Clause 94 : Benefit cap

Amendment 58C

Moved by Baroness Donaghy

58C: Clause 94, page 63, line 22, at end insert "except for industrial injuries benefit awards"

Photo of Baroness Donaghy

Baroness Donaghy (Labour)

My Lords, as I said in Committee, I appreciate that this is by way of an interval in the big picture, but it is on a subject that is work related. There has been insufficient consideration of work-related issues in the Bill and I have consistently raised issues such as: what happens to the self-employed; what happens with the redeployment of 20,000 local authority staff on housing benefits; and, the third area, what happens to those who have worked hard all their lives, have been injured at work and have received an industrial injuries compensation-a civilised scheme that is jointly agreed between trade unions and employers, where it is likely that the benefit cap will affect those in receipt of such compensation.

I think that this is about signals. If the Government want to emphasise that this is about concentrating on people at work and encouraging and giving incentives to those on work-related benefits, consideration should be given to my amendment, which covers those on industrial injuries disablement benefit. After Second Reading and Committee, the Minister was unable to say whether they would be exempt, so as far we know they would still be included. The only part which would be exempt would be the constant attendance allowance within this benefit. However, that is only 1 per cent of the total figure. Although we are very grateful for that concession, it does not cover many people or much money.

Benefits under the industrial injuries scheme are different in character from the rest of the benefits system. Whereas other benefits are designed to prevent or ameliorate poverty, help people to cope with extra costs or substitute for lost income, the industrial injuries scheme is a system of no-fault compensation. In November 2010, the Industrial Injuries Advisory Council wrote to the Minister to argue that the industrial injuries disablement benefit should not count towards the cap for just that reason. As I said, employers and unions both support the industrial injuries scheme, which eliminates the need for an adversarial approach to compensating a large number of injuries and diseases that are agreed to be a risk of employment. Damages won through civil litigation are a closer parallel to the industrial injuries scheme than disability or other benefits. Including damages awarded by the courts in the total that is subject to the cap would be plainly unfair, but industrial injuries disablement benefit is also a form of compensation, and including it is just as unfair. Payments under the vaccine damages payment scheme are not to count towards the cap, but they, too, are a form of compensation.

The Government have put forward three reasons for the benefit cap, and all of them are weak arguments for including the IIDB. They have said that they are introducing the cap partly to reduce the benefit expenditure, but IIDB accounts for a very small part of social security expenditure: 0.58 per cent of DWP annually managed expenditure last year. IIDB will account for an even smaller proportion of benefit cap savings, most of which will affect large younger families, especially those in receipt of housing benefit. Claimants of benefits from the industrial injuries scheme tend to be older-50.9 per cent of expenditure is on people over pension age-and will therefore account for significantly less than 0.58 per cent of the budget. It is unlikely that counting IIDB towards the benefit cap would save as much as 1 million a year.

The Government's equality impact assessment states that a further purpose is to "improve work incentives" for those on benefits. It must be emphasised that industrial injuries disablement benefit does not create a work disincentive. Half of all spending on it is accounted for by pensioners, and working age claimants can continue to receive the benefit if they stay in or find work.

Ministers have given greatest prominence to the argument that it is not fair for a workless family to receive more in benefits than an average family would receive in wages. In last year's spending review, the Treasury listed the benefit cap under the heading:

"Fairness ... Reducing the deficit fairly while protecting the vulnerable",

but a working family one of whose members had suffered an industrial disease or injury would not be in a worse position than a workless family; they would have the same right to IIDB.

The Government have not said a good deal about why IIDB should count towards the cap. The Minister has made a distinction between recipients of disability living allowance and IIDB claimants. People do not get industrial injuries disablement benefit to meet extra costs, which can be dealt with by an award of DLA if necessary. He has used this difference to justify excluding DLA but not IIDB. The argument is not a sufficient rebuttal because it fails to address the point that I have made about the nature of the industrial injuries scheme. Furthermore, if having extra costs were the reason for excluding a benefit, how would we explain the decision to exclude retirement pension and pension credit?

Informally, officials sometimes argue that excluding IIDB would open the flood-gates for a long list of special cases that would complicate the benefit plan. I hope that tidiness is never the deciding factor in matters like this and that simplicity is not a sufficient reason for proceeding with an unfair change. I hope very much that the Government will agree with me that industrial injuries disablement benefit should not be counted towards the benefit cap. I beg to move.

3:15 pm
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Baroness Turner of Camden (Labour)

My Lords, I support my noble friend in her amendment, and also urge that industrial injuries disablement benefit should not count towards the cap. This benefit is not a cost benefit or an income-replacement benefit; it is a form of no-fault compensation for the victims of industrial diseases and accidents. Counting this benefit and other benefits paid under the industrial injuries scheme towards the cap would, in effect, reduce the compensation paid to the most needy and vulnerable victims. It is no more reasonable than counting criminal victims' compensation would be, and it should certainly not be included. As my noble friend indicated, many employees who sustain industrial disease or injury often spend a lifetime in pain as a result. It is unreasonable to expect ordinary working people, who are caught in an environment that is not of their own making and in a situation for which they are not responsible, to have their compensation-an industrial injury disablement benefit-counted against the cap under welfare. I fully support everything said by my noble friend, and hope that the Government will respond benevolently to what we are saying.

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Lord Wigley (Plaid Cymru)

My Lords, I rise briefly to speak in support of the amendment. I do so against the background of the industrial injuries and diseases that we are very familiar with in Wales, from coal-mining, slate mining and many other industries. I know that all industrial parts of these islands have similar experience.

If the Government's line on this whole issue is that it is unreasonable that people who are working earn less money than some people get in benefits and that the changes are justified for that reason, surely this exemption makes all good sense. People have an industrial disease or injury by virtue of the fact that they have been hardworking members of the community and get this as a result of their efforts of working. What is more, in all probability they will not be in a position to return to the workforce, so that argument disappears as well. I realise that special pleading for any one group will cause difficulties-and it may for the rest of today's debates-but this instance stands out as clear-cut and deserves sympathy.

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Lord McKenzie of Luton (Labour)

My Lords, this amendment, moved so ably by my noble friend Lady Donaghy, goes to the heart of fairness. It does not challenge the concept of a cap or indeed the level of the cap. As my noble friend clearly said, it does not undermine the stated aims of the Government for its introduction-whether we agree with them or not. We have heard that the industrial injuries scheme is a system of no-fault compensation. As the noble Lord, Lord Wigley, said, to qualify for the benefit, the claimant must have had a personal injury in an industrial accident or he must have a prescribed industrial disease. That must have arisen when the claimant was an employed earner. The amount of the benefit depends on the extent of disablement. An award is made for a period during which the claimant has suffered or may be expected to continue to suffer from the relevant loss of faculty.

On the rationale for the cap the Government alternate between reducing benefit expenditure and changing attitudes. The cost of the industrial benefits scheme, applicable to working-age claimants, as my noble friend said in moving the amendment, is below 0.5 per cent of DWP AME. As for encouraging the benefits of work, claimants would have had to have been in work in the first place to get the benefit. In a sense, they would have had to have been exposed to both the benefits and the risks of work. This raises broader questions about health and safety, but perhaps that is a topic for another day's debate. The benefit would be payable to those able to return to or stay in work as well as to those whose loss of faculty prevents it. In essence, the Government are saying that the greater the suffering an individual endures from an accident doing what the Government want-being in work-the tighter the cap should bite. That does not have a ring of fairness.

In Committee, the Minister left the door slightly ajar and indicated the possibility of further consideration. It would be good to hear that the door remains open and that he will be able to make appropriate commitments today or at Third Reading.

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Lord Freud (Conservative)

My Lords, before I speak to the specific amendment, I would like to make some general points about the rationale for the household benefit cap. First, there is a principled point that households should not be able to receive more on benefits than the average working family in Great Britain earns in work. Secondly, people on benefits should face the same choices as working families, including about where they can afford to live. Thirdly, someone in work should always be better off than someone on benefits. The proposed cap of 500 a week is equivalent to an annual salary of 35,000 a year before tax. We have set the cap at the median earned income for working families after tax and national insurance. We think this is a reasonable representation of average household earnings.

I ask noble Lords to consider how well these principles are received by the public at large. They will have seen press reports of a YouGov survey that found that 76 per cent of the public are in favour of the benefits cap. The overwhelming majority of people think there should be a limit to the amount of benefit those out of work can receive. We have received many representations that we are pitching the level of the cap far too high. In fact, only 7 per cent of respondents in today's YouGov survey think that the cap should be higher than 26,000. Another 9 per cent think there should be no cap, so of the people who answered the survey, 69 per cent thought that the cap as we have set it or below that amount is the right figure. Of those who expressed an opinion, the figure is above 80 per cent, or above four-fifths. The truth is that people do not understand why we pay claimants more money when they are out of work than they could reasonably expect to earn from working full time.

I accept that arguments can be made for special treatment for a whole range of groups and benefit payments. Indeed, many such arguments were eloquently expressed previously in Grand Committee, and this amendment moved by the noble Baroness, Lady Donaghy, is an example. However, we must be wary of such arguments clouding the bigger picture of the need to reform a complex benefits system, which is failing those people on benefit who want to work but, equally importantly, is placing a costly burden on the taxpayers in work who pay for it.

We have today published an updated impact assessment with more detailed and robust estimates for the numbers and characteristics of people who may be affected by the cap. The high-level figures are broadly in line with the figures in the previous assessment, but there are some important differences. In particular, we now estimate that in nearly 40 per cent of households the claimant will be subject to JSA conditionality. We also estimate that the proportion of social rented sector households is 44 per cent, which is substantially less than we thought previously. The new figures are derived from the administrative records held by the department on benefit recipients. Thus, they are much more robust than the previous survey-based estimates. They provide a much firmer basis than before for considering transitional measures. Crucially, the methodology here means that we know who is likely to be affected by the cap and can start working with them and local authorities to minimise the problems for individual households when the cap is introduced.

Amendment 58C would require us to disregard payments of industrial injuries disablement benefits when operating the benefit cap. The noble Baroness, Lady Donaghy, has argued that these payments are worthy of special consideration because they take the form of compensation payments in lieu of injury or disability caused at work. I recognise the nature in which these payments are made, but I am afraid that I do not believe that it should override the need for a limit to the amount of welfare payments households should receive. Disregarding payments of IIDB would serve only to undermine that fundamental principle and create a precedent for others to argue for such special treatment.

We have previously been asked to reconsider the position of IIDB recipients in light of the fact that we have announced that we will fully exempt from the cap recipients of disability living allowance, personal independence payment, attendance allowance and constant attendance allowance. I have to say that I do not find these groups analogous. DLA, PIP and equivalent benefits are paid to people to help with the extra costs arising from their disability. Their receipt provides an appropriate means of identifying those disabled people who should be exempted from the cap. Many people receiving industrial injuries benefits will be exempt because they get constant attendance allowance as part of their industrial injuries entitlement or DLA.

I take the point about vaccine damage payments raised by the noble Baroness, Lady Donaghy. These lump-sum payments will be taken into account as capital and not income in assessing means-tested benefits. In other words, vaccine damage payments are not comparable to weekly income payments through IIDB. But, as has been said in debate today, the basic IIDB payments are compensation payments and do not reflect whether the disability or illness necessarily brings extra financial costs. I cannot agree that there is any reason to provide an automatic exemption in these circumstances.

On the disincentive to work, any IIDB recipient in work who is entitled to working tax credit will be exempt from the cap, as will any households in receipt of working tax credit. The cap of course will not apply to pensioners. I therefore ask the noble Baroness to withdraw her amendment.

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Baroness Donaghy (Labour)

I thank the Minister for that reply. I was beginning to think that he had moved straight to the big picture and that my interval was not even going to be considered-that we were all off buying our popcorn and he had started the big picture. At least the last few minutes of his reply tackled the subject that I have raised. As I have said, this amendment is about signals and hard-working people who, through no fault of their own, have been injured at work and, with the support of unions and employers, have been given compensation. I do not suppose that that would have been easy to achieve or that the bureaucracy is particularly easy. Having achieved that compensation those people will now be told that it will not be exempt from the cap.

With all due respect, I think that the Minister is so concerned about undermining the principle of the big picture that these people are being victimised. I do not believe that any precedent whatever would be set as regards the debates that are going to take place later. They would probably be only too happy to go back to work, having spent their lives in work. If only the YouGov survey to which the Minister referred had asked a question about industrial injuries benefits, we might have got a clearer picture of what people really felt.

I am aware from a previous reply that there will be an opportunity to talk about regulations at some stage. In the circumstances, I shall withdraw the amendment, but we will come back to the issue when it comes to discussing regulations.

Amendment 58C withdrawn.

Amendment 58D

Moved by Lord McKenzie of Luton

58D: Clause 94, page 63, line 22, at end insert-

"( ) Regulations under this section must provide for an exemption from the application of the benefit cap for vulnerable individuals, and individuals and couples with children, who-

(a) as a result of the application of the benefit cap, the relevant local authority would consider threatened with homelessness and in priority need,

(b) are owed a duty to be provided with interim or temporary accommodation under section 188, 190, 193 or 200 of the Housing Act 1996, or

(c) which the local authority has accepted as homeless and in priority need."

3:30 pm
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Lord McKenzie of Luton (Labour)

My Lords, it seems that we are all, Lib Dems, Conservatives and ourselves, in favour of a benefit cap. Perhaps at some stage in the future, some analyst or academic might look back on these times and determine the origin of these policies, what analysis underpinned them and whether assuaging the court of public opinion played any role. It seems from what the Minister said a while ago that it played quite a considerable role.

But we are where we are. My party supports a benefit cap, but one based on fairness. A particular concern for us, as currently proposed, is its potential to drive increased homelessness, which is a major consequence of the cap-homelessness for vulnerable individuals, homelessness for families and homelessness for children. The way in which the cap is to be applied, albeit calculated by reference to a range of benefits, means that it is an effective second cap on housing support. It is a second cap on top of the range of reductions in housing support already introduced through the move to the 30th percentile of local market rents, uprating by CPI, a cap on rent levels and room sizes, and increases in scope of the shared room rate.

Not only will the overall cap dramatically increase the prospects of people becoming homeless but, in some cases, the Government will miss their target, and local authorities will bear the cost of the benefit cap, not the tenant. It will fall on council tax payers. If a family is already in accommodation provided for them under homelessness duties, no shortfall between housing benefit or housing allowance and actual rent will be payable by the tenant. Increasing the shortfall by the cap does not change this. There may be the opportunity to discharge the duty into cheaper accommodation, but this is increasingly unlikely to be available, certainly without significant migration to elsewhere in the UK, with all that that entails.

As Shelter points out, the reach of the household benefit cap goes way beyond the extreme cases generally associated with London, and it will be difficult for many households to afford to rent both in the private sector and at 80 per cent of market rents in the social sector across much of the south-east. It affects not only households with large families. Families in the private rented sector with just two children will be subject to the cap in all of central London. The DWP estimates that 50,000 households will be affected by this measure-I think that the estimate has been uprated to 75,000 households as a result of today's news-and lose 83 a week on average, with 90,000 adults and 220,000 children affected by the measures. Fifteen per cent of those households will lose more than 150 a week. The Children's Society has suggested that more than 82,000 children could lose their homes as a result of the cap. As the Children's Commissioner pointed out in a recent report, the DWP's own equality impact assessment sees homelessness, diversion of living costs benefits to housing costs and migration within the UK as primary effects of the cap. In a chillingly bland comment, the DWP states in the original impact assessment:

"The cap is likely to affect where different family types will be able to live".

Housing benefit may no longer cover housing costs and some households may go into rent arrears. This will require expense and effort on the part of the landlords and the courts to evict and seek to recoup rent arrears. The impact assessment continues:

"Some households are likely to present as homeless, and may as a result need to move into more expensive temporary accommodation, at a cost to the local authority".

It is an awful admission that by deliberate act of policy people are to be made homeless, are to run up rent arrears and are to be evicted; an admission also that reduced costs for the DWP will add cost to local authorities. Can the Minister say whether these increased burdens will be met by central government?

The Children's Commissioner's report concluded that the impact of the cap will be increased child poverty with associated poor health, educational and other outcomes. The report identified that in order to stay in their homes, parents who cannot or do not find work will have to divert large amounts of their living costs, the non-housing element of universal credit plus child benefit, to make up the shortfall. This will have obvious consequences for children's well-being. For those who cannot bridge the loss of housing benefit, the loss of the family home will be severe. Local authorities may well have an obligation to rehouse but this may be in temporary accommodation and may require a move to cheaper areas, if they exist. As 70 per cent of those affected by the cap already live in social housing-that percentage may have been updated by today's impact assessment-cheaper housing may not exist. Evicting families from such accommodation only to rehouse them in more expensive private sector or temporary accommodation would only add cost for local authorities.

The impact of such moves on families is traumatic, especially for children. We know that children from homeless and transient families are more likely to go missing from education. Uprooting families from support networks, friends and communities can have a severe impact on the emotional and physical well-being of parents and children, and for vulnerable people especially so.

There are a number of ways in which these dire consequences might be addressed and subsequent amendments cover a series of possible ameliorations. This amendment supports the amendment separately tabled by the noble Lord, Lord Best, concerning those owed a duty to be provided with interim or temporary accommodation as part of the homeless safety net. The amendment refers only to English legislation and I was advised today that it should also be extended to Scotland. We might bear that in mind for later stages. As the noble Lord explained in Committee, temporary accommodation tends to be more expensive than mainstream housing and local authorities will struggle to obtain suitable accommodation for homeless families. Our amendment goes further and seeks exemption from the cap for those accepted as homeless and in priority need and those threatened because of the cap with becoming homeless. This raises points of detail that would have to be settled in regulations.

If the cap was introduced, households for which a homeless duty has been assumed and which are in temporary accommodation face a shortfall in rent as well as council tax. Local authorities must either cover the shortfall from the general fund or secure alternative temporary accommodation elsewhere within the monetary limits. However, it takes a long time to procure temporary accommodation and some local authorities will be in longish contracts with owners. They will need a long transition and so it may not be possible. Any family in private accommodation entered into prior to the introduction of the household benefit cap that falls into arrears and is in priority need and threatened with homelessness will be able to apply as homeless to the local authority which can then discharge its duty into alternative private accommodation affordable for the family. In many areas there are already insufficient private rented homes that are affordable to people on the local housing allowance. But this does not relieve the local authority of its duty.

Any family with a secure assured tenancy and facing a shortfall-whether it is a council or housing association property-would in theory be able to ask the local authority to secure them affordable accommodation if they are threatened with homelessness due to arrears. However, as all local authorities have their own allocations procedure this would inevitably mean tenants in secure social housing exchanging these tenancies for assured shorthold private tenancies in cheaper parts of the country, again if they can be obtained. If not, the local authority will have to fund the shortfall.

What would be the effect of our amendment? It would relieve the pressure on local authorities currently housing homeless families which would face the cost of the shortfall in rent if there was no suitable cheaper alternative. It would avoid costs being transferred to the general fund, potentially costing some hard-pressed councils millions of pounds. It would stop some individuals and families being uprooted from their communities. This protection would apply not only to households with children but to vulnerable individuals; for example, those with mental health conditions, disabled people and people fleeing from domestic violence. It would not stop increased homelessness and migration within the UK driven by cuts already announced to housing benefits but it could help to stop it getting much worse. It would not facilitate people remaining in lavish up-market properties, so beloved of the press. The pre-cap housing support would be determined on the basis of the changes already being introduced.

The Minister will doubtless put another of his costings on this amendment. When he does, perhaps he will make sure that he includes the actual costs to local authorities in meeting rent shortfalls; the implications for a range of services in supporting the migration across the country which will flow from the cap; and, of course, the costs to landlords and the courts in pursuing evictions. Most of all, will he factor in the human misery that the cap will generate?

There are a range of other amendments suggesting carve outs for the cap, transitional measures and refining the basis of calculation which can sit perfectly well alongside this amendment. If for no other reason, this amendment can provide for those who seek, and have the leverage to encourage, concessions from the Government, but its primary purpose is to prevent the slide into further poverty and disadvantage that homelessness can bring and the multiple disadvantages that spring from poor housing to blight lives, particularly those of the young. I beg to move.

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Lord Best (Crossbench)

My Lords, I support the amendment. As we have heard, it would mean that families facing immediate homelessness because of the imposition of the benefit cap would be saved.

A major problem with the cap is that, as well as taking no account of the number of children in a family-a point which a later amendment in the name of the right reverend Prelate the Bishop of Ripon and Leeds and others will seek to address-it takes no account of the level of rent: that is, it takes no account of how much of the benefits within a 500 cap must go to the landlord not the tenant. The 500 cap looks relatively high in areas where housing costs are low. In Committee, I quoted 85 per week rent for a council house in the north-east or south Wales, leaving a headroom of 415 per week for benefits to cover all other expenditure. Indeed, the average cost of housing-the 500 is all about comparisons with average earnings-is some 87.50 per week. However, the same cap applies in all areas, including London and the south-east of England, where housing costs are much higher. I am not talking about the extreme cases of refugee families with 10 children living in Hampstead. A rent for a not very salubrious private sector flat in the east end of London can be 350 a week. A 500 cap will plunge a family with three children living there into poverty, with only, in this example, 150 per week left for food, clothing, ever rising fuel bills and the rest, instead of more than 300 as at present. It is not their fault that rents are so high in much of southern England, but clearly the family will have to move out if the application of the cap is not moderated as by this amendment.

However, it is very uncertain where those made homeless can be moved to. The logistics for local authorities of moving large numbers of families to cheaper areas will be extremely complex and expensive. Finding new homes for them, even in a much lower cost area, will not be easy. Most private landlords prefer not to take on tenants on housing benefit and local housing allowance, particularly those not known in the locality, not least because benefit is now seldom paid direct to the landlord. No one wants to send families to so-called benefit ghettos with the lowest quality housing which is bound to undermine the hopes, aspirations and life chances of those sent there. It should be remembered that the new benefits cap is in addition to the caps on rents in high-priced areas which have already been introduced and are now beginning to bite, as existing tenancies come to an end. Regrettably, we are just beginning to see a return to the use of expensive but seedy bed-and-breakfast hotels as the numbers of homeless families rise. The new cap will considerably compound the problem.

This morning on the radio I heard the Secretary of State, Ian Duncan Smith, suggesting that the definition of homelessness was that children would have to share a bedroom. That is a confusion with an earlier amendment which found favour with your Lordships concerning the underoccupation penalty-the so-called bedroom tax-which was not about homelessness at all. Families are deemed to be homeless if the local authority deems that unintentionally they have no place to go. That can happen if they can no longer pay the rent where they are because their benefits are cut drastically. The council is then required to step in to find them somewhere to live. Amendment 58D would avoid that miserable and expensive outcome for thousands of families and tens of thousands of children who will otherwise have to leave their current homes. Two later amendments in my name address two of the most extreme aspects of the imposition of the new cap. At this point, I am pleased to support Amendment 58D.

3:45 pm
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The Bishop of Ripon and Leeds (Bishop)

My Lords, I have added my name to Amendment 58D for a number of reasons. The figure of 80,000 people who could be made homeless-really homeless-by the cap must be alarming to us all, not least because it comes when homelessness is, in any case, increasing across our country, partly because of the increase in unemployment at the moment. The number of homeless people in west Yorkshire is rising steadily and churches and others in the county are increasingly involved in providing night shelter accommodation for the homeless. Any arrangement which seeks to find accommodation for people is liable, in practice, to see some of them slipping through the net and finding themselves with nowhere to go at all. Just this weekend, churches in Halifax have begun to offer that particular service but those who are providing the service are frightened that an already inadequate service, as they would say, will be made hopelessly so by extensive homelessness as a result of the cap.

In addition, I support Amendment 58D because, at last, it gets children into Clause 94. I retain that major concern for children whose parents are made redundant and become unemployed. Such children are in danger of losing not only their home, but also their school, their friendship groups and their local contacts. Schools are very concerned about the possibility of children being moved from one locality to another as a result of their parents becoming unemployed and as a result of the effects of the cap. There is not only an effect on those children but also on their friends and the whole life of the school. Later, we shall debate the issue of child benefit, but this amendment will defend a significant number of children. It is those who cannot speak for themselves who are likely to suffer as a result of the cap. This amendment will go some way to preventing a spiral of homelessness and it will relieve the pressure on some of those vulnerable people who are affected by the cap. I hope that noble Lords will feel able to support it.

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Lord Hamilton of Epsom (Conservative)

My Lords, I find it remarkable that the noble Lord, Lord McKenzie, says that the Labour Party in principle supports a cap, but in this particular instance thinks that somehow it should be alleviated. We face a considerable deficit in this country and the social security bill is certainly one of the largest elements of public spending. If we continue to find all sorts of ways of alleviating measures that the Government are taking, no savings whatever will be made to the social security bill.

This is also an opportunity to change attitudes completely. We are privileged in our House to have the right reverend Prelates on the Bishops' Benches. I think it was Alastair Campbell who said of Tony Blair, "We don't do God", but in this House we do not have to be inhibited in that way. We can talk about the morality of a benefits system that encourages single mothers to have more children, because the more children they have the more benefit they get. Is that moral? I have my doubts. Is it moral for a Somali family to move down from the Birmingham area to Hampstead because they wanted to live in a more salubrious part of London where it was extremely expensive to house them? Is it moral to have a benefits system that pins people in their houses and prevents them going out and looking for work, given that underlying this is the Government's intention that people should be encouraged to go and find work?

Of course people will have to move, but that is what people in the private sector do. I question the morality of having a benefits system that gives people infinitely more money than the take-home pay of people on average earnings in this country. It is the taxpayers who are paying for these very high levels of benefit. I support this cap and I hope that the House will vote against the amendment.

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Lord Wigley (Plaid Cymru)

My Lords, in Committee when we addressed this question, there was a suggestion that as many as 200,000 people-I have not heard the figure gainsaid-may have to move from areas of high rents to areas of low rents. The noble Lord who has just spoken said that of course people will have to move. But where will they move to? We have heard mention of Middlesbrough in the north-east and Merthyr Tydfil in south Wales-areas where unemployment is high, the chances of getting a job are very low indeed and where local circumstances place tremendous pressures on social services departments. If not just the generality of those who cannot afford the rent in expensive areas such as the south-east but particularly those with special needs covered by the amendment are moved to areas that may not have the resources to cope with them, we will inevitably build up pressures when we should avoid doing so. We will build up pressures in the communities to which those people may move. Even more seriously, we will build up pressures for families who will essentially be forced to move away from their relatives, grandparents and friends in school. Is this really the sort of policy that our Government support? I urge the House to support this amendment.

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The Bishop of Chichester (Bishop)

My Lords, I am extremely grateful to the noble Lord, Lord Wigley, for responding to the point made by the noble Lord, Lord Hamilton. I was feeling anxious abut what I should say but the noble Lord has largely made my case for me. One of the issues here is not just the moral and philosophical question of whether the benefits system needs to incentivise people to work and to take the initiative in their lives. We can all agree on that. The issue is that the Bill is going through the House at a time of unprecedented austerity when burdens are falling on families who are among the most vulnerable. There are times when one has the luxury of having a big social debate but this is not the time when we should burden poor families with more costs and burdens. We should debate these big philosophical questions on other occasions when we have more leisure to do so.

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Lord Winston (Labour)

I had not intended to intervene in this short debate, but I have just heard something that I feel is utterly wrong-the idea that people who are on benefit are having more children and thus keeping themselves on benefit. The evidence shows that this is simply not true. Populations expand when people are poor, women are ill educated and there is a lack of services to families. Surely, that argument cannot be used in this context in this Bill.

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Baroness Walmsley (Liberal Democrat)

Like many of those who have spoken, I support the principle of the cap, and I think that public opinion is right to do so. I applaud the Government for grasping this particular nettle, which is a very difficult one and something that Labour has failed to do over 30 years. However, in my 12 years' career in your Lordships' House, I have always stood for the interests of children. I am not about to change that position now. In some cases, there is the potential for innocent victims to emerge from the Bill as it stands. The noble Lords, Lord McKenzie and Lord Best, and the right reverend Prelate have put their finger on the really serious issue-that is, homelessness. I am not one who feels that a workless family should never be required to move, because families in work very often move to follow their jobs. However, your Lordships should remember that children in families who are dependent on benefits and therefore are relatively poor, and where there is no work, are already disadvantaged. For those children, changing their school can, in particular, be a lot more serious than it is for any other child, because for many of those children school is the only stable thing in their lives.

There has been a lot of discussion about how much homeless this measure has the potential to create. The Government say zero, because they are going to put plenty of measures in place to make sure that that does not happen-and I do hope they are right. A lot of other people say that there could be a great deal of homelessness. If the Government are right, the measures in this amendment will not need to be called into play at all. However, if others are right, it could cost a great deal of money. Local authorities will have the duty to rehouse those families, which will prevent the Government making the savings that they need to make to tackle the terrible economic situation that we have inherited. Indeed, it could also interfere with the Government's very important and laudable objective of providing more affordable and social housing-another thing that Labour has failed to do.

It is for these reasons that, unhappily, I find myself having to speak and vote in a way that is at odds with my Front Bench, because I will support the amendment if it is put to the vote. I do not necessarily think that it is exactly the right amendment, but we need to send it back to another place and ask it to think again and tell us a little more about the measures that will be put in place-I hope that they will be, and know that the Government intend that they will be-to make sure that families with children are not made homeless. For those children who, as I said, are already disadvantaged, to be made roofless or overcrowded, just adds to their disadvantage. It is going to be very bad for their education and is not going to be good for the Government. A life of dependency on benefits is also not good for those children, so I encourage the Government to do everything that they say that they will do to help workless families to get back into work. However, until those jobs are available and that work has been done, we need to be given more detail. If this amendment goes through your Lordships' House today, I hope that the Government will think carefully and come back to the House with a very clear strategy about what they will do to prevent innocent children being further disadvantaged by the life choices or life circumstances of their parents.

Photo of Baroness Gardner of Parkes

Baroness Gardner of Parkes (Conservative)

I intend to support the Government on the amendment, because I really think that the situation is quite unbelievable at the present time. However, I would like the Minister to clarify two things. Those people-I hope there will be few of them, but there will certainly be some-who do become homeless should never be classified as voluntarily homeless. That is very important because if they are classified as voluntarily homeless they have no claim to any help at all with housing, but if they are not, there is a procedure that they can go through. The other thing I hope the Minister will tell us is that there will be sufficient transitional arrangements to cover the circumstances, so we do not have sudden and terrible disruption.

Years ago, when I was on Westminster council, we had an offer from outside London to send people to another area where there was masses of housing, and we gave them the offer. They all agreed to go, but only about two-thirds actually arrived. The other third we never heard from again, so clearly their needs cannot have been as great as they made out. That was a particular instance. No one knows at the moment what is going to happen, but the important thing is that no one should be made voluntarily homeless under this arrangement.

4:00 pm
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Lord Elystan-Morgan (Crossbench)

My Lords, there is nothing inherently immoral or unjust in the concept of a cap. It all depends upon the way in which it is handled. It might be handled in an understanding, intelligent, sensible and equitable way, although it might not be so easy to save money in net terms or indeed eradicate a fundamental injustice; I accept that.

The Minister has quoted the court of public opinion, where there is, I accept, an overwhelming majority verdict in favour of the Government's attitude to a cap. I say with humility and the utmost respect that this depends entirely on how well founded that decision on the part of the great public was. It is possible, and I respectfully suggest, that it is a fool's gold concept of justice-and noble Lords will remember what fool's gold is. As a small boy I remember being handed a large lump of quartz, and inside that quartz was a gleaming vein of dull metal that seemed to be the real thing, but it was iron pyrite-utterly worthless and totally misleading. I ask the Government to consider very deeply whether this is not a fool's gold kind of justice.

If you deal with families that have arrived at a certain economic situation from very different directions in exactly the same way, are you doing justice? The Government's policy draws no distinction between a family that is totally workshy and has had no one working for the past quarter of a century, and another family that had an excellent work record until the head of that family, through redundancy and no fault of his own, lost his job in the past six months. A family with a small number of children might not be affected by the cap even though it is totally workshy, while another family with every merit possible in its favour might be totally impoverished. That is the injustice.

I do not know the exact answer, but I suspect it is in this direction: that one should look not just at the totality of income that comes into a household but at how much of that income is disposable. That, to my mind, is a much more real and indeed equitable test. That is why I support this amendment. It may well not be perfect-likewise the other amendments for that purpose-but it has the ring of justice about it.

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Lord Fowler (Conservative)

My Lords, it is not my habit to trample on the territory of my Conservative social security successors, but perhaps I could just intervene briefly. First, by common consent, we are at a time when public spending needs to be drawn back. The total social security and pensions bill at the moment is 200 billion. The truth is that if the social security budget is to be subject to all kinds of exceptions, we might as well not start the whole process of looking for social security economies. I say this as a former Secretary of State who worked closely with my noble friend Lord Newton, to whom I pay sincere and undying tribute. We spent six years fighting battles on the one hand with the Treasury and on the other with different welfare groups, not always successfully. Rummaging through my desk at the weekend, I found a badge that was distributed when I was Secretary of State, which says, "Action for benefits-more not less from DHSS. Stop Fowler's cuts", so this is not remotely the first Government who have sought to limit the social security bill. Nor is it remotely the first Government who have run into flak. I would claim, and I think that anyone with responsibility in a department for social security would confirm this, that it is almost impossible to make changes in the social security budget without running into controversy and flak.

One of the most extraordinary things about the proposal which the Government are now putting forward is that, first, the public seem to be overwhelmingly on the side of making this change. Secondly, on the cap that is being set, 26,000 per annum-the equal of 35,000 a year before tax-is a not ungenerous limit, and most people in this country would regard it in that way. On the cap itself, we tend to get into figures that rather overegg the number affected. I am not going to downplay this, but we should accept that the number is 67,000 households, or perhaps a little more than that on the latest figures: that is, only 1 per cent of the total claimant population.

As I say, everything must be done to prevent hardship to such people. One of the rather irritating things about how this debate is being organised is that the debate on the next amendment will be very similar to this one, so, if I may, I will discuss during the next debate some of the measures that can be taken to prevent that hardship. However, first and foremost, this change will be introduced in 2013, so we have the time to sort out the problems before that change takes place. We really cannot have the situation in which beneficiaries living in houses that they cannot afford, or could not afford when in work, will never be able to get back into work because of that situation.

Perhaps I may say this to the noble Lord, Lord McKenzie, who proposed this amendment. I am rather intrigued by where the Opposition stand on these issues. The noble Lord started with how much he supported the principle of the changes, but ended with words about human misery being caused by them. I had rather gathered from their Commons spokesman that the Opposition supported the changes and did not intend to try and vote them down. I simply point out to the House that they have so far supported amendments that, far from saving money, will cost, I am told, something like 5 billion over the next five years. I do not want to be offensive-or no more than usual-but their policy seems to be one of, "Now you see it, now you don't", and, frankly, mostly we do not. Goodness knows how much they would have spent had they not supported the principle of the Government's policies, so it would be fair for us to ask the noble Lord where precisely the Opposition stand on this issue.

Above all, I put it to the House that there is a very great prize in the Government's plans: that of universal credit, which both parties have been seeking to achieve for the past half-century. That prize is something worth fighting for and the benefit cap is a crucial part of it. There is no question that the Government's own plans allow us to deal with the 1 per cent who will be adversely affected. The amendment should be opposed and the Government's policy should be supported.

Photo of Lord Newton of Braintree

Lord Newton of Braintree (Conservative)

Irresistibly, in view of what my noble friend Lord Fowler has said, I find it necessary to make what I hope will be a brief intervention.

This is a rather grandiose claim but I am going to make it: probably I alone, but certainly I and my noble friend together, have more experience of social security and its reform than any other people in history, let alone currently present in your Lordships' House. We had our difficulties and our rows with the Treasury and, as my noble friend has just said, we would have given our eye teeth to have been able to bring forward this proposal for a universal credit, which is a huge achievement by the Secretary of State and the Minister on our Front Bench together. Everyone acknowledges that and supports it, yet now large numbers of people are trying to shoot it full of holes before it is even often off the launch pad. That is not sensible.

I am not going to put a lot of weight on the point about deficit reduction. It is valid but others have made and will make it, and people can make up their own minds about how important it is. Personally, having caused some trouble for the Government on this on a number of occasions, I do not think it sensible or reasonable to go on voting twice a week, in whatever form, to make the deficit worse than it otherwise would be. That is all I will say; if people want to do it, they can.

I have a straightforward social security reason for being opposed to this and every other amendment on our agenda today. It is a great pity, as my noble friend said, that they are being debated in such a disorderly fashion; there are linkages between all of them. For example, the amendment of the noble Baroness, Lady Howe of Idlicote, on regional variations in housing clearly links with what we are discussing at the moment, and it would have been far better if these things had been discussed together.

For a long while as Social Security Minister-I was sometimes attacked for this-I made sure that social security legislation left wide powers in secondary legislation because you would never get it all right in primary legislation and you needed the flexibility to be able to respond to the things that you had not spotted in advance. However much work you do, that will happen. There is no doubt, though, that we have here a series of amendments, designed-some of them pretty hastily and off the cuff-to write requirements and restraints into the primary legislation that would certainly prove a drag when the detailed work was done.

As with the DLA last week, there is a right course for the House to take, and I will join it in taking it. Ministers know from me, privately and publicly, the importance that I attach to transitional measures and protection, but the place for that is in the secondary legislation. If the House wants to vote for enhanced affirmative procedures, as I said last week, I would be inclined to support that so that we would all get a proper opportunity to consider the detail when it had been done. However, I am not in favour of tying the Government's hands and writing anything into the concrete of primary legislation that we shall regret in six or eight months' time. I hope that the House will accept that and not vote to put this stuff in, in the way that is proposed today.

4:15 pm
Photo of Lord Ashdown of Norton-sub-Hamdon

Lord Ashdown of Norton-sub-Hamdon (Liberal Democrat)

My Lords, I feel that this debate is probably drawing to a close, and I want to address particularly the last point made by my noble friend about transitional measures. I fear that I do not agree with him.

I speak as somebody who has voted consistently with this Government for every single one of the very tough benefit reform proposals. I think that Mr Duncan Smith and my good colleague Steve Webb in the other place are doing something extremely important. They are at last reforming the welfare system root and branch. I agree with the point made by my noble friend that there is a huge prize to be gained here, namely the universal credit and genuine reform. I am strongly in favour of that, as indeed I am in favour of a benefit cap, contrary to what was said in certain broadcasts yesterday which inaccurately reported comments that I had made. It is important and I strongly favour it. But I believe that, before we vote for this, it is important-for exactly the reasons that have been given earlier-to have a look, at least in outline, at some of the transitional mechanisms.

I hope that the Minister in answering this debate will address that, not least because that was what was promised by Mr Duncan Smith in the other place. I shall quote what he said:

"We recognise that there must be transitional arrangements ... We will make sure"-

this is his promise-

"that families who need transitional support will receive it".-[Hansard, Commons, 9/3/11; col. 922.]

When he answers this very important debate I hope that the Minister will tell us whether those measures have been advanced and whether any proposals have been made. If they have not, surely it would have been better to consider this with at least some outline of what those measures-to fulfil a promise made by the Secretary of State himself-will be. If he cannot do that now, will he at least tell us when he will be able to bring them forward?

Like my noble friend Lady Walmsley, who spoke from our Benches a moment ago, I believe that this should be passed. But I cannot pass it without at least some sight of the Government's outline proposals for those transitional measures. If the Government cannot offer that to us now, let them at least say when those proposals will be published.

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Lord Lester of Herne Hill (Liberal Democrat)

My Lords, may I ask the Minister a couple of questions, as a member of the Joint Committee on Human Rights? As I am sure he will have been briefed, the committee made a report on the Bill in which it raised a couple of questions which are in harmony with the points made by my noble friend Lady Walmsley about the effects on children.

The first proposal was to suggest to the Minister that instead of calculating the cap on the basis of all households, the fairer thing to do is to calculate on the basis of the income of households with children. Since we raised that in the committee, I would be grateful to know whether that idea has been pursued, and if so with what result. This proposal was in paragraph 1.59.

The second proposal that was made was to suggest that, where benefits are earmarked for children, this should be done in order to make sure that they are treated fairly. For example, it was suggested that,

"the Bill could be amended to allow payments intended for children to be labelled as such and be paid to the main carer".

That was in paragraph 1.82. Again, I would be grateful, on behalf of the committee, to know whether that idea has been pursued.

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Baroness Hollis of Heigham (Labour)

My Lords, I will be very brief, but I cannot resist the effrontery of trying to challenge some of the assumptions made by two people whose views on social security I very much respect, the noble Lords, Lord Fowler and Lord Newton.

The noble Lord, Lord Fowler, said that the social security bill is pushing 200 billion and needs to be contained and cut. He is correct, but the biggest single group driving that increase in costs are of course pensioners. There is an increased number of pensioners, who are living longer, sometimes with poor health. These cuts do not-in my view, rightly-impinge on them at all. We are making other people pay for the demographics that are not their fault.

The second point I would like to address comes from the noble Lord, Lord Newton. He says that there is a big prize in this: universal credit. He is absolutely right. I defer to nobody in my support for universal credit and my support for the Minister on the structure of universal credit. However, that structure is being contaminated by where some of the cuts fall. If we can keep those two things separate in our minds, we can fully the support the Minister on his structure, as we do, while trying to protect those who are most vulnerable and affected by where the cuts fall.

At the end of the day, it is about political and moral choices. Noble Lords, including the noble Lord, Lord Hamilton of Epsom, said that we face a deficit and must bring it down-these cuts have to fall. May I gently suggest to him that I rather doubt that any of the cuts have affected him? Not one of them has affected me. Indeed, my council tax is being frozen at a cost of nearly 1 billion a year, which is very nice. Over five years, that equates to the very 5 billion that the noble Lord, Lord Fowler, cited. I get my council tax frozen while disabled children, cancer patients and vulnerable children at risk of homelessness carry my bills for me, even though we in this House have broader shoulders on which to carry the cost. It is about choices and the choice of every Member in this House today. I hope they will make a choice that most of us would regard as the decent one.

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Baroness Butler-Sloss (Crossbench)

My Lords, I say bluntly that I came here uncertain as to which way I should vote on this amendment today. I remain uncertain but I endorse the suggestion that the Minister should explain what will be done for the most vulnerable by way of the transitional provisions. Like others, I strongly support the cap. The amendment goes too far in my view but it has a nugget of enormous importance. Like the noble Baroness, Lady Walmsley, my main reason for being here today is because I support children. The transitional provisions may provide the answer but can the Minister tell us how the most vulnerable people will be protected? I should like to know that because it will have an enormous effect on which way I vote.

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Lord Empey (UUP)

My Lords, we have to be honest with ourselves in this House. There is no way that you can reform welfare without affecting one group or another in our community. I cannot think of any means or mechanism whereby you can leave people as they are and change the system at the same time.

There is a fundamental double standard running through some of our debate this afternoon. First, the noble Baroness, Lady Hollis, made the point that the demographics meant that older members of the community were taking up a larger slice of the social security budget. That is true. However, many Members here have said that they do not want to do anything to upset the housing situation because of the inevitable disruption that could arise, with implications for children. Yet we have no compunction-the welfare state has no compunction-in sequestrating the houses of older people to pay for their care. I put it to noble Lords that policy in the 1980s encouraged families to buy their homes. Indeed, we made enormous volumes of public sector properties available to encourage people to buy them. People scrimped and saved in the hope of perhaps passing on a small legacy to their children. They lived their lives, worked hard, saved and purchased a property. What are we saying now? "Oh, I'm sorry chaps. Well done. You did that but now that you're frail and need to go into care, we will pay for that by taking that property and reducing its value by 550 a week until it is 16,000, and then the state will look after you." What consistency is there in that?

I do not believe that any current Secretary of State has come into office more prepared, and having done more homework, than Iain Duncan Smith. I saw at first hand a lot of his work with his think tank. He went to the States. He studied carefully and learnt the situation on the ground. I therefore believe that the fundamental drive behind this is based not simply on an ideological rant but on experience and a thoughtful purpose as to how we are to improve our community.

The other thing we have to face up to is that we are not as wealthy as we once were and we have collectively allowed the social security situation to grow out of control. We allowed circumstances whereby people could pay unlimited rents for homes and then we throw our hands up in horror and say that perhaps we cannot afford to keep them in these properties any longer. Whose fault is that? It is the collective fault of parties and Governments over decades.

I support entirely the idea of national insurance, whereby we provide a safety net if we are down on our luck. I have so much of it in my own area, where for generations people have not had the opportunity to work, and I know-we all know-that people abuse the system. However, we should not allow that to make our decision for us. The question is: can any Government advance any proposal that will not upset one particular group or another in the community? I put it to the Minister that it cannot be done. You cannot make changes to welfare without upsetting people.

It is also misleading to gross up the total benefits paid and say that that is the equivalent to a salary of 35,000 a year. I disagree with that.

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The Countess of Mar (Crossbench)

My Lords, I am sorry to interrupt the noble Lord but he appears to be making a Second Reading speech and this is Report stage. Would he kindly address the amendment?

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Lord Empey (UUP)

My Lords, I thank the noble Countess for the intervention, but because of the grouping I had thought that this was like a Second Reading and I am trying to address the issue of housing-the subject of the amendment. I agree with the noble Lord, Lord Newton, that the grouping is unfortunate.

The point that I am trying to get to is: it will not be possible to change the welfare system without upsetting some group or other in our community. I therefore believe that if we put the amendment in the Bill, the Minister and the Government, including their successors, will be hidebound by it. However, the Minister has also heard the widespread view in the House that we are confronted with an area of concern, particularly when children are likely to be moved from their homes, lose their schools and all that goes with that. Secondary legislation is the right place in which to put this issue but, if we believe we can go through a process of changing the welfare system and not affect a particular group in the community, we are misleading it as well as ourselves.

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Baroness Hussein-Ece (Liberal Democrat)

My Lords, I also came to the Chamber intending not to speak but to listen carefully to the arguments. I feel moved to speak because of my personal experience as a local councillor in inner city areas such as Islington and Hackney, where homelessness and poverty have gone hand in hand and where over several decades we have seen the decline of affordable housing that ordinary families can rent. The two previous Governments have to take responsibility for not building enough affordable housing. That is the fact of the matter and the elephant in the room that is not being addressed.

It therefore pains me when I hear people around this Chamber, whom I respect, saying, for example, that families are moving to upmarket areas such as Hampstead in order to live in a better area. I have never seen evidence of that. When families through no fault of their own lose their home, which might be because it has been repossessed or they have been unable to keep up with the mortgage payments, they naturally present themselves to the local authority. The local authority has to take a view in making an assessment of such families and, if the family is not dysfunctional enough, if the children or either parent do not have enough of a disability or they do not have enough points-because it is all done on a points system-there is not much that the local authority can do. Very often, those families or individuals are directed to the private sector. Local homelessness departments will usually give them a list of estate agents where they can go to find somewhere. Often, families who have lost their homes will end up in the private sector. The private sector has filled the gap, certainly where I come from in Islington, between the unaffordable private homes and social housing. It has taken up the slack there. Of course, prices have shot up because of demand. That is not the fault of people who have become unintentionally homeless.

I hear my noble friend saying that 76 per cent of the public support a cap. I do not think that anyone in your Lordships' House would disagree that there should be some form of cap and that it should not be an open-ended provision. It is the implementation, how this will work, that is worrying many of us here. We should not force out families from areas such as mine. People often think that Islington is a very rich area full of wealthy people, which it is, but it has the third-highest level of child poverty. We have the extremes: very rich people and very poor people. The very rich live in the houses that have become increasingly unaffordable for most people, and the rest live in social housing, apart from some in the middle who live in private accommodation. I want to live in a mixed community. I do not want to live in a Paris-style ghetto. I do not want ghettos such as in Paris, where the poorer families have been forced into the doughnut outside the city. We should support mixed communities. We want our children to have a healthy outlook and mix with people from all different backgrounds.

Where exactly are we saying that people should be moving out to? For example, even the less salubrious areas of Islington and the neighbouring borough of Hackney have become incredibly expensive. That is not the fault of people who still live there, whose children go to school there, whose families are there and who may have lived there for generations. All their support networks are there. We are asking people to move outside London-I have read that more than 50 per cent of those directly impacted would be living in London-but where would they go? They would move outside to areas where, as was said earlier, there is probably not much employment. Over the past 15 to 20 years, as a Londoner I have witnessed people moving to London to find work. Are we now saying that people should move away from any possibility of getting work to areas where there is very little work? That does not make sense. I do not think that the full consequences have been properly examined.

I get irritated when I hear unfortunate comments, such as that families are having children in order to get more benefits. We are talking about people with a lack of education and support. Some of the women from those communities are not in a position to make such choices. It is unfortunate that that has been mentioned. We have poorer families who are entitled to social housing-but there is a lack of social housing-and then we have families who are not. Until we hear from the Government-

4:30 pm
Photo of Baroness Garden of Frognal

Baroness Garden of Frognal (Liberal Democrat)

I apologise for interrupting my noble friend, but I think that she is trespassing again on a Second Reading speech, and I invite her to bring her comments to a conclusion.

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Baroness Hussein-Ece (Liberal Democrat)

I apologise. Although we have heard the assurances that there will be transitional arrangements, I have not yet heard what those protections will be for the families who will be most affected.

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Lord German (Liberal Democrat)

My Lords, I start by making it clear that the concerns that have been expressed from these Benches are not around there being a cap. It is essential that there should be a cap; people find it manifestly unfair that claimants can receive in benefits more than the average working family gets in wages. The concerns expressed within the amendment are about two crucial issues: homelessness and housing; and the vulnerability of children. We are looking for discussion and reassurances from my noble friend the Minister on the issues raised by the cap. Our concern is about how those policies will be ameliorated-how to find a cap that fits.

I remind my noble friend the Minister that in Committee he said:

"The Government are looking at ways of easing the transition for families and providing assistance in hard cases. We recognise that there are households for which it would be inappropriate to restrict the amount of benefit that they can receive".-[Official Report, 21/11/11; col. GC 346.]

The Government have already announced in another place and here that transition arrangements are to be made. This is the opportunity for my noble friend to express the Government's views on those two crucial issues contained in the amendment. These details should emerge at this stage because it is appropriate that people know the Government's direction of travel. It is not simply a question of us accepting that you need flexibility for the future. I understand that the Government's regulations will follow from these debates, that there will be affirmative resolutions and that the House will have the opportunity to hear and vote on the detail. We need reassurances now in the broadest terms about the issues raised in the amendment.

I appreciate that by DWP standards-the noble Lord, Lord Fowler has said this already-the numbers captured by this policy are small. However, they are small only in respect of the DWP's overall workload, not in terms of the 67,000 families or the 220,000 children who will be affected. We cannot put aside the fact that there is personal impact.

First, I turn to the issue of homelessness. I understand-we heard it this morning in a broadcast by the Secretary of State, and it has also been referred to in this debate-that the numbers of potential reported homeless households is based not on rooflessness but on the structure of how this is measured by the Department for Communities and Local Government. I wonder what reassurance my noble friend can give that we will not find families out on the street, that we will find homes for people and that they will be accommodated. If the numbers who are classed as homeless are those who are sharing rooms, which I heard from the Secretary of State, what methodologies and transition arrangements are being put in place? After all, if people are entitled to be classed as homeless by virtue of that definition, and are sharing a room, what is to prevent them presenting themselves to a local authority as homeless, thereby generating further cost to the public purse and creating no savings whatever? What transition arrangements will be put in place to ensure-what this House is asking for-that no one should be made roofless as a result of this policy. Any savings if they were to come by having to throw the balance to another department might be illusory. I am seeking reassurance from my noble friend the Minister. We want to hear the outline of the arrangements to be put in place to ensure that we do not sustain expenditure by simply passing costs from one department to another.

We are told that the department now has extensive information on the households that will be affected by the cap. I seek reassurance that there will always be a property available-not necessarily close to the same street in which the people have lived-for the people who will be displaced and that they will always have somewhere to live. Crucially, what help will be provided in the transitional period between now and April 2013 and perhaps beyond given the Minister's comments in Committee. I also ask him to outline the processes to be put in place during this transition period and to provide the reassurances needed to demonstrate that rooflessness and overcrowding are not options that the Government are considering.

A second issue, which we will come back to in another debate, is that of children. This issue is mentioned in this amendment and has been raised before. It is indeed a powerful statement that children are not responsible for the decisions of their parents, but in workless households the worst disincentive is not to aspire to work. Those of us with experience representing the poorest areas-in my case, the poorest area-within our country know that it is a dreadful stigma which we place upon our young people. I wonder whether the Minister can provide some reassurance and tell us what arrangements he is making. What support will be given to the longer term aspirations towards work for our younger people? Alongside this is the impact of a parent becoming unemployed without suitable transition arrangements.

Perhaps all these issues need to be outlined in principle now, so that my noble friends on these Benches and noble colleagues around this Chamber can decide whether the Government are keen to ensure that the impacts are going to be ameliorated by this cap.

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Lord Freud (Conservative)

My Lords, the noble Lord, Lord McKenzie, closed his remarks on Amendment 58D by saying that it is designed to prevent a slide into poverty, particularly for those who are young. The benefit cap is about changing psychology. It is about trying to get a change of circumstances in those families. Let me remind noble Lords-I know that they do not need any reminder-that the worst thing for youngsters is to be in a workless household. We need to change behaviours, and this benefit cap is designed to do that.

We need to move towards the cap in a highly organised way, and we will have a year to work with those families that are going to be affected. As my noble friend Lord Fowler pointed out, this affects around 1 per cent of the population that we deal with and we know exactly who they are. In the new impact assessments, we were working on the particular families. We can spend a year with those families making sure that they respond in advance to what the cap implies for them. It is a very simple answer for the bulk of them: we need to get you into work.

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The Countess of Mar (Crossbench)

My Lords, I gather that there are now more than 3 million people unemployed. Something like 72 people apply for every job in some areas. How are the Government going to get these people into work?

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Lord Freud (Conservative)

My Lords, I will deal with that straightaway because it is a point that has been raised more generally. Two things are confused here. Levels of employment are, regrettably, too high. We as a Government regret that, and we are throwing enormous resources at ameliorating that position, but this is a different issue. This is about people and families who are, and have been, excluded from the workforce entirely. They have been inactive. We need to put in place arrangements to get them able to move back into the workforce. It may take a bit of time for them to get in, but that is a completely different order of issue from helping people who are unemployed and are waiting to get a job. We must not confuse snapshot numbers of vacancies available with flows. The problem is that the flow of people going into work is, on a monthly basis, slightly less than those who are moving out. That is the problem. However, there are still large numbers of people going into work every month and finding jobs. We just need to make sure that the excluded communities become part of that process. This is one of the ways to do it.

We need to make sure that that transition is organised. We need to put jobcentre staff and caseworkers on it to help those families. That is by far the most important thing we can do to make sure that this benefit cap has the effect that it needs to have. Clearly, we need assistance in hard cases, which we plan to have, but that is a second-order issue in terms of trying to work with families to get them back into work. In the Bill, we have all the powers that we need to get into the detailed design of the cap and to make sure that those circumstances are picked up and dealt with.

Let me pick up on the point made by the noble Lord, Lord Best, about benefit ghettos. The reality is that 67,000 families could not create a benefit ghetto in this country. That would be 1 per cent of working-age recipients. We are not talking about massive numbers on any standards.

The amendment seeks to place in the Bill an exemption from the benefit cap for households provided with interim or temporary accommodation by a local authority. It also gives local authorities the discretion to apply an exemption to people who are either homeless and in priority need, or those who are at risk of becoming homeless and in priority need as a result of the cap. In looking at the wording of the amendment, it is easy to see that any local authority could consider people threatened with homelessness and in priority need as potentially meaning any household with children. In practice, that is the same as not having a cap at all. For that reason, the Government regard this amendment as a wrecking amendment.

In answer to the question on costings asked by the noble Lord, Lord McKenzie, this is not a matter of costing but a matter of rendering the policy in practice unworkable. The Opposition tell us that they support the principle of a benefit cap, but is that the reality? When we have a complicated amendment such as this, which undoes the ability to run a cap of any kind, one is driven to ask what form of cap the Opposition think is appropriate. From what we have heard in debate here and in the Commons, it appears that the only cap that they would consider to be appropriate would be so high or would have such broad exemptions that it would apply only to a few people and most households would be exempt.

As I said in my remarks introducing the first group of amendments, in the court of public opinion-as the noble Lord, Lord Elystan-Morgan, referred to it-only 7 per cent of those polled would set the cap higher than 26,000 a year and only 9 per cent believed that it should not apply at all. The Government are well within the court of public opinion. We are looking at a benefits system that is desperately in need of reform. Many households receiving benefits find themselves trapped in the benefits system because there is little financial incentive for them to move off benefits.

When we moved into office, more than 10.6 million working age people in this country did not work and around 2.6 million people had spent at least half of the previous 10 years on some form of out-of-work benefits. We find that situation unacceptable.

4:45 pm
Photo of Lord Ashdown of Norton-sub-Hamdon

Lord Ashdown of Norton-sub-Hamdon (Liberal Democrat)

I have listened to the Minister very carefully. I take it from his answer earlier on-he will forgive me for interrupting at this point; I just wanted to wait and see whether anything else was forthcoming-that the Government are not going to say anything more about transitional mechanisms at this stage. Is that correct? If it is, can he tell us when those details will be made available?

Photo of Lord Freud

Lord Freud (Conservative)

My Lords, I was going to come on to what we were proposing with regard to temporary accommodation. That is currently out for consultation and is the particular area which this amendment looks at. We are going through the process and will come up with proposals in due course-I am not sure that I can measure the months too precisely. The general regulations will need to be in the April to May period. That is the time by which we are looking to get our arrangements for temporary accommodation sorted out so that those affected do not find themselves being double hit by going into very expensive temporary accommodation.

We are looking at the very high rental costs associated with temporary accommodation. We are looking at tackling those levels while ensuring that providers' reasonable costs are met. Temporary accommodation rates, as your Lordships will know, are very often well above the market rate and the LHA rate due to the higher management costs. We are looking at stripping those management costs out of the temporary accommodation rates so that they do not impact within the cap. We have carried out an informal consultation with key stakeholders-local authorities, housing associations, government departments and some homelessness organisations-and their input will feed into the design of those temporary accommodation arrangements.

Perhaps I may pick up on one or two of the extra points that were made. The noble Lord, Lord Wigley, said that 200,000 people would have to move. I do not know where that figure comes from. The total number of households affected is only 67,000 and we do not expect that every household affected by the cap will need to move at all. We are aiming to get all these other options into shape.

Photo of Lord Lester of Herne Hill

Lord Lester of Herne Hill (Liberal Democrat)

I am sorry that the Minister thinks that this is a wrecking amendment. I thought that it was an amendment to make it easier to pass the Bill. Can he deal with the two issues raised on behalf of the Joint Committee on Human Rights as a means of alleviating the adverse impact on children?

Photo of Lord Freud

Lord Freud (Conservative)

We have looked at the human rights issues, putting particular emphasis on households with children and making sure that the arrangements are effective. I shall speak later about payments for children being earmarked. The structure of the universal credit means that it is an overall payment and that there are not different segments going for different purposes. That will simply not be practicable in the universal credit world whereas it is practicable in today's benefit world. I ask the noble Lord to withdraw his amendment.

Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

My Lords, I should like to thank everyone who has participated in this very extensive debate. Given the time, I will not seek to answer each of the points raised but I will try to touch on some of them. I start with the noble Lord, Lord Freud, who talked about a change in psychology. A lot was said about the universal credit in the debate. We have made clear our support for the universal credit given that it can help people into the labour market but it is very unclear what extra benefit derives from this cap. If such a benefit exists, can the Minister explain the psychology that 54 per cent of the people affected by it are going to be in London and only 3 per cent will be in Wales? What is it about the psychology of those in London and Wales that causes such disparity? Is it possibly something to do with the cost of accommodation and nothing to do with a change in psychology?

The noble Lord, Lord German, asked for an assurance that there would always be a property available for someone who was not able to stay in their current home. I do not believe we heard one. I do not know whether the noble and learned Baroness, Lady Butler-Sloss, or the noble Lord, Lord Ashdown, will be comforted by the transitional arrangements; I certainly was not. I thought they were weak and generalised and have not taken us forward at all. I would say to the noble Lord, Lord Empey, that of course changes in the benefit system are bound to give rise to circumstances where somebody loses out. But the question is not whether you can avoid that; the question is who is losing out, is it fair, and is the construct of the change fair? We challenge whether it is, particularly in relation to homelessness.

The noble Lords, Lord Newton and Lord Fowler, focused on the universal credit. I have made our position clear on that. I was going to ask whether there were any spare badges, but possibly not. Of course, public spending needs to be addressed. We have made our position very clear both on that and on the cap. We support the cap and its level but it must be dealt with in a fair manner. We are perfectly entitled to probe when it is not and to challenge and seek change to its application in relation to homelessness.

The noble Baroness, Lady Hussein-Ece, made a very powerful speech which differentiated between what actually happens on the ground and what affects people's housing circumstances. The noble Lord, Lord Best, gave us the benefit of his huge experience to say what is happening in the housing market and what these changes can give rise to. The right reverend Prelate the Bishop of Ripon and Leeds reminded us that, quite apart from these changes, homelessness is on the increase. Let us be clear. We are dealing with all those housing benefit changes which we have debated previously. This amendment does not seek to challenge those; it seeks to challenge the consequences of the cap in relation to homelessness.

The points made by the noble Lord, Lord Hamilton, were very effectively addressed by the noble Lord, Lord Winston. The noble Lord, Lord Wigley, questioned how it helps the economy if people move to areas that are cheaper because there are no jobs. Part of the problem is that the Government look at only one side of the equation. They look at what they see as benefit savings forgone, not at the costs generated by the policies they seek to implement. That is the fundamental flaw on this aspect of the cap. I have detained your Lordships long enough. I wish to test the opinion of the House.

Division on Amendment 58D

Contents 222; Not-Contents 250.

Amendment 58D disagreed.

Division number 1

See full list of votes (From The Public Whip)

Amendment 59

Moved by The Lord Bishop of Ripon and Leeds

59: Clause 94, page 63, line 25, after "benefits" insert "with the exclusion of child benefit"

5:13 pm
Photo of The Bishop of Ripon and Leeds

The Bishop of Ripon and Leeds (Bishop)

My Lords, Amendment 59 would allow families whose benefits have been capped to retain child benefit. It would do no more and no less than that. It does not challenge the basis of the cap. It does not challenge the amount of the cap. It is certainly no threat to the very welcome universal credit of which we have spoken a good deal this afternoon, but it would save some 80,000 children, according to government figures, from falling into poverty.

The Government's assessment of the impact of the cap is that some 67,000 households will be affected. The Minister spoke of that earlier as not a massive number. It is pretty massive for those involved, but the fact that it is not massive in the overall terms of Welfare Reform Bill means that it ought to be possible for us to pass the amendment without seeing ourselves as fatally damaging the Bill itself. Those 67,000 families will lose on average 83 a week. Analysis from the Children's Society shows that those households contain around 220,000 children. Three-quarters of those affected by the cap are children, yet Clause 94 says nothing about children at all.

The cap as it stands is not just, because it fails to differentiate between households with children and those without. It makes no provision for the additional cost of bringing up children, which is the purpose of our most successful and well targeted provision of family support: child benefit. The Government have decided that 500 a week should be the cap for a couple, and I have no quarrel with that; but if that is right, it cannot be right for the cap to be the same for a childless couple as for a couple with children. Child benefit is the most appropriate way in which to right that unfairness.

5:15 pm
Photo of Lord Mawhinney

Lord Mawhinney (Conservative)

I and perhaps others in your Lordships' House would find it helpful if the right reverend Prelate would tell us the cost to the public purse if this amendment were approved.

Photo of The Bishop of Ripon and Leeds

The Bishop of Ripon and Leeds (Bishop)

Thank you very much. The answer to that question is 113 million, which is a minute proportion of the total cost of welfare benefit addressed in the Bill.

This cap is not simply targeted at wealthy families living in large houses. It will damage those who have to pay high rents, because often that rent has increased substantially in the course of occupancy of that house. An out-of-work couple with four children between five and 12 and with 250 a week rent, which is nothing out of the ordinary in many parts of the country, and 20 council tax, currently has an income under present arrangements of some 373 a week after housing costs are deducted. After the cap, that drops from 373 to 230, or 5.50 per person per day-not the 500 of the headlines that we have been seeing. That is much less than 40 per cent of median household income, and I do not understand what a family in those circumstances is meant to do. I do not believe that a child can have a good childhood in circumstances such as that.

I had a letter the other day from someone who disagreed fairly strongly with me and said that surely 500 a week should be enough to bring up a family in normal circumstances. I would not disagree if we were talking about 500 rather than 230. But those whose benefits are capped are not in normal circumstances; they have particular reasons for being in need. Often that will be a substantial rent, and sometimes there will be several children who may not be their own and who may have been taken into the family to avoid their costs falling on the state.

Child benefit is a non-means-tested benefit paid to both working and non-working families. In setting the cap, it has been ignored by the Government. It should also be ignored in calculating benefit income against the cap. Those who are suffering from the cap should be allowed to retain their child benefit. I know that, from 2013, higher taxpayers will not be entitled to child benefit-that is a different issue-but anyone taking home 26,000 will be entitled to it, as will many of those earning a good deal more than that. The intention of the benefit cap is to promote fairness between working families and those who, however hard they try, cannot find a job.

I admire and salute those who bring up families on low pay. I am very aware of poverty in working families and see it through my own working life. We need to defend the interests of those who are poorly paid, but we do not do so by refusing child benefit to those who are out of work. This amendment declares the importance of child benefit both for working families and for the unemployed. Both should receive state support in bringing up their children. Child benefit is paid for the needs not of adults but of children. It has a massively high take-up rate and is used to benefit children whatever their situation. We are rightly proud of its effect in helping the next generation.

This amendment is a compromise between the present situation and the cap as proposed in the Bill. Child benefit is paid at a rate of 20.30 for the first child and 13.40 for every subsequent child. At present, a child born into a family with benefit income of over 500 a week-that is, income over the cap-will receive 62.40 in benefit support through child benefit and child tax credits. Under the benefit cap as proposed, there is no support for that child at all. This amendment restores only 13.40 of the 62.40. In that sense it is an extremely modest amendment, but it does mean that there will be some money coming in for children in this pressurised and often suffering environment, as we discussed in the previous debate. It means that there is some help for children while maintaining the principle of the cap. All of us who have used child benefit or family allowance know just how crucial it has been in our own lives to bringing up our children. It is entirely inappropriate that the only people not allowed to receive child benefit should be those who are out of work and whose benefits are capped.

Quite a number of people have asked, especially over the past few days, why Members on this Bench have been particularly concerned about the needs of children in these welfare debates. Christianity, along with other faiths and beliefs, requires us to think most about those who have no voice of their own. Children who are in most need are one of the most evident examples of that, and the New Testament shows that Jesus had a very special concern for children. Children have no vote in our society; they probably do not answer YouGov questions.

This amendment goes some way towards protecting children by helping two groups especially. First, for children in families that are struggling to pay rent, it will mean fewer face homelessness-especially but not only in London. Secondly, it will help those in larger families. Children do not choose to be in large families and many are so because parents have taken in, and provided love for, those who would otherwise be a burden on the taxpayer. It cannot be right for someone who becomes unemployed not only to lose their job and have their assessed benefit cut but to be told that their children no longer have a right to child benefit.

This amendment declares our support for children, families and the next generation, and I beg to move.

Photo of Baroness Sherlock

Baroness Sherlock (Labour)

My Lords, I speak in support of this amendment, to which my name is attached. I am grateful to the right reverend Prelate the Bishop of Ripon and Leeds for tabling it, and I pay tribute to both his and the Children's Society's long-standing work in support of children. My concern about this amendment is that the measure has some very poor consequences, whether intended or unintended. Perhaps the Minister can tell us which they are.

I want to suggest three ways in which this cap, as the Government have put it together, is particularly badly constructed and three problems that it will cause. First, as we have heard, this measure will seriously and disproportionately affect children. A new DWP impact assessment came out today, which significantly changed the figures that we were working with previously. I have been able only to skim read it but I see from the headlines that the official impact assessment says that 220,000 children will be affected, and the losses in income those families will face are not small amounts. Initially, 67,000 households will lose an average of 83 a week, while 17 per cent of those affected will lose more than 150 a week. Those are very significant sums, so the behavioural impacts which the Minister wants to see happen will have to be very big indeed to address losses of that size, and I wonder what we can do about them.

I am not clear what steps those parents are meant to take to be able to avert those losses. That impact assessment says that 44 per cent of households affected are already living in social housing-in other words, in the cheapest accommodation available in their area. These are not families who are living it up in Kensington mansions, sipping cocktails by the pool before dinner. Forty-four per cent of them are already in social housing and most of the rest are in the kind of private housing that the noble Baroness, Lady Hussein-Ece, described earlier. As anyone who has had cause to go knocking on doors in London will know, there is housing out there which is astonishingly expensive but of astonishingly poor quality. The nature of the private sector market in London and other very high-cost areas is such that it is depressingly easy to rack up rents of 350 a week if you have two or three children.

What will happen and what are those families to do? In Committee, I put down an amendment which sought to exempt from the cap specific groups of vulnerable children who, for example, had been the subject of child protection orders, and I asked the Minister what those families could do to avoid being forced to move. He gave me three ways in which families could avoid that. The first was that they could negotiate a reduced rent with their landlord, although he had the good grace to acknowledge that may not succeed. The second way that the Minister suggested was that they could move into work, but when we look at the figures, we find that some 60 per cent of the families affected-a majority-are not required to work, either because they have small children or because they are sick or disabled and have limited capacity to work. In fact the Government's own policy of not trying to push sick people or the parents of young children out into work is now suggesting that they do that, which does not seem like a great idea either.

The final suggestion which the Minister made was that families could use their savings to pay the shortfall. I believe that one of your Lordships mentioned in the previous debate that the average family in Britain had just 300-worth of savings. That would not go very far in paying shortfalls of this nature, and one has to suspect that these families are likely to have less than the average amount of savings. We therefore have to accept that what will happen is that these families will be forced to move.

Many children's charities have made representations to me, as I am sure to many noble Lords, saying that they fear that families would be forced to move not just once but repeatedly. If they move to a cheaper area and rents rise faster than the cap, they have to move again. What are the consequences of that for the children? Again, I looked into this in Committee. The initial DWP impact assessment highlighted the possible damage to children forced to move school repeatedly, and the evidence is quite clear of the impact-the negative impact, obviously-which that has on children's academic achievement. As I also pointed out in Committee, forced moves reduce the ability of child protection professionals to keep track of families where children are at risk of abuse. I asked the Minister to write to me on how the Government would address those particular categories, and he did. I am afraid that it was with no very satisfactory encouragement and, again, I hope to give him the opportunity to be more specific when he responds to this.

In research that looks into the case reviews that follow the serious events that happen to children who have faced abuse and sometimes death, certain themes come out again and again. One of them, and I have heard this said by Members of this House, is that when everyone gathers around the table for a serious case review, someone always says, "Do you know, I wish we'd all talked before. Maybe, if we'd all talked to each other, this wouldn't have happened". One of the things that make it less likely that that communication will happen regularly is if the families in question move house repeatedly. Are we really going to force more families to do so? I am very concerned about what will happen in that regard, but I can see no way around it. What else can we do? We have to press on.

The Minister's next argument is that he is clear about what the policy is for. I am not at all clear about that. He said in Grand Committee that the purpose of the cap was to encourage work; the Secretary of State for Work and Pensions has said many times in the media over the past 48 hours that he will ensure that people will never be better off on benefits than in work; and I have sat through all the stages of the Bill so far and lost count of the number of times that the Minister has told us that the universal credit will ensure that work always pays more than welfare. If that is the case, will he explain why this additional measure is needed? If work is always going to pay, we do not have a problem-so that cannot be the issue.

My final concern is whether the comparison is fair, a point made by the right reverend Prelate the Bishop of Ripon and Leeds. The Government-unintentionally, I am sure-are misrepresenting the impact of this amendment. They declare that no one should receive more in benefits than the average family will earn, yet surely they are wilfully ignoring the fact that that average family would themselves be entitled to claim child benefit for every child in the household. They are deliberately and intentionally putting child benefit on one side of the equation and leaving it out from the other, thereby constructing a test that cannot be fair. We have tried many times in Grand Committee to get the Minister to explain that anomaly. My noble friend Lady Lister put the point specifically to him on 23 November: how could he justify this? Clearly, she said,

"We are not comparing like with like".

The Minister said:

"My Lords, I acknowledge that we are not comparing like with like. We are looking at a sensible level at which to put the maximum benefit payment ... I think that one can overelaborate the logic, which I will not attempt to do here".-[Official Report, 23/11/11; col. GC 419.]

There is not much danger of the logic being overelaborated. Rather, we have a logical deficit here, and I invite the Minister to explain it.

Thankfully, we have some mitigation here. The cavalry has appeared cantering over the horizon in the form of the right reverend Prelate the Bishop of Ripon and Leeds, who has put down an amendment that allows us to address all these questions. In particular, he has pointed out that benefits specifically for children such as child benefit-a universal benefit, although recently some but not all families paying higher rates of tax have been excluded from it-are not means-tested. Originally it was a tax allowance, and it was always intended to be a transfer from the public in general to families with children, in recognition of the fact that children are a public benefit as well as a private one. Today's kids will pay my pension-at least, if I am ever old enough to claim it, although the age at which I will be allowed to is receding into the distance. It therefore seems reasonable that we all make a contribution to that, hence the nature of universal child benefit.

Once we start to decide that some benefits are not really for everyone and that some benefits such as this one are excluded, we have to understand the rationale for that. I struggle to do so. To be in a position where some families earning over 80,000 a year would get child benefit but the families that we are talking about would not is simply unjust.

The Minister has said that this is a matter of principle. Frankly, that is the one thing it is not. He has decided on a cap but he has told us-and we already know-that certain types of payment will be exempt, such as disability living allowance, attendance allowance and some payments to war widows. All we are suggesting in the ame benefit to that list and saying that payments of child benefit specifically should be exempt as well. If we cannot do that for the children of our community, what can we do? I am pleased to support the amendment.

5:30 pm
Photo of Baroness Tyler of Enfield

Baroness Tyler of Enfield (Liberal Democrat)

My Lords, I support the amendment, to which my name is also attached. We have heard a lot today about fairness. It is important that people in work feel that there is fairness in terms of how much money can be received by those out of work and on benefits, and that there is a clear incentive for all those capable of work to do so in order to r themselves and their families. I place on record that I welcome the measures being taken by the Government, such as the work programme, to give intensive help and support to people needing a lot of help to get back into the jobs market.

There is another aspect to fairness, though: fairness to children, irrespective of the circumstances of their birth. I shall run through the reasons why I feel that child benefit should be exempt from the calculation of the benefit cap. First, as we have heard, it is a non-means-tested benefit paid to all households with children. We have already heard this question posed today, but is it fair that children born into small families with earnings in excess of 80,000 a year receive child benefit while those born into larger families with a benefit income of 26,000 a year do not? I do not think that that passes any fairness test.

Secondly, child benefit is paid to assist with the costs of raising children. In my view, it is not about sending signals or penalising adults who do not work-and I add that all adults who can work should do so. Thirdly, this measure would have a disproportionate impact on children. We have heard the figures from the noble Lord, Lord Wigley, and the right reverend Prelate, and I do not intend to go through them again. Fourthly, it is a question of a compromise solution between children in large families receiving the full current level of state support and receiving nothing at all, which I perceive to be unfair. Fifthly, reducing the impact of this policy on large families would reduce the couples penalty that is currently built into the benefit cap.

The reason why I am concerned about the current situation is the issues raised compellingly in the debate earlier by my noble friend Lady Walmsley. This is about families having to move abruptly to cheaper areas and the disruption that that will cause to children's schooling, often halfway through a school year. It is about families feeling, rightly or wrongly, that they will have to split up because if they created two households instead of one, parents would then be entitled to 26,000 a year in benefits. That cannot be right. Experts in the field have said that there is a substantial couples penalty built into the cap that is completely at odds with my own view, and that of the Government, of the need to support strong and stable families.

I am concerned about the impact on children who might find themselves homeless, perhaps in unsuitable and expensive temporary accommodation. With children and young people's services already very overstretched, there is a real danger of children at risk simply disappearing from view below the radar, which raises child protection and safeguarding concerns.

I will summarise by saying, as was said earlier today, that children should not be the innocent victims of this policy. The vulnerability of children is very important to people on these Benches, and I look forward to hearing what safeguards the Minister has to offer in this area. I heard him say in the previous debate that he saw the transitional issues as a second-order issue. I do not consider the welfare of children to be a second-order issue at all.

Photo of Lord Greaves

Lord Greaves (Liberal Democrat)

My Lords, I have not spoken in the Welfare Reform Bill debates so far and I will be brief now. On the specific issue of child benefit, the Government seem to have got it seriously wrong. What is being proposed undermines the whole principle on which child benefit-and before that, as many of us will remember, the family allowance-has been based. If the Government are going to do that, I fear that that is the beginning of a slippery slope, and they will have to explain to us very carefully why they think the basic principles no longer apply.

In illustration, I go back to the example given by the noble Lord, Lord Best, about typical, ordinary-perhaps very ordinary-accommodation in the East End. There has been lots of fancy new development in the East End in the past decade or two, but most of it is still not regarded as being the most desirable part of London. People living in other parts of London in particular usually find themselves paying a great deal more than 350 a week for an ordinary two or perhaps three-bedroom flat. According to the paper today, for a four-bedroom house in the least salubrious part of Kingston-I did not know that such places existed, but it appears that they do-400 a week is not unusual. That is four times what you would pay for an ordinary, perfectly decent house in my part of the world, but there you go.

If as a family whose benefits are being capped you receive 500 a week, and you are paying out 400 a week for rent, that leaves you 100 for everything else. I challenge any Members of your Lordships' House to tell us how well they would do at bringing up a family of two, three or four-or perhaps more-children, plus one or two adults in the house, on 100 a week. It can be done, and many people in many parts of the world survive on far less than that, but this country is now almost the most prosperous that it has even been, if you take away the last five years. We are still incredibly well-off. If Members of your Lordships' House think back-most of us are getting on a bit-to our childhoods and the circumstances that we were brought up in, they will see that this country is now incredibly rich and well-off. To require families to bring children up on 100 a week for everything apart from their rent is unacceptable.

When the media are encouraged, I have to say by some politicians in this country, to rant and rave about how these people are getting 26,000 a week and that everyone ought to be able to live on that-I apologise, 26,000 a year; some people are on 26,000 a week, but they are rather different-the debate really ought to start at what you have left after your rent. The state of the private housing market, and indeed rents in the public sector, is not the fault of people who have to live in these houses. There is a scandalous situation in which commercial landlords are ripping off people-indeed, they are ripping off the state, if people are getting housing benefit-by charging ludicrously high rents that are not justified by the cost of maintaining those properties but that are what the market will bear. If the Government and the rest of us want to do something about the state of the private housing market, we should look at housing policy and perhaps at the way in which the private housing market works. But that is a different issue all together. It is not the fault of the people. To try to do this-to try to force rents down or to try to regulate the markets and move people around the country by capping the benefits of the people living in those houses so that they can no longer live there-is penalising the tenants when the people who ought to be penalised are the landlords.

I have digressed a little from child benefit. I apologise for that. Child benefit, as my noble friend and others have said, has always been a non-means-tested benefit that goes as of right to families with children. It has always been paid on a per capita, per child, basis. That is a fundamental principle. The first child gets more nowadays, then each child after that gets the same, in order to assist the work of bringing up that child. To abolish child benefit, which is what is actually being done in this Bill, for people who are at the benefit cap and who are getting other benefits that take them up and beyond that cap, as is highly likely, is a fundamental attack on the whole principle of child benefit.

This ought to be resisted. Your Lordships ought to resist it, and we really ought to ask the Government very seriously to think again on this particular issue.

5:45 pm
Photo of Baroness Meacher

Baroness Meacher (Crossbench)

My Lords, I had not planned to speak in this debate, but the noble Baroness, Lady Grey-Thompson, put her name to this amendment, but has been detained and so cannot be in the Chamber. I think it is important to make the point that there is Cross-Bench support for this amendment.

I want to make one point. The Minister has made a great deal of the importance of fairness between those in and out of work. We know that there are problems in this Bill such as issues of fairness across geographical areas or between different sizes of household. I shall simply focus for a second on the fairness between those in and out of work. One thing that puzzles me is that not only will those who are in work get their average earnings-let us say, of 26,000 a year-they will of course also get child benefit. As I understand it, they will also, if they have three or four children, receive housing and other benefits under universal credit. The cap will not apply to those in work, so there is a discrepancy not only in that child benefit will go to those in work but not to those out of work but because it will be at the same level of net income. This applies to other benefits too.

I certainly do not want the cap to apply to those in work, but one does have to consider this. Presumably the argument for not applying the cap to those in work is that those families are really struggling-the so-called middle earners or middle-income people. It is very tough to live with three or four children on average earnings. Therefore, they need a whole range of benefits. If they need a whole range of benefits, it is very difficult to see how the Government and the Minister justify excluding any reference to all the benefits that those in work will have, and arguing that those out of work should be able to live on a level of income that no one in work would be expected to live on.

If you assumed, as I sometimes get the feeling the Government do, that anyone out of work can get back into work, and you really could find and get a job within a week, or two or three weeks, you could just about justify this. However, so many people who are on benefits are going to continue to be on benefits, and they have a range of disabilities that will not even entitle them to PIP in the future, because things are going to become very tough. The Minister knows the group of people I am most concerned about: people with a range of mental health problems. It is very difficult for those people to get any employer to take them on, yet they are going to be expected to live on a level of income that people in work will not be expected to live on. I would like to hear the Minister's response on that point.

Photo of Baroness Butler-Sloss

Baroness Butler-Sloss (Crossbench)

My Lords, I totally understand why the Government require it to be said that not everyone should get child benefit. There are two groups of those who are not employed and to whom the cap will apply about whom I am particularly concerned. I should declare an interest as the president of the Grandparents' Association.

A considerable number of grandparents, particularly grandmothers, have been in perfectly good employment over a number of years and then for one reason or another find themselves obliged to take on the care of children, who are sometimes extremely young, in addition to their own teenage children. As well as grandparents, there are also other kinship carers, as they call themselves, who take on the care of other people's children, usually their nephews and nieces and sometimes their great nephews and great nieces. They give up their jobs. They have to, because they cannot care for these young children, who have in a sense been dumped on them without any prior warning on some occasions. They will give up their jobs for the care of their grandchildren or other kinship children, then find themselves in real difficulties with this cap.

We are not just talking about one or two children-this is my second point. There are families with a considerable number of children, not all of whom are their own. There are single mothers who have gone through a number of different partners by whom they have had a child. They end up sometimes with five different successive partners, and with more than five children. How on earth will that group of families cope if they are unable to have additional child benefit? I can understand their coping perhaps with one or two children but not three, four, five or six. Such families make up a smaller percentage; the figures were given in our previous debate. However, they do exist and they will be in real difficulty. Unless there is some sort of hardship allowance for families who cannot cope on this 26,000 cap without child benefit, I fear that I will go the way I would prefer not to go-against the Government.

Photo of Lord Kirkwood of Kirkhope

Lord Kirkwood of Kirkhope (Liberal Democrat)

My Lords, this is a very important subject and this is the most important amendment as it seeks to deal with some of the problems that will flow from Clause 94.

I want to make it clear that I am implacably opposed to a household benefit cap in principle. People's eyes glaze over when I try to explain my main reasons. I tried it in Grand Committee and by the end people looked at me as though I was possessed. However, there is a point that has not been made and it is very important. I am talking to my own side as much as to anyone else. I have spent my entire life fighting for benefit entitlement to be enshrined in law. That is to say, if you meet the eligibility criteria you get the amount due. That has been hard fought for and it is a very important part of our social security set-up.

Clause 94 changes that. It is a ministerial override. The Chancellor of the Exchequer or the Secretary of State for Work and Pensions will decide, arbitrarily in my view, although the Minister says that it is to do with mean or median average income. These are not figures that are easily pinned down in our systems of legal entitlement in social security Acts. A Minister of the Crown now says that he can, by regulation, override who gets child benefit if it is counted in a cap and if they are over the arbitrary limit. That is a change. We are giving powers to Ministers that I do not think it is safe to grant them.

If the Government think that housing benefit is too high in some circumstances, let us reform housing benefit. I would be up for that. We have heard powerful speeches. My noble friend Lord Greaves just made a very powerful speech about the amount of money that is being diverted to landlords. It is 2 billion a year in housing benefit. Anyone sensible would want to take a look at that, but this is looking at it over too short a period and doing it in a technical way that strikes at some of the protections that we have in Parliament. When we set entitlements in the uprating Statement every year, we can be confident that if people meet those entitlements they will get that money. We cannot say that any more because a cap may be applied. Look at the regulations and look at Clause 94; it is very general. This is a very targeted debate, which it should be as it is about child benefit. I say to noble Lords that, in future, child benefit amounts can be attacked in a way that we will not be able to control. Local authorities will have to reduce child benefit entitlements to enforce this cap. That is not something that this House should accept casually.

What I should really like to do with Clause 94 is vote against the whole thing. However, my noble friend Lord German and one or two others took me into a dark room, sat me down and said, "That wouldn't be sensible because the great British public know the square root of next to nothing at all about the detail of the technicalities". He has persuaded me that I should mitigate Clause 94, and I am prepared to do that. This amendment is the best form of mitigation because it protects a universal benefit that people earning just shy of 80,000 a year will qualify for until we look at that. The Government say that they are on the case. Those people will get that benefit, while people subject to the housing cap in future may not. I do not see the equity in that situation and it would not be safe for us to run with the clause if unamended. I am grateful to my noble friend Lord German for showing me the error of my ways in getting the mitigation.

I want to say two other things as well. This does not attack universal credit. If I believed that the amendment did that, I would certainly vote against it. Why do I not believe that? The amendment is to Part 5 of the Bill, whereas universal credit is in Part 1. If this is an essential part of universal credit, why is it not in Part 1-in the first 43 clauses? It is not. It is there only because of something called the Treasury claw-back, which we discussed at great length in Grand Committee. I was absolutely persuaded that I would die in a ditch to save universal credit. I pay credit-universal and otherwise-to the Minister for achieving it. As someone said earlier, it is an achievement. It will transform and improve dramatically the way that the welfare and benefits system is rolled out. We will certainly be in a much better place when the economy recovers.

However, the Treasury claw-back is 18 billion over the CSR period. The amendment, give or take the new version of the impact assessment, which I have not yet studied, will save 113 million. My point is simply this: the deal was done by the department in 2010, when it was absolutely reasonable to expect that the green shoots of the economy would start to be seen in 2014. Is there anyone in this House who now believes that that will happen? The circumstances of 2010 are now changed, so we are not lashed to the mast. If you want to give some protection to the people at the lower end of household income distribution, this is the amendment to mitigate that affect.

There is a lot of misunderstanding in this debate about the difference between a poverty indicator before housing costs and a poverty indicator after housing costs. After housing costs, the families that will be hit by this household benefit cap will be as poor as church mice. When you measure the amount of income available to a household and divide it by the number of people in it-these are big households-they will get tiny sums of money. I saw an article in the Guardian today that referred to 62p per family member after the household benefit cap in one case that had been worked out. What are we doing here if we are approaching that kind of thing?

The Government will not be able to control this. The child benefit that will be withdrawn will be withdrawn by local authorities. Once the regulations are passed, we will lose control of what will happen to these households. I contrast that. Colleagues may know that the DCLG is running a very interesting programme on troubled families. The Prime Minister tells us that there are 120,000 troubled families-I am sure there are-just in England. We are spending just shy of 450 million on getting alongside them, getting them back into work and getting their kids into school. That is a much better way of dealing with some of this stuff. Why, on the one hand, are we helping troubled families? People who are hit by the housing benefit cap will very quickly become troubled. Maybe they will get help from this left-handed scheme. Meanwhile, they have to face the reductions that are being made by the right hand of the Government.

I am very worried about this. Child benefit is a universal benefit and a mitigation that is essential to protect the interests of children. It does not affect universal credit. If it did that, I would not vote for it. However, if it is pressed, I will vote for this amendment with enthusiasm.

6:00 pm
Photo of Baroness Corston

Baroness Corston (Labour)

My Lords, I want to speak briefly about child benefit. I was very proud of the fact that in 1977 the then Labour Government, under Jim Callaghan, brought in child benefit. At the time, there was a huge campaign saying that it was taking money out of the wallet and putting it in the handbag. We said, "Yes, that's exactly what it is going to do and it is exactly what it should do". My noble friend Lady Gould, who was my boss at the time as chief women's officer for the Labour Party, and I played our part in making sure that Jim Callaghan knew what the women of the Labour Party thought about child benefit.

I want to address my comments to a particular part of this argument about child benefit being a benefit that is paid to the carer of the child. It is money that goes to women. In my work with women in prison, I have more than once come across a tragic phenomenon where a woman shoplifts. I know of a case in the south-west of England where a woman shoplifted 99 times in a year, each time for food for her children. Her husband had control of the family income-whatever that family's income is, and it might be benefits. The only money she had was the child benefit and all of it went on feeding her children, but it was not enough and she therefore stole food. I say to the Government: you think very carefully about the effect that any incursion into child benefit-as a universal benefit payable to the carer of the child, irrespective of income-will have, and that is a hugely important principle. If people do not need the benefit, then use the income tax system to make sure that there is a redress, but please do not, without thinking very carefully, attack a benefit that is the only means whereby some women can feed their children.

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Baroness Lister of Burtersett (Labour)

My Lords, the noble Lord, Lord Hamilton, asked questions about the morality of the current situation. I should like to ask this House, following the point made by the noble Lord, Lord Kirkwood: is it moral that we are deliberately pushing families with children below the level of income that Parliament has decided is necessary to meet their most basic needs? Research shows that that money is not sufficient to meet those basic needs, as determined by the wider population.

A number of noble Lords, including the noble Lord, Lord Fowler, on the government Benches, have asked questions about costs-I had a wonderful vision of the noble Lord wearing his "Action for benefits" badge in front of the mirror. In the other place, the Minister said that this is not primarily a cost-saving measure. What is it? He said it is primarily about changing behaviour, but my noble friend Lady Sherlock pretty well demolished those arguments.

The Minister also said that this is about restoring the credibility of the welfare benefits system. However, that credibility is being undermined by the misinformation being put out by Ministers about that system-in particular, the way that they slide between talking about average incomes and average earnings as if they are the same thing, when they are not. The median family in work receives 33.70 in child benefit as well as various other in-work benefits. The point was made that child benefit replaced child tax allowances. If that had not happened and we still had family allowances and child tax allowances, the median earnings of the average family would be that much higher because of the effect of child tax allowances. It is therefore really unfair that we are not comparing like with like and, as my noble friend pointed, when the Minister was pushed on this issue in Committee regarding how he could justify the fact that we are not comparing like with like, he simply did not have an answer.

Photo of Baroness Wheatcroft

Baroness Wheatcroft (Conservative)

My Lords, I did not join your Lordships' House in order to kick the underprivileged, particularly children, but I did believe that the Government were committed to healing the broken society. I do not think that any of us can doubt that society is broken, and we would all agree that there is a need to heal it and that dealing with the dependency culture is an important part of that. That is something that I believe in absolutely. That is at the heart of this legislation. To my mind, the worst sort of child poverty is poverty of aspiration.

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Baroness Whitaker (Labour)

I apologise for interrupting the noble Baroness, but she used the term "broken society" and said "I think we all accept that it is". I am really surprised to hear her say that. Can she give us her evidence for the broken society?

Photo of Baroness Wheatcroft

Baroness Wheatcroft (Conservative)

I would refer only to the recent riots as evidence of a society that was not entirely at ease with itself. If the noble Baroness is content and happy with the state of society, I am happy for her. I have qualms myself, particularly when I look at the number of children who have no aspiration to education or a career. That is one of the things that I believe the Ministers who are pushing this legislation through are committed to.

As I said, the worst sort of child poverty is poverty of aspiration, and in this country there are many households with no experience of paid employment. That is a terrible condemnation of what has been allowed to grow up in the name of a welfare system.

One of the greatest welfare benefits that we can bestow on children is an aspiration to acquire education and then a career. Growing up in a household where the concept of working for a living is understood and embraced is important for starting youngsters on the right path. A cap on benefits is a sensible step towards encouraging people into work. If we are going to have a cap, in the end we have to have a cap. There is no saying where child benefit is spent. It may go to the women but, I am afraid, not every woman devotes her time to spending her money on her children. That is what we might like to think, but there are others who have drug habits to fund and so on. Women are not infallible and I would be the first to agree with that.

The Government have assured us that they are not approaching welfare reform in a truly one-dimensional way. This is not just about cuts and saving money. The problem households that are locked in a cycle of benefits dependency are known to the authorities. We are told that the authorities are ready to work with those households between now and when this legislation comes into force. They can produce results. I can believe the Government when they say that they are committed to doing that. If they do, and they produce long-term benefits for children in those households, it will be a far more caring result than just handing out cash.

Photo of Baroness Farrington of Ribbleton

Baroness Farrington of Ribbleton (Labour)

My Lords, I also had not intended to speak in this debate, but I have just been reminded that we are celebrating the work of Charles Dickens. I do not know why that came into my mind in the last few moments. Is it the deserving poor or the undeserving poor?

In answer to the noble Baroness, I actually stand in the middle as regards the broken society. To me, as an individual, parts of our society are broken, and the ones that are the most broken are those who lack empathy for those less fortunate than themselves. That is the root of our problem: whether the lack of empathy is the teenager who is incapable of understanding that the pensioner at the bus stop whose handbag he tries take is a human being like his mother or grandmother; whether it is someone who has made it in life and believes, "It is all due to me and other people could be like me"; or whether it is the elderly person who says-and we are all in danger of doing this-"It was not like this when we were young".

When I fought against the threat to what was then family allowance many years ago, some of the people who said, "I don't agree with you, Josie", were people who said, "I didn't get it when my kids were young". They then went on to tell me about the miseries they went through because they did not get it. Today, we are debating family needs and the issue of what makes a good society. I cannot understand how, on the same weekend when this debate was around in the media, someone suggested that we should give a new tax allowance to people who were working, given that any tax benefit, any cut in taxation, benefits those who earn most at the expense of those who have least.

We have a Prime Minister who has talked about the importance of marriage. That is a matter for him. To me, the important issue is that of families with children: how we provide a society in which the next generation has more empathy. I know that I am not alone in coming from a large family. There is among large sections of this country, certainly in focus groups, the view: "Why did they have all those children? They didn't need to". Among some people, there is prejudice that there is something morally wrong about having children. You can argue that case, but the child born into the large family should not be penalised. My work as a councillor leads me to know that there will be those who will blame their children for the fact that their income has gone down. They will say, "If I had not had you little devils, I would have had more money to spend on us". That is the harsh reality of some children's lives.

I cannot understand how the Minister is talking about fairness. We need to be fair to families with children. Anybody who believes, as was hinted at on the radio this morning by a member of the Government, that people have children in order to get money, has never brought up a child. Child benefit does not cover the cost, however little you give those children. We are facing a system that will penalise children to appease those who think that the children ought not to have been born. There, I have said it. That was what made me remember Charles Dickens. He knew that there were huge sections of society who believed that the undeserving poor ought not to have children.

The Minister has told us that large chunks of the people who will lose their child benefit are people who cannot work, by the Government's own admission, yet sweeping changes will affect them. I appeal to everyone who knows what is fair and what is right. We did not fight the issue of income tax allowance; we must fight to keep child benefit. We know that we are not dependent on those children for our old age, because they are too young to be supporting us; most of us will be long gone; but we need them for a good future and we do not want to inculcate in them grinding poverty, and grinding poverty is what we will be condemning them to. I remember in my childhood that the best meal of the week after Sunday was Tuesday night, when the family allowance was paid out. That was a very common experience. We need to ensure that those people who have children can provide the basic necessities-they are basic necessities-and support the right reverend Prelate the Bishop of Ripon and Leeds.

6:15 pm
Photo of Lord Newton of Braintree

Lord Newton of Braintree (Conservative)

My Lords, I had not intended to speak again, having had my say earlier, and will not repeat what I said, although I cleave to the view that this is not a sensible way to deal with these problems; they should be dealt with in secondary legislation. In that, I embrace the comments made by the noble and learned Baroness, Lady Butler-Sloss, about people taking in other people's children and the need to be sensitive to issues that could arise there. Indeed, I remember noticing while I was in not another place but another location during the first week of discussion on the Bill that a lady in Huntingdon, I think, was reported to have taken in five children of friends of hers, both of whom had died in a short space of time. Others may have noticed the story. Such a case, and others raised in an amendment by the noble Baroness, Lady Drake, need consideration in detail, but we cannot do that on the Floor of the House in discussing amendments to primary legislation.

I need no encouragement in willingness to hold Ministers' feet to the fire about addressing some of those detailed problems, but I question whether it can be done in this way. My noble friend Lord Kirkwood is a real friend. I cannot remember the last time that I disagreed with him. He is clearly out to be more reverend than the Bishops' Bench in his defence of no benefit cap at all. He makes his case. He suggests that it is not incompatible with his support for universal credit. Fundamentally, his position is hostile to the intention of universal credit, which is to diminish the number of people who cannot afford to work.

I must say to the right reverend Prelate that the basic point about the amendment is that it raises the level of the benefit cap. There may be an argument for that, but that is what it does. There is a knock-on effect of that. It must increase the number of people who cannot afford to work. That is a matter of logic. It must do. The more children you have, the less likely it is that you will be able to afford to work, because you will not necessarily be able to command earnings which will replace the benefit. That is the core of the problem that we are seeking to address.

The right reverend Prelates may want to do that; they may think that it is right; but it needs to be straightforwardly stated, in the context in which many people have said-I do not make a judgment on this-that the worst thing that can happen to children is to be trapped in a household which cannot afford to work, in which they have never known anyone in the household in work. Keith Joseph used to have a phrase for that: the cycle of deprivation. We are not free of it. We need to take account of it. People can draw their own conclusions about the right level, but we need to know what we are doing.

As I said, I hesitate to challenge the right reverend Prelates, but they are making life easier for some in financial terms but worse in what I would regard as a sensible way to approach social policy. They may have put figures on that; they may not; but that is my view.

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Lord Greaves (Liberal Democrat)

Does my noble friend accept that the logic of what he is saying is that child benefit should be abolished for everybody who does not have a job?

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Lord Newton of Braintree (Conservative)

I meant to say at the beginning, but I do not think I did, that if anyone can be held responsible for the continued existence of child benefit in this country, it is me. In the late 1980s, it had not been uprated for two or three years. I became Secretary of State for Social Security. I fought tooth and nail to reintroduce the upgrading of child benefit.

I had a lot of battles with a lot of colleagues and managed to do it in the form of introducing the increased rate for the eldest child-the first child-which was laughed at at the time but appears again to have stood the test of time. I yield to no one as a defender of child benefit and I certainly do not want to abolish it. I have reservations about the Government's proposals on taxing it-they will come up at another time-but I will not be accused of being hostile to child benefit. I am simply saying that I support it but I also support the objective of ensuring that children are in households where it pays for the people involved to work if possible.

Photo of Lord Ashdown of Norton-sub-Hamdon

Lord Ashdown of Norton-sub-Hamdon (Liberal Democrat)

I am most grateful to the noble Lord for making the point. Indeed, he deserves all the credit for child benefit-he does not claim it as he is not an immodest man-and millions in this country owe him a great debt. The question that puzzles me, and perhaps he can help, is: how is it right, morally or otherwise to deny child benefit to somebody on 26,000 a year when they get it on 80,000?

Photo of Lord Newton of Braintree

Lord Newton of Braintree (Conservative)

The issue is at what level the benefit cap should be set, and whether to set a different level that automatically puts people with children, depending on the number, in a position in which fewer of them can afford to take jobs at the rates they are likely to be able to command. It is a matter of judgment not of fact. It is an issue that cannot be evaded, but it has been evaded in a lot of the discussion we have had tonight. I will not vote for the amendment but I will not dismiss the concerns, particularly those addressed by the noble and learned Baroness, Lady Butler-Sloss. They need to be addressed by Ministers in working out the detail. I repeat my phrase that I will join in on holding their feet to the fire but I will not join in on this rather hasty and ill considered amendment today.

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The Bishop of Chichester (Bishop)

My Lords, I was very tempted to intervene in the middle of what the noble Lord, Lord Newton, was saying when he accused the Bishops of suggesting that we wished to have no cap at all. I have not heard one of us say that, but I am glad that I did not intervene as he then admitted that he did not really mean that and talked about us trying to raise the level of the cap. I am glad that I was patient.

I do not want to intrude on what my friend the right reverend Prelate the Bishop of Ripon and Leeds will say later, but I want to address something that has not come up yet. Quite a lot has been said about the popularity of this Bill, particularly the cap. One has to be fairly careful about being too quick in response to vox pop when making legislation. If we were debating capital punishment, for example, I suspect that many of the same things would be said. If we were to tease out what public opinion was concerned about, I suspect that we would probably find a remarkable unanimity of view within the House about the end we want, but the question of limitation is important. There have to be limitations on benefits and there have to be limitations on all sorts of other things, such as rents, but that point has already been made. I suspect that there would be a remarkable degree of agreement about the need to incentivise people to work and encourage a culture in which society as a whole sees the point of work, and particularly that young people are educated with a vision and the desirability of a career.

Finally, I suspect that there would be considerable sympathy and recognition of the dependency culture that we have inadvertently allowed to develop, and out of which we need to enable society as a whole to grow. The question is: who bears the price of that change and in what time does it change? I agree entirely-I suspect that I have the mind of my colleagues on this-that we need to change the mind of society on how we address a number of things. This Bill, properly refined, could well contribute towards that. We also have to help to educate public opinion in the way in which it responds to vox pop surveys. I suspect that another thing on which people would agree-we might find a high degree of popular agreement-is that in the provision for children in their homes, their education, and the stability of their family lives lie the best possible foundation for the future. If you ask people that question rather than some others that get knee-jerk reactions, I suspect that we would find much greater unanimity in the country about what we are trying to achieve. I suggest caution on having too easy a reliance on popular opinion polls.

Photo of Lord Brooke of Sutton Mandeville

Lord Brooke of Sutton Mandeville (Conservative)

This will be not a Second Reading speech but a Second Reading remark, I hope said quickly enough to save my noble friend the Whip getting up gently to rebuke me. It would not have been relevant on the previous amendment but it is on this one.

The noble Lord, Lord Best-I almost called him my noble friend-indicated that homelessness was already on the rise. This debate is about homelessness as much as it is about fairness to children, and will be used as a quarry for homelessness policy in the future. Homelessness can still occur under this amendment in the future where the previous amendment sought to prevent it.

I shall make a counterintuitive comment. For 24 years I represented in the other place what was almost certainly the most poverty-stricken Conservative seat in the country by the proportions of standard household criteria. A lot of my homeless constituents were moved from hotel to hotel, frequently outside my constituency, and often from constituency to constituency. I do not recall anyone talking before about this diaspora but there is no policy, no rule and no mutual convention as to who their MP is as they move to different places. If MPs are not agreed about who their MP is, the poor homeless family cannot be expected to know. In the process, beyond the price their children pay educationally and socially by moving, the whole family pays a democratic price in not knowing who represents them. Believe me, as a former inner-city MP, I know that they stand in considerable need of representation. As a London Member, the present Secretary of State can almost certainly recognise this problem but I reward my Whip's silence by saying that I am in favour of the cap.

Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

My Lords, this is an important amendment that we can wholeheartedly support. I pay tribute to the right reverend Prelate for his leadership and support for this proposition that has come from many quarters, especially the faith communities. Far from being out of touch, we know that it is the faith communities that so often reach the most disadvantaged people and that statutory services, for all the want of trying, simply cannot reach them.

The debate is fundamentally about fairness. I do not propose to repeat or answer all the points that have been raised. That is the Minister's job but I agree with the noble Lord, Lord Kirkwood, that if this were about undermining universal credit we would not support it. That is not what it is about; it is a completely separate issue. It has become very confused in the debates we have had both before and now.

I shall speak a little about the dependency culture issue. As I said before, I thought that universal credit was the mechanism to encourage people into work, into the labour market and to make it clear that being in work paid. That was the key government policy. If that is not sufficient and if it is a deficient policy that needs another component, as said by my noble friend Lady Sherlock, perhaps the Minister can explain that. If this is to drive everyone who is caught by the cap into employment, how does the Minister deal with the point that fewer than half the people on the updated analysis of those who will be caught by it are, on the Government's own assessment, not required to work, not fit for work or have responsibilities for young children that place them outside the properly constructed category of those who should be expected to work and not rely on benefits? Does the Minister say that somehow the broad policy and all the assessments that have been put in place as a result of universal credit have to be torn up and rewritten for this specific category of 75,000 households? If so, perhaps he can tell us precisely why.

The new impact assessment, which we received just a few hours before this sitting, sets out the choices people must make: work more hours, even though most of them are deemed not fit for work; reduce their non-rent expenditure; or reduce their rent expenditure. We have just debated how, in large measure, reducing rent expenditure is not an easy option or an option at all for most people. What about reducing non-rent expenditure and what does that imply? Does the Minister accept that that concept means spending less on children too? As the new impact assessment identifies, the number of children to be affected by the cap is 220,000 by 2013-14. A third of those affected will lose 100 a week or more, so can the Minister tell us what sort of items he thinks can be excluded from the family budget to save even the average of 83 a month? Would he accept that, particularly as the cap will bite hardest on large families, children will be affected and caught up by that? What is his understanding of how these families affected by the cap spend their income? Where does he see the scope for this massive saving that is needed if this cap proceeds as is recommended? Removing child benefit from the cap would at least preserve a stream of funding for families and a source that is supposed to be focused on the needs of children.

As the right reverend Prelate has explained, this amendment would not remove all the savings that the Government wish to make from the cap. It does not fatally undermine the thrust of the Government's argument, whether one subscribes to it or not, but it would provide some protection for children who are most affected by this measure. It would introduce greater fairness in the construction of the cap. It is not in conflict with a range of other amendments that we have yet to consider, but it will be supported with enthusiasm both by the Benches behind me and by my colleagues on the Front Bench.

6:30 pm
Photo of Lord Freud

Lord Freud (Conservative)

My Lords, the right reverend Prelate the Bishop of Ripon and Leeds made the point that the job of a member of the church is to look after children in need, but one needs to ask the question about children in need at a slightly different level. For instance, if we leave families with rents that they could never afford in work, what does that do for the children? What does it do for the children in those families when there is no working role model in them? We know what happens to those children. What does it mean to leave them in workless families given the much higher level of poverty that we know exists in them? What does it mean for the generational worklessness that we see in those families? The question that, from a religious point of view, you need to come from is much wider-What is the best thing for those families?-rather than looking at it from a narrow financial basis.

Let me supply the figures because they were just slightly misquoted. We estimate that the savings generated by the cap will be 120 million in 2013-14 and 130 million in subsequent years. I think I heard 113 million. Putting those figures to one side for the moment, the reality is that the savings on this measure are not the core point. We are trying to change behaviours. If we do not cut the benefit bill by the amount we have in the estimate, that is a good thing because we will have got people into work and changed their behaviour.

This measure does something different: it cuts the number of families affected by the cap from 67,000 to about 40,000. That is the real cost of this amendment. It takes the pressure away from those 20,000 families that will go on in the same way that they have been going, and we will not have the behavioural change that we want and need from those families.

Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

The Minister is not dealing with the point. On the latest updated assessment, something like a quarter of the people who will be caught by this cap are on employment and support allowance. Depending on which category they are in, it requires people to move closer to the labour market, but does not require them to work. Why are the Government using this leverage on people in that group? Thirty-eight per cent of them are on income support, which is again a category of people who, for all the reasons we have debated, are not required to work. For people on JSA, you could see this might be an extra spur, but why does this measure cover those people who, under the Government's assessment and on the basis on which they are going to construct universal credit, are not required to work?

Photo of Lord Freud

Lord Freud (Conservative)

My Lords, on the figures in that new impact assessment, the majority of people have full or partial conditionality in ESA, given the proportions of ESA. Most people on ESA in the support group will, in practice, be on DLA and therefore will not be affected by this cap, so we can look at the majority looking for work. Even if there is no formal conditionality, the message to families is that work is a solution in this circumstance. I need to remind the House that the coalition Government firmly believe that there has to be a limit on the overall level of benefit it is appropriate for the state to provide for those who are not working. Let me be absolutely clear about the structure because this is a point raised by several noble Lords. The noble Baroness, Lady Corston, made the point most emphatically. The structure of this does not take money out of the carer's pocket because we are not stopping payments of child benefits. Those families will still continue to obtain their child benefit, and there is an offset in the other benefits to get the cap to work. It will not work through child benefit. I know all money is fungible and households will operate within the same overall money, but there is no need for this concern that the money is taken away from the carer directly.

Photo of Baroness Farrington of Ribbleton

Baroness Farrington of Ribbleton (Labour)

My Lords, will the Minister just give a categorical assurance to the House that those affected by this government proposal, who the Government assess as not able to work at that time, will keep their child benefit, then we can all go home?

Photo of Lord Freud

Lord Freud (Conservative)

My Lords, I am obviously not going to make that commitment because that is not how this cap is structured. It is based on the premise that payment at unrestricted rates ultimately serves nobody. It does not serve those who are paying the taxes to fund it, and it does not help those who are trapped in dependence by providing little or no incentive to move off the benefit.

Let me answer a point about how it works that was raised by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie. They asked why we need it when we have universal credit. Universal credit is designed to provide an incentive to get people back into work or to reduce the disincentive. The cap does two things. While UC is the carrot, the cap is the stick, but it also provides the message to people much more widely than the families that are affected that a life dependent on benefits is not the way to go. There are other solutions, work being the main one.

It is vital that the benefits system is seen to be fair. We do not believe that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households. That is why the cap is set at 26,000 a year net or 35,000 a year gross. Even there, significant amounts of financial assistance will be available to the state.

Like other welfare benefits, child benefit is provided by the state and funded by taxpayers. Therefore, we believe it is right that it is taken into account along with other state benefits when applying the cap. The effect of excluding child benefit would simply be that families on benefit would have an income higher than average earnings. There would be no upper limit to the amount of benefit a household could receive. Clearly, that would depend on the number of children. My noble friend Lord Newton hit on the head the point of why one would want to tell people that that is not a solution to a life on dependency.

We are trying to achieve a simple rule for the level of the cap and a simple set of exemptions. We have already recognised that there are some households for whom it would not be appropriate to restrict the amount of benefit that they can receive; that is, households in receipt of DLA, constant attendance allowance and PIP when it is introduced. We will also exempt war widows and widowers. These households do not need an exemption for child benefit as well.

For other households, work should be the way out of the cap. We have said that we will exempt households entitled to working tax credit and that there will be a similar exemption for working households on universal credit. This will encourage people who could be capped to seek work, reinforcing the improved incentives that will come with universal credit. Excluding child benefit will only dilute our aim that being in work, even part time, must always pay better than relying on benefits alone.

I want to pick up the important issue of kinship carers raised by the noble and learned Baroness, Lady Butler-Sloss. In Committee, I made clear that I am looking at kinship carers in the round. In practice, the numbers affected are pretty small. In dealing with those issues, clearly, we need to get it right in regulations. The most effective point made by kinship carers, at least where I am concerned, is that when you take on a child or children, there is quite a period-a year is suggested-during which a big adjustment factor goes on because many children being taken on are quite troubled by the time they are transferred. I am very conscious of that issue, which needs addressing generally. That is what we propose to do.

When we introduce the cap we intend to use a method which looks at median earned income after tax and national insurance for all working families. We believe that this will strike the right balance between providing support for families, promoting fairness between those out of work on benefits and those in work, and ensuring clear financial incentives to work. In summary, I repeat the fact that this is the kind of figure that the general public see as appropriate.

My noble friend Lady Tyler raised family breakdown and splitting up. One of the key drivers of family breakdown is long-term unemployment, which puts considerable pressure on vulnerable families. One of the most supportive things we can do for these families is to make sure that work always pays and that the transition to work is as smooth as possible.

In this debate, we have talked a lot about children. I want to re-emphasise the point that children already have their life chances and opportunities damaged as a result of living in households where no one has worked for years and where no one considers work to be an option. Over the years, we have paid these families large and increasing amounts of benefit with the result that they have become dependent on the state to support their children and see no advantage to going out to work and supporting their children themselves. The cap, and the assistance to find work we will give households in the year leading up to the cap, will help towards freeing people from this benefit trap and giving their children a positive example. We will spend the next year putting an enormous amount of effort into helping these families move on and move out of dependency.

I know that the right reverend Prelate feels strongly on this issue but I would urge him to withdraw his amendment.

6:45 pm
Photo of The Bishop of Ripon and Leeds

The Bishop of Ripon and Leeds (Bishop)

My Lords, I am grateful to all those who have contributed to this debate and to the Minister for his comments. This amendment is not simply or even primarily concerned with generations of workless people. It will affect a significant number of people who have been put out of work in recent years, months and days. At times, it almost sounded as if the Minister thought that it was a bad thing to bring people out of poverty. But we are talking about children, and child benefit remains one of the great anchors, as the noble Lord, Lord Newton, reminded us, of the whole way in which we work with children and families.

I do not think we have heard any real response to the basic point that the Bill means that a childless couple has the same cap as a couple with a number of children. It does not seem logical to say that we have to put a lot more pressure on families with children than on those who do not have any. I was grateful to the noble Lord, Lord Greaves, in particular, and others, for speaking about the importance of universalism in terms of child benefit. We have ranged widely during these discussions but this matter is about children. As the noble and learned Baroness, Lady Butler-Sloss, and the noble Baroness, Lady Corston, said, this amendment is about children and the women and carers who care for those children. It is those who will be helped if noble Lords are prepared to back this amendment.

On that basis, I appeal to noble Lords to support the amendment or, if they cannot do that, at least to abstain. It would help children and I believe that it is right to test the opinion of the House.

Division on Amendment 59

Contents 252; Not-Contents 237.

Amendment 59 agreed.

Division number 2

See full list of votes (From The Public Whip)

Amendment 59A

Moved by Baroness Flather

59A: Clause 94, page 63, line 41, at end insert-

"(ea) make provision so that, prior to the application of the benefit cap, should the relevant amount include an award of universal credit under section 10(1) then the amount included for-

(i) the third child shall be reduced to 75 per cent; and

(ii) the fourth child shall be reduced to 50 per cent,

of that included for the first child;"

7:02 pm
Photo of Baroness Flather

Baroness Flather (Conservative)

My Lords, this is a very strange juxtaposition of amendments, because your Lordships have just had your heartstrings pulled at over children and here is my amendment, which suggests that there should be fewer benefits for children for various reasons that I shall try to explain.

I should like to make two apologies, with qualifications. The first is to the noble Lord McKenzie of Luton, who said that he did not want to hear about this matter again in this Chamber. Well, I am sorry, but he will have to. I would also ask him, with respect, to look at what is going in Luton, since it forms part of his territorial designation. There are a lot of things to be looked at in Luton and I hope that he will do so.

My other apology is to Pakistanis and Bangladeshis, because I mentioned only them in my Second Reading speech. I did not mention many white families or many single mothers; nor did I mention the Somalis. There are people in this country who have many children, and it is innocent to think that they would keep having those children were they not helped by the benefits system. They might not stop having children, but they would certainly not have as many if they were not sure of getting the money to look after them. It is extremely important that children are brought into this world because they are wanted and not because it is convenient, because you get a bigger house and because you get more money, which it is absolute nonsense to think is not happening. Your Lordships are kind but also very innocent if you do not know what is going on in this country.

One of the reasons why I moved this amendment is the support I have received from ordinary working people. I have had so much mail-e-mails and letters-asking me to suggest that benefits should stop after two children, not after the fourth. They say, "We cannot afford to have more than two children; we are working and can just about manage. We care for our children, we care about their education, we care about their future and it upsets us greatly to see others having seven or eight. Would these people continue to have so many children if the state did not provide for them?". It is a matter that should be seriously considered. The cap will take care of some of that, and I am pleased to say that it is time that it did so. I know there are many noble Lords, especially on the opposition Benches, who are against the cap and believe that we are moving in the wrong direction, but we have made this a country of people who rely on handouts and it is about time we stopped.

I was very pleased to hear the noble Lord, Lord Freud, talk about role models. There are no role models in families where there are six or seven children. There is no one who has worked and no one is expected to work. A lot of those parents do not even know which school their children go to; they do not know what they are doing at school. We have large numbers of young unskilled people, especially in places such as Yorkshire and Lancashire, and especially the boys. It is the boys we need to worry about; they need to be skilled and to attend courses that will teach them basic skills such as plumbing, electrics or carpentry; they must become skilled at something. They are neither educated nor skilled and they have no future. They will not work, their children will not work either, and it is very important that the cycle is broken at some stage. If we are to listen to people in this country, the sooner this happens the better it will be. Working people are fed up with the way some people manage to live on benefits.

In my Second Reading speech, I pointed to one other area that is not in this amendment: people being given money to pay for their drugs. That is disastrous. If you give money to people for drugs, why would they want to work? They are disabled because they use drugs, but they get money to buy their drugs, so why would they ever want to get off them and return to work? We are talking about getting people into work and I think we should look carefully at every area.

There is also a huge rise in polygamy in some Pakistani families. I was interviewed about this amendment on the radio and during the broadcast one man said that he had three wives. The interviewer asked him how he managed and he said, "On a rota basis". I am afraid that a lot of men have more than one wife. The latest fashion is to go to southern Spain, cross over to Morocco and bring back girls. They marry according to Sharia law and the wives live as single mothers in homes of their own. We need to look at what we are doing to this country. How do they get away with it? They have three or four wives and they presumably visit them-as this man said-on a rota basis. This should not be happening. We do not need this kind of behaviour in this country.

Some people seem to think they have no choice when having children: that they just have them. Children are a choice and a responsibility. They need to be looked after and they need to be brought up. Not only that, there has to be fairness between those who work and those who live off taxes. This drastic situation calls for action. I hope the Government will take action and discourage people from having large families unless they are in a position to look after them.

I was privileged to receive a letter from the Prime Minister two days ago. I wish it had arrived earlier. It states that this issue will be looked at under the provisions of the cap. I knew the cap was coming but I did not know exactly what was likely to happen. I wrote to the Secretary of State for Work and Pensions but he did not reply. However, I sent a copy to the Prime Minister and he did reply-I felt very privileged by that-and he has put my mind at rest about the issues that are important to the people of this country.

The sooner we tackle this kind of disadvantage-and it is a disadvantage for these children-the better. If you have five children, and even if you get benefits you do not look after them and do not give them education, they are disadvantaged all the way through and they will never work.

I leave your Lordships with two comments that you might like to think about. First, the recent British social attitudes surveyis very much against the benefits system. There has never been so much disquiet about the benefits system as there is this time. Secondly, the last time the children being born in this country were counted, 50 per cent were born to mothers born overseas. We need to think about that very seriously if we do not want this country to change totally in its attitudes. I beg to move.

Photo of Baroness Howe of Idlicote

Baroness Howe of Idlicote (Crossbench)

My Lords, we are back again to groupings and, like the noble Lord, Lord Newton, I am very much in favour of them. Sadly, in this case it has meant that my amendment has been somewhat delayed. If it had been in the first group of amendments it would have been well and truly dealt with by now. However, I am pleased now to be in a group.

I listened with interest to what my noble friend Lady Flather has said and, although I cannot say that my sympathies are in the same direction, nevertheless it is her view that if you are paid less for the more children you have that will lead to a happier lifestyle. She may be right, but I do not agree with that approach.

Photo of Baroness Flather

Baroness Flather (Conservative)

I did not say that. I said that if people know that they will not continuously keep receiving benefits they might decide not to have so many children, and that if the benefit cap was to come, it would not come as a retrospective.

7:15 pm
Photo of Baroness Howe of Idlicote

Baroness Howe of Idlicote (Crossbench)

I am grateful for being put right. However, I still have differences of opinion with my noble friend Lady Flather.

However, my amendment was very much part, alas, of all the other amendments that have been debated. I have listened very carefully and, having had the benefit of being in the Chamber the entire time, I have been fully appraised before deciding which amendment to support and which not. The general impression that I have got from these debates is that there is a great feeling about families and about doing the best for children whatever household they are in. It is for that reason that I was happy to table the amendment for London-London Councils kindly provided me with the material-because London is such an obvious area where you have extremes of very expensive accommodation and fairly poor areas where it is not as easy to survive if you are living on benefits and are among some of the more disadvantaged and disabled.

All three of my amendments relate to the same issue which is why it is better to address them all together. If the Government want a benefit cap that fairly reflects average earnings, it would be logical and just for the cap to reflect geographical variations, not only in wages but in other important living costs such as those related to accommodation and childcare. The amendments would require the Secretary of State to take account of these variations: the average weekly cost of private rented accommodation, the average weekly cost of childcare and average weekly earnings.

By way of background, the most recent evidence regarding these factors shows that, as regards accommodation, London has the highest average private sector rents in the country at 222 per week. That is more than 36 per cent higher than the national average. Childcare in London and the south-east is at least 20 per cent higher than the national average. For example, a nursery place for a child costs an average of 113 per week in London and the south-east compared with the national average of 94 per week. Earnings in London are 31,935 compared with 26,133, a 20 per cent difference.

What would be the impact of the Government's proposals on the benefit cap? Independent research by Navigant Consulting, commissioned by London Councils-I should emphasise that London Councils is a cross-party organisation speaking on behalf of all London boroughs and the City of London-has estimated that the impact on London of the proposed universal credit cap would be as follows. A total of 73,000 workless households would experience a shortfall in their benefits against living and housing costs. In aggregate, the cap would produce a loss of 8.2 million per week for workless households and more than 427 million per annum across London. There would be a significant impact on families with children and on larger families in particular. While less than 3 per cent of households without children will find their accommodation unaffordable, that rises to more than 30 per cent for families with children. The average weekly loss across London for households affected by the cap is 105.

The majority of the London boroughs are already reporting that a significant number of households are having to move home as a result of changes to housing benefit caps. That has led to an increase in the number of homeless households placed by boroughs in bed-and-breakfast temporary accommodation. The use of temporary accommodation recently reached a three-year high after 25 quarters of reduction since 2003. Now almost 1,500 families are living in bed-and-breakfast accommodation in London. That effect will be replicated elsewhere and will undermine efforts to retain and build sustainable mixed communities, a point that has been made very effectively by others in other debates. There is a genuine concern that reductions in benefit entitlements for workless households may lead to an increase in child poverty and safeguarding issues. With children and young people's services already stretched, the fear is that vulnerable children might slip through the net.

The Government have argued that they need to cap household benefit entitlement in order to reduce the 20 billion deficit bill and to return fairness to the welfare state. Of course, both of those objectives are laudable and entirely understandable. However, simply fixing a national limit and attempting to apply it across all households, regardless of variation in individual circumstances, is not only unfair but it is also likely to usher in a host of unintended consequences. We have heard about many of them in previous debates so I shall not go into the detail of those.

The cost of life's essentials varies from place to place and family to family. One does not expect to pay the same to rent a two-bedroomed home as a four-bedroomed home. One does not expect to pay the same to rent a home in the south-east as one might in the north-west. If the welfare system is genuinely to support people and households, surely it is only fair that any support matches, in so far as it is possible, the scale of the challenges facing households, which, so often, through no fault of their own, find themselves in high-cost areas. I hope that the Government will agree to these very reasonable amendments.

I would like to stress that I hope that the Minister will agree to meet London Councils and go through some of its real concerns about this issue. That would reflect on whether I might wish to bring this matter back at Third Reading

Photo of Baroness Tyler of Enfield

Baroness Tyler of Enfield (Liberal Democrat)

My Lords, I would like to add some of my concerns about the impact of the benefit cap in London. The noble Baroness, Lady Howe of Idlicote, has set out very clearly and eloquently all the facts and figures and I certainly do not wish to repeat them. I shall pick out one which is particularly relevant to me.

The level of rents in London means that families with just two children will be subject to the cap in many parts of inner London and also in some parts of outer London, including Newham, Haringey, where I live, and Hounslow. I am concerned about the impact of this on mixed communities, or looking at it the other way, one might refer to social segregation as poorer families are moved out of expensive areas. This is a very particular issue in London in terms of social cohesion. It also puts pressure on public services. I think that London Boroughs is right to be worried. The migration and concentrations of workless households in some areas will potentially have significant implications for the full range of local authority services. Boroughs with an inward migration of households are likely to face significantly increased service pressures very quickly and with very little time to plan for them in relation to unemployment, poverty, housing and so on. On the other side of the coin, boroughs that experience reduced demand for such services-again very quickly and without time for planning to adjust-will certainly face challenges and costs in adapting to different, if reduced, demands.

Families, particularly larger families, will be very much affected. In London it will also affect families with two children. I share the concerns that have already been voiced by the noble Baroness opposite. I also hope that there will be an opportunity to meet the Minister and London Councils to discuss further the sort of measures that could be put in place to mitigate some of the harsher implications that I have just set out.

Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

My Lords, I start with the amendments of the noble Baroness, Lady Flather. I find them confused on a number of levels. I should explain that during Second Reading-the noble Baroness referred to my comments about not wishing to hear what she said again-she said that Pakistani and Bangladeshi communities have lots of children because of the money. I objected to that and I thought I objected in about as gentle a way as one can, without being rude, and that is consistent with how we do business in this House.

The noble Baroness has just made reference to Luton and supposed problems there. I know Luton well; I live there. One of the strengths of Luton is its great diversity. We have a range of communities and-I almost called him my noble friend-the noble Lord, Lord Hussain, would attest to that as well. Having diversity brings challenges but also joy and I believe that is a great strength of Luton. I do not believe the proposition that people in any community, particularly the Pakistani and Bangladeshi communities, have lots of children because they believe it will be beneficial in terms of child benefit. If people had children only on the basis of a cost benefit analysis, I suppose there would be no children at all, given all the challenges that come with them. My experience of communities in Luton, particularly the Bangladeshi, Pakistani and Indian community, is that there is great aspiration for their children. If you sit down with people, you hear them speak with pride about their children just having qualified as a doctor, or a lawyer, or even some as an accountant, which brings particular pleasure. I honestly do not see the picture painted by the noble Baroness.

Technically, it seems to me that the amendment that she moved is flawed. As I understand it, the "relevant amount" is that which is based on estimated average earnings and effectively sets the level of the cap. It does not, therefore, specifically include amounts in respect of children. If it were based on income, rather than earnings-depending on the definitions-of course it would. It could, for example, involve child benefit, but this is not how the Government wish to proceed and it is not how they have constructed the cap.

Universal credit will be, as we have discussed, an in-and-out-of-work benefit and we still do not know what the cut-off point will be for those treated as in work. Perhaps the Minister can give us an update on that. Presumably the calculation of earnings would not include any amount of universal credit. If the noble Baroness is arguing that an award of universal credit should involve reduced amounts for third and fourth children, in terms of the cap, of course, that would clearly lessen its impact. However, the family cap of 26,000 applies regardless of the number of children in the household, so larger families are likely to be particularly affected, as we have just discussed. Estimates are that 80 per cent of the households likely to be affected by the cap will include three or more children. We know from the DWP impact assessment-certainly the original one-that children from BME groups are more likely to be disproportionately hit by the cap. It would seem that what the noble Baroness intends would drive these families further into poverty and that is not something that we could countenance or support in any way.

The noble Baroness, Lady Howe, introduced some interesting amendments. Certainly the issue of the impact on London, particularly of high rents, featured in our earlier discussion and that is recognised. The broader issue of whether one could have benefits constructed on a regional basis is a very wide debate-we would be unwise to tick that through tonight-although we should recognise that it is done, for example in local housing allowances done on a local basis, structured by reference to local market areas.

I repeat that we support the cap. We support the 26,000 level, but the way it operates brings some perverse consequences, and high rent levels in London are a particular driver of some of the unfortunate outcomes. I think that I would just hang on to the point, to which the Minister has not given us an answer, that if this is about changing behaviours, what is it that makes proportionately more people in London-this is what the data show-in need of changing behaviours than people in other parts of the country? We know that is not to do with changing behaviours; it is about rent levels and how those impacts on the cap. The noble Baroness, Lady Howe, has advanced some interesting ideas and arguments, but before we embark more generally on a regional benefits system, we need a lot of discussion.

7:30 pm
Photo of Lord Freud

Lord Freud (Conservative)

My Lords, the effects of Amendments 59A and 61A would be to reduce the level of universal credit awarded in respect of children in larger families who would be subject to the benefit cap. Under this amendment, families who would not be subject to the cap would be able to receive the full amount of the child element of universal credit for their third child and any subsequent children. We recognise that families with more children do require more support and we believe that it is right that this is recognised in universal credit. However, as I have said, we also believe that there should be a limit to the overall amount of financial support that households on out-of-work benefits can expect to receive in welfare payments. That is why we intend introducing the benefit cap. We believe that this is the most appropriate way to address this issue as in future people will have to understand that there is a limit to the amount of benefit the state can afford to pay them.

I move now to Amendments 61ZB, 61ZC and 61ZD. These would require us to replace the national cap based on median earned income earnings with regional caps based on the local average weekly costs of private rented accommodation, the local average weekly cost of childcare and the local average weekly earnings. Given that we will not take childcare payments into account, this part of the amendment is obviously unnecessary. More generally, while the Chancellor may be asking the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets, we do not have a regionalised benefits system and it would not make sense to regionalise the cap without that. In addition, the approach suggested by the noble Baroness would be extremely expensive to administer, add considerable complexity to the benefits system and would be a recipe for confusion for claimants and staff.

On my noble friend Lady Tyler's point that the cap disadvantages people living in London, given that many working age households with adults in work cannot afford to live in central London-or, indeed, central-ish London-it is not right for the taxpayer to subsidise households on out-of-work benefits who do so. In answer to the point raised by both my noble friend Lady Tyler and the noble Baroness, Lady Howe, on whether I would see London Councils, I would be happy to see London Councils if it asks to see me-if it wants to see me-although it would probably be best to meet in the context of discussing the regulations that will implement this measure.

Both these sets of amendments are about how we set the maximum amount available to people. We believe our approach is fair and simple. When we introduce the cap, we intend to use a method that, by looking at median earned income after tax and national insurance for all working families, will strike the right balance between providing support for families-promoting fairness between those out of work on benefits and those in work-and ensuring clear financial incentives to work.

Before I ask the noble Baroness to withdraw her amendment, I would like to make it clear that the Government see Amendment 61A as directly consequential on Amendment 59A and Amendments 61ZC and 61ZD as directly consequential on Amendment 61ZB. So, if we divide on Amendment 59A, a further division would be required should the noble Baroness wish to press Amendments 61ZB, 61ZC or 61ZD to a vote. I ask the noble Baroness to withdraw her amendment.

Photo of Baroness Flather

Baroness Flather (Conservative)

My Lords, I will just say a few words about what has been said about my amendment. I was very surprised to hear the noble Lord, Lord McKenzie of Luton, say that the Pakistanis, Bangladeshis and Indians all have the same aspirations. I am sorry to say that I do not agree with that. I am afraid the aspirations of Indians are very high, but the aspirations of Bangladeshis and Pakistanis do not come up to the same level, as they do not have as much interest in education as in Indian communities. The Indian communities are mostly in work-more in work than any other community except for the Poles. A survey by Channel 4 said that the highest number of taxpayers of the immigrant communities were the Indians and the Poles. I would like there to be a little more consideration of the fact that Pakistani and Bangladeshi communities in Tower Hamlets, in Yorkshire and in Lancashire are not doing well. Whatever way could be found to help them to do well would be a good thing.

Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

My Lords, I do not wish to be unkind, but we do not have to subject ourselves to this nonsense, do we? This is absolutely outrageous.

Photo of Baroness Flather

Baroness Flather (Conservative)

My Lords, forgive me, but I thought I was a Peer here, and being a Peer means being equal.

Amendment 59A withdrawn.

Consideration on Report adjourned until not before 8.38 pm.