High Court Judgment: Benefit Cap

Debate between David Linden and Caroline Dinenage

Tuesday 4th July 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Work and Pensions (Caroline Dinenage)]

It is a great pleasure to serve under your chairmanship, Mr Hanson. I congratulate the hon. Member for Glasgow Central (Alison Thewliss) on securing this important debate on the benefit cap High Court judgment.

The hon. Lady is absolutely right to bring the issue to the House. As she knows, the Government are committed to building a country that works for everyone, and that means taking action to help and encourage people into work and away from a life of welfare dependency and to restore fairness between those who pay into the system and those who access it. We believe that those out of work should not receive more in benefits than many working families are able to earn. Before the cap, the Department for Work and Pensions disproportionately spent £10 million a year on just 300 families.

As the hon. Lady said, we introduced the benefit cap in 2013 at a national rate of £26,000 a year. Its aim was to encourage people to find work, and that is exactly what has happened. We did that on the principle that work not only pays, but brings self-esteem, better health, better happiness and improved self-confidence, as well as much more opportunity for social mobility for children in such households. The evaluation of the original cap shows that that is what has happened.

Capped households are 41% more likely to go into work than uncapped households, and 38% of those capped who were interviewed said that they were doing more to find work. The original cap met its aims, but the change was mainly felt in London and the south-east. To spread the work incentives across the country, we introduced a lower tiered cap in November last year. It aims to build on the original successes. The new tiered cap is set at £23,000 for couples and lone parents in Greater London and at £21,000 for other parts of the country. That is an equivalent salary of £29,000 in London or £25,000 in the rest of the UK. We know that four out of 10 households in London and in the rest of the UK earn less than those respective amounts. That system is fair to those who use it and to those who pay for it.

The cap levels continue to provide a clear incentive to work. Households are only required to work part-time hours to be exempt from the cap. Households that claim working tax credits are exempt from the cap if they work just 16 hours a week for lone parents or earn £520 a month on universal credit. However, we acknowledge that the move into work just is not appropriate for some people. That is why there is a range of exemptions for vulnerable groups, including households in receipt of most disability benefits, carer’s allowance, the equivalent universal credit carers element and the guardian’s allowance.

We were disappointed by the High Court judicial review decision, which challenged the application of the cap to lone parents with children under the age of two. The Court gave the Government the ability to appeal, and we will be appealing the decision, as we strongly believe that work is the best way for people to raise their living standards. We know that children whose parents work benefit from increased life chances. They are less likely to grow up in poverty. Evidence shows that one of the biggest drivers of child poverty is long-term worklessness and low earnings.

I want to respond to some of the issues that the hon. Lady raised. The latest labour market statistics show that we continue to have a record number of people in work. In April, nearly 32 million people were in work. Evidence shows that work is the best route out of poverty. There are also record numbers of lone parents in employment. It is not easy. In life, very few people choose to be a lone parent, as I know. I never made the choice to be one, yet I was a working lone parent, making the same difficult decisions that lone parents, particularly mothers, have to make every single day.

An evaluation of the previous benefit cap showed that it changed attitudes and behaviours. One in five of all capped households went to work after a year, compared with just 11% of similar uncapped households previously. Importantly, capped lone parents were 51% more likely to be in work after a year as compared with similar uncapped lone-parent households. Those surveyed said that the new employment had brought financial rewards —some felt better off and able to afford extra treats for their children—and other rewards in health, happiness and self-esteem.

The hon. Member for Glasgow East (David Linden) talked about the family test, but he is mistaken about what it is. He has a far too pessimistic view. It is not a tick-box exercise, but a way of assessing the impact of a policy on a whole range of family measures. It is not in children’s best interests to live in workless households. Children’s life chances and opportunities can be significantly damaged by living in households where no one has worked for years and where parents do not consider work as an option.

Let us face it: we are only requiring people to work for 16 hours a week. Children in households where no parent or carer is in work are much more likely to show challenging behaviour by age five. Parental worklessness has been shown to be significantly associated with poorer academic attainment and greater behavioural problems in children aged seven. Growing up in a workless household is associated with a higher risk of being not in education, employment or training in late adolescence.

[David Linden]

The Minister is talking about the importance of ensuring that we do not have households with worklessness, but part of the problem is that the Government have done very little to tackle pay inequality. They are bringing forward a living wage that does not support under-25s. Nothing the Minister is saying reassures me that the Government are making any attempt to tackle pay inequality, particularly for under-25s. This Government will be actively discriminating against them with their false living wage.

[Caroline Dinenage]

I am afraid the hon. Gentleman is just wrong. Some 1.3 million people on the lowest incomes have been taken out of income tax altogether since 2015. In April 2017, we increased the national living wage to £7.50. That will directly benefit 12 million workers this year. A full-time worker on the national living wage will see their annual pay increase by more than £500.

One issue raised was that the benefit cap is forcing people to move. Our evaluation of the original cap found that very few households moved house. Where they have moved, the vast majority have moved locally.

I am particularly concerned about the arguments that the hon. Member for Glasgow Central made in respect of vulnerable women. Before doing this job, I was the Minister for Women and Equalities, and the violence against women and girls agenda is close to my heart. That is why I am delighted that the Government have committed more than £100 million to tackling violence against women and girls. Such violence is absolutely unforgivable in any circumstances.

We recognise that some groups, such as pregnant women, new mothers and victims of domestic violence, find it harder to adapt to benefit caps. That is why we have explicitly stated in the guidance that direct housing payments should provide targeted help to women within 11 weeks of an expected birth and to households with children under nine months. Women who need safe accommodation, such as sanctuary houses, are prioritised. Housing benefit can be paid for both the home a victim has fled and the refuge or other temporary accommodation for up to 52 weeks. That 52-week limit is to avoid the blocking issue that the hon. Lady specified. It is also disregarded from the benefit cap.

In regard to Scotland, 7,300 households have been capped since the benefit cap was introduced. Of those, more than half are no longer capped, with 21% moving into work. The cap is having a positive impact. We can always find negative and distressing stories; when those happen, the hon. Lady is more than welcome to bring them to my desk and to my attention, but we have to look at the vast majority of people who have been assisted by the cap.

Both the cap and the policy limiting entitlement to the child element of tax credits were subject to detailed impact analysis throughout their development. We know that children whose parents work have improved life chances and are less likely to grow up in poverty. Parents receiving universal credit can get help with up to 85% of their eligible childcare costs. That is not just for children over the age of two or three; there is no minimum child age requirement for claiming costs through working tax credits or universal credit.

Our new childcare offer is backed by unprecedented levels of investment. Spending on childcare will increase to £6 billion by 2020. I was the Minister for early years education, and we are spending more than any previous Government on early years education and support for childcare. Finally, the flexible support fund can be used to help those working fewer than 16 hours a week with childcare costs for a child of any age, when those costs would otherwise present a barrier to work.

Lowering the cap emphasises the message that it is not fair for someone on benefits to receive more than many people in work. The hon. Lady may say that I should cross through those lines in my speech, but they are the most important. Even when claimants remain capped, they are better off from any work they are able to do. In some cases, a relatively small amount of work can be sufficient to mitigate the effects of the cap. For those impacted by the cap, we have made discretionary housing payments available to people who may need extra help.

Motion lapsed (Standing Order No. 10(6)).