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Bishop challenges Welfare Reform Bill

The Bishop of Salisbury, Nicholas Holtam, has challenged the Government’s Welfare Reform Bill, which will be debated in the House of Lords on Monday 28 November.

Bishop challenges Welfare Reform Bill

Bishop Nicholas Holtam and children of Coombe Bissett School

Bishop challenges Welfare Reform Bill

The Bishop of Salisbury, Nicholas Holtam, has challenged the Government’s Welfare Bill, which will be debated in the House of Lords on 28 November.

Joining with other bishops, Bishop Holtam is concerned  that if it is passed in its current form, it will have a disproportionate impact on children and families: ‘Analysis from The Children’s Society, a Church of England charity, shows that children are disproportionately affected by the proposals. 210, 000 children will be affected, compared to 70,000 adults.’

He added: ‘This means that 75% of those affected are children, making them nine times more likely than adults to be affected. Only one in 556 adults are affected, and one in 64 children stand to lose out. Up to 80,000 children could be made homeless.’

The Welfare Reform Bill has the aim of making it easier to return to work, and more beneficial to be in paid work than to receive state benefits.

The Government plans to cap household benefit entitlement for out of work households so that the amount received in benefits cannot exceed average weekly wages for working households. It estimates that 50,000 households will be affected by the planned cap. 

The Children’s Society research led its Chairman, the Bishop of Truro Tim Thornton, along with 17 other bishops who sit in the House of Lords, to write an open letter to last Sunday’s Observer to explain the implications of the proposals, which they say risk pushing thousands of children into poverty and homelessness.

The bishops are backed by the Archbishops of Canterbury and York.

Bishop Holtam commented, ‘The Bishop of Ripon and Leeds, John Packer, has tabled 5 amendments to the Bill which are due to be debated today.’

The suggestions include: removing child benefit from household income for the purposes of calculating the level of the cap; calculating the level of the cap based on earnings of families with children, rather than all households; removing certain vulnerable groups from the cap; and the introduction of a significant grace period of exemption from the cap for households in which people have recently left employment.

The Bishop added, ‘No one is objecting to a cap on benefits but the purpose of welfare is to protect the poor and most needy. As currently proposed, the cap will cause hardship and have unintended consequences for children, especially those who care for children aged under 5, or for the children of others.’

He concluded , ‘The alternative proposals from the Bishops in the House of Lords ask the Government to give detailed consideration to protecting children especially because  it is wrong for our children to carry the burden of the economic downturn. We hope the government will listen to, and act upon, our plea, for the sake of some of the most vulnerable in our society.’

For the full Children’s Society briefing see below; and for further information on benefit cut proposals follow the link:

http://www.childrenssociety.org.uk/news-views/press-release/low-income-working-families-hardest-hit-soaring-inflation-and-benefits-shak

 

Benefit Cap: Proposed Committee/Report Stage amendments

Introduction

The Government plans to cap household benefit entitlement for out of work households so that the amount received in benefits cannot exceed average weekly wages for working households. The cap is expected to be set at around £500 per week for couples and lone parent households.

The Government’s equality impact assessment[1] estimates that 50,000 households will be affected by the planned cap on household benefit entitlement.  The average loss resulting from the cap will be around £93 per week of household income, and 7,500 households will lose more than £150 per week. 

Analysis from The Children’s Society reveals that children are disproportionately affected by these proposals. 210, 000 children will be affected by the cap, compared to 70,000 adults.

This means that 75% of those affected are children, making them nine times more likely than adults to be affected. Only one in 556 adults are affected, and one in 64 children stand to lose out.

The amendments below suggest changes to clause 93 of the Welfare Reform Bill (which introduces the benefit cap), in order to reduce the impact of the cap on children.

In most cases, the amendments are also able to indicate the likely level of the cap were the amendment to be accepted.  These findings are also summarised in Appendix 1 at the end of this paper.

Amendment 1: To base the cap on average earnings for families with children

Amendment 2: To base the benefit cap on household income rather than household earnings

Amendment 3: To base the benefit cap on mean or trimmed mean average earnings rather than median earnings

Amendment 4: To introduce further exclusions to the benefit cap

Although presented separately, two or more of the amendments can be used in combination.  The overall impact of this is set out in Appendix 1.

Amendment 1: To base the cap on average earnings for families with children

93 Benefit cap  (1) Regulations may provide for a benefit cap to be applied to the welfare benefits to which a single person, couple, or family with children is entitled.

(7) In this section “estimated average earnings” means the amount which, in the opinion of the Secretary of State, represents at any time the average weekly earnings of a relevant working household in Great Britain, after deductions in respect of tax and national insurance contributions.

(9) In this section a “relevant working household” refers to a working household of “a family with children” when assessing the level of the cap for families with children.

(10) In this section a working household refers to a household working 16 or more hours per week.

Notes

At present the benefit cap is proposed to be set at two different levels.  The first for single people without children, which will be introduced at around £350.  For couples or households with children, the cap will be introduced based on net average earnings for a working household, which the Government estimate to be around £500 per week at the point of introduction.

In order to promote comparison of entitlements on a like to like basis, this amendment proposes a third level of the cap, which would set the level of the cap for families with children at average weekly earnings for working families with children.  For the purposes of this calculation the amendment proposes that working households are those working 16 or more hours per week.

This promotes fairness, since the current proposals compare income for a couple with children, to household earnings, including those for a single person without children.  This cannot be comparable on a fair basis.  This amendment also reflects the initial proposals for the cap as laid out by George Osborne at the Conservative party conference last year.

“we will introduce a limit on the total amount of benefits any one family can receive.  And the limit will be set according to this very simple principle: Unless they have disabilities to cope with, no family should get more from living on benefits than the average family gets from going out to work. (...) A maximum limit on benefits for those out of work.  Set at the level that the average working family earns.”

The impact depends on the type of “average” used in calculations.  Based on using median earnings, we estimate that using families with children would increase the level of the cap to around £560 for families with children, and would remove around 25,000 families from the cap.

Amendment 2: To base the benefit cap on household income rather than household earnings

(6) The amount specified under subsection (5) is to be determined by reference to

estimated average income

(7) In this section “estimated average income” means the amount which, in the opinion of the Secretary of State, represents at any time the average weekly

income of a relevant working household in Great Britain, including receipt of benefits and tax credits, and after deductions in respect of tax and national insurance contributions.

Notes

At present the benefit cap is planned to be based on household earnings for working households.  However, many working households are also in receipt of benefits in work (including child and working tax credits, child benefit, housing benefit and council tax benefit.)

The principle behind the benefit cap is that households should not be better off on out of work benefits than the average working household receives.  For fairness, benefit income should be compared to income in work, rather than earnings in work to give a more equitable comparison.

We estimate that basing the cap on median income in work rather than earnings in work would increase the level of the cap to around £605 per week – this would remove around 38,000 households from the cap (see appendix 1).

However, if Disability Living Allowance and Working Tax Credit are removed from the calculations (on the grounds that households in receipt of DLA will be exempted from the cap, and because Working Tax Credit is not paid to workless households,) the Government estimate this would reduce the number of households affected by around 30%[2] - meaning around 15,000 households would be removed from the cap.

Amendment 3: To base the benefit cap on mean or trimmed mean average earnings rather than median earnings

(8) such earnings will be estimated according to mean earnings estimates.

 Notes

The Government proposes to introduce the cap on out of work benefit receipt based on average earnings for working households. This means that the level at which the cap is set would be affected by the type of average used for calculating household earnings. 

Our estimates suggest that using median earnings estimates would set the level of the cap at £483 in 2013/14 when it is introduced. 

If mean earnings were used this would be around £620.

If a trimmed mean (mean earnings, but with the top and bottom 5% of working households excluded) were used, then the cap would be set at around £533.  This would remove around 12,000 families from the cap. 

Therefore one possible amendment to reduce the impact on families would be to use mean earnings estimates rather than median earnings estimates for calculating the level of the cap.  This would not undermine any of the principles of the cap since it just calculates average earnings in a different way.

Amendment 4: To introduce further exclusions to the benefit cap

(To add a new subsection to clause 93)

(10) Exceptions to the benefit cap will be made for households:

(a) where one or more members is in receipt of Disability Living Allowance

(b) where one or more members of the household is a war widow

(c) where the household has left employment within the last 6 months 

(d) where the household is unable to move into work as a result of being unable to make work pay.

(e) where the household is working more than 16 hours per week in total.

(f) where the household contains a lone parent with a child under the age of 5.

(g) where the household includes a "family or friend" carer

Notes 

The Government has announced that certain groups will be exempted from the benefit cap, including working households.  This amendment (1) sets out a suggested definition of what it means to be in work for the purpose of the cap, and (2) proposes additional amendments for further households, including those who have recently left employment and those who are unable to make work pay.

a. exemptions for working households

Currently an exemption is proposed for households in receipt of working tax credit (the rule by which working households are exempted.)  However, under the Universal Credit Working Tax Credit will no longer exist.  As a result an alternative means of identifying working households is required.

The Government could include an earnings based exemption to the cap, but this would discriminate against low income earners.  The alternative would be to exempt households working a certain number of hours.  This is the method suggested in this amendment.

b. exemptions for households in receipt of DLA and war widows.

This amendment sets these exemptions out on the face of the bill.

c. exemptions for those who have recently left employment.

Some households affected by the cap have only recently left work.  For these households, the imposition of the benefit cap could make it harder for them to re-engage with the Labour Market, particularly if they have to move away from the local area as a result of being unable to afford the rent on their current property.  An exemption of households who have recently left employment from the benefit cap would ensure that those who have recently left employment are able to maintain contact with the Labour market.

In addition, the Government has announced that households in receipt of Disability Living Allowance are exempted from the benefit cap.  However, there is currently a 3 month "qualifying period" following the onset of a disability, during which the affected household will be entitled to Disability Living Allowance, following the introduction of the Personal Independence Payment, it is proposed that the qualifying period will be extended to 6 months.  This would mean that families who have had to leave work as a result of the onset of a disability could still be affected by the cap whilst in the 6 month qualifying period for PIP.  A six month exemption from the cap for households following leaving employment would help to ensure that workers who have left employment as a result of disability are not affected by the cap.

d. exemptions for those unable to make work pay.

In a limited number of cases, households will be unable to find any job which makes work pay more than the household would be entitled to receive in out of work benefits.  This is particularly the case for families who would face high levels of childcare costs on moving into work.

In such cases households could be forced into a position where they are unable to escape poverty by moving into work, but if they remain out of work, their support will be substantially cut as a result of the benefit cap.  They will be left with nowhere to run in order to escape poverty.

Where a household is unable to find a job which makes work pay, this would need to be reported by JobCentre Plus in order to exempt them from the cap.

e. exemptions for Lone Parents with children under the age of 5.

As a result of their additional care commitments, lone parents with children under the age of 5 are not, expected to be actively seeking work in order to claim out of work benefits.  Given that the current welfare system recognises these additional commitments which can make it extremely difficult to move into work , it seems reasonable that they should be exempt from the cap which limits their out of work benefit receipt to average earnings in work.

f. exemptions for "family and friend" carers.

Some family and friends carers will be penalised for taking on the care of a child by the introduction of a cap for total benefit payments introduced by the Bill.  This would be unfair on people who have stepped in because of difficult family circumstances to keep vulnerable children out of care.  Family and friends carers often live in large households as a result of taking in children, with an estimated one in 10 living in households of five or more people, and so will be disproportionately affected by the benefit cap. Around six in 10 give up work or reduce their hours when children move in, because of the needs of the children they are looking after, and are often told to do so by social workers.  Particularly for large households where family and friends carers also have the own children still living at home, or take in several children, the cap will act as a disincentive for people to provide care and is likely to have the unintended consequence of more children being taking into care.

The supplementary regulations required to bring this exemption into force would need to be along the following lines:

Family and friends carers will be exempt from the benefit cap:

( i) 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; or

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

(iii) 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; and/or

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

(v) Where the carer has a Residence Order, Special Guardianship Order following the accommodation of a child’; or

(vi) Where the carer has a Residence Order or Special Guardianship Order following the death or serious illness of a parent.

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