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I do not wish to raise my noble friend’s hopes on this. I reiterate that I am happy to reflect on it given the history and what was said in the Green Paper. However, I cannot promise to come back with an amendment that she would find satisfactory.
Baroness Hollis of Heigham: I beg leave to withdraw the amendment.
72: After Clause 2, insert the following new Clause—
“Income disregard for lone parents
(1) The Social Security Contributions and Benefits Act 1992 (c. 4) is amended as follows.
(2) In section 136 (income and capital), after subsection (3), insert—
“(3A) Regulations made within subsection (3) above shall make provision for the amount of earnings to be disregarded for a lone parent to be no less than £87.”.”
Baroness Hollis of Heigham: As the noble Lord, Lord Skelmersdale, identified, there are two separate issues. One is a premium for taking part in work-preparation activity. This one, as he rightly identified, is about disregards.
Lone parents on IS currently have a disregard of £20 a week, which equates to about three and a half hours of work. Thereafter, any further hours they work carry no financial benefit at all until, if an employer will allow them to do so, they reach 16 hours a week at which point they switch on to wage plus tax credit and double their take-home pay.
That cannot be sensible or good public policy. I hope that other Members of the Committee will agree with me that we want to encourage the lone parents to
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Mini-jobs, as Kate Bell’s research at Gingerbread has shown, make good sense for many lone parents. They increase their income and skills, whether till work, teamwork or stock control. They increase sociability and self-esteem and the parents learn about a wider world of work opportunities: the knowledge network that comes from knowing what is going on, which those isolated on benefit so often lack. All the research shows that one of the biggest barriers to getting back into work is the lack of access to the knowledge economy of what is going on in the labour market.
We want a staircase into work, not the daft present system. It is worth it if you are a lone parent working for three to four hours a week: you keep every penny. Then for the next 12.5 hours or so a week, you lose every additional penny. Then, at 16 hours—bingo!—you double your pay. Who could have thought of such a scheme? Not women, I think.
The amendment is obviously more probing than most, because it puts a figure of £87 in the Bill, which is not sensible at all—in fact, it is really rather silly—as we would need primary legislation to uprate it. However, that figure is there to indicate the purpose of the amendment. The disregard is worth at least 15 hours a week at the minimum wage, and at 16 hours a week you go into tax-credit-supported work. The amendment sounds generous, but it has already been conceded that claimants on ESA can earn up to £88.50 a week without losing access to benefits. We have always had similar and rightly helpful benefit top-ups, such as therapeutic earnings for disabled people. It would cost the taxpayer nothing because the lone parent receives the benefit as usual and the employer, not the Government, tops it up with a part-time wage.
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I willingly concede that, providing it is kept simple, a taper might be appropriate or we could limit such an arrangement to the first two years back to work or until the youngest child is seven. Recent research by Gingerbread and the Institute for Fiscal Studies suggests that this would increase voluntary employment of lone parents by 5 per cent or more, which is as much as we have achieved in the past five years of elaborate policy-making and new deals. Make work pay, and work works. It is already the case that 27 per cent of jobs advertised in jobcentres are for less than 16 hours a week because employers need flexi-working. Indeed, lone parents who are currently working 16 or 18 hours a week are, in a recession, finding their hours cut back to 12 or 14 hours a week and they immediately cannot afford to work because they lose every penny beyond the original disregard of £20. That is what happens when you have snakes instead of ladders, which is the system we have devised.
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Even if my noble friend cannot agree today to introduce a staircase of opportunity moving from benefits into work, I am sure he would wish to do so once he has thought through all the implications. I accept that it would be an 18-month policy haul because of the read-across to other benefits that always bedevils social security, although it is easy enough to do. However, we could give much of the same help if we took the path that the noble Lord, Lord Skelmersdale, indicated and increased the disregard for lone parents from the current £20 a week to £50 a week, although that is not as generous as my £87. What would that mean? For the lone parent it would be worth working nine hours a week before benefits deduction came into play; it is very simple, and it can easily be done in 48 hours by regulation rather than after 18 months’ policy haul. Bluntly, this is the amendment I would really like to see delivered, for reasons I hope to argue, and I might wish to come back to it on Report, if that seemed appropriate.
What are the amendment’s virtues? First, it would help child poverty. An extra £50 a week on top of benefits would be transforming. For the lone parent, along with any child maintenance, it would lift her and her children well above the poverty line. Is it not worth going after a really noticeable reduction in child poverty? After all, we have a child poverty Bill ahead of us. Secondly, it would help the lone parent remain attached to the labour market. The evidence shows that mini-jobs are the best preparation for a 16-hour tax-credit-supported proper job. Working nine hours each week, sorting out the transport and the childcare and learning the appropriate skills are a far more effective way to prepare a mother for conventional, full-time work than all the interviews, action plans, CV training, skills courses—which may not relate to local jobs—newspaper adverts search and the rest in the work-preparation package. I support that work-preparation package, but the best preparation for work is not work preparation, with hours spent travelling to and from the jobcentre, but work. Precisely because the mother is a willing employee, not a reluctant conscript, she will sustain it and build on it and we are there. She is doing exactly what we want her to do and gaining experience in the world of real work, so why do we not make that possible and attractive rather than punish her by taking away some of her benefit?
Child poverty reduction and the lone parent in work are the first two arguments. The third is that it would help the employer, who would have a larger pool of flexible labour on which to draw. I repeat, more than a quarter, and I suspect it will soon be a third, of jobs in Jobcentre Plus are for fewer than 16 hours. As the recession recedes, an employer with a woman in a nine-hours-a-week job would be poised to increase her hours so that, in time, she can come off benefit and go into tax-credit-supported work. Many employers hesitate to employ a lone parent, as they do a disabled person, because of possibly misguided fears of unreliability. It would take the employer’s risk out of employing her, as the risk of entering work is taken out for her. She would know that she can cope and that she is comfortable. We all know that the best way of getting a better job is to be in one already, preferably with the same employer.
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Fourthly, it would also help to get fraud out of the system. One of the biggest reasons for fraud is that a lone parent, understandably from hers and her child’s point of view, does work on the side—perhaps cleaning—which she does not declare and she is always nervous about whether a neighbour might report her to the social, which adds to the stress in her life.
Finally, it would be really cheap. With more wet towels I could possibly establish that it might even save the Government real money. Taxpayers pay benefit exactly as is—no change—and forgo only the tiny amount of benefit that a highly scrupulous, lone parent now declares which is deducted. Of course, they either do not work now, because it is not worth it, or they do and they do not declare it. The extra money—the £50—which the lone parent gets comes because she has worked for it and the employer is paying for it; it does not come from taxpayers. If even half of lone parents with children under the age of seven work nine hours, it would cost taxpayers a modest £20 million a year and, I suspect, even that is a serious overestimate. The cost of putting all lone parents through the work-preparation scheme would also be about £20 million a year, a tentative figure, according to the regulatory impact assessment. Given the much greater likelihood of lone parents moving fully off benefit earlier from a mini-job than from any work-preparation scheme, however desirable—and I support them—the Government could expect to see savings much sooner as those parents will no longer need to rely on benefit. There is no contest and I would have thought it was a no-brainer. In net terms, we might even save the Government money.
I urge my noble friend to bring a proposal forward on Report, or possibly, more sensibly, a commitment to do this by regulation, as it should be done of course, to increase the disregard to £50 a week. I know that the previous Secretary of State and the department were exploring that. Think of the gains: first, a real contribution to lifting children out of poverty; secondly, as it is a mini-job, it is a sensible and decent preparation for work, infinitely more effective, appropriate and in real time than action plans, work preparation and the like; thirdly, it would take fraud out of the system; fourthly, it would help the employer; and, fifthly, it would be so cheap and effective that compared with work-preparation programmes it could well save the Government money. I suggest to my noble friend that it is a no-brainer. I beg to move.
Baroness Thomas of Winchester: This amendment was foreshadowed by the noble Baroness, Lady Hollis, in her Second Reading speech and we warmly support it from these Benches. As she has said, it is intended to ensure that the income disregard for lone parents is at least the value of 15 hours at the national minimum wage. That is where the complication of the benefit system comes in. As she said, ESA claimants may claim up to £92 a week, although I think it has gone up, without losing access to means-tested benefits, enabling them to work in jobs of fewer than 16 hours, after which they would become entitled to tax credits. However, single parents on benefits can earn only £20 a week, meaning that there is no financial incentive to work in jobs of between four and 16 hours.
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Baroness Turner of Camden: I also support the amendment. As will be recalled, we discussed lone parents earlier in the passage of the Bill. I took the view at the very beginning that lone parents ought to have a choice as to whether they spend their time looking after their children or try to access a work environment in some way or other. The amendment comes to terms with that choice. Many lone parents want flexibility. They want to be able to decide how little work they can do and not lose any benefit, which this amendment is designed to enable. It would therefore be desirable for it to be included in the Bill and I hope that the Minister will agree with it in principle on Report, even though he may not like the wording.
Baroness Meacher: I rise with some trepidation to make a few comments. I had not planned to make a speech and am relying somewhat on my memory of 30 or 35 years ago when I was heavily involved in campaigning for increases in the income disregard; in those days it was £4 a week. The arguments that were always put to me in that context were around the poverty trap. I very much support the basic principle of the amendment, that you need a stepladder back into work. However, I am conscious of the huge complexities of achieving a nice, neat stepladder because of the multitude of benefits and the implications for the incentive to get closer to full-time work if you have a clunky income disregard. I hope that the Minister takes the amendment away and gives serious thought to how best to achieve a nice, neat little stepladder. However, I fear that, in trying to achieve that, he will have to take account of the housing benefit withdrawal rate, changes in council tax as your income increases, and so on. It is no simple business. I remember huge tables of this sort of material from many years ago.
I support the principle of the amendment, but the Minister and his department will have a lot of work to do if he is to achieve this without dropping large numbers of single parents into a poverty trap at a slightly higher level; that is, if he is really going to achieve a money saving, which is ultimately what the Government—and no doubt any alternative Government—would be after, by encouraging lone parents to return to work in a way that would reduce the state contribution to their weekly income. I hope that I have said enough to convey one or two points to the Committee.
Baroness Hollis of Heigham: Before my noble friend responds, the noble Baroness’s understanding of the position 30 years ago is absolutely right. Since 1998, however, we have introduced the tax credits system
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Baroness Meacher: I am grateful for the noble Baroness’s clarification, and am glad that I confessed to my somewhat out-of-date information.
The Countess of Mar: The noble Baroness mentioned seasonal workers. Coming from a rural community as I do, I am used to the idea of seasonal workers—strawberry picking, asparagus cutting, raspberry picking and even goose plucking in the winter. That is how things work. What concerns me a little is that it will not be the same people doing all those different jobs. A young mother may, as I have done myself, take her child with her to work; that is what I used to do when I was younger. She can earn quite a lot in a short period of time, but then there is a desert when she has no more. How could that be balanced out?
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Lord Skelmersdale: That remark reminds me of a book that I read years and years ago in which a good lady working as a reaper on a farm in Hungary gave birth within seconds of putting down her scythe. Of course, seasonal work has to come into this, but the real problem is that we do not have a graduated withdrawal system across the board. The basic stumbling block has always been the 16-hour rule. Until we find a way in which to get rid of that we have to accept either disregard, as in this amendment, or absolute allowances, as in the noble Baroness’s first amendment.
The noble Baroness, Lady Hollis, is clearly warming to her theme. I do not wish her to think that I am determined to thwart her at every turn. I have a great deal of sympathy with this amendment, which she moved, as usual, with great passion. It is difficult to pick a figure that everyone can agree with; the amendment mentions £87 as acceptable for subsistence. It is even harder to do that when one is trying to balance one’s genuine concern for struggling parents with the cold necessity of working out what is affordable and practicable. I hope that my genuine concern is not in doubt. The figure of £87 that would be disregarded for lone parents is around the ball park of the numbers I have seen suggested. I believe that the Z2K Trust has calculated the subsistence level to be £64.30 a week, so an extra £22.70 would not seem excessive if there are children involved. But I now understand what the noble Baroness was saying, and that her ultimate objective is to have a £50 one.
I expect that the Minister will be able to furnish us with his department’s most up-to-date statistics, along with his reasons for resisting the amendment. However, I hope that they will not be too strong, as I agree with
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I was interested in the figures that the noble Baroness gave. I should like to know why a single parent is perhaps slightly disadvantaged in these cases. That said, I should like to examine the figures that she gave us; if her proposal is really close to cost-neutral and the Minister said that it would not be unreasonable in the terms of the Bill, I would be more favourably disposed towards the amendment. The noble Baroness will understand why I cannot go any further than that at the moment. However, parents do maintain responsibility for their children and when they can afford to pay for their childcare, they must continue to do so. The Minister has already told us that when parents cannot afford to pay for childcare, the jobcentre will pay for them. As with so many debates that we have had in Grand Committee, the same theme raises its head: much depends on getting the action plans right. Getting childcare arrangements sorted out to the satisfaction of parents is crucial to the success of the scheme. For that reason, all noble Lords will be thinking carefully about how to approach action plans, as this matter will be returned to with some gusto on Report.
What I have just said has very little to do with the finances behind the amendment, but I believe it to be true just the same. We should look at these two things together, as I have no doubt the Minister is about to do.
Lord McKenzie of Luton: I hope that I can give my noble friend more comfort on this amendment than on the previous one—although perhaps not total comfort; I do not want to raise her hopes unduly.
We announced in our response to the Gregg review that the department would test an improved financial incentive for parents with younger children to work less than 16 hours while on benefit in the progression-to-work pathfinders. On the question whether mini-jobs lead to other employment opportunities, research—which I think is the research to which my noble friend referred—shows that mini-jobs could play a role in engaging mothers in the labour market and allowing them to combine both caring for children and working. Mini-jobs may be appealing particularly to those who are further from the labour market, such as those with young children, or those who have a larger family and lack qualifications. Being in a mini-job helps them remain in employment. The impact of mini-jobs for couple-mothers is less clear. The evidence suggests that participation in mini-jobs tends to be a stable activity of couple-mothers.
As a result of our desire to test and improve financial incentive, we are proposing to introduce in the pathfinders an earnings disregard higher than the current £20 a week into income support for lone parents working below 16 hours a week. Our evaluation has indicated that an appropriate amount to test would be to increase the current disregard to £50 a week. The rationale is that it balances the increase in income that a lone parent receives when working on benefit when they obtain a mini-job and the need to ensure that lone
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As my noble friend pointed out at Second Reading, we would not want a lone parent to miss out on moving into work of 16 hours or more a week and accessing tax credits where they can. Some people are able to double their take-home minimum wage and make work really pay—again, as my noble friend instanced.
It is crucial to test the improved incentive of a £50 disregard within the pathfinder areas to try out work while on benefits. It will represent one way in which lone parents can be encouraged to take up work-related activity that helps them make the transition into full-time work as part of the progression-to-work pathfinders. The new amount also represents a relatively simple and clear increase in the disregard and a much improved incentive to try out work while on benefits, without allowing lone parents to receive significantly more by working fewer hours and staying on benefits than if they were working 16 hours or more.
The provision would not provide the step-progression that my noble friend referred to, because, at a £50 disregard, you are pretty much on the cusp of whether working just slightly under 16 hours equates to working 16 hours and being out of benefits and into the tax credits system. With the £50 disregard, there would be a level income for somebody working about eight hours through to working just under 16 hours. The provision does not deal with the step-progression that my noble friend sought, but seeks to test improved financial incentives for parents in mini-jobs, which is the key point that my noble friend was pressing.
We also feel that it is inappropriate to specify an amount in primary legislation, because we would have to debate a new amount every time we wanted to change it. That is best left to delegated legislation and the processes already in place; for example, scrutiny by the Social Security Advisory Committee. Having heard what we intend to do, I hope that my noble friend will feel able to withdraw the amendment.
Baroness Hollis of Heigham: First, I thank every member of the Committee who has taken part in this debate for their support. I understand the caution of the noble Lord, Lord Skelmersdale—some of us have been in that situation before—but the fact that he supports the amendment in principle and recognises the stumbling block of the 16 hours is welcome. Most of us would agree that in an ideal world, if one were doing a zero-sum game, one would indeed have a step system. But it is quite a profound policy haul because of the interface; therefore, we need time and reflection. We can get much of the same benefit by going for the simple disregard.
I was delighted at my noble friend’s response. He will not be surprised if I ask him some questions on timing, numbers and rollout. Would he regard this as being in place of work preparation—otherwise being work preparation itself? I would obviously be entirely satisfied with keeping six-monthly WFIs going so that one could keep track, so to speak.
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