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Baroness Hollis of Heigham moved Amendment No. 116:

Page 9, line 9, at end insert ("of not less than £10,000").

The noble Baroness said: This argument is somewhat similar in nature to the earlier one about earnings disregard. This amendment applies to capital disregards. The £3,000 threshold of capital disregard was fixed in April 1988. If that were up-rated, it would now be worth £4,179 with RPI. The sum of £8,000 determined in 1990 would now be worth £10,119 if RPI-ed. Both figures would be considerably higher if, instead, they were earnings related.

This is a probing amendment. We want to tease out the Government's presumed objection to it. At the moment, one may retain capital up to £3,000. Thereafter, as a couple, capital between £3,000 and £8,000 is taken into account and a notional income attributed to it which is docked off—offset—against

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income support. Above that capital limit of £8,000, one is not entitled to income support and, therefore, presumably, JSA in its entirety.

Perhaps I may be allowed to make some obvious points. First, as we said earlier we accept and the Minister accepts the principle of up-rating in benefits generally. If that is not done, the worth of the benefit is cut by inflation each and every year. In other words, inflation should not be allowed to eat away at the intention of Parliament when it first fixed the limit. Not to index it is to cut it. Therefore, in all fairness, all such disregards should be RPI-ed each and every year, consistent with the benefits; otherwise, it is worth less and, by knock-on consequences, so is the benefit. Therefore, we undermine Parliament's original intention.

The second point is particular to the capital rules and does not apply to earnings. The Government have fixed a very high notional income attached to those savings. One pound a week in benefit is deducted for every £250 of savings one has over £3,000. I believe I am right in saying that that means that there is assumed to be a notional income from one's capital of over 20 per cent. Many of us would like to have a real income from capital of 20 per cent. Yet the most poor of our society who do not have generous savings and who are on income support are, quite notionally, assumed to have capital giving an income flow of 20 per cent. That bears no relation to the real world we inhabit. That is lost altogether if one has savings over £8,000. Therefore, the second reason for up-rating is to defer the point at which that very severe notional flow of income from savings takes people off benefit.

The third concern is that JSA, the contributory benefit in which savings are not taken into account, is being cut from 12 months to six months. Therefore the effect of that very high penal rate on savings is coming into account six months earlier than under present UB rules and savings will be eaten into much earlier. The consequence is that the Government are sending out to people on income support and those who might be eligible for JSA, a signal that it is not worth saving because if one does those savings are sharply penalised, not just in terms of the notional income one is supposedly drawing from it, but at the cut-off point at which one loses JSA. There is an even greater sense of unfairness when those savings have come not just by putting money away weekly into a policy or whatever, but when they have been awarded, say, as compensation for injury or redundancy. In other words, a payment made for a wrong done is then to be treated not as compensation, but as income on which one is expected to live.

I doubt whether there is anyone in this Committee who disagrees with the view that it is a great mistake, in terms of wider social policy, to wipe out people's modest savings. For example, savings in a rural area allow one to acquire a battered car in the absence of public transport with which to jobseek, acquire and then hold down a job. If those savings are wiped out then one does not have a chance of re-entering the world of work in sparsely populated rural areas. It is those savings which, as one approaches old age, will float one

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off the need for some charity hand-outs and allow one to buy the aids and adaptations which perhaps allow one to remain in the community rather than needing to go into Community Care. It is those savings, modest though they are, which will prevent an unemployed person from slipping into debt on water and fuel bills. All the evidence from the CABs shows that something like half of all unemployed people slip into debt from which it is almost impossible for many of them to recover. It is equally important for those who are losing their jobs in their later 50s and have virtually to exhaust their savings before they can get JSA. They are also only a year or two off retirement with no cushion whatever to take with them.

We are all living in an increasingly insecure society. Is it really wise for government to make it silly to save? That is what the Government's Jobseekers Bill does. If they were minded to indicate that they will accept these amendments the Bill will be a little less perverse than it is at the moment. I beg to move.

Lord Swinfen: When assessing the nominal or supposed income from capital, in what is that capital supposed to have been invested to produce the income suggested by the noble Baroness?

Earl Russell: On behalf of these Benches we support these amendments. I shall not attempt to gild the lily, but I now have authority to say something which I would like the Committee to know. If we are in a position to do so, we shall repeal this Bill. If the electorate should choose to put us in partnership with another party we shall endeavour to persuade that party, whichever it may be, that it should join in repealing this Bill. I hope that the Opposition will be able to join in this commitment.

I watched the Minister's face. I can see him reaching for his calculator, but before he does so, can he try to get it right this time? We need to know what this provision is going to cost. The figure in the financial memorandum is £270 million of which £220 million is attributable to the cutback in unemployment benefit. On that costing I have been entirely persuaded by the very able speech made by the noble Baroness, Lady Hollis of Heigham, at Second Reading. I hope that she is as successful with that speech at persuading the Treasury people in her own party, as she has been in persuading me. In the other part of the Bill there is a saving envisaged of £50 million. I am sure that the Minister understands why it will carry much greater expenses. The assumption that repealing it would be cost-neutral is very pessimistic, but it is the assumption on which I am acting because I am sometimes pessimistic as regards financial matters. I hope that we can get rid of the legislation at some time.

Lord Mackay of Ardbrecknish: That was an interesting intervention. Clearly, the Liberal Democrat Party have been deep in conclave for a day, a week or an hour—I am not entirely sure—to come to the conclusion that, given the opportunity, they will repeal this Bill. However, that should not stop us in our tracks from carrying on with consideration of the Bill.

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I never hear figures of costs from the Opposition concerning their amendments. They sometimes counter what I suggest may be the cost and give the Committee the impression that somehow or other their proposals will be "costless". I do not believe that that was the experience of the Treasury Ministers during the time of the last Labour Government.

Baroness Hollis of Heigham: I am not sure if I offend the rules of the Committee by intervening, but I am sure that Members of the Committee will at least temporarily forgive me. I merely looked to the resources which the Minister has in the Box. There is usually nine, 10 or 11 staff and sometimes we have one or two and sometimes none. That may be why the Minister has better resources to carry out the costings than we have. Of course, we hope to enjoy those benefits ourselves in the not too distant future.

Lord Mackay of Ardbrecknish: I thought that the noble Baroness was going to suggest that I should sack the officials and in that way save money, but she was not quite making that jump. It will be an interesting policy if her party puts that forward as one way in which to find some of the additional money which the amendments before us promise.

I return to the amendment. As I said earlier, income-based JSA is intended to help unemployed people whose resources are insufficient to meet their day-to-day living expenses. It is only right that in any system based on need, capital or income which is available, including that of the claimant's family, is not ignored. In the case of a family, benefit is paid for the whole family, taking into account the resources and needs of the family as a whole.

Income-based jobseeker's allowance will closely model income support, as I have said on a number of occasions. The upper limit will be £8,000 and the lower will be £3,000. We believe that it is necessary to preserve alignments of benefits in order to avoid anomalies and inequities and to preserve incentives.

The present lower and upper capital limits strike a balance which allows people to maintain a cushion of savings to fall back on while expecting those with capital to use some of their resources towards their own living expenses before they have recourse to public funds. Part of that is called "saving for a rainy day". If the rainy day comes—and this is obviously one of them—it is right that the taxpayer should expect people to use their umbrella at least to some extent before calls are made on the taxpayers' resources. The capital limits are part and parcel of the fabric of the system and are designed to ensure that people who have some resources make some use of them before they can ask the taxpayer—the general community—to pay an income-related benefit.

Turning to the amendment which seeks to raise the capital limits to a lower limit of £5,000 and an upper limit of £10,000, the cost of implementing such provisions for income support alone—that is, for all income support, not only for unemployment benefit; I do not think that such provisions could be applied to one narrow group—would be £55 million.

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At the risk of hearing another story about calculators, my calculator has already totalled over £100 million of Opposition spending this afternoon—and it is only 4.40 p.m. I shudder to think what my calculator might show at the end of the day. As I said, it already shows well over £100 million in Opposition pledges. I am quite content for the Labour Party to promise such additional expenditure on these and other matters, but that bill will suddenly become very large and unsustainable when added to the current very large social security bill.

I believe that increasing the capital limits would represent poor targeting and add an extra £55 million to the social security budget. Our priority has been to maintain benefit levels and improve help for claimants who are most in need rather than increasing disregards for those who have some resources of their own.

I shall leave answers to the questions about "steps" until we reach Amendment No. 118, tabled by the noble Earl, Lord Russell. That is the time to discuss whether there should or should not be steps between the limits of £3,000 and £8,000. I hope that the noble Baroness will withdraw her amendment. I can see that she does not agree with my proposals. Perhaps that keeps some clear blue water—or should it be clear red water?—between our parties. It is evident that the Labour Party has not lost its taste for spending public money.

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