This briefing is intended to update Northern Housing Consortium (NHC) members on the progress of the Welfare Reform and Work Bill (henceforth ‘the Bill’), following the completion of the House of Commons second reading on Monday 20 July 2015.
About the Bill
The main changes included in the Bill are the flagship policies of the Conservative manifesto including changes to welfare including the benefit cap; the freeze on social security benefits for four years, changes to tax credits and child tax credits, changes to employment support allowance and changes to Universal Credit reflecting changes to child element and readiness to work.
Perhaps most important to the housing sector is the Bill’s provision for changes to social housing rents including details of the one per cent down rating as well as details of any exceptions to the policy in addition to enforcement if the changes outlined are not undertaken.
Other issues addressed include loans for mortgage interest as well as duties for ministers to report yearly on the target of full employment; the number of new apprenticeships created and progress on the troubled families programme.
About second reading
Second reading is the second stage in the passage of a Bill and is the first time that MPs from all parties have an opportunity to discuss the Bill. Amendments may not be made at this point and debate is limited to the substance of the Bill placed before the House.
Timeline of a Bill
First reading – where the Bill is introduced either in the House of Commons or the House of Lords, but no debate takes place
Second reading – where the general principles of the Bill are discussed and debated.
Committee stage – where detailed, line by line examination of the Bill takes place and amendments can be introduced and voted on, usually conducted by a small group of MPs or Lords that are representative of the political make-up of either the House of Lords or the House of Commons, or by a Committee of the Whole House.
Report stage – where a debate is conducted on the floor of either the House of Commons or House of Lords with any MP or Lord allowed contributing to proceedings. Report stage allows the changes introduced at committee stage (amendments) to be reported to the whole House and gives all MPs or Lords the chance to introduce their own amendments to the Bill.
Third reading – a short debate and final vote on the Bill before it proceeds to either the House of Lords (if the Bill is introduced in the House of Commons) or the House of Commons (if the Bill in introduced in the House of Lords) where the process then begins again in the respective House. No amendments can be introduced and debate is limited to the substance of the Bill.
Overview of second reading
The debate, as you would expect for a contentious piece of legislation such as the Welfare Reform and Work Bill, was at times heated. Outlining the government’s reasons for the Bill, the Work and Pensions Secretary, Iain Duncan Smith said that “this is a Bill for working Britain, and it is underpinned by three key principles: first, work is the best route out of poverty, and being in work should always pay more than being on benefits; secondly, spending on welfare should be sustainable and fair to the taxpayer while protecting the most vulnerable; and, thirdly, people on benefit should face the same choices as those in work and those not on benefits”.
He noted that the benefits cap would ensure that more people got back into work and reintroducing fairness to the system. He added “it is right to keep the level of the cap under review to ensure that it continues to be fair and that it provides the right incentives for people to move into work” responding to Clause 8 of the Bill which states “the Secretary of State may … review the sums specified”. This suggests two things: firstly, that the £20,000 cap across the three northern regions could go lower, or secondly, the benefit cap may soon be highly regionalised and asymmetric.
Referring to the government’s plan to cut work-related activity component of employment support allowance (ESA) to the level of jobseeker’s allowance (JSA), he said “we know that the majority of people receiving work-related activity ESA payments want to work, but the current system discourages claimants from making the transition into work”. Stephen Timms, a Labour Shadow Work and Pensions Minister, asked the Secretary of State to respond to claims made by Parkinson’s UK and Macmillan Cancer Support that, in the case of Parkinson’s, there are some 8,000 people in the work-related activity group with Parkinson’s and other progressive diseases who are not going to get better but who, under his proposals, will lose £30 a week. Iain Duncan Smith responded that “the purpose of the work-related activity group is that the people in that group are deemed to be capable of some work, or at least to be capable of doing some work very soon” (my emphasis).
The Secretary of State continued that “as a result of our reforms, five in 10 families with children will be eligible for tax credits, bringing greater balance to the welfare budget” as opposed to the nine in 10 families in 2010. He went on to discuss the Bill’s provision for a 1% down rating of social rents noting they had “increased by 20% since 2010”. He said that such measures were necessary as they “[protect] taxpayers from the rising cost of subsidising rents through housing benefit, and protecting tenants from rising housing costs”. On Clause 11 of the Bill, detailing changes to child tax credits, the Secretary of State said that the government “are ensuring that people on benefits face the same choices as those in work and those not on benefits … it is right that people who receive child tax credit should make the same financial choices about having children as those who are supporting themselves through work”.
Speaking for the opposition, Stephen Timms noted that Labour “support a number of measures in the Bill”. He welcomed the reporting obligations on full employment, apprenticeships and troubled families contained in the Bill and reasserted that the Labour Party were committed to a cap on household benefits to help make families better off in work. However, he added that despite this common ground, the Bill was flawed as “it abolishes the duty of government to tackle or even to report on child poverty, it breaks promises that the Conservative Party made before the election to protect sick and disabled people, and it comes alongside a ruthless reduction in the support to working families through tax credits that will reduce work incentives and undermine the goals of universal credit”.
Speaking on the changes to tax credits, Stephen Timms noted that while an increase in the minimum wage was welcome, the increase did not make up for other measures in the Bill, particularly the cut in tax credits for working families. He said that the Secretary of State was wrong to say so noting that the Institute for Fiscal Studies had said it was “arithmetically impossible”. He also noted that the changes to the minimum wage were phased in over five years while the changes to tax credits were scheduled for 2016 meaning “over 3 million working families will lose over £1,000 a year on average, and work incentives will be cut”.
On the benefit cap, Mr Timms reiterated that “[Labour] support the principle that work should always pay and that people should be better off in work than on benefits. That is why our manifesto supported a household benefit cap and the idea that it should be lower in areas where there are lower housing costs.” He added that despite this support and “to avoid hardship and unfairness with the reduction of the benefit cap, we will press for some people to be protected from the cap” such as carers, those with very young children and those who have been affected by domestic violence living in support accommodation.
Turning his focus to the plans to reduce social rents, Mr Timms said: “We welcome the plans to reduce social rents, which will save 1.2 million households £700 a year, but we have grave concerns about the impact on housing associations and local authorities. They will face a huge reduction in rent revenue, drastically undermining their capacity to borrow and to build. The Office for Budget Responsibility says that many fewer homes will be built; the National Housing Federation puts the figure at 27,000”, adding that Labour planned to table amendments to address that.
Mr Timms noted that with the changes to the definition of child poverty “the Bill abandons any pretence” that the government were serious about reducing child poverty adding “instead of eliminating the scandal of child poverty, the Bill attempts to eliminate the term”. Qualifying his earlier support for a two child cap on child tax credits, Timms said “we will aim to amend the Bill in Committee, for example to protect families with multiple births or those whose claim arises because of exceptional circumstances”.
In his remarks on the Bill, Tim Farron, Liberal Democrat MP and recently elected Leader of the Liberal Democrats, said that “[Liberal Democrats] cannot and will not support the Bill. If it did what it said on the tin, there might be much to commend it, but it does not … [the government] want a welfare state that is anything but good for our country’s welfare”. He added his concerns that changes to ESA “will not help into work people with depression, fluctuating conditions, schizophrenia or physical conditions that make more difficult the ordinary tasks that many of us take for granted”. Closing his remarks, he said that the Liberal Democrats “will stand up for families, whether they are hard-working or just desperate to be hard-working. We will not let the Conservatives through choice, or the Labour party through their silence, unpick our welfare system”.
In her contribution to the debate, Helen Jones, Labour MP for Warrington North lamented the changes to the definition of child poverty contained within the Bill saying “from now on, there will be no income-based measure of child poverty; instead, the Secretary of State will have to report on worklessness and educational attainment, although two thirds of the children who are in poverty come from families who are in work. The problems to which the Secretary of State has referred, such as family breakdown and addiction, are indicators of poverty, but they are not a measure of it.” She added her concerns that the Bill will make many more working families much poorer highlighting the iniquity of 21 to 25 year olds – considered as adults, possibly with families of their own – who would be unable to take advantage of the Chancellor’s higher minimum wage.
Helen Goodman, Labour MP for Bishop Auckland and proposer of a so-called ‘rebel amendment’ that would have declined second reading to the Bill, began her remarks “I do not believe this government have a mandate for the changes they are making in this Bill. Throughout the election campaign the Tories refused to say how they were going to save £12 billion from the welfare bill, because they knew that the measures would be unpopular and it would hit them in the ballot box. Indeed, the Prime Minister went on national television to say that he would not be cutting tax credits.” She added that the measures proposed in the Bill would take around £300m a year from the north east economy.
She continued that “this is a phenomenally regressive Bill and a very regressive Budget. It will take £10 million out of the local economy every single year in my constituency” adding that “one of the worst things about the tax credit cuts is that they affect in-work families, who are struggling in low-paid jobs to do their very best for their children”. She also noted she had received representations from carers, sick and disabled people and lone parents who are concerned that the 30 hour conditionality attached to the government’s childcare promise will see them lose out.
Graham Evans, Conservative MP for Weaver Vale, stated in his remarks that “the United Kingdom represents 1% of the world’s population; it also has 4% of the world’s wealth and accounts for 7% of the world’s welfare. That is clearly not sustainable” He asserted his belief that everyone with the ability to work should be given the support and opportunity to do so and commented that the previous system wrote off too many people and left too many trapped in welfare dependency.
Focusing her remarks on changes to child poverty and the concerns of many third sector organisations that welfare changes will increase child poverty, Melanie Onn, Labour MP for Great Grimsby, said “I cannot support a Bill that abolishes the target for the government to reduce and eradicate child poverty”. She added “during the previous Parliament, we saw support cut for families on low incomes, many of whom are in work. Cuts to tax credits hit households with children the hardest, with families losing thousands of pounds. Figures from The Children’s Society show that 15,000 children in Grimsby were adversely affected by below-inflation rises in child benefit and by reductions in tax credits.”
Helen Whately, the Conservative MP for Faversham and Mid Kent, noted in her remarks that “this Bill … asks us to make three choices. It asks us to think about what sort of society we want to live in, the place of welfare in that society and whether welfare should be a way of life. It asks us to think about the relationship between the state, employers and labour. It also asks us about our tolerance for people being better off on welfare than in work.” She spoke of “a very clear message from the voters at the election that it is not right for people to be better off on welfare than in work”. Summarising her view of the Bill, she said: “It is critical to recognise the three principles of the Bill: that the best way out of poverty is work; that we have a better economy when we have people on higher pay with lower taxes and there is higher productivity as well as high employment; and people should be better off in work than on welfare.”
The next stage of the Bill is the committee stage in the House of Commons, a process by which the Bill is examined in great detail – often line by line – by a small group of MPs reflecting the overall political make-up of the House of Commons. It is at this point that MPs and the Government can make amendments to the Bill. It is anticipated that the committee stage of the Bill will take place in the autumn.
If you have any questions or feedback about this briefing, or would like to work with NHC on the Welfare Reform and Work Bill when it reaches the House of Commons in the autumn, please email email@example.com.