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Page 3, line 36, at end insert:
("( ) The earnings disregard in respect of part-time earnings shall be reviewed annually in the light of the previous year's price inflation.").

The noble Baroness said: I hope that I may hang onto the coat-tails of the noble Lord, Lord Swinfen, and provoke the good humour of the Minister. We may, perhaps, end the evening on a bright note. However, I am not sure about that. It is a matter of money and that is something which it is always very difficult to persuade the Government to come forward with.

The proposed provision is quite straightforward. It would enable the disregard in respect of part-time earnings to be index linked. Of course, the disregard is really a means of providing a bridge to enable the individual to go from being unemployed to actually getting back into employment. Indeed, it would ease the situation and would act in a way which would not discourage people from taking part-time work which, eventually, could also lead to full-time employment.

We suggest that it not only makes sense to up-rate the disregard annually, but that it is also the honest thing to do. If the Government have reached the view that this is the level to set when the Bill becomes law, it makes sense to maintain that relative value. Of course, I am aware that the unemployment benefit disregard itself has not been up-rated since about 1982. We certainly would not want to see that situation continuing under the Bill when it is enacted.

There are a number of benefits that are not up-rated and that, too, has encouraged us to table the amendment so that it would be on the face of the Bill. That would mean that it would not be discretionary and that it would require an annual review of the level of disregard so as to provide some measure of assurance of a retention of the value of the disregard year on year. I beg to move.

Lord Mackay of Ardbrecknish: As I mentioned earlier this evening, the jobseeker's allowance will have common rules for the contribution-based and income-based claimants. The rules applying in unemployment benefit are complex and outdated relating to the daily benefit paid in respect of six days a week. We are aligning the rules with those of income support and applying an earnings disregard which, for most single claimants, will be £5 a week.

The level of the disregard is designed to strike a balance between providing an incentive to do some work without creating a disincentive to take up full-time work. Part-time work, supplemented by JSA, cannot be

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an acceptable long-term option. We believe that across-the-board increases can act as a disincentive to move off benefit and into more substantial work.

It has never been thought right to up-rate earnings disregard automatically. We prefer to concentrate on maintaining and, wherever possible, improving overall benefit levels rather than increasing the amount of the earnings disregard, which can only benefit those who are able to work part-time. Increasing disregards currently across income support, housing benefit and council tax benefit by only £l a week would cost in the region of £25 million a year. Therefore, looking at increasing disregards is not exactly a costless option.

One has to look at what we are doing in JSA as a package. We believe that it is important to introduce new incentives for people to take up, or stay in, part-time work. As I have already mentioned, we shall be doing that not by increasing the disregards by small amounts each year but by giving a new joint £10 disregard for couples through the back-to-work bonus and through the increase in the partner's hours rule from 16 to 24 hours, which we discussed earlier.

We believe that that is the right way to go about such issues and not in fact to give the right of reviewing annually the earnings disregard which currently stands, as I said, at £5. I am sorry that I have to disappoint the noble Baroness, in that she has not managed to get such a satisfactory answer on this occasion as that received by my noble friend for his amendment.

Baroness Dean of Thornton-le-Fylde: As a colleague has just said, "What's new!" I am disappointed but not surprised in my disappointment. I feel that it is all of matter of penny pinching. Indeed, £5 is not a great deal of money. Perhaps we should have tried to get the whole lot index linked. However, we thought that we would have a go on this one and that the Minister might see sense. If it is worth £5 today as a disregard to act as an incentive—or not to be a disincentive—for people to go into work, then that kind of logic should follow through year on year; otherwise it does not have a logical base. I hear what the Minister says. With the permission of the Committee, I beg leave at this stage to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 34 not moved.]

Baroness Hollis of Heigham moved Amendment No. 35:

Page 3, line 38, at end insert:
("( ) In the case of a claimant residing with his spouse or contributing to the maintenance of his spouse, there shall be added the amount specified in Schedule 4, Part IV, column 3 of the Benefits Act (adult dependant's allowance).").

The noble Baroness said: This amendment concerns the adult dependence allowance. This amendment seeks to protect the status quo. What is the current situation? At the moment someone who qualifies by virtue of National Insurance contributions and the work test, receives unemployment benefit for 12 months, which for him—let us assume he is the main earner—is £45.45, and for her is £28.05. In other words, as a couple, they receive £73.50 based on the claimant's record. Any savings, any redundancy payment, or her earnings do

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not affect this couple's allowance. It is a benefit as of right paid for by him, covering them both. It is a contributory benefit.

Under JSA such a couple are penalised not once, not twice, but three times over. We think this extraordinarily harsh. First, the contributory benefit is cut from 12 months to six months; thereafter it is means tested. That is bad enough but, secondly—this relates very much to the point made by the noble Baroness, Lady Williams, earlier this evening—that six months contributory JSA does not include an allowance for a spouse. It is simply in other words a non-means-tested benefit of £45 for the claimant; it is a personal allowance, not a couple or family allowance, as it was under unemployment benefit. If the claimant claims what he is currently entitled to—the adult dependence allowance—he promptly moves from a contributory to a means-tested benefit on day one, without even six months on the contributory benefit for which his National Insurance was designed to pay.

He has been robbed twice. If he does not claim for her, his benefit is cut from 12 months back to six months; it is cut back from 12 months to nothing, in terms of a contributory benefit, if he does claim for her. As soon as he claims for her, and therefore goes onto a means-tested benefit, he is then penalised a third time in terms of any modest savings he may have had. He loses £1 in benefit for every £250 he has in capital over the £3,000 rule, and loses all benefit if he has savings over £8,000. Those savings may have been accumulated by weekly or monthly savings but they may be the result of a redundancy payment of, say, £10,000 which will have to be exhausted before they get means-tested benefit. Or the savings may have resulted from an injury compensation or an industrial accident compensation and that money will not be used as compensation, as was intended, but as a living allowance before he can claim the benefit they were entitled to under National Insurance rules.

In other words, he is offered the Faustian choice of, "Maintain your wife or maintain your savings, but you cannot do both". Is that what the Government really intend? Is not that an attack on the family, on the one hand, and on the principle of thrift and savings on the other? For the Government to manage both in one Bill is pretty good. The Government expect to make some £220 million savings in a full year by moving from 12 months to six months contributory benefit; and of that, scrapping the adult dependence allowance will save £20 million. The Government themselves estimate that some 5,000 people will be pushed onto means-tested benefits, thus increasing their poverty trap.

So what have we? We have a Bill that not only savages the contributory principle, reducing it from 12 months to six months, even though National Insurance payments, as my noble friend Lord McCarthy mentioned, have recently been raised by 10 per cent. bringing in £2.2 billion to the Treasury, but also attacks the principle that the noble Baroness, Lady Williams, referred to earlier on; namely, that social security benefits are household or family benefits. Yet the Government in their usual Janus-faced way casuistically are seeking to have it both ways. His contributory

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benefit does not cover her, but if she is working her earnings are expected to cover him and he loses benefit pound for pound. Which is it that the Government will have? His contributory benefit does not cover her, it belongs exclusively to him. The moment she works, her earnings are expected to cover them both and he loses benefit. In other words, social security benefits cover them both when it saves the Government money but do not cover them both when it costs the Government money. So much for a Government of insurance, savings and the family. The Government's Bill attacks all three. The Government have made the JSA test harsher. They have then proceeded to cut the value of the benefit, just as they have with incapacity benefit.

We could at least mitigate some of the deep unfairness and unpleasantness of the Bill if the Committee were minded to accept the amendment. I beg to move.

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