Welfare Reform and Work Bill

Lord Freud Excerpts

Monday 21st December 2015 Lords Chamber

Moved by

[Lord Freud]

That the House do now resolve itself into a Committee upon the Bill.

[Baroness Hayman (CB)]

My Lords, on a business point, perhaps I can help the noble Baroness, Lady Anelay, as I noticed that other Members of the House wished to come in on the Question, but we had only 10 minutes in which to do so rather than the 20 minutes that we would have had on a Statement.

It was not a prime ministerial Statement, but I well remember making a proper ministerial Statement to this House when the other place was not sitting when the first case of foot and mouth disease was discovered in February 2001. As I say, the House of Commons was not sitting. Although the noble Baroness is not the Prime Minister, she has the respect of this House and I simply recommend to the Government Front Bench that it would be possible to have a ministerial Statement in those circumstances; there is precedent for that.

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[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, Amendment 72, tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, would retain the benefit cap at its current levels and have those levels apply across Great Britain. We introduced the benefit cap to increase incentives to work, to promote fairness between those in work and those on benefits and to help address the deficit, and it is clear from the evidence that the cap is working. Since it was introduced in 2013, more than 18,000 previously capped households have moved into work.

The evaluation evidence shows that capped households are 41% more likely to go into work than similar uncapped households. This is even more marked in London alone, where households were 70% more likely to go into work than similar uncapped households.

I am heartened to hear from the noble Baroness, Lady Sherlock, that she now supports the existing benefit cap. I happen to remember that that was not necessarily the position on the Opposition Benches in 2012. Indeed, I seem to remember that the counter proposition from them was that we should have a regional cap, so I hope that the Opposition are now delighted that we are beginning to move in the direction suggested. Perhaps in another three years, in 2018, the Opposition—

[Lord McKenzie of Luton (Lab)]

When we debated the regional cap at that time, did the noble Lord support it?

[Lord Freud]

Of course I did not support it; I am on the record as not supporting it. This is not an absolute regional cap—this is a two-tier cap, London and the regions—but, the Opposition may feel that it is better late than never. I look forward, by 2018, in another three years, to the full-hearted support of the Opposition for the current proposals.

[Baroness Hollis of Heigham]

My Lords, does the Minister not also accept—I am sure that his memory stretches back this far—that the main concern of the Opposition, led by my noble friend Lady Sherlock, who will no doubt respond to this in any case, was to come in behind the Bishops’ amendment? That was to ensure that we compared like with like—not, as the Government were doing, like with unlike. They were excluding from those in work income such as child benefit and additional forms of benefit, so they were comparing income for those exclusively on benefit with earnings only, excluding benefits, for those in work. We therefore came in behind the Bishops’ amendment to try to protect children caught in that situation.

[Lord Freud]

I am delighted to have a trip down memory lane, but since we have changed the basis of the measure, as noble Lords have pointed out, we might just spend unnecessary time on it.

Let me go on to the present proposition, which is to align the cap with the circumstances of many working people throughout the country. The Bill reduces the cap to £20,000 a year for lone parents and couples and £13,400 for single people without children, except in Greater London, where it will be £23,000, with a lower rate of £15,410 for single people without children. These are still significant amounts: £20,000 is the equivalent of an annual pre-tax income of £25,000, while £23,000 is equivalent to an annual pre-tax income of £29,000. About four out of 10 households in London earn less than £23,000 a year, while approximately four out of 10 households outside of London earn less than £20,000.

[Baroness Hollis of Heigham]

Has the noble Lord assessed the figures for their income rather than their earnings?

[Lord Freud]

I do not have that to hand. As a noble Lord said, we are now reaching a judgment on how to arrive at those figures. Indeed, the debate that we had in 2012 basically looked at the same point. We are looking at the level of earnings that we feel is fair above which people should not get benefits.

[Baroness Hollis of Heigham]

My Lords, the Minister is not addressing the issue. What matters is income versus income, not income versus earnings, ignoring additional income. Therefore, if the Minister is going to run this argument, which I understand is a perfectly proper argument to run—and I think it commands a lot of support—he has to include actual income and not exclusively earnings, because those families that he is talking about will almost certainly have additional payments for their children and additional payments for their housing.

[Lord Freud]

Yes, I am just looking here at the level of earnings and that is the figure that we are taking. These levels for the cap will reinforce our message that work pays, and that it is not fair for someone on benefits to be receiving more than many working households. Having looked at the evidence, we believe it is fair to have a higher cap in London.

[Baroness Hollis of Heigham]

This question session has not got anywhere. Those families do not have an income that is higher than that for those at work. The point is that if you compare it only with earnings, you are possibly excluding a substantial portion of income that is available to those in work. I hope that the Minister will correct his statements as he goes through, otherwise he is comparing apples with oranges, and it does none of us any kindness to continue down that path.

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[Lord Freud]

I have tried to make it as clear as I can that we are looking at the level of earnings here. It is not a matter of direct comparisons between earnings and income: we are looking at the level of earnings.

[Lord Kirkwood of Kirkhope]

May I try to make sense of this? I do not think that the Government know what the disposable income per head is of the families that are subject to the benefit cap. That is my objection, because big families obviously have a disposable income that is divided by the number of people in the house. I do not think that these metrics exist, and therefore the noble Baroness is absolutely correct: it is not safe to rely on earnings, because you are not comparing like for like. The really important question for me is: how do we know, in relation to the impact it has on children, what the disposable income per head is in those families that are subject to the cap?

[Lord Freud]

I accept that that is a point about which noble Lords opposite are concerned, but I can only reiterate that we have reached these levels by using the basis of earnings. That is the basis.

[Lord Oates (LD)]

Is the Minister not, then, concerned about disposable income and the impact on children? He said that these Benches were concerned: are he and the Government not concerned?

[Lord Freud]

We are very concerned about the interests of children, and I will come on to that. Let me summarise the point that I will make later. The reason for this is that it is in the interests of children to be in a household where one or two adults are in work. All of the measures that we have suggest that they do better in life when that is the case.

The tiered element of the cap means that we estimate that roughly three-quarters of capped households will live outside of London, with around 24% in London. It has been set at a level that also recognises that housing constitutes one of the biggest costs for households. For example, in London, housing benefit awards are on average £3,000 a year more than they are elsewhere in the country. Even in the south-east, the average housing costs are only around half those for London, so we think it right that the benefit cap take those differences into account. I say to the noble Lord, Lord McKenzie, that that might account for the difference between the regional proposal and this two-tier proposal.

On the question from the noble Baroness, Lady Sherlock, on savings versus costs, the Treasury-led scoring process and the estimated savings are agreed by both the Treasury and the Office for Budget Responsibility, which felt them to be a robust and fair estimate of the policy change. On the question from the noble Baroness, Lady Manzoor, about where people would go, interestingly, under the current cap—if that is an indicator—very few capped households have moved house and generally those who moved did so only a short distance, so the double hit that concerned the noble Baroness is a relatively small issue. Again in answer to her, the impact assessment sets out that 59% of capped households will be those of female lone parents. There are about 1.25 million lone parents in employment in the UK, so combining parenting with childcare is possible. Those doing 16 hours work a week and receiving working tax credits will be exempt from the cap. Later, under UC, the measure will be 16 hours at minimum wage.

We believe that introducing this tiered level will build on the success of the cap and do more to improve work incentives throughout the country while promoting greater fairness. Again in answer to a question from the noble Baroness, we set out the impact of the cap on protected groups in our impact assessment. On the question from the noble Baroness, Lady Lister, I am not utterly convinced that she believes in what the Opposition Front Bench says: that work is the solution for people. However, work remains the best route out of poverty. We know that around 75% of poor people left poverty altogether where the parents moved into employment. One of the genuine points that I agree with is the danger of a cul-de-sac. The present legacy system has that wrinkle in it because it traps people at the 16-hour point. One thing we are now beginning to see in universal credit in the north-west is the freeing of benefit recipients from that particular cul-de-sac.

Amendment 74, tabled by the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, provides that the application of the cap may not reduce any welfare benefit where that would result in a breach of a person’s convention rights within the meaning of the Human Rights Act 1998. I will not go through the sterling work of my noble friend Lord Blencathra, who was utterly masterful on the legal aspects and certainly taught me a lot. However, I can say that the Government are of the view that the Bill is compliant with the European Convention on Human Rights, so this amendment is unnecessary.

On the question from the noble Baroness, Lady Lister, on the poverty impact, clearly we do not comment on leaked internal documents which may or may not be part of the iterative policy process. One of the real issues behind that is that any assessment of child poverty must not be purely static but should take into account the dynamic effects of the cap.

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[Baroness Lister of Burtersett]

I said to the Minister that I am quite happy for any estimates of the impact on child poverty to be qualified with reference to possible dynamic effects. Has the department assessed the likely impact on child poverty, taking account of the dynamic effects it hopes to see as a result of the cap?

[Lord Freud]

I am clearly not in a position to comment on the work that we do, but I can say that estimating dynamic effects is extraordinarily difficult. We are working on improving how we do that. One of the reasons why we can often get into sterile debates is that getting hold of the real figures and the real behavioural impacts is very difficult. I quoted our child poverty experience. The latest Universal credit at work, in which we outlined theses new approaches, set out big behavioural changes. Many more people—13% more—are going into work, compared with the comparable JSA. That is an example of behavioural effects that is very difficult for us to pre-estimate.

Amendments 92, 93 and 94 are tabled by the noble Baronesses, Lady Meacher, Lady Sherlock, Lady Pitkeathley and Lady Lister, the noble Lords, Lord McKenzie and Lord Kirkwood, and the Earl of Listowel. These amendments would require the Secretary of State, when reviewing the level of the benefit cap, to have regard to any impacts on disabled people, their families and carers; the relationship between the level of the cap and median household income; the promotion of the welfare of children in the United Kingdom; households affected by the cap; and public authorities, local authorities and registered social landlords.

The noble Baroness, Lady Sherlock, asked whether we will go on reducing the cap. The Bill requires the Secretary of State to review the level of the cap at least once during a Parliament and provides him with the power to review it at any other time if he considers it appropriate. We believe that this provides the most effective means of ensuring that the cap stays at the appropriate level, while also providing the stability that households on benefits require. Any changes to the benefit cap level will be sensitive to its key principles of maximising work incentives, bringing fairness for working households and providing a reasonable level of support for capped households.

The noble Baroness, Lady Pitkeathley, spoke about carers. I emphasise that the Government recognise the contribution carers make to society. I will deal with carers when discussing the amendment that appears in a later grouping.

The power to review the level of the cap is necessarily broad and has been drafted to allow the Secretary of State to take into account any matters he sees relevant—for example, the wider impacts on families and children. I do not think it right to prescribe in legislation any particular factor which must be considered as part of this review.

Amendment 94 requires the Secretary of State when reviewing the level of the benefit cap to take into account the impact on disabled people, their families and carers. As I mentioned, there are exemptions from the cap for people who are a member of a household that includes somebody who is entitled to attendance allowance, disability living allowance and PIP.

That has been in place since the cap’s introduction and reflects the fact that these benefits are paid in recognition of the extra costs that disability can bring. There is also an exemption for those who are entitled to the support component, and the equivalent in UC, whose health conditions mean that they are unable to undertake any work-related activities. Those exemptions are not changing.

The new provisions will allow the Secretary of State the ability to consider the context of the cap and its level in a broad and balanced way. For example, he may take into account, although he is not limited to these, factors such as: earnings, housing costs and the wider impact on disabled people, families and carers.

[Lord Kirkwood of Kirkhope]

How does this fit into the annual uprating statement? The Minister has just said that the Secretary of State, who has this power, must do it once in every five-year period. There is an annual social security uprating where all these things are considered. Surely we are not going to have, at random in the middle of the year, the Government coming up with a judgment on the cap that is in isolation from the rest of the established procedures for uprating benefits.

[Lord Freud]

The established procedures, of course, are basically to go in line with CPI; this is a much broader look than that, as I have tried to describe. While we have safeguarded those with illness or disability, we do not think it right that in undertaking a review of the level of the cap the Secretary of State should have a legislative requirement to take into account any extra impacts on specific groups.

[Baroness Hollis of Heigham]

If the Minister says—quite rightly and decently, and I am sure that the whole House will support him in this—that he will exempt people who are in the ESA support group because the Government acknowledge that they cannot be expected to work, and therefore the issue of work incentives does not apply, why does he not apply the same reasoning to lone parents with children under three or to the carers in full-time unwaged work that my noble friend Lady Pitkeathley described? The Government accept that those two groups are effectively out of the labour market in exactly the same way as the support group, yet one, decently, is exempted from the cap, while the other two, indecently, are not.

[Lord Freud]

There is a difference between having a specific provision that does not require people to work and having one that actually financially incentivises people to work. That is the difference. As the noble Baroness pointed out, we do not require anyone with a child under three to go to work, but people often go into work with a child much younger than that. When people look at this measure on balance, they may think that it is the appropriate thing for them. That is my best answer to this question.

This is a peculiar process and I am running incredibly late now, but I think that noble Lords would prefer me to finish. I have just had so much dialogue, and that is rather unusual.

[The Lord Bishop of Durham]

Will the Minister accept that he has just proved my point that children get ignored? I asked him a specific question about whether or not that happens, and he has not answered it.

[Lord Freud]

I apologise to the right reverend Prelate. The only reason why I have not answered by now is that I am taking an intolerably long time to get through this speech. I will come to his point. I crave noble Lords’ indulgence to let me get through and then, right at the end, if they have some outstanding questions, we will have another—

[A noble Baroness]

Pass.

[Lord Freud]

Thank you.

The revised cap levels are being set to create a strong work incentive to ensure fairness for both working households and those receiving out-of-work benefits, while providing a safety net of support for the most vulnerable. Amendment 92 would require the Secretary of State to have regard to the relationship between the level of the cap and median household income—a point reinforced by the noble Lord, Lord Beecham. Additionally, it would require that the impact on households affected by the cap was considered along with the financial impact on public authorities, local authorities and registered social landlords.

In future, when reviewing the levels of the cap, the Secretary of State must take into account the national economic situation and, where necessary, he will be able to consider any other matters that he might consider appropriate. Earnings and housing costs may be very much a part of this, but other factors also may be, such as inflation, benefit rates, the strength of the labour market and any other matters that may be crucial and relevant at the right time. Any decision when taken in the round will balance these factors with the impacts of the cap on its principal aims: to incentivise work and bring greater fairness to those in work while maintaining support for the most vulnerable.

Reinstating any direct link between future cap levels and the median household income undermines the changes we are introducing. Many working families earn less than the level of average earnings of £26,000 a year. It is important that relevant matters are looked at in the round. We want the Secretary of State to have the flexibility to consider a broad range of social and economic factors when reviewing the level of the cap in the future. Legislating for these specific factors to be considered unnecessarily reduces the scope for that.

Amendment 93, tabled by the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, would require the Secretary of State to take into account the need to safeguard and promote the welfare of children when reviewing the cap. I reiterate that we consider the impacts with regard to all relevant legal obligations when formulating the provisions of the Bill.

Now I move, at last, to the point made by the right reverend Prelate the Bishop of Durham. The welfare of children is at the heart of our reforms. It is important that children grow up recognising the value of work. Work provides purpose, responsibility and role models for children. The evidence shows that, for families responding to work incentives, the cap provided clear positive impacts on children and family lives through additional income and from the long-term positive role model effect provided by parents being in employment. There is clear evidence that children in workless families suffer worse educational outcomes compared to those in working families. That is why, as we discussed earlier, we are introducing new measures of worklessness and educational attainment.

The benefit cap is a key part of our aim to reduce long-term welfare dependency. The revised cap levels are being set to create a strong work incentive, ensuring fairness for working households and those receiving out-of-work benefits. These principles will guide a review of the cap levels in the future. It means the Government will be able to review the level of the cap in the light of any significant economic events that occur. The clause as drafted provides the best approach to allow for any future review to set the cap at the most appropriate level.

Before I ask the noble Baroness to withdraw her amendment, I await to be intervened upon.

[Baroness Lister of Burtersett]

My Lords, I will do so on the question of the welfare of children. First, there is no difference between myself and my Front Bench on this issue—there may be on some issues but not on this one. The noble Lord has not dealt with the point I made when I referred to what the noble and learned Baroness, Lady Hale, said, although I did not do so simply because she said it. Noble Lords have quoted from the IFS peer review, which showed that the great majority of those affected by the cap did not move into paid work; indeed, the House of Commons Library said:

“There is no general consensus that the … cap … is proving an effective means of moving claimants into work”.

My noble friend also made a point about those who are not expected to move into paid work anyway. The point is: what happens to the welfare of children in those households which are still out of work? It cannot be in their best interest, which is supposed to be a primary consideration, to reduce the incomes of their parents further and further below the poverty line.

I also quite accept what was said about role models and the value of work, and so forth, but I remind the Minister that in one of our earlier debates I referred to some research from the University of Bath. That showed that where a lone mother goes into work then cannot maintain that job for whatever reason in an insecure labour market and falls out of work again, it raises big questions in those children’s minds about the value of work, and that it can be totally counterproductive if you push people into paid work in a way that is not helpful to them and their families.

[Lord Freud]

On the last point, there are always particular cases such as those referred to by the noble Baroness, but the broad evidence shows that on balance children gain from their parents going to work. One other point is that noble Lords may not have clocked how the benefit cap works. Quite a lot of people have rather small amounts—£50 or so—capped. In many cases, if you do a small amount of work and earn £50 over a week, we cannot take the money away from you twice—we have capped you at that level—and those extra earnings are not then withdrawn, as they would be in many cases under the legacy system. We do not have data on that as they are very hard to get, but it would not surprise me if quite a lot of people earn small amounts of money which, in most cases, is 100% in their pocket.

[The Earl of Listowel]

My Lords, I am grateful to the Minister for the care with which he is responding to these concerns, particularly about children. He will be aware of a recent small study dated November 2015 from the University of Manchester on the impact of the bedroom tax. It found that children were hungry and were having difficulty in concentrating at school. The response from the Minister’s department was that this was a small study which did not fit the larger picture. I would be grateful if, before Report, he could send a letter setting out what research will be undertaken in the 12 months following the implementation of this provision. What research will be commissioned to look carefully into the impact on children? I take his point that many children will benefit from their parents going into work but I am worried about those who do not.

[Lord Freud]

It was a small report on, I think, 14 children, and we aim to look at things on a much safer basis. I ask the noble Baroness to withdraw her amendment.

[Baroness Sherlock]

My Lords, I thank all noble Lords who have contributed to this extensive debate. There are three more groups to come on the same subject, so we are going to do it very good justice. Given the extent of the debate, I will not try to respond to all the many points that were made. I am grateful to all those who have contributed, particularly in trying to highlight the impact of this lower benefit cap on a number of different groups: on single parents, as the noble Baroness, Lady Manzoor, said; on disabled people, as the noble Baroness, Lady Meacher, said; on carers, as the right reverend Prelate the Bishop of Durham and my noble friend Lady Pitkeathley pointed out; and on children.

I decline to rise to the noble Lord, Lord Blencathra, and engage in political debates about who said what and when, but I confirm that it is the policy of the Labour Front Bench in both this House and another place that we oppose the reduction in the benefit cap to the new levels. I was hoping to respond to the noble Lord, Lord Lansley, but, sadly, he is not in his place. Perhaps when he comes to read this debate he will start to reflect that it is important for us as a House to understand what the Government are trying to do here. They have always offered two arguments for this measure: one is that it is related to work incentives; the second is that it is fair.

On work incentives, the noble Lord may not be aware that significant work incentives are already built into the system. In fact, the CPAG did a report on this very recently showing how much better off families with children already are if they work. The point is that this is comparing individual wages and household income. Someone may earn a certain amount in wages but how much the household needs depends on where they live, how many children there are, whether they have a disability and whether they are carers. As my noble friend Lord Beecham said, this is primarily driven by high housing costs in the private sector. Most people do not get anything like these amounts of money in benefits. Where they do, it is almost always because they have very high rents. That is not their fault; it is the fault of the state, which has failed to get a grip on the housing market, have enough supply and make sure that people can afford to rent in places where there are jobs without driving themselves into this situation. I urge the Government to consider that very carefully.

The point about the comparator really matters. Whether or not the Government are going to set it at 50% or something else, there needs to be a way of understanding at what point the Government would do this. I can create brilliant work incentives tomorrow: I will abolish all benefits. That would be a fantastic work incentive but it would not be reasonable. The point of a social security system is to support people who cannot work—to enable them to meet their needs and feed their children—and then, where appropriate, to support them in work. We have to get an appropriate balance between, on the one hand, the needs of families, and particularly of children and vulnerable people, and the ability of the state to afford it; and, on the other hand, work incentives.

It is not unreasonable for this House to want to understand how the Government reach that judgment. Once you take away any external benchmark, it can simply become an annual whim. That is not appropriate, but it is completely appropriate for this House not to get into the micropolitics but to say, “We want to understand the impact on individual families, and we press the Government to make clear their thinking so that each year we can judge what is a fair amount of money to give to families”, as the noble Lord, Lord Kirkwood, pointed out.

In this country we have a very long tradition of Parliament looking carefully at what families need to survive and building up components of a social security system to address the different sets of needs. The benefit cap overrides all that, so it matters very much how it is constructed and it matters very much that the Government are transparent and accountable in the way that they go about creating it.

I shall not go into the other areas as we have a number of different debates coming up, but on the question of work incentives I point out that 85% of those who are capped at the moment are not in categories required to work, as we will come on to look at in two of the next three groups. Given all that has gone before and given all that we have yet to come, I beg leave to withdraw the amendment.

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[Lord McKenzie of Luton]

My Lords, I speak to Amendment 86, which is in my name and that of my noble friend Lady Sherlock. I also speak in support of Amendment 73 moved by the noble Lord, Lord Best, and Amendment 90A in the name of the noble Lord, Lord Kerslake. As we have heard, regardless of whether the benefit cap has played a role, local authorities remain legally obliged to rehouse families who are demonstrably homeless through no fault of their own, are vulnerable in some way or are in priority need for rehousing.

Families will be placed in temporary accommodation while a council decides whether it owes them a rehousing duty and then until a settled home can be found. For some families, the wait for rehousing can be considerable. I note that the noble Lord, Lord Best, has a 39-week grace period. I understand that that is likely to be sufficient in the overwhelming majority of cases but not in all cases, particularly in London. While in temporary accommodation, councils charge families rent to cover their own costs and expenses, and this is commonly paid for by housing benefit. In some cases, councils have to top up additional costs out of their own funds or, as we have heard, the limited pot of discretionary housing payments.

Temporary accommodation is generally leased by local authorities from the private sector at a premium, placing a considerable burden on them. Councils are already struggling to secure enough temporary accommodation as a result of the combined effect of limited funding and a shortage of self-contained accommodation. This is already leading to an increase in bed-and-breakfast use or people being rehoused away from their local area. The lower benefit cap will increase demand for homelessness services and exacerbate the pressure on the local authority supply of temporary accommodation. With more homeless families affected by the cap, local authorities are likely to be forced into further subsidising the cost of temporary accommodation. This will be difficult for cash-strapped councils, increasing the incentive to place families in the cheapest areas far away from their support networks.

It will also make it harder to permanently rehouse homeless families, as the benefit cap will make alternative housing options unaffordable. For larger families, even social housing will be subject to the cap. The policy therefore risks the perverse scenario in which families are made homeless because of the benefit cap and trapped in the limbo of temporary accommodation by the benefit cap at the expense of the public purse. The amount that can be reimbursed through the local housing allowance is limited to £500 a week, which means that other costs over and above that amount must be met by local authorities. In some cases, this will come from funding for discretionary housing payments, but often the necessary funds will have to come from elsewhere, given that DHP funds are in such short supply in the context of seemingly insatiable demand.

We know that the Government have declined to collect statistics which might help them measure the extent to which any purported savings from capping household benefits are simply being shifted on to local authorities in the form of additional homelessness costs. Our honourable friend Emily Thornberry MP sent freedom of information requests to every local authority in London over the summer and the findings throw doubt on the idea of the cap as a savings measure.

In the first year following the introduction of the cap, London councils spent a combined total of £19.2 million supporting households which had been hit by it. In the second year, this rose to £23.3 million altogether. Some boroughs spend more than 80% of their total DHP allocations on supporting capped households, and in most boroughs the proportion is increasing each year. To date, local authorities in the capital have spent almost £47 million in DHP funding as a direct result of the benefit cap and it is likely that this is just the tip of the iceberg in terms of the overall costs involved. Reliance on temporary accommodation is a significant driver of these additional costs.

As we have heard, across London more than a quarter of households currently affected by the benefit cap are living in temporary accommodation and in some boroughs it is much higher. In Waltham Forest, apparently a staggering 58% of capped households live in temporary accommodation. This compares with less than 1.5% of the overall population of people claiming housing benefit. The disproportionate presence of families in temporary accommodation among households affected by the cap is a huge issue for local authority spending. It is also a real source of human misery as, increasingly, councils are having to house homeless families in temporary accommodation outside their area, and sometimes many miles away from their support networks and their children’s schools.

Our amendment would exempt newly homeless households from the benefit cap. This would allow councils to continue to procure nearby temporary accommodation and make it easier for them to move households into affordable accommodation. It will also help councils focus their DHPs and their own budgets on homelessness prevention. If the Government are serious about cutting back on public expenditure associated with the benefit system, and in targeting the benefit cap at families in a position to make choices about where they can afford to live, it is hard to see why they should argue against exempting homeless families being housed in temporary accommodation.

[Lord Freud]

My Lords, these amendments seek to exempt people in temporary accommodation from the benefit cap. I cannot agree that it is appropriate to have a blanket exemption from the cap for all those living in temporary accommodation, even if it is time limited in the case of Amendment 73. Rather, I believe that the best approach is to provide support so that people may better address their barriers to work. My challenge to the noble Lord, Lord Best, is: if there were to be a 39-week exemption, how would that not have a perverse incentive on people staying in temporary accommodation longer term if it is likely that the cap will apply to them when they move? That is the reason for our approach.

Discretionary housing payments are available from local authorities for those households who need additional support in adjusting to the cap. We have made £800 million available over the next five years for all the welfare reforms. However, in particular areas, one of which is London, this will be a substantial element. In the Autumn Statement, it was announced that further DHP funding will be made available for the most vulnerable people, including those who may be in supported accommodation. In 2016-17 it will go up from the current level to £150 million, and the allocation of those funds reflects the new measures we are bringing in, as does the timing of their introduction.

We have already made provision to support the most vulnerable people who might be affected by the cap. Housing benefit paid to households in specified accommodation is disregarded from the benefit cap and we have included refuges within the definition of “specified accommodation”. The disregard applies to benefit cap cases under both housing benefit and universal credit. While this does not mean that these households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these vulnerable cases will not be affected by the benefit cap.

Finally, from April 2017 the weekly management fee, currently £40 in London and £60 elsewhere, will be abolished and replaced with a grant that devolves this funding to local authorities. Unlike the existing management fee, the new grant will not count towards the benefit cap and will help local authorities tackle homelessness more effectively. I would therefore ask the noble Lord to withdraw his amendment.

[The Earl of Listowel]

My Lords, I would be grateful if the Minister provided a little detail on the research that will be coming forward after the Bill is enacted so that I and we can see its impact on children. For instance, for some time now the University of East London has been researching the issue of family homelessness. Is the Minister thinking of talking to such institutions? Going back to the previous debate, it is important to get some high quality research that goes into the detail and granularity of the impacts of these measures.

[Lord Freud]

The noble Earl will be aware that an enormous amount of research is conducted in this area. I will write to him with anything specific that I can on our research proposals.

[Lord Best]

I thank all noble Lords who have participated in this mini debate, and particularly the noble Lords, Lord McKenzie of Luton and Lord Kerslake, for their contributions to one of the key housing aspects of the wider debate on the benefit cap. The noble Lord has found a fundamental flaw, as he sees it, in the argument in favour of temporary accommodation being exempted: that there will be no incentive for those who are placed in such accommodation to move for the full 39 weeks, because as soon as they do they will no longer be exempt from the cap. This is a consideration I shall have to ponder in some depth, and I am grateful to the noble Lord for explaining it. I fear that the position already is not that the vast majority of people will not be affected by this arrangement, because we know that an awful lot of families are being moved well away from the place where they are most likely to get a job, where their children go to school and where they have their family and friends close by to help them. A high proportion of families are now having to move a long way away because of the need to keep down the cost of temporary accommodation. We will have to think some more about this issue, but in the mean time, I beg leave to withdraw the amendment.

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[Baroness Pitkeathley]

My Lords, I rise to strongly support the amendment moved by the noble Baroness, Lady Meacher. We have said already that the cap is applied unequally to carers. While I welcome the exemption for households in receipt of PIP or DLA, it means that carers who are considered to be not in the same household as the person they care for will be penalised.

[Lord Freud]

In the interests of saving time, it may be worth me saying one of the key things that I will say as I close. Clearly, noble Lords will be aware of the High Court judgment in the case of Hurley and others. The Government are considering this closely. Can I ask noble Lords to allow me to come back to them on this important issue at a later date? By that I am hopeful that it will be on Report. I am hopeful but I cannot guarantee it—well, it must be at Report stage. I will come back with the Government’s decision on that, which might help to truncate some of our deliberations. That is all I can say at this stage.

[Baroness Pitkeathley]

I am grateful to the Minister and will happily truncate and wait with bated breath for his response on Report. Meanwhile I simply support the amendments of the noble Baroness, Lady Meacher.

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The reduced benefits resulting from the lower benefit cap could jeopardise existing kinship care arrangements, deter potential kinship carers and work against the child’s best interests—and, indeed, increase the cost to the Government if more children go into the care system rather than stay with kinship carers. But the impact assessment provides little or no assessment of these effects or the deterrent effect on kinship carers. State expenditure simply trumps the interests of these children and their kinship families, even though that reduction in state expenditure would not be delivered at all—let alone the interests of the child protected—if more children went into the care system because of the deterrent effect on kinship carers. The case for exempting kinship carers from the benefit cap is quite compelling.

[Lord Freud]

My Lords, Amendments 75, 78, 80, 81 and 83 seek to exempt specified benefits from the list of those that are included within the cap or to exclude those benefits in the same way that pensioner benefits are. These amendments undermine the fundamental principle we established when we introduced the cap: there has to be a clear limit to the amount of benefits that an out-of-work family can receive. This is a principle that has gained very broad support across the country.

Turning to the specific proposals, after my intervention on the noble Baroness, Lady Pitkeathley, on the carer’s allowance, I re-emphasise that the Government recognise the valuable contribution that carers make, and I will come back to that issue. Amendment 78 also exempts all those claiming employment and support allowance. Those in the support group are already exempt. But the benefit cap is a work incentive. Those in the WRAG have been assessed as being able to undertake some work-related activity, with a view to moving into employment in the short to medium term, and therefore we believe it is right that the cap be applied to these people.

The same principle applies to those in receipt of IB and SDA together. The recipients of these benefits will not necessarily be unable to undertake any work-related activity, but we are reassessing them for ESA and those who are found to be entitled to the support component will become exempt from the cap. Income support is a benefit paid to claimants in an extremely wide range of circumstances. It is an income-replacement benefit and as such, it is appropriate that, like the other income-replacement benefits, it is included in the cap.

The cap increases work incentives and promotes fairness by limiting the amount that those out of work can receive in benefits. I do not think that a blanket exemption from the cap for simply everybody in receipt of income support would support either of those aims. The vast majority of capped households that have found work include parents who have managed to balance their caring responsibilities with work—as millions of working households already do up and down the country. By going out to work, parents show their children the importance of a strong work ethic and reinforce the message that work is the best route out of poverty.

Before turning to Amendments 87 to 90B, I remind noble Lords of the exemption from the cap for anyone who is a member of a household that includes somebody who is ill or disabled and is entitled to attendance allowance, DLA, PIP, industrial injuries benefits or the armed forces independence payment. Additionally, as well as war widows and widowers, those who are entitled to the support component of ESA or universal credit’s limited capability for work or work-related activity element are exempt.

In recognition of the work incentive objective of the cap, households that are entitled to working tax credit or meet the prescribed earnings threshold for universal credit are also exempt from the cap. I have already mentioned the nine-month grace period from the cap for households that have recently left sustained employment. We have committed £800 million, as I have already said, for discretionary housing payments over the next five years to provide extra support for households that may be affected by the cap, within the context of that £800 million being for all the welfare reforms. I hope that noble Lords are assured that, combined with the additional funds that we have allocated for DHPs, there are already numerous safeguards in the design of the cap which protect the most vulnerable, as well as those with a strong work history.

I have already said that I will come back on Amendment 87. Amendment 88 would exempt from the cap all those in receipt of universal credit who are not subject to all work-related requirements. There is already an exemption, as I have said, for those who have limited capability for work or work-related activity. But this amendment would extend the exemption far more widely, including to those subject to work-focused interviews and work preparation requirements, many of whom will have a relationship with their work coach focusing on what they can do to prepare positively for a return to work.

Amendment 89 also seeks to exempts all those on ESA. I will not repeat the particular arguments but will add that there is a large body of evidence showing that work is generally good for physical and mental well-being and that where their health condition permits, sick and disabled people should be encouraged and supported to remain in or re-enter work as soon as possible. I am encouraged that the noble Lord, Lord McKenzie, was happy to acknowledge that point a couple of weeks ago.

Amendment 90 would also introduce an exemption for all those in receipt of income support. Again, that is an extremely wide range of circumstances.

[Baroness Hollis of Heigham]

I accept the point about income support covering a wide category of claimants, and I know that we will come on to this later, but is the noble Lord willing to reconsider his position on attaching a benefit cap to people from whom work is not expected by virtue of, say, the age of their child?

[Lord Freud]

I have already answered that question in the first of these amendment groupings. I repeat: there is a difference between having a state expectation—and conditionality attached—for people to go to work, and a financial incentive for them to do so.

The noble Baroness, Lady Sherlock, asked whether responsible carers would be set requirements that they cannot meet. We will ensure that any work-related requirements will be tailored to individual circumstances and compatible with childcare responsibilities.

I turn to the amendment tabled by the noble Earl, Lord Listowel, on kinship carers. The Government recognise the service that kinship carers and others provide, and the Bill continues the current provisions for foster carers, kinship carers, and family and friend carers. If they, or a child for whom they are caring, are in receipt of an exempt benefit the cap will not apply. In addition, any payments received from the local authority for providing care will be disregarded from the benefit cap. Finally, there is a nine-month grace period whereby the cap may not be applied to those who have recently left sustained employment. This will give time for kinship carers who may have had to leave employment to take on additional caring responsibilities to adapt to their new circumstances. Family and friend carers are treated in the same way as parents in the benefit system, so it is only fair to ensure that this principle applies to the application of the cap, too. The benefit cap is intended to promote fairness between those in and out of work, and to increase incentives for people to move into work—principles that I believe apply in the same way for family and friends carers as for parents.

Regrettably, I am not in a position to supply the specific data requested by the noble Baroness, Lady Drake, on what is happening in London. As I said, I will come back to the matter of carers at a later date but I cannot support the other amendments and I ask noble Lords to withdraw or not press them.

[Baroness Meacher]

My Lords, I thank all noble Lords who have spoken very powerfully in support of these incredibly reasonable amendments. My understanding is that what we are all about is seeking that the cap does not apply where it is completely inappropriate and unfair to expect that person to work. In the case of kinship carers as well as other carers, the impact on the disabled child or relatives is likely to be extremely serious. The impact on the Exchequer or the taxpayer is also likely to be extremely costly.

I thank the Minister for informing the House that Ministers will be returning to the issue of carers, but surely the arguments of the High Court and the judge in relation to carers in general apply equally to kinship carers. I cannot see any possible argument that they do not—they just have to—so I ask the Minister to take away that point and consider the relevance of the High Court judgment and comments on kinship carers, and the need for some consistency. I also ask him to think further about the importance of people who cannot work for whatever reason, whether they have a one year-old child or are disabled to such an extent that they simply will not get better. Those people should be exempt from the cap and I ask the Minister not just to put that issue away and think “Job done”, but to think seriously and say, “Now hang on—surely we should be doing something about this”.

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[Baroness Lister of Burtersett]

My Lords, I rise to speak in support of Amendments 76 and 77, to which I have added my name. I apologise that we will be going over some of the issues raised in the first group of amendments, particularly by my noble friend Lady Hollis, but they are crucial because they go to the nub of some of the disputes among us as to what is fair and what is not.

The amendments follow on from my Amendment 93, discussed earlier, which was designed to safeguard and promote the welfare of children. In speaking to that amendment, I referred to Lord Carnwath’s judgment in the recent Supreme Court case on the cap, in which he made the point that the inclusion of child benefit and child tax credits in the cap raises,

“questions why the viability of a scheme, whose avowed purpose is directed at the parents not their children, is so disproportionately dependent on child related benefits”.

He also said:

“The cap has the effect that for the first time some children will lose these benefits, for reasons which have nothing to do with their own needs, but are related solely to the circumstances of their parents”.

This takes us to one of the “policy objectives” or “intended effects” listed in the impact assessment, namely to:

“Promote even greater fairness between those on out of work benefits and tax payers in employment (who largely support the current benefit cap), whist providing support to the most vulnerable”.

The “most vulnerable” are not defined, but in the impact assessment on the benefits freeze, the term is qualified with the phrase,

“who are least able to increase their incomes through work”.

Surely children fall into that category. Yet the justification for the way the cap is constructed and for the reduction in its level ignores this and, as Lord Carnwath observed, takes no account of children’s needs, relating instead solely to the circumstances of their parents. Moreover, it is worth repeating the observation of the noble and learned Baroness, Lady Hale:

“The children affected suffer from a situation which is none of their making and which they themselves can do nothing about”.

My noble friend Lady Hollis made the point that it is not a level playing field here—a horrible sporting metaphor—and that we are not comparing like with like when we compare in-work earnings with out-of-work incomes, although I will not go into more detail on that. I tried to find out by way of a Written Question how much the so-called hard-working families we hear so much about were likely to be receiving in benefits. This time the response I received rehashed the latest government mantra of their commitment to,

“a higher wage, lower tax, lower welfare economy”,

and referred me to the HM Revenue & Customs website. I enlisted the help of the Library to see whether it could elicit the answer from the website, but—surprise, surprise—it could not. In effect, a government Minister—in this case, the noble Lord, Lord O’Neill of Gatley—was encouraging me to waste my time by sending me to a website that would not supply me with the answer to the questions I was posing. Given that the Government were able to supply similar figures in answer to a Written Question during the passage of the Welfare Reform Bill in 2012, it is surely possible, and beneath the disproportionate cost threshold, to do so again now. I fear that, increasingly, government departments simply cannot be bothered to answer our completely legitimate questions, thereby ignoring their responsibility for parliamentary accountability.

Similarly, I tabled a Question to find out what the impact would be in terms of the total number of households capped, the number of children affected and the cost to the public purse, if children benefit and child tax credit were excluded from the cap. Once more, I was referred by the Minister to the impact assessment, as if that contained the answer. Yet again, such information was made available during the passage of the Bill in 2012, showing that nearly half the savings from the cap were being made as a result of the inclusion of children’s benefits: in other words, nearly half the savings were being made on the basis of a blatant piece of unfairness that drives a coach and horses through the Government’s claim to be creating that beloved level playing field between families in and out of paid work, giving rise to Lord Carnwath’s query about why the policy’s viability is so disproportionately dependent on child-related benefits when its avowed purpose is directed at the parents not the children. It is clear from the evaluation of the existing cap that one consequence is likely to be even greater arrears and debt, thereby aggravating what the Government themselves consider to be a root cause of child poverty.

On our first day, there was broad agreement among noble Lords who spoke that the two-child policy does not meet the Government’s own family test. Although it might not be quite so blatant here, I believe the same applies to the inclusion of children’s benefits in the children’s cap. Although the impact assessment for the cap is much more thorough than that for the two-child policy, I could not see any reference to the family test having been applied. Could the Minister confirm that it was applied and could he undertake to publish the documentation?

When we last discussed this issue, during the passage of what became the 2012 Act, as we have already heard, there was strong support in your Lordships’ House, under the leadership of the right reverend Prelate the Bishop of Ripon and Leeds, for excluding children’s benefits from the cap. I very much hope that that support will be there again now, because with a reduction in the level of the cap to an arbitrary two-tiered level below median earnings, the case for exclusion is stronger than ever.

[Lord Freud]

My Lords, this group of amendments seeks to exclude specified benefits payable for children and widowed parents from the list of those included within the cap. As I mentioned in relation to the other amendments, these amendments would undermine the fundamental principle that was established when the benefit cap was introduced: that there has to be a clear limit to the amount of benefits that a family can receive. That is a principle that has gained very broad support across the country and indeed from the Opposition.

The benefit cap is one part of our suite of welfare reforms which are restoring work incentives and fairness to the benefits system. That previous system was not fair on working taxpayers; nor was it fair on claimants, trapped in a life where it was more worth while claiming benefits than working. Our welfare reforms are about moving from dependence to independence, and the benefit cap is helping people take that important step into work.

We have always accepted that there should be some exemptions from the benefit cap. To incentivise work, the cap does not apply to those households in receipt of working tax credit, which, for lone parents, requires 16 hours of work a week. To recognise the extra costs that disability can bring, households which include a member who is in receipt of AA, DLA, PIP or Armed Forces independence payment are exempt. Those who have limited capability for work and are in receipt of the support component of ESA or the equivalent in universal credit are exempt. War widows and widowers are also exempt.

--- Later in debate ---

[Baroness Lister of Burtersett]

I am very sorry to intervene. I may have missed it, but I do not think that the Minister addressed my argument, also made by my noble friend Lady Hollis, about the fact that the comparator families in work will be receiving child benefit and almost certainly child tax credit, so why are they being included in the cap as we are not comparing like with like? I also asked a specific question about the application of the family test, to which the noble Lord did not give an answer.

[Lord Freud]

We did apply the family test; I had better write to the noble Baroness with the details because I cannot recall what was in it. There was quite a lot of material going through in a short time.

I think that I have now dealt twice with the fact that we are looking at earnings and we are not making that comparison, even though I know that neither the noble Baroness, Lady Lister, nor the noble Baroness, Lady Hollis, like the answer. That is my answer—I do not have another answer, however much I am asked.

[Baroness Hollis of Heigham]

Forgive me, my Lords, but an assertion is not an explanation. What we are getting is an assertion from the Minister: “I am not going to compare income and income, just income with earnings, and additional income for that person on earnings which comes from benefit will not be taken into account. Why? Because I say so”.

The Government are running two arguments, over and beyond the repeated headline stuff. One is about work incentives—people are expected to move into work by virtue of this Bill. The second is the question of fairness between those currently in work and those out of work on benefit. I understand why the Minister is making these arguments, but on neither does he have a case, nor has he made one. He has simply made assertions.

On excluding people, rightly, from the support group, the Minister is still not explaining, but merely asserting: a lone parent with a child of one or two may have the choice to work; the Government do not expect them to work; most people would not necessarily want them to work; none the less, the cap will apply. When it comes to carers, a pause button has been pressed.

On the Minister’s second argument, over and beyond the work incentive whereby he is comparing those in work and those out of work, he is disregarding a chunk of people’s in-work income, which is in addition to those earnings. Why? Because he says so. The incentive into work does not apply to some of the groups we have been discussing. On the fairness between in-work and out-of-work income, the Minister has not included part of the income which would establish a reasonable basis of comparison.

What does the Minister expect us to do? He is asserting things without giving us any evidence and not engaging in the argument. His two assertions—this is why he is doing what he is doing—are not substantiated by any evidence or argument that he has offered. I am sorry, but this will not do. It is not good enough. The Committee is owed more from the noble Lord than we are getting.

[Lord Freud]

I have done my best to lay out that this is based on equivalent pre-tax incomes of £25,000 and, in London, £29,000. The comparable earnings figure is roughly at the level of four in 10. But I cannot produce any more information or justification—I cannot give what I have not got. I am afraid that that is what I am able to provide today.

[Baroness Hollis of Heigham]

I do not want to be discourteous to the Minister. He is much respected in the House, and many of us engaged with him in a very satisfactory way on universal credit. He took suggestions away, he listened, he argued, he produced new evidence which made some opposition Members change their mind. We have every respect for the fact that, as a Minister, the noble Lord is genuinely evidence based—except on this. He has produced no evidence.

What puzzles me is that the Minister has not asked for the evidence to substantiate his two drivers about getting people into work and having fairness between in-work and out-of-work claimants. We know from experience that the noble Lord respects evidence and offers it to us. He has come to the Committee, after Second Reading and three Committee sittings, knowing that we will be looking for evidence to sustain his position—and if he has it, we will respect it—but he has not come forward with it; he has simply repeated assertions. Either the evidence is not there, in which case the assertions have no substance, or the evidence is there but is not being shared with us, which suggests a level of bad faith that I do not in any way attribute to the Minister. So where are we?

[Lord Freud]

I will try one last time. If noble Lords are dissatisfied, that is the reality.

We currently have a benefit cap in operation at a single rate of £26,000, and we are taking that down. That has mainly affected London. We are now spreading it out to affect just short of 100,000 people—90,000-odd on the impact assessment, although it is interesting that, in 2012, a smaller number were involved in practice than in our original impact assessment, so let us just see.

Our experience of running that benefit cap and the reaction to it were such that the Government decided that we could safely reduce the level and put it into two tiers, so that its impact is spread through the country more evenly. We have taken it down by 12.5%. It is the experience of running it live that has led the Government to think that we could move it to these levels and get the incentive effects that we are looking for to operate. I do not have any more information to provide for the noble Baroness—much though I know that she would like more. I apologise to the extent that she is disappointed.

[Baroness Sherlock]

My Lords, I thank the Minister for trying, if not succeeding, to answer the questions. He must appreciate that we had some very good discussions during the passage of the Welfare Reform Act, which brought in the cap in the first place. One reason that they were good was because a lot of evidence was around. He was asked some searching questions from Peers from all Benches, he engaged with the argument, we had some good debates and I would like to think that the system that we now have in universal credit is better than it would have been had it not been for them. In fact, I think he was kind enough to say so at the time.

One reason why I have always enjoyed participating in debates in this House in this area is precisely because we have been able not just to trade in political slogans but get into detail and understand how we might improve current policy—which is the whole purpose of this Chamber as a revising Chamber.

[Lord Freud]

I say only that I remember with some fondness—not entire fondness, because 17 Sittings in Committee is too much for anyone—that we had some very valuable dialogues then. One of the most important was about universal credit and led directly to the creation of universal support, which is becoming a valuable tool that we are developing. I remember equally vividly that the benefit cap area was one where at least equivalent frustration was expressed by noble Lords about what I was saying. I remember that very distinctly. There were some very punchy discussions. I will say no more than that, but it was not an area where we had the most sweetness and light on that Bill.

[Baroness Sherlock]

I thank the Minister for reminding me of that joyous period; I think of it often.

The Minister mentioned that a lone parent could avoid the cap by going into work for 16 hours on working tax credit. He did not pick up the point that I made on the previous amendment, which was that, on universal credit, he always said that lone parents would be expected to work only if they could find a suitable job where they could get childcare. He has not responded to the fact that a lone parent with a baby would have to go to work. The offer of childcare for three and four year-olds does not apply to babies. The offer of childcare for disadvantaged two year-olds does not apply all year round. There is a real issue. Someone might find that the only response was to take jobs which either might not be available or for which they could not find suitable childcare.

I am sorry to say that I did not find the Minister’s response on maternity allowance persuasive at all. I think this is one of these oddities, and I think the Government just got it wrong and should have just put their hands up. These are generally probing amendments, but I think that that is just genuinely bizarre. The impact assessment says that, if people do the right thing and move into work, they will not be capped. How is it possible for a woman who is about to give birth to do the right thing and move into work? That just does not work. However, I fully accept that I am not getting any more than I have.

Finally, during Committee, my noble friend Lady Lister has given two or three examples of Written Questions that she has asked, the Answers to which have been, frankly, unsatisfactory. They have mostly referred her to another document or website in which the answer was not found—as she has established with the help of the Library. That is a very bad trend in which legitimate questions are being asked for information which would help to inform deliberations in Committee on a Bill, but the department, via its Minister, is not providing them. We will keep a close watch on this and, if it comes up again, we will raise it again on the Floor of this House.

In the mean time, I beg leave to withdraw the amendment.