My Lords, I rise to support Amendments 1 and 2 in the name of the noble Baroness, Lady Meacher-who does not appear to be here-as well as in my name. These are not techie, administrative amendments; they are about people's lives and have particular consequences for the lives of women, who are still the main managers of poverty on a day-to-day basis. At present, the out-of-work benefits, which the universal credit will replace, are paid fortnightly.
These payments used to be paid weekly and, according to Fran Bennett of the Women's Budget Group, there is evidence from recent qualitative research carried out at Oxford University that the move to fortnightly payments has caused more problems than is sometimes claimed. "Struggle" was the word one woman used to describe what it meant. The leap from fortnightly to monthly payments will be much greater. As one claimant put it, "Very difficult to budget with two-weekly payments, impossible with monthly". For those in-work recipients of tax credits who have opted to receive the credit weekly rather than four-weekly, who tend to be those on lower wages, the leap will be greater still.
We know from government survey evidence that nearly two in five of the lowest fifth of low-income families with children run out of money always or frequently, so we are not talking about a small number of vulnerable people in exceptional circumstances, nor are we talking in most cases about mismanagement. Again, research shows how well most people on low incomes manage their money-probably better than many of us, because they have to. However, managing money on a low income is very stressful, particularly for women who act as the shock absorbers of poverty, and it can have a damaging impact on physical and mental health.
One of the big fears is that monthly payments will lead to more families turning to high-cost credit and getting into debt. Just last week a big news story was the spread of payday loans which, according to an earlier report, have quadrupled in the past four years. In Committee, I read from an e-mail that I had received from a Conservative supporter, who described himself as a "responsible lender" to low-income households and who was enraged by the idea of monthly payments, which, he warned, would lead to an even greater reliance on such loans, which he wrote, had,
"risen up on the back of predominantly low income earners who get paid monthly".
According to last week's R3 report, nearly half the population sometimes or often struggles to make it to payday. In addition, there has been growing use of pawnbrokers, particularly by low-income women with children.
In Committee, we all got the impression that the Minister really listened and took on board the concerns expressed from all Benches. Indeed, he said that we had given him quite a bit of food for thought. This was very welcome. It is therefore disappointing that, having digested the overwhelming message coming from the Committee, he appears not to be willing to concede even on the point of giving claimants the right to opt for twice-monthly payments with the default remaining monthly, as provided for in Amendment 1. Instead, he appears to be looking to encourage access to budgeting products such as jam jar accounts, which would enable people to mimic jam jars in allocating their universal credit payment to different purposes through their accounts.
The Minister rightly observed in Committee that budgeting products mystified him, so, like a good academic, I have done my research. I can see the attraction in this context and I hope that the Minister is successful in developing the idea, but I am yet to be convinced that such accounts obviate the need for the amendments before your Lordships' House. Certainly, this is the view of the Personal Finance Research Centre. At present, only about 150,000 people use such accounts and typically they are charged between £12.50 and £14.50 a month for doing so. While I acknowledge that Social Finance, which provided these figures, is enthusiastic about the potential of such accounts to help people manage monthly payments, there is a long way to go to get there from here. Moreover, it has been suggested by the Personal Finance Research Centre that such accounts are more relevant to helping people who receive income weekly or fortnightly and pay monthly and quarterly bills, so they would still have a role to play in the context of the proposed amendments.
I know that the role of such budgeting tools will be explored in the planned demonstration projects, which according to the DWP will test some of the support mechanisms we will need to have in place for vulnerable groups. However, as I have already tried to explain, this is not just an issue for certain vulnerable groups. Anyone on a low income is potentially vulnerable to the problems created by monthly payments. Are they all going to be helped to access such budgeting products? I appreciate the effort that the Minister is putting in to try to develop the budgeting products solution to the problems raised in Committee, which he acknowledged were very real. However, I remain puzzled as to why he is so resistant to accepting the most obvious solution that we offered-more frequent payments.
"Is it because of cost?", some people have asked me. It would appear not, as that was not an objection raised in Committee. The Minister himself emphasised in Committee that there is a distinction between payment period and assessment period, so that more frequent payment would not require more frequent assessment, which perhaps would have cost implications. The answer to a Written Question about cost in the House of Commons simply evaded the question. It leaves me to wonder whether the Minister's solution is not more costly, particularly as it will also involve more frequent use of interim payments to tide people over as payments are made four-weekly in arrears. A story in the FT in September suggested as much. It said that,
"the plans had not yet been fully worked out or costed".
In Committee, I asked that your Lordships' House should receive a fully costed plan before monthly payments are finally agreed, but no such plan has been forthcoming. In its absence, I believe that it is only prudent that your Lordships' House build in the kind of protection that the amendment would provide.
If it is not about cost, is it about complexity, as simplicity was one of the justifications provided in the policy briefing on the issue? Twice-monthly payments are no more complex than monthly, and arguably the kind of budgeting products being pursued by the Minister are themselves quite complex. Nor do I consider that building in a degree of choice is complicated for claimants to understand. In fact, I think that the Minister gave us the answer in his speech in Committee when he explained that,
"we will shape the way people arrange their lives".-[Official Report, 10/10/11; col. GC 442.]
Originally the department's argument was that monthly payments would mimic work and encourage people to prepare for work by managing their affairs,
"in a manner that best reflects the demands of modern life".
But it was then pointed out that about one in five people are still paid weekly or fortnightly, and the department's own figures show that as many as half of those earning less than £10,000 a year are not paid monthly. I think that we can safely assume that they are paid more frequently. Moreover, where universal credit is paid on top of a wage, it is unclear why it has to mimic it. So the mimicking work argument begins to look rather threadbare.
Instead, it now appears that the Government want to shape the behaviour of people, both in and out of work, to fit with their perception of how modern life ought to be. We "will shape the norm", is how the Minister put it in Committee. There appears to be almost an implicit assumption that monthly payments are somehow morally superior to fortnightly budgeting. This all strikes me as the kind of interfering state paternalism or social engineering that modern Conservatives and Liberal Democrats would usually frown on.
My preference is to facilitate the way in which many people on low incomes actually budget, through twice-monthly payments as provided for in Amendment 2. However, I would suggest that Amendment 1 does at least avoid the paternalism of the Government's position by offering the claimant choice. Indeed the department itself has argued that,
"making decisions over household finances and budgeting in the most appropriate way to meet family needs is best done by the family itself".
The amendment would allow the family to decide if twice-monthly payment would be a more appropriate way to meet its needs. But it still allows the Government to nudge the claimant towards monthly payments because this would be the default position.
If the Government accepted this amendment, they would address the concerns raised in their own research into perceptions of welfare reform and universal credit, which the Minister told the Committee he was studying "with great attention". The report on the research observed that monthly payment was "strongly criticised", and it concluded that,
"overall there was a strong feeling that there should be options, or at least an opt-out from the default where required".
Given that the department has emphasised its commitment to a user-centred design for universal credit, surely it should take this very clear message on board.
Moreover, the researchers warned that monthly payment is one of a number of potential,
"risks which could jeopardise the successful delivery of universal credit", and they advised "mitigating action". I acknowledge that the Minister's work on budgeting products potentially constitutes such action, but, as I have explained, I am not yet convinced that on its own it will be enough. Surely we have a responsibility to ensure that there is some mechanism in the law to protect people on low incomes from unnecessary hardship, should this action not be as effective as the Minister hopes.
I conclude simply by quoting what the noble Lord, Lord Boswell, said in Committee. He said that,
"if this is the nail in the shoe that gets the whole thing discredited because it does not work or gives rise to disturbing social consequences, we will have lost the great prize of universal credit that many of us want".-[Official Report, 10/10/11; col. GC 434.]
I beg to move Amendment 1.
My Lords, it is a privilege to speak in support of the noble Baroness's amendment. Her evident mastery of the subject has impressed the whole House, as it certainly impressed everyone involved in Committee. I do not have a great deal to add to what she said except that, in reading the transcript of that Committee, it struck me that two things did not emerge clearly enough, particularly given what the Minister said in reply. They were: first, a clear recognition that living on a very low income requires highly sophisticated financial domestic management and highly sophisticated budgeting. That would almost certainly be beyond the rest of us to manage. It seem to me unreasonable to expect people who are living with the burden of that kind of pressure also to develop skills beyond what the average in the community would be in terms of managing their finances.
That relates to my second point. The proposal for a monthly payment seems to have been made to generate a culture change among those who are not perhaps in the habit of regular employment-in other words, to build the capacity of those in receipt of the benefit to behave like the rest of society. However, I put it to the House and to the Minister that perhaps what we need more of is the capacity of government to understand what it is like to live on a very low income. That is where the capacity building needs to happen here.
I very much hope that the Minister, who has consistently shown a readiness to listen and respond, will think again on these amendments. My own experience as a parish priest in east London, and more recently in the parishes of the outer estates of Leicester, has shown me repeatedly and at first hand the extreme pressures under which those on very low incomes live. This is a modest amendment that would signal to those in receipt of these payments that their problems are understood and that the Government are ready to be sympathetic.
My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness's behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone's interest.
I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend's request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.
Moved by Baroness Meacher
1: Clause 7, page 3, line 32, at end insert-
"( ) Regulations must make provision for claimants to require payment of universal credit to be received more frequently than would otherwise be the case under subsections (1) and (3)."
My Lords, I think that I owe a rather large apology to the House. I seem to have caused complete confusion, and am deeply sorry. I rise now to speak to Amendments 1 and 2, which, one way or another, would ensure that universal credit could be paid more frequently to claimants. Amendment 1 provides choice. Amendment 2 provides something rather specific.
The Government's aim has been to encourage,
"out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life".-[Official Report, 10/10/11; col. GC 440.]
Those are the words of the Government. The point is that very many low-income earners are paid weekly or fortnightly, as the noble Baroness, Lady Lister, has rightly pointed out. Although two-thirds of tax credit recipients are paid monthly, many of these people will cease to be entitled to benefits in the future. The great majority of universal credit recipients will be very low paid, going in and out of work, as many people do, to weekly or fortnightly payments and then back on to benefit. People certainly do need to be prepared for the world of work-I completely agree with the Minister about that-but they need to be prepared for the world of work that they are actually going to move into. That is the whole point. At a very helpful meeting last week, the Minister seemed to accept that there are differences and that there needs to be some flexibility. Promotion of choice in the frequency of payment is very much in line with the Government's choice agenda. I am sure that the Minister identifies with that.
In practical terms, it was made clear in Committee that monthly payments will cause very considerable management problems within households, and a dramatic increase in the numbers of people struggling with debts. The fact that applications for crisis loans rose significantly from 2009, when the change from weekly to fortnightly payments was introduced, tells the story. The CAB service saw a fourfold increase in the number of people with payday loans coming to them for debt advice in the first quarter of this year compared with the same period two years ago. The Association of Business Recovery Professionals is the UK's leading trade association for insolvency and related issues. On
What is the Government's estimate of the number of payday loans to claimants of universal credit that will be in place within 12 months of the introduction of the new system? This is clearly a matter of very grave interest to Members of this House-we know that such loans have interest payments in excess of 300, 400 or 500 per cent, if not more than 1,000 per cent. We cannot just ignore that problem.
At the meeting with the Secretary of State on Thursday, he talked about the need for a culture change. Indeed, he even implied that this was the only problem-people just need to change the culture within which they live. However, people's problems in managing money over a month are far more extensive than purely a matter of culture. Numeracy skills are vital if people are going to manage their bills and payments over a month. I understand that the Skills for Life survey found that 1.7 million people had very poor numeracy skills. A further 5 million had poor numeracy skills. All these people's skills were described as "below functional".
That does not sound to me like applying to people who could manage their money. You can be sure that these groups dominate the ranks of claimants. Last Thursday, the Secretary of State seemed to suggest that people who cannot manage their money over a month will not be able to manage it over a week either. I find that an extraordinary argument. If people run out of their benefits on Thursday but they will receive some more money on Saturday, at least the children will go hungry only one day a week. If people run out of their benefits on the second Thursday of the month, for the sake of argument, and there will be no more money for two weeks and two days, that is a much more serious situation.
The 2008 families and children study showed that one in four families with children more often than not run out of their money before the money next came in. The percentage must be higher for benefit claimants, so this is a huge problem. I believe that the Minister is seeking to resolve these issues, and I applaud him for that. The amendment has been crafted to try to take on board his interesting and innovative ideas and design, as I understand it, to create the possibility for claimants to have their benefits paid monthly and yet have the option of drawing them systematically on a more frequent basis. That system, if it really works, would appear to respond to all the concerns around the House: the claimants need to have a choice to receive their benefits at intervals which they can manage.
That is my tentative understanding of what the Minister is trying to do. However, on the basis of my limited understanding, I need some issues clarified. I should be really grateful if the Minister can help me with some of them. One of them has to do with saving. I had assumed that whether payments are made monthly or fortnightly or whether there is some choice would not involve major extra expenditure for the Government. Can the Minister confirm that there is no significant cost involved in introducing either choice or fortnightly payments?
My second question is: does the Minister assume that the Jobcentre Plus official will sit down with the claimant when they are awarded their universal credit entitlement to work out the frequency of payment that that claimant can manage, or will it be left to the claimant to go off to the post office, or wherever, and work things out with the post office or the Co-op? If the latter, I do not think that we have anything substantial or substantive. I need to understand whether there will be some kind of system in place to ensure that greater frequency is really there for people.
My next question is whether the Minister is confident that the Post Office, the Co-op, or any other institution that he is working with to develop those accounts for people will be able to ensure in every location that the system can be operated in the interest of those claimants so that they can receive their benefits on a more frequent basis. Fourthly, if the Minister's plans do not come to fruition-it is not clear to me whether they will; I am not sure that it is quite clear to him at this stage-does he have an amendment up his sleeve which will enable a fallback position to be put in place so that more frequent payments can be introduced automatically through provision for regulations or whatever? It would help the House if we understood whether the Minister himself has a fallback position that he can explain to us.
I very much hope that the Minister can respond to these questions, because on that basis, we can all be clear whether we have the system in place which will give us the assurance that these arrangements will not lead to the most massive debt problems.
My Lords, all those who participated in the deliberations of the Grand Committee will regard it as a rather extraordinary process in two respects. First, for those of us who do not claim huge expertise-though it was represented elsewhere in the Committee-it was a remarkably informative process, and that applied across all quarters. Secondly, there was a high degree of understanding, if not consensus, and it is entirely proper of course that the process of refining the difficulties comes forward to this Report stage and we then get to the moments when the rubber hits the road.
I intervene briefly for two reasons. The first is in a sense to express my gratitude to the noble Baronesses, Lady Lister of Burtersett and Lady Meacher, for their contributions in Committee. As the forenamed has actually been kind enough to quote me in terms in support of her argument I probably owe her a response. The second reason is that it is understood by all sides of this House that there is a real problem. I have an odd facility about which I do not boast, which is the ability to craft titles for books that I never get round to reading-writing, I mean. One of them would have been "Life After Tuesday". There is clearly a difficulty for people, where they have limited means, in budgeting and in managing themselves. I will quote two points about that. First, as in previous occupations I have run farms and paid farm workers, I am fairly familiar with people who are typically paid at the lower end of the pay spectrum. Secondly, I have recently chaired on behalf of the National Institute of Adult Continuing Education an inquiry into adult literacy. I do not of course confuse that with numeracy, but the problems of the two are somewhat conjoined. An estimate of something like 5 million people who would have difficulty in functioning is a real worry. The question is what we do about that.
On reflection, having listened to the Minister's remarks both in Committee and indeed at the meeting of some of us on Thursday, I think that the Government's strategy is the right one. It is right, and it also avoids any suggestion of patronisation, to say people should try to budget on the same basis as those who now receive a wage. I make the point in passing that many of the people-the farm workers and other people in relatively low-paid occupations-have transitioned fairly effectively towards monthly payments or salaries and arrangements of that kind. It is not conceptually impossible and we certainly should not set out to preclude it in advance.
The question is how it works. That was behind my remarks in Committee and will be behind my interest in my noble friend the Minister's remarks when he comes to respond. It is clearly important that we are able to engage in a sensible package which enables people to find a way through this. If we were simply to say it is a month unless you deem it to be otherwise, or unless some special arrangements are invoked by way of a legal right, then that would be giving something of a green light towards people falling back into shorter periods-perhaps when that is not necessary or appropriate for their circumstances. But at the same time, picking up my non-written book, it clearly is important that people should be able to manage through this, not only for themselves and other adults in their household but also for children who need sustaining and maybe should not be expected to pay the price for parental or other failure.
We look to the Minister to explain very carefully the ideas which he has begun to develop, and which are very positive, for saying we start with a month, but of course like everybody else you need in effect to be able to navigate through that month, and this is how we will help you. That is, as it were, an approach of principle. Secondly, there is an issue of practicality here, which again I slightly touched on in Committee. If this system does not work comfortably and there is a huge increase in the use of pay-day loans, crisis payments or whatever, then there will be problems with the credibility of the universal credit system, which, to judge by the Committee, we all want to see, as I certainly do.
The Minister has to find a practical way of doing this but I suggest, with respect to the noble Baroness whose amendments we are considering, that the way of finding a practical solution should not lie through derogating from the principle of moving towards the monthly payment of credit with the necessary safeguards.
My Lords, we delved into this issue in quite considerable depth in Committee, and I do not want to rake over areas that we have covered. However, I suspect that there is a fundamental question here, which I think the Minister accepts-namely, that there will always be some people who find it difficult, if not impossible, to handle a lump-sum budget that is meant to cover a month. In those circumstances, some mechanism-whether it is a voluntary one making a facility available, as suggested by the noble Baroness, Lady Meacher, a moment ago, or some other mechanism-has to be brought forward by the Government to ensure that these people are helped to avoid getting into financial difficulties. That must be in the interests of the Government and everybody who is concerned about children, in particular, who may be vulnerable as a consequence of such action. I think that the House would be very glad to hear from the Minister how he sees the operation of a mechanism that will ensure in a minority of cases where the monthly pattern does not fit that a system is in place to answer the needs of these vulnerable families.
My Lords, I am a relative newcomer to this debate but I should like to pick up one point made by the noble Baroness, Lady Lister, who said that cost had never been an issue here. I cannot quite understand why money would not be saved if payments were made monthly rather than weekly. It seems to me that a saving would be made there, and surely we are trying to achieve savings because of the economic situation that this Government have inherited.
I should like to pick up one other point from the right reverend Prelate the Bishop of Leicester. He seemed to think that it was a bad idea that the Government were trying to introduce a culture change. I should have thought that that was rather a good idea. Surely we are trying to get people into a mindset whereby they move into the world of work and come off benefits. Anything that can be done to encourage that seems to be a good idea. However, I should like some guidance from the Minister on whether there is any saving to be made here and whether he has any idea how much it would come to.
My Lords, I, too, have sat right the way through Committee and have been very persuaded that some families-I accept that they are mainly families with children-who are not good managers of money will have difficulties in meeting the Minister's no doubt otherwise ideal method of providing these benefits. However, I argue that there will be people other than those with families who may not be good with their sums or who, because of mental health problems or other reasons, might much prefer to have weekly or fortnightly payments, rather than monthly payments, which would mean a larger gap to fill with few finances.
Having said that, I accept that the Government clearly have plans in mind for sorting out this problem. However, echoing what others have said, it will be very important to get the support of those of us who have sat through all these debates by explaining in considerable detail exactly how the system will work and what flexibility it will contain. I hope that the Minister will be able to respond to those points.
I shall pick up a point, if I may, made by my noble friend Lord Hamilton. The Government said that it was not a cost issue; there is no doubt about that. Indeed, the Minister was good enough to confess that. I have been thinking about this since we had our full discussion upstairs and I remain totally unconvinced that it is necessary to effect such a culture change. The notion that the kind of people we are seeking to serve with universal credit will fall into executive jobs that will pay them monthly into bank accounts is so remote from reality as to be unhelpful, but I put that to one side.
I say honestly to anybody who is listening that this is not a trivial matter. It seemed like an operational issue but it is not that at all. It is about the management of weekly budgets day by day in families that can blow apart because of debt. Anybody who thinks that we are short of debt, especially in the household income strata of below £10,000 a year, is completely wrong and should look at the evidence referred to by the noble Baroness, Lady Meacher, about the payday loans and the extent to which people rely on week-to-week, month-to-month emergency packages, paying Peter and paying Paul on different days and trying to survive in the middle. It is a great skill, which some people are forced to exercise. It causes enormous pressure, which is normally borne by the women in the household. We have to be careful how we typify some of the caricatures within families, but in my experience it is the womenfolk who have to make the difference between Tuesday and Friday, which is not always easy. Often they go short of food in trying. That is the reality.
How do I know that?In 2009 the payment system went from weekly to fortnightly, which caused enormous difficulty. It is not that long ago, so we do not really know what the impact of that change has been. If in 2011 we are considering going from weekly to monthly, we are talking about an entirely different regime of family budgets and people keeping their households together. It is symptomatic of how we treat the 15 per cent of the caseload that will be affected and will struggle with this. I encourage the Minister, who is absolutely correct to be ambitious for this new reform. He has lots of ideas and is a master of the technology to the extent that Ministers have not been before in terms of what he is trying to do. I absolutely support the jam jar accounts, sophisticated bank accounts and applications that go on my iPad so that if I ever need income support I will be fine. But I do not believe that the 15 per cent of the family households at the bottom end of the income distribution will be anywhere near using these things comfortably.
For me, this is a litmus test issue; it is not a trivial, operational matter. It is not safe to have anything in the legislation other than payment being fortnightly. Anything else is a bonus. By paying universal credit fortnightly there is a chance of being safe and dealing with the 15 per cent of the household distribution that we are talking about. If we do not get the system to work for the lower end of the household income distribution, we will fail the people who need it most, so it is not a sensible policy to be considering. Lots of imaginative things have been talked about and I am in favour of them all, but they are a fudge. We are making it potentially much more difficult for people who cannot manage day-to-day budgets from week to week.
The other thing that I have great fears about is that, no matter how many jam jars there are in your bank account, it is all arrestable. My Scots law might be slightly out of date but a long time ago-to my shame-I used to work for the South of Scotland Electricity Board, arresting people's wages. In those days, you had to go to the sheriff to get the account properly closed down and the supply cut off. Those days are thankfully now gone, but you can still pend and arrest bank accounts. If I am owed money and I know somebody is getting a monthly payment of all their benefit under one wrapper called universal credit, I will be waiting at the counter of the bank and I will slap an injunction on them and they will have no money at all.
There must be some safety mechanism to protect these essential monthly payments. You might get away with surviving fortnight to fortnight if one fortnightly payment is made, but just think of the pressure and difficulty for families who have annual incomes that rely on universal credit if somebody arrests their Co-operative account or whatever it is that the Minister isusb thinking of. These are not straightforward issues and this is not a small matter. Unless the Minister can persuade me that this will adequately serve the 15 per cent of the caseload at the bottom end of the income distribution, this House would be sensible to require fortnightly payment to be put in the primary legislation.
I too apologise for not being here at the start. I just ask the Minister to reflect on the words of my company sergeant-major when the Army moved from weekly pay packets to bank accounts. He said, "Thems that pays by the week lives by the week, but if you pay them by the month they will still live by the week".
My Lords, I have a couple of brief points to add. One is addressed to the noble Lord, Lord Hamilton. Perhaps he would like to reflect on the fact that what the Minister is doing in this Bill is taking two completely separate systems of support, one for those in work and one for those out of work, and creating a single seamless new product. However, for that to work, it must meet the needs of both sets of people. I think that was the point that the noble Lord, Lord Kirkwood, was making just now-that the Minister may want to effect a culture change for those who are in work, or whom he would like to be in work, but universal credit is also available to support many people who are not required to work, who may never be required to work and who may never be capable of working. Why should they be forced to go through a culture change to no end? Is there really a strong case and can the Minister explain it to us?
Secondly, I want to pick up on the very good point made by the right reverend Prelate the Bishop of Leicester that it takes a lot of time, energy and skill to manage on a very small amount of money. It also takes a lot of intelligence and aptitude to be able to budget well on that. Perhaps the Minister could reflect on what may seem to be simply a matter of timing. If one has plenty of money it is much easier; it is also easier if one has a pot of working capital, so if something goes wrong one month the consequences are simply that you dip into your savings. I spent some years working with single parents and most of them had almost no cushion at all, so if they got it wrong they had nothing to fall back on. For many poor people, their friends are also poor, their families are poor; they do not have the kind of networks where you simply go and borrow from somebody else or you to go the bank and ask it to lend the money, because it will not. The consequences for those families of getting that budgeting wrong can be very severe. Given what is happening in other areas to the Social Fund and the other kinds of support, we really do not want to be driving people into the arms of moneylenders.
Finally, within that group there are some people who, because of their particular circumstances, have very strong reasons why they need to be paid regularly. It is a point I made in Committee but I think it bears repeating here. I have worked with families where, for example, the husband had a problem with drugs or alcohol and went off on a bender and spent the week's wages; the mother would have to find a way of feeding the children until the next benefit cheque arrived. If that happens in one week, it is difficult; if it is happening in two weeks, it is difficult; but as the noble Lord, Lord Boswell, will appreciate, if it is not a matter of "life after next Tuesday" but "life for the three weeks that follow next Tuesday until the end of the month", how does she manage?
The question the Minister has to answer is not whether he would like to do this; I have no doubt that he would. Rather, it is: is the price that will be paid by some of the poorest people really worth the culture change he wants to achieve?
My Lords, I am always staggered to find out more about my noble friend Lord Kirkwood. In Committee we learnt what he did in the bath, and now we have learnt that he goes around arresting bank accounts. We have been having some very interesting debates. However, I am slightly less sanguine about this issue than he is, perhaps largely because many of your Lordships have said that we have to look at people for what they can do and what their ambitions are. People, and groups of people, are not all the same. It strikes me that this is not about going in one direction or another, and that we are treating people as having exactly the same ability to manage their own money.
I also heard in Committee the Minister's ambitions for looking at other methods of dealing with payments. I looked back over the last four to five years of the growth in the Post Office card account and in basic bank accounts, which of course is where you would expect to find the sorts of people who make and deal with money in this manner. And there has been growth; in fact, 12 per cent of the whole population-according to the appropriate survey done by the DWP, which is published on their website-is using one of those two bank accounts.
It also struck me that the price that we are paying for the Post Office card account is frighteningly expensive for what we get as a country. It is a bank of this country, and a bank, JP Morgan, underwrites it, and it charges the state for managing these Post Office card accounts. I believe that we pay something like £50 each a year-£142 million per annum-have those accounts run for us. It strikes me that we perhaps need a presumption to ensure that we put things of this nature in place by giving people the appropriate support, but at the same time ensuring assistance for those who cannot. The language that I have heard many Lordships use, which seems to come from the documents, is the "chaotic family syndrome", where people just cannot manage and need to have some different form of assistance. That is why I started by saying that we should not treat everyone in the same way.
The Post Office card account is a bank account. It does not come with what we might normally expect a bank account to have, but why not, when we are paying so much money for it? Why are people not able to make payments from it for their utilities and gain benefits and savings? I guess that most noble Lords do this because of the way in which they pay for their heating, electricity and gas at the present time. Surely we should be offering that opportunity and using that ability to help people in that manner. We also should not think that people should not be able to separate out their money in the way in which they pay it to themselves. However, in order to do that you have to have appropriate levels of support.
My question to the Minister is: if you are pursuing the idea of developing the facilities which a large number of people currently use for payment, will you also be able to offer advice and support to assist those people who might wish to avail themselves of an enhanced system that allows them to pay their utility bills monthly by a straight payment or direct debit, thus allowing them to get the benefits of reduced charges?
I noticed that the Cabinet Office issued a press release for those who live in England, which says that £16.8 million of support will be given for free debt advice in this country. Does the Minister regard that as being some of the funding that he intends to use for the support that might go with these enhanced accounts?
I know that over the years there has been considerable discussion about the use of the Post Office card account, primarily, of course, in the context of trying to support the local post office in each of our communities. Surely, however, if we were able to do more with it and to provide that advice, perhaps even at the Post Office, it might even be better to do that with the funding that might be available.
There is the problem that many people, or some people, will not be able to manage and will need alternative forms of assistance and advice. My noble friend Lord Boswell was saying that we ought to move in one direction, but it strikes me that we must be wary and understand that there are people who will not be able to manage. We must be able to assist those people properly.
One further point relates to the third amendment in this group, which I know the noble Lord has not yet spoken to. It is a point that comes up quite frequently on the matter of reviews. I feel very passionate about how we often approach these issues and how we structure them in Bills before this House, and about the fact that we look at them as features that have a milestone at some point in a whole system. One of the advantages that we have gained from the Harrington review-although it was not probably set up in that format-has been that it has been a much more iterative process between the community at large and politicians. This has meant that people have not been fixated on a particular date when things should happen. People have been able to hear, read about and commit to change continuously throughout the process of a new Bill.
There needs to be what I would call continuous evaluation by an independent assessor right through the process of universal credit. All its aspects should be looked at and reported on. The days are gone when nothing is open for the public to see. We see reports that are written, which gives an opportunity to raise questions. Artificial milestones are perhaps not the way to go in understanding better how things are turning out for us. At some stages, your Lordships might wish to get faster answers and responses than simply waiting for one or two years, or whatever milestone is put in. I shall make this point subsequently in speaking to a variety of amendments about reviews.
In conclusion, I should like simply to point out to the Minister that we spend a lot of money on the Post Office card account. Are we not able to make better use of that money and give people a much better deal in what we are providing for them?
My Lords, I reassure the government Chief Whip that I intend to speak no more on Report than I did in Grand Committee; nor will I speak on the substance of this matter except early on Report to thank the Minister for providing upstairs on Thursday afternoon the opportunity to discuss this issue, among others, on an all-party basis. I think it would be in the spirit of the comradeship that we developed in Grand Committee to suggest that, following the graciousness with which the government Chief Whip rescued us from the procedural imbroglio at the start of this group, he or the Minister should, before we leave this group, confirm my understanding that on a group of amendments, in the absence of the first name on the Order Paper, anyone in your Lordships' House can move the first amendment on their behalf without necessarily speaking to it, but that no one can speak on the subsequent amendments in the group unless this initial formality has been discharged.
My Lords, I do not know whether the Minister wants to give guidance on that point or to take it up later. I want to intervene briefly, and slightly apologetically, because, like the noble Lord, Lord Kirkwood, I was a bit late on the scene, but I am conscious that I played some part on this subject in Committee, so I think that it would be wrong to keep my head completely down in this debate.
I differ from my noble friend Lord Kirkwood in one respect; I think that the objective of what the Secretary of State describes as culture change in this field is not unworthy. Apart from that, I agree with pretty well everything that the noble Lord said. However, we need to remember something I learnt in various roles, including in my early years as a junior Social Security Minister when I became, it was be fair to say, friends, more or less, with the noble Baroness, Lady Lister. As I said in another context recently, culture change is not an event; it is a process. It takes time and not everyone will get through it. In an organisation, if you want a culture change and people cannot accommodate it, sooner or later they and the organisation have to part company, and they do something else.
This is the social security system, and people cannot part company with it. There is nowhere else for them to go, and we cannot abandon them. There is therefore real force in some of the concerns that are being expressed. Some people, such as those I tried to help in my former constituency, simply will not be able to manage. What are we going to do about them? As I say, we cannot abandon them. I might say that this will feed into something that is coming up later: whether rent should be paid directly to landlords. In some cases, where they cannot manage they will put the food for the baby first and the rent will not be paid. Then there will be another little problem, and someone will have to sort them out. Let us not pretend that this is easy, even if the objective is worth while.
I am not sure-and here I look with some trepidation at the noble Baroness, Lady Lister-that inserting into the Bill an insistence on ossifying fortnightly payments is right. The Bill already provides for some flexibility. Some benefits-including disability living allowance, I think I am right in saying-are paid monthly. This is not a simple picture. We do, however, need that flexibility where it is clear that failing to pay at more frequent intervals will multiply problems, difficulties and further costs in other parts of the system. The Bill allows for that, and I welcome that, but we need clear indication from the Minister this afternoon that this flexibility will be used.
My Lords, first, I thank the government French Bench for facilitating the debate on these three amendments, after the hiccup we had at the start, and I thank the noble Lord, Lord Brooke, for his helpful advice. I say to the noble Lord, Lord German, in respect of his comments on Amendment 3, that I take the point. If he wants, perhaps, a more iterative process, I am happy to accept an amendment to our amendment. I am bound to say that we rather learnt about calling for reviews from the Liberal Democrats and Conservatives when we were in Government-it has the merit of generally not having much of a price tag attached to it.
We start our deliberations on Report by considering the important aspect of how universal credit would work-that is, how payment would be affected, especially the frequency of the payment. However, let me first put in context our approach to the general issue. As we have clearly stated on the record, we support the concept and broad approach of universal credit, a benefit system that provides in-and-out-of-work support, as a clear system of the income disregards and common tapers has significant potential, not least the prospect of clearer incentives for work.
As has been apparent from our committee sessions, and the matters that we will discuss at Report, the manner in which it is proposed to be introduced is, we believe, flawed. Some of the shortcomings are resource issues-work incentives for second earners-but some are potential failings in the base architecture: the exclusion of council tax benefit; the treatment of self-employed people; and, also, the payment arrangements. I agree with the noble Lord, Lord Kirkwood, that this is not a peripheral operation or issue-this is central to how the system should work.
We will come on to discuss issues about which member of the couple should receive payment and how landlords are to be treated-as the noble Lord, Lord Newton, has indicated. The amendments we are considering now address the vital matter of frequency of payment. Amendment 3, tabled in my name and that of my noble friend Lady Hayter, calls for,
"a review into the impact of payment arrangements on claimants, to conclude one year after the coming into force of this Act".
I will acknowledge that it might be more appropriately triggered by the universal credit provisions coming into force. We see this review focusing on the impact on claimants by looking at it from the claimant's perspective. In Grand Committee on
We know that at present JSA is paid fortnightly in arrears, that ESA is normally paid fortnightly in arrears, income support is normally paid fortnightly in arrears, and that tax credits are paid on request either weekly or every four weeks, although I think one would acknowledge that HMRC has an overriding discretion in that respect. Housing benefit is normally payable in arrears at intervals of a week, two weeks, four weeks or one month, but as I understand it, if the rent allowance is greater than £2 a week, the claimant can require it to be paid fortnightly. So in having for universal credit the norm as monthly payments, the Government are clearly not seeking to get the best fit with the current components that are to be displaced. Indeed, I think that the Minister and this debate have acknowledged that. He said on the same occasion in Grand Committee that:
"With this system, we are one of the drivers of the way people behave and of social change".-[Official Report, 10/10/11; col. GC 441.]
I support the comments that have been made by a number of contributors, including by my noble friend Lady Sherlock, about culture change, but culture change to what effect in this respect? We understand and accept the thrust of a system that encourages people into work and helps them to understand the benefits of work by seeing its financial rewards, but what is so important about trying to encourage people to get used to a monthly payment and budgetary arrangement rather than one on a different basis, even if they were in a position to do that? The noble Lord, Lord Freud, also referred in Grand Committee to his search for flexibility. If this is an acknowledgment that monthly does not have to be the rigid approach to payment, we may be closer on this issue than perhaps we thought.
We heard from the noble Baroness, Lady Meacher, my noble friend Lady Lister and other noble Lords about compelling reasons why payments on a monthly basis will create particular difficulties for some families, and not just a small minority of supposedly inadequate budgeters. As for mimicking work, which we have heard as well, while 75 per cent of those in employment are paid monthly, 25 per cent are not and half of those earning £10,000 a year or less are paid less frequently than monthly. We heard in Committee and again today about the growth in the business of payday loans. Recent surveys show that nearly half of the population struggles to make earnings stretch until pay day, with 7 per cent considering taking out a high interest short-term loan within the next six months. The issue of how to stop the exploitation of poor people is a debate that I hope we will have on another day.
Amendment 1, eventually moved by the noble Baroness, Lady Meacher, would require regulations to be drawn up giving claimants the opportunity to require payment of their universal credit entitlement more frequently than would otherwise flow from Clause 7. We support this amendment and so, we hope, will the Minister, because it seems to fit foursquare with his acceptance of the need for flexibility. Obviously the regulations would have to set out practical parameters to the choice available to claimants, but this should include a fortnightly option. The Minister will know also that it would not preclude arrangements where a claimant could draw down against a monthly entitlement. It would be consistent with that. Neither would it preclude the Minister from retaining the distinction between the assessment period and frequency of payment, a point made by my noble friend Lady Lister.
It is understood that the Minister may argue that the issue of frequency of payment can be addressed by the development of new banking products and that he would not wish the Bill to preclude that. That is fair enough, but we consider that the thrust of the amendment moved by the noble Baroness, Lady Meacher, would not shut out those types of options provided that there are arrangements with parameters dealt with in regulation for claimants to choose. But we do not know today that these banking products can be delivered in time for the introduction of universal credit, whether they can be comprehensively available and without high cost. Without that certainty, it is right that something is included in the Bill along the lines of Amendment 1.
Perhaps the Minister will take the opportunity to update us on the Government's thinking in this area, as other noble Lords have requested. In particular, do they support the proposition that there should be flexibility within sensible and practicable parameters of receipt patterns? Should there be a right for claimants to choose within these parameters? Can he confirm that the arrangements being considered are not just about drawing down on a monthly payment already made in arrears?
Amendment 2 is more clear-cut and, I think, more to the liking of the noble Lord, Lord Kirkwood. It sets down a requirement for amounts to be paid fortnightly. It has the merit of being clear and closest to the current patterns of receipt, making it slightly more manageable to exist from payday to payday. We support the amendment as an alternative proposition should Amendment 1 be rejected or fail today.
My Lords, these amendments intend to provide for universal credit to be paid twice a month or, in Amendment 1, for a claimant to be able to choose to be paid more frequently than monthly. As with existing benefits, we will specify payment frequency in regulations made under existing powers in the Social Security Administration Act 1992. I am, though, grateful for the opportunity to set out why we intend for universal credit to be paid monthly.
We want universal credit to prepare people for work and to encourage them to move away from costly weekly and fortnightly budgeting. The present system does not allow people to take responsibility for their finances as the majority of people in work do, day in, day out. That is wrong. It means that the transition to work is more difficult than it needs to be as people have to adjust to monthly budgeting and managing their own rent payments, often with no support. We want to make the first steps into work easier by helping claimants to switch to monthly budgeting while claiming universal credit. Essentially, we are looking for a more empowering system.
The figures have already been raised in the debate. Some 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year are currently paid monthly. It is then right that we help families to deal with the reality of working life, whether they are in or out of work, by paying benefits in a way that mimics payment of a salary.
The noble Lord, Lord McKenzie, asked the straight question: what is so important about monthly payments? He went on to talk about the exploitation of poor people. That is what this is about. Save the Children has estimated that low-income families can face an annual poverty premium of £253 on their gas and electricity alone. Organisations including Consumer Focus, Church Action on Poverty and Family Action recognise the importance that access to the right banking products and sound advice can make in helping families to make the best use of their income. The simple point is that if you are managing on small gobbets of money weekly, it is very tough to match your budgeting process to utility bills or some of the larger or medium-scale capital items. That is why larger amounts paid monthly help people with this poverty premium.
However, I recognise that many people on low incomes are used to budgeting on a weekly or fortnightly basis and are concerned about moving to monthly payments. We absolutely need to support some families to budget effectively. That is why I am keen to develop effective budgeting support for families in this position. In some cases that is just a question of signposting to existing information and advice, in other cases it may require much more intensive, face-to-face support; but we need to take an innovative approach to these budgeting products if we are to stop the exploitation of the poor continuing, as the noble Lord, Lord McKenzie, said.
The universal credit and how we flow money to poorer people in our community is the main opportunity that we have to make a real difference for people in this area. We are working with the banking sector, credit unions, supermarket financial services and the Post Office to explore the opportunity to create cost-effective budgeting accounts. I am looking at accounts that my noble friend Lord Kirkwood will not be able to arrest at his whim, because there are some protections in the way in which we devise those accounts. In the next 18 months there will be an absolute focus of intense work to get this right. One example is the housing demonstration project next year, which will help us to understand the demand for budgeting support and the best ways to deliver it. I am not saying that it will all be easy; it is not. However, it is essential that we develop 21stcentury solutions to these issues and not think back decades and get in the mindset where we did not have these new ways of approaching things.
A simple system of payment on account will be made available to support claimants. Budgeting advances will provide an efficient means for eligible claimants to have access to interest-free credit, providing an alternative for those on the lowest incomes to high-cost, and even illegal, lenders. I must say that I was admiring a Wonga.com advertisement on the side of a bus this morning. In our system of budgeting advances, in the last year already over a million claimants received budgeting loans worth almost half a billion pounds. In the department we have a revolving fund of £1.1 billon, which will continue to be under our control for these purposes.
Clearly there is an issue, which we are addressing, about helping people move from fortnightly to monthly payments. We need to help with that migration period by stretching payment periods and providing the missing funding, if you like, as they move up, and I am looking at a system of doing that over three months. Many noble Lords have made the point that there are people with exceptional circumstances for whom a monthly payment is simply not appropriate. My noble friend Lord Kirkwood talked about the 15 per cent; my noble friend Lord Newton talked about those who will not cope. Clearly there is a group in this category. Where there is a risk of harm to the claimant or the household, we will of course want to make sure that safeguards for these people are in place. Nevertheless, we cannot set up a system to get the bulk of people in control of their finances and then take that control away from them when they can manage it. We need to look at it that way round, not devise a system which protects the 15 per cent of people that my noble friend estimated would be affected. We must not have the tail wagging the dog. We must include support but we must not have a system which stops people going into the workplace when they can. We have begun working with local authorities, housing associations and the relevant third sector organisations to develop guidance around who might qualify for more frequent payments or the direct payment of a proportion of an award to a third party, such as a landlord. Again, the housing demonstration projects will allow us to test the criteria for exceptions.
I appreciate noble Lords' concerns about protecting claimants who have not previously been required to budget monthly. However, I truly believe that this is a fundamental part of what we are trying to achieve with universal credit. It is an opportunity to change the dynamic to design a system that is right for the majority but takes account of exceptional circumstances by ensuring that we have the means to make payments more frequently.
I wish to pick up a couple of questions. We can make universal credit payable more frequently. I say in answer to the point made by my noble friend Lord Hamilton that there is a small cost to doing it fortnightly rather than monthly but it is very small; it is about a penny. As regards the fallback position, the regulation-making powers which are used to determine the frequency of payment are not in this Bill but in the Social Security Administration Act 1992. The legislation on ESA and JSA, for instance, says that they are payable weekly. However, as we know, they are paid fortnightly. We have complete flexibility to pay as often as we think is appropriate.
The noble Lord said that payments can be made more frequently. Will he assure the House that payments will be made more frequently, and that that facility will be available?
I assure the House that where people cannot handle monthly budgeting, we will have arrangements to help them. However, I ask noble Lords not to tie my hands on this. This can make a major difference to poor people by creating banking and budgeting products that will help their lives. Tying our hands on this, particularly mine, will not help. Therefore, I ask noble Lords not to vote against this.
We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?
My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account-some would argue that that is what it is as regards budgeting advances, for instance-or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.
My Lords, I thank all noble Lords on all sides of the House who have contributed to this debate-the Conservatives, the Liberal Democrats, the Labour Party and Cross-Benchers. It has been a very powerful debate and strong concerns have been expressed about the impact of this amendment. The importance of the amendment lies in the mass of cuts to disability benefits, housing benefits-virtually every benefit that one can think of. Therefore, what the House is looking for is some sort of security for these very low income people to ensure that they can try to stay out of the way of these sharks who charge them hundreds and hundreds of per cents of interest over a year. I thank very much everybody who has spoken, in particular the noble Baroness, Lady Lister, who rescued the situation that I am afraid I caused.
The Minister referred to people managing small nuggets of money and having difficulty doing that because, of course, there are payments that need to be made monthly. I think the Minister is not familiar with the ways of very poor people in terms of having all their little jam jars on the mantelpiece and putting bits of money in as they can through the month to enable them to pay these bills. Obviously, in the middle classes we do not do that sort of thing. The Minister is shaking his head, but I am afraid this is actually the way things work. Therefore, it is all about the drastic cuts in benefits.
The Minister has referred to 21st century solutions. In fact, driving people into the hands of these sharks who charge them hundreds of per cents of interest is not really a 21st century solution. The Minister talks about the ability to make provision in exceptional circumstances. I am afraid we are not talking about exceptional circumstances; we are talking about huge numbers of people who are going to find it extremely difficult to manage. I do not have a sense of absolute assurance that there will be provision for these people to manage. This is not playacting; these are real concerns about what is going to happen to large numbers of people facing these cuts over the years ahead in difficult times. I know that the Minister does not want me to test the opinion of the House, but I feel an obligation to do that. I wish to test the opinion of the House.