Welfare Reform Bill

Absolutely. We are discussing a framework piece of legislation that will allow us to bring in the regulations. I am sure that next year many of us will discuss the detail of this for many months. It is an introductory, not a locked-in proposition. I have tried to explain, and hope that I have explained, that this system is an architecture and it can roll and improve. We may find in many areas that a change will pay for itself in its own terms, both in what the benefit system costs and the benefit to the economy. We will be able to test those propositions. A lot of what I talk about when we lay out the structures is simply what is affordable within a very difficult financial environment where we have had to put a proposition that we can float and that works. I have made the point before that that is within a context where we are injecting £4 billion into the pockets of the poorest people. Every time someone says, ““Do that”” or ““Do the next thing””, they are adding to that figure. We can either take something else away or provide that. That is where we have come out. Later on, when the financial situation is more suitable or we establish that changing something pays for itself in its own terms, we can make changes and improvements. I labour the point only because we can spend a lot of time arguing whether this is better than a disregard or addition. The answer is that none of us knows but I hope that in the medium term we will. In the example, we estimate that if couples who are both in work were entitled to an additional disregard of £700 a year, the cost would be £240 million. If the disregard was £1,000 a year, the cost would be £350 million. This is real money. We took the decision that it would be better spent, for instance, on childcare, where we had to find an extra £300 million. In current out-of-work benefits, there are no additional disregards for second earners. Similarly, working tax credit makes no additional provision for second earners. It is true that members of a couple may qualify for the disability elements of working tax credit if both are working and disabled. Equally, when a disabled person is not in work, no disability element can be paid. Indeed, working tax credit may not be payable at all. I turn to the proposal that lone parents, disabled people and second earners should receive the sum of two earnings disregards if their circumstances entitle them to each, rather than the higher of the two as we propose. Many people on low incomes will have substantially more support under universal credit because of the earnings disregards that we propose. The standard weekly disregard in current out-of-work benefits for these groups is only £20, after which benefit is withdrawn pound for pound. Some people on employment and support allowance may benefit from the permitted work rule with a disregard of up to £95 per week. However, this provision is available only for one year, after which the disregard returns to £20 for most claimants. Crucially, earnings disregards are not added together in current out-of-work benefits. In working tax credits, various elements can be added together. However, that does not differ from the way elements in universal credit build up to a total award. The earnings disregards in universal credit are more generous than those in the current system for lone parents and disabled people, helping in particular those working a small number of hours. For instance, a disabled person working 12 hours a week at the national minimum wage will be more than £50 a week better off, and a lone parent will be more than £60 a week better off in work because of the disregards in universal credit. This will provide a stronger incentive to work than exists in the current system. For most people claiming universal credit, the main financial incentive to work will be provided by the taper. Our proposals for a structure of disregards are intended to provide an additional incentive for those who need it most. If additional funding were available, we would need to consider the taper as well as the disregards. Adding together two or more disregards simply because the claimant falls into a number of categories would be inconsistent with the approach that we have adopted. If the earnings disregards worked in this way, we would not have the funding to set each at the level that we have. Universal credit must be delivered within the financial envelope we have available. I hope that this explanation will persuade the noble Baroness to withdraw her amendment.