My Lords, I absolutely understand and appreciate the desire of the right reverend Prelate and other noble Lords who have spoken on these amendments to protect and support children; of course, we all want to do that. However, our view is that supporting children is not just about increasing benefit levels. One of the most important things that we as a country can do to support children is to tackle the deficit and restore economic growth. In doing so, we create a future of prosperity, opportunity and jobs for the parents of those children in the short-term and for those children as they grow up. Taking benefits out of the Bill, as proposed by the right reverend Prelate, would take away some of what we consider to be the vital savings required to do this.
The amendments which we are debating now would remove from the Bill the child element of tax credit, child benefit and the lower rate of disabled child addition in universal credit. I assume that the right reverend Prelate’s intention in removing those elements is that they would be up-rated with prices, as was the case previously. If that were the case, I need to remind the House that the savings delivered by the Bill would be reduced by nearly £1 billion. In our view, those savings simply have to be found. If we did not do it through the Bill, they would have to be found from somewhere.
I was extremely grateful to the right reverend Prelate for the fact that, unlike the Opposition, he at least set out how he would raise the money. It was a long and credible list. However, it is not a list with which the Government agree. The Government’s view is that tax credits and child benefit account for over 40% of
working-age welfare expenditure. It is not realistic to think that they can be excluded from the need to make savings.
We are attempting to prioritise resources into reforms which can help children in a variety of ways. To repeat some of the points which I made in my earlier speech, I hope not too tediously, we have since September 2010 entitled all three and four year-olds to 15 hours per week of free early education. This is being delivered flexibly to meet parents’ needs. It will be extended to 260,000 disadvantaged two year-olds from September 2013. We are also helping 100,000 more working families with their childcare costs by spending an extra £200 million in universal credit.
To deal with a point made by the noble Lord, Lord Touhig, we are taking action to deal with exorbitant practices by payday loan companies and loan sharks. One thing that we are grappling with, with which any Government would grapple, is that many families on low incomes have got very high levels of personal debt. This is not new. When I was Treasury spokesman for the Liberal Democrats about seven or eight years ago I appeared, somewhat implausibly, on the steps of the Treasury with my right honourable friend Vince Cable, bearing an outsized cheque at the point when personal debt in the country reached £1 trillion. Most of this, I accept, was mortgage debt; it is not the debt that we are talking about today. However, some of the biggest increases in personal debt over the past decade have been among people on low incomes. This growth in personal debt was not effectively recognised or tackled in the past. Indeed, our appearance bearing this cheque just guaranteed a huge amount of ridicule for Vince Cable and myself, rather than anybody, including the previous Government, taking the slightest notice of it, which was deeply distressing—or, more importantly, taking the slightest action to deal with the culture with which we are now grappling.
However, both in terms of loan sharks and payday lenders, I hope that we are taking more effective measures, not least through the amendments during the passage of the Financial Services Act, to ensure that people requiring access to short-term loans can, at the very least, do so with companies which will treat them half-decently. The other area which we protected, which is vital to families and benefits those at the poorer end at least as much as those at the upper end, is the support they get through the schools system and the NHS, where the budgets are protected.
The right reverend Prelate spoke about child benefit, which he is anxious to protect. I remind the House that, even after the changes that have been made to child benefit, nine out of 10 households are still covered by it. We are taking the entitlement away only right at the top end. Child benefit continues to be paid to many households which are by no means on low income.
7 pm
The other point, which is hugely important in the context of this debate, is that while we have restrained child benefit, in April 2011 we also increased the child element of child tax credit by £180 above inflation to take account of that freezing of child benefit. I hope that all noble Lords will support us in tilting the
expenditure on families and children, taking child benefit and child tax credit together so that a higher proportion of what is paid goes to children at the lower end of the income scale.
I appreciate that the intention behind Amendment 17 is to increase the amounts paid for less severely disabled children, which is an understandable ambition. Many noble Lords will have taken part in far more debates than I on this subject, not least during the passage of the Welfare Reform Act and the subsequent regulations. I will not repeat those arguments, as I do not believe that anybody would disagree that the current benefits system is too complex, and that welfare reform is much needed.
In universal credit, the disability support package has been restructured to remove much of the current complexity, creating a system that is simpler both to understand and to administer. We have removed many of the disability premiums and complicated entitlement rules, and have created a system that delivers what it is designed to do: to support the most vulnerable and ensure that work pays.
The disability package in universal credit focuses support on disabled people with the greatest needs, who would be less able to provide additional support for themselves through taking up work. This Bill excludes universal credit elements paid to the most severely disabled adults and children. This higher rate, paid to the most severely disabled adults and children, reflects the fact that some people will face longer durations on benefits, and in the case of children there is also an important relationship with the level of care which a parent will need to provide, which itself affects their ability to take up or increase the level of paid employment.
Over the past decade, child payments have increased at a faster rate than adult payments. We firmly believe that aligning the extra amounts payable for disabled children and adults is the right and fair thing to do. This amendment would remove this alignment and set us back on a path towards complexity and multiple rates. That is something we wish to avoid.
I hope that I have gone some way to reassure noble Lords that, while we have restructured the disability support package in universal credit, we have not reduced the funds available, and that maintaining a balance between child and adult payments continues to be the right thing to do.
The noble Lord, Lord Low, gave an example of how much a family with a less severely disabled child would receive under universal credit. However, as we said, transitional protection will mean that existing claimants whose circumstances remain unchanged will not receive less in money terms as a result of moving to universal credit. The amount will be squeezed, but they will not face the kind of cliff edge that he was talking about.