My Lords, I shall speak also to Amendment 92. These amendments were tabled in my name and that of my noble friend Lord McKenzie of Luton. I shall also speak to the other amendments in this group. In doing so, I thank the many organisations which supplied briefing on this subject, including CPAG, Gingerbread and Shelter.
When the benefit cap was introduced, the Government made much of the fact that they were setting it at the level of average earnings. In May 2011, the then Minister, Chris Grayling, sought to defend the rationale for the cap by saying in another place:
“Our policy approach, and the Government’s clear intent, is to have a cap that bears reference to average earnings. That is necessary for the credibility of our benefit system. It is the right place to set the cap”.––[Official Report, Commons, Welfare Reform Bill Committee, 17/5/11; col. 952.]
We in this House debated at length whether the test was fair, and we voted to exclude child benefit from the cap—a move that was overturned in another place. Now the Government have simply abandoned any such rationale and have plucked figures out of the air. The Bill reduces the cap to £23,000 a year in London and £20,000 elsewhere.
Even more worryingly, in future the Secretary of State can review the cap whenever he wishes without reference to any external benchmark and change the level simply by regulation. This could become a vehicle for Ministers to ratchet down the amount of help given to needy families without adequate parliamentary scrutiny. Our amendments seek to remove the subsection which would enable a reduction in the benefit cap. The effect would be to leave the cap at its current level.
Now that the Government have abandoned any external benchmark, it is hard to understand their
rationale for choosing these levels. The impact assessment sheds little light. The nearest it comes to justifying the lower rate outside London is on the grounds that one in four households in London earns less than £23,000 a year while one in four households outside London earns less than £20,000. Is that the new benchmark? Is it to be set at a level equivalent to 40% of median earnings or is this, as I suspect, a post hoc rationalisation of an arbitrarily chosen figure? Once again, the rationale is misleading by referring only to household earnings rather than to income and in doing so failing to acknowledge that many households earning below the cap will also be receiving benefits covered by the cap, such as child benefit, child tax credit or housing benefit.
The new threshold will drastically change the impact of the cap. It will more than quadruple the number of capped households. The DWP estimates that as many as 90,000 additional households will be affected, and they could see their housing benefit reduced substantially. Rather than hitting large families in expensive areas, it will hit small families right across the country. For example, Shelter says that the new cap would affect a family with one child living in Guildford, a family with two children in Leeds or Plymouth or a single-parent family with two children sharing a room in almost one in five areas in England.
As the Government’s evaluation shows, relatively few households have been able to move into cheaper accommodation to escape the benefit cap. The lower thresholds will make it even harder for families to move to cheaper accommodation as ever-lower rents must be found. Without the availability of cheaper housing in areas where there are also suitable jobs and childcare, families are going to be put in an impossible position. If they find it hard to escape the benefit cap, their only choice is to become poorer.
Once again the people most affected by this policy are poor families with children. The impact assessment says that 330,000 children will be hit further by the reduced cap, 24,000 for the first time, and the benefits of the rest, who are already in capped households, will be cut further still. They will include families who have been forced to move to cheaper houses or areas only to find that they are now above the new cap and could have to move again, with the children having to move to new schools.
Can the Minister reassure the Committee that it is not the Government’s intention to keep cutting the cap repeatedly? Otherwise, these families, some of whom will have very good reasons for being unable to work, as we will hear in the next couple of debates, could face being shunted around the country, moving repeatedly, damaging their children’s education and destroying family stability in the process. How will that help the Government’s desire to focus on improving educational outcomes for poor children?
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The Government have made much of their research into the effect of the benefit cap as evidence that it acts as a work incentive. In fact, the research found that the proportion of households that moved into work was just 4.7 percentage points higher among capped households than in the control group. The IFS concluded that,
“a large majority of affected claimants responded neither by moving into work nor by moving house”.
Indeed, I presume that that is because 85% of them are in circumstances where even this Government do not require them to work, recognising that they have good reasons not to; perhaps they are carers, have children or have been found not fit for work. The Opposition are sympathetic to the goal of reducing overall spending on social security, but we want to get that down by seeing reduced rents, people in skilled, sustainable jobs with better wages, and more people able to work. Slash and burn is not the solution.
There is increasing evidence that a cap could end up costing, not saving, the public purse. The Government’s own assessments show that rent arrears, evictions and homelessness could increase—crucially, forcing local authorities to house families out of their own budgets. The Chancellor has acknowledged that by having to announce in parallel an increase of £800 million in discretionary housing funds. Labour opposes the reduction in the benefit cap because it will drive people further into poverty, and because it sets a clear precedent for a further reduction in the support offered to low-income families irrespective of rising living standards in the wider economy. It is not acceptable to get the benefit bill down by sending more children into poverty and socially cleansing our towns and cities, splitting up communities and damaging local economies.
Clause 8 provides that the Secretary of State must review the level of the cap at least once in each Parliament, and may do so at any time. Clause 8(3) says that in carrying out a review, the only thing that the Secretary of State must take into account is “the national economic situation”. He may take into account other matters, but he is not required to. It is sensible—in fact it is obvious—that the Secretary of State should consider the national economic situation in setting the cap. Of course he should—but that is not enough. Amendment 92 would add two other factors that the Secretary of State should take into account as well. The first is the relationship between the level of the benefit cap and median household income—and in my defence I refer to the statement from Chris Grayling at the start of my speech. The second is the impact on households affected by the cap. I hope that the reasons for that are obvious and incontrovertible.
As we have heard, when introducing the cap, the Government stressed the importance of linking it to what other people in our country were living on. Lots of doubts were expressed about the way in which that would be done, but at least it was a benchmark; it could be measured and tested and, presumably, it meant that as earnings rose, the cap would rise as well. Instead, even though earnings are finally rising, the cap is being reduced—substantially, in the case of households outside London. Even more worryingly, the Government have now abandoned any objective rationale or yardstick, so they can adjust the cap by regulation at whim annually, or even more often if they choose.
All that this second amendment does is to say that the Secretary of State must take account of what is happening to household income in those households before he takes the decision to change the level of the
cap. Any civilised Government should want to take account of the consequences of their decisions before repeating or adjusting them. The amendment would require Ministers to look at the impact on those households. As I said at Second Reading in relation to other measures, if Ministers will the ends, they must will the means. They should be forced to consider the effect on poor households, most of which have young children, before reaching a decision that could make it very difficult for many parents to clothe, house and feed them. I beg to move.