Welfare Reform Bill

Lord Sheikh Excerpts

Tuesday 13th September 2011 Lords Chamber

[Lord Sheikh]

My Lords, this Bill is one of the boldest attempts to repair and restructure a welfare system that has essentially failed taxpayers and jobseekers. Welfare reform is an important plank of this Government’s programme. The current system has resulted in welfare provision that is not always distributed to the recipients who are most in need. It is also a system that favours reluctance among some people to work rather than to seek employment. That system is simply not sustainable.

The centrepiece of this Bill is the universal credit award. It has been reported that the universal credit has the potential to lift more than 350,000 children and 500,000 adults out of poverty. In streamlining the current system, the universal credit will provide clarity and accountability as opposed to the multifaceted approach. A simplified system will make a valuable contribution towards the fight against benefit fraud. It has been estimated that this type of fraud costs the taxpayer £1.5 billion per year.

I welcome the clearly defined boundaries within Part 1 of the Bill, as it details the sanctions that will be put in place if claimants fail to comply with the requirements of the universal credit award. I support the Government's efforts to tackle the current situation surrounding housing benefit, which has seen claims rise by £10 billion over the past 10 years. A move towards an annual uprating in line with the consumer prices index will contribute towards greater stability in rents. It has been estimated that the change will generate savings of approximately £300 million a year. The current system unintentionally allows a number of registered social landlords to encourage welfare dependency among clients for their own financial gain.

It can be argued that the most significant aspect of the universal credit is its potential to encourage unemployed people to find work while ensuring that they are not left out of pocket by doing so. Much debate has focused on the conditionality to be introduced with universal credit, requiring claimants to look for work with appropriate sanctions. As an employer and chairman of companies, I feel that we need to encourage people to work. People should work principally for two reasons: first, to earn a living and, secondly, to obtain job satisfaction. I shall therefore concentrate on matters relating to work.

Our welfare system should align incentives to ensure that those who demonstrate a willingness to work are not less well off than those who resist opportunities to earn. It is a tragedy that nearly 5 million people of working age in the United Kingdom are on out-of-work benefits, with almost 1.5 million having received them for more than 10 years.

We have one of the largest workless populations in Europe, and just under 2 million children living in households with nobody working. The current system penalises people for looking for work. The majority of people on benefits do not wish to be recipients for the remainder of their lives, but we need to consider carefully the process of transition so that they are not penalised in the interim period.

The most effective mechanism for relieving poverty is work. Work is good for people's mental health, their physical health and their general well-being. These benefits have been demonstrated repeatedly. Dependency is not liberating; it constrains people and prevents them achieving their ambitions. People have become trapped in our welfare system and they need to be freed.

This Government have shown their commitment to helping individuals find long-term employment through the work programme. Approximately 2 million children are living in households where those of working age are unemployed. Unemployment and a heavy reliance on benefits have devastating effects on our economy and our wider society. These adverse effects often include high levels of personal debt, anti-social behaviour and solvent abuse. The current system fosters a dangerous culture of dependency and lethargy.

The Department for Work and Pensions has estimated that the reforms proposed by the Bill could reduce by 300,000 the number of households where those of working age are unemployed. It is also thought that the changes could improve the net incomes of 700,000 of the country's lowest paid workers, as they will be able to keep a greater portion of their earnings. The Bill encourages social mobility while tackling the causes and effects of poverty and unemployment.

I turn to the new sanctions regime in the Bill. I welcome the fact that all those claiming benefits will have to sign a claimant contract, including a pledge to turn up for appointments and interviews and take up reasonable offers of work. By introducing more appropriate financial sanctions, the new regime will provide the necessary spur to the minority of claimants who fail to comply.

The provisions in the Bill encourage social mobility while tackling the causes and effects of poverty and unemployment. These elements suggest that there will be wider gains to the British economy. The Bill raises questions not of political allegiances, but of fairness. I welcome the Bill and the Government's resolve to get this right.