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Welfare Reform Bill

Volume 539: debated on Wednesday 1 February 2012

Consideration of Lords amendments

I must draw the House’s attention to the fact that financial privilege is involved in a substantial number of Lords amendments. If the House agrees to these amendments, I shall ensure that the appropriate entry is made in the Journal.

Clause 51

Period of entitlement to contributory allowance

With this it will be convenient to consider the following:

Lords amendment 17, and Government motion to disagree.

Lords amendment 18, and Government motion to disagree.

Lords amendment 19, and Government amendment (a) thereto.

Lords amendment 23, and Government motion to disagree.

Throughout the process of the Bill in both this House and the other place, we have listened carefully to the concerns that have been raised. We have taken them on board wherever possible and provided important clarifications on the Government’s position and responses to technical concerns. However, let us be clear that we stand firmly behind the aims and detail of our reforms.

As you indicated, Mr Speaker, Lords amendments 15, 17, 18 and 23 impinge on the financial privileges of this House. I ask the House to disagree to those amendments, and I will ask the Reasons Committee to ascribe financial privilege as the reason for doing so. It cannot be denied that we are in extremely difficult financial times, and that the Government have no choice but to take measures to address the situation. Tackling the unsustainable rise in spending on benefits and tax credits, as part of the Government’s overall deficit reduction strategy, is undeniably important. However, I emphasise that the affordability of the welfare system is just one objective of the reforms being introduced in the Bill.

We are making principled reforms that will finally tackle the trap of welfare dependency. Universal credit will ensure that work always pays, lifting 900,000 individuals out of poverty, including more than 350,000 children and about 550,000 working-age adults. The Bill will also deliver fairness for claimants and for the taxpayers who fund the system. We will discuss the benefit cap in the next group of Lords amendments, but it is clearly not fair, for example, that households on out-of-work benefits should receive a greater income from benefits than the average earnings of working households. Finally, our reforms will radically simplify the system, ensuring that it is easier for claimants to understand and for staff to administer. Hon. Members should be clear that those are vital principles, of which financial considerations are only one part.

I turn specifically to the provisions on employment and support allowance that are dealt with by this group of amendments. I shall set out the Government’s full rationale for rejecting the Lords amendments. First, Lords amendment 15 was simply a paving amendment that had no effect. Lords amendment 17 would increase the time limit for claimants receiving contributory ESA in the work-related activity group from the proposed 365 days to a minimum of 730 days, which would have to be prescribed in regulations.

On contributory benefit, does the Minister accept that giving a person who has made a recovery after suffering from cancer only 365 days to get back into work is a little prescriptive? Does he accept that the Lords amendment would allow them additional time—up to two years—to get back into work? The amendment is about fairness for those people alone.

I will talk in more detail about cancer, which is one of the measures we are addressing. I accept that there are anxieties in respect of cancer, but the approach that we are taking to all our reforms, and particularly those relating to sickness and disability, is that we should not write off automatically any individual with a particular condition. Applying a one-size-fits-all measure to any one condition is the wrong thing to do.

The Minister initially said that the Government are introducing their measures because they need to save money on the welfare Bill, but he also said—I hope there is great support in the House for this—that their measures will shape behaviour. Are the national insurance measures designed to shape and change behaviour, and in what way will they do so, or are they merely just to save money? In other words, is the Minister doing what the Treasury has required him to do on national insurance?

The important thing about that measure is that we must have a welfare system in which people have confidence. The principle of our proposal reflects the principle used in the jobseeker’s allowance system—people should get something back for what they have contributed, but not indefinitely. The Government’s measures simply seek to extend that principle to the group on ESA.

I do not think there is any agreement on that. Is it not possible to honour national insurance contributions and attach “seeking work” requirements?

The principle I described is a long-standing one that has been applied to other benefits, such as jobseeker’s allowance. It is important to state that the Government are not taking benefits away from people who have no other form of income, or from people in the support group who need long-term, unconditional help. The measure simply affects those in the work-related activity group. It applies to them the same principle that exists in jobseeker’s allowance.

Does not the Government’s proposal conflict with what they are trying to do? The Minister says that benefits will not be taken away from those who have nothing, but their measure will take away benefits from, for example, a couple in which one partner is in part-time work. They could be asked to dig into what they have saved for retirement.

The principle of the welfare state that I described—that it is there to provide a safety net for those who have no other form of income—has operated for a very long time, including under the previous Government. The welfare state provides a degree of support to those who have another form of income, but it is a long-standing principle of the jobseeker’s allowance system that such support is not unlimited. We are simply applying that same principle to ESA for people who are deemed to have the potential, in due course, to return to work.

Is the Minister aware that many of us are grateful for what the House of Lords has done? It has acted as the conscience of Parliament. It is extremely unfortunate that the Government are today determined to reverse its decision. What is so obnoxious about the Government’s measures is that the most vulnerable are being hit, meaning not only cancer patients, but others with life-threatening diseases. It seems that the Government are totally indifferent to the group of people who will be harmed as a result of their proposals.

I do not doubt the hon. Gentleman’s views, but he is a member of a party whose leader and shadow Secretary of State made speeches a fortnight ago on the need to take tough decisions on welfare. I am afraid that what the hon. Gentleman says is another example of the disconnect that exists within the Opposition.

What taxpayers in my constituency find obnoxious is people who use the welfare state as an alternative lifestyle choice rather than as a safety net, for which it was first intended. Does my right hon. Friend agree that the Government, through this measure and their other changes, are trying to go back to what the welfare state was initially intended for, namely a safety net rather than an alternative lifestyle choice?

My hon. Friend is absolutely right that we have to have a system that is fair both to the taxpayer who pays for it and to the recipients. As a result of these reforms, we will have a system that is fairer to those receiving support and also fairer to those who are paying for that support.

Support to find work, for those people who will be affected, will be available for all ESA claimants from the outset of their claim, through Jobcentre Plus on a voluntary basis until the outcome of the work capability assessment and, following the WCA, for those claimants placed in the work-related activity group, through Jobcentre Plus or through the Work programme. Every single person who is on ESA, including those on a contributory basis, has access to the Work programme.

Some have said that the limit is arbitrary. I do not accept that. As the Minister with responsibility for welfare reform explained in the other place, it is similar to that applied by several countries around the world, including France, Ireland and Spain, and strikes an appropriate balance between the needs of sick and disabled people claiming benefit and those who have to contribute towards the cost.

Can the Minister clarify, for the avoidance of doubt, that someone who has been in the work-related activity group on contributory ESA for two years who subsequently gets reassessed as belonging to the support group will have their ESA reinstated even though they do not have the national insurance contributions that would allow that to happen?

I can indeed confirm that that is the case. We have listened very carefully on this issue, and it was a point well made by my hon. Friend the Member for Cardiff Central (Jenny Willott) in Committee. We have listened and we have taken appropriate action. It is important that we look at such details to ensure that we get them right, but that does not detract from the overall principle of what we are trying to achieve.

I believe that a time limit of one year is the correct approach. It applies the right balance between restricting access to contributory benefits and allowing those with longer term illnesses to adjust to their health condition and surrounding circumstances. There is also a very strong financial argument. If accepted, this amendment would reduce the total savings in the spending review period by around a third by 2016-17, which is £1.6 billion. Given the current fiscal climate, we cannot afford to forgo these savings and this is one of a number of very difficult decisions the Government have had to make because, as the shadow Secretary of State pointed out at the time, there was no money left.

Lords amendment 18 would mean that no time limit would be applied to contributory ESA for those claimants receiving treatment for cancer if they have or are treated as having limited capability for work, or they have or are treated as having limited capability for work as a consequence of a cancer diagnosis. The whole point of our approach on these matters is that we have always looked at the effects of a condition on an individual, rather than at the condition itself. We can all think of other cases which could equally be regarded as special cases. We are trying to be sensitive to the very real concerns of individuals suffering from cancer, and since we took office we have made significant changes to improve the protection and support that we provide to them.

Most individuals with cancer are placed in the support group at the outset of their treatment. We have increased the scope of the support group for cancer patients. We have been working closely with Macmillan Cancer Relief to improve how the WCA assesses individuals being treated for cancer. We are now consulting on our proposals, following work by Macmillan and Professor Harrington, our independent assessor of the work capability assessment.

We are clear that our proposals, which are now out to consultation, include a presumption that someone with cancer will be in the support group. What we simply do not accept is that in all circumstances, regardless of the impact of cancer on an individual’s ability to work or otherwise, they should be guaranteed a position in the support group. We have not taken that approach with any other condition and we do not believe that we should take it with cancer.

I know that there has been some discussion in the last few days about whether, if a doctor or nurse were able to provide confirmation that a person with cancer was not able to work, that person would be automatically passported into the support group. Is that something that the Government intend to introduce?

It is very much our intention—especially for those who have finished their treatment but are not yet prepared to return to work—to have a simple system that enables a medical professional to indicate to us that that person is not yet sufficiently recovered to make a return to work. Our proposals are out to consultation at the moment, but our overall clear goal is that, in the vast majority of cases, someone who is undergoing treatment for cancer or is recovering from the aftermath of that treatment should be in the support group. What we cannot accept is a principle for absolutely all cases and regardless of circumstance, and some people with cancer do work—

The Minister mentioned Macmillan, which is a well respected organisation. It estimates that some 7,000 cancer patients could lose up to £94 a month. Is that right?

The issue comes back to the core principle of why we are imposing the time limit. We are not taking benefits away from people who do not have other financial means. The people who will be affected by the 12-month time limit—not just cancer patients, but generally—are those who either have another household income or who have many thousands of pounds of savings in the bank. They are the ones affected. We are not taking contributory support away from those people in the support group. Most cancer patients, as I have just described, will be in that support group. We are not taking benefits away from them, just from those with other financial means.

No, I have already given way to the hon. Gentleman.

If amendment 18 were accepted, it is estimated that it would cost around £90 million cumulatively by 2016-17 based on a two-year time limit, or around £140 million cumulatively based on a one-year time limit. That would be a significant additional cost for the taxpayer, and would fly in the face of a principle that we have tried to bring to this whole process, which is that we do not bracket any condition into one absolute position. We look at each individual case to understand the impact of the condition on the ability to work.

The third area of focus this afternoon is our proposed changes to the condition relating to entitlement to ESA on grounds of limited capability during youth. These changes are part of our principled approach to reform. We want to modernise and simplify the current welfare system, focus support, avoid duplication of provision and redefine the contract between the state and individuals, in advance of the introduction of universal credit. It cannot be right that, for example, where a claimant has qualified for contributory ESA under the youth provisions and some years later they receive a substantial inheritance, they should be able to continue to receive unlimited contributory ESA without the need to have paid any contributions and without any condition from the state.

These proposals will not affect those in receipt of income-related ESA. We expect that around 90% of those who presently receive ESA on youth grounds will be eligible for income-related ESA. It will be a simple transition from their point of view. Only some 10% will not qualify because they have other means available to them—and I emphasise that that means a partner in full-time work or capital of more than £16,000. We are merely targeting the support the Government can provide to where it is needed most. I do not think it is right that someone with independent income or capital should be able to access state support on a long-term, ongoing and unconditional basis.

Can the Minister clarify absolutely that a 20-year-old who will never work and who lives at home with their parents will be able to get income-related ESA? Obviously it cannot be contributory as they have made no national insurance contributions. Even if they live in a household above income support levels, will they continue to get income-related ESA in their own right?

I cannot give an undertaking in all circumstances, because every circumstance will be different. But 90% of those who presently receive ESA on youth grounds will be eligible for income-related ESA. It will depend on the circumstances of each individual case.

We have already mentioned the fact that the Government amendments allow claimants to re-qualify for a further award of contributory ESA after their ESA has ceased as a result of time limiting, and they are later placed in the support group because of a deterioration in their health. That applies equally to ESA youth claimants.

There is, however, another factor to take into account—and this, again, is an example of why this is about more than just money. We must also consider the impact of the Stewart judgment given in the European Court on 21 July 2011, as a result of which someone living abroad can qualify for benefit without having to satisfy the past presence test, if they can demonstrate a genuine and sufficient link to the United Kingdom. The Court determined that Ms Stewart arguably could demonstrate a link with the UK because she was in receipt of another UK benefit, was dependent on her parents, who were UK pensioners, and had spent a significant part of her life in the UK.

We want people to qualify only if they have lived in the UK recently prior to the claim, but we are also obliged to take account of the Court’s case-law view of what constitutes a sufficient link. We strongly disagree with the Court’s ruling. The effect of that EU judgment is that we can no longer have a blanket past presence test of this kind for benefit claimants. As a result, the ESA youth provision is potentially more widely available than intended, and given that we are bound by EU law, there is nothing, short of abolition, that we can do by way of domestic legislation—even primary legislation—to change its effect. As a consequence, we could end up paying this benefit, on a long-term unconditional basis, to more people who have never lived in the United Kingdom but who can simply demonstrate a link to it.

Will the Minister confirm that the case in question relates to a disabled young woman who is living with her British parents—in Spain, I think—but who was born and brought up in the UK?

It relates to someone who has not lived in the UK for most of the past 15 years, although she is a British national and has a link to the UK. The implication of the court case is that somebody who has a link to the UK but who has had no recent contact with it is none the less entitled to receive benefits. That is where we disagree with the European Court and why we think that its decision was wrong.

We think that the best way to close this door is to abolish the ESA youth provision, but it is not the only reason we are abolishing the youth provision. It is by no means the sole rationale for doing so, but as a matter of principle it is our view that we should make every effort to ensure that our benefits are paid only to those whom we think should be paid UK benefits—those who have recent connections to, or have lived in, the United Kingdom.

I want to try to follow the Minister’s logic a step further. Is he going on to propose that British citizens who have retired abroad—for example, to Spain—will not be able to receive their pensions in the years to come? Is that the logical extension of his argument?

Of course it is not. We are saying that somebody should not be able to claim a benefit for the first time having not lived in the United Kingdom for many years. That is the argument that we put to the European Court, and it is a principle that we stand by. I emphasise that that is one of the reasons, but by no means the only reason, why we are taking this measure.

Has the Minister talked to the Secretary of State about this? Would a more logical position not be that we get exemptions from the European Court ruling, and not distort our social security system to fit the European Court’s decisions?

I would love to secure a more pragmatic and sensible approach to the regulation of social security in Europe. I have been working on it for the past 18 months with my counterparts in other member states, and I hope that we will make progress as soon as possible. Right now, however, we must obey European case law as delivered to us by the European Court—much as it sometimes might be frustrating to do so.

I have a couple of technical points to make before I finish. As a result of providing for the new category of entitlement, in respect of claimants whose health has deteriorated to such a degree that they are placed in the support group—I referred to this earlier in response to the hon. Member for Aberdeen South (Dame Anne Begg)—it has been necessary to remove the substance of the ESA youth time-limiting measure from the original clause 52 and to insert it in clause 51 via a new subsection in section 1 of the Welfare Reform Act 2007. The Opposition amended that new subsection by changing the period of the time limit from 365 days to a period to be prescribed of at least 730 days. That is Lords amendment 19. As a result, the House will need to agree to amendment 19 but with an amendment consequential upon the rejection of the other amendments providing for entitlement to ESA to be for 730 days rather than 365 days. This will restore the Government’s intention.

A similar complexity surrounds amendment 22, which was voted for in the other place and which ensures that no new claims can be made under the youth provisions in the future—in effect, from whenever that provision is commenced by order. This amendment would amend clause 52 by removing the substance of ESA youth time limiting, which is now included in clause 51, but would retain the key provision in clause 52 preventing new ESA youth claims from being made.

I am afraid that this position is further complicated by the fact that also in the other place amendment 23 was not pushed to a vote and therefore also stands part of the Bill. Amendment 23 effectively allows claims to be made to contributory ESA under the youth provisions for those that are placed in the support group. We therefore now have two conflicting clauses for conditions relating to youth. Finally, if amendment 23 were to be accepted, it would reduce the expected cumulative benefit savings by around £17 million by 2016-17—savings that would need to be found elsewhere in the benefits system.

In the light of these arguments—the urgent need to address the fiscal deficit we have inherited and the need to deliver principled reform to our welfare state—I hope that hon. Members will feel able to support the Government.

The Government are determined to insert some terrible things in the Bill, and none of them is worse than the indefensible one-year time limit on contributory employment and support allowance for people in the work-related activity group. Amendment 17 removes that one-year limit. The Government are trying to put it back. Now, with the blanket appeal that we have heard for financial privilege, they are trying to prevent the other place from daring to disagree with them once again.

The measure is literally indefensible: the Government have been unable to defend it. The Minister made no effort to defend it in his speech, other than to point out that it would save a great deal of money. He referred to what happens in other European countries, but there, of course, the support that people fall back on is much more generous than here. There is no defence for the one-year time limit, and the House needs to be aware that this change will start to impact in two months’ time, at the beginning of April. According to the Government, 100,000 people will lose contributory benefits at the beginning of April this year, having already been in receipt of contributory ESA for more than one year, and another 100,000 will lose it as they reach the one-year stage of their claim over the following 12 months.

Some people argue that ESA should not be limited at all—for example, the Liberal Democrats. At their party conference, they opposed any arbitrary time limit on how long claimants can claim contributory ESA, and the Liberal Democrat peer Baroness Thomas of Winchester told Members of the other place that what troubled the conference last year was

“the arbitrary nature of the one-year cut-off.”—[Official Report, House of Lords, 11 January 2012; Vol. 734, c. 158.]

Liberal Democrat party policy is clear on this, but we understand that today its elected representatives will take no notice of it.

The Lords amendments that the Government want to overturn are much more modest. They argue that the time limit should be not less than two years and, crucially, that the limit should be set down in regulations rather than in primary legislation. If the Government get their way, absurdly it would require a new Act of Parliament to change the limit. Throughout debates on the Bill—many Members have been present in Committee and other stages of the Bill—the Minister has told us that the purpose of the Bill is to provide the structure and that the details would be in regulations. On this measure, however, with no explanation, the opposite approach has been applied. These debates provide a clear indication of whether Ministers mean what they say when they tell us these things, or whether they are simply reading the script put in front of them.

We do not quarrel with time limiting. As the Minister said, contributory jobseeker’s allowance has been time-limited to six months for many years. The rationale has always been that within six months more than 90% of jobseekers are back in work. If it is to be fair, however, a time limit for ESA must also give people a reasonable chance to get back into work. A year is not enough. The Government’s own figures suggest that 94% of those who qualify for ESA are still on it a year later, so fewer than 6% are managing to get into a job within a year.

May I ask the right hon. Gentleman how he has factored into his considerations the typical six-month period that somebody in that position would have spent on statutory sick pay before they started on contributory ESA?

The question is: how long do people need to be on ESA before they get back into work? According to the Minister’s figures, only 6% are off the benefit within a year, whereas 90% are off contributory jobseeker’s allowance within the period that is being allowed for that benefit.

I would be grateful if the right hon. Gentleman answered my question. I asked him to what extent he had factored in the additional six months that most people would have had on statutory sick pay before starting 12 months on contributory ESA.

I answered the Minister’s question. What his figures show is that only 6% of those who go on to ESA—no doubt many of them will have been on statutory sick pay before that—are in a position to come off the benefit within one year. That is not a reasonable chance to get back to work, as I think the Minister will recognise if he reflects on the matter.

As the Minister said, Lords amendment 18 specifically addresses cancer. I do not think that anyone in this House will be surprised to learn that, for many cancer patients, 12 months is not long enough to become well enough to get back into work. At 12 months, many people are still experiencing debilitating physical and psychological effects from the cancer and from its treatment. People cannot go back to work in those circumstances, and that is why Macmillan Cancer Relief, which my right hon. Friend the Member for Cynon Valley (Ann Clwyd) referred to, says that

“proposals that ESA claimants who are expected to carry out work-focused activities will only receive the benefit for one year, without being means-tested, will hit cancer patients particularly hard”.

Macmillan also says:

“Three quarters…of people with cancer placed in the ESA Work-Related Activity Group are still claiming ESA 12 months later.”

Does my right hon. Friend agree that the Minister, with his rather “Let them eat cake” answer to our right hon. Friend, the right hon. Member for Cynon Valley (Ann Clwyd), was emphasising that the 7,000 people affected would generally have another income available to them? That ignores, first, that that other income could be quite modest; secondly, their family circumstances; and, most importantly, the fact that they face other costs—of a personal, family and household nature—because of their condition.

My hon. Friend is absolutely right. Ministers say that there is no need to worry because means-tested ESA will still be there, but if a partner is earning £7,500 a year, no means-tested support will be provided at all.

In the other place, Baroness Hayter quoted a letter from a 59-year-old man currently on contributory ESA who has worked and paid into the system since he was 15—that is, for 44 years. Now, when his health is failing, he will be left on the poverty line. He draws the obvious conclusion—this picks up on the point that my right hon. Friend the Member for Birkenhead (Mr Field) made earlier—saying:

“It would be better if my wife stopped working then perhaps I could claim income-related ESA—just like any person who has never worked”.

That is the position that this change is putting people in. The Government say they want to reward work; with this measure, they are scrapping the reward for work.

Before my right hon. Friend moves on, perhaps he could dwell on that point. The Government rightly say that this Bill is about changing and shaping behaviour, and for all of us in this House, it is important to know that this year we will probably crash through the £200 billion mark. Anybody who thinks that that does not affect people’s behaviour is living in cloud cuckoo land. However, what message is this Bill sending out, when those who have provided and paid their contributions will get no benefits if there is any other income in their house, whereas those who have not played by the rules—who have decided that they will coast it on the back of taxpayers—get rewards?

My right hon. Friend is absolutely right. I am afraid that the message that this measure is sending to people in that situation is, “You’ve wasted your time.” Indeed, that is the case not only if they have a partner with an income, but if they have any savings. If they have more than £16,000 saved, there will be no means-tested support at all.

Members need to be clear about what the Government will be doing if they get their way. Under this measure, people who are in the middle of a health crisis will be plunged into a financial catastrophe. People who have worked and paid into the system all their lives—people who have, as my right hon. Friend says, done the right thing—will find that the system is not there to help them when they need it.

The shadow Minister has just talked about the position of somebody who has a spouse who is earning £7,500 a year. Will he confirm to the House that as a result of a diminution of household income, they would also be entitled to working tax credit, housing benefit, council tax benefit and possibly to child tax credit, and that therefore the amount of support that they will receive is substantially more than he is suggesting?

It will be a financial catastrophe for a very large number of people, and the Minister should listen to what people in that position are saying to him, because they have made their position extremely clear.

Does the right hon. Gentleman agree that, very simply, this change that the Government are seeking is saying to cancer patients, “You will be penalised because you are not recovering quickly enough”? That is where the insult rests: they are doing their best.

The hon. Gentleman is absolutely right: 12 months is simply not long enough for a very large number of cancer patients—or other patients, in fact—to get back to work.

Lords amendment 18 was moved in the other place by Lord Patel, the Cross-Bench peer who was formerly president of the Royal College of Obstetricians and Gynaecologists. He quoted a man with renal cancer who had had a kidney removed and who started claiming ESA in March last year. His partner earns £160 per week, but if the Government win, that man will lose all his contributory benefit in April. He says:

“We have used up virtually all our savings already. I have worked all my life and paid into the system but this doesn't seem to mean anything”.

Is that really how the Government want their system to work? Of course, it is not just cancer patients who will be affected.

Does the shadow Minister agree that it is completely illogical to single out cancer as a separate disease when, in fact, there are many illnesses and conditions that may result in someone being unfit for work and when, under these provisions, they would be provided for by being put in the support group?

The hon. Gentleman is absolutely right—indeed, I am just going on to make that very point. It is not just cancer patients who will be affected; there are many other people in exactly the same position. That is why we have argued for a two-year limit instead of a one-year limit, because with a two-year limit there is a chance for people to get back into work. The National Aids Trust makes the point:

“Many people living with HIV who are found eligible will face significant barriers to work that cannot be overcome within 12 months.”

The other group of people who will be affected by the time-limiting are those who have slowly progressive degenerative conditions. Initially on diagnosis, they may not be able to work—or they may have fallen out of work—but their conditions will not be severe enough for them to be placed in the support group, and they could spend up to 10 years without any kind of independent income-replacement benefit.

My hon. Friend is absolutely right. A woman with Parkinson’s disease also makes exactly that point:

“There’s no guarantee that I’ll find a job in 12 months. It could take me much longer. I’ve worked all my life and paid for decades into the system on the understanding that there will be support if I need it. To be told that all this support could have a… time limit is…unfair and stressful.”

The charity Sense points out that for some people in the work-related activity group, once their health has stabilised, they will need to retrain to get back into work. It will be impossible for them to do that within the 12-month period that is being proposed.

Does my right hon. Friend share my concern about those constituents of mine who have had strokes and who are not able to return to work within that period of time, and the concern that DWP officials are implementing the legislation in advance of its being on the statute book?

I was not aware of that, and I am concerned to hear it. My hon. Friend is absolutely right that stroke is exactly the type of condition that we are talking about. In the other place, Lord Low read out a letter that had been written to him, which said:

“The state is breaking its side of the contract at a time when people are most vulnerable”,

having had a stroke, or whatever it is. Someone else was quoted in that debate in the other place who made the point that the news of the time limit

“came as a massive shock to me. I have found it…hard to come to terms with the fact that the government can be so cruel”.

They continued:

“My medicine prescription has been increased 4-fold and been supplemented with extra medication since the time limit was announced”.

This is a dreadful proposal. Removing contributory benefit long before most people will have a chance to get back to work will remove an absolutely key plank of the contributory system. In the past, people have been able to depend on support in the event of a health disaster. This change will mean that that will no longer be the case. Those in the other place were absolutely right to say that what the Government are trying to do is shameful. This House should throw it out.

The right hon. Gentleman has accepted the principle of time-limiting. He says that a year is too short a time, and he is against arbitrary time limits. Will he tell the House the basis on which he alighted on two years, rather than three, four of five?

If the hon. Gentleman looks at the amendment, he will see that it refers to a period of “at least 730” days. That was proposed precisely because there is as yet no evidence—certainly not from the Department—about what the right period should be. We can be absolutely sure, however, that it should not be less than two years, for all the reasons that I have just outlined.

The right hon. Gentleman makes a heart-rending case, but will he tell us what assessment he has made of the extra cost of moving to a two-year limit?

Those figures were quoted extensively in our debate. Our view is simply this: we should not be taking large sums of money from people who are recovering from cancer or from a stroke, and who have been told throughout their lives that if they paid into the national insurance system, they would be able to get help when they needed it. That pledge needs to be honoured, even by this Government.

Let me turn to Lords amendment 15 and the question of the youth passport. It is astonishing that the spiteful policy towards disabled young people remained in the Bill for so long. It is even more astonishing to see the Minister now trying to ram it back in today, after the other place took it out. The current principle is that people who have been disabled since birth or childhood should be passported on to a contributory benefit. In Committee, the Minister described the principle as an “oddity”, but it has been well established since the 1970s and backed by Tory Ministers throughout the 1980s and 1990s. Only now are this Government trying to scrap it. It provides an independent income for severely disabled people whose disability started before they had a chance to work. The Minister wants to deny them that. The principle that young people who are disabled from birth ought to be able to rely on a secure independent income might seem odd to him; to most people, it is simply right.

The Government’s impact assessment justifies this change, disgracefully, on the basis of simplifying the system.

The change will affect not only those who have had a disability since birth or childhood. A young person who has worked for only six months before having a major accident could also lose out and never have the chance to have an independent income-replacement benefit at any time in their life.

My hon. Friend is absolutely right.

The impact assessment states that the provision

“puts those previously eligible for ESA ‘youth’ on an equal footing with others who have to satisfy the relevant National Insurance conditions before they qualify for contributory ESA, which will create a simpler system”.

It will not put them on an equal footing. They have been unable to work since before they had a chance to work, or at least to build up two years of contributions, as my hon. Friend points out. They have had no chance to build up their contributions, and they are therefore at a disadvantage, compared with everybody else. Attempting to justify the proposal—in frankly Orwellian terms—as a simplification really takes the biscuit. We are talking about a small group—15,000 people—who have never had a chance to build up a contribution record. It is right that they should be treated differently. A little complexity is necessary for fairness.

It is worth looking at how much money the Government will save by overturning this amendment. It involves a fair amount of contributory ESA —Ministers in the other place said £70 million. However, many of those young people—the Minister said it would be 90%—will be entitled to income-related benefit if they lose their contributory benefit. Furthermore, the amendment from the other place is very narrow. It applies only to the support group—that is, those who the Government accept should be protected from ESA time-limiting. The net annual saving from this spiteful cut will be about a quarter of the amount that the state-owned Royal Bank of Scotland will hand out in executive bonuses this year. It will be less than £10 million a year.

When my hon. Friend the Member for Aberdeen South (Dame Anne Begg) asked a question about a 20-year-old living at home, we did not get an answer. I was just wondering whether my right hon. Friend was trying to find out the answer by osmosis. At what point will disabled young people qualify in their own right for means-tested support, as opposed to having a household means test applied to them?

I also noted that the Minister did not give my hon. Friend the Member for Aberdeen South the assurance that she was seeking. My understanding is that any other income in the household, from any source, contributes to the household income, and the benefit for the disabled young person is therefore removed, pound for pound. My hon. Friend was seeking an assurance that some other provision would be put in place to safeguard the young person, but the Minister was unable to give her such an assurance, because I do not think that that is the Government’s intention. No such provision appears in the Bill at the moment.

Does my right hon. Friend agree that the measure will have an impact on young people’s ability to form relationships? Having to depend on the income of a potential partner will have a great impact on their lives.

That is a particularly important point. If a person decides to marry someone who has an income, they will lose all their own income. The independence that the system has provided for 40 years is now being taken away.

The social impact of the proposals concerns me greatly. The right hon. Gentleman has rightly characterised them as “spiteful”. It is at the point when a long-term severely disabled person is in transition from their teenage years to adulthood that their parents or family unit require additional support. Cutting that support will hit the family, and the young person, really hard, socially.

The hon. Member for North Antrim (Ian Paisley) was talking about young people who are living with their parents, who might have a little bit of income or savings. My hon. Friend the Member for Aberdeen South was seeking an assurance on that point, and if the Minister were able to give her that assurance, it would be most welcome.

My right hon. Friend is prompting the Minister with the answer. We will look carefully at the detail of the proposals. Presumably, they are going to appear in regulations; they are certainly not in the Bill. It is helpful that the Minister has told us that, however.

Concerns have been expressed to me by parents who have tried to save for their disabled children. They have put money aside for them, but the proposals will affect them because the money will be in their children’s names.

The Minister has told us that someone who receives an inheritance should lose all their support from the state. Those could be similar circumstances to those that the hon. Lady has just mentioned.

Does the right hon. Gentleman agree that the answer that the Minister has just given is quite astounding? He seemed to suggest that, in order to qualify for independent benefit, a disabled young person would have to leave the family home, where they have the support and facilities that they need, despite all the additional costs that that would entail. That would end up being even more costly.

To be fair to the Ministers, I think that there is some confusion on the Front Bench over the position on this. The Minister was asked by my hon. Friend the Member for Aberdeen South, who chairs the Select Committee, to give the House a straightforward assurance. He failed to do so—

Let us be absolutely clear: when someone leaves child benefit—which can be at the age of 18 or 19, depending on their circumstances—they are deemed to be an independent adult. The only issue around the savings rule comes in if they actually hold and own the money themselves. So, if someone gets a £1 million inheritance, they will not carry on getting benefits. Surely the right hon. Gentleman does not disagree with that principle.

The Minister talks about people getting £1 million, but people who have £16,000 will get absolutely nothing. That is the system that he is putting in place, and I am not surprised that he is ashamed of it.

As a matter of general principle, does the shadow Minister agree that there has to be a rule about the amount of capital that people hold? Should not a cut-off apply? It was the Labour Government’s rule: there has to be a cut-off.

We are being taken into a slightly broader argument, but I will answer the point directly. The capital limit has always been a feature of means-tested out-of-work benefits. It was never a feature of the tax credit system because the previous Government wanted to encourage people in work to save. That incentive to save is being destroyed by the application of this capital limit—exactly the same capital limit—in future to people in work as well as out of work. That is another terrible feature of this Bill.

What has just been illustrated is the assumption that people are out of work in order to get benefit. We know—well, we hope, unless the Government are proposing to change the new personal independence payment—that there will be no capital rules, so someone with a million pound inheritance will, if they qualify and meet the criteria, continue to get benefit. That has always been in our system.

My hon. Friend is absolutely right. The number of people who have a million pounds can be counted on the fingers of one hand.

Are not Government Members mistaken on this? We are talking about the existing rules, which encourage parents to put away money—they might have found it difficult to do so—for an endowment for a very disabled child. They will now find that their carefulness in not playing the system but trying to seek independence for their offspring will be penalised by the rules, which they could never have foreseen.

That is absolutely right; that is how the Government are changing the system. Disabled young people, in recognition of their particular circumstances, have been assured since the 1970s—under Governments of both parties—of an independent income from the state. This Government are taking it away from them. As a result of this change, they will lose that security in exchange for very little saving at all to the Exchequer. The Child Poverty Action Group points out that the current arrangement helps

“young disabled people who may be vulnerable to forming unsuitable relationships, or may avoid forming a suitable relationship due to fears about losing an independent income”,

as my right hon. Friend the Member for Birkenhead (Mr Field) correctly said. The current arrangements give the chance of a more secure and independent life to people who would, through absolutely no fault of their own, find that very difficult otherwise. At less than £10 million a year, that is a price worth paying for the independence of severely disabled young people. I urge the House to reject the Government motion.

I am pleased to welcome the vast bulk of what the Government are doing. It is a pleasure to hear that people are not being defined by their condition and are not being forced to have decisions taken about them on the basis of a label or a particular condition. That is why, as I say, I strongly welcome much of what the Government are doing.

I would, however, like to reflect briefly on amendment 23, which relates to the youth passport. It is not that I particularly disagree with what the Government are doing, but I wish to focus on a few questions, which I hope the Minister will answer, about how we intend to ensure that these young people are given, as it says in the impact assessment, the “equal footing” that the Government rightly want them to have.

My primary concern is that these young people have not been able to acquire national insurance contributions because they are severely disabled. I would welcome some clarity about the expectation that they will accrue these contributions and be protected in the welfare system at the point at which they become an adult. Despite reading the impact assessment and all the debates in the House of Lords and listening carefully to what has been said today, I am still not entirely clear how that will be achieved.

Before my hon. Friend moves on and in case I do not have a chance to respond at the end of the debate, I would like to draw his and the House’s attention to the fact that people who leave contributory ESA will still be able to accrue national insurance credits in the same way as happens today for those who are not on contributory JSA. Ultimately, they will still have the same pension entitlement they would have done had they been in work.

I thank the Minister for that helpful clarification.

Secondly, I want to reflect on the comments pre-empted by what was said by the hon. Member for Makerfield (Yvonne Fovargue) and perhaps go beyond the implementation of this system to look at the wider impact on the ability of individuals to form independent relationships.

As the right hon. Member for Birkenhead (Mr Field) has recognised, we are talking largely about the impact on human behaviour. I am concerned—it is possibly a mistaken fear—that if people were to enter into a relationship and cease to be an independent household, they might become dependent on their partner’s income. That could be a deterrent to forming a meaningful relationship. I may be a simple Member of Parliament who fails to understand this complex issue, but the all-party parliamentary group for young disabled people, which I chair, has asked me expressly to raise this issue, which is at the heart of its concerns about this amendment. I would welcome some clarification of how the Government think people will behave in real life as opposed to in the benefit system.

I shall not detain the House any longer. The Government have my full support on these amendments, but I would like more clarity about how they view their implementation.

Let me say from the outset that I support the Lords amendments and do not agree with the Government’s motion to disagree. I shall talk about two main aspects: one is the time limitation and the second is the can of worms that I have managed to open this afternoon about the youth rate.

The time limit is unfair to people who have worked all their lives, done the right thing and thought that part of their payment of national insurance would provide them with some kind of insurance scheme so that if an unfortunate accident or ill health befell them, they would qualify for an income replacement benefit—in this case, employment support allowance—regardless of their actual income. People believed that it would work like any other insurance policy and would pay out if the unfortunate happened. The Government are breaking that link between the concept of an insurance policy and how much and for how long it will pay.

People suffering from cancer are often used as an example of a group that will fall into the work-related activity category of ESA: cancer patients will often not be well enough to go back to work within the year. Other groups of people have fluctuating conditions and some have slowly progressive neurological conditions. From everything the Minister said today, the assumption seems to be that people in the work-related activity group will move towards work, but some will be on the opposite journey, moving further and further away from work as their condition deteriorates.

Because we assess people not on their condition but on how their condition affects them when they go through the assessment, someone with multiple sclerosis or in the early stages of Huntington’s disease might not qualify for the ESA group, might end up in the WRA group and might qualify only some time in the future. They are likely to be a group that has already been in work and will have fallen out of work precisely because they have been diagnosed with these conditions. Although many of us—and probably those people, too—want to be in work, we live in the real world where employers will often not take the risk of employing someone with that type of condition, especially if the person has already lost one job precisely because of it.

I think the time limit is arbitrary and unfair, and I wish the Government would look at it again. The two-year provision is arbitrary as well—[Interruption.] In fact, I do not agree with time-limited provisions at all, but this is the best we have; it is twice as good as the Government’s proposal. [Interruption.] I am sorry that some Conservative Members at the back of the Chamber find this so funny. The people with Parkinson’s disease and MS do not find it funny. It is their lives that are being undermined, and it is they who will not have an independent income. It is my constituents—and, indeed, those of Government Members sitting at the back of the Chamber—who, because they have saved all their lives, will not qualify for income-related ESA and will suffer as a result. They will lose their independent incomes, and their household incomes, although they may have been cataclysmically affected, may still be too high for them to qualify for income support. Despite what those Government Members sitting at the back may think, income support levels are very low, and the actual level of income on which such households will have to live will therefore not be what they may have expected.

My hon. Friend may recall that, in an intervention on the Minister, the hon. Member for Shipley (Philip Davies) pledged his support to the Government on the basis that, in rejecting the Lords amendments, they were removing from the system people who had been abusing it as a “lifestyle choice”. The people we are discussing are people who are suffering from life-impacting conditions such as cancer, Parkinson’s and AIDS, or young people who have had disabilities since their birth or childhood. Where does the issue of lifestyle choices come in for those people?

I could not agree more with my hon. Friend. It is not a lifestyle choice to be diagnosed with a progressive, debilitating condition. It is hard. It is difficult. Individuals in that position face enough prejudice in society already, probably from the employers who told them that they could no longer do their jobs. That is why they need to apply for and claim benefit: because they have already faced that prejudice, which the Government may be making even worse. It is hard for those people, and we are making it harder.

To a certain extent I agree with what the hon. Member for Shipley (Philip Davies) said about lifestyle choices, but surely, in this instance, people who have decided to save, make provision and do the right thing are being penalised for making a lifestyle choice. It is the kind of lifestyle choice of which I imagine the hon. Gentleman would approve, but the measures that we are discussing will punish people for making what he and many other Members would presumably describe as a good lifestyle choice.

Indeed. As I said earlier, the people who will be punished most are those who have done the right thing. They are the ones who have been in work, the ones who have saved, and the ones who have partners who have been in work and remain in work. It would be much easier for their partners to drop out of work as well, because they and their partners would then, as a household, qualify for the benefit. That would probably be the wrong thing to do from the point of view of the family, but given such a benefits system—I was going to say “a benefits system that would make them better off”, but it might not do that—it will become a logical choice for a working partner in those circumstances to give up work. Although it would probably be wrong, it would be logical.

Will the hon. Gentleman sit down while I answer his question? The whole point of contributory ESA is that it is based on national insurance contributions. These are people who may have worked for 30 or 40 years, paying into what they thought was an insurance scheme. Does the hon. Gentleman, if he has insurance, expect the insurers not to pay out at the point at which the money is due to be paid?

I thank the hon. Lady for giving way to me again. I have been made redundant twice in my life, and on both occasions, because I had capital, I was not entitled to any employment relief. I was given no benefits at all, because I had about £20,000 in the bank, and although I had been paying into the system since I was 16, I had to accept that.

Order. The hon. Member for Sittingbourne and Sheppey (Gordon Henderson) has asked a question, Dame Anne Begg wants to answer it, and I am sure that other hon. Members would love to hear the answer as well. They may wish to intervene later.

Thank you, Mr Deputy Speaker.

I think that the hon. Gentleman’s intervention illustrates some of the confusion that exists. Some Members seem to believe that losing a job because of ill health is exactly the same as losing a job by being made redundant, but it is not. As was pointed out by my right hon. Friend the Member for East Ham (Stephen Timms), the chance of obtaining another job is far, far higher for someone who has been made redundant than for someone who has lost his job because he has received a diagnosis of multiple sclerosis, or because he has had a major road accident which means that he is now dependent on a wheelchair to survive. Those conditions are different, and they should therefore be treated differently in the national insurance and, indeed, the benefits system.

Does the hon. Lady accept that any responsible policy must be fully costed? If so, will she answer the question that the shadow Minister failed to answer, and tell us how much it would cost for the one-year period to be increased to two years, as the amendment proposes?

At present, those on incapacity benefit—the existing benefit, which the Government are to replace—who have made the necessary national insurance contributions will keep that benefit until they return to work. Is the hon. Gentleman saying the costing should be done on any other basis? Obviously, the reason the Government are introducing the time limit is to save money: there can be no other reason, as the hon. Gentleman has effectively admitted. This is the result of a money-saving decision by the Government. It is not about being fair; it is about saving money to deal with the debt and the deficit, which were not caused by the people—and their partners, wives and husbands—who have tried throughout their lives to do the right thing.

I am conscious of the time, but I now want to say something about the youth rate. When I intervened on the Minister, I was genuinely trying to obtain some clarification, but I have ended up even more confused than before about how the youth rate will work and which groups of young people will no longer receive an independent—that word is important—income replacement benefit. They may receive non-means-tested benefits and, for instance, disability living allowance or the new personal independence payment, but they will not have any income.

Let me give an example of someone I think will be caught by that, someone who came to my constituency office a number of years ago. He was a young lad of 20 who had been in work for six months when he was diagnosed with a virulent condition. I cannot remember what it was, but it meant that he would be unlikely to work again, and indeed his condition was going to deteriorate. This young man lived with his girlfriend, who earned about £15,000 or £16,000 a year, just over the income support level. Under the measures proposed by the Government, he would not qualify for any income at all. He would be wholly dependent on his girlfriend, and the household income would consist only of her income. That does not strike me as right, and it does not strike me as fair. I should be grateful if, before we vote on the amendment, the Minister would tell us exactly which group of people will lose out as a result of the abolition of the contributory youth rate.

Does the hon. Lady accept that that young man would probably qualify for disability living allowance? He would therefore have some income, even if he did not receive means-tested ESA.

The household might possibly get housing benefit, but that goes on paying the rent. The young man might get disability living allowance, but that is paid because he has extra expenses due to his disability. What he does not have is an income. He has no money to go to the pub for a pint, to buy clothes, or to do anything that the rest of us, disabled or not, take for granted. He has no independent income. It is totally different if someone is out of work and unemployed. I am disappointed that those on the Government Benches cannot see that distinction, and cannot see that those who are long-term ill or disabled, and who have no prospect of improving their financial circumstances themselves because of the level of their disability, are being penalised by the Government. That is partly why I most certainly will support the Lords amendments this afternoon, and I encourage right hon. and hon. Members to do so, too.

Returning to the issue of the time-limited employment and support allowance, there is real concern about an arbitrary time limit. As was kindly pointed out by the right hon. Member for East Ham (Stephen Timms), at a party conference the Liberal Democrats showed their concern by passing a motion against arbitrary time limits. However, the amendment from the Lords and the Government’s original proposal both set arbitrary time limits; it is just that one is longer than the other. Neither of the options in front of us would get rid of an arbitrary time limit, as a number of Members have highlighted.

One way to make the system less arbitrary is to ensure that people are in the right category in the first place, with those in the greatest need in the support group, so that they are not affected by a time limit. My colleagues and I have looked long and hard at the issue, and the important thing is to get the assessment right in the first place and make sure that people are in the right category, as those in the support group are exempt from the time limit. We need to make sure that people who need long-term, indefinite support are in the support group and can get that. That is a more effective way to protect those who need the most help than changing one arbitrary time limit for another.

I share the hon. Lady’s concern about getting the test right in the first place, but is she confident that the work capability assessment is working as it should?

I was going to come on to that. If the hon. Lady will bear with me, I will hopefully answer her question.

The hon. Lady is making many interesting points. Does she agree that when a person has a degenerative illnesses such as multiple sclerosis, their condition may change during any finite period, so it is important to emphasise that people can be reassessed and put into the support group if their condition deteriorates?

The hon. Lady is right, and many conditions get worse at varying rates—very slowly for some people, and very quickly for others. It is important to make sure that people get the benefit that they should, and that the assessment is right, as the hon. Member for Banff and Buchan (Dr Whiteford) said.

I will make some progress, because I have hardly said anything yet, and I am being intervened on left, right, and centre.

The Harrington process is critical to getting the assessment right. I welcome the work that has been done looking specifically at cancer patients, which will ensure that the vast majority go into the support group. That is the right way forward. I also welcome the fact that Professor Harrington is looking at how we assess chronic pain and fatigue, because in many chronic, long-term conditions—particularly fluctuating conditions—those are the elements that cause people most difficulty in thinking about returning to work, and the elements that, at the moment, the work capability assessment is not very good at identifying and reflecting. I really hope that Ministers will implement whatever recommendations Professor Harrington makes on those issues; on past experience, his recommendations have been sensible and have made a significant difference to the assessment.

On the point made by the hon. Member for Banff and Buchan, there is evidence that the system is improving. I looked earlier today at the latest figures on the outcome of the work capability assessments, which I found quite reassuring when it comes to the Bill. We have to treat the figures with caution, but they show that initially, following the work capability assessment, more people are going into the support group than the work-related activity group. That is a crucial point. If we are getting the assessment right, and more people are going into the support group in the first place, the time-limit for people in the work-related activity group becomes less of an issue, because the people who need the most care are getting support indefinitely.

My concern remains that far too many people are having to appeal against their work capability assessment result, and those appeals are overturning the original decision, so the system really is not working as well as it should.

I understand the hon. Lady’s concern, and the issue has been raised over a number of years by those on both sides of the House.

It is important that we put it on record for the House once again that, possibly with a tiny number of exceptions, no appeals have yet been completed following the introduction of the Harrington reforms. Every appeal that has been discussed up to now took place under the system that we inherited, rather than since we changed the system last summer.

I am grateful to the Minister, and I hope that when the figures flow through on appeals that have taken place under the new system, we see a reduction in the number of decisions overturned, and in the number of people who go to appeal. That would suggest that the assessment was working properly.

If we make sure that the assessment works properly, it will reduce the arbitrariness of the timetable, but as the Minister mentioned in an intervention on the Opposition spokesman, the right hon. Member for East Ham, it is important that we recognise that many people will receive six months’ statutory sick pay before they go on to the ESA, so they will be receiving benefits for 18 months. It is important that the Government continue the work that is being done to look at ensuring that employers work with staff when they become disabled or fall sick, and do not immediately push them on to ESA. Instead, employees should get the support that they need, possibly to stay in work over an extended period, and get their full entitlement to statutory sick pay and ESA, so that they get the full 18 months’ support to which many of them will be entitled.

The hon. Lady set out the fact that there was objection at her party conference to an arbitrary time limit. Does she accept the case for setting the limit, whatever it should be, in regulations instead of in the Bill? Putting it in the Bill means that it will take another Act of Parliament to change it in future.

There needs to be some stability, so that people know what to expect. One of the problems with putting that type of provision in regulations is that it becomes very difficult for people to know what they can expect. That creates uncertainty, which makes it more difficult for people to cope.

To return to the point made by the hon. Member for West Worcestershire (Harriett Baldwin) about people with deteriorating conditions, I welcome the concession that the Government made in the Lords. It is important that people with MS, motor neurone disease, Parkinson’s and so on get ongoing support when they really need it. That is definitely a step forward.

I still have some concerns about work incentives and the means test. A person does not get means-tested ESA if their partner has a low level of income. If the partner worked 24 hours a week on the minimum wage, that would be a household income of £145 a week. However, as people would get increased housing benefit, council tax benefit and so on, the drop in income for that household when the sick or disabled person no longer received ESA would be significantly less than the scare stories are leading people to believe. I also appreciate that when universal credit is introduced, that will be far less of an issue, because the income disregard for households in which there is someone with a disability will be set much higher, at £140 a week. In the future, under universal credit, a household with an income of £140 a week will get the whole of their income and the full universal credit on top of that, so this is mainly an issue for the 18 months between the introduction of the policy that we are discussing and the introduction of the universal credit in October 2013.

I would be grateful if the Minister, if he gets the chance to sum up at the end of the debate, would say whether anything can be done to bridge that gap. For example, we could look at making sure that people in that category are among the first to be moved on to universal credit, so that we can ensure that the period in which they lose out on income is as short as possible. In addition, the DWP impact assessment says that it is likely to cost £30 million in increased benefit payments as the partners of those affected leave work. I would be grateful if the Minister could consider whether there is anything that could be done to reduce that amount of money by considering the effect on such households.

Finally, the debate has been getting quite heated on the subject of young disabled people. I understand that there is a lot of concern about this group, because they are particularly vulnerable, but there has been a good deal of rhetoric—not least today—about the Government taking away those individuals’ whole income. We have heard suggestions that people will not get anything at all, but it has been made clear today that the means test will not take into account parents’ income once the disabled or sick young person reaches the age of 18 or 19. Despite the best efforts of those on the Opposition Front Bench to muddy the waters, it is quite clear that the means test will only take into account that individual’s circumstances. The parents’ savings and income will not be taken into account and that is why nine out of 10 of the people affected will still receive income-related ESA. That is a crucial message for people who are concerned about this move. The vast majority of people will not lose their benefits, despite the negative messages we have heard, which are creating fear that is unnecessary and worrying.

I will not give way any more, because quite a number of people want to speak and we have only half an hour left.

There are still issues about the time limiting of ESA, although many of them will be resolved when the universal credit is introduced. I believe that the Government have been making good progress on improving the assessment process, which is critical to making the system work. I hope that the Minister gets the opportunity—even if only through interventions—to respond positively to some of the points that I have raised.

This is indeed a grubby and obnoxious measure, but I have no doubt that at 2.30 pm, the Government will carry the day. I sat on the Government Benches for 13 years, and in the unlikely event that my Government had introduced such a measure, I would not have hesitated to vote against it, as I did on other motions on one or two occasions—although not many. I would not have expected my Government to propose such a measure, and I am pleased that we are opposing it. In essence, we are debating a 12-month limit—if the Lords amendments are defeated, as I expect they will be—for those with cancer and other life-threatening illnesses in the work-related activity group of the employment and support allowance. After 12 months, most of them will be means-tested. Some Government Members will ask why such a means tests should not be imposed, but let us be clear, so that when hon. Members vote in half an hour they know what they are voting on: a claimant in the category that I have mentioned whose partner works for more than 24 hours or earns £149 weekly—£149, not £249 or £549—could lose all their benefit. I wonder how many Government Members, who seem so keen on the proposal, could justify that in their constituencies. I certainly could not and would not wish to try.

As has been stated, Macmillan Cancer Support believes that 7,000 cancer patients will be adversely affected by the proposal. The Government’s own figures show that 94% of people with cancer who are placed in the group that I have mentioned need ESA for longer than 12 months. That is not disputed—if it is, the Minister will intervene. I repeat: the Government’s own statistics show that 94% of such people require that support for longer than 12 months.

This is not just about cancer patients. Let me quote a piece written by someone who has a rare bone disease. He is 50 years old and has spent more than three years in hospitals, trying to recover. He is not in a position to take employment, and that is not disputed. He says that he paid national insurance contributions all his life, until his illness, and he gets £89 a week through ESA. He writes that it

“isn’t a big sum…but it makes a huge difference for me. Among other everyday essentials it pays for the heating to keep me warm during the long and often painful days at home while my partner is out at work.”

Not an extravagant sum, is it? We are not being over-indulgent to someone who worked until he had that terrible disease and wants to try to make the best of his life in such circumstances. He says—[Interruption.] I hope the Minister is listening—he smiles.

If I understand correctly, the hon. Gentleman has just described the very sad case of someone who will not be able to work again and would therefore certainly be placed in the support group and would not be affected by the measures. I am not sure that I understand the point being made.

He may well work again, but not at this moment. He writes that when the Welfare Reform Bill becomes law in April he, and others, such as cancer sufferers, people with psychiatric problems and those with other life-threatening illnesses will have their benefits “stripped” from them once 12 months is up. If his partner earns the sum I have mentioned of as little as £149 a week and if they have modest savings, he will receive nothing at all once he is means-tested. If that case is an illustration of the Government’s intentions, there is all the more reason for a reluctance to support the measures and a recognition of what the House of Lords has tried to do.

As I listened to the hon. Member for Cardiff Central (Jenny Willott) and to the Liberal Democrat Minister of State, who intervened on my right hon. Friend the Member for East Ham (Stephen Timms), I asked myself whether, if they were in opposition, they would have the slightest hesitation in upholding the decision of the Lords by majority vote. The answer is pretty obvious. To their credit, a number of Liberal Democrats in the Lords decided to vote against the Government, and Liberal Democrat MPs would, in opposition, have voted in the same Lobby as us at half-past 2. It is unfortunate that they are willing to sacrifice their principles so flagrantly as a result of being in the coalition.

Let me end on a quote:

“People who are sick, who are vulnerable…I want you to know we will always look after you. That’s the sign of a civilized society and it’s what I believe.”

That was the Prime Minister at his party conference. What he is now doing with his colleagues and with the support of the Liberal Democrats is hitting out at the most vulnerable people in our society—cancer patients and the rest, including the man I mentioned. Those are the people who will be penalised financially and harmed in so many ways as a result of what the Government are doing. That is a direct contradiction of what the Prime Minister said about protecting the most vulnerable in our society.

Order. Quite a few Members wish to speak, so may I ask for short speeches? That will mean that we can get everybody in and all the views will be on the record.

It is always a great pleasure to follow the hon. Member for Walsall North (Mr Winnick), although I do not agree with him on many occasions. I do not agree with him today either, except on one thing—the Government will get this measure through today, and that is because they are doing absolutely the right thing. One thing that I heard time and again from my constituents in the last election campaign was that they were sick and tired of the number of people taking a lifestyle choice to live a life on benefits, as my hon. Friend the Member for Shipley (Philip Davies) has mentioned.

Does my hon. Friend share my surprise that the Labour party, which now has this synthetic anger about the proposals for means-testing, was the party that when in government—the hon. Member for Walsall North himself said that he supported them more often than not—extended means-testing more than any other Government in history?

Absolutely. We have heard a lot about this means-testing this afternoon. We have heard that the system is insurance-based, which it is, but with any insurance policy there are terms and conditions. In this case, the means test is just shorthand for the terms and conditions of the policy.

What I find so hard to understand in the argument the hon. Gentleman is presenting is that the very people he might be condemning—people who have not worked and have not had savings—will continue to get benefit. The people who are being damaged by this policy are those who have saved, who are working and who have tried hard.

We must have rules of policy in an insurance system. The Labour party accepted that when it was in government and the hard-working families in my constituency, many of whom have no savings at all, or less than £1,000 in savings, will ask why their taxes should go towards paying benefits to people who have far more in savings than they have. That is a perfectly logical and sensible view.

If people thought about this they would realise that if they had been saving and making that effort—and we are not necessarily talking about huge amounts because the measures would start to affect people to some degree at £6,000—they would find the measures unfair.

I do not agree. We have to ask why people save. They save for a rainy day. They save in case they lose their job or have an illness. The changes will still mean that the most needy in our society will be looked after. There will still be a safety net that will help those who most need help in our society.

Will the hon. Gentleman be advising his constituents to take out private insurance to protect against unemployment or ill health? After all, he is supporting the limiting of the state’s role in that respect.

Some constituents might choose to do that, but that is a matter for them. I am not going to recommend whether that is the right or wrong thing to do because it is a decision they have to take for themselves. It is about personal responsibility. Hon. Members should be in no doubt that at a time when the welfare bill is spiralling out of control and this country has run out of money—we are essentially bankrupt; we are having to borrow money every single day to pay our way—it is essential that we bring the welfare benefits bill under control. It is only by taking tough decisions that that will ever be done.

Like me, my hon. Friend might not be surprised that the Opposition are ignoring the effect of universal credit. Does he accept that many of the families in the margins who are affected badly by means-testing will benefit from universal credit?

My hon. Friend is absolutely right. With universal credit, we seek to sweep away some of the complexities of the welfare system that inevitably lead to confusion and the possibility for people to make errors—sometimes deliberately.

I am very conscious that many other speakers want to get in and I am sure that we want to hear the Minister’s reply. Let me say again that I want to speak up for the hard-working families in my constituency and the vast number of my constituents who think the Government are doing absolutely the right thing on welfare. I urge everyone to back these moves today.

If anyone ever had any doubt about the same old Tories and the nasty party, they have just seen an absolutely fine example of it. I am not surprised by the views of the hon. Member for Shipley (Philip Davies) either, bearing in mind that he said that disabled people should work for less than the minimum wage—well done!

Order. It is up to the hon. Gentleman whether he wishes to give way. Having three people shouting at once is not the way to get anyone to give way.

Thank you, Mr Deputy Speaker.

One in three of us suffers from cancer at any one time. I am very unfortunate, as my parents and my wife’s parents all died at a relatively young age.

On a point of order, Mr Deputy Speaker. Is it in order for an hon. Gentleman to make an accusation that five national newspapers apologised for making? Is it in order for him to make the same accusation and then not give way to allow me to correct him? Those five newspapers at least had the courtesy to acknowledge that they had made a mistake.

That is not a point of order for the Chair, but you have put the point on the record which I think is what you wished to do.

As I was saying, one in three of us—[Hon. Members: “Shame!”] I will start again. One in three of us, sadly, comes into contact with cancer during our lifetime. It is a very difficult situation. I lost both my parents, and my wife lost both of hers, so I understand how sufferers and their relatives and friends are affected. It is not just the disease that has an effect—there is also the mental and physical stress and traumatisation for people who suffer from diseases such as cancer and stroke.

Some of the people who suffer from cancer might not see two years—they might not have a vision of the next two years on this earth—but the Government propose to cut benefits from those people at that time in their lives. It is absolutely dreadful that in 2012 we have a Government who are even considering such heinous acts against the most vulnerable. When the Secretary of State, who has left the Chamber, discusses these issues on television and in the media he seems to relish the fact that benefits will be cut. He seems to have a sense of contentment or self-satisfaction—almost an arrogance beyond belief—when he states clearly that benefits will be cut. To say the very least, it is gut-wrenching.

We as politicians across the board should be looking to defend people whose voices are mostly unheard. They elected us into our positions, and they depend on us. The Government must consider an extension to ESA for two years, and we must exempt those receiving cancer treatments from any time limit whatever. It is breathtaking and incomprehensible that benefits are being cut from people at that critical point in their lives, when some see the possibility that they will not live much longer.

There are regional differences as well, regarding the availability of cancer treatments, for example. The north-east fares very poorly in that. We also have the highest incidence of newly diagnosed cancers, and I am certainly not happy with the cutting of benefits in any way, shape or form to people suffering from cancers, strokes and all those debilitating diseases.

In conclusion, we need to give such people a break—give them a chance and some understanding. You can nod your head all you wish.

Obviously, the hon. Gentleman is not concerned with the facts at all. Cancer does not respect political boundaries. Do you not think that colleagues on this side of the House have suffered in the same way that you have? Such a person as you have described would clearly be in the support group.

Thank you, Mr Deputy Speaker. I am the sort of person who would not, in any event, agree to cuts for people on benefits who were suffering from debilitating or life-threatening diseases. That is the type of person I am. If you want to vote for that—my apologies. If it is your intention to vote for that, you do it.

Order. We are going to go through the Chair and we cannot use “you”. We know better now. Okay, Mr Ian Lavery.

Will my hon. Friend give me some clarification to get the facts straight? If someone who has worked all their life and paid contributions to the system tragically contracts cancer, after one year will their ESA contributions-based benefit stop?

That is certainly the intention of the Government’s proposal, and it is absolutely outrageous.

To conclude, bearing in mind the time, I want to say that it is about time that we gave some dignity to the people we have mentioned—

It is important that the House understands the facts. Somebody who is diagnosed with cancer who goes through chemotherapy will spend an extended period in the support group, so they will not lose benefits after 12 months. Does the hon. Gentleman accept that, today, there are more cancer patients receiving unconditional ongoing support in the support group than under the previous Government?

What I will not accept is that everyone suffering from cancer will be in the work group. That is not the case. They might be in for a short time or a prolonged period, but they are not guaranteed to be in there all the time. That means their benefits will be cut.

Does my hon. Friend agree that it is rather strange that a Government who have been saying that disabled people should not be condemned to worklessness and should be encouraged to work seem to be turning on a pin to argue that everything will be all right because all those people will be in the support group?

If that was the case, there would not be a problem with the legislation. Everybody would get what they were due and there would not be the apparent cut.

For the third time, I shall try to conclude. We must give dignity to those people, who are in most need, and stop the war against those in need.

I will try to keep my comments brief, given the time pressure on us.

The Lords has done us a big service by highlighting the impact and implications of these measures for sick and disabled people. The 12-month limit to contributory ESA is arbitrary. Regardless of the people in the support group, the measure will affect people who are adapting to radical and serious changes in their health, income and life. They might be suffering from life-limiting conditions, long-term disability or fluctuating conditions. They might be people who have been used to living on an average income, but will have to get used to living on a very low income. Those adaptations take time; getting better takes time. Some people will take less than 12 months, some considerably more. Macmillan thinks that 94% will need support in the work-related activity group for more than 12 months. In that respect, while I do not accept the principle of an arbitrary time limit, I suspect that two years would catch more of those people and see them getting the support they need.

Fundamentally, these measures will upset the contract that we all like to think we have when we pay our national insurance contributions—that there will be some limited safety net for us if we are unfortunate enough to become sick or disabled. That could happen to any one of us in this Chamber, at any time. We do not know when we are going to have an accident or develop a serious illness, so not only cancer is involved, although we know that people across society are affected by it. Other conditions are just as serious, and the same principles apply.

On insecurity, I should draw an analogy with what happened when banks tried to prey on people’s insecurities about the future by asking them to take on insurance for loans they had taken out. The banks have had to pay out seven-figure sums in compensation to people who were mis-sold insurance policies. I hope that that does not happen again as people think, “If I get a serious illness, there will not be support for me.” I am worried that there will be an opportunity for unscrupulous selling of insurance policies to vulnerable people at the most vulnerable times in their lives.

I am concerned about the knock-on impact of the proposals on carers too. In my constituency, I have seen families working longer hours, often in low-paid jobs, just to provide financially for family members who are no longer able to work, but who once were. There is particular concern around young people; that was mentioned earlier in the debate, but it has not been focused on so much. Parents of disabled young adults have often saved throughout their lives as they are concerned about what will happen when they are no longer able to look after their children. They have saved for their children to ensure that they have independent means and a bit of money behind them for when they are adult and their parents are no longer in a position to provide.

It would be unfortunate if the capital of those young people were eroded at a time when they still had some support from their parents. They might be prevented from having an independent old age and might be made more dependent on the state than they would otherwise be. That is about the dignity of young disabled people as much as anything.

I urge the Government to consider the fact that ESA needs to be assessed on the basis of medical need, not an arbitrary time limit. People should get the support they need according to their health, not some arbitrary category that they may or may not fit into.

What we have heard today is that there is a big divide between the parties on our views of what the welfare state is for. The Minister opened the debate by saying that the welfare state is a safety net, by which he meant a safety net only on financial grounds; those who are very poor get help, but those who are not do not. That is not how I see it. The welfare state was set up to help us through the times when we are in difficulties, including illness and poor health. It is the social security that gives us the confidence that we will be provided for when we need it. This distinction clearly illustrates the divide between the parties.

It was very odd to hear the hon. Member for Cardiff Central (Jenny Willott) argue that this matter was somehow not as important as the Opposition think it is because people will end up in the support group. That goes against everything that many disability organisations are saying, which is that people who have an illness or a disability do want to get back to work. Perhaps they are not quite ready to go back to work within a year, but they do want to work. Parking people in the support group is a very odd solution indeed, because we will end up going back to the situation that the Government have so heavily criticised. Where people have saved, they should have that opportunity. If someone falls ill at that age, they will already have incurred considerable financial losses and no doubt bitten into their savings. We are talking not about welfare, but about people who will start to lose benefits when they have savings of over £6,000 a year.

The hon. Lady is absolutely right that people’s circumstances change, but does she not agree that they can go for a reassessment?

One of the things that it would be interesting to discuss if we had more time, and it is dreadful that so little time has been given for considering these important matters, is whether someone who has been in the work-related activity group—

Debate interrupted (Programme Order, this day).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83F), That this House disagrees with Lords amendment 15.

Lords amendment 15 disagreed to.

The Deputy Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83F).

Government amendment (a) made to Lords amendment 19.

Lords amendment 19, as amended, agreed to.

Motion made, and Question put, That this House disagrees with Lords amendment 17.—(Chris Grayling.)

Lords amendment 17 disagreed to.

Motion made, and Question put, That this House disagrees with Lords amendment 18.—(Chris Grayling.)

Lords amendment 18 disagreed to.

Lords amendment 23 disagreed to.

I have received a report from the Tellers in the Division at 10.14 pm yesterday on the Question that new clause 11 be added to the Local Government Finance Bill. The hon. Members for Preseli Pembrokeshire (Stephen Crabb) and for Leicester South (Jonathan Ashworth) have informed me that the number of No votes was erroneously reported as 309 instead of 299. I will direct the Clerk to correct the numbers in the Journal accordingly. The Ayes were 225 and the Noes were 299, so the verdict is not altered.

Clause 93

Benefit cap

With this it will be convenient to consider new clause 1 and amendments (a) to (j) in lieu of Lords amendment 47.

As Mr Speaker has indicated, Lords amendment 47 impinges on the financial privilege of this House. I ask the House to disagree to it, and I will ask the Reasons Committee to ascribe financial privilege as the reason for doing so. Notwithstanding that, the House has an opportunity to debate the substance of the Lords amendment and I intend to provide the Government’s full rationale for rejecting it. I will also deal with the matters raised in the amendments tabled by the Opposition and explain why they should be rejected as well.

I should like to start by stressing that this debate is not simply about the financial aspects of what we are doing. The fact is that the arguments in favour of a cap are about fairness and about ending a situation in which, for some people, benefit rates are so high that it is not worth working. It is worth my saying that on this issue, the public of this country are overwhelmingly behind us.

I congratulate my right hon. Friend on disagreeing with the Lords on this point. He is absolutely right that the public are right behind us, but does he agree with many of my constituents who think that the cap is still being set too high? They find it incredible that anybody could possibly think that it was too low.

Indeed, and what my hon. Friend says makes all the more extraordinary the flip-flopping position that we have seen from the Opposition in the past few weeks.

A recent YouGov poll showed 76% support for the cap, confirming what all of us will know from our mailbags—that the vast majority of the general public agree with the Government. It is not just the general public as a whole who agree with us, it is Labour voters as well. More than two thirds of them support the principle of a benefit cap. They agree with us that it is wrong to pay people who do not work more in benefits than people earn on average when they do work.

The cap will set a firm upper limit on total benefit entitlement, which for families and lone parents will be equivalent to the average wage for working households. We estimate that to be about £500 a week or £26,000 a year, which is equivalent to gross earnings of £35,000 a year.

I would support entirely what the Minister says but for the fact that in my constituency, rents are so high and housing shortages so great that people do not have a choice. They are obliged to rent properties that entitle them to higher housing benefit, which costs more than the cap. That is the fault of landlords for the rents that they charge, not of the poor people who have no choice and will become homeless under the cap provision.

The right hon. Lady uses the evocative word “homeless”, but what happens to people in her constituency who are bringing up a family and earning a salary of £35,000 a year? Should they pay for those who are not working to have a home at the taxpayer’s expense?

As the Minister will know perfectly well, families in work are entitled to housing benefit, and approximately half of housing benefit recipients in my constituency are working families.

Of course people on lower incomes can receive housing benefit, but I am not aware that it is paid to families earning £35,000 a year. Surely that is the point. We are setting a dividing line.

The Opposition say that they agree with the principle of a cap, but they have been an unedifying sight in the past few weeks. Labour has said one thing one day and another the next. Let us take the example of the former Minister and now Opposition spokesman in the House of Lords, Lord McKenzie. On Second Reading, he described the cap as an “arbitrary measure”. On Report, however, he said that he was in favour of a benefit cap. Then bizarrely, no doubt at the instigation of the shadow Secretary of State, he tabled an amendment that was officially judged to be a wrecking amendment. When the vote on it was lost, the Opposition decided that they would support the exclusion of child benefit, and the new clause that they tabled effectively stated that they believed £26,000 a year was not enough.

Of course, if child benefit were excluded from the cap, a household in work would have to earn a gross salary of around £40,000 a year to receive as much as a household with four children would get in benefits.

I am sure that my right hon. Friend has seen that, in recent years, a large number of new jobs in this country have gone to people who have recently arrived. They have not seemed to be attractive to people who have been settled here longer and are unemployed. Does he think that is because it is not worth their while, as benefits are too high relative to pay?

That is exactly the problem. Many people are taking a hard look at the financial situation and asking, “Why would I return to work?” Surely that has to end.

Although most of us agree that there should be a cap, does the Minister not accept that the situation is different for people living in different parts of the United Kingdom? Costs are different, so common sense says that the cap should be different.

I was going to come on to the Opposition amendments, but I should make the point that, although this debate is not simply about money, there is no getting away from the fact that their amendments would be costly. They would cut the savings that will be generated by £120 million in 2013-14 and £130 million in subsequent years.

I have great respect for the hon. Lady, and she makes an important point, but it would be altogether more credible if it had not been made at the very last minute. I do not ascribe the blame to her personally, but what we have heard from the Labour party has been quite extraordinary. Its latest effort, in today’s amendments, is to propose a regional benefit cap set by an independent body. The Opposition have tabled that idea and want to discuss it. However, did they table it on Second Reading? No. We had an extensive debate in Committee, which included many of the right hon. and hon. Members who are currently in their places, and I have no recollection of any mention of a regional benefit cap. We then had Report, and again I have no recollection of its being mentioned. My right hon. Friend the Secretary of State led on Third Reading. I have asked him, and he cannot remember mention of a regional benefit cap. There were then the debates in the House of Lords, in which there was no mention of it. I believe that the first time we heard about it was on the “Today” programme about 10 days ago. Frankly, it is a proposal designed to get the Opposition off the hook.

Can I assume that if the Government accepted the Opposition’s proposal, the £26,000 cap would apply to London and the south-east and my hon. Friend the Member for Shipley (Philip Davies) might get the smaller cap that he wants in his constituency?

That may well be the case, but of course it is not clear. We do not quite know what is in the mind of the Labour party. Is it suggesting—this is not in its amendments—that the cap should still be set at £26,000, in which case there is no reason why Labour Members should not back our measures? Or do they plan a higher cap in some parts of the country and a lower cap in others, accepting that our benefit system should be regionally based? Frankly, I am completely confused, and the House has every reason to be the same.

I, too, have a great deal of respect for the hon. Member for Vauxhall (Kate Hoey), but does my right hon. Friend agree that the logical conclusion of a regional cap is regional benefits? She cannot call for a regional cap unless she is also prepared to argue for regional benefits.

My hon. Friend is absolutely right, but that is not a conversation that the shadow Secretary of State will wish to have with his close friends in the trade union movement, who would not approve at all of the idea of beginning to regionalise how the public sector operates.

The Minister expressed surprise at the concept of variable caps and benefits. Is he not aware that that concept has applied since the time of Beveridge, in the form of local reference rents, which have existed up to now? Why does he not recognise that regional or area variations in the cap are appropriate, because rents vary enormously from area to area?

We need to be clear about what has happened. We have been through months of debate. The Labour party has got itself on to an almighty hook on the issue of the benefit cap—it is on the wrong side of the argument—and is desperately trying to wriggle free. The Government are having none of it. We are standing by our proposal. The benefit cap that we propose is the right thing and we will press ahead.

My right hon. Friend is right that in the 26 sittings of the Welfare Reform Bill Committee, which I had the pleasure of attending, we did not hear once about the regional benefit cap. Fifty-seven per cent. of those affected live in London. Does the timing of the Opposition proposal have anything to do with the London mayoral elections?

There might be an element of that—it is difficult to escape that conclusion. The Opposition proposal would have more credence had it not been made at the 59th minute of the 11th hour. We should not take them seriously when they make such ill-thought out, last-minute proposals.

The Government are clear that average earnings are the right way to determine the level of the cap. We do not need the Opposition’s proposed independent body—another quango, I hasten to say—to tell us otherwise. The cap needs to be a single, national one for the policy to make sense. The Government will lay before the House a report on the policy’s impact evaluation after a year of operation.

The Minister knows that the Committee extensively discussed the impact of housing costs and their interaction with the cap. If a household loses income through the benefits system through no fault of its own, can it claim legitimately to a local authority to be statutorily homeless, in line with existing homelessness legislation?

I am sorry, but I simply do not buy the homelessness argument that Labour Members keep making. We are talking about a cap equivalent to a salary of £35,000 a year. Labour Members were vociferous 12 months ago when the housing benefit cap was introduced, but we have not seen the consequences of which they warned in the terms they used. I simply do not accept that somebody receiving the equivalent of £35,000 a year should be categorised as homeless and unable to find anywhere to live.

Much was said in the other place on the importance of child benefit. Let me make it clear that the introduction of a benefit cap will not result in a single household losing its entitlement to child benefit, which will continue—rightly—to be paid to the current recipient. That important principle will not change.

We are, however, changing another important principle: households on out-of-work benefits should not in future expect to receive unlimited financial support from the state. Like other welfare benefits, child benefit is funded by taxpayers. We therefore believe that it is right for its value to be taken into account along with other state benefits when applying the cap.

I agree with where the Minister is coming from, but he should not doubt the sincerity of many London Members, particularly those of us who represent inner-London seats. We have deep concerns that some of our local residents will have to move. They will not be made homeless—I agree with him that we should not exaggerate—but they will have to move to other parts of London or the UK.

However, all London Members have constituents who might be forced to move out of central London if they have a second or a third child because of the requirement for more space. Does my right hon. Friend think it perverse that the one category of people who are exempt from that is those on housing benefit?

That is important. I said at the beginning of the debate that our amendments are not simply about money, but about points of principle. What we are trying to achieve with our reforms is to replicate in our benefits system the realities of the world of work so that people can move quickly from one to the other—we need to do that as closely as we can. Fundamentally, that is what the our proposals are about.

I shall make some progress because we do not have that much time and other hon. Members will want to contribute.

The Government have said that there will and should be some exemptions from the cap, but we believe that work should be the primary way in which households can avoid it. We will therefore exempt households that are entitled to working tax credit. There will be a similar exemption after 2013 for working households on universal credit. Excluding child benefit will only dilute our aim. Being in work—even part-time work—must always pay better than relying on benefits alone.

We have always acknowledged that there will and should be exemptions from the cap among benefit recipients. Those will be households where someone is in receipt of disability living allowance. We will also exempt war widows and widowers. I can announce today that we intend to exempt the small number of households where someone is in receipt of the support component of employment and support allowance but not in receipt of DLA.

We have been clear that we are looking at ways in which to ease the transition for families and to provide assistance in hard cases. That is no different from what we did when we introduced the housing benefit cap a year ago. We used the time before the measure came in to work with those affected; we had flexibilities around the start; and we ensured discretionary funding for local authorities to support hard cases. It is our intention to take the same approach with the Bill.

I support the principle of the cap and appreciate the Government’s efforts to understand the difficulties of those hon. Members who represent high-cost housing areas. The house price in my constituency is roughly double the national average.

Can the Minister confirm what our right hon. Friend the Secretary of State told me in the House on 9 November 2010—that it is “the Government’s policy that” people should not be forced to move

“to a far-off community with which they have no links, and that the intention will always be that”,

if they have to move,

“they should ideally stay in the community or council area where they come from and where they have lived”?—[Official Report, 9 November 2010; Vol. 518, c. 166.]

The Secretary of State gave me that assurance. Will the Minister repeat it?

My understanding is that those were not the words used by the Secretary of State, but I want to reassure my right hon. Friend.

Let me set out in a little more detail how the transitional measures will work. First, those who are affected by the cap will receive and have access to immediate support from Jobcentre Plus and the Work programme, starting from April this year. We know who the families are. We need them to understand how the cap will work and how it will apply to them, because people in receipt of working tax credit will be exempt from the cap. So we have a 12-month period to work intensively with the families concerned to explain what steps they need to take, to provide support through the Work programme and to look for employment opportunities for them, which will address the issue and move them back into work.

We also always expected that we would provide a grace period—a degree of transition—for people who simply lose their jobs and find that their circumstances have changed dramatically through no fault of their own. We will not penalise those who are in work and doing the right thing. We will put in place a nine-month grace period for those who have been in work for the previous 12 months and lose their job through no fault of their own. We have always intended to make this measure, and I am happy to make that clear to the House today.

In addition, the Secretary of State and the Prime Minister have made it clear that we will provide transitional support to help manage families into more appropriate accommodation—as we did when we introduced the housing benefit cap. So we will follow the same model of additional money for discretionary housing payments that we adopted for the introduction of the housing benefit cap last year. We will ensure that resources are available in the right areas, such as London, where a larger proportion will be affected. We will provide short-term, temporary relief to families who may face a variety of challenges, such as not being able to move immediately for reasons of education or child protection, supporting minimum levels of access to the housing market.

We will provide up to £80 million for this purpose in 2013-14, and a further £50 million in 2014-15. However, we intend to work extensively with these families over the next 12 months. It is not our expectation that we will need anything like that amount of money, but it is there and available to ensure that we can provide appropriate transitional support for those who may require it.

The whole House will welcome these transitional provisions. In my constituency, many people get up at 6 in the morning to catch the coach to London because they cannot afford to pay the fare for the train, let alone for a flat in Bermondsey. It is not fair on them for their taxes to be supporting benefits for people to live permanently without a job in some of the most expensive accommodation in the country.

My hon. Friend is absolutely right. As I have said, we have to seek to replicate the realities of working life as closely as possible in the benefits system. If we are paying for people to live in a part of town that they could not afford to live in if they were in work, we are trapping them in a way that will prevent them from getting back to work.

More than 1,000 households in my borough will be affected, as in that of the hon. Member for Cities of London and Westminster (Mark Field). Does the Minister realise the implications of what he is saying? It is easy to score political points, but more than 1,000 children will be taken out of their communities and sent not necessarily to other parts of London but to other parts of the country. That is happening now, and the Minister is complacent about it. Is he prepared to see the dislocation of whole communities in order to make a political point?

I am afraid that the hon. Gentleman is simply out of touch with the reality of what is happening in our country. He talks about the impact of the cap on children. But children are already having their life chances and opportunities damaged by growing up in households and communities in which no one is working. That is what we are seeking to change. The former Archbishop of Canterbury, Lord Carey, said last week:

“If we cannot make the rewards of hard work more appealing than a life spent on the dole then we will have failed a generation of children.”

That is the reality that we face today and it is why we seek to change the way in which our welfare state operates. The Government clearly have the support of the British people on the cap. If we do not reject the Lords amendment, the public will not understand why. This is a reform that is long overdue and the Government are determined to deliver it.

I rise to speak in favour of the amendment in my name and those of my right hon. and hon. Friends. I shall state at the outset that we wish to seek a Division on that amendment, and I am disappointed that the Government have tried to invoke financial privilege to defend against a vote on our amendment in the House of Lords, where they know very well that they will once again be defeated. I am, however, grateful that the Minister has incorporated half of our amendment, by ensuring that there will be a grace period of nine months, but I want to set out the dangerous flaws that have now been exposed in the “one cap fits all” approach and also set out what I think would be a better approach.

I will give way to the Secretary of State who I know will join me later this week in forming a new all-party group.

The right hon. Gentleman says that he is upset that we are invoking financial privilege. Will he tell us why, throughout all the debates in the Lords and here, his party has not tabled an amendment to regionalise the cap at any stage, but instead chose to knock out child benefit?

Of course. The Labour party advanced the position in our amendment not, as the Minister said in a slip of the tongue, 10 years ago but well over one year ago. It was advanced by my predecessor and the Leader of the Opposition. During the passage of the Bill, we have talked extensively about the risks—[Interruption.] The Secretary of State might like to listen to the answer. We have given the Government ample opportunity to put in place safeguards against the dangers of their having to spend a lot of money patching up what is being done this afternoon. In the absence of those safeguards, I want to propose to him a better approach.

In a moment. I will give way to him as often as he wants.

We have set out a clear alternative approach. The Government have today burned one third of the savings that they proposed for this measure because they got the policy wrong. Today, by conceding a nine-month grace period, they have incorporated part of our amendment, but now I want to show the Secretary of State a better way of instituting a principle on which I think we both agree.

Throughout this debate, we have seen a game played out by the Opposition: on the one hand they are in favour but then they vote against everything. I cannot understand why, if the right hon. Gentleman takes this principled position and if Labour has believed in it for a while, he has not previously advanced this amendment, which he apparently believes so passionately now needs advancing? Why not in the Lords? Why not here before? There is no answer except that he is trying to indicate one thing and run away with the other.

I spent much of this morning perusing the helpful Conservative party briefing on the Bill—I am sure that Government Members have a copy—page 2 of which contains a useful summary explaining how I, the shadow Business Secretary, the shadow work Minister and the Leader of the Opposition have set out clearly their support, in principle, for the Bill. However, we want to give the Government the chance to institute important safeguards—for example, not allowing the cap to kick in if someone has not been offered the chance to work and instituting new safeguards for homelessness, on which they have had to spend a lot of money today. The Government have not listened to any of that, and now they have had to come back to the House accepting half of Labour’s amendment and spending a huge amount of money, thus burning many of their savings.

I am grateful to the shadow Secretary of State for giving way. Having read the Conservative briefing, he will recall saying last week that he thought the benefit cap right in principle. Why, then, will he vote against it this evening?

We will seek a vote on Labour’s amendment on Labour’s benefit cap, and we are disappointed that the Government are trying to invoke financial privilege to prevent us from having that vote again in the House of Lords, where the Government know they will lose.

It is important to start by debating a principle on which both sides agree—the principle that people should be better off in work. Back in 1971, my right hon. Friend the Member for Birkenhead (Mr Field) pointed out the dangers of the poverty trap and the possibility of changes in the tax and benefits system resulting in people not being better off in work. Frankly, little progress was made in tackling that problem during the 1980s and the 1990s, which was why the institution of tax credits under Labour was such an important part of our welfare reform. Together with the national minimum wage, it ensured that people were better off in work. It was wise, therefore, for the Government to accept the principle of tax credits in their proposed changes to universal credit. That, too, is a principle that we support, and it is why we are in favour of a benefit cap, but we would like one that does not backfire and one that works in practice. That is what our amendment sets out.

Will the right hon. Gentleman answer the question put to him just now by Government Members? Does he or does he not accept that it is wrong in principle in the long term for a family to live indefinitely in an area where they could not afford to live if they were in work?

The principle on which we both agree and which we have advanced reforms to put in place is this: people should be better off in work than on benefits. That is why we are so frustrated with the Government’s failure to get people back to work. Five people are now chasing every job. That is the situation with which we now contend in many of our constituencies. In my constituency, 33 people are chasing every job. That is frustrating for those who believe that people should be better off in work than on benefits. That is why we are so disappointed with the performance of the Work programme.

In constructing a regional cap, will the right hon. Gentleman ensure that no more money is expended than by having a cap of £26,000— in other words, that the regional pot will remain as it is? If we are to go down that route, will he also support the idea of regional pay and regional benefits?

I will come to the localisation of the benefit system, which, as the hon. Gentleman will know, we have had for 70 years in this country, when I set out how I believe our proposal can work in practice.

Will my right hon. Friend help those Government Members to understand one simple fact: that housing support and council tax benefit are in-work benefits, and that—thanks to those benefits and the tax credits policy—it is virtually impossible for any household of comparable size and comparable housing costs to be worse off in work than on benefits? The whole system is constructed to avoid precisely that scenario. Will he also help those Government Members to understand that the impact of the cap hits not only Knightsbridge and Mayfair—the Government want to run the policy by anecdote—but outer London boroughs and suburbs, such as Enfield, Barnet and Brent, as well as Birmingham? Where will those households find somewhere that they can be priced into?

My hon. Friend did an extraordinary job of deconstructing the Bill as it went through Committee, and she is an acknowledged expert on this subject. Her point is absolutely right. The Minister was not able to confirm that somebody on £35,000 could receive, for example, housing benefit. I am reliably informed that that is, in fact, the case. Because the Government have not thought this measure through, we are now confronted with the extraordinary spectacle of a cap that appears to cost more than it saves. As was pointed out by the hon. Member for Shipley (Philip Davies), who is not in his place now, in some parts of the country that will not send the signal that people are better off in work than on benefits. Only the Government could have introduced a proposal that is, frankly, that much of a dog’s breakfast.

Let us take the cost side first. In this debate, we are in the happy position of not simply having to rely on costing an assertion made by Opposition Members. We are very grateful that we have got the analysis that was presented by our good friend, the Secretary of State for Communities and Local Government. In a blunt warning—not to just anybody, but to the Prime Minister’s Office—the principal private secretary in the Department for Communities and Local Government said:

“we think it is likely that the policy as it stands will generate a net cost”,

and that was before the Government burnt all the money that they have sent up in smoke just this afternoon.

A cursory glance at some of the scenarios that we will see in, for example, the constituency of the hon. Member for Cities of London and Westminster (Mark Field) confirms exactly what is going on.