Welfare Reform and Work Bill (Eleventh sitting)

Priti Patel Excerpts

Tuesday 20th October 2015 Public Bill Committees

[Emily Thornberry (Islington South and Finsbury) (Lab)]

I beg to move, That the clause be read a Second time.

Like housing, the cost of childcare has weaved its way through these debates, as we have considered a Bill that places significant new burdens on working families with children. The rising cost of childcare is not a new phenomenon, but it has certainly made life more difficult in recent years for working parents, who have seen their incomes largely flatline, whereas the cost of childcare has been going up.

According to figures compiled by the Family and Childcare Trust, the costs for preschool children have increased by 20% in real terms over the past decade. Between 2007 and 2013, the proportion of families who said that they found it either difficult or very difficult to pay for childcare increased from 18% to 26%. In the past five years, as prices have continued to outstrip wages, the trend has worsened to the point where the average family will pay an additional £1,500 a year in nursery fees compared with what they paid in 2010.

The impact on families with the lowest incomes, regardless of whether they work, has been particularly alarming. Children living with parents who have to pay for childcare are now a third more likely to live in poverty once those costs have been taken into account. The Bill, which attempts to redefine poverty by focusing on whether anyone in a household works, instead of on how much working households can earn, will effectively ignore the problem. That does not make it any less real, however, for real families in the real world, and it should not blind the Committee to the fact that there is a lack of consistency in the Government’s approach, which seeks to impose strict requirements on parents to support themselves solely through work while providing less and less support to cover the costs of the childcare that would make work an option.

It is significant in that context that 41% of parents who responded to a survey carried out by Citizens Advice last year said that the cost of childcare either prevented them from working at all, or, if they already worked, prevented them from increasing their hours. That will not be helped by a promise to increase the number of hours of childcare available, as long as the promise simply remains a promise and is, frankly, no more than an unfunded commitment. We have discussed that commitment at length during previous debates in this Committee and the fact that the Childcare Bill, which is currently making its way through the other place, is a four-page Bill, which does not increase the confidence of Opposition Members that this pledge is realistic.

The most obvious concerns—I will not rehearse them all this morning—are that the extension is inadequately funded; that the Government have yet to outline their plans for increasing the number of childcare places to meet any increase in demand; and that we have had no indication that any additional support will be made available for single parents who will be expected to be available for work as a result of measures in this Bill. It seems telling to us that when we put forward an amendment saying effectively that no parent should be forced to work unless adequate childcare is in place, Government Members felt it necessary to vote against such a reasonable amendment. That group of people will be hit particularly hard by the regressive four-year freeze on working-age benefits and tax credit, which clauses 9 and 10 provide for. I remind the Committee that single parents make up 56% of families receiving both working tax credit and child tax credit. If the extension of free hours is inadequately funded—I would welcome any evidence to the contrary—it is inevitable that the out-of-pocket costs parents are forced to pay will increase as sharply in the next five years as they have in the past five years.

Freezing the level of working tax credit, under which working parents can claim reimbursement for up to 70% of their childcare costs, is particularly counterintuitive if the aim is to make work pay, as the Government continue to insist it is. If we assume that childcare costs will rise at the usual pace over the four years during which the payments are frozen, the amount that working parents will be able to claim for support with childcare costs will fund fewer and fewer hours each year. In those circumstances, the only option for many parents will be to cut back on the hours they work, which would seem to be at odds with the underlying principle of the so-called Welfare Reform and Work Bill. Parents who take such a step, which the Bill as it stands would make an entirely logical choice, will leave themselves open to harsh penalties under the sanctions regime if they find themselves unable to work altogether.

New clause 8, which would require the Secretary of State to undertake an annual review of the childcare element of working tax credit, would not require that the sums involved necessarily be increased, but would simply acknowledge that a four-year freeze in all benefits and tax credits is an extreme measure that will tie the Government’s hands in all circumstances. Economic growth may, for example, significantly exceed expectations over the next four years—that seems unlikely, but it is possible. Were that to happen, the freeze might prove unnecessary and more extreme in its effects, widening the gulf between the incomes of low-income families and the costs they are expected to cover.

It might also be the case—this seems somewhat more likely—that the promised extension of free childcare will not materialise according to the Government’s plans. In that scenario, significant costs will continue to fall to parents, whether they are working or looking for work. I would like to think that, in such circumstances, the Secretary of State would be open-minded enough to admit that tax credit payments specifically earmarked to cover working parents’ childcare costs might need to increase at a level that was adequate to ensure that those costs remained affordable. If the intention behind the Bill is, as the Government say, to give people an incentive to work and to ensure that work always pays, more flexibility is surely called for.

[The Minister for Employment (Priti Patel)]

A very good morning to the Committee.

The new clause seeks to ensure that the Secretary of State would have to review the level of the childcare element of working tax credit annually, and that that review would be used to determine the maximum rate at which that element was set.

By way of background, I should say that the childcare element, like a number of other elements of tax credits, has never been automatically increased as part of an annual review, but we do keep it under review. Indeed, since its inception in 1994 as part of family credit and disability working allowance, it has increased from a starting rate of £40 per family towards the costs of childcare to its present-day level, where the Government contribute 70% of childcare costs up to £175 a week for one child or £300 a week for two or more children. Under universal credit, as the Committee has discussed, that will increase to 85% of childcare costs.

In addition, the Government have taken significant steps to increase support for childcare for working families, including by extending free entitlement to childcare for working parents of three and four-year-olds to 30 hours—an increase on the 15 hours allowed for in the last Parliament—and by providing for 15 hours of free childcare a week for two-year-olds from disadvantaged backgrounds. We also have the forthcoming introduction of tax-free childcare, which will benefit up to 1.8 million working families by up to £2,000 per year per child, or by up to £4,000 per year for disabled children.

[Emily Thornberry]

I have been sitting here processing what the Minister has said, and I believe that she told the Committee at the outset of her speech that the Government have kept the cost of childcare continually under review. If that is right, there is not a huge gap between us. Given the alarm that is spreading across the country over cuts in benefits and whether working families will be able to make ends meet, would it be a good idea to give a commitment today that the review will happen annually? We would not need to discuss the matter any further.

[Priti Patel]

We take the view that the new clause is not needed. The childcare element has never been included in formal annual uprating reviews, and the Bill does nothing to change that. The Government already keep the level of the childcare element under review, as we have said. We are committed to helping families with childcare through some of the areas to which I have already alluded. On that basis, the new clause is not needed and I urge the hon. Lady to withdraw it.

[Emily Thornberry]

This was largely a probing new clause, and I am grateful to the Minister for her response. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Changes to age of eligible claimants of housing benefit

‘(1) The Social Security Contributions and Benefits Act 1992 is amended as follows.

(2) After section 130(1) insert—

“(1A) The Secretary of State shall not make provision about eligibility for housing benefit in respect of the age of a claimant except by primary legislation.”.’—(Hannah Bardell.)

This New Clause aims to ensure that any changes to the age of eligible claimants for housing benefit must be made by primary legislation rather than regulation. The Government intends to withdraw entitlement to housing benefit from 18-21 year olds and it is understood this change would be enacted by regulation.

Brought up, and read the First time.

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The Government’s so-called living wage, of course, will not apply to this group of people. If we are to sign up to the idea of it actually being a living wage, we must also sign up to the idea that those who do not get it therefore cannot afford to live. We must put down in black and white exactly how we are going to mitigate that, especially for the vulnerable and abused. I ask the Government, with grace, to look at the evidence being provided by the brilliant alliance of youth homelessness charities, a copy of which I have sent to the Secretary of State and the Chancellor pretty much every week since I have been here, and to reconsider how they manage the situation. I ask for primary legislation rather than regulations, to offer security and simplicity to all those in both the statutory and voluntary services dealing with these cases.

[Priti Patel]

May I begin my remarks by thanking the hon. Members for Livingston and for Birmingham, Yardley for their thoughtful contributions? This is an important area, to which the Government naturally want to develop the right approach.

I should like to make two points. The change in housing support debated thus far refers specifically to the new youth obligation that will be introduced from April 2017, the purpose of which is to help young people to develop the skills and experience they need to get into work. Specifically, from day one of their claim, young people will benefit from an intensive period of work-related support, which will include job search support, interview techniques and structured work preparation. After six months, having built up their work preparation and received support to help them to get into employment, they will have the choice of applying for an apprenticeship or traineeship, of gaining the work-based skills that employers value, or of taking up a work placement. The youth obligation will be integrated with universal credit, ensuring that those moving into work will be better off and supported.

With regards to the housing changes, the hon. Member for Birmingham, Yardley was right in her comments and in the representations she has made to the Government. She has heard that the Government are focused on protecting vulnerable people.

The hon. Member for Islington South and Finsbury made a relevant point about the definition of vulnerability. We want to ensure that we get that right, so we are currently working with a wide range of stakeholders to understand those vulnerable groups. That work needs to be completed for robust policy and, importantly, for support, measures and exemptions to be put in place to help those groups. That work is still under way.

The hon. Member for Birmingham, Yardley touched on a number of stakeholders, some of whom we are working and engaging with. Should she like to present others to the Government, we would be very happy for her to do so.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Will those consultations be completed before Report and Third Reading?

[Priti Patel]

I will be honest: I simply do not know, so I will find out and come back to the hon. Lady on that.

The hon. Members for Birmingham, Yardley and for Livingston touched on the various groups that cannot rely on the stability of a family home. We are focused on that and want to do everything we can to help those young people. That is the reason for the exemptions to protect the vulnerable. We are discussing the policy with landlords, housing associations and charities, who provide a unique perspective on the groups discussed.

I hope we can work together on stakeholder engagement. As I have said, that work is under way and the policy will not be introduced until next year, which gives us time for the detailed approach we absolutely need. I therefore urge the hon. Member for Livingston to withdraw her new clause.

[Hannah Bardell]

We will not withdraw the new clause.

Question put, That the clause be read a Second time.

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[Hannah Bardell]

The hon. Lady has made a powerful speech. I will not drag out my comments on a painful and frankly despicable assault on our society. Much has been said about tax credits and I would like to give a bit of a Scottish flavour to the debate.

Since the election campaign and throughout this Parliament, the SNP has opposed the Bill in its entirety and the cuts to child tax credits in particular. It is important to highlight the findings of the IFS, that it was “arithmetically impossible” for families to do better with the limited increase in the living wage. We are talking about an attack on low-income families and vulnerable working families. In Scotland more than 500,000 children live in families that rely on tax credits to make ends meet; 350,000 of those children will feel the impact of the cuts as much needed tax credits are stripped away from more than 200,000 low-income families.

The austerity measures proposed by the Conservative Government are disproportionately harming the poorest and most vulnerable households while giving tax breaks to the better-off, thus increasing inequality, not closing the gap. Much has been said about families claiming benefits and families in work as if they were different people, different sections of society, but the reality is that the majority of people who will be affected by the provisions of the Bill are families in work.

The changes are regressive; they take proportionately more from low-income households and give to the richer ones. Planned cuts to tax credits increase the burden on the working poor and the children living in such households. The IFS has found that 63% of children living in poverty are in working households—I repeat: 63% of children living in poverty are in working households. The increase in the minimum wage for people aged 25 and over, which has been wrongly branded a living wage, is nowhere near enough to offset the cuts. The changes run contrary to the Government’s own policy of making work pay and they weaken the incentives to work, because the impact of cuts will fall disproportionately on low-income working families. This is not war on poverty; this is war on the poor.

[Priti Patel]

I am speaking on behalf of my hon. Friend the Exchequer Secretary, who has been paired for the clause.

It is clear that we are going to disagree on this clause. I will speak about the tax credits changes in the context of the new deal presented by the Government in the summer Budget. As my right hon. Friend the Chancellor stated at the time, the deal was to move Britain from a high welfare, high tax, low wage economy to a low welfare, low tax, higher wage economy. I know that I am rehearsing arguments that hon. Members have heard previously, but spending on tax credits more than trebled in real terms between 1999 and 2010; at the same time that increase in spending did not address issues of poverty. There was a 20% rise in poverty at that time.

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[Debbie Abrahams]

Will the Minister give way?

[Priti Patel]

No, I will not give way.

[Debbie Abrahams]

On a point of order, Mr Streeter. The fact is that child poverty was reduced during the period the right hon. Lady is referring to, and so was pensioner poverty. Not to have the opportunity to challenge those points is a question for the Chair, I believe.

[The Chair]

I am afraid that is not a point of order, but the right hon. Lady has skilfully made her point, and there is of course an opportunity for others to speak after the Minister, should they wish.

[Priti Patel]

I will restate my point. Nine in 10 families with children were eligible for tax credits. That was reduced to six in 10 in 2010 following the coalition’s reform in the last Parliament. The present reforms will reduce that and take tax credit spending back to where it was in 2008 and not, as Opposition Members suggest, to a world without tax credits. Alongside the tax credits changes, we are introducing the national living wage, which, we have clearly heard, Opposition parties do not support. That will be worth more than £9 an hour by 2020.

[Emily Thornberry]

With great respect, the right hon. Lady is talking nonsense. Of course we support wages going up by whatever means that can be done. What we do not support is the ridiculous associated rhetoric suggesting that the proposals are somehow taking over or working on the national living wage campaign, which is based on a completely different set of statistics. It is typical of the Conservative party to try to confuse people and confabulate as it is doing. Of course we support increases in wages.

[Priti Patel]

It is typical of the Labour party to scaremonger and distort some of the facts that we have heard, as well.

The national living wage will be worth more than £9 an hour by 2020. The increase in the personal allowance is part of a single thought-out and coherent plan to ensure that people keep more of their money, rather than having more of their income taxed. The new national living wage means that someone working full time on the current national minimum wage will have a pay rise of nearly £1,000 gross next year, and about £5,000 by 2020. Of course, the personal allowance will go up from £11,000 to £12,500, which means a typical taxpayer will pay more than £1,000 less income tax by 2020.

The Opposition have given illustrations of their view, and I want to give illustrative examples of how families will benefit over the course of the Parliament when the welfare and tax changes announced in the Budget are taken fully into consideration. The income of a couple with two children where only one parent is in work on the current national minimum wage will increase by £2,480. The income of a lone parent with one child working 35 hours at the current national minimum wage will rise by £1,500. A family with two children where the parents are working 35 hours a week on the national minimum wage will see their income increase by £5,500. And a single person with no children working 35 hours on the current national minimum wage will see their income rise by more than £2,000.

There will also be a wider ripple effect in the economy, which is growing, through the national living wage pushing up wages above the current national minimum wage. As we have discussed, not just in this clause but in previous ones, we are committed to doubling free childcare for three to four-year-olds and providing £5,000 of support in childcare for working parents.

No analysis has taken into account those factors from 2016, with the wider ripple effects, which are set to benefit more than 3 million working people. On top of the uplift in the free childcare, there is the £2,000 per child that working families and parents will be entitled to through tax-free childcare.

[Neil Coyle]

On childcare, will the Minister explain how families with children older than the qualifying age will benefit from that policy?

[Priti Patel]

They will benefit from tax-free childcare. That will be available for families whose children are at school—basically, those who are still school age. That is a Treasury policy.

[Debbie Abrahams]

Will that cover school holidays?

[Priti Patel]

My understanding is that tax-free childcare will cover after-school clubs and school holidays, but I will get clarification—[Interruption.] Well, I will give the hon. Lady clarification.

The point I would like to make is that, as we discussed in the previous sitting, the Government have a very strong record on childcare provision, tax-free childcare and support for disadvantaged two-year-olds. The fact that we have been spending in excess of £5 billion on supporting childcare provision for working families should be welcomed by all parties. It is sad that political parties choose to point-score about childcare provision.

We are clearly going to disagree on the content of the new clause. I have highlighted how the increased personal allowance, the national living wage and the welfare changes announced in the summer Budget will provide support for working families. For the reasons I have set out, the new clause is not appropriate for inclusion in the Bill, and I urge the hon. Member for Islington South and Finsbury to withdraw it.

[Emily Thornberry]

We will not withdraw the new clause, Mr Streeter.

Question put, That the clause be read a Second time.

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[Hannah Bardell]

My colleagues have spoken very passionately on the new clause and the Scottish National party absolutely supports it. It might be interesting for the Committee if I shared some of Michael Adler’s report on benefit sanctions and the rule of law. In his concluding remarks, he says:

“We now come to the question of whether benefit sanctions are compatible with the rule of law. My conclusions, and I must stress that these are my personal conclusions and that other people may wish to take issue with them, is that they are not.”

The SNP has, for a very long time, in Committee, on the Floor of the House and publicly, opposed the sanctions regime and called for a root-and-branch review. Much of that is highlighted in Mr Adler’s report. He notes how

“the House of Commons Work and Pensions Committee (2015) reiterated its previous call for a comprehensive, independent review of sanctions and for a serious attempt to resolve the conflicting demands on claimants made by DWP staff to enable them to take a common-sense view on good reasons for non-compliance. The Committee concluded that there was no evidence to support the longer sanction periods introduced in October 2012 and recommended the piloting of pre-sanction written warnings and non-financial sanctions. Sadly, these recommendations seem to have fallen on deaf ears and to date there has been no response from the DWP to the Report.”

I encourage DWP to give us its thoughts on that and why it cannot take that on board.

Mr Adler also says in his report:

“Vulnerable claimants are most likely to be sanctioned and, despite the availability of hardship payments, many of those who are sanctioned experience enormous hardship. Anecdotal evidence suggests that many of them end up becoming homeless, using food banks and resorting to crime.”

As DWP has said, sanctions are supposed to be part of a benefits system that gets people back into work and helps people. How can that be the case when someone of that credibility suggests that they are damaging society so badly?

I have not yet been in office for six months, but at least 25% of the workload coming through my constituency surgery and office is down to people who have been sanctioned. One of those is someone who suffers from Parkinson’s and who was treated appallingly by a representative of DWP. I am fighting that case and I have taken it up on the Floor of the House. I urge DWP and Ministers to look again at the sanctions regime and how it is treating vulnerable people in our society. It is not encouraging them back into work and it is not helping their families. We must have a root-and-branch review and listen to the Committees of the House on which Members across the political divide sit so that we can have a sensible approach to treating the most vulnerable.

[Priti Patel]

Let me start by saying that the Government keep the operation of the sanctions system under constant review to ensure that it continues to function effectively and fairly. Where we identify an issue, we will act to put it right. It is therefore unnecessary to embed the implementation of a review in the Bill. The Government have made a number of improvements to the JSA and ESA sanction systems following recommendations made by the independent review led by Matthew Oakley only last year. That improvement work is continuing to ensure that the Oakley recommendations are acted on in the right way where possible. In addition, we are taking the opportunity to ensure that the ongoing improvements in the review are built into the design and delivery of universal credit.

We have not only responded promptly and positively to the recommendations, but have gone further. We have improved the clarity of the JSA and ESA hardship application process, and made improvements to the payment process to ensure that payments are made within three days. We have carried out a review to check that our systems are operating effectively in respect of housing benefit, and that housing benefit is not impacted when a sanction is applied. We have introduced an improved claimant commitment for JSA jobseekers on the Work programme. We have also revised guidance to encourage jobseekers to share that claimant commitment with their provider. That will ensure that jobseekers understand what is required of them—their responsibilities both to Jobcentre Plus work coaches and Work programme providers—and that providers are clear on any previously agreed restrictions for the jobseeker, helping them to design tailored support.

We have made significant improvements to the decision-making process to ensure that doubts about actively seeking work are resolved quickly. The vast majority of decisions are now made within 48 hours, including consideration of good reasons. Our systems are ensuring that, when decisions are made in the jobseeker’s favour, their benefit payments are transferred to them using faster electronic payment systems to ensure that payment reaches their account on the same day.

I would like to touch on a couple of the points hon. Members have made. Sanctions were discussed in Committees in the previous Parliament, and there have been many debates about sanctions in the Commons Chamber and in Committees. Each month, more than 99% of ESA claimants comply with the requirements that are asked of them with regard to sanctions, and the individuals are asked only to meet the requirements that they agree with their advisers. That includes consideration of any health conditions, disabilities or health impairments.

[Neil Coyle]

There are individual examples. A man with a visual impairment and who has a guide dog was sanctioned for non-compliance. He did not know what the agreement said, because he was never sent it in an accessible format—he never had a Braille copy of the agreement. That was raised with the Royal National Institute of Blind People. A case was raised with Mencap of someone with a significant learning disability who never understood what the agreement meant, could not comply with the proposals that he had supposedly agreed to, and ended up being sanctioned. Does the Minister agree that those examples do not reflect a system that she has described as effective and fair? Where is the Department’s review of accessible formats provision?

[Priti Patel]

The hon. Gentleman is right to give those examples. What happened is not right. He mentions accessible formats. I will go away and report back to him on that, but what happened in that case is simply not right—that should not have happened to someone with a visual impairment.

The Department is considering the contents of the Work and Pensions Committee report and looks forward to working with it not just on that, but on future reports.

I come back to my point that, with all our policies, we will keep the operation of the sanctions system under review. We are focusing our efforts on continuing to improve the process on JSA and ESA to ensure that the agreed recommendations can continue to be delivered in the existing universal credit live service and embedded into the design and build of the emerging universal credit digital service. On the basis that we have a system of continually reviewing the sanctions system and are looking at it with regard to the universal credit live and digital services, I urge the hon. Member for Islington South and Finsbury to withdraw the new clause.

[Emily Thornberry]

We will press the new clause to a vote.

Question put, That the clause be read a Second time.