Welfare Reform Bill

Lord Skelmersdale Excerpts

Monday 23rd January 2012 Lords Chamber

[Baroness Drake]

My Lords, I support Amendment 60, to which my name is attached. It would support hard-working people and their families with a clear work ethic to manage the challenges of today’s flexible labour market and the consequences of losing their job through no fault of their own by allowing a transition period of 26 weeks before the benefit cap is applied. In integrating in and out-of-work benefits, universal credit has to be applied to two different constituencies: those who are out of work for long or sustained periods and those who are regularly in work. A single system has to provide an experience fit for both. I accept that a modern welfare system has to incentivise people to work and to address benefit dependency, but it also has to support hard-working people with a clear work ethic and their families in managing difficult economic circumstances. A benefit cap immediately applied can have a very negative effect on hard-working people and their children when the wage earner loses their job or work involuntarily, even more so where the loss of work happens quickly.

The Government have made clear that a driving principle of the Bill is that work should always pay more than out-of-work benefits and that a benefit cap is, first, a clear message that there is a maximum level of financial support that claimants can expect and, secondly, necessary to provide incentives to work and to reduce benefit dependency. When my noble friend Lord McKenzie questioned the Minister in Committee about whether, if it were established that the cost of the cap outweighed the benefit savings, he would still support the cap, the Minister replied:

“Clearly the message that we are trying to get over is a behavioural one much more than a cost-based one”.—[Official Report, 23/11/11; col. GC 421.]

What is the change in behaviour that the immediate application of the cap is designed to achieve in hard-working people who have lost their job and are desperately seeking another one? Where someone has a clear work ethic and a clear pattern of working and is desperately seeking another job, a grace period of 26 weeks will give them a fighting chance of re-entering the labour force before the weight of penalties comes into play and the cap bites. When faced with job loss, normal working people do not clap their hands and say, “Oh goody goody, I'm off to a life on benefits”. They are more likely to be stressed, anxious and worried about their home, paying bills, their children and their future while they rush around trying to find another job, probably fighting feelings of depression while they do so.

It is higher housing costs that are most likely to push families over the cap. As the noble Lord, Lord Best, said, without a period of grace, many families in private rented accommodation, particularly those with children and living in the south, will see the benefits for their housing costs cut, potentially forcing them to look for alternative housing elsewhere.

The Government’s impact assessment of the cap said that those affected will need to choose between taking up work, reducing non-rent expenditure or cheaper accommodation, but where someone who loses their job is clearly choosing to take work, they need time to do that. Finding a new job rarely takes days. It is most likely to take quite some weeks and even longer in difficult economic circumstances. The welfare system should provide this safety net, otherwise at the very time when a person needs to put all their efforts into finding another job, their efforts may be redirected to relocating to cheaper accommodation and relocating their children to different schools. In moving, they may lose, as has been said, their contacts, their local knowledge and their networks—all the routes that would most frequently take them back into work. The ultimate irony is that lone parents could face having to relinquish their childcare arrangements—their nursery place or their childminder—just as they need to keep them in place so that they are available to make an early transition back to work.

Currently, approximately 50 per cent of people on JSA get back to work within six months, 75 per cent in nine months and 90 per cent within a year. They clearly want to work. I accept that these figures might have been overtaken because of the rise of unemployment that we are now experiencing whereby 10 people are chasing every job in London, but the underlying argument holds good. They are chasing them because they want to get back into work.

The immediate application of the benefit cap would penalise those who have just lost their jobs—decisions about their rental costs or family size were made while they were employed—before they had even been given time to find another job. Rather than penalise people who are trying to make a rapid return to employment, universal credit should be supporting them. A grace period of 26 weeks does not contradict the simple message, as expressed by the noble Lord, Lord Freud, who said that,

“in the end, there is a limit to how much the state is prepared to support someone”.—[Official Report, 23/11/11; col. GC 422.]

Rather, a transition period would ensure that hard-working people faced with an involuntary loss of work are assisted in making an early move back into the labour force and getting their family’s lives back on track before the cap bites. That seems to be a fair, reasonable and decent thing to do.

The Government want to see an increase in private sector employment relative to the public sector to increase flexibility in the labour market through a reduction in employment rights and regulation, but they appear reluctant to transition the benefit cap to help hard-working people manage today’s labour markets and economic realities—realities that will become harsher as global competition intensifies. As currently drafted, the benefit cap would undermine the expectation that if you work hard, pay into the system and play by the rules, there will be a safety net available to you if you hit hard times so that you have a chance to recover.

This Bill also sets the welfare rules for people who have no record of benefit dependency and are paying their national insurance contributions. When I made that point in Committee, the Minister commented:

“I shall bear that point very much in mind as we go through the next stages”.—[Official Report, 23/11/11; col. GC 427.]

We are at the “next stages” and I encourage him to put flesh on that consideration. This amendment does not pose a principled challenge to the cap; it poses a 26-week transition for people who are rushing around urgently trying to find another job before the cap is imposed. I accept that the Minister has made a major contribution to welfare reform but I ask him to accept the case for a safety net. As I have said, that seems to me to be a fair, reasonable and decent thing to do.

[Lord Skelmersdale]

My Lords, would the noble Baroness, Lady Drake, accept that she is talking about those who have been earning more than cap and fallen on hard times rather than those with whom much of the legislation is involved: that is, those who in employment have been earning under the cap?

[Baroness Drake]

The Bill sets the welfare rules for people who do not have a record of benefit dependency. In the national insurance contribution system, one is trying to design something that gives people a cushion. Sometimes it will be because they will be earning higher than the cap; on other occasions it is because of the nature of their accommodation. Either way, instead of having a cushion so that they can concentrate on getting back into work as quickly as possible, which it is clear most of them want to do, there is a danger that the immediate way in which the cap will operate means that they will have to take defensive measures to bring down their level of expenditure rather than putting all their efforts into finding a job.