‘; and this will include an additional prescribed minimum level for claimants in receipt of the universal credit additional amount for caring responsibilities, and will be paid in addition to any other prescribed minimum level.’.
Amendment 33, in schedule 2, page 114, leave out lines 34 to 39.
Amendment 26, in schedule 6, page 123, line 10, at end insert—
‘(4) No less than six months before the appointed day the Secretary of State shall publish a report on the access to welfare advice, including advice for those unable to use the internet, that will be available at the appointed day, and shall satisfy himself on the basis of that report that provision is adequate to support migration to Universal Credit.’.
Government amendments 14 to 19.
Amendment 61, in clause 97, page 64, line 29, at end insert—
‘(3C) For the purposes of paragraph (3B), any element or sub-element of the universal credit award that is paid in respect of children, including childcare, shall be paid to the designated carer, except in prescribed circumstances. Regulations may provide further circumstances in which a proportion of universal credit may be payable to a particular individual.’.
Government amendments 20 and 21.
Stephen Timms: As this Bill returns to the Chamber on Report, it is astonishing how many policy gaps remain. This group of proposals addresses some of the worst holes in the policy on universal credit, and new clause 2 in particular deals with child care.
This is what has happened. Perhaps understandably, Ministers behaved naively, and with beginners’ enthusiasm they boasted that universal credit would solve all the problems in the benefit system: that it would always pay to be in work; that the system would be simpler; that thousands would be better off and nobody worse off; and that the benefits bill would be cut. In truth, one did not have to be Milton Friedman to work out that that did not all add up. That is now the Government’s problem: they cannot stand up their boasts. When it comes to the detail, they have been unable to deliver. Nowhere is that clearer than on child care support in universal credit.
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Ministers have rightly recognised—as the Secretary of State did earlier—that support for child care is key to whether parents are better off in work or out of work. But the Secretary of State promised, in his evidence to the Committee in March, that the Government’s proposals on child care support would be available before the Bill left Committee. He promised the Committee on 24 March that
“it will certainly be done within the Committee stage.”––[Official Report, Welfare Reform Public Bill Committee, 24 March 2011; c. 161, Q313.]
As I pointed out in Work and Pensions questions, that promise has been broken. No policy was announced before the end of the Committee stage and now the Bill will leave the House of Commons this week and we still do not have a clue what the Government’s policy is, because Ministers have not been able to work a policy out.
At the beginning of the Committee stage, we told the Government that we were worried by the lack of crucial details, and now the Bill has come back to the House and they are still missing. Ministers have failed to make this fly. We are talking not about minor details, but about whether parents really will be better off in work, as they generally are under the current system. Achieving the whole purpose of these changes hangs on the Government’s decision on child care, but Ministers have failed to reach a decision. That is why Oxfam, Barnardo’s, the Child Poverty Action Group and others wrote recently to the Secretary of State saying that for many families on low or middle incomes “the success of universal credit will stand or fall on the level of child care costs covered.” Those groups are right: the success of this policy stands on the Government’s decision, but Ministers have simply failed to come up with a decision.
At least with the NHS reforms the Government paused to work out a policy: on this Bill, they have not managed to work out a policy, but they are pressing on all the same. No proposals were presented in Committee and we have none in front of us today. Instead, we just had an informal seminar on options. We know that the Government want to extend provision for child care support to people working fewer than 16 hours a week, but they want to do that within the existing budget. That does not add up—it is a mess.
Harriett Baldwin (West Worcestershire) (Con): I thank the right hon. Gentleman for giving way on this extremely important issue. Is his solution the same as that of the groups he mentioned earlier—to put more money into child care?
Stephen Timms: No: our solution is the one in new clause 2, which we are debating. The priority should be to maintain the support currently being received by people working more than 16 hours a week. I understand why the Government say that they cannot simply find more money for supporting child care, but what will be disastrous is what appears to be the Government’s intention to give a lot more people support from the same cash-limited sum of money. If that proceeds, a very large number of people for whom work pays at the moment will find that work no longer pays.
Harriett Baldwin: Does the right hon. Gentleman welcome the proposals that would allow people to move into work of up to 16 hours—the mini jobs?
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Stephen Timms: If that would mean that people who are currently able to work for more than 16 hours had to give up their jobs altogether, I would not welcome it. That would be a seriously retrograde step. I accept that there is a case for supporting the cost of child care for people in mini jobs as well, but if the additional resources are not available to fund that, it would be a terrible mistake to press ahead and claw that money from people who depend on it to make work pay at the moment.
The Secretary of State set out at the seminar, at which I think the hon. Member for West Worcestershire (Harriett Baldwin) was present, some of the possible options. The Children’s Society has analysed some of the options and concluded that under one of them a family could pay out £1.56p for every additional pound earned. Ministers told us that that problem would be eliminated by universal credit, but it now appears that, if they proceed on the basis of that option, the new system will be a great deal worse than the current one, and will introduce a draconian new penalty for working parents. As I said to her, there is a good case for supporting child care for people in mini jobs, but it must not come at the expense of parents being helped at the moment.
The recent report from the Resolution Foundation and Gingerbread also underlined the point that spreading the same budget among a lot more people will mean families losing money for every additional hour they work. The Government are right to express the aspiration that it should always pay to be in work, but in this case, if they pursue the option set out in the seminar, something will be lost in translation, because families will have to pay out in order to work. The current system does a far better job; the new system that is envisaged will be a severely retrograde step, if it has the effect of taking more than £1.50 off people for each extra pound they earn. The Government appear poised, once they have finally worked out what their policy is in this area, to make work far less attractive than at the moment.
The Government have failed to come up with a policy, so our new clause 2 proposes one: it would retain the percentage of child care costs covered and the cash limits in the current system; it would ensure that work continues to pay for those for whom it pays at the moment; and it would allow the retention of the existing 16 hours’ threshold. The Government say that they cannot afford any extra spending on child care at the moment. My case to the House is that support for child care for those in mini jobs would need to wait until there is funding for it in order to ensure that jobs of 16 hours per week actually pay, as they do at the moment.
Kate Green: Does my right hon. Friend agree that it is disingenuous of the Government to make proposals to fund child care for mini jobs, given that the child care market is simply not designed in that way? Finding short episodes of child care for just a few hours a week is extremely difficult for parents, and could make child care provision even more financially unviable and drive providers out of the market?
Stephen Timms:
My hon. Friend makes an important point and is absolutely right. People are worried about what the Government’s proposed changes will do to the child care market as a whole. It could make some
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providers uneconomical. If a large number of people currently using child care for more than 16 hours a week are forced, as a result of these changes, to give up their jobs and to withdraw from their child care places, it would put a huge dampener on, and cloud over, the whole child care market in the way she is right to fear. We feel strongly about this matter—the Government simply have not come up with a policy—so I will seek, if I can, to divide the House on new clause 2.
The Government’s failure to produce a policy on child care before the Bill leaves the House is a particularly abject failure. Ministers have not been able to turn their claims into policies. However, although child care might be the most spectacular and significant hole in the Government’s policy, it certainly is not the only one. In this group of amendments, therefore, we have tabled two further new clauses to fill the policy holes on passported benefits, such as free school meals and free prescriptions.
At the moment, people on out-of-work benefits are passported to those additional benefits, but the out-of-work benefits will be abolished, so who will be entitled to free school meals in future? Again, that is not an obscure, but a basic question and the Government have again failed to give us an answer.
Chris Leslie (Nottingham East) (Lab/Co-op): My right hon. Friend is right to point out the importance of free school meals for many of our constituents whose children are sometimes in desperate need of the basic nutrition that they receive in schools. For the Government to have got to this stage in the Bill’s passage with no clarity about what triggers free school meals entitlement is confusing. Will they introduce a new means test? I am very glad that he has raised the matter.
Stephen Timms: I am grateful to my hon. Friend, who is absolutely right about the centrality of free school meals entitlement in the system. The Government have simply failed to work out who, under their proposals, will be entitled to free school meals. It is not that I am disagreeing with the Government’s policy: the problem is that they have no policy. We have no idea whom they believe should be entitled to free school meals. As far as we can tell, they have not got a clue, either.
As my hon. Friend points out, free school meals are an important part of the system. They can be worth more than £350 a year to a family with one child in a primary school and easily more than £1,000 a year to a family with three or more children at school. Clearly, that makes an enormous difference.
Families currently receive free school meals until they work for more than 16 hours, at which point they receive working tax credit so that they are not worse off as they move into additional hours of work. The universal credit White Paper suggested that the Government intend to remove entitlement to free school meals at a fixed income threshold. That may partially answer my hon. Friend’s question. However, if they do that, it creates precisely the sort of cliff edge that we were told the Bill would eradicate. I presume that that difficulty has prevented the Government from setting out their policy and is the reason for the Bill’s silence on the matter and the absence of notes on the regulations to explain the Government’s policy.
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If a lone parent with three children lost entitlement to free school meals at some level of earnings—say, £150 a week or more—their net household income would fall unless they earned more than £4,000 extra a year. If the new system works like that, it will be a disaster. It is exactly the sort of disincentive that we have been told all along that universal credit is supposed to remove. If the Government introduced such a policy, universal credit would make the problem of work disincentives far worse than it is in the current system.
Our proposal in new clause 3 is that the value of free school meals should be paid through universal credit and then tapered away gradually as household income rises. I recognise that there is concern among many who follow these matters closely that that could mean that the cash is not used for school meals but other expenses. Given the pressure on household budgets, one can well understand how that might happen. I therefore suggest that the solution is for the cash to be paid on to an electronic card, which could be used only to purchase school meals. An arbitrary cut-off in income, whereby all support for free school meals was withdrawn, would be damaging.
Chris Grayling: Does the right hon. Gentleman accept that his proposal flies in face of the admirable position at the moment whereby, in the lunchtime school queue, there is no obvious and visible difference between those who receive free school meals and those who do not? A provision that would effectively give some, but not others, a particular card with money on it would surely stigmatise those kids who get free school meals.
Stephen Timms: No, the Minister is mistaken. All pupils in the school would pay for their meals with the card. The difference would be how the money got on to the card. Some would pay cash as currently happens and others would have the money placed on the card through universal credit. The Minister is right to raise the matter, which is important, but my solution would solve the problem.
Stephen Timms: I gladly give way to the Minister again. Perhaps he will tell us how the Government propose that entitlement to free school meals will be determined.
Chris Grayling: If the right hon. Gentleman will forgive me, I will try to catch Mr Speaker’s eye in a moment to answer questions, but for now, perhaps the right hon. Gentleman can answer one for me. As different schools today use different systems—some use fingerprinting, some use an electronic card system and some still use cash—does he envisage his proposal requiring schools up and down the country to scrap their current systems and have a new, harmonised system? If so, has he calculated what the cost of that system would be and how long it would take to introduce?
4.30 pm
Stephen Timms: I very much hope that the Government are working out the answers to those questions. I would certainly aim to use existing systems, with the addition of payment via universal credit to simplify the transition.
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Harriett Baldwin: On the important subject of free school meals, is the right hon. Gentleman suggesting that the taper would begin immediately someone went into work, or would it come into play once the earnings disregard had moved out of the way, and if so, what would be the cost of his proposals?
Stephen Timms: The point is that it is a zero-cost proposal; I am simply suggesting that the funding would be provided through the mechanism that I have described. It would be tapered away, along with the rest of universal credit, and would sit naturally on top of existing payments, so that there would be just an additional payment in respect of school meals, where appropriate, which would then be tapered away once the disregard had been exhausted. The budgetary cost would be exactly the same.
We have exactly the same issue with free prescriptions. The current system provides them to people on benefits and to some people with low incomes through the HC2 form, but once again, we have heard nothing from the Government about what will happen under universal credit. Our new clause 4 addresses that.
By the way, it is perhaps worth making the point in passing that the number of pupils receiving free school meals is an important indicator for education policy as well. The pupil premium depends on the number of people receiving free school meals. The fact that we have no idea at all who will be entitled to free school meals under the Government’s proposals will create serious problems with that, too.
Jenny Willott (Cardiff Central) (LD): Returning to the right hon. Gentleman’s proposals on prescription charges, is he not concerned about the evidence that we received at the beginning of the Public Bill Committee from a number of witnesses who said that there was a significant difference between school meals and prescription charges? School meals are an ongoing cost every day, whereas prescription charges tend to come in a batch. By tapering the amount of money that somebody received, they still would not be able to afford significant costs—potentially the cost of a number of prescriptions at the same time—because the amount of money concerned would be an ongoing amount, unlike under a system more similar to the current one, where all the prescriptions are paid for when they are needed.
Stephen Timms: I agree with the hon. Lady’s point, and to that extent the current system has a lot of attractions. The problem is that we will lose that system with universal credits. The question is: who will be entitled to free prescriptions? I do not imagine that she is arguing—as perhaps the Government will; I do not know—that there should be a cut-off point in income beyond which people suddenly lose all help for prescriptions. If that happens, we will create a serious and damaging cliff edge in the system, which everyone agrees is an undesirable feature. Our new clause 4 therefore proposes to address that problem, although there may be other problems as well. What I would dearly love to extract is a proposal from the Government, so that we can find out exactly what they intend to do, because so far they have been silent on that subject, as on all the others.
We have been told throughout these debates that the main point of the Bill is to ensure that people are always better off in work. Our task in Parliament is to scrutinise
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whether the Bill lives up to that laudable aim, but without knowing what the Government will do to provide help with child care, school meals or prescription costs, we simply cannot tell.
Frankly, it is an abuse of the parliamentary process not to tell this House what the Government’s policy is before the Bill leaves us. I do not accuse Ministers of withholding information from Parliament; the problem is that they have no more clue about their policy than we do. It is an astonishing and abject failure on their part. They made all these boasts at the beginning—their bragging ran away with them—but now they cannot deliver policies to substantiate those boasts.
Oliver Heald (North East Hertfordshire) (Con): Is it not a bit rich to put the case in that way when under the right hon. Gentleman’s Government, who were in power for many years, these aspects were not covered by a benefit? There was no child care benefit or a school meal benefit as such. They were dealt with outside the benefit system, no doubt in a way that he approves of, as I probably do as well, but why suddenly bring these elements into the benefit system?
Stephen Timms: The hon. Gentleman has a good deal more experience in these matters, if I may say so, than some of his Front-Bench colleagues who are dealing with them at the moment. Good provision, particularly for child care support, was of course made through the tax credit system. That strong support for the costs of child care is why there was such a dramatic rise in lone parent employment under the previous Government. I supported that and I suspect from what the hon. Gentleman just hinted at that he supported it and continues to support it today. The problem is that once tax credits are abolished and universal credit takes their place, we have no idea how child care is going to be supported in the future. That is why I am—rather modestly, I think—appealing for the Government to tell us.
Kate Green: Does my right hon. Friend also agree that one of the real concerns we face as a result of universal credit forcing us to look at lumping all the different strands of financial support for families into a single payment is that all the eggs are in one basket, so if one thing goes wrong, the whole benefit—the whole structure of financial support for that family—could collapse?
Stephen Timms: My hon. Friend is absolutely right. For that very reason, the risks are great indeed. When I come on to speak to amendment 24 in a few moments, I will point out that if people go beyond a prescribed level of savings, they will lose all that help under all those headings.
Chris Grayling: Will the right hon. Gentleman clear up one point of confusion for me and, I suspect, for my hon. Friends? Over the past two or three months, he has said that he supports the universal credit in principle. However, his remarks and those of his hon. Friend the Member for Stretford and Urmston (Kate Green) imply some distancing from the proposal. Does he intend to support the Bill on Third Reading or not?
Stephen Timms:
The right hon. Gentleman will find out the answer to that question in due course. We have been consistent in supporting the principle of universal
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credit. We think that bringing in-work and out-of-work benefits together is a good idea that has a number of attractions. The problem is that the detailed work to make that policy fly has simply not been done by the Minister and his hon. Friends. There are desperate, gaping gaps in the policy and fundamental questions that he is unable to answer or explain about how the arrangements will work. As a result, the Bill, on departing this House, will leave many households, and many working families in particular, in a very precarious position.
Having talked about a lot of things that we do not know about, let me now deal with some things that we do know about. Clause 5, which I touched on a moment ago, will badly undermine the aspirations of people who are in work on modest incomes. Under the current rules—they have been a long-standing feature of the system—people who are out of work but who have above a prescribed capital sum are expected to use it to support themselves before claiming income-related, out-of-work benefits. If somebody has more than £6,000 in savings, the Government assume an income from them, which is then subtracted from the benefit entitlements; someone with more than £16,000 in savings will not receive means-tested, out-of-work benefits at all. Those two figures were increased from £3,000 and £8,000 by the last Government to help people retain some of their savings when they lost work. For people in work, the story has been very different. There is no savings cap at all on tax credits. Clause 5 will change that fundamentally by extending the rules on savings for those who are out of work to people who are in work.
The Conservative party used to tell us that it wanted to encourage people to save. Clause 5 will not just discourage people from saving; it will make it impossible for them to save. Anyone on a modest income who decides to save for a deposit to buy a house in the future, or for the cost of university education, will suffer an extraordinary punishment under the clause. It is impossible to buy a house today, or to obtain a mortgage for shared ownership, with a deposit of less than £16,000. However, if people have savings of £16,000 towards, say, the deposit for a mortgage—if, as Ministers seem to believe, they start to get ideas above their station—they will lose all their universal credit. Typically, that might be £5,000 a year. In addition, they will lose any support that they receive for the costs of child care, and on top of that they will lose any help that they are given with housing costs.
Those measures will add up to an extraordinary punishment for saving. They will make saving literally impossible, because as soon as people have managed to save £16,000 from their earnings, the Government will drain their savings away. The problem will start as soon as they have saved £6,000. The hon. Member for Redcar (Ian Swales)—who, I am pleased to see, is present—said in Committee that the problem would not last very long because people’s savings would soon be gone, and he was absolutely right. These proposals mean that if anyone attempts to start building up a saving that would be enough for, say, a deposit on a house or a contribution towards higher education costs, the Government will take it away by withdrawing their universal credit. The message being sent to people on
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low incomes who are doing the right thing and working to support themselves could not be clearer: “This Government will not support you.”
Amendments 23 and 24 would change that. They would allow people to save money in an individual savings account—up to £50,000 if they are in work. Ministers have told us that it would cost just £70 million a year to exclude all working households from the savings cap, and this measure is obviously more modest than that.
Surely we should be encouraging people to save, not punishing them for saving. People work to improve their lives and the lives of their families. They are aiming not for a bit more spending money each month, but for the means to buy a house, to help their children through university, to start a business or to pay for a child’s wedding. If they are to achieve such aspirations, people need to be able to save from their earnings, but clause 5 denies them the chance to do that.
Paul Uppal (Wolverhampton South West) (Con): The right hon. Gentleman has stressed the importance of aspiration. New clause 3, which concerns free school meals, is also relevant to that. Does he not find it interesting that, according to an examination of educational attainment among different ethnic groups, the most successful sub-group are Chinese students, and the second most successful are Chinese students receiving free school meals? The issue is not just money, but how Government can encourage aspiration and ambition, which is the ethos of the Bill.
Stephen Timms: Certainly the Bill should encourage aspiration, but if it prevents people from saving in the way that I have described, as clause 5 will, it will undermine aspiration. That is the point: we want to change the Bill so that it will allow people, even those on universal credit, to save. We believe that everyone should be encouraged to save, rather than being punished for having saved.
The Secretary of State used to agree with us. In 2008, he said that
“poverty is not just about how little you earn; it’s also about how little you own.”
If we want people to work their way out of poverty in the way in which the hon. Gentleman suggests—and I agree with him about that—we need to offer them the chance to save. I am afraid that if the Government press ahead with making saving on a low income impossible, the phrase “compassionate conservatism” will be revealed as a sham.
For similar reasons, I hope that Government Members will share my concern about the Bill’s discouragement to self-employment. Schedule 1 provides for a minimum income floor when calculating universal credit for self-employed people. Under that provision, Ministers are making the assumption that self-employed people will be earning at least the minimum wage for every hour they work, but anyone with even a passing knowledge of what is involved in starting up in self-employment will know that that is absurd. While establishing their business, many self-employed people work extraordinarily long hours and earn hardly anything at all, and their income fluctuates hugely month by month. It is absurd to assume that they will earn the minimum wage for every hour they work, and that they should therefore
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have their universal credit reduced accordingly. That is why the Chartered Institute of Taxation has warned that this new system will be much less supportive of self-employment than the current one.
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Our amendment 27 therefore seeks to align the universal credit definitions of income for self-employed people with those used in the tax system and in tax credits. The Chartered Institute of Taxation’s low incomes tax reform group has pointed out that allowances are made in the tax credit system for investment in business assets and equipment and for trading losses that can be set against other income or the profits on later periods of trading. Those arrangements reflect the reality of being self-employed. The idea that the self-employed are earning at least the minimum wage for every hour they work in self-employment is a complete illusion, and if the Bill is not amended it will destroy the very effective support that the tax credit system currently offers to self-employment.
Guto Bebb (Aberconwy) (Con): The question of the income levels of the self-employed is not as simple as the right hon. Gentleman makes out. Under the current capital allowance system, a self-employed individual can invest £25,000 in a piece of machinery and immediately wipe off their profits, and it causes deep resentment when they are then able to claim family tax credit. The Government are trying to create a system that supports the self-employed but is fair to other taxpayers.
Stephen Timms: The problem is that the proposed system does not support the self-employed in the way that the tax credit system supports them, because it treats the self-employed as if they are earning at least the minimum wage for every hour they put into their business. I know that the hon. Gentleman is genuinely interested in the position of the self-employed and I think he is supportive of self-employment, but he will know that it is absurd to suggest that a person who starts up in self-employment will be earning at least the minimum wage from day one. That will not be the case, of course; there may be weeks, or perhaps months, in which they earn nothing at all. The current tax rate system reflects that, but the new system will not.
Guto Bebb: Obviously I support the self-employed and want the universal credit system to support them, but we need to recognise that there are situations such as the following: somebody sets up in business to breed angora rabbits for their wool and manages to make £80 in sales in the year. I have not made that up, and it is absurd that that type of business should be supported by the taxpayer.
Stephen Timms: I am sorry to hear the hon. Gentleman belittling self-employment. For many people, including people who have lost their jobs, a move into self-employment can be absolutely the right thing to do, and, over time, they might find that they are able to develop a serious business—not breed rabbits—and earn a living from it. We should be valuing, not ridiculing, such contributions to the economy. I am afraid that there are many problems with the Bill, and one of them is that it so badly weakens and undermines the support that is currently available for self-employment.
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Kate Green: Does my right hon. Friend agree that one of the attractions of supporting self-employment is that it often particularly helps those who find it difficult to access the traditional labour market, such as women, because they need to combine work with caring responsibilities and therefore need more flexible hours, and disabled people, who may not be able to access full-time work in a structured workplace but can do some work on their own at home? We also certainly know that there is a long-standing tradition of some of our ethnic minority communities finding that self-employment is the best way for them to sustain economic independence.
Stephen Timms: My hon. Friend is absolutely right to say that self-employment is a crucial element of our economy for many people, including those with caring responsibilities; others who, for other reasons, are not necessarily able to commit to a full-time job; and, indeed, those who simply want the opportunity to build up a business for themselves—it is crucial that the system supports them. Tax credits have done so, but I am afraid that universal credit will not. That is a real worry and the approach being taken flies in the face of Government statements of support for self-employment.
Stephen Timms: I will gladly give way, and I hope that the hon. Gentleman will support self-employment this time.
Guto Bebb: I am surprised to hear those comments. I understand that the right hon. Gentleman is talking about supporting businesses and self-employed people perhaps working a day a week or two days a week. How does that fit in with his proposals on supporting child care in respect of micro-jobs and part-time jobs?
Stephen Timms: I have made it clear that the priority should be to maintain child care support for those who are currently receiving it. There is a case, with which perhaps the hon. Gentleman agrees, for extending that support to others. If that is to be done—and I can well see the case for it—the funding needs to be provided for it. What we cannot do is take support away from one group, making work impossible for them, in order to support another group. If we only knew the Government’s policy on child care support, we could have a proper debate about it, but that appears to be where they are heading. They simply have not had the ability to put a policy together and tell us what it is. The hon. Gentleman has suggested that perhaps too many self-employed people are either earning a negligible amount or are under-declaring their profits.
Guto Bebb: It is important to correct the record. I did not state that self-employed people were under-declaring their profits; I simply stated that the capital allowance system allows the self-employed, completely legally, to reduce their profits to nothing by purchasing an asset. That was the simple point that I was making.
Stephen Timms:
That is a long-standing feature of the tax system for businesses generally, and we should be encouraging investment. I see it as a strength of the current system that such necessary investment is supported. The hon. Gentleman is right in the sense that universal credit will remove all that completely. I am afraid that,
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as the Chartered Institute of Taxation has pointed out, it will be a far less supportive system for self-employment than the current one.
Guto Bebb: Again, I need to clarify the record. It is important to understand that the capital allowance system has been changed fundamentally in the past two years as a response to the economic crisis that we are facing. Someone could not previously claim 100% allowances, but they can at this point in time. A 100% allowance on the purchase of an asset worth £25,000 results in the net profits of a small business reducing to nothing and therefore they are supported by the tax credits system. It is important that this Government support the self-employed, but not in a way that encourages them to make investment decisions for the purpose of universal credit rather than for the purpose and benefit of their own business.
Stephen Timms: I am not clear whether the hon. Gentleman supports the fact that we have had 100% capital allowances recently, although I hope he does. When the downturn hit, they were introduced for a very good reason, which was to encourage enterprise and investment, particularly on the part of small businesses.
One of the problems with the Bill is that in many cases self-employed people will be strongly pressured to lie about the hours they have worked. They are not going to admit to having worked 18 hours a day, as some are doing, because they will then lose pound for pound from their universal credit, as it will be assumed that for every one of those 18 hours they have earned at least the minimum wage. This is a bad policy and it needs to be changed.
Amendment 33 may cause some puzzlement. Many people will not know that the Government intend to remove pension credit from people over pensionable age who have a spouse under pensionable age. That has not been announced anywhere and the Pensions Minister has not stood up to tell us about it. We find it buried in, of all places, the middle of schedule 2, on page 114 of this Bill. If the older person were living alone, they would receive pension credit. Those people will in future be penalised because they have a younger spouse. This is a new couples penalty, but we have been assured that the Conservative party wanted to stamp out such penalties. Indeed, the Secretary of State said, once again, in DWP questions earlier that he wanted to remove couples penalties from the system—but here he is inventing a new one. That will change the pension entitlements for some couples with very little notice and, in some cases, by a substantial sum. If Ministers want to change the arrangements for pension credit, they should set that out openly, the provisions should be made in the Pensions Bill and there should be full discussion of the change. They should certainly not try to sneak it past us in the second schedule to this Bill.
We have now established that of the 610,000 recipients of pension credit with a partner, almost 100,000 have a partner aged under 60. The difference between the couple rate for jobseeker’s allowance and the pension credit rate is more than £100 a week, so for each year that a couple is in receipt of JSA rather than pension credit, those couples stand to lose more than £5,000.
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Chris Grayling: The right hon. Gentleman will remember that we debated this matter extensively in Committee, so it is not quite the bolt from the blue that he suggests. Is it his party’s policy that people under retirement age who happen to have a partner who is over retirement age should, through that partner, be able to access means-tested support from the state without any obligation to look for work themselves?
Stephen Timms: In government, we set out the arrangements for pension credit as they stand. In our view, those arrangements made sense. If the Government want to make a case for changing those arrangements, I simply suggest that they need to announce that change and to stand up openly and say that they have decided that in future people cannot have pension credit if their spouse is under pensionable age. We could then have a debate. I would have thought that such a measure ought to be in the Pensions Bill. The Minister is right that we were able to spot the change in Committee and to discuss it then, but this is certainly not an example of the Government’s being open—far from it. They seem to have hoped that they could slip this measure through and nobody would notice.
For those couples for whom there is a substantial age gap—in 40% of those cases, the partner will be younger than 55, so the gap will be more than five years—this measure could represent an enormous cumulative loss of £5,000 a year for five years or more.
Chris Grayling: May I take the right hon. Gentleman back to the key question? We are talking about people of working age whose households would be in receipt of means-tested benefits from the state without being obliged to look for work. Is it his policy that those people should not have an obligation to look for work and that their households should be able to continue to receive means-tested benefits from the state?
Stephen Timms: As far as I can see, the arrangements for pension credit have worked perfectly well up to now, presumably with the feature that the Minister is now deprecating. My case is that if the Government want to change the rules for pension credit to discriminate against people who have a spouse under pensionable age, they should do so openly. They should announce the change: it should have been in the Budget, the welfare reform announcement or the Pensions Bill. We have a Pensions Bill going through Parliament at the moment—why was it not included there? Instead, the change was slipped into a schedule to this Bill and no Minister, until asked, said anything about it.
Charlie Elphicke (Dover) (Con): I am a little unclear about whether the right hon. Gentleman’s position is that this measure is wrong in principle and he disagrees with it, or he agrees with it but thinks it should have been announced with a fanfare. Will he explain which it is?
Stephen Timms: I certainly think that the arrangement should have been announced, and our amendment proposes that it be removed. I shall be interested to hear the Government’s response.
Charlie Elphicke: Let me understand fully what the right hon. Gentleman is saying. If a retired man, say, of 66 is married to a spouse who is 45, she should be able not to have to work and they should be able to double-claim pension credit—is that correct?
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Stephen Timms: No, it is not. Any income to the household from a working spouse will be counted in the household income for pension credit purposes. My argument is that if there is a case to be made for a change to pension credit, it should be made openly, and it should have been in the Pensions Bill, which Parliament is currently considering.
Chris Grayling: Forgive me for probing. The right hon. Gentleman has rightly set out his case as an amendment, but I wish to press him on the following point. If a household is receiving elements of pension credit that gives them the wherewithal to survive, is he saying that a 45-year-old should have no obligation to work while the household receives means-tested benefits from the state? It would be helpful to understand that. If that is his party’s policy, will he say so clearly and unequivocally?
5 pm
Stephen Timms: I do not recognise the policy that the Minister describes. We have had a long-standing arrangement for pension credit which appears to work perfectly well. If he has found abuses of pension credit, I shall be eager to hear those examples from him when he responds to the debate. I notice that when asked recently about this by my hon. Friend the Member for Leeds West (Rachel Reeves), the Pensions Minister stated:
“We recognise that it is important not to undermine the stability and outcomes for existing pension credit customers, so there will be no change for couples already in receipt of pension credit at the point of change.—[Official Report, 9 June 2011; Vol. 529, c. 422W.]
That is welcome and helpful. I do not know whether the Minister of State, the right hon. Member for Epsom and Ewell (Chris Grayling) has satisfied himself that the abuse that he has just described is not a problem at present. But even that reassurance from the Pensions Minister is not on the face of the Bill. For many couples who have planned around receiving pension credit and been reasonably able to do so, and who are now approaching retirement, the change will come as a severe shock.
We will support the principle of universal credit, despite the holes in the policy about how it will work and despite the perverse incentives that the Government have added for savers and the self-employed, but this is not, as Ministers have frequently claimed, a panacea for all the problems in the system. It is therefore vital that sufficient welfare advice is available at the point of transition. People will find any transition difficult, even one which, unlike this, is to a simple system. Yet at precisely the moment when the Government are embarking on this massive upheaval to the system, funding for welfare advice is being cut.
A large part of the funding—for example, to Citizens Advice—comes at present through legal aid, and the Government have announced that there will be no legal aid funding for welfare advice at all in future. About a quarter of the current funding for Citizens Advice comes from that source and it is being taken away. Most of the rest of the funding comes from local authorities, and that is also being cut. Demand for welfare advice will rocket and funding will plummet. This is a perfect storm for advice services. Our amendment 26, therefore, requires the Secretary of State to report, before universal
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credit is introduced, on the availability of welfare advice, and to satisfy himself that it is adequate to support people through the transition that the Government envisage.
New clause 5 aims for clarity about how claimants will be informed about their universal credit. It stipulates that every claimant should be provided with a record of the amount of their award, including details of the separate elements that make it up. I understand that the Government intend to provide each claimant with the equivalent of a payslip. I hope the Minister will be able to confirm that when responding to the debate. Will that payslip be provided on payment, as with payslips for those in work? Will it be provided directly by the Department or through the employer, and will it set out the various elements of the award—child care, housing support, support in respect of children and so on? A full statement would ensure transparency between the Government and claimants and would be a welcome feature.
Amendment 30 addresses support for families with disabled children under universal credit. It amends clause 10 to ensure that the amount that those families receive is not less than under the current tax credit and benefits system. My hon. Friend the Member for Glasgow East (Margaret Curran) raised this important point in Work and Pensions questions earlier this afternoon. Under universal credit, a family receiving the higher rate care element of DLA for a disabled child will receive £74.50 through the severe disability addition. At first glance, that seems broadly in line with the current position, but there are worries, because we are told that the higher level of the disability addition will be uprated in future only as resources allow, so it is very likely that families with severely disabled children will lose out over time.
For families with disabled children not receiving the higher rate care element of DLA the situation looks a great deal worse. The amount available under the universal credit disability addition will be £26.75 a week, compared with the £53.62 available under child tax credit, so support will be halved. The Minister has justified that in terms of aligning the support given to children and adults and easing the transition, but we know that children helped under the disability addition will not automatically be helped under adult universal credit.
Amendment 61 proposes that the elements of universal credit paid in respect of children must be paid to the designated carer of the children, except in prescribed circumstances. That is crucial for safeguarding the interests of children. Let me simply quote from the briefing that Oxfam has sent every Member: “We know from our work on the ground that money in households is often unevenly distributed and that women in poor households can have little or no access to money. As mothers usually take the main responsibility for feeding and clothing children, this affects both women and their children. This sometimes means that women themselves go without eating in order to pay the bills or put a meal on the table for their children. This lack of access to income in their own right leaves women open to the risk of financial abuse and can also reduce their chances of escaping domestic violence. As a crucial first step, the Bill must be amended to allow payments intended for children to be labelled as such and paid to the main carer, who is usually female. This change will make it more likely that this money is spent on children.” That would be the effect of the amendment.
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Amendment 68 would provide for a minimum amount to be paid to any claimant who has caring responsibilities. It is vital that people who give up their time and energy to look after the most vulnerable in society, saving the taxpayer considerable sums in the process, are properly supported when they move on to universal credit, in line with the help currently available through carers allowance. I hope that the Minister will make it clear how he will ensure that that happens.
In rehearsing these concerns, I remind the House that the whole project of universal credit will depend on an enormous new IT system, which the Government claim will be ready in an implausibly short period of time. In truth, it will not be ready by October 2013, as claimed, which will give rise to serious problems as that deadline approaches.
Charlie Elphicke: I put it to the right hon. Gentleman, as I did in Committee when he made that point, that this Government’s approach to IT is far more thought through and better planned than the approach taken by the previous Government, who spent vast amounts of money without any consideration for the end, route or purpose of the policy. This Government are being far more direct and should get the IT ready on time and on budget.
Stephen Timms: I look forward to reminding the hon. Gentleman of that comment in September 2013.
The intention of universal credit is that work should always pay. Without decisions and policies on child care or passported benefits, we cannot know whether work will always pay, and all the indications are that the Government will in due course, when they finally put a policy together, introduce one that will mean that for many work will no longer pay.
On savings, I am afraid that the Government are heading to crush the hopes of many people in work. On the self-employed, the Government will crush the hopes of many who want to set up their own businesses. As Policy Exchange recently argued in its report, universal credit has been oversold by Ministers. I very much hope that the House will support our amendments so that universal credit can support the aspirations of families across the country.
Chris Grayling:
I should like to start by making the same point that I made in Committee. I have listened to the right hon. Member for East Ham (Stephen Timms) setting out a vast range of measures and details that he wants us to write into the Bill. He is conveniently forgetting the first fundamental element of a Bill, and the lesson that he taught me 10 years ago, when I was first elected to the House, about the nature of primary legislation. I remember, as a new Member of Parliament, debating an education Bill in Committee and asking why there was not more detail in the Bill. I proposed amendments to provide certain details. I remember the right hon. Gentleman, as a Minister, arguing why that should not happen. He explained that it was a piece of enabling legislation to create a framework for the changes that his Government were seeking to put in place, and that my amendments were all unnecessary. Today the roles are reversed, and the right hon. Gentleman has conveniently forgotten everything that he, as a Minister,
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taught me all those years ago. Instead, he is telling me that I should put all kinds of new details into the Bill that I have introduced. I am sure that hon. Members will therefore forgive me if I take some of his proposals with a pinch of salt.
Stephen Timms: Is the Minister seriously saying that how the cost of child care will be supported is a detail?
Chris Grayling: I am saying to him precisely what he said to me all those years ago—that many of the details will be dealt with in secondary legislation. The Bill contains a framework that will include, among other things, provision for a child care element in universal credit. That is fundamental, and we all agree that there should be such an element, just as there should be elements relating to disability and to other aspects of the current benefits system that need to be replicated in universal credit.
Sheila Gilmore (Edinburgh East) (Lab): Why does the Minister expect us—and, indeed, the general public—to accept his statements about the impact of this huge reform when so much of the detail in unknown? Is it not reasonable for us to request the details that will tell us whether people are in fact going to be better off?
Chris Grayling: I expect it for precisely the same reason that the right hon. Member for East Ham expected me to support his education measures 10 years ago. He asked me to take on trust many of the same kinds of thing that I am asking the House to accept today. We have been completely transparent in setting out the different stages of the formulation of universal credit, and about the consultation processes that we have been through to fill in the details. We have also been clear and transparent in setting out the principles that we are following in trying to fill in those details.
Dame Anne Begg (Aberdeen South) (Lab): I went along to one of the meetings about the Government’s proposals for child care to which the Secretary of State was kind enough to invite people. We were presented with three options containing some very selective figures, and it was therefore impossible to tell exactly what the Government were proposing. I am still none the wiser. It is very difficult to vote on a principle when we do not know what the Government are going to do to implement it.
Chris Grayling: The point is that we do not write numbers on the face of a Bill. I will speak in detail about the right hon. Gentleman’s amendments in a moment, but the fact is that primary legislation sets out the framework for such things. We have worked with the hon. Lady and her Select Committee members, with other Members on both sides of the House and with people and representative groups outside the House working in child care and other areas. We started a discussion process to determine which was the best of a number of options to fit into the framework that we are creating.
Dame Anne Begg:
The Minister is right that often things are not written into a Bill, but usually the regulations have been published before the Bill leaves the House of Commons. I remember Members who are now on the
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Government Benches criticising regulations for being late—not for not having been published, but merely for being late. Where are the regulations so that there can be parliamentary scrutiny of this important aspect of the Bill?
5.15 pm
Chris Grayling: I have had this discussion within the Department. We have already brought forward a number of draft regulations—far more, I am told, than was the case under the previous Government, when, I was told, the instruction of Ministers was very much not to bring forward as many regulations. We have produced as much detail, if not more, about this measure than the previous Government did about their measures. They did introduce some sensible measures—for example, their reforms to introduce employment and support allowance, which was the project of the right hon. Member for East Ham himself—but they wrote a framework into their legislation and filled in the detail with secondary legislation.
Dr Whiteford: One of the concerns raised by children’s organisations in Scotland is that not enough consideration has been given to the different statutory framework that pertains to child care in different parts of the UK. In particular, they are concerned that the existing child care infrastructure may not be able to cope with the increased demand that could arise from the introduction of universal credit. I appreciate that the Minister does not want to be drawn on the detail, but can he assure us that parents who are unable to access good-quality affordable child care will not face sanctions if, through no fault of their own, they are unable to find the child care that they need?
Chris Grayling: Of course, we already provide child care universally through our schools system. The truth is that no parent with a youngest child under school age can be subject to any job search-related sanctions. Only once their youngest child reaches school age are they subject to a work-search requirement and can face sanctions. Under the rules that are pursued at the moment, and under the provisions that we have clearly said will exist within universal credit, we will expect lone parents of children at primary school to do a part-time job only if that fits in with the hours of that school.
Dr Whiteford: I am slightly surprised to hear the Minister describing school as a glorified babysitting service. The real pressure point pertains to older children, and particularly to out-of-school care. That is not covered across the UK by the Childcare Act 2006, which applies only to England and Wales. I urge him to take a closer look at that and to give the House the assurance that parents will not be penalised.
Chris Grayling:
The point is that we do not penalise parents, particularly lone parents. We do not require them to pursue work; that is out of keeping with the reality of their child care responsibilities. I am not describing school as a giant babysitting service; I am saying that for a goodly part of the year children of school age are at school, and therefore do not need additional child care. The requirements placed on parents
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by Jobcentre Plus in relation to their job search and whether they take up employment are designed to work around what it is reasonable and what it is not reasonable for them to do. For example, we do not expect lone parents of school-age kids to work night shifts. I can certainly assure the hon. Lady that it is not our intention, nor will it be, to seek to sanction parents in relation to a job requirement that is unreasonable and unrealistic given their child care responsibilities.
Dame Anne Begg: On a matter of principle, does the Minister believe that the regulations should be subject to parliamentary scrutiny in the same way as primary legislation?
As the right hon. Member for East Ham will know, I have tabled several Government amendments to address the concerns that he and other Members raised in Committee. I will deal with those before I talk in detail about his amendments.
Government amendments 14 to 21 will make certain regulation-making provisions for universal credit, employment and support allowance, jobseeker’s allowance and pension credit subject to the affirmative resolution procedure when they are first used. I recognise the hon. Lady’s point, and it is a point that was made well by the right hon. Member for East Ham in Committee. I do not think that it would be sensible to make the provisions subject to the affirmative procedure year in, year out, but it is right and proper that the House should be able to debate them fully when they are first introduced.
Charlie Elphicke: I thank the Minister for his important announcement on the use of the affirmative procedure the first time the regulations go through. The process that the Government have taken of consulting informally and sharing the consultation document so transparently, so that we could all sit down and discuss the options for child care, is a great and important step forward. I would have thought that the Work and Pensions Committee would have stirred itself to take a proper look at the document before the regulations come in, and make constructive comments to add to the process of reforming our benefits system.
Chris Grayling: My hon. Friend makes an important point. Some of my colleagues and I have been in the House for longer than he has—and when the Labour party was in government, I do not recall once being called in to discuss the policy-making process for one part of a piece of primary legislation. I was not asked to go in and discuss education or health options; the decisions were always just made. What is different is that we have extended the hand of involvement to the Opposition and said, “Please come and be part of the decision-making process.”
Sarah Newton (Truro and Falmouth) (Con): As another new Member, I ask my right hon. Friend to cast his mind back and consider whether the right hon. Member for East Ham (Stephen Timms), when he was a Minister, ever consulted quite so extensively as this Government have with third sector organisations, charitable organisations and other organisations to inform their work in developing the benefits system.
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Chris Grayling: I cannot remember the previous Government doing more than we have to engage people in Westminster, people around Parliament, third sector groups and members of the public. We are making a genuine attempt in a number of complex areas to get things right and to involve everyone in the decision-making process, and that will continue. Notwithstanding this afternoon’s amendments, we will continue to be delighted to seek and involve the input of Opposition parties, including the Labour party and the nationalist parties. As the hon. Member for Banff and Buchan (Dr Whiteford) said, it is right and proper that we have full dialogue with the Administrations in Cardiff, Belfast and Edinburgh, and with the Members of Parliament who represent Wales, Northern Ireland and Scotland.
Stephen Timms: It is certainly the case that the previous Government never got to this stage in a Bill’s passage with such an enormous hole in the policy as there is in this Bill.
Chris Grayling: The technical response to that is, “You wish!” I remember many occasions on which we came to a debate and asked what the Labour Government were planning to do. Did we ever get an answer? Not at all. The right hon. Gentleman and I have different memories of the way things were.
It is important to remember that this Bill creates a structure for universal credit, and that the details will be set out in regulations. The Opposition amendments relate mainly to issues that will be dealt with in regulations, and which do not affect the structure of universal credit as set out in the Bill.
I have accepted certain recommendations from the Opposition. The Bill as introduced provided that the regulations will be subject to the negative procedure. In Committee it was suggested that that would not provide the right level of parliamentary scrutiny and control. The right hon. Member for East Ham identified a number of provisions that he thought should be subject to the affirmative procedure, and I gave a commitment in Committee on 28 April to consider those provisions carefully.
There are two provisions, in clauses 22 and 25, relating to conditionality, for which we do not think the affirmative procedure is appropriate, because they do not introduce new principles. Although we intend that regulations will be much less prescriptive than the current jobseeker’s allowance regulations, the powers in the Bill will be used to create a regime for jobseekers that is broadly similar to the current one. We have therefore formed the view that there is no necessity to subject those two to the affirmative resolution procedure. Of course, it always remains within the gift of Opposition Members to pray against regulations if they want a matter to be debated. They could, of course, do so anyway, but we are making their life a bit easier by providing for the affirmative procedure.
I have thought long and hard, and apart from those two specific provisions I agree with the right hon. Gentleman’s suggestion that regulations should be made under the affirmative procedure in the first instance. I say “in the first instance” because it does not seem sensible to repeat the process year in, year out when the regulations are regularly renewed.
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As set out in amendment 14, that principle covers all the key regulation-making powers relating to the universal credit, including the rules on capital, the calculation of income, the treatment of self-employed people’s cases, and the amounts of the elements within an award, including those for disabled children, housing and child care. Opposition Members might say that that is not enough to allay the concerns that they have raised on specific issues, and I shall deal with some of those specific concerns in a moment. However, I made it clear in Committee that we recognised the importance of getting the details of universal credit right. We are working hard to do so in consultation with key stakeholders, and we are listening to their concerns.
The Opposition amendments would pre-empt our considerations and tie the hands of this and any future Government with regard to areas of policy in which it is important to retain flexibility. I believe that it is perfectly reasonable to say that as we reach a final conclusion on what is right, involving Members of all parties, the Work and Pensions Committee, organisations such as the Social Security Advisory Committee, and third-party groups, we will bring regulations to the House by the affirmative procedure. There can then be a full and proper debate in Committee and a vote on Floor of the House.
Dame Anne Begg: Clearly the Minister has moved on this issue, but there is still the problem that the affirmative procedure is “take it or leave it”. The Work and Pensions Committee and other Members have no ability to amend regulations, so it is not the same as the line-by-line scrutiny that primary legislation receives.
Chris Grayling: I accept that, but that is precisely why we have extended the hand of involvement to the hon. Lady and her Committee and to Opposition Members, so that they can help us shape the details. This is a big complex project and there are challenging issues to deal with, and we want to work on a bipartisan basis and take views from all parties on how best to shape the system. In the end we will have to take a final decision ourselves, but it is our goal and intention to involve all those who wish to be involved in the thought process.
That brings me on to child care, on which we have been seeking to do precisely that. New clause 2 raises important points about how we intend to support people with formal child care costs within universal credit. Hon. Members will be aware that we recently held two seminars on the topic. Members of both Houses attended, and there were interesting and fruitful discussions. There was a follow-up seminar with a group of key stakeholders. I am aware that Members raised particular queries, and we have undertaken to look into them and provide more information. The seminars were part of an ongoing dialogue about how best to structure child care support under universal credit.
For now, I reiterate the point that I made in Committee. The Bill already allows us to include an additional element for child care within universal credit, under clause 12. We have made a firm commitment to provide such an element, but I make no apology for taking time over the details. We must get them right, and to do so we must listen to those with experience and expertise and consider the options.
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Sandra Osborne (Ayr, Carrick and Cumnock) (Lab): The Minister will be aware of how important the child care tax credit has been in supporting families’ child care. Will he undertake that people will not be worse off in terms of their child care costs, or is the change really just about saving money?
Chris Grayling: As the hon. Lady would have known if she had listened to the debate in Committee, we are putting in place transitional protection for the introduction of universal credit, so that no one will lose out in cash terms as a result of the changes. That is right and appropriate. The problem with new clause 2 is, first, the cost, which the right hon. Member for East Ham did not mention.
Had we introduced new clause 2 with the current 16-hour rule, the cost would be around £200 million to £400 million, which would be additional to current expenditure of around £2 billion. The Opposition have therefore made a clear spending commitment, which appears to be a reversal of their policy—I was under the impression that the Leader of the Opposition and the shadow Chancellor had said, “No spending commitments without official sanction.” Perhaps this spending commitment has official sanction, but, if so, they need to say where the money is coming from.
Two or three Opposition proposals that we will debate today require extra spending. It is incumbent on a party that has just presided over the building of the biggest deficit in our peacetime history to say where the money is coming from if it proposes spending commitments that would take away some of the money that we are trying to reinvest to deal with the deficit. Do Labour Members want to borrow more money? If so, that £200 million to £400 million means extra public borrowing. Alternatively, will they increase taxes? They need to explain where the money is coming from.
Mrs Madeleine Moon (Bridgend) (Lab): Does the Minister understand that many women are frightened by the Bill’s proposals and nervous about their futures—about whether they can continue working and supporting their families? Women who are looking to move into work are not worried about artificial arguments on whether the Labour party has a new spending commitment. They want to know whether the Bill will give them the opportunity to move into work when they are capable of doing so, and whether the Government will give them child care support. In many cases, child care is the only thing stopping them making that step.
Chris Grayling: Women and men in this country have realised that the previous Government’s belief that money grows on trees is wrong. They have also realised that the consequence of the previous Government’s policies—they simply threw money at every problem—is that we are faced with the most monumental deficit challenge. If we do not deal with that, we will end up in the same position as a number of other countries. I would not want us to be in that place, because women’s chances of getting back into work would be much diminished by the state of such an economy.
Mrs Moon:
I appreciate that there is concern about the deficit, but will the Minister assure us that women who are unable to work because the cost of their child care will remove all the benefit of them doing so will not find themselves harassed or pressured by the Department
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for Work and Pensions to take work that will leave them out of pocket? Will that be taken into account when their capacity to work is reviewed?
Chris Grayling: I am not sure whether the hon. Lady was in the Chamber a moment ago when I answered question on child care from the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne), but the former seems to be forgetting the fact that there is no job search obligation for the lone parent of a child who is below school age. A job search requirement is made only when a child is at school, and the requirement is for a willingness to accept a reasonable job offer that fits around school hours. No draconian measure is waiting to hit a lone parent as their child grows older. Our system is pretty supportive, and we have been absolutely clear that child care costs will continue to be paid through universal credit.
The hon. Member for Bridgend (Mrs Moon) must also understand that our nation’s resources are finite. We cannot just turn on the financial taps because we feel like it. We must take pragmatic decisions on what the nation can and cannot afford. We set out very clearly in our announcement last year that there is a £2 billion envelope to fund child care. Parliamentarians now need to agree how best to spend that money.
John McDonnell (Hayes and Harlington) (Lab): As the Minister knows, I have supported the universal credit system for some while, but each of the proposed amendments address vulnerable people—people on free school meals, people living in near poverty or poverty, children with disabilities, and people who are sick and who incur health costs. Those real anxieties about the introduction of the new system need to be assuaged. When the Minister responds on those issues, could he at least give us some sort of time scale on which they will be addressed, so that those people can have more certainty in the run-up to the introduction of the new system?
Chris Grayling: The answer is that we will do it as quickly as we possibly can. We are not in the business of delaying these things. We are doing the consultation on child care now, and I hope that we will reach a resolution in a relatively short space of time. However, I want to take the time to get it right. I do not want to rush through under an artificial timetable something that is not necessary right now. We are still two and a half years away from the introduction of new claims for universal credit. We have got time to get these things right and we are trying to work with a fixed envelope of money for child care—we will talk about some of the other issues shortly. We want to take the time to look at the real costs of child care, the requirements and how we can best deploy the £2 billion available.
John McDonnell: I am not trying to catch the Minister out—I am trying to secure clarity on each of these issues. What is an indicative time scale for addressing those anxieties, so that people can have some prospect of being able to calculate their futures in those areas?
Chris Grayling: I will endeavour to answer that. On the child care issue, we are in consultation at the moment. I would hope that we will get all the responses that we are going to get by the summer and be able to take decisions quickly after that. That would be my first answer to the hon. Gentleman’s question.
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Mrs Main: Does my right hon. Friend agree that it is unhelpful for the hon. Member for Bridgend (Mrs Moon) to talk about the Department for Work and Pensions “harassing” women who are considering going back to work? All these measures are an attempt to be mindful of the public purse and to encourage people to go back to work and do the best they can for their families—because being in work is good for their families.
Chris Grayling: My hon. Friend makes an important point. The whole purpose of universal credit is to provide assistance to people who are trying to get back to work and to ensure that work always pays. I hope that the women of Bridgend will benefit, like those across the country, from the introduction of universal credit and the extra support that it will provide to ensure that they are better off in work.
Kate Green: I noted the Minister’s reminder a few moments ago that transitional protection would also be available in respect of child care costs. Can he confirm that one change in circumstances that can be predicted is that child care costs will vary between term time and school holidays and that that will not trigger a change in circumstances that would lead to the cancellation of transitional protection?
Chris Grayling: It is not our intention that routine or minor changes in circumstances would lead to the loss of transitional protection. The requirement for child care clearly fluctuates during the course of the year, but follows a set pattern. It is not our intention for a moment to remove transitional protection in that situation, nor is it our intention to remove it in an environment in which there is an annual increase—RPI or CPI—in the rate of child care. We are looking at material changes in circumstances, and I certainly would not envisage the change from term time to holidays as a material change.
The other issue that I have with the Opposition’s proposals is that they would remove the ability for people to take up mini jobs. For women re-entering the workplace after a lengthy time out of it, there is a bigger barrier than needs to be the case. One of the strengths of the universal credit system is the flexibility for people to take on mini jobs. The level of prescription set out in the Opposition’s proposals would set up unnecessary and inappropriate barriers to getting people back to work.
Sheila Gilmore: In Committee, we heard a great deal about these mini jobs. We have just heard the Minister say that we should not be worried about the effect on parents of children of school age because a job could be encompassed within school hours. Why is it so necessary to take money away from people who are trying to improve their families’ prospects of getting out of poverty in order to help people in mini jobs—although I do not fully understand the concept—because surely those would be covered by school hours even more?
Chris Grayling:
The changes we made last year—the reduction from 80% to 70% support—merely returned us to the situation that applied before 2006. On the mini jobs, I want us to spend the money we have on supporting people from deprived backgrounds and in the most deprived situations into the work place so that they can make the most of their lives. The mini job is a perfectly reasonable way of doing that. I also happen to think
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that for many lone parents, a mini job during schools hours is a perfectly reasonable alternative that might mean that the need for child care is not great. None the less, the option should be there. We should not be writing—this is the key point about some of the Opposition amendments—into primary legislation rules that cannot be undone for two or three years, while we wait for a parliamentary slot. Instead, we need to set out straightforwardly a situation in regulations that can be amended if the situation requires. I could not possibly accept an amendment from the right hon. Member for East Ham that would write into primary legislation actual amounts of benefits that should be paid. The Labour party would never have done that while in government. It would not have happened, and I am not going to tolerate the idea now.
Charlie Elphicke: The detailed and comprehensive information that the Minister and the Department for Work and Pensions shared with members of the Bill Committee and the Work and Pensions Committee sets out clearly that joint working is the norm for couples in this country. In most families, mine included, with young children, both spouses or partners work. I, for one, resent the idea among some older people that mothers just sit at home and have primary responsibility for child care. Society has changed, and it is time people moved on from being old-fashioned and out-of-date and accepted that the reality of modern Britain is that both parents play a key role in bringing up children.
Chris Grayling: My hon. Friend makes his point in his usual forceful and inimitable way. He highlighted how Labour Members struggle to move on from traditional ways of things. Listening to the right hon. Member for East Ham, I am still not sure on which side of the argument he falls. Does he think that we are doing the right thing, but want to fine-tune it a bit, or is he trying to distance himself from the Bill, so that on Wednesday the Opposition can vote against it and so say to the pressure and lobby groups, “We are on your side”? I am genuinely not sure which is the case, although if they do vote against it, I will love it. I will look forward to arguing up and down the land that this Government have got it right on welfare reform, and that the Opposition have not. I wait with interest and enthusiasm to discover how they vote.
New clauses 3 and 4 provide an amount for school meals and health costs in universal credit. It is absolutely our objective to ensure that people on universal credit will continue to receive appropriate support for school meals and health costs, and that this support is withdrawn gradually to avoid damaging the incentives to work. However, entitlements to passported benefits are the responsibility of other Departments and devolved Administrations. We have been working closely with those responsible to consider the options, and we have commissioned the Social Security Advisory Committee to review passported benefits and how they interact with universal credit. The review was announced in a written statement on 23 May, and a copy of its terms of reference has been placed in the Library. To answer a question put to me earlier, I should say that the Committee will produce its interim report in September and a final report by January. The Committee provides a good way of considering this challenging and important cross-governmental issue. We are certainly well aware of the
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potential for a large cliff-edge reduction in a person’s income, if support for school meals is withdrawn completely when they reach a certain level of earnings, and we are working closely with other Departments on the matter, as well as on the review.
On health, we aim to ensure that passported benefits are awarded to broadly the same number of people as now. However, passporting is not the only source of help with health costs. Income-related help is also available through the NHS low-income scheme, which can be claimed by anyone on a low income who has capital of less than £16,000. For people on medication, pre-payment options can also significantly reduce the cost of recurring prescription charges. With a 12-month pre-payment certificate, the maximum cost of a prescription is £2 a week, although of course that is an issue only for England; for those with constituencies in Scotland, there are no prescription charges.
Stephen Timms: The Minister made an important point a moment ago. He said that he agreed that support for free school meals and prescriptions should be tapered away. That is different from the proposal in the White Paper to have an income threshold and no support. Is that a change in Government thinking?
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Chris Grayling: That is precisely what we have asked the Social Security Advisory Committee to examine for us: how best we deal with that cliff edge. We accept that it is there. How do we tackle it to maximise the likelihood of people moving into work?
In most cases, health charges will be one-off or occasional costs that are unlikely to weigh heavily in people’s perception of the financial gains from working. However, for some disabled people in particular, there may be a more significant factor. The current passport from working tax credit together with the separate NHS scheme for people on low incomes should mean that health costs are not, in theory, a disincentive to work, but we know that the reality is often dictated by perceptions and issues about access. We will work to get that right for universal credit. However, we await the Social Security Advisory Committee’s recommendations with interest and we believe that it will be necessary to consider them with other Departments. We need to find a way in which to address the matter that maintains support without creating insuperable barriers to returning to work. It is a complex subject, which falls beyond simply decision making by our Department because we are not responsible for much of it.
New clause 5 would ensure that claimants understand how the amount of universal credit that they receive is calculated. I share that goal, but we do not need primary legislation to achieve it. We are designing universal credit to ensure from the outset that people have the information that they need in an accessible form that is clearly set out. We intend to provide a clear record of any award when it is first made and of subsequent changes, ensuring that claimants are always up to date with the latest position.
Universal credit will be a digital service by default that claimants will predominantly access online. However, we recognise that not all universal credit claimants have access to the internet and we will continue to provide notification through other channels. We are also working
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with the Government Digital Service—as well as other partners—to help people get and stay online by providing more reliable internet access and training in communities. Of course, we put in place some of the measures to increase digital access when we debated the appropriate regulations last week.
The hon. Member for Stretford and Urmston (Kate Green) was concerned that one part of the benefits system going wrong would bring down the whole deck of cards for a family. She is wrong in thinking that, simply because we have multiple channels, the system somehow works well at the moment and will be much more vulnerable under universal credit. The current system does not often provide that security. Outstanding questions can affect a wide range of existing benefits, particularly at key points of transition, such as moving into work. Many people do not even claim everything to which they are entitled. Rather than a patchwork of provision, with people thinking, “Have I got everything I’m entitled to? If I don’t know a particular answer, everything gets delayed”, a single point of entry, a single point of access and a single system of paying benefits makes it less likely that somebody will get into difficulties and not receive all the money to which they are entitled. I do not therefore believe that the hon. Lady has got that right. We are confident that universal credit will not have the effect that she suggests—it will make it easier to access benefits. Of course, we intend to introduce a system of payment on account, which will allow some payments to be made even if all the details of the claim cannot be sorted out straight away.
Amendment 26 on reporting would make it a legal requirement that we assess and report on access to welfare advice, including advice for those unable to use the internet, before we introduce universal credit. Universal credit will be a simpler system than we have today. It will be easier for potential and existing claimants to find out relevant information online, and easier for advisers to understand and advise.
Welfare advice is already provided by Jobcentre Plus, Her Majesty’s Revenue and Customs and local authorities through a variety of means—over the internet and via other routes.
Dame Anne Begg: Even if universal credit fulfils what the Minister describes—he says that it will be simpler, and although it will certainly be simpler superficially, in practice it may be more difficult—with any move from an old system, it takes time for people such as advisers to become familiar with the new system. Advice will be crucial at that pinch point. Will the Minister ensure that the organisations that provide advice are properly funded in that transitional period?
Chris Grayling:
My view is that our partner organisations, such as Citizens Advice, need to be involved and informed of all the changes. We need to continue to be able to offer the valuable advice that they give to individuals. We provide quite substantial blocks of Government funding to Citizens Advice and similar organisations, and it will be for them to decide how best to use that financial support. In what are straitened financial times, I would hope that those organisations would see their priority as sending as much of that money as possible to front-line advice services, and spending as little as possible on central administration, central marketing activities and other head office functions. I would like
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those organisations to focus on providing every spare bit of cash that they can for front-line advice services—as well as finding ways of generating more spare cash for that purpose—because after all, that is where the money is most effectively and valuably spent.
We will seek to provide guidance, training and advice for advisers on the universal credit and the implications thereof. There is always a willingness on our part to talk to groups of advisers, including at some of the big conferences that Citizens Advice organises. I have not been able to do so yet—I have offered to do so on other matters—but we are always willing to provide such input to those organisations.
Yvonne Fovargue (Makerfield) (Lab): Does the Minister accept that the money currently given to Citizens Advice is spent centrally on vital services such as training advisers, the information system and support for those agencies? In fact, none of the money goes to local bureaux, which are extremely concerned about the effects of the cuts in 2013.
Chris Grayling: Every organisation has to look at how it operates in tougher times financially, and at how best to spend the money that it has available. I am sure that Citizens Advice will be no different in that respect.
Amendments 23 and 24 deal with the capital limit and propose that for claimants who work, the universal credit assessment should ignore savings that they hold in individual savings accounts up to a prescribed maximum of no less than £50,000. We fully understand the importance of saving. Working families should seek to provide for their future needs and larger purchases. However, families with substantial savings should draw on those reserves when their incomes fall, not look to the taxpayer for support. Our analysis suggests that in 2014-15, there will be up to 100,000 households on tax credits with savings over £16,000 who could be affected by the capital rules in universal credit. However, transitional protection will ensure that there are no cash losers at the point of the transition to universal credit where circumstances remain the same.
However, it is important to be fair to the taxpayer. Although nearly one in three pensioner households have savings in excess of £16,000, only 13% of households with a working-age adult in them have that much in savings. A typical working-age household has only £300 in savings. It cannot be right that people with significantly greater savings than the average family can claim universal credit. A maximum limit of at least £50,000 in ISA savings, as proposed by the right hon. Member for East Ham, is a large sum to be excluded from the capital ceiling. We are striking the right balance between protecting people with modest savings and placing responsibility for their own support on those with substantial resources. Once again, we are talking about an uncosted spending commitment. The right hon. Gentleman said that it would cost £70 million a year to uncap totally, but not that many people on universal credit would have savings of more than £50,000, so the majority of that £70 million would be spent on his measure. The reality is that this is a multi-tens-of-millions-of-pounds spending commitment. Once again, we have not heard from the right hon. Gentleman where the money would come from.
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Amendment 30 to clause 10 would mean paying at least as much in the additional elements for disabled children as we did in benefits and child tax credit prior to the introduction of universal credit. As we announced in policy briefing note 1, “Additions for longer durations on Universal Credit”, we will retain two levels of payment for disabled children in universal credit. The higher element will be payable to more severely disabled children receiving the highest rate of the care component of disability living allowance. The lower rate will be payable to children receiving the other rates of the disability living allowance care component. The higher rate will be increased by £52 a year, with eligibility extended to children who are severely visually impaired, who currently receive only the lower entitlement.
The key change is that we propose to align the elements for disabled children and disabled adults. That means that the lower rate would be around £26.75 and the upper rate £74.50 a week in current figures. The lower rate for a less severely disabled child in universal credit would be less than now, but we have pledged that where universal credit entitlement is less, transitional protections will be put in place. Our aim is to simplify and align the additional elements for disabled children with those for adults. We do not think it right that when a young person claims benefits in their own right, the extra amounts payable for disability are different. We also want to focus resources on the most severely disabled children and adults. Savings from abolishing the adult disability premiums and changes in the child rate are not going back to the Exchequer. This is not a cutting exercise; it is about recycling that money into higher payments for more severely disabled people.
Amendments 27, 28 and 29 to schedule 1 relate to the regime for self-employment in universal credit. As I told the right hon. Gentleman many times in Committee, we are committed to ensuring that people in self-employment have the financial support that they need. Amendments 27 and 28 would take a power to allow “accruals accounting” of profits and losses from a trade to be used in the reporting of earnings from self-employment. Strictly speaking, that is unnecessary, as the power taken by paragraph 4(1)(b) of schedule 1 already permits such a regulation. Amendment 29 would limit the application of the power taken at paragraph 4(4), which allows for a minimum level of earned income from self-employment to be set. It proposes that the minimum level would not apply where the claimant’s business was conducted on a commercial basis with a view to the realisation of profits.
We recognise that self-employment is a vital element of the economy and will be an important contributor to the sustained recovery from recession that we all want. It is also an important route into work for many people. We are therefore giving careful consideration to the conditions that we set for people claiming universal credit who seek to make their living from self-employment. The enabling framework provided by the Bill allows the treatment of income from self-employment, including the definition of earnings to be taken into account, to be set in regulations. We therefore do not need to decide this question today; we can work to get it right. However, as I have said to the right hon. Gentleman previously, we have to deal with the issue carefully. It is not the intention to make it impossible for people to get into self-employment, particularly in the first few months, when they have difficulties and money does not come easily. However, in the current system, people can report
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no or very low income from their business activity and continue to receive the bulk of their benefit or tax credits entitlement. We want people to become progressively less reliant on benefits and universal credit. At the end of the day, we cannot have the taxpayer funding someone who is notionally self-employed—and on whom there is no job search requirement—but who generates little or perhaps no income at all from that self-employment. We have to apply a threshold to determine whether someone is credibly in self-employment or whether they are using self-employment as a reason for not looking for other job alternatives. We have to get this right.
Mrs Main: My right hon. Friend makes a valid point about people who are considered self-employed. Does he have any view about those who are considered self-employed who sell magazines such as The Big Issue?
Chris Grayling: My hon. Friend makes an important point. That is something that we need to address, because the current situation is not right. We need to ensure that the system is fair and justifiable in the eyes of taxpayers and other individuals. I share some of her anxieties, and although it is not in my remit to pursue the issue, I am sure that she will make her representations elsewhere in Government. It is not that we want to do anything that undermines that publication or others in a similar position; rather, we want to ensure that the position is not only fair and equitable, but defensible and justifiable.
Mr Christopher Chope (Christchurch) (Con): My right hon. Friend knows that I have expressed some concerns about this issue in the past. Can he give us an assurance that self-employed income will be based on actual income, rather than deemed income? Linking self-employed income with an assumption that people are earning the minimum wage would effectively put most farmers in this country the wrong side of the line, because probably most of them earn less per annum than they would if they were paid the minimum wage for the hours they work. The same goes for young barristers, lots of people in the carpentry and building trade, and others building up businesses. Surely the system should be based either on actual earnings or on something else. If it is based on something else, that surely needs to be spelt out clearly, because there are rumours circulating that we are effectively imposing a minimum wage by the back door on self-employed people.
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Chris Grayling: My hon. Friend makes a good point, underlining the complexity of these issues and why I believe it inappropriate to set hard-and-fast rules in primary legislation. If we find that we have not got it right the first time around, or if things need to be done to remove anomalies, which they might well be, it makes no sense to have written the fine print into the detail of primary legislation, therefore making it more difficult to adjust accordingly. This is one reason why it is important to maintain as much flexibility as possible.
Stephen Timms:
The hon. Member for Christchurch (Mr Chope) referred to rumour, but the White Paper said that self-employed people would be deemed to have earned at least the minimum wage for each hour of
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employment. Can we take it from what the Minister is saying that the Government are reconsidering that White Paper decision?
Chris Grayling: As I said to the right hon. Gentleman in Committee, we are looking at the best way of doing this. We cannot have a situation in which people who are receiving an entitlement to the universal credit while generating no income at all over long periods of time still say that they are self-employed. We must ensure that that does not happen, and we are looking for the best way of doing it. If we wrote the rules into primary legislation, we would not be able to take decisions and fine-tune on the basis of experience, as we would have to come back to primary legislation every time. That is why I think it inappropriate to accept the right hon. Gentleman’s amendments.
Let me make some further progress. Amendment 33 seeks to remove the restriction on eligibility for pension credit for couples where one member is below and the other is above the pension credit qualifying age. Suffice it to say that although someone over the retirement age should be able to receive benefits for the household under the pension credit system, someone under the retirement age being able to receive the benefits of a means-tested system without having to go out and look for a job is just plain wrong. I am afraid we disagree on that, and I am comfortable with the changes. They are set out in legislation, which is where one would expect them to be set out. I am disappointed at the right hon. Gentleman’s disappointment that we have not issued a press release on the subject, but I do not think that this is the kind of change that would command the front pages of any newspaper. It seems perfectly reasonable to set out proposed changes in legislation, given that it is legislation that is laid before the House with accompanying explanatory notes that Members can read and discuss and into which they have an input.
Amendment 68 would add additional provisions for carers to paragraph 4(4) of schedule 1. It is not necessary to set a minimum level of payments to carers. The risk is that the incentives for carers to get into work are blurred by the automatic payment of an amount that does not relate to their personal circumstances. We all agree that work, not benefits, is the best route out of poverty, and we must ensure that payment levels are not set so high as to undermine that.
Amendment 61 takes us back to an issue that was extensively debated in Committee in respect of the payment of universal credit. Opposition Members suggest that that default position should be that payments made in respect of children are routinely directed to the carer. The amendment would provide powers to specify other circumstances for paying a portion of the universal credit award to a particular individual.
We have published a policy briefing note setting out our intentions for payments. We have already said that couples will be able to choose which of them receives the award and they could direct it to a joint account for both to access. It is a core principle of our approach that individuals are best placed to make choices about what is best for their own circumstances. There will, of course, be some exceptional circumstances and there are powers within the Bill to amend the Social Security Administration Act 1992 to allow the Secretary of State to pay all or part of an award to another individual. We
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do not need this amendment to ensure that. However, the default position should be that we make payment to the person chosen by the couple, not by anyone else.
Many of the concerns raised in this debate are, of course, about the possibility that universal credit might be less generous to some people than the current system of benefits and tax credits. We propose a radical reform and a simplification of the welfare system. In that situation, it is not possible to replicate exactly every aspect of the current system. That is why we will introduce a system of transitional protection to ensure that there are no cash losers as a result of the move to universal credit.
Dame Anne Begg: Will the Minister tell us how much will be available for the transitional protection? The figure of £2 billion was mentioned, but that included all the changes, all the administration and IT as well as the transitional protection. What is the spending envelope? How much will cover the transitional arrangements?
Chris Grayling: The £2 billion contains sufficient money for us to be able to deliver the transitional protection and the various changes. I do not have the numbers in front of me, but I will happily write to the hon. Lady to give her the more detailed figures we have published so far. We have given a clear commitment to transitional protection. It costs what it costs, but we have made a sensible projection of what we believe it will cost, which is contained in the budget for the spending review period. It is important to ensure that there are no cash losers as a result of the transition, but it is impossible to make a big change of this kind without finding that people in subsequent years are in a different financial position from their counterparts in previous years. Inevitably, some will move one way; others will move another. The only fair and proper way of dealing with the situation is to ensure that everyone is protected in cash terms.
We think that we have put together a framework in part 1 that will give us the flexibility to introduce the universal credit and to fine-tune the proposals as necessary so that if we do not get everything quite right at the start, we can fine-tune as we go by, and that a future Government will have the flexibility to do that. We have made absolutely sure that we have the appropriate protections in place so that there is an element for child care, for parents, for those with disabilities, and so on and so forth.
We think we have created a sensible framework of the kind that in different areas of policy and in different ways were created through primary legislation by previous Governments, including the last Government. I do not believe for a second that it would be prudent to write into the Bill the sort of amendments that the Opposition have tabled. I have responded to their wish to see more measures brought forward on the affirmative rather than the negative procedure, which I think is right and proves that we will listen and make amendments where it is sensible to do so. I am afraid that the Opposition are seeking to write the sort of detail into the Bill that they would never have put in legislation when they were in government; they would never have followed that approach themselves. That is why I cannot possibly
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accept their amendments and why I ask the House to accept the Government new clauses and to reject the Opposition amendments.
Sheila Gilmore: The debate we have had—in Committee and this evening—shows some of the pitfalls of saying, “We are going to simplify benefits.” The Minister and his colleagues have said to the country generally, “We're going to simplify benefits. This is a simpler system, so it must, by definition, be a good thing.” They expected and, indeed, got from many people the answer, “We agree that benefits should be simplified.” The problem is that when dealing with real people and real situations it all becomes much more complicated, as our debates tonight and on previous occasions have demonstrated quite clearly.
The details of issues such as school meals, health charges and the even bigger matter of child care are extremely important, and will have a real impact on whether the new system works for people, will make them better off, and enables them to get into employment, stay in employment, improve their circumstances and get out of poverty. We all agree that, except for those who suffer from real and deep health problems, employment is the best way out of poverty. If, however, such an important element as child care is left so undefined, we cannot know the answer to that question.
Frankly, we are being asked to buy a pig in a poke. We are told, “If you don’t accept it, don’t vote for it or don't agree with it, you are throwing over the whole issue of welfare reform.” I do not accept that. Nor do I accept the Minister’s view that he was given that sort of response by the previous Government and that there should be simply a framework—an empty bookcase, as he was wont to say in Committee—as there was before. It seems to me that if he thought it was wrong then—and it sounds as if he did—it may still be wrong now. As I said in Committee, people should not be asked to buy that empty bookcase without knowing whether it contains classics or cheap comics.
Charlie Elphicke: The Government have gone to great lengths to engage all parliamentarians, including the hon. Lady, in discussions about the nature and design of child care. Is she saying that she would prefer the Government to present a fait accompli, rather than listening to her and giving her a chance to inform, and possibly change, Government policy?
Sheila Gilmore: In general, I should prefer legislation not to be pushed through all its stages until more of the details have been dealt with. When the original Bill was presented to the House, some of the consultations with the public were still taking place. An important consultation about disability benefits, with which we shall deal later, had not finished before the Bill was printed, and consultations about child maintenance did not end until April, when proposals were already in writing. There are other ways of doing things, and the fact that they have or have not been done properly by past Governments does not strike me as a reason for not trying to do them properly now.
Child care is particularly important to people who want to improve their position. The hon. Member for Dover (Charlie Elphicke) said that we had been consulted, and indeed we were invited to a briefing at which we
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were presented with certain scenarios, but I am not sure that I gained a very clear understanding from that session of exactly what the Government were proposing. I subsequently received briefings from other organisations, as no doubt has the hon. Gentleman, expressing the view that the new child care arrangements, such as they were—the proposals had not been finalised—would not leave people better off. It is a question of what we accept and what we believe.
It is difficult for us to form a view, but it is possible that if we do not get the child care arrangements right, many people will decide that work does not pay. They will feel either that they must reduce their hours considerably, or that they cannot afford to continue their work and must give it up altogether. I do not think that that is the outcome that the Government seek.
Charlie Elphicke: The hon. Lady clearly supports the fait accompli proposed by the Opposition—including, it seems, the ending of the whole principle of the mini-job, which would imprison people with child care responsibilities in their homes. Does she really think that that is the answer?
Sheila Gilmore: I am not convinced that the new clause does away with the entire principle of the mini-job, although I would certainly have liked—preferably before we embarked on the Bill—a debate about what was, for me, a new idea, possibly good and possibly bad. I do not think we have fleshed out exactly what we are doing in this regard.
As I said in an intervention earlier, if the idea is to encourage people to undertake work involving all hours of employment—given that they are able to obtain such work—I am not sure where the so-called mini-jobs will be found or what their quality will be. Are we talking about six or eight hours a week, as some people seem to be? Where will the jobs be, to what extent will they increase earnings, and will the necessary child care be available?
Guto Bebb: I am surprised that the hon. Lady refers to micro-jobs as if they were not important. I should have expected a Scottish Member to be delighted by the Government’s attempts to make work pay. Shockingly, the number of people who have never been employed in Scotland increased from 37,000 in 2000 to 40,000 in 2005, and to 45,000 in 2010. I think that, rather than being disparaging about micro-jobs, the hon. Lady should welcome the fact that the Government are serious about showing that work pays and gives people self-respect in our society.
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Sheila Gilmore: I hope that those figures for Scotland are not like the figures for the whole United Kingdom, which, according to the Sunday newspaper that I read this week, included students. That was in the small print, but the fact remains that the wrong figure is constantly given.
I am not defending circumstances in which people are unable to work. However, we should examine the whole notion of the mini-job much more carefully than we have been able to do so far. We need to be clear about exactly what it will deliver. We already know that many people who have been able to start work over the
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past 10 or 15 years as a result of measures introduced by the previous Government, including families with children, are still living in poverty.
The mini-jobs, or micro-jobs, that we are discussing may indeed enable people to work, and being able to work for six, eight or 10 hours may be seen as some great moral advantage. I fear, however, that the jobs will be of such poor quality and so poorly paid that those people will remain in poverty, and the path out of that poverty does not appear to be very well mapped. I think that we should have given the proposal much more consideration before using it as a reason to remove child care provision from other people.
Mrs Main: The hon. Lady seems to be digging herself into a hole. She has admitted that the measures taken by the last Government did not work, and that people were left in poverty. Surely she should welcome an innovative approach from the present Government, and surely she should stop trying to filibuster their proposal into the long grass by demanding so much blessed detail that nothing will ever get done. We owe our families more than that after the Labour Government’s failure to get people into work and out of poverty.
Sheila Gilmore: I cannot accept the hon. Lady’s premise. People were able to work as a result of the measures introduced by the Labour Government, such as the minimum wage, but we did not manage to take all families out of poverty because of the type of jobs that many of those people were doing and the levels of income that they received. It is wrong to suggest that a system allowing people to work for fewer hours will in itself deliver them from poverty.
Sarah Newton: How on earth does the hon. Lady think someone who has not had a job can obtain a better job?
Sheila Gilmore: Of course people have to work, and of course they have to be able to work in real, proper jobs. The hon. Members for St Albans (Mrs Main) and for Truro and Falmouth (Sarah Newton) should think, at times, about the type of jobs that they are talking about, and the kind of experiences that people will have. I want to be sure that those who go into work undergo a proper job progression rather than becoming stuck in a sideline meaning that a box can be ticked because they are now working and have some work experience.
Harriett Baldwin: Does the hon. Lady not accept that that is exactly what happened when people were stuck in jobs that paid them to work for 16 hours, so that it made no sense for them to work for 15 or 17?
Sheila Gilmore: I think that it often made a lot of sense for people to work for 16 hours and more, and issues such as child care were key to that. In many cases, child care costs kick in when hours like that are involved.
We should not try to justify reductions in child care provision simply by saying that they may help another group who need a certain amount of help—and, indeed, they may not do so. We need to examine the model thoroughly, because otherwise we will not know what will happen. Depending on which version of the proposals the Government decide to adopt, help for child care for people working 16-plus hours may be cut and there may
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not be a call on child care costs for people doing mini-jobs. If that is the case, money would be freed up. I am unsure as to whether there will be a call on it for the following reason.
Some mini-jobs will be at times such as 5 until 8 o’clock in the evening, and those doing them might not have another family member who can undertake child care at that time. Child care costs may therefore be incurred—although I am not sure from what source any child care might be found at such a time of day. When the hours of a mini-job fit in with nursery or school hours, however, child care costs may not be incurred. Therefore, if there is not a call on child care costs for people working fewer than 16 hours, I hope that the available money will be recycled for the people from whom it appears it is to be taken, regardless of whether we know there is a demand for it.
Charlie Elphicke: The hon. Lady speaks as though the idea that a woman looking after a child would work for fewer than 16 hours a week is novel and has never happened before. Let us consider the situation for one of the obvious age groups, however: for children aged five to six, some 61% of lone parents who are in work are in part-time work, and 65% of partnered mothers in work are in part-time work. Many of those people will be working for fewer than 16 hours as their children are so very young. Is it right not to help them with child care in those circumstances? Why does the hon. Lady want to persecute people who work fewer than 16 hours a week?
Sheila Gilmore: With all due respect, I think the boot is on the other foot. It appears that the people who are to be persecuted are those who work hours for which they require child care and who get assistance at present. Let us consider the proposals that were put before us at the briefing meetings—which I would not necessarily call fully consultative meetings. Under the proposals, it appears that people who currently get child care assistance will have that taken away, and that that will amount to a substantial loss which will lead possibly to their reducing their working hours. If they do that, their ability to move on with their work experience and their lives, and to get out of poverty, will be much reduced. I do not think positing one group against the other is helpful, therefore, and I would much rather we gave assistance wherever we can.
In Committee, Opposition Members were constantly expected to balance our suggestions against the costs that the Government have set up, but we would not start from that point. It is ludicrous to say that the Opposition have no right to make any spending suggestions as we do not support the Government’s model of deficit reduction. If we put more people out of work by cutting our deficit so quickly, as this Government seem intent on doing, benefit bills will rise and tax takes will fall, and we will not resolve the deficit problems in any case. That is one of the major reasons why we have opposed this Government’s stance. If we have a different view on how to tackle the deficit, the speed at which to tackle it, where to reduce spending and the impact of that, it is perfectly legitimate for us not to accept the spending envelope the Government have decided to impose.
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I would hope that we would not just think about how we might take a little away from one group that happens to be a bit less poor than another group because we want to help the most needy. I noted in this afternoon’s departmental questions that Ministers were quick to take up one aspect of the Leader of the Opposition’s speech today: the comments he made about people on benefits. They were not so quick to mention his comments about the responsibility of those in our society who are a good deal better off, however. If we do not look at both those issues, we will be making the poor pay the cost of the economic crisis.
Charlie Elphicke: The hon. Lady speaks as though everyone is going to be terribly badly off under universal credit, but the figures in table A.2 on page 80 of the Red Book make it very clear that almost everyone is much better off, and that is especially the case in respect of part-time work. Does she not accept that that is positive, and that the Government have made sure that the transition will be managed in such a way that people will do better?
Sheila Gilmore: I shall try to unpick that question. First, it has almost been forgotten—I hope not entirely forgotten—that universal credit will be introduced after £18 billion has been cut from this country’s welfare spending, so many people will already be worse off before universal credit comes into effect. Secondly, we do not know when the transitional protection we keep hearing about will end. Will it end and begin only if somebody gets into work or falls out of work, or will there be other circumstances in which that transitional protection will cease, which would mean that many people would be considerably worse off? The third reason that I have concerns about the assertion that people will be better off under universal credit is to do with all the points raised in our discussion of these amendments. Unless we are clear about issues such as the cost of child care and school meals, and how they will be accounted for under universal credit, we cannot know whether the assumptions made, the figures given and the statements made about people being better off will prove to be true.
Harriett Baldwin: The hon. Lady has repeated the much-quoted figure of £18 billion being taken out of welfare spending, but does she acknowledge that £3.75 billion of that is coming from higher rate taxpayers such as myself who receive child benefit on a four-weekly basis? Would she like me to get my child benefit back after 2013?
Sheila Gilmore: In answer to that, let me give a personal view that I would not want to attribute to all my colleagues, as I am unsure whether they would all accept it. If we feel that we can no longer pay child benefit as it was previously paid and that we must make savings, it would have been much fairer to have made that part of taxable income. For many reasons, that would have avoided some of the anomalies that the Government’s proposal has set up. However, we have frequently rehearsed those reasons, so I shall not spend a lot of time talking about them now. If savings had to be made, we might have ensured that some of that money came back in the way I have suggested. I personally think that, subject to a fair taxation system, that would be a better way of dealing with this issue than having the suggested abrupt cut-off.
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I want to talk about savings, and in particular the savings cap being introduced on people who work. It is astonishing that this change should be made by a Government who have so much to say about their wanting to encourage people to get back on their own feet, to be self-reliant and to save for their future. It is very easy just to say that the average amount of savings of a person of working age is only £300—and that is frightening and appalling for our society if it is true. However, for those people who currently—[Interruption.] I do not know what is so funny. Currently, people who have savings and receive tax credit have been able to get assistance without losing that money, but the Government’s view appears to be different for those who fall on hard times, no matter what their circumstances are, and no matter what situation they find themselves in. We will, no doubt, have this debate again on Wednesday when we discuss non-contributory and contributory employment and support allowances. The Government’s view seems to be that the first thing someone should call on in difficult circumstances is any savings that they have previously been able to make. There is a lot that is unacceptable about that.
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People may find themselves with a certain amount of capital in all sorts of circumstances. They may have gone through a recent separation and received their share of a former matrimonial home, which they may then plan to use to put a deposit down on another property so that they can buy a home and no longer be as dependent on the state as they have been previously. That opportunity is being taken away by this provision. It is not at all clear whether the Conservative party thought it was entirely unacceptable that people were able to receive tax credits and still have savings—presumably Conservative Members did think that, but I do not know whether they said so.
We have had a system, which seems to have been working well, whereby people have been able to receive assistance to enable them to stay in employment and improve their circumstances without such loss of savings which they may have worked hard to accrue. They may have been asked to take reduced working hours, as many people have in the past two or three years, and they may have experienced a pay freeze and, thus, fallen, perhaps for the first time, into the position where they become entitled to universal credit. The first thing that will happen to them is that they will be told that they are not eligible until they have reduced their savings below a certain limit. Their prospects of using those savings, perhaps towards their retirement—these people may not be young, and they may be thinking that that money will give them a more comfortable retirement or they may want to buy a house to put themselves in a better position—are being taken from them. There is no good reason for changing the tax credit arrangements, which have been working well in getting people back into employment.
Charlie Elphicke: What would the hon. Lady say to a constituent of mine who earns £15,000 a year, has no savings, works really hard and pays their taxes? How would she justify their taxes going to pay benefits to someone who has £50,000 in the bank?
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Sheila Gilmore: It is important in this debate to get away from the attempt to say that one group of people are hard-working taxpayers and another group do not pay tax and should have their rights diminished. The taxpayer may also be receiving certain benefits, if we feel that it is correct for them to do so. People pay taxes in all sorts of ways. They pay council tax, VAT and often income tax at various points in their life. They may do that while they are receiving benefits or they may have done so just before a change in their circumstances took them below the threshold for paying income tax; they may have had to reduce their hours or they may have been forced to do so. These are not different groups of people.
In our approach to these issues we need to consider the following seriously: we should see our welfare state not only as something into which all of us pay when we can, but as something from which we have an opportunity to take when things happen to us. These two groups of people should not be fighting each other. Someone should not say, “I am hard working; you are not. You should not be getting, because somebody else is working.” At a lot of the income levels that the hon. Gentleman mentions people probably will be entitled to benefits, be that help with their rent or council tax, or some other benefit. I ask the Government to think again about their attitude to people who are doing exactly what they have been asked to do, which is to get into employment, to work hard and to save. I ask the Government not to keep this savings provision in the Bill.
Harriett Baldwin: I welcome the opportunity to discuss the child care element of the universal credit. We did not have the chance to talk about it at length in Committee, but we all got invited to a discussion with the Secretary of State on the various different options for child care. This is an essential part of the equation that any parent considers when deciding the best way for them to approach the workplace.
I wish to talk about a slightly different approach from the one in new clause 2. I disagree with new clause 2, because I do not think that it takes the right approach, and I want to say exactly why. First, it retains the characteristic whereby someone has to work for a minimum of 16 hours to qualify for support with their child care. That fails to take into account an entire psychological barrier and frame of reference that a parent can have when they move into work. It is very hard to take the first steps into work, particularly when someone makes that choice—which, as we have heard, is optional, with smaller children. Those are large steps to take, so allowing parents to move into work by doing fewer hours—perhaps two days a week in the office or at work—is an extremely important part not only of encouraging a parent to move into the workplace, but, importantly, encouraging parents to maintain contact with the workplace when their children are small. That is a really important benefit of the approach that the Secretary of State has been discussing with us.
Bob Stewart (Beckenham) (Con):
I agree with what my hon. Friend has to say, but does she think it is also very important for a mother to keep contact with her children? When a mother goes into work for three hours a day, she will know that she does not have to do more
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than that and that she can get back to her children. I think that that is terribly important. I wonder whether my hon. Friend agrees.
Harriett Baldwin: Yes. We were reassured earlier by the Minister that any kind of sanction regime would apply only once children joined school at the age of five.
This linear move into work is an important aspect here—it is probably even more important for parents than for any other group in society—so I am pleased to see that it would be possible under the Secretary of State’s proposals. I am also pleased that the £2 billion which has been mentioned will still be in place to provide support for families making that transition into work.
Ms Karen Buck (Westminster North) (Lab): The hon. Lady is making a powerful argument. Will she confirm that Labour Members are not arguing that child care assistance should not be available to people working less than 16 hours? Of course if the financial envelope is large enough it is right that that assistance should be available, for all the reasons she is outlining. What would she say to people who live in high-cost areas, such as my constituency, to parents of larger families, and to parents who have no choice but to work longer hours? Their child care is going to be reduced or lost, because their child care is going to be capped to pay for the things that she is talking about.
Harriett Baldwin: I shall deal with some of those other points in my later remarks, because they are all important subjects for debate. Indeed, the proposals in new clause 2 suggest a figure of £300 a week for this element. I was genuinely surprised that there were people who were getting as much as that. I do acknowledge the cost of child care in central London: I have paid it for many years, so I recognise what we are talking about. However, £300 a week is a lot of money—it works out as £15,600 a year. It is indeed a generous cap.
I propose that we turn the child care element on its head. The initial move in what we might call the slide into work should be reimbursed at 100%. When people make the difficult first choice to go into work, the first few hours of child care, perhaps up to the earnings disregard—I ask the Minister to ask the Department to consider some of the maths involved—should be reimbursed at 100% as they make that important transition. When they reach the level of annual earnings represented by the disregards that we are talking about, the tapering of the contribution that the person in work would make to their child care would begin.
Kate Green: The hon. Lady has obviously given this matter very careful thought, and I have great respect for the way in which she is approaching it. Does she not see a risk that the mini-job would become a trap, and it would be impossible for people to be incentivised financially to increase either their earnings or their hours of work, because they would start to lose child care support?
Harriett Baldwin:
The hon. Lady underestimates the extent to which the 16-hour job has already become a trap. I think we all know people who have been trapped
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in one. I am proposing that when people move on to that slide and have greater support in those initial steps into work, they will become much more familiar with the world of work. When they move into taking on more hours and so on—let us not forget that once somebody has moved into the workplace they often find themselves eligible for a promotion or for the next move up the employment ladder, which might coincide with their children rising five and going to primary school—the fact that they are on more of a slide will mean that because they have extra work they will be able to share more of the cost of their child care. I would like to see some experimentation with the formula so that the child care support for the first steps into work is more generous, and the tapering begins further down the line.
Charlie Elphicke: Does my hon. Friend recall going to the seminar where we were consulted about the child care costs, and does she recall, as I do, that the idea that people lose out when they work more hours is a fiction? The Government are funding substantially more money for the system, which means that people will be far better off than under the current system even if they are working all hours, as well as benefiting when they are in 16-hour jobs.
Harriett Baldwin: My hon. Friend highlights the complexity of this area, not just because of the formulae and the mathematics but because of the financial behaviours of individuals who are making the choice between working and not working. This is an important behavioural area for people who are not in the benefits system. We all know people who have left work, had a baby and taken time out of the workplace. They make the trade-off and ask whether it makes sense for them to go back to work and pay for child care or not. That happens outside universal credit, in the world of people who are not touched by the benefit system in any way. This is a complex area.
Sarah Newton: My hon. Friend is making an excellent case. In addition to the financial considerations for women who are returning to work, there are great psychological concerns. Women ask whether the necessary quality of child care will be available, whether their family will adapt and whether they will cope with the separation from their child. Enabling people to be supported to take those first steps into work, even for a few hours, would help families overcome that barrier and, I hope, go on to increase their hours and ultimately go back into work full-time.
Harriett Baldwin: I vividly remember going back into full-time work after maternity leave—and on that first day back, frankly, one is amazed that one’s child is still alive at the end of the day for which they have been left with someone else. The psychological transition is very important, and taking it in smaller incremental steps—perhaps with more generous support—is extremely important, because it builds up trust in the alternative child care while also allowing the child to get used to it in small steps. I urge the Minister to suggest that the Department consider some other iterations along those lines.
My other point concerns the review of the consultation put forward by the Secretary of State.
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Harriett Baldwin: I shall give way to the hon. Lady, who was so generous in giving way to me.
Sheila Gilmore: Will the hon. Lady consider whether, in this debate, we have got ourselves into the situation of being forced to contrast one group of people who are trying to work against another? Perhaps she would care to join me—I am not sure whether my Front Benchers would agree with me, and perhaps her Front Benchers would not, either—in saying that it would be better to give child care assistance to people who work all hours. Perhaps we should join forces to argue for that.
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Harriett Baldwin: My point is that we should try to concentrate the support that the taxpayer gives into the early hours of going back into work. I would like the taper, and what can be afforded, to be announced annually by the Chancellor at the Dispatch Box, just like the overall taper in universal credit. The country’s potential to support people in those choices would go along those lines.
My second point about the alternatives to new clause 2 that the Department might consider concerns the need to recognise that the cost of child care varies greatly with the age of the child—although I acknowledge this goes somewhat against the simplicity of universal credit. Of course when children go to school the cost of child care out of hours drops dramatically from the cost of providing child care for an 18-month-old child. I suggest some form of annual review of child care support that takes into account the age of the child or children. We should also consider this in terms of the annual envelope, because that would address the issue raised by the hon. Member for Stretford and Urmston (Kate Green) about the predictable fact that holiday cover is an annual challenge for working parents, and reflect the fact that there is that fluctuation for parents of children at school.
I wanted to outline why I do not agree with new clause 2 and why I welcome the fact that the Government are having an open dialogue about the £2 billion that they are putting into child care support, and to emphasise that all families, whether they are on universal credit or not in the benefit system at all, have to make behavioural and financial choices about the world of work. I would like the support that the state gives to encourage people into work to be concentrated on those first few hours of child care.
Kate Green: I want to comment first on the proposed child care amendments. Owing to the funding envelope within which we work we face a difficult financial choice about which group of parents to assist with child care costs. I warmly welcome the implication in the comments of the hon. Member for West Worcestershire (Harriett Baldwin). Obviously, one would want to support funding for child care as far as possible, and in making an early selection about which group of parents should benefit we do not want to shut off the possibility of financial support for child care for more parents being an aspiration over time.