Welfare Reform Bill

My Lords, I congratulate the noble Baroness, Lady Tyler, on moving her first amendment, following the first amendment moved by my noble friend Lady Lister, who is not in her place now. I think that the noble Baroness somewhat misled us when she said that her expertise was modest; it clearly is not. As noble Lords have said, childcare is not simply an issue for parents, enabling them to go out to work while their children are well looked after. It is key to the Government’s commitment to make work pay, and the driver behind their plans in the Bill. It is also, quite clearly, right that work should benefit a family financially—including, of course, through the proper payment of wages, as my noble friend Lady Turner said in an earlier debate and my noble friend Lord Wigley just referred to. An adequate system of meeting childcare costs is also essential in addition to the issue of wages. That is why Labour invested so significantly in childcare. The Daycare Trust, which has already been mentioned, recognises that: "““There has been significant investment in childcare over the last decade and the number of full daycare places has doubled””." Under Labour, because tax credits paid 80 per cent of childcare costs, which, added to the disregard for childcare costs in housing benefit, those families who were claiming housing benefit effectively had 95 per cent of the relevant childcare bill met. Now there will be only 70 per cent and, as there will be only one subsidy for childcare costs under the universal credit, the extra uplift for the lowest earners will not be available. So whilewe join the noble Baroness, Lady Tyler, in welcoming the Government’s additional £300 million for childcare—and I mean that very warmly—our understanding is that this is to be spent on extending the current tax credits to those working any hours—that is, from one hour up to 16 hours—not on helping those already in receipt of such childcare help. Some clarification on that and an answer to the questions posed by the noble Lord, Lord Kirkwood, would be helpful. The universal credit will meet up to 70 per cent of childcare costs—up to £175 for one child and £300 for two or more children. That support will be available to all claimant families who qualify, regardless of how many hours they work. I assume that the figure of £300 million was put together on the basis of assumptions about those numbers, but it would be a help to see that. There is a problem with what has been proposed, not least in places such as London where even part-time childcare can cost £113 per week. The OECD has shown that Britain has some of the most expensive childcare in the world and has identified that this causes significant disincentives to work for parents on middle incomes as well as low incomes. Among families in severe poverty, nearly half had to cut back on food in order to afford childcare. More than half said that they were, or would be, no better off working, once childcare was paid for. Therefore, the question which has to be asked about the reduction to 70 per cent is: what will the effect be on work incentives? The new impact assessment includes childcare in its estimates of winners and losers but goes on to say: "““For the purpose of work incentives analysis, childcare support is excluded from the baseline and Universal Credit model””." However, given that childcare forms a critical part of work incentives for families with children, perhaps the Minister can explain why that particular formula has been used. Again, I quote the Daycare Trust. It uses modelling from Family Action and states: "““We believe that 80 per cent of costs covered is the minimum amount to ensure positive work incentives for parents””." That is based on calculations carried out by Family Action, which show that even effective marginal deduction rates for a working family paying income tax and national insurance, with childcare costs of 80p for each additional pound earned, would be 100 per cent if only 70 per cent of childcare costs were covered. However, if 80 per cent of childcare were covered, the marginal deduction rate would fall to 92 per cent. Those are a lot of figures but basically you lose it all if only 70 per cent of childcare costs is covered due to NI and tax, and it would be reduced to 92 per cent if only 80 per cent of childcare costs were covered. It is unclear at the moment whether the Government have found a way of compensating those low earners who will lose out because of the loss of the additional subsidy for childcare costs that exists at the moment in housing benefit and council tax benefit. Are they part of the substantial proportion of families who will see a lower entitlement under universal credit? The impact assessment that we have seen says that under universal credit 17 per cent of lone parents will rent, 40 per cent of lone parents will not be renting, 12 per cent of couples will rent and 48 per cent of couples will not be renting. That adds up to 27 per cent of all households—that is, 2 million people—who will see a lower entitlement under universal credit. Twenty-seven per cent of all households will see a lower entitlement under universal credit, 38 per cent will see a higher entitlement and 35 per cent will see no change. That is a large proportion who will see a lower entitlement. That, of course, relates only to universal credit; it does not include the other effects of the Bill, such as the underoccupation rules, the benefit cap or other changes. Therefore, although I say thank you very much for the £300 million, I am like Oliver Twist and we will ask for more. I shall comment briefly on Amendment 31, spoken to by the noble Baroness, Lady Tyler, specifying that childcare should be localised. We absolutely understand the reasoning behind this amendment, not least because childcare costs are so much higher in London, as the noble Baroness said. Some initiatives were taken under Labour to run pilots that would help parents to meet these costs. However, let us be honest: the real problem for parents in London is the lack of work. As my noble friend Lady Sherlock said earlier, unemployment has reached a 17-year high. I repeat: 17 years. I wonder why 1994 sounds familiar. Yes, we had a Conservative Government. Well, congratulations to this Conservative Government, who have taken just 17 months to get back to their previous record. This time, London has particularly been hit. Very often in the past London was shielded from the worst of recessions but now unemployment has hit it particularly hard. I am sorry to my noble friends from the north behind me who are always looking over my shoulder, but we do have a problem in London. The number of people in employment there fell by 34,000 in the previous quarter. Unemployment rose by 28,000 to reach 425,000. The number of people claiming jobseeker’s allowance increased by 1,600 on the previous month. Within London there are particular areas of great disadvantage. In Bethnal Green and Bow there are nearly 11 people chasing every job, in Camberwell and Peckham there are 25 and in Croydon there are 15. This means, first, that there is downward pressure on wages; secondly, that people have to travel further to find work, which is expensive in London; and, thirdly, of particular relevance to this amendment, that such longer journeys mean that childcare is needed for more hours per day—this in a city with among the most expensive childcare in the world. While we might not agree with the amendment, which would remove certainty, clarity and some simplicity from the Bill, we understand the pressure for it. Instead, we ask the Minister to outline how he expects to help Londoners and those in other high-cost areas back into work, and, especially, to provide a plan B to ensure that the economy plays its part in providing jobs for willing citizens.