Welfare Reform Bill

Public Bill Committee, 17 May 2011.

Clause 93

Kate Green (Labour, Stretford and Urmston)

I beg to move amendment 205, in clause 93, page 61, line 40, at end insert

‘excepting where they are the parent(s) or principal carer(s) of a child who is the subject of a child protection plan, a Children in Need assessment or Common Assessment Framework Team Around the Child’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following: amendment 197, in clause 93, page 62, line 24, at end insert—

‘(4A) Family and friends carers will be exempt from the benefit cap—

(a) where the child comes to live with the carer as a result of plans made within a section 47 Children Act 1989 child protection enquiry;

(b) where a child comes to live with the carer following a section 37 Children Act 1989 investigation;

(c) where a carer has secured a Residence Order or Special Guardianship Order to avoid a child being looked after, and there is professional evidence of the impairment of the parents’ ability to care for the child;

(d) where the carer has a Residence Order or Special Guardianship Order arising out of care proceedings;

(e) where the carer has a Residence Order or Special Guardianship Order following the accommodation of a child;

(f) where the carer has a Residence Order or Special Guardianship Order following the death or serious illness of a parent.’.

Amendment 206, in clause 93, page 62, line 24, at end insert—

‘(h) make provision where there are parent(s) or principal carer(s) of a child who is the subject of a child protection plan, a Children in Need assessment or Common Assessment Framework Team Around the Child.’.

Kate Green (Labour, Stretford and Urmston)

It is a pleasure to return to the Committee with you in the Chair, Mr Gray.

I suspect that we will spend a large part of this morning’s sitting, and perhaps some of this afternoon’s sitting, talking about the Government’s proposed introduction of a benefit cap. The more that we read about the Government’s plans, the more that we see that the plans are both unworkable and discriminatory. My hon. Friend the Member for Westminster North looks forward to expounding at length on issues related to family size and structure, housing costs, employment status and so on.

With this group of amendments, I want to focus on two groups of families that will be affected by the design of the cap. Amendments 205 and 206 address families in which there are child protection issues, and amendment 197 addresses families with kinship care situations. Later this morning, my hon. Friend will deal with the broader aspects, such as housing, family size and so on, that particularly affect such families.

I will start with amendments 205 and 206, which address child protection issues. There is considerable concern, as the Government have admitted, that the welfare reforms encompassed within the Bill and the earlier housing benefit reforms introduced by the Government will result in increased housing mobility, as the value of the total income of benefit claimants declines relative to the rents that they can afford in the private rented sector, where they may be occupying properties that will become unaffordable for them.

In addition to the contribution of material poverty to child neglect, the evidence of a number of serious case reviews of children subject to child protection issues shows that housing transience and inappropriate housing, which the welfare reforms could exacerbate, contribute to such neglect. Housing transience also makes it difficult for local authorities to keep track of families in which children are at risk. We can already see that in some London boroughs. The impact of housing transience, particularly its implications for child protection, was specifically highlighted by Lord Laming in his report on the death of Victoria Climbié some years ago.

I am not for one minute stigmatising all poor families by suggesting that they have a heightened risk of having child protection issues. Child neglect and child abuse can occur across all family backgrounds, and poor parents are in general as committed to the well-being and good upbringing of their children as any parent. They care as deeply about their child’s welfare as any parent from a better-off background. None the less, we have to observe that the number of incidents is sufficient to be concerned that child protection case loads will increase in the poorest boroughs as vulnerable families relocate, as a result of the benefit reforms, to boroughs with cheaper housing stock.

The leader of Haringey council, Councillor Claire Kober, is on record on that point. She told The Guardian in October 2010 that flight to cheaper boroughs as a result of reforms to local housing allowance had already caused an inflow of children at risk. She said:

“In the last two months we have seen an influx of 40 children on child protection plans. That’s more than a 10% rise for us in vulnerable children…which means other services come under pressure”.

That was before the introduction of the new benefit cap that we are debating. As a result of the benefit cap, there is a risk of difficult and potentially dangerous child protection cases being concentrated in certain parts of the country that have low-cost housing.

Research into serious case reviews that were conducted between 2005 and 2007 found that, in 45% of sample cases, the families were highly mobile and living in poor conditions. The report stated:

“Reluctant parental co-operation and multiple moves meant that many children went off the radar of professionals.”

Family Action highlights an example: family Q of Sheffield and Lincolnshire moved 67 times to conceal three decades of parental sexual and physical abuse.

In London, where rents are higher than elsewhere, there is an even clearer indication of the link between housing issues and safeguarding challenges. A London Safeguarding Children Board paper found that of the serious case reviews that were completed in the capital between 2006 and 2009,

“47% of the sample had rent arrears, had either been evicted or were described as on the verge of eviction”.

The paper concludes:

“Children disappear from view when there is high mobility (including inter country) and housing problems.”

The situation that we are moving to, in which families may be forced repeatedly to move in search of affordable housing as a result of the benefit cap, will exacerbate the problem and prevent the vital safeguarding and tracking of vulnerable children and their parents. High mobility contributed to the failure to trace and share information between different London local authorities in the death of child C in Sutton in 2006.

Charlie Elphicke (Conservative, Dover)

I am listening to the hon. Lady’s argument with care. My understanding is that the cap for housing benefit will be about £500 a week or thereabouts. Will she confirm that my understanding is correct and explain how people would not manage to have quite substantial houses for that kind of rent?

Kate Green (Labour, Stretford and Urmston)

The hon. Gentleman needs to understand that there are two caps: one relates to housing size and the other to overall benefits received. I think that the latter is the £500 a week for families with children to which he has referred. Considerable analysis of the impact of the Government’s earlier housing benefit reforms and the cap proposals in the Bill suggests that a substantial number of families with children will be unable to remain in their current housing. That is particularly so in London, especially in the high-cost London boroughs such as that represented by my hon. Friend the Member for Westminster North, but it is true in other parts of the country as well. For example, my borough, Trafford, has relatively high housing costs in the north-west of England, so we expect to see—both within and across boroughs—some dislocation of families as a result of the caps.

Charlie Elphicke (Conservative, Dover)

Correct me if I am wrong, Mr Gray, but I believe—

James Gray (Conservative, North Wiltshire)

Order. I will not be correcting anyone.

Charlie Elphicke (Conservative, Dover)

Indeed. I believe that we are talking about £26,000 in rent each year, or thereabouts, which is an awful lot of money. How many families will really be affected?

Kate Green (Labour, Stretford and Urmston)

First, if a single child becomes at risk as a result of these proposals and becomes the subject of child protection arrangements that are more difficult to enforce, we must be seriously concerned about that. Secondly, two caps are running. The benefit may be capped by the size of a family and the number of bedrooms that they can have, as well as the financial cap that the hon. Gentleman has alluded to. We are seriously concerned that such families will face a total income cap of £500 a week, from which they will have to meet housing and other costs. It will be very difficult even for families with three children—such families are not particularly large—to stay in the high-cost housing that some occupy in some boroughs. That applies especially in London and in other parts of the country, too, either because they are expensive parts of the country, or because those families need relatively larger accommodation.

As I have said, high mobility will cause an increased risk for children, where there are child protection issues. We can see that very clearly; it happened in the case of child C in Sutton in 2006. In that case, the extended family was known to five different local safeguarding children boards, yet the mobility of the family impeded the sharing of vital information. I am not for a minute suggesting that removing the benefit cap would solve all the problems of information sharing across boroughs for children who are the subject of child protection measures. We should, however, think carefully about any benefit arrangements that might create further mobility issues and further dislocation and disconnection from the social services that need to have the closest eye on vulnerable children. That is the thrust of amendments 205 and 206.

In August 2010, Ofsted found that

“in instances of a failure to share information between schools and health professionals, local authorities were unable to identify children under their authority. As parents have no legal requirement to inform professionals when they move into or out of a borough, it is often through health professionals that children become known to local authorities.”

However, health professionals are also likely to lose contact with many such vulnerable families as a result of the benefit cap.

When we have raised concerns about families who will be harshly impacted by benefits changes in the past, the Government have highlighted the role that transitional protection will offer to vulnerable claimants. Although that is welcome and useful in the short term, while it lasts, Ministers have yet to tell us what will trigger the end of transitional protection and what changes in circumstances will mean that it is no longer in place. In any event, in the long term, transitional protection will obviously not exist for families who are not currently in the benefits system or for those who are not in receipt of any relevant benefit. Only existing benefit claimants will be protected.

Following the introduction of universal credit, new claimants will receive no protection, and they could lose substantially compared with their entitlement under the existing system. From the briefing notes provided by the Department, we now know that protection will not be uprated with inflation. Losses could be relatively large under universal credit, and benefits could be further eroded within only a few years. As I have said, households whose circumstances change will lose their cash protection, and what counts as a change in circumstances for those purposes has not been defined in detail.

Amendments 205 and 206 seek to remove from the benefit cap those families where child protection is an issue, and there are a number of variants relating to how that issue could be defined by the administrative processes.

Ian Swales (Liberal Democrat, Redcar)

I have a lot of sympathy with many of the hon. Lady’s arguments. I will say more later in the debate, but first, can she say how many families she thinks that the amendments would affect? Secondly, is she not concerned that, if her amendment were accepted, there would be a perverse incentive for children somehow to be considered as vulnerable, either by authorities or through the families’ actions? In other words, if it enables someone to stay in a house, it is a good idea for the children to be vulnerable. Does she not understand that that could be a perverse way of gaming the system?

Kate Green (Labour, Stretford and Urmston)

I cannot give the hon. Gentleman the numbers, but I will get back to him because it is a good question. However, the numbers are relatively small; substantial numbers of families do not have serious child protection issues, although the numbers have risen in recent years in the wake of the Climbié report, as all hon. Members are aware. That is already putting strain on local authorities, as they have to take more children into care, or make them the subject of child protection orders and assessment frameworks, and so on. I will get the information that the hon. Gentleman seeks, because it is an important question, but let us remember that child protection is no issue at all for the vast majority of low-income parents. They are good, caring and loving parents who put the well-being of their children first, just as any parent does.

On the perverse incentive, the motivation to abuse children is a very dark place, and it is difficult for us, as amateurs, to unpick what drives such behaviour and what leads parents into patterns of abuse. I am therefore not able to say that any current abuse has arisen as a result of poverty. Indeed, I am explicitly not saying that any more than I can say that building in some sort of financial incentive would have any impact on parental behaviour. We cannot go into any rational analysis of whether that is likely. We can say, however, that there is clearly a coincidence between material depravation, child neglect and frequent housing transience. With vulnerable children, who may need to become the subject of child protection procedures, we need to do all that we can to minimise those risks.

Amendments 205 and 206 would, when child protection orders, assessment and so on are in place, leave families outside the ambit of the cap. If the Government are not able to accept those amendments, I hope that we will at least receive assurances from Ministers about how they will ensure that children do not fall down the gaps as a result of the introduction of the benefits cap. I would also like assurances about what extra support Ministers will be offering to those local authorities that are already finding that their child protection and safeguarding services are increasingly stretched, as a result of the rise in case load that I have already mentioned, as well as the rise in case load that has already taken place in some boroughs following housing benefit reform, which we expect will now be exacerbated.

With regard to amendment 197, the other family group that I want to highlight is those who provide kinship care to children—relatives, grandparents, godparents and so on—and might take them into their homes because those children’s parents are unable to look after them properly. When we discussed that group a few weeks ago, there was widespread support and sympathy for the need to recognise the contribution that such families and family members make, and to give them the support to enable them to care for children in an environment where those children are likely to feel safer and more stable, because they are with family members—people who know and love them—and because they relieve the state of the financial burden of providing such care.

Amendment 197 would exclude the families and friends who are providing such care from the ambit of the benefit cap. A failure to do so could lead to some families being financially penalised specifically for taking on that caring role, and I am sure that we would want to avoid that. Inevitably, taking more children into a household will make it larger, and family and friends carers often end up being members of large households as a result of taking on not only one child, but perhaps several siblings so that the family is kept together. That has led to an estimated one in 10 family carers living in households of five or more people, and they are therefore likely to be disproportionately affected by the benefit cap. It is also more likely that those family and friends carers may have to take time out of the labour market to settle children who will be arriving under often quite distressing and stressful circumstances, so they may be more reliant on a higher level of out-of-work financial support for a time. In many cases, the payments for the children will be coupled with their own out-of-work benefits, which is likely to push them above the level of the cap.

For those households that already have their own children, the cap will act as a disincentive to offer care to, and to take in, the children of family and friends in distressing circumstances. If those people are already just below the level of the cap, there will be a very real effect on their inducement to take on children because they would thereby risk losing financial support through the benefits system.

We know already that kinship carers highlight the financial disincentive that is built into taking children into the household without getting all the financial benefits that might accrue to their parents. The benefits cap risks pushing a small number of families, albeit ones that we are all agreed we should support, into a situation in which they are significantly disadvantaged financially by offering care to the children of family or friends. An unintended consequence could be that more children will be taken into care because they cannot go to live with family and friends.

Even if the Government cannot accept the amendment, I hope that they can offer us some assurances about their intentions on supporting families providing kinship care. We all recognise that such care is important and valuable, and it is something that we want to see acknowledged. I look forward to hearing the Minister’s comments on these two groups of families.

Chris Grayling (Conservative, Epsom and Ewell)

This is the first of what I suspect will be a series of debates about the clause and the benefit cap. The hon. Lady wishes to exempt certain households from the benefit cap through amendments 197 and 205. Amendment 206 is more general and indicates a desire to make special provision for such households when making benefit cap regulations. The theme of writing exceptions into the Bill is one to which we shall return as we consider in the next few groups of amendments.

First, I should point out that subsection (4)(c) makes specific provision that regulations may make exceptions to the application of the benefit cap, which raises the obvious question about the circumstances in which those exceptions should be made. I want to make it clear that given that the provision is there, it is not my intention to write specific exceptions into the Bill. I will be as helpful as I can to Committee members, but I take them back to my original comments about the nature of the Bill—and the bookcase, which has not made an appearance for a while. The clause simply creates a framework that allows a benefit cap to be established. We are not specifying the detail, the amounts or the exceptions. There will be a lot of debate about exactly how individual situations such as the ones that the hon. Lady described should be handled. The Bill simply creates the mechanics for all this to take place.

Amendments 205 and 206 would apply to households when social care services had put formal plans in place to secure a child’s safety and well-being, often due to parental problems such as mental or physical health, divorce, domestic abuse or substance abuse. Those issues can clearly be hugely disruptive to families and children as they grow up. In other families, such parental problems may lead to another family member or a friend taking over the child’s care, and that might happen for other reasons, such as the death of the child’s parents. Those households are covered by amendment 197; indeed, some households would be covered by all three amendments.

We recognise that the welfare of children whose parents are not always willing or able to look after them appropriately has to be carefully considered when policy making. In addition, we must acknowledge the immense value of the care given by family and friend carers who look after children whose parents are unable to provide the necessary care themselves. It is important to reiterate that we are introducing the benefit cap to increase incentives to work by addressing the injustice of a benefits system that can sometimes give significantly more to people who do not work than the average earnings of those who do. That injustice not only is unfair to the workers who fund the system, but fails benefit claimants by making the choice to take a job an illogical one when their benefit income will not be matched. It also contributes to the inappropriate stigmatisation of benefit claimants when people who are in work look with frustration at those who are receiving more than them through state support.

It is vital that we use the levers of the benefit system to make work the natural choice. To achieve that, the benefit cap must apply to most households, including those in which concerns about child welfare have been registered. The presence of a child welfare concern should not materially affect the way in which such families interact with the benefit system. It is not a question of saying, “We’re worried about the children, so let’s provide more money.” The question is much deeper and more challenging than that.

The hon. Lady referred to the situation that exists now in which housing mobility can lead to child protection problems.

Karen Buck (Labour, Westminster North)

Does not the Minister recognise that in child welfare cases, parents are almost invariably required to attend regular sessions with social services during the working day—that is often part of a court order? In such circumstances, how would that be compatible with a work-search requirement?

Chris Grayling (Conservative, Epsom and Ewell)

We cannot deal with deep-rooted social problems in a family by exempting them from the return-to-work path about which we have talked extensively. How can it help a family with deep-rooted problems if we do not try to help the parents get into work, which would increase the money coming in and increase the family’s purpose and direction in life?

Sheila Gilmore (Labour, Edinburgh East)

As I understand it, the benefit cap will apply even if someone’s needs have been assessed as requiring particular categories of benefits. People may receive the allowance that is due to them as an individual or a couple, which will include any child, disability or housing element. Is it right to take money away from people when the system has decided that they are entitled to that money?

Chris Grayling (Conservative, Epsom and Ewell)

The key point is that these households receive substantial amounts. We are talking about households that receive the average national income without going out to work. There is an important point of principle here: our reform package is designed to encourage and incentivise people into work.

If the hon. Lady reads subsection (4)(b), she will see that if there are individual challenges and anxieties about individual issues—about war widow’s benefit, to pick one example—the Bill allows regulations to

“make provision as to the welfare benefit or benefits from which a reduction is to be made”.

The Bill therefore clearly provides for the possibility of exceptions in such circumstances. The benefit of our approach, as I have said about other aspects of the Bill, is that it provides for freedom and flexibility. If the country is unfortunate and misguided enough to vote for a Labour Government in the future, that Government will have the freedom to use the Bill’s flexibility to make any adjustments that they wish.

The hon. Member for Stretford and Urmston referred to housing mobility and how housing mobility can lead to child protection problems. I do not deny that the benefit cap may result in individual cases of housing mobility, but I do not believe that the measure will exacerbate and existing problem. She described a situation under the current system in which a household made 67 moves to cover up a child protection issue. We should be extremely concerned about that, but it is not a problem of our benefit system; it is a much broader problem of how our social services interact with each other within and between local authority areas. Of course, that sort of problem has to be watched extremely carefully, but not including such households in the benefit cap will not solve it. The problem has to be addressed in a very different way.

It is vital that we use the levers of the benefit system to make work the natural choice. To achieve that, the benefit cap must apply so that people recognise that there is a point beyond which they cannot simply receive money from the state. In that way, we will use the wider advantages that come with moving into work to address such concerns about social issues, rather than assume that they are simply a question of benefit levels. I do not buy the argument that those problems are a matter of benefit levels. They are much deeper rooted than that; they are policy failures that exist outside the welfare state.

I now turn to the amendments. Some households in which children are cared for by relatives or friends receive fostering allowance from the child’s local authority to cover the cost that caring for the child brings, but I am well aware that many more relative and friend carers are not approved foster carers, so although they may receive some payment from the local authority, they do not have access to fostering allowance. That is clearly the group that the hon. Lady is talking about. Such carers are able to receive support for the children who are in their care through the benefits system, because, unlike approved foster carers, they have access to child benefit and child tax credit on the same basis as parents. Any payments they receive from the local authority will be disregarded. That parity of treatment with parents will be continued with the introduction of universal credit. Where work-related requirements apply, the safeguards that are in place for parents will extend to friends and family carers to take account of their caring responsibilities.

If we are to treat family and friend carers in the same way as parents for other facets of the benefit system, it seems logical and appropriate that that parity is extended to the application of the benefit cap. The benefit cap principles apply to family and friend carers as they do to parents, so it would not be appropriate to create an exemption as amendment 197 proposes. If we did so, we might be in the absurd position of not applying a benefit cap to a family with fewer children than another to which the cap is applied. Surely, we have to deal with individual circumstances differently; we should not simply say that solely because someone has caring responsibilities for a child, they should be given a blanket exemption from the benefit cap. I simply do not accept that argument. However, the Bill provides the flexibility for adjustments to be made to the benefit cap in regulations, so if Opposition Members feel strongly about the matter, they can form and pursue a policy decision if they want.

Sheila Gilmore (Labour, Edinburgh East)

I understand the point that the Minister is making about powers to make regulations and to change them, but am I to understand that he is not inclined to make any of these groups an exception in any circumstances? I am thinking, for example, of kinship carers for a period when they first take over responsibility for children; by definition, that is a difficult situation. Am I to understand that when the Minister comes to draw up the regulations, he will not be disposed to make any exceptions for any of the groups that my hon. Friend the Member for Stretford and Urmston has highlighted today?

Chris Grayling (Conservative, Epsom and Ewell)

I am not persuaded by the hon. Lady’s argument, although I understand the sincerity with which she makes it. The current system, which allows friend and kinship carers to receive child benefit and child tax credit in a way that other foster carers would not, provides additional financial support for such families. None the less, there is flexibility and we have not yet drawn up the detailed regulations. If Labour Members feels strongly about the matter, the Bill provides the flexibility to make such changes.

That brings me to placing specific exemptions from the benefit cap in the Bill. Throughout the Committee’s deliberations, I have explained that we intend the Bill to be a framework for our welfare reforms, with much of the detail to come in regulations, which is similar to the approach used by the previous Government. The amendments propose a series of exceptions to be written into the Bill, which we simply cannot accept.

I understand that hon. Members on both sides are concerned about getting the detail right. We will be thoughtful, we will listen to the arguments put to us, we will listen to the concerns and we will seek to make sure that the policy is implemented in the best and most effective way possible. However, I simply do not accept that the right way to go about that is to write a series of specific exemptions for individual groups into primary legislation, so with all due apology to the hon. Member for Stretford and Urmston, I cannot accept the amendments. I assure her that we will think carefully about the issues that she has raised, because she has made some valuable points. I do not agree with her in principle on kinship carers, but we will take note of the issues that she has raised.

Kate Green (Labour, Stretford and Urmston)

I am disappointed by the thinness of the Minister’s reassurances about two important and vulnerable groups of families. If he is thinking so carefully, perhaps he should consider the consequences of not having particularly well designed arrangements for these families. Members on both sides of the Committee are genuinely anxious about kinship care arrangements. He should be mindful that the potential effect of what he has said this morning is that fewer families will be able or willing to offer kinship care. I hope that Ministers will keep that under careful review, so that if that consequence flows from the policy that has been expounded this morning, it can be revisited immediately.

As my hon. Friend the Member for Edinburgh East said, such situations often occur quite suddenly. Families often have to make unexpected and emergency arrangements, and I would expect the Minister to want at the very least to facilitate such transitions. It is important to recognise that kinship care may be a relatively short-term, stop-gap arrangement. I hope that anything that reduces the propensity for children to be taken away from their families for good and put into care, such as providing shorter-term care within the family setting, is not damaged by the policy to which the Minister seems so committed. I am disappointed that he is so convinced that there is no reason to treat families providing kinship care differently from other parents, when clearly the situation is extreme and difficult and therefore very different from the normal domestic family set-up. I should have liked him to have shown a little more flexibility in his response.

The right hon. Gentleman said that it was important to understand that the overall purpose of the benefits cap is to make taking up employment the prevailing norm—the issue that will trump every other in determining the way in which the benefits system works. We have long advocated that the paramount interests of children should be the guiding principle in all aspects of public policy in which they are involved, not just specifically in relation to children’s issues. I am really concerned that the need to get parents into work takes precedence over their children’s safety and well-being.

There will be some families where moving the parents into some paid employment will help them to develop their parenting skills, but as my hon. Friend the Member for Westminster North points out, many families are already being required to comply with other conditions and requirements, which will make moving into paid work particularly challenging for them, and others are living in incredibly chaotic circumstances. It is right to seek to move those families towards the labour market over time, but for some of those chaotic families that can be a very long time—years in some cases.

The Minister says he does not believe that child protection issues arise out of the levels of benefits. I certainly am not suggesting that poverty causes parents to abuse their kids—many parents on low incomes would be horrified by the thought of such a thing—but he has to accept that there is a correlation or a coincidence between material deprivation and child neglect, and he needs to accept that housing mobility will be increased by the reforms that the Government are bringing in. Whether or not he thinks that will happen in many cases and or that it is a new problem, Labour Members believe that we will see a significant increase in housing mobility in certain parts of the country. It will not be seen everywhere—we accept that in some parts of the country it is not an issue; but where it is an issue, I am concerned about the stretch on local authority social services and children’s services. The right hon. Gentleman has been quite cavalier about the potential consequences.

I am pleased to hear the Minister say that he understands the value of families providing kinship care, and I noted what he said about the ability, within regulations, to do more work to describe, very particularly, families and households that we believe ought to be left outside the scope of the benefits cap. We will give more consideration to that when the secondary legislation is laid.

I am surprised by the Minister’s saying that he does not want to start specifying families where there are child protection issues and where there are kinship care arrangements, because he does not want to specify lots detailed instances and examples, yet he is able to say straightaway to my hon. Friend the Member for Edinburgh East that war widows will be exempted. That seems like a differentiation between the deserving and undeserving poor. I am therefore disappointed with the right hon. Gentleman’s answers.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Lady obviously did not understand my point. The clause contains provisions to decide which benefit should or should not be included in the benefit cap as well as provisions for exceptions to be made. Does she understand that those are different things?

Kate Green (Labour, Stretford and Urmston)

The point is that the Minister is prepared to sign up now to some families being treated in a particular way by the rules on the benefit cap, but is prepared to deal with other families only when we come to discuss regulations in detail a few months’ time. That sends a message about the kinds of families that will receive exemptions from the benefit cap.

Chris Grayling (Conservative, Epsom and Ewell)

May I draw attention to the fact that there is no reference to any individual benefit in the Bill? I have simply given an example. No benefits or exceptions are given; it is purely a framework.

Kate Green (Labour, Stretford and Urmston)

I understand that, but we have heard from Ministers several examples of the kinds of situation that might be exempt from the cap. We also know that we are discussing—I think I am right in saying—how families where disability is an issue or in employment will not necessarily be encompassed within the cap, although we have some questions about the extent of that, which my hon. Friend the Member for Westminster North will raise later. My point is that the Minister seems willing to say now that there are some kinds of family structure and family type where he has some sympathy for a more flexible interpretation of the benefit cap. I am concerned that he is not able to make such positive statements about two groups of families that I think merit such flexibility.

I am therefore disappointed, but we have many other questions about some of the broader aspects of the benefits cap, such as incomes, family structures and housing, which will give the Minister further opportunities to offer us some broader assurances. Given that there is an extensive list of such propositions that we want to raise today, I beg to ask leave to withdraw the amendment.

Karen Buck (Labour, Westminster North)

I beg to move amendment 232, in clause 93, page 61, line 40, at end insert—

‘(1A) The Secretary of State shall not apply a benefit cap on a claimant’s welfare benefits where the claimant has not received a reasonable offer of a job, except in prescribed circumstances.’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following: amendment 244, in clause 93, page 62, line 15, at end insert

‘including one for couples with children who between them work more than a prescribed number of hours.’.

Amendment 235, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for couples or a single person who within a prescribed period has left work due to redundancy or illness or reasons relating to the care of a child.’.

Amendment 236, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for couples with dependent children who if living in separate households would have benefit entitlements lower than the relevant amount.’.

Amendment 237, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for households where no adult is subject to all work related requirements as defined in Clause 22.’.

Amendment 238, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for families who are worse off in work once childcare costs are taken into consideration.’.

Amendment 246, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for any claimant in receipt of disability living allowance, personal independence payment, attendance allowance, constant attendance allowance, employment and support allowance, carer’s allowance, or any element or sub-element of universal credit paid in respect of a disability.’.

Karen Buck (Labour, Westminster North)

It is a pleasure to continue the debate under your chairmanship, Mr Gray. We have begun to air some of the arguments about the benefit cap.

Political history is littered with wheezes, emerging most commonly in political conference speeches, and I would go so far to say that that is not confined to one side of the Chamber. All too often, such wheezes, which sound great in the context of a political speech, tend to unravel. Picking up the bookcase analogy—the Minister has correctly not aired that often enough—the benefit cap is like a garish coffee table book given to one by a relative that one is then required to display, despite the fact that it is something of an embarrassment. From the political news commentary, which we know is often correct, we learn that the benefit cap is not popular within the Department for Work and Pensions, or with the Secretary of State or the Deputy Prime Minister, and that negotiations are ongoing between the Treasury and those Ministers to find ways to deal with the problem. They are completely right to raise their concerns, because the problem with the benefit cap is that it interacts in a destructive way with the universal credit and will complicate greatly many other aspects of the smooth transition into UC. It will have all kinds of perverse and unintended consequences. The further we dig down into it, the more obvious that becomes.

It is obviously true—the Opposition agree with this—that work should always pay; that is the banal observation about the benefit cap. But it is also true that, broadly speaking, when one looks at comparable incomes for comparable household sizes the issue is not nearly as stark as the Government would have us believe. With very few exceptions, families of comparable size are better off in work than on benefits. The central problem with the cap is that one is not comparing like with like. I will return to that.

If one is living in Hull or Easington, some of the rents, which inform this debate—slightly misleadingly, in the context of the overall benefit cap—are eye-watering. One completely understands why those figures shock and surprise people, but unfortunately, good public policy is not usually made on that basis.

We need to drill down into how the provision will work. As is so often case, the impact assessments are brutally informative. We know how much the Government want to save with the benefit cap, but we have no idea how much it will cost. That is a particular challenge for Ministers. The impact assessment tells us:

“Housing Benefit may no longer cover housing costs and some households may go into rent arrears. This will require expense and effort by landlords and the courts to evict and seek to recoup rent arrears. 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 not possible to quantify these costs because they are based on behavioural changes which are difficult to assess”.

So we are able to quantify a cost, but we have no means of quantifying what the Government’s offsetting expenditure will be. That is before we even start to calculate the costs of moving people into work, because, broadly speaking, the households that we are talking about will, in many cases, require more public expenditure to move into work. I will address child care costs in a few moments, but child care is one example of that.

In principle, the working tax credit in the transitional period into universal credit, possibly with transitional protection, will in many cases, particularly for lone parents with larger families, result in higher expenditure. But at the moment we are flying blind. We do not know what the costs are likely to be. As is the case with other provisions in the Bill, we have no real confidence in the figures that are being presented to us.

We also know who will be affected by the cap; it will almost invariably be larger households. Approximately 40% of households affected by the cap will consist of five or more children, and 80% will consist of three or more children; fewer than 10% of households will have no children at all. The impact assessment tells us that

“a large proportion of those affected by the…cap are likely to be…households from cultural backgrounds with a high prevalence of large families”.

The Office for National Statistics finds:

“Asian households are larger than households of any other ethnic group. Households headed by a Bangladeshi person were the largest of all with an average size of 4.5 people in April 2001, followed by Pakistani households…and Indian households”.

People from ethnic minority households, particularly certain groups, including 30% of Pakistani and Bangladeshi households, are more likely to be in receipt of income-related benefits. The weighting is larger for families, particularly for black and ethnic minority families. An impact assessment says that it expects some

“60% of customers”—

that seems to be a singularly inappropriate use of the word “customers”—

“who are likely to have their benefit reduced by the cap to be single females but only around 3% to be single men. Most of the single women affected are likely to be lone parents”.

Households will lose £93 a week on average; the median loss will be £66 a week. The mean is skewed by some households losing significantly larger amounts, and such households will almost all be in London. Some 40% of the losers will lose less than £50 a week; 25% will lose between £50 and £100 a week; 20% will lose between £100 and £150 a week; and 15% will lose more than £150 a week. The impact assessments set out dramatic figures relating to who will be affected and by how much, but they do not dig deeper into the Government’s thinking, which is what our amendments, some of which are probing, seek to address. There are many reasons why the policy is flawed.

Charlie Elphicke (Conservative, Dover)

I am listening to the hon. Lady’s argument carefully. Do the Opposition believe that there should be no benefit cap whatever, as a matter of principle?

Karen Buck (Labour, Westminster North)

I believe that it is absolutely right that households should be better off in work. There will always be exceptions, however, and there will be some individuals for whom the work-search categories do not apply, which is a point that I will come on to. As drafted, the cap is so flawed and so full of perverse incentives that is really hard to see how it will operate at all—still less operate and save the money on which the proposals are predicated.

The central argument is one of comparability between working households and households who are out of work and on out-of-work benefits. I will return to this point in more detail, but the difficulty is that people’s average earnings are used for comparison, not their average income. In many cases, households who are on average earnings are entitled to top-up in-work benefits, such as housing benefit, council tax benefit, working tax credit and universal credit, so we are not even beginning by comparing like with like. Centrally, there is also no recognition of regional variations, particularly in housing costs, which is the single biggest flaw in terms of the scale of the money that is involved. It is, of course, impossible to make a meaningful comparison between households in work in Easington and Hull and households in work in London, because there is an enormous disparity in housing costs, through no fault of theirs. I will return to that point later.

Charlie Elphicke (Conservative, Dover)

My constituency of Dover is less likely to be directly affected, but my constituents rail at me, asking why people should earn more on benefits than they do when they are in work. Surely, it is right in principle that the effective earnings equivalent of £35,000 should be a cap, to deal with the level of public concern that there is.

Karen Buck (Labour, Westminster North)

The hon. Gentleman is absolutely right that people are shocked by rent levels, but rent levels are what they are. I will come on to this matter in later amendments, but people with the lowest possible housing costs are also affected by the cap. That point has not been particularly worked through. People expect households to be better off in work than out of it. That is absolutely right, but even the existing system’s harshest critic would have to recognise that there are differences in housing costs in different parts of the country, and that should be reflected in the benefits system.

It is reflected in the benefits system, of course—in housing benefit. A few weeks ago in Parliament, we debated the housing benefit cap, which is being levered down. We think that is happening more harshly and faster than necessary, but those measures are predicated on a recognition that there are variable housing costs in different parts of the country. On one hand, therefore, the housing benefit reform that we are charging ahead with recognises local variations in housing costs, but that is not recognised in the benefit cap, which is a fundamental flaw.

It has become clear from further scrutiny of the cap that the main risk element for the cap applying is having a larger family. In effect, it is a back-door attempt to reduce benefit for those families with larger numbers of children. Such families already face the highest risk of falling into poverty. No one has properly explained how applying a cap to families with larger numbers of children will have a significant behavioural effect. What do we do about those families who are left in that situation through no fault of their own: people who are widowed, abandoned or severely ill?

The measure introduces the ultimate in couples’ penalties. It would be extraordinary for two rational individuals whose combined income in out-of-work benefits would leave them subject to the cap, not to seek to form separate households. Not all of them would do so because there are many other factors at play, but why, logically, should we have a benefits system that creates an incentive for households to separate, which will not only have a devastating effect on that family but increase expenditure?

Why have the Government no confidence in all of the other measures that are being introduced through universal credit and other benefit changes and employment changes leading up to the introduction of universal credit? We already have a sanctions regime. We already have a commitment to the Work programme. We already have a programme of measures that are designed to tackle worklessness and the Government are extremely positive about its impact. If the Government are so convinced about the Work programme and the fundamental thrust of universal benefit to improve the income of households out of work, why do we need to introduce yet another entirely arbitrary measure that cross-cuts all of this?

Charlie Elphicke (Conservative, Dover)

The hon. Lady asks why we should introduce such a measure. The answer is because of the level of public concern. Half of the hon. Lady’s own voters support the introduction of a cap; 78% of Liberal Democrat voters support the introduction of such a cap, as do 94% of Conservative voters. Overall that is 72%. That is nearly consensus in opinion polling land. In Parliament we represent people, and we should listen to them and serve our constituents and engage in their concerns. This is a lot of money to be capped.

Karen Buck (Labour, Westminster North)

It is not a lot of money for the cap. The hon. Gentleman’s earlier intervention implied that he was slightly confusing the housing benefit cap with the universal cap. This cap does not only apply to housing costs. I completely understand that public opinion is shocked and surprised by high rents. That does not necessarily mean that a particular measure that deals with that public concern will work, let alone save money and let alone not have all kinds of unintended consequences that the public do not like either. We are all the same. We all want several contradictory things at the same time. There are consequences here that will cause a great deal of concern.

The nastiest dimension to the benefit cap is the fact that there is almost no way for many of these larger families to avoid its impact. One obvious reason—the Minister will tell me if I am wrong—is that around 5,000 of the 50,000 households who are currently assumed to go into the benefit cap are currently in work-search groups. That number may increase. It is possible that as income support fades out into universal credit and the assessment of incapacity benefit is rolled out, there will be an increase. None the less the majority of households currently covered are not in work-search groups. So there is another series of perverse consequences.

We had a debate earlier about the exemption of families whose children are under five. The Minister confidently asserted that work search would not be expected to apply to households with children under five. But the benefit cap, as currently constituted, requires such households to be included. The other, larger problem is that we know from the way that the benefit cap interacts with the total income of a household in terms of child benefit, child tax credit and so on, that the impact will be predominantly on people’s housing choices.

We are indebted to Ferret Information Systems for some of the analysis that has been done on way that the measure will apply to families. For larger families, such as a single parent with five children, if that family is not to dig into their child tax credit and child benefit in a way that significantly lowers the disposable income available to spend on the children, there will not be a single private sector property of an appropriate size anywhere in England that they can move into—at proposed levels of local housing allowance and subject to the reductions that the Government are already applying—without facing a shortfall.

I cannot believe that the Government intend to leave households, which will be unable to cover their rental costs and would, therefore, need to move into cheaper accommodation—moving to cheaper accommodation is constantly repeated as being one of the purposes of the Government’s agenda—in a position whereby there is nowhere in the whole country that they could move to. The model example that Ferret Information Systems gives is that the lowest local housing allowance figure for a four-bedroom house in England is in the broad rental market area of Bradford and south dales, and, factoring in council tax and housing benefit there, a family would find that their benefit was still capped by £25 a week. If the family are unable to work, for all kinds of reasons, including long-term sickness or the fact that the children are under-five, they cannot take averting action. They will not be able to find a property in the private rented sector anywhere in England that they could rent without leaving them below the minimum income that the Government have stated—they continue to support that—is the least that they can live on. If the household in question is a couple, that situation is even worse, because the gap in income would be even larger. If they have more than five children, the gap would be larger still.

Returning to the argument about employment, we all agree that it is desirable, where households are able and where they are in a work-search category, for people to go into employment. If they cannot find work, however, it seems a little odd, as we have discussed with housing costs, for those families to seek to avert the impact of the cap by moving from higher housing-cost areas to the north of England—Bradford, as in the example, or Liverpool—where work opportunities are even fewer than in London and in the south-east. In my experience, the overwhelming majority of households that are physically capable of work, and for whom work can be made to pay through child care, want to work, and they want to look for jobs.

I want to share one or two examples of real households that I know. I have swapped some of the personal characteristics, so that they cannot be identified, but they are real people. Mr and Mrs B have four children, and they have been placed by the local authority in what is called settled accommodation. They were homeless, and they were then offered accommodation that requires them to pay market rents for three years, and, after those three years, their rent gradually declines. Mrs B and two of her children suffer from sickle cell disease, and she is unable to work. Mr B, who is a graduate, was made redundant two and a half years ago, and he is absolutely desperate to work. He is engaging in all the Jobcentre Plus work-search activities, and he came to me with his CV and was pleading with me about what I, as a Member of Parliament, could do to help him back into work, because all he wants to do is find a job. If he finds a job, he will still need housing benefit to top up the rent for his settled home, in which he was placed by the local authority.

At the moment, if the cap applied to Mr and Mrs B, their family would face a shortfall well in excess of £200 a week. They have already been found homeless and placed in local authority accommodation, so they are now set on the same path. He will not be able to pay his rent—nobody would be able to cover his rent—and he will have to leave London, where he has worked and where he is trying to find employment, with his four children, two of whom have sickle cell disease. Where is he going to go? His children are teenagers, and he would not be able to find a property of an appropriate size anywhere in the country that did not leave him with an income shortfall. That is certainly the case according to my analysis. His rent for a three or four-bedroom private sector private property would have to be less than £120 a week. If somebody could find me a three or four-bedroom property for less than £120 a week, I would recommend it to Mr and Mrs B.

Mrs N has four teenage children, who will all be sitting public exams when the cap applies. Mrs N was also homeless and she was placed in temporary accommodation by the local authority, where she has been for six years. She is expected to remain there for at least another three years according to the points that she has, and she has a rent liability in local authority obtained private accommodation of £600 a week. She has severe osteoarthritis and severe depression, which in many weeks renders her unable to leave the house. She will be affected by the cap. Her husband was in employment, but sadly he died last autumn, so she is widowed and is now stuck.

Mrs Miah is another example, from a Bangladeshi family of the kind who will frequently be affected by the cap. She has five children, two of whom are below school age, and she was also widowed last year. She lives in a council flat, which is the cheapest form of accommodation that anyone can find, with a rent of £130 a week. The cap on her income will mean that the shortfall on her rent, let alone on her council tax, will be £65 a week.

We have dozens of examples of such people, who in many cases want to work, have tried to work, have been in work and are stuck through no fault of their own. It is not surprising that criticism of the way in which the cap works is pouring in from just about every quarter. We would expect criticism to come from Shelter, the Child Poverty Action Group, Barnado’s, the Children’s Society and other expert organisations which have some idea of the people with whom they are dealing and what the implications will be. We were surprised to see the criticism from the Centre for Social Justice, which was published last week. The CSJ, which is such a cheerleader for universal credit and the Government’s plans, is concerned that the benefit cap

“will bring hardship to as many as 50,000 large families who will have the rug pulled from under them overnight. The impact of the average projected loss for such families of £93 a week could be highly damaging, and for families who are predicted to lose much more, it is likely to be devastating. Giving such families tailored transitional support through initiatives like the Work Programme will mitigate some of the damage, but the Government should think again urgently about its implementation plans for the full benefit cap.”

In addition, the Mayor of London has made clear his deep concerns that the cap disproportionately applies in London because of higher housing costs. He, too, wants changes to be made to the cap before it has the kind of damaging implications about which he has also warned for the housing benefit cap. We discussed that at Christmas, and he and his researchers helpfully advised us that the housing benefit cap would cost more in additional homelessness and temporary accommodation costs than it would save.

Those are some of the reasons why we believe that the benefit cap is fundamentally misconceived and unworkable. Amendment 232 would require the Government not to apply the cap unless a reasonable offer of work has been made. The Government—again, in response to my hon. Friend the Member for Stretford and Urmston—stressed the centrality of encouraging people into work where possible. I could not agree more, but if a person such as Mr B desperately wants to work and is desperately searching for work, and is complying with every single requirement that the Government and Jobcentre Plus set—and has not been sanctioned for being in error or for not showing themselves keen to be employable—but still cannot find a job, why would the benefit cap apply to them? If the Government are so confident that the Work programme and Jobcentre Plus under their stewardship will deliver employment opportunities, surely it would be extremely easy for them to accept the amendment.

Charlie Elphicke (Conservative, Dover)

The hon. Lady expresses great concern for London. However, I believe that 69% of Londoners support the cap, which does not bear out her argument.

Karen Buck (Labour, Westminster North)

I am not sure what the hon. Gentleman means by that. People have not been tested on whether the cap will end up costing more money, creating a cut-off penalty and forcing significant numbers of people into homelessness. Do they think that it is right that 90% of the people who will be affected by the cap are currently in work-search categories? The public assumption on this is that large numbers of people—and there are some—simply choose not to participate in work-search or take on any employment because it is always better to be on benefit, which, in terms of comparable family size, is wrong. It is right that we should be informed and advised by public opinion, but to make public policy on that basis when the policy itself is so flawed would be a serious error.

Amendment 235 requires that the cap should not apply to people who have been made redundant or who have had to leave work to care for a child. Shelter and many other organisations that have been making representations on this point say that this is a particularly harsh measure to apply to households in which somebody has been in work and then lost their job through no fault of their own. They are subject not simply to the trauma of unemployment and reduced income but to the associated disadvantages that will accrue if the cap applies.

Harriett Baldwin (Conservative, West Worcestershire)

Would not amendment 236 create a perverse incentive for someone to leave work to care for a child in the way in which my hon. Friend the Member for Redcar described in relation to a previous amendment?

Karen Buck (Labour, Westminster North)

No, it would not because the amendment would provide that people were exempted from the cap only if they were made redundant or they left work to care for a child in a way in which Jobcentre Plus recognises. We have already discussed in Committee a whole range of sanctions that apply to people who leave work without reasonable cause. If we have confidence in that sanctions regime, it should be enough to cross-reference it with the benefit cap. Clearly, we are not saying that none of those investigations should apply. They apply in normal circumstances and they should also apply if people fall foul of the cap. We know from the statistics on jobseeker’s allowance that the vast majority of people—90%—who lose their job and claim JSA return to work within a year. In fact, a large majority tend to do it much more quickly than that. In the case of people who are made redundant or who lose their job through no fault of their own, the cap will take what will be, in most cases, a temporary period of unemployment and turn it into a catastrophe in which many people lose their homes and are plunged below the poverty line.

Ian Swales (Liberal Democrat, Redcar)

The hon. Lady talks in her amendment about a prescribed period. Will she say more about how she sees this amendment operating? For example, if someone is made redundant, how long would the exemption apply?

Karen Buck (Labour, Westminster North)

I have already cited the statistics for jobseeker’s allowance. We know what proportion of people who have lost their job and make an application for JSA stay out of work. I expect that this is technically difficult—more work needs to be done on the clause. However, as this entire benefit cap is so deeply technically deficient anyway, I am not sure that it is any more difficult than anything else we are being asked to consider. Through the amendment, we want to ensure that what, in many cases, is a temporary period of unemployment does not result in people plunging below the level they need to live on, in some cases by hundreds of pounds, and, as a consequence, losing their home.

Harriett Baldwin (Conservative, West Worcestershire)

Will the hon. Lady confirm that redundancy is often accompanied by a redundancy lump-sum payment? How would her amendment address that?

Karen Buck (Labour, Westminster North)

In the same way that existing benefit rules treat redundancy payments.

The amendment is specifically designed to get the Government to understand and recognise that the cap is such an excessively punitive measure to apply to unemployed people that we need to find some way of offsetting it. People on lower incomes regularly move in and out of employment. That is one of the characteristics of people on the margins of the labour market. What we should be doing—this is the element of Government policy that we always agree with and support—is trying to smooth that transition as much as possible.

Universal credit is designed to blur the distinction in the benefit system between being in and out of work. It is designed to ensure that people can move in and out of work, take a few extra hours or drop a few hours without its having a dramatic effect on their income. The overall benefit cap cuts right through the middle of that argument. It creates cliff edges and makes a temporary period of unemployment a catastrophe. It should be possible to change that with some additional work. The Government have often promoted the bookcase analogy. Further details and regulations have yet to be explored in so much of the universal credit system. It should be possible to find a way to address the provision.

Amendment 237 would exempt people not subject to the work-search requirement at any given time. As I said earlier, 4,850 of the 50,000 households currently liable to be caught by the cap are not in work-search categories: nine out of 10 households caught by the cap are not currently in work-search categories. It is an extraordinary state of affairs for the Minister to stand up, as he has done several times in this Committee, and rightly defend the exclusion of other elements of the sanctions regime, such as households with children under five, yet apply this cap to exactly the same group of people. It is essential, therefore, that those who are not in work-search categories should not to be caught by the cap, although the number of people in work-search categories will be a moving feast.

Amendment 238 would exempt those households for which work does not pay because of child care costs. Again, it would be extremely difficult to make work pay for families with large numbers of children. The Government have made that worse by reducing the child care tax credit as we move towards universal credit. The imposition of the cap would cut in half the household income of a lone parent going into work, because of the way in which child care tax credits are currently assessed. A lone parent with four or five children, particularly if one or more of those children are under five, would have no means whatsoever of escaping the cap, because those children could not be placed in a child care environment covered by the child care tax credit, or its successor.

Surely it is fundamental to the operation of any benefit cap designed to incentivise people into work, as the Minister has said, to make work pay in all those circumstances. Surely the Government do not expect families with children—particularly lone parents, because they are most likely to require child care costs—to go into employment, to take a job offered by the jobcentre, if they find that they are, in some cases, hundreds of pounds worse off in work because there is no child care support. A family will not be able to pay for themselves to go into work, and this is the central point: if child-care costs were covered, that would significantly erode the savings that the Government are assessing.

Amendment 236 seeks to prevent a couples penalty from applying, when it could become advantageous for a family to form separate households. Couples have a higher benefit entitlement than single people. If a couple with a higher benefit entitlement find that the entitlement and rent costs are in excess of the benefit cap, the obvious thing would be for the family to form separate households. A husband or wife may form a household with some of their children, or some adult children could leave the family and set up homes on their own. As well as meaning additional expenditure for the Government, in terms of their social agenda, it would be undesirable for families to seek to do that, because it cuts right across everything that the Government have said about wanting to encourage couples to stay together.

Regulations have slightly caught up with amendment 244, and I look forward to the Minister telling us more about how he sees the issue of families going into work, in terms of the transitional period before universal credit applies, and afterwards. How will a household be assessed on the work that it does and the income that it achieves from work, and how will the cap interact with working households? Commentators who have looked at how all the elements of universal credit—and working tax credit, in the transitional period—interact with the cap are extremely anxious about the measurement and how the Government will assess families going into work, because of the step change that is introduced into the system. The step change, for those families who are on the cap, cuts right across universal credit and the smooth line of additional income as families increase their hours. If the Government are planning an earnings threshold that is, for example, 24 hours of work for an individual on the minimum wage—roughly the equivalent of £7,500 a year—the cap will apply to fewer people, and those affected would be on the edge of work. What it means is that as people move in and out of employment and as their hours rise and fall, the cap could apply one week to a working household, but the following week, somebody in that household could escape from work, sometimes through no fault of their own. It might even be that income from the minimum wage increased, and people might be caught as a consequence.

The White Paper stressed that it should be financially rewarding for families to work additional hours. Paragraph 20, under “Earnings Incentives”, states that universal credit will mean that it will be

“financially rewarding for a lone parent to work 15 hours per week, or 17 hours per week (both of which would not have been financially rewarded under the existing system which only recognised 16 hours per week)”—

so, the existing system creates a step at 16 hours. However, that smooth line will no longer apply for families who have more than four children, and it will not apply where families have high rent or a non-DLA disability component. In some cases, people will find that they will be capped if they work fewer than 16 hours, and “de-capped” if they work more. Therefore, if their income fluctuates, they will have serious problems in managing their income.

As paragraph 19 states:

“Establishing a single withdrawal rate, and eliminating the hours rules currently present in Working Tax Credit, has the potential to create a much more flexible labour market. Workers will be able to work the number of hours that most suits their needs and those of their employer, without being constrained by the structure of the benefits system. Employers will find that their workforces become more flexible and open to opportunities for progression.”

Again, the proposals break that commitment.

In the case of a couple with children, moving to 24 hours work from 23 hours on minimum wage would mean that they become entitled to £47.98 a week in working tax credit, and that they escape a benefits cap of £95.21, which would otherwise apply, as their benefit income would otherwise have been £595.21. However, an increase in net income of £148.29 for an extra hour of work becomes a fall of £148.29 if the hours are reduced, as capping would be applied once more. There is a cliff edge in the system that, perversely, will apply only to the 50,000 households, the larger households, the families with more children.

The system is full of anomalies, and people in lower paid jobs will therefore be hit by the cap, while those working the same hours but on a higher rate of pay will escape. How will this work for the self-employed? Net profit for the self-employed is calculated on a different basis. It is often adjusted later in the year. If the cap is applied on a weekly basis, how will this have any interaction with households whose earnings are calculated on a different rota?

Finally, we seek in amendment 246 to include in the Bill a range of the benefits that would be exempt from consideration for the universal cap. Those benefits interact with the earlier point about families being exempted if they are not in work-search categories. I particularly want to stress the importance of people with disabilities. Disability living allowance has been mentioned as a benefit that would not be included in the calculation but there are other people with disabilities on employment support allowance, carer’s allowance, attendance allowance and so forth who would be caught by the cap unless this is spelt out more specifically.

As well as all those perverse incentives and difficulties in workability, there will be an impact on the local authorities that have to make the decisions to reduce housing benefit, because it will be housing benefit that will be cut in all these cases. The benefit cap, while being a simple wheeze at conference, with all the elements that attract people because they understandably object to the rent amounts they hear mentioned, will have all kinds of unexpected consequences. It is deeply punitive. It is hard to see how it will work, and it will result in thousands of people losing their homes when they lose their jobs. It will create new pressures of homelessness and mobility, which I am sure the Government do not intend. We are on the Secretary of State’s side. We are on the Deputy Prime Minister’s side. We believe that the benefit cap is unwelcome and unworkable, and that it will not save money. I look forward to the Minister’s response.

Stephen Timms (Labour, East Ham)

I, too, am pleased to see you in the chair again this morning, Mr Gray. I rise to add briefly to the powerful analysis set out by my hon. Friend the Member for Westminster North and to speak specifically about amendment 244 with the aim of clarifying how the Government intend to implement the exemption from the benefit cap that was promised in the case of working households. Initially the Government made it clear that the exemption will be for those who qualify for working tax credit, which in the case of a couple with children is when they work between them more than 24 hours a week. That is the idea that is picked up in the wording of 244.

The problem is that that version of an exemption will not work in universal credit. It will not work because the Government will not know how many hours couples are working unless that information was collected alongside PAYE data in the real-time system for PAYE data from employers being implemented by HMRC. It would be difficult and a large burden on employers to collect hours data alongside the PAYE data. Indeed, the Minister rightly made that point, and it is confirmed in some of the notes that have been sent to us by the Department that the exemption will not be based on hours for that reason.

So what will the replacement test be? The Minister suggested that the most likely test would be an income proxy for the 24 hours per week working test. That would be the minimum wage for 24 hours a week, which is £142.32 a week or just under £7,500 a year. The proposition appears to be whether the income is above or below that level. If it is above, the benefit cap will not apply; if it is below, the cap will apply. We can all see roughly how that would work.

That version of the test has a significant advantage over the hours test, in that it is more generous. Everyone exempted from the benefit cap by exceeding the hours threshold will certainly be exempted on the pay threshold, and quite a few people who would not be exempted from the cap if it was an hours test would be exempted on the basis of a pay test. The reason is obvious; quite a few people working fewer than 24 hours a week will nevertheless be earning more than 24 times the minimum hourly rate because their hourly rate of pay is above the minimum. Nevertheless, there is a significant problem with such a test.

If the exemption is defined on the basis of pay it will, as my hon. Friend said, introduce a whole new raft of cliff edges, perverse incentives and penalties of exactly the kind that the Government have said they want to eradicate through the introduction of universal credit. The benefit cap creates a multitude of peculiar and damaging features that do not exist under the current system that will undermine the new system if the benefit cap is implemented as the Government seem to intend.

To illuminate the matter, I have four questions for the Minister. He has indicated that he envisages having an income proxy for the 24 hours a week test. First, will the test be applied to all income or just to earned income? Secondly, assuming that the test will be applied monthly along with the universal credit payment schedule, will it take account of seasonal earning variations? If so, how? Or will it be strict and test income for each month separately? Thirdly, if the test is to be based on earning, will it be applied to gross or net earnings? Fourthly—my hon. Friend has already raised this point—how will the test be applied to the self-employed, for whom monthly earnings cannot be calculated in real time?

The answers to those four questions will determine precisely which new cliff edges, perverse incentives and penalties will be introduced. There certainly will be cliff edges, perverse incentives and penalties, but we will not know precisely what they will be until we have the answer to those questions. I hope that the Minister can answer them.

As we pursue the matter, it will become clearer why there is a dispute within the coalition about the benefit cap. It was reported over the weekend, as my hon. Friend said, that the Deputy Prime Minister is at loggerheads with the Chancellor, with the Deputy Prime Minister opposing the cap. Perhaps the Minister will shed some light on that in a few moments and tell the Committee whether we are correct, but it seems that the Chancellor insists on keeping it. However, according to reports, the Secretary of State agrees with the Deputy Prime Minister and is at odds with the Chancellor. We did not get much of a sense from the Minister about whether he agrees with the Secretary of State or the Chancellor, but he appears to be taking the Chancellor’s line.

The analysis that we are setting out may explain why the Secretary of State disagrees with the benefit cap. Listening to an earlier intervention by the hon. Member for Dover, I reflected that that opinion survey—admittedly it was of only three people: the Chancellor, the Deputy Prime Minister and the Secretary of State of Work and Pensions—appeared to divide two to one against the benefit cap, which is rather different from the figures cited by the Minister.

Charlie Elphicke (Conservative, Dover)

The right hon. Gentleman tempts me to point out that the opinion polls, by ICM and YouGov, showed pretty much the same thing—that a majority of Labour voters support the benefit cap as do nearly 80% of Liberal Democrats and 90%-plus Conservatives. Does the Labour party support a benefit cap in principle—yes or no?

Stephen Timms (Labour, East Ham)

The hon. Gentleman has not told us whether the sample that was polled in those surveys included the Secretary of State for Work and Pensions. We are not at all sure. From the reports last weekend there appears to be a 2:1 split against. As I go on, the hon. Gentleman will understand why the Secretary of State apparently does not agree with the benefit caps.

Let me give an example of the problems that this will introduce into the system. Like my hon. Friend, I am indebted to Gareth Morgan, from Ferret Information Systems, who has done the modelling to investigate this. Let us assume that the exemption from the benefit cap is for a couple, who between them have gross earnings greater than 24 times the hourly national minimum wage each week. The couple have four children, one person is in work and the couple are renting privately a three-bedroom house in outer south-west London, paying the local housing allowance sum for that area. If one person works 20 hours a week, earning £10 an hour, the couple’s earnings will take them above the threshold and the cap will not apply. They will have a household income of £747 a week.

Suppose that the rate of pay falls from £10 an hour to £7 an hour, which is a drop in earnings of £60 a week. That household’s weekly earnings will now be below the threshold, so the benefit cap will apply. A sharp fall in earnings will be transformed by the cap into a catastrophic drop in income, and the household income will fall to £640 a week, which is a drop of more than £100 a week. The earnings go down by £60 a week, but the income goes down by £100 a week, because the cap suddenly comes into play.

The Minister may be taking his inspiration from the New Testament. Luke’s Gospel, chapter 19, verse 26 states:

“I tell you that to everyone who has, more will be given, but as for the one who has nothing, even what he has will be taken away.”

That appears to be how this mechanism will work. I approve of the Minister’s taking his inspiration from the New Testament, but he has got the wrong end of the stick about what that parable meant. We saw during the recession that the tax credit system cushioned household income from the impact of reduced earnings. The benefit cap will have precisely the opposite effect, amplifying the impact of a reduction in earnings and making things considerably worse.

I do not imagine that that is what the Minister intended, but that is what the benefit cap will do if the exemption for working families is applied in the way he has suggested to the Committee. In the example I have given, on top of a drop in earnings the household will suffer a cut in benefit of more than £90 a week. None of that includes child care support; we do not yet know how the Government intend to support child care in universal credit. It appears, however, that child care support will be included in the benefit cap, so the loss might be substantially more. I am looking forward to seeing the new clause on child care support that the Secretary of State has promised to give us before the Bill leaves Committee.

If the household in my example suffers a further drop in income to the minimum wage rate of £5.93 an hour, the earnings fall is in total just over £80 a week but the benefit cap hits harder still. The benefit forfeit in this case is £106.53 a week and the capped weekly income falls to £618.93—an income fall of £130 a week—which is an even more dramatic amplification of the loss of earnings.

It is clear that if the Government proceed as they have indicated, we will end up simply with a mess. Ferret has modelled the impact of a test based on hours, but it has concluded that a test that is based on pay, as the Government have indicated it will be, will make matters worse still. It points out that the problems of some people who fluctuate around the limit—a point also raised by my hon. Friend the Member for Westminster North—is that one month they will hit by the cap, the next they will not, and the one after that they will.

The most extreme example that Ferret has modelled is, again, somebody in the type of household I referred to, who works 20 hours a week. If their rate of pay is £7.12 an hour, their income will be £733. 65; they will be outside the cap. If, however, their rate of pay falls by 1p an hour to £7.11 an hour, suddenly the benefit cap will apply and their income will fall to £642.16. That is a fall of more than £90 a week because their earnings have fallen by 20p in the week. That is how the test will work. That is far worse than the problems in the current system. The benefit cap is introducing dreadful new problems that are far more severe for individuals than the problems in the current system.

The Government have made the eradication of such problems one of the main arguments for introducing universal credit. They might argue that odd cases such as the one I have described will be very unusual. However, the disincentives in the current system do not affect that many people, either, yet the Government have made removal of those odd features one of the principal arguments for universal credit. The truth is that universal credit helps remove cliff edges, perverse incentives and undesirable penalties, but the benefit cap is going to reinvent far worse ones and insert them straight back into the system. I imagine that is why the Secretary of State opposes the benefit cap.

This is a mess; the legislation is half baked. At the very least it needs to be far better thought through.

Sarah Newton (Conservative, Truro and Falmouth)

Although I can understand the right hon. Gentleman’s desire to make a big party political point, surely this is just Parliament doing its job? At least in this new Parliament, Back Benchers from all parties are able, through the proper scrutiny of legislation, as is going on here, to reflect on analysis being done outside this place and urge the Government to take it on board and sort out the problems and unintended consequences affecting this group of 50,000 families, so that the system can be improved.

Stephen Timms (Labour, East Ham)

I am grateful to the hon. Lady; that is exactly what we are doing. We hope that we are going to hear in moment from the Minister that he agrees and is going to do something about this issue, although I fear we may not. I hope the hon. Lady will urge the Minister to make changes accordingly.

Charlie Elphicke (Conservative, Dover)

The right hon. Gentleman is clearly scrutinising the legislation carefully, but does he think the principle of the benefit cap is right?

Stephen Timms (Labour, East Ham)

My worry is that the Government’s proposal is simply unworkable for the reasons I have set out, and because of the bizarre effects it will interject into the welfare system. I read briefing note No. 5, which the Department sent to us last week. It sets out the core objectives for universal credit, which are designed to simplify the benefit system:

“In order to help households understand what money they receive and how choices over work affect it, the universal credit will be simpler and will work on a single system of disregards and one taper…It supports work incentives directly by ensuring that individuals can keep more of their income from work but also by simplifying the system and providing more certainty about what people will receive in work”.

I agree with all that. I also agree that universal credit will have some of those advantages, but the benefit cap, in the form the Government are arguing for, will unfortunately undo a large part of those benefits.

George Hollingbery (Conservative, Meon Valley)

Given that the right hon. Gentleman has, in effect, confirmed that he is for a benefit cap and that he did not take the chance to deny as much, can he explain for us how he would treat it? Would he increase the level of the cap? Would he exclude rent from it? What would his solution be to that dilemma?

Stephen Timms (Labour, East Ham)

It is absolutely clear—the hon. Gentleman is perhaps tacitly accepting this—that the cap is unworkable as currently proposed. I was about to say that there is no easy solution. Much more work is certainly required before the proposal proceeds. We understand that the Chancellor is sticking to his insistence that the proposal should be implemented, and I am afraid that it will create all sorts of serious problems. I am particularly keen to know the Minister’s answers to the four questions that I set out earlier, because that will illuminate the effects of the cap.

On this occasion, however, I must say that the Secretary of State and the Deputy Prime Minister are right, and the Chancellor is wrong. The problem is that the proposal is difficult and complicated. The Government are rushing in and making dramatic claims about the improvements that they will bring about, and they are saying that they can create the IT system in time to implement the proposals. However, they have not worked out the detail, and they have not done the background work properly, and if the Government stick to their guns, we are heading for trouble.

Kate Green (Labour, Stretford and Urmston)

I will be brief, because I want to raise one issue only, which is in addition to the many important points made by my hon. and right hon. Friends this morning. My point relates to the amendment on couples. I am concerned that we are in a situation where, as my right hon. Friend suggested a few moments ago, yet another disincentive or penalty for couples is being introduced into the benefit system. That may explain, of course, why the Secretary of State is so unenthusiastic about the proposals. He has made great play of the importance of family stability. He has emphasised repeatedly, over many years, the significance for children of, wherever it is possible, being brought up in households with both parents, and I had understood that one of his personal objectives for his benefit reforms was to promote and support parenting in couples, which is what he perceives to be in the best interests of children.

A benefits cap is surely yet one more inducement for couples to separate and to live separately. It enables them each to take their own benefits allowance up to the amount of the cap without suffering any penalty. I am curious to know, therefore, what we think the likely impact of this measure on family structure, stability and breakdown will be. I am so curious that, in a written question at the beginning of this year, I asked the Secretary of State what assessment had been made of the likely effects on family structure and breakdown. It took until the middle of March to get an answer, but, on 14 March, the Minister of State responded to me, and he told me that no assessment had been made by the Government of such an impact. I find that surprising for a Government that put family stability and couple relationship so much at centre stage in their approach to policy in general, including welfare reform.

We can be concerned, therefore, that while it may be quite difficult to be confident that couples will actually separate as a result of the benefits cap, although it could be one of the many unintended consequences of this flawed policy, it will certainly make it less likely that some couples will form stable relationships, which are those that could be very much in the interests of children. For example, a widow with three children forming a relationship with a widower with three children would lead to a substantially large family, and they will have each arrived in that situation through absolutely no fault of their own. Inevitably, with six children, one of them will be at home, taking care of the children, and if the other one, through no fault of her or his own, loses their employment, that family is likely to be vulnerable to the imposition of the benefits cap. When jobs look potentially uncertain and people may not feel confident about the stability of their employment, that is likely to be a factor that people consider when looking at whether to move in together and combine their household finances. The combining of household finances is, surprisingly, a significant factor that women in particular consider when they form new relationships. I am interested in the lack of thought that Ministers, as of the middle of March, appear to have given to this issue.

The Minister said in his written response to me that the Government were looking at ways to ease the transition for families and provide assistance in hard cases, so my question this morning is, in what way is he looking to provide assistance in hard cases? He might think that this is entirely a problem of people meeting their housing costs and he will point yet again to the discretionary housing payment to bail families out. As we heard in earlier sessions on the Bill, that pot of money is being stretched very far. Families will not have concerns only about housing costs, so will he be clear about what assistance he proposes for hard cases affected by the benefit cap and, particularly, how does he intend to use such measures to ensure that family stability is protected? Will the proposals facilitate the stable family homes—preferably, in the Secretary of State’s view, those with parents in a stable couple relationship—to which the Secretary of State has turned his attention?

Sheila Gilmore (Labour, Edinburgh East)

Discussing a benefit cap in the context of public opinion will always be tricky. If I ask many of my constituents in a bold sense, “Do you think that anybody should be getting benefit x?” or, “Do you think that people who are working should be better off than those who are not working?”, I know what the answers will be, but when I discuss individual cases and circumstances in which they, their friends or their relatives may find themselves, the situation is different. That is the difficulty with legislation and provisions of this kind. However easy it is to say how unfair something is in general, it is very different when we are dealing with real people, families and households.

There will always be circumstances in which it is genuinely very difficult to realise the general desire to make, for example, work pay or to ensure that benefits do not seem too high relative to work, unless we say that simply because someone has a particularly large family or particularly difficult circumstances, they must get less money than we, as a Parliament, have decided they should have. Remember, the cap is not just a housing benefit cap, but an overall benefit cap, and the elements in benefits will have been based on what was felt to be appropriate to meet a family’s needs. There are payments for an individual, a couple and there are elements of benefits for children, because it is recognised that there are clear costs in having children. We could all argue about, and there are debates on, whether benefits when taken in their separate elements are enough for people to live on.

We might all feel that in some circumstances people should not have very large families, although I doubt if people would actually say that. People may have large families for cultural reasons, and we have seen huge changes in family size in this country over the past 100 years. I do not think that we will return to those very large families, but nevertheless there are large family groups. A lot of them are blended families made up of people who came together after a relationship breakdown rather than those with children whom a couple had together as a single family. We have all encountered large families, and we might find them wholly inappropriate. I remember the local paper making a big fuss about a family in Edinburgh who had 11 children. The parents were not working and the paper worked out how much benefit they were receiving. The council had had to knock two houses into one for them, and that was thought to be grossly unfair. Nevertheless, such families are there, so how do we deal with them? The reason that we end up talking about housing benefit as if it was just about high housing costs is that it is probably the most flexible end of the overall benefit that may be capped. If we say that the amount for children, an individual or a couple is in relation to their needs, they will either have to cut back on those needs in terms of food and clothing or they will have to cut back on their housing costs. To cut back on housing costs means either not paying their rent, and there are consequences of that, or finding somewhere else to live, which may or may not be easy. That is why we end up talking as if this is just about housing.

Where people live has a lot to do with their family background and where they were born and brought up. Even in cities such as London, which has such huge disparities of wealth, we can find a mix of people within a single council area. There has always been a social mix, and that is a positive thing. Houses worth some £1 million stand cheek by jowl with affordable homes. In Edinburgh, we have been making an effort to build affordable housing all over the city.

James Gray (Conservative, North Wiltshire)

Order. I am sorry to interrupt the hon. Lady, but perhaps I could make a couple of quick points. First, the question of housing more accurately comes under the next group of amendments. Secondly, I have allowed a fairly general stand part debate. We should be discussing exemptions rather than the principle of the cap itself and, therefore, I will probably decide not to allow a stand part debate later on. Perhaps the hon. Lady might like to bring us back to the particular group of amendments under discussion, bearing in mind that housing comes into the next group.

Sheila Gilmore (Labour, Edinburgh East)

Specific housing issues come up in the next group of amendments, but clearly there are overall issues about how the proposed cap will have an effect. I understand why the Minister wants to have this empty book case and to come back to a lot of these issues later, but I would like to draw his attention to amendment 246, which proposes to list some specific exemptions in the Bill. If there is a consensus that certain kinds of benefit would not form part of the cap, it would be advantageous for them to be listed. It does not prevent the flexibility of adding to or changing those at a later date, but it would reflect an overall consensus on what types of benefit should not be part of the cap. Things such as disability living allowance and carers allowance are listed and are exactly those sort of benefits to which the cap should not apply.

Harriett Baldwin (Conservative, West Worcestershire)

Does the hon. Lady accept that in the paperwork that we have already had from the DWP, the disability living allowance and its successor are exempt from the cap. That is an important message to put on the record.

Sheila Gilmore (Labour, Edinburgh East)

With all due respect to the hon. Lady, we have, at this stage, only a statement that that will happen. We have not yet reached the stage of agreeing regulations. If there is such a high degree of consensus, I do not entirely understand why there is such a resistance to including these benefits at this stage. For example, if there is consensus on benefits such as the disability living allowance, why not list them because it would be of considerable advantage to the people who are worried. We have learned a lot in the course of this debate about people’s worries and whether they are justified, and who is causing people to be anxious. If there is agreement and overall consensus, we should spell it out at this stage because that could reduce anxiety. Those who fear that they might be affected would benefit from having this now spelled out. Where there are other issues over which there is not the same degree of consensus, they will still be debated at the time of regulation. I do not understand why there is such a degree of resistance to including such an exemption.

Harriett Baldwin (Conservative, West Worcestershire)

A document was published on the DWP website last Friday that spelled it out. I would submit, therefore, that it has been spelled out.

Sheila Gilmore (Labour, Edinburgh East)

A document on the DWP website is not legislation, and it is not yet regulation. It is simply a statement of intent, and it is a statement of intent that I welcome. If it is a statement of intent, and if we all agree with it, I do not understand why including it in the Bill is so difficult.

The other clear theme, as the Minister said when he addressed the previous group of amendments, is that the main reason for having a benefit cap is to ensure that work pays. That is the most important reason why the Government want to introduce an overall benefit cap. In that context, I urge the Minister to look carefully at amendment 237, which would address the situation of people whom the system has decreed do not have to seek work. Such people, for the most part, would either have children under five or be in the support group of ESA, as it currently is, or its successor under universal credit. Having decided that someone with such severe health or disability needs does not have a work requirement, it is not clear why that person should be covered by a cap that, as the Minister has said, is intended to encourage people to seek work.

On the basis of his own statement on the purpose of the benefit cap, I urge the Minister to look in particular at amendment 237. If he is not prepared to agree to the amendment, he should at least give some indication of his views on future regulations and how they might be drawn up.

Chris Grayling (Conservative, Epsom and Ewell)

As you have pointed out, Mr Gray, we have had a lengthy debate on the scope not only of the amendments, but of the clause as a whole. I will begin my remarks, therefore, by following your guidance and saying a little about the clause as a whole.

James Gray (Conservative, North Wiltshire)

Order. I apologise for interrupting the Minister, but, further to my remarks a moment ago, representations have been made to me that one or two members of the Committee would like a stand part debate. It is quite possible, therefore, that I will allow such a debate. I suggest to the Minister, therefore, that he might like to constrain his thoughts and stick to the amendments under consideration.

Chris Grayling (Conservative, Epsom and Ewell)

I will happily follow your guidance, Mr Gray.

I will start with the key question, because it directly affects this group of amendments. The question was put to the right hon. Member for East Ham a few minutes ago by my hon. Friend the Member for Dover. My hon. Friend asked whether the Opposition are in favour of the principle of a benefit cap—yes or no—and, notably, he did not get an answer. We are left in a state of considerable confusion as to where the Opposition stand on that issue.

A few days ago, I read out a quote from an adviser to the shadow Secretary of State that appeared in the Financial Times. The adviser said that Labour supports the principle of a cap on benefits. That statement has not been repeated today by the right hon. Gentleman, and I am not entirely surprised. What we have here is a set of what can only be sensibly described as wrecking amendments. They are not a series of thoughtful, probing tweaks; the amendments would completely demolish the principle and substance, and the rest, of a benefit cap.

Stephen Timms (Labour, East Ham)

Will the Minister comment on the accuracy of the rest of that article in the Financial Times? The article explained that the Secretary of Sate and the Deputy Prime Minister are opposed to the benefit cap, but that the Chancellor supports it.

Chris Grayling (Conservative, Epsom and Ewell)

Much though I am sure that the right hon. Gentleman would love to get into a debate about politics, if I am not mistaken, there is nothing in the amendments or the clause that describes anything to do with the discussions that take place in government, and I would therefore be out of order if I were to follow that path. The reality is that, taken together, the amendments would totally emasculate the concept and the practical application of a benefit cap. I can therefore only take it that this is an attempt by the Opposition to put a marker very clearly into the ground that they oppose the principle of a benefit cap. I intend to make my remarks in that context.

The basic principle behind all these reforms is that we want to encourage people to progress into work. The reality is that there is a very simple principle at the heart of what we are introducing, which is that there is a point beyond which the state should not continue to provide financial support. That matters for two reasons: first, it matters to the message that we send out about the importance of people getting into work; secondly, it matters to the credibility of our welfare state.

It does no service to welfare claimants in this country if they are seen to be receiving amounts of money from the state that exceed the average earnings of people who are in work. That encourages, develops, fosters and grows a narrative that says there is something wrong, and it has the effect of stigmatising those claimants, which is not right. People are better off in work, and we should do everything we can to help them into work. However, it is also important that we have a welfare system in which the people of this country can have confidence. At the moment, it is clearly demonstrable that that is not the case. The comments made by my hon. Friend the Member for Dover about the level of public support for taking such a measure are absolutely right.

Karen Buck (Labour, Westminster North)

The Minister is rightly discussing the integrity of the system and people being better off in work. Will he clarify why the benefit cap will apply to people who are not in work search categories, when everything else we have discussed in Committee in relation to the universal credit and the existing benefit system includes people who are not in work search categories?

Chris Grayling (Conservative, Epsom and Ewell)

The reality is that the measure has to apply across the spectrum. We cannot say, “This type of claimant group is being cut; this type of claimant group is not being cut.” In policy terms, we have indicated a number of areas where we would make exceptions or where we would not include benefits in the benefit cap. This set of reforms should apply across the board, and we have made provision for that.

Today, we are debating a clause that sets out a framework. It does not specify any exceptions, and it does not specify any particular benefits to be included or not included in the cap; it creates the mechanism for this and a future Government to decide how and at what level to constitute a benefit cap. The measure does no more than that. However, the impact of the amendments would be to totally change that. They would write off significant parts of the welfare spectrum in terms of the people who would be excluded from these measures. In effect, the amendments would make it impossible to implement a benefit cap that would be even remotely credible in the eyes of the public. That is first and foremost why I cannot possibly accept the Opposition’s amendments.

Paul Uppal (Conservative, Wolverhampton South West)

I am grateful to my right hon. Friend for giving way. I wanted to wait for him to make his comments before I intervened. If this Public Bill Committee is genuine in its aspiration for people to escape from poverty, an essential part of the Bill and the principle we are talking about is that people should live within their means. I appreciate the points that he has made about the message we send out about the welfare system and how it works. However, if we are genuine in our aspiration not just to make work always pay, but to enable people to escape poverty, that is an essential message we should send out in the Bill.

Chris Grayling (Conservative, Epsom and Ewell)

My hon. Friend makes a valuable point. He has articulated it very well—better than I could. What he has said is very clearly on the record. He is absolutely right.

First and foremost, my right hon. Friend the Secretary of State made it clear on Second Reading that we are looking at ways of easing the transition for families by providing assistance in hard cases. We will provide more detail as we develop our implementation plans, but the Bill gives us all the powers necessary for the purpose. We have made it clear all along that there will be certain exemptions. For example, it is right to exempt households where the claimant, their partner or a dependent child, are entitled to the DLA or an equivalent benefit, because we realise that they have additional disability-related costs.

My point to the hon. Member for Edinburgh East is this. We know from past experience that writing provisions into primary legislation means that future Governments wishing to make changes will be unable to do so. There is no need to write such a safeguard into the Bill. We intend to replace the DLA shortly, and the Bill sets out replacements for it. We or future Governments may wish to make other changes to the system, and it would be daft if we could not help claimants by providing additional support, because we had written such things into primary legislation.

I want to make it absolutely clear that it is right to exempt households if a claimant, their partner or a dependent child are entitled to DLA or an equivalent benefit in recognition of the fact that there are additional disability-related costs. That is a clear statement of intent by the Government, and I imagine that future Governments of whatever persuasion would share it. It is the right thing to do. It is also right to exempt war widows and widowers by not including their benefits in the cap. We have made it clear that working families entitled to working tax credit will be exempt, and there will be an exemption for working families on the universal credit. I shall address the points raised by the right hon. Member for East Ham in a moment. All those exemptions, and the detailed criteria for the working families exemption, will be set out in regulations in due course. The Bill creates scope for further exemptions, if we or future Governments consider it appropriate. However, the case for exemptions must be set against the reasons for needing a benefit cap.

It is certainly the case that this measure provides some savings, but it is not primarily a financial savings measure. The primary objective is to tackle the culture of welfare dependency by setting a clear limit to what people can expect from the benefits system. It is important that the system is fair and that it is seen to be fair to the taxpayers who pay for it. It is not reasonable or fair for households receiving out-of-work benefits to have a greater income from benefits than the net average weekly wage for working households. Many working people have to cope with difficult circumstances, and they have to live within their means. It is not sensible, nor is it ultimately helpful, to shield people on benefits from the realities of life by giving them unreasonably high levels of financial support. To do that would certainly create a culture of welfare dependency. For that reason, it is essential that exemptions are kept to a minimum.

Kate Green (Labour, Stretford and Urmston)

Will the Minister comment on the matter raised by my hon. Friend the Member for Westminster North earlier this morning, which is that average earnings are not necessarily the right comparison point, even accepting the Minister’s premise, because many on average earnings will also be in receipt of other in-work financial support?

Chris Grayling (Conservative, Epsom and Ewell)

I return to the subject of our debate: this measure requires the cap to be determined by reference to estimated average earnings, but it does not tie the hands of Government.

Our policy approach, and the Government’s clear intent, is to have a cap that bears reference to average earnings. That is necessary for the credibility of our benefit system. It is the right place to set the cap. If Opposition Members believe that we are wrong, and they are successful in a future general election, the Bill will provide them with the flexibility to make changes. However, this Administration intend to set a cap that relates to national average earnings.

Charlie Elphicke (Conservative, Dover)

I found it noteworthy, particularly in light of the last intervention, that we have not heard of any case studies on the effect on the squeezed middle householder who earns £35,000 a year—the alarm-clock strivers who work hard and who ask the question in our constituencies. “Why should we work hard while others are better off? It is not fair.”

Chris Grayling (Conservative, Epsom and Ewell)

My hon. Friend makes a valuable point. It was interesting to note the case study given by the hon. Member for Westminster North, in which she described someone who was potentially on the benefit cap but who was paying about £5,000 a year in rent. That person would have income of £20,000 after rent. That is more than many people in work receive. It is important that we have a system that is credible in the eyes of those people who are in work. If we do not, it undermines the principle of our welfare state in a variety of different ways.

I remind Opposition Members that local authorities have the power to deal with individual hardship cases through the discretionary housing payment scheme, if they so choose. The problem with the amendments is that the cap would apply to almost no one. Under amendment 232, the cap would apply only where someone has turned down a reasonable job offer. That would turn the cap into a form of sanction, which is totally inappropriate. Why would we limit the cap to a situation where someone had turned down a job offer? That would be nonsensical. It would eliminate a significant proportion of those people in receipt of benefits. Turning down a reasonable job offer is in itself a sanctionable offence that can lead to the withdrawal of benefits for an extended period, so amendment 232 is completely illogical.

Amendment 235 exempts short claims and provides some breathing space during which people can adjust their circumstances to take account of the cap. We certainly need to give some thought to that. I have some sympathy with that but we need to look at issues like that in the formulation of the detailed application and the way we make this work and how we deal with short-term pressures. These are issues that will be dealt with in the regulation-making process. They are not things that need to be written into primary legislation. People who have been in work recently may be in a stronger financial position and better able to return to work quickly. As I have said, the Secretary of State has talked about the importance of being able to provide assistance in hard cases.

Amendment 236 is intended to counter any risk of additional couple penalties. I would simply say that if there is such a risk, I am not convinced that doubling the cap for couples so that they can get £50,000 a year in benefits is the best way of dealing with it. As for the couple penalty, if they break up they still have to pay two lots of rent in different places. I am not persuaded by the Opposition’s argument about couples. I do not think we should automatically limit the cap to households where at least one adult is subject to all work-related requirements, as proposed by amendment 237, or to link it to the cost of available child care, as proposed by amendment 238, because both approaches would undermine the principle of the cap.

Amendment 244 creates an exemption for couples in work according to the number of hours worked. The right hon. Member for East Ham discussed that amendment, and I will answer his questions in just two moments. Amendment 246 is consistent with our intention to exempt the DLA and equivalent benefits, but it includes some other benefits where we do not think that the argument for an exemption is as clear-cut. The exemption for the DLA means that in effect we will be exempting carer’s allowance recipients in households where one member of a couple or a dependent child is severely disabled and the other member cares for them. That does not arise in cases where the carer’s allowance claimant is caring for someone outside the household. Nor do we think that there is a case for a general exemption for ESA recipients or people gaining a disability element in universal credit. These claimants will be exempt if they have additional costs and are receiving the DLA.

The right hon. Member for East Ham asked a number of specific questions about the details of exemption for people in work. Those questions will all be answered in the regulations. For now, I will say that my expectation is that the test would be for earnings and not income out of work. Seasonal variations would be treated no differently from the universal credit. People experience variations, which should be reflected in the way the system operates. We will have to vary people’s support with universal credit, and that will be no different. On the question whether the cap will apply to gross or net earnings, universal credit will be assessed on the basis of earnings after tax and national insurance and 50% of contributions to pension schemes, and this will be no different. For self-employed people we will have to build this on the same rules that we put in place for handling self-employment through the universal credit. We will have to do that quite carefully to make sure that we do not create the kind of disincentive to self-employment that concerns the right hon. Gentleman.

The reality is that the cap is all about influencing behaviour; it is not about creating hardship. If we succeed in influencing behaviour, the number of cases affected by the cap will be cut to a minimum. However, we will only influence behaviour if we have a simple rule which people can understand, and not one hedged about with numerous exemptions that only welfare rights experts can follow. The simple message to every citizen of this country as they enter adult life is that there is a limit to the amount of financial support that the state will provide to people if they fall on hard times, and therefore they need to adapt their circumstances to reflect that reality.

It is essential to have a welfare state that is fit for purpose, that provides support to people when they need it and that commands the credibility and confidence of the public at large. At the moment, as evidenced by the poll findings referred to by my hon. Friend the Member for Dover, that is certainly not the case. This mechanism will enable us to start to rebuild that confidence.

I cannot accept the amendments and will, in due course, be commending the clause to the Committee.

Karen Buck (Labour, Westminster North)

There was a telling intervention by the hon. Member for Wolverhampton South West about the importance of people living within their means, with which of course I have a great deal of sympathy. However, the fact is that family means are determined by the Government. That has not changed. The means given to people in the form of child benefit and child tax credit remain extant, and the Government have taken that decision about the minimum that a household should have to live on. Yet the Government are now changing the rules—in effect, retrospectively, because a family cannot change its household composition or the number of children. I will come back to housing costs, but those households are now required to adjust their means, and often they cannot avoid the cap.

That inability, in the overwhelming majority of cases, to take meaningful action to avoid the implication of the cap is one of things that worries me most. The Minister glossed over the important amendment on child care, but it is an important illustration. If a lone parent with four or five children wishes to avoid the benefit cap by taking work—I have no doubt that many will—that household will end up worse off because of child care costs. That flies in the face of everything that the Government have rightly said is the guiding principle of universal credit, and I cannot believe that that is their intention.

We agree that, if the Government want people to go to work, work should always pay. Larger households are currently exempt from everything else in the benefit system if they have children under the age of five, but members of those families will now be required to go into work and lose money as a consequence. That is a powerful illustration to which the Minister did not respond.

The measure will retrospectively hit households that already include living, breathing children who have needs and who need to be looked after. It will affect 55,000 households with children, so, by definition, it will involve at least 250,000 people, because the families affected are largely ones with more children. They are losing £93 a week on average and, as the Minister has made it clear, include—bizarrely in my view—the nine out of 10 households not currently subject to work search requirements. I do not understand that at all.

On the one hand, the Minister rightly defends the exclusion of certain categories of people, such as people on ESA who have been assessed and deemed unfit for work, or families with children under the age of five. They are not required to look for work but, on the other hand, in Committee and elsewhere, the Minister wishes to apply a punitive benefit cap which, in many cases, as the information we have had from Ferret and others illustrates, will require those households to move to avoid the cap. In fact, it will not require them to move to avoid the cap and to find somewhere they can afford, because there is often not anywhere they can afford. That is spelled out in considerable detail.

The Minister has rejected the idea that households should only be subject to the extended sanction if they refuse a work offer. I do not understand that. If we want people to get into work—we want work to pay—surely people should have the opportunity to receive a job offer. People in vulnerable households, which often include those who are sick or widowed, or deserted wives, should not be subject to this benefit sanction when no one has offered them a job or, in many cases, is even looking for a job for them. If those people go into Jobcentre Plus, they would presumably be sent away. It would say, “Hang on, you’ve got children under the age of five; you’re on employment support allowance and are not required to look for work. We’re not going to look for a job for you.” Will Jobcentre Plus help those people and find them a job? I do not think so, because that is not how it currently operates.

At the heart of the legislation, we should do everything that we can to support, advise and incentivise people to go to work. However, where they have no means of avoiding the benefit cap because they have not been offered a job and are often not in work search categories, such penalties are wrong. The scale of the penalty that will apply is so great in both financial and housing terms that it is wrong. Many of our amendments are probing amendments, but we will press for a Division on the issue of a reasonable offer of employment.

Harriett Baldwin (Conservative, West Worcestershire)

How does the hon. Lady define “reasonable”?

Karen Buck (Labour, Westminster North)

In the same way that employment is defined elsewhere in Jobcentre Plus. If people are in a job search category and required to work, a sanction will apply if they turn down an offer of employment. It is essential to the integrity of the measure that people have the opportunity to work, and for that work to pay. On that basis, I will press the amendment to a vote.

James Gray (Conservative, North Wiltshire)

Order. Before we start the afternoon’s business, it has been brought to my attention that one or more of us are twittering from the Committee. While it is a matter of individual taste, the general feeling of the Speaker and the Panel of Chairs is that that is not a good practice, and that electronic devices should be used in Committee only for receipt of a minimal number of personal messages, and no other purpose, until such time as Standing Orders change. It would be better if we avoided twittering from the Committee.

Chris Grayling (Conservative, Epsom and Ewell)

I beg to move,

That the Order of the Committee of 22 March shall be amended as follows—

(1) in paragraph (1)(m) leave out ’10.30 am and 4.00 pm’ and insert ‘9.30 am and 2 pm’;

(2) in paragraph (4) leave out ‘7.00 pm and insert 6.00 pm’.

As members of the Committee will be aware, next Tuesday is the last day before the Whitsun recess. We are on that day operating Wednesday hours of the House. However, following discussion with various members of the Committee about their commitments that day, there is a consensus that the best hours for us to sit to maintain the length of sitting hours would be to begin at 9.30 am and sit until 11.25 am, to reconvene at 2 pm and to close the day’s proceedings formally at 6 pm. That clearly requires a change in the original order of the Committee of 22 March.

Karen Buck (Labour, Westminster North)

I beg to move amendment 233, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples living in social housing as defined by section 68 of the Housing and Regeneration Act 2008.’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Amendment 234, in clause 93, page 62, line 25, at end insert—

‘(5A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples owed a duty to be supported with interim or temporary accommodation under sections 188, 190, 193 or 200 of the Housing Act 1996.’.

Amendment 242, in clause 93, page 62, line 27, at end insert—

‘(6A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples living in supported or sheltered accommodation.’.

Amendment 243, in clause 93, page 62, line 27, at end insert—

‘(6A) Regulations under this section must provide for an exemption from the application of the benefit cap for individuals or couples who are offered accommodation under the prevention and relief of homelessness powers and duties in part 7 of the Housing Act 1996.’.

Karen Buck (Labour, Westminster North)

The theme of housing costs inevitably dips in and out of all the amendments and the discussion about the benefit cap. This group concentrates on some of the housing implications and the way in which the housing costs element of the cap will impact on individuals, and how it interacts with statutory duties for people to be housed by local authorities.

Before I go into detail, I ask the Minister, when he replies, to give us more information about how the figure of 50,000 households affected by the cap was calculated. We know that, apart from an extremely small number of cases, it is council tax benefit, child benefit and child tax credit that make up the bulk of benefit entitlements for larger families that push them over into the cap, which then affects their housing costs. Obviously, households with higher housing costs will add to that calculation, even when they are smaller families and therefore further down the scale.

We understand that 50,000 households are affected, of which 70% are in social housing, leaving us able to estimate the number of households in the private rented sector. The bulk of the discussion in the media, the Committee and elsewhere, has tended to focus on individuals who choose housing in the private rented sector. Looking at the figures, it seems to me impossible that such a small proportion—30% of 50,000 households—will be caught in that trap.

The number of households currently accommodated on behalf of local authorities in temporary accommodation is 48,000, of which 36,000 are in London. Given the average cost of procuring temporary accommodation, I cannot imagine that many of those 36,000 households in London—and probably a high proportion of the 48,000 overall—will fall outside the cap. A substantial and growing number of households to which local authorities would otherwise owe a homelessness duty are now directed and assisted into housing in the private rented sector under the prevention and relief of homelessness duties. As recorded by the Department for Communities and Local Government, their number is now running at some 65,000 annually. Some of those households will be very small, and in the north of England, for example, they will probably not be caught by the cap on the basis of housing costs alone, but most of them will be. The larger share of those households, more than half, are in London and the south-east.

One can conservatively estimate that, annually, there will be 30,000 households that would otherwise be owed a homelessness duty, and 48,000 households in temporary accommodation. whose housing costs alone will take them over the cap. There would be some degree of interaction with child benefit and child tax credit taking larger families close to the cap limit, but for the most part they are free-standing. On top of that, there are all the households in the private rented sector, who are making individual choices and, in some cases, moving in and out of employment. Of those, some 113,000 such households in London alone will be affected by housing benefit caps. Now that we know what the level of the housing cap will be, it is reasonable to assume that a significant proportion of those families will also be caught by it.

I will be fascinated if the Minister can tell us his calculation. To be frank, I do not think the Department knows the answer, and I have never been able to work it out, but, on the face of it, between 36,000 and 48,000 households are in temporary accommodation and 60,000 or so are in prevention and relief of homelessness accommodation annually; there are also all the families in settled homes schemes and a proportion of the 113,000 households in London, and perhaps even the 750,000 households in the country as a whole, in the private rented sector and in receipt of housing benefit. How the Government reach the figure of 50,000 is therefore a matter of some conjecture.

Will the Minister tell us his calculations regarding the proportion of those affected by the cap who are in the private rented sector? How will they interact with the different categories of accommodation? What are the modelling assumptions for housing costs overall? I believe that the modelling is being done on the basis of a sample survey and a computer model and that assumptions are being made about rent levels for the purposes of the cap, but my reading is that the assumptions, even for social housing, they are well below the level that prevails in London and the south-east. There is a real danger that the entire basis for the numbers affected by the cap driven by housing costs is completely wrong. I want to probe the Minister on that and get some assurances.

When the cap was first proposed, the Department for Work and Pensions press office briefed journalists that social housing would not be included in the calculation. In their briefings, the National Housing Federation and other housing bodies also said that they did not believe that social housing would be caught in that calculation. We now know that that is, not only wrong, but spectacularly wrong as an assumption. Parliamentary questions have confirmed that 70%—nearly three quarters—of households caught by the cap are in social housing. The Minister may want to challenge that. My understanding is that the DWP was not surprised, although I was surprised, because larger families, who are overwhelmingly caught by the cap, are disproportionately likely to be in social housing because they are poor and are unlikely to be able to cover their housing costs in the private-rented sector. We now have a perverse situation, which I find extraordinary, in which families who often enter social housing, which is available to anybody and is the cheapest form of accommodation—average rents in social housing are significantly below, and in some cases around half, the prevailing levels in the private rented sector—through a route that has already taken them through homelessness, are not only affected by the cap, to the surprise of the housing sector, but disproportionately affected by it.

One of the most dramatic problems facing the Government goes back to some of my examples and the journey that must be made by those caught by the cap: what will happen to them? People currently living in council houses will have entered the system through different routes—for the past two or three decades, people have often been allocated a council house because they were defined as being in need or homeless—and have then became the responsibility of the local housing authority. Such people will now be caught by the cap because the social housing rent for a large family will take them above the threshold, and they will not be able to pay the shortfall in rent without pushing themselves into poverty. The local authority will say that in law, arrears have been accrued, and the family have placed themselves at risk of losing their home. However, that will not be through any fault of theirs: they did not take specific steps to put themselves in that situation. The Government did—the Government changed the terms and conditions.

The local authority will have to find that such people are homeless. The impact assessment notes that one cost that cannot be calculated concerns what will happen when people now in social housing fall out of that and move into homelessness accommodation procured by the local authority, which is more expensive. In theory, the Government will be moving people from a social housing property where the rent is £110 a week, which they cannot afford, into temporary accommodation or private rented accommodation that costs £400 a week. That will dramatically increase the Government’s bill, and will catch that family in an even deeper cap. I look forward to the Minister explaining the logic behind the measure because I cannot see it.

The Government’s top-line argument will be that such families must cut their cloth to meet their means. They must move out of the social housing—it could be almost anywhere in England; there are only a few places where social housing rent is significantly lower—and find somewhere cheaper. The problem with that argument is that no other local authority in the country will have a duty to house that family. Local authorities already have local connection rules which, not least because of the Localism Bill, are becoming more entrenched. My local authority is changing its local connection threshold to 10 years. No other local authority will take that family, so they will not have the choice of moving to cheaper social housing but will have to move into private rented accommodation which, almost everywhere, is more expensive. The legislation is almost Kafkaesque.

I cannot see how a family will make a journey out of social housing and into something cheaper. I am not sure that that is possible. I am sure there will be some examples whereby a family moves from Wandsworth to Liverpool, but I am not sure how that will be done or how that family will deal with the costs that accrue from losing one home and finding another. I do not know who would assist them with a deposit in the private rented sector in such circumstances. Not for the first time, we have ended up with a lack of coherence in the interaction between DWP and DCLG, and in households being priced out of the cheapest available form of accommodation and pushed somewhere more expensive. I look forward to the Minister explaining how that will work.

Jennifer Willott (Liberal Democrat, Cardiff Central)

As the hon. Lady has said, rents in the private sector are generally higher than those in the social sector. Does she agree that it seems unfair to exclude from the cap those in the cheaper social sector, but not those who pay higher rents in the private sector? I do not understand the logic behind the amendment.

Karen Buck (Labour, Westminster North)

The Government could argue that some in the private rented sector will be able to make a choice about where they move. The point about people in the social housing sector is that effectively they do not have a choice. They are constrained by an allocation system that is bound, for the most part, within local authority rules. Sometimes it is bound by a housing association, which has its own strict geographical distribution of properties.

The point about social housing is not just that it is bizarre to move people out of cheaper accommodation into more expensive accommodation, but that those people cannot move anyway because of the way in which the allocations and local authority rules operate. If a person is in the private rented sector, they have a degree of choice over their accommodation. Moreover, the Government have accepted, in housing benefit rules but not for the benefit cap, that there will be local variations. The amount of housing benefit a person can obtain in London, capped though it is, is significantly higher than in Easington or anywhere else, but the Government do not accept that argument in this instance.

Charlie Elphicke (Conservative, Dover)

The hon. Lady makes a correct point about social housing and the difficulty of moving. Is that not why the Government’s proposals on the right to move, and their proposals to make it easier to move within social housing and local authority housing, are a good idea and should be welcomed?

Karen Buck (Labour, Westminster North)

I am entirely in favour of more effective home swapping and different means of encouraging greater mobility in the sector; I have spent a great many years lobbying for those things. However, I do not see how any of the proposals match up. If the logic of the argument prevails, the Government will have to accept—if they accept this, it will give us some clarity about their position—that they are looking to move a minimum of 250,000 people. That is the minimum; I think it is a massive underestimate, because there are at least 50,000 households, and those families are mostly larger. The Government will have to move those households almost exclusively from London, where housing costs are more expensive, to the north-east, where housing costs are cheaper, although in many cases, those costs still do not come under the cap. If that is what the Government are saying, they should be absolutely explicit that that movement of population from London to the north-east is happening. Then they could explain to us the logic of moving people from London and the south-east to an area where there are fewer jobs in order to improve their work incentives, because that does not match up either.

I come to my last point on housing. There is an extraordinary twist in the whole saga. Another part of the Government is intent on raising social housing rents to 80% of market levels for new entrants to the sector. In some cases—possibly many—it increasingly looks as though tenant transfers will be affected. We know from the work that Steve Wilcox and others have done that that will increase the housing benefit bill, and in addition, more people, through no fault of their own, will be caught in that trap.

A family who did all the right things, but who had been in and out of work, had faced all sorts of difficult circumstances and had been accepted as homeless, might be on a path to accommodation where rents are lower; that would improve their incentives to work. The Government will now not let that happen. They will say that those people will have to pay 80% of market rents. That amount will be higher than the 30th percentile in the private rented sector, which is the point at which the Government are capping private housing benefit. How does that match up? The sheer incoherence is quite extraordinary. The situation is complicated not only by inconsistencies in DWP’s position, but by massive inconsistencies between DWP and DCLG.

Housing providers, the Council of Mortgage Lenders and companies lending finance to housing developers and registered social landlords have made it clear—we touched on this when we talked about housing costs in universal credit—that they will not be able to provide the much-needed new social housing that we all want, because the cap will prevent them from being able to get in a stream of income to provide those properties. Let me give an example. When social landlords gave evidence to the London assembly planning committee, they spelled out the implications of the measures. I have asked how the “80% of market rents” measure would affect them, and how it interacts with the cap. Ealing’s family housing association said that it was

“a question of affordability, but housing benefit is…the biggest factor here. The notion of using higher rents to pay for your development, in principle there is no problem with it so long as the tenants can afford the rents. What is on the table at the moment is the idea that we will charge higher rents but a significant number of the people who we are supposed to house will not be able to afford them because they will not be able to get sufficient benefit. That is the fundamental challenge and obstacle” .

The chief executive of Places for People, which is the biggest registered social landlord in the country, said that if housing associations charged up to 80% of the market rent and there was a £500 cap on benefits, its existing client group would not be able to afford the homes that it was building. For that reason, it is doing its best to operate within the measures, but they have a direct consequence on the volume of new house building.

One way or another, the interactions are creating a pincer. Developers will not be able to build the homes that we so desperately need, because the people for whom they are building the homes, and who will create an income stream to subsidise that new development, will not be able to afford it. For those interacting reasons, I tabled an amendment that suggests that social housing should not be included, as I think it is completely perverse and unworkable to include it.

The other amendments effectively relate to sub-strands of social housing—forms of housing that people have accessed through the local authority through homelessness duties, temporary accommodation, prevention and relief of homelessness placements, and of course sheltered and supported accommodation in which people are placed as a result of disability. I would like to know how the calculations have arisen, and how the Minister sees that all working.

As I understand it, because income above the cap is being recovered by local authorities through housing benefit, presumably, where a family exceed the cap through any other form of benefit entitlement, that cannot be recovered. How could it be recovered? Presumably, nobody who is receiving state help because they have a mortgage will be affected. There will not be many such households, but if a family owned their own home, and members of the family lost their job—I am sure that there will be such examples—and required mortgage interest relief, presumably they would not be affected by the cap because there is no way of recovering the money. The only way that the money can be recovered is through local authorities. That seems to be another strange anomaly that interacts with how housing costs are calculated.

These are probing amendments. I look forward to the Minister helping me to understand how this all works.

Sheila Gilmore (Labour, Edinburgh East)

Although much of the impact appears to be on families, as has been mentioned, the impact assessment suggests that approximately 5% of the people affected will be single people. Will the Minister explain the circumstances in which they will be affected? A number of campaigning organisations are concerned that the measure might affect people in temporary or supported accommodation. A single person who claims benefit with no child additions or other things that generally bring people up to the cap, and who is in a standard private rented sector tenancy, will be subject to the local housing allowance rates. As we know, they have already been reduced to 30% of the local market rent. As has been suggested, if the cap for a single person is to be £350 a week—that is not in the Bill, but that is the figure under discussion—it seems unlikely that someone in a standard tenancy would be affected by the cap.

Are those single people in the DWP’s impact assessment those in temporary or supported accommodation? What is the Government’s view on that? It is clear that significantly higher amounts are paid for such accommodation. I do not know about the position across the country, but I know from my experience in Edinburgh that that is true of temporary accommodation provided directly by the local authority or by a housing association—often on a local authority’s behalf—and also of other forms of interim accommodation. We have a private sector leasing scheme, which people are encouraged to enter. As a result of the lack of temporary accommodation, it acts as a safety valve for about 1,500 households, some of which are single-person households.

Housing benefit rules have treated such temporary accommodation differently. In the past, it was not covered by the usual local housing allowance rules, and it is not clear exactly how it will be treated under the new system, and whether it will bring some single people in under the cap. It would be helpful to know that. Although it is wholly undesirable for people to be in temporary accommodation at such high rents for any great length of time, sadly that does happen, and sometimes not just for a few months—people can be in our private sector leasing scheme for two, three or four years at a time. It would help the discussion if the Minister gave us further information, specifically in relation to amendment 234, on single people in interim or temporary accommodation.

Jane Ellison (Conservative, Battersea)

I want briefly to challenge a couple of the assumptions made by the hon. Member for Westminster North. London Members on both sides of the House are interested in how some of the measures will affect them, aware, as we all are, of the unique aspects of London’s housing economy. The hon. Lady made a lot of assumptions about how the market, particularly the private rented market, might react to some of the changes, and I am not sure that that was thoroughly explored. I have had detailed discussions with housing directors in my area to try to understand what the repercussions might be, and there are still many unknowns. Will the Minister tell us how he feels the provision will impact on homelessness regulations, especially in London?

Chris Grayling (Conservative, Epsom and Ewell)

I will happily try to answer some of the questions that have been asked, but I have to say, as a starter for 10, that I am puzzled. I look at the previous group of amendments, this group and the group that lies ahead and do not know whether the Opposition believe that anyone should be covered by the benefit cap. I remind Opposition Members that the provision is a framework clause and an enabling one, which does not contain specific provisions but paves the way for the detail of the benefit cap to be implemented in regulations. From the comments of the adviser to the shadow Secretary of State, I had thought that the Opposition supported the principle of a benefit cap, but I am now worried that they do not. If the Labour party wants to vote against even the principle of a cap I will be delighted to have that debate in public.

My hon. Friend the Member for Dover said earlier that the provision is overwhelmingly popular with the public. I accept that we need to get this right and that issues clearly need to be addressed—one or two of which, about housing, I shall touch on in a moment—but the policy is overwhelmingly popular, and I shall be delighted to see the Labour party vote against it this afternoon.

The four amendments propose that the benefit cap should not apply to households living in specified types of accommodation, particularly those that might be seen as at risk and with whose housing needs local authorities have a responsibility to assist. We have made it clear that it is not right that some families on benefits have been able to live in homes that most working families could not afford. Although it is important that people continue to have access to decent housing, the support provided needs to be founded on principles of fairness, affordability and making work pay. The benefit cap ensures that there is fairness in the system. Working families throughout the country make decisions about their housing based on their incomes, and the same should be expected of people on benefits. It is not about penalising larger families or people living in supported or sheltered accommodation, but about ensuring that there is a level playing field for everyone.

Households affected by the cap will still be able to receive significant assistance from state welfare payments, but at the end of the day people have to take some responsibility for themselves. That includes ensuring that they live in accommodation that they can afford. In some circumstances, it may well require them to move to cheaper accommodation or locations.

I cannot accept amendment 233. My hon. Friend the Member for Cardiff Central is absolutely right to point out its absurdity. In most cases, people who live in social housing pay considerably lower rents than those in the private rented sector, so why on earth would we exempt those people from the benefit cap while applying it to those in the private rented sector who pay higher rents? That is what is so illogical about the Opposition’s amendments. Perhaps I should give them credit, but unless they are entirely opposed to the principle of a benefit cap, which is not what we have been told previously, although, admittedly, the shadow Minister, the hon. Member for Westminster North, did not respond to my hon. Friend the Member for Cardiff Central, amendment 233 makes no sense.

We have estimated that 70% of those households affected by the cap are likely to live in social housing. I will talk about temporary accommodation in a moment. A non-taxed income of £26,000 is already a lot of money to provide to any one family in social housing. Our policy limits the potential for those on benefit to receive more income than those in work while doing what is possible to limit perverse effects.

Touching briefly on temporary accommodation, the truth is that local authorities have a clear duty to provide accommodation that is suitable for the applicant. Suitability includes affordability. Whatever the cost of the accommodation, a local authority can pass on only a reasonable charge that the applicant can afford. We are currently looking at housing costs for those in temporary accommodation and how they might be treated from 2013 onwards. Special arrangements already exist in housing benefit for that position. We intend to have detailed proposals ready this year. I say to my hon. Friend the Member for Cardiff Central and to hon. Members on both sides of the Committee that, of course, we have to get that right. We must address temporary accommodation carefully and sensitively in the regulations. At the end of the day, it is a local authority’s responsibility to secure accommodation that is suitable for the applicant.

Amendment 234 would exempt from the cap all households to which local authorities owe a duty because they are homeless or threatened with homelessness. Duties range from providing advice and assistance to the main homelessness duty, whereby a local housing authority must ensure that accommodation is available for the applicant. We are looking at future arrangements for that. We will provide details later this year, but it is much too early to consider a blanket exemption for this group, because it is not yet clear to what extent they would be affected by the overall benefit cap when it comes in. The amendment would create a degree of inflexibility that makes it more difficult for us to provide a sensible system that reflects some of the differing needs with which we have to deal.

I remind hon. Members that this is a framework clause. I have no doubt that it will be followed by a lot of detailed measures and a lot of detailed debate. It simply puts in place the mechanics to introduce the benefit cap, and I will not accept amendments that remove the flexibility to get that right by writing into the Bill, as opposed to regulations, things that we may need to consider carefully later.

Amendment 242 would require us to introduce

“an exemption from the application of the benefit cap for individuals or couples living in supported or sheltered accommodation”,

and amendment 243 would exempt from the cap anyone who has avoided homelessness because their local authority has helped them find alternative accommodation. The amendments undermine the simplicity of the current proposal. There is no formal definition of supported or sheltered housing. It would be very difficult to come up with a classification that captures the sheer variety of types of supported or sheltered housing.

We have always said that we will look at ways of providing transitional assistance in hard cases. There may be an argument for providing such help in some of the circumstances raised in this debate. We have not yet taken any decisions on who should get this support. That is where hon. Members’ contributions are valuable. We listen carefully to the issues raised in a debate like this. We will look carefully at the points made as we shape the final arrangements. The Bill gives us the flexibility we need to listen, respond and deliver something that is right. That is what we will seek to do.

A couple of specific questions were asked. How did the Government estimate the 50,000 households who will be affected by the cap? The impacts on households are estimated using the DWP’s policy simulation model. It is a micro-simulation model based on data from the 2008-09 family resources survey, uprated to the relevant year’s prices, benefit rates and earnings levels. The modelling was carried out under the current benefits system rules and the impact assessment makes it clear that there is some uncertainty over small groups, which may not be fully captured by the survey.

The hon. Member for Edinburgh East asked about single people affected by the cap. The impact assessment showed that we expect relatively few single people without children to be affected by the cap. Our modelling suggested that only around 5% of the cases would be single person households. It is difficult to generalise about the characteristics of such a small group of cases, except to say that we believe that the cap would rarely apply. Let us put the concerns about housing benefit in context. The majority of people on housing benefit do not get amounts that come anywhere near the scope of the cap. In November 2010, 96% of the housing benefit case load got £10,000 a year or less in housing benefit; 75% got £5,000 per year or less. However, it is important to have a system in which people have confidence. That is the purpose of the policy as a whole.

There are clearly issues that need to be addressed as part of our detailed work on the regulations. We have said that we need to look carefully at how we move from the current system of supporting people in temporary accommodation to a new system in the context of the benefit cap. That work will be done. What I cannot accept this afternoon is a set of amendments that tie our hands in doing that work and that write into the Bill things that have no place in an enabling clause.

The clause is designed to create the flexibility for us to listen to the issues that have been raised in a debate like this and to shape something that is consistent with the views of hon. Members, the reality on the ground and the need to deliver proper support to those who need it. I hope that that goes a little way towards answering the questions. There is much more work to do in this area. I have listened to and heard what hon. Members have said but I am afraid that I cannot possibly accept the hon. Lady’s amendments.

Karen Buck (Labour, Westminster North)

I am grateful to the Minister. He gave us a little extra information about housing costs. What he told me confirmed my fears that the model for estimating who will be affected is probably not robust because we start by talking about quite a small number of people—50,000 households—who are affected, which is already in statistical terms almost insignificant. It is about 1% of households on working-age benefits. Because we are using a micro-simulation model and because it makes assumptions about rent levels that the Minister did not share with us but which I believe are significantly below actual rent levels across the piece, the chances of getting it wrong by a factor of one, two, three or four, with not 50,000 households but potentially 100,000, 150,000, or 200,000 households being affected, including all the children in them, is huge. It is just a simple calculation looking at what we know about households, even in the priority categories of the private sector. That is worrying.

Although we will return to the matter in regulations, the Government have introduced the Bill. They have asked us to scrutinise it in Committee line by line and we are trying to do so, but with little information and, to be honest, in many cases, information that we simply cannot trust. Again and again, the assumptions that are being made repeat the implication that the overwhelming majority of households affected by the provision are the same households that we have discussed in the context of the housing benefit caps: individuals making expensive housing choices, and there are some. We agree that there are certain behavioural draws, in some cases, that need to be tackled, but that is not what we are talking about. I do not think that the Minister has reflected on the sheer craziness of having a system that means that 70% of those affected are in social housing. They are affected not because their housing costs are dragging them into the cap, but because they are larger families and their child tax credit and child benefit payments, in particular, are taking them above the cap for the cheapest housing in the country. That does not make any sense.

We already have a method; we can argue about the exact level at which it is set, but we have a method for capping housing benefit. The local housing allowance is a de facto cap and an additional cap is being introduced on top of that. That additional cap was introduced just weeks before the Conservative party conference that introduced this new cap, as if none of those things existed. So I am afraid that I am not confident about the numbers. These were probing amendments that were trying to find out—and I do not think we have—whether we can trust the figures that we are being given for how many people are affected, whether we really get a sense that the Government understand the cap’s interaction with people to whom legal duties have been owed in terms of homelessness, and whether they understand how the cap will interact with people who are in social housing.

The Minister tells us that we are ruining his proposal by introducing complications into a system that values simplicity. When the drive for simplicity conflicts with other legal obligations and overrides the needs of people, in many cases exceptionally vulnerable people who are, by definition, at or even below the minimum level that the Government have decided they should live on, that is the wrong approach. I do not intend to press these amendments. I am looking for more information. I do not think that we have had it today and I certainly think that we will have to go away and press the Government by other means to give us some of the information that allows us to make a proper assessment of what the cap will mean. At the moment, I do not think that the Department really knows the answer to that question.

I beg to ask leave to withdraw the amendment.

Karen Buck (Labour, Westminster North)

I beg to move amendment 239, in clause 93, page 62, line 27, after ‘earnings’, insert

‘plus in work benefits which the average earner might expect to receive’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following: amendment 182, in clause 93, page 62, line 27, at end insert

‘equivalised as to household size’.

Amendment 240, in clause 93, page 62, line 27, at end insert—

‘(6A) Regulations under this section must exclude housing benefit and any components of universal credit that relate to housing costs from the amount specified under subsection (5).’.

Amendment 241, in clause 93, page 62, line 27, at end insert—

‘(6A) Regulations under this section must exclude child benefit, child tax credit, and any elements or sub-elements of universal credit that are paid in respect of children, from the amount specified under subsection (5).’.

Amendment 245, in clause 93, page 62, line 27, at end insert—

‘(6A) Regulations under this section must exclude any element or sub-element of universal credit paid in respect of a disability from the amount specified under subsection (5).’.

Karen Buck (Labour, Westminster North)

The amendment seeks to explore the Government’s thinking and calculations a bit further. In fact, they all do, but one deals with comparability and the others cover the interaction of the cap with housing benefit. We talked about the interaction with rent obligations and housing duties, housing benefit and the payments made to children and families.

I will try extremely hard not to duplicate what we have been talking about in terms of the cap, but, obviously, the Government’s central premise is that people who are out of work should not receive a benefit entitlement which is above that of the average working household. As we have previously said—I am seek further clarification—one problem is that we do not think that we are comparing like with like. For the cap to have any credibility, households that fall foul of the cap should be compared with the income, not the earnings, of comparable households. It is a fundamental flaw in the benefit cap if we are talking about comparing a single earner household with one, two or possibly no children with a couple with possibly five children. The lack of comparability in such circumstances is worrying.

We would like greater clarity, if not in Committee then afterwards, about average income including in-work credits and benefits—council tax benefit, housing benefit, working tax credit and, potentially, universal credit. What would the entitlement be for each size of household and for households in different regions? We would have more confidence in a set of comparables if we could say that some families, such as out-of-work lone parents with four or five children in London, receive more benefit, as the Government imply, than same family would in work. Similarly, the total out-of-work entitlements of a couple with two children in the midlands or the north of England could be compared with those of a family of the same size who are in work. We would then have a clearer idea of exactly how big the problem is and what the sources are of the different cost components of the problem.

Looking at the Office for National Statistics data, I understand that we have a national figure for the difference between the earnings and the income of working households. That gives us an average of £3,319 a year. If there were two households, one of which was out of work and subject to the cap and the other was in work, the working family would receive in-work benefits of £3,319. In one case, we add state assistance in the form of council tax benefit, housing benefit and so forth, and in the other case, we do not. Before making a final decision, we should at least have that information in front of us to see whether we are comparing total state support with total state support in its different guises for families of different kinds.

I suspect—perhaps the Minister will clarify this—that if we drill down into more comparability at regional and household levels, we will find that it is very rare indeed for families of the same size to be better off out of work than they are in work. Where that is the case, the overwhelming number would be at the very extreme and involve housing costs, which will almost invariably be of the kind that we discussed on the previous amendment—households placed in temporary accommodation for the prevention and relief of homelessness. We must look at the special provisions, and the Minister has implied that there could be special provisions for those categories.

We have to look at the extreme cases; but for the overwhelming number, we need to know whether we are comparing like with like and know exactly how big the problem is when we take the regions of London and the north-east. Do the Government have that information? Can the Minister tell us what the average income, including in and out-of-work benefits, would be for every household size in every region, so that we can have an informed opinion on the right way to proceed? So much of what we have talked about on the benefit cap is based on assumptions and micro-simulations, and, frankly, we are flying blind. It would be helpful to have a more informed conversation.

The other amendments in my name probe a little deeper into the composition of the different elements of the benefits that make up a household income that leads to the cap. I will not repeat all the arguments, but Shelter and the housing organisations are particularly concerned that housing costs will bear the brunt of the cut-off that having a cap implies and that that will push substantially below the poverty line households in ordinary circumstances in social housing and, in some cases, in ordinary private rented accommodation in the cheaper parts of the country. Their major piece of research, which I believe was done by Cambridge university, looked at the number of areas where families would face a shortfall of at least £20 a week or £86 a month, because their tax credits, child benefit and so forth pushed them over into the cap, which then affected their housing costs. It was found that, in 91 local authority areas in England, families with a three-bedroom house—I am not talking about the seven bedrooms in Knightsbridge about which we hear so much—would have to find at least £86 a week.

We should remind ourselves, because we forget time after time, that the income of the households that we are talking about is already set at the lowest level that the Government have decided is reasonable for households to live on and that, if there are reductions in household income below that, the implication is inevitably poverty. The housing sector’s main concern is to take housing costs out of the calculations so as not to increase homelessness.

We can be confident that, for a host of reasons, a substantial number of households will simply not be able to uproot themselves from London and the south-east and other areas with higher costs that are now deemed no longer to be affordable. We can all think of examples: some families will be looking after an aged relative, some will have children who are about to take public examinations and some may have been in work a few weeks ago and have a realistic prospect of getting back into work soon. Those households will choose to take a hit on their income, which may be temporary but could last months and in some cases even years. That fall in post-housing cost income and the struggle to pay the rent and avoid homelessness will drive a significant number of households into poverty.

What are the implications? I would like the Committee to know—I would have liked to know before we started this debate—the knock-on implications for a benefit cap in each case for taking the various benefits out of the calculation. The Minister accuses us of tabling wrecking amendments and says that no one will be affected. So he says, but who will be affected? How many will be affected in each of those cases—if child benefit was not included, if child tax credit was not included or the child element of the universal credit was not included? Given a robust set of calculations, which we do not have, how many people would be affected?

Finally, has the Minister calculated the implications for poverty? We have heard a great deal about the Government’s high hopes for universal credit in reducing child poverty. The Opposition hope for the same; we hope that the simplification agenda will indeed have a beneficial effect on child poverty. I believe that 300,000 children are to be lifted out of poverty by universal credit, but the benefit cap, which will invariably hit larger families with three, four or five children, will probably push a 50,000 minimum of households and probably more into poverty because of the benefit cap. My maths says that it will be easy to cancel out the 300,000 children who will be lifted out of poverty by universal credit by another 300,000 or more being pushed into poverty by the imposition of the overall benefit cap. It is yet another element of the benefit that makes no sense.

I hope that the Minister will respond to some of those questions and assure the Committee before we go any further that we will have better information on which to judge the impact of the cap.

Kate Green (Labour, Stretford and Urmston)

I want to speak briefly to amendment 182, in my name.

I reinforce what my hon. Friend the Member for Westminster North says, and I shall speak first about comparing like with like. She alluded to the importance of not mixing earnings and income. Earnings are merely a component of income for most families, and those earnings will be supplemented by a range of in-work benefits and benefits for children. She has also rightly drawn attention to the importance of looking at the comparison regarding family structure.

I am particularly concerned because the driver, as far as we can see, of families who will be hit by the benefit cap is predominantly family size. More than anything else, it is the number of people in the household. We should understand the impact on those families with a larger number of children. We know that larger families are particularly vulnerable to poverty and that the children in those households are particularly at risk of poverty. Imposing a benefit cap on them will put those families at risk of greater poverty.

I would be grateful to the Minister if he told us what assessment has been made of the likely impact on financial losses for families with different numbers of children—three, four, five, six, seven and so on. Has any assessment been made of those losses, and therefore of the potential impact on child poverty? I am not aware that any assessment has been made of the likely period of time for which such families might find themselves affected by the benefit cap. The impact assessment is quite thin on the details of how families with three or more children are affected.

The amendment goes to a point about fairness and being rational about the way a benefit cap is calculated and imposed. It cannot be rational to compare a single figure plucked out of the air to represent average earnings and to apply that figure to all kinds of family structure and type if we are interested in having a benefit system that in every other way is designed to be flexible enough to reflect different degrees and aspects of need. There is an intellectual inconsistency in putting in place a single figure benefit cap to apply across the board, when in every other way the benefit system does not operate like that.

The amendment proposes that the benefit cap should be adjusted to take account of family size and, therefore, to provide a fairer comparison between families in work and out, which we understand to be the thrust of the Government’s intentions. I support all my hon. Friend’s comments about other aspects of the inconsistencies and lack of rational approach to the imposition of the benefit cap. I look forward to the Minister’s comments.

Chris Grayling (Conservative, Epsom and Ewell)

It is increasingly clear that there is a divide in philosophical view on these issues. The amendments seek to provide that the cap should depend on household size and expected amounts of in-work benefits. They seek to carve out various benefits and elements of universal credit from the cap. The key point is that there needs to be some limit on the overall benefits that it is reasonable for the state to provide. It is not reasonable or fair that households on out-of-work benefits should receive an income that could far exceed the net earnings of working households. That is the issue.

The hon. Member for Westminster North talks about the different circumstances of different families. People in work have to take decisions about what they can afford to do. Why is it not reasonable to set a limit on the amount of support that we provide to people who are not working?

Kate Green (Labour, Stretford and Urmston)

Does the Minister not accept that people in work are still eligible both for in-work financial support if they are on low earnings and, in almost all cases, for support with the costs of raising their children?

Chris Grayling (Conservative, Epsom and Ewell)

Our intention is to set the cap so that it represents the average net weekly wage for working households: £500 a week for couples and lone parents, and £350 a week for single people without children. That is the equivalent to a household with a salary coming in of well in excess of £30,000 a year, taking into account tax and national insurance payments. We are talking about the net figure for the benefit cap. Do we honestly believe that it is unreasonable to tell people who are in receipt of state support that there is a limit to how much support we will provide to them that is set at a net earnings figure for a working household? I am disappointed that the Opposition do not seem to feel that that divide is reasonable. We have to be thoughtful about some aspects of the changes in relation to things such as temporary accommodation in London. We have to think through the implications in individual circumstances; but surely, for the vast majority of claimants, this is not an unreasonable proposition.

Sheila Gilmore (Labour, Edinburgh East)

Is the Minister not creating an artificial distinction between one group of people who are out of work and claiming benefits, and another group who are taxpayers and are supporting themselves? In fact, there is a great deal of crossover. People go in and out of work, and people who are in work who have, say, a large family—the group of people that we are really talking about—will be receiving additional assistance through child benefit, tax credits and universal credit successors to those, because of the size of their families. There is not, therefore, the clear-cut distinction that the Minister is trying to draw.

Chris Grayling (Conservative, Epsom and Ewell)

The average value of in-work benefits across the population as whole is £20 a week. The amounts that we are typically providing to families with parents in work are much lower than the benefit cap. We do not think that it is right to structure a benefit cap based on the size or composition of a household or the specific benefits that they receive.

Kate Green (Labour, Stretford and Urmston)

Can the Minister clarify whether that average payment of £20 a week of in-work benefits is only the adult payments, or whether it includes benefits for children?

Chris Grayling (Conservative, Epsom and Ewell)

That is the figure for adults, but I will give the hon. Lady a figure for children in a moment. The question is whether we believe that it is right to have a crossover line and say that we will provide people with support up to a point, or whether we simply uncap benefits and say that we can provide an indefinite amount of support. The approach that the hon. Member for Westminster North proposes would result in an individually calculated cap for virtually every household. She is talking about a benefit level that is determined by the current level of housing benefit and the number of children, which is basically the current situation; effectively, there is no cap at all. Attempting to do that would compromise the clear message that our reform is intended to provide. It would lead to a lack of clarity for claimants and increase administrative complexity.

I now turn to the amendments. Amendment 182 would set the cap with direct reference to the size and composition of a household. We are introducing the cap to ensure that the benefit system is fair, and is seen to be fair, to the taxpayers who pay for it. The salaries of those in work are not determined by family size, and we believe that it is right to apply that principle to the level of the cap.

Amendment 239 would require us to take into account the level of in-work benefits that someone earning the average wage might receive when setting the level of the cap. That would still result in a level for the cap that was based on averages, so it would be no better a mechanism for accommodating household size or characteristics than our intended method. I acknowledge that our proposed level for the cap is lower than the total income of someone who is receiving in-work benefits while earning the average wage, but surely we should be ensuring that people are better off in work. Returning to the point about state support, if we look at grossing up the level to the mid-£30,000s a year, at that level very few people are getting benefits of any sort, whether working tax credits or housing benefit. In proportion to the working population—we are talking about the equivalent of a salary in the mid-£30,000s a year—we are not setting the cap at an absurdly low level. There has to be a dividing line.

Kate Green (Labour, Stretford and Urmston)

The Minister has said that households with incomes in the mid-£30,000s would be unlikely to be receiving any financial support, but they would be receiving child benefit, and I think I am right in saying that they would continue to receive an element of child tax credit and potentially the tax breaks for child care as well.

Chris Grayling (Conservative, Epsom and Ewell)

As the hon. Lady knows, child benefit is paid at a flat rate until an individual becomes a higher rate tax payer. The other benefits referred to by the hon. Lady would become a component part of the universal credit and would taper away. By the time someone starts to earn £35,000 or £37,000 a year, one would expect virtually all the support they receive to have tailed away.

Amendments 240, 241 and 245 all attempt to allow households to receive total benefit above the level of the proposed cap, by requiring the Government to disregard certain benefits for housing, children and disability when calculating how much total benefit a household receives. Each amendment undermines the fundamental principles that underpin the cap, namely that there must be a limit to the amount of benefit a household can receive, and that work should pay. As we have made clear, there will be some exemptions. Disability is an important area, where we recognise that there are extra costs, issues and challenges. That is why we will not apply the cap to households where someone is entitled to disability living allowance or an equivalent benefit, or to households where someone is receiving war widow’s or widower’s benefits. The cap is intended to increase incentives to work, so we will exempt households with a member who is entitled to the working tax credit, and there will be an exemption for working households on universal credit.

We have now considered three sets of amendments that would effectively destroy the core principle of the benefit cap. We are talking about a total income per household that is equivalent to the annual income in a working household—the mid £30,000s. The net figure of £500 a week at which we intend to set the cap is the net equivalent of a household with an income midway through the £30,000s per year. I think that is an entirely reasonable level. It is not appropriate to have a cap that is varied because trying to link the cap to household size or region would create a system as complex as the one that we are currently trying to simplify. To clarify that last point, the total income of those earning the average wage including in-work benefits, is approximately £20 a week more than the average wage.

I think the Government’s approach is right and I do not accept the amendments tabled by the Opposition.

Kate Green (Labour, Stretford and Urmston)

I apologise for interrupting the Minister again, but did he not say a few moments ago that the £20 average was for adult benefits only?

Chris Grayling (Conservative, Epsom and Ewell)

Yes. It does not include child benefit; I said that. It includes the payments made to adults. It is the in-work benefits received at that level.

Kate Green (Labour, Stretford and Urmston)

Does the Minister accept that that is not a representation of the income of a working household?

Chris Grayling (Conservative, Epsom and Ewell)

As I have said, the in-work benefits that would be received by someone at that level—those in receipt of housing benefit or tax credits, for example—the average amount across the whole population, is £20 a week. But that is a side issue. I do not accept the principle that we should apply to the benefit cap all the various caveats that Opposition Members wish to apply. This is a simple, straightforward framework clause and I cannot accept the amendment.

Karen Buck (Labour, Westminster North)

Simple indeed it is, and the likely consequence of that simplicity will be quite appalling rough justice. That has been drawn out from the Minister’s comments and our discussions this afternoon. Some people will fall foul of the cap simply because, even if they wanted to go to work, their child care costs would be such that work would not pay and would leave them £100 or more worse off. That is extraordinary. Some people will fall foul of the cap because they happen to live in London, go to work on Friday but lose their job on Monday. Other households may have been on benefits for a great many years, but because they live in a different part of the country they will not be affected.

Take two households of exactly the same composition. One may not be subject to work-search requirements because they have three children under the age of five, for example, and live in social housing and are not affected by the cap; but the family next door with five children may be subject to work-search requirements, even though their children are the same age. There are so many inconsistencies and anomalies, and I have not the slightest doubt that there will have to be massive concessions, because the more we dig, the more it will become obvious that the costs will not add up. The anomalies will be too numerous, and the hardship will be too great for Ministers to stomach.

The Minister did not give us any assessment of what the implications would be for child poverty, which the Government have said that they are as committed and signed up to tackling as we were. They have pinned so much on universal credit, but I do not see how it is possible for the overall benefit cap to do anything other than—at least— eradicate any of the child poverty gains that are made as a consequence of universal credit.

All I sought to do with this group of amendments—and I have been disappointed with the response—was ask the Minister whether we have the kind of information that would allow us to really understand to what extent the central premise of the Government’s case holds true. The Minister is pointing to a national figure, which, as we have argued, is an unreliable guide to income because of the enormous variations in incomes and housing costs in different parts of the country, and because it fails to take into account different household sizes.

Before any final decisions are made on whatever the final framework is for the benefit cap, we would simply like to see what the projected losses are for households of different family sizes in different parts of the country, as my hon. Friend the Member for Stretford and Urmston has asked. We would also like to see the comparable levels of in-work credits for each different household size in different parts of the country, as well as what the implications would be of taking out all the different benefits, so that we can at least properly understand those issues.

Guto Bebb (Conservative, Aberconwy)

I have listened carefully to the arguments about regional variations, and I represent part of the world in which the average wage is comparatively low, but in view of the comments about the need to recognise regional variations, would the hon. Lady be in favour of getting rid of national pay bargaining?

Karen Buck (Labour, Westminster North)

Mr Gray, that is so far outwith the scope of the Committee that you would rightly strike me down if I attempted to answer. It is a completely different argument. We know that there are different incomes in different parts of the country, that different levels of in-work benefits are paid to families and that there are very different housing costs. That is what lies at the heart of the debate about the benefit cap.

I sought clarification from the Minister on a number of those points, but I fear that I did not get it. These were probing amendments, tabled to elicit that information, and my hon. Friends and I will seek to find out from the DWP what information it holds as we go forward, to allow us to make these decisions. I regret—and my regrets are shared by the Deputy Prime Minister, and by the Minister’s boss, the Secretary of State for Work and Pensions—that we are having to conduct these supposedly in principle discussions in the absence of so much important information, which would allow us to analyse what the impact of the benefit cap would be, and what meaningful and workable variations there might be that we could all agree on. That is a point that we will want to return to, but I beg to ask leave to withdraw the amendment.

James Gray (Conservative, North Wiltshire)

As the Committee will recall, I took the view that we have had a fairly substantial discussion on the clause in principle during discussion of the various groups of amendments, and that therefore we did not need to have a stand part debate. However, representations have been made that we should have a brief debate, so perhaps it is sensible to do that, but in a reasonably light way.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I will be brief, as a lot of my concerns about the clause have been mentioned earlier in today’s debate.

First, I want to make it clear that, unlike the shadow Minister, I do not have a problem with the principle of a cap, and I am happy to put it on record that a cap is the way forward. It is not good for taxpayers to fund benefit claims, and it is not good for families if it is impossible for them ever to afford to get into work. In my view, however, the cap as proposed will not work, and I am concerned that the interests of children in particular have not been taken properly into account. The Government’s proposals would effectively punish children for the decisions of their parents, particularly in families with a large number of children. In addition, hard-working families would be hit, because there is no cushion for those who suddenly lose their job and find themselves unable to pay their rent. I also find it worrying that even quite small families will be affected. Many two-child families in London will lose about a third of their housing benefit, and three-child families in a third of local authorities will have a shortfall in their local housing allowance. Those are not sizeable families, so the effects can be quite broad.

Some of the implications are worrying. The average loss is £93 a week, but 15% will lose more than £150 a week, which is a significant amount of money. Some smaller families with three or four children could lose enough to force them to move house, as we have heard earlier today, which will move them inevitably further and further away from their support networks and their families. I should be grateful to the Minister if he confirmed what is implied in the equality impact assessment, which is that for some larger families there will be literally nowhere in the country where they could find affordable housing. What would happen to those families?

The Minister has said that the cap is intended to incentivise work, but not everyone can work. The cap does not differentiate between those who are currently receiving jobseeker’s allowance and those who are on employment and support allowance. The cap will affect people whom the state does not expect to work and who are considered too sick to work. I also understand from the paperwork that half of the affected families will contain somebody who is disabled but not in receipt of disability living allowance, so the family will not be exempt from the cap. In addition, two thirds of those who are affected will be lone-parent families, and some of those will have children aged under five. Those parents are not expected to work, but they will nevertheless be caught by the cap.

People whom we do not expect to work will, therefore, be caught by the cap. They could only escape that if they become eligible for DLA, so a couple of perverse incentives are created by the measure. One is that it could encourage people to try to claim DLA for a child in their household, as that would exempt them from the cap. DLA for children has no objective test, so that may be a way for people to go forward. As has been mentioned, the cap could also encourage family breakdown, because a family that splits up would effectively be entitled to double the amount of benefit, which would be worrying.

The savings that are due to be made are illusory. The proposals are intended to save £225 million in 2013-14 and £270 million in 2014-15, but that relies on the assumption that no one will change their behaviour to avoid the cap. Some families will find work in order to escape the cap, which is clearly a good thing, but they will potentially be able to claim a larger amount of money via in-work benefits. Others will be made homeless, which, as we have discussed, will be more expensive for local authorities, and others will try to get on to DLA.

Is the Minister able to confirm what I have heard, which is that the DCLG estimates that the cap will lead to an increase in homelessness of around 20,000 people? That would cost local authorities some £300 million in emergency housing for those families, which would totally cancel out the £270 million estimated savings. The impact assessment acknowledges that, for some families, housing benefit may not cover their rent and that some will go into rent arrears. It also accepts that that will lead to extra costs for landlords and for the courts as a result of eviction proceedings and the recouping of those arrears. The impact assessment also accepts that local authorities will incur extra costs, because of the homelessness, and the estimate for that together is some £400 million. I shall be grateful if the Minister will elaborate on that figure. It seems a little crazy to introduce a policy that costs more to implement than it could save, particularly given the implications of that policy.

We have already had much discussion about the impact of potentially forcing families to move as a result of the changes. I do not believe a lot of the scaremongering about some of the former changes to housing benefit, which the Opposition suggested would force all poor people to move out of London and the south-east. I do not believe that that was true. However, I am concerned that this policy could mean that families receive housing benefit way below the level for which they are eligible and way below the housing benefit cap. That would leave them with the choice of either paying the difference themselves, which in almost every case would probably be impossible, or moving. That will uproot children from schools, will mean people moving away from their support networks and will put pressure on cheaper areas, as we have already heard. Those areas often have fewer job opportunities, which also has implications for worklessness. In addition, if people move away from family and friends, there is less chance for those families to rely on informal support networks for child care when parents go back to work. That has implications for the affordability of people being able to get back into work.

The final issue that I want to raise is the impact on social housing. The impact of the 80% rent rate on social housing across the country has already been discussed, and I share some of those concerns. However, the cap could have a further impact on social landlords because those affected by the cap will no longer receive the full amount of housing benefit, so they will have to top up the rent themselves from their other income. As identified by the impact assessment, that will lead to an increase in rent arrears, and in many cases it will no longer be possible for the full rent to be paid direct to the landlord. Families will therefore become less attractive to landlords in the private rented sector because they will have to ensure that the rent is topped up from their own income. The policy also makes things more expensive for social landlords because they will receive housing benefit directly and will have to pay for the additional administrative costs of getting the top-ups in to ensure that they receive the full level of the rent.

Stephen Timms (Labour, East Ham)

The hon. Lady is making some telling points. She has given us some estimates of the cost of the policy, which we can offset against the savings that the Government have told us will be accrued. Does she believe that her estimates of the cost will be endorsed by the DCLG?

Jennifer Willott (Liberal Democrat, Cardiff Central)

That is what I am asking the Minister today. I have heard various figures being bandied around, but I should be grateful if the Minister would clarify what those figures are because I am not sure what the estimates are likely to be. As I said, I agree with the principle behind the policy but, for the reasons I have set out, we are a long way from finding the right way of putting that principle into practice.

There are a number of different ways to mitigate some aspects of the policy, many of which have already been debated today. We could exclude child benefit from the cap, which would take account of family size; we could exclude housing benefit, which would take account of regional differences in housing costs; or we could set the cap at the level of the average income of family households, rather than including single-person households in that calculation. That would mean the figure is set at around £672, which is significantly higher than the £500 cap that has been put forward.

I am glad to see that the equality impact assessment states that the Government are looking at ways of easing the transition for families and providing assistance in hard cases, but I should be grateful if the Minister would tell us which options are under active consideration to ameliorate some of the policy’s impacts. I would like the Minister to say that he will take on board the concerns that I and other Committee members have, and that he will work with his colleagues to find a different way forward that retains the principle but has a different way of putting it into practice.

As the Minister has said, none of the detail is in the Bill. I will therefore not be voting against the clause at this stage because, even with the clause in the Bill, it gives the Minister time to take the matter away and come back with different proposals on how a cap could be calculated and what benefits could be included in or excluded from that calculation. As we know, that will be set out in regulations. The Bill as drafted would allow for a number of those options, so I hope the Minister can reassure me that he will take away my concerns and come back with more palatable proposals that will not harm as many people as the current proposals would.

Sheila Gilmore (Labour, Edinburgh East)

I should like to take this opportunity in the stand part debate to complete some of the thoughts I had earlier. There is clear agreement among many of my constituents that people should not get too much money for nothing, and that people who are not working should not in some sense live a great life of luxury at the apparent expense of others. I have already said that we sometimes make too sharp a distinction in debate between those who are taxpayers and good people, and those who are not taxpayers, as though they were completely different groups. Most of us are taxpayers, and through measures such as VAT, many very poor people who are not working are also taxpayers and are contributing to society. That distinction worries me deeply, as it creates a notion that some people are less worthy because they do not in any way contribute.

The issue that has come through in many contributions is housing costs, which are part of a wider discussion that we cannot debate entirely within welfare reform. Some worries that people express result from the fact that another debate is going on about housing reform more generally, and the conflicts are perturbing. Housing costs are a serious issue. People who have high housing costs should not be regarded purely as taking on those costs, or making those choices, because they want to live more luxuriously without working. Many people have little choice. I am amazed by how often people tell me that they do not want to go into the private rented sector, even when the cost of doing so would be covered by housing benefit, because they do not like other aspects of that sector. Sometimes, however, they end up with no choice.

On Friday, I was speaking to a young woman who has been living in very overcrowded circumstances with in-laws, with whom she does not particularly get on. She has a small baby and a room that does not even have space for a cot. I asked her whether she had considered going into one of the private leasing scheme properties that the council might be able to access for her. She answered, “No, I want to be settled. I want a secure place to live; I do not necessarily want to be in the private rented sector.”

There are many people like that young woman, who are not saying, “Whoopee! I could get a high-rent house somewhere because I have a small baby and I am not working at the moment. I could get housing benefit to cover that.” They are saying, “I don’t want that; I would rather have an affordable rented house, if one were available.” However, that woman has been a priority for eight months and there has been little sign of anything coming her way, so her choices are limited. If council or housing association houses are not forthcoming, she might have no choice but to look into the private rented sector in some form. As she is not currently working and as her child is under one year old, she would receive housing benefit to cover that. She may well end up being one of those people whom others look at and say, “There’s someone who’s getting a lot of money”, even though some of it is simply to cover her rent.

This issue is serious. The primary problem arises from housing costs, and not from the huge generosity of other benefits, because when we consider each element, they are not so outstandingly high. If, for example, as the hon. Member for Cardiff Central has suggested, housing costs were taken out of the overall cap, there would not be a major problem, except, perhaps, for some outstandingly large families, who are very few and far between. Equally, if child benefit were taken out of the cap, it might substantially reduce—I do not know in what numbers—the number of people who would be within the cap. However, that shows up the cap for what it is. It will punish people who have high housing costs—not necessarily through choice, but because of where they live and their lack of choices. In my city, costs are high; it is not that house rents are anywhere near as high as they are in London, but the choice of alternatives is exceptionally limited.

The situation will get harder and harder until we properly address how to provide affordable housing. People with large families and people who have exceptionally high housing costs will suffer. If we exempt them, many fewer people will be covered by the cap and it will probably not have much effect. If the cap is to make the alleged savings, it is likely to do so to the detriment of some of those groups. They may have little choice but to accept that, unless they can move easily—they cannot do anything about family size, if that is why they hit the cap—their disposable income will fall to a level at which their financial position will be even more difficult. Is it supposed to be a stick with which to beat people into working at a time when jobs are not easy to come by? That aspect of the matter has not really featured in today’s debate. There is an assumption that people will simply be able to find work, but that is not necessarily an option that is easily available.

Many of the issues may go well beyond the scope of the Bill, but when we are legislating, we must bear in mind who will be harmed. I accept that people may easily be worked up into being resentful of one another, sometimes because certain pictures are presented to them, but for real people the situation is more difficult. We could make many exemptions, perhaps through regulations, when the bookcase is filled in. The Minister has spoken against putting exemptions in the Bill, but if they were put into regulations, some of his objections on grounds of complexity would disappear because they would still exist, but in a different format; or we could have simplicity, and many of the difficult cases that have been outlined by the previous speaker and throughout the debate would not be exempted in any way, whether it is the type of benefit or the type of household that is exempted.

If there are not exemptions, there will be hard cases out of simplicity, and that is always a danger. Simple is attractive, and it is easy to say that things should be made simpler—no one will disagree with that—but simple rules sometimes give rise to hard cases because people fall through the cracks. We must be clearer about how many of the issues will be covered by regulations—that may yet come out—and whether the Minister is holding to his view that having many exemptions would be too complicated, and that there will be a cap that will affect many of the groups to which reference has been made.

Ian Swales (Liberal Democrat, Redcar)

I want to speak briefly about the benefit cap, and deprived areas. My constituency is mixed, and we even have a Conservative councillor, but some parts are among the most deprived in the country. An article in The Guardian earlier this year referred to a fifth generation being born into a family where the previous four generations had never worked. They were my constituents.

The root cause, of course, was long-term loss of manufacturing jobs in an area that was built on manufacturing. My constituency is ranked 30th of 650 for unemployment. To recall a former right hon. Member for Chingford, people are getting on their bikes and going off to get work, so instead of the problems in the south-east of housing shortages and worries about school places, we have housing available and schools closing. That is relevant, because I am worried that Government policy and reaction to it are often about the south-east and big cities, and not about the rest of the country. I shall give a few examples.

First, the difference between social rents, market rents and proportions thereof is irrelevant in my area, where they are very similar. In fact, some evidence suggests that housing benefit drives them all. Secondly, the Bill contains provisions for under-occupancy. Last Friday, I met the chief executive of the large social housing provider in my area who said that in some areas he has problems getting people to take empty social housing. To get a couple into a three-bedroom house in such areas might be great for regeneration of the area, but there will now be serious penalties for such tenants because of the under-occupancy provisions. Those are examples of how national policy may not always apply well, and we now have the benefit cap.

The Government are talking about a figure based on national earnings, and we have heard at length today that the main elements are housing and the rest. Housing costs vary dramatically across the country. Simple mathematics says that if there is an overall cap and dramatically different housing costs, there will effectively be a highly variable cap on people’s non-housing living costs. It will vary a lot across the country. Fairness should be at the heart of what we are about, and such variation seems unfair.

We have heard at length about how often quite small families in expensive parts of the country will have large bites taken out of their living costs because of the housing issue. In my area it will not be a problem. Even large families will probably get nowhere near the cap, because housing costs are so low.

The cap could have two parts, as a few of the most recent speakers have said. We have already talked about a housing benefit cap, which is part of the provision, so why do we not get more creative? Rather than having an overall cap of which housing is part, perhaps we could have a cap on the non-housing part of the equation, too. That could lead to a more equitable solution.

I accept that we must incentivise people into work. The heart of my concern about the cap is that it will probably reduce the likelihood of my constituents moving into work. Why is that? The Minister talked earlier about influencing behaviour, so let us consider an out-of-work family in my area. They will be paying relatively low rent—even larger families may find that their benefits are not capped—so to move into work they have two options. They could move into work locally, where pay levels are quite low by national standards. I assume that the universal credit will ensure that it is worth their while, but I am still not sure how it will interact with the cap. Finding work locally may not be easy, however. For example, the Financial Times came to my constituency during the general election and a reporter chatted to a few people on the street. They found a lady who had recently managed to get a job cleaning the local supermarket. She was delighted because there were 485 other applicants for the job, and she was the chosen one. That says something about the availability of work.

My sample family may want to move to an area where there is more work. Either they do not have a job and move speculatively to that other area, and assuming that the area has higher housing costs, which is highly likely, the family income will fall if they are a significant family affected by the cap; or if they have a job to go to, they may be concerned that the job might not last and that they might find themselves out of work in a new area with less money to live on. They might then think, “Why didn’t I stay at home?”

As the hon. Member for Westminster North said, there is another perverse incentive. People living in high-cost housing areas will undoubtedly be incentivised to move to lower-cost housing areas where there is less employment opportunity. We talk about the Bill’s basic premise of trying to encourage people into work, but the clause has potential counter-pressures.

I agree that benefits should be capped. I am firmly behind that, but as currently drafted, the clause is potentially unfair. It will not have the intended consequence of encouraging people to go to areas where work is available. Such movement of people and mobility of employment is the key thing.

There are redrafting possibilities. I accept the need for simplicity, but the numbers could be made to add up slightly differently. Before the hon. Member for Dover jumps out of his seat, a slight improvement could result in a cap system that does not cost any more, and might even cost less, by reflecting the reality across the country.

Chris Grayling (Conservative, Epsom and Ewell)

I have listened carefully to the comments made by hon. Members on both sides of the Committee, not only in the stand part debate, but through the course of today. Let me start by reminding everyone that we are considering a framework clause that simply puts in place the mechanism for a cap to be introduced. It is no more, and no less, than that. I hope that in the debate today the Opposition live up to what I saw in the papers at the weekend—that they support the principle of a cap and will not oppose the framework. I hope that I am not disappointed, but if they decide to vote against the clause I will relish a debate in the public arena, to argue the case for a cap and to highlight the fact that the Opposition do not believe in capping benefits. Perhaps that debate lies ahead; perhaps it does not. We will find out in a moment.

The first issue is that of the principle I have set out. In the debate about poverty and the impact of the changes, we are talking about a plan to set a benefit cap at an equivalent annual income level, before tax and national insurance, of £35,000. We are not setting a poverty level cap that means that no one will have any money coming in; we are setting a cap at a comparator level with people who are in reasonably good employment.

Kate Green (Labour, Stretford and Urmston)

Is the Minister not aware of the Government’s commitment to the relative income poverty target, which is a target set on median income equivalised by family structure and size?

Chris Grayling (Conservative, Epsom and Ewell)

So that we can have a welfare system in which people have confidence, we seek to set a benefit cap at a level that is equivalent to an earned salary of £35,000 coming into the household. That is a fair and sensible dividing line, beyond which the state provides support only in exceptional circumstances. Various issues have been raised about some of the challenges in that mix.

There is work to be done, and I hope that my hon. Friends the Members for Cardiff Central and for Redcar will be part of the discussions that take place over the next few months to get the regulations right and to ensure, in particular, that we have the right mechanisms to deal with hardship cases. The Secretary of State made it clear on Second Reading that we will need such mechanisms, and at local authority level we have put in place an extra £190 million to provide support for people affected by the changes we are making to housing benefit arrangements, including the cap. I expect local authorities to use that resource in cases where there is a particular challenge to address.

We also clearly need to look carefully at temporary housing. There are mechanisms in the current system to address the costs of temporary housing, and careful consideration needs to be given to ensuring that we have the right mechanisms in place in the future. My hon. Friend the Member for Cardiff Central was absolutely right about that. The majority of people she talked about will be in receipt of DLA and will therefore not be affected by the change, as we are obviously not applying the cap to DLA households. The people on ESA who are potentially affected, are likely to be those who are closer to the workplace, and with the introduction of the Work programme and the migration from incapacity benefit I hope that we can help that group to find a path to work relatively quickly. I would expect those with more serious health challenges to be in receipt of DLA as well, which is not, of course, affected by the cap. Nevertheless, we need to carefully consider whether we missed any issues when forming the policy, and I hope that she will take part in those discussions.

My hon. Friend the Member for Cardiff Central also asked about the figures for the increased cost of homelessness. She cited figures that she had been told were Department for Communities and Local Government estimates. Our impact assessment stated that the costs could not be quantified because of the behavioural effects of the introduction of the cap, and that remains the case. I have no clear evidence that further information is available, but am happy to provide my hon. Friend with more background on the information that we have. At the moment we do not recognise any further figures beyond the detail in the impact assessment because we simply do not believe, yet we can understand fully, the behavioural effects of the measure in terms of costs.

The clause is not primarily a cost-saving measure. It may save costs, but fundamentally it is about creating a more credible welfare system. It is about tackling the culture of welfare dependency in the country by setting a clear limit to what people can expect to receive from the benefits system. It is very much about fairness. Fairness applies in both directions here. Fairness also applies to taxpayers, who pay for the system. We do not believe that it is reasonable or fair 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 the core principle that we are seeking to put in place here.

I do not believe that we can or should write into an enabling clause in primary legislation all the different caveats that have been brought forward this afternoon. We need to work through the preparation of the regulations so that we get it right. There will clearly be further debate about the impact of the decisions that we make and about the detail of the regulations that we bring forward. What I am asking the Committee to back in the clause is simply the mechanisms to have that discussion, a discussion in which all members of the Committee are welcome to participate and to share their concerns so that we get it right.

My last point is for my hon. Friend the Member for Redcar. As he knows, month by month I deal with the labour market statistics. We have another day tomorrow. At every briefing meeting about labour market statistics, my first question, after asking whether unemployment has gone up or down, is about the north-east. I am genuinely concerned about the north-east. There are many parts of the country that have been badly affected by unemployment through the recession, but the north-east remains one of my biggest concerns. It is an area which, as he has rightly said, lost part of its economic base, and we desperately need to see growth. I was encouraged by the regional grants announced recently for manufacturing research, for new manufacturing capabilities and for investment for some of the industries on Teesside. All that is very important.

While I accept that in some cases people may seek to move away from the north-east to find work elsewhere, I would much rather that we pursued an agenda of growth that brought more successful international businesses to the north-east and also encouraged the growth of more domestic, local, entrepreneurial-based businesses, so that we create the kind of jobs that my hon. Friend wants for his constituents. That is something that I feel strongly about. It is something that I know colleagues across the Government feel strongly about. It is one of the things that bring us together as a coalition, and I give him the assurance that we will work hard to ensure that the flows are going his way rather than the other way.

This is a framework clause that will start a process of filling in the gaps over the next few months. The discussion process we will go through is open to Members on both sides. I commend the clause as a way to get that discussion going.

Clause 94

Karen Buck (Labour, Westminster North)

I beg to move amendment 248, in clause 94, page 63, line 13, leave out subsection (4) and insert—

‘(4) In section 150 of the Social Security Administration Act 1992 (annual up-rating of benefits) after subsection (7) there is inserted—

(7A) The Secretary of State—

(a) shall in each tax year review the relevant amount specified under subsection (5) of section 93 of the Welfare Reform Act 2011 (benefit cap) to determine whether its relationship with estimated average earnings and any other factors specified in subsection (6) of section 93 of the Welfare Reform Act 2011 (within the meaning of that section) has changed; and

(b) after that review, must, if the conclusion of that review is that estimated average earnings and any other factors stipulated in subsection (6) of section 93 of the Welfare Reform Act 2011 have increased in relation to the amount specified under subsection (5) of section 93 of the Welfare Reform Act 2011, include in the draft of an up-rating order provision increasing that amount in proportion to the increase in earnings; or

(c) after that review, must, if the conclusion of that review is that estimated average earnings and any other factors specified in subsection (6) of section 93 of the Welfare Reform Act 2011 have decreased or remained unchanged in relation to the amount specified under subsection (5) of section 93 of the Welfare Reform Act 2011, include in the draft of an up-rating order provision increasing that amount in proportion to the general level of prices under section 150 of the Social Security Administration Act 1992.”.’.

I will be brief. On the assumption that a form of a benefit cap goes ahead, which I suspect will be a butchered form, I want to probe the Minister on his thinking about the uprating formula. We know that he intends to have an uprating formula. At the moment, this provides for an uprating by inflation, but what is the logic behind that? The whole point of the benefit cap is to peg benefits entitlements to average earnings, so what is the logic in looking at an uprating formula that will be linked to inflation rather than linking it to earnings and the relationship between earnings and in-work benefits that have to be included in the total? It seems illogical to establish a benefit link to earnings and then not to uprate it with earnings. Has the Minister made any planning assumptions on what the implications of those different options would be?

Chris Grayling (Conservative, Epsom and Ewell)

We have said that the level of the benefit cap should be set to reflect estimated average earnings. As currently drafted, clause 94 will require us to review the level of the cap each year to see whether its relationship with estimated average earnings has changed. Following that review, we will be able to increase or decrease the level of the cap, if we consider it to be appropriate.

The amendment similarly requires the annual review of the level of the cap. It also says that if the review finds that estimated average earnings have risen, we would be required to uprate the level of the cap in line with the increase in earnings. Should estimated average earnings be found to have decreased in value or stayed the same, the amendment requires us to increase the level of the cap in line with the rise in prices.

As we are setting the level of the cap to reflect the average weekly wage, it is right that these respective levels be regularly reviewed to determine whether the relationship between the two has changed. Where the relationship is found to have changed, the powers we are taking will ensure that we are able to increase or decrease the level of the cap, when it is considered necessary.

The amendment goes further than we intend and requires that where average earnings have gone up, we increase the cap by the same proportion. Such compulsion is not appropriate. There is no statutory requirement to uprate jobseeker’s allowance or other out-of-work benefits, so I see no need to introduce one for the level of the cap.

We also need to be mindful of the operation of the benefit system. Our intention throughout the reforms is that it should be simple and clear. We have said that benefits should be capped with reference to the level of the average earnings and not at the specific average earning figure itself. Fixing the level of the cap to the exact level of average earnings or increasing it in precise proportion to their increase would result in a potentially cumbersome measure.

Clause 94 applies a link to earnings. The amendment creates an additional link to prices as well. In effect, we would end up with a parallel process of both earnings and prices, which is clearly a technical flaw in the amendment.

I do not agree with the reasoning behind the hon. Lady’s approach. Uprating the cap in line with the increase in prices if earnings were found not to have risen would give us a dual mechanism for uprating, which is not sensible. We should either have one mechanism or the other. The cap is intended to promote fairness with those in work. Wages are not automatically increased in line with prices. If estimated earnings fail to rise thereby triggering an increase based on prices, it would create a disparity in treatment between those in work and those on benefit. We could have a statutory mechanism that requires an increase in line with prices. Indeed, given that prices have been rising faster than earnings over the past few months, it would require us to increase the level of the benefit cap faster than the rate at which earnings themselves are increasing, which would create an inappropriate conflict.

Our intention is to review the cap annually and to make changes where it is appropriate to do so. Clearly, we intend to adjust the cap as circumstances change. The amendment is not sensible for two reasons. The duality in terms of prices and earnings is not right. Nor is it right to tie the hands of a Government in primary legislation, so that they have to make changes to what are effectively the level of payments through the benefit system in future when circumstances can be so varied, depending on what is happening in the outside world and in the economy at a particular time.

Karen Buck (Labour, Westminster North)

I thank the Minister for that response. I tabled a probing amendment to seek the Government’s view. Although I see the logic in what the Minister has said, we are in a slightly complicated position, because the Government have brought forward a hybrid proposal, which, for the first time, links benefits to average earnings and they have to accept some of the consequences of doing that. On occasion, it will leave people in an anomalous position. While I accept the point about complexity, it may be that in the future, his Government or another Government may seek to make changes to benefit levels and to alter the uprating of benefits, which would have knock-on consequences for a benefit cap and create their own anomalies. Obviously, reporting on how things will work out is something that we will watch closely in the short term.

Something we did not explore, which is worth bearing in mind, is an interesting anomaly—the level of earnings against which the cap will bet set and presumably uprated will itself be amenable to change in, for example, the nature of the work force as well as in earnings. Thus, if we had more single earners in the work force, the consequence would potentially be to lower average earnings, therefore bringing the cap down.

Monitoring will need to look at earnings and prices but also at the extent to which what happens to earnings is a result not only of earnings growth but of completely unrelated changes in the composition of the work force, which could have their own knock-on consequences. I hope that Minister is nodding and that he is committed to ensuring that any monitoring of the movements in earnings and, consequently, in the benefit cap will take into account some of those complexities and not only the headline figures for inflation and earnings. No doubt we will turn to that later. I beg to ask leave to withdraw the amendment.

Clause 97

Stephen Timms (Labour, East Ham)

I beg to move amendment 249, in clause 97, page 64, line 34, at end insert—

‘(3C) For the purposes of paragraph (3B), elements or sub-elements of the universal credit award that are paid in respect of children, including any amount in respect of childcare, shall by default be paid to the main carer of the children, except in prescribed circumstances.’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss new clause 9—Payment of universal credit elements —

‘(1) Any amount of the universal credit award that is paid in respect of rent charges shall by default be paid to the person liable for that charge, except in prescribed circumstances.

(2) Any amount of the universal credit award that is paid in respect of a disability shall be paid to the disabled person or to that person’s designated carer, except in prescribed circumstances.

(3) Regulations may provide further circumstances in which a proportion of universal credit may be payable to a particular individual.’.

Stephen Timms (Labour, East Ham)

I am pleased, Mr Gray, that you have grouped the amendment and new clause 9 together—thank you for doing so. They relate to different elements of the universal credit award, although both address the same question, so debating them together is appropriate.

The amendment and the new clause are intended to ensure that the single universal credit payment can be split between two or more individuals in certain circumstances. That might appear a rather technical matter, but such detail could have significant consequences, so it is important that the system includes sufficient provision to allow such a split.

The amendment specifies that any element or sub-element of the universal credit award paid in respect of children should by default be paid to their main carer. Any amount under clause 10, which is entitled “Responsibility for children and young persons”, would be covered by the amendment. In addition to an amount for each child, it is expected to include an additional amount for children with a disability.

I also expect some parts of payments under clause 12 to be covered by this proposed provision, a particular example being the amount in respect of child care, which is specifically referred to in the amendment. The Secretary of State has promised us details before the Bill leaves Committee of how the Government propose to support child care in the universal credit. We are looking forward to seeing those details and to debating the proposals next Tuesday. Another example might be free school meals. We have already tabled a new clause on that, which we will certainly be debating before the Committee concludes.

The amendment specifies that those elements should be paid to the main carer “by default”. However, exceptional circumstances might make it more appropriate to pay the money to someone else, and the amendment recognises and allows for that.

New clause 9 identifies two additional circumstances in which payments should be split. First, any amount paid in respect of rent ought to be paid to the person who is liable to pay that rent. It might well be that one member of a couple, for example, pays the rent, but the other is the main applicant for universal credit.

Secondly, new clause 9 specifies that any amount in respect of a disability should be paid to the disabled person, or to that person’s designated carer. Clause 12 outlines three circumstances in which a component of universal credit may be paid in respect of a disability: first, where the claimant has limited capability for work; secondly, where the claimant has limited capability for work and is required to undertake work-related activity; and thirdly, where the claimant has regular and substantial caring responsibilities for a severely disabled person.

Again, the new clause stipulates that those elements of the award should be payable to a specific individual “by default”, as there may be circumstances in which that arrangement would be inappropriate, and it allows for that. It also includes provision for additional circumstances to be added to the list, should they be necessary. For example, in certain circumstances, it might be appropriate to split the standard allowance between the two members of a couple. I think that that is conceivable, and if such circumstances arose, the new clause would cover that eventuality.

It is clear why split payments could be necessary: universal credit will replace a range of existing benefits, which are currently often claimed by different members of a household. Certain benefits in respect of children—for example, the child care element of the child tax credit—are usually paid to the main carer. We have supported the principle of a universal credit, but whereas payments currently go into a household and are split between different recipients, that splitting could be lost. I suggest to the Minister that that potential difficulty can be readily overcome by splitting the single award between more than one recipient, as proposed in the amendment and the new clause.

The case for splitting payments is particularly compelling for awards made for children. A strong body of evidence suggests that the money is a good deal more likely to be spent on the children if it is paid directly to their main carer. Generally, though not invariably, that is their mother. Platform 51, the organisation we used to call YWCA England and Wales, has lobbied on this issue, and it states that the Government’s current proposal

“does not recognise the most effective way of ensuring that money allocated for children reaches them through paying it to the main carer,”

and it goes on to add that the system of paying money to the main carer,

“has been applied previously to child benefit, family credit, child tax credit and the childcare element of working tax credit”

and that it

“has been proven to be most effective. Platform 51 believes Government welfare policy should promote gender equality and also recognise the reality that, in the majority of families, women are still the main carers.

“Furthermore, in low/moderate-income families, it is still mothers who tend to shoulder responsibility for meeting children’s day-to-day needs and evidence shows that women tend to have responsibility for purchasing food and items for children”.

Harriett Baldwin (Conservative, West Worcestershire)

Does the right hon. Gentleman share my understanding that there is no proposal in the Bill to change the person to whom child benefit is paid?

Stephen Timms (Labour, East Ham)

That is my understanding. Platform 51 is clear about that, but I think that its argument is that the principle, which is well tried and accepted by the Government for child benefit, should also be applied to those elements of universal credit that are paid in respect of children, for the same reason. A connected and equally important point has been made by Oxfam. It says that by clearly labelling money paid for children, it is more likely to be spent on them.

There is a broader issue around gender equality. The main carer of children is usually their mother. Oxfam points out that, among claimants who are in work, 86% of main carers for the purpose of child tax credits are women. As the hon. Member for West Worcestershire said, they will continue to receive the child benefit. The argument is that they should receive the child tax credit, and its equivalent under universal credit. Clearly, income is not always shared equally between the two members of a couple and, indeed, in answer to a written parliamentary question that my hon. Friend the Member for Stretford and Urmston tabled, to which she received an answer on 14 March, the Minister said:

“Research has suggested that, particularly in low-income households, the above assumption with regard to income sharing within couples is not always valid as men sometimes benefit at the expense of women from shared household income.”—[Official Report, 14 March 2011; Vol. 525, c. 126W.]

If the universal credit payment is not split or is not capable of being split, there is a particular danger for women who experience domestic abuse. Sadly, that often extends to what is sometimes called financial abuse. According to a 2008 survey, again carried out by Platform 51, about a third of women using its YWCA England and Wales centres had experienced some form of financial abuse. It stated:

“The proposed payment method could have an impact on levels of financial abuse, and we have asked the Government to review this but we have not as yet seen any such assessment. The Government has suggested that in cases such as this where there is proven abuse of the money, they would look to redirect the payment urgently (as can be done now). This, however, puts the onus on the person experiencing abuse to take individual action, which can be very difficult, and is unlikely to happen in many cases. It is far better to ensure, as far as possible, that the potential is minimised in the first place.”

New clause 9(1) is intended to deal with circumstances in which the person receiving universal credit is not the person liable to pay the rent. Again, there are very clear gender equality implications. Oxfam suggests that, unless the amount payable in respect of rent is paid to the person liable for that charge, that too could have significant, negative consequences for women. It highlights, for example, the potential consequences for lone parents who join a new partner, and states in its briefing:

“Cases of concern could include a lone parent with a new partner moving into her rented property; the couple will need to claim UC jointly, but the lone parent may not immediately be ready to share tenure rights. If the new partner were paid all the UC, this could result in insecurity of housing tenure for her and her children. In a 2001 study”—

that was some time ago—

“some 1 in 4 cohabiting men and women said they had moved into accommodation in which their partner lived—but this was higher for men in the separated/divorced group. For 1 in 3 men and women (nearly 1 in 2 older women), when they started living together as a couple the accommodation was in their own name only. Another study included examples of social housing tenants and owner-occupiers who did not (yet) wish to add their new partner’s name to their tenancy or mortgage agreement. Housing tenure is not always joint among couples, especially cohabitees.”

In those circumstances, there is a compelling case for allowing payments to be made to the person who is actually liable to pay the rent.

Tackling domestic abuse and women’s independence are not the only reasons why the changes in our proposals make sense. It could be that, for budgeting purposes, a couple would prefer certain elements, such as the rent, to be paid to one member of the couple rather than to the person who otherwise receives universal credit. That was also said in a briefing sent to us from Save the Children about the child element of the award. It states:

“Splitting payments would also suit traditional budgeting habits amongst low income families. There is a history of paying entitlements intended for the maintenance and benefit of children to the main carer (for example Child Benefit).”

That picks up on the point made in the intervention. The briefing continues:

“Splitting payments is likely to make the transition from benefits/tax credits to Universal Credits smoother for claimants.”

At the very least, there should be provision for such an arrangement to be put in place. It seems appropriate that any amount, in respect of a disability, should generally be paid directly to the person who has the disability or to their carer, rather than the person receiving universal credit for that household, if that is a different person.

In conclusion, the merits of a universal credit bringing different benefits together are very clear. We have discussed them already in Committee and I do not think that they are contentious. However, there is a risk that if we are not careful there could be unintended consequences that are entirely preventable. In particular, there is the potential to undermine the position of some women whose income will be dependent on universal credit, of which the main recipient is somebody else. Addressing those concerns does not require us to abandon the principle of a single payment or universal credit. It does not require big changes to the Government’s proposals. It requires that the Minister and the Department can calculate the amount of any award that is paid in respect of certain circumstances—I suggest that those should be rent, disability or children—and then pay those components to an individual other than the main applicant for universal credit.

The amendments would make relatively minor operational changes, but they could have very substantial and positive implications for some claimants, particularly the most vulnerable. I read the note on regulations to find out whether it was the case—it was not completely clear, but maybe the Minister can reassure me—that the Minister intends to do what I have described and that the regulations will provide for that. I do not expect the Minister to have difficulty with the principle that I have set out, but the amendments and the new clause would allow for that appropriate splitting to be made when it is needed.

Kate Green (Labour, Stretford and Urmston)

I endorse my right hon. Friend’s comments and wish to add one or two points that I hope will emphasise to the Minister just how important this issue is, particularly for women. This is not a slight or trivial issue, but one which causes considerable concern, particularly in the context of universal benefit. The decision about where money goes is much more significant when the eggs are all in one basket. The design of the benefit integrates different elements of financial support. We must recognise that it brings with it some dangers that, operationally, it needs to be possible to reduce.

I hope that we will not see—I do not believe from anything I have heard from the Minister that this will be the case—that the prevailing concern is administrative convenience. We must aim for a position that enables couples to be confident and stable in their personal financial obligations and commitments, provides properly for the protection of children and other vulnerable members of the household, and promotes financial independence for women and for men overall.

What will happen if one member of a couple wants a particular element of universal credit to be paid to her or to him, and the other member does not agree? Currently, sometimes in relation to benefits for children, there is a race to be the first person to identify themselves as the main carer, and therefore to receive the benefits. I am interested to know the Minister’s intentions, because I understand that he intends to allow couples to have that choice in some circumstances. What will happen when the couple cannot reach agreement about the exercise of that choice? We know already that couples are becoming more likely to keep their financial affairs separate. Joint savings and investments, and indeed joint debts, are on a downward trend in couple households today.

On pressing on wholesale with payments to only one member of a couple, I am keen to highlight a few inconsistencies between what the Government might be doing by taking such an approach and their intentions and priorities elsewhere. It is possible that, by weakening the financial independence of women in particular, by making a payment to one member of the couple—it is likely to be the man—we will undermine the formation of committed couple relationships. My right hon. Friend alluded to an aspect of that a moment ago when he talked about housing obligations and how people wish to be confident that their home would not be put at risk by financial support for the rent being paid to another member of the household.

Rolling everything up and paying it to one person in the household is quite a risk for someone who is entering a new relationship to contemplate. Their current income stream might be taken from them and paid to the other member of the household. That will be a risk factor in terms of supporting committed couple relationships, which is what the Government desire. The evidence is clear that financial security is an important factor for women when deciding whether or not to form a new relationship, and it is financial independence for women within couples that strengthens the stability of a couple overall.

My right hon. Friend mentioned the huge importance of ensuring that money for children is more likely to reach them. We have so much evidence over many decades that that has always been the case when the money has been paid to the children’s direct carer, who today remains—typically, though not invariably—the mother. We therefore want money for children to be directed to the main carer, to ensure that children’s material well-being remains a priority.

As my right hon. Friend has said, labelling a benefit as a payment for children helps that money to be spent on children. We all know of couples who describe what they do with their child benefit. Low-income families will say, “I spend it on shoes,” or they use it to cover the lumpy expenditure that they might not be able to meet otherwise. Better-off families may not spend it immediately, but they will set it aside for their children. It is clear that labelling is important. Paying benefits that are specifically for children to the main carer is a way of getting resources to the person in the couple who is less likely to have independent means. That also enables them to enjoy some additional financial autonomy in relation to the care of the children.

Finally, when couples exercise choice in relation to where joint payments are directed, that choice typically favours the man. We have good examples from the pension credit. Of 227,000 partnered recipients of the pension savings credit, 77% of couple claims are received by the man. Moreover, of 205,000 partnered recipients of the pension guarantee credit, 81% of the payments are to men. Gender imbalance seems to be the default position. If we are concerned to ensure that payments meet the payment obligations that are more likely to be incurred by the woman in a couple—whether for her rent or for the care of her children—there must be a clear mechanism to allow that money to get to that woman, so that she can to meet those obligations.

It would be ironic if all the Government’s intentions for the introduction of universal credit to promote more independence from the state actually reduced independence within families, particularly for women. That will happen if we are not careful and thoughtful about the proposal. It has been a long-fought battle for women to secure some of that financial independence, from ensuring in the 1940s that payments for children could be paid directly to the main carer, to our campaign in the 1980s for independent taxation. I hope that the Minister will take this opportunity to ensure that universal credit will represent another step forward in sustaining and promoting women’s financial independence. I, along with my right hon. Friend, look forward to hearing how he intends to allow that to happen in practice.

Chris Grayling (Conservative, Epsom and Ewell)

I shall both disappoint and, I hope, reassure Opposition Members. As we have heard, the amendment and the proposed new clause seek to replicate the current system in tax credits of making payments of child tax credit on the child care element of working tax credit to the main carer of the children. New clause 9 would require the Secretary of State to pay an amount for rent to the person liable to pay that charge and to pay amounts in respect of a disability to the disabled person or their carer. The new clause allows exceptions to those circumstances to be prescribed and other circumstances for paying a proportion of universal credit to a particular individual to be set out in regulations.

I absolutely understand Opposition Members’ views: their arguments are perfectly reasonable, but routinely dividing payments—I emphasise “routinely”—contradicts one of our principles for the universal credit, which we have touched on in earlier debates. The payment proposal was the subject of one of our policy briefing notes, which was made available to the Committee and on the Department’s website. We have outlined our intention to give universal credit as a single payment to a household. We think that that is important so that the household can see clearly the effect of their decisions about work on total household income and so that claimants can take responsibility for budgeting. We think that as far as possible, universal credit should mimic payments of salary for paid employment, as part of the move towards work that we want.

For single-person households, it is straightforward: the person making the claim receives the money. We ask that couples decide between themselves who will receive the money. We think that the people within a household are best placed to make the money management choices that are most appropriate for them. It is not for Government to dictate how a family spend their money.

It is also important to remember that under universal credit, claims by couples will be joint claims. In the current benefits system, JSA excepted, one member of the couple makes a claim and the other is treated as their dependant. That will not be the case under universal credit. It is not right for one member to have access to the benefit and the other not to. They will be jointly entitled, which is critical to consideration of both new clause 9 and amendment 249.

In practice, a single payment must be made to one account, which is why couples need to decide what arrangements suit them best. They might have a joint bank account that allows them both access to the money, or they might choose to make alternative arrangements. The hon. Member for Stretford and Urmston is right: many couples choose to be financially separate in managing their affairs.

Ian Swales (Liberal Democrat, Redcar)

Reading the clause again, I see that there is clear provision for part payments and a sense that election could be involved. Will the Minister clarify what the provision discussing

“all or any part of a payment”

might operate? According to his clear exposition, it will be a one-payment, one-person approach.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Gentleman is correct, and I was going to talk about that. It is important that we do not create a system that is completely inflexible. There are, of course, circumstances in which a household situation will require us to form a view on how best to handle the payments. One would hope that that could be decided by a couple together, but in some circumstances—perhaps for some of the reasons that Opposition Members have discussed in their comments—it might be necessary to divide a payment between two parties.

Ian Swales (Liberal Democrat, Redcar)

On a point of clarification, the Minister says that the Secretary of State will decide that. Is there any possibility that claimants will be able to elect for payments to be separated? He did not say that in his answer.

Chris Grayling (Conservative, Epsom and Ewell)

It is not our intention that that should be our approach, but we will not make it impossible in regulations for that to happen. We have left open flexibilities so that we can offer numerous different permutations. Although our default preference is to make a single household payment in most cases, we have sought to leave open flexibilities. We are aware that there are some people who might struggle to budget effectively and for whom a single payment to the household is not appropriate. We are carefully considering how to take into account those people’s circumstances. Dividing payments between two or more parties by exception is certainly being considered as a part of that process. We are working it through and we will provide more information on the conclusions that we reach in due course. I am very happy to receive input from members of the Committee about that.

On amendment 249, I am aware of the body of evidence that suggests that money paid to the main carer and explicitly labelled as being for children is more often used to benefit those children. The hon. Member for Stretford and Urmston is absolutely right about that. We are considering how best we can display information about how a claim is made up, so that claimants are aware what they are receiving and for which needs, and labelling elements might be an important part of that. Of course, there is no question but that child benefit payments are being retained outside the universal credit; in the vast majority of cases, those payments go to the mother and they are explicitly labelled as being related to the upbringing of children.

The other important point that members of the Committee should note is that the power in section 5(1)(i) of the Social Security Administration Act 1992, which will apply to the universal credit by virtue of schedule 2 to the Bill, contains a broad power that allows regulations to set out the person to whom a benefit is paid. That power could be used to provide for payments to be split and paid to different people if we or a future Government wished to do so.

Consequently the amendments that the right hon. Gentleman has tabled are not necessary, because the powers are already there in the 1992 Act and in the terms of the clause. We are not closed-minded in any way at all to the issues that he and the hon. Lady have raised. More often than not—in the majority of cases—we want to be able to treat the universal credit as a straightforward single household payment to a couple who are perfectly capable of managing their own affairs and who can decide for themselves about where they want the money to be paid.

Stephen Timms (Labour, East Ham)

I do not think that I have entirely grasped what the Minister is proposing. He says that recipients can choose, but if they wish the money to be split in a particular way, he was saying, I think, that he would not normally permit that. I do not quite understand why. If the process is about choice, surely couples ought to be able to choose how the payment is split between them.

Chris Grayling (Conservative, Epsom and Ewell)

Obviously, there is also the issue of how we manage a single payment split in two directions to two bank accounts with a single joint assessment, but the measures in the Bill do not preclude any options. Our policy position is that we expect to make single payments to single households, except in unusual or exceptional circumstances—where there are particular reasons such as hardship or relationship breakdown, or reasons that might be determined individually by an adviser on the ground dealing with an individual case—where we have left in place the provision either to make individual household payments on a different basis, or group payments on a different basis. We are working through the detail to establish how best to deploy those powers.

I can reassure the right hon. Gentleman that the powers that his amendments seek to establish exist already: in the 1992 Act, which will apply to the universal credit via schedule 2 to the Bill, and in the flexibility in making regulations. Although we might differ on the approach, it is not our intention to have large numbers of people electing to have split payments—our default preference is to have single payments—but we have left in place the flexibility to have split payments where there is a very good reason to have them.

Stephen Timms (Labour, East Ham)

I am disappointed by that response and I think that a lot of people following the proceedings of our Committee will also be disappointed by it. There is agreement across the Committee that paying child benefit to the main carer has worked very well; the intervention by the hon. Member for West Worcestershire drew attention to that. By extension, all my amendment is proposing is that the elements of universal credit that are specifically related to children should also be paid to the main carer. It will be quite a significant step backwards if that cannot happen in normal circumstances.

I am grateful to the Minister for telling me that if another Government—perhaps a rather more enlightened Government—is elected before too long, there are powers that will enable my proposal to be implemented, but I am disappointed that the present Government seem to want to apply such a retrograde policy.

The amendments and the new clause were tabled for probing purposes, and I do not intend to press them to the vote. However, many people will want to reflect on what the Minister has said, and when we return to the subject, they will urge the Government to take a different view and use the powers that the Minister assures us they will have to allow the sort of splitting for which we have argued. I beg to ask leave to withdraw the amendment.

Clause 98

Karen Buck (Labour, Westminster North)

I beg to move amendment 250, in clause 98, page 65, line 6, at end insert—

‘(3) Where there is insufficient information to calculate entitlement to the full amount of universal credit, the claimant shall continue to be paid an amount in respect of any component or components for which there is sufficient information to calculate eligibility, with these components corresponding to the elements in sections 9 to 12 of this Act and/or to any appropriate sub-elements as specified in regulations, except in prescribed circumstances.’.

With this amendment, I seek guidance from the Minister on the capacity of the universal credit system and the Government’s motivation. I want to avoid the predicament or complication of one element of a universal credit application that results in delay or temporary suspension leading to a household being left destitute, with all the other components of its universal credit payment disappearing at the same time.

As the benefit system operates now, one of the few plus sides to the complexities within tax credits and benefits system is that if something goes wrong with one element of the system, although there are exceptions for the most part, it does not necessarily mean that all the family’s income stops. For example, if a family is asked to present their new baby’s birth certificate and it goes missing, additional payments in respect of that child might not be paid, but it does not mean that the household’s housing costs will be stopped, which can give rise to undesirable consequences. If there is a complication with the equivalent of a child tax credit or any child care support that might be forthcoming under universal credit, it would not mean the suspension of benefits in respect of their children.

A number of people in the advice and other sectors are concerned that the provision effectively firewalls the various components of universal credit. In evidence to the Work and Pensions Committee, Family Action said that that was a particular worry and pointed out that, although the simplification agenda of universal credit was welcome and important, the most overriding concern was that families should not be left with no income. Family Action suggested that it should be possible to ensure that the components that make up universal credit are separately tracked, so that difficulty with one strand of those payments does not necessarily result in the suspension of the entire universal credit. Is any of this technically possible? In response to questions from the Work and Pensions Committee, the Secretary of State said that if we started firewalling the different elements of the benefit, all the advantages would immediately be lost. He stated:

“The trouble with things such as firewalling and the way payments are made within the individual elements is that you then, almost immediately, start to lose the whole point of the Universal Credit, and you start subdividing again.”

I understand that, and it is not a silly point. We all accept that one strength of the universal credit is simplification. I know that the Government have incredibly high hopes that there will be no administrative problems with universal credit, but they must understand that even with a vastly simplified system, Labour members of the Committee fear that any payment system that involves millions of people and human circumstances is simply bound, under some circumstances, to have complications, whether it is the claimant’s fault or the fault of the IT or administrative system.

It is crucial that where things go wrong, however rarely, it does not leave people destitute. It now seems that if people are left without universal credit under the new unified system, they will be in greater financial difficulties; there may be fewer of them, but they will be in greater financial difficulties, and of course that has knock-on consequences, which perhaps the Minister could explain; perhaps he could also let us know the way around them. There would be knock-on consequences for demand for all kinds of emergency payment systems—for those within the elements of the social fund that are retained in DWP, and for the local authority administered discretionary elements of the fund—and there would be additional pressure on advice services.

I do not doubt for a second that the Government want to prevent those consequences. I am not challenging the Government’s motivation, but there is a very real risk, and it would be remiss of the Government not to find ways of addressing it and making sure that people are not inadvertently left in the most desperate financial circumstances. I look forward to hearing what the Minister says.

Chris Grayling (Conservative, Epsom and Ewell)

That was a valuable, brief debate. It is welcome that the hon. Lady has raised the issue, and I hope to reassure her.

The amendment seeks to ensure that when a claim for universal credit cannot be determined immediately due to a lack of information or evidence, those elements of the benefit that have been determined can be paid to the claimant. We know that elements of universal credit include a standard allowance, an allowance for children, housing costs and elements related to other particular needs such as disability. If there is a delay in calculating one of the elements, payment for the elements that have been determined should commence and continue. We recognise that that is an issue. It needs to be carefully considered, and it needs to be dealt with in the final design of the universal credit. I can confirm that we are looking at it as part of the detailed planning and design work that we are doing for universal credit, and we will seek to have a mechanism in place that addresses the issues to which the hon. Lady referred.

I want to reassure members of the Committee that payment-on-account powers in clause 98 allow some benefit to be paid when an award cannot be determined in full. Regulations will set out detailed provisions on when such payments may be made, and I think that clause 98 does what the hon. Lady asks. It is sufficiently wide to enable such payments to be made and her amendment, which is probably a probing amendment, is not technically necessary.

There will always be some cases in which all the evidence for a benefit claim is not available immediately. That can happen for very good reasons, and we need a system that is responsive to and reflects that possibility. Generally speaking, I do not think it is unreasonable to say that anyone who claims a benefit should, where possible, provide sufficient information and evidence to support their claim. We have to have a system that is balanced, fair and affordable for the taxpayer, but that also helps those in genuine need and is sufficiently flexible to deal with the kind of issues that the hon. Lady talked about.

With the rationalisation of many benefits into the universal credit, we will be able to provide a streamlined service, and we expect that delays caused by the need to gather informational evidence will be substantially reduced. The key point to make is that, quite apart from making provision in the design of the universal credit for the issues that the hon. Lady has raised—for example, for cases where evidence of housing costs is still outstanding—we have payment-on-account provisions in the Bill, which will allow some payments to be made. There is no question of anyone being left completely high and dry. We will work hard on the design of the universal credit over the next few months, and prepare regulations to make sure that we have addressed the issues that she is concerned about. I hope that gives her sufficient reassurance. She has raised an important point, which we recognise, and we will take steps to address it.

Karen Buck (Labour, Westminster North)

I very much welcome that recognition, and I am relieved and encouraged that the design of the IT system will enable a form of firewalling to be built in. For clarification, I assume that what the Minister says means that all the distinct sub-elements in universal credit—the housing, children, and disability elements, and so forth—could be separately identified in the design of the system. That is good, though slightly at odds with what the Secretary of State told the Work and Pensions Committee. If that means that more thought has been given to the issue in the intervening period, that is extremely welcome.

I just emphasise two points. Of course, it is right that claimants have a duty to provide supporting evidence. However, with the best will in the world, even in a system where the gateway is intended predominantly to involve IT, providing hard and supporting evidence is often where the problem arises. Evidence goes missing in Jobcentre Plus now. I was probably slightly scarred by Westminster council’s outsourcing of its housing benefit to Capita. At one point, 28,000 items of unopened post—evidence—disappeared. It was stacked up in different buildings, and nobody was getting any answers. As a consequence, huge numbers of people were left without payments. Although it is right and encouraging that the Minister is saying that payment on account will deal with those problems, if people do find all their benefits suspended, it will put a considerable burden on ensuring that the payment and accounts system responds more quickly and robustly than at present.

The Minister is clearly sympathetic to the principle and the point that we are making. We look forward—as we do in so many other respects—to being reassured that the specifications for the IT system will be sufficient for the system to carry the burden that is put on it. With that, I beg to ask leave to withdraw the amendment.

Clause 99

Karen Buck (Labour, Westminster North)

I beg to move amendment 251, in clause 99, page 66, line 16, at end insert—

‘(10) In section 5(1) of the Social Security Administration Act 1992 (regulations about claims and payments), after paragraph (r), there is inserted—

“(s) for the making of a payment pending appeal.”’.

The need for the amendment was brought to our attention by Citizens Advice and the Child Poverty Action Group, which have a number of concerns about clause 99 and the consequences of the provisions on payments on appeal. I look forward to hearing the Minister tell us a little more about the reasons for the clause. The view of specialist organisations is that the Department for Work and Pensions already has sufficient power to reconsider and revise decisions if there is sufficient evidence for doing so.

Clause 99 introduces a new requirement for claimants to request a revision and have that request determined before accruing the right to appeal to an independent tribunal. It seems to the organisations, and to us, that that will introduce an unnecessary and bureaucratic new barrier for claimants who wish to exercise their appeal rights. Appeal rights are essential if we are to hold the system to account and expose flaws and errors in it. The organisations are concerned, as are we, that the new tier will make the system less user-friendly and will increase delays in resolving problems, because claimants will inevitably be confused about the difference between revisions and appeals. They will be in danger of making inappropriate requests at the wrong time, or failing to appeal at the right time, because they are confused about their different rights and responsibilities in the system. That may prejudice justice and result in applications being wrongly referred back to claimants as invalid.

Given that there are no time limits for the benefit authorities when processing revisions and appeals, there are inevitably long delays with both processes. A statutory requirement to request and receive a revision determination will inevitably result in longer delays before problems are resolved and, in particular, long delays before claimants can attend an appeal hearing. The worry is that that will leave claimants in more hardship, with all the risks of homelessness and destitution that there are if people are left without their basic benefit income. Given our concerns and the sector’s concerns about why clause 99 exists at all, and why a new request for revision is built into the system, amendment 251 seeks to redress the risks by ensuring that vulnerable claimants are not left destitute pending the new, more complicated appeal process.

We are particularly concerned because in universal credit, personal allowances, payments for children, housing costs and other benefits are all paid together—that refers back to the amendments that we have just discussed—which will increase the risk for claimants and increase demand and pressure on the payment-on-account process. Under the present system, provision is made for payment of ESA pending an appeal about the work capability test. At the very least, given the additional complications, we would like a corresponding provision for universal credit, so that payment can be made pending an appeal. Vulnerable claimants would then be in no worse a position under universal credit than they are now. In a sense, it is a procedural form of transitional protection. I look forward to the Minister explaining some of the thinking behind clause 99 and how he will ensure that delays are avoided and claimants are not left without income in the intervening period.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Lady has raised a couple of questions about the clause generally; I was going to make some remarks on clause stand part, but if you will allow it, Mr Gray, I would like to do so now, and do without the stand part debate.

I am aware that there is a degree of misunderstanding about the purpose of clause 99, and I wish sometimes that some of the groups that are lobbying on the issue would simply ask the question. The purpose of the clause is straightforward, and the drive relates particularly to the incapacity benefit migration process. We are trying very hard to get this right in the wake of the Harrington review. We are trying to get more decisions right quickly within Jobcentre Plus to ensure that fewer people end up going to appeal and that there are fewer successful appeals, because long waits for successful appeals serve nobody’s purpose. I want us to get the decisions right quickly.

We will not always get the decisions right immediately; sometimes people come back very quickly after the initial decision with new evidence, and we want to be able to take that into account. One of the frustrations that many decision makers face, as Professor Harrington highlighted in his report, is that the judges considering an appeal often have more evidence available to them than the decision makers in Jobcentre Plus did. Our focus on strengthening the reconsideration process is all about making sure that we try to maximise the evidence available to us. We give people the opportunity to return with further evidence if they have frustrations, so that we can look again at that evidence and reconsider the decisions before they go to appeal. In that way, we can carry out the process more quickly and effectively. There will always be decisions that are got wrong the first time round, however hard we try to perfect the system. The focus on reconsideration aims to ensure that decisions are changed quickly if we get them wrong the first time.

The challenge that we face is that if people launch an appeal straight after the first decision—this happens now, even before we have increased the focus on reconsiderations—the two things can end up going in parallel. The judges tell us with some frustration that an appeal will often reach its due date and no longer be valid, because the person concerned is having reconsideration or has withdrawn their claim. It would be crazy if someone said on the same day that they would like a reconsideration and an appeal, and a couple of weeks later the reconsideration took place, as a result of which the decision was overturned, but the appeal carried on. A few months later, after the administrative work had been done within the tribunal service, somebody would turn around and say, “Oh, we don’t need that any more.”

It seemed entirely sensible to say to claimants that we want to get it right and that we will have a much more focused reconsideration process. If someone says that they do not agree with the migration decision on whether they should be found fit for work or put into the work-related activity group, it is their absolute right to come back to Jobcentre Plus and ask for a second opinion, but they should wait until they have received a second opinion before the start of the appeals process, with all its complexity of form-filling for the individual, and all the costs to the tribunal service for a process that might not be necessary. That is the reason for the clause, which is entirely sensible. It is not about making people wait for long periods; it is about making the system better, more efficient and more sympathetic to people who might have been given a wrong decision the first time round.

The question arises of whether the approach of someone being left to receive their full benefits while waiting for an appeal decision is right for appeals in general. If someone is going through incapacity benefit migration, for example, and is found to be fit for work but wants to appeal, they will be moved down to the assessment rate of ESA, which is the same level as jobseeker’s allowance, until the appeal is heard. If it is successful and they are put back on ESA, the money lost during that period will be reimbursed, so they do not lose out financially. Their claim will be backdated to the date of the original decision, which is right and proper.

The problem with the approach put forward by the hon. Member for Westminster North is that if someone is on the full ESA amount right through to the appeal, there will be two effects. First, it creates an absolute incentive for everybody to appeal. Appeals by people who go through the process and receive the right decision will be enough of a challenge, but to create a situation in which people have a tangible financial reason to appeal, because they will receive more money if they do, simply makes no sense.

Secondly, if the higher rate was paid up to the appeal date, and the original decision was upheld, someone might have received many hundreds of pounds in overpayment of benefits that we would have to seek to recover. People might not have that money anymore, and we would have to try to recover it from them in the county court, which will end up with a thoroughly messy situation that is almost impossible to handle.

That is why the Labour party in government, when the right hon. Member for East Ham was in the Department for Work and Pensions, presided over a system in which people could only lose a benefit as a result of an appeal. At the end of the application period for ESA, if people are not allowed to move on to ESA and have to return to JSA, but they want to appeal against that decision, they will continue to receive the assessment rate until the appeal is heard. That was the right decision at that time, and it is the right decision now.

In a whole variety of ways, it would be horrendously complex to change the system in the way described by the amendment. Fundamentally, the clause is not about creating extra barriers, burdens and obstacles for people going through the process of having their claims assessed; it is about streamlining and simplifying that process. I want decisions to be taken more accurately in Jobcentre Plus. That is why we are working to give decision makers greater training, why we continue to consider how to improve the quality of the decision-making process, and why I am absolutely clear that I want to get as much of this right as possible. Of course, people will still have the right to appeal, but I do not want them to start those appeals until we have at least had the chance to take the right decision.

Karen Buck (Labour, Westminster North)

I think we all agree that a fine balance must be struck in appeal processes and revisions. However, appeals are an essential part of testing the effectiveness of a benefits system. It is important that they happen; it is not a success measure when there are no appeals. The Minister is completely right that it is a sign that the system is not working properly when the number or success rate of appeals is too high, so there is a fine balance.

What worries me about the process of going forward into the universal credit is whether there is a risk that vulnerable individuals will be left with no income at all. That is unlike the situation where what is decided on appeal is whether a person has a higher or lower rate of benefit; in that case, they still receive a level of income. That refers back—we had some assurances from the Minister on this point—to the question of firewalling and whether people could be left with no income at all during the revision or appeal process. He did not address that point in his response to me. The example he gave is one that I would not disagree with, but that is not the only example that we might want to use in testing whether the measure works.

We will have to reflect on what the Minister says. No doubt his words will be looked at very closely by the advice sector and other agencies. Those organisations seem to be in dialogue with officials—rightly so—to try to get a good understanding. In many cases, they are the organisations that are giving professional advice to claimants. It worries me that there is such a disjunction between what the Minister is saying about the purposes of the amendment and what those organisations are hearing. They genuinely and sincerely believe that an unnecessary layer of bureaucracy is being injected into the system, and that a consequence will be that some people are at risk of losing more of their income under universal credit.

Those people who are unable to interact with the universal credit through a professional advice agency will be more confused. The answer to a problem with the role of appeals is rarely to have an additional tier of bureaucracy. Such an approach will confuse people, and that is clearly the sector’s view. We will reflect on the Minister’s words. I beg to ask leave to withdraw the amendment.

Clause 101

Stephen Timms (Labour, East Ham)

I want to ask some questions about the clause, which deals with electronic communications. I understand that it will allow the Department to shift existing paper-based processes into an electronic form and therefore to offer a more efficient and effective service. The clause came into being because the Department published a business plan six months ago that said it would:

“Introduce automated end-to-end processing of applications, enquiries and changes of circumstances for all benefits, beginning with Jobseeker’s Allowance,”

starting in June 2011 and ending in October 2012. That is what the clause 101 would make possible.

However, the Government published a different series of business plans last Friday, which were picked up in an article in The Times on Saturday. The Government also published 48 pages showing variations between the various departmental business plans published six months ago and those published last Friday. That original proposal of six months ago of introducing automated end-to-end processing of

“applications, enquiries and changes of circumstances for all benefits”

has now been changed. The following has now been proposed:

“To significantly improve Jobseeker’s Allowance online by fully automating at least 75% of the processes, with the remainder still requiring a value-added intervention from staff”.

That is due to start not in June but in July this year, and to end next year. The Committee knows that I do not believe that the information technology will be ready for all new applicants to universal credit by October 2013, as the Government have told us it will. Those who think I am being unduly alarmist about this should take a look at what has happened here. The document published on Friday gave a bit more information about why the Government’s ambition has been scaled back so dramatically:

“The new text has been drafted in recognition that full automation of all benefits”—

bear in mind that the business plan said six months ago that they would fully automate all benefits—

“is not possible. One of the primary reasons is that a significant element of the decision/award process, including applying and checking JSA conditionality, will continue to require human intervention.”

I do not know why that was not apparent six months ago, but apparently it is apparent now.

“A second reason is that there are a number of complex ‘exception’ cases, for example Share Fishermen, which would be extremely difficult to automate.”

That is because it all depends on how much the share fishermen catch on a particular trip, and programming the IT system to automate the benefits they ought to receive would be rather difficult.

“The aspiration is to maximise automation, rather than to fully automate benefits processing.”

The journalist who wrote that up for The Timesspoke to somebody in the DWP, who said:

“A number of these elements will come under universal credit which will itself be largely automated.”

That is why it was watered down.

Given the lengthy debate that we had earlier in the Committee about the problems that I think the Government will have delivering the IT for universal credit on time, I wanted to put three specific questions to the Minister. First, will the application process for universal credit be fully automated? Our understanding was that it would be, but our understanding was that it would be automated for all benefits, and now it will be only three quarters automated for one and not at all for the others. Secondly, will some human intervention still be required for universal credit applications? In the case of share fishermen, will the universal credit IT system work everything out automatically? Thirdly, which, if any, elements that the Government now say cannot be automated for JSA will be automated for universal credit?

I have repeatedly made it clear that I do not believe that the Government’s plan for IT for universal credit is credible, but I must say that this development undermines its credibility further. Even before the parallel IT exercise has begun, it has been delayed—six months ago we were told that it would start in June this year, and it has already slipped to July, so it is late before it even begins. The DWP has concluded that an exercise, which six months ago we were told would be finished by October next year, cannot be completed at all.

Harriett Baldwin (Conservative, West Worcestershire)

I am enjoying the synthetic anger about IT problems. The right hon. Gentleman will recall that the introduction of the working tax credit and the child tax credit was not necessarily a hallmark of benefit reform under the previous Government. Does he accept that the Department putting the business plans on its website so that we can be kept informed of the developments is a welcome addition to transparency, particularly with regard to fishermen?

Stephen Timms (Labour, East Ham)

The hon. Lady is right. I was certainly delighted to find 48 pages of changes to business plans that were published only six months ago and to discover that it took 48 pages for the Government to tell us all the things that they got wrong. No doubt we will have another 48 pages of further changes in another six months. I welcome that degree of transparency; it is very informative. I did not intend to express anger, merely some bemusement and perhaps a little sense of, “I told you so”—these things are difficult.

Six months ago, we were told that all benefits would be automated, but it turns out that it is not possible because of share fishermen and other considerations. That is an extraordinary blunder on the part of the Department’s IT function. As he knows, and as I have said previously, I have a high regard for the IT operations in the Department. They have a good track record. The fact is, however, that at the same time as the officials told the Minister that they could automate all the processes for the benefits system by October next year, they were also telling him that they could deliver the IT system for universal credit by October of the following year. Why did they make such a blunder? Why did they get it so wrong six months ago and set a date for this change last Friday? Is it because they have suddenly become incompetent? No, I do not think it is. It is because Ministers, in their enthusiasm to deliver the ambitious goals that have been set, are forcing officials to sign up to goals—no doubt laudable goals—which, in reality, are unachievable.

Ian Swales (Liberal Democrat, Redcar)

Does the right hon. Gentleman agree that the activities of share fishermen are only one example of self-employment? Does he share the hope that the Minister will give us some reassurance that self-employment will be comprehensively covered?

Stephen Timms (Labour, East Ham)

The hon. Gentleman is right. We have no information at all on how self-employed people will be dealt with in the universal credit system, whether by IT or by human intervention. I suspect that share fishermen will continue to require human intervention. The way it looks at the moment, large numbers of self-employed people may well have that requirement as well. The hon. Gentleman is right to remind the Committee of the importance of the Government giving us an answer on what will be done about self-employed people.

My theory is that the Minister said, “Let’s go for automating the benefits system. This is what we have to do.” Officials loyally said, “Okay, we will do it all by October 2012.” Now, however, they have realised that it is, to quote page 37 of this document, “Not possible.” That is what has also happened with the IT for universal credit. I appeal to the Minister to take a long, hard look at the plan for the IT for universal credit and the claim that it can all be delivered and will all work perfectly, for share fishermen and all, by October 2013. The truth is that that is no more deliverable than the plan unveiled six months ago—now abandoned—for benefit automation.

Chris Grayling (Conservative, Epsom and Ewell)

I do love a nice conspiracy theory to finish the day. The right hon. Gentleman has asked sensible questions about aspects of the delivery of the universal credit IT system, which we have sought to answer. We will continue to offer him answers to his questions over the months ahead. This one, however, is stretching a point slightly.

Let us be clear. We did not say, “Wave a magic wand, we have taken steps since the election to suddenly start automating the benefit processing operations of the DWP.” In many of these cases, we inherited programmes from the previous Government, who were sensibly moving to a greater level of automation and a greater level of usage of IT. It is possible that the right hon. Gentleman could also have explained the changes that he pointed out in the business plan by saying that, as we got more into the workings of the Department, we discovered some shortcomings in what he and his colleagues were doing before they left office.

None the less, on the business plan changes the right hon. Gentleman has taken a three-second cinema ad and turned it into a blockbuster. The DWP business plan confirmed a small reduction in the number of JSA claims that will be automatically processed from start to finish, due to the fact that not all claimants can make their claims online and that some people will still need to speak directly to one of our advisers. There is no great rocket science in that. We have said clearly that when universal credit starts, a small part of its delivery will not be able to take place through automated systems. The intention is that the vast majority of what we do in the future will be done, so far as is possible, through automated means.

Stephen Timms (Labour, East Ham)

The Minister is right. The announcement is that at least 75% of processing will be automated. I am not sure that 75% is a small reduction, even from 100%, but it is a reduction, certainly. The announcement is also that the rest of the benefit system will not be automated at all. The automation effort, which was going to be applied to all benefits six months ago, will now be applied only to JSA, and in that case only to 75% of it.

Chris Grayling (Conservative, Epsom and Ewell)

The right hon. Gentleman is right. One tends not to do a nice respray of a car that is about to be scrapped. Income support, for example, will be scrapped progressively from two years’ time, so it would not be entirely logical for us to spend lots of money on automating income support only to scrap it. I suspect that the Public Accounts Committee would have something to say about it if we did.

Naturally, with the transformation of the benefit system that the Government have initiated, including the move to universal credit and the total transformation of the way that our welfare state works, it is not entirely logical to spend lots of money to automate some of the legacy schemes, too. We have changed the plans that we inherited from the previous Government, because we are not keeping many of the things that they intended to keep in place.

That is simple and basic. The right hon. Gentleman is trying to see issues where there are none. The system and the business plan we are talking about are separate from the one that will run universal credit, which is still on track for delivery in 2013, as we have committed.

The clause will introduce a simple technical change that streamlines the DWP’s automation process. It will create a simpler approach to regulation and will not make any dramatic changes. It will not introduce new powers. It will simply make it easier in regulatory terms to make the changes that are in train under the Government and were in train under the previous Government.