Welfare Reform Bill

Lord Kirkwood of Kirkhope Excerpts

Monday 10th October 2011 Grand Committee

I hope first and foremost that the Minister will reconsider the decision to pay universal credit monthly—or, at the very least, will allow the claimants to choose between fortnightly and monthly payments in line with the Government’s own philosophy of choice. As a fallback, a third amendment would allow a claimant proactively to choose fortnightly payments while retaining monthly payments as the default, and the fourth would require a review of the impact of monthly payments should they go ahead. I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I am privileged enough to share the billing on the amendment with the noble Baroness, Lady Lister of Burtersett. She has made a very powerful and comprehensive case, and there is not an awful lot left to say, except one or two things. This is a significant change. In my previous incarnation, as a member of the Select Committee in the other place, I was always surprised at the extent to which weekly budgeting is a feature of life that is qualitatively different. If you do not live under those circumstances, it is hard to appreciate how difficult it is. A change to monthly payments would be extremely significant. I feel that it is part of my duty to protect the Minister of State from his normal missionary zeal in many of these cultural attempts to change the way people behave. They are perfectly logical, but potentially really quite dangerous if we take them too far and too fast.

The first thing I hope that the Minister will do for the Committee is put some flesh on the Government’s proposed mitigation factors which talk about exceptions and budget support. The noble Baroness, Lady Lister, correctly asked for those to be made clearer. She is right that if this is to be done properly and the system is to be equal to the task, it might cost more than the department currently thinks. That has the potential to wreck some of the elegance of the simplicity around universal credit, which would be a bad thing. However, before the Committee can make a judgment on the Government’s position, we need to listen carefully to what is planned.

Secondly, this is a significant change because there is no appeal on frequency of payment. As colleagues know, throughout the benefits system there is a highly developed set of circumstances for people who feel that they are being short-changed or not being properly served. There are means of recourse through systems that are well known, well used and well supported by the legal advice community, pressure groups and the like. There is no right of appeal here, so if we get it wrong, people will have nowhere else to go.

There is an issue too about monthly payments. Monthly is not the same as 12 times a year. People pay their bills monthly because that is how often the bills come in. So it is not just a simple question of weekly payments or not, it is actually that people being paid on a weekly basis know when the utility bills will come in and know where savings have to be made in order to meet them. It is not an easy thing to move from weekly payments to 12 times a year.

I absolutely agree with the noble Baroness, Lady Lister, about the payday loans issue, and I think that it will become seriously significant. I would draw attention to what I am sure colleagues already know intellectually, which is that discretionary payments made under the Social Fund are flying up under the changes we are making now. The Government say that we need not worry too much about it because there are local circumstances—400 of them in England, not to mention Scotland and Wales—and they will fill the gap. I remain to be convinced of that. We need to be careful that we are not creating a loan shark’s charter at the expense of lower income households in our communities.

We need an impact assessment, and many noble Lords were right to draw attention to that. I look forward to seeing the document that was magicked to some effect out of the Minister’s top hat earlier today, and long may that continue. If we have one of those every time the Committee sits, we will make some serious progress. In the end, however, this is a question of choice. For me, Amendment 27 does it perfectly. It states,

“so that it is payable twice per month where requested by the claimant”.

I understand the driver to replicate the monthly situation. Obviously everyone in this Committee has a natural rhythm of payments constructed around monthly bills, direct debit payments and all the rest of it. The ability for the claimant to request that this is the way that they work and to do otherwise would cause them serious distress would still leave them with a default position where they would largely get what they want, and the people who are nearer the labour market would be perfectly happy to accept the discipline that they need to make this work successfully.

--- Later in debate ---

[Lord Freud]

My Lords, I was coming to this issue. The universal credit is a rather differently structured benefit system. We have talked in the past about much greater flexibility with earlier draw-downs and an automatic repayment system. We are looking at these kinds of structures. When I talk about budgeting support, I am not just talking about education, advisers and that kind of support, I am also talking about a degree of flexibility in the system that simply does not and cannot exist now. I do not think there would be any stigmatisation at all in how people use this system. We have not worked out all the detail of this, and noble Lords have given me personally quite a bit of food for thought. How we develop these regulations and get them right so that we do not run into the kind of problems which noble Lords have so powerfully raised today is something that we will look at very closely. On the stigmatisation point, my intention would be that it would be invisible, and within the universal credit system, it can be invisible.

Let me revert to the question put by my noble friend Lord Kirkwood about the impact assessment. I have to tell him that payment frequency is not one of the issues in the impact assessment. It was referred to in the equality impact assessment where we said we were carefully considering the claimant welfare implications of the options, so that is where it is.

[Lord Kirkwood of Kirkhope]

May I clarify the point for the avoidance of doubt? Is there a technical issue about frequency of payments? I understand and am listening carefully to what he is saying about assessment periods versus payment periods. Are his new computers going to be agile enough to pay fortnightly rather than monthly?

[Lord Freud]

I think the noble Lord, with his normal subtlety in his amendment, has made a distinction between bi-monthly and fortnightly. This is one of those issues, to be honest, where if you start delving into it, you will end up with daily rates because of the arbitrariness of both weeks and months. It is not a straightforward thing to do. Clearly, at one level all the utility systems are driven on a monthly basis, while other areas are driven on a weekly basis. With this system, we are one of the drivers of the way people behave and of social change. We should not forget that; how we do this will shape the norm, so it is not just a question of saying, “This is what everyone does. We must adapt to it”. There is an element of saying, “If we do it like this, we will shape the way people arrange their lives”.