Report (1st Day) (Continued)
Welfare Reform Bill
Amendments 2 and 3 not moved.
Clause 8 : Calculation of awards
Moved by Baroness Grey-Thompson
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,"
Baroness Grey-Thompson (Crossbench)
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.
Baroness Campbell of Surbiton (Crossbench)
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.
Baroness Thomas of Winchester (Liberal Democrat)
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.
Lord Wigley (Plaid Cymru)
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.
Baroness Wilkins (Labour)
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?
Lord Boswell of Aynho (Conservative)
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.
Baroness Howe of Idlicote (Crossbench)
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.
Baroness Turner of Camden (Labour)
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.
Baroness Sherlock (Labour)
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.
Lord McKenzie of Luton (Labour)
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.
Lord Freud (Parliamentary Under Secretary of State (Welfare Reform), Work and Pensions; Conservative)
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.
Lord Wigley (Plaid Cymru)
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 was done, will lose out financially. Does he have any proposals to provide a safety net for those people?
Lord Freud (Parliamentary Under Secretary of State (Welfare Reform), Work and Pensions; Conservative)
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 so 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 year 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.
Lord Freud (Parliamentary Under Secretary of State (Welfare Reform), Work and Pensions; Conservative)
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.
Now, 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 in. 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-
Lord McKenzie of Luton (Labour)
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.
Baroness Grey-Thompson (Crossbench)
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.
Baroness Hollis of Heigham (Labour)
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 depended 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.
Lord Newton of Braintree (Conservative)
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.
Baroness Meacher (Crossbench)
I support the amendment of the noble Baroness, Lady Hollis, on the importance of including council tax benefit within the universal credit structure and payments system, and I reinforce what the noble Lord has just said. As always, the noble Baroness has set out the arguments extremely cogently, and I know that the Minister needs no reminding of these arguments from me. I want only to reinforce the important point about the resentment of local authorities and their resistance to the proposal to leave them with the council tax benefit problem.
The head of the benefits department of a particular local authority explained on Friday that because they have so little time to change the council tax benefits system radically, they are going to have to use the current system with a 20 per cent taper. This means that they will have to impose a minimum percentage that every claimant of working age will have to pay. This will apparently vary from one local authority to another, depending, as the noble Baroness, Lady Hollis, has said, on the numbers of pensioners living in particular communities and of other vulnerable people who will have to be protected. This particular local authority will have a basic council tax rate of 25 per cent that will have to be paid-a sort of poll tax of 25 per cent of council tax. The local authority in question is far from happy about that, and I understand, as others have said, that anger on the part of local authorities is widespread.
On a more personal basis, a fixed charge of 25 per cent of council tax for people on JSA of £67 per week will cause enormous problems and will be one of the factors that will lead to the debts that we were discussing earlier with regard to another amendment. In addition to ruining the work incentive system within the universal credit and its simplicity-two aspects of the system that have had broad support from across the House-in my view council tax could become a major political problem for the Government. Ministers need to be aware that they will be accused of reintroducing the hated poll tax-the phrase just trips off the tongue-and that that will be campaigned about. This issue, compounding the cuts across the benefits system, could cause unrest on a scale not known in this country since the 1930s. I know that the Minister is well aware of these issues, but are his colleagues aware of the trap into which the Government are walking, which could so easily be resolved by incorporating the council tax benefit within the universal credit? I await the Minister's response with keen interest and concern.
Lord German (Liberal Democrat)
My Lords, I do not intend to turn my back on what I said in Committee; in fact, I intend to repeat some of it, so I hope that noble Lords will bear with me. If you believe that council tax benefit is a universal benefit and part of the social security system, clearly you need to ensure that it is delivered everywhere within our country and on a uniform basis so that people will know the rules and the benefit they are going to get.
The noble Baroness, Lady Hollis, has talked about England, but I want to talk, as noble Lords know I frequently do, about the other parts of the United Kingdom that will also be affected by this. I start with a big question to the Minister. He wrote to me about this issue when I asked him how it would work in Wales and Scotland. I was told that the money would be given with a 10 per cent saving-that is a crucial sentence because we can reflect on that and on how we can manage the budget within a council tax benefit structure-and that the saving would be given to the devolved Administrations to enable them to bring forward their own arrangements for help with council tax.
The next sentence was about the powers that they would need to bring forward their own arrangements for help with council tax, and it says that these arrangements must fall within existing competence. This is a crucial question; if there is one thing that I know about, it is that the demand for competence is very important. Clearly it is not primary competence because it is not primary legislation that is being transferred, but executive devolution powers must be being given to both the Scottish Parliament and the Welsh Assembly to be able to achieve that. I would like to know which executive powers have been given, because both Scotland and Wales could refuse to have those powers, which would be a perfectly reasonable thing for them to do. If they think that this is not something that they can manage or want to do, they can refuse to take those competences.
Even if Scotland were to accept those powers, and I have made this point in Committee, I wonder what game we would be playing into in Scotland alone. Remember that the basis of the Scotland Bill that is before your Lordships' House is that social security should not be devolved; it is part of the glue that holds the United Kingdom together. Say that you do not give the social security competence but you obviously give some competence to the Scottish Government. If you give them that money, my guess, and it is purely a guess, is that they will take the money, convert it by putting a bit of Alex Salmond paste on top of it and make it into a Scottish system. They will then use that as an argument to say, "If you think you want a social security system in Scotland but that we can't cope with it, here we are, doing a better job than they are in England". There is a danger to the unity of the United Kingdom in this matter, which is why we ought to consider very seriously what the effects of this change will be.
I am told that Clause 11 gives powers to take the competences back. There is no doubt that there is considerable anguish about this matter, but if you believe that it is a universal system, surely it makes sense to use the funding as part of the universal benefit but also to take the hit that has to come with the budget reduction. After all, if the DCLG is going to be able to allocate the money with the budget reduction, that budget reduction could just as easily be done by the DWP. Obviously it would not be a nice, friendly or comfortable process, but as with all levers you have not damaged the social security structure of this country at the same time.
My question to the Minister is this: if you are to retrieve these competences from Wales and Scotland, which competences are you retrieving, and where does Clause 11 give the power to the other place to bring back the powers into the social security structure? The most important feature that we have to decide here in your Lordships' House is whether it is better placed, with the appropriate cut, inside the universal credit or inside a social security system for our country as a whole, or whether we wish absolutely and once and for all to abolish council tax credit and have what might be called a local support scheme in whatever the local authority can provide with the money that is provided for it if you cannot even call it a benefit.
I worry greatly about this prospect, and I ask my noble friend the Minister to reassure me that we can bring this back and to tell me how we can bring it back and how we get it back from Scotland and Wales.
Lord McKenzie of Luton (Labour)
My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.
My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.
Lord McKenzie of Luton (Labour)
Very good. Of course, this issue is having to be considered, as has been said, against the backdrop of the overall funding for council tax benefit being reduced by 10 per cent but with commitments to protect awards of council tax support for pensioners and possibly for other vulnerable groups. This means, as has been said, that support for working age claimants is to be squeezed dramatically.
The consultation on this proposition, the Localism Bill, closed two months ago, and perhaps we can know when the Government's response to this will be forthcoming. Quite apart from the administrative consequences of the proposed localism of the benefit, there is, as my noble friend pointed out, a fundamental difference compared with what happens currently. Under present arrangements, council tax benefit is demand led. Whatever the calculation shows is due is made available to the claimant, by offset against the council tax bill, with full reimbursement from the DWP. It is, as my noble friend explained, the AME-annually managed expenditure-bit of government spending.
This will in effect change under a localised system. If claims under a localised system exceed the budgetary amount locally, authorities will have much more limited resources from which to meet the increased demand. They might dip into reserves, if they have any, or they might make the system less generous in a subsequent period. They might switch expenditure from other local authority spend, but given the savage cuts to local authority budgets that have been made recently, there does not seem to be much room for manoeuvre to do that.
It is suggested that local authorities might approach a localised system on some consortium basis, and therefore that other local authorities will help out. I suggest that the prospects for this are not strong. One consequence of these constraints will be that local authorities will inevitably budget on a prudent basis, building in contingencies that will further diminish the resources available to claimants of a localised system. That indeed is what the risk assessment will dictate.
"the big advantage is that they will have a stake for the first time in what people who live in those homes are doing; in other words, an incentive to help get the person back into work".
This is a rather strange view: that it takes possible savings from a benefit pot for local authorities to have an incentive to help people back to work. It is a view that ignores, or is ignorant of, the proactive and imaginative work that many local authorities do to help local residents into work. However, in any event, the driver for having clear incentives to support work is supposed to be the universal credit itself. If there is any incentive in the system, there is a risk that local take-up campaigns will diminish, as any wider take-up will come from the resources of the council.
We have yet to know how much central direction there will be for a localised system. If the Government run true to form, there will be quite a lot. This was certainly the outcome of the Localism Bill, which espoused localism and gave additional powers to local authorities but came with lots of strings attached, as the noble Lord, Lord Newton, will recall, despite some of those strings being removed in your Lordships' House. There will clearly have to be central direction if the position of pensioners is to be protected, and some form of direction to deal with tapers and work incentives.
We understand, to follow the line of questioning by the noble Lord, Lord German, that the Minister will say that he cannot support a change to the universal credit to include a council tax benefit now. However, there is nothing to stop it being included in the future, as the Bill now stands. If this is the Government's position, will the Minister confirm that he considers that regulations under Clause 11 will be the route to effect this?
The noble Lord, Lord German, also raised some fascinating questions about how this works for Wales and Scotland. Can the Minister say whether the proposition that he will advance tonight will be, "Don't worry about it now-you can get it all back in due course."? What changes would have to be made to the systems that are currently being built to put this into effect? Including council tax support as part of universal credit is of course not without its challenges, particularly the payment issue, so perhaps we can hear whether there has been any thinking around that matter.
However, we support my noble friend's strong contention that the sensible, practical and principled way to deal with council tax benefit is to include it as part of universal credit. We believe that the Minister, a very logical person, must have come to the same conclusion. If a strong vote today will help his cause, we are more than prepared to play our part.
Beware Greeks. My Lords, noble Lords will be aware from previous debates that we are proposing to abolish council tax benefit before the introduction of universal credit and replace it with local schemes of support. Localising support for council tax is part of a wider policy of decentralisation, which will give councils increased financial autonomy and a greater stake in the economic future of their local area. Localisation also reintroduces the link between council tax levels and the costs of providing support, thus reinforcing local financial accountability.
This reform will give local authorities a significant degree of control over how a 10 per cent reduction in expenditure on the current council tax benefit bill is achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. This saving is an important contribution to the Government's vital programme of deficit reduction. We need to ensure that localisation supports the improved work incentives that universal credit will bring. However, the Government believe that the key principles required to incentivise work can be delivered through local schemes with the help of technical guidance provided by central government. Local authorities will have a greater stake in getting people back into work than ever before.
The Department for Communities and Local Government has consulted on the proposal for local schemes in England. The consultation closed on
The time has passed for the inclusion of council tax benefit within universal credit. The universal credit programme is now too advanced for such a change to be made for the launch of universal credit without endangering the timetable. However, the Government understand the importance of allowing local authorities to run schemes that are simple to administer. We are considering how data flows from universal credit and pension credit will support this aim and help to ensure that people can easily claim local council tax support alongside DWP benefits.
I shall turn to the specific questions raised by my noble friend Lord German, which were reinforced by the noble Lord, Lord McKenzie, about the move of council tax benefit to both English local authorities and the devolved Administrations. CTB is not being devolved. Under Clause 33, it will be abolished and funding made available for local schemes in England. The devolved Administrations will be funded through the Barnett formula to bring forward new schemes within their existing competence. If a future Government so decided, Clause 11, which covers housing costs, is sufficiently broad to give legislative cover to include support for council tax costs in universal credit.
Scotland and Wales already have the executive powers to establish schemes based on applying discounts to council tax. I can assure my noble friend that social security remains absolutely reserved as a UK matter and that localisation funding does not affect this. I thank the noble Baroness for raising these issues.
Lord McKenzie of Luton (Labour)
My Lords, perhaps the noble Lord would reiterate a point. I thought I heard him say that a Bill for the localisation of council tax benefits or whatever it is called will be introduced in this Session. Does he have any more precise detail?
I am afraid that I do not have any more precise detail but, although I do not think that in the consideration of the Welfare Reform Bill I can say soon, I can probably say that it will be between January and May or June, or something like that. I have no more precise information.
Baroness Hollis of Heigham (Labour)
My Lords, I thank everyone who has taken part in this brief expedited debate. I beg your Lordships on the government Benches to hear the words of the noble Lord, Lord Newton, in their ears; namely, that 400 schemes are inane, insane, unwanted and unwelcome, and that council tax benefit should be brought back to where it belongs in social security in order to make universal credit work. The Minister tried to suggest-I would say manfully-that it is too late to change. I do not believe that. That is why we have this House of Lords and this Report stage. Universal credit will not come online until two years' time in 2013. If your Lordships today support what I believe is the real view of everyone in this Chamber-that council tax benefit should be part of social security-they will support this amendment today. I should like to test the opinion of the House.