Welfare Reform Bill

My Lords, I support the two overlapping amendments, Amendments 102ZA and 102A, as well as Amendment 102B, to which I will not speak specifically. Clause 97 is the Groundhog Day clause. Back in the 1980s I helped to lead a charge against the then Conservative Government’s attempt to pay the family credit through the wage packet. I then helped to persuade the previous Government of the error of their ways when they proposed to pay working families’ tax credit through the wage packet. I was able to do this using JRF-funded research that I had just carried out with Jacky Goode and Clare Callender into the distribution of income within families in receipt of benefits. It demonstrated the importance of paying benefits for children to the mother who was in all those families the parent with the main responsibility for the day-to-day care of the children. Indeed, once out-of-work families had migrated to child tax credit, we would have achieved that for out-of-work families as well as those in work. It was with a heavy heart that I realised we were back to square one and having to persuade the Government of the day why it is so important to pay money for children direct to the parent who has the main responsibility for the day-to-day care of the children and for day-to-day budgeting. But this time the stakes are that much higher because so much is being wrapped up in the universal credit, particularly because, as Amendment 102ZA refers to, payment for housing costs are also at issue. We need to bear in mind here our earlier debate about the hazards of payment of rent as part of the universal credit. The noble Baroness, Lady Howe of Idlicote, and my noble friend Lady Hayter of Kentish Town have already explained extremely persuasively why what is colloquially known as purse-wallet is such a critical issue for children and women. I do not intend to repeat those arguments, instead, I want to examine the Government’s case for mandating payment of the universal credit as a single payment into either a joint account or a single account nominated by the couple and see whether it has any substance. There appear to be a number of arguments. First, that mandating single payments is important so that households can see clearly the effect of their decisions about work on total household income. This is just a variant on the argument used by the previous Conservative Government for paying family credit through the pay packet. It did not convince anyone then, and I do not find it convincing now. Secondly, receipt of the universal credit should mirror the experience of those in work so as to smooth the transition into work. I find this a curious argument as universal credit is not a wage and in many cases, mainly in single-wage households, it will be paid in addition to a wage. Unlike universal credit, wages are not jointly owned or assessed, a point made, I think, by my noble friend. Moreover, it is increasingly common for two wages to be coming in to a household so that each partner is receiving some independent income. Whether we are talking about one or two-earner couples with children, as my noble friend has said, child benefit is paid separately from the wage direct to the caring parent, so the payment of the child and childcare element to the caring parent would simply mirror the payment of child benefit. Indeed, the payment of part of the universal credit to each partner rather than mandating its payment to one account arguably more accurately reflects the reality of life for many couples with one or both partners in paid work. The Government’s third main argument concerns responsibility. This was spelled out by the Minister in a letter to Platform 51. He wrote: "““As we say in our policy briefing note on our payment proposals, decisions over household finances and budgeting are best made by the family itself. Government interference in this area will inevitably have the effect of undermining individual responsibility””." Again, I find this a curious argument as it has never been suggested in the past that payment of money for children to the caring parent undermines their responsibility, so I looked rather more carefully at the briefing note. It cites a serious legal textbook The Law of Social Security in support of this very strong contention, but the briefing note is conflating two completely different policy issues here. As the Minister acknowledged in a Written Answer to me, the quotation from The Law of Social Security which suggested that individual responsibility might be undermined was referring to deductions of benefits at source. It had absolutely nothing to do with the proposal that the Government should direct part of the benefit payment to the caring parent. I am therefore at something of a loss to understand how responsibility would inevitably be undermined. Indeed, I argue that responsibility would be strengthened in two main ways. First, my research and that of my colleagues suggested that some parents might be likely to see payment of money for children as the responsible policy because they know it increases the chances of the money being spent on the children. Secondly, in a recent letter to the noble Earl, Lord Listowel, the Minister drew our attention to a study by the Financial Services Authority that found evidence of a strong association between financial capability and psychosocial well-being. He suggested that having an operating bank account is one dimension of claimants taking responsibility for their financial affairs and, in a sense, an indication of work-readiness. Again, this touches on an argument put by my noble friend. The baseline survey of financial capability found that about one in five people living with a partner relied on someone else to manage the money. This was particularly likely where there were children, and there is some evidence to suggest that money management was often connected with managing an account. The Women’s Budget Group suggests that if universal credit for couples were paid into only one nominated account, the numbers relying on their partner to manage the money could well increase. This could cause problems down the line if the partner not used to managing a bank account took a job or the relationship broke down, so paying part of the money separately could in fact encourage a partner to take responsibility for their financial affairs in a way that the Minister applauds with potentially positive long-term consequences. There was a final government argument which I must admit I did not really understand, so perhaps the Minister could explain. The latest equality impact assessment explains that, "““choice over payment of joint claims will … create a level starting point for all couple claimants””." It is a level starting point to what? ““Choice”” here refers simply to a choice between a single and a joint account. There is no option to choose for the payment for children or rent to be paid separately from the rest of the universal credit. As has already been explained, joint accounts are not necessarily the answer. Fran Bennett of Oxford University, who has conducted qualitative research very recently that is relevant to this area, argues that the existence of a joint bank account does not always mean that, in practice, both partners access it. Neither does having a joint account always guarantee access for both partners to the money held in it or sharing of power in terms of management and control of household finances. Moreover, it cannot be assumed that all couples have joint accounts. Secondary analysis of the FSA baseline survey of financial capability found that fewer than half of couples had a joint account and that these were often combined with an account in one partner’s name only. In about a third of couples, both partners had an account in their own name only. A recent survey conducted by First Direct found that nearly 60 per cent of cohabiting couples did not set up a joint account when they moved in together. Universal credit should surely be flexible enough to work for all kinds of families and not just for stable married couples, a point argued by my noble friend Lady Hayter. Moreover, according to another recent study, joint savings, investments and debts among couples are decreasing. I have tried to explain why I believe that the Government’s arguments for making a single payment of universal credit are weak. I suggest that these amendments are, in fact, in line with the Government’s own philosophy. Would it not be in line with the Government’s enthusiasm for nudge theory and sending signals—we have heard much about signals already today—to send signals to tweak the payment of benefit so as to increase the likelihood that it is used for the purposes for which it is intended, particularly the needs of children and the rent? It is feared that the payment of the full universal credit into just one account could discourage the forming of a committed couple relationship because it increases the risks involved—again, we have heard a bit about this already. The Women’s Budget Group argues that, for those on low incomes and contemplating moving in with a new partner, a significant leap of faith would be required given not just joint assessment claims and liability for universal credit but also the potential for the whole of universal credit to be paid into the other partner’s account. This could be the case in particular for a lone parent considering joint residence with a new partner, because of the potential implications for the welfare of her children. At the same time, as my noble friend Lady Hayter has indicated, in certain circumstances both members of the couple will be subject to conditionality requirements without each being guaranteed independent access to some of the benefit. That strikes me as a rather one-sided welfare contract. The Government place great emphasis on choice. They present their policy in terms of the state not intervening in what should be the family’s choice as to how to organise its financial affairs, but it makes no provision for those families who would choose for the money for children to be paid directly into an account for the partner with the main day-to-day responsibility for the care of the children, and/or the money for housing costs to be paid to the partner responsible for paying the rent. If the Government do not like the amendments on the Order Paper, another option would be to allow families to choose for the payment to be split if they so wish. I have reservations about this, because, as the Minister observed earlier in our proceedings, effective choice exists only when the balance of power is equal. The noble Baroness, Lady Howe, has reminded us of the gender inequalities within families which mean that, often, the balance of power within families is not equal. Nevertheless, this option would at least be more consistent with the Government’s own position on choice. We might want to debate the best way of ensuring that universal credit does not exacerbate hidden inequalities and poverty within the family, but I am quite sure that the position taken by the Government is not it. Given the concerns raised, will the Minister in his reply please expand on the Minister of State’s Written Answer in the other place? He said that the Government, "““are currently considering our approach to monitoring and evaluation of universal credit, including the distribution of income within households””.—[Official Report, Commons, 11/5/11; col. WA 1247.]" Will he tell the Committee how they plan to monitor this crucial aspect of the credit’s impact? Finally, I hope that the Minister will forgive me if, like a broken record, I return to the question of the payment of contributory benefits, which is relevant to these amendments. In an earlier session, I argued that it is an important point of principle that the benefit is paid to the person who has paid the contributions and not to their partner. I was not sure that he quite got the point that I was trying to make. His response was: "““The key point is that contributory ESA and JSA will continue as individual entitlements””.—[Official Report, 8/11/11; col. GC 42.]" I agree that that is crucial but it does not address my concern. He then made reference to budgeting support, which confused me because this has nothing to do with that. It is about individual control over the benefit for which a person has paid contributions. I wonder whether a decision has been taken on this matter yet. If it has not, can the Minister assure me that the points I have made on numerous occasions—that is what it feels like now—will be taken into account when the decision is made?