Welfare Reform Bill

My Lords, I think that I owe a rather large apology to the House. I seem to have caused complete confusion, and am deeply sorry. I rise now to speak to Amendments 1 and 2, which, one way or another, would ensure that universal credit could be paid more frequently to claimants. Amendment 1 provides choice. Amendment 2 provides something rather specific. The Government’s aim has been to encourage, "““out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life””.—[Official Report, 10/10/11; col. GC 440.]" Those are the words of the Government. The point is that very many low-income earners are paid weekly or fortnightly, as the noble Baroness, Lady Lister, has rightly pointed out. Although two-thirds of tax credit recipients are paid monthly, many of these people will cease to be entitled to benefits in the future. The great majority of universal credit recipients will be very low paid, going in and out of work, as many people do, to weekly or fortnightly payments and then back on to benefit. People certainly do need to be prepared for the world of work—I completely agree with the Minister about that—but they need to be prepared for the world of work that they are actually going to move into. That is the whole point. At a very helpful meeting last week, the Minister seemed to accept that there are differences and that there needs to be some flexibility. Promotion of choice in the frequency of payment is very much in line with the Government’s choice agenda. I am sure that the Minister identifies with that. In practical terms, it was made clear in Committee that monthly payments will cause very considerable management problems within households, and a dramatic increase in the numbers of people struggling with debts. The fact that applications for crisis loans rose significantly from 2009, when the change from weekly to fortnightly payments was introduced, tells the story. The CAB service saw a fourfold increase in the number of people with payday loans coming to them for debt advice in the first quarter of this year compared with the same period two years ago. The Association of Business Recovery Professionals is the UK’s leading trade association for insolvency and related issues. On Wednesday 7 November, it released a report into payday loans showing that 3.5 million adults are considering taking out a payday loan over the next six months and that 48 per cent of the people who receive payday loans believe that the loans have made their debt crisis worse. What is the Government’s estimate of the number of payday loans to claimants of universal credit that will be in place within 12 months of the introduction of the new system? This is clearly a matter of very grave interest to Members of this House—we know that such loans have interest payments in excess of 300, 400 or 500 per cent, if not more than 1,000 per cent. We cannot just ignore that problem. At the meeting with the Secretary of State on Thursday, he talked about the need for a culture change. Indeed, he even implied that this was the only problem—people just need to change the culture within which they live. However, people’s problems in managing money over a month are far more extensive than purely a matter of culture. Numeracy skills are vital if people are going to manage their bills and payments over a month. I understand that the Skills for Life survey found that 1.7 million people had very poor numeracy skills. A further 5 million had poor numeracy skills. All these people’s skills were described as ““below functional””. That does not sound to me like applying to people who could manage their money. You can be sure that these groups dominate the ranks of claimants. Last Thursday, the Secretary of State seemed to suggest that people who cannot manage their money over a month will not be able to manage it over a week either. I find that an extraordinary argument. If people run out of their benefits on Thursday but they will receive some more money on Saturday, at least the children will go hungry only one day a week. If people run out of their benefits on the second Thursday of the month, for the sake of argument, and there will be no more money for two weeks and two days, that is a much more serious situation. The 2008 families and children study showed that one in four families with children more often than not run out of their money before the money next came in. The percentage must be higher for benefit claimants, so this is a huge problem. I believe that the Minister is seeking to resolve these issues, and I applaud him for that. The amendment has been crafted to try to take on board his interesting and innovative ideas and design, as I understand it, to create the possibility for claimants to have their benefits paid monthly and yet have the option of drawing them systematically on a more frequent basis. That system, if it really works, would appear to respond to all the concerns around the House: the claimants need to have a choice to receive their benefits at intervals which they can manage. That is my tentative understanding of what the Minister is trying to do. However, on the basis of my limited understanding, I need some issues clarified. I should be really grateful if the Minister can help me with some of them. One of them has to do with saving. I had assumed that whether payments are made monthly or fortnightly or whether there is some choice would not involve major extra expenditure for the Government. Can the Minister confirm that there is no significant cost involved in introducing either choice or fortnightly payments? My second question is: does the Minister assume that the Jobcentre Plus official will sit down with the claimant when they are awarded their universal credit entitlement to work out the frequency of payment that that claimant can manage, or will it be left to the claimant to go off to the post office, or wherever, and work things out with the post office or the Co-op? If the latter, I do not think that we have anything substantial or substantive. I need to understand whether there will be some kind of system in place to ensure that greater frequency is really there for people. My next question is whether the Minister is confident that the Post Office, the Co-op, or any other institution that he is working with to develop those accounts for people will be able to ensure in every location that the system can be operated in the interest of those claimants so that they can receive their benefits on a more frequent basis. Fourthly, if the Minister’s plans do not come to fruition—it is not clear to me whether they will; I am not sure that it is quite clear to him at this stage—does he have an amendment up his sleeve which will enable a fallback position to be put in place so that more frequent payments can be introduced automatically through provision for regulations or whatever? It would help the House if we understood whether the Minister himself has a fallback position that he can explain to us. I very much hope that the Minister can respond to these questions, because on that basis, we can all be clear whether we have the system in place which will give us the assurance that these arrangements will not lead to the most massive debt problems.