House of Lords
Monday, 12 December 2011.
Prayers—read by the Lord Bishop of Oxford.
My Lords, Heathrow Airport’s annual capacity is capped at 480,000 air transport movements, and the Department for Transport’s latest aviation forecasts assume there will be no increase in runway capacity to 2050. The Government do not make detailed assumptions about the airport’s capacity levels at peak times. This is a matter for the airport operator.
My Lords, the short answer is that the South East Airports Taskforce, chaired by my right honourable friend Theresa Villiers, determined that there should be operational freedoms for Heathrow Airport to enable the airport to recover quickly from disruptions to operations.
According to the Written Answers I have received from Ministers, when the Chinese Government, the Chinese civil aviation authority and the Chinese airlines have asked repeatedly for more landing slots at Heathrow they have been told that their views will be taken into consideration by the review. Is this not deeply embarrassing and totally hopeless, in view of the economic need of this country to relate to China and other countries of that nature?
My Lords, as another member of the numerous club of former Aviation Ministers in your Lordships’ House, I ask the Minister whether the additional runway capacity that may in due course—perhaps fairly soon—be required in the south-east really cannot be at Heathrow.
My Lords, I apologise for my jack-in-the-box tendency earlier, which was due to my eagerness on this topic. Can the Minister confirm that operational freedoms are currently only in a pilot scheme and are undergoing consultation? Can he also confirm that the Government will be putting some pressure on the airlines to see whether they can move night flights into the post-6 am slot and to use quieter aircraft—the Airbus A380s, as they come on stream—for any flights that must happen at night?
My noble friend is quite right. The operational freedoms trial is in two phases: the current phase, and another phase largely over the Olympics period. One of the benefits of the operational freedoms trial is to reduce unscheduled night flights. I will have to write to my noble friend on the detail of her rather more searching questions.
My Lords, the House must be dismayed at the Minister’s negative response to this very important issue. After all, aviation is one of the important parts of the economy that is capable of growth, yet we are getting nothing but negative responses from the Government. Will the Minister at least acknowledge that we on the opposition Front Bench have offered to meet Ministers to see how we can plan a future for aviation that is considerably more productive than the Government’s present position, which is largely one of stalling and negativism?
My Lords, it is difficult to avoid being negative when the answer is, “No third runway at Heathrow”. However, we look forward to any contribution Her Majesty’s Opposition make to the future aviation policy framework. The Government want aviation to grow, but to do so it must play its part in delivering our environmental goals and protecting the quality of life of local communities. We are developing a sustainable framework for UK aviation that supports economic growth and addresses aviation’s environmental impacts.
My Lords, is the Minister aware that many airlines now are changing to larger aircraft, which will bring in many more passengers on each flight? Will that contribute to helping Heathrow to continue at least to receive more people, even if not more flights?
My Lords, the tourism industry is very concerned about congestion at Heathrow, particularly as we approach 2012, which is such a significant year. I have a registered interest as a director of VisitBritain. We know that a number of airlines are not using their slots at Heathrow, thereby adding to the congestion. Will the Minister undertake to look at the situation and see whether there is a way of freeing up the slots that are being hoarded?
My Lords, the slots at Heathrow are managed by an organisation called Airport Coordination Limited, which is independent of government, and has to be. However, it has mechanisms to ensure that slots are used as much as possible. As I understand it, there are penalties if it does not use all the slots economically.
The Government are committed to protecting the rights of the most vulnerable workers in all sectors. I am pleased to say that the need for the GLA to enforce protections for vulnerable workers in its sectors was endorsed by the red tape challenge ministerial star chamber, although it recognised that the GLA needed to better target non-compliant operators and reduce burdens on the compliant. The GLA will of course continue to be monitored under the Government’s ongoing reviews of public bodies and enforcement agencies.
I thank the noble Lord for that encouraging reply. As he will be aware, the GLA’s remit is limited to the agricultural sector. Currently, if the GLA finds that a business is engaged in abusive behaviour and practices operating in other sectors as well as agriculture, it has no powers to take action. I wonder, given the confidence in its effectiveness, what the Government are doing to ensure that the GLA can take a leading role in multiagency actions which tackle the abuse of vulnerable workers.
The noble Baroness can be reassured by the fact that the GLA works with a number of enforcement agencies, particularly as a partner in the Government’s human trafficking strategy. However, there are principles that underline the red tape challenge’s review on employment. The Government’s workplace rights compliance and enforcement review is now considering an enforcement architecture which would cover all workplaces and vulnerable workers, and how that can be made as effective as possible. This is part and parcel of the way in which the GLA may well be able to provide particular expertise to that body.
Given the success of the GLA, which has just been admitted in the industry that it manages and looks after, why can its remit not be extended to the construction industry? Why should the construction industry, which is as full of gangmasters as agriculture and farming, be exempt from the kind of activities that the GLA does on behalf of workers?
I think that I have just given the noble Lord the answer to that question. Indeed, there is a review of all vulnerable workers across the piece. Noble Lords will accept that there needs to be balance. We do not want employment to be so difficult and complex that people are discouraged from taking on employment, but we all have a duty to make sure that vulnerable workers are properly protected.
My Lords, it is welcome that the Government have protected the budget of the GLA during this financial year. In the light of that support, is it clear that Defra will remain the lead department in order to ensure that the vital work that the GLA does to support vulnerable, low-paid, low-skilled workers will continue?
I have made it clear that Defra values the GLA and sees it as being a particular responsibility to make sure that it is properly funded. Not only is its budget protected for this year, it is protected for the next four financial years in its enforcement activities. I hope that noble Lords are reassured by that and the determination of the department to make sure that it is effective in performing its task.
My Lords, last month, when I raised the issue of the Gangmasters Licensing Authority in Questions, I was much reassured by the Minister’s answer that the authority would remain free-standing. In his answer to the noble Baroness, Lady Young of Hornsey, he talked about a new “enforcement architecture”—that was the pithy phrase he used. Does that mean that the position has changed around its remaining free-standing? If so, what has changed that the Government want to weaken the focus of this highly effective body?
There is no way in which the Government wish to weaken the focus of this highly effective body. The previous questions pointed out that there are experiences that the GLA has in its field which could well be useful in other fields of employment. That is why my honourable friend Ed Davey, in conducting his review, is looking at the GLA to see how its practices can be incorporated into a broader brief.
My Lords, I am sure that the House was very interested to learn that the red tape challenge has a ministerial star chamber. Will the Minister tell us how many other ministerial star chambers there are in government? Is there one on the European Union?
From my knowledge of star chambers, which is rather limited to history books and the like, they are where conflicting views which may need to be resolved are discussed in an informal way. That is exactly how the star chamber has functioned in this way. I am not suggesting for a moment that the European issue could be resolved quite so easily.
My Lords, as with all benefits, a series of measures is in place to ensure that disability benefits are paid only to those who are entitled. These vary for each benefit. Last month, Professor Harrington confirmed that there has been positive progress in improving the work capability assessment, which determines entitlement to employment and support allowance. The department continues to develop the assessment for personal independence payment in consultation with stakeholders and relevant experts.
Yes, my Lords. I very much welcome the fact that we have made an arrangement with Crimestoppers. We already have the national benefit fraud hotline; but the good thing about Crimestoppers is that it is a very trusted brand, which carries anonymity to those who call it. That will be particularly useful when we look at organised fraud, an area about which I am particularly concerned.
My Lords, does the Minister accept that the campaign organised by parts of the tabloid press insinuating that disabled people drawing benefits are cheats and scroungers, is totally unacceptable; that the vast majority of disabled people dependent on benefits are absolutely straight and honest; that the level of fraud is relatively low; and that this campaign should stop?
Well, my Lords, clearly we are very concerned by any misrepresentation in the tabloid press, which likes to simplify matters a great deal. We have a real issue in making sure that we have a very clear, coherent and consistent categorisation of who should receive these benefits, because one of the main policy thrusts of this Government is to make sure that the people who really need the money are the ones who get it.
My Lords, is the Minister aware that the Benefit Integrity Project, introduced by the previous Government to weed out the misuse of disability benefits, found more people on DLA whose needs had risen than fallen, contributing to a rise in expenditure on benefits? Does he expect the introduction of personal independence payments to lead to a similar increase in expenditure, as well as a rise in the cost of administration?
My Lords, there has been relatively little research on DLA and how accurately it is targeted. The last comprehensive survey was in 2005, and it was found that more than 11 per cent of cases were no longer applicable. That does not mean that fraud was involved; it just means that matters had moved on so that it was no longer applicable. We also found a reasonable proportion—much less—of people who should have had higher payments. It is a subjective, inconsistent benefit, which relies too much on self-assessment. We need to get a grip of it.
My Lords, is the Minister aware that many of us are very concerned that the measure envisaged might have a deleterious effect on the very group that the Government are most concerned to help—that is, those who would come into the support group eligible for universal benefit, but who are actually living alone and without carers?
Yes, my Lords. One of the things we are aiming to do with the employment and support allowance, and the support elements there, is to make sure that we have consistent and simple definitions of who should obtain benefits. At the moment, we have a multiplicity of benefits, and we are aiming to simplify things so as clearly to direct our support to those who need it most.
My Lords, this is a very interesting issue. We have been reading closely Macmillan’s evidence to us, and what is set out is not what Macmillan is actually asking for. Many of the oncologists whose evidence was taken say that it is important for many patients to stay in work. One stated that it may be inappropriate for some patients and that it risks stigmatising chemo patients, but that some people on long-term maintenance treatments may have little or no upset and be quite able to work. We are taking that evidence and looking closely at how we apply it. We will have more people with cancer in the support group because many undergoing oral chemotherapy need to be in it. However, we are not taking a blanket view and we do not want to stigmatise cancer patients.
My Lords, yes, one of the things we are keen to ensure is that there are people with expertise on whom those making the assessments can rely. Professor Harrington addressed that in his first review. For that reason, we had mental health champions in particular in each of the offices undertaking this work.
My Lords, many Members of your Lordships’ House will be aware from personal and family experience that the experience of undergoing chemotherapy of any kind, quite apart from oral chemotherapy, is most unpredictable in each individual case. Within a period of 48 hours, someone who had been coping admirably can suddenly find that they are unable to work. How on earth can the Government respond immediately to those circumstances and how can they stop the media, to which the Minister referred earlier, castigating everyone on chemotherapy as though they are workshy?
My Lords, let me make it absolutely clear that the presumption for people on chemotherapy, whether it is in oral or other forms, is that they will be in the support group. However, we will check this because some people, as the evidence in the Macmillan report demonstrated, get through their chemotherapy with few ill effects, so it is right for them to continue in the workplace. They will want to do that, but the risk is that if there is a blanket move away from the workplace, we basically write off those people’s opportunity to work, and that is wrong.
My Lords, perhaps I may declare an interest. My wife underwent chemotherapy treatment for some time and she could not have worked at all. How much consultation is there with the patients themselves as they undergo chemotherapy as opposed to with their doctors, in order to find out exactly what their response to this is?
My Lords, when people are in a position where they cannot work and the presumption is that they will be in the support group, we will take the evidence for that from the people who are treating them because it is easily available. It is only in those cases where people are able to work that we will look to place them in the other category so that we do not have a blanket position. This is what the evidence from Macmillan has shown us. We are now going to consult more widely with other cancer organisations so as to be sure that we get this particular, very difficult policy right.
My Lords, on 15 November the government-funded Waste and Resources Action Programme—if my noble friend Lord Brooke of Sutton Mandeville will forgive me, I shall call it WRAP—announced a 1.1 million tonne, or 13 per cent, reduction in annual UK household food waste since 2006. We recognise the efforts of householders and the actions taken by WRAP and the food industry to help achieve this reduction. We are continuing to work with the industry to help householders cut food waste through responsibility deals and consumer advice.
While welcoming this significant improvement and accepting that there is much more to do, I would like to ask about the Courtauld commitment. Accepting that supermarkets have made reasonable progress towards their household food waste reduction objectives—3 per cent towards their rather unambitious 4 per cent target—would my noble friend agree that the slow progress on the grocery supply chain product and packaging waste reduction, with a marginal decrease to date of only 0.4 per cent against a 5 per cent 2012 reduction target, is disappointing? Bearing in mind the estimated £17 billion a year cost associated with food, drink and packaging waste generation, would he tell us what the Government are doing to encourage supermarkets to achieve this target by the timescale set in the Courtauld commitment?
We are working through a voluntary deal in the Courtauld agreement. It has had some success, as I have just revealed with the figures on the reduction of food waste. Much of that is down to the work that WRAP has done in co-operation with the grocery retail trade and food manufacturing sector. My noble friend is right that more needs to be done to meet our new target for reducing waste in the supply chain. We are developing Courtauld 2 to achieve that objective.
My Lords, are the Government making it a priority to return the nutrients and phosphates from food waste back on to the land through anaerobic digestion? I declare an interest as chairman of the Anaerobic Digestion and Biogas Association. Also, are the Government taking into account the financial savings that are being made for council tax payers through using anaerobic digestion and segregating waste on the doorstep? This has been undertaken in Wales and has shown that it costs councils a great deal less than putting it into landfill.
I thank my noble friend. Anaerobic digestion can divert food waste from landfill. It generates some renewable energy and improved nutrient management on farms, as he said. The biogas can generate heat and energy or be injected into the gas grid. The Government published an AD strategy and action plan in June that includes actions to develop a £10 million loan fund to support that new capacity. However, the strategy must be to avoid food waste in the first place, hence the Government’s focus on the Courtauld agreement. I note what my noble friend said about the Welsh experiment. We are learning a lot from projects undertaken in the devolved authorities. We will certainly monitor them carefully and take that on board.
My Lords, I have noticed one thing with retailers: buy one get one free. Buying two is cheaper than buying singly. Are the Government trying to do anything to encourage retailers to reduce the price of each unit of product rather than produce these gimmicks?
The noble Lord is very topical. Some results are to be released shortly on research into exactly the impact of BOGOF—as it is called in the trade—on expenditure patterns and food waste. The noble Lord will have to await the outcome of that research before I can give him an answer.
My Lords, surely we owe a vote of thanks to retailers for the way they have taken up what the Minister calls WRAP. A 3 per cent achievement in a single year is to be greatly welcomed. Would my noble friend comment on one area where there is still confusion? The “best before” date is still confused by the “use by” date. Is there any programme for further publicity to clarify what each of those two phrases means?
This is an ongoing project, and an important one. As my noble friend quite rightly points out, there is confusion. Defra recently published date-marking guidance. This should help to ensure that dates are applied consistently—for example, that all hard cheeses display “best before” dates—thus making it easier for consumers to understand their meaning. I have already seen date marks that drop the confusing “display until”, in line with our guidance. I will shortly be visiting Sainbury’s to see its new eco-labelling system. My noble friend is quite right to congratulate supermarkets on the efforts that they are making.
My Lords, as we agreed in the debate last week, household food waste is still way too high. The voluntary approach is having some effect with retailers, as we have heard. Many are moving away from BOGOF—as the Minister likes to refer to it—and for that they should be applauded. However, these actions are easily undermined by more unscrupulous competitors. Is the Minister still planning an effective grocery adjudicator, and will it have a remit to report and act on measures to reduce food waste?
Indeed, my Lords, the grocery supply code of practice aims to prevent retailers from transferring excessive risk to their suppliers through unreasonable business practices. Two of its conditions cover wastage and forecasting errors, clarifying the conditions in which compensation for these may be sought. The greater certainty provided to suppliers and the role that the groceries code adjudicator will play may help to reduce food waste; we certainly hope so. The body will indeed be set up.
Water Supply (Amendment to the Threshold Requirement) Regulations 2011
Motion to Approve
Welfare Reform Bill
Report (1st Day)
Clause 5 : Financial conditions
Amendments A1 and A2 not moved.
Clause 7 : Basis of awards
Amendments 1 to 3 not moved.
My Lords, I rise to support Amendments 1 and 2 in the name of the noble Baroness, Lady Meacher—who does not appear to be here—as well as in my name. These are not techie, administrative amendments; they are about people’s lives and have particular consequences for the lives of women, who are still the main managers of poverty on a day-to-day basis. At present, the out-of-work benefits, which the universal credit will replace, are paid fortnightly.
I beg your Lordships’ pardon. I am speaking to Amendment 2, but also to Amendment 1, even though it has not been formally moved.
These payments used to be paid weekly and, according to Fran Bennett of the Women’s Budget Group, there is evidence from recent qualitative research carried out at Oxford University that the move to fortnightly payments has caused more problems than is sometimes claimed. “Struggle” was the word one woman used to describe what it meant. The leap from fortnightly to monthly payments will be much greater. As one claimant put it, “Very difficult to budget with two-weekly payments, impossible with monthly”. For those in-work recipients of tax credits who have opted to receive the credit weekly rather than four-weekly, who tend to be those on lower wages, the leap will be greater still.
We know from government survey evidence that nearly two in five of the lowest fifth of low-income families with children run out of money always or frequently, so we are not talking about a small number of vulnerable people in exceptional circumstances, nor are we talking in most cases about mismanagement. Again, research shows how well most people on low incomes manage their money—probably better than many of us, because they have to. However, managing money on a low income is very stressful, particularly for women who act as the shock absorbers of poverty, and it can have a damaging impact on physical and mental health.
One of the big fears is that monthly payments will lead to more families turning to high-cost credit and getting into debt. Just last week a big news story was the spread of payday loans which, according to an earlier report, have quadrupled in the past four years. In Committee, I read from an e-mail that I had received from a Conservative supporter, who described himself as a “responsible lender” to low-income households and who was enraged by the idea of monthly payments, which, he warned, would lead to an even greater reliance on such loans, which he wrote, had,
“risen up on the back of predominantly low income earners who get paid monthly”.
According to last week’s R3 report, nearly half the population sometimes or often struggles to make it to payday. In addition, there has been growing use of pawnbrokers, particularly by low-income women with children.
In Committee, we all got the impression that the Minister really listened and took on board the concerns expressed from all Benches. Indeed, he said that we had given him quite a bit of food for thought. This was very welcome. It is therefore disappointing that, having digested the overwhelming message coming from the Committee, he appears not to be willing to concede even on the point of giving claimants the right to opt for twice-monthly payments with the default remaining monthly, as provided for in Amendment 1. Instead, he appears to be looking to encourage access to budgeting products such as jam jar accounts, which would enable people to mimic jam jars in allocating their universal credit payment to different purposes through their accounts.
The Minister rightly observed in Committee that budgeting products mystified him, so, like a good academic, I have done my research. I can see the attraction in this context and I hope that the Minister is successful in developing the idea, but I am yet to be convinced that such accounts obviate the need for the amendments before your Lordships' House. Certainly, this is the view of the Personal Finance Research Centre. At present, only about 150,000 people use such accounts and typically they are charged between £12.50 and £14.50 a month for doing so. While I acknowledge that Social Finance, which provided these figures, is enthusiastic about the potential of such accounts to help people manage monthly payments, there is a long way to go to get there from here. Moreover, it has been suggested by the Personal Finance Research Centre that such accounts are more relevant to helping people who receive income weekly or fortnightly and pay monthly and quarterly bills, so they would still have a role to play in the context of the proposed amendments.
I know that the role of such budgeting tools will be explored in the planned demonstration projects, which according to the DWP will test some of the support mechanisms we will need to have in place for vulnerable groups. However, as I have already tried to explain, this is not just an issue for certain vulnerable groups. Anyone on a low income is potentially vulnerable to the problems created by monthly payments. Are they all going to be helped to access such budgeting products? I appreciate the effort that the Minister is putting in to try to develop the budgeting products solution to the problems raised in Committee, which he acknowledged were very real. However, I remain puzzled as to why he is so resistant to accepting the most obvious solution that we offered—more frequent payments.
“Is it because of cost?”, some people have asked me. It would appear not, as that was not an objection raised in Committee. The Minister himself emphasised in Committee that there is a distinction between payment period and assessment period, so that more frequent payment would not require more frequent assessment, which perhaps would have cost implications. The answer to a Written Question about cost in the House of Commons simply evaded the question. It leaves me to wonder whether the Minister’s solution is not more costly, particularly as it will also involve more frequent use of interim payments to tide people over as payments are made four-weekly in arrears. A story in the FT in September suggested as much. It said that,
“the plans had not yet been fully worked out or costed”.
In Committee, I asked that your Lordships’ House should receive a fully costed plan before monthly payments are finally agreed, but no such plan has been forthcoming. In its absence, I believe that it is only prudent that your Lordships’ House build in the kind of protection that the amendment would provide.
If it is not about cost, is it about complexity, as simplicity was one of the justifications provided in the policy briefing on the issue? Twice-monthly payments are no more complex than monthly, and arguably the kind of budgeting products being pursued by the Minister are themselves quite complex. Nor do I consider that building in a degree of choice is complicated for claimants to understand. In fact, I think that the Minister gave us the answer in his speech in Committee when he explained that,
“we will shape the way people arrange their lives”.—[Official Report, 10/10/11; col. GC 442.]
Originally the department’s argument was that monthly payments would mimic work and encourage people to prepare for work by managing their affairs,
“in a manner that best reflects the demands of modern life”.
But it was then pointed out that about one in five people are still paid weekly or fortnightly, and the department's own figures show that as many as half of those earning less than £10,000 a year are not paid monthly. I think that we can safely assume that they are paid more frequently. Moreover, where universal credit is paid on top of a wage, it is unclear why it has to mimic it. So the mimicking work argument begins to look rather threadbare.
Instead, it now appears that the Government want to shape the behaviour of people, both in and out of work, to fit with their perception of how modern life ought to be. We “will shape the norm”, is how the Minister put it in Committee. There appears to be almost an implicit assumption that monthly payments are somehow morally superior to fortnightly budgeting. This all strikes me as the kind of interfering state paternalism or social engineering that modern Conservatives and Liberal Democrats would usually frown on.
My preference is to facilitate the way in which many people on low incomes actually budget, through twice-monthly payments as provided for in Amendment 2. However, I would suggest that Amendment 1 does at least avoid the paternalism of the Government's position by offering the claimant choice. Indeed the department itself has argued that,
“making decisions over household finances and budgeting in the most appropriate way to meet family needs is best done by the family itself”.
The amendment would allow the family to decide if twice-monthly payment would be a more appropriate way to meet its needs. But it still allows the Government to nudge the claimant towards monthly payments because this would be the default position.
If the Government accepted this amendment, they would address the concerns raised in their own research into perceptions of welfare reform and universal credit, which the Minister told the Committee he was studying “with great attention”. The report on the research observed that monthly payment was “strongly criticised”, and it concluded that,
“overall there was a strong feeling that there should be options, or at least an opt-out from the default where required”.
Given that the department has emphasised its commitment to a user-centred design for universal credit, surely it should take this very clear message on board.
Moreover, the researchers warned that monthly payment is one of a number of potential,
“risks which could jeopardise the successful delivery of universal credit”,
and they advised “mitigating action”. I acknowledge that the Minister's work on budgeting products potentially constitutes such action, but, as I have explained, I am not yet convinced that on its own it will be enough. Surely we have a responsibility to ensure that there is some mechanism in the law to protect people on low incomes from unnecessary hardship, should this action not be as effective as the Minister hopes.
I conclude simply by quoting what the noble Lord, Lord Boswell, said in Committee. He said that,
“if this is the nail in the shoe that gets the whole thing discredited because it does not work or gives rise to disturbing social consequences, we will have lost the great prize of universal credit that many of us want”.—[Official Report, 10/10/11; col. GC 434.]
I beg to move Amendment 1.
My Lords, it is a privilege to speak in support of the noble Baroness’s amendment. Her evident mastery of the subject has impressed the whole House, as it certainly impressed everyone involved in Committee. I do not have a great deal to add to what she said except that, in reading the transcript of that Committee, it struck me that two things did not emerge clearly enough, particularly given what the Minister said in reply. They were: first, a clear recognition that living on a very low income requires highly sophisticated financial domestic management and highly sophisticated budgeting. That would almost certainly be beyond the rest of us to manage. It seem to me unreasonable to expect people who are living with the burden of that kind of pressure also to develop skills beyond what the average in the community would be in terms of managing their finances.
That relates to my second point. The proposal for a monthly payment seems to have been made to generate a culture change among those who are not perhaps in the habit of regular employment—in other words, to build the capacity of those in receipt of the benefit to behave like the rest of society. However, I put it to the House and to the Minister that perhaps what we need more of is the capacity of government to understand what it is like to live on a very low income. That is where the capacity building needs to happen here.
I very much hope that the Minister, who has consistently shown a readiness to listen and respond, will think again on these amendments. My own experience as a parish priest in east London, and more recently in the parishes of the outer estates of Leicester, has shown me repeatedly and at first hand the extreme pressures under which those on very low incomes live. This is a modest amendment that would signal to those in receipt of these payments that their problems are understood and that the Government are ready to be sympathetic.
My Lords, perhaps I may clarify precisely what it is that we are debating. I believe that my noble friend Lady Lister moved Amendment 1, somewhat belatedly, on behalf of the noble Baroness, Lady Meacher, and also spoke to Amendment 2, which is in her name.
My Lords, as I understand it, Amendment 1 has not been moved, but Amendment 2 has. I think that the noble Baroness, Lady Meacher, will speak to Amendment 1, but I do not think that she is in a position to move it. That is my understanding.
My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.
I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend’s request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.
My Lords, I was under the impression that when the noble Baroness, Lady Lister, got to her feet to speak, she said that she would move the first amendment and speak to the second. As she has her name on the first amendment, I would not have thought that there was an issue.
1: Clause 7, page 3, line 32, at end insert—
“( ) Regulations must make provision for claimants to require payment of universal credit to be received more frequently than would otherwise be the case under subsections (1) and (3).”
My Lords, I think that I owe a rather large apology to the House. I seem to have caused complete confusion, and am deeply sorry. I rise now to speak to Amendments 1 and 2, which, one way or another, would ensure that universal credit could be paid more frequently to claimants. Amendment 1 provides choice. Amendment 2 provides something rather specific.
The Government’s aim has been to encourage,
“out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life”.—[Official Report, 10/10/11; col. GC 440.]
Those are the words of the Government. The point is that very many low-income earners are paid weekly or fortnightly, as the noble Baroness, Lady Lister, has rightly pointed out. Although two-thirds of tax credit recipients are paid monthly, many of these people will cease to be entitled to benefits in the future. The great majority of universal credit recipients will be very low paid, going in and out of work, as many people do, to weekly or fortnightly payments and then back on to benefit. People certainly do need to be prepared for the world of work—I completely agree with the Minister about that—but they need to be prepared for the world of work that they are actually going to move into. That is the whole point. At a very helpful meeting last week, the Minister seemed to accept that there are differences and that there needs to be some flexibility. Promotion of choice in the frequency of payment is very much in line with the Government’s choice agenda. I am sure that the Minister identifies with that.
In practical terms, it was made clear in Committee that monthly payments will cause very considerable management problems within households, and a dramatic increase in the numbers of people struggling with debts. The fact that applications for crisis loans rose significantly from 2009, when the change from weekly to fortnightly payments was introduced, tells the story. The CAB service saw a fourfold increase in the number of people with payday loans coming to them for debt advice in the first quarter of this year compared with the same period two years ago. The Association of Business Recovery Professionals is the UK’s leading trade association for insolvency and related issues. On Wednesday 7 November, it released a report into payday loans showing that 3.5 million adults are considering taking out a payday loan over the next six months and that 48 per cent of the people who receive payday loans believe that the loans have made their debt crisis worse.
What is the Government’s estimate of the number of payday loans to claimants of universal credit that will be in place within 12 months of the introduction of the new system? This is clearly a matter of very grave interest to Members of this House—we know that such loans have interest payments in excess of 300, 400 or 500 per cent, if not more than 1,000 per cent. We cannot just ignore that problem.
At the meeting with the Secretary of State on Thursday, he talked about the need for a culture change. Indeed, he even implied that this was the only problem—people just need to change the culture within which they live. However, people’s problems in managing money over a month are far more extensive than purely a matter of culture. Numeracy skills are vital if people are going to manage their bills and payments over a month. I understand that the Skills for Life survey found that 1.7 million people had very poor numeracy skills. A further 5 million had poor numeracy skills. All these people’s skills were described as “below functional”.
That does not sound to me like applying to people who could manage their money. You can be sure that these groups dominate the ranks of claimants. Last Thursday, the Secretary of State seemed to suggest that people who cannot manage their money over a month will not be able to manage it over a week either. I find that an extraordinary argument. If people run out of their benefits on Thursday but they will receive some more money on Saturday, at least the children will go hungry only one day a week. If people run out of their benefits on the second Thursday of the month, for the sake of argument, and there will be no more money for two weeks and two days, that is a much more serious situation.
The 2008 families and children study showed that one in four families with children more often than not run out of their money before the money next came in. The percentage must be higher for benefit claimants, so this is a huge problem. I believe that the Minister is seeking to resolve these issues, and I applaud him for that. The amendment has been crafted to try to take on board his interesting and innovative ideas and design, as I understand it, to create the possibility for claimants to have their benefits paid monthly and yet have the option of drawing them systematically on a more frequent basis. That system, if it really works, would appear to respond to all the concerns around the House: the claimants need to have a choice to receive their benefits at intervals which they can manage.
That is my tentative understanding of what the Minister is trying to do. However, on the basis of my limited understanding, I need some issues clarified. I should be really grateful if the Minister can help me with some of them. One of them has to do with saving. I had assumed that whether payments are made monthly or fortnightly or whether there is some choice would not involve major extra expenditure for the Government. Can the Minister confirm that there is no significant cost involved in introducing either choice or fortnightly payments?
My second question is: does the Minister assume that the Jobcentre Plus official will sit down with the claimant when they are awarded their universal credit entitlement to work out the frequency of payment that that claimant can manage, or will it be left to the claimant to go off to the post office, or wherever, and work things out with the post office or the Co-op? If the latter, I do not think that we have anything substantial or substantive. I need to understand whether there will be some kind of system in place to ensure that greater frequency is really there for people.
My next question is whether the Minister is confident that the Post Office, the Co-op, or any other institution that he is working with to develop those accounts for people will be able to ensure in every location that the system can be operated in the interest of those claimants so that they can receive their benefits on a more frequent basis. Fourthly, if the Minister’s plans do not come to fruition—it is not clear to me whether they will; I am not sure that it is quite clear to him at this stage—does he have an amendment up his sleeve which will enable a fallback position to be put in place so that more frequent payments can be introduced automatically through provision for regulations or whatever? It would help the House if we understood whether the Minister himself has a fallback position that he can explain to us.
I very much hope that the Minister can respond to these questions, because on that basis, we can all be clear whether we have the system in place which will give us the assurance that these arrangements will not lead to the most massive debt problems.
My Lords, all those who participated in the deliberations of the Grand Committee will regard it as a rather extraordinary process in two respects. First, for those of us who do not claim huge expertise—though it was represented elsewhere in the Committee—it was a remarkably informative process, and that applied across all quarters. Secondly, there was a high degree of understanding, if not consensus, and it is entirely proper of course that the process of refining the difficulties comes forward to this Report stage and we then get to the moments when the rubber hits the road.
I intervene briefly for two reasons. The first is in a sense to express my gratitude to the noble Baronesses, Lady Lister of Burtersett and Lady Meacher, for their contributions in Committee. As the forenamed has actually been kind enough to quote me in terms in support of her argument I probably owe her a response. The second reason is that it is understood by all sides of this House that there is a real problem. I have an odd facility about which I do not boast, which is the ability to craft titles for books that I never get round to reading—writing, I mean. One of them would have been “Life After Tuesday”. There is clearly a difficulty for people, where they have limited means, in budgeting and in managing themselves. I will quote two points about that. First, as in previous occupations I have run farms and paid farm workers, I am fairly familiar with people who are typically paid at the lower end of the pay spectrum. Secondly, I have recently chaired on behalf of the National Institute of Adult Continuing Education an inquiry into adult literacy. I do not of course confuse that with numeracy, but the problems of the two are somewhat conjoined. An estimate of something like 5 million people who would have difficulty in functioning is a real worry. The question is what we do about that.
On reflection, having listened to the Minister’s remarks both in Committee and indeed at the meeting of some of us on Thursday, I think that the Government’s strategy is the right one. It is right, and it also avoids any suggestion of patronisation, to say people should try to budget on the same basis as those who now receive a wage. I make the point in passing that many of the people—the farm workers and other people in relatively low-paid occupations—have transitioned fairly effectively towards monthly payments or salaries and arrangements of that kind. It is not conceptually impossible and we certainly should not set out to preclude it in advance.
The question is how it works. That was behind my remarks in Committee and will be behind my interest in my noble friend the Minister’s remarks when he comes to respond. It is clearly important that we are able to engage in a sensible package which enables people to find a way through this. If we were simply to say it is a month unless you deem it to be otherwise, or unless some special arrangements are invoked by way of a legal right, then that would be giving something of a green light towards people falling back into shorter periods—perhaps when that is not necessary or appropriate for their circumstances. But at the same time, picking up my non-written book, it clearly is important that people should be able to manage through this, not only for themselves and other adults in their household but also for children who need sustaining and maybe should not be expected to pay the price for parental or other failure.
We look to the Minister to explain very carefully the ideas which he has begun to develop, and which are very positive, for saying we start with a month, but of course like everybody else you need in effect to be able to navigate through that month, and this is how we will help you. That is, as it were, an approach of principle. Secondly, there is an issue of practicality here, which again I slightly touched on in Committee. If this system does not work comfortably and there is a huge increase in the use of pay-day loans, crisis payments or whatever, then there will be problems with the credibility of the universal credit system, which, to judge by the Committee, we all want to see, as I certainly do.
The Minister has to find a practical way of doing this but I suggest, with respect to the noble Baroness whose amendments we are considering, that the way of finding a practical solution should not lie through derogating from the principle of moving towards the monthly payment of credit with the necessary safeguards.
My Lords, we delved into this issue in quite considerable depth in Committee, and I do not want to rake over areas that we have covered. However, I suspect that there is a fundamental question here, which I think the Minister accepts—namely, that there will always be some people who find it difficult, if not impossible, to handle a lump-sum budget that is meant to cover a month. In those circumstances, some mechanism—whether it is a voluntary one making a facility available, as suggested by the noble Baroness, Lady Meacher, a moment ago, or some other mechanism—has to be brought forward by the Government to ensure that these people are helped to avoid getting into financial difficulties. That must be in the interests of the Government and everybody who is concerned about children, in particular, who may be vulnerable as a consequence of such action. I think that the House would be very glad to hear from the Minister how he sees the operation of a mechanism that will ensure in a minority of cases where the monthly pattern does not fit that a system is in place to answer the needs of these vulnerable families.
My Lords, I am a relative newcomer to this debate but I should like to pick up one point made by the noble Baroness, Lady Lister, who said that cost had never been an issue here. I cannot quite understand why money would not be saved if payments were made monthly rather than weekly. It seems to me that a saving would be made there, and surely we are trying to achieve savings because of the economic situation that this Government have inherited.
I should like to pick up one other point from the right reverend Prelate the Bishop of Leicester. He seemed to think that it was a bad idea that the Government were trying to introduce a culture change. I should have thought that that was rather a good idea. Surely we are trying to get people into a mindset whereby they move into the world of work and come off benefits. Anything that can be done to encourage that seems to be a good idea. However, I should like some guidance from the Minister on whether there is any saving to be made here and whether he has any idea how much it would come to.
My Lords, I, too, have sat right the way through Committee and have been very persuaded that some families—I accept that they are mainly families with children—who are not good managers of money will have difficulties in meeting the Minister’s no doubt otherwise ideal method of providing these benefits. However, I argue that there will be people other than those with families who may not be good with their sums or who, because of mental health problems or other reasons, might much prefer to have weekly or fortnightly payments, rather than monthly payments, which would mean a larger gap to fill with few finances.
Having said that, I accept that the Government clearly have plans in mind for sorting out this problem. However, echoing what others have said, it will be very important to get the support of those of us who have sat through all these debates by explaining in considerable detail exactly how the system will work and what flexibility it will contain. I hope that the Minister will be able to respond to those points.
My Lords, I, too, was a Member of the Grand Committee considering this issue, and I apologise to the noble Baroness for being late for her opening remarks, whichever amendment she moved.
I shall pick up a point, if I may, made by my noble friend Lord Hamilton. The Government said that it was not a cost issue; there is no doubt about that. Indeed, the Minister was good enough to confess that. I have been thinking about this since we had our full discussion upstairs and I remain totally unconvinced that it is necessary to effect such a culture change. The notion that the kind of people we are seeking to serve with universal credit will fall into executive jobs that will pay them monthly into bank accounts is so remote from reality as to be unhelpful, but I put that to one side.
I say honestly to anybody who is listening that this is not a trivial matter. It seemed like an operational issue but it is not that at all. It is about the management of weekly budgets day by day in families that can blow apart because of debt. Anybody who thinks that we are short of debt, especially in the household income strata of below £10,000 a year, is completely wrong and should look at the evidence referred to by the noble Baroness, Lady Meacher, about the payday loans and the extent to which people rely on week-to-week, month-to-month emergency packages, paying Peter and paying Paul on different days and trying to survive in the middle. It is a great skill, which some people are forced to exercise. It causes enormous pressure, which is normally borne by the women in the household. We have to be careful how we typify some of the caricatures within families, but in my experience it is the womenfolk who have to make the difference between Tuesday and Friday, which is not always easy. Often they go short of food in trying. That is the reality.
How do I know that? In 2009 the payment system went from weekly to fortnightly, which caused enormous difficulty. It is not that long ago, so we do not really know what the impact of that change has been. If in 2011 we are considering going from weekly to monthly, we are talking about an entirely different regime of family budgets and people keeping their households together. It is symptomatic of how we treat the 15 per cent of the caseload that will be affected and will struggle with this. I encourage the Minister, who is absolutely correct to be ambitious for this new reform. He has lots of ideas and is a master of the technology to the extent that Ministers have not been before in terms of what he is trying to do. I absolutely support the jam jar accounts, sophisticated bank accounts and applications that go on my iPad so that if I ever need income support I will be fine. But I do not believe that the 15 per cent of the family households at the bottom end of the income distribution will be anywhere near using these things comfortably.
For me, this is a litmus test issue; it is not a trivial, operational matter. It is not safe to have anything in the legislation other than payment being fortnightly. Anything else is a bonus. By paying universal credit fortnightly there is a chance of being safe and dealing with the 15 per cent of the household distribution that we are talking about. If we do not get the system to work for the lower end of the household income distribution, we will fail the people who need it most, so it is not a sensible policy to be considering. Lots of imaginative things have been talked about and I am in favour of them all, but they are a fudge. We are making it potentially much more difficult for people who cannot manage day-to-day budgets from week to week.
The other thing that I have great fears about is that, no matter how many jam jars there are in your bank account, it is all arrestable. My Scots law might be slightly out of date but a long time ago—to my shame—I used to work for the South of Scotland Electricity Board, arresting people’s wages. In those days, you had to go to the sheriff to get the account properly closed down and the supply cut off. Those days are thankfully now gone, but you can still pend and arrest bank accounts. If I am owed money and I know somebody is getting a monthly payment of all their benefit under one wrapper called universal credit, I will be waiting at the counter of the bank and I will slap an injunction on them and they will have no money at all.
There must be some safety mechanism to protect these essential monthly payments. You might get away with surviving fortnight to fortnight if one fortnightly payment is made, but just think of the pressure and difficulty for families who have annual incomes that rely on universal credit if somebody arrests their Co-operative account or whatever it is that the Minister is thinking of. These are not straightforward issues and this is not a small matter. Unless the Minister can persuade me that this will adequately serve the 15 per cent of the caseload at the bottom end of the income distribution, this House would be sensible to require fortnightly payment to be put in the primary legislation.
I too apologise for not being here at the start. I just ask the Minister to reflect on the words of my company sergeant-major when the Army moved from weekly pay packets to bank accounts. He said, “Thems that pays by the week lives by the week, but if you pay them by the month they will still live by the week”.
My Lords, I have a couple of brief points to add. One is addressed to the noble Lord, Lord Hamilton. Perhaps he would like to reflect on the fact that what the Minister is doing in this Bill is taking two completely separate systems of support, one for those in work and one for those out of work, and creating a single seamless new product. However, for that to work, it must meet the needs of both sets of people. I think that was the point that the noble Lord, Lord Kirkwood, was making just now—that the Minister may want to effect a culture change for those who are in work, or whom he would like to be in work, but universal credit is also available to support many people who are not required to work, who may never be required to work and who may never be capable of working. Why should they be forced to go through a culture change to no end? Is there really a strong case and can the Minister explain it to us?
Secondly, I want to pick up on the very good point made by the right reverend Prelate the Bishop of Leicester that it takes a lot of time, energy and skill to manage on a very small amount of money. It also takes a lot of intelligence and aptitude to be able to budget well on that. Perhaps the Minister could reflect on what may seem to be simply a matter of timing. If one has plenty of money it is much easier; it is also easier if one has a pot of working capital, so if something goes wrong one month the consequences are simply that you dip into your savings. I spent some years working with single parents and most of them had almost no cushion at all, so if they got it wrong they had nothing to fall back on. For many poor people, their friends are also poor, their families are poor; they do not have the kind of networks where you simply go and borrow from somebody else or you to go the bank and ask it to lend the money, because it will not. The consequences for those families of getting that budgeting wrong can be very severe. Given what is happening in other areas to the Social Fund and the other kinds of support, we really do not want to be driving people into the arms of moneylenders.
Finally, within that group there are some people who, because of their particular circumstances, have very strong reasons why they need to be paid regularly. It is a point I made in Committee but I think it bears repeating here. I have worked with families where, for example, the husband had a problem with drugs or alcohol and went off on a bender and spent the week’s wages; the mother would have to find a way of feeding the children until the next benefit cheque arrived. If that happens in one week, it is difficult; if it is happening in two weeks, it is difficult; but as the noble Lord, Lord Boswell, will appreciate, if it is not a matter of “life after next Tuesday” but “life for the three weeks that follow next Tuesday until the end of the month”, how does she manage?
The question the Minister has to answer is not whether he would like to do this; I have no doubt that he would. Rather, it is: is the price that will be paid by some of the poorest people really worth the culture change he wants to achieve?
My Lords, I am always staggered to find out more about my noble friend Lord Kirkwood. In Committee we learnt what he did in the bath, and now we have learnt that he goes around arresting bank accounts. We have been having some very interesting debates. However, I am slightly less sanguine about this issue than he is, perhaps largely because many of your Lordships have said that we have to look at people for what they can do and what their ambitions are. People, and groups of people, are not all the same. It strikes me that this is not about going in one direction or another, and that we are treating people as having exactly the same ability to manage their own money.
I also heard in Committee the Minister’s ambitions for looking at other methods of dealing with payments. I looked back over the last four to five years of the growth in the Post Office card account and in basic bank accounts, which of course is where you would expect to find the sorts of people who make and deal with money in this manner. And there has been growth; in fact, 12 per cent of the whole population—according to the appropriate survey done by the DWP, which is published on their website—is using one of those two bank accounts.
It also struck me that the price that we are paying for the Post Office card account is frighteningly expensive for what we get as a country. It is a bank of this country, and a bank, JP Morgan, underwrites it, and it charges the state for managing these Post Office card accounts. I believe that we pay something like £50 each a year—£142 million per annum—have those accounts run for us. It strikes me that we perhaps need a presumption to ensure that we put things of this nature in place by giving people the appropriate support, but at the same time ensuring assistance for those who cannot. The language that I have heard many Lordships use, which seems to come from the documents, is the “chaotic family syndrome”, where people just cannot manage and need to have some different form of assistance. That is why I started by saying that we should not treat everyone in the same way.
The Post Office card account is a bank account. It does not come with what we might normally expect a bank account to have, but why not, when we are paying so much money for it? Why are people not able to make payments from it for their utilities and gain benefits and savings? I guess that most noble Lords do this because of the way in which they pay for their heating, electricity and gas at the present time. Surely we should be offering that opportunity and using that ability to help people in that manner. We also should not think that people should not be able to separate out their money in the way in which they pay it to themselves. However, in order to do that you have to have appropriate levels of support.
My question to the Minister is: if you are pursuing the idea of developing the facilities which a large number of people currently use for payment, will you also be able to offer advice and support to assist those people who might wish to avail themselves of an enhanced system that allows them to pay their utility bills monthly by a straight payment or direct debit, thus allowing them to get the benefits of reduced charges?
I noticed that the Cabinet Office issued a press release for those who live in England, which says that £16.8 million of support will be given for free debt advice in this country. Does the Minister regard that as being some of the funding that he intends to use for the support that might go with these enhanced accounts?
I know that over the years there has been considerable discussion about the use of the Post Office card account, primarily, of course, in the context of trying to support the local post office in each of our communities. Surely, however, if we were able to do more with it and to provide that advice, perhaps even at the Post Office, it might even be better to do that with the funding that might be available.
There is the problem that many people, or some people, will not be able to manage and will need alternative forms of assistance and advice. My noble friend Lord Boswell was saying that we ought to move in one direction, but it strikes me that we must be wary and understand that there are people who will not be able to manage. We must be able to assist those people properly.
One further point relates to the third amendment in this group, which I know the noble Lord has not yet spoken to. It is a point that comes up quite frequently on the matter of reviews. I feel very passionate about how we often approach these issues and how we structure them in Bills before this House, and about the fact that we look at them as features that have a milestone at some point in a whole system. One of the advantages that we have gained from the Harrington review—although it was not probably set up in that format—has been that it has been a much more iterative process between the community at large and politicians. This has meant that people have not been fixated on a particular date when things should happen. People have been able to hear, read about and commit to change continuously throughout the process of a new Bill.
There needs to be what I would call continuous evaluation by an independent assessor right through the process of universal credit. All its aspects should be looked at and reported on. The days are gone when nothing is open for the public to see. We see reports that are written, which gives an opportunity to raise questions. Artificial milestones are perhaps not the way to go in understanding better how things are turning out for us. At some stages, your Lordships might wish to get faster answers and responses than simply waiting for one or two years, or whatever milestone is put in. I shall make this point subsequently in speaking to a variety of amendments about reviews.
In conclusion, I should like simply to point out to the Minister that we spend a lot of money on the Post Office card account. Are we not able to make better use of that money and give people a much better deal in what we are providing for them?
My Lords, I reassure the government Chief Whip that I intend to speak no more on Report than I did in Grand Committee; nor will I speak on the substance of this matter except early on Report to thank the Minister for providing upstairs on Thursday afternoon the opportunity to discuss this issue, among others, on an all-party basis. I think it would be in the spirit of the comradeship that we developed in Grand Committee to suggest that, following the graciousness with which the government Chief Whip rescued us from the procedural imbroglio at the start of this group, he or the Minister should, before we leave this group, confirm my understanding that on a group of amendments, in the absence of the first name on the Order Paper, anyone in your Lordships’ House can move the first amendment on their behalf without necessarily speaking to it, but that no one can speak on the subsequent amendments in the group unless this initial formality has been discharged.
My Lords, I do not know whether the Minister wants to give guidance on that point or to take it up later. I want to intervene briefly, and slightly apologetically, because, like the noble Lord, Lord Kirkwood, I was a bit late on the scene, but I am conscious that I played some part on this subject in Committee, so I think that it would be wrong to keep my head completely down in this debate.
I differ from my noble friend Lord Kirkwood in one respect; I think that the objective of what the Secretary of State describes as culture change in this field is not unworthy. Apart from that, I agree with pretty well everything that the noble Lord said. However, we need to remember something I learnt in various roles, including in my early years as a junior Social Security Minister when I became, it was be fair to say, friends, more or less, with the noble Baroness, Lady Lister. As I said in another context recently, culture change is not an event; it is a process. It takes time and not everyone will get through it. In an organisation, if you want a culture change and people cannot accommodate it, sooner or later they and the organisation have to part company, and they do something else.
This is the social security system, and people cannot part company with it. There is nowhere else for them to go, and we cannot abandon them. There is therefore real force in some of the concerns that are being expressed. Some people, such as those I tried to help in my former constituency, simply will not be able to manage. What are we going to do about them? As I say, we cannot abandon them. I might say that this will feed into something that is coming up later: whether rent should be paid directly to landlords. In some cases, where they cannot manage they will put the food for the baby first and the rent will not be paid. Then there will be another little problem, and someone will have to sort them out. Let us not pretend that this is easy, even if the objective is worth while.
I am not sure—and here I look with some trepidation at the noble Baroness, Lady Lister—that inserting into the Bill an insistence on ossifying fortnightly payments is right. The Bill already provides for some flexibility. Some benefits—including disability living allowance, I think I am right in saying—are paid monthly. This is not a simple picture. We do, however, need that flexibility where it is clear that failing to pay at more frequent intervals will multiply problems, difficulties and further costs in other parts of the system. The Bill allows for that, and I welcome that, but we need clear indication from the Minister this afternoon that this flexibility will be used.
My Lords, first, I thank the government French Bench for facilitating the debate on these three amendments, after the hiccup we had at the start, and I thank the noble Lord, Lord Brooke, for his helpful advice. I say to the noble Lord, Lord German, in respect of his comments on Amendment 3, that I take the point. If he wants, perhaps, a more iterative process, I am happy to accept an amendment to our amendment. I am bound to say that we rather learnt about calling for reviews from the Liberal Democrats and Conservatives when we were in government—it has the merit of generally not having much of a price tag attached to it.
We start our deliberations on Report by considering the important aspect of how universal credit would work—that is, how payment would be affected, especially the frequency of the payment. However, let me first put in context our approach to the general issue. As we have clearly stated on the record, we support the concept and broad approach of universal credit, a benefit system that provides in-and-out-of-work support, as a clear system of the income disregards and common tapers has significant potential, not least the prospect of clearer incentives for work.
As has been apparent from our Committee sessions, and the matters that we will discuss on Report, the manner in which it is proposed to be introduced is, we believe, flawed. Some of the shortcomings are resource issues—work incentives for second earners—but some are potential failings in the base architecture: the exclusion of council tax benefit; the treatment of self-employed people; and, also, the payment arrangements. I agree with the noble Lord, Lord Kirkwood, that this is not a peripheral operation or issue—this is central to how the system should work.
We will come on to discuss issues about which member of the couple should receive payment and how landlords are to be treated—as the noble Lord, Lord Newton, has indicated. The amendments we are considering now address the vital matter of frequency of payment. Amendment 3, tabled in my name and that of my noble friend Lady Hayter, calls for,
“a review into the impact of payment arrangements on claimants, to conclude one year after the coming into force of this Act”.
I will acknowledge that it might be more appropriately triggered by the universal credit provisions coming into force. We see this review focusing on the impact on claimants by looking at it from the claimant’s perspective. In Grand Committee on 10 October this year, at col. GC 440, the Minister referred to the research being undertaken, particularly around the frequency of payment. An obligation to undertake an early review of how things are working in practice and a report to Parliament would be entirely consistent with the Government’s evidence-based approach to this issue.
We know that at present JSA is paid fortnightly in arrears, that ESA is normally paid fortnightly in arrears, income support is normally paid fortnightly in arrears, and that tax credits are paid on request either weekly or every four weeks, although I think one would acknowledge that HMRC has an overriding discretion in that respect. Housing benefit is normally payable in arrears at intervals of a week, two weeks, four weeks or one month, but as I understand it, if the rent allowance is greater than £2 a week, the claimant can require it to be paid fortnightly. So in having for universal credit the norm as monthly payments, the Government are clearly not seeking to get the best fit with the current components that are to be displaced. Indeed, I think that the Minister and this debate have acknowledged that. He said on the same occasion in Grand Committee:
“With this system, we are one of the drivers of the way people behave and of social change”.—[Official Report, 10/10/11; col. GC 441.]
I support the comments that have been made by a number of contributors, including by my noble friend Lady Sherlock, about culture change, but culture change to what effect in this respect? We understand and accept the thrust of a system that encourages people into work and helps them to understand the benefits of work by seeing its financial rewards, but what is so important about trying to encourage people to get used to a monthly payment and budgetary arrangement rather than one on a different basis, even if they were in a position to do that? The noble Lord, Lord Freud, also referred in Grand Committee to his search for flexibility. If this is an acknowledgment that monthly does not have to be the rigid approach to payment, we may be closer on this issue than perhaps we thought.
We heard from the noble Baroness, Lady Meacher, my noble friend Lady Lister and other noble Lords about compelling reasons why payments on a monthly basis will create particular difficulties for some families, and not just a small minority of supposedly inadequate budgeters. As for mimicking work, which we have heard as well, while 75 per cent of those in employment are paid monthly, 25 per cent are not and half of those earning £10,000 a year or less are paid less frequently than monthly. We heard in Committee and again today about the growth in the business of payday loans. Recent surveys show that nearly half of the population struggles to make earnings stretch until payday, with 7 per cent considering taking out a high interest short-term loan within the next six months. The issue of how to stop the exploitation of poor people is a debate that I hope we will have on another day.
Amendment 1, eventually moved by the noble Baroness, Lady Meacher, would require regulations to be drawn up giving claimants the opportunity to require payment of their universal credit entitlement more frequently than would otherwise flow from Clause 7. We support this amendment and so, we hope, will the Minister, because it seems to fit foursquare with his acceptance of the need for flexibility. Obviously the regulations would have to set out practical parameters to the choice available to claimants, but this should include a fortnightly option. The Minister will know also that it would not preclude arrangements where a claimant could draw down against a monthly entitlement. It would be consistent with that. Neither would it preclude the Minister from retaining the distinction between the assessment period and frequency of payment, a point made by my noble friend Lady Lister.
It is understood that the Minister may argue that the issue of frequency of payment can be addressed by the development of new banking products and that he would not wish the Bill to preclude that. That is fair enough, but we consider that the thrust of the amendment moved by the noble Baroness, Lady Meacher, would not shut out those types of options provided that there are arrangements with parameters dealt with in regulation for claimants to choose. But we do not know today that these banking products can be delivered in time for the introduction of universal credit, whether they can be comprehensively available and without high cost. Without that certainty, it is right that something is included in the Bill along the lines of Amendment 1.
Perhaps the Minister will take the opportunity to update us on the Government’s thinking in this area, as other noble Lords have requested. In particular, do they support the proposition that there should be flexibility within sensible and practicable parameters of receipt patterns? Should there be a right for claimants to choose within these parameters? Can he confirm that the arrangements being considered are not just about drawing down on a monthly payment already made in arrears?
Amendment 2 is more clear-cut and, I think, more to the liking of the noble Lord, Lord Kirkwood. It sets down a requirement for amounts to be paid fortnightly. It has the merit of being clear and closest to the current patterns of receipt, making it slightly more manageable to exist from payday to payday. We support the amendment as an alternative proposition should Amendment 1 be rejected or fail today.
My Lords, these amendments intend to provide for universal credit to be paid twice a month or, in Amendment 1, for a claimant to be able to choose to be paid more frequently than monthly. As with existing benefits, we will specify payment frequency in regulations made under existing powers in the Social Security Administration Act 1992. I am, though, grateful for the opportunity to set out why we intend for universal credit to be paid monthly.
We want universal credit to prepare people for work and to encourage them to move away from costly weekly and fortnightly budgeting. The present system does not allow people to take responsibility for their finances as the majority of people in work do, day in, day out. That is wrong. It means that the transition to work is more difficult than it needs to be as people have to adjust to monthly budgeting and managing their own rent payments, often with no support. We want to make the first steps into work easier by helping claimants to switch to monthly budgeting while claiming universal credit. Essentially, we are looking for a more empowering system.
The figures have already been raised in the debate. Some 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year are currently paid monthly. It is then right that we help families to deal with the reality of working life, whether they are in or out of work, by paying benefits in a way that mimics payment of a salary.
The noble Lord, Lord McKenzie, asked the straight question: what is so important about monthly payments? He went on to talk about the exploitation of poor people. That is what this is about. Save the Children has estimated that low-income families can face an annual poverty premium of £253 on their gas and electricity alone. Organisations including Consumer Focus, Church Action on Poverty and Family Action recognise the importance that access to the right banking products and sound advice can make in helping families to make the best use of their income. The simple point is that if you are managing on small gobbets of money weekly, it is very tough to match your budgeting process to utility bills or some of the larger or medium-scale capital items. That is why larger amounts paid monthly help people with this poverty premium.
However, I recognise that many people on low incomes are used to budgeting on a weekly or fortnightly basis and are concerned about moving to monthly payments. We absolutely need to support some families to budget effectively. That is why I am keen to develop effective budgeting support for families in this position. In some cases that is just a question of signposting to existing information and advice, in other cases it may require much more intensive, face-to-face support; but we need to take an innovative approach to these budgeting products if we are to stop the exploitation of the poor continuing, as the noble Lord, Lord McKenzie, said.
The universal credit and how we flow money to poorer people in our community is the main opportunity that we have to make a real difference for people in this area. We are working with the banking sector, credit unions, supermarket financial services and the Post Office to explore the opportunity to create cost-effective budgeting accounts. I am looking at accounts that my noble friend Lord Kirkwood will not be able to arrest at his whim, because there are some protections in the way in which we devise those accounts. In the next 18 months there will be an absolute focus of intense work to get this right. One example is the housing demonstration project next year, which will help us to understand the demand for budgeting support and the best ways to deliver it. I am not saying that it will all be easy; it is not. However, it is essential that we develop 21st century solutions to these issues and not think back decades and get in the mindset where we did not have these new ways of approaching things.
A simple system of payment on account will be made available to support claimants. Budgeting advances will provide an efficient means for eligible claimants to have access to interest-free credit, providing an alternative for those on the lowest incomes to high-cost, and even illegal, lenders. I must say that I was admiring a Wonga.com advertisement on the side of a bus this morning. In our system of budgeting advances, in the last year already over a million claimants received budgeting loans worth almost half a billion pounds. In the department we have a revolving fund of £1.1 billon, which will continue to be under our control for these purposes.
Clearly there is an issue, which we are addressing, about helping people move from fortnightly to monthly payments. We need to help with that migration period by stretching payment periods and providing the missing funding, if you like, as they move up, and I am looking at a system of doing that over three months. Many noble Lords have made the point that there are people with exceptional circumstances for whom a monthly payment is simply not appropriate. My noble friend Lord Kirkwood talked about the 15 per cent; my noble friend Lord Newton talked about those who will not cope. Clearly there is a group in this category. Where there is a risk of harm to the claimant or the household, we will of course want to make sure that safeguards for these people are in place. Nevertheless, we cannot set up a system to get the bulk of people in control of their finances and then take that control away from them when they can manage it. We need to look at it that way round, not devise a system which protects the 15 per cent of people that my noble friend estimated would be affected. We must not have the tail wagging the dog. We must include support but we must not have a system which stops people going into the workplace when they can. We have begun working with local authorities, housing associations and the relevant third sector organisations to develop guidance around who might qualify for more frequent payments or the direct payment of a proportion of an award to a third party, such as a landlord. Again, the housing demonstration projects will allow us to test the criteria for exceptions.
I appreciate noble Lords’ concerns about protecting claimants who have not previously been required to budget monthly. However, I truly believe that this is a fundamental part of what we are trying to achieve with universal credit. It is an opportunity to change the dynamic to design a system that is right for the majority but takes account of exceptional circumstances by ensuring that we have the means to make payments more frequently.
I wish to pick up a couple of questions. We can make universal credit payable more frequently. I say in answer to the point made by my noble friend Lord Hamilton that there is a small cost to doing it fortnightly rather than monthly but it is very small; it is about a penny. As regards the fallback position, the regulation-making powers which are used to determine the frequency of payment are not in this Bill but in the Social Security Administration Act 1992. The legislation on ESA and JSA, for instance, says that they are payable weekly. However, as we know, they are paid fortnightly. We have complete flexibility to pay as often as we think is appropriate.
I assure the House that where people cannot handle monthly budgeting, we will have arrangements to help them. However, I ask noble Lords not to tie my hands on this. This can make a major difference to poor people by creating banking and budgeting products that will help their lives. Tying our hands on this, particularly mine, will not help. Therefore, I ask noble Lords not to vote against this.
We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?
My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account—some would argue that that is what it is as regards budgeting advances, for instance—or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.
My Lords, I thank all noble Lords on all sides of the House who have contributed to this debate—the Conservatives, the Liberal Democrats, the Labour Party and Cross-Benchers. It has been a very powerful debate and strong concerns have been expressed about the impact of this amendment. The importance of the amendment lies in the mass of cuts to disability benefits, housing benefits—virtually every benefit that one can think of. Therefore, what the House is looking for is some sort of security for these very low income people to ensure that they can try to stay out of the way of these sharks who charge them hundreds and hundreds of per cents of interest over a year. I thank very much everybody who has spoken, in particular the noble Baroness, Lady Lister, who rescued the situation that I am afraid I caused.
The Minister referred to people managing small nuggets of money and having difficulty doing that because, of course, there are payments that need to be made monthly. I think the Minister is not familiar with the ways of very poor people in terms of having all their little jam jars on the mantelpiece and putting bits of money in as they can through the month to enable them to pay these bills. Obviously, in the middle classes we do not do that sort of thing. The Minister is shaking his head, but I am afraid this is actually the way things work. Therefore, it is all about the drastic cuts in benefits.
The Minister has referred to 21st century solutions. In fact, driving people into the hands of these sharks who charge them hundreds of per cents of interest is not really a 21st century solution. The Minister talks about the ability to make provision in exceptional circumstances. I am afraid we are not talking about exceptional circumstances; we are talking about huge numbers of people who are going to find it extremely difficult to manage. I do not have a sense of absolute assurance that there will be provision for these people to manage. This is not playacting; these are real concerns about what is going to happen to large numbers of people facing these cuts over the years ahead in difficult times. I know that the Minister does not want me to test the opinion of the House, but I feel an obligation to do that. I wish to test the opinion of the House.
My Lords, it may be a convenient time for me to repeat a Statement made 18 minutes ago in the House of Commons on the recent European Council. As it is a Statement of some importance, it has been agreed through the usual channels that if, after 20 minutes, there is still a number of Back-Bench speakers who would like to take part, we will increase the amount of time available to them to up to 40 minutes. I hope that that is met with relief by Members of the House.
The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement on last week's European Council. I went to Brussels with one objective: to protect Britain's national interest, and that is what I did. Let me refer back to what I said to this House last Wednesday. I made it clear that if the eurozone countries wanted a treaty involving all 27 Members of the European Union, we would insist on some safeguards for Britain to protect our own national interests.
Some thought that what I was asking for was relatively modest. Nevertheless, satisfactory safeguards were not forthcoming, so I did not agree to the treaty. Let me be clear about exactly what happened, what it means for Britain and what I see happening next. Let me take the House through the events of last week. At the Council, the eurozone economies agreed that there should be much tighter fiscal discipline in the eurozone as part of restoring market confidence. That is something that Britain recognises is necessary in a single currency. We want the eurozone to sort out its problems. That is in Britain's national interest because the crisis in the eurozone is having a chilling effect on Britain's economy too.
So the question at the Council was not whether there should be greater fiscal discipline in the eurozone, but rather how it should be achieved. There were two possible outcomes: either a treaty of all 27 countries with proper safeguards for Britain or a separate treaty in which eurozone countries and others would pool their sovereignty on an intergovernmental basis, with Britain maintaining its position in the single market, and in the European Union of 27 members.
We went seeking a deal at 27, and I responded to the German and French proposal for treaty change in good faith, genuinely looking to reach an agreement at the level of the whole European Union, with the necessary safeguards for Britain. Those safeguards—on the single market and on financial services—were modest, reasonable and relevant. We were not trying to create an unfair advantage for Britain. London is the leading centre for financial services in the world, and this sector employs 100,000 people in Birmingham, and a further 150,000 in Scotland. It supports the rest of the economy in Britain and more widely in Europe.
We were not asking for a UK opt-out, special exemption or generalised emergency brake on financial services legislation. They were safeguards sought for the EU as a whole. We were simply asking for a level playing field for open competition for financial services companies in all EU countries, with arrangements that would enable every EU member state to regulate its financial sector properly.
To those who say we were trying to go soft on the banks, nothing can be further from the truth. We have said that we are going to respond positively to the tough measures set out in the Vickers report. There are issues about whether this can be done under current European regulations, so one of the things we wanted was to make sure we could go further than European rules in regulating the banks. The Financial Services Authority report on RBS today demonstrates how necessary that is. We have problems in this country that this Government inherited and need to sort out.
And those who say that this proposed treaty change was all about safeguarding the eurozone—and so Britain should not have tried to interfere or to insist on safeguards—are also fundamentally wrong. The EU treaty is the treaty of those outside the euro as much as those inside. Creating a new eurozone treaty within the existing EU treaty without proper safeguards would have changed the EU profoundly for us too. It is not just that it would have meant a whole new bureaucracy, with rules and competences for the eurozone countries being incorporated directly into the EU treaty, it would have changed the nature of the EU, strengthening the eurozone without balancing measures to strengthen the single market. An intergovernmental arrangement is not without risks but we did not want to see that imbalance hardwired into the treaty without proper safeguards.
And to those who believe this was not a real risk, France and Germany said in their letter last week that the eurozone should work on single market issues like financial regulation and competitiveness. That is why we required safeguards and I make no apologies for it. Of course I wish those safeguards had been accepted. But frankly I have to tell the House the choice was a treaty without proper safeguards, or no treaty. And the right answer was no treaty. It was not an easy thing to do, but it was the right thing to do. As a result, eurozone countries and others are now making separate arrangements for the fiscal integration they need to solve the problems in the eurozone. They recognise this approach will be less attractive, more complex and more difficult to enforce and they would prefer to incorporate the new treaty into the EU treaties in the future. Our position remains the same.
Let me turn to what this means for Britain. Britain remains a full member of the European Union, and the events of the last week do nothing to change that. Our membership of the EU is vital to our national interest. We are a trading nation and we need the single market for trade, investment and jobs. The EU makes Britain a gateway to the largest single market in the world for investors. It secures more than half of our exports and millions of British jobs. And membership of the EU strengthens our ability to progress our foreign policy objectives too, giving us a strong voice on the global stage in issues such as trade and, as we have seen in Durban this week, climate change and the environment.
So we are in the European Union, and we want to be. This week there will be meetings in the councils on transport, telecommunications and energy, and agriculture and fisheries. Britain will be there as a full member at each one. But I believe in an EU with the flexibility of a network, not the rigidity of a bloc. We are not in the Schengen no-borders agreement and neither should we be, because it is right that we should use our natural geographical advantage as an island to protect us against illegal immigration, guns and drugs. We are not in the single currency, and while I am Prime Minister we will never join. We are not in the euro area bailout funds, even though we had to negotiate our way out of it. And we are not in this year’s euro-plus pact.
When the euro was created, the previous Government agreed there would need to be separate meetings of eurozone Ministers. It is hardly surprising that those countries required by treaty to join the euro chose to join the existing eurozone members in developing future arrangements for the eurozone. Those countries are going to be negotiating a treaty that passes unprecedented powers from their nation states to Brussels. Some will have budgets effectively checked and rewritten by the European Commission. None of this will happen in Britain.
But just as we wanted safeguards for Britain’s interests if we changed the EU treaty, so we will continue to be vigilant in protecting our national interests. An intergovernmental treaty, while it does not carry with it the same dangers for Britain, none the less is not without risks.
The decision of the new eurozone-led arrangement is a discussion that is just beginning. We want the new treaty to work in stabilising the euro and putting it on a firm foundation. I understand why they would want to use EU institutions, but this is new territory and does raise important issues which we will need to explore with the euro-plus countries.
So in the months to come we will be vigorously engaged in the debate about how institutions built for 27 should continue to operate fairly for all member states, and in particular for Britain. The UK is very supportive of the role the institutions play in safeguarding the single market, so we will look constructively at any proposals with an open mind. But let us be clear about one thing. If Britain had agreed treaty change without safeguards, there would be no discussion. Britain would have no protection.
Let me turn to the next steps. The most pressing need is to fix the problems of the euro. As I have said, that involves far more than simply greater medium-term fiscal integration, important though that is. Above all, the eurozone needs to focus at the very least on implementing its October agreement. The markets want to be assured that the eurozone firewall is big enough, that Europe’s banks are being adequately recapitalised and that the problems in countries such as Greece have been properly dealt with.
There was some progress at the Council but far more needs to be done. The eurozone countries noted the possibility of additional IMF assistance. Our position on IMF resources remains the one I set out at the Cannes G20 summit. Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world.
But IMF resources are for countries not currencies. They cannot be used specifically to support the euro, and we would not support that. There also needs to be greater competitiveness between the countries of the eurozone. But let us be frank—the whole of Europe needs to become more competitive. That is the way to more jobs and growth. Many eurozone countries have substantial trade deficits as well as budget deficits. If they are not to be reliant on massive transfers of capital, they need to become more competitive and trade out of those deficits.
The British agenda has always been about improving Europe’s competitiveness. At recent councils we have achieved substantial progress on completing the single market in services, opening up our energy markets and exempting microbusinesses from future regulations. This has been done by working in partnership with a combination of countries that are in the eurozone and outside it.
Similarly, on this year’s EU budget it was Britain in partnership with France, Germany and Holland among others that successfully insisted on no real increase in resources—for the first time in many years.
On defence, Britain is an absolutely key European player, whether leading the NATO rapid reaction force or tackling piracy in the Indian Ocean, and our partnership with France was crucial in taking action in Libya. Britain will continue to form alliances on the things we want to get done.
We have always had a leading role in advocating the policy of enlargement, and at this Council we all celebrated the signing of Croatia’s accession treaty. That is one European treaty I was happy to sign.
Let me conclude with this point. I do not believe there is a binary choice for Britain: that we can either sacrifice the national interest on issue after issue or lose our influence at the heart of Europe’s decision-making processes. I am absolutely clear that it is possible both to be a full, committed and influential member of the European Union and to stay out of arrangements where we cannot protect our interests. That is what I have done at this Council. That is what I will continue to do as long as I am Prime Minister. It is the right course for this country, and I commend this Statement to the House”.
My Lords, I thank the Leader of the House for repeating the Statement on the EU Council made today in another place by the Prime Minister. In this House, Leaders of the Opposition tend to open their statements on normal, regular EU Council meetings in roughly that vein. This was a normal, scheduled EU Council meeting, even if it was taking place at a particularly difficult time. But this was no normal, regular outcome to a normal EU Council meeting. What happened in Brussels in the early hours of Friday morning was momentous. The implications of the Prime Minister’s decision may well take years, decades even, to unfold fully. It is clear that Britain is now travelling in a different direction from the rest of Europe.
The reality of where we are is this: the Prime Minister has given up our seat at the table; he has exposed, not protected, British business; he has got a bad deal for Britain. The Prime Minister told us that his first priority at the summit was sorting out the eurozone but the euro crisis is not resolved. There is no promise by the European Central Bank to be the lender of last resort. There is no plan for growth. There is little progress on bank recapitalisation, so can the Leader of the House tell us why the Prime Minister’s promise of a so-called big bazooka did not materialise and what that means for Britain? At the summit that was meant to solve these problems, the Prime Minister walked away from the table.
Let me turn to where that decision leaves this country. Many people feared an outcome of 17 going it alone. Few could have dreamt of the diplomatic disaster of 26 going ahead and one country—Britain—being left behind. The Prime Minister talks of isolation in the national interest but the truth is that this is isolation against the national interest. The Prime Minister rests his whole case on the fact that 26 countries will be unable to use existing treaties or institutions. Can the Leader of the House confirm that Article 273 of the European treaty allows them to use the European Court of Justice, and no doubt they will use the Commission’s service and, yes, even the buildings? In case anyone had any doubt, it is confirmed by what the Deputy Prime Minister said yesterday that it clearly would be ludicrous for the 26, which is pretty well the whole of the European Union, to completely reinvent a whole panoply of institutions.
The Prime Minister claimed in his Statement to have done what he did because this treaty posed a grave threat to our financial services industry. Can the Leader of the House point to a single proposal in the treaty that would have entailed the alleged destruction of the City of London? What was the threat? Can the Leader of the House now tell us? In any case, there is nothing worse for protecting our interests in financial services than the outcome that the Prime Minister ended up with. Can the Leader of the House confirm that there is not one extra protection that the Prime Minister has secured for financial services?
The Prime Minister has laid great stress since Friday on his claim that British interests would be better protected as a result of his decision in Brussels. Can the Leader of the House tell your Lordships the basis for such a claim? Can he say precisely what safeguards the Prime Minister asked for? Can he say what mandate the Prime Minister had, and from whom, for making those demands? Was it the full Cabinet or the Deputy Prime Minister? The Prime Minister wanted a veto on financial services regulation but he did not get one. The Prime Minister wanted guarantees on the location of the European banking authority but he did not get them. Far from protecting our interests, the Prime Minister has left us without a voice and the sensible members of the Prime Minister’s own party, including some Members of your Lordships’ House understand this as well as anyone. We on these Benches agree with the remarks made at the weekend by the noble Lord, Lord Heseltine, when he said:
“You can’t protect the interests of the City by floating off into the middle of the Atlantic”.
What about the rest of British business—the part of British business that the Prime Minister does not seem to have been thinking about? There is a danger for it, too, in that the discussions about the single market on which it relies will take place without us—a point that Sir Martin Sorrell, chief executive of WPP, the advertising company, is only the first from the business world to be making today.
The Deputy Prime Minister clearly does not agree with the Prime Minister. He says that this outcome leaves Britain “isolated and marginalised”. Does the Leader of the House agree with that assessment? Can the Leader of the House explain how the Prime Minister can expect to persuade anyone else that this is a good outcome for Britain when he cannot even persuade the Deputy Prime Minister? The Prime Minister believes that this decision was best for Britain, but the Deputy Prime Minister does not. Which is the Government’s position on this issue—the Prime Minister’s or the Deputy Prime Minister’s? With the Deputy Prime Minister saying that he is “bitterly disappointed” with the outcome obtained by the Prime Minister, can the Leader tell the House how the coalition can work properly with, at its heart, such a fundamental disagreement on such a fundamental issue?
The Prime Minister claimed to have wielded a veto, but a veto is supposed to stop something happening—it is not a veto when the thing you wanted to stop goes ahead without you. How did we end up with this outcome? Can the Leader of the House confirm that what the Prime Minister actually proposed was to unpick the existing rules of the Single European Act signed by the noble Baroness, Lady Thatcher? Given that it was changing 25 years of the single market, why did the Prime Minister propose it in the final hours before the summit, and where were the Prime Minister’s allies? If the Prime Minister wanted a deal, why did he fail to build alliances with the Swedes, the Dutch, the Poles—our traditional supporters? If the Prime Minister really wanted to protect the single market and financial services, can the Leader of the House say why no guarantees were sought that these issues would only be discussed with all 27 members in the room?
Can the Leader tell us why the Prime Minister walked away from a treaty negotiation even before there was a text on the table on which we could have negotiated? The treaty will take months and months to negotiate. The Prime Minister could have reserved his position and continued to talk, as other countries have done. We believe the real answer is that the Prime Minister did not want a deal because he knew that he could not deliver it through his Back-Benchers.
I usually start my day by having a loud, one-sided argument with the “Today” programme, either with the presenters or coalition Ministers espousing policies with which I disagree because of the detrimental effect they will have on the people of our country. However, on Friday morning I was stunned into silence when I heard that the Prime Minister had wielded the veto at the European summit. This was such an extraordinary failure of diplomacy. I simply could not understand why a veto had been used over a treaty that as yet has no text and which we are not even being asked to sign yet, and how our national interests could be best served by absenting ourselves from future discussions and negotiations. The implications of our isolation are huge and we are in danger of being sidelined on a vast number of issues, including the single market.
We now have no influence at all on the final form and content of the new intergovernmental treaty. Why is this important? It is about the future stability of our continent, the future stability of the euro and therefore the future stability of the UK economy. Of course, people are right to be concerned about the European Union and the situation in the eurozone because these have great implications for our country. However, by absenting ourselves from the negotiations, by leaving an empty chair, we are abnegating our responsibilities. We should have a voice in the discussions but we are choosing not to use it. This is clearly not in our national interest.
Nothing has changed in terms of banking, financial services and hedge funds. The decisions will continue to be taken by qualified majority because financial services regulation is part of the internal market rules. However, I suggest that the 26 will be less likely to listen to our concerns in future. In addition, the 26 will naturally develop the habit of working together on a broad range of economic policy, and our voice—the voice of the most economically liberal and free market member state—will not be heard until most of the discussions have taken place.
I have always believed, and continue to believe, that as a nation we are strengthened by membership of the European Union, not just in terms of trade but of our place in the world. Suddenly, with one fell swoop of a veto that was never even used by the noble Baroness, Lady Thatcher, we were sidelined, and our role in the world was diminished. It could mean that in future the Americans think doing business with Europe means doing business with Berlin, Paris and Brussels rather than London. This is a bad deal, which we have ended up with for bad reasons, and it will have long-lasting consequences. It is a decision that means that we are on the sidelines, not just for one summit but for the years ahead.
The Prime Minister told the other place on 24 October:
“At the heart of our national interest … is not only access to that single market but the need to ensure that we are sitting around the table … determining the rules that our exporters have to follow. That is key to our national interest, and we must not lose that”. [Official Report, Commons, 24/10/11; col. 38.]
However, that is exactly what the Prime Minister has done. He has done what no Prime Minister has ever thought to be wise before: to leave the room to others, to abandon our seat at the table. The Prime Minister says that he had no choice, but he did. The Prime Minister could have stayed inside and fought his corner. He should have stayed inside and fought his corner.
This country will rue the day that the Prime Minister left Britain alone without allies and without influence. The outcome obtained by the Prime Minister is bad for business, bad for jobs, and bad for Britain.
It is always good to hear the noble Baroness, the Leader of the Opposition, on such fine form. I strained to hear, in all her words, whether or not the Labour Party would have signed up to the agreement on Thursday night, and I have no idea if anybody else heard the answer—I certainly did not. I invite the noble Baroness to nod, or shake her head, and she is doing absolutely neither.
It is very hard for the noble Baroness to criticise when she is not able to tell us what her party would have done in our position. When the Labour Party was in a position to stand up for British interests, it gave away the opt-out on the social chapter, signed up to the Lisbon treaty and refused to ask the British people for approval, and gave away something like £7 billion of the rebate and got absolutely nothing in return.
The Prime Minister was clear all along that he would protect our national interests. That is exactly what he did. It is in our national interest for the countries with the euro to fix their problems. We said that we could only agree a new treaty if certain modest, reasonable and relevant safeguards were obtained—safeguards for the EU as a whole, not just for the UK—but we could not get those safeguards. That is why the Prime Minister did not sign the treaty.
The noble Baroness asked specifically about the EU institutions. At this stage it is very difficult to know exactly what role is proposed for the EU institutions, and therefore to take a view as to what will happen in the outcome over the course of the next few weeks.
The noble Baroness asked, though she did not put it quite in these words, what we fear from the existing treaty. What concerned us was the huge damage that could potentially have occurred to the single market and financial services. We stopped Britain from signing up to something that was damaging.
The noble Baroness asked what has changed since Thursday. The answer is, very little between Wednesday and Friday. We are still firmly part of the EU, as I, or rather the Prime Minister in his Statement, explained.
The noble Baroness asked what safeguards we were asking for. We were not asking for very much. We were asking for legal clarity, that decisions on running and extending the single market would not be taken away from the EU as a whole and be made instead by the eurozone-led group. On financial services we asked for practical and focused proposals to protect the openness and competitiveness of the single market for all, especially for those outside the euro. We also asked for a proper role for our national regulators, scrutinising institutions from outside the EU which are present in Britain but nowhere else, and for freedom for our regulators to impose additional requirements on our banks, if we in this House, and in another place, so chose.
These are the most humble safeguards that we could possibly have asked for. The noble Baroness should not be asking why, in her words, we were isolated, but why the 26 countries did not agree with us, or agree to give us these safeguards. The noble Baroness says that we are isolated and marginalised. But no, we are one of the biggest economies in Europe and one of the biggest contributors to the EU. We are one of the most successful countries, and we will continue to be so. That, my Lords, is why we did not sign the treaty.
My Lords, I thank the noble Lord for repeating the Statement in your Lordships’ House. I have two questions. First, the decision taken by the Prime Minister requires not just a Statement but an early debate in your Lordships’ House. Will the Leader of the House consult the usual channels so that such a debate can take place well before the Christmas Recess? Secondly, the Chancellor is reported to have said that,
“his officials were putting unprecedented effort into planning for all eventualities”.
Will the Leader make available information to indicate how the interests of the City of London are to be protected?
My Lords, I wholly understand why my noble friend would ask for a debate; obviously this is an area of great interest. Perhaps I may suggest that the usual channels should meet, perhaps with representations from all parties and groups in this House, to see whether we can find a time. As the House knows, we will rise for Christmas next Wednesday. It might be a little bit difficult to find a suitable date before then, and in any case it might be better to meet again in January to discuss these issues. We had a very successful debate on 1 December but I am not averse to having a further one.
My noble friend also asked a question about the Chancellor of the Exchequer saying that he was planning for all eventualities. The reality of our decision not to join the euro means that, for some time now, the eurozone countries have developed and continue to develop their own arrangements. For the UK and other countries that have not joined the euro, that means being vigilant in protecting our national interests. That will remain the case, but it is nothing new.
We will continue to exert our influence on financial services legislation and on single market legislation more broadly. But I am sure that, for reasons which I am sure the House will understand, the Government do not comment on the detail of their contingency planning in order to ensure that we can best protect the interests of the whole economy, including the City.
My Lords, I congratulate the Leader on the ebullience of his response to the noble Baroness, Lady Royall. Perhaps I may ask that he include a little more content in his answers to the questions that I have for him. First, will he confirm that since 1988, when at the initiative of Prime Minister Thatcher we secured qualified majority voting for financial services regulation legislation, the United Kingdom has never been outvoted on a financial services proposal in the Council of Ministers in Brussels? Secondly, will he confirm that the financial transaction tax is a complete red herring because, as a tax measure, it is on a unanimity legal base and if we do not agree with it, we can block it?
I have three questions on institutions. I listened with great interest to what the Leader said about the Government looking constructively at any institutional proposals. First, if the Government consider that tighter deficit control arrangements among eurozone countries could somehow create a threat to City interests—and I do understand the concern—would this threat not be best contained if the arrangements that the eurozone countries make were required not to undermine the single market, not to create barriers to trade between all member states and not to distort competition between them? He will recognise the language of Article 326.
Secondly, as the Government constructively consider institutional proposals, will the Leader consider Article 136, under which eurozone member states may go for tighter control of their deficits, and only they may vote on measures imposing such controls, but all member states are entitled to be present and able to defend their interests? Thirdly, will he confirm that it is still the Government’s view that the survival of the eurozone, and therefore the “remorseless logic” of fiscal union among eurozone member states, is an important UK interest and that we therefore wish to help the eurozone quickly reach effective, enforceable arrangements for tighter deficit controls?
I am sorry. This may be unwelcome to the Tea Party on the Back-Benches opposite but the country wants to know the answer to these questions.
Would requiring the invention of intergovernmental arrangements, as the French always wanted, not hand them victory, and be a loss to all our natural allies, such as the Dutch, the Danes and the Swedes, as well as a loss to efficiency, and thus an own goal?
I have two questions on tactics.
My Lords, this sounds very much like a speech for the coming debate.
May I ask one question of tactics? I am grateful to the noble Lord. Will he confirm that, exactly 20 years ago, John Major secured the social opt-out and the euro opt-out by attaching his conditions to the conclusion of the negotiation, where unanimity is required, and not to the convening of a negotiation, for which only a simple majority is required?
My Lords, I know that the noble Lord, Lord Kerr of Kinlochard, is trying to be constructive and helpful in guiding the Government through all this. He asked a number of questions, but I will not be able to answer them all in the time allowed. However, he is right on the financial transaction tax, and I am sure that he is right about us never being outvoted under QMV over the past 20 years. As for the question that he posed at the end about John Major and the opt-outs, I supported the opt-outs. The opt-outs were an excellent thing. However, as soon as the Labour Party got into office it got rid of the opt-outs, and it got absolutely nothing in return. We want something far firmer and longer-term than that.
There are two key questions. First, on the EU institutional proposals and whether we should consider using Article 136, it is, of course, still the earliest possible days in how all this plays out. Even the French President and others have agreed that this process will last until March. There are at least three countries that need parliamentary approval before they can sign up to these treaties, so there is plenty of time to look at these things.
As I said earlier, the exact role being proposed for the institutions is not yet clear to anyone. We will need to look carefully at the detailed proposals as they emerge to ensure that Britain’s interests are safeguarded. The noble Lord also asked about our view overall of the eurozone. Let me say most emphatically that we hope that the new treaty can play a significant role in stabilising the euro and putting it on a strong, sustainable path. That is in the interests of Europe, and it is in British interests as well.
My Lords, people will differ in their view about whether the Government’s negotiating position last week was tenable or realistic. Will the Government reflect on the utterly shambolic way in which they prepared their position and sought support for their proposals at the summit last week? Why were the Government’s proposals only shared with the legal service of the Council literally the day before the summit? Why were they not shared with, and why was support not sought from, more than a handful of German officials? The French were not informed or consulted at all about these proposals. In view of such lamentable incompetence, is it really surprising that we ended up in a majority of one?
My Lords, I cannot agree with the noble Lord, even though he brings immense experience to this House. We believe that we issued every signal possible by the Prime Minister, the Foreign Secretary and many others as to what we regarded as vital British interests. In the run-up to last Thursday’s summit everyone should have been entirely clear what the implications of that were.
My Lords, I warmly support my right honourable friend the Prime Minister. He took an extremely difficult decision in the circumstances, but it was the right one, and I have no doubt that it will increasingly be seen to have been the right one as time unfolds. Is it not clear that the misbegotten venture of European monetary union has already proved a massive disaster for the whole of Europe and that, furthermore, this particular agreement, if that is the name for it, which was made on Friday has not solved any of the problems? I do not think it can, because I think that it is doomed. Indeed, as the financial markets have made clear today, it certainly has not solved any of the problems. All it will do is create increasing divisions within the members of the eurozone. They will interpret it in different ways and are concerned about many different aspects of it. Differences will also arise between the Governments of a number of eurozone countries and the peoples of those countries. This is not clever. As for—
Finally, perhaps I may commend my right honourable friend on being determined to protect the interests of financial services both in this country and in Europe. Unconsidered and malicious regulation will lead to financial services companies going not to other European countries but to Hong Kong, New York and Zurich.
My Lords, I thank my noble friend for his unqualified support for what the Prime Minister has done and I strongly agree with much of what he says. As I said to the noble Lord, Lord Kerr, we wish the euro well, and we wish it to succeed, because unless we resolve the crisis that is facing the eurozone it will have an extremely negative effect on the British economy. I also agree entirely with my noble friend on his last point about financial services. There is a view that even if we could veto the financial transaction tax, it would affect only the UK. It would be too easy for many companies and organisations simply to relocate to the rest of the world, so it would be a loss to Europe as a whole, not just London. That was why the Prime Minister was trying to defend the financial services industry right across Europe, not just in the United Kingdom.
My Lords, there are three questions which the Prime Minister ducked, and I hope that the Leader of the House will do better. First, in which paragraphs were proposals tabled which required the British to use their veto of the treaty? Will he enumerate the paragraphs to which we took objection? Secondly, what safeguards of our interests were we trying to secure? Thirdly, why could we not have reserved our position, since this was a very early stage in the whole process? As I said, the Prime Minister ducked those questions. I hope that the Leader of the House will be able to do better.
My Lords, I spelt out in some detail what safeguards we asked for in reply to the noble Baroness the Leader of the Opposition, so I will not repeat them. However, the noble Lord has asked a good question to which people will want to know the answer: why did we exercise the veto at the start of the process? It is my understanding that the French made it absolutely plain that under no circumstances would they accept the safeguards that the Prime Minister was asking for. At that stage, the Prime Minister had absolutely no choice if he was going to continue in good faith. That is why he took the decision that he did.
My Lords, my gratitude is exceeded only by my surprise. I trust that the Leader of the House will forgive me if I congratulate the Prime Minister on his courage in standing alone and on taking what I hope will be the first small step towards the lifeboats on the “Titanic” which is the EU. I have two short questions. First, where do the Government now stand on the 49 proposals for new Brussels legislation in the financial area, some of which will be very serious for our financial industries and taxpayers, and which are already in the pipeline under qualified majority voting? Secondly, the noble Lord has said that we do not know what is on the way, so do not yet know the precise answer, but can he confirm that the other EU countries cannot use the institutions of the whole EU to further their ill-fated plans to prop up the euro without our consent?
My Lords, on all proposals emanating from the Commission on financial services, we will vigorously defend British interests. We will continue to do so. Indeed, we believe that we have protected our interests in being able to do so by not signing up to the treaty. On the second question, I hope that I have dealt with EU institutions. We do not rule out the use of the institutions outside the treaty. After all, we have agreed to that before, along with all the member states, for the EFSF treaty where we thought that made sense. There are other intergovernmental treaties that became part of the umbrella of EU treaties, such as on Schengen, where we have an opt-out. So it is too early to give a specific answer to the noble Lord but he will understand that in our vision of a flexible Europe there should be enough room to have different treaties at different times to deal with different issues.
Would my noble friend agree that, as financial services regulation can be passed without unanimity, the only reason such regulation has not been passed in a way that is unacceptable to this country over the last 30 years is because we have been able to get sufficient goodwill from our partners? In order to retain the goodwill which will continue to be needed in future, would my noble friend agree that it will be necessary—if not today, certainly soon—to make it clear that we are not going to try to stop the 26 going ahead by denying them the use of European Union institutions? That would be regarded as an act of great hostility and would deprive us of that goodwill in future.
My Lords, we very much want to retain goodwill and there is no reason why we should not do so. I say again that it is not yet entirely clear what role is being proposed for the EU institutions. We will want to look carefully at the details of what is proposed. No doubt we shall do so over the course of the next few months.
My Lords, does it not beggar belief to suppose that anybody could be so stupid or incompetent, if he really believed that there was a threat to national interests from a prospective change in financial service regulation in the EU, as to engineer a situation in which henceforth such regulation will be discussed and in practice decided in a context in which we will not even be in the room? Is it not absolutely clear that it was not national interests at all that drove the Prime Minister but party political interest and the desire to curry back the favour of the Tory Eurosceptics who gave him such a hard time last Wednesday? Does the Leader not think that the country is intelligent enough to see through the propaganda that they have heard this afternoon and to realise that the Prime Minister has played with the national interest for party political reasons?
My Lords, only the noble Lord could come out with that particular quip. Of course we feared the dangers to our national interests or we would not have said what we did. It takes two to agree but it also takes two to disagree. The other 26 could have wholly accepted that we had a deep concern about our national interest and agreed with us. Then there would have been a treaty of the 27.
My Lords, given that we have now cast the veto without stopping anything; that in the name of protecting the City of London we have made it more vulnerable; that we have in a time of crisis given greater incentive to investors to put their money in northern Europe than in isolated Britain; and that we have reduced our leverage in Europe and diminished our voice in Washington, is it not now necessary that we take every step to get ourselves out of the position that we find ourselves in, make ourselves relevant to the argument and get back in the game? How do we intend to do that? Does my noble friend realise how much depends for this country—and for this Government—on our success in doing so?
My Lords, would the Minister confirm that, had the texts before the Council in Brussels been agreed by 27, not one word would have applied to this country because they solely concerned tighter arrangements for the eurozone countries? If that is so, it is a little hard to see why they were contrary to our interests. Would he also now perhaps answer the question that has been put to him quite a lot of times? There was a tried and trusted route used by the noble Baroness, Lady Thatcher. In 1985, when she was voted down on the procedural issue of starting a treaty-changing negotiation, she nevertheless decided that her Government would participate in that negotiation. She stated that if it did not come out in a way that safeguarded British interests, she would have no hesitation in vetoing it at the end. In the end it came out for British interests. Why on earth did we not do that this time?
My Lords, my right honourable friend the Prime Minister made an entirely appropriate and sensible decision on Friday night not to agree with the treaty that was going forward. He did so because he believed that vital British interests were at stake. Contrary to what the noble Lord said, our view is that the new treaty would have completely reshaped the whole basis of the EU treaties. We would have been dragged into a whole series of changes and evolutions that would not have served our interests well. That is why we vetoed it.
The complacency of the Leader of the House is mind-boggling. Has he not managed to discomfort the majority of the Liberal Democrats? He appeals to the worst instincts of the British people. As far as I can see, there is to be no repatriation of powers, no European Union allies and no real protection of the City. The Government have not been courageous but desperately cowardly and, most of all, barren of influence. Is that not the case?
My Lords, I am bound to say that I disagree with all of that. This was not about party but national interests. It was not about—what did he say?—playing to the worst aspects of the British character. That is quite wrong. This is the problem that noble Lords opposite find themselves in. Time and time again, they feel that agreeing with our European partners on everything will protect our long-term interests. We disagree.
My Lords, we are not absolutely sure of this but is it not likely that the issue will come back to the European Council if there is any attempt or desire on behalf of the eurozone people to make use of the institutions of the Union? When the issue comes back, we will be there making our point of view known. Did the Leader of the House hear on Radio 4 this morning the comment by the distinguished American economist that if you are not prepared to walk away you will have no leverage?
My Lords, I did not hear that interview, but my noble friend is right. In any negotiation, particularly one as important and controversial as this one, you have to take a decision right at the beginning on whether you are going to negotiate in good faith. As I have already said, we put forward a proposal that was relatively humble, it was not agreed with, and that is why we said no.
On the question of EU institutions, I think I have covered that very fully this afternoon. Of course, it will come back as an issue and we will take a decision in due course.
My Lords, with the veto of the treaty, we are losing sight of the essence of this; it is about sorting out the eurozone mess. I have two questions. First, the Government seem to be encouraging greater fiscal union among the eurozone countries to sort out the eurozone problem. Surely the Government accept that the euro is dead in the water—in fact, it is under water—and that these countries will never be in sync, and fiscal union and handing of sovereignty realistically will never happen. If it were to happen, those countries would unite even more and we would be even more isolated.
Secondly, the Prime Minister insinuated in his Statement that the veto was almost a negotiating tactic, and that, if we did not use it, we would not be taken seriously as being able to protect our own interests. Surely, if that is the case and we intend to go back to the table, we might be seen not as a bulldog but as a dog returning with its tail between its legs.
My Lords, the noble Lord says that the eurozone is in a mess and that it will not succeed. That is not the view of the British Government. We believe that the countries of the eurozone have got themselves together. It is true that they face a crisis, but the issue that needs to be resolved is how to solve that crisis, and to do so as quickly as possible, since, as every week goes by, it becomes more expensive to be able to do so. We think that sensible steps were taken forward over the last few days, but only the markets will decide whether the euro is to succeed. We believe that it is in British interests that the euro should succeed, that there should be a greater fiscal union and that many of the things that were proposed late on Thursday night are the right things for the EU to do.
Secondly, as to question of whether this was a negotiating tactic by the Prime Minister, it most certainly was not. Of course we understand that at this level these summits end up in negotiations. Indeed, we put forward a very fair proposal that we wholly expected the other European countries to agree to. They did not do so, and that is why the Prime Minister could not agree.
My Lords, does the Minister agree that, if the Prime Minister had not attempted to pacify his party when he was first elected by leaving the European People’s Party—a group to which both Chancellor Merkel and President Sarkozy belong—and hooked up with some pretty unsavoury parties from Eastern Europe, he would have been invited to the pre-summit meeting in Marseilles where he could have made his case? He locked his party out of the room and now he has locked the country out of the room.
My Lords, it is a nicely put question, but I cannot agree with the noble Baroness. We left the EPP for very good reasons to do with a different philosophical view of where the EPP was heading. I also cannot believe that, if we had been present at the Marseilles meeting, Thursday night would have ended up any differently.
My Lords, does the Leader of the House recognise the huge damage done to Britain’s influence and reputation far beyond the European continent, as any reading of recent journals in the United States or, for that matter, in Russia indicates very clearly? Would he agree that, in the negotiating document that was put to the 26 by the Prime Minister, there were a number of issues that were already on the way to being resolved in ECOFIN, and some of them had already been resolved in ECOFIN 2009? Would he also agree that there were some issues that related to unanimous votes like the financial transfer tax, and therefore there was no threat to British interests? Finally, going back to the question asked by my noble friend Lord Ashdown, I ask whether the Prime Minister and the Government will now recognise fully the need to make a gesture towards the crucial importance of saving the eurozone, which is in our interests as much as in theirs, by making clear that the European institutions will not in any way be blocked from being part of the outcome of that difficult decision?
My Lords, I really do not believe that Britain’s influence or reputation have been affected in any way negatively by what was done at the end of last week. If anything, they have been enhanced. A British Prime Minister laid out very carefully what he was going to do to protect British vital interests. He went and negotiated, and when he could not get what he believed was right, he said, “I am not going to agree”. That is a position of courage, and he was absolutely right to make that decision.
On the question of the institutions of the EU, which I know are of great interest to many Members of this House, at this stage it is too early to take a view of what is proposed or all the detail of what is meant and what EU institutions are going to be asked to do at what stage. We will look very carefully at these proposals as they come out.
My Lords, there has been a lot of controversy about when exactly the British proposals were put before our colleagues in the European Union. May I follow up on the question raised by my noble friend Lord Mandelson and ask when exactly were these proposals put to the French?
Secondly, the text of the Statement twice refers to an intergovernmental arrangement being “not without risks”. Can the Minister tell us what are the risks that the Government acknowledge are inherent in the intergovernmental position that is now before us?
My Lords, I cannot give an exact date as to when the proposals were put to the French, but, if I can find out, I will be very happy to write to the noble Baroness. However, the generality of the Prime Minister’s position has been well known for some weeks, and particularly over the course of the days leading up to the summit. Of course, even within an intergovernmental treaty, there are some risks attached. To some extent, we will have to wait to see exactly how that works out. As to the kind of risks, I think that the noble Lord, Lord Kerr, spelt out that there are some countries that might feel the need to go along with what the big countries in the intergovernmental treaty want. Again, we shall have to wait to see. Nobody should be under any illusions that the British Government will not continue to fight very strongly for vital British interests, whether it is within an EU treaty or an intergovernmental treaty.
My Lords, if I may strike a slightly more optimistic note, is my noble friend aware that our achievement in getting major headway on the Single European Act at the Luxembourg summit followed immediately after the Milan summit, in which our agenda scarcely received any attention at all? That is another rather surprising matter that went ahead without us having much enthusiasm for it. Is my noble friend aware that the future is not as gloomy or as difficult as some people might believe?
My Lords, I very much welcome the positive note that my noble and learned friend brings to all of us. He is also right about the Single European Act, which was a vital and game-changing initiative. I agree with him that nothing is ever quite as bad as you think it is, and perhaps some things are not quite as good as you think they are either. Nevertheless, the Prime Minister made the right decision on Thursday night and, if he were asked again, he would do the same thing.
May I congratulate my right honourable friend the Prime Minister on standing up for Britain and speaking for the people of this country, as opinions show? May I also congratulate the Deputy Prime Minister on establishing a new principle that a weekend is a long time in politics?
I think this may be the last time that I get called. On the substance of the meeting, why did no one address the immediate crisis, which is what to do about repaying the debt? If anyone is isolated, is it not Germany because Germany needs to realise that she needs to write a cheque or allow the European Central Bank to be the banker of last resort and print money? We will otherwise go into deep crisis. This crisis is being used as an excuse for further integration and as such is deeply irresponsible.
My Lords, I entirely agree with my noble friend that the substance of the issue is to solve this economic crisis—an economic crisis which has a chilling effect on the rest of Europe, including this country. In the first instance in the short term, you have to have a firewall of money to stop contagion. Secondly, we accept that there need to be clearer fiscal rules so that countries cannot get into the trouble they have got into in the past. Thirdly, far more work needs to be done on competitiveness within Europe and between countries of the European Union. It is the only way that we are going to succeed in the long term.
Are the Government aware that the British press—the Daily Mail, the Daily Express and the Telegraph—are becoming more and more xenophobic in the way they treat this question? Is the Minister content with this trend whereby British public opinion seems to think that a “fight them on the beaches, fight them in the air, no surrender” policy is reasonable and one with which we can make friends and influence people around Europe?
My Lords, I do not at all agree with the noble Lord. This is not about the newspapers. I think that the British people generally accept and support what the Prime Minister did because they understand that he was standing up for vital British interests.
My Lords, the Leader of the House has time and again stated the clear intention of Her Majesty’s Government to assist the eurozone. Does he accept the stark reality of the situation; namely, that 17 countries with different economies and utterly disparate economic circumstances formed a eurozone but, when bad weather came along, disintegration became a very real possibility? In practice, the only two real possibilities are either that there should be a draconian situation of considerable discipline imposed on the eurozone or that there should be a United States of Europe or a Republic of Europe.
My Lords, that is a huge question and one that requires a much longer debate on another occasion. However, I agree with the noble Lord that there is a mess. There needs to be discipline; whether that is in a United States of Europe is another question altogether.
My Lords, does my noble friend agree that under the terms of Article 136 of the treaty of Rome, to which the United Kingdom is a signatory, those members of the eurozone have been entitled, and are entitled—we wish them well in doing so—to take measures specific to those member states whose currency is the euro, so in that sense nothing has changed? Furthermore, is it not the case that under Article 136, those measures must be taken ensuring that they are compatible with those adopted for the whole of the Union, of which the United Kingdom continues to be a member? Does he not agree that what we are witnessing is not the end of the European Union or of the eurozone, and it is certainly not the end of Britain’s influence in those matters?
Welfare Reform Bill
Report (1st Day) (Continued)
Amendments 2 and 3 not moved.
Clause 8 : Calculation of awards
4: Clause 8, page 4, line 8, at end insert—
“(ba) any amount of support for disabled children included under section 10 should be no less than the amount that was provided under the benefits and tax credits system prior to the introduction of the universal credit,”
My Lords, this amendment would ensure that the disability additions for children provided under the universal credit are not cut compared with the disability additions provided through the current benefits and tax credits system. Families with children who have a disability are likely to have much higher costs than other families. I would briefly like to explain the current system. Disability living allowance is there to make a contribution to those costs. In addition, the means-tested system has also offered extra support to these families to help with these costs. Families with children who are judged to have the highest needs and receive the highest rate of the care component have an extra £76 added to their child tax credit to help with those costs. Families with children receiving any rate of DLA, except the highest rate of the care component, have an extra £54 added to their child tax credit to help with those costs.
The Government have announced that the disability elements of the child tax credit will be replaced with a disability addition and higher addition within the universal credit. However, all those who receive the higher addition will receive only half of the current rate. If the child is in receipt of the higher rate of the care component of DLA, the family will receive the higher disability addition, worth £77. Children who are registered blind will also now qualify for this higher addition. This means that those families who have a child eligible for the higher addition will receive £1.50 a week more than current claimants. However, households with disabled children who are not entitled to the higher rate and who claim benefit after the measure is brought in will receive only the disability addition worth about £27, which is about £27 less than the current rate.
As can be seen, the disability addition halves the level of support provided under the current system, so most families with a disabled child will lose around £1,400 a year. I have a number of concerns regarding which families will be affected by this. Only families of children in receipt of the higher rate of care component of DLA and severely visually impaired children will receive the higher addition. All other families of disabled children receiving DLA will receive the reduced level of support. In order to receive the middle rate of the care component of DLA, children have to need help frequently throughout the day or through the night. Those care needs have to be substantially in excess of the average care needs of a child the same age. To receive the higher rate of the care component, the child has to have frequent needs through the day and the night. Many children with a very significant level of impairment such as children with Down's syndrome or children who are profoundly deaf are likely to be in receipt of the middle rate of the care component as there is no reason why they would be likely to have substantial care needs in excess of other children at night. They will thus only be entitled to the lower addition.
The Government estimate that this change will affect around 100,000 disabled children. Disabled children are more likely to live in poverty than other children. Recent research by the Children's Society indicates that once the additional costs of disability are accounted for, four in every 10 disabled children are living in poverty. Contact a Family in 2010, in a survey of more than 1,000 families with a disabled child, found that almost a quarter of those families were unable to afford sufficient heating. This figure had risen from less than a fifth of families in 2008. It commented that,
“lack of heating in a household with a disabled child can have serious health risks. Many disabilities and health conditions worsen in the cold weather and heating is necessary to prevent a child becoming ill and in some cases hospitalised”.
It quotes one respondent who said:
“You try and do what’s right by your child, give them the food instead of yourself. She’s had one chest infection after another because we have no central heating and it costs too much to put on the oil filled heater”.
The Government have argued that this measure aligns the level of support for disabled children with those for disabled adults, contributing to simplification of the welfare system. However, the gateway for additional support for disabled children for universal credit will be through receipt of disability living allowance, whereas for adults it will be through the test of fitness for work. These tests are very different so support will not be aligned. For example, someone who is severely visually impaired will receive the higher addition as a child. However, as an adult he is likely to be found fit for work and so then he will be treated as if he had no level of impairment at all and receive no extra support.
The Government have argued that this proposal will be fairer as the addition for disabled children will be the same as the addition for disabled adults. Members of your Lordships’ House will by now be familiar with the additions and disregards for disabled adults. Although it is true that the addition for disabled adults who are found not fit for work is £27—the same as the proposed addition for disabled children in universal credit—disabled adults also get some extra help through the disability disregard. The disability disregard gives disabled adults who can do some work £17 more help than other adults. This means that disabled adults potentially get £44 of extra support while disabled children will get only £27. This does not align support.
It is certainly true that disabled adults need the support, but there are different and equally valid reasons why disabled children also need this extra support. Poverty from an early age is likely to affect the long-term life chances of disabled children. Cuts in support to disabled children are likely to have a negative impact on the later life chances of disabled children, making it harder for them to escape poverty as adults. Parents of disabled children want their children to have the opportunity to reach their full potential, but giving them this opportunity takes extra time and money.
A Citizens Advice adviser described one family. They have two disabled children. Their father has to spend a considerable period of time working away from home. The older child has multiple conditions, which require numerous hospital appointments. The younger child has cerebral palsy and has regular appointments and a lengthy list of exercises to be done in short bursts for his parents to carry out while playing with the child. They have spent a lot of money on equipment and toys to help the children’s development. Giving the children the best possible chance to fulfil their potential is expensive and a very demanding full-time job for their mother.
Lots of parents of disabled children also find it impossible to work because of their care responsibilities and childcare is often either not an option or not appropriate. The Children’s Society described a single mum who it has been supporting. She is bringing up her disabled son. He is now 14 and has both severe learning disabilities and problems with his hearing. Angela needs to be with her son the whole time when he is not in school. Options such as childcare do not apply in situations like this. Although she feels able occasionally to pop down the road to the shop, she cannot leave him for more than five to 10 minutes in case he gets into any difficulties. She currently gets carer’s allowance for looking after him. At some point she would like to get back into work. She previously worked in a care home and would like to go back to that. However, for now, her caring responsibilities make this impossible.
I would like the Minister to respond to the points I have raised as so far I am not convinced of the arguments for the Government’s reform. Indeed, I think it will damage thousands of families who rely on this support for their disabled child who does not quite meet the threshold of severity to keep the benefit level they once had. I beg to move.
My Lords, I am happy to put my name to the amendment of the noble Baroness, Lady Grey-Thompson. Losing 50 per cent of the support currently provided by the disability element of child tax credit will be extremely difficult for many families who face considerable extra costs as a result of having a disabled child who may not meet the severe disability threshold.
The severity of one’s disability should not be the overall defining factor for eligibility to this financial entitlement. The impairment severity is a highly unreliable measure for financial support needed by families to offset the extra costs of raising these children. All manner of disabled children face the extra costs associated with overcoming socioeconomic and environmental barriers. Medical textbook impairment measures are only part of the picture. For example, according to the textbooks, as a child I was considered to be at the most severe end of the scale—very severe. This is still the case today. A person with moderate autism or cystic fibrosis, however, is deemed much less severe. But if you ask my mother who, in my school class, needed financial support the greatest, she would say without a doubt, “Lorna, Mark and Peter”. All would be deemed to have moderate impairments today. We all came from similar economic backgrounds; working class and money was extremely tight. So why were their needs greater than mine?
My mother explains much better than me—as always. Lorna, because she had a hole in the heart and needed expensive extra warmth, good nutrition and babysitting, as both parents needed to work to survive and no family friend or family members felt confident enough to care for her. They were scared: she had a hole in the heart; she was going to die at any moment. Actually she was not, but that was the assumption. Mark, because he had moderate autism, whose particular behaviours could not be financially accommodated by his disabled mother, who herself needed support financially to raise his other two brothers as well. Finally, Peter, whose asthma meant several emergency admissions to hospital per month making it almost impossible for his single parent mother, with two other young siblings, financially to bear the cost of transportation to the hospital and childminders for the other siblings. None of these children is considered to be textbook severe, yet compared to my family their disability-related financial need was much greater.
I believe the Government’s obsession with aligning certain benefits to be really hazardous—unintentional, of course. Such assumptions are not based on practical evidence, as we realised when the Government attempted to align hospitals with residential care homes when looking for areas to cut the significant DLA budget. Please do not let us make the same mistake again.
The noble Baroness, Lady Grey-Thompson, has given reams of evidence from various notable NGOs and charities which I do not need to repeat. Before finishing, I did contact the eminent Dame Philippa Russell for advice as to what to highlight today. Noble Lords will know of Dame Philippa. She is famous for advising successive Governments for nearly 40 years on disabled children, and she ran the Council for Disabled Children for 30 of those years. She is currently the chair of the Prime Minister's Standing Commission on Carers. She said to me:
“I am very keen (with my two sector hat on) to stress the need to move away from this categorisation of people as having severe, moderate, low needs. None of those categories make sense without screeds of explanation that tax credit assessors simply will not have. They completely negate the idea of prevention and support”.
Let us listen to the experts and accept the amendment, which I feel makes sense.
My Lords, I spoke to a similar amendment to this in Grand Committee, but it was grouped with various other amendments and the debate was therefore not as clearly focused on disabled children as it might have been. In this amendment, the focus is simply on ensuring that disabled children do not receive less support in universal credit than they did under the benefit and tax credit system. The two noble Baronesses from whom we have just heard said it all and I shall not repeat what they said. However, it may be worth reinforcing how this works.
The disability elements of child tax credit will be replaced under universal credit with either a disability addition if the child is on the lower rate of the care component of DLA, or a higher addition if the child is in the middle or top rate of the care component. Children who are registered as blind will now qualify for the higher addition. The difference in rates is significant. As the noble Baroness, Lady Grey-Thompson, said, the lower addition will be worth about £27 instead of the current £54. We know that children will still receive DLA, even after other disabled people have transferred to the personal independence payment, and there are three rates of care component within DLA—lower, middle and higher. In the benefits system, the middle and higher rates usually go together, but under universal credit the middle rate will be aligned with the lower rate. This means, as we have heard, that children with significant impairments, such as those with Down’s syndrome or who are profoundly deaf and who now receive the middle rate, will in future be entitled to only the lower rate. Thus, their families will lose out.
The bar is set pretty high for children to qualify for the highest rate of the care component. They either have to be visually impaired or need not only frequent care or continual supervision by day but prolonged or repeated care during the night. This means that children who are, say, registered as blind will be entitled to £77 a week, while children with Down’s syndrome or who are profoundly deaf will receive about £26 a week.
The rationale for the change is, as we have heard, supposedly to align the rates of support for adults and children and to simplify the additions—as well as to target those in greatest need. However, the gateways for children and adults are so different that the alignment is not really relevant. As for targeting those in greatest need, it is a matter of judgment as to whether it is better to help a greater number of families with disabled children or to give fewer families greater help. What worries me most is that families with disabled children are disproportionately more likely to live in poverty, as many studies have demonstrated, and as the noble Baroness, Lady Campbell, said. Parents of disabled children are less likely to be in work, so the so-called tidying-up and aligning exercise is likely to push already poor families deeper into poverty.
I would very much welcome some help regarding the transitional arrangements, which I failed to grasp when my noble friend described them in Committee. Perhaps he can tell us about them in his reply. We are having to cope with a difficult question.
My Lords, I support the amendment of the noble Baroness, Lady Grey-Thompson, which has been eloquently supported by the noble Baronesses, Lady Thomas and Lady Campbell.
I had an opportunity at Second Reading and in Committee to refer to the extra cost and burden placed on families with disabled children as a direct result of their disability. The extent of the extra costs will obviously vary with the extent of the disability. One does not argue about that, and the previous system has contained gradations that allowed that to happen. One accepts that those in the greatest need should have the greatest support. None the less, there are those in the intermediate category who have substantial needs and they would, without financial help, undoubtedly feel enormous stress arising directly from their financial position.
If the figures quoted by the noble Baroness, Lady Grey-Thompson, of a loss of up to £1,400 a year are true, such a sum cannot be ignored, and the stress that that would cause to the parents and families of disabled children would be immense. That surely cannot be allowed to happen. If as many as 100,000 families could be affected directly—presumably not to the extent of £1,400—that is an immense number.
I put it to the Minister that if one went out on to the streets in the towns and villages of these islands and asked whether people would be prepared to pay a little extra in tax to ensure that families with disabled children would not lose out as a direct result of government policy arising from this legislation, people would say yes. Surely in those circumstances, the Government must look at their priorities and ensure that families with disabled children are not left to carry the can for the financial mess in which we find ourselves.
My Lords, I strongly support the amendment and urge all noble Lords to do so. Are we really becoming such a mean-spirited nation that we are willing to take away funding from less disabled children as the only means by which more severely disabled children can benefit? That is what the Government are proposing to do with this clause, although we know from a recent Children’s Society report that 40 per cent of disabled children live in poverty, and that if there is more than one disabled child in a family the poverty rate increases to 50 per cent. As the noble Lord, Lord Wigley, suggested, might there not be some people with broader shoulders who could contribute and endeavour to raise all disabled children out of poverty?
In order to be eligible for the higher rate, a child must require care both day and night. Many disabled children with significant needs will not qualify. Think what the loss of that money means for a family on a very low income—that £1,400 a year would amount to £22,000 over the life of a disabled child. It can mean not buying another box of incontinence pads when your allocation runs out, so that the mother spends exhausting hours changing and washing bed sheets, day after day. It can mean not being able to replace a sibling’s toy that the disabled child has broken, perhaps in a temper tantrum or frustration or because he or she cannot control their movements. It means intolerable strains on families that too often lead to family break-up.
Much of the Bill is about changing behaviour by the imposition of penalties. However, having a disabled child is not a lifestyle choice. Parents desperately need financial help in order to give their disabled child an equal chance in life, or are we really willing to let this legislation increase the shameful number of thousands of disabled children already living in poverty?
My Lords, it would be impossible to have served, as I have for a number of years, as party spokesperson on disability issues and maintain a continuing interest in my party’s disability group without a degree of sensitivity to the problems of disabled children and, of course, to those of their families. The noble Baronesses and noble Lords who have spoken about this issue are clearly right in drawing the House’s attention to it. All that I would say is that we need to pause for a moment in looking at the overall implications of these proposals, because my understanding of the position is that relatively—broadly over the past decade, and it may properly be attributed to the previous Administration—there has been significant acceleration in the support given to disabled children, reflecting the pressures to which we have referred that have caused their benefit rates to increase faster than those of adults.
The Government’s proposal is not, and indeed was not presented as being, simply a matter of cutting back the support for disabled children. The other aspect of the Government’s proposals is the alignment of rates, reflecting the position of adults and including some with more severe disabilities. All I would say, with respect, to those who have moved this amendment is that if we are going to make proposals that will increase or maintain the public cost in relation to children, it will be very difficult to provide the equivalent or additional increases for adults. Given the economic state of the country, we cannot proceed through the Welfare Reform Bill with what I might call the “highest common factor” approach to benefits of all kinds. We need the most appropriate and targeted system. I say that not in derogation of the case that has been made but simply with reservation about its sustainability.
There may be a glimmer of hope—indeed, there is already a chink of precedence—in relation to the arrangements for transition and run-on to the new system. I know that the Government have already indicated that they will maintain DLA with its three levels in relation to children rather than transfer them all to the personal independence payments. That is a start. The key to this—and this will not be the only case in the matters that we will hear tonight—is that there should be appropriate and sensitive transition arrangements so that people do not lose significant or very large sums in years one or two, but that nevertheless the overall objective—rebalancing the system and maintaining some coherence in public revenues and expenditure—is maintained.
My Lords, I support the views that have been expressed today. They were not as clearly enunciated in Committee, as we have already heard, but they have been spelt out pretty effectively today. I also accept that the money has to come from somewhere. The important thing may be the transition period and keeping an eye on just what the effect of the transition period is. However, when one thinks that 100,000 disabled children will be less well off as a result of some of these changes, one becomes worried. Four in every 10 lives will be lived in poverty—that was the figure given by the Children’s Society.
Although I accept that it is a difficult decision for the Government to make, I would like to think that there are other pockets from which rather more could be produced. I urge the Minister to look hard in those directions.
My Lords, I, too, support this amendment. I have been reading in newspapers lately that parents of disabled children have begun to get very worried lest the changes being brought about by this Bill reduce the benefits that they already get. This has made a number of them extremely nervous, with the result that we have had a fair amount of lobbying from the organisations that represent disabled people.
One of the attractive things about this amendment is that it seeks to ring-fence the benefits that people have at the moment so that they do not decrease as a result of this Bill. We have heard today from a number of speakers that bringing up disabled children is really quite difficult. Very often parents give up their work in order to care for them. It is often also extremely expensive to look after disabled children. It therefore seems to me that there is some merit in ring-fencing what people have at the moment, so that people who look after disabled children at least have some assurance that they are not going to be worse off as a result of the benefits being introduced under the welfare Bill before us this evening.
My Lords, I will detain the House only very briefly, but I feel I should say a word of support, having put my name to this amendment, put down by the noble Baroness, Lady Grey-Thompson.
I wish to say just three things. First, we have heard that the effect of these cuts is really quite severe. The noble Lord, Lord Wigley, is correct: parents could find themselves losing up to £1,400 a year, even if they have a family with just one disabled child. That is a very significant loss.
Secondly, the case for doing this is weak. The only case that I have heard over money is about alignment with adults. We have heard a very compelling argument from the noble Baroness, Lady Grey-Thompson, as to how that simply is not the case.
Finally, there is the question of money. I understand that the Government have said that the cuts are not intended to save money but to redistribute it, so that the money saved by these cuts will be used to raise the level of support for adults in the support group. This amendment lays down a marker; by saying that the support given to disabled children cannot be reduced below the current level, it makes the Government think again about that particular brand of rough justice. There is no particular reason why, in making these redistributions, disabled children should be asked to pay for money that is being given to other groups of disabled people. This amendment is not seeking an investment of billions of pounds; it is simply laying down a marker and saying that, when decisions are being taken, this group cannot be expected to bear that cost.
My Lords, we support Amendment 4, so comprehensively moved by the noble Baroness, Lady Grey-Thompson, and spoken to by a number of noble Lords who are very knowledgeable about these issues. It deals with just part of the inequity introduced by the restructuring of support for disabled people: that affecting families with children. We will debate further issues affecting disabled adults and the removal of the severe disability premium in due course.
Like other speakers, I welcome proposals to increase, over time, the levels of benefit for those in the support group, but we do not think that this should be paid for by drastic cuts in support provided for families with disabled children. Leaving aside transitional protection, my figure is that some 200,000 could lose £27 per week. Whether it is 100,000 or 200,000, it is many children indeed.
We have heard about transitional protection, particularly from the noble Lord, Lord Boswell, but transitional protection is of no use to new claimants. It might stop you losing what you have, but it does not help if you are claiming for the first time. As it is a cash protection it will in any case reduce in real terms over time. Transitional protection will also cease on change of circumstances—the noble Baroness, Lady Thomas, pursued this point—and we have yet to receive clarity on quite what this means.
We are told that the restructuring of these benefits is to simplify the system and that aligning the rates of support for adults and children will ease the transition for disabled children into adulthood, but how does the Minister respond to the point that there is not true alignment? There is also the issue that the gateways are different: for adults it is the WCA process; for children, as now, it is via the DLA. Children who are severely visually impaired will receive the higher addition—a move that we welcome—but it is by no means certain that adults who are severely visually impaired will be allocated to the support group under the WCA. Furthermore, as the noble Baroness, Lady Grey-Thompson, pointed out, disability disregards in the universal credit proposals add to the support for adults.
In Committee, we had some knowledgeable contributions from noble Lords about the costs that families with disabled children face. We know that families with disabled children are disproportionately likely to be living in poverty. In Committee, we heard the very personal experiences of the noble Lord, Lord Wigley. We also heard detailed analysis. We have heard further details today from the noble Baronesses, Lady Grey-Thompson and Lady Campbell, and my noble friend Lady Wilkins. I shall list some of the potential extra costs faced by families: heating, which is a big issue; sensory equipment; special toys; special diet; transport; extra and special clothing; and help with siblings, who will not have their parents’ time and attention. To this must be added the lost opportunity for parents—or at least for one of them—to work.
For those in work, costs can be higher because of the increased costs associated with care and transport for disabled children. Those costs do not only or most heavily fall on families with the most disabled children—that point was tellingly made by the noble Baroness, Lady Campbell. As framed, the amendment need not have overall cost implications for the Government, but it would of course cause a rethink of the restructuring, a restructuring that currently redistributes resources away from children and towards adults.
Reversing a benefit loss of £27 a week for some of the neediest families in our country must be a priority. Failure to do so will inevitably increase poverty at a time when the Government are reneging on their commitment to upgrade the child element of the child tax credit by more than inflation—a measure that they proclaimed in their 2010 Budget would ensure that effects on child poverty would be statistically insignificant but that is a cloak that they can no longer hide behind.
If the noble Baroness is minded to test the opinion of the House, we will support her on the amendment.
My Lords, I appreciate absolutely the intention behind the amendment, which is to protect the amounts currently paid to support disabled children. I also take the opportunity to thank the noble Baroness, Lady Wilkins, for her letter, which covers this matter. I will also address some of the points that she raises in this amendment.
This is not easy. We have a fixed financial envelope as we face these difficult times and we have to target resources, so we have some real choices to make. Our approach is to focus our support on the most severely disabled people, ensuring that we have the best support possible for those with the greatest need. I make it absolutely clear that we are not looking to make any savings in the changes. We are making a series of changes to make a coherent system; we are not taking money out of the system. We firmly believe that aligning the extra amounts payable for disabled children with those of disabled adults is the right and fair thing to do. We are aiming to focus our support for disabled people on their need, not on their age.
We know that the movement between support for disabled children and adulthood can be very difficult. The report, Improving the Life Chances of Disabled People, shows that the drop in income from childhood to adulthood can cause financial difficulties for young disabled adults. We want to smooth the transition from childhood to adulthood by removing that artificial divide. This is clearly also essential if we are to protect work incentives in adulthood.
To pick up the point raised the noble Baroness, Lady Grey-Thompson—that amounts for children and adults are meant for different things—support for families with disabled children is not limited to the disability addition. Families with disabled children also receive a disregard. The purpose of the disregard is to make work pay for the household. If the parent of a disabled child is working, they will qualify for a disregard at the appropriate rate for a couple or a lone parent. Our latest assumptions about earnings disregards mean that families with children will always have a disregard at least as high as the disability disregard.
I can take noble Lords through some of the figures. Large figures have been cited for the number of disabled children affected, which have not taken into account the overall effect of universal credit. When you consider what happens to a family with a disabled child where someone in the family is in work, the total return for that family goes up from £383 to £416. That is the effect of all the elements of universal credit coming together. That is for the disabled child, not the severely disabled child, who clearly gets more.
The noble Lord, Lord McKenzie, made a point about the number of children in working families receiving the disabled child element of child tax credit, which is 157,000, which is substantially more than the ones who are not working. The equivalent figure is 131,000. I share with other noble Lords a concern to get this right. When you look at the figures of what is happening under universal credit, a large number of the children about whom we are worried, when you look at the whole package, will benefit. For the minority who see a decline, there will be behavioural changes as they move into the other category, where they can—I accept that they cannot always.
To pick up a question from my noble friend Lady Thomas about what happens in universal credit to children on the middle rate of DLA care, they will get the lower of the two rates of current child tax credit. We are carrying forward the rule that the highest rate goes to those on the highest rate of DLA care.
As I have continuously reiterated through our debates, we are overhauling the entire support, so it is important not to fixate on one aspect of universal credit but to consider the entire package for families. That is why we need to look at that rather than to concentrate on individual components.
The Minister has acknowledged that whereas some will benefit from other sources of money and that that will counteract the loss of disability benefits, there will be a category who, unless something else is done, will lose out financially. Does he have any proposals to provide a safety net for those people?
Yes I do, and I will come back to that if I may, because a whole series of questions was raised about transitional protection, which I need to deal with comprehensively.
Our impact assessments made clear that, overall, families are more likely to be better off on universal credit. In addition, departmental modelling estimates are that the impact of the reform of disability payments on the number of disabled children living in relative poverty will be negligible. We must remember that support for families with disabled children is provided by the universal credit package as a whole.
On the absolute figures of support, under universal credit, an out-of-work family with a disabled child will receive just over £8,000 a year in benefits for their child once universal credit has been introduced. That compares to just over £4,000 for an out-of-work family with a non-disabled child and about £1,000 for a family who receive only child benefit. The figure for a child on the severely disabled level is £12,000. That is the order.
Let me now turn to the really important point raised by many noble Lords about taking money away from families who have learnt how to build their lives around it. That is exactly why we have introduced transitional protection. My noble friend Lord Boswell has referred to an assurance on no losses for years one and two. The way transitional protection works is that where circumstances remain the same, people’s payment level is protected on a cash basis. That means that families currently receiving child tax credit will not see a cash reduction at all as a result of the move to universal credit, and we will provide cash protection for as long as the universal credit award is less than the previous benefit entitlement. I hope that represents a level of ring-fencing that the noble Baroness, Lady Turner, will recognise.
No, clearly there is an erosion factor. Cash protection does not also inflate it. But the point about the universal credit is that it is structured to provide adequate support for families overall, and on top of that where there are differences we have a reasonably long period of transitional protection.
We simply cannot maintain the existing rates for disabled children if we are going to increase the rates for severely disabled adults. I know it is hard to absorb lots of figures at once, but let me just try and capture it. What we are looking at is fundamentally paying a severely disabled child or adult £77 once the universal credit is introduced. That is a big leap for severely disabled adults today who are on £32.35. That is where we are trying to move to, and that is where we are trying to put our resource.
As we move people on to the universal credit and take people off the other systems we will be gradually putting people on to that amount. But I am better off writing to the noble Lord on that particular matter of timing because it is quite a complicated equation. Basically, we are looking to maintain an overall fixed level of spend in this area, and as we pull down one element we can move up the other elements—that is essentially what is happening, so there is a periodicity there.
We are trying to get money to the most severely disabled in our community. There is a real decision here: maintaining the existing rates for children without doing that—without finding this money—would cost an extra £200 million a year. I simply do not have that money. If this amendment is passed, it will not be possible to increase the addition for the most severely disabled people to £77. So there is a decision to be made here: do you agree with the way we want to rebalance the system—
I am sorry to interrupt the noble Lord again, but is it not right that that equation only follows if you look at those two together? You do not have to operate within that envelope; there are other envelopes, as my noble friend Lady Sherlock mentioned in her contribution.
That is the envelope in which we are operating. If I could find £200 million more to add to that envelope then I could do it, but we are not in that position. As noble Lords know, we have put a lot of money into the universal credit. The overall gross figure going into people’s pockets—the poorest people in the country—every year once we get universal credit in is £4 billion a year. Of that £2 billion is net extra; £2 billion is through a more efficient system. That is the money we have found; that is the overall envelope that we are operating in. I do not have any more money, and there are some very difficult choices.
The question is this: does the noble Baroness want to maintain the rates for moderately disabled children at the expense of raising the limits for severely disabled people? That is really the juggle that we have to do. As I have said, this is not easy; these are difficult judgments. It has been very difficult to get to this position, and that is the decision that we think is best for people who we really want to help. We want to focus our support on the most severely disabled people regardless of their age; to simplify and to align the extra payments for disabled people; and to smooth the transition into adulthood. That is fundamentally the reason why I ask the noble Baroness to withdraw her amendment.
My Lords, I thank the Minister for his response and I thank all noble Lords who have contributed to the debate on this vital amendment. The restructuring of support for disabled adults and children is taking money from disabled children who need it. The Government say that it is not a money-saving measure and that its main aim is to simplify the system and to give more to adults with the severest levels of impairment. However, the simplification is superficial and fails to give more to those with the greatest needs. I think that we should remember the words of the noble Baroness, Lady Campbell of Surbiton, who quoted Dame Philippa on the need to move away from categorising people based on severity of impairment.
Additionally, this measure is going to cause significant hardship to families with disabled children, who are already disproportionately likely to be living in poverty. It will make the situation much worse for those who are likely to have higher costs—those in the very group of adults whom this measure is meant to help. I believe that the Government’s proposals will undermine their own prevention agenda. There is no reason why an adapted form of the current levels of financial support could not be introduced into universal credit, with extra help being given to the support group when new moneys allow. It would not cost anything and would mean that families with disabled children were not among the biggest losers under the new system.
We have often heard it said that the devil is in the detail, and I agree, but I believe that the Minister is also making grand assumptions about the ability of parents of disabled children to work. We have heard much about the transition but this is about the new children who will be coming into the system. I believe that the measures that the Government are proposing will push more children into residential care.
I thank the Minister for asking me whom I would be most likely to support. That is not a question that I would like to answer on my own, and I therefore wish to test the opinion of the House.
5: Clause 8, page 4, line 9, after “costs)” insert “and council tax benefit”
My Lords, I am moving this amendment precisely because I strongly support universal credit. If the House agrees with me in supporting universal credit, I suggest in all decorum that it should also support this amendment.
At the moment, council tax benefit is a social security benefit—a national benefit—which responds to local need. The DWP reimburses local authority spend. If, for example, a factory closes, the need for council tax benefit in that community may increase, and that need is met because the benefit is national and needs-led. Sensibly, therefore, it should be part of universal credit, along with JSA, housing benefit, ESA and so on, because the need for council tax benefit runs alongside those other benefits and should be related to family need, as universal credit will be. Instead, the DWP’s need to include CTB within universal credit appears to have been trumped by the demand of the DCLG and other departments that it form part of a completely separate agenda—the localism agenda. These agendas—universal credit versus localism—clash, and so far the wrong decision has been made.
What is DCLG proposing? In future DCLG will award a fixed-rate grant to local authorities from which it will have to construct its own council rebate scheme. What is wrong with that, your Lordships may think? Quite a lot, and there are three reasons in particular. First, instead of one national scheme that is common across the country, understood by everyone—claimants, local authorities, staff and advice centres—there will be 400 different schemes. There will be a separate and different scheme for every local authority in the country. Norfolk, for example, will have seven schemes that are all different.
Think of the staff resources involved, when we are trying to save money, in constructing and running such schemes, especially when local authorities already outsource much of their work. Think of the complexity of giving advice to people who come into, say, the Norwich Citizens Advice office from all over Norfolk, trying to understand UC and then having to add on seven different taper arrangements according to which district council they come from within Norfolk. All of the admirable simplicity of UC goes out the window. Think of the possibility of underpayment, overpayment, error or even fraud because there is no standard scheme. Given that there will not be enough money to go round, why would any local authority encourage take-up? They will not.
We in this House are rightly building these problems out of universal credit, and the Minister is to be congratulated on that. But we will be building them back in again if this amendment is not accepted. DCLG has balkanised council tax benefit in the name of localism. It recognises this, and now DCLG urges local authorities to do the opposite of what it was calling for—to share common schemes—in which case, why balkanise it in the first place? It will be financed by a fixed grant and will not be needs-led in future. If a factory closes and local need increases, the grant will not go up. Presumably everybody gets less. Or, it will have to be topped up by the council tax that is already suffering 30 per cent cuts in services and a freeze. Think, my Lords, for a moment if that applied to jobseeker’s allowance, and that what you have if you are unemployed in your district depends not on your needs, or on any national standard, but on the needs of everyone else in your district. Your payment would go up and down according to local employment or unemployment figures in your district.
DCLG in its consultation paper recognises this risk, so it suggests—hopefully, idealistically—that local authorities should voluntarily help each other and bail each other out. Oh yeah? Why balkanise, as DCLG requires, if local authorities are too small to bear the risk, as DCLG recgonises? Worse, that fixed grant will be cut by the DCLG by 10 per cent, perhaps more in future. There will be a 10 per cent reduction in council tax benefit per head, but pensioners are to be protected, so the cuts that fall on others will be 20 per cent. However the council, under pressure from local charities, could decide to protect, say, disabled people—I could understand why they would—and give them the full CTB. The more vulnerable families you protect in devising your own local scheme, the more that families in low-paid work—the last man standing, so to speak—carry the cuts.
The Association of North-East Councils has calculated that once vulnerable families are protected, other working-age claimants will face cuts of up to 50 per cent in their council tax benefit. Then work will not pay and universal credit will be a waste of time. Severe cuts in other words are being smuggled in under the drapery of localism but are they essential? At the same time DCLG is spending £250 million on reinstating weekly bin collection or £800 million to freeze council tax, so that my council tax bills are protected while those with much lower incomes on council tax benefit will face cuts of 50 per cent.
Finally, what you will get in CTB will, of course, be determined by your income. Families facing the means test of universal credit will now find that they also face a second means test—that of CTB. How on earth will the value of moving into work be calculated, which is what universal credit is all about, when people face two means tests, two tapers—one with national rules and one with 400 separate local rules—that are layered on top of each other? As the noble Lord, Lord German, rightly said in Committee,
“if you believe in a universal credit, and you have a postcode lottery for what that amount of money might mean to you, how on earth are you going to be able to judge whether or not work is beneficial for you?”.—[Official Report, 6/10/11; col. GC 381.]
Exactly so; I could not have put it better.
UC was designed to bring all working-age benefits together into one so that every one of us would know what we would get and why work paid. Under the localism agenda, council tax benefit—a social security benefit—is being plucked out of UC, thereby destabilising it and balkanising the system. Forgive me, but this is administrative madness. All of this is being proposed in the name of localism but do local authorities want it? City authorities, like the one I used to lead in Norwich, hate it, as they will see some of their poorest citizens unable to pay their council tax and facing arrears and debts. Equally, some small rural districts are now wondering where they will get the staff resources to devise and run their own in-house schemes. East Devon district council’s cabinet has said that the scheme means: “costs, costs, costs”. A councillor said:
“This should be strangled at birth. It is a disgrace . . . We haven’t got the resources and we haven’t got the time”.
Nearly 6 million people receiving council tax benefit will in future not know what they will get because they will have no entitlement—just a handout from the local authority whose generosity or meanness will vary from district to district, from factory opening to factory closure, and from year to year. We took social security away from local authorities when we finally abolished the Poor Law after the Second World War. Now one of the worst effects of the Poor Law—the postcode lottery—is being reinstated for council tax benefit under the name of localism. That is wrong. To add extra means-testing on top of universal credit’s means-testing is insane. It will undermine universal credit without a shadow of a doubt. I and almost every other Member of your Lordships’ House want to see it working, so what then is the point of this Bill? Worse, this guise of localism will make poor people poorer, and local authorities, in whose name this is being done, will be powerless to help them. Council tax benefit needs to be brought back within UC. I beg to move.
My Lords, I shall be brief because I know that the House wants to get on. I am a supporter of the universal credit, so I am opposed to anything that is inimical to its success, and the exclusion of council tax benefit is exactly that; it is totally inconsistent with the Government’s proposals.
It is an open secret, although I do not expect the Minister to confirm this from the Front Bench, that the DWP does not want council tax benefit to be excluded, that there has been a battle with the DCLG and that for the moment, although heaven knows why, the localism agenda has prevailed. When anyone asks about 400 different social security systems, we are told that it will not be allowed to happen—so the localism agenda, we are told, will not be allowed to be localism because the local systems will be made to come into line in some sensible way. That is daft, but it is what we are confronted with.
I have two or three points to make. This is said to be cash limited, and indeed a cut. What is going to happen in an area where there is a big factory closure and the money has already been spread out? Does everyone already on council tax benefit have to take a cut in order to finance those who have just come on to it? In areas where, say, a big Tesco opens and 400 new jobs are created, does everyone get a bonus because a lot of people have been taken off council tax benefit? It is mad.
My first constituency boundaries straddled a parish boundary; number 36 Havengore was in Braintree and number 34 was in Chelmsford, but the houses were semi-detached. Can we really have totally different benefit systems for the people living in those two houses? Again, this is mad. Do the local councils want it? The answer is no, it is a nightmare for them. We should stop it, and if this amendment is pressed to a vote, for the first time today I shall not be able to vote for the Government.