Welfare Reform Bill

Lord Empey Excerpts

Tuesday 14th February 2012 Lords Chamber

[Baroness Drake]

My Lords, I support Motion G1. I am conscious that I have entered the debate several times on the matter of the grace period before the weight of penalties comes into play and the benefit cap bites for those who lose their job through redundancy or some enforced reason. I apologise today if I sound a little repetitive, but it is something about which I feel most strongly. A modern welfare system, while addressing benefit dependency, must also support those hard-working families with a clear work ethic in managing today’s flexible labour market. It must not fail to support responsible hard-working people and their families managing today’s economic realities. There is a danger that this dimension has lost some focus in the current debate on the Bill.

The Bill writes the welfare rules for those in work and for those who have no record of benefit dependency. There are millions of people in this country on modest and low incomes who are hard-working, take the hard knocks that life hands out to them and fight to stay on course, so I welcomed the comments from the Minister, Chris Grayling, in the House of Commons on the 1st of this month that the Government would put in place a period of grace of nine months for those who have been in work for the previous 12 months and have lost their job through no fault of their own. The Government’s recognition of the case for a period of grace is most welcome, but I remain anxious.

We know that the Government want to see increased flexibility in the labour market, including, if I may speculate, revisions to employment laws on redundancy consultation and no-fault dismissal for SMEs for up to two years—we await their proposals on these matters. This desire, taken together with the realities of today’s labour market and the intensity of competition, makes a powerful case for inserting into the Bill the provision that regulations will provide for a period of grace in the circumstances where someone faces forced job loss. The provision of a period of grace for a fair period should be hardwired into the welfare system—an integral part of the definition of fairness—and not too easily reserved to the Secretary of State’s discretion, which is why I feel that the amendment is correct.

Ever one who is keen to build on progress to see if there is any more progress to be made, I would like to clarify a matter with the Minister. Experience since 2007 has revealed that some employers have been more creative in responding to downturns than by using the traditional laying off of workers and redundancies. We have seen reductions in working hours and we have seen unpaid sabbaticals—that is, extended periods of non-payment and no work, where, through agreement and to avoid compulsory redundancy and to assist the company, the employment contract has stayed in place but the flow of wages has been suspended or reduced. I hope that the Minister will agree that positive and innovative employment practices to ride out a recession are to be encouraged; they can be good for productivity, employment and the speed of competitive response. However, that raises a question: in such situations where hours fall to a very low level so that they are below the threshold and work conditionality kicks in, or where any payment of wages is suspended for a significant period, will the period of grace apply? In such a situation, the people affected may not strictly have lost their job, because the employment contract remains in place, but they have lost their wages through no fault of their own.

I repeat that hard-working families have paid their dues but will need support in managing their way through a difficult labour market. A period of grace is of itself fundamentally fair. After all, for hard-working people who have lost their job and are desperately seeking another one, which most of them do, what change of behaviour can the immediate application of the cap be designed to achieve? Rather, it would have the perverse effect of undermining their efforts to get back early into the labour market because they were rushing around trying to find affordable accommodation, move their children into new schools or whatever. While I welcome, in the statements from the Minister today and from Chris Grayling, that they have accepted the argument for a grace period, in my view that argument is so compelling that it should not be a matter of discretion but should be enshrined in the Bill. Could that period of grace be applied in a way that fits in with trends in the modern labour market?

I would like to make a final comment. I had not intended to do so but have been prompted to by the comments of the right reverend Prelate the Archbishop—sorry, the Bishop of Ripon and Leeds; I accidentally promoted him there—on kinship carers, a matter on which I myself have tabled several amendments. The Minister has given us his promise that he recognises the contribution of kinship carers, who keep 200,000-plus children out of care, and that he is on the case. I trust him on that; I trust him to honour his promise. I hope that he can reassure the right reverend Prelate that he will hold to his promise, even if today we cannot get the details of how he will do so.

[Lord Empey]

My Lords, I have some remarks on Motion G2. I recall vividly that in the Autumn Statement there were indications that regional pay was to be examined and the Chancellor had asked regional bodies throughout the United Kingdom to report to him by next July on the issues of regional pay. From a regional perspective, I have to say to the noble Lord, Lord McKenzie, that I have great reservations about his proposals. While a cap is by definition a blunt instrument, and there always has been a specific London issue in pay for as long as I can remember anyway, if we go down the route of establishing a body to run around the regions—as the noble Lord, Lord Newton, has pointed out with his usual typical incisiveness, the variation is not only between regions but within regions and within cities, streets and districts—then I fear that we open the Pandora’s box not only of regional pay but of regional benefit, and sooner or later some people are going to say regional taxes. I fear that the amendment could inadvertently have a perverse effect on all of us, particularly in the regions. I understand that there is very much a London issue, but within regions there are vast variations.

If you want to encourage people to move to where they are more likely to get work, that tends to be in densely populated areas—that is just the reality of life. This measure, however, portends a reality where you could discourage people from going somewhere that they are more likely to find work. I fear that if we go down the road of the amendment, we could open up a range of issues in the regions relating to pay, benefits, taxes and the whole relationship that exists there.

When I heard the noble Lord’s colleague announce this policy in the other place some time ago, I was greatly surprised. Many of his colleagues spoke to me after I had made the point about regional pay and said, “Yes, we can see this is coming”. However, this would actually accelerate the process, so I hope that the noble Lord might not move his amendment and might instead reconsider the policy as it might apply to the regions.

[Lord Freud]

My Lords, in my opening remarks I described the measures that the Government are putting in place to ensure that the cap operates fairly. I explained that the exemption of people in the ESA support group ensures that the cap affects only people who, taking account of their health and any disability, can reasonably be expected to do work or work-related activity. I explained that the nine-month grace period will ensure that those who have been in work for 12 months or more will have time to find alternative employment or consider alternative options before the cap applies.

I have been asked a series of questions and I shall try to deal with them rapidly. On the question where the money is coming from, I think we shall leave that to the Budget.

Where one member of a couple satisfies the criteria for the grace period, yes, it will apply. The grace period will apply where either member of the couple meets the criteria.

I was asked which payments would be ignored. The noble Lord, Lord McKenzie, went through what I said in Committee and I do not think there is any reason to change any of that. We have to work out the exact nature of the work exemption but, in principle, I see no reason why the grace period should not apply when hours are reduced.

The question of the noble Baroness, Lady Drake, is so detailed that we need to wait for the regulations. That is a very good reason not to put some of this stuff in primary legislation.

An important point was raised by my noble friend Lord Kirkwood about monitoring people. We will monitor these cases very closely and keep track of their destinations. We already know who they are and will engage proactively with them from now on.

The right reverend Prelate the Bishop of Ripon and Leeds and the noble and learned Baroness, Lady Butler-Sloss, raised a question about kinship carers. In practice, the grace period is particularly helpful for kinship carers. We have the conditionality issues. Having this £80 million on a discretionary basis means that we can target those families of exactly the kind that will need such support. Therefore, the way that we have done it is rather more satisfactory in that area.

The right reverend Prelate raised the question of what a benefits system is for. We are constructing the universal credit to make a modern benefits system that does what we need it to do. He can take that as read.

Amazingly, I think I might have answered all the questions. The right reverend Prelate mentioned sweetness and light in relation to Motion G1. Fundamentally, I think that there is sweetness and light. I hope so, in that we are providing a grace period through regulations. We have all the powers that we need to do it, so in practice this amendment is unnecessary. It is sweetness and light in that sense and I hope the Motion will be withdrawn.

To be absolutely honest, there is less sweetness and light over Motion G2. I am resisting having some political knockabout on this. I know that it is not proper in this Chamber; let us leave that to another place. However, I find it very hard to think about having regional limits set by a new quango. My noble friend Lord Newton and the noble Lord, Lord Empey, have made the point that this could be very confusing and complex. If the noble Lord were sitting on my side of the Table at some future point, I would give him some advice: “You don’t want to do this”. Looking at it with a slightly stricter hat on, if we were to vote the Motion through it would mess up and delay the application of the cap. We are talking there about real money. We simply could not make the saving of £200 million a year because it would be such a complicated thing to introduce. Therefore, I hope that Motion G2 will be withdrawn. My mouth will be open if it is not.

There is an important principle in this debate. It is not fair that families on benefits receive more than the average working family. It is not fair to taxpayers. Indeed, it is not fair to benefit recipients who are trapped in a cycle of welfare dependency. Therefore, I urge the noble Lord not to press either Motion G1 or Motion G2.