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Briefing for Peers – Welfare Reform Bill

The Welfare Reform Bill: Financial Privilege, Convention and Fiscal Implications.

With the Welfare Reform Bill (WRB) returning to the House of Lords tomorrow, Tuesday 14th February, we are presenting this briefing in order to bring together all of the most up to date information available on :

·        Financial Privilege
·        Constitutional Convention
·        The net fiscal implications of current amendments
·        The wider implications for future reform of the House of Lords

It has been compiled by leading experts in these respective fields and aims to give peers any information they might need when re-considering the bill.

When the WRB came from the Commons to the House of Lords, it faced extensive, line-by-line scrutiny by Peers. It was immediately apparent that the tone, nature and expertise of the second chamber was very different to that of the Commons. Argument was thorough and informed. The breadth of experience and knowledge brought to the debate was extensive. The partisan and combative nature of the Commons gave way to thoughtful, cross-party analysis.

Noble Lords spent months considering the bill and the amendments passed were intelligent and vital. These amendments have the support of all major charities representing millions of supporters and of grassroots campaign groups representing tens of thousands more. They are supported by disabled people’s organisations, church groups, poverty experts and academics alike. Many of the amendments have support across the house.

They are modest amendments. By no means do they meet all of the expectations of those seeking to improve the bill. They do, however, go some way to mitigating its worst effects.

The schedule in the House of Lords is extremely full, but we ask peers who have invested time and energy into understanding and scrutinising the WRB to attend the debate on Tuesday and vote to protect the amendments they worked so hard to pass. It is likely that new amendments will be proposed in the hope that the Commons may consider “amendments in lieu” We ask Peers to stand for us and speak for us. We ask them to defend us.

We are the people who will be affected by this bill and we have engaged with the political process at every stage. We have shared evidence, we have offered opinion and we have warned repeatedly that some elements of the bill – though by no means all - will cause extreme hardship and suffering. We can do no more than trust in our democratic system and put our faith in democracy and those who represent us.

We thank all of you who voted for the original amendments, but also those who gave their time to listen to and understand the arguments throughout the debates. Many of you expressed concerns or made points of order that brought clarity to the discussions. If you are concerned, as we are, that even modest amendments were not considered by the Commons, and may not be on future bills, we urge you to vote, once more, to amend the WRB and to reassert the role of the second chamber as a revising chamber.

Evidence given to Select Committee on the Constitution 15th Report of Session 2010–12:
 [The House of Lords] "has a proper role in safeguarding the constitution by ensuring, so far as possible, that constitutional changes are not introduced for partisan reasons and that arguments advanced are generally applicable and not motivated by party advantage.”
- Professor David Feldman, Rouse Ball Professor of English Law, University of Cambridge

“There is compelling evidence that the House of Lords has developed into a highly effective second chamber over the past decade or more, playing a key role in the legislative process, and helping to hold the government to account.” - Democratic Audit

“There is an ever increasing reliance on the House of Lords to conduct scrutiny of sections of bills not dealt with by the Commons.” - Hansard Society

Constitution Committee - seminar held on 16 March 2011:
 “The question of the extent to which Parliament should simply accept legislative proposals from the government was an important one. It was not satisfactory for the government to decide changes to the constitution on their own.

“The reality was that the government had the power to do a great deal because they had a majority in the Commons. This tended to be a particular problem at the beginning of an incoming government's term which was when process issues were more likely to be overlooked. Parliament might scrutinise bills, but the government could ignore Parliament if they chose to do so. Whatever the constraints on government, ultimately the government would get their own way. Furthermore, governments were likely to be most insistent when the political stakes were highest which might well be the case when constitutional propriety was being tested.

“It was, however, also argued that the constitution belonged to the people and not to any political party—this highlighted the need for consensus.”

Current Amendments and Reasons for Rejection

The following link gives the current amendments as they stand and the reasons given by the Commons for rejecting them

The key amendments are :

Clause 10 – “To make the lower rate no less than two third of the higher rate” of the child disability rate under the Tax Credit system

Clause 11 – To protect those living in social housing with a spare room from a cut in housing benefit where there is no suitable alternative accommodation available

Clause 51 – To time limit contributory ESA to a period “not less than 730 days” rather than a period “not exceeding 365 days”

To exclude cancer patients undergoing treatment from the one year time limit of cESA

Clause 52 – To protect the entitlement of profoundly disabled children to qualify for NI credits on becoming adults

Clause 93 – To exclude Child Benefit from the benefit cap

Clause 131 – To protect single parents from Child Support Agency fees where reasonable steps have been taken to come to a resolution

The fiscal implications of the House of Lords WRB amendments

During further discussion of Lords’ Amendments (LAs) the following note lays out the Net Fiscal Savings for 2014/15 of the current amendments where Government costings are available.

Total figure: £1.681 billion

The table below shows the DWP’s estimates of Net Fiscal Savings arising from the measures amended by the Lords and overturned in the Commons (note that there are six measures but seven amendments as there were two amendments on time-limiting contributory Employment Support Allowance).

All of the figures relate to 2014/15. Net fiscal savings represent the reductions in expenditure due to the legislation, taking account of any offsetting increases in expenditure arising from the change: for example, the reduction due to time-limiting contributory ESA is offset by increased expenditure on income-based ESA and on some other benefits. The net figure is the savings remaining after these offsetting changes have been taken into account.

Figures are from the DWP’s impacts assessments (IA’s) for the measures. We note that the approach to presenting savings associated with Welfare Reform Bill clauses in the IA’s is surprisingly inconsistent as to the time period to which estimates relate, whether savings are presented on a net basis and whether fiscal impacts are distinguished from the economic cost-benefit analysis. We have tried to use consistent estimates, but even here it is not always clear whether estimates are in real or nominal prices.

In the case of two of the measures amended by the Lords, no estimates for net fiscal impact seem to have been published. These are the proposal to charge parents for services involved in securing maintenance payments from absent parents (Child Maintenance clauses IA, passim); and the proposal to reduce the lower rate disabled child premium in child tax credits from £53.84 to £26.75 (Universal Credit IA Annex 1 Policy Updates para 4). If no estimates of the fiscal impact of these measures are available, it is hard to see the relevance of the invocation of financial privilege.

In another case, the abolition of the youth rule for contributory Employment Support Allowance, the estimated net fiscal savings are minimal at £11m a year. We can contrast this with the net savings of nearly a billion from the time-limiting of contributory ESA: the former represents only 1.2% of the latter. To invoke financial privilege in this context is surely to trivialise the principle involved.

A blanket claim of financial privilege seems therefore of dubious relevance to at least three of the issues of contention between the Lords and the Commons, independently of whether it was in fact appropriate for government to claim privilege in any case [ref Constitution Unit document]. We note finally that it is not clear whether the estimated savings from time-limiting contributory ESA take account of the Department’s upward revision of its forecast expenditure on ESA by £1bn (10% of previously projected total spending) in 2011. This revised sum, which was reported by the Office for Budget responsibility in November, was partly due to higher than expected numbers of claimants entering the support group for ESA. As support group claimants will be entitled to contributory ESA without time-limit, this would be expected to reduce the estimated savings. The estimates in the IA seem to have been last updated in April 2011.

Note on Lords Reform

Under plans for reform of the House of Lords, there is no intention to codify or re-define the role of the second chamber. In recent years, the primacy of the Commons has come to dominate the revising nature of the Lords more and more. If LA’s are not to be considered by the Commons, then as several peers pointed out, what is the role of the Lords? We believe that this question should be answered now, over the Welfare Reform Bill, before all other bills are returned to peers un-amended and before proposals for an elected second chamber are finalised.

The Coalition Agreement commits the government to "bring forward proposals for a wholly or mainly elected upper chamber on the basis of proportional representation".
The draft Bill announced by Deputy Prime Minister Nick Clegg included these key proposals:
·        Reforming and reducing the House of Lords to 300 members, with each member entitled to a single term of three parliaments.
·        80% of the new chamber to be comprised of elected members, representing multi-member electoral districts. The remaining 20% of members to be appointed as cross-benchers by an independent commission.
·        The new upper chamber to be elected a third at a time, using the Single Transferrable Vote (STV) system of proportional representation.
·        The House of Lords elections to take place at the same time as general elections;
·        A reduction in the number of Church of England Bishops sitting in the House of Lords from 26 to 12.
In effect, this would mean the gradual replacement, in thirds, of the current House of Lords over the space of fifteen years with a system of “grandfathering” where some life and hereditary peers would remain throughout the transitional process in order to ensure a smooth transition.
The proposal to introduce a one-off term of three parliaments for members of the reformed chamber is in order to ensure that party whips will be unable to threaten them with the prospect of de-selection and therefore allowing members to retain the same voting independence and non-partisan atmosphere as currently is the case in the House of Lords.
The proposal for 20% appointed cross-benchers is in order to preserve the ability of the chamber to allow independent experts to scrutinise government legislation and use their professional knowledge to add to the quality of debate and scrutiny within the House.
Election in thirds and by proportional representation is intended to prevent the new chamber from ever having a more recent democratic mandate than the House of Commons, and thereby preserving the supremacy of the Commons whilst also giving the reformed chamber its own democratic mandate to lend substance and backing to its voice.

But what is not being reformed, or even codified, is the role of the reformed chamber. It is assumed that the reformed chamber will still be bound by the effects of the Parliament Acts and therefore will still be unable to block money bills. It is also assumed that existing conventions will still apply. As these conventions become stretched beyond their intended use, it is now that we must ask what role the second chamber plays. What role will it need to play in the future? Is it currently allowed to fulfil its role as a revising chamber and should these conventions be carried forward under reform without discussion or definition?
We make the argument that, with reform of the House of Lords by legislation being discussed, the legislation should also include a specific definition of the role of the upper chamber.
For example, the definition of a money bill is conventionally regarded to be a budget or other tax altering bill – but, given that almost any bill passed by parliament involves the spending of money to one extent or another, and that the sole arbiter of whether a bill constitutes a money bill is the Speaker of the House of Commons, it is conceivable for almost any bill to be treated as a money bill, which would negate almost entirely the scrutiny role of the House of Lords. This would appear to be a severe constitutional anomaly.

Similarly, the Salisbury Convention states that the House of Lords should not obstruct a manifesto pledge of the governing party – yet this too is open to interpretation and is not codified. Increasingly, manifestoes do not include many policies that will, in fact, come before Noble Lords.

It can be argued that Lords reform represents an ideal opportunity for legislation to determine and codify once and for all the role of the upper chamber and its relationship with the House of Commons. Given the recent challenges to constitutional convention governing this relationship, in the form of parliamentary behaviour over both the Parliamentary Voting System and Constituencies Act 2011 and the Welfare Reform Bill, the argument for such an approach has been considerably strengthened.

Selected Comments from the Clerk of the House on Financial Privilege and Amendments
Whether the Lords try again (to present new amendments) is a matter for their interpretation of the convention that they should not send back an amendment that “invites the same response”. It is not a matter for the Commons. If the Lords send back amendments, the Commons will consider them. [italics ours]

The Government of the day has no role in deciding whether an LA engages financial privilege.

Disagreeing with a Lords Amendment

It is important to remember that designation [of financial privilege] simply identifies which LA’s have a financial effect. Whether the Government wishes the House to agree to them or not is a matter of policy, and no different from the “ping-pong” process on any Bill. But if the Government of the day uses its majority to get the House to disagree to an LA, then the Reason (see below) given to the Lords will be the financial privilege Reason.

Waiving of privilege

Even if an LA involves spending or charging, and so engages financial privilege, the Commons can accept the amendment (and so waive its privileges).
In the last three years, sixteen Bills have come back from the Lords with amendments which involved privilege. On eight, privilege was waived on all LA’s. On one, the Commons did not (and could not). On the remaining seven, the Commons accepted most LA’s with financial implications but disagreed to 43.
(With regards to the current Welfare Reform Bill, all LA’s in which the Government was defeated, were then rejected by the Commons out of hand. In this instance, the use of Financial Privilege stifles debate and negates the power of the second house as a revising chamber. The Bill cannot be thrown out after its third reading.  Alternative amendments “in lieu” can be proposed but must not be too similar to the originals. In practice, they should incur fewer costs and certainly not more. )

Liberty and the Domination of the Lords

This brief conclusion is taken from a longer article by Stuart G White, published in Our Kingdom

Stuart is a political theorist and lectures at Jesus College, Oxford.

‘…the worst thing that can happen to one in the relations between man and man,’ wrote Rousseau, ‘is to find oneself at the mercy of another.’

According to republican political theory, liberty consists precisely innot living at another’s mercy. One lacks liberty when someone has a power to interfere in your life at their discretion, according to their whim. Liberty is the absence of this power, or what the political theoristPhilip Pettit  calls ‘non-domination’.

It helps to keep this insight into liberty in mind when thinking about the latest turn in the long, on-going story of the Coalition’s Welfare Reform Bill.

Last month, the House of Lords passed a series of amendments – seven in all – to the Welfare Reform Bill.This was a case of the Lords doing what constitutional traditionalists say it is supposed to do: acting as a thoughtful revising chamber.
As political theorists like Pettit argue, we prevent the government itself holding an arbitrary power over us as citizens by making sure that the processes of decision-making contain ‘checks and balances’, little and not-so-little points of blockage and inconvenience, that together make it hard for the government to do just as it likesto us. Our liberty requires – in a sense, consists in the fact - that governments have to get their proposed laws through a process that is at least moderately difficult in this way. (This also tends, in the long-run, to produce better laws.)

Under the new interpretation of financial privilege, the Lords would bedominatedby the Commons – or, more realistically, by the core executive acting through its secure majority in the Commons. The core executive would effectively have the power to decideentirely at its own discretionwhich of its bills it will deign to let the Lords haveany significant say in and which it will not. In effect, the Lords could be called into and out of existence as a revising chamber at the core executive’s whim.
If, however, the Commons comes to dominate the Lords in the way just described, then one of the modest checks and balances in the formal political process will be lost. Domination of Lords by Commons is, or adds to, domination ofusby the Commons – or, more exactly, by the core executive acting through its secure majority in the Commons.
The struggle over the WRB is not only a struggle about welfare benefits. It is also a struggle over the quality of our democracy - and this implicates liberty itself.

This briefing is also available at:

For further information, please contact Sue Marsh or