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Welfare Reform

Volume 721: debated on Tuesday 5 October 2010

Private Notice Question

Tabled By

To ask Her Majesty’s Government what plans they have to report to Parliament the details of welfare reforms including the introduction of a universal credit, a family benefit cap and the ending of universal child benefit.

My Lords, too often the current system traps people in benefit dependency, making a move to work seem risky and financially unsustainable. This has led to a 45 per cent increase in real terms in spending on welfare in the past decade. Our proposals for these and other welfare reforms will be announced at the spending review. We also intend to publish a White Paper in response to our consultation on welfare reforms, and I assure noble Lords that there will be ample opportunity for further debate.

My Lords, I am grateful. There is a real urgency for Parliament to scrutinise these massive changes to the welfare state. Can I ask the Minister what he would say to the mum with three young children who wants to stay at home to care for them while her husband earns just over £45,000 a year? She is already worried about the VAT increase in January; has lost £500 a year with the child tax credit cut; and now will lose another £2,400 with the loss of child benefit. She thinks that she would be better off going back to work or even splitting up her family. Is this why the Prime Minister promised before the election not to touch child benefit, and is this not a sign that the Government are already out of touch with the “squeezed middle” hard-working families of this country?

I would suggest that the only one who is out of touch is the noble Lord himself if he is not aware of the financial difficulties facing this country and the need to reduce government spending in line with the deficit that we inherited. This is essential to our policy. This is not an easy decision to make, but it is a necessary decision to make if we are to bring public spending into line.

My Lords, will my noble friend confirm that the cap on benefits which has been announced will not hit families with disabled children?

I would ask my noble friend to await the debates that we will have following publication of the White Paper in which all these matters will be made clear. The detail of the policy has not been presented to Parliament, as noble Lords will know. There will be plenty of opportunities for debate and at that point this matter can be addressed.

My Lords, the Government have identified £9 billion of savings in the tax and benefits system, £4 billion of which comes from child support. What have this Government got against children?

The Government have nothing against children—indeed I think that that must be self-evident. At the moment we tax people on low incomes to pay for the child benefit of people who earn much more. There is fairness and equality involved in this, and I am surprised that the noble Lord cannot perceive that.

My Lords, is the Minister aware that the necessary cuts are already beginning to harm the most vulnerable families and the services that support them? Does he agree that if the £1 billion saving made by ending universal child benefit were targeted towards those most vulnerable families, many people in this country would agree that it is the right thing to do?

Indeed it is. The strategy, of which this is part, is to reform the welfare system so that it is fairer, and at the same time to raise tax thresholds so that people on lower incomes are likely to be better off rather than worse. At the moment we have a situation where those on middle incomes are paying for benefits to be given to people on higher incomes. That cannot be justified.

My Lords, it has been estimated that 80 per cent of the cuts will fall on women, because women receive most of the benefits that have been alluded to. Women receive the bulk of public services and fill the most posts in low-paid public sector jobs. How will the Government ensure in the forthcoming comprehensive spending review that there is fairness to low-paid, hard-working women?

The Government are very mindful of the point that the noble Baroness makes. That is part and parcel of the detail that the proposals will address.

If mangling the system of support for families with children is vital to the reduction of the deficit, why did people who are now government Ministers, including the Prime Minister, say the absolute opposite before the recent general election?

There has been a review of the whole welfare system. A Green Paper was published. It was quite clear at the general election that the Conservative Party and the coalition both believed in welfare reform. Those matters have been presented to the electorate. It is a pity that all the false starts on welfare reform made by the previous Government were not implemented. We are tackling a task that should have been tackled many years ago.

On the subject of the original Question, is the Minister not aware that when policy changes of this nature are made, it is usual for them not to be announced at a political party conference or to the media, but first to be introduced into Parliament so that Ministers may be questioned at the Dispatch Box?

The spending review will be announced to Parliament on 20 October. A series of business matters arising from that review will, I am sure, interest noble Lords. Meanwhile, the policy announced at the Conservative Party conference was but an elaboration of the consultation process and the policy formation that has taken place since the Green Paper was published.

My Lords, I do not think that the coalition Government will be the first to be guilty of making a special announcement at a party conference. Are they not to be congratulated—

My Lords, perhaps my noble friend would be ever more courteous. The noble Lord, Lord Ashley, has been prevented from speaking by his own side on two occasions. Perhaps we might allow him to do so.

Thank you. Is the Minister aware that, given the current pressure to get people back to work, there is a real danger that genuinely disabled people will be included? The margin is a delicate one and the pressure to get disabled people back to work will be enormous. Will the Minister address this point and confirm that those on the margin will be honoured and respected by the Government?

I admire the noble Lord immensely for his advocacy on behalf of disabled people. The Government are very mindful of the situation and are constructing policies that will bear in mind the point that he is making.

My Lords, should the Government not be congratulated on having a scheme whereby if child benefit is withdrawn from a higher-rate taxpayer, it is both fair and simple and avoids all the problems of means-testing?

One difficulty of all welfare systems is their complexity. It is always difficult to draw the line between a complex system and one that is more arbitrary. The Government have made the right decision in this case.

My Lords, how can it be fair for a married couple on £80,000 a year to keep their child benefit while a married couple on £43,000 a year will lose it?

The question that has to be asked is whether it is reasonable to ask somebody who is earning something like £25,000 a year to contribute through the tax system to the child benefit of people earning that sort of money.

My Lords, what is the Government’s estimate of what a means-testing system would have cost, had they decided to go down that road?

I do not have any figures to answer the noble Lord. The current child benefit system is very straightforward to administer, and that must be a great advantage in its favour.

My Lords, the Minister proclaims simplicity for this scheme. How does he respond to a conundrum—one of many posed in today’s newspapers—in which someone asks:

“I earn £44,000 and have two children. Would I be better off with a small pay cut?”.

The answer is:

“Probably. Tax advisers are already devising ways in which people who earn just over the 40 per cent tax band can legally reduce their income so they still qualify for child benefit. It may be possible to reduce your pay through ‘salary sacrifice’ schemes such as buying extra holiday days”.

Is this not going to be horrendously complex? It is going to need a whole raft of anti-avoidance legislation.

The noble Lord is an expert in these matters. Indeed, I have debated welfare, thresholds and marginality with him at the Dispatch Box before and I respect his contribution. However, inevitably when you draw a line in the sand, you find that there are people on that margin, and it is not unreasonable that they should seek to make sure that their affairs are not adversely affected by it.