Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Monday 12th December 2011 Lords Chamber

[The Lord Bishop of Leicester]

My Lords, it is a privilege to speak in support of the noble Baroness’s amendment. Her evident mastery of the subject has impressed the whole House, as it certainly impressed everyone involved in Committee. I do not have a great deal to add to what she said except that, in reading the transcript of that Committee, it struck me that two things did not emerge clearly enough, particularly given what the Minister said in reply. They were: first, a clear recognition that living on a very low income requires highly sophisticated financial domestic management and highly sophisticated budgeting. That would almost certainly be beyond the rest of us to manage. It seem to me unreasonable to expect people who are living with the burden of that kind of pressure also to develop skills beyond what the average in the community would be in terms of managing their finances.

That relates to my second point. The proposal for a monthly payment seems to have been made to generate a culture change among those who are not perhaps in the habit of regular employment—in other words, to build the capacity of those in receipt of the benefit to behave like the rest of society. However, I put it to the House and to the Minister that perhaps what we need more of is the capacity of government to understand what it is like to live on a very low income. That is where the capacity building needs to happen here.

I very much hope that the Minister, who has consistently shown a readiness to listen and respond, will think again on these amendments. My own experience as a parish priest in east London, and more recently in the parishes of the outer estates of Leicester, has shown me repeatedly and at first hand the extreme pressures under which those on very low incomes live. This is a modest amendment that would signal to those in receipt of these payments that their problems are understood and that the Government are ready to be sympathetic.

[Lord McKenzie of Luton]

My Lords, perhaps I may clarify precisely what it is that we are debating. I believe that my noble friend Lady Lister moved Amendment 1, somewhat belatedly, on behalf of the noble Baroness, Lady Meacher, and also spoke to Amendment 2, which is in her name.

[Noble Lords]

No!

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, as I understand it, Amendment 1 has not been moved, but Amendment 2 has. I think that the noble Baroness, Lady Meacher, will speak to Amendment 1, but I do not think that she is in a position to move it. That is my understanding.

[Lord McKenzie of Luton]

My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.

[Baroness Hollis of Heigham]

I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend’s request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.

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[Lord Newton of Braintree]

My Lords, I do not know whether the Minister wants to give guidance on that point or to take it up later. I want to intervene briefly, and slightly apologetically, because, like the noble Lord, Lord Kirkwood, I was a bit late on the scene, but I am conscious that I played some part on this subject in Committee, so I think that it would be wrong to keep my head completely down in this debate.

I differ from my noble friend Lord Kirkwood in one respect; I think that the objective of what the Secretary of State describes as culture change in this field is not unworthy. Apart from that, I agree with pretty well everything that the noble Lord said. However, we need to remember something I learnt in various roles, including in my early years as a junior Social Security Minister when I became, it was be fair to say, friends, more or less, with the noble Baroness, Lady Lister. As I said in another context recently, culture change is not an event; it is a process. It takes time and not everyone will get through it. In an organisation, if you want a culture change and people cannot accommodate it, sooner or later they and the organisation have to part company, and they do something else.

This is the social security system, and people cannot part company with it. There is nowhere else for them to go, and we cannot abandon them. There is therefore real force in some of the concerns that are being expressed. Some people, such as those I tried to help in my former constituency, simply will not be able to manage. What are we going to do about them? As I say, we cannot abandon them. I might say that this will feed into something that is coming up later: whether rent should be paid directly to landlords. In some cases, where they cannot manage they will put the food for the baby first and the rent will not be paid. Then there will be another little problem, and someone will have to sort them out. Let us not pretend that this is easy, even if the objective is worth while.

I am not sure—and here I look with some trepidation at the noble Baroness, Lady Lister—that inserting into the Bill an insistence on ossifying fortnightly payments is right. The Bill already provides for some flexibility. Some benefits—including disability living allowance, I think I am right in saying—are paid monthly. This is not a simple picture. We do, however, need that flexibility where it is clear that failing to pay at more frequent intervals will multiply problems, difficulties and further costs in other parts of the system. The Bill allows for that, and I welcome that, but we need clear indication from the Minister this afternoon that this flexibility will be used.

[Lord McKenzie of Luton]

My Lords, first, I thank the government French Bench for facilitating the debate on these three amendments, after the hiccup we had at the start, and I thank the noble Lord, Lord Brooke, for his helpful advice. I say to the noble Lord, Lord German, in respect of his comments on Amendment 3, that I take the point. If he wants, perhaps, a more iterative process, I am happy to accept an amendment to our amendment. I am bound to say that we rather learnt about calling for reviews from the Liberal Democrats and Conservatives when we were in government—it has the merit of generally not having much of a price tag attached to it.

We start our deliberations on Report by considering the important aspect of how universal credit would work—that is, how payment would be affected, especially the frequency of the payment. However, let me first put in context our approach to the general issue. As we have clearly stated on the record, we support the concept and broad approach of universal credit, a benefit system that provides in-and-out-of-work support, as a clear system of the income disregards and common tapers has significant potential, not least the prospect of clearer incentives for work.

As has been apparent from our Committee sessions, and the matters that we will discuss on Report, the manner in which it is proposed to be introduced is, we believe, flawed. Some of the shortcomings are resource issues—work incentives for second earners—but some are potential failings in the base architecture: the exclusion of council tax benefit; the treatment of self-employed people; and, also, the payment arrangements. I agree with the noble Lord, Lord Kirkwood, that this is not a peripheral operation or issue—this is central to how the system should work.

We will come on to discuss issues about which member of the couple should receive payment and how landlords are to be treated—as the noble Lord, Lord Newton, has indicated. The amendments we are considering now address the vital matter of frequency of payment. Amendment 3, tabled in my name and that of my noble friend Lady Hayter, calls for,

“a review into the impact of payment arrangements on claimants, to conclude one year after the coming into force of this Act”.

I will acknowledge that it might be more appropriately triggered by the universal credit provisions coming into force. We see this review focusing on the impact on claimants by looking at it from the claimant’s perspective. In Grand Committee on 10 October this year, at col. GC 440, the Minister referred to the research being undertaken, particularly around the frequency of payment. An obligation to undertake an early review of how things are working in practice and a report to Parliament would be entirely consistent with the Government’s evidence-based approach to this issue.

We know that at present JSA is paid fortnightly in arrears, that ESA is normally paid fortnightly in arrears, income support is normally paid fortnightly in arrears, and that tax credits are paid on request either weekly or every four weeks, although I think one would acknowledge that HMRC has an overriding discretion in that respect. Housing benefit is normally payable in arrears at intervals of a week, two weeks, four weeks or one month, but as I understand it, if the rent allowance is greater than £2 a week, the claimant can require it to be paid fortnightly. So in having for universal credit the norm as monthly payments, the Government are clearly not seeking to get the best fit with the current components that are to be displaced. Indeed, I think that the Minister and this debate have acknowledged that. He said on the same occasion in Grand Committee:

“With this system, we are one of the drivers of the way people behave and of social change”.—[Official Report, 10/10/11; col. GC 441.]

I support the comments that have been made by a number of contributors, including by my noble friend Lady Sherlock, about culture change, but culture change to what effect in this respect? We understand and accept the thrust of a system that encourages people into work and helps them to understand the benefits of work by seeing its financial rewards, but what is so important about trying to encourage people to get used to a monthly payment and budgetary arrangement rather than one on a different basis, even if they were in a position to do that? The noble Lord, Lord Freud, also referred in Grand Committee to his search for flexibility. If this is an acknowledgment that monthly does not have to be the rigid approach to payment, we may be closer on this issue than perhaps we thought.

We heard from the noble Baroness, Lady Meacher, my noble friend Lady Lister and other noble Lords about compelling reasons why payments on a monthly basis will create particular difficulties for some families, and not just a small minority of supposedly inadequate budgeters. As for mimicking work, which we have heard as well, while 75 per cent of those in employment are paid monthly, 25 per cent are not and half of those earning £10,000 a year or less are paid less frequently than monthly. We heard in Committee and again today about the growth in the business of payday loans. Recent surveys show that nearly half of the population struggles to make earnings stretch until payday, with 7 per cent considering taking out a high interest short-term loan within the next six months. The issue of how to stop the exploitation of poor people is a debate that I hope we will have on another day.

Amendment 1, eventually moved by the noble Baroness, Lady Meacher, would require regulations to be drawn up giving claimants the opportunity to require payment of their universal credit entitlement more frequently than would otherwise flow from Clause 7. We support this amendment and so, we hope, will the Minister, because it seems to fit foursquare with his acceptance of the need for flexibility. Obviously the regulations would have to set out practical parameters to the choice available to claimants, but this should include a fortnightly option. The Minister will know also that it would not preclude arrangements where a claimant could draw down against a monthly entitlement. It would be consistent with that. Neither would it preclude the Minister from retaining the distinction between the assessment period and frequency of payment, a point made by my noble friend Lady Lister.

It is understood that the Minister may argue that the issue of frequency of payment can be addressed by the development of new banking products and that he would not wish the Bill to preclude that. That is fair enough, but we consider that the thrust of the amendment moved by the noble Baroness, Lady Meacher, would not shut out those types of options provided that there are arrangements with parameters dealt with in regulation for claimants to choose. But we do not know today that these banking products can be delivered in time for the introduction of universal credit, whether they can be comprehensively available and without high cost. Without that certainty, it is right that something is included in the Bill along the lines of Amendment 1.

Perhaps the Minister will take the opportunity to update us on the Government’s thinking in this area, as other noble Lords have requested. In particular, do they support the proposition that there should be flexibility within sensible and practicable parameters of receipt patterns? Should there be a right for claimants to choose within these parameters? Can he confirm that the arrangements being considered are not just about drawing down on a monthly payment already made in arrears?

Amendment 2 is more clear-cut and, I think, more to the liking of the noble Lord, Lord Kirkwood. It sets down a requirement for amounts to be paid fortnightly. It has the merit of being clear and closest to the current patterns of receipt, making it slightly more manageable to exist from payday to payday. We support the amendment as an alternative proposition should Amendment 1 be rejected or fail today.

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[Lord McKenzie of Luton]

We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?

[Lord Freud]

My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account—some would argue that that is what it is as regards budgeting advances, for instance—or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.