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Welfare Reform Bill
|©Parliamentary copyright||Prepared 18th May 2011|
Publications on the internet
Welfare Reform Bill
Welfare Reform Bill
The Committee consisted of the following Members:
James Rhys, Committee Clerk
† attended the Committee
The Chair: Order. Before we start the afternoon’s business, it has been brought to my attention that one or more of us are twittering from the Committee. While it is a matter of individual taste, the general feeling of the Speaker and the Panel of Chairs is that that is not a good practice, and that electronic devices should be used in Committee only for receipt of a minimal number of personal messages, and no other purpose, until such time as Standing Orders change. It would be better if we avoided twittering from the Committee.
As members of the Committee will be aware, next Tuesday is the last day before the Whitsun recess. We are on that day operating Wednesday hours of the House. However, following discussion with various members of the Committee about their commitments that day, there is a consensus that the best hours for us to sit to maintain the length of sitting hours would be to begin at 9.30 am and sit until 11.25 am, to reconvene at 2 pm and to close the day’s proceedings formally at 6 pm. That clearly requires a change in the original order of the Committee of 22 March.
‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples living in social housing as defined by section 68 of the Housing and Regeneration Act 2008.’.
‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples owed a duty to be supported with interim or temporary accommodation under sections 188, 190, 193 or 200 of the Housing Act 1996.’.
‘(6A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples living in supported or sheltered accommodation.’.
‘(6A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples who are offered accommodation under the prevention and relief of homelessness powers and duties in part 7 of the Housing Act 1996.’.
Ms Buck: The theme of housing costs inevitably dips in and out of all the amendments and the discussion about the benefit cap. This group concentrates on some of the housing implications and the way in which the housing costs element of the cap will impact on individuals, and how it interacts with statutory duties for people to be housed by local authorities.
Before I go into detail, I ask the Minister, when he replies, to give us more information about how the figure of 50,000 households affected by the cap was calculated. We know that, apart from an extremely small number of cases, it is council tax benefit, child benefit and child tax credit that make up the bulk of benefit entitlements for larger families that push them over into the cap, which then affects their housing costs. Obviously, households with higher housing costs will add to that calculation, even when they are smaller families and therefore further down the scale.
We understand that 50,000 households are affected, of which 70% are in social housing, leaving us able to estimate the number of households in the private rented sector. The bulk of the discussion in the media, the Committee and elsewhere, has tended to focus on individuals who choose housing in the private rented sector. Looking at the figures, it seems to me impossible that such a small proportion—30% of 50,000 households—will be caught in that trap.
The number of households currently accommodated on behalf of local authorities in temporary accommodation is 48,000, of which 36,000 are in London. Given the average cost of procuring temporary accommodation, I cannot imagine that many of those 36,000 households in London—and probably a high proportion of the 48,000 overall—will fall outside the cap. A substantial and growing number of households to which local authorities would otherwise owe a homelessness duty are now directed and assisted into housing in the private rented sector under the prevention and relief of homelessness duties. As recorded by the Department for Communities and Local Government, their number is now running at some 65,000 annually. Some of those households will be very small, and in the north of England, for example, they will probably not be caught by the cap on the basis of housing costs alone, but most of them will be. The larger share of those households, more than half, are in London and the south-east.
One can conservatively estimate that, annually, there will be 30,000 households that would otherwise be owed a homelessness duty, and 48,000 households in temporary accommodation. whose housing costs alone will take them over the cap. There would be some degree of interaction with child benefit and child tax credit taking larger families close to the cap limit, but for the most
I will be fascinated if the Minister can tell us his calculation. To be frank, I do not think the Department knows the answer, and I have never been able to work it out, but, on the face of it, between 36,000 and 48,000 households are in temporary accommodation and 60,000 or so are in prevention and relief of homelessness accommodation annually; there are also all the families in settled homes schemes and a proportion of the 113,000 households in London, and perhaps even the 750,000 households in the country as a whole, in the private rented sector and in receipt of housing benefit. How the Government reach the figure of 50,000 is therefore a matter of some conjecture.
Will the Minister tell us his calculations regarding the proportion of those affected by the cap who are in the private rented sector? How will they interact with the different categories of accommodation? What are the modelling assumptions for housing costs overall? I believe that the modelling is being done on the basis of a sample survey and a computer model and that assumptions are being made about rent levels for the purposes of the cap, but my reading is that the assumptions, even for social housing, they are well below the level that prevails in London and the south-east. There is a real danger that the entire basis for the numbers affected by the cap driven by housing costs is completely wrong. I want to probe the Minister on that and get some assurances.
When the cap was first proposed, the Department for Work and Pensions press office briefed journalists that social housing would not be included in the calculation. In their briefings, the National Housing Federation and other housing bodies also said that they did not believe that social housing would be caught in that calculation. We now know that that is, not only wrong, but spectacularly wrong as an assumption. Parliamentary questions have confirmed that 70%—nearly three quarters—of households caught by the cap are in social housing. The Minister may want to challenge that. My understanding is that the DWP was not surprised, although I was surprised, because larger families, who are overwhelmingly caught by the cap, are disproportionately likely to be in social housing because they are poor and are unlikely to be able to cover their housing costs in the private-rented sector. We now have a perverse situation, which I find extraordinary, in which families who often enter social housing, which is available to anybody and is the cheapest form of accommodation—average rents in social housing are significantly below, and in some cases around half, the prevailing levels in the private rented sector—through a route that has already taken them through homelessness, are not only affected by the cap, to the surprise of the housing sector, but disproportionately affected by it.
One of the most dramatic problems facing the Government goes back to some of my examples and the journey that must be made by those caught by the cap: what will happen to them? People currently living in
The local authority will have to find that such people are homeless. The impact assessment notes that one cost that cannot be calculated concerns what will happen when people now in social housing fall out of that and move into homelessness accommodation procured by the local authority, which is more expensive. In theory, the Government will be moving people from a social housing property where the rent is £110 a week, which they cannot afford, into temporary accommodation or private rented accommodation that costs £400 a week. That will dramatically increase the Government’s bill, and will catch that family in an even deeper cap. I look forward to the Minister explaining the logic behind the measure because I cannot see it.
The Government’s top-line argument will be that such families must cut their cloth to meet their means. They must move out of the social housing—it could be almost anywhere in England; there are only a few places where social housing rent is significantly lower—and find somewhere cheaper. The problem with that argument is that no other local authority in the country will have a duty to house that family. Local authorities already have local connection rules which, not least because of the Localism Bill, are becoming more entrenched. My local authority is changing its local connection threshold to 10 years. No other local authority will take that family, so they will not have the choice of moving to cheaper social housing but will have to move into private rented accommodation which, almost everywhere, is more expensive. The legislation is almost Kafkaesque.
I cannot see how a family will make a journey out of social housing and into something cheaper. I am not sure that that is possible. I am sure there will be some examples whereby a family moves from Wandsworth to Liverpool, but I am not sure how that will be done or how that family will deal with the costs that accrue from losing one home and finding another. I do not know who would assist them with a deposit in the private rented sector in such circumstances. Not for the first time, we have ended up with a lack of coherence in the interaction between DWP and DCLG, and in households being priced out of the cheapest available form of accommodation and pushed somewhere more expensive. I look forward to the Minister explaining how that will work.
Jenny Willott (Cardiff Central) (LD): As the hon. Lady has said, rents in the private sector are generally higher than those in the social sector. Does she agree that it seems unfair to exclude from the cap those in the
Ms Buck: The Government could argue that some in the private rented sector will be able to make a choice about where they move. The point about people in the social housing sector is that effectively they do not have a choice. They are constrained by an allocation system that is bound, for the most part, within local authority rules. Sometimes it is bound by a housing association, which has its own strict geographical distribution of properties.
The point about social housing is not just that it is bizarre to move people out of cheaper accommodation into more expensive accommodation, but that those people cannot move anyway because of the way in which the allocations and local authority rules operate. If a person is in the private rented sector, they have a degree of choice over their accommodation. Moreover, the Government have accepted, in housing benefit rules but not for the benefit cap, that there will be local variations. The amount of housing benefit a person can obtain in London, capped though it is, is significantly higher than in Easington or anywhere else, but the Government do not accept that argument in this instance.
Charlie Elphicke (Dover) (Con): The hon. Lady makes a correct point about social housing and the difficulty of moving. Is that not why the Government’s proposals on the right to move, and their proposals to make it easier to move within social housing and local authority housing, are a good idea and should be welcomed?
Ms Buck: I am entirely in favour of more effective home swapping and different means of encouraging greater mobility in the sector; I have spent a great many years lobbying for those things. However, I do not see how any of the proposals match up. If the logic of the argument prevails, the Government will have to accept—if they accept this, it will give us some clarity about their position—that they are looking to move a minimum of 250,000 people. That is the minimum; I think it is a massive underestimate, because there are at least 50,000 households, and those families are mostly larger. The Government will have to move those households almost exclusively from London, where housing costs are more expensive, to the north-east, where housing costs are cheaper, although in many cases, those costs still do not come under the cap. If that is what the Government are saying, they should be absolutely explicit that that movement of population from London to the north-east is happening. Then they could explain to us the logic of moving people from London and the south-east to an area where there are fewer jobs in order to improve their work incentives, because that does not match up either.
I come to my last point on housing. There is an extraordinary twist in the whole saga. Another part of the Government is intent on raising social housing rents to 80% of market levels for new entrants to the sector. In some cases—possibly many—it increasingly looks as though tenant transfers will be affected. We know from the work that Steve Wilcox and others have done that that will increase the housing benefit bill, and in addition, more people, through no fault of their own, will be caught in that trap.
A family who did all the right things, but who had been in and out of work, had faced all sorts of difficult circumstances and had been accepted as homeless, might be on a path to accommodation where rents are lower; that would improve their incentives to work. The Government will now not let that happen. They will say that those people will have to pay 80% of market rents. That amount will be higher than the 30th percentile in the private rented sector, which is the point at which the Government are capping private housing benefit. How does that match up? The sheer incoherence is quite extraordinary. The situation is complicated not only by inconsistencies in DWP’s position, but by massive inconsistencies between DWP and DCLG.
Housing providers, the Council of Mortgage Lenders and companies lending finance to housing developers and registered social landlords have made it clear—we touched on this when we talked about housing costs in universal credit—that they will not be able to provide the much-needed new social housing that we all want, because the cap will prevent them from being able to get in a stream of income to provide those properties. Let me give an example. When social landlords gave evidence to the London assembly planning committee, they spelled out the implications of the measures. I have asked how the “80% of market rents” measure would affect them, and how it interacts with the cap. Ealing’s family housing association said that it was
“a question of affordability, but housing benefit is…the biggest factor here. The notion of using higher rents to pay for your development, in principle there is no problem with it so long as the tenants can afford the rents. What is on the table at the moment is the idea that we will charge higher rents but a significant number of the people who we are supposed to house will not be able to afford them because they will not be able to get sufficient benefit. That is the fundamental challenge and obstacle” .
The chief executive of Places for People, which is the biggest registered social landlord in the country, said that if housing associations charged up to 80% of the market rent and there was a £500 cap on benefits, its existing client group would not be able to afford the homes that it was building. For that reason, it is doing its best to operate within the measures, but they have a direct consequence on the volume of new house building.
One way or another, the interactions are creating a pincer. Developers will not be able to build the homes that we so desperately need, because the people for whom they are building the homes, and who will create an income stream to subsidise that new development, will not be able to afford it. For those interacting reasons, I tabled an amendment that suggests that social housing should not be included, as I think it is completely perverse and unworkable to include it.
The other amendments effectively relate to sub-strands of social housing—forms of housing that people have accessed through the local authority through homelessness duties, temporary accommodation, prevention and relief of homelessness placements, and of course sheltered and supported accommodation in which people are placed as a result of disability. I would like to know how the calculations have arisen, and how the Minister sees that all working.
As I understand it, because income above the cap is being recovered by local authorities through housing benefit, presumably, where a family exceed the cap through any other form of benefit entitlement, that
Sheila Gilmore (Edinburgh East) (Lab): Although much of the impact appears to be on families, as has been mentioned, the impact assessment suggests that approximately 5% of the people affected will be single people. Will the Minister explain the circumstances in which they will be affected? A number of campaigning organisations are concerned that the measure might affect people in temporary or supported accommodation. A single person who claims benefit with no child additions or other things that generally bring people up to the cap, and who is in a standard private rented sector tenancy, will be subject to the local housing allowance rates. As we know, they have already been reduced to 30% of the local market rent. As has been suggested, if the cap for a single person is to be £350 a week—that is not in the Bill, but that is the figure under discussion—it seems unlikely that someone in a standard tenancy would be affected by the cap.
Are those single people in the DWP’s impact assessment those in temporary or supported accommodation? What is the Government’s view on that? It is clear that significantly higher amounts are paid for such accommodation. I do not know about the position across the country, but I know from my experience in Edinburgh that that is true of temporary accommodation provided directly by the local authority or by a housing association—often on a local authority’s behalf—and also of other forms of interim accommodation. We have a private sector leasing scheme, which people are encouraged to enter. As a result of the lack of temporary accommodation, it acts as a safety valve for about 1,500 households, some of which are single-person households.
Housing benefit rules have treated such temporary accommodation differently. In the past, it was not covered by the usual local housing allowance rules, and it is not clear exactly how it will be treated under the new system, and whether it will bring some single people in under the cap. It would be helpful to know that. Although it is wholly undesirable for people to be in temporary accommodation at such high rents for any great length of time, sadly that does happen, and sometimes not just for a few months—people can be in our private sector leasing scheme for two, three or four years at a time. It would help the discussion if the Minister gave us further information, specifically in relation to amendment 234, on single people in interim or temporary accommodation.
Jane Ellison (Battersea) (Con): I want briefly to challenge a couple of the assumptions made by the hon. Member for Westminster North. London Members on both sides of the House are interested in how some of the measures will affect them, aware, as we all are, of the
Chris Grayling: I will happily try to answer some of the questions that have been asked, but I have to say, as a starter for 10, that I am puzzled. I look at the previous group of amendments, this group and the group that lies ahead and do not know whether the Opposition believe that anyone should be covered by the benefit cap. I remind Opposition Members that the provision is a framework clause and an enabling one, which does not contain specific provisions but paves the way for the detail of the benefit cap to be implemented in regulations. From the comments of the adviser to the shadow Secretary of State, I had thought that the Opposition supported the principle of a benefit cap, but I am now worried that they do not. If the Labour party wants to vote against even the principle of a cap I will be delighted to have that debate in public.
My hon. Friend the Member for Dover said earlier that the provision is overwhelmingly popular with the public. I accept that we need to get this right and that issues clearly need to be addressed—one or two of which, about housing, I shall touch on in a moment—but the policy is overwhelmingly popular, and I shall be delighted to see the Labour party vote against it this afternoon.
The four amendments propose that the benefit cap should not apply to households living in specified types of accommodation, particularly those that might be seen as at risk and with whose housing needs local authorities have a responsibility to assist. We have made it clear that it is not right that some families on benefits have been able to live in homes that most working families could not afford. Although it is important that people continue to have access to decent housing, the support provided needs to be founded on principles of fairness, affordability and making work pay. The benefit cap ensures that there is fairness in the system. Working families throughout the country make decisions about their housing based on their incomes, and the same should be expected of people on benefits. It is not about penalising larger families or people living in supported or sheltered accommodation, but about ensuring that there is a level playing field for everyone.
Households affected by the cap will still be able to receive significant assistance from state welfare payments, but at the end of the day people have to take some responsibility for themselves. That includes ensuring that they live in accommodation that they can afford. In some circumstances, it may well require them to move to cheaper accommodation or locations.
I cannot accept amendment 233. My hon. Friend the Member for Cardiff Central is absolutely right to point out its absurdity. In most cases, people who live in social housing pay considerably lower rents than those in the private rented sector, so why on earth would we exempt
We have estimated that 70% of those households affected by the cap are likely to live in social housing. I will talk about temporary accommodation in a moment. A non-taxed income of £26,000 is already a lot of money to provide to any one family in social housing. Our policy limits the potential for those on benefit to receive more income than those in work while doing what is possible to limit perverse effects.
Touching briefly on temporary accommodation, the truth is that local authorities have a clear duty to provide accommodation that is suitable for the applicant. Suitability includes affordability. Whatever the cost of the accommodation, a local authority can pass on only a reasonable charge that the applicant can afford. We are currently looking at housing costs for those in temporary accommodation and how they might be treated from 2013 onwards. Special arrangements already exist in housing benefit for that position. We intend to have detailed proposals ready this year. I say to my hon. Friend the Member for Cardiff Central and to hon. Members on both sides of the Committee that, of course, we have to get that right. We must address temporary accommodation carefully and sensitively in the regulations. At the end of the day, it is a local authority’s responsibility to secure accommodation that is suitable for the applicant.
Amendment 234 would exempt from the cap all households to which local authorities owe a duty because they are homeless or threatened with homelessness. Duties range from providing advice and assistance to the main homelessness duty, whereby a local housing authority must ensure that accommodation is available for the applicant. We are looking at future arrangements for that. We will provide details later this year, but it is much too early to consider a blanket exemption for this group, because it is not yet clear to what extent they would be affected by the overall benefit cap when it comes in. The amendment would create a degree of inflexibility that makes it more difficult for us to provide a sensible system that reflects some of the differing needs with which we have to deal.
I remind hon. Members that this is a framework clause. I have no doubt that it will be followed by a lot of detailed measures and a lot of detailed debate. It simply puts in place the mechanics to introduce the benefit cap, and I will not accept amendments that remove the flexibility to get that right by writing into the Bill, as opposed to regulations, things that we may need to consider carefully later.
and amendment 243 would exempt from the cap anyone who has avoided homelessness because their local authority has helped them find alternative accommodation. The
We have always said that we will look at ways of providing transitional assistance in hard cases. There may be an argument for providing such help in some of the circumstances raised in this debate. We have not yet taken any decisions on who should get this support. That is where hon. Members’ contributions are valuable. We listen carefully to the issues raised in a debate like this. We will look carefully at the points made as we shape the final arrangements. The Bill gives us the flexibility we need to listen, respond and deliver something that is right. That is what we will seek to do.
A couple of specific questions were asked. How did the Government estimate the 50,000 households who will be affected by the cap? The impacts on households are estimated using the DWP’s policy simulation model. It is a micro-simulation model based on data from the 2008-09 family resources survey, uprated to the relevant year’s prices, benefit rates and earnings levels. The modelling was carried out under the current benefits system rules and the impact assessment makes it clear that there is some uncertainty over small groups, which may not be fully captured by the survey.
The hon. Member for Edinburgh East asked about single people affected by the cap. The impact assessment showed that we expect relatively few single people without children to be affected by the cap. Our modelling suggested that only around 5% of the cases would be single person households. It is difficult to generalise about the characteristics of such a small group of cases, except to say that we believe that the cap would rarely apply. Let us put the concerns about housing benefit in context. The majority of people on housing benefit do not get amounts that come anywhere near the scope of the cap. In November 2010, 96% of the housing benefit case load got £10,000 a year or less in housing benefit; 75% got £5,000 per year or less. However, it is important to have a system in which people have confidence. That is the purpose of the policy as a whole.
There are clearly issues that need to be addressed as part of our detailed work on the regulations. We have said that we need to look carefully at how we move from the current system of supporting people in temporary accommodation to a new system in the context of the benefit cap. That work will be done. What I cannot accept this afternoon is a set of amendments that tie our hands in doing that work and that write into the Bill things that have no place in an enabling clause.
The clause is designed to create the flexibility for us to listen to the issues that have been raised in a debate like this and to shape something that is consistent with the views of hon. Members, the reality on the ground and the need to deliver proper support to those who need it. I hope that that goes a little way towards answering the questions. There is much more work to do in this area. I have listened to and heard what hon. Members have said but I am afraid that I cannot possibly accept the hon. Lady’s amendments.
Although we will return to the matter in regulations, the Government have introduced the Bill. They have asked us to scrutinise it in Committee line by line and we are trying to do so, but with little information and, to be honest, in many cases, information that we simply cannot trust. Again and again, the assumptions that are being made repeat the implication that the overwhelming majority of households affected by the provision are the same households that we have discussed in the context of the housing benefit caps: individuals making expensive housing choices, and there are some. We agree that there are certain behavioural draws, in some cases, that need to be tackled, but that is not what we are talking about. I do not think that the Minister has reflected on the sheer craziness of having a system that means that 70% of those affected are in social housing. They are affected not because their housing costs are dragging them into the cap, but because they are larger families and their child tax credit and child benefit payments, in particular, are taking them above the cap for the cheapest housing in the country. That does not make any sense.
We already have a method; we can argue about the exact level at which it is set, but we have a method for capping housing benefit. The local housing allowance is a de facto cap and an additional cap is being introduced on top of that. That additional cap was introduced just weeks before the Conservative party conference that introduced this new cap, as if none of those things existed. So I am afraid that I am not confident about the numbers. These were probing amendments that were trying to find out—and I do not think we have—whether we can trust the figures that we are being given for how many people are affected, whether we really get a sense that the Government understand the cap’s interaction with people to whom legal duties have been owed in terms of homelessness, and whether they understand how the cap will interact with people who are in social housing.
The Minister tells us that we are ruining his proposal by introducing complications into a system that values simplicity. When the drive for simplicity conflicts with other legal obligations and overrides the needs of people, in many cases exceptionally vulnerable people who are, by definition, at or even below the minimum level that the Government have decided they should live on, that is the wrong approach. I do not intend to press these amendments. I am looking for more information. I do not think that we have had it today and I certainly think that we will have to go away and press the Government by other means to give us some of the information that
‘(6A) Regulations under this section must exclude housing benefit and any components of universal credit that relate to housing costs from the amount specified under subsection (5).’.
‘(6A) Regulations under this section must exclude child benefit, child tax credit, and any elements or sub-elements of universal credit that are paid in respect of children, from the amount specified under subsection (5).’.
‘(6A) Regulations under this section must exclude any element or sub-element of universal credit paid in respect of a disability from the amount specified under subsection (5).’.
Ms Buck: The amendment seeks to explore the Government’s thinking and calculations a bit further. In fact, they all do, but one deals with comparability and the others cover the interaction of the cap with housing benefit. We talked about the interaction with rent obligations and housing duties, housing benefit and the payments made to children and families.
I will try extremely hard not to duplicate what we have been talking about in terms of the cap, but, obviously, the Government’s central premise is that people who are out of work should not receive a benefit entitlement which is above that of the average working household. As we have previously said—I am seek further clarification—one problem is that we do not think that we are comparing like with like. For the cap to have any credibility, households that fall foul of the cap should be compared with the income, not the earnings, of comparable households. It is a fundamental flaw in the benefit cap if we are talking about comparing a single earner household with one, two or possibly no children with a couple with possibly five children. The lack of comparability in such circumstances is worrying.
We would like greater clarity, if not in Committee then afterwards, about average income including in-work credits and benefits—council tax benefit, housing benefit, working tax credit and, potentially, universal credit. What would the entitlement be for each size of household and for households in different regions? We would have more confidence in a set of comparables if we could say that some families, such as out-of-work lone parents with four or five children in London, receive more
Looking at the Office for National Statistics data, I understand that we have a national figure for the difference between the earnings and the income of working households. That gives us an average of £3,319 a year. If there were two households, one of which was out of work and subject to the cap and the other was in work, the working family would receive in-work benefits of £3,319. In one case, we add state assistance in the form of council tax benefit, housing benefit and so forth, and in the other case, we do not. Before making a final decision, we should at least have that information in front of us to see whether we are comparing total state support with total state support in its different guises for families of different kinds.
I suspect—perhaps the Minister will clarify this—that if we drill down into more comparability at regional and household levels, we will find that it is very rare indeed for families of the same size to be better off out of work than they are in work. Where that is the case, the overwhelming number would be at the very extreme and involve housing costs, which will almost invariably be of the kind that we discussed on the previous amendment—households placed in temporary accommodation for the prevention and relief of homelessness. We must look at the special provisions, and the Minister has implied that there could be special provisions for those categories.
We have to look at the extreme cases; but for the overwhelming number, we need to know whether we are comparing like with like and know exactly how big the problem is when we take the regions of London and the north-east. Do the Government have that information? Can the Minister tell us what the average income, including in and out-of-work benefits, would be for every household size in every region, so that we can have an informed opinion on the right way to proceed? So much of what we have talked about on the benefit cap is based on assumptions and micro-simulations, and, frankly, we are flying blind. It would be helpful to have a more informed conversation.
The other amendments in my name probe a little deeper into the composition of the different elements of the benefits that make up a household income that leads to the cap. I will not repeat all the arguments, but Shelter and the housing organisations are particularly concerned that housing costs will bear the brunt of the cut-off that having a cap implies and that that will push substantially below the poverty line households in ordinary circumstances in social housing and, in some cases, in ordinary private rented accommodation in the cheaper parts of the country. Their major piece of research, which I believe was done by Cambridge university, looked at the number of areas where families would face a shortfall of at least £20 a week or £86 a month, because their tax credits, child benefit and so forth pushed them over into the cap, which then affected their housing costs. It was found that, in 91 local authority areas in England, families with a three-bedroom house—I
We should remind ourselves, because we forget time after time, that the income of the households that we are talking about is already set at the lowest level that the Government have decided is reasonable for households to live on and that, if there are reductions in household income below that, the implication is inevitably poverty. The housing sector’s main concern is to take housing costs out of the calculations so as not to increase homelessness.
We can be confident that, for a host of reasons, a substantial number of households will simply not be able to uproot themselves from London and the south-east and other areas with higher costs that are now deemed no longer to be affordable. We can all think of examples: some families will be looking after an aged relative, some will have children who are about to take public examinations and some may have been in work a few weeks ago and have a realistic prospect of getting back into work soon. Those households will choose to take a hit on their income, which may be temporary but could last months and in some cases even years. That fall in post-housing cost income and the struggle to pay the rent and avoid homelessness will drive a significant number of households into poverty.
What are the implications? I would like the Committee to know—I would have liked to know before we started this debate—the knock-on implications for a benefit cap in each case for taking the various benefits out of the calculation. The Minister accuses us of tabling wrecking amendments and says that no one will be affected. So he says, but who will be affected? How many will be affected in each of those cases—if child benefit was not included, if child tax credit was not included or the child element of the universal credit was not included? Given a robust set of calculations, which we do not have, how many people would be affected?
Finally, has the Minister calculated the implications for poverty? We have heard a great deal about the Government’s high hopes for universal credit in reducing child poverty. The Opposition hope for the same; we hope that the simplification agenda will indeed have a beneficial effect on child poverty. I believe that 300,000 children are to be lifted out of poverty by universal credit, but the benefit cap, which will invariably hit larger families with three, four or five children, will probably push a 50,000 minimum of households and probably more into poverty because of the benefit cap. My maths says that it will be easy to cancel out the 300,000 children who will be lifted out of poverty by universal credit by another 300,000 or more being pushed into poverty by the imposition of the overall benefit cap. It is yet another element of the benefit that makes no sense.
I reinforce what my hon. Friend the Member for Westminster North says, and I shall speak first about comparing like with like. She alluded to the importance
I am particularly concerned because the driver, as far as we can see, of families who will be hit by the benefit cap is predominantly family size. More than anything else, it is the number of people in the household. We should understand the impact on those families with a larger number of children. We know that larger families are particularly vulnerable to poverty and that the children in those households are particularly at risk of poverty. Imposing a benefit cap on them will put those families at risk of greater poverty.
I would be grateful to the Minister if he told us what assessment has been made of the likely impact on financial losses for families with different numbers of children—three, four, five, six, seven and so on. Has any assessment been made of those losses, and therefore of the potential impact on child poverty? I am not aware that any assessment has been made of the likely period of time for which such families might find themselves affected by the benefit cap. The impact assessment is quite thin on the details of how families with three or more children are affected.
The amendment goes to a point about fairness and being rational about the way a benefit cap is calculated and imposed. It cannot be rational to compare a single figure plucked out of the air to represent average earnings and to apply that figure to all kinds of family structure and type if we are interested in having a benefit system that in every other way is designed to be flexible enough to reflect different degrees and aspects of need. There is an intellectual inconsistency in putting in place a single figure benefit cap to apply across the board, when in every other way the benefit system does not operate like that.
The amendment proposes that the benefit cap should be adjusted to take account of family size and, therefore, to provide a fairer comparison between families in work and out, which we understand to be the thrust of the Government’s intentions. I support all my hon. Friend’s comments about other aspects of the inconsistencies and lack of rational approach to the imposition of the benefit cap. I look forward to the Minister’s comments.
Chris Grayling: It is increasingly clear that there is a divide in philosophical view on these issues. The amendments seek to provide that the cap should depend on household size and expected amounts of in-work benefits. They seek to carve out various benefits and elements of universal credit from the cap. The key point is that there needs to be some limit on the overall benefits that it is reasonable for the state to provide. It is not reasonable or fair that households on out-of-work benefits should receive an income that could far exceed the net earnings of working households. That is the issue.
The hon. Member for Westminster North talks about the different circumstances of different families. People in work have to take decisions about what they can afford to do. Why is it not reasonable to set a limit on the amount of support that we provide to people who are not working?
Kate Green: Does the Minister not accept that people in work are still eligible both for in-work financial support if they are on low earnings and, in almost all cases, for support with the costs of raising their children?
Chris Grayling: Our intention is to set the cap so that it represents the average net weekly wage for working households: £500 a week for couples and lone parents, and £350 a week for single people without children. That is the equivalent to a household with a salary coming in of well in excess of £30,000 a year, taking into account tax and national insurance payments. We are talking about the net figure for the benefit cap. Do we honestly believe that it is unreasonable to tell people who are in receipt of state support that there is a limit to how much support we will provide to them that is set at a net earnings figure for a working household? I am disappointed that the Opposition do not seem to feel that that divide is reasonable. We have to be thoughtful about some aspects of the changes in relation to things such as temporary accommodation in London. We have to think through the implications in individual circumstances; but surely, for the vast majority of claimants, this is not an unreasonable proposition.
Sheila Gilmore: Is the Minister not creating an artificial distinction between one group of people who are out of work and claiming benefits, and another group who are taxpayers and are supporting themselves? In fact, there is a great deal of crossover. People go in and out of work, and people who are in work who have, say, a large family—the group of people that we are really talking about—will be receiving additional assistance through child benefit, tax credits and universal credit successors to those, because of the size of their families. There is not, therefore, the clear-cut distinction that the Minister is trying to draw.
Chris Grayling: The average value of in-work benefits across the population as whole is £20 a week. The amounts that we are typically providing to families with parents in work are much lower than the benefit cap. We do not think that it is right to structure a benefit cap based on the size or composition of a household or the specific benefits that they receive.
Chris Grayling: That is the figure for adults, but I will give the hon. Lady a figure for children in a moment. The question is whether we believe that it is right to have a crossover line and say that we will provide people with support up to a point, or whether we simply uncap benefits and say that we can provide an indefinite amount of support. The approach that the hon. Member for Westminster North proposes would result in an individually calculated cap for virtually every household. She is talking about a benefit level that is determined by the current level of housing benefit and the number of children, which is basically the current situation; effectively, there is no cap at all. Attempting to do that would compromise the clear message that our reform is intended to provide. It would lead to a lack of clarity for claimants and increase administrative complexity.
I now turn to the amendments. Amendment 182 would set the cap with direct reference to the size and composition of a household. We are introducing the cap to ensure that the benefit system is fair, and is seen to be fair, to the taxpayers who pay for it. The salaries of those in work are not determined by family size, and we believe that it is right to apply that principle to the level of the cap.
Amendment 239 would require us to take into account the level of in-work benefits that someone earning the average wage might receive when setting the level of the cap. That would still result in a level for the cap that was based on averages, so it would be no better a mechanism for accommodating household size or characteristics than our intended method. I acknowledge that our proposed level for the cap is lower than the total income of someone who is receiving in-work benefits while earning the average wage, but surely we should be ensuring that people are better off in work. Returning to the point about state support, if we look at grossing up the level to the mid-£30,000s a year, at that level very few people are getting benefits of any sort, whether working tax credits or housing benefit. In proportion to the working population—we are talking about the equivalent of a salary in the mid-£30,000s a year—we are not setting the cap at an absurdly low level. There has to be a dividing line.
Kate Green: The Minister has said that households with incomes in the mid-£30,000s would be unlikely to be receiving any financial support, but they would be receiving child benefit, and I think I am right in saying that they would continue to receive an element of child tax credit and potentially the tax breaks for child care as well.
Chris Grayling: As the hon. Lady knows, child benefit is paid at a flat rate until an individual becomes a higher rate tax payer. The other benefits referred to by the hon. Lady would become a component part of the universal credit and would taper away. By the time someone starts to earn £35,000 or £37,000 a year, one would expect virtually all the support they receive to have tailed away.
Amendments 240, 241 and 245 all attempt to allow households to receive total benefit above the level of the proposed cap, by requiring the Government to disregard certain benefits for housing, children and disability when calculating how much total benefit a household receives. Each amendment undermines the fundamental principles that underpin the cap, namely that there must be a limit to the amount of benefit a household can receive, and that work should pay. As we have made clear, there will be some exemptions. Disability is an important area, where we recognise that there are extra costs, issues and challenges. That is why we will not apply the cap to households where someone is entitled to disability living allowance or an equivalent benefit, or to households where someone is receiving war widow’s or widower’s benefits. The cap is intended to increase incentives to work, so we will exempt households with a member who is entitled to the working tax credit, and there will be an exemption for working households on universal credit.
We have now considered three sets of amendments that would effectively destroy the core principle of the benefit cap. We are talking about a total income per household that is equivalent to the annual income in a working household—the mid £30,000s. The net figure of £500 a week at which we intend to set the cap is the net equivalent of a household with an income midway through the £30,000s per year. I think that is an entirely reasonable level. It is not appropriate to have a cap that is varied because trying to link the cap to household size or region would create a system as complex as the one that we are currently trying to simplify. To clarify that last point, the total income of those earning the average wage including in-work benefits, is approximately £20 a week more than the average wage.
Chris Grayling: As I have said, the in-work benefits that would be received by someone at that level—those in receipt of housing benefit or tax credits, for example—the average amount across the whole population, is £20 a week. But that is a side issue. I do not accept the principle that we should apply to the benefit cap all the various caveats that Opposition Members wish to apply. This is a simple, straightforward framework clause and I cannot accept the amendment.
Ms Buck: Simple indeed it is, and the likely consequence of that simplicity will be quite appalling rough justice. That has been drawn out from the Minister’s comments and our discussions this afternoon. Some people will fall foul of the cap simply because, even if they wanted to go to work, their child care costs would be such that work would not pay and would leave them £100 or more worse off. That is extraordinary. Some people will fall foul of the cap because they happen to live in London, go to work on Friday but lose their job on Monday. Other households may have been on benefits for a great many years, but because they live in a different part of the country they will not be affected.
Take two households of exactly the same composition. One may not be subject to work-search requirements because they have three children under the age of five, for example, and live in social housing and are not affected by the cap; but the family next door with five children may be subject to work-search requirements, even though their children are the same age. There are so many inconsistencies and anomalies, and I have not the slightest doubt that there will have to be massive concessions, because the more we dig, the more it will become obvious that the costs will not add up. The anomalies will be too numerous, and the hardship will be too great for Ministers to stomach.
The Minister did not give us any assessment of what the implications would be for child poverty, which the Government have said that they are as committed and signed up to tackling as we were. They have pinned so much on universal credit, but I do not see how it is possible for the overall benefit cap to do anything other than—at least— eradicate any of the child poverty gains that are made as a consequence of universal credit.
All I sought to do with this group of amendments—and I have been disappointed with the response—was ask the Minister whether we have the kind of information that would allow us to really understand to what extent the central premise of the Government’s case holds true. The Minister is pointing to a national figure, which, as we have argued, is an unreliable guide to income because of the enormous variations in incomes and housing costs in different parts of the country, and because it fails to take into account different household sizes.
Before any final decisions are made on whatever the final framework is for the benefit cap, we would simply like to see what the projected losses are for households of different family sizes in different parts of the country, as my hon. Friend the Member for Stretford and Urmston has asked. We would also like to see the comparable levels of in-work credits for each different household size in different parts of the country, as well as what the implications would be of taking out all the different benefits, so that we can at least properly understand those issues.
Guto Bebb (Aberconwy) (Con): I have listened carefully to the arguments about regional variations, and I represent part of the world in which the average wage is comparatively low, but in view of the comments about the need to recognise regional variations, would the hon. Lady be in favour of getting rid of national pay bargaining?
Ms Buck: Mr Gray, that is so far outwith the scope of the Committee that you would rightly strike me down if I attempted to answer. It is a completely different argument. We know that there are different incomes in different parts of the country, that different levels of in-work benefits are paid to families and that there are very different housing costs. That is what lies at the heart of the debate about the benefit cap.
I sought clarification from the Minister on a number of those points, but I fear that I did not get it. These were probing amendments, tabled to elicit that information, and my hon. Friends and I will seek to find out from the DWP what information it holds as we go forward, to allow us to make these decisions. I regret—and my regrets are shared by the Deputy Prime Minister, and by the Minister’s boss, the Secretary of State for Work and Pensions—that we are having to conduct these supposedly in principle discussions in the absence of so much important information, which would allow us to analyse what the impact of the benefit cap would be, and what meaningful and workable variations there might be that we could all agree on. That is a point that we will want to return to, but I beg to ask leave to withdraw the amendment.
First, I want to make it clear that, unlike the shadow Minister, I do not have a problem with the principle of a cap, and I am happy to put it on record that a cap is the way forward. It is not good for taxpayers to fund benefit claims, and it is not good for families if it is impossible for them ever to afford to get into work. In my view, however, the cap as proposed will not work, and I am concerned that the interests of children in particular have not been taken properly into account. The Government’s proposals would effectively punish children for the decisions of their parents, particularly in families with a large number of children. In addition, hard-working families would be hit, because there is no cushion for those who suddenly lose their job and find themselves unable to pay their rent. I also find it worrying that even quite small families will be affected. Many two-child families in London will lose about a third of their housing benefit, and three-child families in a third of local authorities will have a shortfall in their local housing allowance. Those are not sizeable families, so the effects can be quite broad.
Some of the implications are worrying. The average loss is £93 a week, but 15% will lose more than £150 a week, which is a significant amount of money. Some smaller families with three or four children could lose enough to force them to move house, as we have heard earlier today, which will move them inevitably further and further away from their support networks and their families. I should be grateful to the Minister if he confirmed what is implied in the equality impact assessment, which is that for some larger families there will be literally nowhere in the country where they could find affordable housing. What would happen to those families?
The Minister has said that the cap is intended to incentivise work, but not everyone can work. The cap does not differentiate between those who are currently receiving jobseeker’s allowance and those who are on employment and support allowance. The cap will affect people whom the state does not expect to work and who are considered too sick to work. I also understand from the paperwork that half of the affected families will contain somebody who is disabled but not in receipt of disability living allowance, so the family will not be exempt from the cap. In addition, two thirds of those who are affected will be lone-parent families, and some of those will have children aged under five. Those parents are not expected to work, but they will nevertheless be caught by the cap.
People whom we do not expect to work will, therefore, be caught by the cap. They could only escape that if they become eligible for DLA, so a couple of perverse incentives are created by the measure. One is that it could encourage people to try to claim DLA for a child
The savings that are due to be made are illusory. The proposals are intended to save £225 million in 2013-14 and £270 million in 2014-15, but that relies on the assumption that no one will change their behaviour to avoid the cap. Some families will find work in order to escape the cap, which is clearly a good thing, but they will potentially be able to claim a larger amount of money via in-work benefits. Others will be made homeless, which, as we have discussed, will be more expensive for local authorities, and others will try to get on to DLA.
Is the Minister able to confirm what I have heard, which is that the DCLG estimates that the cap will lead to an increase in homelessness of around 20,000 people? That would cost local authorities some £300 million in emergency housing for those families, which would totally cancel out the £270 million estimated savings. The impact assessment acknowledges that, for some families, housing benefit may not cover their rent and that some will go into rent arrears. It also accepts that that will lead to extra costs for landlords and for the courts as a result of eviction proceedings and the recouping of those arrears. The impact assessment also accepts that local authorities will incur extra costs, because of the homelessness, and the estimate for that together is some £400 million. I shall be grateful if the Minister will elaborate on that figure. It seems a little crazy to introduce a policy that costs more to implement than it could save, particularly given the implications of that policy.
We have already had much discussion about the impact of potentially forcing families to move as a result of the changes. I do not believe a lot of the scaremongering about some of the former changes to housing benefit, which the Opposition suggested would force all poor people to move out of London and the south-east. I do not believe that that was true. However, I am concerned that this policy could mean that families receive housing benefit way below the level for which they are eligible and way below the housing benefit cap. That would leave them with the choice of either paying the difference themselves, which in almost every case would probably be impossible, or moving. That will uproot children from schools, will mean people moving away from their support networks and will put pressure on cheaper areas, as we have already heard. Those areas often have fewer job opportunities, which also has implications for worklessness. In addition, if people move away from family and friends, there is less chance for those families to rely on informal support networks for child care when parents go back to work. That has implications for the affordability of people being able to get back into work.
The final issue that I want to raise is the impact on social housing. The impact of the 80% rent rate on social housing across the country has already been discussed, and I share some of those concerns. However, the cap could have a further impact on social landlords because those affected by the cap will no longer receive the full amount of housing benefit, so they will have to top up the rent themselves from their other income. As identified by the impact assessment, that will lead to an
Stephen Timms (East Ham) (Lab): The hon. Lady is making some telling points. She has given us some estimates of the cost of the policy, which we can offset against the savings that the Government have told us will be accrued. Does she believe that her estimates of the cost will be endorsed by the DCLG?
Jenny Willott: That is what I am asking the Minister today. I have heard various figures being bandied around, but I should be grateful if the Minister would clarify what those figures are because I am not sure what the estimates are likely to be. As I said, I agree with the principle behind the policy but, for the reasons I have set out, we are a long way from finding the right way of putting that principle into practice.
There are a number of different ways to mitigate some aspects of the policy, many of which have already been debated today. We could exclude child benefit from the cap, which would take account of family size; we could exclude housing benefit, which would take account of regional differences in housing costs; or we could set the cap at the level of the average income of family households, rather than including single-person households in that calculation. That would mean the figure is set at around £672, which is significantly higher than the £500 cap that has been put forward.
I am glad to see that the equality impact assessment states that the Government are looking at ways of easing the transition for families and providing assistance in hard cases, but I should be grateful if the Minister would tell us which options are under active consideration to ameliorate some of the policy’s impacts. I would like the Minister to say that he will take on board the concerns that I and other Committee members have, and that he will work with his colleagues to find a different way forward that retains the principle but has a different way of putting it into practice.
As the Minister has said, none of the detail is in the Bill. I will therefore not be voting against the clause at this stage because, even with the clause in the Bill, it gives the Minister time to take the matter away and come back with different proposals on how a cap could be calculated and what benefits could be included in or excluded from that calculation. As we know, that will be set out in regulations. The Bill as drafted would allow for a number of those options, so I hope the Minister can reassure me that he will take away my concerns and come back with more palatable proposals that will not harm as many people as the current proposals would.
Sheila Gilmore: I should like to take this opportunity in the stand part debate to complete some of the thoughts I had earlier. There is clear agreement among many of my constituents that people should not get too much money for nothing, and that people who are not working should not in some sense live a great life of
The issue that has come through in many contributions is housing costs, which are part of a wider discussion that we cannot debate entirely within welfare reform. Some worries that people express result from the fact that another debate is going on about housing reform more generally, and the conflicts are perturbing. Housing costs are a serious issue. People who have high housing costs should not be regarded purely as taking on those costs, or making those choices, because they want to live more luxuriously without working. Many people have little choice. I am amazed by how often people tell me that they do not want to go into the private rented sector, even when the cost of doing so would be covered by housing benefit, because they do not like other aspects of that sector. Sometimes, however, they end up with no choice.
On Friday, I was speaking to a young woman who has been living in very overcrowded circumstances with in-laws, with whom she does not particularly get on. She has a small baby and a room that does not even have space for a cot. I asked her whether she had considered going into one of the private leasing scheme properties that the council might be able to access for her. She answered, “No, I want to be settled. I want a secure place to live; I do not necessarily want to be in the private rented sector.”
There are many people like that young woman, who are not saying, “Whoopee! I could get a high-rent house somewhere because I have a small baby and I am not working at the moment. I could get housing benefit to cover that.” They are saying, “I don’t want that; I would rather have an affordable rented house, if one were available.” However, that woman has been a priority for eight months and there has been little sign of anything coming her way, so her choices are limited. If council or housing association houses are not forthcoming, she might have no choice but to look into the private rented sector in some form. As she is not currently working and as her child is under one year old, she would receive housing benefit to cover that. She may well end up being one of those people whom others look at and say, “There’s someone who’s getting a lot of money”, even though some of it is simply to cover her rent.
This issue is serious. The primary problem arises from housing costs, and not from the huge generosity of other benefits, because when we consider each element, they are not so outstandingly high. If, for example, as the hon. Member for Cardiff Central has suggested, housing costs were taken out of the overall cap, there would not be a major problem, except, perhaps, for some outstandingly large families, who are very few and far between. Equally, if child benefit were taken out of the cap, it might substantially reduce—I do not know in what numbers—the number of people who would be within the cap. However, that shows up the cap for what it is. It will punish people who have high housing
The situation will get harder and harder until we properly address how to provide affordable housing. People with large families and people who have exceptionally high housing costs will suffer. If we exempt them, many fewer people will be covered by the cap and it will probably not have much effect. If the cap is to make the alleged savings, it is likely to do so to the detriment of some of those groups. They may have little choice but to accept that, unless they can move easily—they cannot do anything about family size, if that is why they hit the cap—their disposable income will fall to a level at which their financial position will be even more difficult. Is it supposed to be a stick with which to beat people into working at a time when jobs are not easy to come by? That aspect of the matter has not really featured in today’s debate. There is an assumption that people will simply be able to find work, but that is not necessarily an option that is easily available.
Many of the issues may go well beyond the scope of the Bill, but when we are legislating, we must bear in mind who will be harmed. I accept that people may easily be worked up into being resentful of one another, sometimes because certain pictures are presented to them, but for real people the situation is more difficult. We could make many exemptions, perhaps through regulations, when the bookcase is filled in. The Minister has spoken against putting exemptions in the Bill, but if they were put into regulations, some of his objections on grounds of complexity would disappear because they would still exist, but in a different format; or we could have simplicity, and many of the difficult cases that have been outlined by the previous speaker and throughout the debate would not be exempted in any way, whether it is the type of benefit or the type of household that is exempted.
If there are not exemptions, there will be hard cases out of simplicity, and that is always a danger. Simple is attractive, and it is easy to say that things should be made simpler—no one will disagree with that—but simple rules sometimes give rise to hard cases because people fall through the cracks. We must be clearer about how many of the issues will be covered by regulations—that may yet come out—and whether the Minister is holding to his view that having many exemptions would be too complicated, and that there will be a cap that will affect many of the groups to which reference has been made.
Ian Swales (Redcar) (LD): I want to speak briefly about the benefit cap, and deprived areas. My constituency is mixed, and we even have a Conservative councillor, but some parts are among the most deprived in the country. An article in The Guardian earlier this year referred to a fifth generation being born into a family where the previous four generations had never worked. They were my constituents.
The root cause, of course, was long-term loss of manufacturing jobs in an area that was built on manufacturing. My constituency is ranked 30th of 650 for unemployment. To recall a former right hon. Member
First, the difference between social rents, market rents and proportions thereof is irrelevant in my area, where they are very similar. In fact, some evidence suggests that housing benefit drives them all. Secondly, the Bill contains provisions for under-occupancy. Last Friday, I met the chief executive of the large social housing provider in my area who said that in some areas he has problems getting people to take empty social housing. To get a couple into a three-bedroom house in such areas might be great for regeneration of the area, but there will now be serious penalties for such tenants because of the under-occupancy provisions. Those are examples of how national policy may not always apply well, and we now have the benefit cap.
The Government are talking about a figure based on national earnings, and we have heard at length today that the main elements are housing and the rest. Housing costs vary dramatically across the country. Simple mathematics says that if there is an overall cap and dramatically different housing costs, there will effectively be a highly variable cap on people’s non-housing living costs. It will vary a lot across the country. Fairness should be at the heart of what we are about, and such variation seems unfair.
We have heard at length about how often quite small families in expensive parts of the country will have large bites taken out of their living costs because of the housing issue. In my area it will not be a problem. Even large families will probably get nowhere near the cap, because housing costs are so low.
The cap could have two parts, as a few of the most recent speakers have said. We have already talked about a housing benefit cap, which is part of the provision, so why do we not get more creative? Rather than having an overall cap of which housing is part, perhaps we could have a cap on the non-housing part of the equation, too. That could lead to a more equitable solution.
I accept that we must incentivise people into work. The heart of my concern about the cap is that it will probably reduce the likelihood of my constituents moving into work. Why is that? The Minister talked earlier about influencing behaviour, so let us consider an out-of-work family in my area. They will be paying relatively low rent—even larger families may find that their benefits are not capped—so to move into work they have two options. They could move into work locally, where pay levels are quite low by national standards. I assume that the universal credit will ensure that it is worth their while, but I am still not sure how it will interact with the cap. Finding work locally may not be easy, however. For example, the Financial Times came to my constituency during the general election and a reporter chatted to a few people on the street. They found a lady who had recently managed to get a job cleaning the local supermarket. She was delighted because there were 485 other applicants for the job, and she was the chosen one. That says something about the availability of work.
My sample family may want to move to an area where there is more work. Either they do not have a job and move speculatively to that other area, and assuming that the area has higher housing costs, which is highly likely, the family income will fall if they are a significant family affected by the cap; or if they have a job to go to, they may be concerned that the job might not last and that they might find themselves out of work in a new area with less money to live on. They might then think, “Why didn’t I stay at home?”
As the hon. Member for Westminster North said, there is another perverse incentive. People living in high-cost housing areas will undoubtedly be incentivised to move to lower-cost housing areas where there is less employment opportunity. We talk about the Bill’s basic premise of trying to encourage people into work, but the clause has potential counter-pressures.
I agree that benefits should be capped. I am firmly behind that, but as currently drafted, the clause is potentially unfair. It will not have the intended consequence of encouraging people to go to areas where work is available. Such movement of people and mobility of employment is the key thing.
There are redrafting possibilities. I accept the need for simplicity, but the numbers could be made to add up slightly differently. Before the hon. Member for Dover jumps out of his seat, a slight improvement could result in a cap system that does not cost any more, and might even cost less, by reflecting the reality across the country.
Chris Grayling: I have listened carefully to the comments made by hon. Members on both sides of the Committee, not only in the stand part debate, but through the course of today. Let me start by reminding everyone that we are considering a framework clause that simply puts in place the mechanism for a cap to be introduced. It is no more, and no less, than that. I hope that in the debate today the Opposition live up to what I saw in the papers at the weekend—that they support the principle of a cap and will not oppose the framework. I hope that I am not disappointed, but if they decide to vote against the clause I will relish a debate in the public arena, to argue the case for a cap and to highlight the fact that the Opposition do not believe in capping benefits. Perhaps that debate lies ahead; perhaps it does not. We will find out in a moment.
The first issue is that of the principle I have set out. In the debate about poverty and the impact of the changes, we are talking about a plan to set a benefit cap at an equivalent annual income level, before tax and national insurance, of £35,000. We are not setting a poverty level cap that means that no one will have any money coming in; we are setting a cap at a comparator level with people who are in reasonably good employment.
Chris Grayling: So that we can have a welfare system in which people have confidence, we seek to set a benefit cap at a level that is equivalent to an earned salary of £35,000 coming into the household. That is a fair and sensible dividing line, beyond which the state provides support only in exceptional circumstances. Various issues have been raised about some of the challenges in that mix.
There is work to be done, and I hope that my hon. Friends the Members for Cardiff Central and for Redcar will be part of the discussions that take place over the next few months to get the regulations right and to ensure, in particular, that we have the right mechanisms to deal with hardship cases. The Secretary of State made it clear on Second Reading that we will need such mechanisms, and at local authority level we have put in place an extra £190 million to provide support for people affected by the changes we are making to housing benefit arrangements, including the cap. I expect local authorities to use that resource in cases where there is a particular challenge to address.
We also clearly need to look carefully at temporary housing. There are mechanisms in the current system to address the costs of temporary housing, and careful consideration needs to be given to ensuring that we have the right mechanisms in place in the future. My hon. Friend the Member for Cardiff Central was absolutely right about that. The majority of people she talked about will be in receipt of DLA and will therefore not be affected by the change, as we are obviously not applying the cap to DLA households. The people on ESA who are potentially affected, are likely to be those who are closer to the workplace, and with the introduction of the Work programme and the migration from incapacity benefit I hope that we can help that group to find a path to work relatively quickly. I would expect those with more serious health challenges to be in receipt of DLA as well, which is not, of course, affected by the cap. Nevertheless, we need to carefully consider whether we missed any issues when forming the policy, and I hope that she will take part in those discussions.
My hon. Friend the Member for Cardiff Central also asked about the figures for the increased cost of homelessness. She cited figures that she had been told were Department for Communities and Local Government estimates. Our impact assessment stated that the costs could not be quantified because of the behavioural effects of the introduction of the cap, and that remains the case. I have no clear evidence that further information is available, but am happy to provide my hon. Friend with more background on the information that we have. At the moment we do not recognise any further figures beyond the detail in the impact assessment because we simply do not believe, yet we can understand fully, the behavioural effects of the measure in terms of costs.
The clause is not primarily a cost-saving measure. It may save costs, but fundamentally it is about creating a more credible welfare system. It is about tackling the culture of welfare dependency in the country by setting a clear limit to what people can expect to receive from the benefits system. It is very much about fairness. Fairness applies in both directions here. Fairness also applies to taxpayers, who pay for the system. We do not believe that it is reasonable or fair that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households. That is the core principle that we are seeking to put in place here.
I do not believe that we can or should write into an enabling clause in primary legislation all the different caveats that have been brought forward this afternoon. We need to work through the preparation of the regulations
My last point is for my hon. Friend the Member for Redcar. As he knows, month by month I deal with the labour market statistics. We have another day tomorrow. At every briefing meeting about labour market statistics, my first question, after asking whether unemployment has gone up or down, is about the north-east. I am genuinely concerned about the north-east. There are many parts of the country that have been badly affected by unemployment through the recession, but the north-east remains one of my biggest concerns. It is an area which, as he has rightly said, lost part of its economic base, and we desperately need to see growth. I was encouraged by the regional grants announced recently for manufacturing research, for new manufacturing capabilities and for investment for some of the industries on Teesside. All that is very important.
While I accept that in some cases people may seek to move away from the north-east to find work elsewhere, I would much rather that we pursued an agenda of growth that brought more successful international businesses to the north-east and also encouraged the growth of more domestic, local, entrepreneurial-based businesses, so that we create the kind of jobs that my hon. Friend wants for his constituents. That is something that I feel strongly about. It is something that I know colleagues across the Government feel strongly about. It is one of the things that bring us together as a coalition, and I give him the assurance that we will work hard to ensure that the flows are going his way rather than the other way.
This is a framework clause that will start a process of filling in the gaps over the next few months. The discussion process we will go through is open to Members on both sides. I commend the clause as a way to get that discussion going.
‘(4) In section 150 of the Social Security Administration Act 1992 (annual up-rating of benefits) after subsection (7) there is inserted—
(7A) The Secretary of State—
(a) shall in each tax year review the relevant amount specified under subsection (5) of section 93 of the Welfare Reform Act 2011 (benefit cap) to determine whether its relationship with estimated average earnings and any other factors specified in subsection (6) of section 93 of the Welfare Reform Act 2011 (within the meaning of that section) has changed; and
(b) after that review, must, if the conclusion of that review is that estimated average earnings and any other factors stipulated in subsection (6) of section 93 of the Welfare Reform Act 2011 have increased in relation to the amount specified under subsection (5)
(c) after that review, must, if the conclusion of that review is that estimated average earnings and any other factors specified in subsection (6) of section 93 of the Welfare Reform Act 2011 have decreased or remained unchanged in relation to the amount specified under subsection (5) of section 93 of the Welfare Reform Act 2011, include in the draft of an up-rating order provision increasing that amount in proportion to the general level of prices under section 150 of the Social Security Administration Act 1992.”.’.
I will be brief. On the assumption that a form of a benefit cap goes ahead, which I suspect will be a butchered form, I want to probe the Minister on his thinking about the uprating formula. We know that he intends to have an uprating formula. At the moment, this provides for an uprating by inflation, but what is the logic behind that? The whole point of the benefit cap is to peg benefits entitlements to average earnings, so what is the logic in looking at an uprating formula that will be linked to inflation rather than linking it to earnings and the relationship between earnings and in-work benefits that have to be included in the total? It seems illogical to establish a benefit link to earnings and then not to uprate it with earnings. Has the Minister made any planning assumptions on what the implications of those different options would be?
Chris Grayling: We have said that the level of the benefit cap should be set to reflect estimated average earnings. As currently drafted, clause 94 will require us to review the level of the cap each year to see whether its relationship with estimated average earnings has changed. Following that review, we will be able to increase or decrease the level of the cap, if we consider it to be appropriate.
The amendment similarly requires the annual review of the level of the cap. It also says that if the review finds that estimated average earnings have risen, we would be required to uprate the level of the cap in line with the increase in earnings. Should estimated average earnings be found to have decreased in value or stayed the same, the amendment requires us to increase the level of the cap in line with the rise in prices.
As we are setting the level of the cap to reflect the average weekly wage, it is right that these respective levels be regularly reviewed to determine whether the relationship between the two has changed. Where the relationship is found to have changed, the powers we are taking will ensure that we are able to increase or decrease the level of the cap, when it is considered necessary.
The amendment goes further than we intend and requires that where average earnings have gone up, we increase the cap by the same proportion. Such compulsion is not appropriate. There is no statutory requirement to uprate jobseeker’s allowance or other out-of-work benefits, so I see no need to introduce one for the level of the cap.
We also need to be mindful of the operation of the benefit system. Our intention throughout the reforms is that it should be simple and clear. We have said that benefits should be capped with reference to the level of
Clause 94 applies a link to earnings. The amendment creates an additional link to prices as well. In effect, we would end up with a parallel process of both earnings and prices, which is clearly a technical flaw in the amendment.
I do not agree with the reasoning behind the hon. Lady’s approach. Uprating the cap in line with the increase in prices if earnings were found not to have risen would give us a dual mechanism for uprating, which is not sensible. We should either have one mechanism or the other. The cap is intended to promote fairness with those in work. Wages are not automatically increased in line with prices. If estimated earnings fail to rise thereby triggering an increase based on prices, it would create a disparity in treatment between those in work and those on benefit. We could have a statutory mechanism that requires an increase in line with prices. Indeed, given that prices have been rising faster than earnings over the past few months, it would require us to increase the level of the benefit cap faster than the rate at which earnings themselves are increasing, which would create an inappropriate conflict.
Our intention is to review the cap annually and to make changes where it is appropriate to do so. Clearly, we intend to adjust the cap as circumstances change. The amendment is not sensible for two reasons. The duality in terms of prices and earnings is not right. Nor is it right to tie the hands of a Government in primary legislation, so that they have to make changes to what are effectively the level of payments through the benefit system in future when circumstances can be so varied, depending on what is happening in the outside world and in the economy at a particular time.
Ms Buck: I thank the Minister for that response. I tabled a probing amendment to seek the Government’s view. Although I see the logic in what the Minister has said, we are in a slightly complicated position, because the Government have brought forward a hybrid proposal, which, for the first time, links benefits to average earnings and they have to accept some of the consequences of doing that. On occasion, it will leave people in an anomalous position. While I accept the point about complexity, it may be that in the future, his Government or another Government may seek to make changes to benefit levels and to alter the uprating of benefits, which would have knock-on consequences for a benefit cap and create their own anomalies. Obviously, reporting on how things will work out is something that we will watch closely in the short term.
Something we did not explore, which is worth bearing in mind, is an interesting anomaly—the level of earnings against which the cap will bet set and presumably uprated will itself be amenable to change in, for example, the nature of the work force as well as in earnings. Thus, if we had more single earners in the work force, the consequence would potentially be to lower average earnings, therefore bringing the cap down.
Monitoring will need to look at earnings and prices but also at the extent to which what happens to earnings is a result not only of earnings growth but of completely
‘(3C) For the purposes of paragraph (3B), elements or sub-elements of the universal credit award that are paid in respect of children, including any amount in respect of childcare, shall by default be paid to the main carer of the children, except in prescribed circumstances.’.
‘(1) Any amount of the universal credit award that is paid in respect of rent charges shall by default be paid to the person liable for that charge, except in prescribed circumstances.
(2) Any amount of the universal credit award that is paid in respect of a disability shall be paid to the disabled person or to that person’s designated carer, except in prescribed circumstances.
(3) Regulations may provide further circumstances in which a proportion of universal credit may be payable to a particular individual.’.
Stephen Timms: I am pleased, Mr Gray, that you have grouped the amendment and new clause 9 together—thank you for doing so. They relate to different elements of the universal credit award, although both address the same question, so debating them together is appropriate.
The amendment and the new clause are intended to ensure that the single universal credit payment can be split between two or more individuals in certain circumstances. That might appear a rather technical matter, but such detail could have significant consequences, so it is important that the system includes sufficient provision to allow such a split.
The amendment specifies that any element or sub-element of the universal credit award paid in respect of children should by default be paid to their main carer. Any amount under clause 10, which is entitled “Responsibility for children and young persons”, would be covered by the amendment. In addition to an amount for each child, it is expected to include an additional amount for children with a disability.
I also expect some parts of payments under clause 12 to be covered by this proposed provision, a particular example being the amount in respect of child care, which is specifically referred to in the amendment. The Secretary of State has promised us details before the Bill leaves Committee of how the Government propose to support child care in the universal credit. We are looking forward to seeing those details and to debating the proposals next Tuesday. Another example might be
The amendment specifies that those elements should be paid to the main carer “by default”. However, exceptional circumstances might make it more appropriate to pay the money to someone else, and the amendment recognises and allows for that.
New clause 9 identifies two additional circumstances in which payments should be split. First, any amount paid in respect of rent ought to be paid to the person who is liable to pay that rent. It might well be that one member of a couple, for example, pays the rent, but the other is the main applicant for universal credit.
Secondly, new clause 9 specifies that any amount in respect of a disability should be paid to the disabled person, or to that person’s designated carer. Clause 12 outlines three circumstances in which a component of universal credit may be paid in respect of a disability: first, where the claimant has limited capability for work; secondly, where the claimant has limited capability for work and is required to undertake work-related activity; and thirdly, where the claimant has regular and substantial caring responsibilities for a severely disabled person.
Again, the new clause stipulates that those elements of the award should be payable to a specific individual “by default”, as there may be circumstances in which that arrangement would be inappropriate, and it allows for that. It also includes provision for additional circumstances to be added to the list, should they be necessary. For example, in certain circumstances, it might be appropriate to split the standard allowance between the two members of a couple. I think that that is conceivable, and if such circumstances arose, the new clause would cover that eventuality.
It is clear why split payments could be necessary: universal credit will replace a range of existing benefits, which are currently often claimed by different members of a household. Certain benefits in respect of children—for example, the child care element of the child tax credit—are usually paid to the main carer. We have supported the principle of a universal credit, but whereas payments currently go into a household and are split between different recipients, that splitting could be lost. I suggest to the Minister that that potential difficulty can be readily overcome by splitting the single award between more than one recipient, as proposed in the amendment and the new clause.
The case for splitting payments is particularly compelling for awards made for children. A strong body of evidence suggests that the money is a good deal more likely to be spent on the children if it is paid directly to their main carer. Generally, though not invariably, that is their mother. Platform 51, the organisation we used to call YWCA England and Wales, has lobbied on this issue, and it states that the Government’s current proposal
“has been proven to be most effective. Platform 51 believes Government welfare policy should promote gender equality and also recognise the reality that, in the majority of families, women are still the main carers.
“Furthermore, in low/moderate-income families, it is still mothers who tend to shoulder responsibility for meeting children’s day-to-day needs and evidence shows that women tend to have responsibility for purchasing food and items for children”.
Stephen Timms: That is my understanding. Platform 51 is clear about that, but I think that its argument is that the principle, which is well tried and accepted by the Government for child benefit, should also be applied to those elements of universal credit that are paid in respect of children, for the same reason. A connected and equally important point has been made by Oxfam. It says that by clearly labelling money paid for children, it is more likely to be spent on them.
There is a broader issue around gender equality. The main carer of children is usually their mother. Oxfam points out that, among claimants who are in work, 86% of main carers for the purpose of child tax credits are women. As the hon. Member for West Worcestershire said, they will continue to receive the child benefit. The argument is that they should receive the child tax credit, and its equivalent under universal credit. Clearly, income is not always shared equally between the two members of a couple and, indeed, in answer to a written parliamentary question that my hon. Friend the Member for Stretford and Urmston tabled, to which she received an answer on 14 March, the Minister said:
“Research has suggested that, particularly in low-income households, the above assumption with regard to income sharing within couples is not always valid as men sometimes benefit at the expense of women from shared household income.”—[Official Report, 14 March 2011; Vol. 525, c. 126W.]
If the universal credit payment is not split or is not capable of being split, there is a particular danger for women who experience domestic abuse. Sadly, that often extends to what is sometimes called financial abuse. According to a 2008 survey, again carried out by Platform 51, about a third of women using its YWCA England and Wales centres had experienced some form of financial abuse. It stated:
“The proposed payment method could have an impact on levels of financial abuse, and we have asked the Government to review this but we have not as yet seen any such assessment. The Government has suggested that in cases such as this where there is proven abuse of the money, they would look to redirect the payment urgently (as can be done now). This, however, puts the onus on the person experiencing abuse to take individual action, which can be very difficult, and is unlikely to happen in many cases. It is far better to ensure, as far as possible, that the potential is minimised in the first place.”
New clause 9(1) is intended to deal with circumstances in which the person receiving universal credit is not the person liable to pay the rent. Again, there are very clear gender equality implications. Oxfam suggests that, unless the amount payable in respect of rent is paid to the person liable for that charge, that too could have significant, negative consequences for women. It highlights, for example, the potential consequences for lone parents who join a new partner, and states in its briefing:
“Cases of concern could include a lone parent with a new partner moving into her rented property; the couple will need to claim UC jointly, but the lone parent may not immediately be ready to share tenure rights. If the new partner were paid all the UC, this could result in insecurity of housing tenure for her and her children. In a 2001 study”—
“some 1 in 4 cohabiting men and women said they had moved into accommodation in which their partner lived—but this was higher for men in the separated/divorced group. For 1 in 3 men and women (nearly 1 in 2 older women), when they started living together as a couple the accommodation was in their own name only. Another study included examples of social housing tenants and owner-occupiers who did not (yet) wish to add their new partner’s name to their tenancy or mortgage agreement. Housing tenure is not always joint among couples, especially cohabitees.”
Tackling domestic abuse and women’s independence are not the only reasons why the changes in our proposals make sense. It could be that, for budgeting purposes, a couple would prefer certain elements, such as the rent, to be paid to one member of the couple rather than to the person who otherwise receives universal credit. That was also said in a briefing sent to us from Save the Children about the child element of the award. It states:
“Splitting payments would also suit traditional budgeting habits amongst low income families. There is a history of paying entitlements intended for the maintenance and benefit of children to the main carer (for example Child Benefit).”
At the very least, there should be provision for such an arrangement to be put in place. It seems appropriate that any amount, in respect of a disability, should generally be paid directly to the person who has the disability or to their carer, rather than the person receiving universal credit for that household, if that is a different person.
In conclusion, the merits of a universal credit bringing different benefits together are very clear. We have discussed them already in Committee and I do not think that they are contentious. However, there is a risk that if we are not careful there could be unintended consequences that are entirely preventable. In particular, there is the potential to undermine the position of some women whose income will be dependent on universal credit, of which the main recipient is somebody else. Addressing those concerns does not require us to abandon the principle of a single payment or universal credit. It does not require big changes to the Government’s proposals. It requires that the Minister and the Department can calculate the amount of any award that is paid in respect of certain circumstances—I suggest that those should be rent, disability or children—and then pay those components to an individual other than the main applicant for universal credit.
The amendments would make relatively minor operational changes, but they could have very substantial and positive implications for some claimants, particularly the most vulnerable. I read the note on regulations to find out whether it was the case—it was not completely clear, but maybe the Minister can reassure me—that the Minister intends to do what I have described and that
Kate Green: I endorse my right hon. Friend’s comments and wish to add one or two points that I hope will emphasise to the Minister just how important this issue is, particularly for women. This is not a slight or trivial issue, but one which causes considerable concern, particularly in the context of universal benefit. The decision about where money goes is much more significant when the eggs are all in one basket. The design of the benefit integrates different elements of financial support. We must recognise that it brings with it some dangers that, operationally, it needs to be possible to reduce.
I hope that we will not see—I do not believe from anything I have heard from the Minister that this will be the case—that the prevailing concern is administrative convenience. We must aim for a position that enables couples to be confident and stable in their personal financial obligations and commitments, provides properly for the protection of children and other vulnerable members of the household, and promotes financial independence for women and for men overall.
What will happen if one member of a couple wants a particular element of universal credit to be paid to her or to him, and the other member does not agree? Currently, sometimes in relation to benefits for children, there is a race to be the first person to identify themselves as the main carer, and therefore to receive the benefits. I am interested to know the Minister’s intentions, because I understand that he intends to allow couples to have that choice in some circumstances. What will happen when the couple cannot reach agreement about the exercise of that choice? We know already that couples are becoming more likely to keep their financial affairs separate. Joint savings and investments, and indeed joint debts, are on a downward trend in couple households today.
On pressing on wholesale with payments to only one member of a couple, I am keen to highlight a few inconsistencies between what the Government might be doing by taking such an approach and their intentions and priorities elsewhere. It is possible that, by weakening the financial independence of women in particular, by making a payment to one member of the couple—it is likely to be the man—we will undermine the formation of committed couple relationships. My right hon. Friend alluded to an aspect of that a moment ago when he talked about housing obligations and how people wish to be confident that their home would not be put at risk by financial support for the rent being paid to another member of the household.
Rolling everything up and paying it to one person in the household is quite a risk for someone who is entering a new relationship to contemplate. Their current income stream might be taken from them and paid to the other member of the household. That will be a risk factor in terms of supporting committed couple relationships, which is what the Government desire. The evidence is clear that financial security is an important factor for women when deciding whether or not to form a new
My right hon. Friend mentioned the huge importance of ensuring that money for children is more likely to reach them. We have so much evidence over many decades that that has always been the case when the money has been paid to the children’s direct carer, who today remains—typically, though not invariably—the mother. We therefore want money for children to be directed to the main carer, to ensure that children’s material well-being remains a priority.
As my right hon. Friend has said, labelling a benefit as a payment for children helps that money to be spent on children. We all know of couples who describe what they do with their child benefit. Low-income families will say, “I spend it on shoes,” or they use it to cover the lumpy expenditure that they might not be able to meet otherwise. Better-off families may not spend it immediately, but they will set it aside for their children. It is clear that labelling is important. Paying benefits that are specifically for children to the main carer is a way of getting resources to the person in the couple who is less likely to have independent means. That also enables them to enjoy some additional financial autonomy in relation to the care of the children.
Finally, when couples exercise choice in relation to where joint payments are directed, that choice typically favours the man. We have good examples from the pension credit. Of 227,000 partnered recipients of the pension savings credit, 77% of couple claims are received by the man. Moreover, of 205,000 partnered recipients of the pension guarantee credit, 81% of the payments are to men. Gender imbalance seems to be the default position. If we are concerned to ensure that payments meet the payment obligations that are more likely to be incurred by the woman in a couple—whether for her rent or for the care of her children—there must be a clear mechanism to allow that money to get to that woman, so that she can to meet those obligations.
It would be ironic if all the Government’s intentions for the introduction of universal credit to promote more independence from the state actually reduced independence within families, particularly for women. That will happen if we are not careful and thoughtful about the proposal. It has been a long-fought battle for women to secure some of that financial independence, from ensuring in the 1940s that payments for children could be paid directly to the main carer, to our campaign in the 1980s for independent taxation. I hope that the Minister will take this opportunity to ensure that universal credit will represent another step forward in sustaining and promoting women’s financial independence. I, along with my right hon. Friend, look forward to hearing how he intends to allow that to happen in practice.
Chris Grayling: I shall both disappoint and, I hope, reassure Opposition Members. As we have heard, the amendment and the proposed new clause seek to replicate the current system in tax credits of making payments of child tax credit on the child care element of working tax credit to the main carer of the children. New clause 9 would require the Secretary of State to pay an amount for rent to the person liable to pay that charge and to pay amounts in respect of a disability to the disabled person or their carer. The new clause allows exceptions
I absolutely understand Opposition Members’ views: their arguments are perfectly reasonable, but routinely dividing payments—I emphasise “routinely”—contradicts one of our principles for the universal credit, which we have touched on in earlier debates. The payment proposal was the subject of one of our policy briefing notes, which was made available to the Committee and on the Department’s website. We have outlined our intention to give universal credit as a single payment to a household. We think that that is important so that the household can see clearly the effect of their decisions about work on total household income and so that claimants can take responsibility for budgeting. We think that as far as possible, universal credit should mimic payments of salary for paid employment, as part of the move towards work that we want.
For single-person households, it is straightforward: the person making the claim receives the money. We ask that couples decide between themselves who will receive the money. We think that the people within a household are best placed to make the money management choices that are most appropriate for them. It is not for Government to dictate how a family spend their money.
It is also important to remember that under universal credit, claims by couples will be joint claims. In the current benefits system, JSA excepted, one member of the couple makes a claim and the other is treated as their dependant. That will not be the case under universal credit. It is not right for one member to have access to the benefit and the other not to. They will be jointly entitled, which is critical to consideration of both new clause 9 and amendment 249.
In practice, a single payment must be made to one account, which is why couples need to decide what arrangements suit them best. They might have a joint bank account that allows them both access to the money, or they might choose to make alternative arrangements. The hon. Member for Stretford and Urmston is right: many couples choose to be financially separate in managing their affairs.
Chris Grayling: The hon. Gentleman is correct, and I was going to talk about that. It is important that we do not create a system that is completely inflexible. There are, of course, circumstances in which a household situation will require us to form a view on how best to handle the payments. One would hope that that could be decided by a couple together, but in some circumstances—perhaps for some of the reasons that Opposition Members have discussed in their comments—it might be necessary to divide a payment between two parties.
Ian Swales: On a point of clarification, the Minister says that the Secretary of State will decide that. Is there any possibility that claimants will be able to elect for payments to be separated? He did not say that in his answer.
Chris Grayling: It is not our intention that that should be our approach, but we will not make it impossible in regulations for that to happen. We have left open flexibilities so that we can offer numerous different permutations. Although our default preference is to make a single household payment in most cases, we have sought to leave open flexibilities. We are aware that there are some people who might struggle to budget effectively and for whom a single payment to the household is not appropriate. We are carefully considering how to take into account those people’s circumstances. Dividing payments between two or more parties by exception is certainly being considered as a part of that process. We are working it through and we will provide more information on the conclusions that we reach in due course. I am very happy to receive input from members of the Committee about that.
On amendment 249, I am aware of the body of evidence that suggests that money paid to the main carer and explicitly labelled as being for children is more often used to benefit those children. The hon. Member for Stretford and Urmston is absolutely right about that. We are considering how best we can display information about how a claim is made up, so that claimants are aware what they are receiving and for which needs, and labelling elements might be an important part of that. Of course, there is no question but that child benefit payments are being retained outside the universal credit; in the vast majority of cases, those payments go to the mother and they are explicitly labelled as being related to the upbringing of children.
The other important point that members of the Committee should note is that the power in section 5(1)(i) of the Social Security Administration Act 1992, which will apply to the universal credit by virtue of schedule 2 to the Bill, contains a broad power that allows regulations to set out the person to whom a benefit is paid. That power could be used to provide for payments to be split and paid to different people if we or a future Government wished to do so.
Consequently the amendments that the right hon. Gentleman has tabled are not necessary, because the powers are already there in the 1992 Act and in the terms of the clause. We are not closed-minded in any way at all to the issues that he and the hon. Lady have raised. More often than not—in the majority of cases—we want to be able to treat the universal credit as a straightforward single household payment to a couple who are perfectly capable of managing their own affairs and who can decide for themselves about where they want the money to be paid.
Stephen Timms: I do not think that I have entirely grasped what the Minister is proposing. He says that recipients can choose, but if they wish the money to be split in a particular way, he was saying, I think, that he would not normally permit that. I do not quite understand why. If the process is about choice, surely couples ought to be able to choose how the payment is split between them.
Chris Grayling: Obviously, there is also the issue of how we manage a single payment split in two directions to two bank accounts with a single joint assessment, but the measures in the Bill do not preclude any options. Our policy position is that we expect to make single payments to single households, except in unusual or exceptional circumstances—where there are particular reasons such as hardship or relationship breakdown, or reasons that might be determined individually by an adviser on the ground dealing with an individual case—where we have left in place the provision either to make individual household payments on a different basis, or group payments on a different basis. We are working through the detail to establish how best to deploy those powers.
I can reassure the right hon. Gentleman that the powers that his amendments seek to establish exist already: in the 1992 Act, which will apply to the universal credit via schedule 2 to the Bill, and in the flexibility in making regulations. Although we might differ on the approach, it is not our intention to have large numbers of people electing to have split payments—our default preference is to have single payments—but we have left in place the flexibility to have split payments where there is a very good reason to have them.
Stephen Timms: I am disappointed by that response and I think that a lot of people following the proceedings of our Committee will also be disappointed by it. There is agreement across the Committee that paying child benefit to the main carer has worked very well; the intervention by the hon. Member for West Worcestershire drew attention to that. By extension, all my amendment is proposing is that the elements of universal credit that are specifically related to children should also be paid to the main carer. It will be quite a significant step backwards if that cannot happen in normal circumstances.
I am grateful to the Minister for telling me that if another Government—perhaps a rather more enlightened Government—is elected before too long, there are powers that will enable my proposal to be implemented, but I am disappointed that the present Government seem to want to apply such a retrograde policy.
The amendments and the new clause were tabled for probing purposes, and I do not intend to press them to the vote. However, many people will want to reflect on what the Minister has said, and when we return to the subject, they will urge the Government to take a different view and use the powers that the Minister assures us they will have to allow the sort of splitting for which we have argued. I beg to ask leave to withdraw the amendment.
‘(3) Where there is insufficient information to calculate entitlement to the full amount of universal credit, the claimant shall continue to be paid an amount in respect of any component or components for which there is sufficient information to
With this amendment, I seek guidance from the Minister on the capacity of the universal credit system and the Government’s motivation. I want to avoid the predicament or complication of one element of a universal credit application that results in delay or temporary suspension leading to a household being left destitute, with all the other components of its universal credit payment disappearing at the same time.
As the benefit system operates now, one of the few plus sides to the complexities within tax credits and benefits system is that if something goes wrong with one element of the system, although there are exceptions for the most part, it does not necessarily mean that all the family’s income stops. For example, if a family is asked to present their new baby’s birth certificate and it goes missing, additional payments in respect of that child might not be paid, but it does not mean that the household’s housing costs will be stopped, which can give rise to undesirable consequences. If there is a complication with the equivalent of a child tax credit or any child care support that might be forthcoming under universal credit, it would not mean the suspension of benefits in respect of their children.
A number of people in the advice and other sectors are concerned that the provision effectively firewalls the various components of universal credit. In evidence to the Work and Pensions Committee, Family Action said that that was a particular worry and pointed out that, although the simplification agenda of universal credit was welcome and important, the most overriding concern was that families should not be left with no income. Family Action suggested that it should be possible to ensure that the components that make up universal credit are separately tracked, so that difficulty with one strand of those payments does not necessarily result in the suspension of the entire universal credit. Is any of this technically possible? In response to questions from the Work and Pensions Committee, the Secretary of State said that if we started firewalling the different elements of the benefit, all the advantages would immediately be lost. He stated:
“The trouble with things such as firewalling and the way payments are made within the individual elements is that you then, almost immediately, start to lose the whole point of the Universal Credit, and you start subdividing again.”
I understand that, and it is not a silly point. We all accept that one strength of the universal credit is simplification. I know that the Government have incredibly high hopes that there will be no administrative problems with universal credit, but they must understand that even with a vastly simplified system, Labour members of the Committee fear that any payment system that involves millions of people and human circumstances is simply bound, under some circumstances, to have complications, whether it is the claimant’s fault or the fault of the IT or administrative system.
It is crucial that where things go wrong, however rarely, it does not leave people destitute. It now seems that if people are left without universal credit under the new unified system, they will be in greater financial
I do not doubt for a second that the Government want to prevent those consequences. I am not challenging the Government’s motivation, but there is a very real risk, and it would be remiss of the Government not to find ways of addressing it and making sure that people are not inadvertently left in the most desperate financial circumstances. I look forward to hearing what the Minister says.
The amendment seeks to ensure that when a claim for universal credit cannot be determined immediately due to a lack of information or evidence, those elements of the benefit that have been determined can be paid to the claimant. We know that elements of universal credit include a standard allowance, an allowance for children, housing costs and elements related to other particular needs such as disability. If there is a delay in calculating one of the elements, payment for the elements that have been determined should commence and continue. We recognise that that is an issue. It needs to be carefully considered, and it needs to be dealt with in the final design of the universal credit. I can confirm that we are looking at it as part of the detailed planning and design work that we are doing for universal credit, and we will seek to have a mechanism in place that addresses the issues to which the hon. Lady referred.
I want to reassure members of the Committee that payment-on-account powers in clause 98 allow some benefit to be paid when an award cannot be determined in full. Regulations will set out detailed provisions on when such payments may be made, and I think that clause 98 does what the hon. Lady asks. It is sufficiently wide to enable such payments to be made and her amendment, which is probably a probing amendment, is not technically necessary.
There will always be some cases in which all the evidence for a benefit claim is not available immediately. That can happen for very good reasons, and we need a system that is responsive to and reflects that possibility. Generally speaking, I do not think it is unreasonable to say that anyone who claims a benefit should, where possible, provide sufficient information and evidence to support their claim. We have to have a system that is balanced, fair and affordable for the taxpayer, but that also helps those in genuine need and is sufficiently flexible to deal with the kind of issues that the hon. Lady talked about.
With the rationalisation of many benefits into the universal credit, we will be able to provide a streamlined service, and we expect that delays caused by the need to gather informational evidence will be substantially reduced. The key point to make is that, quite apart from making provision in the design of the universal credit for the
Ms Buck: I very much welcome that recognition, and I am relieved and encouraged that the design of the IT system will enable a form of firewalling to be built in. For clarification, I assume that what the Minister says means that all the distinct sub-elements in universal credit—the housing, children, and disability elements, and so forth—could be separately identified in the design of the system. That is good, though slightly at odds with what the Secretary of State told the Work and Pensions Committee. If that means that more thought has been given to the issue in the intervening period, that is extremely welcome.
I just emphasise two points. Of course, it is right that claimants have a duty to provide supporting evidence. However, with the best will in the world, even in a system where the gateway is intended predominantly to involve IT, providing hard and supporting evidence is often where the problem arises. Evidence goes missing in Jobcentre Plus now. I was probably slightly scarred by Westminster council’s outsourcing of its housing benefit to Capita. At one point, 28,000 items of unopened post—evidence—disappeared. It was stacked up in different buildings, and nobody was getting any answers. As a consequence, huge numbers of people were left without payments. Although it is right and encouraging that the Minister is saying that payment on account will deal with those problems, if people do find all their benefits suspended, it will put a considerable burden on ensuring that the payment and accounts system responds more quickly and robustly than at present.
The Minister is clearly sympathetic to the principle and the point that we are making. We look forward—as we do in so many other respects—to being reassured that the specifications for the IT system will be sufficient for the system to carry the burden that is put on it. With that, I beg to ask leave to withdraw the amendment.
‘(10) In section 5(1) of the Social Security Administration Act 1992 (regulations about claims and payments), after paragraph (r), there is inserted—
“(s) for the making of a payment pending appeal.”’.
The need for the amendment was brought to our attention by Citizens Advice and the Child Poverty Action Group, which have a number of concerns about
Clause 99 introduces a new requirement for claimants to request a revision and have that request determined before accruing the right to appeal to an independent tribunal. It seems to the organisations, and to us, that that will introduce an unnecessary and bureaucratic new barrier for claimants who wish to exercise their appeal rights. Appeal rights are essential if we are to hold the system to account and expose flaws and errors in it. The organisations are concerned, as are we, that the new tier will make the system less user-friendly and will increase delays in resolving problems, because claimants will inevitably be confused about the difference between revisions and appeals. They will be in danger of making inappropriate requests at the wrong time, or failing to appeal at the right time, because they are confused about their different rights and responsibilities in the system. That may prejudice justice and result in applications being wrongly referred back to claimants as invalid.
Given that there are no time limits for the benefit authorities when processing revisions and appeals, there are inevitably long delays with both processes. A statutory requirement to request and receive a revision determination will inevitably result in longer delays before problems are resolved and, in particular, long delays before claimants can attend an appeal hearing. The worry is that that will leave claimants in more hardship, with all the risks of homelessness and destitution that there are if people are left without their basic benefit income. Given our concerns and the sector’s concerns about why clause 99 exists at all, and why a new request for revision is built into the system, amendment 251 seeks to redress the risks by ensuring that vulnerable claimants are not left destitute pending the new, more complicated appeal process.
We are particularly concerned because in universal credit, personal allowances, payments for children, housing costs and other benefits are all paid together—that refers back to the amendments that we have just discussed—which will increase the risk for claimants and increase demand and pressure on the payment-on-account process. Under the present system, provision is made for payment of ESA pending an appeal about the work capability test. At the very least, given the additional complications, we would like a corresponding provision for universal credit, so that payment can be made pending an appeal. Vulnerable claimants would then be in no worse a position under universal credit than they are now. In a sense, it is a procedural form of transitional protection. I look forward to the Minister explaining some of the thinking behind clause 99 and how he will ensure that delays are avoided and claimants are not left without income in the intervening period.
Chris Grayling: The hon. Lady has raised a couple of questions about the clause generally; I was going to make some remarks on clause stand part, but if you will allow it, Mr Gray, I would like to do so now, and do without the stand part debate.
I am aware that there is a degree of misunderstanding about the purpose of clause 99, and I wish sometimes that some of the groups that are lobbying on the issue would simply ask the question. The purpose of the clause is straightforward, and the drive relates particularly to the incapacity benefit migration process. We are trying very hard to get this right in the wake of the Harrington review. We are trying to get more decisions right quickly within Jobcentre Plus to ensure that fewer people end up going to appeal and that there are fewer successful appeals, because long waits for successful appeals serve nobody’s purpose. I want us to get the decisions right quickly.
We will not always get the decisions right immediately; sometimes people come back very quickly after the initial decision with new evidence, and we want to be able to take that into account. One of the frustrations that many decision makers face, as Professor Harrington highlighted in his report, is that the judges considering an appeal often have more evidence available to them than the decision makers in Jobcentre Plus did. Our focus on strengthening the reconsideration process is all about making sure that we try to maximise the evidence available to us. We give people the opportunity to return with further evidence if they have frustrations, so that we can look again at that evidence and reconsider the decisions before they go to appeal. In that way, we can carry out the process more quickly and effectively. There will always be decisions that are got wrong the first time round, however hard we try to perfect the system. The focus on reconsideration aims to ensure that decisions are changed quickly if we get them wrong the first time.
The challenge that we face is that if people launch an appeal straight after the first decision—this happens now, even before we have increased the focus on reconsiderations—the two things can end up going in parallel. The judges tell us with some frustration that an appeal will often reach its due date and no longer be valid, because the person concerned is having reconsideration or has withdrawn their claim. It would be crazy if someone said on the same day that they would like a reconsideration and an appeal, and a couple of weeks later the reconsideration took place, as a result of which the decision was overturned, but the appeal carried on. A few months later, after the administrative work had been done within the tribunal service, somebody would turn around and say, “Oh, we don’t need that any more.”
It seemed entirely sensible to say to claimants that we want to get it right and that we will have a much more focused reconsideration process. If someone says that they do not agree with the migration decision on whether they should be found fit for work or put into the work-related activity group, it is their absolute right to come back to Jobcentre Plus and ask for a second opinion, but they should wait until they have received a second opinion before the start of the appeals process, with all its complexity of form-filling for the individual, and all the costs to the tribunal service for a process that might not be necessary. That is the reason for the clause, which is entirely sensible. It is not about making people wait for long periods; it is about making the system better, more efficient and more sympathetic to people who might have been given a wrong decision the first time round.
The question arises of whether the approach of someone being left to receive their full benefits while waiting for an appeal decision is right for appeals in general. If someone is going through incapacity benefit migration, for example, and is found to be fit for work but wants to appeal, they will be moved down to the assessment rate of ESA, which is the same level as jobseeker’s allowance, until the appeal is heard. If it is successful and they are put back on ESA, the money lost during that period will be reimbursed, so they do not lose out financially. Their claim will be backdated to the date of the original decision, which is right and proper.
The problem with the approach put forward by the hon. Member for Westminster North is that if someone is on the full ESA amount right through to the appeal, there will be two effects. First, it creates an absolute incentive for everybody to appeal. Appeals by people who go through the process and receive the right decision will be enough of a challenge, but to create a situation in which people have a tangible financial reason to appeal, because they will receive more money if they do, simply makes no sense.
Secondly, if the higher rate was paid up to the appeal date, and the original decision was upheld, someone might have received many hundreds of pounds in overpayment of benefits that we would have to seek to recover. People might not have that money anymore, and we would have to try to recover it from them in the county court, which will end up with a thoroughly messy situation that is almost impossible to handle.
That is why the Labour party in government, when the right hon. Member for East Ham was in the Department for Work and Pensions, presided over a system in which people could only lose a benefit as a result of an appeal. At the end of the application period for ESA, if people are not allowed to move on to ESA and have to return to JSA, but they want to appeal against that decision, they will continue to receive the assessment rate until the appeal is heard. That was the right decision at that time, and it is the right decision now.
In a whole variety of ways, it would be horrendously complex to change the system in the way described by the amendment. Fundamentally, the clause is not about creating extra barriers, burdens and obstacles for people going through the process of having their claims assessed; it is about streamlining and simplifying that process. I want decisions to be taken more accurately in Jobcentre Plus. That is why we are working to give decision makers greater training, why we continue to consider how to improve the quality of the decision-making process, and why I am absolutely clear that I want to get as much of this right as possible. Of course, people will still have the right to appeal, but I do not want them to start those appeals until we have at least had the chance to take the right decision.
Ms Buck: I think we all agree that a fine balance must be struck in appeal processes and revisions. However, appeals are an essential part of testing the effectiveness of a benefits system. It is important that they happen; it is not a success measure when there are no appeals. The Minister is completely right that it is a sign that the system is not working properly when the number or success rate of appeals is too high, so there is a fine balance.
What worries me about the process of going forward into the universal credit is whether there is a risk that vulnerable individuals will be left with no income at all. That is unlike the situation where what is decided on appeal is whether a person has a higher or lower rate of benefit; in that case, they still receive a level of income. That refers back—we had some assurances from the Minister on this point—to the question of firewalling and whether people could be left with no income at all during the revision or appeal process. He did not address that point in his response to me. The example he gave is one that I would not disagree with, but that is not the only example that we might want to use in testing whether the measure works.
We will have to reflect on what the Minister says. No doubt his words will be looked at very closely by the advice sector and other agencies. Those organisations seem to be in dialogue with officials—rightly so—to try to get a good understanding. In many cases, they are the organisations that are giving professional advice to claimants. It worries me that there is such a disjunction between what the Minister is saying about the purposes of the amendment and what those organisations are hearing. They genuinely and sincerely believe that an unnecessary layer of bureaucracy is being injected into the system, and that a consequence will be that some people are at risk of losing more of their income under universal credit.
Those people who are unable to interact with the universal credit through a professional advice agency will be more confused. The answer to a problem with the role of appeals is rarely to have an additional tier of bureaucracy. Such an approach will confuse people, and that is clearly the sector’s view. We will reflect on the Minister’s words. I beg to ask leave to withdraw the amendment.
Stephen Timms: I want to ask some questions about the clause, which deals with electronic communications. I understand that it will allow the Department to shift existing paper-based processes into an electronic form and therefore to offer a more efficient and effective service. The clause came into being because the Department published a business plan six months ago that said it would:
However, the Government published a different series of business plans last Friday, which were picked up in an article in The Times on Saturday. The Government also published 48 pages showing variations between the
That is due to start not in June but in July this year, and to end next year. The Committee knows that I do not believe that the information technology will be ready for all new applicants to universal credit by October 2013, as the Government have told us it will. Those who think I am being unduly alarmist about this should take a look at what has happened here. The document published on Friday gave a bit more information about why the Government’s ambition has been scaled back so dramatically:
“is not possible. One of the primary reasons is that a significant element of the decision/award process, including applying and checking JSA conditionality, will continue to require human intervention.”
Given the lengthy debate that we had earlier in the Committee about the problems that I think the Government will have delivering the IT for universal credit on time, I wanted to put three specific questions to the Minister. First, will the application process for universal credit be fully automated? Our understanding was that it would be, but our understanding was that it would be automated for all benefits, and now it will be only three quarters automated for one and not at all for the others. Secondly, will some human intervention still be required for universal credit applications? In the case of share fishermen, will the universal credit IT system work everything out automatically? Thirdly, which, if any, elements that the Government now say cannot be automated for JSA will be automated for universal credit?
I have repeatedly made it clear that I do not believe that the Government’s plan for IT for universal credit is credible, but I must say that this development undermines its credibility further. Even before the parallel IT exercise
Harriett Baldwin: I am enjoying the synthetic anger about IT problems. The right hon. Gentleman will recall that the introduction of the working tax credit and the child tax credit was not necessarily a hallmark of benefit reform under the previous Government. Does he accept that the Department putting the business plans on its website so that we can be kept informed of the developments is a welcome addition to transparency, particularly with regard to fishermen?
Stephen Timms: The hon. Lady is right. I was certainly delighted to find 48 pages of changes to business plans that were published only six months ago and to discover that it took 48 pages for the Government to tell us all the things that they got wrong. No doubt we will have another 48 pages of further changes in another six months. I welcome that degree of transparency; it is very informative. I did not intend to express anger, merely some bemusement and perhaps a little sense of, “I told you so”—these things are difficult.
Six months ago, we were told that all benefits would be automated, but it turns out that it is not possible because of share fishermen and other considerations. That is an extraordinary blunder on the part of the Department’s IT function. As he knows, and as I have said previously, I have a high regard for the IT operations in the Department. They have a good track record. The fact is, however, that at the same time as the officials told the Minister that they could automate all the processes for the benefits system by October next year, they were also telling him that they could deliver the IT system for universal credit by October of the following year. Why did they make such a blunder? Why did they get it so wrong six months ago and set a date for this change last Friday? Is it because they have suddenly become incompetent? No, I do not think it is. It is because Ministers, in their enthusiasm to deliver the ambitious goals that have been set, are forcing officials to sign up to goals—no doubt laudable goals—which, in reality, are unachievable.
Ian Swales: Does the right hon. Gentleman agree that the activities of share fishermen are only one example of self-employment? Does he share the hope that the Minister will give us some reassurance that self-employment will be comprehensively covered?
Stephen Timms: The hon. Gentleman is right. We have no information at all on how self-employed people will be dealt with in the universal credit system, whether by IT or by human intervention. I suspect that share fishermen will continue to require human intervention. The way it looks at the moment, large numbers of self-employed people may well have that requirement as well. The hon. Gentleman is right to remind the Committee of the importance of the Government giving us an answer on what will be done about self-employed people.
My theory is that the Minister said, “Let’s go for automating the benefits system. This is what we have to do.” Officials loyally said, “Okay, we will do it all by
Chris Grayling: I do love a nice conspiracy theory to finish the day. The right hon. Gentleman has asked sensible questions about aspects of the delivery of the universal credit IT system, which we have sought to answer. We will continue to offer him answers to his questions over the months ahead. This one, however, is stretching a point slightly.
Let us be clear. We did not say, “Wave a magic wand, we have taken steps since the election to suddenly start automating the benefit processing operations of the DWP.” In many of these cases, we inherited programmes from the previous Government, who were sensibly moving to a greater level of automation and a greater level of usage of IT. It is possible that the right hon. Gentleman could also have explained the changes that he pointed out in the business plan by saying that, as we got more into the workings of the Department, we discovered some shortcomings in what he and his colleagues were doing before they left office.
None the less, on the business plan changes the right hon. Gentleman has taken a three-second cinema ad and turned it into a blockbuster. The DWP business plan confirmed a small reduction in the number of JSA claims that will be automatically processed from start to finish, due to the fact that not all claimants can make their claims online and that some people will still need to speak directly to one of our advisers. There is no great rocket science in that. We have said clearly that when universal credit starts, a small part of its delivery will not be able to take place through automated systems. The intention is that the vast majority of what we do in the future will be done, so far as is possible, through automated means.
Chris Grayling: The right hon. Gentleman is right. One tends not to do a nice respray of a car that is about to be scrapped. Income support, for example, will be scrapped progressively from two years’ time, so it would not be entirely logical for us to spend lots of money on automating income support only to scrap it. I suspect that the Public Accounts Committee would have something to say about it if we did.
Naturally, with the transformation of the benefit system that the Government have initiated, including the move to universal credit and the total transformation of the way that our welfare state works, it is not entirely logical to spend lots of money to automate some of the legacy schemes, too. We have changed the plans that we inherited from the previous Government, because we are not keeping many of the things that they intended to keep in place.
That is simple and basic. The right hon. Gentleman is trying to see issues where there are none. The system and the business plan we are talking about are separate from the one that will run universal credit, which is still on track for delivery in 2013, as we have committed.
The clause will introduce a simple technical change that streamlines the DWP’s automation process. It will create a simpler approach to regulation and will not make any dramatic changes. It will not introduce new powers. It will simply make it easier in regulatory terms to make the changes that are in train under the Government and were in train under the previous Government.
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