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13 Oct 2011 : Column GC483

Grand Committee

Thursday, 13 October 2011.

Welfare Reform Bill

Bill Main Page
Copy of the Bill
Explanatory Notes
17th Report from DP Committee

Committee (4th Day)

2.01 pm

The Deputy Chairman of Committees (Baroness Harris of Richmond): My Lords, I apologise for my late appearance; the lift would not come.

If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes. I remind noble Lords of the new procedure in Grand Committee on this Bill for Divisions in the Chamber. Members who have registered with the Clerk of Parliaments may vote in their places in the Grand Committee, provided that they are present in the Grand Committee when the question is put in the Chamber after three minutes. Members who have not registered and who are not here at the three-minute mark will not be able to vote in their places. I also ask Members to make sure that they speak up and do not touch the microphones.

Clause 8 : Calculation of awards

Amendment 30A

Moved by Lord Kirkwood of Kirkhope

30A: Clause 8, page 4, line 21, at end insert-

"( ) The maximum amount to be awarded in each component part of the universal credit in section 1(3) shall be decided annually after consideration of independently researched minimum income standards both before and after the payment of housing costs and council tax."

Lord Kirkwood of Kirkhope: In advance of formally moving the amendment, it might be for the convenience of the Committee to pause on a procedural point. I am conscious that there is some pressure on Members to degroup big amendments. I certainly understand that. The noble Baroness, Lady Drake, in a very effective piece of advocacy in the previous sitting, degrouped six amendments when she was talking about exemptions from capital limits, making two groups of three. I assume that is because there is an expectation of a fuller ministerial response, which is absolutely understandable. The Committee had a very good debate on that. On the other hand, if we are to get to Clause 136, which I have an interest in getting to because the child maintenance provisions of the Bill are important, there is an advantage in having a big group of amendments around housing, for example. It allows for a wider debate to take place.

However, that is sensible for Members of the Committee only if the Minister of State is able to give at least some indication of the Government's position on each amendment in that group. The Committee is trying to understand where we will be by Report.

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This is only my idea-I have talked to nobody-but it seems sensible. I am happy if the common view is that we should all degroup everything, but we will need to be very disciplined in how we structure the debates. I must stop calling the Minister "the Minister of State", since it promotes him, although it is only a matter of time until he is promoted. Maybe I should offer to be his personal assistant and be the advance party on his visits to Warrington. His career is safe in my hands.

Baroness Hollis of Heigham: Such generosity.

Lord Kirkwood of Kirkhope: Indeed. If the Minister was able to say that a succinct, formal response from the Government to each individual amendment in a group could be made available, that would satisfy me. We might then also have a more coherent debate about some of the bigger subjects, which is what I think the Committee wants. I can see that that does not find favour with everybody-certainly not the noble Baroness, Lady Hollis-but perhaps the Minister could think about that. It is in our interests to get an understanding. I am very happy to play by whatever rules we all agree. As long as we get a commitment from the Minister on responses, then the bigger debates would satisfy me.

Lord McKenzie of Luton: We could do it one of two ways: either degroup into lots of little groups, or, in some respects-and I think we had some concerns about-

Lord Skelmersdale: Order. The question has not been put yet.

Lord McKenzie of Luton: He has not moved anything yet, has he?

Lord Kirkwood of Kirkhope: I moved the amendment. I am not making this argument in anticipation of these amendments, but this group of amendments could have been degrouped.

Lord McKenzie of Luton: I was just trying to be helpful, and give our point of view. Whether it is a bigger group or series of smaller groups is not so important to us, as long as the Minister is able to treat them as mini-groups so that we can have full responses and an iterative process as we address each of the sub-issues. If that is consistent with the noble Lord's view, that is a basis upon which we can move forward.

Lord Kirkwood of Kirkhope: I am formally moving Amendment 30A and speaking to Amendment 30B, both of which stand in my name. I think this discussion is appropriate at Clause 8, as we are considering the calculation of awards for universal credit, which as we all know is a big change, although one could argue that Clause 136, which deals with the commission that the Government are setting up, or Schedule 13 might be more appropriate places for some of the fine print about minimum income standards.

Amendments 30A and 30B seek the Government's reaction to two things. Amendment 30A would introduce a requirement to consider minimum income standards in the setting of the calculation of the awards for universal credit as the reform is rolled out. Amendment 30B

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relates to a more finely drawn point, about the situation of pregnant women. I have become more and more concerned about their situation as nutritional science has become more accurate about determining just how sensitive a period pregnancy is. This is particularly the case for low-income families and low-income pregnant mothers, and the children that are born to pregnant women in low-income families. I am concerned about how that rolls out for the life opportunities for the children and indeed for the mother.

First of all, I acknowledge that minimum income standards are not new. People are too young to remember but, in the mists of time, Sir Brandon Rhys Williams and Hermione Parker-veritable Conservative titans in this area of debate-were the first people who introduced me to the idea of minimum income standards. Recently, the Joseph Rowntree Foundation, particularly Donald Hirsch, and an organisation that will be no stranger to the noble Baroness, Lady Lister, namely the Centre for Research in Social Policy at Loughborough University-an excellent unit in an excellent university-have been promoting the advocacy of minimum income standards.

Why do we need minimum income standards? It occurs to me that, when we are having a public debate about social security policy generally, trying to get the metrics of the money involved is a very difficult thing. We talk about percentage upratings of benefits each year-2 per cent up, or 1.5 per cent down-or we talk about increase in real terms cash, which is often actually the most misleading thing of all as global sums of money are very difficult for ordinary people to understand. The public debate is harder as a result of that. Even if we talk about percentage GDP and future forecasts, forecasting of GDP is a very inexact science, so the metrics around all this misinform the public debate. In this country, we do not discuss seriously exactly how these things are working out-not even in the broadsheet press. Therefore, the question of adequacy needs to be addressed in a different way. I am suggesting minimum income standards as a different approach-an additional metric-that we might use to inform the process. In that regard, the amendment is very modest. All I am asking the Government to do is to weigh in the balance "after consideration", in the words of the amendment, the data that come from minimum income standards in order to inform the operating strategy going forward. That is very, very important.

Noble Lords will know that minimum income standards are pretty unique because they are based on survey evidence of what the public themselves feel is a modest but adequate income. They are quite instructive, because the public are very realistic about what a modest but adequate income is, and they reflect people's ability to participate in the societies in which they live. That means that they need occasional holidays, access to technical white goods and televisions, and perhaps even mobile phones. Therefore, when the public are asked via the methodology that is now very well developed-it was started by the Family Budget Unit in the mists of time but has now been developed by Donald Hirsch and his colleagues-they are quite realistic. That methodology is robust in making clear what the communities in which people live expect

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people to have access to. The research can be done to work out what individual family groups in individual regions of the country need in order to contribute positively to society.

I remember being very struck in 1999, when I first started studying this in any real depth-and it is a figure that stays with me-that an unemployed couple with two children on unemployment benefit were, under an MIS, left with £39 per week below what they needed. That was the benefit level in 1999 and it was for not just one or two weeks but week in, week out. When you think about that, it colours your understanding of how the important policies that we are deciding in this Bill affect other people.

I am absolutely not calling for minimum income standards of modest but adequate levels to be translated into benefits-of course, there would be huge work disincentives and I am not stupid. However, I think that access to this kind of data changes people's appreciation and understanding of the subject. I have two examples of that. I believe that the change from the minimum wage to the living wage, which we have seen in London-and the Mayor of London deserves great credit for this-has come about as a direct result of the kind of influence that minimum income standards can have on the general public debate. The other example goes back to the days of the Labour Government, when quite a lot of investment was put into entitlements for the retired population in our country. I think that that was partly informed by some of the work of the Select Committee, on which I sat, on minimum income standards for pensioners. As a result, pensioners as a group are better off relative to other benefit recipient groups. In my opinion, such data can be immensely influential in shaping how the policy goes forward.

The one thing that we must avoid in the introduction of the universal credit is trapping families in levels of benefit from which they cannot escape and which do not match a modest but adequate level of standard of life. Noble Lords will be looking at the recent IFS research, which shows the squeeze that is coming from a combination of rising prices and stagnating incomes. We can all see that. There is also the Shelter report on housing, and perhaps we will be referring to that when the Committee comes to the important group of amendments on housing. However, I want to make a very strong point about CPI. In terms of uprating, we are now in quite different territory using the consumer prices index. Lots of statistics could be used here but, for me, the most frightening one is that over the past decade the cost of a modest but adequate basket of goods has risen by 43 per cent. Over that same 10-year period, the consumer prices index has risen by 27 per cent. These are unsustainable gaps. We need to be really careful that we understand what is going on in individual household budgets, going forward. The minimum income standards for 2011, according to Donald Hirsch's latest work, would leave a single-earner couple with two children requiring a £31,600 pre-tax salary; and a single person would require £15,000 a year, at 2011 prices, to have a modest but adequate income. These are startling figures that we need to bear in mind in all our discussions on the Bill.

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2.15 pm

The final point I want to make relates to Amendment 30B on pregnancy. I was struck by the findings of the Marmot strategic review of health, published in 2010, entitled Fair Society, Healthy Lives. Under the conclusion "Policy objectives", the first objective advocated was a,

The principal policy recommendation is to:

"Develop and implement standards for minimum income for healthy living".

It goes on to talk about the inadequacies in general health but of health in pregnancy in particular. There is compelling evidence that pregnant women are not being properly looked after, particularly in low-income households. It prejudices the life chances of the infants and the mothers, at least regarding post-natal depression, and gives a very poor start for children being born in this country. In this day and age that is unacceptable.

I have a bit of a bee in my bonnet about this but it is a very important subject. It is a different approach and a different way of doing things, and it would be in the best interests of the community to bear these amendments in mind as we go through the rest of the Bill. I beg to move.

Baroness Sherlock: My Lords, my name is also on Amendment 30A and I support it. The amendment simply requires the Government to consider independently researched minimum income standards before deciding on the maximum amounts to be awarded in each component part of universal credit. Like the noble Lord, Lord Kirkwood of Kirkhope, and as the Minister will be relieved to know, I am not asking that the Government suddenly uprate benefits to the level of minimum income standards. However, the amendment is gently worded and asks simply for consideration of this matter, and I hope that that would be acceptable to any rational person, not least to such an incredibly rational person as the Minister; and perhaps we might see it coming back as a government amendment on Report. I look forward to that.

The noble Lord, Lord Kirkwood, gave us a good background into minimum income standards. Perhaps I may say that if he is going to have a bee in his bonnet, it is a good one to have, and I commend him. Long may it stay with him. I hope it buzzes around him for some years to come and does not sting him at all. One of the real benefits of minimum income standards and the way that the measure has been developed, which is unusual, is public involvement. It combines scientific research, and the JRF carried out good scientific research into the nutritional needs of families and worked out exactly what is needed for healthy living, and has looked at all the other things-the basket of goods that a family would need. It then sat down with members of the public, looked at different categories of family, and asked, "What do people need to have a modest income?". Interestingly, it is often found that the public are rather more generous than politicians are minded to be, perhaps because the public know exactly what it feels like-what goes into every day and putting a budget together. They are only too aware of how hard it is to make ends meet. That is one of the things that makes public involvement in minimum income standards helpful.

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The noble Lord, Lord Kirkwood, explained precisely what has happened to the cost of living over the past decade, compared with the minimum income standards. Certainly, the JRF has made the point that the earnings required to make ends meet have increased much faster than living costs, particularly for families with children. That is partly because child benefit has been frozen and tax credits reduced. It is also because tax credits helping low-income families to cover childcare have been cut. Noble Lords will have heard of two reports this week that give us even more cause for alarm. First, Wednesday's labour market statistics make pretty grim reading. We have all heard, I am sure, that more people are unemployed now than at any point since 1994. Youth unemployment is at 991,000, the worst it has ever been. Women's unemployment is more than 1 million, 1,069,000, the highest since 1988. The second report-the report from the Institute of Fiscal Studies, also funded by the JRF, which contained the latest poverty forecasts-is even more alarming.

On Tuesday, the noble Lord was kind enough to give us a glimpse of the impact assessment that he had just published. I was grateful to him for explaining to me-as someone who does not understand these things as well as he does-precisely what its forecasts were for what will happen to poverty. He kindly explained to us that he predicted that universal credit would lift 350,000 children and 550,000 working-age adults out of poverty. That is obviously after modelled behaviour on benefits. The IFS predicts that between the previous financial year and 2012-13, absolute poverty is likely to rise by 600,000 children and 800,000 working-age adults. The point is that universal credit will do its bit, but the IFS report states:

"However, the net direct effect of the coalition government's tax and benefit changes is to increase both absolute and relative poverty. This is because other changes, such as the switch from RPI- to CPI- indexation of means-tested benefits, more than offset the impact on poverty of Universal Credit".

The reason I raise this now is that the question of the adequacy of the level of financial support, which is embedded in universal benefit from the outset, will be fundamental to the way we address poverty over the next decade. The Minister has constantly urged us in briefings to focus on the architecture, not the detail. I will not follow him all the way: I am too much of an anorak to be willing to do that in its entirety, but if we are to focus on the architecture of universal credit we need to think about what is different about it from all previous benefit systems. One thing is that because it is a single system available to a whole range of people in different circumstances, it matters that we address questions of adequacy from the outset. I shall come back to that.

If we look at what families have described that they think people need, they are quite generous. I can hear some people saying: "Nobody said that benefits were meant to be cushy. Surely all you need are the basics to keep body and soul together". That takes us back to the philosophical purpose of the social security system. There are those who see social security solely as a means of protecting people from destitution-a kind of safety net. Arguably, it does not even do that adequately. If we look at the data about what it takes simply to have a healthy diet, as the noble Lord, Lord

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Kirkwood, pointed out, pregnant women cannot even get a healthy enough diet to ensure that their babies are born with a reasonable chance in life, so arguably it is not even doing its safety-net job. That also has implications for the next generation.

Leaving that aside for a moment, my concern is that the social security system in the past, and certainly not as it has developed now, has never just been about that. Beveridge never saw it solely as a safety net to protect people from destitution. The social security system is not the workhouse, and it never was. It is not the poorhouse, and it never was. It attempts to prevent people falling into destitution, but it also has a social insurance function. It has had that from the outset, in much the same way as the NHS has a social insurance function. Most healthy people happily pay taxes to support the NHS because they know that it is the hallmark of a civilised society that we look after other people who are sick; and we know that we may get sick and may well need it. There is a healthy dose of self-interest in that, and I encourage it. So it is with welfare. We support people who cannot work-because of illness, disability, unemployment, caring responsibilities or old age-because any of those things can happen to any of us. In fact, I very much hope that old age will happen to me, the alternative being even less palatable.

If we accept that all those things could happen, the point of rehearsing the argument is that we understand why it matters that benefit levels are set at a decent threshold. There are those who are unable to work, and they should clearly have a decent standard of living. There are those who could work, with help, and they should be given help to be able to move into work and develop within it. There are those who need to balance work with other responsibilities, and the system should make that possible. I think that the Minister is with me all the way on that: I hope that I see him nodding, but perhaps I need my eyes testing. Finally, there is a small group, statistics tell us, who simply do not want to work. There are plenty who want desperately to work but cannot find a job, but there is a small group who simply will not work. I suggest that that is the point at which conditionality is brought into play.

However, if the Minister is going to create a single system to cover all those people-and I commend him on trying to do that-we cannot use a tool of simply driving down the adequacy of benefit levels so low, to encourage a small minority into work, that it renders a range of other people unable to live a decent healthy life. That is a fundamental consequence of the architecture, not simply about the detail. It is important that, from the outset, universal credit is nuanced enough to take account of the very different circumstances in which people find themselves.

I suppose it is in that light that I urge the Minister to consider taking this amendment on, not because I would expect him to act on it now but because, if the Government are genuinely to build a new social security system for the next age, they need to be able to consider how they support for quite long periods people who may never be able to work, who are raising children and whose health and life chances could be impaired; we all know that the scarring effects of poverty in childhood are to be found throughout

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someone's life cycle. Would he consider this as a new measure against which we could judge whether benefit levels were adequate?

There was an interesting letter from Reverend Paul Nicolson of the Zacchaeus 2000 Trust in the Observer on 9 October. He notes that without a minimum income standard,

That chimes with my experience. If I talk to people with no experience of the benefit system, they often, if asked, significantly overestimate what benefit levels are and are often genuinely shocked when they find out what people are asked to live on. One of the things that this would do is help reconcile the interests of the population as a whole in supporting each other, and to look at justice as well as compassion on how well we support the poorest.

The Earl of Listowel: My Lords, I support both amendments. I shall concentrate on the issue of the isolation of parents in poverty and the effects that that has on possibly driving some isolated impoverished parents towards comfort in alcohol, cigarettes or other means of escape. I am thinking particularly of visits that I have made in the past to Barnardo's families in temporary accommodation provision and of when I have spoken to parents at children's centres. Research into families living in temporary accommodation identifies that, when parents become isolated, they are at great risk of moving into depression and then losing the capacity to care for their children. One of the benefits of things like the family temporary accommodation scheme, which brings families in those situations together and gives them support, or children's centres is that they allow people who might otherwise feel very isolated to join together, have care for their children, have coffee with each other, get support and feel that they are part of a community.

I was interested to hear the noble Lord, Lord Kirkwood, refer to mobile phones. That might seem a luxury but, if one is isolated and one has a family a long way from one's own community, it is a vital tool for keeping connected. One needs money for transport; one needs to get those two buses to get to the local community and to one's extended family.

My concern is that if we do not get this right, we put more pressure on those families and it is less easy for them to reach out to others and feel connected. The danger is that they may move towards a depressive state, and when mothers are in that state they are more likely to turn to, for example, alcohol for comfort. I have heard mothers say about smoking, "Well, it's my only comfort. This is how I get by, although I know it's bad for me". They may have less money to pay for cigarettes-there is another side to that. When they drink and smoke when they are pregnant, this has a bad impact on the foetus. Foetal alcohol syndrome is more and more recognised as a very adverse outcome for children in terms of their future mental health and development, and we know how appalling the impact is of smoking when pregnant. In particular, it lowers the birth weight of children, which limits their development later in life.

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All the other measures in the Bill, such as the underoccupation penalty and the cap on housing benefit payments, may put pressure on these vulnerable groups. It is right, as the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock, have said, that we research the impact of this on low-income families, and that we particularly consider women who are coming up to pregnancy or who are pregnant.

2.30 pm

Lord McAvoy: My Lords, I shall speak briefly to Amendment 30B, spoken to by the noble Lord, Lord Kirkwood of Kirkhope. He has recognised early on that to push or argue for a broad sweep of payments without research and without targeting is unreasonable-I do not think that it would happen anyway. Nevertheless, the noble Earl, Lord Listowel, has said much that I intended to say, so I shall restrict myself to saying that I totally agree with him about vulnerable women in particular. Without going into the broad issue of the place of women in society, we all surely accept that women in all strata of society do not get the full consideration and services that they should. I do not want to go into controversial territory, but I think that pregnant women, particularly in the vulnerable groups mentioned by previous speakers, are bombarded with other advice about pregnancy. They do not seem to be bombarded with advice on how to maximise their income or benefits to their unborn child-we all know the damage that can be done to unborn children by poor diet, smoking and all the rest of it.

Leaving aside grants and a heap of things that would cost a lot of money without achieving anything, does the Minister accept that we should target advice on that comparatively small vulnerable group and perhaps establish a greater level of knowledge about that sector of society? That could certainly be achieved with that little extra assistance. I am firmly in support of Amendment 30B.

The Lord Bishop of Wakefield: My Lords, I, too, should like to speak positively for these two amendments, Amendments 30A and 30B, from the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock. I commend the work that Paul Nicholson and the Zacchaeus 2000 Trust have done. There is some very important information there for all of us.

Last night, I spoke briefly on the Localism Bill about sustainable development, which is another term that all of us would want to speak in favour of but that not everyone wants to pin down. I referred to the south-eastern part of the diocese which I represent. In places such as Kinsley and Fitzwilliam, there is profound poverty, related almost directly to the collapse of the mining industry during the past 20 years, and significant worklessness. I take up the point made by the noble Lord, Lord Kirkwood, about work disincentives. This is an area of our diocese where we need to look in that direction and need to be careful about how we order welfare reform. Featherstone, well known to those of your Lordships who used to be fans of Rugby League and Eddie Waring, is a sad place now, being one of the most depressed and deprived parts of our part of Yorkshire. I think that I am right in saying that it has

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one of the lowest percentages of motor car ownership of anywhere in England, which is an indicator of the problems faced by areas such as that.

It therefore seems essential for us to focus on the question of minimum income. Our own General Synod, some 10 years ago now in July 2001 in a debate on the health of the poor, passed a motion which asked Her Majesty's Government to commission independent research which would lead to the identification of minimum income standards related to need and then bring forward the legislation that would put such minimum standards into effect. That was 10 years, and one Government, ago. The noble Lord, Lord Kirkwood, will be pleased to hear that the same sort of thing has been passed by the General Assembly of the Church of Scotland. Indeed, other bodies, not just church bodies, have made similar points.

It is not simply the sort of urban poverty that I have just been referring to in our part of the world, but rural poverty too. Immediately before my time in Yorkshire I spent eight years in Norfolk, and one of the things that I encountered, more than I ever imagined I would, was rural poverty. It is depressing that that is growing faster even than urban poverty due to the increased cost of fuel, increasingly limited public transport and the need to maintain a car.

Poverty is now hitting not only the unemployed but those on low wages. It is those very people who are often budgeting carefully to cover their costs and, through no fault of their own, find themselves in difficulties. A single unemployed person in a rural area now has only one-third of his or her cost of living covered by benefits, and that is just to get to a level of subsistence living. Indeed, an article in the Guardian today notes that the Family Budget Unit published groundbreaking research in 1999, 12 years ago now, that showed that the unemployment benefits of a couple with two children were £39 a week below a robust income needed for healthy living. That research was used in the London living wage by the GLA.

No Governments-I am taking us back now to 1999 and 2001-have published or adopted robust estimates of the weekly cost of healthy living like those now provided by the Joseph Rowntree Foundation, which have been based on the science of nutrition, the minimum weekly needs for fuel, clothing and transport and the opinions of the public as to reasonableness. We have already heard reference made to concern for pregnant women, which feeds straight into the area of nutrition and lifestyle. We also have concerns that the minimum level is set at a liveable rate so that, especially, people like mothers and pregnant women are able to get enough food adequately to feed their families. This seems to be another area, rather like the issue of sustainable development, where all of us would basically be in favour of these things but we would be very careful about ever stating what we meant by it. I understand why that might be on some occasions, because it could always mean that those who wished to proceed with litigation would try to find fault in an Act, but ultimately it will not do to talk about minimum income and sustainable development if we are not prepared to make it clear what we mean by that and use the information that we have-the background

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statistics-to take forward the social responses that we need. On those grounds, I support the amendments that we are focusing upon.

Baroness Lister of Burtersett: My Lords, I strongly support the amendments in the names of the noble Lord, Lord Kirkwood, and my noble friend Lady Sherlock. I should declare an interest, in a way, and the noble Lord referred to this: much of the work being done on minimum income standards has been done by the Centre for Research in Social Policy, my colleagues at Loughborough University. I pay tribute to them for all the work that they have done.

I have made this point before in the House, and I fear that I will probably make it again many times: we debate social security and it has been reformed endlessly-more times than some of us would prefer to remember-yet we never talk about the adequacy of these benefits that we are reforming or debating. That is central to what we should be talking about. Minimum income standards provide a tool to assess that adequacy. As the noble Lord said, no one is arguing that we should pay benefits tomorrow at the levels set by minimum income standards; other factors come into account when deciding what benefit levels should be. As Donald Hirsch has argued, though, it is a standard to which society might aspire.

As the noble Lord has said, the standard is not simply dreamt up in another era by academics such as myself; it is based on what members of the public believe is a minimum socially acceptable standard of living. In drawing up the standards, we are talking about not wants but needs. Members of the public are clear that needs are not just about basic food, clothes and shelter-keeping body and soul together, as my noble friend said-but about the ability to participate in society. This is a crucial human need.

The benefits for people of working age fall far short of the minimum income standard. The latest upratings carried out by the Centre for Research in Social Policy for 2011 showed that the gap between benefit levels and minimum income standards has widened over the past three years. According to the centre for research, the rate for a single adult on income support or jobseeker's allowance is only 41 per cent-or two-fifths-of the minimum income standard.

That is particularly important when we come to the second amendment, Amendment 30B, in relation to pregnant women. Mention has already been made of the Marmot report. Again, I have to declare an interest, as I was a member of one of the working groups that fed into the Marmot review. The report said:

"Support to families needs to start prenatally to improve the health and well-being of mothers. There are strong associations between the health of mothers and the health of babies and equally strong associations between the health of mothers and their socioeconomic circumstances. This means that early intervention before birth is as critical as giving ongoing support during their child's early years".

The report goes on to say:

"Central to this is ensuring that women have an adequate level of income and other material support during pregnancy to enable them to maintain a good level of health and nutrition. This requirement needs to be taken into account when considering minimum income levels for healthy living".

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The previous Government started to address this question-not sufficiently in my view, but they did start to address it. However, unfortunately the present Government have reversed the policies put forward by the previous Government. According to Sam Royston of Family Action, an unemployed woman aged 18 to 25 receiving £51.85 a week and an unemployed woman aged 26 to 60 receiving £64.45 a week in jobseeker's allowance and ESA will lose £1,735 during pregnancy and in the first year of a child's life as a result of this loss of benefits.

Other research carried out by Jonathan Bradshaw and Emese Mayhew in connection with the Millennium Cohort Study underlines the association between poverty and low birth weight, which in turn is associated with a higher risk of mortality and poor health. In their study, they warn that,

My noble friend Lady Sherlock quoted a recent letter from the Reverend Paul Nicolson in the Guardian. As she said, that letter ends:

"Therefore comfortable citizens with adequate incomes have no standards against which to judge the justice of the level of their taxation that supplements the incomes of the poorest both in and out of employment".

We are those comfortable citizens with adequate incomes, and it behoves us to ensure that those standards are written into the legislation that we are passing.

Baroness Hollins: My Lords, I add my support to these amendments-in particular, Amendment 30B. I think I am right in saying that the average age for first conception has gone up from 23 to 28 in the past 30 years. One reason for that is the cost of living and young people's concerns about whether they can afford to have a baby.

The majority of mothers with dependent children are now in part-time or full-time employment. The president of the Royal College of Obstetricians and Gynaecologists attracted some publicity when he commented that the best time to have a baby is in your early 20s. It is the best time biologically and emotionally. The older you are when you have your first child, or indeed when you have any child, the greater the number of complications. Midwives really enjoy having young mothers come into the maternity unit because they know that the mothers will be able to get up and walk out with their babies much more easily than older mothers. These are important points.

There is good evidence that anxiety and depression during pregnancy is associated with emotional and behavioural problems in the child-not just in the early years; there is an association between depression in teenagers and mothers who are anxious or depressed. That anxiety is increased when there are worries about the economics of having a family. There is plenty of evidence that, in order to look after the young people of the future, we need to make sure that they have the best possible start in life.

2.45 pm

Lord Northbourne: My Lords, I should like to delay the Committee for only two minutes by quoting from Supporting Families in the FoundationYears, published

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this autumn by Sarah Teather. I am speaking to Amendment 30B. In that policy statement, that Minister says:

"The Government is clear that all young children, whatever their background or current circumstances, deserve the best possible start in life and must be given the opportunity to fulfil their potential. But this is not just about doing the best for individual children and families. A strong focus on the first few years of children's lives leads to huge economic, social and emotional benefits later on, both for individuals and for society as a whole".

The executive summary states:

"The foundation years are critically important for children and their families ... the Government's vision ... is for everyone who commissions, leads and delivers services for mothers and fathers during pregnancy and for very young children, to the age of five".

The summary continues by saying that the policy,

Therefore, if the noble Lord were to reject this amendment, the Government would be speaking with forked tongues. I have a further important quote from the summary to the report. It states:

"Children's health is strongly influenced by what happens in the womb and the first two years of life, and the mother's health and wellbeing and health behaviours in pregnancy, including smoking, nutrition and obesity".

I rest my case.

Baroness Hollis of Heigham: My Lords, perhaps I may ask a simple question of the Minister, following my noble friend's powerful argument, and draw on the IFS report. The IFS states:

"Absolute and relative child poverty are forecast to be 23% and 24% in 2020-21 respectively. These compare to the targets of 5% and 10%, set out in the Child Poverty Act (2010) and passed with cross-party support".

As my noble friend stated clearly, the report made clear that the main reason for that is that although universal credit may lift children up, the cap on benefit increases resulting from the change from RPI to CPI will more than outweigh the gains of universal credit.

The argument at the time for going from RPI down to CPI, as I understood it, was that the main difference between the two levels of benefit, which would run at anywhere between 2 per cent and 4 per cent a year, was housing costs, that most pensioners do not have housing costs because they are either on full HB or their mortgage is paid, and that working-age people dependent on benefits are likely to be simultaneously supported in their housing needs by HB. The Government's position was that it was therefore reasonable to go from RPI to CPI. Can the Minister help the Committee by telling us how many people on universal credit he estimates will in future not get any housing help? This may include people with modest mortgages who will therefore be fully exposed to the rigors of CPI for their housing costs, without any protection coming in from the parallel resource of HB.

Baroness Turner of Camden: My Lords, this debate seems to have drifted into the area of wages. As we all know, the previous Government introduced the minimum wage and, more recently, a number of us have been

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talking about the living wage. On the other hand, a number of people do not even get the minimum wage. Are the Government concerned to ensure that the minimum wage conditions, at least, are enforced when considering what should be paid by way of benefits? There seems no reason why employers who pay very poor wages should be subsidised by the taxpayer, because we have to support those inadequate wages through the benefits system.

Lord McKenzie of Luton: My Lords, I am conscious that I have not spoken to our three amendments in the group, although the subject matter has effectively been covered. Our amendments simply provide for the amounts in Clauses 9, 10 and 12 to be subject to an annual uprating. The purpose of that is to give the Minister an opportunity to set out the Government's current position, particularly in the light of the issue raised by several noble Lords today of the IFS report: the fact that all the benefits that can flow from universal credit will be swamped by the negative effects of the tax and benefit changes, the most pernicious of which is the uprating by CPI. It will be interesting to hear from the Minister on that point.

I was fascinated by this debate because it takes us back 18 months to when we were debating the Child Poverty Bill. I see the noble Baroness, Lady Thomas, nod. Indeed, the noble Lord, Lord Kirkwood, tabled a very similar amendment then. To be fair, he was more ambitious-his amendment would have required minimum income standards to be introduced. I see that he is easier on the coalition Government.

Contrary to what I would really like to do, I cannot say from the Front Bench today that we would call for minimum income standards to be immediately applied to the benefits system; I would not survive long if I did.

I touch on Amendment 30B and issues about maternal health and health in pregnancy. I note that the health in pregnancy grant was stopped from 1 January this year and that the Sure Start maternity grant has been reduced to the first child only. I would be interested to hear from the Minister what compensates for the withdrawal of those benefits in addressing the problems that have been identified.

When we debated this issue during the passage of the Child Poverty Bill, the answer from the ministerial brief was that there are real issues about calculation and work incentives. We pointed out at that stage that the Child Poverty Bill contained four measures to identify and try to tackle poverty: relative low income, absolute low income, combined low income and material deprivation, and persistent poverty. All of the focus has been on relative or absolute low income and those targets.

At the time, the noble Lord, Lord Freud, asked me whether the Government considered 60 per cent of median income to be enough for families to live on. I am tempted to push the question back to him and ask his view on that. Our debate was not only about income transfers; there were the other building blocks out of poverty: education, health, housing and skills, including parenting skills, on which the noble Lord, Lord Northbourne, in particular, pressed us.

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Having thought about it since, and having listened to the debate today, it seems to me that what the noble Lord is asking is not unreasonable. It is not for minimum income standards to be introduced but for there to be some calibration of them so that we can take stock of what is happening.

In different ways, several noble Lords made the point that the universal credit has to be all things to all people, whether they are in work, out of work, do not want to work, are moving closer to the labour market, have health issues which prevent them working or are in urban or rural poverty-which have different components, as the right reverend Prelate the Bishop of Wakefield identified.

Somehow we have to fit all that into single benefit. We have acknowledged that the Government seek to support those who are more likely to be on benefits long-term because of health problems; that is reflected in the benefit rates proposed. However, that addresses just one component of the issue. It will be fundamentally difficult to address all the separate issues.

There is also an issue, which has been touched on, about people being on benefit for a short time as opposed to a long time. I guess we could all at a pinch survive at benefit levels for a week, for as long as we do not have to buy new shoes, buy a new suit, go out to dinner-

Baroness Hollis of Heigham: A washing machine.

Lord McKenzie of Luton: -or buy a washing machine. However, the grinding awfulness of poverty, week in, week out, should and does concern us.

My noble friends Lady Lister and Lady Sherlock and the noble Lord, Lord Kirkwood, made the point that minimum income standards are needs-based, and based on people's perception. That seems hugely important as well.

There is no easy answer to this, but the fundamental proposition being asked for is that we should calibrate what minimum income standards are, and have regard to those or have them to hand when benefit levels are assessed. That does not seem unreasonable. It is a world away from saying that benefit levels should be at minimum income standards, for all the reasons that we recognise. I am sure that the noble Lord will touch on the deficit and how it has to be addressed; perhaps he will not-

Baroness Hollis of Heigham: That would be a first.

Lord McKenzie of Luton: It would be a first. There is a real point here, particularly because universal credit has to cover all these circumstances. Even if we had equivalent levels of benefit under a split system, at least there would be the prospect of different levels of benefit; that does not really apply to universal credit. For all the good things that could come from universal credit, difficulties come with it and the noble Lord, Lord Kirkwood, has certainly identified one by generating the debate, which has been quite powerful.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, in recent years there has been growing interest in minimum income standards and a belief that some people have insufficient income for healthy living.

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That in turn has led to pressure to increase support for those on benefit. We debated minimum income standards in great detail a couple of years ago now on the Child Poverty Act, and I recognise many of the participants from that debate-and many of the arguments.

We will continue to take note and look carefully at the evidence from research on minimum income standards. However, the limitations of that approach have been acknowledged by the Joseph Rowntree Foundation, which has stated that the minimum income standard should not be taken as a poverty threshold. There is no single answer to the question, "How much is enough for a family to live on?". Different families have different needs and wants and will spend their income in different ways. I also need to point out the central conundrum around this approach. There are various other approaches to absolute poverty and relative poverty, which are the measures that this House, this Government and the previous Government use in a legislative context to address these issues. In that context, I respond to the noble Lord, Lord McKenzie, that, after much debate, we have decided that one key measure to look at is 60 per cent of the median rate. Clearly, that is a different measure, albeit a useful and important one, as I said.

3 pm

As the noble Lord, Lord Kirkwood, acknowledged, there is an inevitable trade-off between the level of benefits and incentives to work. Raising benefit levels would undoubtedly hamper the work-incentive effects which universal credit is designed to produce. We target extra resources towards people in greater need, and will continue to do so under universal credit, through additional elements and disregards for people with limited capability for work, caring responsibilities and children.

Apart from the impact on work incentives, there would be significant financial implications if benefits were to be linked in a more formal way to minimum income standards. I shall not irritate Members of the Committee by talking about the deficit-well, not here. However, even a slight increase in rates of benefits would be very expensive. The noble Baroness, Lady Sherlock, referred to the IFS report on the effects of the universal credit. She will, I know, excuse me for concentrating briefly on the effects of the universal credit on child poverty. I was pleased to see that the estimate that the IFS made was a reduction in the number of children in child poverty by 450,000, which is rather more than the 350,000 that we had calculated. To give noble Lords a measure of what we are talking about, the costs of increasing the couple and single rates by £10 a week would be around £1.6 billion.

Amendment 30B relates to minimum income needs of women before conception and while pregnant. Universal credit is designed to provide for the individual needs of claimants, whether or not they make the choice to have children. Furthermore, it would simply not be possible to indentify the group of claimants intending to have children for the purposes of the benefits system. I am not sure that it would be desirable or fair to consider paying them a higher level of benefit, even if we could.

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In response to the question of the noble Lord, Lord McKenzie, about Sure Start maternity grants, I can tell him that we targeted our money there, as he will remember from our debates on this, where the costs were highest, which is when the first child arrives. To provide an alternative source of financial help for some families which are having their second or subsequent child, we are taking powers in the Welfare Reform Bill to extend the purpose for which a Social Fund budgeting loan can be awarded to include maternity needs.

I turn to the point of the noble Lord, Lord Kirkwood, about the Marmot review. I will deal with the point more generally. I do not accept that there is a well defined link between benefit levels and living healthily. This covers a much wider set of public health issues which I do not believe will be solved simply by paying out more benefits, even if the financial situation allowed for this. I appreciate the comments of the noble Earl, Lord Listowel. One must recognise that individuals are free to allocate resources within the household however they choose.

I turn to Amendments 30BA, 30D and 50B. These amendments seek to link three sets of regulation-making provisions to arrangements for annual uprating. These are regulations under Clause 9 on the standard allowance, under Clause 10 on payments made in respect of children or qualifying young people and under Clause 12 on payments made for particular needs and circumstances.

Provision for the uprating of universal credit is already made in the Bill. Schedule 2(22) contains an amendment to Section 150 of the Social Security Administration Act 1992 to include universal credit as a benefit to which the provisions of that section apply. This means that each year the Secretary of State must review and, if appropriate, uprate universal credit.

The CPI is a headline measure of inflation in Great Britain. It is the most appropriate measure of the general level of prices and social security benefits. Many noble Lords will remember our debate on what the CPI and the RPI measure. I do not intend to repeat that. The main difference is that the CPI has the substitution formula effect, of how people trade down as prices move differentially for similar products. The intention of benefit and pension indexation is to protect purchasing power, not to give the highest increase possible.

We will apply the same arrangements to universal credit as we currently apply to working-age benefits generally.

Baroness Hollis of Heigham: The Minister may move onto this, in which case I apologise, but could he help me on a housing point? As I recall, CPI has only 4 to 6 per cent-I cannot remember if it is 4 per cent or 6 per cent-in it for housing, which is somewhat less than CPI allows for meals in restaurants. Can he help us on that point?

Lord Freud: CPI currently has a much lower measure for housing. I will respond to her question-which I was about to come to-about the proportion. There will be roughly 8.8 million households on universal credit. Currently roughly 5 million households are on housing benefit. That is the proportion. However,

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I think it is probably safer for me to write to the noble Lady with precise figures, to allow her to do her own sums in this area.

Baroness Hollis of Heigham: Given that generous offer, would he be kind enough to include in his reply the figures that would have been the case had we remained with RPI-in other words, the gross and net losses from going down from RPI to CPI for these separate groups? Obviously this is a detail that needs precision.

Lord Freud: The safest thing I can say is that if I can do that in a straightforward way, I will. With those assurances, I urge the noble Lord to withdraw the amendment.

Baroness Lister of Burtersett: My Lords, I may have misheard the Minister, and I apologise to him if I did, but did he say that he did not accept that benefit levels have an effect on healthy living? That is what I heard him say. It is obviously not the only factor affecting healthy living, but Sir Michael Marmot, who is one of the world's authorities on public health, made it very clear that benefit levels are a crucial element in healthy living. If people cannot feed their children properly and if they are stressed because of trying to make ends meet, it has profound effect on their health.

Lord Freud: My Lords, it is easier to go back to what the noble Lord, Lord McAvoy, said. Healthy living is tied to a large number of issues, of which benefit levels are one, but better information on nutrition, smoking, alcohol, exercise, obesity and so on all are also vital matters in this area. That is the point that I was aiming to make.

The Earl of Listowel: My Lords, I thank the Minister for his reply. I know that he is concerned about the immediate, fearful financial position that we all find ourselves in, but, in time, we will move out of this world stagnation. In that future world, there will be fierce competition across the world, and we will need in this country a workforce of young people who are as productive as possible. The evidence is clear: every £1 spent in the early years on early intervention will save £7 in adulthood. We need to think about the short term, but if we are going to be a viable economy in the future, we also have to think about the long term and maintaining as far as possible effective early intervention even in these difficult times. Can we not think about doing practical things? For instance, could not pregnant women have access to free bus passes? I understand from previous discussions that that is not currently the case. In terms of mobile telephony, are there not practical things that we could do to work with the telecommunications industry to ensure that pregnant mothers and lone parents have some special concessions? As a concerned society, recognising as Iain Duncan Smith and others have done that early intervention is crucial to the future success of this country, why do we not try to think of some practical things we can do without producing the disincentives that the Minister spoke about.

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Lord Freud:We are not taking this area lightly. Iain Duncan Smith has set up a Cabinet committee for social justice which is looking at interventions across the range. It is taking these matters extraordinarily seriously but on a much more holistic basis. I can assure the noble Earl and all noble Lords here that we are not tidying this issue away; we know that it is all-important. We are trying to get a set of interventions right across the piece that will make a difference.

Lord McKenzie of Luton: Can the noble Lord help me on one further point on research, which is what the noble Lord's amendment seeks? The Child Poverty Act provided a right for the Child Poverty Commission to request research of the Secretary of State-we had a debate at the time as to whether it should be funded, which I think that the noble Lord, Lord Kirkwood, pressed on us. The formulation at the end of the day was that the commission should have a right to request and that, if the Secretary of State did not agree or was not going to carry it out, he had to say why. I think that those provisions are disappearing. I know that the Child Poverty Commission will become the Social Mobility and Child Poverty Commission. Does that new commission have the right to request or the ability to conduct research around issues of poverty?

Lord Freud: I suggest to the noble Lord that we might discuss that issue when we come to it, when it will have to be handled in a comprehensive way.

Lord Kirkwood of Kirkhope: My Lords, I am grateful to the Minister for that response, particularly on that last point. For my money, I cannot see why the Social Mobility and Child Poverty Commission could not be tasked-maybe not annually, but certainly frequently-with doing the MIS research.

However, if this is a useful and important measure that informs the debate, why should we have to rely on the generosity of the Joseph Rowntree Foundation and its researchers? This is an important part of public policy. I know that the Government are looking at all of these areas carefully; I am satisfied of that. This sounds like a threat-I am determined to stay best friends with the Minister so I will not threaten him-but if we tabled an amendment at Report that that research should be part of the commission's work, I think that he would lose if he tried to oppose it. I hope that he will reflect on that.

I am determined to get to Clause 136, when we may return to this, but I am very grateful to colleagues. We have had a good debate. Adequacy is a broad point which will always be with us. I am satisfied that we have had a sensible discussion on the issue and I am happy to withdraw the amendment.

Amendment 30A withdrawn.

Amendment 30B not moved.

Clause 8 agreed.

Clause 9: Standard allowance

Amendment 30BA not moved.

Clause 9 agreed.

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3.15 pm

Clause 10: Responsibility for children and young persons

Amendment 30BAA

Moved by Lord McKenzie of Luton

30BAA: Clause 10, page 4, line 32, after "is" insert "primarily"

Lord McKenzie of Luton: I shall speak also to our other amendments in the group, Amendments 30C, 31A and 33A and will comment on the others in due course.

I start with a confession: the reason we introduced the amendment was to be able to get a more sensible grouping arrangement which separated amounts in respect of children and qualifying young people who are disabled from the broader but clearly important issue of childcare. I accept that the inclusion of "primarily" is unnecessary, but it gives us the opportunity to probe what is likely to be in the regulations in this regard.

The existing rules have a variety of criteria: income-based JSA or ESA is different from housing benefit and council tax benefit. Perhaps the Minister can tell us what formulation is to be adopted for universal credit and why. He may say that it is in the draft regulations that we already have, in which case he might kindly direct us to which of the 100-odd pages it is on.

The amendments are otherwise focused on additional amounts included in the calculation of the universal credit award for a child or qualifying young person who is disabled. Amendment 30C requires an additional amount to be included, and Amendment 31A provides for a further additional amount in the case of severe disability.

Amendment 33A replicates an amendment that we moved in the other place and is a duplicate of Amendment 33. It would provide a safety net by requiring that amounts included should not be less than additional support provided for disabled children prior to the introduction of universal credit. The Government state that they intend that the support for disabled children be "more generous"-that is their description; I am not sure that I agree with it-but at a higher level than for those who are not disabled. Obviously, we support that. For adults, the assessment is to be built on the framework of the WCA, which we discussed last week and will doubtless return to many times during the course of the Committee.

There are to be two additions for adults: an amount worth £26.75 equivalent to the work-related activity component of ESA; and a support component equivalent, which will eventually rise to £74 a week from the current ESA support rate of £32.

That the WCA is to be the gateway for those additions for adults is something to which we shall return, but the Government propose to equalise additions for children with those for adults. We understand that eligibility for children will remain linked to the rates of DLA that they receive, and that DLA for children will remain as is and there are no early plans to replace it with PIP. The Minister by nodding his head has perhaps confirmed that.

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We note, support and welcome the inclusion of children who are severely visually impaired in those for whom a higher addition is payable. However, overall, the Minister will be aware that the proposals have caused considerable alarm. While the higher rate will bring an extra £1.42 per week for claimants, receipt of the lower rate will cause a loss of some £26 per week for out-of-work and low-income families. The higher rate adult amount of £74 is, in stages, to be phased in. Can the Minister confirm that there will not be any phasing in of the severely disabled children's component? Every Disabled Child Matters asserts:

"Childhood disability is frequently a 'trigger event' for poverty ... The two main factors that contribute to child poverty ... are the considerable additional and ongoing expenses related to bringing up a disabled child, and the barriers to entering work and resulting income penalties".

Families with disabled children are less likely to have two working adults, due to their caring responsibilities, and a Carers UK analysis of the 2001 census data found that among families with a sick or disabled child 38 per cent had two working adults, compared with 55 per cent of families generally. Contact a Family's 2010 survey, Counting the Cost, demonstrated that almost a quarter, 23 per cent, of families with disabled children are going without heating, and one in seven-14 per cent-are going without food.

Families with disabled children are currently able to access two additional means-tested disability payments. The purpose of these benefits is to provide financial support to families on low-incomes or who are out of work. These additions are intended to reflect not the extra costs experienced by families with disabled children met through DLA, but the costs, such as those for extra heating, that were met under the system of supplementary benefits. Families who receive DLA and qualify for the child tax credit are able to access the disability element of child tax credit. It is mirrored for those in receipt of income support and income-based jobseeker's allowance, housing benefit and council tax benefit as the disabled child premium, and is worth £2,715 a year-equivalent to £52 a week. Each child registered blind in a family receiving the high-rate component of DLA can also receive the severe disability element of child tax credit-mirrored for those in receipt of income support and other means-tested benefits such as the enhanced disability premium of child support. This is paid in addition to the disability element and provides an additional £1,095 per year for each child receiving the higher-rate care component of DLA. These premiums are crucial tools for families with disabled children to meet the significantly higher outgoings that they have to pay out of a household income that is often reduced by additional barriers to work.

In terms of numbers, some 200,000 children will potentially lose £26 per week as a result of these changes, and 120,000 children will receive an additional £1.42 per week. It is understood that there are two justifications for this drop in support: to align the adult and child systems for simplicity and to ensure a smooth transition for disabled young people moving from child to adult welfare systems. Every Disabled Child Matters would certainly contest this. It does not believe that the aligning of additions within the universal credit for children and adults makes the system simpler.

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These additions have different purposes. The additions for disabled adults are to help them meet the higher costs they face due to barriers to employment and the higher costs for people living on their own. The additions for families with disabled children are to meet the higher costs they face that are not met under DLA. These include higher utility bills, additional laundry requirements, funding safety measures within the household, buying additional clothing for their child, and meeting their child's specific dietary requirements-to name just a few examples. Additionally, the consequence of aligning these benefits will be a reduction in the household income of many thousands of families with disabled children, who are already at very high risk of living in poverty.

Transitional protection is of little comfort to the hundreds of thousands of families with disabled children who risk having their premiums substantially dropped in the future when this transitional protection may end. This policy also fails to support families with disabled children to meet the additional costs of care that they face in the future and to help them remain out of poverty. Specifically, on transitional protection, will the Minister say something about the changes in circumstances that would remove it? Would it be a change in the circumstances of any member of the claimant unit, or would it relate only to the child or children for whom these additional premiums are paid? It is a crucial question in understanding what changes to the life of the family could result from this dramatic drop in support for young disabled children. I beg to move.

Baroness Thomas of Winchester: My Lords, I shall speak to Amendment 32 in this group, which seeks to add children on the middle-rate care component of DLA to those receiving the higher disability addition. In tabling his amendment, trumping mine, the noble Lord, Lord McKenzie, had first go at the subject and explained a little about how the disability additions work. Therefore, I have been able to cut out half of my speech, which is probably an extremely good thing.

I understand why the Government are keen to get rid of different disability regimes and want to align to disability additions for adults and children, so that they are targeted more on those in the support group of ESA. However, in doing so they will leave many families with disabled children much poorer. The rationale is for simplification and, as we have heard from the noble Lord, Lord McKenzie, to smooth the transition from childhood to adulthood when the child is 16. Therefore, universal credit will have just two disability additions-a higher one and a lower one. As we have heard, for adults to qualify for the higher disability addition in universal credit, they must be in the support group of ESA. For children to qualify for the higher disability addition in UC, they have either to be severely visually impaired or receive the highest rate of the DLA care component, which means that they need not only frequent care or continual supervision by day but prolonged or repeated care during the night. They will also qualify if they have a terminal illness.

As the noble Lord said-it is worth repeating-the higher disability addition is worth £77. However, if a disabled child does not need continual supervision at

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night, the family receives only £25.95 a week. To highlight the arbitrary nature of how the disability additions will work in practice, I point out that children who are registered blind will be entitled to £77 a week, while children with Down's syndrome will receive £26 a week, for example.

Disabled adults, on the other hand, may qualify for the lower disability addition if they are in the work-related activity group of ESA or even in low-paid work, which would give them an extra £26.75 a week. This lower addition also entitles them to an earnings disregard of £40 in universal credit, which is worth £26 to them and gives them in total an extra £53 a week. This is in stark contrast to the £25.95 that disabled children's families may receive. Thus, the families of disabled children may lose a great deal of money, perhaps as much as £1,400 a year, which is surely the last thing that anybody wants. Is it really right, for the sake of simplification and smoothing the transition from childhood to adulthood, for poor families to be made even poorer?

3.30 pm

As we have heard, it is well known that families with disabled children are disproportionately likely to live in poverty, due to unavoidable additional costs such as heating and utility bills being higher and additional laundry costs. The Children's Society reckons that as many as 40 per cent of disabled children live in poverty. This new policy is set to make things worse. The most troubling extra cost at the moment is sky-high energy costs. Heating a home to the warmth needed for many disabled children is getting more and more expensive. A mother and son, both with myotonic dystrophy, said last year that the cost of keeping their house warm was really high. Their last gas bill was £1,005 and they are now struggling to raise £148 every month to pay for it. Another family had to have an electric shower removed because of the cost.

High energy costs are not the only extra expenses. Homes may need specialist safety measures. Disabled children may need special toys, sensory equipment, a certain diet and many other items. Other costs that families with children who are not necessarily on the highest DLA care component have to meet may include suitable specialist powered wheelchairs, which are estimated by the Joseph Patrick Trust to cost around £17,500. This means that families often have to finance or part-finance this essential equipment themselves. Another piece of equipment that is often not funded by the NHS is a cough assist machine, which costs approximately £5,000. Many people think that the cost of such specialised pieces of equipment is automatically met by the state but this is absolutely not the case.

Transport is another important area that is just as expensive for families whose disabled child receives only the middle-rate care component, rather than the higher rate. Often only taxis are available, and specially adapted taxis are much more expensive than normal cars.

There is another point that is mentioned only by the specialist lobby groups. This policy will particularly severely affect families where there is a genetic likelihood of children inheriting a particular disease. In these families there is often more than one disabled child.

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Amendment 32 would include children who receive the middle-rate care component of DLA in the higher addition group. There is, in truth, often not much difference between the two groups. This is recognised elsewhere in the benefits system, where the higher and middle-rate care components are always considered together. Amendment 33 would simply provide the same financial awards in UC as in the current system.

I turn briefly to Amendment 50, which would restore the position whereby severe disability premium is paid to disabled people living alone who are entitled to DLA care at the middle or highest rate, claim a means-tested benefit and have no one claiming carer's allowance but providing care. It is currently worth £53.65 per week and is both an in and out-of-work benefit. Disabled people living alone face a wide range of extra costs, as I know. It is particularly relevant to young carers, who are not eligible to apply for carer's allowance. I wonder what the result was of the discussion that the Minister, Chris Grayling, said that he would have on this very subject with the Minister for Disabled People, Maria Miller. Perhaps the Minister will tell us. Those who currently receive the severe disability premium and are not in the support group of ESA are particularly hard hit. There are, by definition, a relatively small number of people who receive this benefit. I urge the Government to consider their position.

Lord Wigley: My Lords, at Second Reading I had an opportunity to refer to my and my wife's personal circumstances. We had two severely disabled children and I talked about the tremendous financial difference that that made-something that we came to realise only after we had lost both boys. At that time, it probably amounted to a difference of £100 a month, which would be at least £500 a month in today's money. The additional costs very often cannot be easily identified, although several of them have been referred to. There are not only the costs of caring, diet, extra clothing and perennial cleaning but those of helping with siblings, who will not have their parents' time and attention, the cost of extra transport, which inevitably will be necessary, and the cost of the loss of the opportunity to earn, which is usually incurred by the mother, as was the case in our family. All that adds up, and it was only after our two boys died that I came to realise the enormity of those costs. It was only after that-I had been in Parliament for 11 years then-that I was able to start getting out of the red at the bank.

If that was the case in our circumstances-we were very well off in terms of having a parliamentary income, my wife being able to do a certain amount of work on a freelance basis as a musician, and having my parents living next door, who could help us to cope at times when it would otherwise have been impossible-that makes me wonder how somebody who is dependent on benefits can possibly cope with the sort of figures that we are talking about. A moment ago we heard the figure of £26, which cannot start to address that sort of cost agenda. I implore the Minister to look at these amendments, even if the wording is inadequate, and to come back on Report with amendments that safeguard the position of these most vulnerable people.

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Lord Rix: My Lords, I cannot for the life of me think why I did not add my name to as many of these amendments as possible, although one or two are somewhat overcrowded. Unfortunately, I am not able to read very clearly at the moment and therefore I was probably not able to read the Marshalled List correctly. However, I wholeheartedly support all the amendments as well as what my noble friend Lord Wigley had to say. I have known my noble friend for many, many years, and I know from past experience that the conditions that he has just explained apply to many parents with disabled children, particularly-unhappily, still-those with learning disabled children. The costs, the strain and the stress on parents with a learning disabled daughter or son are tremendous, and I fully support every one of these amendments. I can only apologise to those who tabled them that I did not add my name in the first place.

Baroness Lister of Burtersett: My Lords, the noble Lord, Lord Wigley, has spoken very movingly from personal experience. I think that he is pointing to the importance of taking account of the costs of disability. All the poverty figures that we have underestimate poverty among disabled people because they do not take account of the kind of costs to which the noble Lord referred. This relates back to our previous discussion. Minimum income standards have to be different for people with disabilities because of the costs associated with disability.

I simply want to add to the debate by referring to a piece of research which I think reinforces the point, although perhaps not as powerfully as the noble Lord has done. It came winging into my e-mail box a few days ago from the Children's Society. It has reported that four in 10 disabled children live in relative income poverty once the additional cost of their disability is accounted for. This means that 320,000 disabled children are living in low-income families, lacking the resources they need to engage in the kinds of normal social activities that other children take for granted. This, again, goes back to our previous discussion. This shocking statistic means that disabled children are disproportionately likely to live in poverty when compared with around three in 10 of all children. The society goes on to say that it is extremely concerned that this figure could become worse as a result of cuts to support for disabled children to be introduced under the universal credit. These cuts will mean that around 100,000 disabled children will lose up to £27 per week under the new benefits system. It strongly recommends that the Government reconsider this proposal, which could have a damaging impact on an already vulnerable group. I do not know whether the Minister has seen this research yet. I hope that he will look at it and, in the light of it, reconsider what is being proposed.

Lord Boswell of Aynho: My Lords, for a number of years I was the chairman of my party's disability group. I think I know two things for certain in an uncertain world. The first is that the Minister is in a tremendous bind with public expenditure; we cannot forget that. The second, as has been so eloquently said by the noble Lord, Lord Wigley, and others, is that people with disabled children face quite remarkable

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additional costs, which are often difficult to calculate. We have to try to bring those two points together in the most humane way we can. Perhaps I could gloss it for the Minister by saying that if there is any degree of flexibility within the envelope he has, this is perhaps an area where it would be most effectively applied and would do the most good.

I bring to the Committee's attention a matter of comparatively recent provenance. I have taken over from my noble friend Lord Newton of Braintree-just yesterday-the chair of the advisory group of the charity National Energy Action. There is a particularly acute situation with energy prices rising so quickly. The Committee will have seen estimates that have been made during the course of the week about the likely impact of the rise in energy prices on families generally. Significant numbers may find themselves in fuel poverty shortly, unless the price situation is mitigated or reversed.

It is self-evident to anyone who has looked at this area that where there are disabled people in a household, whether adults or children, people tend to face higher costs. That fact plays into the current situation. There are no easy answers here, and I appreciate the Minister's position. He should see what he can do now. Given the prospective appraisal that he gave at Second Reading, if and when there is some opportunity for mitigation, even if it cannot be done now, it would be appropriate to exercise a little flexibility and support in this area.

I have been fortunate, personally, in not having had children with significant disabilities that I have had to wrestle with. It is difficult enough raising a family in straightforward and relatively privileged conditions. It is very much more difficult when those circumstances do not apply.

Baroness Wilkins: My Lords, noble Lords have explained the situation more than adequately. It seems extraordinary, since we know that disabled children are already living in poverty and it has been a scandal for years, that we should be discussing the possibility that they should be even more deprived than they are at the moment. I hope that the noble Lord will look at this issue again. In looking for justifications for the policy, the idea that it should make transition easier for young disabled people moving into adulthood also seems extraordinary when many of those disabled children will not actually have the chance of reaching adulthood. I do hope that he will reconsider.

Baroness Hollins: My Lords, I want to add briefly to the comments of the noble Lord, Lord Wigley, about the additional costs of having a disabled child. A factor that needs to be borne in mind is that many children with learning disabilities and with autism may have challenging behaviour. There are considerable costs associated with having a child with behaviour that may lead, for example, to the destruction of property. There are additional costs in keeping both the child and the home safe. The Challenging Behaviour Foundation would want me to make that comment.

3.45 pm

Baroness Tyler of Enfield: My Lords, I shall speak to Amendment 50, to which my name is also attached. The amendment has already been spoken to by my

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noble friend Lady Thomas of Winchester, so I do not need to go into a great deal of detail to explain it. The basic purpose of the amendment, and what I want to do, is to highlight the plight of young carers. The amendment would provide enhanced protection to them, essentially, by replicating the current severe disability premium within the universal credit for severely disabled lone parents.

This is an important area. Without this enhanced support for disabled adults with no adult carer to look after them, in practice too many young children become those carers and that can often result in a young child within a family looking after a mother, a father or another adult very much at the expense of their own educational and personal development. I was involved in this area of work a few years ago and I know that the reality is that carers as young as eight can get involved in what are essentially very adult caring responsibilities. That can include having responsibility for making meals, washing and cleaning but also for assisting very personal tasks such as personal washing, bathing and using the lavatory. These are not things that young children should be forced to do.

DWP figures indicate that some 25,000 lone parents are currently in receipt of a severe disability premium, meaning that more than 40,000 children are likely to be affected. I am concerned that the cut in support will place substantial pressure on these children to take on additional inappropriate care responsibilities of the sort that I have explained, simply because the parent can no longer afford to pay for the additional costs of care for themselves.

I recognise that one of the key benefits of the universal credit is to simplify the welfare system, something that I support, and it is true that disability premiums paid within the current welfare system can sometimes produce what feels like an overly complicated system, but I contend that simplification of the system must not override social justice for the most vulnerable and indeed the very idea of fairness. Although the disability premiums can be complicated, they provide vital support for tens of thousands of families in these difficult situations that I have described.

This is a very different argument from those around work incentives, and I am sure that none of us in the Committee wants to see young children taking on these difficult and inappropriate adult caring responsibilities. It is for this reason that a way must be found to prevent that.

Lord Newton of Braintree: My Lords, I sought to intervene earlier and I shall do so only briefly in a way that the Minister might find more helpful than some of my interventions. I had rather looked forward to saying that 24 hours is a long time in politics; you make one speech in favour of the Government and you are allowed out on licence. I am not going to use that licence, though.

I will not disguise the fact that I have a lot of sympathy with the sort of situation described by the noble Lord, Lord Wigley, and recognised by others, not least the position of young carers, to which we have not given enough attention over the years. I hope that the Minister will listen sympathetically to the

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cause that is being advanced, but from experience I have to say-this is where I am going to be more helpful than some people might have liked-I am not sure that such things can be dealt with through a universal provision because the circumstances vary so much from household to household and from case to case. It may be that these rates and the definitions of who gets what rate are wrong, but there is an awful lot in this, including cases like the one cited by the noble Lord, that need a different and more specific kind of attention and require help to be provided in another way than can be provided under a universal, broadly defined benefit. I thought I ought to say that before the Minister got to his feet.

Lord Freud: My Lords, there is great knowledge in this Room about this issue. I am grateful for the deeply thoughtful contributions that we have heard. Perhaps it will help if I start by explaining our overall approach to disability additions for both adults and children, based on the twin objectives of simplicity and affordability. First, on simplicity, instead of seven different components within the current system of benefits and tax credits for adults, and two further rates and child tax credit for disabled children, we intend to have two rates, one higher and one lower, for both adults and children. Before tax credits were introduced, the rates for children and adults were aligned, so the idea of common rates for adults and children is not new. It also makes sense in smoothing transitions to adulthood.

Secondly, on affordability, we spend over £40 billion a year in total on disabled people and their services. We will continue to provide substantial support through universal credit. Indeed, we are not making any savings on our restructuring of disability additions. All the savings are being reinvested in the higher rate which, at around £77 a week, will be higher than both the existing support components for adults and the elements for severely disabled children in child tax credit. Under our proposals, families will receive more than £4,500 a year for a disabled child on the lower rate, and more than £7,000 for a severely disabled child on the higher rate. We are also extending eligibility for the higher rate to children registered blind.

To respond to the important point made by the noble Baroness, Lady Lister, as noble Lords know, we expect a significant impact on child and adult poverty as a result of increased take-up due to the simplicity of universal credit as well as entitlement changes. The transitional protection will ensure that, where rates are lower than now, there will be no cash losers at the point of change where circumstances remain the same. In response to the query of the noble Lord, Lord McKenzie, we are currently working through the key definitions, which we will of course make available when they are completed.

The noble Lord asked what happens to the rate for severely disabled children while the higher rate for adults is being phased in. We published in our briefing note on 12 September that the rate for severely disabled adults will be increased to £77 over time, but the initial rate for severely disabled children will not be less than the child tax credit equivalent. For a time, while the new adult rate is being phased in, the child rate is likely to be higher.

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Lord McKenzie of Luton: I am not sure if I follow that. Are we saying that over the transitional period the child rate may be higher, but it will not necessarily have reached the eventual rate at which they will be aligned?

Lord Freud: In practice, the difference between what we are proposing and the child tax credit rate is not very large. We are not talking about a high difference as we move up. I am not making a commitment to go straight to the proposed rate immediately, but we are not talking about large figures here.

Turning to the specific amendments, Amendment 30C would limit the flexibility that we seek under Clause 10 to determine the criteria and amounts payable in respect of a disabled child. We have made clear our commitment to providing additional amounts to disabled children, so I hope that noble Lords will agree that the amendment is not needed.

Amendment 31A would specify an additional element for a severely disabled child. We have already stated in the policy briefing note that there will be a higher amount for the most severely disabled children, and I have reiterated that commitment today, so that amendment is also unnecessary.

Amendment 32 would entail a cost of about £250 million a year and mean that we could not afford to pay the increased amount-the illustrative £77 a week-for severely disabled children and adults. If we widened eligibility, we would have to reduce the amount for severely disabled adults and children by around £10 a week for it to be affordable.

The noble Baroness, Lady Thomas, asked about the relationship between additions and disregards. The purpose of the disregards is to make work pay for the household. If the parent of a disabled child is working, they will qualify for a disregard at the appropriate rate for a couple or a lone parent. Our latest assumptions about earnings disregards mean that families with children would always have a disregard at least as high as the disability disregard.

Amendments 33 and 33A would mean retaining the existing system for disabled child rates and so would not allow us to achieve simplification and alignment, about which I spoke earlier. I strongly urge noble Lords to agree that our approach to simplify and align the extra payment for disabled children with the extra payments for a disabled adult is the right one.

Turning to Amendment 49A, the definition we have used in Clause 12 is drawn from carers allowance legislation. I assure the noble Lord that eligibility for the carer element covers situations where the disabled person is a child, as the carers allowance does now, and that we intend the meaning of "severely disabled people" to reflect eligibility for the highest rates of the DLA care component, so we feel that the amendment is unnecessary.

Amendment 50 would add a further element to the calculation of universal credit for this group of severely disabled person. That is similar to the definition of the severe disability premium in the current system. I have explained that simplification is one of the key aims. There have always been significant questions about the rationale for the severe disability premium and

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significant problems with its administration. Further, it does not make sense to continue with a situation where some additions for adults are awarded on the basis of the work capability assessment and others are passported from the DLA. We believe that it is right to target additional support for severely disabled people on universal credit on cases where the work capability assessment establishes that there is limited capability for work or work-related activity. Severely disabled people have the least opportunity to work. It is, after all, a work-related benefit.

Noble Lords have also raised the impact on young carers of abolishing the disability premium. The severe disability premium was never intended as a support for young carers and would not be paid in circumstances where a non-dependent, such as an older brother or sister, was living in a household. We are sympathetic to young carers. In the other place, Ministers gave a commitment to look at the specific position of young carers. However, consistent with the carers strategy published last November, we believe that support for young carers should focus on achieving their educational and employment potential, having the same opportunities as other young people, without assuming that they should always be a carer. The amendment would return us to the complexity of the existing system.

To respond specifically to my noble friends Lady Thomas and Lady Tyler, it is the role of local authorities and social services to support young people with caring responsibilities to achieve their potential, and £2.2 billion of funding is provided each year to support vulnerable children and their families. An extra £1.5 million has been made available to support young carers.

4 pm

Baroness Thomas of Winchester: My Lords, perhaps I may intervene at this point to say that we know that the reality of the situation is that many families or disabled adults rely on young carers to do precisely the sort of jobs that my noble friend spoke about. Local authorities' budgets are so tight now that it is no wonder that a lot of families have simply given up on local authority carers.

Lord Freud: My Lords, the direction of travel is the one that my noble friend Lord Newton was indicating. It is just not appropriate to have a system to deal with these very difficult social problems. When we have an inchoate system, as we do now, people adjust around it. That kind of partial set of solutions does not work in a coherent system. We will end up having to address particular problems properly, which is what this Government are very keen to do. It will not be appropriate to go on running a system with patches when we introduce the universal credit.

Lord Newton of Braintree: Perhaps I may intervene briefly. I know that I am upsetting the people who thought that I was their friend but I think that what I have to say is right. If the problem is a shortage of money for discretionary spending by local authorities, tailored to people's specific circumstances, then we should address that problem. I am sorry to say that in my view the problem cannot be solved through a universal benefit system.

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The Earl of Listowel: My Lords, I thank the Minister for this opportunity to put a brief question to him. I share the concern that in the real world at the moment local authorities and social work departments are so stretched that they are finding it difficult to meet their duties properly and that, unfortunately, the new arrangement may not work out as we would all wish. It may be very sensible for this approach to be taken but in the real world it may not work. Will the Minister undertake to monitor the impact of this change on young carers? Can he give us a snapshot of how it is now and how it will be in two years' time so that we can see that the new arrangement is working satisfactorily and that we should not have worried?

Baroness Hollis of Heigham: Will the Minister also ensure that the current expenditure on the severe disability premium, which covers the situation of young carers, is transferred to local authorities as a ring-fenced grant for exactly that purpose, thus meeting the concerns expressed by the noble Lord, Lord Newton?

Lord Freud: As noble Lords will know, I am not in a position to make those kinds of specific commitments, as I think noble Lords around the table know. However, these are real issues. We are conscious of them and are worrying about them. They are very broad issues and I will talk about them with my colleagues in the DCLG. With regard to having a formal process of assessment after two years, as noble Lords know, the universal credit will come in over a number of years starting in October 2013. Clearly there will be time to look at the impacts of its introduction and we will be looking at it very closely. One thing that I am hoping to discuss in the near future is how we will examine and improve the system the whole time, and I hope that a lot of noble Lords will be enthusiastic about that.

Finally, Amendment 30BAA would add "primarily" in reference to who has responsibility for a child. The draft illustrative regulations on universal credit elements, recently issued, contain draft provisions on responsibility for a child or young person. These illustrative regulations draw on existing rules in child tax credit and housing benefit. The main test is whether a child or young person normally lives with the claimant.

I apologise to your Lordships if that response was a little lengthy but I hope that the explanations and assurances I have given will satisfy the noble Lord and that, as a result, he will withdraw the amendment.

Baroness Sherlock: Before my noble friend rises to speak, can the Minister provide some clarification on something he just said? He mentioned that children who are registered blind will automatically be put on to the higher rate. I am sure that other noble Lords have received the briefing from Every Disabled Child Matters in which there is a question I should like the Minister to help me understand-being gentle with me as this is not, by some way, my specialist area. Every Disabled Child Matters states that children with Down's syndrome often receive middle-rate care awards, and children with cerebral palsy might receive higher-rate mobility allowance only and lower-rate care. Can the Minister explain the rationale for children who are

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registered blind being on the higher rate, while other children who may also have very high care costs are on the lower rate?

Lord Freud: My Lords, our direction of travel here is towards far more specific assessment because one can be categorised with a particular ailment or disability but there may be a wide difference in functional capability-whether in a child or adult. It is a matter of assessing the individual to establish the right level of support.

Lord McKenzie of Luton: My Lords, I usually try to thank the Minister when he has responded to a debate. I am not quite sure what I have to thank him for on this occasion. We have not heard anything that addresses the issues we have raised. We have heard powerful contributions from noble Lords about the extra costs involved when disabled children are in the family. Yet we hang onto the mantra of simplicity. I think it was the noble Baroness, Lady Tyler, who said, "Simplification, yes; but not at the expense of social justice". I certainly support that view.

The noble Lord, Lord Boswell, invited the Minister at least to recognise that when finance is improved this should be an area to be addressed. We did not have even that nuance from the Minister. I am not as experienced at reading the nuances as my noble friend Lady Lister, who is now an expert in these matters. She may advise me otherwise but I did not hear any movement on that.

The issue around relying on local authorities is, frankly, a cop-out. Every noble Lord here knows the strain that local authorities are under, and unless there were guarantees around ring-fenced funding, which the Government have increasingly set their face against, we know what will happen if additional funding were to be put in. Local authorities are being asked to deal with issues that the Government themselves shy away from. That is profoundly unfair. I am sure that this is an issue to which we will return on Report. I beg leave to withdraw the amendment.

Amendment 30BAA withdrawn

Lord De Mauley: My Lords, I suggest that this would be an appropriate moment to have a break and that we reconvene at 4.23 pm.

4.08 pm

Sitting suspended.

4.23 pm

Amendment 30BB

Moved by Baroness Tyler of Enfield

30BB: Clause 10, page 4, line 32, at end insert-

"( ) In calculating the amount included for each child or qualifying adult consideration must be given to any differences in the level of childcare costs between different areas."

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Baroness Tyler of Enfield: My Lords, in moving Amendment 30BB I should explain that this is the first time that I have moved an amendment in Committee. I therefore ask for noble Lords' forbearance if I am not as au fait with the procedural niceties as I ought to be. I pay tribute to the hugely impressive expertise around this Table in relation to the benefits system. I recognise that, in comparison, my own expertise is somewhat modest.

This amendment concerns childcare. In saying that, I recognise that the childcare landscape has changed substantially since our original amendment was tabled. The Government's announcement that an extra £300 million will be made available for childcare is hugely welcome and I pay tribute to the Minister for his role in that. This additional funding to address the acute difficulties faced by families who are taking the first steps in moving into work is much needed. Certainly, having spoken last week to a number of charities which have campaigned long and hard on this issue, I know how pleased they were with that outcome.

So far, and quite understandably, there has not been much detail about precisely how the money will be spent. I looked with interest at annexe 1 to the impact assessment. Paragraphs 14 to 17 gave a little detail but it would be very welcome if the Minister could give any further detail in this area.

The purpose of the amendment is to draw attention to the impact of this extra funding in areas with high-sometimes very high-childcare costs. There is considerable regional variation in the costs of childcare. My particular concern is that without increasing the threshold in high-cost areas, this very welcome additional funding may have little impact on incentivising families with two or more children to move into work or to extend the hours that they work. Ministers have said throughout this exercise that the welfare system should boil down to a basic contract: work pays; being out of work does not. I strongly support this principle. However, for many larger families in areas with very high childcare costs, this contract barely holds.

I shall illustrate the point about the scale of some of these regional variations with reference to some recent research that was commissioned by London Councils. The research shows that under the current universal credit proposals, London families with two or more children where both parents work will be at least £1,500 per year worse off than their counterparts in other parts of the UK.

I use the example of London because it is where I live and the place I am most familiar with; it is also where the problem is most acute. However, I am conscious that I do not want to be accused of being too London-centric-something that we heard last week in Committee-and I know that the same issue applies equally in other parts of the country that have high childcare costs. I have one other statistic. The same research shows that childcare costs in London are estimated to be 43 per cent higher than in the north- west. Is it not right that disparities on this scale should be recognised in some way in the universal credit?

I contend that childcare costs could be organised in the same way as housing support is currently managed, by using broad market areas. Indeed, for the purposes

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of support for housing costs, there are 16 areas in London. Could those not provide a basis for ensuring that actual costs were reflected? That could ensure that the provisions were put into effect in an efficient and cost-effective way. My basic feeling is that, if it can be done for housing, why can it not be done for childcare too?

To recap, the aim of the amendment is twofold. First, it would ensure that in the calculation of the benefit account was taken of the amount of childcare support available under universal credit and the welcome addition of new money, which will vary according to the childcare costs in different areas; and, secondly, it would ensure that, through universal credit, childcare support included holiday and wraparound care for school- age children-things such as top-up times with nurseries, provisions at breakfast class and that sort of thing.

The very nub of my argument here is that universal credit should ensure that families in areas of high childcare costs have the same incentives to work as those in areas of lower cost, and we should find a way to do that. I beg to move.

Baroness Turner of Camden: My Lords, I support the amendment. As a matter of fact, I have received a note from the TUC on this item. It says that its most pressing and significant concern is about the design of the universal credit and how it will reform support for childcare costs. It says that the Daycare Trust's 2011 childcare cost survey found that in the past year childcare costs have increased by more than the average wage, and that the average yearly expenditure for 25 hours of nursery care per week for a child under two is more than £5,000 in England and Scotland and more than £4,700 in Wales. As has already been pointed out by the mover of the amendment, there is a substantial difference across various localities.

At the time of writing, the Government's final plans are still not clear. Until 6 April this year, the childcare element of working tax credit allowed for up to 80 per cent of the eligible costs-up to £175 a week for one child and £300 for more than one. This has been cut from 70 per cent of eligible costs up to the same limits.

Until April, couples with one child in childcare would receive £140 support. The first option that the Government have in mind would reduce the maximum that they could receive to £87.50. The second option being considered by the Government would reduce the maximum to £80 for couples with more than one child in eligible childcare. Maximum support would fall from £240 in April 2010 to £147 in the first option and £120 in the second option. We would be grateful to know whether the Government have made up their mind on the couple of options that have apparently been under consideration.

There has been some publicity recently, I am sad to say, about the fact that a number of women who already have jobs are considering giving them up and moving back to looking after their families at home because, they say, the childcare costs are too considerable for them to cope with. One hopes that this does not happen, particularly against the background of a lot of unemployment among women. The unemployment rates for women, which, as everyone knows, have been

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publicised in the past few days, have risen substantially, and we are very sorry to hear about that. It becomes even more necessary that the Government ensure that the childcare costs available to the working mother are sufficient for her to happily leave her family and her child at home in proper care and not give up her work in order to look after her children, which may be a pressure on her in the current economic circumstances. I support the amendment.

4.30 pm

Lord Kirkwood of Kirkhope: My Lords, I speak to Amendment 51, which is in my name. I concur with my noble friend Lady Tyler: this £300 million announcement has changed the situation that we were facing previously, and I congratulate the Minister on his part in bringing that about.

I shall restrict my remarks to a couple of technical points about the £300 million regarding how it will be implemented, the timescale, and whether it will be available to benefit claimants under the existing system or whether it will not be available until universal credit is rolled out. That is important to clarify. Existing claimants who are working fewer than 16 hours would like to know how quickly they will be able to get their hands on that money.

I have a question relating to the £20 billion implementation fund, which I have never really understood. I understand that the £300 million has been taken from that, which is fine as far as it goes. Is there a breakdown of the implementation fund? I know that as regards DEL and AME there is some quite nifty footwork concerning spending to save, which I support. However, it would be helpful if the Minister could say something about the implementation fund. For example, if we were taking this £300 million-which is a significant sum of money-from, say, agile computing in Warrington, then I would be less happy about that. The Minister gets the point, I think. It may be that this is a moveable feast but, if he could say anything about the implementation fund and where the £300 million has come from, that would be icing on the cake. This is good news, which I welcome. We can now proceed with more confidence in the area of childcare. I look forward to the Minister's reply.

Lord Wigley:My Lords, I concur entirely with the noble Baroness who has moved the amendment that it is the intention of all of us to enable people to get back to work. That must be the goal. I accept entirely what she says about the higher costs that exist in London compared with Wales, although probably within Wales itself there is a great range as well-comparing, for example, Cardiff with the valleys or the rural areas.

The other element which comes into the question when people are deciding whether they can afford to work is the amount of money that they can receive from their work. That varies enormously as well. GVA per head in Kensington & Chelsea is nine times greater than the GVA per head in Anglesey, and that information brings the message home. These dimensions also need to be taken on board. We are moving in the right direction. It is a question of how one gets a formula to address all these variables.

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Baroness Sherlock: My Lords, I shall follow up the questions raised by the noble Lord, Lord Kirkwood of Kirkhope. I should be very grateful if the Minister could explain in a little more detail what the transition arrangements will be. In particular, what will the migration arrangements be? Has he made any decisions about either the migration timetable or the migration order? That information would help us to understand the question of the £300 million and how far it will go. Like the noble Lord, Lord Kirkwood, I was rather confused as to how what sounded to me like a DEL spend could in fact be applied to something that would seem on the face of it to be an AME spend. I realise that this may be a question about working out the total cost within the envelope of a single spending review period, and that may be the deal that the Minister has done with the Treasury. In that case, I am glad to hear it. However, how far can £300 million go in AME? What concessions has he had to make on that about the time it starts, to whom it is applied and when it finishes?

Baroness Hayter of Kentish Town: My Lords, I congratulate the noble Baroness, Lady Tyler, on moving her first amendment, following the first amendment moved by my noble friend Lady Lister, who is not in her place now. I think that the noble Baroness somewhat misled us when she said that her expertise was modest; it clearly is not.

As noble Lords have said, childcare is not simply an issue for parents, enabling them to go out to work while their children are well looked after. It is key to the Government's commitment to make work pay, and the driver behind their plans in the Bill. It is also, quite clearly, right that work should benefit a family financially-including, of course, through the proper payment of wages, as my noble friend Lady Turner said in an earlier debate and my noble friend Lord Wigley just referred to.

An adequate system of meeting childcare costs is also essential in addition to the issue of wages. That is why Labour invested so significantly in childcare. The Daycare Trust, which has already been mentioned, recognises that:

"There has been significant investment in childcare over the last decade and the number of full daycare places has doubled".

Under Labour, because tax credits paid 80 per cent of childcare costs, which added to the disregard for childcare costs in housing benefit, those families who were claiming housing benefit effectively had 95 per cent of the relevant childcare bill met. Now there will be only 70 per cent and, as there will be only one subsidy for childcare costs under the universal credit, the extra uplift for the lowest earners will not be available. So while we join the noble Baroness, Lady Tyler, in welcoming the Government's additional £300 million for childcare, and I mean that very warmly, our understanding is that this is to be spent on extending the current tax credits to those working any hours-that is, from one hour up to 16 hours-not on helping those already in receipt of such childcare help. Some clarification on that and an answer to the questions posed by the noble Lord, Lord Kirkwood, would be helpful.

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The universal credit will meet up to 70 per cent of childcare costs-up to £175 for one child and £300 for two or more children. That support will be available to all claimant families who qualify, regardless of how many hours they work. I assume that the figure of £300 million was put together on the basis of assumptions about those numbers, but it would be a help to see that.

There is a problem with what has been proposed, not least in places such as London where even part-time childcare can cost £113 per week. The OECD has shown that Britain has some of the most expensive childcare in the world and has identified that this causes significant disincentives to work for parents on middle incomes as well as low incomes. Among families in severe poverty, nearly half had to cut back on food in order to afford childcare. More than half said that they were, or would be, no better off working, once childcare was paid for. Therefore, the question which has to be asked about the reduction to 70 per cent is: what will the effect be on work incentives?

The new impact assessment includes childcare in its estimates of winners and losers but goes on to say:

"For the purpose of work incentives analysis, childcare support is excluded from the baseline and Universal Credit model".

However, given that childcare forms a critical part of work incentives for families with children, perhaps the Minister can explain why that particular formula has been used. Again, I quote the Daycare Trust. It uses modelling from Family Action and states:

"We believe that 80 per cent of costs covered is the minimum amount to ensure positive work incentives for parents".

That is based on calculations carried out by Family Action, which show that even effective marginal deduction rates for a working family paying income tax and national insurance, with childcare costs of 80p for each additional pound earned, would be 100 per cent if only 70 per cent of childcare costs were covered. However, if 80 per cent of childcare were covered, the marginal deduction rate would fall to 92 per cent. Those are a lot of figures but basically you lose it all if only 70 per cent of childcare costs is covered due to NI and tax, and it would be reduced to 92 per cent if only 80 per cent of childcare costs were covered.

It is unclear at the moment whether the Government have found a way of compensating those low earners who will lose out because of the loss of the additional subsidy for childcare costs that exists at the moment in housing benefit and council tax benefit. Are they part of the substantial proportion of families who will see a lower entitlement under universal credit?

The impact assessment that we have seen says that under universal credit 17 per cent of lone parents will rent, 40 per cent of lone parents will not be renting, 12 per cent of couples will rent and 48 per cent of couples will not be renting. That adds up to 27 per cent of all households-that is, 2 million people-who will see a lower entitlement under universal credit. Twenty-seven per cent of all households will see a lower entitlement under universal credit, 38 per cent will see a higher entitlement and 35 per cent will see no change. That is a large proportion who will see a lower entitlement. That, of course, relates only to universal credit; it does not include the other effects of the Bill,

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such as the underoccupation rules, the benefit cap or other changes. Therefore, although I say thank you very much for the £300 million, I am like Oliver Twist and we will ask for more.

I shall comment briefly on Amendment 31, spoken to by the noble Baroness, Lady Tyler, specifying that childcare should be localised. We absolutely understand the reasoning behind this amendment, not least because childcare costs are so much higher in London, as the noble Baroness said. Some initiatives were taken under Labour to run pilots that would help parents to meet these costs. However, let us be honest: the real problem for parents in London is the lack of work. As my noble friend Lady Sherlock said earlier, unemployment has reached a 17-year high. I repeat: 17 years. I wonder why 1994 sounds familiar. Yes, we had a Conservative Government. Well, congratulations to this Conservative Government, who have taken just 17 months to get back to their previous record.

This time, London has particularly been hit. Very often in the past London was shielded from the worst of recessions but now unemployment has hit it particularly hard. I am sorry to my noble friends from the north behind me who are always looking over my shoulder, but we do have a problem in London. The number of people in employment there fell by 34,000 in the previous quarter. Unemployment rose by 28,000 to reach 425,000. The number of people claiming jobseeker's allowance increased by 1,600 on the previous month.

4.45 pm

Within London there are particular areas of great disadvantage. In Bethnal Green and Bow there are nearly 11 people chasing every job, in Camberwell and Peckham there are 25 and in Croydon there are 15. This means, first, that there is downward pressure on wages; secondly, that people have to travel further to find work, which is expensive in London; and, thirdly, of particular relevance to this amendment, that such longer journeys mean that childcare is needed for more hours per day-this in a city with among the most expensive childcare in the world. While we might not agree with the amendment, which would remove certainty, clarity and some simplicity from the Bill, we understand the pressure for it. Instead, we ask the Minister to outline how he expects to help Londoners and those in other high-cost areas back into work, and, especially, to provide a plan B to ensure that the economy plays its part in providing jobs for willing citizens.

Lord Freud: My Lords, I thank noble Lords for their amendments, which raise several important points about how we intend to support people with formal childcare costs in universal credit. I will, however, keep to the specifics and not make general comments about employment and growth strategies. I am sure that we will have other opportunities to discuss that and I do not think noble Lords want to hear it from me.

I am pleased that noble Lords welcomed the statement made last week by the Secretary of State, Iain Duncan Smith, and the Deputy Prime Minister, Nick Clegg, on childcare. We had already committed to allocating the same amount of money to childcare support as is

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provided by the current system. The spending envelope for childcare and universal credit was ring-fenced at £2 billion, which is the forecast spend for the current system in 2014-15. However, we have now made £300 million more funding available for childcare in universal credit, given that we know how important childcare is in helping parents to work.

My noble friend Lord Kirkwood asked where this money came from and whether I could do a line by line. I regret that I cannot do a line by line; that is not how it works. We had an envelope and there were a huge number of changes in assumptions. On the first big reworking of the figures there was money available. That was the amount and we took the political decision that this was the best place to use it. I know, from discussing other issues around this Table, that people want a bit of money for this, a bit for that and a bit for the other. We took the decision that this was the best place to use this extra money.

In response to my noble friend Lady Tyler, who I congratulate on her first amendment, working families will be able to recover 70 per cent of monthly childcare costs up to £760 for one child or £1,300 for two or more children, which is equivalent to the current arrangements in tax credits of £175 for one child and £300 for two or more children per week. It will support our aim of ensuring that work will pay for all families.

Lord Wigley: Will the Minister assure us that circumstances where there are twins, when costs are surprisingly high because the same problems arise with two children who are of the same age and need individual care, were taken into account when the figure for one child and the figure for two or more were determined? I declare an interest as a grandfather of twins.

Lord Freud: I hope that I am answering this right and that I have not missed some subtle point, but if there are two twins they will be treated as two children. Does the noble Lord mean two sets? No, one set of twins will be treated as two children and therefore the £300 rate would apply, not the £175.

Lord Wigley: I will not overegg this, but say that the second and third child are twins. There will be a ceiling on how much is available, but the cost of looking after twins is more than the cost of looking after a child who may be two years older than the younger and is more responsible. One almost needs two sets of eyes to keep them under control.

Lord Freud: I confess that I do not think we have elaborated to that level. We are in the position where we have the proposals to maintain effectively the same balance between one, two or more.

Lord McAvoy: Would the same apply to triplets?

Lord Freud: I am running out of fingers to count on. I am sure that I shall make some dreadful mistakes and commit huge amounts of money if I am not very careful, so I shall now withdraw on this issue. I make the general point that we have found this money now. Let us hope that times are better in future; we are

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doing all we can to make them so, although I will not go into that. These are political decisions for the Government of the day to make about where one wants to put one's money.

We know from the current system that our proposals should enable parents to work full-time if they choose. Paying a higher proportion of the costs is simply unaffordable without significantly reducing the maximum limits. We had a balance between the percentage and the amount that we had to play with, and we took that decision. The cost of moving to 80 per cent, which was urged by the noble Baroness, Lady Hayter, is estimated to be £400 million on top of the £300 million that we have now injected into the system. I will not be unpleasant enough to ask where that money might be found, but that is the issue.

The vast majority of claimants in the current tax credit system do not actually report costs at the current maximum limits. However, there are times when the costs are higher, such as school holidays, so the limits for universal credit are calculated as a monthly amount rather than a weekly one. That should provide considerable flexibility to smooth out over weeks that have different costs, whether higher or lower, for claimants to receive appropriate support.

Baroness Hayter of Kentish Town: If I have understood the Minister correctly, had it been 80 per cent rather than 70 per cent, that would have cost £400 million.

Lord Freud: More.

Baroness Hayter of Kentish Town: Yes, more. So the drop from 80 per cent to 70 per cent is, in a sense, being paid for by the people already in receipt of the £400 million. Effectively, that is going to the people working 16 hours, for whom £300 million has been allocated. I know that there is a £100 million difference, but effectively it is the people in receipt of 80 per cent who are now paying for it to be increased for those below 16 hours. Is that correct?

Lord Freud: Let me clarify that. There was a decision in the spending review to move down from 80 per cent to 70 per cent. That is the current position, so we are moving from current to current. We have £300 million extra on that. The bulk of that £300 million is effectively being directed at a new audience, the group who could not work for 16 hours, and getting rid of the 16-hour rule allows us to do that. The way that we do it is through looking at people's earnings rather than at their hours.

To pick up the issue raised by the noble Baroness, Lady Hayter, about the interaction of the disregards for housing benefit and council tax benefit, rates will not be driven up into the mid-90 per cent level under universal credit.

Universal credit simplifies the benefits system. We therefore expect more parents to take up the support that they are entitled to. Where families receive less support under universal credit, a package of transitional protection is being developed to ensure that they do not lose out in cash terms.

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We know that childcare plays a crucial part in parents' work decisions, and are determined that those making the first steps into work are supported to do so. We have ensured that all claimants working even a few hours will be able to claim this support, rather than just those working over 16 hours, as in the current tax credit system. The noble Lord's new clause would allow us to define work for the purposes of childcare support. We intend that any definition of work would not involve an hours rule, as extending support to parents working fewer than 16 hours will allow about 80,000 families who are currently not eligible to receive help with childcare costs, increasing their financial incentives to take work.

I would like to comment on two other aspects raised by the amendments. Although we do not intend to support a higher proportion of costs or use higher limits for disabled children through the childcare element, there will be a child element within universal credit with different rates paid for disabled and severely disabled children, as we have discussed. As we discussed, we have also announced the extension of the higher rate to those who are severely visually impaired.

In response to the question of the noble Baroness, Lady Tyler, about differential rates across the country, we do not intend to do that-certainly not at any early stage. Although I acknowledge that costs vary across the country, when we started to look at regional variations we discovered that the childcare market is not so much regional as local. There are significant variations within the regions, and sometimes within very small areas. In practice, getting the flexibility that the noble Baroness is looking for would be very hard.

Childcare is not only about the rate. We are working with stakeholders to consider the optimum delivery mechanism for the childcare element. Our key aim is to minimise complexity and confusion that is the mark of the current system, so that claimants and administrators alike can navigate the system more easily. We will provide more information when draft regulations are laid and then debated in the House.

To pick up the question from the noble Baroness, Lady Sherlock, about the order of migration: we have made some indications so far as to how we intend to proceed, with our intention to stop accepting new claims for out-of-work benefits from October 2013. Natural migration will take place from that time as claimant circumstances change. New claims for tax credits will probably cease in April 2014. We will then gradually transfer all claimants to the system, and lay out the migration. One thing that we are looking to do as we plan the migration is to make sure that we get the cost, the simplicity and the social impact balanced correctly. That is what we are currently working on.

5 pm

Baroness Sherlock: I thank the Minister very much for that information. To press this point, as he will appreciate, the reason for asking about transition in what appears to be a question about cost is that different orders of migration have very different costs. He said that he had one set of assumptions, he has now reworked them and as a result he finds that he has £300 million left over. I understand that. I would like

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him to reassure the Committee that he has not changed the assumptions on transition, for example, in order to free up the £300 million. I am sure that he has not-I have a horribly suspicious mind which comes of my years in the Treasury-but I will be grateful if he can reassure me and bring me back into a land of happiness.

Lord Freud: I am pausing before answering that question. There were a huge number of factors involved as we redid the package. There were certainly no deliberate changes in the transition to generate that package and we have not, as I said, established the migration strategy yet, so it would not be possible. I think that I can ease the noble Baroness's suspicions, mainly because I do not think we have elaborated that aspect of it enough to have done that.

Lord Kirkwood of Kirkhope: Am I correct in assuming that the £300 million comes onstream only when universal credit is introduced?

Lord Freud: Yes. That was another question that my noble friend asked. The effect of these changes come in with the universal credit. We are not proposing to get rid of the 16-hour rule for people in advance of them moving on to the universal credit; it will be part of that process. I hope that noble Lords will agree with me that this is a very positive move for families and that it will make a great improvement to the incentives to take work. In the light of the commitments that the Government have now made in this area, I urge my noble friend to withdraw his amendment.

Baroness Hollis of Heigham: I apologise for coming in slightly late on this. Will the Minister remind us whether there are any changes to the childcare arrangements for disabled children-which, as he will remember, allow that childcare to take place in the child's home rather than in the home of a registered childminder-and that therefore a family member could take on that responsibility? Would that family member, most likely to be a grandparent, be eligible, as a result, for childcare costs, especially if they have become registered as a childminder, so that the obligation that there has to be another child, and for the care to be in the minder's home, would not apply in those circumstances?

Lord Freud: We are still working through those arrangements, but we are picking up the existing system as our base. I cannot make any assurances either way, but clearly, we will be very conscious of the existing position.

Baroness Hayter of Kentish Town: I do not think that the Minister responded to my question about the impact of childcare on work incentives, which is not included in the impact assessment. Is there a reason for that and is there a different assessment that we can see?

Lord Freud: No, there is not a different, hidden assessment. We have worked this through and on our figures we are confident that we have work incentives based on the extra £300 million. That is why we have injected it.

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Baroness Tyler of Enfield: I thank the Minister for explaining clearly the impact of the abolition of the 16-hour rule. It is very welcome, particularly the number of additional people who will now come within the scope of receiving childcare. That is something that I very much welcome and I sense that that is shared in the Committee. I also welcome the Minister's assurance that the £300 million that has been found is additional money; that is a very important point. Like other noble Lords, I look forward to hearing in more detail about how that money will be implemented, when it will become available, transitional arrangements and such things.

I am pleased that we have had an opportunity to debate regional variations-some very good points were made. I fully take the point made by the noble Lord, Lord Wigley, that as well as childcare costs varying significantly, so do wage rates. I also understand the complexity of the issue, particularly with very local variations. None the less, it is still an issue that we will have to consider further as time moves on. I hope that it will at some stage be possible to consider further what might be done in this area.

I welcome the overall architecture that universal credit provides. I hope that, as time moves on and resources allow, it will be possible to increase either the percentage or the amount of childcare costs covered, because they are such a barrier to getting back into work for some people. However, I beg leave to withdraw the amendment.

Amendment 30BB withdrawn.

Amendments 30C to 31A not moved.

Amendment 31B

Moved by Lord Northbourne

31B: Clause 10, page 4, line 34, at end insert-

"( ) Regulations may make provision for the inclusion of an additional amount if the responsible carer has a prescribed qualification for the care of children, or is prepared to attend a prescribed course on parenting skills and the parenting needs of young children."

Lord Northbourne: My Lords, I am going to change the bowling a little from childcare to the support of parents, enabling them to do the job that they want to do better. I recognise that the main objective of the Bill is to introduce the universal credit, but that should not allow us to ignore the possibility that some of the things we might do in creating the universal credit might also have beneficial effects for children and their parents.

My Amendments 31B and 51E, which are small amendments, propose alternatives and could contribute significantly to the Government's policy on improving outcomes, particularly in education, social mobility for young people and reducing disadvantage.

Amendment 31B would secure that a small proportion of the childcare element of universal credit, perhaps no more than 10 per cent, would be conditional on the person claiming the element making at least some attempt to "hone" their knowledge of the parenting

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needs of young children and to improve their own parenting skills before they took on the job. This deal would have the advantage that it would not be stigmatising, because it would be open and available to all who claimed the childcare element. My Amendment 51E, which is an alternative to Amendment 31B, would go rather further and prevent an applicant for benefits claiming the childcare element unless he or she had attended specified parenting classes. I like this alternative rather less.

There is now a wide measure of agreement among experts worldwide that a child's future success in school and in employment is strongly influenced by the kind of love, encouragement, care and educational preparation they get in the first three years of life. In this context, I had intended to use the quotations that I unfortunately used up when responding to the amendment of noble Lord, Lord Kirkwood. I am sure that all your Lordships have memorised them, so I shall provide just two other, brief quotes from Supporting Families in the Foundation Years. It states that,

It continues:

"The things that parents or carers do with children at home, like talking to, reading to, and playing with them, are key predictors of future development and readiness for school. The impact of the early home-learning environment on outcomes at age five has an effect over and above factors such as socio- economic status, maternal education and family income".

I rest my case on the importance of what I am talking about.

For the very young child, parents or surrogate parents are nearly always the principal carers. Time spent in the home is vastly more than time spent in childcare, even when good childcare is available. The Bill seems to put out-of-home care centre stage, and shows much less concern for care in the home or parenting in the home. I have come to realise that that is not government policy, but it is a serious defect in the Bill. The amendments would send the message: "These days, parenting is a difficult job to do. To do it well, we all need some advice and help and some updating of our skills". The Government would be saying not that training for parenting should be compulsory, but that they believe that it should be so important that they are prepared to offer a small bonus for carers who are prepared to undertake a short course to upgrade their knowledge about modern parenting.

Parenting UK, the lead body for parenting education, which I had the privilege of chairing for many years, believes from experience that an evening class once a week for about eight to 12 weeks can be effective in improving parenting outcomes for children. The bonus that I suggest would do more than that; it would say something about the status of good and supportive parenting in our society. I think that there is room for a change of heart in our attitudes towards the importance of parenting.

There is a national parenting campaign in New Zealand entitled SKIPS, which stands for Strategies with Kids-Information for Parents. I do not suggest that we adopt that acronym. It targets all parents and

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care givers and is said to be transforming the way in which people in New Zealand think about parenting by establishing the idea that good parenting of young people is a learnt skill.

I acknowledge that the wording of my amendments may be inadequate, but I should be very grateful if the Minister would consider them. Perhaps I may come to talk to him about them.

Baroness Hayter of Kentish Town: My Lords, I think we would all endorse good parenting. I like to think, as I guess we all do, that we are the results of it-despite, or perhaps because of the fact that I was brought up in a one-parent family. There is no doubt that love and attention, in addition to good sense and experience, make a wealth of difference. Many of our parents and grandparents learnt their parenting skills from their parents and grandparents, their aunts and uncles. With the move to nuclear families, family break-ups, more geographical movement and, yes, demands of time on two parents working, many of us worry about parenting skills. We would encourage classes, mentoring, learning-anything to improve the child experience.

However, not every parent, thankfully, needs a course. As I am this week celebrating the birth of a great-godchild, I know that some parents just seem to be born to it. We would not want to force every parent on to a course to improve their income or, in effect, which is the other side of the coin, to take away any income from parents who cannot or will not attend such a course. That in itself would disadvantage their child. We support the acquisition of parenting skills, but we doubt that the universal credit is the best vehicle for it.

Lord Northbourne: Perhaps I could explain to the noble Baroness that my plan was not to force people but to bribe them.

Baroness Hayter of Kentish Town: I am usually very open to bribes. So is the Minister, who when offered a chocolate biscuit earlier nearly promised us another compromise, but we did not get it. I accept that point, but it would be very unfair if those who, for whatever reason, resisted the bribe, had their children disadvantaged.

Sure Start was of course intended to help exactly those parents who can most benefit from some upskilling in this regard. We particularly noted the reviews by Frank Field and Graham Allen on early intervention. We should be grateful if, in reply, the Minister can report on the discussions that the DWP might be having on those reviews to ensure that the system he is setting up will at least help signpost people to support in parenting skills.

5.15 pm

Lord Freud: My Lords, the intention behind these amendments is a laudable one-to provide an incentive for parents to attend parenting courses. We recognise that parents are the single biggest influence on a child's healthy development and we want to do more to support them. The Department for Education is developing a trial that will offer vouchers for high-quality parenting classes to mothers and fathers of children up to five years old.

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I know that parents can find parenting classes to be life-changing by helping them improve communication with their children and encouraging good behaviour. Parents should have the opportunity to attend good-quality parenting classes as and when they want to, not be told to attend them if they wish to receive extra benefit or be exempted from work-related requirements.

Amendment 31B would provide a financial incentive to attend parenting classes and would, I suggest, send the wrong message to parents who are already doing a good job. It would also increase the overall cost, much of which would be for parents who did not require parenting classes at all.

There are also a number of difficulties with Amendment 51E. It would be complex for my department to judge whether a claimant did understand or was committed to learning about the needs of the child they were caring for when determining the claimant's work-related requirements. Perhaps most importantly, accepting this amendment could lead to more parents with young children being subject to inappropriate requirements, at least until they could demonstrate their understanding of, or willingness to learn about, their child's care needs. Despite the very best intentions, this could well be detrimental to the child.

I think everyone in this Room today agrees that good parenting is important for the future of our children. We value the long, consistent series of contributions of the noble Lord, Lord Northbourne; he has set himself up as the absolute guardian in this area, and I am always willing to talk to him about how we can push this agenda further. However, for the reasons I have explained, the Government cannot support these particular approaches and use universal credit and welfare reform in this way. I urge the noble Lord not to press these proposals and amendments.

Lord Northbourne: After that delightful offer from the Minister, I shall obviously beg leave to withdraw the amendment.

Amendment 31B withdrawn.

Amendments 32 to 33A not moved.

Clause 10 agreed.

Clause 11 : Housing costs

Amendment 33B

Moved by Lord McKenzie of Luton

33B: Clause 11, page 5, line 4, at end insert "including mortgage interest payments"

Lord McKenzie of Luton: My Lords, this is a probing amendment that concerns mortgage interest payments and I am indebted to Shelter for its briefing on it. Clause 11 allows the Secretary of State to determine by regulations how the housing element of the universal credit will be calculated. Obviously, that can include support for homeowners' mortgage interest as well as housing benefit. SMI is a benefit claimed by nearly 250,000 vulnerable homeowners. It pays towards their mortgage interest and goes straight into their mortgage accounts, helping them to avoid arrears and repossession.

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At the moment it can be claimed by struggling homeowners who are in receipt of income-based jobseeker's allowance, state pension credit or income support. SMI claimants largely include vulnerable and low-income homeowners who are unable to make ends meet in old age or due to job loss, disability or the cost of lone parenting. The majority of SMI claimants, some 117,000, are over 60 and in receipt of pension credit; 77,000 claimants, including lone parents and disabled people, receive SMI because they claim income support; and 31,000 claimants are unemployed and claim jobseeker's allowance. SMI is a cost-effective way of helping borrowers to avoid arrears and stay in their homes. It is important that any Government do all they can to help people avoid repossession, with all the knock-on social and financial costs that this can generate.

Figures from DCLG estimate that repossessing the home of a vulnerable household can lead to housing benefit costs alone of £16,000 per case, without taking account of the local authority time and expense in processing a homelessness application, or any other support that may be needed. That could be as high as £34,000 in some cases, according to the New Economics Foundation. The latest figures from the Council of Mortgage Lenders show that there were 7,900 repossessions in the fourth quarter of 2010, which represents a welcome fall.

However, many homeowners are struggling and will encounter difficulties when interest rates go up. Recent CML research revealed that one in four mortgage holders is not aware that interest rates are at an historic low. Sadly, those on variable or tracker mortgages will experience a huge shock once rates inevitably go up. Recent research by Shelter showed that the number of homeowners struggling to make their mortgage payments has risen by 78 per cent in a year, while the number of people using credit cards to help pay their rent or mortgage has increased by 50 per cent. With so many homeowners already living on a knife edge, any increase in interest rates will seriously threaten their ability to keep hold of their income.

In 2008, in response to rising mortgage arrears, the previous Labour Government introduced a temporary freeze on the interest rate at which SMI is paid, at 6.08 per cent. They also reduced the waiting time for new claimants to receive payments from 39 weeks to 13 weeks and allowed new claimants to claim on up to £200,000 worth of mortgage, instead of £100,000. However, a time limit of two years for claiming SMI was also introduced for JSA claimants, and the first group of claimants reached their two-year limit in January this year. Housing advisers are already seeing people whose time has run out, who can no longer claim SMI and who are struggling to keep up with their mortgage payments.

In the June 2010 Budget, the first of the coalition Government, the Government announced that the rate by which the amount of SMI is calculated will be set at the Bank of England average mortgage interest rate, currently 3.63 per cent, rather than the 6.08 per cent rate at which it had been temporarily frozen by the previous Government. In the March 2011 Budget,

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the Chancellor said that the Government would be keeping the 13-week waiting time period and £200,000 capital limit until January 2013.

The question therefore is: how will this all be dealt with in the world of the universal credit? Shelter contends that support for homeowners should continue to be provided as part of the universal credit. It believes that homeowners should be entitled to claim an amount equivalent to the full rate of mortgage interest that they are paying, rather than the average mortgage interest rate. It says that that is because many homeowners are stuck on fixed-rate mortgages that are higher-in some cases, far higher-than the average mortgage interest rate and are unable to meet the shortfall.

One principle underpinning the universal credit is the move towards a more responsive real-time benefits system that better interacts with claimants' real-life situations. A shift towards paying SMI at actual interest rates would of course be entirely consistent with that. Shelter also thinks that, under the new system, SMI should continue to be paid directly to lenders, as it is at present.

I stress that this is a probing amendment. It was pressed in the other place and I should be grateful for an update from the Minister. I beg to move.

Baroness Hollis of Heigham: My Lords, may I tack some concern on to my noble friend's amendment, given what we discussed earlier about the RPI and CPI rates? Had universal credit been uprated by RPI, housing costs, including assumptions about mortgage interest payments, would have been included in the RPI assessment. As my noble friend says, with CPI it is not because 5 million of the 8.8 million are on housing benefit and nearly 250,000 are on the support for mortgage interest. That means that around 3 million owner-occupiers who are paying mortgages and mortgage interest, and who are on universal credit, will now see universal credit uprated by the lower rate of CPI without any of the protection that RPI offered them by including housing costs. What would the Minister suggest to those people?

I do not want to get into the language of hard-working people and so on, but we are talking about people who may be fairly marginal owner-occupiers. They are on low incomes, which is why they get elements of universal credit. If interest rates rise they will find it problematic to repay. Therefore, they face the possibility of longer-term repossession if we are not able to help them with the sort of issues that my noble friend has mentioned. In other words, they are fully exposed to an uprating that gives them no protection on their housing costs, unlike those in rented accommodation who qualify for HB. What does the Minister think might be done to help in that situation so that we do not find that those people are, effectively, hit twice over?

Lord Freud: My Lords, Amendment 33B is intended to ensure that help with mortgage interest will be available through the housing cost element in universal credit for claimants who are homeowners. I reassure noble Lords that assistance with eligible mortgage interest will continue to be provided for homeowners

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as part of the housing cost element. The illustrative draft regulations that we have sent out in recent weeks show that help will continue for homeowners as now. Therefore, I see no need to set out in the Bill specific reference to mortgage interest payments.

There is a lot of history to what has been happening, which the noble Lord, Lord McKenzie, laid out accurately, in terms of how the rates have been changing. We moved to 3.6 per cent on the Bank of England average rate, which was a rather more generous rate than would have been the case under arrangements that were based on a LIBOR-related formula, which would have been a little more than 2 per cent, when we came off the emergency 6 per cent rate. The rate will increase in line with the average Bank of England mortgage rate.

I shall pick up on the concern of the noble Baroness, Lady Hollis, about RPI, CPI and what happens to owner-occupiers. There is a very technical set of arguments around CPI and RPI; noble Lords might not want to go into it in depth. However, the current RPI is based on taking in interest rates. There is a peculiarity, and one of the reasons for concern about it as an index, about RPI, which we see when the Bank of England takes an anti-inflationary measure and pushes up interest rates to damp down the economy-not a position that we are in today. Bear with me while I explain it. Using RPI has the perverse effect of pushing up inflation when one takes a measure intended to reduce it. It has been very unsatisfactory. The statistical committee currently looking at CPI is conducting an exercise on incorporating more housing costs in CPI. I do not know what it will conclude, but it is likely that more housing costs will be brought into CPI. The committee's approach is to take not interest as the primary measure of housing costs but rather what is happening in the housing market. I think that housing costs will be included, but they will be true housing costs. We should not become wound up over the impact of this rather artificial measure, nor should we commit ourselves in these provisions.

5.30 pm

Baroness Hollis of Heigham: My Lords, that is really helpful. Can the Minister give us an assurance that we will not move to universal credit until we have had that report on CPI, such that homeowners who may be marginal because they are on UC can none the less have their housing costs counted in? Can we get that assurance about timing?

Lord Freud: Regrettably, my Lords, I cannot give that kind of assurance. My understanding is that the reconsideration will be done in the next year or so, so it may happen before the move to universal credit. I simply do not have control of the slightly murky processes by which changes are made to indices. They are a black art and completely impervious to any external influence.

Given my reassurances on these points, I ask the noble Lord to withdraw his amendment.

Baroness Lister of Burtersett: My Lords, the Minister said that help with mortgage interest would continue as now. I presume that he means for people out of paid

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work and not people in paid work receiving universal credit. Given that the whole point of universal credit is not to have a distinction between "in-work" and "out-of-work", how does that tally?

Lord Freud: The support is time-limited for two years, so we have it within universal credit, albeit with these rules. It is not question of indefinite support at working age. There are groups of people who receive indefinite support: disabled people and pensioners-pensioners are in any case outside universal credit.

Baroness Lister of Burtersett: Does that mean the Government are extending help with mortgage interest to people who are in full-time paid work?

Lord Freud: No. I am saying that we are leaving the rules as they currently are, because we will give support to people who lose a job for those two years. That is the process and we are not planning to change it in any way.

Baroness Lister of Burtersett: That is what I thought. I apologise for pushing this. In other words, will there still be a distinction between in and out of work, even though one of the selling points of universal credit has been to do away with that distinction and to integrate in-work and out-of-work assistance, which noble Lords support?

Lord Freud: Yes. Our analysis of this area tells us that people who own houses are highly incentivised to go back to work and that changing the system-at huge cost, I might add-does not have any additional incentivising effect, so it would be wasted money.

Lord McKenzie of Luton: My Lords, I am grateful to the Minister. This debate has had some extensions, which I have found particularly helpful-certainly I have found the probing of my noble friend Lady Lister helpful, as well as the point raised by my noble friend Lady Hollis.

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