Welfare Reform Bill: Financial privilege, constitutional convention, fiscal and second chamber reform implications

Sue Marsh


The Welfare Reform Bill (WRB) which has returned to the House of Lords on 14 February 2012, before its final passage to Royal Assent, is seen by those living at the sharp end of society (not least disabled and sick people) as a significant threat to their livelihood. These issues have been addressed in detail elsewhere on Ekklesia. This briefing paper by Sue Marsh, co-author of the Spartacus Report ('Responsible Reform') on Disability Living Allowance, examines * Financial Privilege. * Constitutional Convention. * The net fiscal implications of Welfare Reform Bill amendments. * The wider implications for future reform of the House of Lords.

The Welfare Reform Bill (WRB) which has returned to the House of Lords on 14 February 2012, before before its final passage to Royal Assent, is seen by those living at the sharp end of society (not least disabled and sick people) as a major and significant threat to their livelihood in its current form.

These issues have been addressed in the paper ‘Betraying disabled people and welfare’, by Karen McAndrew, published by Ekklesia on 01 May 2011 (http://www.ekklesia.co.uk/node/14675). Also in the Spartacus Report, ‘Responsible Reform: Changes to Disability Living Allowance’, by Sue Marsh et al, published by Ekklesia and other agencies on 9 January 2012. See 'Need for a pause on PIP and Welfare Reform Bill', 17 January 2012 (http://www.ekklesia.co.uk/node/16094).

The Spartacus authors have now addressed the WRB in terms of four related issues:

* Financial Privilege.
* Constitutional Convention.
* The net fiscal implications of Welfare Reform Bill amendments.
* The wider implications for future reform of the House of Lords.

This briefing has been compiled using analysis from leading experts in these respective fields and aims to locate the key issues concerned in re-considering the bill – something which disability activists, charities and Ekklesia itself have called for.

1. Introduction

When the Welfare Reform Bill 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.

Peers 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 had support across the house. They are modest amendments. By no means do they meet all of the expectations of those seeking to improve or substantially change the bill. They do, however, go some way to mitigating its worst effects. See: ‘Welfare Reform Bill amendments going to House of Commons from the House of Lords’ (http://www.ekklesia.co.uk/node/16194).

2. Current Amendments and reasons for rejection

The amendments as they stood at the end of January 2012 and the reasons given by the Commons for rejecting them are set out as follows: http://www.publications.parliament.uk/pa/bills/lbill/2010-2012/0126/1212...

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.

A wide range of responses to the issues contained in the amendments, and to their rejection by the Cabinet and the Commons, are cited here: http://www.ekklesia.co.uk/welfarereformbill

3. Fiscal implications of the House of Lords WRB amendments

During further discussion of Lord’s 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 is 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. [see Constitution Unit comments].

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 of Budget responsibility in November 2011, 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.



Annual Net Fiscal Savings 2014/15
(constant prices except where indicated *, figures in ’000s)

HB underoccupation ...................... 430,000
Youth rule for contributory ESA ...... 11,000*
Time-limited contributory ESA ...... 935,000*
Household benefit cap ................... 305,000
Disabled child premium ................. No costings published
CSA charge for calculations ........... No costings published

(*DWP does not specify whether figures are in constant prices)


(4) Note on House of 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 LAs are not to be considered by the Commons, then as several peers pointed out, what is the role of the Lords?

There is a strong case for saying that this question should be answered now, over the Welfare Reform Bill, before other bills are returned to peers un-amended and before proposals for an elected second chamber are finalised.

The Coalition Agreement commits the UK 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?

Those hardest hit by the Welfare Reform Bill are making 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, manifestos do not include many policies that will, in fact, come before Peers.

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.

5. Selected comments from the Clerk of the House on Financial Privilege and amendments (italics ours)

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

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

(a) Disagreeing to a Lords Amendment:

It is important to remember that designation [of financial privilege] simply identifies which LAs 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.

(b) 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 LAs. On one, the Commons did not (and could not). On the remaining seven, the Commons accepted most LAs with financial implications but disagreed to 43.

(With regards to the current welfare reform bill, all LAs in which the Government were 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 practise, they should incur fewer costs and certainly not more.)

6. Liberty and the domination of the second chamber

This brief conclusion is taken from a longer article by Stuart G White, published on openDemocracy’s ‘Our Kingdom’ site on 7 February 2012 as ‘Liberty is at stake: Commons, Lords and the Welfare Reform Bill’ (http://www.opendemocracy.net/ourkingdom/stuart-white/liberty-is-at-stake...). Dr White 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 in not 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 theorist Philip 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 (January 2012), 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 likes to 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 be dominated by 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 decide entirely at its own discretion which of its bills it will deign to let the Lords have any 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 of us by 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.

© Sue Marsh, 2012, and the sources cited and credited above.

This paper, redacted for online publication by Simon Barrow, has been used to brief Lords Temporal and Spiritual in the debate over the Welfare Reform Bill 2011/12.


Ekklesia's reporting, commentary, analysis and research on the WRB - referencing NGO and academic sources - is available in aggregated link form here: http://www.ekklesia.co.uk/welfarereformbill

Background and resources from the Spartacus initiative: http://wearespartacus.org.uk/


Sue Marsh is co-author of the report 'Responsible Reform' (http://www.ekklesia.co.uk/responsiblereformDLA) on the government's flawed Disability Living Allowance (DLA) reform. A commentator, blogger and campaigner, she writes regularly at The Diary of a Benefit Scrounger (http://diaryofabenefitscrounger.blogspot.com/), from which this is adapted and excerpted. She live daily with the realities about which she writes, researches and advocates. Read Sue's blogs on Ekklesia here: http://www.ekklesia.co.uk/suemarsh