Welfare Reform and Work Bill

Lord Freud Excerpts

Monday 25th January 2016 Lords Chamber

I would be very grateful if the Minister would tell us three things. What was in the family test assessment? Why did DWP not publish it, and what are the Government going to do to monitor and mitigate the impact on children if the level of the cap is reduced as proposed?

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

My Lords, Amendment 25 seeks to remove child benefit and child tax credit from the list of those benefits included within the benefit cap, so that they are disregarded when calculating the total amount of benefits that a household can receive before the cap is applied. This amendment undermines the fundamental principle that we established when we introduced the cap: that there has to be a clear limit to the amount of benefits that an out-of-work family can receive. This principle has gained very broad support across the country.

The benefit cap is just one part of our suite of welfare reforms, which are restoring work incentives and fairness to the benefits system. The previous system was not fair on working taxpayers, nor on claimants who were trapped in a life where it was more worthwhile claiming benefits than working. Our welfare reforms are about moving from dependence to independence and the benefit cap is helping people to take that important step into work. Indeed, the evidence shows that the cap is working, with capped households 41% more likely to go into work than similar uncapped households. In fact, more than 18,000 households have entered work since the cap was introduced.

However, we have always accepted that there should be some exemptions from the benefit cap which support the cap aims of incentivising work and bringing greater fairness to the welfare system, while supporting the most vulnerable. To incentivise work, the cap does not apply to those households which qualify for the in-work exemption in universal credit. Nor does it apply to those households in receipt of working tax credit. For lone parents, this is just 16 hours of work per week; for couples with children it is 24 hours of work per week. In recognition of the extra costs that disability can bring, households which include a member who is in receipt of attendance allowance, disability living allowance, the personal independence payment and the Armed Forces personal independence payment are exempt. Those who have limited capability for work and receive the support component of employment and support allowance, or the universal credit limited capability for work- related activity element, are exempt. Furthermore, war widows and widowers are also exempt. Noble Lords should also not forget that if the claimant, their partner or a child for whom they are caring is in receipt of an exempt benefit, the cap will not apply.

As well as promoting fairness for those families who are in work, the welfare reforms are about transforming life chances. Since the cap was introduced in April 2013, nearly 9,400 capped lone parents have moved into work and claimed working tax credits, joining the 1.26 million lone parents in employment in the UK. 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, while improving their longer-term life chances.

As to the ECHR criticism about the rights of the child, the interests of children are best served by doing everything possible to get their parents into work and providing the right support to remove the barriers to work, such as employment support, training, budgeting advice and free childcare. DHPs are available to assist in hard cases, and the Government will make £870 million available in that area over the next five years.

The noble Baroness, Lady Lister, raised the family test, and the noble Baroness, Lady Sherlock, was kind enough to remind her that I managed to get a letter to her saying that the family test had been applied when considering the benefit cap changes. The way that the test works on the whole is that the department thinks carefully how the new policy can support family relationships. We have been very clear, as I have been this evening, that it is important that children grow up in households that are in work. The cap is a key way of delivering this particular policy and this particular change.

Like other welfare benefits, child-related benefits are provided and funded by the state, and it is therefore right that they are taken into account along with other state benefits when applying the cap. It is only fair that households receiving benefits should make the same choices that families in work do. The cap levels are equivalent to annual pre-tax incomes of £29,000 and £25,000. These are still considerable incomes, with around four in 10 households earning these sums in London and the rest of the country respectively.

It is a simple matter of fairness for those families with children who are in work to set the cap at these levels and to include child-related benefits within its scope. To be clear, households who go out to work and qualify for the in-work exemption in universal credit or for working tax credits will be entirely exempt from the cap and will receive all of these benefits over the cap level. For those households who need additional support in adjusting to the cap, DHPs are available: £800 million has already been made available and a further £70 million was added to that figure in the Autumn Statement.

There is of course a nine-month grace period in which the cap may not be applied to those have recently left sustained employment. This gives households, including those people who are receiving child benefit and child tax credit and who may have had to leave employment, time to adapt to their new circumstances or find work before the cap is applied to them.

For the reasons I have explained, I do not agree that we should remove child benefit and child tax credit from the cap, as would be the result if this amendment, as drafted, was passed. I ask the noble Baroness to withdraw her amendment.

[Baroness Lister of Burtersett]

My Lords, I am grateful to my noble friend Lady Sherlock and to the Minister. I never received the letter last Thursday, although I recall there was another letter when we raised the question of the family test in relation to the policy we will be discussing on Wednesday about families with two or more children. That said exactly the same thing—I think it was almost the same sentence.

When I was preparing this over the weekend, I realised I had never received a letter about our fourth day in Committee, so I emailed the Minister’s office to ask whether there had been such a letter, and I have not had a reply yet. Perhaps the letter about our fourth day could be re-sent, because I have certainly not received it. Anyway, it sounded horribly familiar—that is, it did not tell us very much at all, as my noble friend said.

I did not really expect we would agree on this. The Minister has certainly not satisfied me that it is fair when we are not comparing like with like. That is really the nub of the argument. On the rights of the child, he simply repeated the very argument that the noble and learned Baroness, Lady Hale, had pretty much destroyed in the Supreme Court judgment. He brought up the old DHPs again—many moons ago I said this was the loaves and fishes argument. DHPs have to be extended to cover everything and they do not provide anyone with any kind of right because they are discretionary. Clearly we are not going to make progress on this but it is important that we at least keep maintaining why we believe that this is not fair. I beg leave to withdraw the amendment.

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[Baroness Sherlock]

My Lords, the amendment would exclude guardian’s allowance from the cap. I shall briefly set out the regulations on exactly who gets guardian’s allowance, because I think it is worth doing. You can get it only if you are caring for somebody else’s child, you are entitled to child benefit for the child and both of the child’s parents are dead, or one of the child’s parents is dead and at that time the whereabouts of the other parent is unknown and you have made all reasonable efforts to find them, or one of the child’s parents is dead and the other is in prison with a minimum sentence of two years remaining to serve, following the death of the other parent. People do not get this allowance lightly. It is not paid to foster parents or prospective adopters. My noble friend Lady Hollis, with a precision and a lyricism that I could not begin to match, set out the effects of taking this away from a group of people who are reaching out to some of the most vulnerable children in our country. I hope that that has persuaded the Minister how important this is. But given those effects, and given how few these people are in number, and given how vulnerable the children are, I would like the Minister to explain why they do not fit into the category that he described under the last amendment, when he said that the Government wanted to incentivise work but also to protect the most vulnerable. Why do they not count as the most vulnerable?

In Committee on 21 December I asked the Minister what behavioural incentives the Government were seeking by including guardian’s allowance in the cap. He said:

“Recipients of maternity allowance and guardian’s allowance will be affected by the benefit cap only if they are in receipt of a significant amount of other welfare payments”.—[Official Report, 21/12/15; col. 2378.]

That is not a justification. Either it is right to include guardian’s allowance in the cap or it is not; it cannot be right because you get other benefits as well. So if the Government believe that it is right, can the Minister please tell the House what behavioural response the Government are looking for from people who receive guardian’s allowance as a result of the cap? If he cannot provide one, will he accept that the fact that they will be affected by the cap only if other benefits are also received is not a good argument for guardian’s allowance itself to be counted towards the cap? That argument could be made for any benefit. I look forward to the Minister’s explanation.

[Lord Freud]

Amendment 26 seeks to remove guardian’s allowance from the list of those that are included within the benefit cap, so that it is disregarded when calculating the total amount of benefits a household can receive before the cap is applied. Guardian’s allowance is paid to those who are responsible for a child or young person and either both parents or in some circumstance one parent have died. The Government recognise the crucial and valuable role that recipients play in helping children to recover from the loss of their parents, but I do not agree that it should be excluded from the benefit cap. That is about the principle that there is a clear limit to the amount of benefits that an out-of-work family can receive.

In the interests of time, I shall not repeat my previous arguments, but will provide the best information that we have, which is that the noble Baroness, Lady Hollis, is right to say that this affects very few people. On our sums, the inclusion of the guardian’s allowance within the cap affects fewer than 50 claimants—those are the figures that I have. Rather than a blanket exclusion of this benefit, it is better that targeted support is offered to those who need it. That is where the discretionary housing payments of £870 million come into play. On that basis, I ask the noble Baroness to withdraw her amendment.

[Baroness Hollis of Heigham]

First, I thank my noble friend who spelled out the devastating situation in which these children find themselves, and how those who care for them—on kinship care, usually—are therefore entitled to receive guardian’s allowance.

The Minister made two points. First, he said that the principle was that there is a clear limit to benefits that out-of-work families can receive, even when that out-of-work family has taken on the joyless but essential and necessary task of caring for another family’s children. Why does the Minister not consider that therefore they are entitled morally—I am not saying practically, but morally—to benefits for two families, because that is what they are doing? We are not talking about families of their own children; we can argue for that, as my noble friend did, and she was absolutely right to do so.

I am talking about a situation at the extreme end of kinship care, when somebody has taken on responsibility for another family’s children. To say that, on principle, that out-of-work family should not get additional money for doing that—that is not a principle. A principle usually has some sort of moral quality to it. That, I am afraid, is a Treasury statement. I cannot believe that the Minister believes that it is the right policy to uphold in this situation. We should be hugging those kinship carers who are entitled to guardian’s allowance and giving them every support we can. Instead, what we do is to make them poorer.

The Minister’s second point was that he reckoned there were 50 families. I would love to see how he got to that figure. I could not work it out—obviously, because I could not work out how many people were grandparents, how many were in-work families and how many were below the limit, and therefore exempt, because they did not already have children of their own.

If we are really talking about 50 families, why on earth are the Government not conceding? How much does the Minister think this will cost? Let us assume that the average number of children taken on by a guardian is one and a half—in some cases one child, in others two children, and in a few cases three or more. I estimate that that would work out at about £1,000 to £1,200 a year. For 50 families that would be about £50,000 to £60,000 a year. The Minister cannot find £60,000 a year—or £65,000, if we push it—to address this problem? I am going to sit down and ask him whether, in the light of the information he has so far given, he is willing to reconsider his position.

[Lord Freud]

No, I am not in a position to reconsider at this stage.

[Baroness Hollis of Heigham]

What does that mean—“at this stage”? Is the Minister willing to come back at Third Reading with a little amendment just taking out this group of people, who are among the poorest of the poor, who are taking on the hardest of hard tasks—caring for bereaved and traumatised children—at a time when they themselves are probably also bereft?

[Lord Freud]

Regrettably, as I said, I am not in a position to make any kind of commitment.

[Baroness Hollis of Heigham]

I guess it is my fault. I should have brought this up in Committee and perhaps given the Minister more time to think about it. Perhaps he will look back on today’s proceedings. He absolutely rightly responded to my noble friend Lady Pitkeathley on a situation that we all recognised it was important that he should respect and meet—and not just because of the court case. I suggest to him that this is another such case—and I think he may wish to do otherwise. Obviously I shall withdraw the amendment now, but I would hope, none the less, that on reflection he will feel able, for 60,000 quid a year, to take guardian’s allowance, at the extreme end of kinship care, out of the benefit cap. He will not even notice it—but they will. I beg leave to withdraw the amendment.

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[Baroness Sherlock]

My Lords, this amendment, in the name of my noble friend Lady Hollis, would exempt from the cap women who are at least 29 weeks pregnant or responsible for a child under nine months of age. I thank my noble friend for making it clear to the House just what a perilous situation these women will find themselves in if things proceed as planned.

Some very strong arguments were made to me by Gingerbread as to why this particular group ought to be excluded. It suggests, first, that the group will find it most difficult to move into work to escape the cap and therefore will simply be pushed deeper into poverty. Of course, that is the last thing that it wants for a woman who is pregnant or has a very young child. Secondly, it points out that the Government want families on benefits to make the same choices as those who are in work. Parents in work have pregnancy and maternity rights, including an expectation that they will have some time away from work both when they are in the later stages of pregnancy and in the first months of their child’s life, so this exemption would mirror the rights of working families.

As my noble friend Lady Hollis pointed out, pregnant women and those with very young children are not listed as a priority group for discretionary housing payments, despite the complex challenges that they face as they move into work, and therefore they cannot have that to fall back on as other vulnerable groups might. I would be very interested to hear the Minister’s response to these challenges.

In Committee, I tabled an amendment that would have excluded maternity allowance from the cap. I did so to probe the Government’s reasoning and particularly to try to find out what behavioural responses the Government were expecting of pregnant women. However, as I explained earlier, I could not get an answer from the Minister. The only thing that I got on maternity allowance was the same as for the guardian’s allowance: the response was that people would not be affected unless the household was also getting other benefits. As I have said, that is not an answer.

This amendment from my noble friend seeks to protect a very narrow group of people at a very vulnerable time. The Government’s usual response is that if someone wants to escape the cap, they should either get a job or move house. Can the Minister explain to the House what he thinks the chances are of a woman who is 29 weeks pregnant getting a job? How strong does he think her chances will be out there in the job market if she has not worked previously? Secondly, if that is not a practical thing for her to try to do, maybe he thinks she should move house. I do not know whether he has ever had to help a very heavily pregnant woman move house, but would he really suggest to her that moving house when she is very heavily pregnant or has a brand new baby is either desirable or practical, unless of course she is forced into it in the circumstances described by my noble friend because she ends up being evicted for rent arrears?

I just want to get the Minister to address the practicalities of this situation. This is a very narrow group of people. What do the Government expect them to do if they find themselves hit by the cap? Will he please tell the House?

[Lord Freud]

My Lords, as I have already set out, those with a sustained work history benefit from a nine-month grace period before the cap is applied to them. Therefore, those households that have been in employment for at least 50 out of 52 weeks will be exempt from the cap. This gives time for households, including those with a new child, to adapt to their new circumstances before the cap is applied to them.

Households in receipt of working tax credits or which meet the UC earnings threshold will be entirely exempt from the cap. Although some single mothers will not be immediately able to move into work, for those households consisting of couples, the partner need work only 24 hours a week for the household to qualify for the exemption. Around 45% of households that include a maternity allowance claimant who will be affected by the new cap levels are households consisting of a couple, meaning that a partner can help to exempt a household from the cap through work. Households that include a claimant in receipt of maternity allowance may also be entitled to working tax credits and so be exempt from the cap.

Although I am grateful to the noble Baroness for speaking on this issue and for the research that she has put into it, I am not sure that the amendment would do what is intended. It would not create a disregard or exemption from the cap for the specified group; it would, however, appear to make the group subject to a different prescribed list of benefits to be defined by the Government in regulations. That would of course go against the approach that the Bill adopts of providing certainty about the capped benefits by including them in the Bill. I therefore ask the noble Baroness to withdraw the amendment.

[Baroness Hollis of Heigham]

I thank my noble friend Lady Sherlock. The Minister’s answer is that if a woman has a partner, he can increase his hours and she will be okay; if she does not, the amendment is technically deficient and so she cannot be helped. Is that a fair summary of what the Minister has argued? I think it rather is. But what about the situation of a deserted mum? She has one or two children already, she is now pregnant and the man has swanned off. What then? She has no partner who can increase his hours, she already has the care of children and she is up to or at the point of the benefit cap. She is now 29 weeks pregnant and trying to manage a budget, given she is in the private sector, that means she is probably unable to follow the nutritional guidelines and all the rest of it that is heavily recommended for her at this stage. I ask the Minister the same question that my noble friend asked: what is she supposed to do—apart from find another man?

[Lord Freud]

One of the things we have tested rather thoroughly through the courts is the role of discretionary housing payments for the kind of hard cases that the noble Baroness is so adept at finding. This is precisely where one would anticipate that provision, which is quite substantial, being used. The courts have found, again and again, that it is appropriate to use those payments for such cases because they are so hard to define in statute. Because of that difficulty, the flexibility of the DHP is the way to address the issue.

[Baroness Hollis of Heigham]

In that case, why do such women not fall within the Government’s guidelines as having high priority for DHPs? As my noble friend says, they do not. Although I have not been able to verify it myself, I understand that, as a result of that, in most local authorities they do not get such money because the money is not there. They certainly, I suspect, would not get it for nine months after and up to two months before, or something like 11 months’ continuous payment, because local authorities cannot run it. They use DHPs to deal with temporary, immediate emergencies. Therefore, if the Minister means what he says, he should be giving guidance to local authorities that this should be a priority consideration and he should back that with the necessary money, which is not there at the moment, to do so. However, I see that he is standing up, perhaps to respond to that.

[Lord Freud]

I just want to make the point that DHPs can be used for the long term. They are not just a temporary thing and the guidance says that very precisely.

[Baroness Hollis of Heigham]

I do not know how many local authorities the Minister has spoken to about their use of DHPs, but that is not my experience. Obviously, I have not been able to test the opinion of the entire local authority movement, but certainly this is what I am assured. I have crawled over some of the priority considerations of certain local authorities and can assure the Minister that what he is saying does not hold good: there is simply not enough money.

As far as I can see, the only advice the Minister is offering is that these women should throw themselves on the mercy of non-existent DHPs from local authorities whose money is already spent, cross their fingers and hope. I do not think that is a policy. I do not even think it is appropriate for the Minister to possibly suggest that that is what they should rely on. However, at this point, and given the time of night, I beg leave to withdraw the amendment.

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It is not that households are making extravagant choices about their accommodation—they have to take what is on offer—and surely exempting these situations from the benefit cap is the fair thing to do. I beg to move.

[Lord Freud]

Amendment 27 seeks to exempt people in temporary accommodation from the benefit cap. I do not agree that it is appropriate to have a blanket exemption from the cap for people living in temporary accommodation. Rather, the best approach is to provide targeted support early so that people may better address their barriers to work. As I said in Committee, an exemption might, in fact, prolong a stay in temporary accommodation if it is likely that the cap will apply when a household moves to more permanent accommodation. That is an incentive both on the local authority and on the family.

I have already explained how £870 million in discretionary housing payments will be available for those households that need additional support in adjusting to the cap. Provision already exists 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 included refuges within the definition of “specified accommodation”. While this does not mean that such households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these cases will not be affected in practice by the benefit cap.

From April 2017, the weekly management fee in respect of temporary accommodation, 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, this new grant will not count towards the benefit cap and that will help local authorities tackle homelessness more effectively. I therefore ask the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

I thank the Minister for his reply. None of it was a surprise, and I will, of course, withdraw the amendment in due course. I would just like to ask the Minister a few questions. He said that if there were a blanket exemption, this would prolong the stay of people in temporary accommodation. What evidence is there for that? Is it not generally the case that temporary accommodation is not of the best quality, and some of it pretty grotty? Why would families not want to move out of temporary accommodation as soon as they could to put down their roots in a more permanent arrangement? In relation to the grant, that seems helpful in principle, but on what basis is that grant going to be made available? Is it going to be ring-fenced for these situations, or just generally devolved to local authorities and caught up in the morass of funding and cuts that they are having to face?

[Lord Freud]

One of the most worrying aspects about temporary accommodation is that many cases have not been temporary. There have been cases where people have been kept in temporary accommodation for months, stretching to years. One of the reasons for that was that the only way it could be extinguished was by going into social housing. People were quite keen on that route through. That was changed in the 2012 Act so that it can be extinguished by going into private housing. Nevertheless, we want to incentivise councils to move people into settled housing as quickly as they can. Indeed, I think that the limit is 13 weeks. There are just too many examples; I do not have the exact number, but there are too many cases where it has gone on too long.

On the fee, funding previously paid to local authorities will become an upfront payment no longer tied to households remaining in temporary accommodation. The fund will be administered by the DCLG and the devolved Administrations. We will be able to give further details of that process in due course. That is all I have at the moment.

[Lord McKenzie of Luton]

I am grateful to the Minister for that. I will read the record, but I am not sure that I would agree with the proposition about local authorities not wanting to move people into more permanent accommodation as quickly as they can, and away from temporary accommodation, which is expensive for them. Having said that, and given the hour, I beg leave to withdraw the amendment.

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Moved by

[Lord Freud]

28: Clause 7, page 9, line 41, at end insert—
“(b) in subsection (4), omit “other”.”

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[Lord Freud]

The Delegated Powers and Regulatory Reform Committee recommended in its report of 23 November a number of amendments to the benefit cap clauses in the Bill. Amendments 29 and 30 are technical and consequential amendments as a result of the committee’s recommendations. Amendment 28 is a tidying amendment and not as a result of the committee’s recommendations.

Before I do that, I would like to explain that, although the committee recommended that Clause 7 should be amended so that new Section 96, which it inserts into the Welfare Reform Act 2012, should reference single persons, couples and lone parents, and provide for the meaning of those terms to be specified in regulations, the Government do not consider this to be necessary. Redrafting the provision in the way suggested would overly complicate the legislation. The Government have been very clear in debates and briefings that the higher tier of the cap levels will apply to lone parents and couples, and that the lower-tier levels will apply to single people without children. I am happy to formally put on record again here today that this is the policy.

Turning to the amendments that are being taken forward, the committee recommended that the affirmative procedure should apply to any regulations amending the level of the benefit cap, using the power introduced in new Section 96A of the 2012 Welfare Reform Act to be inserted by Clause 8. As currently drafted, the affirmative procedure is applied only if the level of the cap is lowered. The amendments to Clause 8 mean that any change to the levels of the cap will be subject to parliamentary debate in line with the committee’s recommendation. This is a considerable level of extra parliamentary scrutiny for these future decisions. I am sure that these amendments to Clause 8 will reassure noble Lords’ concerns that for any future review of the cap this House and the other place will have the opportunity to have the decision explained and debated, and to agree it.

The committee also highlighted that currently regulations pertaining to the benefit cap are not required to be referred to SSAC. It has recommended that an amendment be made to provide that regulations pertaining to the cap must be referred to SSAC. After careful consideration, the Government accept this recommendation in principle and will table an amendment at Third Reading to reflect this. However, the Government do not accept that regulations relating solely to the level of the cap should be referred to SSAC, as that is a matter for Parliament.

A consequential amendment to Clause 7 has been identified. It has arisen as a result of the removal of Section 97(3) of the Welfare Reform Act 2012. Section 97(3) provided that the first set of regulations made under Section 96 were affirmative. As the first set of regulations has been made, the removal of the word “other” from Section 97(4) is purely consequential on that. I beg to move.

[Baroness Sherlock]

My Lords, I thank the Minister for that explanation. We welcome the move to affirmative regulations and are happy to accept his assurance that the other amendments are technical and consequential. I look forward to his returning at Third Reading with details of the amendments relating to SSAC. I would like to ask him to come to Third Reading armed with some specific information. If the Government are not minded to make reference to SSAC in relation to the level of the cap, and given that all the benefits affected by the cap are now in the Bill, will the Minister come back and detail for us precisely what those regulations might refer to that are still available to be sent to SSAC? Will he come back at that point and give a better explanation, of appropriate length—I am not blaming him for not doing it now—as to why the Government do not think that the level of the cap should be referred to SSAC, given that that is probably the single biggest determinant of the impact on those affected by it?

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Moved by

[Lord Freud]

29: Clause 8, page 11, line 21, leave out from “subsection” to “may” in line 23 and insert “(4) insert—
“(4A) A statutory instrument containing regulations under section 96A”