Universal Credit Regulations 2013

Baroness Sherlock Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Baroness Sherlock]

At end to insert “but that this House regrets that the regulations will not achieve their aim of making work pay for all and in fact will provide lower work incentives for 2.1 million households; will have the effect of penalising savers; will result in a cut in childcare support for working families; will result in cuts to the income of some of the poorest and most vulnerable in the country and will have a disproportionate impact on women and lone parent families; do not meet the needs of disabled people; do not provide adequate treatment of small businesses and the self-employed; and risk pushing many families into arrears and homelessness”.

[Baroness Sherlock]

My Lords, in rising to move an amendment to the Motion, I thank the Minister for his co-operation and for the work that he and his officials have done to help us to understand the very complex regulations we have had to work through in preparation for today.

I believe that this is probably one of the most important set of regulations your Lordships will debate this Session. The main Universal Credit Regulations operationalise the workings of the new system of means- tested benefits for most working-age people. This is huge. They constitute the framework which supports the huge tent that is universal credit, into which millions of people will be moved over time. The Universal Credit (Transitional Provisions) Regulations provide the detail of how people will move into the tent. In working through this considerable amount of material, I have been impressed by and grateful for the detailed work done by many stakeholder organisations, including the Children’s Society, Citizens Advice and many others. We on these Benches also broadly support the principle of a single structure for working-age support, but we have always said that the design and implementation are all. These regulations are too important to the many citizens who depend on the money that the state provides to them for us not to go over them in detail.

Now that we have most of the regulations and some, but not all, of the guidance, what was a pile of canvas on the floor is starting to take shape as a tent. It raises some very significant concerns, the first of which is money. In the Second Reading of the Welfare Benefits Up-rating Bill on Monday, we heard of the huge losses already being faced by many low and middle-income families, with more to come. We are about to find that significant numbers of people are going to be worse off as a result of universal credit. The impact assessment states that,

“3.1 million households will have higher household entitlement under Universal Credit”,

than now; but that 2.8 million will have a lower entitlement and that 300,000 households will lose more than £300 a month. These are significant sums. There is of course transitional protection at the point of moving across if someone is actively moved on to the new system. However, if someone claims universal credit because they have lost their job or had a baby, they will not get any protection. As the Welfare Reform Bill went through both Houses of Parliament, we were repeatedly assured that the new system would make sure that work always paid and that more work would pay more. I have been struggling to reconcile those assurances with the views of many experts outside the House who have made representations to most of your Lordships.

Regulation 22 sets out the way in which income from work will be treated for the purposes of withdrawing universal credit. To understand what that will mean in practice, we have to go through the impact assessment, which contains details of what are called “participation tax rates”—which reflect how much a claimant would gain from moving into work—and “marginal deduction rates”, which reflect how much better off they would be from increasing their earnings once they were in work. When I read this, I was astonished to find that more people will see their marginal deduction rates rise than fall; so some people will get to keep more of every pound that they earn than now, but more people will get to keep less of every pound that they earn than now. Some 1.8 million first earners will have higher marginal deduction rates under universal credit and 1.3 million will have lower ones. Similarly, most second earners will face higher marginal deduction rates than now, and couples with children are generally likely to see an increase rather than a decrease in those marginal deduction rates. How can this be in a system that is designed, surely, to make work pay? I think the culprits are found in different places.

First, there is childcare. Currently, the childcare element of working tax credit covers up to 70% of childcare costs for children in working families. However, many low-income working families can currently get up to 96% of their childcare costs covered through the tax and benefits system. The extra 26% comes through an allowance within housing benefit and council tax benefit. Around 100,000 families—about 20%—who get help with childcare through the system get this extra money. But under universal credit, that will not be around. The Children’s Society estimates that this will leave some of the lowest-income working families paying more than seven times as much out of their own pockets.

Barnardo’s did some detailed figures and discovered a whole series of circumstances in which parents could be worse off by doing more work—precisely what the system is not meant to do. For example, a lone parent with two young children ends up in effect paying to work once she starts having to use paid childcare rather than free childcare. Does the Minister accept that there is a problem in making work pay for parents who pay for childcare?

--- Later in debate ---

[Lord Freud]

I will be pleased to write.

[Baroness Sherlock]

My Lords, I thank the Minister for trying to answer our questions. Of course he could not answer them all in the time because there were so many. I have never been through a two-and-a-quarter-hour debate over one set of regulations with so many powerful speeches from every set of Benches in this House. I understand it is complicated, but we are running out of time. This is not simply a rough sketch of the architecture; these regulations describe what will happen to real claimants when the system starts operating in April. I understand that the Government are doing something that will revolutionise payments to all working-age claimants. We support that principle, but we cannot experiment on the lives of ordinary men and women in this country and on their children. The Minister has been unable to answer, despite his best efforts, concerns from all around the House about the impact on disabled people, childcare, free school meals, vulnerable people, of forcing people to claim online and so much more. We have to let these regulations go through because that is the nature of our House, but we do not have to allow them to go through without making a very clear signal to the Government that they need to get these things right. To that end, I wish to test the opinion of the House. I urge all noble Lords to come with me.

Social Security (Payments on Account of Benefit) Regulations 2013

Baroness Sherlock Excerpts

Wednesday 13th February 2013 Lords Chamber

[Baroness Lister of Burtersett]

My Lords, I have a few points to make. The Minister will be glad that I am not going to go over all the previous arguments about the demise of the Social Fund and I will not cover everything that I had planned to cover. However, I want to ask about budget advances. I think that the Minister may have referred to my first point. In the answers to questions raised at the seminar, which I was unable to attend, it was stated that,

“the test of ‘serious risk’ for budgeting advances has been carried forward from the existing system and is deliberately set at a high bar, but it is one staff are familiar with”.

However, I am advised by CPAG that in the existing system the “serious risk” test is applied to crisis loans and not budgeting loans, which budgeting advances replace. So, yes, staff are familiar with it but in another part of the system. By introducing the test for budgeting advances, the bar is being set higher for this part of the system, and yet another part of social security is being made available only in situations of dire need. Surely, the point of budgeting loans is in part to help prevent ever getting to a situation where there may be a serious risk of damage to health or safety. Will the Minister explain why this particular change has been made? To be honest, I think that he slightly conflated crisis and budgeting loans in his introductory explanation. Will he also confirm that, as with regard to crisis loans, health will include mental as well as physical health, and that safety relates to potential as well as actual danger? Does he agree that the lack of adequate cooking, heating or sleeping facilities could constitute a risk to health? I would feel happier about this shift if the Minister could give that assurance.

Regulation 15 prescribes the maximum amounts of budgeting advances as £348 for single people, £464 for couples and £812 for households with children, single or couples and irrespective of the number of children. These amounts are much lower than the current maximum amount under the Social Fund budgeting loans scheme, which is £1,500. I should be grateful if the Minister could explain the justification for this reduction. In particular, is there any evidential basis to suggest that the maximum amounts can be so substantially reduced, compared to that used for the Social Fund scheme of budgeting loans, without it causing problems for some claimants?

Having elicited some management information through Parliamentary Questions, I accept that these amounts are higher than the average budgeting loan award made to each of these family groups in 2011-12 and that fewer than 100 people are recorded as receiving awards higher than those specified. However, that suggests that such a big reduction in the maximum amount is unnecessary from a public spending point of view while a small number of claimants could suffer as a consequence. Is the Minister able to give any information as to the kinds of circumstances in which claimants have received higher awards than those specified and what kinds of sums are involved? Given that these maximum amounts are set out in the regulations, can he explain the procedures for keeping them under review and for uprating them? This question becomes more important now with the significant reduction in the maximum amounts.

I thank the Minister for explaining why a person has to pay back all a previous advance before getting the next one, but I am still worried that, at a time when benefit levels are being cut in real terms and people will have problems with monthly budgeting, these new rules will be unduly restrictive and cause real hardship. Lone parents and disabled people currently receive two-thirds of the gross expenditure on budgeting loans and they will therefore be the groups hardest hit.

[Baroness Sherlock]

My Lords, I thank the Minister for introducing these regulations and explaining how they would work; and my noble friend Lady Lister for her characteristically incisive questions. For this one moment only, I am glad that I am standing here and not sitting in the Minister’s seat. As has been explained, these regulations come in two parts. I will first look briefly at the payments on account. The Minister has explained the circumstances in which these will operate and my noble friend Lady Lister has already tried to tease out the reason why the Government have gone for this strict test of being available only to those in financial need. It is even slightly stricter than that. They will be available only for those in financial need as a result of having applied for a benefit, but not yet received a payment, when it seems likely that they will do; or when an award of benefit has been made, but the date on which it would be paid has not yet been reached.

That last one is likely to be of particular interest to millions of people who will find themselves being moved from weekly or fortnightly to monthly payments. Recent research commissioned by DWP, Work and the Welfare System: a survey of benefits and tax credits recipients, by Tu and Ginnis in 2012, found that 42% of potential universal credit claimants said they would find it harder to budget with monthly payments; 80% of these said that they were likely to run out of money before the end of the month. As I understand it, they will not all be entitled to budgeting advances, only those who find themselves in this stiff test of financial need, as a result of the circumstances I have described.

I would be grateful if the Minister would explain what he understands as being a “serious risk”. Would running out of food or cooking facilities constitute that, as my noble friend Lady Lister mentioned? Food banks already see significant numbers of people turning up because their benefit payments have been delayed. I suggest that this is likely to become much more significant in future with the move to monthly payments. Even if the test is the same as now, will the Minister concede that there may be a different set of needs resulting from a change in the circumstances because all these people are moving into monthly payments? Has he considered that aspect of it?

Regulations 11 to 15 cover budgeting advances. My noble friend Lady Lister has gone through the reduction in the maximum amount available, so I do not need to revisit that but I will be interested to hear the Minister’s answer. I would be interested, though, in the following information, if the Minister can provide it. His department has inquired about what has been happening with regard to the replacement for the Social Fund in different parts of the country. How many of those schemes will offer cash to claimants? What has his department found out about that? That will be important since they will replace a system whereby claimants can access cash at the moment. What research has the department done to establish the alternatives to which claimants are likely to turn? Since many claimants will not be able to access mainstream credit, it must be feared that they will turn at best to expensive legal credit, home credit or retailer financing, or at worst to illegal loan sharks.

I would be grateful if the Minister could explain again why he thinks it is important that claimants should be able to have only one loan at a time, even when it is a very small loan. A family may have borrowed £150 to buy a bed for a child but then a disaster strikes: for example, their washing machine breaks down, there is a flood or the bicycle which the mum is going to use to get to a job interview is stolen. They then need a significantly larger loan. What is the rationale for their not being allowed to take out more than one loan even if the total of the loans is well below the ceiling?

Will the Minister address the interaction between the new low ceiling, the fact that the adviser will be required to establish that the claimant can afford to repay the loan and the fact that the maximum period over which it can be borrowed has been reduced from two years to one year? Therefore, somebody taking out the maximum loan will have to contend with a tighter borrowing period and will have to prove that he or she can afford to repay it. Is there not a danger that that will make it even harder to get the loan in the first place?

These regulations may seem minor and technical but we will see millions of people face changes in their payment patterns because the decisions the Government have taken—in the face of widespread dismay and advice to the contrary—to move to a single payment, including amounts for rent, children as well as work, and to pay it monthly in arrears, are likely to be the cause of significant difficulty for a great many claimants. The least they deserve is a generous, open, accessible system of payments on account to ease the regulations’ passage.

[Lord Freud]

My Lords, again, lots of punchy points have been made. I think that the noble Baroness, Lady Lister, is under a misunderstanding—this rarely happens—as regards the serious risk test. This is applied only to short-term advances. It does not apply to the budgeting advances. I reassure her that not having access to heating would clearly be considered a risk to health. The budgeting advances are exactly the same as for the current budgeting loans in terms of the maximum. The current budgeting loan is lower than the available maximums because that counts for the whole of the Social Fund debt—the £1,500 figure—which includes budgeting loans and crisis loans. Because the Social Fund will no longer exist and we are sending elements of it to the regions and the devolved areas, we are not comparing like with like. The actual maximums as regards the like-for-like components have not changed.

As regards mental health issues, the test is whether the claimant or a member of their family would face a serious risk to health or safety. Clearly, savings are a factor, as are other sources of income, but health, including mental health issues, will be considered.

The context here is to widen the source of funding for families, which is why we are looking to deliver a further £38 million investment into the credit union movement, thereby aiming to make sure that it becomes a viable industry that is able to support families. I am looking forward to making more announcements about that in the not-to-distant future.

Taxation: Families

Baroness Sherlock Excerpts

Thursday 17th January 2013 Lords Chamber

[Baroness Sherlock]

My Lords, what a wonderful place to start. I would certainly not want to go back to when my noble friend Lord Graham or the children of today would have no boots, but maybe a place where Wayne Rooney got £7 a week would be a country I would think about living in.

Like other noble Lords, I am most grateful to my noble friend Lady Hollis for introducing this debate so powerfully. If I were the Minister I would be getting anxious already about how I would respond to that rather forensic opening statement. I congratulate her, too, on choosing the topic and expressing it in a way that has drawn so many powerful speeches from around the House. In a debate such as this, I am proud to be a Member of this House. I have learnt something from every speaker and having the opportunity to come into the debate at the end is really a privilege.

It is clear that there is widespread concern about the impact of tax and benefit changes on families. Given the rather forensic opening assault by my noble friend Lady Hollis, the Minister has some rather big questions to address. I was impressed that my noble friend had done so much spade work in trying to dig out the cumulative impact on families of successive tax and benefit changes since 2010. She mentioned a whole number of cuts that have been made but there are more. As well as those changes she mentioned, the Government have abolished the health in pregnancy grant and the baby element of child tax credit; they have cancelled the planned toddler element of child tax credit; the government contribution to the child trust fund has gone; the Sure Start maternity grant is not there for second and subsequent children; and the Government are introducing hefty charges for using the Child Support Agency.

All of that makes me worry about the extent of the burden being borne by women and children. This was highlighted very well by my noble friend Lady Massey of Darwen. If I were a mum of young kids, out there on a modest income, I would be starting to wonder what David Cameron thought about me and why so much of this burden seems to be borne by people like me. This is before we discuss the move to uprate benefits by just 1% for the next three years. Would the Minister like to comment on Tuesday’s admission by the Government in another place that that 1% change would increase child poverty by 200,000 more than would have been the case if benefits were uprated by CPI?

What is the Government’s strategy on tax and benefits for families? The Chancellor of the Exchequer, Mr Osborne, explained this very well. Introducing the Autumn Statement in another place on 5 December, he said:

“Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it”.—[Official Report, Commons, 5/12/12; col. 877.]

Let us test the Government’s record against that statement. First, will those who have the most contribute the most? The Government decided to reduce the top rate of income tax from 50% to 45%, a move that will give a major tax break to high earners including, as the noble Lord, Lord Alton, explained very clearly, giving 8,000 people an average tax cut of £2,000 a week. This is at the same time as introducing a Bill that would give someone on jobseeker’s allowance an increase of just 71p a week for three years.

What, then, of the personal tax allowance increase that was advocated so ably by the noble Lord, Lord German? Does that help the poor? Sadly, it does not. The nature of tax allowances is that everybody who pays tax benefits from them and the poorest do not, a point clearly made by the right reverend Prelate the Bishop of Exeter and the noble Baroness, Lady Jenkin. The Child Poverty Action Group calculated that a working family eligible for both housing and council tax benefits will gain just 13p a week from the extended personal allowances. The much quoted Institute for Fiscal Studies noted that households towards the bottom of the income distribution,

“benefit relatively little from the increase in the income tax personal allowance, as many individuals in these households would have had a personal income below the allowance (i.e. they would have paid no income tax)”.

The IFS continued,

“Households in the middle and upper-middle of the income distribution benefit the most as a percentage of income from the increase in the personal allowance”.

So, that is not so good on those with the most paying the most.

What, then, of the opportunity to consider how the Government make sure that the system is,

“fair to the working people who pay for it”?

Tax credits, and all those payments I listed at the beginning of my speech, are or were available to working parents. The Minister may argue that surely the Welfare Benefits Up-rating Bill will rebalance things by giving people on benefits only a 1% increase. Again, no. As the noble Lord, Lord Alton, noticed, although it is true that some 2.5 million workless households will find their entitlements reduced by an average of £215 a year, 7 million households, about half of those with somebody in work, will lose an average of £165 a year. As a number of noble Lords have commented, I am sure we have all seen the report from the Children’s Society which describes the kind of losses that occur. A second lieutenant loses £552 a year; a nurse or a primary school teacher lone parent loses £424. These people are not sleeping off a life on benefits but they will really pay the price.

As we heard from my noble friend Lady Hollis, in the case she cited of a Daily Telegraph reader, tax credits have made a real difference, in particular to enable people with children to move into low-paid work. Not only do they help those who cannot work full-time, they have also helped households where only one member of a couple is in work—the groups of concern to the right reverend Prelate the Bishop of Exeter and to the noble Baroness, Lady Jenkin. The Government have taken the decision to move across to universal credit, to replace all these benefits. I see the noble Lord, Lord German, has confidence that all will be well in those days and I very much hope so, although I confess that I am getting worried about the repeated reports of delays and the constant snipping away at the support within universal credit—not as worried as the Minister, perhaps, but he can tell us more of that later.

If the Government are confident and want to invest in universal credit because it will help people to move between welfare and work, why are they doing so much to undermine work incentives and cut the payments to low-income families in work? How can that make sense? When Ministers say, as they often do, that social security spending is unsustainably high but fail to be honest about the drivers for that spending, not only is that bad politics but it will cause them to make the wrong policy choices, which is even worse. One reason spending on out-of-work benefits is higher than the Government want it to be is that unemployment is higher than the Government predicted, and pursuing economic policies that make the recession worse or longer and do not promote growth are likely to make that situation worse.

The Government have made some decisions about their work programmes. They abolished Labour’s successful Future Jobs Fund and their own Work Programme has been shown to be worse than doing nothing. I regret to say that I read in the Guardian this week that the Government’s much vaunted unemployment figures include some 20% of people who are in fact on job training schemes, most of them still claiming jobseeker’s allowance. The Government need a strategy other than simply blaming people for the fact they have lost their jobs. As a country, we need a strategy to go out there to pursue growth and create jobs, as was so well described by my noble friend Lady Prosser. We also need measures to support those who are long-term unemployed. There are currently more than 130,000 adults over the age of 25 who have been out of work for two years or more. I share the view of the noble Lord, Lord Bates, that people who can work should work. Labour had said that if it was in government now, it would introduce a two-year compulsory programme; when someone had been on jobseeker’s allowance for two years, they would be in a compulsory job. That would have tackled the question of long-term youth unemployment.

I have focused on working families not because I want to demonise or marginalise those who are not in work, but to try to point out that the tendency to imply that the entire social security bill is spent on a bunch of idle layabouts and is paid for by hard-working people is at best disingenuous and at worst playing politics with the lives of struggling families who are already finding it very hard to make ends meet. My noble friends Lady Prosser and Lady Donaghy have explained how tough life can be for struggling, low-income workers, either in employment or self-employment. The last thing these people need at the moment is for the state to take away from them some of the bit of help they have which is just about helping them to make that transition.

Statements such as that from the Chancellor fail to acknowledge that when unemployment is high there are people claiming benefits who, before they were made redundant, were paying tax to fund them and will do so again. It also fails to acknowledge the disabled people who will clearly struggle, a point made very well by my noble friends Lord Touhig and Lady Pitkeathley and by the noble Lord, Lord Alton. I would be grateful if the Minister could confirm what will happen to disabled people who, even if they receive protected benefits, often get 70% of their income from benefits which will be hit by the 1% limit.

I finish where this debate started. The analysis of my noble friend Lady Hollis was very powerful. I urge the Minister to tell the House today whether he accepts her figures for the impact of the Government’s changes to tax and benefits. If he does not, will he tell us when the Government will publish their own analysis of all they have done to families in Britain? In Britain today it seems that we can afford tax breaks for millionaires but a food bank is opening every three days and a million people have resorted to a payday loan just to pay their rent or mortgage. I invite the Minister to explain those priorities to the House.

Personal Independence Payment

Baroness Sherlock Excerpts

Thursday 13th December 2012 Lords Chamber

[Lord Freud]

My Lords, I made a very full Statement, which I hope was comprehensive. We have focused a lot on people with mental health and learning difficulties. Indeed, we divided communication activity in the new assessment criteria, so there is a new activity focused on reading and understanding signs, symbols and words. That reflects the importance we place on the non-physical side which is one of the areas on which PIP is far more satisfactory than DLA

[Baroness Sherlock]

I shall pick up where my noble friend Lady Hollis stopped. Will the Minister help us to understand the implication of the fact that some people will be better off and some worse off? We cannot understand whether those who will be worse off are those, for example, who are getting the severe disability premium at the moment on one benefit. It is hard to understand. We may simply be redistributing the large amounts of money currently given to people with very high needs by giving smaller amounts of money to those who have lower needs. A number of noble Lords were at a briefing this morning where a range of charities were raising questions with us. Has the Minister been able to reflect, for example, on what happens to those who currently receive severe disability premium—those on mid or high rate DLA who live alone and do not have a carer in receipt of carer’s allowance?

[Lord Freud]

We may have to pick that up and take it later as we are out of time. Within PIP there is a greater concentration towards the people with highest needs. I gave out percentages: I think it was 23% of people on both top rates, which is more than under DLA.

Universal Credit

Baroness Sherlock Excerpts

Tuesday 6th November 2012 Lords Chamber

[Lord Freud]

My Lords, we did a survey on our complete claimant base and found, somewhat to our surprise, that 78% of them were already online, and, indeed, that 41% of them used online banking. Our target when we start next year is to have 50% of people going online, with others going to our other channels which support the online process. We plan to have a support and exceptions process to help the people who need support in getting their universal credit.

[Baroness Sherlock]

My Lords, is the Minister aware of the recent report of the Joseph Rowntree Foundation which showed that it will be very difficult for people to claim online because only 20% of people now do so and only 40% are ready and able? What will the Government do if people do not feel able to claim online? How far and for how long are the Government willing to extend paper applications to those who struggle?

[Lord Freud]

My Lords, I should make clear that we are not entertaining paper applications. We are looking at either face-to-face or telephone support groups. We have looked at pushing JSA online and the figures have gone up from 16% in September last year to 39% this September. We are moving people very rapidly to the online route.

Benefit Cap (Housing Benefit) Regulations 2012

Baroness Sherlock Excerpts

Tuesday 6th November 2012 Grand Committee

I have urged the Minister before—and I urge him again—to have in his back pocket the opportunity to place a foot in the Treasury door to get more funds in the kitty for these discretionary housing payments, if for no other reason than to keep MPs off the noble Lord’s back. That is because there are going to be protests up and down the country that this is a nonsense—that things that ought to happen cannot happen because of these restrictions and that DHPs are about the only way in which one could possibly hope that they would happen. I leave him with that thought.

[Baroness Sherlock]

My Lords, so much wisdom has already been shared with the Committee that I am not going to try to tread over the ground so impressively covered. I would like, however, to ask the Minister to focus on two particular categories of people. I am particularly concerned about families with children, especially vulnerable families with children. The Minister may recall that, among the many amendments that he faced during Committee stage, I moved an amendment that specifically asked that families be exempted from the cap if their household contained a child who was the subject of a child protection plan, a children-in-need assessment or a common assessment framework team. The Minister sadly did not smile on that amendment, but I hope that he has had the opportunity in the mean time to think some more about what happens to particularly vulnerable children. Since the Government now have data about the families who will be affected by the cap, will he tell the Committee today how many of the households that will be affected contain a child who was the subject of any of those protection plans or assessments or a common assessment framework team? If he cannot do so today, would he commit to write before his regulations are considered or, if time does not permit it, to place that in the Library as soon as possible?

I briefly remind the Committee why this matters. I raised this on Report and I am not going to revisit the principle, but I was concerned at that stage because of discussions that we had had in Grand Committee, where I had heard a noble Lord—I shall not name him, because he is not here, but he was someone with great experience—describe having sat in a serious case review of a very serious incident with a child. He described what I have heard over and over again from social workers, which is that when you get to a serious case review, people gather around the table from all the different agencies and, about an hour in, somebody always says: “If only we had talked to each other sooner; if only we had all shared information previously, maybe it would not have come to this”. Reports from one London safeguarding board showed that, in a significantly high proportion of families affected by serious case reviews, rent arrears or impending eviction had been an issue; of them, a significant number were known to more than one authority.

A number of noble Lords from all sides raised throughout our consideration of the Bill the question of what happens to families who are forced to move repeatedly—in particular, what happens if households containing vulnerable children of the kinds that I have described are forced to move some considerable distance. There must be a real danger that these children disappear from the system. Could the noble Lord tell me whether he has considered my proposal to exempt those families from the cap? If he has not, what assurance can he give the Committee as to precisely how those families will be protected and how those children in particular will be protected?

Picking up the point made by various noble Lords about families in temporary accommodation, I am very concerned about the considerable distances that they and other families with children may end up moving. Like other noble Lords, I have been reading the newspapers this week—but I do not read those left-wing communist rags. I shall quote a headline to the noble Lord:

“Homeless families to be kicked out of London and sent as far away as WALES as councils buy up cheap properties to house them”.

The article goes on to state:

“Local authorities say sky-high rental costs in the capital, combined with the incoming benefits cap has forced them to send people miles away from home. Areas as far away as Manchester, Merthyr Tydfil and Hull … ‘It is going to be practically impossible to provide affordable accommodation to meet our homelessness duties in London,’ Dagenham Council say”.

I am sure that the noble Lord recognises that that is from the Daily Mail.

Will the noble Lord tell the Committee whether that is true? Is he expecting significant numbers of homeless or potentially homeless families to be rehoused hundreds of miles away? If not, why are so many of our grand newspapers labouring under such a misapprehension? Perhaps the Minister could put their minds at rest. He might want to write to the editors with a copy of his speech when he has reassured us today.

I would be interested to know whether there is any danger that families could be forced to move, as has just been described by the noble Lord, Lord Best, more than once, either because accommodation for the homeless has become too expensive or simply because, as was raised in Committee, the median rents have gone up over the area. Rents may rise in an area as a result of an influx of families and then they could hit a cap again. Is there any danger that that could happen? I am sure that the noble Lord is aware of the evidence showing the impact of repeated house moves on a child’s achievement in school. If that is the case, will he say how the Government will protect vulnerable children in particular from the damage that could happen to them not only in childhood but in later life as a result of their schooling being impaired?

Finally, turning to the report from the Child Poverty Action Group, to which my noble friend Lady Lister of Burtersett, referred earlier, I should like to draw the noble Lord’s attention to a paragraph on page 40. It states:

“Authorities are also concerned about the impact of the cuts on their ability to meet other government priorities, in particular around the ‘troubled families’ agenda”.

Will the Minister tell the Committee what discussions he has had with the DCLG and other departments about the extent to which this policy may impact on their ability to deal with troubled families? If so, what steps are being taken to address that?

[Lord McAvoy]

My Lords, I rise to speak briefly because my noble friend Lady Sherlock has spoken with wisdom and analysis, as have my noble friend Lord McKenzie, the noble Lord, Lord Best, and others. I do not think that I could hope to match that. I prefer to speak about the effects of what this Government are doing on families and people. First, I should make it plain that I am not a social liberal or a bleeding-heart liberal with a small “l” or even with a large “L”. As a genuine member still of the honest working class, I am totally opposed to people fiddling the public purse and the benefits system.

I do not think that the Government care so much about that. I am not trying to paint a picture of an uncaring Government, although the effects of what they are doing here are exactly that. Some of the stuff that has come from the Government for dealing with the people who will be affected by this is in the Explanatory Memorandum to the regulations. Paragraph 7.7 states:

“The Government expects different households to have different behavioural responses to the cap but those affected will have a number of options to consider”.

What are the options to consider? The options include,

“reducing their non-rent expenditure”.

I should like to ask the Minister some questions. Under what budget heading should that come? Does he have any suggestions about which item of household expenditure in these poor households should be cut to make up the shortfall in rent? Paragraph 7.7 suggests that they should make up the shortfall,

“using a proportion of their other income or moving to cheaper accommodation or area”.

We will come to that later, because to me that has the biggest impact on families who are being treated in this way.

Young Offenders: Employment and Training

Baroness Sherlock Excerpts

Wednesday 17th October 2012 Lords Chamber

[Baroness Sherlock]

My Lords, I should start with a confession, which is that 18 months ago I knew precisely nothing about this subject, but that would not have necessarily deterred me from contributing to the debate. In the intervening period, something happened that taught me a lot. I was asked to serve on the Riots Communities and Victims Panel, which the Government appointed to look into the riots of last year. That was an experience that left me profoundly concerned about what happens to the astonishingly high number of young people who end up in Britain’s prisons.

As part of that experience, we went into prisons and talked to a number of young men who had been sent to prison for riot-related offences, and their stories highlighted a lot of the issues that noble Lords have raised. One young man described having applied for hundreds of jobs. He attended 19 interviews and completed two apprenticeships, but had not been able to get a job. If he could not get a job before he went into prison, what were his chances when he came out the other end? Another young man had been employed when he committed the offence, and when I asked, “What are you going to do when you get out?”, said, “I want to go back to my job”. I thought, “You haven’t even begun to appreciate what is going to happen to you when you come out the other end”. As the noble Baroness, Lady Young, pointed out, so many young people do not understand the consequences of what will happen when they have served prison sentences.

When the riots panel published our interim report in November last year, we noted that nearly three-quarters of those brought before the courts for riot-related offences were under 25. Most of those in court had a previous conviction and a small group were serious serial offenders. However, as my noble friend Lady Nye noted, young adults are overrepresented in the prison population. They also seem to be more likely to reoffend. In the year ending March 2010, more than 113,000 young people were given what is rather unpleasantly called a formal disposal, of whom a third committed a proven reoffence within a year.

However, what scared me was that the 2009 re-offending figures state that 65% of offenders aged 18 to 20 who are discharged from a custodial sentence of less than 12 months reoffend within a year. Let me say that again: 18 to 20 year-olds come out of prison after a sentence of under 12 months, and two-thirds of them reoffend within a year. What are we doing about that waste of lives, or indeed of public money? What an astonishing figure. What are we going to do to tackle the lives ruined, not just the young people’s lives but those of the victims of the riots? I had the opportunity to meet all kinds of victims whose lives were ruined too. If these young people go out and reoffend, more people’s lives will be ruined. Even if one does not—and I really do—care about those young offenders, as a society we should at least care about the consequences of failing to treat them appropriately.

The riots panel produced a large report, which I hope the Minister has had every opportunity to read, mark and inwardly digest by now, because much of it related to his areas of responsibility: young people, work, the criminal justice system, and a great deal more. Today, I can pull out only a small number, but I want to ask about just a few of the conclusions we reached. Some of the others have been raised by other noble Lords.

A key issue seems to be the transition between the youth and adult justice systems. We heard all kinds of stories about where this goes wrong. However, aside from the general problems of transition, we heard stories of young people either being unable to take courses or that moving them resulted in the loss of all records, which meant that they could not carry on where they had previously left off. That meant that the value of any education or training they received in prison was simply wasted. The panel recommended that a nominated officer be assigned to each young adult whose case is passed between young offending and probation teams to help to manage that.

As my noble friend Lady Healy noted, the provision of proper wraparound support is crucial. We were impressed by many schemes, such as that operated by the Prince’s Trust, mentioned by the noble Baroness, Lady Stedman-Scott. Its scheme at HMP Lewes includes meeting at the gates, mentoring as role models, having someone on hand to sort out practicalities, and support about everything from college places to housing and employment. They are all crucial to the support. However, there is only so much a mentor can do if appropriate provision is not readily available.

Given that the Minister who has the pleasure of replying today is the noble Lord, Lord Freud, I decided that I would pick out a few issues related to his empire, rather than more generally, as it might make it easier for him to respond. In March, the Government announced that people claiming jobseeker’s allowance in prison or within 15 weeks of leaving would be fast-tracked on to the Work Programme. This seems to be a marvellous idea. Does that include all young people leaving custody, even those on short sentences? Is the fee still £5,600 for getting an offender into work if they stay there for two years, as was the case when the scheme was announced? I can see the Minister nodding. Is that amount enough? I understand that the highest payments to Work Programme contractors who aim to get people into work who are a long way from the labour market is £13,000. If £13,000 is paid for some categories, why is such a small sum paid to those who are helping young offenders get into work, given how difficult we have heard it is for them to get in there?

What happens if someone does not get a job within two years? The riots panel was very concerned in general about young people being parked on the Work Programme. Because of the nature of the contracting arrangements, there came a certain point when there was no economic benefit to the provider to do anything more with them; if they passed that time, you might as well let them sit there. The panel recommended that that simply should not be allowed to happen.

I very much support the point made by the noble Lord, Lord Aberdare, about the importance of contracting directly with some of the smaller voluntary or specialist organisations that have the experience to work directly with this client group. I understand why procurement might tempt the Government into awarding contracts only to large prime contractors and letting sub-contracting arrangements go on, but all the evidence shows that that simply is not working for most voluntary organisations. Many voluntary organisations have gone out of business or are simply unable to work in those conditions. Frankly, I would sooner trust the kind of work described by the noble Baroness, Lady Stedman-Scott, and the work I have heard about from the St Giles Trust and many other voluntary organisations, than something sub-contracted, either from a much larger provider or even directly from Jobcentre Plus.

Finally, what kind of career development advice can be provided to young people coming out of prison? I am still haunted by one young man I spoke to. We asked him to describe what happened when he came in. He thought for quite a long time and then said that when he arrived, someone had asked him: “What do you want to do with your life?”. The reason it was so memorable was that no one had ever asked him what he wanted to do with his life, and maybe someone should have. If no one had up to that point, is that not something that whoever the Government ask to work with these young people should have the time and space to do?

I will not go on as time is short. There have been so many wonderful speeches, and I congratulate my noble friend Lady Healy on having provoked a marvellous debate. I hope very much that the Minister will be able to give us the answers that we need.

Child Support Maintenance Calculation Regulations 2012

Baroness Sherlock Excerpts

Monday 15th October 2012 Grand Committee

What has gone wrong since July 2012? Can we have an assurance that we will have a decent period of full running with a caseload of all new applicants before parents with existing CSA cases are moved across? What are the contingency plans if the computer system does not work properly? These are technical issues and may be indirectly related to the statutory instruments, but I for one am very concerned. There is an awful sense of déjà vu all over again about these things. I know that the Minister understands computers and these systems. He has persuaded me that agile computing is a big improvement—I believe that. I just hope that he can put on record the fact that it is not that we are just not facing up to the fact that this computer system is slipping, and in a way that we really should be told about if there are the kind of problems that I suspect there may be.

[Baroness Sherlock]

My Lords, I should like to pick up where the noble Lord left off. I am grateful for the opportunity to discuss this rather large package of regulations. In doing so, I should remind the Committee of my declared interests, which include having been a non-executive director of CMEC and, in the dim and distant past, a deeply historic interest in having once been the chief executive of the National Council for One Parent Families, which is now part of Gingerbread—to whom I am very grateful for their briefing, as with other organisations.

I will focus on three specific issues. One has just been picked up, about the readiness of the new statutory maintenance system. Secondly, perhaps the Minister could help us better understand the decisions behind what income to include or exclude. Finally, I will pick up another issue raised by my noble friend Lord McKenzie of Luton about the readiness of parents for the introduction of the new system.

First, on the readiness of the system, I was very glad that the noble Lord picked up the issue of the pilot group. I was going to ask the Minister to give the names of the members of the pilot group because frankly I cannot believe that it is so big that he could not, with his legendary skills, memorise their names very easily. The question is whether he is confident that a pilot group of that size and peculiarity, statistically speaking, will provide all the evidence the department needs to assess whether the system will work once it is rolled out properly.

The second question raised by the noble Lord, Lord Kirkwood, is much more worrying. It is the idea that we will end up seeing the critical testing of phase two performed in parallel with the programmed delivery of phase one. What will that tell us down the line? I read the report from the Public Accounts Committee, which I am sure is acid-etched on the Minister’s heart. He may recall the questioning by Mr Bacon, who was teasing out whether, when simultaneous testing and development had been tried in the past, it had led to problems. He mentioned tax credits, the Criminal Records Bureau and the Rural Payments Agency. He said:

“The testing was done in parallel in all of them. In some, they hit the go-live button when they knew it didn’t work properly, so we are right to be concerned about this, aren’t we?

The committee was taking evidence from the Permanent Secretary, Mr Robert Devereux. Mr Bacon went on to say:

“So you are not going to hit the live button until you are sure it works, even if it means a delay?”

Robert Devereux replied by saying:

“Absolutely not, and you can assume that that is exactly where Ministers are too. We are perfectly aware of the history”.

I should like to give the Minister the opportunity to go on the record himself on this. Can he assure us that this will not happen? Does he personally have confidence in the amount of testing that it will be possible to carry out before the system goes live?

What assurances can the Minister give about the consequences of the potential losses that have just been mentioned? If delay is going to cost the department £3 million or £4 million a month, will that money come from anywhere else in child maintenance? If so, will we have an opportunity to scrutinise the effect of that? I am also interested in what potentially could happen. My noble friend Lord McKenzie said that a series of different systems could all be running at the same time. Could there be a period, and how long would it be, when delivery staff might be running four systems in parallel? These would be CSR, the pre-2003 old-rules system; CS2, the 2003 current-rules system; the offline clerical system; and the new IT system. What is the maximum period during which the four systems might run in parallel? Given the cuts in staffing levels under the resource constraints the department is facing, can he give an assurance that the department can manage this so that existing CSA clients do not suffer as a consequence?

The next area that I want to address is the effect of the decisions that the Government have taken in relation to the amounts that will be payable. I am particularly exercised, as my noble friend Lord McKenzie flagged up, about the decision that the new system will ignore tax credits when considering the income of a non-resident parent. According to the Government’s own estimates, around 100,000 existing CSA clients could lose an average of £6 per week in child maintenance as a result of changes to the way it will be calculated. Tax credits will no longer be counted as part of gross income. That is significant because at present just under a third of non-resident parents within the CSA are entitled to tax credits, and therefore a significant financial blow to many single-parent households will be coming at a time when they are already suffering in other areas. They will end up having to pay fees for charging out of their current income, and they are facing cuts to benefits in other areas. There are all kinds of problems for this category, and they could be quite significant. I will not go into any more detail until the Minister has had a chance to respond, but I reserve the right to come back on it. Can the Minister explain quite carefully what alternatives were considered? Given that tax credit information rests with HMRC and is therefore available to the department, why can that information not be considered?

Secondly, as others have mentioned, the Government have confirmed that for non-resident parents within the statutory scheme, they intend to raise the minimum flat rate of child maintenance from £5 per week in current-rules cases to £10 per week. That rise is far above inflation, which would probably have been to around £7, but it amounts to 14% of a single person’s weekly jobseeker’s allowance of £71 per week. That is a significant amount of money and is even more than the 12% of earnings that a working non-resident parent in the £200 to £800 band will be expected to pay. Two things have happened here. The parent with care may be getting less money while the non-resident parent in the poorest income bracket will have to pay a higher proportion of his income than those who earn more. On top of that will come the 20% collection charge, should that become necessary.

At the same time, the scheme will be more generous to self-employed parents. The Public Accounts Committee recently criticised the fact that the maintenance calculation will be based on taxable earned income for PAYE taxpayers and total taxable profits for the self-employed. Unearned income such as dividend income or rental income will not be counted. The onus shifts to the parent with care to find that out and apply for a variation. It is only at that point that HMRC will be asked to provide details of taxable unearned income, which it presumably must have anyway. I accept that that will not be the case below the threshold, but I am interested in how that will happen in practice.

The PAC report states:

“The Commission should plan to access all information on income when assessing how much maintenance non-resident parents should pay”.

The report explains how in the new system’s maintenance calculations will happen, and continues:

“Relying solely on parents with care to identify such practices by the non-residential parent to ensure all significant taxable income is taken into account is unreasonable when taxpayer data are available to the Commission. The Commission should access all data on all taxable income sources, such as capital gains and dividends, to calculate the maintenance due, not just PAYE information. Where self-assessment data is not filed until later, the Commission should reassess the maintenance due as part of the next annual review”.

This is particularly especially important because—if I have understood correctly, and I may well not have done as I am rather out of date—HMRC data on income will in future be treated as final so there will not be an opportunity for the parent with care to seek a variation on the grounds of lifestyle, which is what I think the Minister was saying at the outset. This means that there will not be an opportunity for a child maintenance assessment to take account of significant non-taxable income, as my noble friend mentioned, such as substantial ISA and savings certificate holdings or a failure to declare income. I am interested in how the Government respond to the PAC’s concern. Will the Minister explain to the Committee how that combination of the fact that this income does not have to be taken into account and the greater difficulty for the parent with care in being able to persuade the authorities to take it into account, should she be aware of it, will be dealt with? What steps will the Government take to make sure that any potential deliberate evasion of maintenance due will be tackled?

Finally, I want to explore what steps will be taken to prepare parents for the impact of the changes. The new calculations seem to be creating considerable losers and gainers among existing CSA clients who move into the new system. Of course, some gain and others lose, but each time that that happens, there are two parties to that transaction, so it is not always a zero-sum game. The department has managed to make it worse than a zero-sum game by taking charging out on top so everyone is potentially worse off. At the very best, it will be a zero-sum game.

When the new historic gross-income method of calculating comes in, around 9% of existing non-resident parents—just over 100,000 cases—could see a rise in liability of £40 or more per week. Around 3% of existing parents with care—some 33,000—could get £40 per week less. These are very significant sums. Given that, what information and advice will be given to parents regarding the impact of the new rules to prepare them for the translation to the new system? Have the Government given consideration to any kind of transitional help? In other changes in benefits or tax credits, or even in the replacement of council tax benefit, the Government have been able to be persuaded that some sort of transitional help should be available because the jumps in the amount people have to pay or the reduction of the amount they receive are simply too great. Why have the Government not been able to come forward with some means of helping parents in this system?

I shall not say any more at this stage, but I should like the opportunity, if necessary, to come back at the end. I hope the Minister will be able to give us a detailed account of these very significant regulations with enormous consequences. I look forward to hearing his response.

--- Later in debate ---

[Lord Freud]

We are still on that timetable, absolutely. But we will be flexible as a department. The one piece of advice that the Public Accounts Committee has given to us as a Government, and to the last Government, is to feel our way into these things, to be flexible, pathfind the way and build from there. So we are taking that advice. We cannot have it both ways. This means that there is not a date on which we must press the button, and if we do not press the button on that day we are late, it is a delay and a fiasco. I believe it is wrong of us as politicians to play with computer systems in that way. It is not the right way to do it. We must go in steadily and introduce these systems in a smart, incremental way. That is the lesson that we have learnt from some superhumungous tragedies. When it comes to computer systems, the Government get a lot of the stick for bad computer system introduction. This is because Government computer systems are publically known. The private sector has just as many snafus with computers as the public sector, it is just that they do not make them public.

This ties in neatly to the point about four schemes in parallel, from the noble Baroness, Lady Sherlock. We already have three systems running in parallel, and this new system will be more automated and more efficient than those. By using the pathfinder approach that I have described, the new system will be working well before we introduce it full tilt. If the new system is working and sustainable with the kind of volumes that I described, then we will be able to manage the four systems that we will have under our hand at any one time.

[Baroness Sherlock]

I am grateful to the Minister. As I understand it, one of the arguments for the new system was that, as it would be more efficient, there would be fewer staff needed to run it and it would be cheaper et cetera. I know that that may all be up for grabs, but is the Minister confident that the kind of cuts in resource that CMEC had before its transition will leave enough staff to be able to run this? I understand the point he makes about agile development and wanting to take time to run the system in before shedding its predecessor systems. However there is a danger, as seen both here and with housing benefit. As each new system has come in, everybody has been assured that the new system will be the thing that will render all previous systems unnecessary, but all that has happened is an accretion of systems. I just want to be confident that he feels that he has the resource to manage all these systems for as long as it takes, because otherwise people stuck on the earlier systems could suffer and find their situation getting worse, not better.

[Lord Freud]

Yes, my Lords. The approach is to bring in a new system, which is efficient and automated, at a level that does not consume a lot of resource to start with. You are running your existing systems with the resource that they require. As you ramp up the new system, it starts to establish itself, because you are doing it on a careful pathfinder basis that maintains that automation and efficiency. Then you can start, in practice, reducing the load on the other three systems. That is how you get the gains by doing it, and that is why it is so important to ramp up the new system so that it does not throw a huge amount of clerical work back into the system to compound the clerical overload. We are still running 100,000 cases clerically in one way or another. It may appear a bit smoother to the outside world now, but every £100 transferred is costing the state £35, and that is not something that any Government can tolerate. That is the process: get something efficient; roll it out when you know that it works; build it up; and then start to work down your existing portfolio. That is the process.

The noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, asked about assets and lifestyles. The reality is that that provision was very difficult to use, as everyone involved knows. It was not a successful mechanism for the parent with care to use. Capturing actual income is far more meaningful for parents and far more administratively achievable, which is why we switched over to that approach.

The minimum flat rate of £5 has not increased since 2003 and will remain until the new scheme is fully open to all new applicants. I fully accept the point made by the noble Baroness, Lady Sherlock, about whether it is compatible with UC. At some stage in the future, it may be possible to look at tapers and matching it up, but it is too soon to do that. I accept the general point, but I do not think we are there yet.

The noble Lord, Lord McKenzie, asked about ignoring unearned income in the calculation. We are making the main calculation on taxable employment income, trading income or pension income because HMRC holds that information for the vast majority of taxpayers. Taxpayers who are not liable for self-assessment are not required to declare income of less than £10,000 per year from savings and investments. It would be unfair to take account of unearned income details sourced from HMRC and not pursue parents who had that income but were not required to declare it. Asking non-resident parents to supply that information would be to repeat the delays of the current schemes where non-resident parents are often unco-operative. A parent with care can apply for a variation to take account of unearned income. It is the same with shared care. The noble Lord was right that where it was agreed that there was shared care and the disagreement was about how much it was, the one-seventh assumption would come in. Where there was no agreement that there was sharing, it would have to be done by way of variation.

On taking account of pension schemes, the new scheme will, as now, allow contributions to an occupational pension scheme to be deducted from income, with the resulting figure used to calculate child maintenance. There is no limit on the amount of contributions that can be deducted. That is not a change in the existing system.

[Lord Freud]

May I offer to write on that issue? We are layers down. Rather than dealing with that impromptu I will aim to write, as I will on how the prompts might work for the non-resident parent on their pensions. Again, that is getting to a level of technicality that I do not have at my fingertips. On tax credits, ignoring that loses 100,000 families about £6 a week in maintenance. Both noble Lords made that point. Again, that is an attempt to get rid of a level of complexity and drive through simplicity. We have set the percentages and thresholds to ensure that changes in liability are minimised except where, as a flat rate, we deliberately intended to raise them. We expect more than half of non-resident parents to pay more than under the current scheme.

[Baroness Sherlock]

Does the Minister accept that those who will pay more and the lone parents with care who are getting less may not be the same pairs of people? Obviously one cannot assume that the poorest parents with care are necessarily partnered to the poorest non-resident parents, but actually research shows that broadly speaking it is not uncommon for partnerships to be among people of very similar socioeconomic backgrounds and demographics. Is the Minister conscious that, even if overall many non-resident parents are paying more, the poorest parents with care may end up getting less as a result of the fact that the poorer among the non-resident parents are having this income ignored?

[Lord Freud]

I am not sure I have a precise breakdown within the socioeconomic groups to do that analysis. I will look later to see if I can send the noble Baroness some information on that. I am not sure off the top of my head that I know how that balances out but I will see what I have and include it to the extent that I do.

--- Later in debate ---

[Baroness Sherlock]

I am very grateful for that. Also, if that is not the case, I would settle for an alternative justification of the decision.

[Lord Freud]

I will either produce information or a justification.

On the war pension point made by the noble Lord, Lord McKenzie, a war disablement pension is considered a prescribed benefit, in which case the flat rate of maintenance will apply. A parent with care can apply for a variation to take account of any additional income received by the non-resident parent.

On the 12-month rule and the position with the Scottish minutes of agreement, we are in discussion with the Ministry of Justice and colleagues in the Scottish Government to ensure that the statutory maintenance system and the family justice system both north and south of the border work together as effectively as possible in the interests of parents and children. We are hoping to meet family lawyers’ representatives in England and Wales and Scotland to discuss this soon. However, I should say that at this point we are yet to be convinced that there is a compelling case for legislative change.

In reply to the question from the noble Baroness, Lady Sherlock, on the level of information and evidence required from a parent with care to make an application for variation, the link with HMRC means that the department has immediate access to a non-resident parent’s income information, which removes the requirement for the parent with care to supply substantial evidence of the non-resident parent’s financial circumstances. That means that fewer applications will be rejected at the preliminary stage and makes it easier for the parent with care to apply for variations. I believe that I have dealt with all the questions.

[Lord McKenzie of Luton]

Perhaps I may briefly revert to the issue of shared care when it is equal shared care. Obviously if both parties agree that there is equal shared care, they would not be in the system anyway because no maintenance would flow from it. Clearly it is potentially in the interest of the non-resident parent to claim equal shared care because then there would be no maintenance liability. What will the process be for determination of that and whether any form of appeal is attached to it?

[Baroness Sherlock]

One of the questions I asked was in relation to preparing parents in the current system for moving across to the new system, in particular transitional protection. I apologise if I missed the Minister’s answer.

[Lord Freud]

On transitional protection, the basic approach is that these rules have been very difficult to operate and our intention is to have very simple rules that are capable of being applied to the majority of parents. While there may be winners and losers, we expect there to be relatively few large losers. Many of them are likely in any case to go into a family-based arrangement, which may be a better option. That is the reason for not planning transitional protection. We will be providing an expanded service of information and advice to customers before the launch of the new system, to be called “Help and support for separated families”.

The way it will work is that if there is equal shared care and there are no payments either way, both parents have to agree that. If there is no agreement, we will go to the one-seventh proportion; that is, one night of shared care. We will accept verbal information about shared care, but both parents must agree. If they do not do so, we then move into the more formal process.

I am down to a very few issues on which I can now write to noble Lords, otherwise we will be here all night. There will be plenty of opportunities to debate these issues since further debates on the child maintenance system are coming up, and I know that many of us are looking forward to those. However, these regulations are narrow in scope and focus on simplifying the statutory child support scheme, improving the service to clients, reducing the costs to the taxpayer and increasing the flow of maintenance payments to children. I am heartened by the fact that there is support in principle, albeit that I will provide some more detail. On that basis, I commend this instrument to the Committee.

Credit Unions

Baroness Sherlock Excerpts

Thursday 19th July 2012 Lords Chamber

[Lord Freud]

My Lords, the whole point of this exercise is to expedite the growth of the movement. There are currently 1 million members of credit unions. The target that we have set is to double that within five to seven years and to make credit unions self-sustaining, which they currently are not.

[Baroness Sherlock]

My Lords, I am very glad that the Minister has given us that target of 2 million people but, in the light of the figures given by my noble friend Lord Kennedy, if 7 million people are using high-cost credit at the moment, with the extortionate interest rates of doorstep lending, is 2 million too unambitious a target? Should the Government not be shooting for a far higher figure?

[Lord Freud]

My Lords, we have to build an industry that is self-sustaining. That is the vital priority. It is no good piling money into an industry that cannot effectively absorb it. It is vital that we get this right, and this expansion project is the right way to go.

Public Bodies (Child Maintenance and Enforcement Commission: Abolition and Transfer of Functions) Order 2012

Baroness Sherlock Excerpts

Thursday 12th July 2012 Grand Committee

[Baroness Sherlock]

My Lords, first, I apologise to the Minister for having missed the beginning of his opening remarks. I am afraid that I misjudged the timings somewhat. In speaking to these regulations, I remind the Committee of my registered interests. In particular, although the Child Maintenance Enforcement Commission had a brief life, I managed for two of its years to be a member of its board, serving as a non-executive director until 2010, shortly after I entered the House. I also declare that I am a former chief executive of One Parent Families, now Gingerbread, to which I am grateful for the briefing.

These are small regulations to effect a major reorganisation. I want to ask the Minister a couple of questions, picking up some points made by my noble friend Lord McKenzie. When CMEC was set up by the Child Maintenance and Other Payments Act 2008, its primary objective was,

“to maximise the number of those children who live apart from one or both of their parents for whom effective maintenance arrangements are in place”.

The wording is significant. As the Minister knows, this does not refer simply to maximising the number of maintenance arrangements made through the statutory system but to maximising the number of arrangements in total. In other words, CMEC had a duty, which it took very seriously, to maximise the number of private maintenance arrangements alongside those undertaken using the statutory system. Given that, what assurance can the Minister give us that this objective will be taken on by the Secretary of State, to whom CMEC’s functions are being transferred? How will that be discharged? The noble Lord, Lord German, suggested that perhaps a report to Parliament might work.

Before CMEC was created, when the Secretary of State had responsibility for child maintenance, the Secretary of State actually issued targets and then reported publicly to Parliament on the extent to which those targets had been met—or not. That might be something that the Minister might like to take on board. Can he tell us if the Secretary of State would be willing to do that, and if not, what other mechanism is there for reporting to Parliament and for ensuring that Parliament can have some criteria for judging the report that is thus made?

The Minister, I am sure, will have read the report on CMEC by the National Audit Office of 29 February 2012, as well as the report of the Public Accounts Committee from April. In relation to the decision to charge parents for using the statutory maintenance service, the PAC report noted:

“A successful fee regime will depend on the Commission being able to deliver reasonable standards of service”.

However, it also said that because of problems with the service, there was a danger that parents would not want to use it. The committee noted:

“The risk is that parents who cannot agree private arrangements and do not trust the statutory system are left without effective child maintenance arrangements and that could impact on child poverty. The Commission should work with stakeholders to monitor whether more separated families agree their own arrangements and understand any service-related reasons for lower than expected applications”.

It also suggests that:

“The first monitoring report should be carried out six months after the introduction of fees”.

What is the Government’s response to that recommendation from the PAC? I apologise if the Minister mentioned that in the first five minutes of his opening remarks. Will the Government accept that recommendation and the timetable, and if not, by what other means are they going to address the concerns raised by the PAC?

Can the Minister give the Committee some assurances about the readiness of all involved for this transfer? The PAC report also noted that the commission’s plans to deliver the £117 million of cost reductions imposed on it by 2014-15 were “high risk”. It said:

“There is a £16 million funding gap for 2014-15 which could widen by some £3 million for every month the new IT system is delayed. A further shortfall of up to £30 million could arise in 2014-15 if projected fee income does not materialise”.

What assurances can the Minister give the Committee that the statutory service has adequate funding to deliver the service promised when the Welfare Reform Act was passing through this House?

Finally, I know that the Welfare Reform Act has made the decision to transfer this but can the Minister tell us what lessons the Government have learnt from history? The department has had the opportunity to see the CSA operating both inside and outside government. In bringing it back in, what lessons has the department learnt and how does it hope to avoid some of the very considerable problems the CSA had in the early 1990s?

[Lord Kirkwood of Kirkhope]

My Lords, I am delighted to follow the noble Baroness, Lady Sherlock, because she said just about everything I had in mind to say. I concur with the important points that she made.

I am very pleased that the noble Lord, Lord Freud, offered us a meeting later in the year. That is part of his unique way of doing business and it is very helpful to the rest of us as we try to understand what is going on. I understand that he and his colleague in the other place are putting a great deal of work in to this important area.

I will stress—because it is easily forgotten—that the client group with whom we are dealing may be disproportionately affected by the impact of the austerity measures that the country faces. I am sure that the Minister and his advisers are already aware of this. As a board member of the Institute for Fiscal Studies, perhaps I could draw his attention to the analysis by James Browne that was published by the IFS for the Family and Parenting Institute in January 2012. It predicted an 8% net loss of income for working single parents and a 12% loss for non-working single parents. We are dealing with a particularly vulnerable client group here, and we all know that. The IFS analysis is useful as a reminder of the importance of getting it right. I know how concerned the noble Lord, Lord Freud, is about these vulnerable groups because he is doing a lot of work on universal credit to try to make sure that these issues are addressed.

In addition to the points addressed to the Committee by the noble Baroness, I will say that other NAO and PAC reports that came out earlier this year—particularly on client fund accounts and on CMEC’s plans to reduce its own spending, which was in an NAO report on 12 February this year—raised matters about which we should all be concerned, including the ability of CMEC to achieve its estimated £117 million savings between now and the fiscal year 2014-15. That is something I would like to put on the agenda for the meeting later in the year, which I would be very pleased to attend—if I get an invitation after this speech.

The NAO was also concerned about the plans to levy charges. I do not need to repeat the point that there is some disjunction between the early planning and the work that the NAO did in highlighting some of the gaps. This will have been worked on and I hope that there will be further and better particulars available. At any future meeting I would like to try to understand how much risk there is in the levying charges policy that is currently being publicly promoted, at least by CMEC.

I agree with the NAO analysis about planning for a 71% take-up of the new statutory system. I have no way of knowing the metrics, systems or processes that CMEC has for measuring that 71%. It is relying very heavily on that as an income stream from which it hopes to move forward. The Comptroller and Auditor-General, the NAO and the PAC were interested to learn more about that, and again expressed concerns. I will also reinforce the point about maximising payments. That is an important duty that will be lost. Any system, whether or not it involves annual reports, should underpin efforts to win back as much of that as we can in the circumstances. That would be useful.

Finally, we still expect a consultation on charging mechanisms. That is a very important piece of outstanding work in which the community, pressure groups and others to whom this area of public policy applies are particularly interested. Perhaps we could add that to the agenda of what now looks like quite a busy meeting some time in the autumn.

This is an important area. I am very ambivalent about this change but I can understand that the costs have to be reduced in a sensible way. I just hope that we are able to do that in a way that does not disproportionately affect the client group we are seeking to serve here. But I have trust that my noble friend Lord Freud is aware and alive to all these things. I hope that the Committee can look to him to give us reassurance, whether privately or publicly, going forward.

--- Later in debate ---

On the question about timetabling asked by the noble Lord, Lord McKenzie, the programme is extremely complex and we are focusing on achieving the introduction in late 2012. There is a lot of work to manage the programme time and cost. Ultimately, we need to introduce a service that works for our clients, so we will introduce a system only when it has been thoroughly tested. Indeed, if I am asked about the lessons of history, as the noble Baroness, Lady Sherlock, did, that is probably the most important one. The early introduction of an unready and inadequately tested system was one of the causes of why things went so badly wrong in 2003. I am not sure that I can think of many other lessons from history off the top of my head.

[Baroness Sherlock]

I would accept a letter from the Minister.

[Lord Freud]

Actually, I would like to turn that around on the noble Baroness; I will accept a letter from her on the lessons from history, and I will pass it on and make sure that they are applied. I look forward to receiving that.

On my noble friend Lord Kirkwood’s question about how we will achieve the savings, we are talking about securing ministerial accountability—this is not about driving savings. The amount of savings from this measure is pretty modest: direct savings are probably running at about £500,000 a year, and that is due to changes to IT systems and one-off costs. We would hope to see longer-term savings from integrating services more deeply into the department. I think, and this point was raised by my noble friend Lord German, that there are some real opportunities here to get holistic support. The longer that I have been in this job, the more I have realised that bringing support together for people and families in trouble is the way to go. There is an opportunity for us to pull the services together in this context as well as in other contexts.

I am tempted to offer to write to the noble Lord, Lord McKenzie. I always feel that it is a triumph if I can get out without offering him a letter because I can answer all his very clever questions. I think that I am down to the one on adverse tax consequences. Although it is always difficult to prove a negative, I cannot imagine how there can be adverse tax consequences because we do something in the middle of the year, when they are both effectively Crown bodies. If that is a wrong tentative statement, I will commit to write, but I hope that I will have avoided any need to put pen to paper for him on this occasion; that would be one of my personal targets. This is about making sure that Ministers are fully accountable to Parliament.