the future will be subject to the same payment rules, whether or not they have a Motability vehicle. The history of this was that when the mobility component of DLA stopped being paid to hospital in-patients in 1996, transitional provisions were built in, including a measure which allowed for payments to continue in order to cover the costs of the lease on a Motability vehicle. These arrangements represented a reasonable adjustment at the time for those in-patients who were committed to a mobility contract when the rules changed. However, noble Lords must understand that any lease held by someone in 1996 will have now long expired and these arrangements are past their sell-by date for the users affected at the time.

In response to the question from the noble and learned Lord, Lord Hardie, about consultation, we clearly signalled our intention to implement this change in our consultation on the detailed design of our reforms to DLA. In that consultation we made clear that this change was not intended to penalise Motability users but to introduce fairness between how we treat those who chose to take out a lease with Motability—some 600,000 people—and the vast, or substantial, majority who do not, which is 1.1 million people.

Unemployment: Young People

Baroness Sherlock Excerpts

Thursday 20th June 2013 Lords Chamber

[Lord Freud]

My Lords, one of the recommendations of the Wolf report, which, as noble Lord’s will remember, I am very enthusiastic about, is to underpin the importance of apprenticeships and vocational training. In the latest year for which I have a record, 2011-12, we had more than half a million apprenticeships—520,000. That is up 86% on the two years before. Clearly this is one of the most important ways in which to get youth back into the workforce in a sustainable way, and it is something that we are pursuing aggressively.

[Baroness Sherlock]

My Lords, the Minister might not realise that one consequence of our very, very slow growth is that 1 million young people are out of work. In the north-east, where I live, a quarter of young people are out of work. We now need something really radical. May I make a suggestion? Labour’s job guarantee would mean that any young person out of work for a year would be guaranteed a job and would have to take it. Will he match that?

[Lord Freud]

My Lords, we have a huge number of programmes in our youth contract to encourage people into work. One thing I need to emphasise is that we have a long-term problem of disengaged youth, which we had right through the longest boom we have ever had. The real measure here is people not in education or work. In 2001, that figure stood at just shy of 1 million and it rose through the boom period. Since the election, we have pulled it down by 60,000. The figure currently is 1.3 million. It is a real problem that cannot be brought down with short-term programmes; it is brought down by fundamentally restructuring how youngsters are supported—through vocational education as a key underpinning to get these kids into meaningful long-term work.

Child Support and Claims and Payments (Miscellaneous Amendments and Change to the Minimum Amount of Liability) Regulations 2013

Baroness Sherlock Excerpts

Wednesday 12th June 2013 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, this instrument was laid in draft before the House on 20 May 2013, and I confirm to the House that I consider it as being compatible with the European Convention on Human Rights.

The minimum amount of liability, more commonly known as the flat rate, is applied to non-resident parents whose gross weekly income is more than the flat rate itself and less than £100 per week. It also applies to all non-resident parents who are in receipt of certain prescribed benefits. The flat rate was set at £5 in 2003 and has not been uprated since. The Child Maintenance and Other Payments Act 2008 made provision for increasing the flat rate of child support for cases dealt with under the rules of any scheme established under the terms of the Act. The change has yet to be brought into force.

The increase provided for in the 2008 Act was from £5 to £7. However, because the 2012 scheme launched as a relatively small-scale pathfinder when it began on 10 December 2012, technical changes were applied to the 2012 scheme calculation regulations to ensure that the flat rate remained at £5. The flat rate for the 2012 scheme will remain at £5 for the duration of the pathfinder and will increase only once the 2003 scheme closes to new applicants. This is to ensure that all new cases will be subject to the same flat rate, regardless of whether they are directed to the 2012 scheme pathfinder or the 2003 scheme.

It is intended that the increase to the flat rate made by the 2008 Act will be brought into force later in the year, when the 2012 child maintenance scheme is opened to all applicants. This instrument makes certain consequential amendments as a result of that increase. The policy intention behind the increase is primarily that the value of the flat rate should be restored to its 2003 real value. This will reinforce the principle that parents have an obligation to support their children where they have the means to do so.

At £7, the increased flat rate will represent broadly the same value as the £5 flat rate when it began. For example, when the flat rate was introduced in 2003, £5 represented 9% of the benefit of a single person over 25 years of age on jobseeker’s allowance. The annual uprating of benefits has meant that the same £5 represents just 7% of the benefit of a single person over 25 years of age on jobseeker’s allowance. A flat rate of £7 represents 10% of the benefit of a single person over 25 years of age on jobseeker’s allowance, restoring the value of the 2003 flat rate.

The proposed flat-rate increase will also amend the percentages applied to the reduced rate of child support maintenance payable if the non-resident parent has an income of less than £200 but more than £100. This will mean that the maintenance liability of parents on the reduced rate will increase in order that the reduced rate continues to smooth increases in liabilities between the flat rate and the basic rate, which is used for those parents earning £200 or more. The Government are also committed to a wider review of the child maintenance calculation formula, with a particular focus on work incentives, once we have delivered the current raft of reforms.

The regulations before us also make miscellaneous amendments in relation to variations, which are those rules that allow for a deviation from the usual child maintenance calculation rules in certain limited circumstances. A variation could increase or decrease a child maintenance liability. For example, if a parent receives unearned income from property, savings and investments or casual earnings, this could increase their liability. On the other hand, if they incur special expenses, such as the cost of travelling to see a child, or boarding school fees, this could reduce their liability. I should make it clear that the changes contained in these regulations affect only those variations that increase liability.

The 2012 scheme is designed to work with historic income information obtained annually from HM Revenue and Customs. The changes proposed will allow that, where the information cannot be obtained electronically from HMRC, we will be able to determine unearned income by reference to information supplied by the parent in relation to the most recent tax year. This change will make for a more efficient means of obtaining reliable unearned income information and therefore allow for a more accurate calculation of maintenance liability.

In addition, the amendments will clarify that where a variation would decrease a non-resident parent’s income for child maintenance purposes to the point that their liability would fall to below the flat rate, even if the variation is agreed, the amount of maintenance that the parent will be liable for will none the less remain at the flat rate. This is in order to strike a balance between reducing liability to take account of special expenses and ensuring that children continue to benefit from some financial support. It puts children first. This will also ensure consistency between a non-resident parent who has their maintenance reduced to the level of the flat rate through a variation and a non-resident parent on the flat rate. A non-resident parent in the latter situation cannot apply for a special expenses variation.

As has always been the practice throughout the development of the 2012 scheme regulations, we have undertaken extensive stakeholder engagement. The proposed increase to the flat rate was subject to a formal consultation in 2011, and stakeholders made it clear that they believe that an increase in the flat rate to £7 is warranted. We have met stakeholder groups since that consultation, and on careful reflection we are persuaded by their arguments and have decided that the flat rate should increase to £7. We will closely monitor the regulations, along with other child maintenance policy changes, to ensure that all the activities in the new 2012 scheme are delivering the intended outcomes.

I hope that that short opening speech reassures the Committee that the changes we have proposed are sensible ones that have been developed with the aim of delivering an efficient statutory child maintenance system. These changes will ensure an appropriate increase in the amount of maintenance flowing to children. They will also make for a more efficient and accurate variations regime. I commend the instrument to the Committee.

[Baroness Sherlock]

My Lords, I thank the Minister for his introduction of these regulations. We could hardly oppose provisions enabling the increase in the flat-rate maintenance amount from £5 to £7, as they flow from the 2008 Act, which was the legislation of the previous Government. The Government were right to listen to stakeholders and to draw back from their original intent of increasing that to £10. As the Minister has indicated, the £7 figure will keep the amount at about 10% of the basic over-25s JSA rate, and the increase should therefore mean more money for children.

I understand from both the documentation and the Minister’s introduction that the regulations are not intended to come into force until the introduction of the 2012 scheme, so the utilisation of gross income in the calculation is used “for all purposes”. Perhaps the Minister could clarify that; otherwise I will have to read the record to see when exactly this is going to come into force. Is it intended to refer to the time when the 2012 scheme is open to all new applicants or the time when the 2012 scheme will have replaced the 1993 and 2003 schemes? If the latter, could he clarify now when the Government expect that to take place?

We have also heard that the regulations cover other “consequential” matters. As the Minister indicated, one of these is the revised rate calculation that applies where the non-resident parent has income of between £100 and £200. The rates in the regulations are lower than those provided for in the 2012 regulations, and perhaps the Minister could explain why. I imagine that it relates to the effect of raising the flat rate but it would be helpful if he could confirm that, as well as setting out the impact on the levels of child maintenance liability for non-resident parents earning between £100 and £200. I would be grateful if he could give some indication of the range of changes—what is the smallest and largest amount by which the future liability will differ from the past? That would give us an indication of whether they are indeed large or small in their impact. I would also be grateful if the Minister could confirm what would happen to someone earning precisely £200. Is there any danger of a cliff-edge when someone moves from below £200, where the reduced rate applies, to £200 where the standard rate will apply?

Mesothelioma Bill [HL]

Baroness Sherlock Excerpts

Monday 10th June 2013 Grand Committee

[Baroness Sherlock]

My Lords, I thank the noble Lord for taking the trouble to look into that and for the gracious way in which he has acknowledged his error. Of course I am happy to forgive him for this and for any similar offences. However, can he reflect for a moment on the consequences of the change? Although I confess to a tendency to pedantry, on that occasion I do not think I was simply being pedantic. I was trying to draw a distinction between whether the matter was a liability for which the insurance company would wish to reserve or a running cost for which it would have to plan, because I understood that the Minister had used the fact that an insurance company would not be permitted to reserve before a certain date as an argument for why the scheme could not start before 25 July. Had that been the case, I would imagine that no such restraint would exist in the case of planning for a payment. An insurance company can plan for a future level of running costs based on its own judgment, not on any auditing limitations. Will the Minister respond to that?

[Lord Freud]

In the interests of time, the best thing I can do today is to accept the fantastic offer of future forgiveness for anything I may say, and in return I promise to reflect on the consequences of the change.

Let me move on to all the other points that have been made. I promised to write to the noble Baroness, Lady Golding, about the Prison Service’s work, to the noble Lord, Lord Browne, on Clause 2, and to the noble Lord, Lord McKenzie, on three counts. A letter is now being sent to Peers and a copy has been placed in the Library. Judging from some side conversations that I have overheard, I am sure there will be further discussion on one or two of those matters. Having dealt with those issues, let me turn to the subject under discussion as set out in Amendment 16.

I understand noble Lords’ wish to ensure that if we are to express payment amounts in relation to civil damages, the data we hold on average civil damages in mesothelioma cases should be current. However, I must reject the proposal to require a yearly review on the grounds that it would not be fruitful due to the volume of mesothelioma cases. Reviewing civil cases on a yearly basis would be too frequent to show any trends or changes in the awards. Indeed, the data that we hold on the initial trawl for the period 2007 to 2012 show this. In this case, it takes a bit longer for meaningful trends to appear.

It should also be said that gathering the data is pretty costly, and in the interests of value for money we need to make sure that they are gathered at intervals that allow us to identify change. One year is too short a period for this, so a review of the data every five years is more appropriate. If we were to accept the amendment, costs would be incurred from gathering data on an annual basis, and further costs would be involved through the requirement for these reviews to be carried out by an independent body. As part of the monitoring planned, civil compensation amounts in mesothelioma cases will be reviewed, but there is no need for a separate body or for annual reports. Furthermore, I can give my assurance that this area will not go ignored.

I also offer the reassurance that we shall not just assign a fixed tariff to this and then ignore it. Far from it. Along with the monitoring of data from civil cases that I have just mentioned, I can confirm for the noble Lord, Lord McKenzie, that we intend to uprate the tariff on an annual basis in line with the consumer prices index. The noble Lord went on to put a vast number of specific questions to me, and we shall touch on quite a few of them later. However, perhaps I may pick up the point about legal fees, although we will deal with them in due course. A figure of £7,000 was mentioned, and more recently £2,000 was mentioned. In practice, it will probably come in at something in between, but we will deal with fees in the fullness of time.

A set of questions was based on what will happen if we collect more or less than we expected. The DWP will underwrite any under levy after the first four years through smoothing. Any over levy will be paid to the Consolidated Fund, as required by HMT.

Clearly, we will be setting a figure initially, then reviewing it. That is our best guess of the right kind of figure that we will be using. We moved the 76% figure to 70% on the basis of what the likely amount was that would minimise the risk of those costs being passed to British industry. This became clearer during the process of negotiation. Rather than go into the specifics about the 2.61% being consistent with the 2.24%, I will add that to a letter.

I hope with the commitments that I have made on how we are planning to set this levy, I reassure both the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, on this matter, and I urge them not to press their amendment.

Mesothelioma Bill [HL]

Baroness Sherlock Excerpts

Wednesday 5th June 2013 Grand Committee

[Baroness Sherlock]

My Lords, I shall speak to Amendments 11 and 14 in my name and that of my noble friend Lord McKenzie of Luton, and to the other amendment in this group. Since we are in Grand Committee, I think that we may take all these amendments that have the same purpose to probe whether—and, if so, to what extent and why—it is reasonable to limit access to the scheme from the date of diagnosis.

I had intended to spend a bit of time trying to understand what the first point of diagnosis meant but, just before we came in, I glanced at the draft scheme rules and realise that this question is covered there in some detail. Where will we have the opportunity to discuss that in more detail? I would be happy to return to it at that point.

On the main issue underpinning these amendments, I, too, have had representations from those supporting people with mesothelioma concerned about their exclusion or potential exclusion from the scope of the scheme. Imposing a limitation to people diagnosed on or after 25 July 2012, which of course is more than two years after the close of the consultation, means that, as my noble friend Lord McKenzie noted at Second Reading, probably some 600 people will have died from mesothelioma during that time. As those representations have said, it seems very unfair that they should be excluded from the scheme. This is a point very well made by the noble Lord, Lord Alton, and others: the date of consultation would be a natural point. It falls to the Minister to persuade the Committee and then the House of any other date, which so far I do not think we have had.

The Minister said at Second Reading that the reason for not keeping the scheme totally open-ended is that the costs would be prohibitive. The reason for picking the particular date of 25 July, we learnt from a subsequent briefing, was that that was the point at which there would be a reasonable expectation that sufferers could get a payment and therefore relevant insurance companies could provide in their accounts for the liability that would ensue.

I wonder if the Minister could help me to understand this a bit more. What is the regulatory or legal framework under which insurers either may or may not provide for a liability at a particular date? I would also be grateful if he could explain whether he actually means reserving for a liability. If so, how is this a liability? Unlike for people who claim under the courts in the normal way, for which there clearly is a liability for which an insurer will provide in the normal way, based on the premiums and the exposure that they have had for business written, is the payment that will be made in the levy not simply in fact an annual payment rather than a liability? If so, how is it in any way covered by rules on provisioning or reserving in the accounts? I would be grateful if the Minister could explain that to me. If not, maybe he could explain where it comes from.

Whether or not the industry has to reserve, it clearly would have to plan to face a change in its cost base as a result of any decision taken at the end of the Bill, so it is worth revisiting how we got here. The noble Lord, Lord Alton, has made reference to the Accessing Compensation document issued in February 2010. He quoted the most apposite point, where the Government of the day, in the person of my noble friend Lord McKenzie, made clear that their intention was to take some action in this area. In terms of funding for the ELIB to which he referred, though, the document was brief. It said:

“One option would be for the insurance industry to provide the funding. The argument for this is that the industry has, in most cases, taken the premiums for policies that are now not being traced. The industry should therefore fund the full costs of an ELIB, including the set up and running costs”.

Well put. No other funding source, at least that I have found, was proposed in that document. In other words, if I am right, there was no option two. An impact assessment produced with that document showed that there was an assumption of an implementation date of April 2011. The document also looked at the scope of the fund and therefore the potential scale of the cost that insurers could reasonably expect to have to face, having read that document.

The impact assessment assessed costs along two axes: whether or not to include all relevant diseases or just mesothelioma, and whether simply to take people from the start of the scheme or all claims brought in the past three years. It is clear that, whether or not the extent of the liability was certain, the Government’s intention was clear at the point of going out to consultation. Furthermore, the proposals in the Bill are very much at the modest end of the spectrum of options explored within that consultation document, so it does not seem unreasonable that the insurers might well have foreseen the liability, or the cost, that they are now going to face.

Given the speeches today from my noble friend Lord Howarth of Newport, who made a very persuasive case, as did the noble Lord, Lord Alton, and the questions from the noble Baroness, Lady Masham, and my noble friend Lord Wills, not to mention the widespread concern about this point right across the House at Second Reading, if the noble Lord wishes to persuade the Committee and ultimately the House that he is to have a cut-off date for people coming in, I think that he has his work cut out to make that anything later than 10 February.

Perhaps the Minister can try to clear up a few other questions for me. First, in letting us know the source of this constraint or requirement to reserve or not reserve, can he explain how that affects the date at which an insurer could reserve and, if so, whose decision is it? Secondly, do the Government have any evidence that insurers have in fact been reserving since July 2012, the point at which the Minister is confident they were clear as to the liabilities? Finally, if the Minister is not willing to share legal advice—and I may yet be surprised on that front—can he tell us if the Government have a concern that they could be exposed to legal action were they to impose a requirement other than a July 2012 date? That would be helpful.

I remain pleased that the Government are acting on this matter and I appreciate the Minister’s commitment to it. However, as my noble friend Lord Howarth of Newport said clearly, that does not take away our responsibility in this House to ensure that the legislation is the best it possibly can be.

[Lord James of Blackheath]

Perhaps the Minister will allow me to make one last entry into this debate. I believe that I can answer part of the question asked by the noble Baroness, Lady Sherlock. I am probably the only person in this Room who has ever made a financial provision for asbestosis. I did so on the last day of December in 1998 when I signed off the creation of Equitas; £12.8 billion of assets were locked in an investment fund put together by Warburg’s, with the countersignature of the Bank of England on it, so it was pretty good. The £12.8 billion has been sitting there and can be used only for each category of settlement of claim. One category is labelled asbestosis. I left £6 billion in there, but it is £6 billion with an annual growth rate of 6%.

When Equitas was sold for a knock-down price to Warren Buffett’s Berkshire Hathaway in 2009—I hasten to add, not with my approval—he took over all the asset reserves that were left. So even after Equitas had traded for 13 years, he got a residual balance of £8 billion of my original £12.8 billion—still growing at 6% per annum. My calculation at that time was that he was left with £5 billion for asbestosis. But the £5 billion effectively included a great deal of unidentified claims, because it was largely rolling up the reinsurance claims around the world. It is very incestuous, this claiming business: everybody insures each other and they come up with these collective figures.

At the moment, my estimate is that the global reserves for asbestosis of all the insurance companies in the world are £65 billion, including all the reinsurance markets around the world as well. But they do not expect that that £65 billion will be paid out. Let us suppose that you settled Turner & Newall for £1 billion—you will not, but let us suppose you did. You would take £1 billion out of the Lloyd’s of London reserve of £5 billion and you would have £4 billion left. But immediately you would have wiped out the consequential reinsurance demands down the chain, so the whole industry would write back as profit something in the region of £15 billion to £20 billion of released reserves.

We have a huge potential gift to the insurance industry here and we must not give it away too cheaply. We can screw this insurance industry into paying what it long since has deserved to pay. Why has it not settled so far? Right through the six years of the collapse and rescue of Lloyd’s of London, the great myth was that there was a massive amount of claims arising in the USA that we had insured and that those claims were largely spurious because they had used television advertising to get people to join up. You did not have to have any illness or even to have been in an asbestos building; you were just told, “Sign up, join in, it is a free lottery ticket”—that was the advertising in America.

We were expecting, having worked at government level and failed, to get the American President to impose strict standards on the American industry to force it to have only legitimate claims. If that had happened, we would have taken billions out of our liability and saved Lloyd’s of London without the need of Equitas. It never happened, but then up comes Warren Buffett and buys it for a knockdown couple of billion. I would put a very substantial sum of money on him having a letter in his back pocket from the President, agreeing to write off those claims or to curtail them. He is going to rip out the whole of that profit. We should not sell cheap on this; there is a huge amount out there, which we can get, and we need very much to play hardball.

--- Later in debate ---

[Baroness Sherlock]

The Minister is again speaking of reserving for the liabilities. I am grateful to the noble Lord, Lord James, both for sharing his considerable expertise and experience and for helping me to understand that I clearly phrased my previous question poorly. I was trying to ask the Minister whether, when he refers to insurance companies reserving for the liabilities, he makes any distinction between the fact that an insurance company would in the ordinary run of things reserve against a future liability that would crystallise if and when somebody whose employer had been insured by that insurer were to develop mesothelioma, and the fact that what an insurance company will have now is arguably not a liability but a requirement to pay something that is more like a tax. Here, I declare an interest as a member of the board of the Financial Ombudsman Service. Is this situation not more like some aspects of the levy applied by the FCA on relevant financial services companies, which requires them to contribute, for example, to the cost of the Financial Services Compensation Scheme? In other words, it is an annual cost that is fixed by the body imposing the levy and not a liability that arises directly from activities of the company. Therefore, does the question of reserving not apply at all?

[Lord Freud]

What happens is that insurers have to provide that they have sufficient funds to meet their liabilities. The levy is a hypothecated tax that they have to pay so that their ability to meet their liabilities is monitored by the Financial Conduct Authority, the FCA—or the FSA, to those of us using old money. The insurer could not pre-empt the outcome of the consultation. That was something that they could not do and did not do, as I understand it.

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[Lord Wills]

I am sure that shortly the Minister will give us an assurance that he will provide the figures that my noble friend Lord Howarth asked for in proposing his amendments. I also ask, in relation to this particular point, whether he can provide the Committee with any assessment that his department has made of the effect on insurers’ balance sheets of either of these two amendments—in other words, the one that has the start date in February 2010 and my noble friend Lord Howarth’s amendment, which would not set a date at all.

[Baroness Sherlock]

I would like to offer the Minister a way of reassuring us on this because we may be talking at cross-purposes.

Obviously, if an insurance company finds that its annual costs of doing business by staying in the market and providing active employer’s liability insurance are going to be higher, it will need to make sure in its usual planning that it has the resources available to enable it to pay the annual costs of doing business to stay in that market. That is not the same thing as saying it must reserve formally against liabilities that it has. That, as I understand it, is the Minister’s main argument as to why they could not have begun this process earlier. If it were about reserving for liabilities, there are clear regulatory requirements and negotiations with auditors that would constrain the point at which the insurance company could start doing this.

However, if we are simply looking at a higher annual cost—and I am not suggesting that that is not a relevant or material consideration to the company—of remaining in the market which is unrelated to the nature of the specific policies that were written, there is presumably no reason why the insurance company could not have planned for that by reading carefully, as I am sure it did, the document published by my noble friend Lord McKenzie. This showed clearly that the Government wished to intervene in this area and the options on which they were consulting, all of which would clearly have required the industry to pay out. It was clear that that was coming down the track.

A way for the Minister to solve this would be to answer my other question. Could he provide—either now or by the next sitting—some evidence of an insurance company that has reserved since the announcement was made in 2012? There must be companies that have a 2012 financial-year end date. If the Minister is right, insurance companies will presumably have reserved. Perhaps he could share that with us.

[Lord Freud]

I will double-check, my Lords, but my understanding is that a reserve from an insurance company is not specified out. There would be a general sum overall and we would not be able to extract those elements. I have made clear that we are not talking about a general level of doing business but about a specific reserve created because of this particular liability. That is what we are talking about.

--- Later in debate ---

[Lord Freud]

I have done quite a lot of work on this, as I have said, and talked to the department. I am saying that this would have to be a Department of Health levy, but the Department of Health is not minded to legislate in this way on this matter because that is not how the structure of research provision in this country works. That is the position. I can get further clarification on this ready for Report.

[Baroness Sherlock]

The question of whether the Department of Health wishes to do this is a separate matter but, on whether the DWP can do this in its Bill, is the Minister saying that it cannot do it because it is not government policy that the DWP should create a levy that would be to the benefit of something that belongs to DoH, or is he saying that it is illegal for it to do so?

[Lord Freud]

I am not sure of the definition of illegality, but our powers are such that we cannot raise money for things that are not within our vote. Whether or not that makes it illegal, I am not sure. However, that is the position and we are held to it.

Mesothelioma Bill [HL]

Baroness Sherlock Excerpts

Monday 20th May 2013 Lords Chamber

[Baroness Sherlock]

My Lords, this has been a very rich debate, suffused with not only the expertise but the passion and compassion for which the House is widely celebrated. It has been a privilege to hear personal stories about people who have been affected by mesothelioma: to hear of lives cut short and ending avoidably in terrible suffering. I am grateful to all noble Lords who were willing to share those experiences, as well as for the knowledge that they brought.

I acknowledge once again what an extraordinary range of people we have in this House. I pay tribute to all those who in many different ways have been part of bringing the story to this stage of its development: to those who campaigned in Parliament, such as the noble Lord, Lord Alton, who has done so much to raise the issue, and the noble Lord, Lord Avebury; and to those who have been Ministers, such as my noble friend Lord McKenzie in recent times and, in times gone by, my noble friend Lord Jones, whom I thank for such a passionate speech and for bringing us back to the point of remembering what this means for those who are going through such pain and suffering at the moment.

I pay tribute also to my noble friend Lady Donaghy and other trade unionists for reminding us of everything the trade unions have done, and to my noble friends Lord Whitty, Lord Monks and others who have been part of the story of trade unions getting behind efforts to try to change this country’s attitude that nothing could be done and prove that perhaps it could. I pay tribute also to the Minister for his personal commitment and—I suspect that my noble friend Lord Whitty was right about this—for conducting some pretty tough negotiations. We hope to give power to his elbow so that he can go back and make them more successful still.

There has been an extraordinary unanimity round the Chamber on almost every Bench on what the top issues will be on which the Minister will have to convince us as the Bill goes through its remaining stages. In true Eurovision style, the top three are already predictable. The first is the scope of the Bill. I understand the pressures that may have led the Government to settle where they have landed. The Minister argued that the Bill’s focus on mesothelioma was based on the fact that it is a terrible disease that is almost always fatal, and that is exclusively caused by exposure to asbestos. That much is uncontested. However, the fact that mesothelioma sufferers will have a case for compensation does not mean that others do not also have such a case, and does not take away from the fact that there are still too many victims of other long-latency asbestos-related conditions who should be entitled to compensation but cannot find either an employer or an insurer to pursue. Of course, their claims would need to be tested, but I see that the Government are not minded to go down that road.

I understand the attractions of clarity and moving forward with the support of stakeholders, but I hope that the Minister has heard the breadth and strength of feeling from all around the House that the Bill needs not only to address this pressing problem but, as my noble friend Lord Browne put it, needs to be fair. It will not be perceived to be fair if it cannot at least set out the way in which the Government will move forward. If the Minister feels that the Bill is not the route forward for that, I hope that he will be able to tell us what the way forward will be, so that by the time we conclude these proceedings we will be able to give some comfort to those who may otherwise feel that they have been unfairly ignored in the process.

I also hope that in Committee we will have a chance to discuss what can be done to try to make the process of moving on in other areas more systematic. I was very struck by the point made by my noble friend Lady Taylor about the piecemeal way in which steps were taken in the past. It would be very helpful if we could set out a way forward that did not involve constantly being dragged step by step into solving problems that will one day have to be solved anyway. Perhaps this time we could be the House that breaks through that way of doing things and tries to find a more systematic way of planning for the future.

The second question on which there is almost total unanimity is why the cut-off point is fixed at 25 July 2012. This point was raised by many noble Lords. Suggestions were made that it could be set at February 2010, when the consultation opened, or May 2010 when it closed. The Asbestos Victims Support Groups Forum suggested that a three-year rule in law should be applied. Whatever the Minister comes forward with, it would be helpful if he would take the House carefully through his reasoning for July 2012, and against having an earlier commencement date. From the reaction of noble Lords around the House, it would seem that simply feeling that one could not leave it open-ended was not enough of an answer to the question: why this, why now and why only then?

The third big question is the crucial question of the proposed nature and level of compensation. My noble friend Lord Browne of Ladyton raised some important questions about the way in which damages are constructed. I hope the Minister can set out some more information for us on the record about that, about how he came to this space—in particular, the question of why compensation is likely to end up being set at 70% of the average damages being awarded by the civil courts. I confess I have not yet heard a persuasive argument for that. I understand that the Minister seemed to be saying—and it is certainly what the briefing said—that the rationale is that an incentive of some sort is needed to ensure that this is genuinely a scheme of last resort. However, my noble friend Lord McKenzie raised the telling question: since claimants can by definition access the scheme only if their former employer’s insurers cannot be traced, and since the body will actually have an obligation to help people trace an employer, why is any incentive needed? The door is only open to people who meet this condition, so they surely do not need to be bribed to step through it as well—or in this case, rather than being bribed, they are facing a hefty financial penalty if they are unable to identify a provider of employers’ liability insurance through no fault of their own, a point made very tellingly by many noble Lords.

There is then the question of who runs the scheme. A number of noble Lords have made the point that concerns are being heard abroad that it might be the insurance industry itself that will run the scheme. The Bill, of course, carefully sets out two options: one of having the scheme run in-house, the other run externally by a scheme operator. However, it is clear in the briefing that the plan is that the insurance industry should run it. It is, we are told, already in the process of setting up a scheme in anticipation of the Bill becoming law, which could then be up and running right away on day one, on the assumption that the scheme meets the criteria set out by DWP. However, as my noble friends Lord McKenzie and Lady Donaghy and others have pointed out, there is a potential conflict of interest here if the same industry that has to fund successful claims not merely underwrites but administers the compensation scheme. Aside from the actual conflict, is the Minister not concerned that the perception of a conflict may be a cause of concern to victims and their families? Have the Government done any research to find out how claimants would view such a provision, having the scheme run by the very industry with which they have to join battle?

In particular, could the Minister tell the House whether he considered any alternatives? Would it not have been better, perhaps, to have had an arrangement like that for the FiSMA bodies, such as the Financial Ombudsman Service—and I declare my interest as a non-executive director of that body—or the Financial Services Compensation Scheme, mentioned by the noble Lord, Lord Avebury? Both of those bodies are set up in statute and funded by levies on the financial services industry, but they are administered by independent scheme operators overseen by boards. The job of the board is to guarantee the independence of the scheme, both from consumers and from the firms that underwrite the scheme. Therefore, I would be grateful if the Minister could tell me whether he looked at that as an alternative, and, if so, why he rejected it.

Moreover, I would be very interested to hear the Minister’s response to the matters raised by my noble friends Lord Howarth of Newport and Lord Browne about the question of benefits. Why do the Government see this position as analogous to that of a compensation payment, an interesting point made by my noble friend Lord Browne, who did indeed manage to introduce additional material very late in the day? Also, my noble friend Lord Howarth asked whether there would be any caps on the amount that can be clawed back, what particular benefits are in that situation—will it be all benefits, including carers’ benefits?—and what happens to the way in which the money is treated? Finally, there was the very important question of research, raised by the noble Lords, Lord Alton and Lord Monks, the noble Baroness, Lady Masham, my noble friend Lord McKenzie and others. I very much hope that we can return to that in some detail in Committee.

I do not want to detain the House any further at this time. This is a Bill whose purpose we support fully, as one would expect, since the previous Labour Government in the person of my noble friend Lord McKenzie started the consultation process which brought us at last to this point. Action has long been demanded by victims, their families and the organisations that have supported them over many years. We owe it to them to act swiftly, but we also owe it to them to get it right. We owe it to the people who depend upon this fund to scrutinise this legislation as well as we can to ensure that it is robust and that the redress it provides will meet the needs placed upon it. Furthermore, I think we should take a moment to reflect on the terrible consequences of a failure to take seriously the health and safety of workers and, indeed, citizens, a point made by my noble friend Lord Giddens, to whom thanks are due for a very interesting exposition of how we came to this point. I was very taken by his suggestion about the idea of a pro-active scanning forward. I would be interested to hear the Minister’s response to that. How do we learn not just from what has happened but learn lessons for the future?

There is a great temptation in modern life to complain about health and safety as though somehow it is there solely as a means for bureaucrats to stop any of us having any fun. The next time any of us is tempted to complain about there being too much health and safety, we might remember the legacy of the days when there was precious little of either health or safety in too many workplaces.

Jobseekers (Back to Work Schemes) Bill

Baroness Sherlock Excerpts

Monday 25th March 2013 Lords Chamber

[Lord Howarth of Newport]

My Lords, is it not the case that every Government of the United Kingdom since 1948 have been committed to the principles and values articulated in the Universal Declaration of Human Rights? Is it not also the case that Article 7 declares that all are equal before the law and are entitled without any discrimination to equal protection of the law? If the Government deny legal aid in these cases, will they not repudiate that historic and fundamental commitment?

[Baroness Sherlock]

My Lords, in responding to this amendment, I should like to pay tribute to my noble friend Lord Bach, who has fought tirelessly on this subject for many months.

As we have heard, it is currently possible for a claimant who meets the eligibility criteria to get free legal advice and assistance to cover preparatory work for a hearing. Legal aid may also be available for higher tribunals and courts appeals on a point of law. However, from 1 April, all welfare benefits will be out of scope for legal aid. The context for this Bill makes this all the more complicated because, as we heard from the Minister, the law on sanctions has changed, so claimants may struggle to work out what applies to their case. Further, since there may often be significant delays between alleged breach and appeal, claimants may also struggle to work out what good cause or recompliance mean so long after the event, subjects to which we will return on a later amendment. This brings me to my questions for the Minister. First, will he clarify the position? If a claimant would have been entitled to legal aid to help prepare his case had he appealed within a month of a decision to sanction him, will he still be entitled to legal aid on the same basis should he appeal after 1 April? If the answer is yes, how will this happen? Who will provide the advice and who will pay for it? If the answer is no, given that the Courts and Tribunal Service is likely to be inundated with cases once the deferred decisions pile is unleashed, what assessment have the Government done of the likely delays and the consequent additional cost to the Courts and Tribunal Service of having so many unadvised appellants arriving at once?

If the Government are unable to give satisfactory answers to all these questions, I suggest that the Minister should accept this very mild amendment. If he does not, and my noble friend Lord Bach chooses to press it to a vote, we on these Benches will give him full support. The very least that the Government should do is provide a considered view—impossible beforehand, given the timetable—of the effect on access to legal advice and support of a group which Parliament never intended to be affected by the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act. We are pleased to support this amendment.

[Lord Freud]

My Lords, before I deal with this amendment, I ask the Committee to indulge me as I answer a couple of questions on the last round from the noble Lord, Lord McKenzie of Luton, which may be relevant.

On the question of what sanctions mean for national insurance, if the failure to participate was after 22 October 2012, national insurance is not credited but if it was before 22 October 2012 then it is. On going into work, no sanctions will be applied to people who no longer receive jobseeker’s allowance. That might save some writing.

--- Later in debate ---

Moved by

[Baroness Sherlock]

7: After Clause 2, insert the following new Clause—
“Guidance
Within a month of this Act coming into force, the Secretary of State will issue guidance on the way in which claimants may be entitled to mitigate any penalty imposed upon them under the 2011 Regulations or the Mandatory Work Activity Regulations following the coming into force of this Act.”

[Baroness Sherlock]

My Lords, the amendment would require the Secretary of State to prepare guidance on how claimants might mitigate any penalty. This is necessary because there are some serious questions for the Government to answer about how the sanction system will work in practice after a delay of many months, potentially longer, and how a claimant is able to limit the effects in the way in which Parliament envisaged when it passed the legislation.

I want to turn briefly to the question of recompliance raised by the noble Lord, Lord Kirkwood of Kirkhope. The Jobseeker’s Allowance (Employment, Skills and Enterprise) Regulations 2011—the regulations that were found to be at fault by the Court of Appeal—explain the consequences of failure to participate in the scheme covered by those provisions. Regulations 8(4) to 8(6) provide that a claimant who fails to participate in an activity may face a loss or reduction of benefit for a period of two, four or 26 weeks. Regulation 8(7) provides that if someone has been sanctioned for 26 weeks but has recomplied, the period for which benefit is stopped is reduced to four weeks—a point explained by the noble Lord, Lord Kirkwood. Recompliance is defined in Regulation 8(8), which refers to the claimant as “C”. It states:

“C will be taken to have re-complied where”,

on the same date, before or,

“after the date on which the Secretary of State determines that C has failed to participate in the Scheme, C complies with … (a) the requirement as to participation in the Scheme to which the determination relates, or (b) such other requirement as to participation as may be made by the Secretary of State and notified to C in accordance with regulation 4”.

Here come the questions, and I apologise that they are not very exciting. Can the Minister tell the Committee how this will work some months after the event? Let us say that a claimant with a fluctuating health problem has failed to turn up for a training course imposed as part of skills conditionality and has been sanctioned for 26 weeks. The course ended last September. Had he been sanctioned at once, he could perhaps have attended the remaining days of the course and had the sanction reduced from 26 weeks to four weeks. Can the Minister explain how that person could now show compliance? It is obviously too late for him to recomply under Regulation 8(8)(a), but perhaps he could recomply under sub-paragraph (b). If so, can the Minister explain how that will work? If the person has been given any subsequent direction and has complied with it in any way at all, will that count as recompliance; does the recompliance have to be specific to the particular scheme that he was put on; or does it have to be specific to the requirement made of him at the time—that is, that training course? Presumably, the Government would want to make sure that this person was not treated any less fairly than he would have been had the Government’s regulations and notices not been found to be unlawful, but how would the Minister do that? If he is not in a position to explain to the Committee in detail now, I would press him to accept the amendment, which simply asks that he issues guidance explaining to jobcentre staff how they should act in order to put the claimant in the position in which they would have been but for the delay caused by the failure of the regulations to be accepted by the Court of Appeal as lawful.

My second question relates to the question of good cause, which the Minister referred to at an earlier stage. If a claimant fails to participate in the scheme, they are notified by the DWP and will be sanctioned unless they show what is known as “good cause” for their failure to participate within five working days.

Let me give another example. I am interested in exploring how good cause works in this time-delayed world. Let us imagine a single mother who was due to attend a course but missed the registration on the first morning because her 13 year-old son was up all night vomiting and she could not take him to school. She could not leave a sick 13 year-old at home alone the next day, so she phoned up the course and explained what had happened and that she would not be in that day. She talked to the receptionist who took a message and said that it would be passed on. The message was not passed on and when she turned up the next day she was told that she could not join the course because she failed to be there for the start. I should say that I have heard of real cases where precisely these things have taken place, and I am sure that the Minister has as well. Can the Minister help us to understand what would happen in that circumstance?

I understood from what the Minister said early on that that lone parent would have been written to at the time that this alleged breach took place, asking if she had any good cause for failing to turn up for the course. So what happened then? Presumably the decision-maker did not make a decision at that stage, so perhaps this would be sat on from that point, say the previous September, until it got around to being processed from the pile of deferred decisions. Would she at this stage have to explain more about what happened? For example, if there were not enough information in the explanation, did the decision-maker go back at the point at which this happened last September to say, “Tell me more”, or will that happen, say, the following April or May? If so, will she be expected to recall precisely what happened with this child’s bout of sickness last September, when it is now potentially April or May? Will she be asked for evidence for a bout of sickness that may not have required a medical appointment if the child was recovered within 24 hours? If she did give all the information but she was then deemed not to have good cause, presumably she could now appeal. If so, can the Minister explain to the Committee how the normal standards of evidence will be relaxed, if at all, given the serious time delay, to deal with the evidential problems and the possible recall problems that come with that?

Finally, can the Minister explain which set of regulations will apply to someone who committed the alleged breach under the old sanctions regime? Will he or she be sanctioned using the provisions that applied at the time of the alleged failing, because of course the ability to reduce the sanction by recomplying has since disappeared? Can the Minister reassure us that in fact someone will be able to reduce a sanction period by recompliance even if such an option no longer exists under the current regulations?

I apologise for having to go into such detail at this stage, but I did not choose to be conducting a Committee stage at quarter past one in the morning. I do think, if we are going to be asked to fast-track a Bill of this complexity and importance, that it is very important that the Committee is given every opportunity to understand precisely what the Government are trying to do to these people. I beg to move.

[The Deputy Chairman of Committees (Lord Haskel)]

My Lords, I must inform your Lordships that the result of Division 3 on Amendment 5A should have been Contents 35, Not-Contents 139—not 137 as announced.

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[Lord Freud]

My Lords, this amendment, which would require the Secretary of State to issue guidance on the way in which claimants can mitigate any penalty imposed under the ESE or MWA regulations after the Act comes into force, is unnecessary, as this information is provided to claimants as a matter of standard practice. When a claimant is issued with a benefit sanction, they are as a matter of course sent a letter explaining the decision made and what effect it will have. The letter clearly tells claimants that if they want to appeal the decision, they should fill in leaflet GL24, If you think our Decision is Wrong, and that claimants can,

“get this leaflet from your Jobcentre or Social Security Office”.

Attached to the sanctions letter are two leaflets: leaflet 1NF1, on appealing against a decision and leaflet JSA9, the hardship leaflet). I have both of these leaflets with me today.

The leaflet on appealing against a decision explains in plain English who the claimant should contact if they want to know more about the decision or, if they think the decision was wrong, how to appeal it and what support they may get in formulating that appeal. The hardship leaflet explains what financial support is available, the eligibility criteria and how to apply for hardship, and provides the form they must fill in to claim hardship. The whole process is done as a matter of course and, indeed, is on the record and available for anyone to see how those leaflets work.

I turn to the point raised by the noble Baroness, Lady Sherlock, on recompliance. If a claimant has been issued with a 26-week sanction but has complied in the intervening period, they will be served with a four-week sanction. Recompliance is not particular to any scheme and can include participation in any other scheme. Of course, the sanctions regime has changed, so if the failure to participate was before 22 October last year, the old regime, which includes the re-engagement, applies. However, if the failure to participate is after 22 October, the current sanctions regime, which has no engagement and which builds up, will apply. That goes on the time of the failure to participate.

The noble Baroness was concerned about the time between the failure and the sanction being imposed on the stockpiled cases. I am sorry that I have not yet found a better word than stockpiled but it is for cases not people. As I said on an earlier amendment, the process of finding that information takes place immediately on the failure. They receive a letter and need to provide good cause at that point. Clearly, where there is a problem and there needs to be amplification, and there is a problem of information or evidence, the decision-maker will have to take that into account in the normal way, given that there is a gap and it is a justifiable lacuna.

As a matter of course, the cases that we have stockpiled will get issued with a sanction and receive the standard letter, and those accompanying leaflets that I outlined. This amendment is therefore superfluous and I ask the noble Baroness to withdraw it.

[Baroness Sherlock]

I thank the Minister for that reply and, in particular, for clarifying that it will be the sanctions regime that was applicable at the time of the alleged breach that would prevail. I will just ask him to clarify one point more specifically. I was glad to hear him say that any subsequent direction can count as recompliance and that it did not have to be something specific to the particular scheme or course originally. It can count, but will it?

[Lord Freud]

If it fits the norms within which that re-compliance operates, then it will. I am not sure whether there is huge distinction, in this case, between the may and the will.

[Baroness Sherlock]

I am not trying to be pedantic, although I confess that it is a hobby. The reason it matters in this case is that normally, if I were sanctioned for not participating in a course, the obvious way to comply is to start going to the course. As the course has long since finished, there are all kinds of unrelated things that may have happened in between then and now, which would not be the obvious way for me to re-comply with a direction on something that has long since ceased. Therefore, the fact that these things could count does not necessarily mean that they will. The reason that I wanted guidance was precisely to make clear to jobcentre staff that in these circumstances they should interpret any form of compliance as being enough. I encourage the noble Lord to say that on the record.

[Lord Freud]

What I will say on the record is that we will ensure that guidance to jobcentre staff will make this absolutely clear.

[Baroness Sherlock]

What will that be?

[Lord Freud]

My Lords, we will make sure that the particular options here are laid out for jobcentre staff so that we do this consistently. I can add that recompliance will count if it is a scheme under the ESE regulations.

[Baroness Sherlock]

That was worth waiting for. I thank the Minister for that. I still think that this amendment is worth while. Although the Minister regards it as superfluous, the information that goes out to claimants actually relates specifically and only to complaints and hardships. The other obvious way to mitigate the effect of a sanction is recompliance and in fact none of that information does relate to recompliance. However, in the light of what he has just said, and given the lateness of the hour, I beg leave to withdraw the amendment.

Amendment 7 withdrawn.

Jobseekers (Back to Work Schemes) Bill

Baroness Sherlock Excerpts

Thursday 21st March 2013 Lords Chamber

[Baroness Sherlock]

My Lords, what a sorry state of affairs we find ourselves in. I almost feel sorry for the Minister, or I would if this shambles were not entirely of the Government’s own making. This debate has made clear the depressing, and I suppose rather shocking, extent of the Government’s failings. It seems as though crucial regulations underpinning the conditionality regime of the Government’s flagship, if utterly useless, Work Programme, as well as various other schemes, have been ruled unlawful by the Court of Appeal, and the Government now want to rectify the problem that they have created by forcing this Bill through Parliament at breakneck speed.

My noble friend Lord McKenzie made the point that the Constitution Committee has said clearly that it disagrees with the Government’s assessment, and we have now heard that, as it were, from the horse’s mouth in an extraordinarily powerful speech from the noble Lord, Lord Pannick. This is only the fourth time that I have spoken from the Dispatch Box in your Lordships’ House, but I suspect that if I were spared to do so another 400 times I would never begin to match the power of a speech like that, and I congratulate him. I am glad that it is the Minister, not me, who has to respond to it. The point that the noble Lord made, which I think is very interesting, is that the Government, having decided that the matter could take four weeks to consider from the time when they got the new regulations laid and enforced in this House, suddenly decided that there was a panic. I would like the Minister to return to this in his response.

In response to my noble friend Lord Foulkes, I think the Minister implied that the Government spent those four weeks considering all the various options before deciding on this deeply attractive one out of the collection. Will he explain why the Government did not consider the options before the decision? Presumably there were always two possible outcomes from the judgment, yes or no, so it would have been possible for them to spend time in advance of the ruling considering what they might do if they lost the case. Why did they have to wait for four weeks to consider the options and then come to Parliament to tell us that, having waited for four weeks, we had to rush through this in days? I will be interested to hear what the Minister has to say.

The shambles is even more annoying because the Government were warned. The Minister seemed to imply that the Social Security Advisory Committee did not tell them that the regulations were illegal, but perhaps he could help me. I understood that the committee drew attention to the overly wide scope of the regulation that was being used. Was that not one of the points on which the Court of Appeal found against the Government? If not, perhaps he could correct me, and I invite him to do so now if he wishes.

[Lord Freud]

The point that was being made by the SSAC about the width was that it meant that it was not necessary to come back to Parliament for specific approvals on particular schemes. It was not that this was likely to be against the law. The point was about parliamentary oversight.

[Baroness Sherlock]

I thank the Minister for explaining that, but of course it was on precisely the fact that parliamentary oversight and scrutiny of the nature of these regulations is important that I understand the Court of Appeal found against the Government. At the very least, this was a pretty heavy hint from the Social Security Advisory Committee, one that the Government managed to ignore completely.

Then there is the issue of retrospection, to which I barely need to turn after the speech from the noble Lord, Lord Pannick. As my noble friend Lord Bach noted, the worst aspect of this debacle is the combination of retrospection and fast-tracking. That is a particularly toxic mix, but it is what we are faced with. I look forward to hearing the Minister’s explanation of how the circumstances here make it necessary to bring forward this particular form of retrospection with this astonishingly foreshortened timetable, a point made by the noble Lord, Lord German. If the Minister’s response on that point is not compelling, I look forward to seeing the noble Lord join us in the Division Lobby should my noble friend Lord McKenzie decide to press his deplore Motion to a vote.

Like my noble friend Lord McKenzie, I am grateful to my noble friends Lady Royall of Blaisdon and Lord Bassam for trying to get us a few extra days to consider this matter. At least we now have the weekend to read the papers in more detail. I am also grateful that my right honourable friends Liam Byrne and Stephen Timms in the other place managed to get the Bill changed so that it would at least guarantee appeal rights for those affected by the sanctions process and ensure an independent review of that process.

It now falls to us in this House to do two things. The first is to register that this state of affairs is not right. The amendment in the name of my noble friend Lord McKenzie of Luton simply puts on record what we on these Benches think about the mess that the Government have got themselves into and the way they propose to get themselves out of it. I very much hope that the House will support it. We will then get down to the work that this House does best: doing our best, in the limited time that we have, to scrutinise the Government’s plans to ensure that there are no more disasters lurking in the undergrowth of this fast-tracked Bill.

There is a whole series of issues to which we will have to come back in Committee on Monday. For example, we know that appeal rights are to be safeguarded, but how can those appeals be robust when there is such a long time lag between the alleged breaches and the sanction being applied? As various noble Lords have said, how will the Government ensure fair treatment of a complainant who may have said that they had perfectly good cause not to comply with the requirement of a programme but who will struggle to evidence that months after the event? There is also the question of hardship. What kind of hardship regime will apply? The hardship regime is in the process of changing. How will the Government ensure that appropriate help is given to those who would suffer hardship as a result of sanctions?

Then there is the $64,000 question posed by my noble friend Lord Bach: will the Minister guarantee that anyone wishing to challenge decisions will have the same right to access to legal advice or aid as they would have done at the time the alleged breach took place, under regulations that have been found to be lawful?

There is so much more that I would like to ask, but we will have to wait until the dog end of Monday’s sitting, to which the remaining stages of the Bill have been confined. The message from today is clear: this is a shambles. I am beginning to wonder whether the Government’s entire approach to getting people into work is not itself a shambles. The evidence is clear. The Government are failing the unemployed of this country. They are failing to create jobs. They are failing to help them get back into jobs. Their flagship Work Programme—

[Lord Fink]

My Lords—

[Baroness Sherlock]

I am so sorry, I could not catch what the noble Lord said from a sedentary position. Let me share a view with him about the Government flagship Work Programme, on which the noble Lord, Lord German, spoke so movingly.

The Public Accounts Committee described it as follows:

“Actual performance was even below the Department’s assessment of the non-intervention rate—the number of people that would have found sustained work had the Work Programme not been running”.

It was worse than doing nothing. I do not regard that as a success. There are other ways to do this. The Minister is aware that if Labour was in power, it would create real jobs for the long-term unemployed: six months of a proper job for 25 hours a week on the minimum wage. It would be compulsory, because we have never had a problem with sanctions, provided that they are fair and robust—oh yes, and legal.

I do not suppose the Minister will see the light today on that point, so instead I look forward to hearing answers to the various questions that have been asked, especially those from the noble Lords, Lord Pannick and Lord German. Our expectations are high. As there are no sitting days between today and all the remaining stages, the Minister will have to answer all our questions today. Unfortunately, on this occasion, we cannot wait for him to write to us, unless he does so very speedily. Perhaps he will also take the opportunity to do one other thing: will he apologise to the House, to the nation and especially to all those affected for the shambles that his Government have created?

Welfare Benefits Up-rating Bill

Baroness Sherlock Excerpts

Tuesday 19th March 2013 Lords Chamber

Moved by

[Baroness Sherlock]

6:After Clause 1, insert the following new Clause—
“Statutory maternity pay
Any mandatory 1% up-rating stipulated in section 1(1) shall not apply to statutory maternity pay.”

[Baroness Sherlock]

My Lords, I rise to move Amendment 6, which is in my name and that of my noble friend Lord McKenzie as well as the names of other noble Lords. We rehearsed this issue in Committee but I return to it on Report because, with apologies, I found the response from the Minister so disappointing. Because it is the last amendment of the day, I will be brief.

The Government estimate that some 232,000 families will claim statutory maternity pay, or SMP, in 2012-13, rising to 235,000 in 2013-14. Using the Government’s own inflation forecasts, the Children’s Society calculated that if a woman were on maternity leave now with her first child, and had her second child in 2015, she would find that she received about £184 less in real terms during her second period of maternity leave than her first. If her earnings were below the flat-rate level of SMP, that figure rises to £217. Just when a family needs money most, support is being cut.

This is by no means the first assault on the living standards of mothers of young children. In Committee, I recited the litany of cuts to support for parents of new children. I will spare the House the entire list but will just reprise one or two. We have seen the abolition of the health and pregnancy grant, the abolition of the Sure Start maternity grant for all but the first child, the abolition of the baby element of child tax credit and the cancellation of the planned toddler element, the abolition of the government contribution to child trust funds, cuts to the percentage of childcare help and much more. Since then, the Children’s Society has analysed in detail the impact of those changes. The results are shocking. They have calculated that a working couple about to have a second child in 2015 could find themselves over £7,000 worse off than they would have been over the following two years, simply as a result of changes since 2010. That is the context for this amendment and, indeed, for this Bill.

My second concern is that the Minister failed entirely in Committee to address the question that I raised as to the rationale for including SMP in this Bill. Noble Lords may recall that the Prime Minister’s official spokesperson responded to critics by telling the Telegraph that it was a “personal choice” for parents to decide whether to return to work or to stay at home after having a child. Of course it is, just like deciding where to go on holiday, where to shop, or where to buy your children’s clothes is a personal choice—if you have enough money, that is. If not, then it is George at Asda for you, rather than Giorgio Armani Junior. Money is what makes people have choices, not simply the fact of having a baby.

However, that was not the reason that the Chancellor gave when he announced this Bill back in the autumn. He claimed that the legislation was necessary to ensure that the welfare state was fair to working people, and not to those who lie in bed with their blinds down when their neighbours go to work. In Committee, I asked the Minister to explain how SMP fits with his argument. Let us recall that SMP is a contributory benefit, paid only to women who have given up work to give birth or to care for a new baby, after having been in continuous employment for the requisite period and earning enough to require their employers to pay national insurance contributions on their behalf. However, answer came there none. I therefore ask the Minister one last time: how does including SMP in this Bill fit with the Chancellor’s narrative, and why should pregnant women and new mothers pay the price for a tax cut for millionaires? I look forward to the answer. I beg to move.

[Lord Bach]

My Lords, I very much support what my noble friend has said in moving the amendment. The House seems very quiet this evening, following the shenanigans of this afternoon when it looked very much to some of us as though there was an organised group on the other side—many of whose members are no longer present, of course, it being after dinner time—who found a huge interest in this Bill in order to keep the Report stage going. Be that as it may, those times are obviously past.

If I read correctly, the Minister—to whom I attach no blame at all for what has been going on, of course—said in reply to my noble friend in Committee that the cost in the last of the three years of allowing this amendment would be around £50 million. Let me tell her one way, at least, that that £50 million could be found five times over. The communities department has £250 million to spend, and has done for some time, in order to make rubbish collections weekly rather than fortnightly. No doubt that is a priority for some, and no doubt it has a validity of its own. However, compared to the wrong which is being done by this Bill—and by others too—and in particular the wrong addressed by my noble friend in her amendment, could the Government not get some proper sense of priority as to what does and does not matter, even at this late stage? That is £50 million, compared with £250 million that is sorted away. This was not mentioned, of course, by the noble Lords who were this afternoon defending the Government’s position with such vigour, because it is an inconvenient truth that in government there is spend which could be much better spent on protecting those who are going to be hammered by this legislation. I ask the noble Baroness to answer my question: what is wrong with spending part of that £250 million, and agreeing to my noble friend’s amendment?

--- Later in debate ---

[Baroness Stowell of Beeston]

In my short time in this House, we tend to sit until about 10 pm and have debates on amendments at all times that we are sitting. I did not realise that we were expected to have debates before a certain time at night.

Let us focus on statutory maternity pay. I remind the House that the UK has a strong and effective maternity and parental regime. The UK is significantly more generous than the requirements of the EU pregnant workers directive. The directive states that a woman should benefit from 14 weeks paid maternity leave; we provide 39 weeks. The directive states that a woman should receive at least the amount that would be paid for sickness; our standard rate of maternity pay and maternity allowance is £135.45 per week. That compares to the statutory sick pay rate of £85.85 per week. In addition, the latest available data from the OECD show that the proportion of our GDP spent on maternity and parental pay is higher than that in Germany or France.

It is also worth reflecting on the fact that in the past decade, the length of time for which statutory maternity pay was payable more than doubled. Under the previous Government, it was doubled. It is important to be aware of the baseline that we are starting from.

Yes, the decisions that we have to take on statutory maternity pay will mean a slightly smaller increase for people over the next few years, but that is in the context of a strong and effective maternity architecture in our country which will remain firmly in place. Indeed, the Government are committed to make this architecture even stronger. Noble Lords will soon be debating provisions in the Children and Families Bill which allow working parents to choose which parent takes parental leave and parental pay to care for their child in the early years.

It is also important to understand these changes in the context of other government reforms that support women, families and children and help make positive changes to their lives. I said this in Committee, but it is important, so I will repeat it. For example, a woman working full time at the national minimum wage for six months of the tax year who then receives statutory maternity pay for the next six months will still be better off overall as a result of changes to the income tax personal allowance.

We have debated universal credit many times before, and it is acknowledged that its purpose is to make it worth while for people to move back into work. Once universal credit is introduced, some 800,000 out-of-work lone parents would benefit significantly if they started to work just 10 hours per week. In nearly all such cases, these parents would see at least £40 more in their pocket per week than they would have done under the current system. Also as part of universal credit, £200 million extra is being spent to support families with childcare costs. For the first time, this support will be made available for families who work fewer than 16 hours per week. That means 100,000 more working families will be helped with their childcare costs.

Looking ahead, as my noble friend Lord Newby mentioned in one of the earlier debates today, we have set out changes that will increase eligibility of support to five times as many families as currently is the case through a new tax-free childcare scheme. As part of these changes, we have also announced today a further £200 million additional support in universal credit that will provide working families with the equivalent of 85% of their childcare costs where the lone parent or both parents pay income tax.

When referring to various different payments to families, the noble Baroness, Lady Sherlock, said that she could go on; so could I. There are other things that the Government are doing to support families and women. The support for families that the Government provide is about more than income transfers. I do not deny that families value them and they can make an important difference, but money is often better invested in interventions that really can change lives. In demonstrating this today, I have tried to explain what the Government are doing in addition to the comprehensive support that we provide to new mothers and to show how much there is in providing for families in the right way.

This amendment would reduce savings from the Bill by around £50 million in 2015-16. As I have said, we have taken none of the decisions in this Bill lightly, but we have to recognise that if the savings do not come from the measures set out in the Bill, that could clearly put additional pressures on to public services. The noble Lord, Lord McKenzie, mentioned alternatives that he would like to propose. They are not ones that I would point to because these amendments are part of a Bill that is about reducing by a smaller amount the increase that we pay in benefits.

To answer the noble Baroness’s question about why we are including statutory maternity pay, we have sought to address the very significant welfare bill, which I am afraid is unsustainable, but doing so in way to protect the most vulnerable. We discussed and debated that at length earlier today. Regrettable as it is to have to make any reductions or cap any of the increases in the way that we have, the infrastructure and architecture there for women and families are strong. They provide sound support that will make a real change to people’s lives. While I recognise that these are difficult decisions, I hope that I have provided enough assurance to the House to show that the Government take their obligations to parents seriously and that we will continue to provide a supportive environment for new mothers in the years to come. I hope therefore that the noble Baroness can withdraw her amendment.

[Baroness Sherlock]

My Lords, I am grateful to all noble Lords who have spoken in this debate, especially to my noble friend Lord Bach for his strong support, and to my noble friend Lady Hollis for her interventions. I am also grateful to the noble Baroness, Lady Howe, for a thoughtful and persuasive speech that highlighted the impact of these cuts on the next generation. I thank her for that.

In response to the noble Lord, Lord Bates, I would say three things. First, we have debated this a lot. We sat through the previous stages, and we have all contributed in long form to the Committee stage and reflected a great deal on this. I hope that we now know what each other thinks. Certain noble Lords contributed to every amendment but they did not make five speeches; they made the same speech five times. I am not sure that that took us much further. None the less, we are doing our best here today.

I say to the noble Lord that it is worth noting that the poorest mothers get the flat rate of SMP and are therefore unaffected by any impact on wage growth, so that point would not affect them. On the question of wage suppression, the consequence of that—in fact, of the whole Bill—is a double whammy for those who are finding that their wages are frozen or have been kept down, because these benefits and tax credits are the very things that will normally help to compensate the individuals as well as acting as stabilisers more broadly.

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.

--- Later in debate ---

[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?

--- Later in debate ---

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.