Welfare Reform Bill

Yvonne Fovargue Excerpts

Monday 13th June 2011 Commons Chamber

[Chris Grayling]

My view is that our partner organisations, such as Citizens Advice, need to be involved and informed of all the changes. We need to continue to be able to offer the valuable advice that they give to individuals. We provide quite substantial blocks of Government funding to Citizens Advice and similar organisations, and it will be for them to decide how best to use that financial support. In what are straitened financial times, I would hope that those organisations would see their priority as sending as much of that money as possible to front-line advice services, and spending as little as possible on central administration, central marketing activities and other head office functions. I would like those organisations to focus on providing every spare bit of cash that they can for front-line advice services—as well as finding ways of generating more spare cash for that purpose—because after all, that is where the money is most effectively and valuably spent.

We will seek to provide guidance, training and advice for advisers on the universal credit and the implications thereof. There is always a willingness on our part to talk to groups of advisers, including at some of the big conferences that Citizens Advice organises. I have not been able to do so yet—I have offered to do so on other matters—but we are always willing to provide such input to those organisations.

[Yvonne Fovargue (Makerfield) (Lab)]

Does the Minister accept that the money currently given to Citizens Advice is spent centrally on vital services such as training advisers, the information system and support for those agencies? In fact, none of the money goes to local bureaux, which are extremely concerned about the effects of the cuts in 2013.

[Chris Grayling]

Every organisation has to look at how it operates in tougher times financially, and at how best to spend the money that it has available. I am sure that Citizens Advice will be no different in that respect.

Amendments 23 and 24 deal with the capital limit and propose that for claimants who work, the universal credit assessment should ignore savings that they hold in individual savings accounts up to a prescribed maximum of no less than £50,000. We fully understand the importance of saving. Working families should seek to provide for their future needs and larger purchases. However, families with substantial savings should draw on those reserves when their incomes fall, not look to the taxpayer for support. Our analysis suggests that in 2014-15, there will be up to 100,000 households on tax credits with savings over £16,000 who could be affected by the capital rules in universal credit. However, transitional protection will ensure that there are no cash losers at the point of the transition to universal credit where circumstances remain the same.

However, it is important to be fair to the taxpayer. Although nearly one in three pensioner households have savings in excess of £16,000, only 13% of households with a working-age adult in them have that much in savings. A typical working-age household has only £300 in savings. It cannot be right that people with significantly greater savings than the average family can claim universal credit. A maximum limit of at least £50,000 in ISA savings, as proposed by the right hon. Member for East Ham, is a large sum to be excluded from the capital ceiling. We are striking the right balance between protecting people with modest savings and placing responsibility for their own support on those with substantial resources. Once again, we are talking about an uncosted spending commitment. The right hon. Gentleman said that it would cost £70 million a year to uncap totally, but not that many people on universal credit would have savings of more than £50,000, so the majority of that £70 million would be spent on his measure. The reality is that this is a multi-tens-of-millions-of-pounds spending commitment. Once again, we have not heard from the right hon. Gentleman where the money would come from.

Amendment 30 to clause 10 would mean paying at least as much in the additional elements for disabled children as we did in benefits and child tax credit prior to the introduction of universal credit. As we announced in policy briefing note 1, “Additions for longer durations on Universal Credit”, we will retain two levels of payment for disabled children in universal credit. The higher element will be payable to more severely disabled children receiving the highest rate of the care component of disability living allowance. The lower rate will be payable to children receiving the other rates of the disability living allowance care component. The higher rate will be increased by £52 a year, with eligibility extended to children who are severely visually impaired, who currently receive only the lower entitlement.

The key change is that we propose to align the elements for disabled children and disabled adults. That means that the lower rate would be around £26.75 and the upper rate £74.50 a week in current figures. The lower rate for a less severely disabled child in universal credit would be less than now, but we have pledged that where universal credit entitlement is less, transitional protections will be put in place. Our aim is to simplify and align the additional elements for disabled children with those for adults. We do not think it right that when a young person claims benefits in their own right, the extra amounts payable for disability are different. We also want to focus resources on the most severely disabled children and adults. Savings from abolishing the adult disability premiums and changes in the child rate are not going back to the Exchequer. This is not a cutting exercise; it is about recycling that money into higher payments for more severely disabled people.

Amendments 27, 28 and 29 to schedule 1 relate to the regime for self-employment in universal credit. As I told the right hon. Gentleman many times in Committee, we are committed to ensuring that people in self-employment have the financial support that they need. Amendments 27 and 28 would take a power to allow “accruals accounting” of profits and losses from a trade to be used in the reporting of earnings from self-employment. Strictly speaking, that is unnecessary, as the power taken by paragraph 4(1)(b) of schedule 1 already permits such a regulation. Amendment 29 would limit the application of the power taken at paragraph 4(4), which allows for a minimum level of earned income from self-employment to be set. It proposes that the minimum level would not apply where the claimant’s business was conducted on a commercial basis with a view to the realisation of profits.

We recognise that self-employment is a vital element of the economy and will be an important contributor to the sustained recovery from recession that we all want. It is also an important route into work for many people. We are therefore giving careful consideration to the conditions that we set for people claiming universal credit who seek to make their living from self-employment. The enabling framework provided by the Bill allows the treatment of income from self-employment, including the definition of earnings to be taken into account, to be set in regulations. We therefore do not need to decide this question today; we can work to get it right. However, as I have said to the right hon. Gentleman previously, we have to deal with the issue carefully. It is not the intention to make it impossible for people to get into self-employment, particularly in the first few months, when they have difficulties and money does not come easily. However, in the current system, people can report no or very low income from their business activity and continue to receive the bulk of their benefit or tax credits entitlement. We want people to become progressively less reliant on benefits and universal credit. At the end of the day, we cannot have the taxpayer funding someone who is notionally self-employed—and on whom there is no job search requirement—but who generates little or perhaps no income at all from that self-employment. We have to apply a threshold to determine whether someone is credibly in self-employment or whether they are using self-employment as a reason for not looking for other job alternatives. We have to get this right.

--- Later in debate ---

[Paul Uppal]

I thank my hon. Friend. Sometimes we in the House have to face uncomfortable truths. We may not like them, but they are the reality that we have to face. I believe that the Bill, in its entirety, goes some way to addressing such problems. I have said before, and will say again, that it is very easy to talk the talk in opposition, but the Government are walking the walk. We are delivering something that is popular not just with Conservative voters but with Labour voters. There is consensus across the board on the issue, and it unites most voters whom I have met, whichever party they vote for. They have seen the reality of what we have done to introduce an ethos of work, aspiration and ambition.

I am glad that I am part of a Government who are taking the difficult decisions and doing the important things. This is a seminal Bill, and people will look back on it as one that changed this country for ever. I know that I may have veered away from my original comments on new clause 6, and I am sorry about that, but sometimes we have to say it as we see it. I, for one, am glad that we have introduced the Bill, and I think it will make this country a better place.

[Yvonne Fovargue]

I agree with one thing that the hon. Member for Wolverhampton South West (Paul Uppal) said, which was about taking responsibility. I therefore hope that he can support amendment 26, because it will mean that agencies can ensure that people know their rights and responsibilities following what has been described as the most fundamental change to the benefit system.

One of the first witnesses to appear before the Public Bill Committee said that although universal credit is a simplified benefit, the application for it will not be simple, because of all the different benefits that are rolled up together into it. I am old enough to remember when supplementary benefit changed to income support, and I saw the rise in demand for advice among people worried about what would happen to their income. For people who are on benefit, a small change in income means a lot.

That problem will be exacerbated in the current case, particularly given the fear of a civil penalty for a mistake or omission. People who go to advice bureaux do not want to know how to defraud the system; they want to know how to fill their form in correctly. An online application process will also worry people—particularly older people, but also some younger ones—who are concerned about filling a form out online and not seeing it until three, four or five days later. Support is needed to smooth the transition.

Universal credit will start in 2013—exactly the same time when the proposed changes to legal aid will remove help for the most complex welfare benefit cases. As my right hon. Friend the Member for East Ham (Stephen Timms) said, that is the perfect storm. Local authorities are examining every non-statutory service that they provide, and in some cases local advice agencies are losing funding. In fact, in a survey, 54% of local bureaux said that they were worried that they were unlikely to be around in 2013.

Let us scotch one myth. Local bureaux and advice agencies do not get any funding from central Government. The money goes to the central Citizens Advice, which provides a vital service in support of local bureaux. It provides information, training, support and IT services. Putting more money into local bureaux would mean that more would have to be charged for those services. It would be self-defeating. Local face-to-face advice is vital, along with the advisory telephone service. Many claimants are vulnerable, and such advice, provided locally, is of particular importance to them.

[Richard Graham (Gloucester) (Con)]

Does the hon. Lady agree that local citizens advice bureaux are probably one of the most important and good causes to whose funding local government can contribute? Will she therefore join me in applauding my city council in Gloucester for the valuable increase in funding that it has given to our local CAB, and recommend that action to other councils?

[Yvonne Fovargue]

I will, but to say that local government is the main funder of CABs is to oversimplify the matter. I know of one bureau that had at least five different funding streams—the primary care trust, legal aid, the local authority, housing associations and a hospital. CABs rely on a mixture of funding streams, many of which are being reduced at the moment. Local authorities cannot take up all the slack, much though they should be continuing advice services.

Investing in early advice saves money. Avoiding costly tribunals and appeals is vital, and people who do not have access to advice are more likely to pursue their case to the appeal stage, costing them money and stress. Public confidence in any new system is vital. Advice on welfare benefits is crucial, and I urge the Government to accept amendment 26.

[Mr Nigel Dodds (Belfast North) (DUP)]

The hon. Lady is making a powerful point. The CAB in my constituency—in the Rathcoole area, which is very needy—does excellent work along the lines that she has described. Does she agree that whatever one’s views about the other amendments or the Bill, everybody should support amendment 26? Clear advice to constituents and clients is what it is all about, whatever one’s views.

[Yvonne Fovargue]

I thank the right hon. Gentleman, and I agree totally. The amendment would simply give people the opportunity to receive advice about their rights and responsibilities. That is crucial at any stage, but particularly when a new welfare benefit system is brought in. I urge all Members to support the amendment.

[Charlie Elphicke]

I rise to speak against new clause 2. One of the major achievements of the reform of introducing universal credit is enabling people to have greater flexibility in taking on part-time jobs—so-called mini-jobs. I have made the point several times in interventions that it is critical that we enable people with child care responsibilities to have the maximum flexibility in how they organise their child care and for how long they wish to work, so that they are reintroduced to the world of work.

I praise the Government particularly for making the effort to consult all parties in their recent seminar. It was not just members of the Public Bill Committee who were there, but members of the Work and Pensions Committee. Such engagement is important, because it enables us to get everything right. The Government have introduced a Bill that is a bookcase into which the books will later be slotted, and they are making an effort to ensure that the books read well and effectively.

One of the most telling parts of the briefing that we were given in the seminar was about what parents had told the DWP that they wanted. It informs the decision on whether new clause 2 is right. The DWP publication—“briefing” is probably a better description—is entitled “Childcare support in Universal Credit” and dated May 2011. It states:

“Recent findings from a survey of lone parents on Income support and with a child aged 5-6 found a strong preference for working part-time.”

Among those looking for work or expecting to do so in future, the majority stated a preference for 16 to 29 hours’ work a week, with 45% giving a preference of exactly 16 hours. Why exactly 16 hours? It has been drummed into everyone that they have to go out and work for 16 hours, not a moment less, or they will not get any help with child care. Subsection (5) of new clause 2 makes it clear that the Opposition want that prescribed minimum number of hours a week to remain. In other words, they do not want the mini-job, and yet we know that lone parents show a strong preference for working part-time, which should be respected. People are not here to dance to the Government’s tune: Governments should dance to the tune of the people, and be as flexible, helpful and enabling as people wish.