Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Tuesday 14th February 2012 Lords Chamber

[Lord Newton of Braintree]

My Lords, I had not intended to intervene either. I will do so very briefly because I have made my points at earlier stages of the Bill. My principal point, as I said to the noble Baroness, Lady Meacher, at the end of last week, was that I did not expect to be able to vote for her amendment because, while I thought that the cause was good, writing this kind of thing into primary legislation was not. That is reinforced by the points that have just been made. I see the noble Lord, Lord Walton, nodding; I am not sure that the noble Baroness, Lady Hollis, will be nodding. The very point that the degree of disability does not directly relate to the costs incurred is actually a point of not trying to write all this stuff in concrete into primary legislation, together with the variability to which the noble Lord, Lord Walton, has referred. So I very much hope that the noble Baroness will not press her amendment to a Division, even though I strongly support the general aim that she has in mind. I want to pay my own tribute to the part that she has played in focusing on this issue.

[Lord McKenzie of Luton]

My Lords, like other noble Lords, I think we should be grateful to the noble Baroness, Lady Meacher, for keeping us focused on the issue of disabled children, and to all noble Lords who have spoken in this short debate with a great deal of expertise and knowledge on the subject. They reminded us that even in this rich country there are people and families who still live in poverty and are challenged by poverty. The deliberations that we bring to bear through legislation may seem somewhat detached from that, but that legislation has a real effect on real people’s lives.

Like my noble friend Lord Peston and the noble Baroness, Lady Howe, I was a bit confused as to how this amendment became caught up in the issue of financial privilege because I thought that the Minister was on record as saying that this was not an issue of money. Indeed, the noble Baroness, Lady Meacher, confirmed that. I did not intervene in the earlier exchanges on this issue but I am somewhat concerned about aggregate figures of costs flying around, whether we agree with them or not, and tagging on to them a provision that has no cost implication at all. If that is permitted under these arrangements, it is a bit of a slippery slope.

However, we should be grateful to the Minister for his engagement running right across the Bill, particularly on this issue, and for his promise of a review on definitions and access to the various benefits. I hope that he will take account of the point made by my noble friend Lady Hollis and others that the issue of costs does not correlate exactly with severity of disability. If I have to take issue with the Minister, I wish that he had not said that his commitment to undertake this programme was conditional on the noble Baroness withdrawing her amendment. Frankly, if it is right to do it, it is right to do it.

Perhaps I may pursue one point with the noble Lord. He previously stated that families would obtain the benefit of transitional protection so that the cash amount of support under universal credit would not reduce. That would not of course protect the position in real terms but perhaps we can at last understand a little more—on the record, I hope—about how transitional protection will work. Is it to be applied separately to the differing components of universal credit or will it be looked at in aggregate? Could an increase in the housing amount, for example, mean an effective reduction in the protected disability addition? Can we also get some clarity around changes of circumstances and what types of situation would cause the transitional protection to be removed? What about, for example, a move in accommodation that might have been caused by the underoccupation provisions that we debated previously and will debate again shortly? Could that represent a change of circumstances that could cut off that vital transitional protection?

I do not wish to go over all of our powerful debate on this issue. I acknowledge the commitments that the Minister has made but repeat that we should be thankful to the noble Baroness, Lady Meacher, for keeping us focused on this important issue.

[Lord Freud]

My Lords, many specific points have been made and I shall try to deal with them. We have debated this issue a lot and perhaps I may gently remind the noble Lord, Lord Peston, that we actually voted both ways on very similar issues. I recall that we had a plus two and a minus 16 on this issue—I think it was this issue. When we talk about the message coming from the Lords to the Commons, there were a number of votes in this area.

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[Lord Freud]

Nearly. I hope that I have made it clear that I really understand the concerns being expressed not just by the noble Baroness but right around the House. I think that our commitment to carry out this review—it is a significant review that will look at the issue properly—is the right way of approaching the matter. It is far better than adding an unnecessary and untested complication to the design of what is meant to be a universal credit system which people can instinctively understand. If it is an offer, I urge the noble Baroness to accept it and withdraw her amendment.

[Lord McKenzie of Luton]

Before the noble Lord sits down, will he write on the issue of transitional protection and changes of circumstances?

[Lord Freud]

Yes, my Lords. I am sorry; I forgot to answer that. At this stage, I am not in a position to lay out transitional protection because we are currently looking at how it will work. However, it will be a bundled up protection. The work in progress effectively involves taking someone’s existing entitlement, comparing it with their universal credit entitlement and paying the difference as a lump sum, which is then maintained. However, in the context of what we are talking about, the migration process is rather more important than the transitional protection. In the vast bulk of cases, it is when those families move on to universal credit that will matter more than transitional protection, which will be towards the tail end of this period, if at all.

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[Lord German]

My Lords, before I raise a number of issues that the Minister considered on Report, I shall just say a word about some of the conversation that there has been on behavioural change in this debate. If we pause for a moment to think of the 1.8 million people on the waiting list for social housing and the number of empty rooms, and put the two together, there is something dysfunctional about our housing sector. We have people living in overcrowded conditions who are waiting for social housing. Around 700,000 of those people fall into the vulnerable categories.

Wherever I go, the answer is always to build more homes, which is obviously part of the solution. However, for as long as there is that dysfunction and a shortage of funding and land to build more housing on—and a resistance to building more housing in some rural areas—people will continue to extend that waiting list. It is important that we do not miss the opportunity to change that dysfunction in some way. That is part of the issue that is being addressed. However, there are difficulties over the transition and how it will affect people. It is not something that is done lightly; nor is it easy to do.

There are questions that I should like to pose to the Minister. In answer to me on 14 December, at col. 1302 of Hansard, on the additional £30 million that would be used for DHPs to make up for the difficulties faced by two specific groups, he said that it would, “assist around 40,000 cases”. Is that simply a division of the amount of money available by the numbers that are predicted, or is it a fundamental assessment of those who live in adapted accommodation or are foster carers? I know that many noble Lords have made significant contributions to the debate on foster carers, both in Committee and on Report. It is of great concern because it has a very wide impact. Therefore, is the amount of money that is being made available sufficient to cope not only with the existing flow of foster carers but with the additional numbers that we need in this country to satisfy a very broad demand?

The second issue that arises from the Minister’s statement on Report relates to the other group that will be assisted by the discretionary housing payments—disabled people who have significantly adapted accommodation. I recall that in Committee we talked about several examples of people who had had very expensive changes made to their accommodation at public expense. That public expense would be duplicated if they had to move to other accommodation. Will the Minister explain to the House what “significantly adapted accommodation” is? Is the definition to do with whether it would not be cash-worthwhile, or does it go beyond that and relate to the nature of the adaptation that has been made?

One issue relates to equipment. Some equipment for disability is very cumbersome, large and bulky and would not warrant being moved. It would probably have been built into accommodation. For example, does this apply to a home where a disabled person requires ground-floor accommodation and where the expense of building a ground-floor extension to a property means that there is an empty bedroom upstairs? Will we still require that sort of change?

This whole transition, which must be effected through regulations, will undoubtedly be the source of some detailed conversations about these matters. Therefore, will the Minister give us some indication of whether the DHP that will be applied will be sufficient to tackle the two specific groups in all circumstances; and what he expects to be able to afford to do in the transitional arrangements that he may bring forward in regulations?

[Lord McKenzie of Luton]

My Lords, the Government have moved in a number of ways on the issues that have been returned from the other place. Along the way, they have also accepted a number of other changes that were pressed on them by your Lordships’ House. However, the Bill remains unchanged in some of its most unacceptable provisions, not least of which are those relating to underoccupancy. That is why we support the amendment in lieu, which was moved with such precision and expertise by the noble Lord, Lord Best. As we have heard, the amendment is less ambitious than that previously accepted on Report, reflecting our obligation to take account of the financial strictures of the Government. However, the amendment is not cost-free and cannot be if it is to provide protection for hundreds of thousands of households that, on average, could see their income fall by £14 a week.

It is clear that, under the guise of addressing underoccupation, the Government seek to make further savings on housing benefit on top of the multiplicity of restrictions—the CPI uprating, the 30 per cent percentile, the rent and size caps and the shared-room rate—that are already in play. Savings from some of these are being made in parallel with the benefit cap. The Government’s stated aims for the underoccupation rules are to encourage greater mobility within the social rented sector; to make better use of the available social housing stock; to improve work incentives; and to curtail housing benefit expenditure. The amendment in lieu addresses each of these issues. It is clear that, should a suitable offer of accommodation be forthcoming, there is an expectation that an underoccupying tenant should take it up, whether or not they have only one spare bedroom or fall into any of the exemption categories listed. If they did not, the housing benefit reduction would ensue. What is suitable would have to be defined in regulations and would have to reflect the circumstances of the household, including its need for adapted property, transport links, access to support services and appropriate schooling.

However, there is no merit at all in an economic incentive to move to smaller properties when there are no smaller properties to which people can move. Therefore, the amendment provides that, with no suitable alternative offer, the underoccupation deductions—the room tax, in the terms of the noble Lord, Lord Best—would apply unless there was no more than one spare bedroom and one or more of the other exemption criteria applied. As for improving work incentives, this can surely have no application for those who have no work requirement placed upon them, for example because of a severe disability. These are people who the Government themselves recognise cannot work and should not be expected to work, so what is the purpose of an economic work incentive for them?

We know that disabled people face extra costs in their daily lives and that it is harder for them to take the hit of reduced housing benefit. Indeed, the Government have already recognised this in the benefit cap by exempting certain categories of individuals from loss of housing benefit or universal credit. These are the self same categories listed in paragraph (b) in the amendment, mainly those on DLA or PIP. War widows or war widowers are similarly included in the exemption to parallel the arrangements in the benefit cap—no more, no less. The noble Lord, Lord Best, referred to the sources of funding on offer to deal with foster caring. It is hoped that the Minister will be able to dispel any suggestion that the new money to which he referred is just being cynically recycled. The Government’s other solution is for people to take in paying lodgers. Perhaps the Minister can say what assessment has been made of this possibility.

We agree that underoccupation in the social housing sector should be addressed and clearly the lack of social housing and the need to build more is part of that, but it is clear that the Government do not see these provisions as a route to doing so. Their assumption is that most people will not move and will take the hit and that is how the Government will get their savings. These amendments would stop them getting those savings from the most disadvantaged in our country. We support them.

[Lord Freud]

My Lords, the amendment in lieu of the noble Lord, Lord Best, seeks to exempt certain categories where the tenant underoccupies by one bedroom and no suitable alternative accommodation is available, those not required to seek work, carers, disabled people, war widows and foster carers. Our estimate of the cost of this amendment is slightly lower than that of the noble Lord. He suggested that it was £150 million. We estimate that it would cost up to around £100 million in 2013-14. We have already announced an increase of £30 million in the discretionary housing payments aimed at some of these categories—those living in adapted properties and foster carers. Others in vulnerable situations can also apply to the fund where they have difficulty meeting the shortfall.

I say to my noble friend Lord Kirkwood that that £30 million is an ongoing rate. The amount will be kept under review to see whether it is meeting the level of demand in different areas. We set the amount at £30 million based on the numbers likely to be affected by the measures. We think that the £30 million could help about 40,000 cases based on the average reduction of £14 a week. That figure is based on the group of 35,000 potentially affected claimants who are wheelchair users and live in accommodation that has been adapted to suit their needs, although, of course, not all of these would need to apply for a discretionary housing payment. We estimate that around 5,000 foster carers, including those in between assignments, could be affected by the measure.

My noble friend Lord German referred to the type of housing that would be affected by the measure. We decided to tackle this matter through discretionary housing payments, as introducing exemptions and classification is very difficult in practice. Therefore, we are leaving it to local authorities to make some very tough judgments on where it makes sense to offer that support as they have a lot of local knowledge. Regrettably, £100 million is a lot of money in the present climate, even though it is less than the £150 million figure estimated by the noble Lord, Lord Best. Clearly, it is difficult to agree amendments and send them to another place when they have such significant costs attached to them.

In summary, we believe it is right and fair to proceed with the measure as it is in the Bill. We will apply a percentage reduction of 14 per cent for those underoccupying by one bedroom and 25 per cent for those underoccupying by two or more bedrooms. That comes in in April 2013. The noble Lord, Lord McKenzie, asked me to disavow any cynical recycling. I am in a position to do that, as we announced a range of these reductions of between 10 and 15 per cent for one room and 20 to 25 per cent for two rooms. When I fixed the rates in December, I was able to do that within the bands that we had set.

[Lord McKenzie of Luton]

Is the noble Lord saying that those rates would be lower if the £30 million had not been made available?

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Moved by

[Lord McKenzie of Luton]

As an amendment to Motion E, leave out from “17A” to the end and insert “and do not agree with the Commons in their Amendment 19A but do propose Amendments 17B, 17C, 17D and 19B as amendments in lieu of Amendments 17 and 19A”

17B: Page 36, line 19, leave out “365 days” and insert “the relevant maximum number of days”

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19B: Line 4, leave out “a prescribed number of days which must be at least 730” and insert—
“(a) 365 days, or
(b) if the Secretary of State by order specifies a greater number of days, that number of days.”

[Lord McKenzie of Luton]

My Lords, Amendments 17B, 17C, 17D and 19B relate to the time limit for the contributory employment and support allowance, and recommend that this can be increased by secondary legislation in the future.

The time-limiting of contributory ESA to just 365 days for those in the work-related activity group is one of the most indefensible provisions in the Bill. It is all about saving money and will bring what my right honourable friend Stephen Timms referred to in the other place as,

“a financial catastrophe for a very large number of people”.—[Official Report, Commons, 1/2/12; col. 836.]

I remind noble Lords that the number affected will rise by 2015-16 to something like 700,000, 40 per cent of whom will not be entitled to income-related ESA. It will hit some 100,000 claimants in a matter of a few weeks when they see their ESA disappear literally overnight, with losses in income of up to £90 a week and over half of those affected in the lowest three income deciles. The very manner in which this is being introduced, including the assessment period and time already on the clock, demonstrates that this is not about fairness but about money.

The arguments against this one-year limitation have been well rehearsed and I do not propose to develop them in detail again this evening. They were subject to a powerful amendment moved by the noble Lord, Lord Patel, on Report. The restriction has no credible evidence base, it undermines the contributory principle, it creates another couple penalty, and it simply fails to take proper account of the time that many will need to overcome their illness or disability so as to be able to access employment. The policy potentially overrides the WRAG conditionality, and the noble Lord, Lord Patel, is rightly pursuing the situation for cancer sufferers. We look forward to supporting him in his endeavours shortly.

Noble Lords sent a strong message to the House of Commons seeking a minimum of two years for the restriction, and for the restriction to be embodied in secondary legislation so that an evidence base could be brought to bear. That message fell on stony ground and the Government have brought the shutters down on our original amendment by claiming financial privilege. Of course, they did this with the full support of the Lib Dems, despite their party policy to oppose arbitrary time limits, but this is a reality that we have to face, if not forget.

In proposing this amendment in lieu, we do not abandon our determination to see this policy based on evidence; nor do we accept the 365-day arbitrary limit. Securing that an upward revision of this limit can be achieved by secondary legislation at least keeps the cause alive. The Minister has claimed international precedents—as he did a moment ago—as part of the evidence base for this policy. Perhaps we can ask the DWP to publish that research so we can share the benefit of it.

Nevertheless, I have some expectation that the Minister will feel able to accept this amendment and I thank him for his consideration if this is the case. For us, this is not the end of the issue.

[Lord Freud]

My Lords, Amendments 17B, 17C, 17D and 19B, tabled by the noble Lord, Lord McKenzie, mean that although a time limit of 365 days will still be applied to contributory ESA claimants in the WRAG, including those claiming under the youth provision, there would also be an order-making power that would allow the number of days to be increased in the future.

I thank the noble Lord, Lord McKenzie, for his amendment as this has given me the opportunity to consider again an order-making power for time-limiting. We have discussed at length our rationale for setting the time limit at 365 days. We have listened carefully to noble Lords’ concerns about this time limit. We have always said that, for clarity, we believe it is right to have the number of days specified in the Bill and that the time limit should not be subject to secondary legislation.

However, this amendment achieves an excellent balance of the two. A time limit of 365 days is still specified in the Bill, but with the added flexibility to increase the number of days by order. We welcome this amendment and I commend the noble Lord, Lord McKenzie, for tabling it.

To sum up, we have listened to the concerns raised by noble Lords and have made amendments to ensure that disabled people whose condition deteriorates are able to re-qualify for contributory ESA if they would be placed in the support group. This demonstrates our continued commitment to supporting those with the most severe health conditions or disabilities.

The noble Lord, Lord McKenzie, has tabled very well considered amendments, so I urge noble Lords to accept them. However, I need to make clear that accepting these amendments in no way changes the Government’s policy on the time-limiting of contributory ESA. The limit will remain 365 days. These amendments simply mean that a future Government—of any hue—would be able to change the limit by order, as well as by further legislation.

[Lord McKenzie of Luton]

My Lords, I am very grateful to the Minister for his acceptance of those amendments. He helped to draft them so he should accept them! I hear what he says about the Government sticking to their 365-day limit, but we will continue to work on him and his colleagues and hope to change their minds before we have a next Government.

Motion E1, as an amendment to Motion E, agreed.

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[Lord Patel]

My Lords, it is true that some cancer patients may not need any treatment after surgery. But many others need therapy and my amendment refers particularly to those who cannot work because of their treatment or their suffering from the effects of the treatment. My key point is that those people want to work. As Jenni Russell said in her article, they are not skiving. They want to work. If the amendment is defective in that area, the purpose is not.

[Lord McKenzie of Luton]

My Lords, when our amendments were considered in the other place, the Minister, Chris Grayling, emphasised that the scope of the support group had been increased for cancer patients and that the consultation, following work with Macmillan Cancer Support and Professor Harrington, carried a presumption that someone with cancer will be in the support group. In an exchange with my right honourable friend Stephen Timms, the Minister also confirmed that it was planned to have a simple system that enables a medical professional to indicate whether someone has sufficiently recovered to make a return to work. That obviously is to be welcomed. It clearly goes with the grain of the amendment in lieu in the name of the noble Lord, Lord Patel, which has our support. He has set out the arguments clearly and the support of noble Lords would bring relief to up to 7,000 people who have or have had cancer.

We recognise that the Minister cannot pre-empt a consultation, but we hope that the Government can accept the thrust of what the noble Lord, Lord Patel, proposes. If he cannot, we hope that the noble Lord will test the opinion of the House. Bringing relief to some 7,000 cancer sufferers is a worthy endeavour. Of course, it does not of itself provide help to the hundreds of thousands who are adversely affected by the arbitrary time limit in contributory ESA but that should not prevent us bringing some relief to this group where that is possible.

[Lord Phillips of Sudbury]

Did the noble Lord say that this would apply to 7,000 people?

[Lord McKenzie of Luton]

I understand that 7,000 is the figure. The noble Lord, Lord Patel, is nodding in assent.

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Moved by

[Lord McKenzie of Luton]

As an amendment to Motion G, at end insert “but do propose Amendment 47B as an amendment in lieu”

47B: Page 62, line 40, at end insert—
“( ) Regulations under this section shall provide that the benefit cap shall not be applied in prescribed circumstances, for the first 39 weeks from the relevant date.
( ) Such prescribed circumstances shall include—
(a) a claimant leaving work as a result of being made redundant or becoming disabled; and
(b) the requirement for the claimant to have been in work for a prescribed period prior to the relevant date.
( ) The relevant date is the date from which a claimant is treated as not being in work for the purposes of this section.”

[Lord McKenzie of Luton]

My Lords, I shall speak also to the amendments in Motion G2.

I accept absolutely the Minister’s assurance that he would have no part in seeking to demonise people on benefits. I have never thought that of him and I think that we would all accept that to be the position. In moving Amendment 47B in lieu, I should welcome the improvements to the working of the benefit cap which the Government announced in another place. While they might protest otherwise, it is clear that they recognise some of the unacceptable consequences of the cap which they are now seeking to ameliorate. This amendment goes with the grain of the Government’s thinking and announcements, and provides an opportunity clearly to embody that recognition in the Bill before it goes on its final journey. It sits alongside our further amendment which focuses on how the cap might anyway be constructed.

The amendment encompasses the concept of a period of grace of nine months before the cap bites for somebody who has become unemployed and it enables the detail to be set by regulation, which will enable the Government to specify their announced requirement of 12 prior months of work for the grace period to run.

When debating this exemption in the other place on 1 February, the Minister, Chris Grayling, also announced further exemptions in the ESA support group which the noble Lord, Lord Freud, confirmed a moment ago. These exemptions add to the existing list, which includes those in receipt of DLA, PIP, attendance allowance and, as we have heard, a war pension for surviving dependants when that is in payment. Further, we know that non-cash benefits such as free school meals, council tax benefit in its localised form and the childcare element of universal credit are to be ignored in what is included in the total benefits for the purposes of the comparison with average earnings—perhaps the Minister will confirm that to be the case.

Moreover, again as we have just heard, there is the announcement of more money, £160 million in total, for the first two years to top up discretionary housing payments to help those facing particular challenges. Whether this will be enough remains to be seen. So far as it goes, it is all well and good, although having lectured us on there being no money, perhaps the Minister can tell us where this funding has come from. Is it new money, or has something else been cut and, if so, what?

The cap will still hit tens of thousands of families hard, but the issue of who is in and who is out, and what is in the calculation, is at least a little porous under what the Government now propose. When announcing the period of grace, the Minister in the other place stated that it was always his intention to introduce this measure. One can only conclude that he went to some effort to disguise it. It did not appear in the impact assessment, including the updated document of 23 January. Indeed, on the basis of a response to an amendment tabled on Report by the noble Lord, Lord Best, pressed also by my noble friend Lady Drake, it seemed to be far from certain that a period of grace would be accepted. The Minister said then:

“What I can say today, as I said in Grand Committee, is that we are well aware of the issues, we are confident that we have the powers we need to ease transitions and we will consider the case for a grace period along with the other options that might be available”.—[Official Report, 23/1/12; col. 892.]

One reason for highlighting this issue in this way is to get on the record how the grace period is to operate. It is understood that if somebody becomes unemployed after or at the time that the benefit cap comes in, the nine-month period will run. I think that the Minister has now confirmed that the period will run also if somebody loses their job before the introduction of the cap, so somebody being made redundant in September this year will still get the benefit of three months’ easement from the cap until June 2013.

Moreover, can the Minister confirm that the period of grace will operate when somebody has their hours reduced so that they fall below the threshold for the number of hours necessary to be considered in work and thus falling within the scope of the cap? Can he also confirm that, for so long as the prior-employment requirement is met, an individual may benefit from the period of grace more than once? What is the position where a couple claims universal credit? Will just one of the joint claimants have to satisfy the conditions for the period of grace to operate? What assumptions underpin the estimate that the period of grace will reduce savings by £30 million? I should make it clear that we support and have argued for a period of grace, and the amendment seeks clarification as to how it will work in practice. We are pleased that it will help to ameliorate the misery that the cap will bring and we want the period of grace to be meaningful and not just a gesture to get the Lib Dems on board.

I turn to Motion G2. We support a benefit cap but do not consider the manner in which it is to be introduced by the Government to be sensible. As we did in the other place, we take the opportunity to set down our view of how a cap could operate. Our amendments approach the benefit cap in a different way. It is different because of the difficulty in particular in seeking to create a one-size-fits-all cap which could lead to at least 20,000 families becoming homeless, wiping out any of the £270 million savings that the Government have said their benefit will produce. Indeed, it would lead to the very consequences which the Government have had to recognise in providing the additional £160 million of funding announced on 1 February—which we have just discussed. They are the sort of consequences which the Government have recognised in a series of exclusions for individuals and exemptions for certain types of benefit from the calculation.

The concept of a cap might be superficially very straightforward and, indeed, attractive: no household should get more in total benefits than the average net-of-tax-and-national-insurance earnings of those in work. A nice round sum of £500 a week for some might seem generous given that, for many, it is more than a family has to live on.

We risk creating the impression that everyone on benefits is getting £26,000 a year; and, by dealing in generalities, we risk ignoring the differing circumstances that families face. Although only 1 per cent of benefit claimants may be caught by the cap, this still amounts to some 67,000 families. The sum of £500 a week might get you a one-bedroom apartment in London, but in Rotherham in Yorkshire it would get a six-bedroom, detached family house. Given that the largest single benefit received by those set to be affected by the cap is housing benefit, one cap, set nationally, cannot be fair. This is particularly—but not exclusively—a London phenomenon, as illustrated by the Government’s own impact assessment. Over half of those affected by the cap currently live in London, with 3,300 in Brent alone set to lose under the cap, so it is no wonder that Lib Dem MPs reputedly went walkabout when the vote came up in the Commons. We believe that our amendment in lieu offers a better way forward. The cap should recognise different housing costs, especially in London. As noble Lords will know, recognising different housing costs has been a localised part of the benefits system for over 70 years.

Moreover, if a benefit cap is to become part of the benefits landscape, there is a case for appointing an independent body to advise on what the appropriate levels for the cap should be. The benefit cap is—or has certainly become—an emotive issue, but it would be bad policy if the structure of the benefit system were driven by public sentiment rather than evidence and analysis. A requirement for an independent body to have regard to safeguarding against homelessness should not be contentions. It is what the Government have just done in pumping £160 million into the system and would help avoid local authorities racking up millions of pounds of costs at a time of austerity. However, it does not mean that somebody should never move, nor does it give anyone licence to occupy the extravagant, upmarket properties so beloved of the media. Neither should this approach negate the Government’s belief that part of the rationale for a cap is to change attitudes. Having regard to child poverty targets is not just about income transfers, it is about a range of building blocks, including accessing the workplace, for those who can.

We seek to support a cap that better reflects reality than that promulgated by the Government. We are of course dealing with some of the most vulnerable families in our country and we owe it to them to construct policies that are not driven by short-term political expediency. I beg to move.

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[Lord Freud]

My Lords, in my opening remarks I described the measures that the Government are putting in place to ensure that the cap operates fairly. I explained that the exemption of people in the ESA support group ensures that the cap affects only people who, taking account of their health and any disability, can reasonably be expected to do work or work-related activity. I explained that the nine-month grace period will ensure that those who have been in work for 12 months or more will have time to find alternative employment or consider alternative options before the cap applies.

I have been asked a series of questions and I shall try to deal with them rapidly. On the question where the money is coming from, I think we shall leave that to the Budget.

Where one member of a couple satisfies the criteria for the grace period, yes, it will apply. The grace period will apply where either member of the couple meets the criteria.

I was asked which payments would be ignored. The noble Lord, Lord McKenzie, went through what I said in Committee and I do not think there is any reason to change any of that. We have to work out the exact nature of the work exemption but, in principle, I see no reason why the grace period should not apply when hours are reduced.

The question of the noble Baroness, Lady Drake, is so detailed that we need to wait for the regulations. That is a very good reason not to put some of this stuff in primary legislation.

An important point was raised by my noble friend Lord Kirkwood about monitoring people. We will monitor these cases very closely and keep track of their destinations. We already know who they are and will engage proactively with them from now on.

The right reverend Prelate the Bishop of Ripon and Leeds and the noble and learned Baroness, Lady Butler-Sloss, raised a question about kinship carers. In practice, the grace period is particularly helpful for kinship carers. We have the conditionality issues. Having this £80 million on a discretionary basis means that we can target those families of exactly the kind that will need such support. Therefore, the way that we have done it is rather more satisfactory in that area.

The right reverend Prelate raised the question of what a benefits system is for. We are constructing the universal credit to make a modern benefits system that does what we need it to do. He can take that as read.

Amazingly, I think I might have answered all the questions. The right reverend Prelate mentioned sweetness and light in relation to Motion G1. Fundamentally, I think that there is sweetness and light. I hope so, in that we are providing a grace period through regulations. We have all the powers that we need to do it, so in practice this amendment is unnecessary. It is sweetness and light in that sense and I hope the Motion will be withdrawn.

To be absolutely honest, there is less sweetness and light over Motion G2. I am resisting having some political knockabout on this. I know that it is not proper in this Chamber; let us leave that to another place. However, I find it very hard to think about having regional limits set by a new quango. My noble friend Lord Newton and the noble Lord, Lord Empey, have made the point that this could be very confusing and complex. If the noble Lord were sitting on my side of the Table at some future point, I would give him some advice: “You don’t want to do this”. Looking at it with a slightly stricter hat on, if we were to vote the Motion through it would mess up and delay the application of the cap. We are talking there about real money. We simply could not make the saving of £200 million a year because it would be such a complicated thing to introduce. Therefore, I hope that Motion G2 will be withdrawn. My mouth will be open if it is not.

There is an important principle in this debate. It is not fair that families on benefits receive more than the average working family. It is not fair to taxpayers. Indeed, it is not fair to benefit recipients who are trapped in a cycle of welfare dependency. Therefore, I urge the noble Lord not to press either Motion G1 or Motion G2.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his detailed responses, as ever. It is all sweetness and light as far as Motion G1 is concerned. It was tabled to get the very detailed answers that we got from the Minister and I thank him for that. I thank all other noble Lords who have participated in this debate. It is always good to hear from the right reverend Prelate the Bishop of Ripon and Leeds, who brings us back to issues of homelessness and vulnerable people. It is all too easy for us to forget about them in this environment.

The noble Lord, Lord Kirkwood, expressed his view that he was less than pleased with the benefit cap. I am well aware that he is not alone in that view. Interestingly, he referred to the cap as a sticking plaster. There is an interesting issue over whether the Government see it as a continuing part of the benefit system. We took it that they did, which is why we made some of our proposals, but maybe it is just a short-term measure.

I thank my noble friend Lady Drake for her support. The noble Lord, Lord Newton, asked about how local we would get in all this. Fundamentally, Motion G2 tries to highlight that rent is the big issue in all this. There are big disparities, particularly the London phenomenon, and rent will never be equalised across the country. I see and understand the potential risks in that, to which the noble Lord, Lord Empey, and others, including the Minister, referred. However, the intent is to focus on rents and that huge disparity. In the instance that I cited, the disparity is so big that how you make one cap fit all on an ongoing basis, without having to pile in more money every year to deal with the effects, is a real issue. The Government will have to face that in the months to come.

However, I should make clear that it is not my intention to press the amendments in Motion G1. On Motion G2, I am bound to say that my colleagues in the other place were denied the opportunity to vote on this. Therefore, I intend to test the opinion of the House.

Motion G1, as an amendment to Motion G, withdrawn.

Moved by

[Lord McKenzie of Luton]

As an amendment to Motion G, at end insert “but do propose Amendments 47C to 47H as amendments in lieu”

47C: Page 62, line 40, at end insert—
“( ) Regulations may provide for the benefit cap to be applied to the welfare benefits to which a single person or a couple is entitled according to the local area in which they are ordinarily resident.”

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47H: Clause 94, page 63, line 37, after “year” insert “refer to the Independent Body on the Benefit Cap for”

[Lord McKenzie of Luton]

I beg to move.

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[Lord Freud]

My Lords, clearly I am very aware of the strength of feeling that has featured in previous debates on child maintenance, and I look forward to hearing the views of noble Lords today.

Perhaps I may start from a rather different position from the one I took in the debate when we last looked at this issue. I shall quote the right honourable Frank Field, who is an acknowledged expert in this area. Even though he sits on a different side, he makes a point that is absolutely smack-on. He said:

“Is not the really big change that we are discussing the fact that when the CSA was first established, the maintenance moneys went to the Treasury to offset what taxpayers were putting up because, generally speaking, fathers were not prepared to do so, whereas now that money remains with the family? Is it not reasonable, in such circumstances, if people are going to get a top-up to their benefit that they should contribute to the cost of gaining that extra money? On the timing, should we not charge people once they are getting the money, not before?”.—[Official Report, Commons, 1/2/12; col. 910.]

That quote highlights the central point to the debate. We need to look at the proposed charges in the context of all the other financial support that the Government provide for lone parents. Child maintenance is only one aspect of that support.

I have made some rough calculations to give noble Lords a sense of the relative orders of magnitude involved. In the 12 months to December 2011, the CSA collected or arranged maintenance of more than £1 billion. However, by far the largest amount of money going from the Government to support lone parents is through the benefits and tax credits systems. The benefits system provides well over £5 billion of support to lone parents, and the Government provide more than £10 billion of further support through tax credits. Thereby, the total support going to lone parents—a few lone parents are bereaved but the bulk, 95 per cent, are not—in either direct state funding or with funds from state mechanisms is well over £16 billion.

Let us now look at the other end of the telescope. What are we asking the parent with care to pay for collecting that extra money? By the end of the next spending review we will collect each year between £50 million and £100 million in collection charges from parents with care. Those figures are based on the 7 per cent to 12 per cent range of collection charges set out in the Green Paper.

Let us take the figure of £75 million and compare it to the £16 billion of support that is being provided to this group, either directly or through the state. That ratio works out at less than one half of one per cent. I do not think that Barclaycard or other credit cards charge as little as that.

[Lord McKenzie of Luton]

To clarify the figures, is the £16 billion to which the noble Lord refers payable just to parents with care who are using the statutory CSA system, or to lone parents generally?

[Lord Freud]

This is paid over to lone parents as a group. That is what we are paying over to lone parents. Some of them have been bereaved, but the bulk of them have not. All of them could look to get support from the non-resident parent, whether or not they had lived with them at one stage. That is the figure I am trying to explain. All of them could look to get some maintenance.

Is it unfair or unreasonable to ask for a small contribution to the cost of running a child maintenance system against a backdrop of that financial support? I remind noble Lords that, as Frank Field said, there is no offset any more; it is money on top; it is disregarded. A lot of the debate we had when CSA started in the 1990s and was so controversial, and in the early 2000s, was framed by the concept that it was money going from the non-resident to the Treasury. Between 2000 and 2010, we moved to a 100 per cent disregard. That is the fundamental difference of which I remind noble Lords.

The next point is that we have committed to reviewing the charging powers and laying the review before Parliament 30 months after introduction. That is to ensure that we are able to test properly whether the intended incentive effects of the charges are realised and that we get the behavioural impact of the charging regime.

Again, simply, we are looking at a 1:2 charging regime in round terms, which is intended to incentivise both sides to reach agreement between them rather than going through the state system as the first option. One reason that it is so important that we encourage both sides to go independently is because research tells us that the children are better off if the parents can agree between them rather than using the state system.

I, and the Government, have the utmost respect for my noble and learned friend, Lord Mackay, and the intention behind the original amendment laid on charging for child maintenance services. The problem of asking for a test to establish when the parent with care has gone through a process is that it may not be a real test—anyone can say, “Yes, I have been through a process”. If that is the case, we will end up with everyone using the system as the first option. If it is a real test, we will have to go through all the work of checking whether they have made efforts and the rights and wrongs, and we will be pulled down the slippery slope that we are so keen to avoid. Because we would be pulling people into the system, that would have a substantial cost because of the pure volumes.

Charging must have a role in the new system to ensure that we do not repeat the failings of the CSA. The proposed charges create an incentive for parents to collaborate and take responsibility.

As a direct result of the concerns expressed in this House, we have also changed the fees to enter the system, to avoid the parent with care being deterred from using the state system. We have announced that we are reducing the maximum charge from £100 to £20 across the piece to ensure that it is not a potential barrier to entry. We are offering a very good service for that £20 in that we will be looking at the non-resident parent’s earnings, and that will be a real benefit for the parent with care.

With regard to reducing the maximum charge and completing the review, when we know how the system has shaken out we can ask whether we have got the figures right and whether the charges are right. That is the point of the review: we can ask whether we are getting the behavioural responses that we need. I hope that I have laid out the issues adequately. I beg to move.

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[Lord Kirkwood of Kirkhope]

My Lords, I am sure that is for the convenience of the House and I am grateful to my noble friend for making that clear. I could see the long faces on some of my Scottish colleagues getting longer by the moment. It is only fair to them that I apologise to them, because I have an interest in the Scotland Bill as well. However, I am sure it will wait until next Tuesday.

At this time of night I want to make a suggestion rather than a speech. Before I do that, I will say that I agree with the analysis of the noble Baroness, Lady Sherlock, about the money. I was a little dismayed at the way my noble friend opened this debate, because dealing with quantums of money and global amounts does not make an awful lot of sense unless there is some context. I much prefer to look at percentage shares of the benefit spend over time, and look at trends, rather than global amounts, because they sound like colossal sums of money. I agree with the noble Baroness on that point. It does not help the debate, because any of us who have been studying these things know that many single parents struggle on low incomes.

That point has been made and I will not pursue it, but I want also to make clear that in terms of the budget impact—which we have seen and which was referred to a moment ago—only 20 per cent of the cuts have attached themselves to household domestic spending and income. That will get worse. The Institute for Fiscal Studies, which has been quoted, has done some valuable modelling work that suggests there is going to be downward pressure on household incomes in single-parent families in future. That has to be borne in mind. Indeed, the Government’s own impact assessment on the ultimate rollout of universal credit from 2013, as I read it, shows that 500,000 working single-parent households will have a lower entitlement under universal credit. It is wrong to say that we are dealing with a category of rich people. There is a mixture, which I want to come on to in a minute in the main question I want to ask.

I have always been against charging. I was against it when the noble Lord, Lord McKenzie, was considering it. Along with the noble Lord, Lord Skelmersdale, we spent many a happy hour trying to resist charging, simply on the basis that it is a disincentive. I still believe that is likely to be the case. All developed western European nations now have various iterations of state-sponsored collection and enforcement services. We should—and will—have a new one, and one that will actually be cheaper as we will be using HMRC data. As my noble friend said, the service will be better and more efficient. There will be annual reviews and the data will be cleaned up as people are asked to come off the existing system and reapply—although that will be a much bigger undertaking than I think people imagine, and I hope that the department is prepared for that. However, it will be a cheaper and better service—£93 million cheaper, if my memory serves in respect of the impact assessment statement and other bits of information. It is important that we cherish the role that it plays and the impact that it has on lower-income families.

Looking at the figures, there are two dimensions to this—the low-income one and the high-income one. I remember an exchange when we last discussed this and have been reflecting on it since. The Government’s position is absolutely arguable for those who have an income of £50 or more per week via Child Support Agency maintenance. Twenty-two per cent of the case load gets 50 per cent or more, per week, of the maintenance delivered through the CSA. That is a big amount of money and gives us some options. Those kinds of families and households have much more flexibility in terms of options and choices. In those circumstances, it is perfectly reasonable to try to affect behaviour. The point I want to make is that 40 per cent of single parents receiving maintenance via the CSA receive less than £10 per week.

It is that category of transfer payment recipients that I am really concerned about. They do not have any options; they are in a very difficult place. The Government’s attempt to get behavioural change is much harder to argue reasonably in that context. I support the amendment of the noble and learned Baroness, Lady Butler-Sloss, but if we are stuck with charges and are reviewing them in 13 months’ time, would the Minister look urgently and robustly at the case for variation in the charges? If somebody is getting £10 per week, 12 per cent of that is quite a load of cash. If there were some way of getting the £75 million that the Government believe they need to fund the system going forward from fees, then they could do that by taking a little bit more out of households and families with a better take and a better return from the CSA than those who are at the bottom of the income distribution pile. If some thought could be given to that—and it is a bit of an ask at this time of night to get a reaction to that idea without notice—or even if the Minister were prepared to say that he would take it away and consider it in the course of the review, I would be happier about the results of the debate. If the noble and learned Baroness is thinking of taking her case to a vote—and that would also be a difficult ask at this time of night—her case has merit and I would support it. If we are stuck with charges, however, we should be looking at variations to try to cushion the effects on some of the low-income households that I think will suffer as a result of the imposition of these charges as currently cast.

[Lord McKenzie of Luton]

My Lords, I shall be brief. I agree with pretty much everything my noble friend Lady Sherlock said about the proposed charging arrangements. We certainly support the amendment of the noble and learned Baroness, Lady Butler-Sloss, because it does the right thing. It is dealing with those people who have no choice but to use the statutory system and cannot now use maintenance direct of their own will, because that depends on the non-resident parent applying to use it and on compliance by the non-resident parent. They have no other choice, and it is therefore wrong that they have to suffer a collection charge.

Will the Minister confirm—in respect of the reduced application fee of £20, which is welcome—that it is not going to be recycled to produce increased collection charges from mothers as well? It is important that we have clarity on that. To the noble Lord, Lord Newton, I would say that we will be in touch with our honourable friend Anne McGuire and tell her that she has misunderstood you. I am sure she would welcome that. The noble Lord, Lord Higgins, said that he thought the amendment of the noble Lord, Lord Boswell, had no cost. If that were right, I would be very worried about it because it presumably means that it is not going to affect the proposed arrangements, and I would not agree with that.

I say to the noble Lord, Lord Boswell, that I am disappointed in a sense with the proposition before us. I understand it is done with good intentions; I accept that because I know his commitment to these issues. However, if at the end of the day that is what is on the table, then that is what we would go with.

I say to the Minister that I do not think it was helpful to have some of those early statistics. Comparing the figure of £16 billion, which I understand is benefits and tax credits paid to all lone parents, with the fees that might be derived by those who use the statutory system of CSA is a nonsense idea. It does not make any sense at all. It is almost as though the assumption was that maintenance was money provided by the state. Maintenance is money that flows from non-resident parents—and we hope in increasing amounts in the future—to the parent with care. It is their money, not money provided by the state. So we probably have limited choices before us tonight. I hope the noble Baroness will feel able to press her amendment, but understand if she does not. If she does not, with a degree of reluctance I think we would support what is on the table from the noble Lord, Lord Boswell. Looking at it, though, I am not sure that it actually achieves anything that cannot be achieved from the existing framework of regulations. If it does, perhaps the Minister can tell us, but if we did not have that amendment, I am not sure that anything the noble Lord seeks to do under it could not be done anyway under the 2008 Act.

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[Lord Freud]

My Lords, I shall start by addressing Amendment 73C, tabled by the noble and learned Baroness, Lady Butler-Sloss, which relates to limiting collection charges for parents with care. This is a substantial amendment that is similar to my noble and learned friend Lord Mackay’s, and it would represent a similarly substantial level of cost.

Before I get into the figures—I know that my figures have not been popular today—I want to highlight an element of the proposed charges that I do not think we have conveyed with sufficient clarity to noble Lords: parents have the option of avoiding collection charges altogether by using maintenance direct. My noble friend Lord Boswell asked a series of questions on this.

[Lord McKenzie of Luton]

Is it not right that under the new proposals the non-resident parent makes the decision to use maintenance direct but that is no longer available to the parent with care? The parent with care cannot opt for that arrangement.

[Lord Freud]

I think it is clear that the way that maintenance direct works is that the two parents have to agree on it. That is the point of maintenance direct. Under that system the Government calculate how much child maintenance is payable, but the payments themselves are made directly by the non-resident parent to the parent with care. If the payments are made in that way, no collection charges apply. It is a mutual decision.

The Government will ensure that a service is provided that enables maintenance direct to be used without the need for any contact to be made or personal information to be divulged. By using this system, the parent with care has the security of knowing that where it is established that payment has not been made in full and on time by the non-resident parent, the case will be moved into the collection service and swift action can be taken to reinstate payments. They can switch back and forth into that system. I take my noble friend’s point that there is a lot of attraction in that system and it may be underpublicised. To the extent that it is, we need to do something about it.

Where the payments move back into the collection service, charges will then be imposed for its use and they are heavily weighted on the non-resident parent. That acts as a real incentive for non-resident parents to pay in full and on time, and indeed by the charge-free method of maintenance direct. On the question of some non-residents wanting to go on punishing their ex, the parent with care, that would be a very expensive way of doing it—it costs the non-resident roughly twice as much as it does the resident.

I want to come back to the noble Baroness, Lady Sherlock, who said that she would deal with my argument piece by piece. I did not particularly agree with her. I was adding up the benefits system but also the tax credits system, which presumably many of the others who were not on the benefits system would have been on. Tax credits were invented in the early 2000s. I am talking about what it was like in the 1990s. The process by which the state supplied money for lone parents grew gradually through the 2000s until there was a total disregard. Early on, that was in the form of tax credits. From 2008, a proportion was in the form of benefits. The full disregard came in 2010. Therefore, I do not particularly buy the dismantling of the noble Baroness, Lady Sherlock.

I want to go into the costs. We estimate that the cost of Amendment 73C would be around £190 million, although it would depend on the exact level of the collection charge. There are assumptions around that. Therefore, in response to the question of my noble friend Lord Higgins, I say that it would be only a little less than the cost of the original amendment tabled by my noble and learned friend Lord Mackay, which was £220 million.

I also acknowledge the serious and considered concerns that have been set out by noble Lords both today and in our previous debate on this. I am prepared to make some specific commitments to the House on the development and oversight of the regulations, along the lines suggested by my noble friends Lord Boswell and Lord Newton. Later this year we will bring forward the regulations. At that point, other Ministers and I would like to offer Peers the opportunity to meet in a special session in Parliament to gather their views. We envisage an agenda based around the regulations, covering those that relate to the key concerns expressed during the passage of the Bill. I will of course take direction from interested Peers—there are a lot of them—as to the structure of that session. We will set that up as required.

We will also conduct a public consultation on the regulations. Following the finalisation of regulations after consultation, we will bring them back to the House. At that point, we will again offer a session for Peers to complement consideration by the committees of the House. That will not be the last time that the House debates charging; we will bring the affirmative regulations forward for debate.

We also acknowledge the need to evaluate and review constantly the impact of charges on parents. In respect of that, we have already amended the Bill to ensure that the review is published within 30 months of its introduction. Again, I here commit that we will seek the input of Peers during the course of that review in advance of a report being laid before Parliament.

Let me also be specific about what we intend to look at as part of that review. We will want to look at the impact of the application and collection charges on the behaviour of both parents and at the outcomes in terms of establishing effective maintenance arrangements. In our report to Parliament, we will make clear our intentions, including a specific view on the position of the poorest parents.