Income Support (Work-Related Activity) and Miscellaneous Amendments Regulations 2014
Lord Bates Excerpts(10 years, 2 months ago)
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Lord Bates
That the draft regulations laid before the House on 22 January, 3 February and 5 February be approved.
Relevant documents: 20th, 21st and 22nd Reports from the Joint Committee on Statutory Instruments, 29th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 11 March.
Income Support (Work-Related Activity) and Miscellaneous Amendments Regulations 2014
Lord Bates Excerpts(10 years, 2 months ago)
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Lord Bates
That the Grand Committee do consider the Income Support (Work-Related Activity) and Miscellaneous Amendments Regulations 2014.
Relevant documents: 20th Report from the Joint Committee on Statutory Instruments, 29th Report from the Secondary Legislation Scrutiny Committee
Lord Bates (Con)
My Lords, these regulations were debated in the other place on 3 March 2014 and I am satisfied that they are fully compatible with our obligations under the European Convention on Human Rights.
The Government have made clear their commitment to improving sustainable employment opportunities and reducing worklessness, while supporting those who are unable to work or who are looking for work. Helping more people into work is essential to the recovery of the economy and to ensuring that people can achieve their aspirations and those of their families. Given this, we remain committed to giving people the support they need at the time it is needed.
The Government have already taken steps to provide additional support for lone parents but believe that more could and should be done to help them prepare for work. This is the reason for these regulations, which essentially provide for two separate changes. First, these regulations would bring income support into line with employment and support allowance by making the work-focused interview regime more flexible and responsive to individual needs. Secondly, they would make changes to income support, employment and support allowance, and universal credit in order to offer more support for lone parents with children aged three or older by requiring them to undertake appropriate activities that will help them prepare for work.
Since 2008, the age threshold for the youngest child has changed so that from May 2012 lone parents with a youngest child aged five or over have no longer been entitled to claim income support solely on the basis of being a lone parent. Such lone parents should either be in work or looking for work. We know that many lone parents are already taking steps in preparation for a return to work but we also know that many more lone parents would benefit from additional support to overcome barriers to future employment.
It is worth reflecting on the current position for attending mandatory work-focused interviews, which varies according to the benefit an individual is awarded. Lone parents with a child aged one to five who are entitled to income support are usually required to attend mandatory work-focused interviews every six months. In the year before entitlement ends, interviews take place on a quarterly basis. Lone parents on employment and support allowance with a child aged one to five attend flexible work-focused interviews, with the frequency determined by their work coaches. Under universal credit, lone parents and responsible carers with a child aged one to five also attend flexible interviews, the frequency of which is determined by their advisers.
From April, these regulations will bring in mandatory work-focused interviews for lone parents on income support, in line with the approach already taken for employment and support allowance and universal credit. The frequency of interviews will be determined by the adviser based on the needs of the individual. It means that a tailored package of support can be offered to lone parents at the time they need it rather than at predetermined times set by an inflexible appointments system. The Government believe that this approach will better serve lone parents to prepare for work. As the House has already agreed to this principle in universal credit and employment and support allowance, I trust that noble Lords will not see any reason to oppose this measure.
Secondly, these regulations change the work-related activity requirements for income support, employment and support allowance and universal credit. It might be helpful if I remind noble Lords of the current position. In the existing system, there is no requirement to undertake work-related activity within income support for any claimant. The current position in employment and support allowance is that lone parents in the work-related activity group can be required to undertake work-related activity when their youngest child is five. Currently, there are no requirements in universal credit for lone parents with a child aged one to four to undertake activities to prepare for work.
The mandatory work-related activity changes will affect lone parents and responsible carers with a youngest child age three or four who are entitled to income support solely on the basis of being a lone parent, those in receipt of employment and support allowance—in both the work-related activity group and new-style employment and support allowance—and those in receipt of universal credit.
The regulations remove the cliff-edge effect of going from not having any work requirements to having full work requirements that is currently faced by many lone parents when their youngest child reaches the age of five. The Government recognise that for many lone parents the main barrier to work or preparing for work has been the lack of affordable childcare. However, the Government have taken steps to improve this position. All children in England aged three and four are now entitled to free childcare for 15 hours a week. We expect lone parents and responsible carers to take advantage of this provision where they can so that they can start preparing for work. Childcare is a devolved matter and Scotland and Wales have their own equivalent offer.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for that explanation. Labour supports the aim of these regulations. Indeed, the leader of the Opposition said in a speech last June that in a workless household, both partners or a single parent should use some of the time while their children are at nursery to make some preparations that would help them get back to work. He also stressed that there would be no requirement to go back to work until the youngest child is five years old. So we support the aim of these regulations.
When this order was debated in another place, my right honourable friend Mr Stephen Timms asked a series of questions of the Employment Minister, Esther McVey. She was able to answer only two of them and perhaps not in the depth that my right honourable friend had hoped for. I shall therefore put some of the same questions to the Minister in the hope that the intervening week will have enabled his officials to brief him to answer them perhaps more fully than was possible on that previous occasion.
First and most seriously, why is there no easement in the regulations for lone parents who have suffered domestic violence? I acknowledge that the Government have taken domestic violence seriously. In this very Room not so long ago, we debated the new cross-government definition of domestic violence and I was pleased to give the Government support for aiming to do precisely that. In the Universal Credit Regulations 2013, there was a clear easement for domestic violence which stated that, for 13 weeks, there would be no work-related requirements. In jobseeker’s allowance, the claimant is exempt for four weeks, which can be rounded up to 13 weeks. But in these regulations, there is nothing.
On 3 March in the Delegated Legislation Committee in another place, Stephen Timms asked Esther McVey this question:
“Can she confirm that it is her intention that there will be guidance that makes it clear that there will be the 13-week easement for people who suffer domestic violence, in line with other regulations?”.
The Minister replied:
“I will indeed; it is right that, as such support is given in other areas, it should be given in this area”.—[Official Report, Commons, First Delegated Legislation Committee, 3/3/14; col. 14.]
Can the Minister confirm that it is indeed the Government’s intention that there will be guidance that makes it clear that there will be the 13-week easement for people suffering domestic violence? If so, can he explain why that is not in these regulations, as it is in the corresponding regulations on income support and jobseeker’s allowance? Finally on this first point, can he explain what a lone parent would have to do if a decision-maker should require her to undertake some work-related activity despite suffering domestic violence? After all, Gingerbread reports many cases of lone parents being pushed to do things which they are not required to do by regulations or by guidance, perhaps because of a misunderstanding among generalist advisers in jobcentres. What should a lone parent do in these circumstances?
The second question that I want to ask is on the issue of parents of children aged five who have not started school and are not legally required to receive full-time education. Parents have to explain why it would be unreasonable for them to find other arrangements for the care of the child until he or she is in full-time education. Why is that easement not in these regulations?
Thirdly, under the regulations and as the Minister explained, single parents cannot restrict their availability for work-related activities during their child’s normal school hours—which is to be expected—or when their child is under the temporary supervision of another adult. Gingerbread is concerned that the latter issue causes a potential problem, because it means that a single parent could be sanctioned for being unable to undertake work activities because informal childcare arrangements had broken down. The Minister may say that childcare is covered in the “good cause” provisions, but that is not acceptable because of the process that would have to be gone through to try to sort that out. In JSA, informal childcare is not taken into account when compliance is being determined, presumably for precisely this reason, so why is it here?
What would happen to a single parent asked to attend an interview or other work-related activity whose three or four year-old was not in nursery and who did not have access to reliable free childcare? How should she pay for childcare? In another place, when Stephen Timms asked about this, Esther McVey referred to the childcare subsidy available for the first year when a parent first starts work. She also referred to Childcare Assist, which helps with childcare costs in the week before a single parent starts work. What about someone who is not working and not required to work? How should she pay for her childcare in these circumstances? Gingerbread suggests that Jobcentre Plus should pay for the childcare. What does the Minister think of that?
Finally, there is the question of travel time. The JSA and universal credit regulations place a limit of 90 minutes’ travel time to and from an interview. Can the Minister confirm that that limit will apply also to single parents undertaking work-related activity? If so, will that be made clear in the guidance to decision-makers? I look forward to the Minister’s reply.
Lord Bates
I am grateful to the noble Baroness for her response and for generously saying that support for this initiative in preparing people for the world of work is shared across parties. When we are dealing with some of the most vulnerable people in the country, it is important that, as far as possible, such agreement exists.
The noble Baroness referred to domestic violence. Again, I preface my remarks by welcoming the fact that she acknowledged that the Government had taken this very seriously and it was of great concern. We do not believe it is necessary to put an easement for domestic violence into these regulations. The draft regulations are flexible enough for advisers to apply the policy when appropriate. The income support guidance will reflect the position in jobseeker’s allowance and universal credit by stating that when a person satisfies the policy requirements, they are eligible to receive the easement, which includes deferring interviews and not setting mandatory work-related requirements. Providing the domestic violence easement in guidance mirrors the current approach taken for claimants who are victims of domestic violence and abuse who are entitled to old-style employment and support allowance.
We believe that these regulations are broadly enough worded for that to be taken into account as a good reason why certain requirements may not be met. We do not think it is necessary to put it in the regulations, as has been requested. But in response to Stephen Timms in the other place, my colleague Esther McVey, who is the Minister responsible for this area, has said that she will issue guidance in this area to the workplace advisers. I hope that will go some way towards reassuring the noble Baroness on this point.
The noble Baroness asked what would happen if the coach made a claimant do something despite them being subject to restrictions. The requirement to undertake activity when subject to domestic violence would be a matter of good cause to be considered, and would also be subject to appeal if that was something that was disputed.
Baroness Sherlock
I just want to be sure that I have understood this correctly. Three questions occur. First, why would the Government use as their comparator the position in old-style ESA rather than JSA or universal credit—the creature of their own invention, which they have just introduced? What is the difference between somebody on universal credit and somebody on income support? Secondly, will the Minister clarify that the guidance he has just referred to will be for a 13-week easement? That was the question asked by my right honourable friend Stephen Timms. Thirdly, if a lone parent who had suffered domestic violence was then inappropriately asked to engage in work-related activity, she could appeal, but would her benefits be sanctioned in the mean time, and how long does the average appeal take? What would happen to her while she was trying to sort that out?
Lord Bates
While I am getting some guidance myself, I will move on to some of the other points that the noble Baroness raised. She asked: if childcare is not available, is this an excuse not to undertake a work-related activity? We have no power to mandate claimants to place their children in childcare in order that they can undertake work-related activity. Claimants may also restrict their availability for work-related activity to times when they do not have childcare responsibilities. However, claimants cannot use the unavailability of childcare as a reason for not undertaking work-related activity. Even with the ability to restrict their availability, the requirement to undertake work-related activity remains. Claimants must accommodate this requirement or face the possibility of sanction. Claimants would therefore need to be reasonable about what they could do, which may involve taking up the offer of free childcare. If a claimant fails to comply with work-focused interview or work-related activity requirements, the regulations prescribe that the availability of childcare must be taken into account in determining whether that is a good cause, although it is not determinative of good cause in itself.
The noble Baroness asked about comparisons with jobseeker’s allowance and universal credit and the limit of 90 minutes’ travel time to and from the place of interview. A 90-minute travel time to work in each direction applies to those claimants who are expected to look for, and be available for, work. It does not apply to lone parents affected by this change, not does it apply to claimants on employment and support allowance. Any work-related activity which a claimant is required to undertake must be reasonable, taking the claimant’s personal circumstances into account, including the time that it would take for the claimant to get there. When determining what is reasonable, matters such as the availability and practicality of using public transport, the location of work-related activity and childcare responsibilities must be considered. Guidance will be updated to ensure that advisers are aware of this and take account of claimants’ individual circumstances.
Another question was about what support the group could get from the flexible support fund. The flexible support fund can be used in a number of ways, including paying for travel and replacement adult or child care to enable lone parents to undertake training, attend interviews or start work.
On why we use comparator old-style ESA, not JSA or universal credit, the JSA easement is for jobseekers. The ESA easement is in guidance. We will consider the need to place this in regulations.
Baroness Sherlock
I thank the Minister. I urge him strongly to take the question of domestic violence back to his colleagues and to think again. I take the Minister’s line as possibly a hint that Ministers may indeed be doing that; I hope very much that I have not overinterpreted it. I look forward to hearing some more information about that. I do not think that the distinction between someone being a jobseeker or not seems to be a good reason why someone who has suffered domestic violence should be treated any differently. If one is coming out of that circumstance, the ability to look for a job, whether mandated to do so, or just to prepare for it, would both seem to be of comparable difficulty and ought to be treated similarly. I look forward to hearing some good news on that before long.
I want to clarify a couple of the Minister’s other points as I may have misheard them. When this matter was discussed in another place, the question of childcare—particularly the position of someone whose child was not in nursery having to use informal childcare—my understanding was that the Government’s position was that the additional childcare offer for two and three year-olds is an offer, not a requirement. I understood the Minister to say that, effectively, a lone parent would not be able to use the fact that he or she might not have access to any suitable childcare as a reason not to engage. Therefore, if they could not find anything else, they would have to take that offer up, whether they wanted to or not, or have their benefits sanctioned. Can the Minister clarify that?
On travel time, I am quite surprised to find that there is no limit. Can the Minister at least reassure the Committee that the guidance will say that one should not be expected to travel for three hours each way to do a brief interview or course? In a sense, the point of having a timeframe is that it is a time limit. If that time limit applies for a job, why would it not apply to a course or some other thing that the department might require the lone parent to do? Can the Minister reassure the Committee that there will be some limit, or some guidance, at least, given to decision-makers as to what a reasonable limit would be?
Lord Bates
On that point, we can safely say that that limit is consistent across JSA and ESA, and therefore the 90 minutes would continue to be the restriction. The whole point of this is to encourage an engagement to prepare people for their place of work, and therefore there is a degree of flexibility on both sides. On whether the 13-week easement in the case of domestic violence would still apply, the answer is yes.
On whether that guidance is still being formulated, of course, we introduce regulations and I would like to think that where we have had drawn to our attention certain lacunae in the regulations, particularly where they affect vulnerable people, we have shown a willingness to pause and look carefully at that. I am sure that when the guidance is issued, that will provide an opportunity for that to happen.
Baroness Sherlock
I thank the Minister for his graciousness in allowing me to intervene. There was one more issue, which was that of parents of children aged 5 who have not started school and are not legally required to receive full-time education, and why that easement was not in the regulations. I suspect the answer may be patterned on some of his previous answers.
Lord Bates
I wonder whether the noble Baroness will bear with me and allow me to write to her on that specific point. I will also seek to follow up on some of the other points which have been raised. I understand the point and want to give an accurate response as opposed to a rushed or hasty one. I am very grateful to the noble Baroness for the interest she has shown in this change.
I hope that I have set out for the Committee the matters behind the regulations and have responded to the issues raised by noble Lords. Therefore, I commend these regulations to the Committee.
Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014
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Lord Bates
That the Grand Committee do consider the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014.
Relevant document: 21st Report from the Joint Committee on Statutory Instruments
Lord Bates (Con)
My Lords, I am pleased to introduce this draft instrument, which was laid before the House on 3 February 2014. I am satisfied that it is compatible with the European Convention on Human Rights. The instrument makes amendments to two of the 2010 automatic enrolment regulations. These are technical amendments but the consequences of the changes are not insignificant. Broadly, they seek to ensure two things: first, that employers using good-quality career average pension schemes are able to do so without any unnecessary impediments; and secondly, that all employers using hybrid pension schemes under automatic enrolment are treated alike in terms of phasing in minimum contributions.
First, I will set out the reasons for the more substantial changes to the regulations, which relate to the revaluation of benefits in career average pension schemes. To be used as a qualifying scheme for automatic enrolment, in addition to satisfying the quality requirements for defined benefits schemes, a career average pension scheme is required to revalue accrued benefits by at least a minimum level while the member is in employment. This is so that the value of the benefits is given a degree of protection against the effect of inflation. Final salary schemes do not need this revaluation in service because historically salaries have tended to at least keep pace with, if not outstrip, inflation.
The minimum level required by the regulations is an annual increase by reference to the general level of price inflation—either the retail prices index or consumer prices index—up to a ceiling of 2.5%. There are problems with this requirement, which, without the amendments we are proposing today, would prevent good-quality career average schemes from being used as qualifying schemes. Schemes that revalue accrued benefits by reference to the change in average earnings rather than prices cannot guarantee that they will meet the minimum level required going forward, so would currently be excluded from qualifying by regulations.
The amendments would allow a longer-term view to be taken. Schemes in the scenario I have described—those that revalue by the change in average earnings or potentially by reference to another measure—will not be excluded from being qualifying schemes so long as the scheme’s funding and statement of funding principles assume that revaluation will be at or above the minimum in the long term. This provides consistency within regulations with schemes that revalue by reference to a discretionary power where funding assumptions can already be considered. It also allows schemes maximum flexibility over the method of revaluation they use, so long as it can be assumed from the scheme’s funding that the minimum level will be provided.
New public service career average schemes could have been excluded from qualifying under the current regulations; for example, if they revalue by average earnings. The new schemes are, of course, of sufficient quality to be used for automatic enrolment, and revaluation in service for all the schemes concerned will be by at least the change in prices or earnings uncapped. New public service schemes that revalue by reference to the planned annual Treasury order are explicitly provided for. If they revalue at the rate specified in the order, they will not be prevented from being a qualifying scheme. Explicit reference was needed in this way because such schemes are not able to consider funding assumptions in the same way as funded private sector schemes, which are required to have a statement of funding principles or an equivalent.
The technical issue regarding hybrid schemes was brought to our attention last year by stakeholders. We are grateful to members of the Society of Pension Consultants for raising it. Employers using hybrid schemes that provide money purchase benefits are intended to be able to phase in contributions during the transitional periods under automatic enrolment. The policy aim here is to allow employers to stagger their costs in the initial years of the workplace pension reforms. However, currently, where the money purchase element of hybrid schemes is certified against one of the sets of alternative requirements, schemes have not been able to do this. Schemes that certify against one of the sets of alternative requirements do so because, for example, the definition of pensionable pay in the scheme is not the same as qualifying earnings. The policy intention is that they be treated just the same as those schemes that explicitly meet the quality requirement. The amendment would ensure that hybrid schemes are able to phase in contributions regardless of how they demonstrate that they meet the money purchase quality requirement. This means that all hybrid schemes will be put on the same basis going forward. I commend this instrument to the Committee. I beg to move.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for that explanation and I do not propose to detain the Committee long on this order.
For many years Governments of all complexions have looked at ways to encourage the UK workforce to save for their retirement. There have been several changes to pension legislation but none as big as the Pensions Act 2008 and the pension reforms that will affect every employer in the UK. Since October 2012 new regulations require every employer in the UK to enrol automatically their eligible workers—which will be almost everyone—into a workplace pension scheme.
I want to say how much I appreciate that this Government have given such strong support to auto-enrolment, which was begun by the previous Government but taken forward by the present one. We also welcome the Government’s policy intent in these regulations to allow schemes providing career average salary benefits to be used as qualifying schemes for the purposes of automatic enrolment. This is a positive step and has the support of the Opposition. The Opposition will continue to support the Government to ensure that auto-enrolment is a success and the move to ensure that both average salary benefits schemes and hybrid schemes are a part of auto-enrolment is also positive.
Lord Bates
I am grateful to the noble Baroness, Lady Sherlock, for that support. Auto-enrolment is very much a success story. The credit for the figures that are coming in transcends parties and Governments. It is also very encouraging for people providing for their retirement. With that support, I commend the regulations to the Committee.
Financial Assistance Scheme (Qualifying Pension Scheme Amendments) Regulations 2014
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Lord Bates
That the Grand Committee do consider the Financial Assistance Scheme (Qualifying Pension Scheme Amendments) Regulations 2014.
Relevant document: 22nd Report from the Joint Committee on Statutory Instruments
Lord Bates (Con)
My Lords, I am satisfied that these regulations are compatible with the European Convention on Human Rights. The Financial Assistance Scheme provides financial assistance to members of certain occupational pension schemes who have lost a significant part of their pensions as a consequence of their scheme winding up or being underfunded. Generally, the FAS is limited to schemes that began to wind up before 6 April 2005. This is because the Pension Protection Fund deals mainly with schemes with insolvent employers from that date. However, schemes have been discovered which, for various reasons, fall between the two schemes: they do not qualify for the PPF, but they cannot get access to the FAS. There has been a long-standing principle that schemes should enter the PPF only if they have been subject to all the protection provisions such as funding and employer debt, and have been subject to the PPF levy. Nevertheless, successive Governments have accepted that it is not reasonable to leave members with neither assistance from the FAS nor compensation from the PPF simply because the qualifying events did not happen in a specific order. These regulations deal with one of these situations.
In order for a scheme to qualify for entry to the PPF there must be a qualifying insolvency event on or after 6 April 2005 relating to what is known as the “statutory employer”. To be such an employer, you must employ at least one active member of the scheme. In 2009, a scheme applied to be considered for the PPF. However, it was discovered that while the employer attached to that scheme did become insolvent in 2009, it was not the statutory employer. On further investigation it was found that the actual statutory employer became insolvent in 2002, before the PPF was established. Unfortunately, as this scheme did not begin to wind up until 2009, it is also unable to look to the FAS for help. Rather than leave the members uncovered, the Government have decided to extend the coverage of the FAS to encompass this scheme and any other scheme in these circumstances. That is what these regulations do.
Specifically, the regulations extend the FAS qualifying conditions to cover schemes which began to wind up between 23 December 2008 and before these regulations come into force, where the employer ceased to be a statutory employer before 10 June 2011, and where the employer became insolvent before 6 April 2005. These dates may appear to be very specific and perhaps I should explain why they have been chosen. The first condition of winding up between 23 December 2008 and before these regulations come into force reflects the fact that schemes which commence wind up before 23 December 2008 due to an insolvency event prior to 6 April 2005 are already catered for in the FAS regulations. The second condition is that the employer must have ceased to be a statutory employer before 10 June 2011. This date is the date that we announced our intention to make the extension. It was important to limit the potential scope of the extension in this case to prevent any incentives for employers to break links with schemes that they were supporting. The third condition of the insolvency event occurring before 6 April 2005 prevents overlap with the PPF qualifying conditions.
I hope that I have explained that these regulations are designed to ensure that members receive assistance from the FAS and I commend them to the Committee. I beg to move.
Lord McKenzie of Luton (Lab)
My Lords, perhaps I may put two brief questions to the Minister. There is no impact assessment attached to these regulations, but my recollection is that the FAS is funded from the public purse and not, as is the case for the Pension Protection Fund, from the levy. It may be that it is just de minimis in the scheme of things because we are dealing with only one identified scheme at the moment. However, I would be interested to know what the costs of this in terms of additional FAS spending might be. Perhaps the Minister might take this chance to update us on what the annual ongoing costs of the FAS currently are. Can the Minister also clarify for me, in relation to the particular scheme that has been identified, whether it had been paying the protection levy? If not, why was it outside of that?
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation and my noble friend Lord McKenzie for his, as always, insightful questions. I am very pleased to see the Government’s ongoing support of the Pension Protection Fund set up by the previous Labour Government. The PPF has made a substantial difference to people’s lives. As regards schemes including Woolworths, MG Rover and Turner and Newall, the members would all have had much lower pensions had it not been for the PPF and the Financial Assistance Scheme. I also welcome the Government’s continued support for that scheme.
I would like to ask a couple of specific questions. First, I recognise that the Minister is trying to close a specific loophole and obviously the changes relate to a particular case. I must confess that the Opposition are therefore unsighted on some aspects of this. Following on from the question of my noble friend Lord McKenzie, can he explain a bit more about the Government’s thinking in deciding to plump for the FAS as opposed to the PPF, rather than leaving the members of a scheme ineligible for either, because that would seem to be the key question?
Secondly, obviously, the Government have not brought forward an impact assessment for these regulations. The Explanatory Note was helpful in explaining the long gap between the consultation process and these being brought forward, but will the Minister confirm that there is a timescale for further consolidation of the regulations on which the Government consulted in 2011, and that an impact assessment will be brought forward to accompany those changes?
Lord Bates
I am grateful for those questions. In terms of context, we are talking about a specific scheme with a number of members—the George and Harding pension scheme. To answer the point made by the noble Lord, Lord McKenzie, the scheme had not been contributing to, or paying, the PPF levy and therefore was not able to claim under that procedure. Therefore, we are changing the relevant dates so that we do not break the contributory principle of the PPF but ensure that financial assistance is made available. The noble Lord, Lord McKenzie, is as astute as ever and I am sure that the noble Baroness, Lady Sherlock, as a former adviser in Her Majesty’s Treasury, will also be aware that Her Majesty’s Treasury did seek to have some idea of what the impact would be on the Exchequer. The estimated full cost of the FAS contribution is £600,000, which comes out of the Exchequer over time because, obviously, that will be the way that people will be compensated as and when the funds will need to be drawn down. That is also the reason for the specific dates because we are trying to cope with a specific scheme rather than giving an open-ended commitment. Having demonstrated this, I hope that we can point to the fact that, should similar gaps in certain schemes arise in the future, we will look very carefully at them without giving any cast iron guarantee.
Lord McKenzie of Luton
Can the Minister clarify whether the £600,000 is the net present value?
Lord Bates
That is the net present value of the cost of the scheme. Annual ongoing cost differs depending on the schemes taken in. I do not know how helpful that is but we try to be as fulsome as we can. Has the relevant firm been paying the protection levy? I have covered that point but that does not mean that it gets entry into the scheme. It was thought that the employer supporting the scheme was a statutory employer. I think that is the point we are dealing with here—the definition of a statutory employer. It was realised that it was not only after investigation. When will we consolidate the FAS regulations? As noble Lords know, there is a great deal happening in the pensions area, to be continued on Centre Court tomorrow, I think. This requires the department to prioritise its resources. The consolidation of the FAS regulations remains on the department’s work plan but I cannot give a definite date as to when the draft consolidation regulations will be laid before Parliament. I am grateful for the probing questions I have been asked. The noble Baroness, Lady Sherlock, looks as though she wants to come back in.
Baroness Sherlock
I thank the Minister for those answers but just want to push a little bit more on consolidation. Is there a difference in principle with how long one might wait after consulting before consolidating legislation? I am glad things are on the departmental work plan, but I gather it is rather a busy work plan at the moment and would be grateful for any hints. The other question I asked is whether, whenever that happened, an impact assessment would be brought forward at that point.
Lord Bates
I think I will probably need to write to the noble Baroness on those two points, again to ensure that we get absolutely the right answer. They are good questions and we want to make sure we get a correct response. I am grateful to the noble Baroness and the noble Lord, Lord McKenzie, for raising their concerns. I commend these regulations to the Committee.
Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014
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Lord Bates
That the draft orders and regulations laid before the House on 21 and 27 January be approved.
Relevant Document: 20th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 3 March
Social Security Benefits Up-rating Order 2014
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Lord Bates
That the Grand Committee do consider the Social Security Benefits Up-rating Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Bates (Con)
My Lords, the Guaranteed Minimum Pensions Increase Order 2014 and the Social Security Benefits Up-rating Order 2014 were laid before the House on 27 January 2014 and I am satisfied that they are compatible with the European Convention on Human Rights.
I start by touching briefly on the Guaranteed Minimum Pensions Increase Order, which provides for contracted-out defined benefits schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 2.7%, which is in line with inflation as at September 2013. As noble Lords will be aware, we are not here to discuss the Welfare Benefits Up-rating Order 2014, which was made on 24 January. The rates increased by 1% in that order were debated in Parliament during the passage of the Welfare Benefits Up-rating Act 2013.
Turning to the Social Security Benefits Up-rating Order, I would like to start with the increase in the basic state pension. One of this Government’s first acts was to restore the earnings link to the basic state pension. Indeed, we went a step further and secured a triple lock for pensioners—a commitment from the Government to increase the basic state pension each year by earnings, prices or 2.5%, whichever is the highest. This year, as prices were greater than average earnings and 2.5%, the basic state pension will increase by CPI at 2.7%. The new rate of basic state pension will be £113.10 a week for a single person, an increase of £2.95 from last year. This means that from April 2014 the basic state pension is forecast to be around 18% of average earnings, a higher share of average earnings than at any time since 1992. Our triple lock commitment means that someone on a full basic state pension can expect to receive £440 a year more than if it had been up-rated by earnings since the start of this Parliament.
On pension credit, we have taken an important decision to ensure that the poorest pensioners are able to benefit from the effects of our triple lock. That means that, rather than rising in line with earnings at 1.2%—the minimum required by legislation—the standard minimum guarantee credit in pension credit will be increased by 2% so that the poorest pensioners benefit from the full cash value of the increase in basic state pension. Single people will receive an increase of £2.95 a week while couples will receive an increase of £4.45 a week. Consistent with our approach last year, the resources needed to pay for that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase.
I can confirm that additional state pensions will rise in line with inflation at 2.7% in 2014-15. That means that the total state pension increase for someone with a full basic pension and average additional pension will be around £196 a year. The decisions we have taken on pensioners reflect the Government’s belief that even in difficult economic times it is important to protect those who are less able to increase their spending power.
That belief is reflected in our decision to ensure that those benefits that reflect additional costs because of disability will be protected and will be increased by the full value of CPI at 2.7%. These include the personal independence payment, disability living allowance, attendance allowance, incapacity benefit, disability premiums in working-age benefits, the support component of the employment and support allowance, and the limited capability for work and work-related activity element of universal credit. That is also true of the carer’s allowance and the carer premium, both of which will be uprated in line with inflation.
In conclusion, I ask your Lordships to note that at a time when the nation’s finances remains under real pressure, the Government will be spending an extra £3.3 billion in 2014-15. Of that, about £2.7 billion is for the state pension and over £600 million will go to people of working age, with nearly £600 million of those increases going to disabled people and their carers.
The uprating commitment I have outlined today will give real support to the poorest and most vulnerable in society, ensuring that people who are least able to change their incomes are protected against increases in the cost of living. On that basis, I commend the orders to the Committee, and I beg to move.
Lord German (LD)
My Lords, I have a number of questions. First, I welcome the triple lock. This is the first time that we have seen prices as the lock that has come into play, which means that pensioners will always benefit from the best of the three options. This is the first time we have seen one of the three locks.
I will spend a few moments on the rationale behind the 1%, 2% and 0.7% for the pensions and other matters. This is really about what is contained in the Government Actuary’s report. For the first time, we see from the Government Actuary what the state of the fund is—the fund from which these benefits will be paid—not just for this year but through to 2018-19. I believe that this is the first time we have been able to have those projections. The report clearly shows that there are a number of difficult years to come, in particular 2015-16. Next year the actuary projects that the Government will have to put in £8 billion extra in order to keep the fund at its one-sixth level of what goes in and what comes out, and what is left in the fund. However, the last table of the Government Actuary’s report shows that the following year will be even more difficult. Can we have some comparison for benefits’ sake?
I will be quite happy if my noble friend wishes to send me information about this or to write to me about it. As we are projecting forward six years to 2018-19, can we have the figures showing how much has had to be contributed in the past 10 years, say, so that each year we can see what the graph or the direction of travel is? Quite clearly, it is not the usual case that the Government have to top up the fund to achieve that one-sixth balance. It might be useful to know how often that happens and what the projections are for the future.
I have just two short questions, one of which relates to the implementation dates in the order. I should probably know the answer to this question, but I would be very grateful if the Minister could answer it, although it is a question similar to, “Why do we always have elections on a Thursday?”. For the dates of implementation, which are contained within this order, we have 1, 7, 9 and 10 April. I know that it does not mean very much if someone has to wait a week longer for their benefit to come through, but why is it not possible to have a single implementation date at the beginning of the financial year, or is there some administrative reason for that?
My second and final question relates to the investments in the national insurance fund. I noticed that the projection from the Government Actuary is that they will fall from £127 million to £90 million. If the investments made £127 million last year, which obviously supported the amount of money that could be put into benefits without having to top them up from the Treasury, why do we see a lower projection in the coming year when all the signs are that investment opportunities are greater in the coming year than they were in the past year? I should be grateful for some explanation, but I will be perfectly happy if my noble friend wants to do that for me in writing.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation of the orders, and the noble Lords, Lord German and Lord Kirkwood, for their contributions. I would like to add myself to the circulation list for this exciting reply to the questions of the noble Lord, Lord German. Is the Minister willing to place a copy in the Library, given that it might be of interest in years to come? They are very good questions.
I share the hope of the noble Lord, Lord Kirkwood, that Parliament retains a sense of the importance of these orders. The decisions taken here by Parliament will affect the living standards of millions of people over the next year. They really matter, and if we ever get to the stage where we stop taking them seriously we will be failing in our duty. I pay tribute to the noble Lord, Lord Kirkwood, who turns out every year, come rain or shine, although I am disappointed that he had nothing to say about the GMP. I look forward to a year when I find something to say to it, but I am not going to ask any questions about it either.
Much has been made of the fact that the Government are uprating pensions by the triple lock. That is welcome as far as it goes. The comments about RPI notwithstanding, will the Minister acknowledge that the triple lock has so far been less generous than the RPI uprating it replaced? It was not used in the first year. I notice that my right honourable friend Stephen Timms pointed out, when this order was debated in another place, that the RPI last September was 3.2%, whereas the pension uprating delivered by the order, as the Minister said, is 2.7%. My right honourable friend said that the triple lock has delivered a lower uprating than the previous formula in each of the three years it has been used. The effect of that is that in RPI terms it is a real-terms cut for the third year in a row.
More concerning is that the standard minimum guarantee element of pension credit is to be increased by only 2%. This reduces both its real-terms value and its value relative to the basic state pension. One of the consequences must be that the poorest pensioners find their pension income falling in real terms. The Minister, I am sure, can confirm that. I would be very interested in the Minister’s answer to the question of the noble Lord, Lord Kirkwood, about cost. If the value of some of these benefits is falling, but the spend is rising, is caseload the reason? I would be interested to know.
The decision on pension credit is significant not just for those currently dependent on pension credit, but potentially for all those who will receive the new single-tier pension, which is due to be introduced in April 2016, if the Pensions Bill currently going through the House receives Royal Assent. The Government have signalled, during our deliberations on that Bill, that they propose to introduce the new single-tier pension at a rate above the prevailing rate of pension credit. By reducing the value of pension credit in real terms, are the Government not giving themselves the option of introducing the single-tier pension at a starting rate lower than might have been the case had pension credit maintained its value in real terms?
Can the Minister help me on another point? As the premiums payable to pensioners with working age benefits will be uprated in line with pension credit rates, does that also mean that they too will face a real-terms cut? Will the Minister confirm that? Also, what assessment has he made of the impact on pensioners with small savings of the Government’s decision to increase the savings credit thresholds by 4.4%, some way above inflation? I know that the Government are keen for people to do the right thing and to save, but the reason for introducing a savings credit was so that people who had put money aside would still find themselves better off than those who had not. Will the Minister explain the Government’s thinking on that?
I also have some questions about process. I am with the noble Lord, Lord Kirkwood: I fear that I may have lost track of some uprating that should have happened. If I tell the Minister what I think is happening, perhaps he will correct me where I go wrong. As I understand it, the Welfare Benefits Up-rating Order 2014 uprates by 1% those on benefits covered by the Welfare Benefits Up-rating Act. The protected benefits are covered by this order. So what happens to tax credits? Where did they get uprated? Where was the benefit cap uprated? I know that it has been, but I am not quite sure where that happened. Also, are all the elements of universal credit uprated in this order and, if so, where are the work allowances uprated? I could not see them.
I have two final questions. First, on childcare, it seems to me that the childcare element of universal credit is not being uprated at all. Can the Minister explain why not? If it is not being uprated at all, that is a significant real-terms cut. The last annual childcare cost survey in 2013 from the Family and Childcare Trust—what used to be the Daycare Trust—found that costs had risen by an average of 6% the previous year, more than double the rate of inflation. If the decision is made to cut that childcare element in real terms, coming on top of the Government’s decision to cut the proportion of childcare costs in universal credit to 70%, will that not have a significant impact on the ability of working parents to afford childcare? There was no impact assessment, and I was not able to work out what the effect of that was. Have the Government made any assessment of the impact on working parents of that decision on childcare and, if so, what is it?
Finally, I should be very interested to hear the answers to the questions from the noble Lord, Lord Kirkwood, on PIP, for example, where I have grave concerns about the implementation. The recent report is not encouraging in that respect. Also, I should like to understand to what extent, if at all, the Secretary of State is using discretion in making judgments about the appropriate levels of uprating, given the concern that abounds now about the use of food banks and the extent of poverty among people who are in receipt of benefits.
Lord Bates
I thank noble Lords for their questions. All Members who have spoken are renowned experts in the field. Until a few months ago, I was joining from the Back Benches in scrutiny of such orders, so I sense the expertise that lies behind the pertinent questions which have been asked. I was particularly struck by my noble friend Lord Kirkwood’s question about how small is the audience for a mere £3.3 billion of taxpayers’ money to go to the poorest in society. That is a worthy point to make, and it would be absolutely ungallant of me to point out the level of participation from the Liberal Democrat Benches and the absence of participation from the Opposition Benches.
Lord Bates
We are a coalition—we share the point. The point is that I think that there is a genuine cross-party support. For example, the triple lock on pensions is welcome, it is working and it is delivering real-terms increases to pensioners.
If I may, I will go through the points raised in the order in which they were raised. My noble friend Lord German raised the question of the Treasury grant to the National Insurance Fund. It is not a question of the National Insurance Fund running out of money. Making provision for such grant has no overall impact on the Government’s finances. It is done primarily for accounting purposes to ensure that the National Insurance Fund complies with the Government Actuary’s recommendation of maintaining a working balance of one-sixth of the expected benefit expenditure in 2014-15. My noble friend was absolutely correct to point out that at least now the information in the forecast is being made available in the Government Actuary’s report. He asked me a specific point about whether we will look at that historically over the 10-year period. I should say that we think that the grant has not been required over that period but, as one of the paragraphs in the probably lengthy letter that I shall be sending to noble Lords, I shall cover that important point and I thank him for raising it.
There was a smart observation asking: why the different dates. They are in place for good administrative reasons, including taking into account the prescribed payment days of different benefits. I know that there might be a follow-up question asking why there are different payment days but perhaps we can just say that that is the answer. However, the noble Lord puts his finger on an interesting point.
My noble friend Lord Kirkwood asked whether we would ensure that working-age benefits will be debated once the Bill is finished. Working-age benefits will be debated again from 2016-17. I will turn to the IFS Green Budget in a minute. My noble friend and the noble Baroness, Lady Sherlock, asked about the uprating of tax credits. The Tax Credits Up-rating Regulations 2014 will uprate certain elements of tax credits by CPI from 6 April. These were laid in draft form on 12 February and are due to be debated later in March. The Child Benefit and Tax Credits Up-rating Order 2014 will increase certain elements of tax credits and the rate of child benefit by 1% from 6 April and 7 April respectively. That was made on 24 February.
My noble friend Lord Kirkwood also asked about how much of the increase in expenditure is in relation to caseload increases. Clearly, caseload is an important factor in the overall expenditure, which is why it is important to make pension spending more affordable over the longer term, including, for example, the changes we are making through increasing the state retirement age. As regards the delay in implementation of the personal independence payment, PIP has been successfully introduced using a controlled approach to learning lessons as we go along in a live environment. We have been very clear that PIP will be introduced in a gradual way. Disabled people have wanted us to take time to get it right, which is what we are doing. Natural reassessment is under way in several areas and we will continue to monitor and evaluate it before making any further decision on widening the reassessment rollout.
My noble friend also asked whether we are going to introduce new eligibility criteria for winter fuel payments. Winter fuel payments are non-contributory and were designed to give older people in the UK reassurance that they can keep warm during the cold weather. The Government intend to bring in an eligibility criterion based on country of residence with payments going to only eligible people living in EEA countries with colder climates. Legislation will be needed to pass this before any changes are made.
On the UC rollout, our current planning assumption is that the universal credit service will be fully available in each part of Great Britain during 2016, having closed down new claims to the legacy benefits it replaced with the majority of the remaining legacy caseload moving to universal credit during 2016-17. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution.
My noble friend Lord Kirkwood also asked about the Green Budget report written by Paul Johnson and the excellent organisation, Oxford Economics, for the Institute for Fiscal Studies. He suggested that we read the report—it says here that I will do so. I think that I will apply the collective and say that I assure my noble friend that we will do so. It is a very important contribution. We have all said that we want these changes to be evidence based. When serious organisations such as the IFS produce serious research, of course we should take it seriously. We will monitor future developments. I am grateful to my noble friend for drawing that to our attention.
Baroness Sherlock
My Lords, I am very grateful to the Minister for explaining the process and what happens to the different benefits, but I am still chewing over the information that neither the childcare allowances nor the work allowances in universal credit will be increased at all and are therefore facing a real-terms cut. I might have let that go, but I am afraid that I will have to push back on his comment that all sides of the House agree that people will be much better off under universal credit than under the present system. Universal credit is simply a delivery vehicle. Whether or not people will be better off will depend on how generous the benefits are, the taper rates applied, the levels of work allowance or disregard applied and the interaction with other sources of support. In other words, unless the calculations done previously about the gains to work and participation rates in work are redone using these figures, we do not know whether people getting universal credit are going to be better off than they are now.
If the Minister cannot tell me now, could he please write to me later and place a copy in the Library on what assessment the Government have done about the effect on incentives to move into work and gains to work as a result of these real-terms cuts to components of universal credit?
Lord Bates
I appreciate the point which the noble Baroness has made and I was not suggesting that everybody would be better off under this provision. The question is one of removing perceived barriers to go back into work—to encourage people to move seamlessly off benefits and into work—without creating disincentives. That principle, I think I am correct in saying, is one that is widely shared on all sides of the House. How it actually applies and is worked out for individuals and individual families is clearly a crucial matter. On that point, I will add that to the list of issues about which I will write to noble Lords immediately following this debate.
I have already explained that we are spending an extra £3.3 billion on uprating pensions and benefits in 2014-15, enabling us to protect key benefits and vulnerable groups. This order protects pensioners, many of whom have worked hard all their lives and are no longer in a position to increase their income through work, and benefits, which reflect the additional costs faced by disabled people, again reflecting our commitment to protect those least able to increase their spending power. Those are principles which I hope all noble Lords can support and on that basis I commend these orders to the Committee.
Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014
Lord Bates Excerpts(10 years, 2 months ago)
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Lord Bates
That the Grand Committee do consider the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Guaranteed Minimum Pensions Increase Order 2014
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Lord Bates
That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014
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Lord Bates
That the Grand Committee do consider the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Bates (Con)
My Lords, in order to make the best use of parliamentary time there are two instruments for debate today. I have agreed with my noble friend Lord Faulks also to present an instrument which falls within the remit of his department, the Ministry of Justice. I will speak also to the draft Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014, which bring forward a measure that is consequential on my department’s regulations. Both regulations were laid before both Houses on 21 January 2014 and are intended to come into effect from 1 April 2014.
I am satisfied that the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 is compatible with the European Convention on Human Rights. Likewise, my noble friend Lord Faulks and I are satisfied that the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014 is also compatible with the European Convention on Human Rights.
First, the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 provide for a maternity allowance to be made available to women who are neither employed nor self-employed in their own right, although they regularly take part in activities related to the business of their self-employed spouse or civil partner. They must be neither a partner nor an employee of the business concerned.
These regulations are being introduced in order to fully comply with European directive 2010/41, which was adopted on 24 June 2010 following negotiation between member states. The directive assures equal treatment between men and woman who are self-employed. It protects self-employed women during pregnancy and motherhood, together with women who are not self-employed, who habitually participate in the activities of their self-employed spouse or civil partner’s business.
The UK already complies with most of the directive through existing equality legislation, primarily the Equality Act 2010. However, Article 8 of the directive legislates for a maternity allowance to be paid to self-employed women and spouses or civil partners who habitually participate in the activities of a self-employed worker. This is required to enable them to interrupt their activities as a result of pregnancy or motherhood. We already provide a maternity allowance to self-employed women.
Women who contribute to their spouse or civil partner’s business by regularly helping out in an unpaid capacity could bring themselves within coverage of the maternity allowance and other social protection by becoming partners in, or employees of, the business. There are strong business and social incentives for doing this, which include tax benefits for the business and greater social protection for the woman. However, for women who do not wish to take these steps we must bring forward these regulations to ensure that we fully comply with the directive. If we were not to bring these regulations forward, we would not be fully compliant with the directive, which would put the UK at significant risk of being subjected to infraction proceedings by the European Commission. This would attract an initial lump sum fine estimated at around €11 million with a daily accrual until we are fully compliant.
The regulations will provide a maternity allowance to women who are due to give birth on or after 27 July this year and regularly assist in the self-employed business of their spouse or civil partner but are neither employees nor business partners. For the first time, spouses or civil partners of the self-employed worker who help in the business and receive no income will be able to receive a maternity allowance enabling them to take a break in their activities as a result of pregnancy.
In line with the Government’s objective to avoid the gold-plating of EU legislation, we will not go beyond the minimum requirements of European directives. This means that benefit will be payable at the weekly rate of £27 for a maximum of 14 weeks. This reflects the lowest rate of maternity allowance that is currently payable to working mothers on a very low income to be paid for the minimum duration specified by the directive.
This rate is less beneficial than the standard rate of maternity allowance currently awarded for up to 39 weeks to women who are eligible because they are employed or self-employed in their own right—the standard rate from April 2014 being £138.18. The higher rate and longer payment period of maternity allowance is intended to provide a measure of earnings replacement to enable women to take a break in their occupation at the end of their pregnancy or soon after childbirth. It would not be right to make a corresponding award of maternity allowance to women who have no earnings to replace. A number of stakeholders have been notified of this forthcoming change: for example, Netmums, Mumsnet, and Maternity Action. Maternity Action has advised that it supports the change and will help us to raise awareness of it if it is passed by your Lordships’ House.
I trust that your Lordships will agree that the regulations will help women who are pregnant or have recently given birth where, prior to that, they have lent unpaid support to their spouse or civil partner in helping them to build and maintain a self-employed business.
I turn to the draft Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014. Those draft regulations amend the Legal Aid (Information about Financial Resources) Regulations 2013 that came into force on 1 April 2013. They add the maternity allowance being introduced for participating spouses or civil partners of self-employed earners to the list of prescribed benefits in the schedule to the 2013 regulations.
If an individual is in receipt of a prescribed benefit, the director of legal aid casework in the Legal Aid Agency, in assessing an individual’s income for the purpose of the legal aid financial means test, may request information about the benefit from various other government departments, including the amount that the individual is receiving. Having accurate information about the financial resources of an individual who is applying for or in receipt of legal aid is an important part of ensuring that only those eligible for legal aid receive it, and that those who can afford to contribute to the cost of their legal representation are made to do so. I commend the instruments to the Committee.
Baroness Scott of Needham Market (LD)
My Lords, I support the social security regulation which we are debating today—not just because it avoids an €11 million fine. I think it is a good thing in its own right. For once, we have a welcome change to the benefits system in that it is beginning genuinely to reflect the diversity of people’s lives and the lives of women in the workforce. That is a very good thing indeed. It is bringing a new group of women, predominantly from the very small, micro-business sector, within the ambit of maternity benefit. I just wish that the gold-plating had been left in place just on this one occasion so that they could have had a benefit more in line with everyone else.
I want to ask two questions. The first is about disseminating information, because this is a very difficult group to reach. They do not tend to be members of chambers of commerce, and that sort of thing. I do not have a particular answer, but I wanted to put in the plea that all efforts are made to ensure that women who are likely to benefit actually know about it and are able to. We hope that the Government’s new enterprise allowance scheme will be successful, so we could have even more very small businesses starting up in the coming year or so, so we need to get on top of how we can ensure that women know that these benefits are available.
Secondly, I welcome the discussions on shared parental leave—I know that the Deputy Prime Minister has been very keen on this and it has some support within government. It would provide welcome flexibility, but I am curious as to how these arrangements might work if we have shared parental leave. With those questions, I welcome the instrument.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation and I look forward to hearing the answers to those two excellent questions. I do not propose to ask any questions about the second order, as I accept the Minister’s assurance that it is consequential upon the first. However, I should like to ask a few questions so as to understand better the implications of the first order, relating to maternity allowance.
The first question relates to the point that has just been made about the rate being so low. The standard rate of maternity allowance is £136 a week, or 90% of average weekly earnings, for up to 39 weeks. In this case, the Government decided to settle on £27 a week for 14 weeks. I think I heard the Minister say that the aim of the allowance was to enable women who regularly help in the business of a spouse or civil partner to take a break from their activities towards the end of a pregnancy or the start of motherhood. Have the Government made any assessment of whether the amount of money involved is such that it is likely to make taking that break possible when otherwise it would not have been?
Secondly, the Explanatory Note says that 1,300 women will be affected by the provisions at an estimated cost of £0.5 million. No impact assessment was carried out, so we do not know whether the Government considered other approaches. Clearly, there is quite a wide range between what the Government are doing and an allowance that is fully gold-plated. Did the Government consider bringing this in at an intermediate level and, if so, what kind of cost would have been implied?
Next, I should be interested in understanding what conditions a claimant would have to meet to qualify for maternity allowance under these circumstances. We have had a question about shared parental leave. I should also be interested in knowing what happens to someone who is adopting a child rather than giving birth, as the regulations are specifically about giving birth or having just given birth. Looking at the regulations, I do not think that someone in these circumstances would be entitled to statutory adoption pay, so would they be entitled to maternity allowance? Similarly, what happens if the child is stillborn or dies immediately after birth? Certainly, I think that SMP is payable if a child is stillborn after 24 weeks, but is there a read-across to this provision?
I was pleased to hear the question about communication because I was going to ask something similar. The Minister made the very good point that there may be strong reasons why women in these circumstances may be better off being paid by the business and being able to pay national insurance. I am very conscious that the Pensions Bill is going through the House at the moment. Of course, if a woman in these circumstances does not end up with 35 years of national insurance payments in her own right, she may find that when she comes to retire she is not entitled to the new single-tier pension, and in future she will not be able to claim on her husband’s contributions either. Therefore, when the Minister looks at the communications campaign, I wonder whether anything can be done to make sure that the opportunity is taken to communicate to those women so that they understand the consequences of not paying national insurance and of not coming within the national insurance and tax system.
Finally, I have a practical question. Can the Minister explain the tax and tax credits treatment of these benefits and say whether there is any passporting or link across to any other benefits as a result of receiving this maternity allowance?
Lord Bates
I thank my noble friend Lady Scott of Needham Market for her contribution and I also thank the noble Baroness, Lady Sherlock, for raising these points. Some very good questions have been asked and I shall do my best to answer them.
My noble friend Lady Scott asked whether women getting this maternity allowance will have access to shared parental leave and a pay scheme. The answer is no, and I am sorry to be disappointing. The statutory shared parental leave and pay provisions are designed for employed couples to share the care of their child. It would be available to eligible women who are entitled to maternity leave, statutory maternity pay or maternity allowance because they are employed or self-employed earners—that is the key word. Therefore, women receiving this form of maternity allowance will not have access to that scheme as they will be neither employed nor self-employed in their own right.
My noble friend Lady Scott and the noble Baroness, Lady Sherlock, asked how we will encourage take-up of the allowance, and we talked about some of the publicity which is being received. We have identified stakeholder groups relating to both self-employment and maternity, and they have been informed of the change. They include Maternity Action, Netmums, Mumsnet, Bounty, Sands, Citizens Advice, the Royal College of Midwives, the British Medical Association and HMRC. We will be publicising the qualified conditions and the claim process on direct.gov.uk, as well as providing relevant guidance and claim forms. Needless to say, if there are any specific organisations which the noble Baroness thinks it would be helpful to include in that list, we will be delighted to hear from her.
I turn to the points raised by the noble Baroness, Lady Sherlock. She asked about the sad cases where there is a stillborn child. The mother would still be entitled to maternity allowance, in the way that statutory maternity pay applies at present. These provisions do not extend to adoption.
Baroness Sherlock
Before the Minister leaves that point, I understand the Government’s argument that they do not wish to gold-plate anything that comes from Europe. I was pushing him slightly because he gave two different reasons for doing this. One was not to gold-plate; the other was to give the women an opportunity to take a break from their activities. My question was whether he had done any assessment of whether the level and duration of the payment would be adequate to meet that objective.
Lord Bates
The answer is that no such assessment was undertaken.
The noble Baroness asked whether this maternity allowance will passport through to other benefits. It is up to each provider of those passported benefits to decide whether to extend their passported benefits to this group. Of course, in the same group of regulations we are talking about changes being made to the legal aid provision, so there is some element of a knock-on effect to that. I am grateful to all noble Lords who have spoken.
Baroness Sherlock
I am happy for the Minister to write to me but I asked about the tax treatment of the allowance and the tax credits position. He may feel free to write if that is easier.
Lord Bates
I apologise to the noble Baroness. I will follow that up in writing.
I am grateful to all noble Lords who have spoken. I thank them for their interest in the debate and take the opportunity to say that I hope we agree that the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 ensure that those women who participate in the business of their self-employed spouse or civil partner can receive maternity allowance to enable them to interrupt their activities due to pregnancy or motherhood, and that the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014 contribute to ensuring that those entitled to help with their legal aid costs receive that help, while those who can afford to pay, do so.
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2014
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Lord Bates (Con)
That the draft Order laid before the House on 15 January be approved.
Relevant document: 19th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 10 February.