Welfare Reform

Lord Knight of Weymouth Excerpts

Monday 11th October 2010 Lords Chamber

[Lord Knight of Weymouth]

My Lords, I am grateful for this Statement—although, given that Parliament was sitting last week and given the contents of paragraph 9.1 of the Ministerial Code and paragraph 6.35 of the Companion, it would have been much better to have had the Statement last week. I disagree with the Minister’s characterisation of the macroeconomy, but we can debate that some other time. Suffice it to say, given that the UK has one of the lowest debt-to-income ratios in the G7, the pace of reform is a choice and not an inevitability.

As my right honourable friend the new shadow Secretary of State said today in the other place, we are not against reform and much of the reform is a continuation of what we did in office. But there are of course a number of questions. On the migration of incapacity benefit claimants through the work capability assessment, rolling this out nationally is, as I am sure the Minister would agree, a huge undertaking. What is he doing to increase capacity in the market for providers of those assessments? Furthermore, given the bleak projections by the Chartered Institute of Personnel and Development and others of rises in unemployment due to the speed of public spending cuts, what proportion of providers’ income will be paid by results on the basis of job outcomes? What is the Minister’s prediction of the unemployment rate when the work programme starts next summer? Given that the bidders of the programme are, with their financial backers, having to make predictions on successfully getting people back to work, I do not think that he can any longer hide behind the mantra that I used that Ministers are not in the business of making predictions.

What is being done to encourage employers to take on those who have been long-term sick when, with the claimant count now rising, they could take the recently unemployed, recent graduates or highly motivated EU migrants instead? Finally on this point, what will be done differently by providers in this programme from that done by those who deliver the old Pathways to Work programme with such mixed success, where the private sector did not outperform the public sector?

I shall move on to the proposed benefit cap of £500 per family per week. To some, that may sound reasonable, but it will cover not just the main income replacement benefits such as jobseeker’s allowance, not just child benefit and child tax credit, and other benefits such as carer’s allowance, but crucially it will also include council tax benefit and housing benefit. In many of our urban areas and in the south-east, the high cost of rented housing and council tax means that, if you lose your job and have a larger family, it will not be long before you lose your home as well, as you will not be able to afford the rent. Does the Minister think that that is fair and will really help those families back into work?

As regards child benefit, has the Minister seen the report in Thursday’s Guardian where the right honourable Secretary of State for Work and Pensions said that child benefit will be rolled into the new universal credit from 2017 and will therefore be means-tested? Can he confirm that the Chancellor’s new wheeze for clawing back child benefit from higher rate taxpayers is only temporary? What discussions took place between Ministers in the Department for Work and Pensions, especially those responsible for child poverty, and Ministers in the Treasury before the announcement was briefed last weekend? In the other place today, the Secretary of State claimed that the unfairness of the child benefit changes was due to the unfairness of the taxation system. Has the Minister seen the comments of the Institute for Fiscal Studies, which stated:

“Using the means-test in tax credits could be considered fairer to single-earner couples, and would not distort incentives so dramatically”?

Is it just not-invented-here syndrome that prevents the Government from using the tax credits system to do this?

Finally, the Chancellor repeated in the media last week that his proposed changes would affect those paying the higher rate of tax—about 1.2 million families. That was also repeated by the Secretary of State in the other place. What is the Minister’s latest estimate of the number of higher rate taxpayers who will lose out due to the child benefit changes, given the reduction in the threshold for higher rate taxpayers announced in the Budget? Surely, if the higher tax threshold is lowered as part of moving to meet the Liberal Democrat ambition of a starting tax threshold of £10,000, there will be many more than 1.2 million people affected by this measure.

The announcements of welfare reform are in large part welcome in principle, because they follow from what my party, and I, pursued in government. The announcements about child benefit last week were frankly a shambles. I hope that this Minister, whom I know to be a good and noble Minister, will clarify things for the benefit of Parliament.