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Lord Henley: He will be back.

Baroness Hollis of Heigham: My Lords, I am sure he will be and we shall welcome him when he returns. In the light of the Prime Minister's speech yesterday, the debate is especially timely. We all recognise that it is impossible to live a financially comfortable life on benefit. But as an example, to raise all income-related benefits by £5 per head would cost a staggering £1.9 billion, nearly £2 billion.

Therefore, we have two priorities: to ensure that those who are trapped in poverty on benefit yet who can--and almost always want to--work should be helped into work; while at the same time we discharge our responsibilities to support those who are unable to work due to age, disability or caring responsibilities in as decent and dignified manner as possible. In other words, we want to make it worth while for people to make the transition into work and ensure a fair return on extra earnings once they are in work. That means addressing both the unemployment trap and the poverty trap. In this House of experts, noble Lords will know what that means.

Noble Lords will know also that there are no easy solutions to those interdependent problems. The noble Earl, Lord Russell, raised the question of tapers. As the noble Earl and the noble Lord, Lord Henley, will know, a measure which improves the return from moving into

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work will generally also increase the severity of marginal tax rates for those in work. When we provide financial support to boost family income in work, we have to consider the effect on incentives as that help is withdrawn. A sharp withdrawal of in-work benefits leaves little incentive to extend hours or earnings. Yet gradual withdrawal--a slower taper, on which I was pressed by the noble Earl--draws more people into means-testing and increases cost.

There are problems both with a long gradual taper off benefit and with its opposite--a short, sharp taper. These are difficulties accentuated because means testing has grown as a percentage of our benefit expenditure, to my regret, from 17 per cent. in 1978-79 to 36 per cent. in 1995-96, and also because our benefit system is household based. We have constructed the perverse effect that to maximise his incentive to work (by withdrawing pound for pound) we may, as the noble Earl recognised, pull any partner of his in part-time work out of work altogether. Similarly, we urge people to save and then taper their benefit down very sharply for any modest savings they may have.

While reviewing those problems, as we shall do, we must not neglect our duty to protect those who are unable to find work. This Government are committed to maximising opportunities for people to play a full part in our society--and that includes ensuring that work pays enough to be worth while. That is why we have appointed Martin Taylor, the chief executive of Barclays plc, to lead a task force undertaking a thorough review of the tax and benefit systems so they can be modernised and streamlined to deliver the Government's aims of promoting work incentives, reducing poverty and welfare dependency and strengthening the community and family life.

Once we have completed this review, we shall have practical and well considered proposals to further our key welfare-to-work objectives by addressing the barriers that keep people out of work and trapped on benefits. In addition, the Government have announced that Professor George Bain will head the low-pay commission to advise the Government on their minimum wage, not much mentioned this evening. The minimum wage will help to ensure, as we urged repeatedly when we were on the Opposition Benches, that in-work benefit moneys do not go to subsidise the exploitative employer but to help those who have particular difficulties in the labour market, perhaps because of the size of their family.

The debate today has been widespread and knowledgeable. It is a timely debate and one to which I have listened with great interest. But it is clear that it is not simply financial matters which people consider when seeking to return to work. We intend not only to review the benefit system to improve incentives to return to work but, as I have been invited to comment this evening, we intend to introduce a whole range of other measures which will help to get people off benefit and into work.

The noble Earl, Lord Russell, and the noble Lord, Lord Henley, both referred to the New Deal. Our first priority is to get 250,000 young people under 25 off

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benefit and into work or quality training. For too long young people were written off by the previous Government. The Government's New Deal will present real opportunities to each and every young person on jobseeker's allowance to better themselves and to prepare themselves for work.

There will be four routes available to them: a chance of employment, for which we will reimburse the employer £60 per week for six months; an opportunity to work with the voluntary sector; a chance of gaining valuable work experience through the environmental task force; or the opportunity for young people without basic qualifications to improve their skills through full-time study or training, an option never before available to them.

Placements on the employer option and those with the voluntary sector and the environmental task force will offer quality accredited training as well as work experience. That is vastly superior to anything offered by the previous Government, who were only interested in make-work schemes which offered little or no real help to the long-term unemployed. By contrast, the New Deal will allow young people to increase their knowledge and gain in confidence from their experiences on the various options. By improving their skills and standards they will increase their overall employability and they will make themselves more acceptable to prospective employers. We are offering them opportunities--opportunities to move into employment; opportunities to train and opportunities to do genuinely meaningful work in the community and for the environment.

All of these placements will offer quality training or work experience, allowing young people to increase their knowledge and gain in confidence. When we interview young people during the gateway to the New Deal, we shall pay specific attention to those who are particularly disadvantaged in the labour market. Obviously fit, able, confident, qualified young people will usually find their way into work. Others who are less confident, less fit and less qualified often become beached in our society. When helping young people to choose the most appropriate New Deal option, we shall look carefully at special needs; for example, those people for whom English is not their first language or young people with a degree of disability.

However, I must offer a note of warning, and the noble Lord, Lord Henley, pressed me on this matter. These are real opportunities for young people and we expect them to avail themselves of those opportunities for improvement. As the Prime Minister said, there will be no fifth option of a life on full benefit if they turn down those options. If reasonable offers are refused, sanctions will inevitably come into play. The majority of people want to work and will wish to take up one of the four options available. But those who do not will not be able to live off benefit. JSA sanctions will apply for fixed periods of two or four weeks.

For the long-term unemployed who are over 25 we are also offering subsidies of £75 per week to employers willing to provide jobs. That will be in addition to the

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numerous programmes which the Employment Service already runs to assist the long-term unemployed in their search for work.

All noble Lords who have spoken have emphasised that it is not just those who are claiming jobseeker's allowance who may want to work. It is our intention to ensure that the wider unemployed, such as lone mothers who are looking for work, are not forgotten or pushed to the bottom of the pile. Lone parents face significant challenges in taking sole responsibility for the upbringing of their children and in pursuing the best possible standard of living for themselves and their families. I agree entirely with the remarks made by my noble friend Lady Turner to that effect. Most of them do an heroic job.

While the majority of lone parents want to work when their youngest child goes to school, they face extra barriers on moving into work. They have to balance the often competing and conflicting needs of work and family responsibilities against the present scarcity of affordable childcare. Moreover, they lack the support of a partner and of a partner's in-laws. In addition, they often have a low skills base and low self-esteem, combined with limited employment experience. All that can mean that lone parents remain unconvinced that they really can be better off in work.

We believe that lone parents do not feel that a life on benefit can satisfy their aspirations to provide the best possible life for their children; nor that the example of the parent living on benefit for a very long time can be a healthy one for their children. My right honourable friend the Minister of State, Mr. Frank Field, sometimes quotes the example of a child in his constituency who, when asked what he wanted to do when he grew up, replied that he wanted to collect his Giro.

We believe that lone parents want to achieve independence and regain personal control over their own lives. In response to the noble Lord, Lord Henley, I should point out that the offer of work for them is not a problem but an opportunity which they are pressing us to deliver. They know, as we do, that the average difference for a lone parent not in work and one in work is £50 per week. That money can transform the living standards, opportunities and aspirations, and, indeed, the quality of life, for them and their children.

Like the noble Earl, Lord Russell, I too have studied the research of Jonathan Bradshaw. It is entirely right that he should draw to our attention tonight the fact that lone parents in this country face hurdles as regards getting back to work which are higher than those which exist almost anywhere else in Europe. It is our job in the first place to dismantle those hurdles so far as we can and, if not, we must help them to overcome them. To do so, the Government are committed to introducing help and advice from a proactive Employment Service. Once the youngest child is in the second term of full-time school, lone parents will be assisted by developing a package of job search, training and after-school care for their children to help them off benefit. Moreover, we will introduce something that we have never had--a national childcare strategy which will plan provision to match the requirements of the

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modern labour market and help parents, especially lone mothers, to balance family and working life. That will entail after-school care and early years development plans. A key feature will be a substantial expansion in out-of-school childcare, at least £150 million of which will be funded by the National Lottery.

There is one other group that has not been mentioned in tonight's debate but it is one that I know is of considerable concern to your Lordships. They may linger for many years on benefit yet would like to work. I am referring to disabled people. They currently find themselves in two situations. They are either receiving long-term sickness benefits with little encouragement to get back into appropriate work which they may feel they can do or they are registering for work but have some partial incapacity which makes finding work very difficult. That is especially true for what we call the "twilight decade". I have in mind those middle-aged men who may have spent years in quite heavy manual work who may have a partial disability--for example, back trouble or angina--but who, given their health record, together with their age and lack of skills, are unlikely to be offered a full-time job and, if they were, would be unlikely to be able to hold it down. But it does not have to be all or nothing. We shall be looking carefully at the problems faced by these groups and seeking to ensure that the benefit system provides more help for the special needs of those disabled people who are able and who wish to get back into work, whether full-time or part-time.

The noble Earl, Lord Russell, referred to the Citizens' Commission. Like him, I have had the privilege of reading that report in advance of its publication and I found it illuminating. I entirely agree with the noble Earl that it shows very clearly how attached people are to the labour market: they want to be financially self-supporting and do not want to linger in dependency--indeed, the subject of tonight's debate. Too often--and I am sure that the report is right--the welfare system has supported people outside the labour market rather than helping them to participate in it. Our strategy will be designed precisely in that direction so as to help people get back into the labour market.

The noble Earl raised many matters. If I have not answered all of them this evening, I hope that he will allow me to deal with them by letter. In particular, he mentioned the possibility of merging income support with family credit and suggested that we should ease the process. That is certainly a question which Martin Taylor will be reviewing and considering. Obviously we have a very real interest in the matter. However, as the noble Earl will know, there is a problem, given the fact that, unlike income support, family credit for the most part--that is, with the exception of things like earnings top-up--is a family/child-related benefit and, therefore, is not something for which single people are eligible except in pilot schemes. Indeed, there could be a problem, although I am not saying that there would be, of a possible incentive to reduce hours. Nonetheless, that is something that we are actively looking at because, if we could smooth the transition between the two, it would surely be right to do so.

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The noble Earl also asked whether we would consider using the social fund for deposits. That is an attractive idea. However, in the past there seems to have been considerable abuse of the system in that in the previous system, costs jumped from £18,000 a year in 1981 to over £10 million before it was finally abolished. In the light of that experience, we believe that the rent guarantee schemes of voluntary and local authorities continue to prove to be a better and more reliable way forward.

The noble Lord, Lord Henley, referred to the problem of seeking to cap social security expenditure as his Government failed to do. The noble Lord is right: his Government did fail to cap social security expenditure. The reason for that was that social security expenditure grew to subsidise the benefits of the previous Government's economic failure. Those benefits of failure from jobseeker's allowance to income support, to extra money on housing benefit and council tax benefit going to the unemployed amounted to £10 billion in real terms in 1979 but over £30 billion in today's money--a leap of £20 billion in real terms. The response to that is to tackle those failings. We firmly believe that the best way of ensuring a cap on social security expenditure--and, indeed, I hope a reduction in social security expenditure--will be achieved because we are working with the grain of what people want; namely, to come off social security benefits and be able to move into work.

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In conclusion, I have outlined a large programme of measures which we believe will improve financial incentives, help people to increase their employability and make them attractive to prospective employers. People who need financial support while they are looking for work will of course continue to receive it, but we will also be providing a wide range of services which will give them both the skills and the confidence which will in turn help them to return to work.

It bears repetition: this Government believe that, for those able to work, work is the best form of welfare. It is also--and the report of the Citizens' Commission shows this to be the case--what they want to do. As one claimant said, "They"--presumably the previous Government--"have taken away everything that would help you get back into work". While another said, "The worst thing is that they have made people feel that they are not part of society". Then, from a person who was one of the long-term unemployed under the previous Government, "People who have been unemployed for years have all their initiative, self-will and self-worth taken away. Then they expect us to get a job".

We believe and hope that we understand the difficulties that people may face when making the transition back into work. We are committed to providing the active support that they need to achieve that aim. We will enable them to do what they most want to do; namely, escape the path of poverty and get back into work.

        House adjourned at eighteen minutes past seven o'clock.

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