Welfare Reform Bill

I hope that I have followed your Lordships’ normal pathway by allowing those who have put their names to amendments to speak first. I understand that that is what your Lordships’ House wants and therefore I have done the appropriate thing. If I had had an amendment in my name, I would have spoken earlier. However, I am quite happy to speak now if your Lordships will permit me. I pay tribute to the right reverend Prelate the Bishop of Ripon and Leeds for introducing this issue, and particularly for his amendment relating to children. That is probably the subject on which I shall focus primarily. It is also an issue where there are unintended consequences, on which some of this debate will focus. I think it is worth starting with what is in the impact assessment for this proposal, which outlays the Government’s objectives in achieving some policy ambitions and states quite clearly that it is intended to deliver fiscal savings. The other two matters relate to dealing with the fundamental unfairness of working families seeing families on benefits living in homes which they cannot themselves afford, and the incentives to help people to work. I believe that a cap is an appropriate device for accomplishing ambitions of this sort and later I shall give some of my reasons for saying that. However, it is important that whatever the cap or caps may be, they must fit the heads on which they are placed. I do not believe that the cap as currently constructed does the job or serves the purpose that the impact assessment lays out. That is because there are of course some unintended and perverse consequences as a result of the way that it is currently being calculated and laid out. As currently crafted, the cap produces a number of these unintended consequences but exploring them does not negate the importance of having a cap or caps. The evidence demonstrates that the current approach will need amendment in order to fulfil its intended purposes. I should like to address the issue of fiscal savings. I am sure that all noble Lords will have seen the letter from the Secretary of State for Communities and Local Government to the Prime Minister, sent via their Private Secretaries, in which the Secretary of State says of this proposal that there are, "““serious practical issues for DCLG priorities””." The letter continues by stating that an additional 20,000 people will be accepted as homeless, according to the DCLG modelling. That is presumably done by those who would know what the outcome would be in a set of circumstances described by government. The letter goes on to say that this would mean additional expenditure in dealing with homelessness and for temporary accommodation, and further that the £270 million savings that the DWP budgets expects to make would be negated by the additional expenditure elsewhere. That is not my interpretation—those are the words I have read. There would, indeed be a net cost to the taxpayer. If these figures stand up to scrutiny—and I certainly have not seen any rebuttal of those figures—the cap as crafted will be at an additional cost to the taxpayer. I should like my noble friend the Minister to tell me: has there been or is there a rebuttal of the figures from the Secretary of State for Communities and Local Government? However, that does not deal with the second policy objective that we have to face: the unfairness of working families seeing benefit recipients living in homes that they could not themselves afford. The challenge is to satisfy this need and at the same time avoid the consequential homelessness that the Secretary of State for Communities and Local Government has indicated. This issue has been left to fester for far too long. The previous Government placed it in the ““too hot to handle”” or ““too difficult”” category, or put it in the long grass pile—whatever metaphor you wish to use. However, as is always the case with very difficult issues such as this, they will simply not go away without some form of policy intervention. Lord Boswell of Aynho: I regret that I was unable to attend the earlier part of this discussion, although I am very interested in what is being said. On the matter that my noble friend just raised, has he been able to discern a clear position from Her Majesty’s Opposition as to the principle and, further, as to the levels or basis of execution of policies in this area of benefit cap? I am not sure where they stand. Lord German: I have not been able to get a clear position. However, I was somewhat interested to hear yesterday the Shadow Chancellor declare that his party is in favour of having limits. Perhaps other noble Lords might explain what those limits are. However, as the Secretary of State for Work and Pensions said in the House of Commons—as I believe I am now allowed to call it—the benefit cap, "““is about those who we believe should be able to go to work but are not doing so””.—[Official Report, Commons, 15/6/11; col. 882.]" Therefore, the purpose of this set of clauses seems to be to try and achieve a balance of fairnesses. Very importantly, we cannot see a rise in costly homelessness that penalises children who are mainly in large families and in high-rental areas. The cap, as proposed, would punish children for the decisions of their parents. Children have little or no control over the upbringing they receive. I wonder whether the current cap, as defined here, could encourage family breakdown as families split up in order to get their benefit entitlement under the cap level. In terms of maintaining family structures, this surely cannot be right. The first issue to be tackled is the one mentioned by the right reverend Prelate the Bishop of Ripon of Leeds—mean and median. The Bill clearly refers to, "““the average weekly earnings of a working household in Great Britain net of tax and national insurance contributions””." However, as many noble Lords have pointed out, there are of course working households with children and working households without children. Working households with children also receive child benefit and possibly tax credits, and other benefits as well. Therefore, if you do the mathematics, a cap measured across average earnings based on working families with and without children can only be tougher on those households with children and easier on those households without children. In fact, I looked at the Family Resources Survey figures for 2009-10, which are the most recent figures that are publicly available and are, I understand, the figures on which the cap levels have been worked out. The issue is quite simple: households with children have a higher median income—to use the words used by the Family Resources Survey—than all households, by £3,380 per annum per household. In other words, if you had a household with children you would be higher than the median. Also, the range of median incomes, by region across the whole of Great Britain, spans a gap of £12,000. London households have a higher median income than UK households, by £4,271 per household. Scottish households have a lower median income than UK households, by £8,522 per household. It is quite clear that if you are going to measure across the country, either by families with and without children or by families in different parts of the country, you are not looking at the actual real figures for those families. Two points follow from that. First, in order to be fair to households with children, the Government should take separate averages for working households with children and those without children. Not to do so will unfairly benefit households without children and discriminate against families with children. For families with a few children, the impact will be tough; for those with five, six or seven children, the burden will be devastating. Secondly, when measuring the average, the Government should take note of working family income, including additional income such as child benefit, which every working family with children—or 99 per cent of them—will get. Not to do so would, again, shift the average working family income against which the cap is being set against families with children and, relatively, help those families without children. Additionally, because of the difference in the levels of income between one part of the country and another, it is obviously important that some financial support is needed for those local authority areas where private sector housing rentals are very high. We also need to be able to help those people to adapt to the changes that are coming to them. It seems to me that time to adapt is a very important point to highlight in this policy. It is necessary for existing households caught by the cap to be given the time to prepare for its implementation. For example, they might want to seek work or negotiate a planned move to a cheaper area. Such a transition period would allow those who are furthest from the labour market the time to gain the necessary skills and experience to enter work. The obvious way to achieve this would be to open up early access to the work programme, thereby ensuring that the appropriate levels of support are in place very quickly. I would also like my noble friend the Minister to assure me that there will be a grace period for people who find themselves out of work through no fault of their own. People need the breathing space to be able to find a new job and to get themselves back into work. The rationale behind this Bill is making work pay. Opening up the work programme and giving people time to find another job, for all those households that will be affected, should be a first and not a last resort. There is also no doubt that households with large numbers of children will be hit hardest by the cap. These parents, often lone parents, will need time to work through the problems of finding affordable childcare. There is a case for saying that there will be grace periods for those who are immediately caught by the cap, but that new potential claimants should be made aware that the cap will be applied immediately to them if they exceed the limits that are eventually set. There are many ways in which the cap can be made to fit. In the search for a balance of fairness to both working families and children in non-working families, the cap level can be constructed to meet these dual ambitions much better. The Secretary of State for Communities and Local Government has already told us that the cap as constructed would produce no savings to the taxpayer. I am sure that many of your Lordships see the merit in this balance of fairness. This stage of the Bill gives the Government time to consider all these issues. Changes are needed, and I would want to see them. The Government have said that they want to balance their budget, but not on the backs of the poor. Well, neither should it be on the backs of children. These children should not have to pay because of the actions of their parents. I know that the Government are listening. I would like to know when we can hear the result of their deliberations, because there must be a way of making the cap fit.