Welfare Reform Bill

My Lords, in recent years there has been growing interest in minimum income standards and a belief that some people have insufficient income for healthy living. That in turn has led to pressure to increase support for those on benefit. We debated minimum income standards in great detail a couple of years ago now on the Child Poverty Act, and I recognise many of the participants from that debate—and many of the arguments. We will continue to take note and look carefully at the evidence from research on minimum income standards. However, the limitations of that approach have been acknowledged by the Joseph Rowntree Foundation, which has stated that the minimum income standard should not be taken as a poverty threshold. There is no single answer to the question, ““How much is enough for a family to live on?””. Different families have different needs and wants and will spend their income in different ways. I also need to point out the central conundrum around this approach. There are various other approaches to absolute poverty and relative poverty, which are the measures that this House, this Government and the previous Government use in a legislative context to address these issues. In that context, I respond to the noble Lord, Lord McKenzie, that, after much debate, we have decided that one key measure to look at is 60 per cent of the median rate. Clearly, that is a different measure, albeit a useful and important one, as I said. As the noble Lord, Lord Kirkwood, acknowledged, there is an inevitable trade-off between the level of benefits and incentives to work. Raising benefit levels would undoubtedly hamper the work-incentive effects which universal credit is designed to produce. We target extra resources towards people in greater need, and will continue to do so under universal credit, through additional elements and disregards for people with limited capability for work, caring responsibilities and children. Apart from the impact on work incentives, there would be significant financial implications if benefits were to be linked in a more formal way to minimum income standards. I shall not irritate Members of the Committee by talking about the deficit—well, not here. However, even a slight increase in rates of benefits would be very expensive. The noble Baroness, Lady Sherlock, referred to the IFS report on the effects of the universal credit. She will, I know, excuse me for concentrating briefly on the effects of the universal credit on child poverty. I was pleased to see that the estimate that the IFS made was a reduction in the number of children in child poverty by 450,000, which is rather more than the 350,000 that we had calculated. To give noble Lords a measure of what we are talking about, the costs of increasing the couple and single rates by £10 a week would be around £1.6 billion. Amendment 30B relates to minimum income needs of women before conception and while pregnant. Universal credit is designed to provide for the individual needs of claimants, whether or not they make the choice to have children. Furthermore, it would simply not be possible to indentify the group of claimants intending to have children for the purposes of the benefits system. I am not sure that it would be desirable or fair to consider paying them a higher level of benefit, even if we could. In response to the question of the noble Lord, Lord McKenzie, about Sure Start maternity grants, I can tell him that we targeted our money there, as he will remember from our debates on this, where the costs were highest, which is when the first child arrives. To provide an alternative source of financial help for some families which are having their second or subsequent child, we are taking powers in the Welfare Reform Bill to extend the purpose for which a Social Fund budgeting loan can be awarded to include maternity needs. I turn to the point of the noble Lord, Lord Kirkwood, about the Marmot review. I will deal with the point more generally. I do not accept that there is a well defined link between benefit levels and living healthily. This covers a much wider set of public health issues which I do not believe will be solved simply by paying out more benefits, even if the financial situation allowed for this. I appreciate the comments of the noble Earl, Lord Listowel. One must recognise that individuals are free to allocate resources within the household however they choose. I turn to Amendments 30BA, 30D and 50B. These amendments seek to link three sets of regulation-making provisions to arrangements for annual uprating. These are regulations under Clause 9 on the standard allowance, under Clause 10 on payments made in respect of children or qualifying young people and under Clause 12 on payments made for particular needs and circumstances. Provision for the uprating of universal credit is already made in the Bill. Schedule 2(22) contains an amendment to Section 150 of the Social Security Administration Act 1992 to include universal credit as a benefit to which the provisions of that section apply. This means that each year the Secretary of State must review and, if appropriate, uprate universal credit. The CPI is a headline measure of inflation in Great Britain. It is the most appropriate measure of the general level of prices and social security benefits. Many noble Lords will remember our debate on what the CPI and the RPI measure. I do not intend to repeat that. The main difference is that the CPI has the substitution formula effect, of how people trade down as prices move differentially for similar products. The intention of benefit and pension indexation is to protect purchasing power, not to give the highest increase possible. We will apply the same arrangements to universal credit as we currently apply to working-age benefits generally.