Guardian’s Allowance Up-rating Order 2013
Lord Freud Excerpts(11 years, 1 month ago)
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Lord Freud
That the draft orders and regulations laid before the House on 4 and 7 February be approved.
Relevant documents: 19th and 20th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 18 March.
Jobseekers (Back to Work Schemes) Bill
Lord Freud Excerpts(11 years, 1 month ago)
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Baroness Hollis of Heigham
My Lords, I support my noble friend in his amendments. Timely and efficient appeals systems are always necessary and in these circumstances they are essential. The social security appeals system is under strain and that strain will be intensified as a result of what claimants will now be experiencing. What are those difficulties? The number of social security cases going to tribunals in general were 418,000 in 2010-11, 70% higher than just two years previously, while, as far as I can tell, this year’s statistics are up a further 14% or so, and appeals against sanctions as such are only a modest proportion of these.
Social security appeals represent half of all tribunal cases. The tribunals are receiving social security cases faster than they can clear them, so that although half of all cases take 14 weeks or less, one-quarter take between three and six months to be heard and 10% take between six months and a year, so only half of those cases meet the key performance indicator, the KPI, of 16 weeks laid down by the department. During that time—that extra long waiting period already experienced—claimants’ circumstances change, they lose oral evidence based on memory and above all they are left without any benefit, some of them for months, and suffer real hardship. Timeliness and efficiency, therefore, are key.
We need the Government to tell us what problems they will meet in unleashing the stockpile of sanctions cases into a system already under strain, with the inevitable appeals that will follow, and how they propose to resolve them. How many cases are currently outstanding? Do the Government have the capacity to increase sitting days beyond the 80,000 or so required at the moment to deal with the full backlog? How long does the Minister expect claimants to have to wait? How many, and what percentage, will be over the three-month KPI target?
The second issue is not about numbers but about verdicts and outcomes. Of those cases going to appeal, some 40% overall are won by the claimant. Former presidents’ reports on this are, frankly, an excoriating indictment of the DWP decision-making process and their findings over the years are confirmed by the recent November 2012 report analysing appeals. The main reason why appellants win is that they produce additional oral evidence not previously taken into account by DWP. However, the reports and the research have noted that tribunal judges were continually frustrated by the behaviour of decision-makers within DWP. In the latest statistics, about one-third of local decisions on sanctions were reconsidered by the decision-maker and, of those, half were in favour of the claimant. Of those not accepted by the decision-maker, just over one-third are going on to tribunal.
Why are those tribunal judges so continuously frustrated by decision-makers’ efforts within DWP? First, we are told by tribunal judges that decision-makers choose not to accept additional, usually oral, evidence without having any good reason for refusing it. That is because they have often failed properly to engage with the claimant. Something like 65% of all appeals come into this category. Secondly, there is little evidence that decision-makers reconsider cases at all. They were, the report said, reluctant to do so and did not bother to explore any discrepancies in evidence or to follow up requests for further information.
Thirdly, decision-makers did not weigh medical evidence at all appropriately, especially for mental health claimants, nor did they seek further information when dealing with a progressive condition. That applied to something like 15% of the appeals that went to tribunal. Most damning of all, they often made different decisions from the tribunal decision-makers on the basis of the same evidence presented to the tribunal, which meant that decision-makers got it wrong, according to law, in 30% of the cases lost by DWP. In other words, had the decision-makers within DWP done their job properly, these reports suggest that DWP would either not have had the appeal because the decision-maker would have rightly reversed the original decision, or at appeal the DWP would have won most of the appeals that it lost because the tribunals would have accepted that all the appropriate evidence had been properly assessed. That is a pretty searing judgment of the current system.
What are the implications for those caught by this Bill? The problem is clearly threefold. First, local offices are making flawed decisions, including on sanctions, and that is before we get on to the disgraceful area of targets. Secondly, decision-makers are not doing a proper job reviewing those local office decisions and are endorsing flawed decisions that they should have corrected. Thirdly, the tribunal service cannot keep up with the increased number of appeals coming its way. Of course, this will get far worse now that legal advice and support are withdrawn and, as a result and as we shall argue later, tribunal cases will take twice as long to process.
Will the Minister reduce the pressure on tribunals and better support claimants by requiring decision-makers to do a more conscientious review of the original decisions? It is clear that at the moment too many of them are not doing a professional job—bluntly, they need to brought face to face with the evidence. Are decision-makers informed of the tribunal’s findings and is their performance reviewed when their decisions are overturned by the tribunal? Could that perhaps be a KPI? What guidance and additional training will be made available to decision-makers to improve their performance? If the Minister is going to review any targets, could we please have a new performance indicator, a really useful target that reduces the number of successful appeals by claimants from the current 40% or so down to, say, 20% or even 15%? That would really transform decision-makers’ behaviour.
Given the trivial basis for sanctioning claimants uncovered by the Guardian, many of whom we can expect to appeal, thus increasing the backlog before eventually being overturned at appeal, as many of them will be, will the Minister ensure that cases going to appeal are pre-reviewed and re-reviewed by decision-makers to improve their own poor-quality decision-making? Will he also ensure that the number of tribunal sitting days is appropriately increased to meet the target of within 16 weeks, so that they are timely, and that—I am trespassing into a following amendment—sufficient advice is given to claimants, as my noble friend Lord Bach will argue, to reduce the number of unsuccessful appeals, given the delays? I hope that the Minister will be able to answer these questions and those of my noble friend tonight and in the process perhaps allay our very real concern for these claimants who are going to be caught up in an appeal system that is increasingly flawed and failing.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the purpose of these amendments is to ensure that the reconsiderations and appeals arising from decisions relating to sanctions that are dealt with by the Bill are considered in a timely and efficient manner, and that appeals take into consideration the delay between the failure to participate and the issuing of the sanction.
I am happy to give a commitment to the House that DWP will process the stockpiled cases, and any reconsiderations and appeals that follow, in a timely manner. It is not in the department’s interest to procrastinate on these cases any longer than necessary. I also note that the department is already required by Article 6 of the ECHR to deal with social security disputes in a reasonable time, while the First-tier and Upper Tribunals are also bound to deal with appeals in a fair and efficient manner. When the Bill receives Royal Assent, I assure noble Lords that processing the stockpiled cases, including any appeals and reconsiderations, will be given a high priority. Purely from a business perspective, DWP will want to unwind these cases and any follow-up activity as quickly as possible so that it can utilise its resource in dealing with more current claims.
The associated amendment seeks to ensure that when the First-tier Tribunals and the Upper Tribunals are determining an appeal against a sanction decision issued in reliance on the provisions in the Bill, they have regard to the circumstances around the Reilly/Wilson case, particularly any delay resulting from the case. I understand, given the noble Lord’s statement at Second Reading, that he is concerned that, because there may have been longer than usual between the failure to participate and the issuing of a sanction, the claimant will be unable either to remember or to provide evidence of any good cause they had for the failure.
I will spend a moment describing the process that happens between a claimant failing to participate and the issuing of a sanction. When a claimant gets referred to a DWP decision-maker for a sanction decision, a letter is sent asking them to provide evidence of good cause. The letter says:
“Will you please contact me before”—
and then a date is inserted—
“to explain why you did not undertake this activity. You should note that unless you provide a good reason for not undertaking this activity, your benefit may be affected”.
So the stockpiled cases would, at the time of the failure, already have been asked once to provide good cause. The fact that we did not deal with these cases immediately will not have prevented these claimants from providing evidence of good cause at the time of the failure. The decision-makers will have all this evidence on the stockpiled cases already, so the risk that they have been unfairly treated is significantly minimised.
I know that not all claimants will have provided their evidence of good cause the first time they were asked for it, although this is of course entirely their fault. However, I reassure noble Lords that in these cases, where a claimant is attempting to argue that they had a good reason for a failure that occurred many months ago, decision-makers and First-tier Tribunals will make an objective decision based on the evidence before them. They would of course take into consideration any claimant’s argument that they had good cause, but that they cannot provide evidence because of the length of time since the failure. It would be up to those hearing the appeals to judge on a case-by-case basis whether they thought this argument was strong enough.
I also note that this amendment only seeks to ensure that the appeal, and neither the decision to issue the sanction nor the reconsideration, takes into account any time delay caused by the Reilly/Wilson case. I assume that this was not the intention of the noble Lord, Lord McKenzie. There is this oversight, and claimants in the stockpile would at the time have been asked for evidence of good cause. The tribunal is also already bound to have regard to all relevant matters.
Picking up the issues raised by the noble Lord and the noble Baroness on national insurance credits, prior to the changes to the jobseeker’s allowance sanctions regime from 22 October last year, national insurance credits were paid during the period of the sanction. National insurance credits are not paid when the benefit is sanctioned on or after 22 October. The Bill does not change these arrangements. The payment or not of national insurance credits with respect to stockpiled sanction decisions will therefore depend—
Lord Howarth of Newport
I wonder whether the Minister would reconsider the language habitually used by DWP. When he talks of a stockpile he is referring to human beings in very anxious circumstances who are waiting for their cases to be considered. Does not this language rather dehumanise them?
Lord Freud
The noble Lord makes the same point as JRR Tolkien, who did not think that “growth” was the right way to refer to hobbits at Bilbo Baggins’s birthday party. If the noble Lord can think of a better word than stockpile, I will happily use it. I cannot think of one off the top of my head. If the noble Lord finds that offensive—
Lord Freud
Yes, but there are six billion people around. I am trying to refer to a particular group. I hope that by the time we get to the next amendment I will have found a better word, so bear with me for a little while if I cannot work that one out on my feet.
On the point about people going into work: if a claimant has been off jobseeker’s allowance for longer than the length of their sanction then they will be deemed to have served their sanction, and therefore will face no penalty. I cannot go through the absolute detail of the proportionate amount but it is likely that we will do this proportionately for those who have been in work, so there will be a record of that.
On the points made by the noble Baroness, Lady Hollis, a lot of the issues surrounding what the tribunals are doing are in ESA cases, while we are dealing here with JSA cases. We are talking about rather small numbers; I will go into more detail on them. This is a very small group of people, and the concerns about how quickly they may go through the tribunals, and the pressure they put on those tribunals, are to that extent much more manageable than if theirs were the more complicated ESA cases. Likewise, much of the concern around those cases has been around the medical area and that, of course, will not arise in this particular instance.
The decision-makers receive in-depth training, including on the importance of impartiality, what constitutes evidence, and the balance of probabilities. Clearly a large number of their decisions—three-quarters—are upheld. By putting decision-makers in between, for instance, the WCA and the tribunal, we were trying to weed out those areas where the DWP considered that the tribunal would find against, and thereby reduce the volume. That is what has been happening, and clearly we watch that very carefully. Having dealt, I hope, with all the issues raised, I beg the noble Lord not to press his amendment.
Lord McKenzie of Luton
My Lords, I indicated at the start that these are probing amendments. That highlights part of the problem of having this truncated process: that we do not have the chance to take away and read the Minister’s comments. We have to try to absorb both what is said and what is not covered this evening.
In relation to deferred decisions, I will not use the term to which my colleagues objected. The Minister said that these would be dealt with in a timely manner. However, the thrust of the presentation made by my noble friend Lady Hollis was to ask whether there was the capacity to deal with this. Decision-makers are struggling under current arrangements, and adding this extra burden will make life more difficult.
On national insurance credits, I was trying to probe the point that when they are withheld because of sanctions, post October, in circumstances where the regulations that underpin the sanctions were originally found to be unlawful, the Bill switches lawfulness back on in respect of the sanctions component. Does that automatically run where national insurance credits have been withheld? What is the connection between the two? Does it automatically flow from whether a sanction has been levied, or does it require another process that authorises the withholding of the national insurance credit? If the original decision was based on an unlawful position in respect of the regulations, is the restoration of the lawfulness of those provisions under the Bill enough to authorise the withholding of national insurance credits? That was the point I was probing, perhaps not in sufficient detail.
On those cases that have been deferred where no decision has been made, I think that what the Minister said was a change from what we previously understood the position to be. I thought that the point had been made very clearly before that if somebody was in work, there would be no sanction. It seems that some nuances to that have been introduced by the Minister’s reply. Now it will depend on how long they have been in work in comparison to the length of the sanction that has been levied. That seems to be a new formulation, which we have not heard articulated before.
I did not hear from the Minister an assurance that we were seeking. Leaving aside the issue of making the regulations and notices retrospectively lawful, is it the Government’s intention that individuals should otherwise be in a worse position than they would have been had the regulations and notices been lawful ab initio? How does that interact with the appeals process? We have not unpicked all those issues this evening.
Having said all that, I do not think that we can get any further. I hope that the Minister will reflect on this discussion. If we could get something further in writing before we rise later this week, it might give us some reassurance. For the moment, I beg leave to withdraw the amendment.
Baroness Sherlock
My Lords, in responding to this amendment, I should like to pay tribute to my noble friend Lord Bach, who has fought tirelessly on this subject for many months.
As we have heard, it is currently possible for a claimant who meets the eligibility criteria to get free legal advice and assistance to cover preparatory work for a hearing. Legal aid may also be available for higher tribunals and courts appeals on a point of law. However, from 1 April, all welfare benefits will be out of scope for legal aid. The context for this Bill makes this all the more complicated because, as we heard from the Minister, the law on sanctions has changed, so claimants may struggle to work out what applies to their case. Further, since there may often be significant delays between alleged breach and appeal, claimants may also struggle to work out what good cause or recompliance mean so long after the event, subjects to which we will return on a later amendment. This brings me to my questions for the Minister. First, will he clarify the position? If a claimant would have been entitled to legal aid to help prepare his case had he appealed within a month of a decision to sanction him, will he still be entitled to legal aid on the same basis should he appeal after 1 April? If the answer is yes, how will this happen? Who will provide the advice and who will pay for it? If the answer is no, given that the Courts and Tribunal Service is likely to be inundated with cases once the deferred decisions pile is unleashed, what assessment have the Government done of the likely delays and the consequent additional cost to the Courts and Tribunal Service of having so many unadvised appellants arriving at once?
If the Government are unable to give satisfactory answers to all these questions, I suggest that the Minister should accept this very mild amendment. If he does not, and my noble friend Lord Bach chooses to press it to a vote, we on these Benches will give him full support. The very least that the Government should do is provide a considered view—impossible beforehand, given the timetable—of the effect on access to legal advice and support of a group which Parliament never intended to be affected by the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act. We are pleased to support this amendment.
Lord Freud
My Lords, before I deal with this amendment, I ask the Committee to indulge me as I answer a couple of questions on the last round from the noble Lord, Lord McKenzie of Luton, which may be relevant.
On the question of what sanctions mean for national insurance, if the failure to participate was after 22 October 2012, national insurance is not credited but if it was before 22 October 2012 then it is. On going into work, no sanctions will be applied to people who no longer receive jobseeker’s allowance. That might save some writing.
Lord McKenzie of Luton
On the point about national insurance credit, I am not sure that the Minister’s answer deals fully with the issue that I raised. Perhaps the noble Lord will look at the record tomorrow and write in due course.
Lord Goldsmith
Does the Minister not think that what has just taken place illustrates how wrong it was to bring this Bill in and try to fast-track it through? He is answering, on the hoof, important questions in relation to the entitlement, not of stockpiles but of people. We have this problem because the Bill is being fast-tracked through. The amendments so far have been admirably moved. In relation to Amendment 2, the Secretary of State will, within a month of the Act coming into force, do something which we would normally expect the Minister to tell us before the Bill is passed. Will the Minister kindly reflect on that and consider whether it is not an absolute disgrace that the Bill is being passed in this way, as the Constitution Committee of your Lordships’ House, of which I am happy to be a member, said last week and other noble Lords made clear at Second Reading?
Lord Freud
My Lords, I may be to blame for moving off the particular amendment. We are not having a Second Reading debate now: we are dealing with a set of amendments. Amendment 2 seeks to ensure that the Secretary of State will have to publish, within one month of the Act coming into force, a report on whether claimants would have sufficient access to legal advice and support including legal aid. After 1 April, claimants who appeal to the First-tier Tribunal in England and Wales on welfare benefit issues will not, as a matter of course, be able to claim legal aid. This will be the position for all claimants affected by the legislation where they have applied for legal aid after 1 April. I hope that clarifies the position for the noble Baroness, Lady Sherlock. There will not be entitlement to legal aid after 1 April.
It is important to note that the change in legal aid in no way affects a claimant’s right to ask for reconsideration or appeal to the tribunal. This change in legal aid eligibility will have a limited impact on the claimants affected by sanction provisions in this Bill. Official statistics show that, of the 170,000 claimants sanctioned on ESE or MWA schemes, only around 5,000 appealed to the First-tier Tribunal. Based on these data, we therefore estimate that only between 1,500 and 2,000 claimants in the cases that have been stockpiled—cases, not people—will eventually appeal to the First-tier Tribunal. I also think that due to the nature of these cases it is likely that the vast majority of cases brought before the tribunal will be about a factual dispute where the claimant will need to present their case in plain language and will not require legal support. They will still be able to ask for support from, for example, a citizens advice bureau.
Lord Bach
My Lords, I thank the Minister for his reply. I thank other noble Lords who have spoken, all of them in favour of my amendment. I also thank noble Lords who have asked questions of the Minister in regard to this matter.
I have to say that I sometimes wonder whether the Government really understand how important these issues are. We enjoy a system of law that enjoys a reputation that is well deserved over many years. One of the jewels in the crown of the English legal system is that people, when they hear about it, know that it applies to everyone, not just to the rich and powerful but applies, sometimes to a limited extent, to those who are at the bottom of the pile. That is the glory of the legal system. What the Government do not seem to understand is that it does not matter whether there are 20 cases, 500 cases, or 5,000 cases; these are fellow citizens who should be entitled to the protection of the law like everybody else. Is the Minister really saying that if the numbers were much greater the Government would change their attitude? I do not think that that is what he is saying.
This measure is particularly unfair to those who, through no fault of their own, have been caught by the hiatus that has been caused by the Court of Appeal saying that the regulations put forward by the Government were unlawful.
Lord Freud
Perhaps I may make absolutely clear the point about the numbers. There was a lot of comment from noble Lords opposite that the system would be overwhelmed by the numbers because people did not have legal advice and the system could not therefore cope. The point I am making is that that argument does not stand in the light of the rather small number of cases—between 1,500 and 2,000—that might come towards the First-tier Tribunal as a result of the Bill.
Baroness Hollis of Heigham
If I may intervene, approximately 500,000 sanctions were issued last year. Something like 3,500 or 4,000 of those cases went to appeal. That was last year, before this additional provision hits them. The Minister may wish to reconsider his statistics.
Lord Freud
My Lords, I will address Amendments 4, 5, 5A and 6 together. The purpose of these amendments is to place in the Bill detailed requirements for the independent report set out in Clause 2.
I should be clear that Clause 2 provides for an independent review of the operation of provisions relating to the imposition of sanctions which would, without this legislation, be unlawful. The amendments could be seen to imply a much wider review; it is not a full review of the operation of sanctions, although clearly there could be wider relevance. At least one of the things covered in the amendment is not within the scope of the Bill: paragraph (d) asks about the number of penalties imposed upon claimants in receipt of employment and support allowance. I can answer that today, as the Bill is only concerned with JSA claimants.
The Government are happy to consider a wide range of areas for the review, but it would be unhelpful to lock down the terms of that review at this stage. Despite my earlier comments, the amendments list a number of areas the review could usefully consider. I am happy to confirm what I said on Thursday, and give a commitment that we will discuss further with the Opposition the scope of the review. Within that process, we can look at the point raised by the noble Baroness, Lady Lister, on provision for outsiders.
Amendment 5A would ensure that the independent reviewer makes an assessment of the extent to which senior managers in Jobcentre Plus have used targets in the operation of sanctions. This amendment is completely unnecessary. There are no targets for sanction referrals. The Government have made a point of removing the vast majority of targets within Jobcentre Plus. It is regrettable that loose drafting of an internal e-mail suggested otherwise. If noble Lords look at sanctions, there is no clear trend in the proportion of the caseload who receives them. Prior to 2007, the rate was running at around 4%; since then it has fluctuated between 3% and 5%. There is not the clear trend in the growth of sanctions which some people have been claiming.
Baroness Hollis of Heigham
My Lords, I do not doubt the Minister’s honesty and integrity in his statements about targets at all. However, the staff clearly do not believe him. It is clear from the evidence that we have seen—the leaked e-mails and all sorts of other examples coming to Members of Parliament and so on—that the staff in local offices believe, because they are told by their managers, that they have to increase the number of sanctions. In the e-mail, the manager of the particular jobcentre was criticised and told that she would be subject to first-stage disciplinary hearings because that office was something like 93rd out of 101 in sanction production; they should have been producing something like 25 a week and were only producing four or six a week. Therefore: “Guys, we should raise our game”.
The e-mail was not loosely drafted. It was very precisely drafted; we have all seen copies of it. That e-mail, from someone senior in the office to their staff, made it very clear that if they did not increase a number of sanctions, they, too, would be involved in a disciplinary process. That is believed by those staff and by staff across the country. I do not doubt the Minister’s word, or that he does not intend that to be the case. What is he going to do, therefore, to ensure that local offices no longer behave in this way?
Lord Freud
My Lords, let me make very clear the difference between having targets, having business or management information, and doing something with that information. Clearly, you collect these data not just to answer parliamentary questions but to run the business. It is used to look at where there are outliers and peculiarities, and what the norms are. When a particular jobcentre may be well outside the norm on either side, you might want to ask it why that was the case. Was it justifiable, and what were the dynamics of that? In some cases you are clearly looking at particular parts of the operation that are not operating in line with the norms. That is not having a target culture. A target culture—as the noble Lords opposite will know, because they were running one in many parts of the public services—is where you incentivise and drive performance based on particular targets. We do not do that. We do not have targets. We do, however, have management information and, as I say, we need to understand why outliers exist.
Baroness Hollis of Heigham
My Lords, will the Minister explain why this senior staff member—the manager of the office—told the staff underneath her that unless they increased the number of sanctions she would be subject to the first stage of a disciplinary procedure, and that that, in turn, would mean that she would have to discipline them? How does he explain that?
Lord Freud
My Lords, I am not going to pick up a particular case because I do not have the detail on it. It would not be appropriate for me to hazard a guess on what was behind a particular e-mail or a particular concern.
Lord Touhig
My Lords, I hear what the Minister has said, and he is held in high regard across the House. In view of what my noble friend Lady Hollis has said, will he therefore initiate an investigation into how this memo came about? Will he come back to the House to explain what action the Government are taking on this? Somebody is clearly acting against government policy, and it should be stopped.
Baroness Hollis of Heigham
Will the Minister also, therefore, ensure that all DWP local offices receive the same information—that this is to be deplored?
Lord Freud
My Lords, I must repeat what I have just said. Clearly, we have internal management information. It is vital that we keep it, and we publish a lot of it. We need to understand why some areas, some jobcentres, have higher rates than others and why some have lower rates. Some may have very good reasons for having lower or higher rates, while others may not. We therefore need this information to correct the anomalies, and that is normal business practice. It may be that in particular cases a jobcentre manager is told, “You are running very high or very low figures, and you cannot justify the reason for that, so you need to get more into line”. It may happen. I have not got the particular details.
Baroness Hollis of Heigham
In that case, what is the difference between coming more into line and targets?
Lord Freud
The noble Lords opposite know exactly how targets operate because they operated a target regime. Targets are when people are incentivised to perform to particular figures.
Baroness Hollis of Heigham
What if they are incentivised by the threat of being punished?
Lord Freud
They are usually incentivised to reach targets, and we do not run a target regime. The no-targets message has gone out repeatedly.
Baroness Farrington of Ribbleton
My Lords, I fail to understand the Minister. Surely if someone is asked to regulate their business, as he calls it, in order to get to the norm, what is the difference between that and a target?
Lord Freud
The difference is that where someone is not performing in line with the rest of the business for no good reason—in other words, where there is nothing different in the underlying constituency of the business—they are not operating the business in line with the standards that we have. That is entirely different from having targets, because it is understood that no figures are going out with instructions to achieve something. The message that there are no targets goes out repeatedly to jobcentre managers; there has been a reminder from the Work Services Directorate that there are no targets; and we will investigate if people have misunderstood that approach.
Baroness Farrington of Ribbleton
My Lords, this is Committee. Many of us are deeply distressed about the Bill. To seek to curtail a discussion where clearly the Minister is saying that people will be asked to comply with a norm if they have no good excuse not to, is to my mind—and, I suspect, to the minds of other noble Lords—little different from a target.
Lord Freud
My Lords, I have answered the question. I will re-emphasise that we do not have targets, we have management information. I may not have convinced noble Lords on the other side, but they should be very familiar with running targets because that is how they tried to run the economy. We do not run targets because they create perverse behaviours. We collect information in this area, not least because it is required for public purposes. Furthermore, we need to run a business and we need to understand what different areas are doing in order to do that.
Referrals for sanctions are made on the merits of each case. Decisions on sanctions are based on evidence presented that is independently reviewed by decision- makers. The fact that only three-quarters of decisions made are upheld by these decision-makers proves the robustness of the process. Furthermore, there is an independent appeals process against decisions, so even if a target regime were in place, which it is not, claimants who were wrongly sanctioned could successfully appeal.
The flexible business model means that managers need to understand the reason for outliers. While differences can be for good reasons such as local labour market conditions, senior managers need to monitor the overall situation in order to spot and correct anomalies.
Given what I have said, it would be odd to require the independent report to cover a sanctions target that does not exist. However, we are happy to give reassurances that we will make clear the position in respect of targets and league tables. I have done my best today, but clearly more may need to be done for some noble Lords.
Lord Rooker
At the risk of upsetting the Whip, I have a question. The Minister does not seem to have addressed one of the examples given by my noble friend. Will he give a personal guarantee that no office will open and call people in on Easter Sunday? How many offices are opening on Sundays? Are they in England, Wales and Scotland? What is the policy of offices opening on Sundays to call in people in the way we heard in the example earlier on? He must address that because this is obviously something quite new.
Lord Freud
My Lords, I do not have the information on Sundays, particularly Easter Sunday. The underlying issue is compliance checks using different days for attending the jobcentre, which are an important element of Jobcentre Plus’s toolkit to combat benefit fraud and confirm conditions of entitlement to benefit. That can include asking claimants to attend a jobcentre on a day other than their normal signing day. That is not something that is different under this Government.
Baroness Lister of Burtersett
I am sorry to intervene, but does the Minister think it is reasonable to ask a mother to come in on Mothering Sunday?
Lord Freud
My Lords, clearly, I cannot talk about examples when I am not familiar with the particular example. It may have been a strategy. As I said, there is a general strategy to prevent non-compliance by using the device of asking people to come in on different days. Sometimes people are asked to come in on every day of the week. The example I am thinking of is the five workings days, but I have seen examples of that. I saw that example under the previous Government to be honest. I do not know why noble Lords opposite are looking aghast as this was absolutely standard procedure under the previous Government and nothing has changed. It was standard procedure and has been maintained because it works in areas where we are concerned about benefit fraud.
On Amendment 4, it is worth noting that for sanctions more broadly much of the information that the noble Lord, Lord McKenzie, sets out in his amendment is already published by the department. For example, we have published, and will publish every six months, tables setting out the number of sanctions issued and the number of reconsiderations and appeals. The latest figures published for employment, skills and enterprise schemes and mandatory work activity show that up to October 2012 around 170,000 sanctions were issued. There were just over 50,000 reconsiderations, with claimants being successful in just over half of them. Following this there were about 5,000 appeals to the First-tier Tribunal, with claimants being successful in around a quarter of them. I hope that gives enough reassurance to the noble Lord and the noble Baroness that the independent review will be comprehensive and in the spirit of Clause 2. I therefore urge them to reconsider the position and not press their amendments.
The noble Baroness, Lady Lister, raised a point on hardship and the new hardship regime. The new hardship regime will not apply to these jobseeker allowance claimants. It will come into effect only when universal credit is in place. The lone parent’s caring responsibilities are taken into account when setting work search requirements. In the example used by the noble Baroness, they can be used in citing a good reason for non-compliance.
I turn now to the linked Amendment 6, the purpose of which is to ensure that there is an interim report on the operation of the provisions relating to the imposition of a penalty, as well as the report after 12 months that the Bill already requires. I am as keen as the noble Lord, Lord McKenzie, that the review is expedited and we will endeavour to complete it as quickly as possible. However, it may help if I set out why an interim report would be unhelpful in providing a complete picture. A claimant who has a sanction imposed on them has 13 months to bring an appeal against that sanction, so by imposing a six-month deadline for an interim report we would miss those appeals made at a later point. That could then give a misleading view of the overall picture in a way that could be unhelpful. As I said earlier, we are committed to producing a report as soon as is reasonably practicable and it would be far better to wait for the full annual report. I hope that the noble Lord will reconsider the position and not press that amendment.
Lord McKenzie of Luton
My Lords, first, I thank my noble friend Lady Lister for her support for this amendment. I believe that my noble friend made a powerful contribution and painted what I think we would all agree is a very troublesome picture of what is happening on the ground in too many instances. She specifically asked whether the review would receive evidence from outside bodies, and I do not think that the Minister has addressed that point. I thank the noble Lord, Lord Kirkwood, too, for his support, at least in spirit. I believe that he is absolutely right that the projected cost of £130 million is excessive. Of course, from the Government’s point of view, the higher that figure, the greater the weight given to the opportunity of retrospective legislation. But I think that the noble Lord’s analysis is right.
The Minister’s response was desperately disappointing generally. On the question of targets, let me be clear about what Amendment 5A says. It seeks a report that,
“will include an assessment of the extent to which jobcentre managers have applied targets on the issue of sanctions”.
I accept the Minister’s words—he would not wish to mislead us—on whether Ministers have targets, but the question is whether as a practical matter targets are being applied within certain Jobcentre Plus premises. The noble Lord says that it is about business information and that it is necessary to spot outliers, but the one document that we have as an example is worth reading. It says:
“I have until 15 February, along with other area managers, to show an improvement, and then it is a performance improvement plan for me”.
A PIP is the first stage of the disciplinary process, as my noble friend Lady Hollis identified. It goes on to say that,
“if I am on a PIP to improve my team’s Stricter Benefit Regime referral rate I will not have a choice but to consider implementing PIPs for those individuals who are clearly not delivering SBR within the team”.
It seems to me that there is an awful lot of pressure there, whether you label it as pressure driven by targets or by some other means. It is pressure, and it is changing the culture of the organisation. What does it lead to? It leads to advice like,
“listen for telltale phrases ‘I pick up the kids’, ‘I look after my neighbour’s children/my grandchildren’ or just ‘I am busy’—all of which suggest that the customer may not be fully available for work, even cases where a parent shares custody can be considered if the arrangement is informal. Not that I am suggesting you go there, but you need to consider each case individually”.
Is not the Minister troubled to understand that those sorts of memos are floating around within Jobcentre Plus? Is that not entirely contrary to what he himself has asserted? I cannot believe that he would feel comfortable about that happening. That is the purpose of the amendment—to find out what is happening or has happened in Jobcentre Plus generally. It is not a question of whether the Minister has set down a particular target but what is happening within those Jobcentre Plus premises and the impact that it is having on people being referred for sanctions.
Again, the hour is late, and I will withdraw the amendment, although when it is called I propose to test the opinion of the House on Amendment 5A, which is the key issue dealing with the sanctions and the revelations that the press have identified, because there is a pressing and clear need for that to be addressed.
Baroness Hollis of Heigham
My Lords, I should like to support my noble friend by saying that I am mortified about the additional numbers on the other side as the result of our strenuous debate. I thought that we might have persuaded a few more to abstain.
I hope that the Minister can agree to this amendment. There are three broad reasons why we need new guidance and clarity on the sanctions regime: the issue of targets/norms, good cause and compliance. The Joseph Rowntree research that came out in December 2010 shows that claimants have a low level of awareness of sanctions and that the more disadvantaged they are, the higher the risk of sanctions and the less knowledge they have about them. This applies to young claimants, those with a disability, those with a poor education, those with large families and those from an ethnic minority. The research shows that they are not out to flout the system but that they have poor information or non-intentional behaviour such as forgetfulness. In that context, I want us to support my noble friend’s amendment.
I turn first to the issue of targets. The Minister was at some pains to explain to us earlier that “targets” is a relevant word only where you are rewarding behaviour, but when you are punishing it, that is a “norm”. We know that if you exceed, you get a target, and that if you underachieve, that is a norm. It is clear that targets or norms, whatever we want to call them, are the enemy of mitigation. Using them to allow the Secretary of State to claim clean hands while the staff do the dirty work under pressure from above is completely unacceptable. We need clear evidence, guidance and clarity from the Minister on the sanctions regime to ensure that targets do not stand in the way of mitigation. If people are allowed to mitigate and sanctions numbers therefore reduce, so will the targets, and staff will obviously have an incentive to fail to ensure that claimants follow good procedure and appropriate behaviour because they themselves face disciplinary action. That is a moral, or immoral, position, into which they should not be put.
Secondly, we need this guidance to ensure that claimants are aware that they may be able to mitigate sanctions by establishing good cause. My noble friend gave the example of the lone parent unable to attend an interview. Every parent in this House has had a child who has been sick and they may have missed an interview as a result. There is no doctor’s evidence because, by the next day, the child is well. Certainly that happened to me on numerous occasions. However, in this new, suspicious, look-for-any-benefit-cutting-excuse, hunt-them-down culture, of course we all now assume that any lone parent will keep her child at home and away from school simply to avoid an inconvenient interview. She says that the child was poorly, but why believe her? As she can provide no evidence, the office has got her and another tick is put on the whiteboard.
The third reason for needing guidance on mitigation is that, as the courts have indicated, claimants need to know and have a right to know how they may end their sanction by complying with jobcentre requirements. This issue marks the crucial line as to whether we are using sanctions to reduce the benefit bill or whether we are using them to change behaviour. If it is the first, giving little information or hope for people to find their way back into the system, then the Minister risks creating a growing underclass without income, without much hope and without any help. But people, as Carlyle pointed out 150 years ago, will not starve quietly. Some may have families to help them, and they will be the relatively lucky ones. Some may beg, while others will cross the line into thieving, drug selling and semi-criminal behaviour. This is what the Rowntree trust warns us of. They will come to regard social security laws, in so far as they understand them, and increasingly other laws, as not applicable to them. We will all then pay a high price. If it is the second—that instead of simply trying to cut the benefit bill on any hook we can find, we want people to change their behaviour and sanctions are part of the tough love regime, as I believe they should be—then we absolutely must encourage people to end sanctions by complying with what they are expected to do. When they do so, we should rejoice, even though it means fewer ticks on the whiteboard of targets to be met.
Research evidence shows up that up to two-thirds of those sanctioned do not know the whys or wherefores, or what they can do about it. The Minister, whose integrity we totally respect, accepted at Second Reading that that was indeed the case and that therefore the issue of sanctions had to be revisited. If the issue has to be revisited, he should now accept my noble friend’s amendment, because it amplifies what he himself has already agreed. Mitigation means ending the culture of targets and, incidentally, protecting any whistleblowers in the process. It means ensuring that people have the help that they need to claim good cause where that exists and it ensures mitigation so that claimants will know how they can end the sanction by conforming to benefit requirements. I hope that all in this Committee agree on these three goals. In which case, I hope that the Minister will accept the amendment.
Lord Freud
My Lords, this amendment, which would require the Secretary of State to issue guidance on the way in which claimants can mitigate any penalty imposed under the ESE or MWA regulations after the Act comes into force, is unnecessary, as this information is provided to claimants as a matter of standard practice. When a claimant is issued with a benefit sanction, they are as a matter of course sent a letter explaining the decision made and what effect it will have. The letter clearly tells claimants that if they want to appeal the decision, they should fill in leaflet GL24, If you think our Decision is Wrong, and that claimants can,
“get this leaflet from your Jobcentre or Social Security Office”.
Attached to the sanctions letter are two leaflets: leaflet 1NF1, on appealing against a decision and leaflet JSA9, the hardship leaflet). I have both of these leaflets with me today.
The leaflet on appealing against a decision explains in plain English who the claimant should contact if they want to know more about the decision or, if they think the decision was wrong, how to appeal it and what support they may get in formulating that appeal. The hardship leaflet explains what financial support is available, the eligibility criteria and how to apply for hardship, and provides the form they must fill in to claim hardship. The whole process is done as a matter of course and, indeed, is on the record and available for anyone to see how those leaflets work.
I turn to the point raised by the noble Baroness, Lady Sherlock, on recompliance. If a claimant has been issued with a 26-week sanction but has complied in the intervening period, they will be served with a four-week sanction. Recompliance is not particular to any scheme and can include participation in any other scheme. Of course, the sanctions regime has changed, so if the failure to participate was before 22 October last year, the old regime, which includes the re-engagement, applies. However, if the failure to participate is after 22 October, the current sanctions regime, which has no engagement and which builds up, will apply. That goes on the time of the failure to participate.
The noble Baroness was concerned about the time between the failure and the sanction being imposed on the stockpiled cases. I am sorry that I have not yet found a better word than stockpiled but it is for cases not people. As I said on an earlier amendment, the process of finding that information takes place immediately on the failure. They receive a letter and need to provide good cause at that point. Clearly, where there is a problem and there needs to be amplification, and there is a problem of information or evidence, the decision-maker will have to take that into account in the normal way, given that there is a gap and it is a justifiable lacuna.
As a matter of course, the cases that we have stockpiled will get issued with a sanction and receive the standard letter, and those accompanying leaflets that I outlined. This amendment is therefore superfluous and I ask the noble Baroness to withdraw it.
Baroness Sherlock
I thank the Minister for that reply and, in particular, for clarifying that it will be the sanctions regime that was applicable at the time of the alleged breach that would prevail. I will just ask him to clarify one point more specifically. I was glad to hear him say that any subsequent direction can count as recompliance and that it did not have to be something specific to the particular scheme or course originally. It can count, but will it?
Lord Freud
If it fits the norms within which that re-compliance operates, then it will. I am not sure whether there is huge distinction, in this case, between the may and the will.
Baroness Sherlock
I am not trying to be pedantic, although I confess that it is a hobby. The reason it matters in this case is that normally, if I were sanctioned for not participating in a course, the obvious way to comply is to start going to the course. As the course has long since finished, there are all kinds of unrelated things that may have happened in between then and now, which would not be the obvious way for me to re-comply with a direction on something that has long since ceased. Therefore, the fact that these things could count does not necessarily mean that they will. The reason that I wanted guidance was precisely to make clear to jobcentre staff that in these circumstances they should interpret any form of compliance as being enough. I encourage the noble Lord to say that on the record.
Lord Freud
What I will say on the record is that we will ensure that guidance to jobcentre staff will make this absolutely clear.
Lord Freud
My Lords, we will make sure that the particular options here are laid out for jobcentre staff so that we do this consistently. I can add that recompliance will count if it is a scheme under the ESE regulations.
Baroness Sherlock
That was worth waiting for. I thank the Minister for that. I still think that this amendment is worth while. Although the Minister regards it as superfluous, the information that goes out to claimants actually relates specifically and only to complaints and hardships. The other obvious way to mitigate the effect of a sanction is recompliance and in fact none of that information does relate to recompliance. However, in the light of what he has just said, and given the lateness of the hour, I beg leave to withdraw the amendment.
Jobseekers (Back to Work Schemes) Bill
Lord Freud Excerpts(11 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this Bill will ensure that, following the recent Court of Appeal judgment in the case of Wilson and Reilly versus the Secretary of State for Work and Pensions, the Government will not have to repay previous benefit sanctions to claimants who have failed to participate in mandatory back to work programmes. It will also enable the Government to impose benefit sanctions where a sanction decision has been put on hold because of the Wilson and Reilly case.
I shall briefly set out the details of the Court of Appeal’s judgment, but let us first be clear on what this case was not about. The court did not cast any doubt on the policy intention behind any of the schemes. In the words of Sir Stanley Burnton, one of the judges, the case was,
“not about the social, economic, political or other merits of the Employment, Skills and Enterprise Scheme”,
and the court noted that the use of mandation was appropriate in such schemes.
The policy intention of our schemes has been clear to all from the outset. I have said that the Court of Appeal judgment was not about the social or other merits of the employment, skills and enterprise scheme, but the judges were not silent on the broad principle underlying mandatory employment schemes. Lord Justice Pill said:
“A policy of imposing requirements on persons receiving a substantial weekly sum, potentially payable for life, is readily understandable. Equally, the means sought to achieve that end are understandable; claimants should be required to participate in arrangements which may improve their prospects of obtaining remunerative employment”.
Again, I say that the case was not about the policy intent of the schemes, which has been clear from their inception.
So what was the judgment about? The judgment centred on the Jobseeker’s Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011, which for brevity’s sake I will from now on refer to as the ESE regulations. These regulations provide for most of the mandatory back to work schemes, including the Work Programme.
First, the court rejected the claimants’ argument that the ESE regulations were contrary to the European Convention on Human Rights—specifically, Article 4.2 on forced labour. Secondly, it rejected the claimants’ argument that the ESE regulations could not be enforced in the absence of a formal published policy.
However, the court found against DWP on two grounds. It found that the ESE regulations did not describe the programmes that they underpinned in enough detail. It also upheld the High Court’s ruling that letters sent to claimants when they were mandated to an ESE scheme were insufficiently detailed to comply with Regulation 4 of the ESE regulations. We have since laid new regulations and issued revised letters so that we can continue to mandate claimants to our schemes and ensure their continued proper functioning in accordance with the principle of imposing requirements on jobseekers in return for paying them benefit.
Your Lordships will not be shocked to learn that the department fundamentally disagrees with the court’s verdict in respect of the two latter grounds, which is why it has applied for permission to appeal to the Supreme Court the Court of Appeal’s judgment in respect of those two grounds. The arguments that we will make before the Supreme Court, if we are granted permission—
Lord Foulkes of Cumnock
If the department was so upset and disagreed with the decision, why did it take it so long to bring legislation before Parliament?
Lord Freud
I will come on to explain that in a little.
The arguments that we will make before the Supreme Court, if we are granted permission, will not be affected by this Bill. However, we need the Bill to provide certainty that the Government are not in a position where we will have to repay previous benefit sanctions, and can impose sanctions where decisions have been stayed, in respect of claimants who have failed to take part in employment programmes without good reason. We have made it clear that we will take steps to ensure that claimants cannot expect a sanction refund as a result of this judgment, and there is a compelling public interest for taking those steps.
The Bill does not overturn previous appeals that have succeeded on the basis of good cause and it does not prevent claimants from appealing a sanction on the basis of good reason. Instead, it ensures that claimants who have failed to participate with no good reason do not obtain an undeserved windfall payment. We estimate that such a windfall could cost the public purse up to £130 million. That is money that would be better spent on people who take their responsibilities seriously, and it is in the public interest that we ensure this.
There is also an important public interest, as the Court of Appeal recognised, in getting people back to work by ensuring that jobseeker’s allowance is paid only to those who are actively seeking employment and who engage with attempts made by the state to achieve that end, and that those who do not do so face the appropriate consequences. The Bill will protect this public interest by ensuring that those who have not engaged with attempts made by the state to return them to work face the appropriate consequences, rather than receiving an undeserved windfall.
The Government respect the general principle that Parliament should not legislate to reverse the effects of the judgments of the court for past cases unless the situation is exceptional. However, it is entirely proper to enact such legislation if there is a compelling reason to do so. There is a compelling reason here on three grounds: first, the cost involved; secondly, the claimants affected do not deserve a windfall payment; and, thirdly, this is an unusual case in social security legislation where a court or tribunal decision has a retrospective effect.
The Bill will provide that any decision to reduce jobseeker’s allowance under the ESE regulations cannot be challenged on the grounds that those regulations were invalid or the notices given under them inadequate. It makes similar provision in relation to the mandatory work activity regulations in respect of notices given under those regulations.
I have said that we fundamentally disagree with the court’s verdict with respect to the lawfulness of the ESE regulations and the notices given under them. We believe that those regulations were correctly drafted. They were drafted to be flexible enough to encompass a wide range of programmes designed to support jobseekers into work. There was no clear and identified need to go further than the ESE regulations in order to lawfully mandate claimants to our schemes.
The Merits of Statutory Instruments Committee, as it was then called, published a report that covered the ESE regulations on 5 May 2011. The Merits Committee had a number of concerns, including the quality of the Explanatory Memorandum. To go off on a tangent, I want to acknowledge that there was a period when we were not servicing the Merits Committee adequately, and I have taken steps since then to improve that position. The Merits Committee had concerns, but the possibility that the ESE regulations were unlawful was not one of them. The committee drew attention to the fact that the regulations,
“interpret the Act very broadly so that future changes to the Scheme could be made administratively without any reference to Parliament”.
However, it did not go on to suggest that they went beyond the primary powers.
The Joint Committee on Statutory Instruments also considered the ESE regulations at its meeting on 15 June 2011. I am sorry to report that no fewer than three instances of defective drafting were identified, which the department acknowledged. However, the committee did not raise even the possibility that the ESE regulations were unlawful. The Social Security Advisory Committee, whose independent and informed advice we value greatly and with which we have a very constructive relationship, also considered the ESE regulations. Among other issues, it made a point about the breadth of the powers, but it did not suggest that they went beyond the primary powers. Similarly, those primary powers in the Welfare Reform Act 2009 received full scrutiny. The Delegated Powers and Regulatory Reform Committee regarded the delegations in the relevant part of the Act and the associated scrutiny procedure as unexceptionable.
We consider that the primary powers do not require that the regulations set out the fine details of the scheme. We believe that it is undesirable to do so, as a wide variety of possible arrangements could be made, depending on the nature of the labour market conditions in particular parts of the country. We also need to be able to respond to changing conditions and challenges quickly and effectively.
We believe that the flexibility that the ESE regulations provided was rational and desirable, and it must be remembered that the High Court ruled that the regulations were lawful. We therefore cannot agree with the Court of Appeal’s judgment. We also believe that the letters issued to claimants provided sufficient information on the consequences of not participating in our schemes. In addition to the information provided in the letter, claimants would have also discussed the precise details of the scheme with their jobcentre adviser, including what was expected of them and the consequences of not upholding their side of the bargain.
Nevertheless, following the High Court judgment, we revised all referral notices to comply with the judgment and sent letters clarifying the position to the then claimants impacted by the decision. That allowed us to continue to operate the schemes as intended—an intention that has been clear to all from the scheme’s inception, based on principles which the effects of the Court of Appeal judgment undermines and which the Bill is intended to protect.
It is right that we are able to operate our schemes as intended, giving jobseekers the opportunity to improve their chances of moving into work, with appropriate consequences for those who fail to take up that opportunity. It is right that government resources are targeted on those claimants who are actively seeking employment and taking all reasonable steps to improve their chances of securing employment and that resources are not wasted on those who have not met their responsibilities.
To pick up the question asked by the noble Lord, as soon as the judgment was handed down, the department explored all the options and avenues available to it to ensure the protection of the public interest. Once the decision to pursue emergency legislation was taken, that required legal advice, the appropriate consent prior to introduction and preparing the Bill products. We also engaged the Opposition, who rightly gave the matter thorough consideration. I am sure that all noble Lords will appreciate the time that that has taken.
Lord Foulkes of Cumnock
As I understand it, this lay in the department without any suggestion of legislation for more than a month. If the department had been really concerned about it, the legislation could have been dealt with through the normal procedure. Instead, both the other place and your Lordships’ House are faced with emergency legislation, which is entirely unsatisfactory for examining such an important Bill in detail. All the subsequent stages will be dealt with on Monday. That is not adequate scrutiny. Does the noble Lord not feel some guilt or embarrassment at having to deal with it in this way?
Lord Freud
My Lords, obviously, it is never desirable to have emergency legislation where one can avoid it. It would be desirable to run this through a more normal process, but we are caught by time constraints. The point that the noble Lord made about delay is accounted for by the various steps that we have had to take in that period.
In conclusion, the Bill guarantees some fundamental principles, which are about helping us to move people into employment and protecting the public purse. I commend the Bill to the House and I beg to move.
Amendment to the Motion
Baroness Sherlock
My Lords, what a sorry state of affairs we find ourselves in. I almost feel sorry for the Minister, or I would if this shambles were not entirely of the Government’s own making. This debate has made clear the depressing, and I suppose rather shocking, extent of the Government’s failings. It seems as though crucial regulations underpinning the conditionality regime of the Government’s flagship, if utterly useless, Work Programme, as well as various other schemes, have been ruled unlawful by the Court of Appeal, and the Government now want to rectify the problem that they have created by forcing this Bill through Parliament at breakneck speed.
My noble friend Lord McKenzie made the point that the Constitution Committee has said clearly that it disagrees with the Government’s assessment, and we have now heard that, as it were, from the horse’s mouth in an extraordinarily powerful speech from the noble Lord, Lord Pannick. This is only the fourth time that I have spoken from the Dispatch Box in your Lordships’ House, but I suspect that if I were spared to do so another 400 times I would never begin to match the power of a speech like that, and I congratulate him. I am glad that it is the Minister, not me, who has to respond to it. The point that the noble Lord made, which I think is very interesting, is that the Government, having decided that the matter could take four weeks to consider from the time when they got the new regulations laid and enforced in this House, suddenly decided that there was a panic. I would like the Minister to return to this in his response.
In response to my noble friend Lord Foulkes, I think the Minister implied that the Government spent those four weeks considering all the various options before deciding on this deeply attractive one out of the collection. Will he explain why the Government did not consider the options before the decision? Presumably there were always two possible outcomes from the judgment, yes or no, so it would have been possible for them to spend time in advance of the ruling considering what they might do if they lost the case. Why did they have to wait for four weeks to consider the options and then come to Parliament to tell us that, having waited for four weeks, we had to rush through this in days? I will be interested to hear what the Minister has to say.
The shambles is even more annoying because the Government were warned. The Minister seemed to imply that the Social Security Advisory Committee did not tell them that the regulations were illegal, but perhaps he could help me. I understood that the committee drew attention to the overly wide scope of the regulation that was being used. Was that not one of the points on which the Court of Appeal found against the Government? If not, perhaps he could correct me, and I invite him to do so now if he wishes.
Lord Freud
The point that was being made by the SSAC about the width was that it meant that it was not necessary to come back to Parliament for specific approvals on particular schemes. It was not that this was likely to be against the law. The point was about parliamentary oversight.
Baroness Sherlock
I thank the Minister for explaining that, but of course it was on precisely the fact that parliamentary oversight and scrutiny of the nature of these regulations is important that I understand the Court of Appeal found against the Government. At the very least, this was a pretty heavy hint from the Social Security Advisory Committee, one that the Government managed to ignore completely.
Then there is the issue of retrospection, to which I barely need to turn after the speech from the noble Lord, Lord Pannick. As my noble friend Lord Bach noted, the worst aspect of this debacle is the combination of retrospection and fast-tracking. That is a particularly toxic mix, but it is what we are faced with. I look forward to hearing the Minister’s explanation of how the circumstances here make it necessary to bring forward this particular form of retrospection with this astonishingly foreshortened timetable, a point made by the noble Lord, Lord German. If the Minister’s response on that point is not compelling, I look forward to seeing the noble Lord join us in the Division Lobby should my noble friend Lord McKenzie decide to press his deplore Motion to a vote.
Like my noble friend Lord McKenzie, I am grateful to my noble friends Lady Royall of Blaisdon and Lord Bassam for trying to get us a few extra days to consider this matter. At least we now have the weekend to read the papers in more detail. I am also grateful that my right honourable friends Liam Byrne and Stephen Timms in the other place managed to get the Bill changed so that it would at least guarantee appeal rights for those affected by the sanctions process and ensure an independent review of that process.
It now falls to us in this House to do two things. The first is to register that this state of affairs is not right. The amendment in the name of my noble friend Lord McKenzie of Luton simply puts on record what we on these Benches think about the mess that the Government have got themselves into and the way they propose to get themselves out of it. I very much hope that the House will support it. We will then get down to the work that this House does best: doing our best, in the limited time that we have, to scrutinise the Government’s plans to ensure that there are no more disasters lurking in the undergrowth of this fast-tracked Bill.
There is a whole series of issues to which we will have to come back in Committee on Monday. For example, we know that appeal rights are to be safeguarded, but how can those appeals be robust when there is such a long time lag between the alleged breaches and the sanction being applied? As various noble Lords have said, how will the Government ensure fair treatment of a complainant who may have said that they had perfectly good cause not to comply with the requirement of a programme but who will struggle to evidence that months after the event? There is also the question of hardship. What kind of hardship regime will apply? The hardship regime is in the process of changing. How will the Government ensure that appropriate help is given to those who would suffer hardship as a result of sanctions?
Then there is the $64,000 question posed by my noble friend Lord Bach: will the Minister guarantee that anyone wishing to challenge decisions will have the same right to access to legal advice or aid as they would have done at the time the alleged breach took place, under regulations that have been found to be lawful?
There is so much more that I would like to ask, but we will have to wait until the dog end of Monday’s sitting, to which the remaining stages of the Bill have been confined. The message from today is clear: this is a shambles. I am beginning to wonder whether the Government’s entire approach to getting people into work is not itself a shambles. The evidence is clear. The Government are failing the unemployed of this country. They are failing to create jobs. They are failing to help them get back into jobs. Their flagship Work Programme—
Lord Freud
My Lords, I thank noble Lords for their valuable and interesting contributions. I need to register some disappointment that the noble Lord, Lord McKenzie of Luton, has tabled this regret Motion on the Second Reading of the Bill. I am saddened by that approach particularly because it contrasts to the very constructive approach of his party in another place. I hope that he does not press the Motion to a vote.
I shall deal directly with the various points raised. The first is the point about government competence. The ESE regulations were drafted to be flexible enough to encompass a wide range of programmes designed to support jobseekers into work. Introducing new regulations for each individual scheme would have been more bureaucratic and expensive. We do not agree that the regulations were ultra vires, and have applied to the Supreme Court for permission to appeal. We believe that the primary legislation does not require that the regulations set out the fine details of each different programme, and, indeed, that was the position taken by the High Court. In fact, we believe that it is undesirable to do so and that this was not Parliament’s intention since a wide variety of possible arrangements could be made depending on the nature of the labour market conditions in particular parts of the country. It is important that we have the flexibility to amend these schemes to reflect the changing labour market conditions on the ground without going through a laborious legislative process which would delay change beneficial to the claimants.
I also want to point out that the ESE regulations were considered by the House of Lords Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments and the non-parliamentary Social Security Advisory Committee, as I said in my opening remarks. None of those committees suggested that the regulations were outside the relevant Act’s powers. They raised different issues.
The Motion also makes reference to the High Court and Court of Appeal judgments that the letters provided did not contain sufficient information to claimants about the consequences of not participating in these schemes, a point which the noble Baroness, Lady Hollis, made with some vigour. That is not the Government’s view and that is why we have sought leave to appeal to the Supreme Court. Regulation 4(2)(e) of the ESE regulations simply required that the notice specify,
“information about the consequences of failing to participate in the Scheme”.
All our letters before the High Court explained that claimants could lose up to 26 weeks of benefit if they did not comply. That is clearly information about the consequences of failing to participate.
Claimants sanctioned under the ESE regulations knew perfectly well what was required of them. The notices that we sent to them clearly set out that they would face a benefit sanction if they failed to participate, and they have had detailed ongoing discussions with their Jobcentre Plus adviser about these schemes. The idea that these claimants failed to participate in these schemes because they knew that a court might decide that the regulations were ultra vires or the notice defective, particularly before any court case had been brought, is, quite frankly, ridiculous. There is no sensible case of unfairness to the claimants in this case.
As the noble Lord, Lord McKenzie, said in 2009 while debating the Welfare Reform Act in this very place:
“Of course there is a very easy way to avoid being sanctioned in the first place, which is to engage with the programme”.—[Official Report, 11/6/09; col. GC 136.]
These claimants failed to do so and must face the consequences of their actions. They are not deserving of a windfall payment as the result of a technical ruling by the Court of Appeal.
Lord Pannick
Will the Minister explain how it can be fair or a question of windfall when these claimants had no lawful obligation at that time to go on these courses? Surely that is the point. The Court of Appeal has so held.
Lord Freud
My Lords, it was clearly laid down in the primary legislation that that was an expectation, and they were informed by their advisers of that expectation. We are looking now at a subsequent finding by the Court of Appeal, on which we have asked for leave to appeal. However, nobody could have anticipated the finding, which is in dispute. There was a lot more information going to clients than was in that letter, because they were in communication with their advisers.
One of the fundamental points at issue here is that we are trying to design a much more flexible welfare system in which we individualise responses. That means that we do not send out loads of generic letters with long lines of prose about what will happen if you do this, that or the other. We are aiming to have a specific conversation with people through a flexible system.
Baroness Hollis of Heigham
My Lords, surely the Minister has accepted his own department’s research that up to two-thirds of those sanctioned did not understand that the failure to do as they were asked or told to do would result in a sanction. They did not know, and his department’s research confirms that.
Lord Freud
My Lords, I agree with the noble Baroness on this—the sanctions have not been well designed. We are redesigning the whole regime, as we did in the recent Act, to make sure that people understand what sanctions are about.
Lord Low of Dalston
My Lords, can the Minister help me on one point? I have been listening very carefully to what he said. As I understand it, he is telling us that the claimants fell foul of the legislation in terms of what it was anticipated to mean by the department. However, we all know that the meaning of legislation cannot always be anticipated with certainty when it is contested; it often requires a court decision to clarify what the legislation means. I think that the Minister is telling us that the claimants fell foul of the legislation as the Government wanted it to be interpreted but not, in fact, as it was interpreted. We have to look at what the Court of Appeal held to know what the legislation meant, not what the Minister hoped it might mean.
Lord Freud
As noble Lords know, we are seeking leave to appeal to the Supreme Court to test that specific matter. I will shortly come on to the point raised by the noble Lord, Lord Pannick, about why we have fast-tracked this Bill. However, we have explored all the avenues and have not taken a decision to fast-track lightly. We have looked at other measures to prevent this course of action but none provides a sufficient guarantee. People have been concerned about the four-week period. We have also spent a significant period discussing, through the usual channels, agreement to expedite this legislation.
Let me make clear why the retrospective legislation is necessary. The Government respect the general principle that Parliament should not legislate to reverse the effects of court judgments on past cases unless the situation is exceptional. However, it is entirely proper to enact such legislation if there is a compelling reason to do so. Perhaps I may spell out the three reasons which make this an exceptional case. First, there is significant money involved—£130 million—in very difficult, austere times. Secondly, the money would go to a group of people who neither expect nor deserve to obtain a windfall payment. These claimants knew exactly what was required of them. They failed to participate without good cause and were rightly sanctioned. Thirdly, this case is most unusual in terms of social security legislation.
Lord Foulkes of Cumnock
The noble Lord is repeating word for word what he said in his introductory speech. Why does he not reply and answer the important questions that have been raised? For example, why did he not ask for his appeal to the Supreme Court to be fast-tracked? Can he not answer the debate instead of repeating what he said at the beginning?
Lord Freud
I am doing my best to explain the reason why this is exceptional. I did not explain it in detail at the outset, so I am really grateful for the opportunity, reinforced by the noble Lord, to explain the exception.
The third reason why this is exceptional is to do with the nature of social security legislation. In almost all cases regarding social security decisions, the decisions of a court or tribunal are only prospective in nature. That is because the most common way in which to challenge a social security decision, including the underlying regulations, is to bring an appeal to the First-tier Tribunal. If that happens, the normal route is followed and the decision of the tribunal will not have a retrospective effect because of Section 27 of the Social Security Act 1998. It is only because there is an anomaly in the text of Section 27 that it does not apply to judicial review cases. That is something that I suspect that this Government will come back to, to clear up. It is clear from Section 27 that Parliament recognised that wholesale retrospective disruption of the social security system was not desirable. That is even more true in a case like this, when the beneficiaries of that disruption are not deserving of the windfall that they would otherwise receive. That is why this is exceptional.
I turn to the reason why we need to fast-track the Bill. I want to respond to the rather witty way in which the noble Lord, Lord Pannick, put his view that there was no urgency by explaining to him and other noble Lords that we have applied for permission to appeal to the Supreme Court. If we are not given that permission to go ahead—and that could come out any day—we immediately become liable to pay back the sanction money of £130 million. That is why there is particular urgency and that is why we are fast-tracking this legislation. We need to provide certainty to taxpayers that we will not spend this money in this way, unnecessarily. The department will endeavour to process the stockpile cases in a robust, transparent and efficient manner. While there is clearly a trade-off between robustness and speed, we will aim to do that as practically as possible.
Lord Pannick
I thank the Minister, who has been very kind. I have one more question for him. He says that it is necessary to have certainty, but why not wait until the Supreme Court rules? If the Government win, as they say they are so confident of doing, there is no problem. If they lose, they can bring emergency legislation before Parliament to clear up the matter in a few days before anyone can complain that they have not been paid out. Why not follow that route?
Lord Freud
The moment that there is a ruling—if there were to be a ruling—against the department, we would be liable from that moment to repay. What would we do? Would we obfuscate, say that we could not pay and were dealing with the paper work while we put through emergency legislation? We would be obliged to make the payments from the moment when the ruling came through. That is what this is about. It is why we are going ahead at this time and at this speed, which is clearly not something that we enjoy doing.
I turn to the review, which we have taken on in response to the Opposition in the other place requesting such a review. It will focus on the sanctions affected by the provisions of the Bill, which amount to roughly 25% of all JSA sanctions issued in the period. I have heard today concern from Peers about how DWP issues sanctions to JSA claimants more generally. I would like to make it clear that the department will discuss with the Opposition the terms of reference of the sanctions review. I assure noble Lords that the stockpile of claimants who are issued with a benefit sanction as a result of the legislation will receive the same information that is received by all claimants who are sanctioned for failing to participate in a scheme; namely, they will be told about their right to appeal, how to appeal and how they can go about claiming for hardship.
I will try to pick up as many of the questions that I have not dealt with as I can. I hope that the noble Lord, Lord Pannick, appreciates how closely we have studied the Constitution Committee’s report. I can tell him that Miss Reilly will not be affected by the legislation as she complied with the scheme that she was required to attend and was not sanctioned. I say to the noble Lord, Lord McKenzie, that we needed to put the regulations out within a day to keep mandating claimants going forward. The retrospective legislation required careful thought and an exploration of all the avenues. We also consulted the Opposition and the whole process took some weeks. I assure the noble Lord that there are absolutely no benchmarks or targets for sanction referrals. Sanctions will involve a temporary loss of benefit. We will not seek lump sums from people in work. We will look to use good cause and, for the more recent sanctions, good reason, but they are in practice the same.
As I said to the noble Baroness, Lady Hollis, a little earlier, the information given to claimants was not confined to what was in the letters. The sanction decision notice provides information on how to appeal and access other help. The noble Lord, Lord Bach, was concerned about legal aid. The first stage of the tribunal process is inquisitorial and legal aid is not required. It helps to ensure that everything that is relevant is considered. That is the job of the tribunal. I say to the noble Baroness, Lady Lister, that the Bill is compatible with the ECHR and will overturn some of the undesirable consequences of the judgment. That should not be done lightly but it is entirely proper to do so in the circumstances.
A number of noble Lords enjoyed having a go at the Work Programme. However, it has resulted in 200,000 people moving off benefits. The PAC report is somewhat premature in its conclusion about what is happening. I look forward to talking about that programme further in the months to come. I conclude by urging the noble Lord to withdraw—
Baroness Lister of Burtersett
I quite understand that the noble Lord has not been able to answer all the questions that were asked. However, will we get answers to those questions over the weekend?
Lord Freud
I have done my best to answer them. We will have a chance to go through some of these issues again in detail on Monday. I urge the noble Lord to withdraw his regret Motion. I commend the Bill to the House.
Guardian’s Allowance Up-rating Order 2013
Lord Freud Excerpts(11 years, 2 months ago)
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Lord Freud
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating Order 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I shall also introduce the Guardian’s Allowance (Northern Ireland) Up-rating Order 2013 and the Tax Credits Up-rating, etc. Regulations 2013. It is the Government’s view that the regulations and orders are compatible with the European Convention on Human Rights.
The regulations and orders before the Committee put into effect a number of reforms to tax credits and child benefit announced at the spending review 2010, the June Budget 2010 and the Autumn Statement 2012. In the spending review 2010, we announced that the basic and 30-hour elements of working tax credit would be frozen for three years from 2011-12. The regulations confirm that policy for 2013-14.
At the June Budget 2010, we announced that the rates of child benefit would be frozen for three years from 2011-12. We also announced that the income disregard, which is the amount by which a family can increase its income within a tax year without a recalculation of its tax credit award, would decrease from £10,000 to £5,000 in April 2013. At the Autumn Statement 2012, we announced that the child element of child tax credit, and the couple and lone-parent elements of working tax credit, would be uprated by 1% for three years from April 2013.
Benefits that help with the extra cost of disability have been protected. The regulations increase the disability elements of tax credits—that is, the disabled child and severely disabled child elements of child tax credit, and the disabled worker and severely disabled worker elements of working tax credit—in line with CPI. The rate of guardian’s allowance will also be uprated by CPI.
The Committee will be aware that the decisions on uprating contained in these regulations are part of a wider package of uprating measures. My noble friend Lady Stowell has already presented the Social Security Benefits Up-rating Order for 2013-14, which increases certain working-age social security benefits by 1%. The Welfare Benefits Up-rating Bill, which confirms the 1% uprating decision for 2014-15 and 2015-16, including for certain elements of tax credits and child benefit, is now entering its Report stage in the House.
I will start by saying that tax credits and child benefit provide valuable support to millions of families, so the decisions to freeze child benefit and tax credit rates or to increase them by less than CPI were difficult. They will mean that the rates will reduce in real terms. However, they are necessary decisions that should be considered in the context of the exceptional fiscal challenge that we inherited: namely, the largest deficit since the Second World War.
The Government are committed to reducing the deficit. Around four-fifths of the total consolidation in 2015-16 will be delivered by lower spending. This is consistent with OECD and IMF research that suggests that fiscal consolidation efforts that are focused on spending are more likely to be successful.
Tackling the unsustainable welfare budget is a key part of addressing our fiscal challenge. From 1997 to 2010, spending on welfare increased by some 60% in real terms, which is equivalent to an extra cost of £2,900 per household in Great Britain. It is an increase from 11% of GDP in 2007-08 to more than 13% today. Welfare now accounts for £1 in every £4 of public spending. Tax credits have significantly contributed to this increase. Under the previous Government, spend increased by an extraordinary 340% compared with the benefits it replaced. Tax credits will cost around £30 billion this year, and child benefit costs a further £12 billion. Together, they make up over 40% of working-age welfare spend.
Freezing the basic and 30-hour elements for three years will save almost £1 billion in 2013-14, while uprating the child, couple and lone parent elements by 1% saves £320 million, and decreasing the income disregard will save £125 million in 2013-14. The three-year child benefit freeze will save an additional £1.25 billion. If these savings were not delivered, this could clearly put additional pressure on spending on public services. While they are tough decisions, they are necessary and will be implemented through these regulations.
I assure noble Lords that while we are taking these tough and necessary decisions on welfare, we are also ensuring that high earners pay their share. The top 20% of households continue to make the greatest contribution towards reducing the deficit. This is true both in cash terms and as a percentage of their income and benefits in kind from public services. Overall, the richest will pay more tax in this Parliament than under the previous Government’s plans. As a result of this Government’s actions, a high earner pays an additional £10,000 on a £100,000 capital gain; pays an extra £60,000 on the purchase of a £3 million house, and an extra £300,000 if purchased via a corporate envelope; loses up to £4,500 a year in entitlement to tax reliefs on annual pension contributions, for an individual previously claiming the maximum annual tax-free pension allowance and paying the additional rate; can no longer benefit from tax relief on contributions to pension pots over £1.25 million in value; and will no longer be able to use income tax reliefs to reduce their tax bill excessively year after year.
These measures clearly affect benefits that are designed to support families with children. I am conscious that there has been much discussion, both in the House and through the media, about the impact that this might have on child poverty. The Government are committed to tackling child poverty and focusing on interventions that transform lives rather than push up benefit incomes to lift people just above a relative income line. We already know that focusing on the relative income line alone yields perverse results. In 2010, 300,000 fewer children were said to be in poverty because the recession had caused median incomes to drop. In other words, people were said to be pulled out of poverty not because anything changed in their lives but because the rest of society had got poorer.
The Government are consulting on a better measurement that includes income, which is of course an important part of tackling child poverty, but goes beyond income to tackle the root causes of poverty, including worklessness, educational failure and family breakdown. I re-emphasise that one of the most important things that we can do to support children is to tackle the nation’s debt and restore economic growth. In doing so, we can create a future of prosperity and opportunity. I simply disagree that what is best for children is to continue spending unaffordable amounts on welfare while building up debts to pay for it.
The Government are prioritising our resources into reforms that really help families with children. We have invested £2.5 billion in the pupil premium for disadvantaged pupils. We have put £1.2 billion into capital investment in schools. We are investing in making work pay through universal credit, sending out a clear signal that we believe that work is the best route out of poverty for parents and their children. As part of universal credit we are spending an extra £200 million to support families with childcare costs, and for the first time this support will be made available for families who work fewer than 16 hours per week. This will mean that 100,000 more working families will be helped with their childcare costs. Of course, we also provide significant support to families through the National Health Service and schools, which, even in these difficult economic times, we have protected the budgets for.
Lord Freud
It is worth just reminding noble Lords that we have to take pretty urgent action to tackle the situation left by the previous Government, which was an unsustainable welfare bill that has been rising and that continues to rise, as I said, from 11% in 2007-08 to more than 13% today.
Lord Eatwell
That is a good point, which I forgot to bring up. Could the noble Lord tell us whether that rise is due to the change in the rate of benefits or to the recession?
Lord Freud
That is a complicated and rather interesting question, so if the noble Lord will accept this I would like to reflect upon it and write to him. One thing is that in the past couple of years we have in effect held level the number of people on out-of-work benefits. It is really quite a complicated question, and I shall go away and try to come back to him with a proper answer.
My noble friend Lord German asked about the 2013-14 savings. The three-year freeze of the basic rate and the 30-hour element of working tax credit have saved £975 million from 2011-12. The three-year freeze of child benefit saves £1.25 billion from 2011-12, and uprating certain elements of tax credits by 1% saves £320 million for the same period.
On the automatic stabilisers, the multiplier that we use is decided by the OBR, which is using a rate of 0.6 for welfare spending. That compares with a fiscal multiplier for capital expenditure of one. Clearly, one of the attractions of moving an extra £5.5 billion into infrastructure over the next two years is that it has that larger multiplier effect. The investments for the next two years are in new roads, science infrastructure, free schools, cutting the rate of corporation tax and increasing the annual investment allowance to £250,000. The OBR has said that it expects the level of GDP to be higher as a result of Autumn Statement policies.
My noble friend asked about the location of the reports on tax credits. I shall send the link to the relevant website. I apologise that it is difficult to find.
On the point raised by the noble Lord, Lord Eatwell, about who pays and about the rich, there are very good reasons for changing the top rate of tax, not least that the analysis of the rise from 40p to 50p, which was meant to have raised £2.5 billion, found that it raised considerably less. HMRC has found that it would raise at most £1 billion, and even less than nothing when indirect effects are taken into account. Clearly, that analysis is of the rising effect; one could look at the argument the other way when one starts to reduce it.
Lord Eatwell
My Lords, can the Minister elaborate on that point? In the Treasury’s initial assessments, and despite what seemed to be the obvious impact of the cut in top-take tax from 50% to 45%, its estimates were far lower than £1 billion. It has therefore significantly increased its estimate of the take; I refer to the estimates published at the time of the announcement of that measure. Will the Treasury publish a full assessment of the impact of the change in tax rates? Will it do so on a rolling basis, because we will know much more in four years about what has really happened during the past year than we know now?
Lord Freud
My Lords, I shall come back to the noble Lord on the plans. I am reporting that HMRC has looked at the projection made at the time of the top rate being raised from 40p to 50p. The projected revenue was £2.5 billion. It is currently saying that the figure is less than £1 billion, with a warning that it could raise less than nothing when indirect effects are taken into account. As the noble Lord said, some of the effects take some time to be realised. I am not sure what the plans are for more reports. Rather than hurrying around to find an answer for what is a detailed point, I will write to him.
Clearly, the freezing and indexation of benefits is not an easy decision to take. Our rationale is that one of the most important things that we can do to support families and children is to bring down the deficit and secure the economic recovery. It is only fair that we tackle the deficit now so that future generations are not burdened with unsustainable debts, higher taxes and diminished public services. I commend the regulations and orders to the Grand Committee.
Guardian’s Allowance Up-rating (Northern Ireland) Order 2013
Lord Freud Excerpts(11 years, 2 months ago)
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Lord Freud
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating (Northern Ireland) Order 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Tax Credits Up-rating, etc. Regulations 2013
Lord Freud Excerpts(11 years, 2 months ago)
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Lord Freud
That the Grand Committee do report to the House that it has considered the Tax Credits Up-rating, etc. Regulations 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Loss of Tax Credits Regulations 2013
Lord Freud Excerpts(11 years, 2 months ago)
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Lord Freud
That the Grand Committee do report to the House that it has considered the Loss of Tax Credits Regulations 2013.
Relevant document: 19th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these regulations were laid on 4 February 2013. I confirm that in my view they are compatible with the European Convention on Human Rights. They support the new powers introduced in the Welfare Reform Act 2012 to enable HMRC for the first time to apply a loss of tax credit penalty to fraudsters.
First I will explain why we need these regulations. Benefit and tax credit fraud has reached a level that is far too high. Around £1.9 billion a year is fraudulently claimed in benefits and tax credits, of which £0.7 billion relates to tax credit fraud alone. The Government have introduced a number of measures to reduce the level of fraud, such as working with credit reference agencies and developing screening technologies to check for potential fraudulent tax credit claims. However, we now need to move towards improving deterrents in order to stop in their tracks those who are thinking about committing fraud. We also need to change people’s perception that tax credit and benefit fraud is acceptable behaviour and worth the risk.
Research conducted by the Department for Work and Pensions shows that 41% of benefit claimants believe that benefit fraud is “easy to get away with”, and one-third thinks that the current penalties are “not too bad”’. Therefore, we need to send a strong message that fraudulent behaviour by tax credit claimants will not be tolerated by the taxpayer or by honest fellow claimants. Our aim is to provide even stronger deterrents to those who set out to defraud the tax credit and benefit systems. We are therefore introducing tougher penalties, increasing the length of penalties, and extending their scope to include tax credits.
The Department for Work and Pensions has already introduced comparable regulations that contain tougher powers to apply a loss of benefit to those making fraudulent benefit claims. These were debated and agreed by your Lordships’ House on 13 February. The draft regulations before noble Lords today support the wider joint DWP-HMRC strategy to reduce benefit and tax credit fraud, which was introduced in the Welfare Reform Act 2012. Jointly they will send a clear message to fraudsters that claiming benefits or tax credits to which they are not entitled will have severe consequences. They will also tackle the perception that tax credit and benefit fraud is too easy to get away with. We also intend to ensure that those who commit the most serious offences, such as organised or repeat offences, will receive the most severe penalties: losing their benefits or tax credits for up to three years. Most claimants are honest and abide by the rules, but to those who are not we want to send a clear message that if they try fraudulently to claim benefits or tax credits, they will face the consequences of their actions.
Noble Lords will be aware that tax credits comprise two elements: child tax credit and working tax credit. Child tax credit provides financial support for families with children whereas working tax credit provides financial support for working families. The Welfare Reform Act 2012 enables HMRC to withdraw payment of working tax credit for those who are convicted or cautioned, or who agree to pay a DWP administrative penalty as a result of a benefit offence. The 2012 Act also provides for the length of the loss of working tax credit period, and the loss of tax credits amount, to be reduced where there is an innocent party in a couple claiming tax credits. Finally, the Act prescribes what constitutes a benefit offence.
The length of time a loss of tax credit penalty is imposed will escalate depending on the number and severity of the offences. It will be applied for four weeks, 13 weeks, 26 weeks or three years. The 2012 Act also introduced provision for an immediate three-year loss of tax credit or benefit penalty to apply where a person is convicted of a relevant offence. “Relevant offence” generally means an offence of serious organised or identity fraud.
Although the loss of tax credit penalty will be applied to working tax credit, I reassure noble Lords that while child tax credit will be a disqualifying payment from April 2013, it is not a payment to which a loss will apply. In other words, although a fraudulent claim for child tax credit will count as an offence, the penalty will be applied only to working tax credit or another relevant benefit. I therefore reassure noble Lords that child tax credit payments will not be reduced or stopped for claimants who receive a loss of tax credits penalty.
On the detail of the Loss of Tax Credits Regulations being debated today, the regulations prescribe that the loss of tax credits penalty will begin from the 30th day after which HMRC is notified of the benefit or tax credit conviction, administrative penalty or caution. The regulations also provide for the payment of working tax credit to be reduced by 50%, not 100%, where there is an innocent party in a couple who have made a joint claim for tax credits. Where both partners are subject to a benefit or tax credit offence, the deduction would be 100% of the payment of working tax credit. This will include any element of working tax credit to which a claimant would be entitled, including childcare costs or disability elements. The regulations provide that the loss of tax credits will apply only to an applicable benefit offence that is committed wholly on or after 6 April 2013. It will not apply to offences committed before that date in relation to which a conviction is obtained after 6 April.
To summarise, in order to send a clear message to those who are thinking about committing benefit or tax credit fraud, we have strengthened the loss of the benefit penalty regime and expanded the scope to include tax credits for the first time. The increase in scope and the length of penalties reflect the seriousness of benefit and tax credit fraud, and aim to provide an effective deterrent. These regulations were referred to the independent Social Security Advisory Committee on 7 November 2012. I therefore seek your Lordships’ support for the regulations here today, and commend them to the Committee.
Lord German
My Lords, I, too, welcome these regulations, but again they are a round two as they match the Social Security (Loss of Benefit) (Amendment) Regulations 2013. I have a number of questions. The first relates to what happens under universal credit to the various sets of regulations that we have been discussing today, which also have their mirror in regulations brought forward by the DWP. It may be a bit of a heresy to say this, but if we are to have separate regulations from separate departments, might it not be a little more useful if we were to back to back them in the same slot so that we could at least look at them together and perhaps save a fair bit of time and effort? Universal credit gives us that opportunity, since we will be looking at these regimes in the round.
My second question relates to the three-year sanction, which is the heaviest of all the sanctions, and the use of the words “deliberative or organised offences”. Has that definition of what is a deliberative offence and what is an organised offence been codified in the handbook and regulations given to decision-makers—both those in the Treasury and obviously those who are to be responsible for universal credit—in order that the level of understanding is of a high nature? When someone goes to court and gets a sentence, we can see that being clearly identified. However, there may be occasions when this is dealt with outside the court through an administrative procedure, in which case there needs to be a clear understanding of when these heavier sanctions will be applied.
I understand that the decision-makers will also be given a level of discretion about the boundaries between some of these sanction periods. Can my noble friend say a little more about the nature of that discretion and whether a framework will be given to the decision-makers in each of these cases, so that we have some certainty that the worst and most difficult offenders will be given the heavier sentences? Will there be any form of appeal internally, apart from the normal tribunal case, where someone has appealed against their sanction? Perhaps my noble friend could give us some idea of how that mechanism will work.
Lord Freud
My Lords, let me try to deal with the points raised. There was a rather interesting question from the noble Lord, Lord Eatwell, about the division between what I think he would call the crooks and the desperate. The best way I can approach that is to look at the way in which fraud develops. I think it is right to say that 80% of the fraud develops out of people not informing of a change of circumstance. There is a drift there that indicates that we are not talking about that many who are desperate because, in one circumstance, people were clearly functioning at a certain level of benefit or tax credit. They then got supplemental income elsewhere and kept the extra, to which they were not entitled. That is quite a typical fraud, so on balance we are talking about crooks here. That is the best figure that I can give the noble Lord. I certainly have not seen anything better, and as your Lordships can imagine I see quite a lot of data.
One of the points that my noble friend made at the end of his last question was about discretion. I must make the point that we are now talking not about the conditionality sanctions, which this can often be confused with, but about people who have committed fraud, have usually gone to court and have had a punishment laid down by the court. There is no doubt about that and it is not in the discretion of our decision-makers. That is not true at the margins, where people accept an administrative penalty, which is at a much lower level. However, as you move up the scale, with repeat offences and the serious offences that we are most concerned about, it becomes a court matter and, to that extent, is not a matter of our codification. The serious offences that I am talking about are laid down in regulations. I speak from memory but I think we are talking about £50,000 offences, serious identity fraud such as trying to pass yourself off with a different identity: that kind of thing.
On my noble friend’s last point, we are bringing the regulations on working tax credit closely together with what happens to today’s benefit system, with a view to pulling both of those into the UC sanction regime. They are being pulled together with a view to there being relatively little change in the overall approach and amount when UC comes into effect for particular people.
I think that covers all the issues that have been raised. The amount of money, £1.9 billion, is substantial, and we want to make sure that it is fully realised that this is not acceptable or safe behaviour. I do not have to hand a comparison with our estimates on tax evasion and tax avoidance. Tax avoidance, as the noble Lord, Lord Eatwell, will be fully aware, is a different matter from tax evasion, but our concern about tax evasion is at absolutely the same level—it is the same offence as defrauding the benefits system.
We need to send out a strong message that this type of fraud is not tolerated. We also believe that, although fraudsters must be promptly and severely dealt with, innocent parties should be protected, which is why this relates only to working tax credit and not to child tax credit, and why we will only reduce working tax credit by 50% in households where one member of a couple has not committed an offence.
I seek the support of noble Lords for these regulations. Indeed, I hear that I have it and I commend them to the Committee.
Housing Benefit
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Baroness Turner of Camden
To ask Her Majesty’s Government what steps they will take to assist families facing homelessness as a result of housing benefit changes due in April this year.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this Government are committed to tackling homelessness, and we do not accept that our housing benefit reforms will increase the level of homelessness. The changes do not necessarily mean that people will have to move, but claimants will have to make the same choices about affordability as those not on benefits. Reforming the welfare system in an effective manner is necessary not only to improve the wider fiscal position but to help to get people off benefits and into work.
Baroness Turner of Camden
My Lords, I thank the Minister for that response. However, is he aware that more than 600,000 households could be affected by this change in benefits, that many people who are unable to meet the requirements under the new benefit arrangements will have no alternative but to get into arrears, and that, if they get into arrears, they will face eviction, which will result in homelessness, despite what the noble Minister has said?
Baroness Turner of Camden
What steps are the Government taking to try to deal with the consequences arising from these new arrangements in regard to housing benefit cuts?
Lord Freud
My Lords, we are expecting a number of responses by people affected by what is effectively the removal of a spare-room subsidy. Clearly some will find that they are capable of paying to retain that extra room, some will look to work, some will look for lodgers and some will look for shared tenancies. Where the options are more limited than that, apart from downsizing, we have had substantial discretionary housing payments transferred to local authorities in order to ameliorate those situations.
Lord Palmer of Childs Hill
My Lords, has the Minister considered the effect that these cuts are having on people? For instance, within the ward that I represent on Barnet council, one person in a two-bedroomed flat in a high-rise block will, because of the changes, have to pay an extra £14.50 per week from the beginning of April out of the very small amount of benefits they receive. This also applies to people on low working wages. This may be all right in principle and on paper but does my noble friend believe that it is possible where there are no one-bedroomed flats for those people to move into?
Lord Freud
My Lords, I said that people will make a range of responses. Some will decide that the best thing they can do is to downsize and they will be supported in that. Clearly, in areas where there is no appropriate social housing, there is the option of moving into private rented housing. However, the essential point is that there is a limit to what the state can afford. We have had quite a lot of changes in the private rented sector, and this brings the social rented sector into line.
Baroness Pitkeathley
The Minister is concerned about the problems of caring families. Has he considered the issue of a carer who looks, say, after her severely disabled husband? The spare bedroom—the surplus bedroom as he puts it—is necessary to keep all the equipment, such as hoists and so on; and sometimes the carer needs to sleep there to have an adequate night’s sleep. What arrangements can be made in that situation?
Lord Freud
My Lords, that is exactly the kind of case that the discretionary housing payments are intended for. Where there are genuine problems of that nature, we would expect those payments to be made to support that particular family in its accommodation.
The Lord Bishop of Leicester
My Lords, is the Minister aware of the pressure on the private rented sector? Many landlords operate a “no benefit claimants” policy, which causes significant problems in night shelters. Is the Minister aware of these problems caused by the shared accommodation rate and what are the Government doing to ensure that people moving on from a night shelter have somewhere to go?
Lord Freud
My Lords, there were concerns ahead of our changes to the local housing allowance that private rented accommodation would not be available. I was pleased to learn that that in contradiction to this, in the key London area, where some of the pressures have been greatest, availability in the private rental sector for benefit recipients has actually gone up 5% since we introduced the LHA changes.
Lord Campbell of Alloway
My Lords, this is a sad affair. Would the Government possibly have another look at it?
Lord Freud
My Lords, when we introduced the local housing allowance changes in the private rented sector a year and a half ago, there were real concerns about homelessness, just as there are now. I stated to the Select Committee that we did not expect any significant increase in homelessness as a result of these changes. We have now run through the LHA changes—they were completed last December—and I am pleased to say that while there have been some modest increases in homelessness in London—it is up 600-odd households—that compares with predictions put out by Shelter and the Cambridge group that up to 134,000 people could move or be made homeless as a result. Your Lordships will understand that it is important to see what the results of some of these changes are, just as much in the social rented sector as we have seen in the private rented sector.
Baroness Uddin
My Lords, is the Minister aware of the deepest concern expressed by a number of women’s organisations, particularly those who work with women with young children fleeing violence? What assessment has he made of the impact of the benefit changes on those women fleeing violence with young children?
Lord Freud
My Lords, we have taken steps to make sure that refuges and other supported exempt accommodation are protected. I am investigating how to do that on a strategic basis in the medium and longer term.
Universal Credit Regulations 2013
Lord Freud Excerpts(11 years, 3 months ago)
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Lord Freud
That the draft regulations laid before the House on 10 December 2012 be approved.
Relevant documents: 17th Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument), 24th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I shall speak also to the Universal Credit (Transitional Provisions) Regulations 2013. This is the first of our debates this afternoon on a series of welfare reform regulations that together will bring forward fundamental changes to the welfare state.
First I will say how grateful I am to the many Members of this House who have taken a close interest in these reforms. Many noble Lords have attended various briefing sessions intended to explain and debate key policy details, keeping up the dialogue that started during the passage of the Welfare Reform Act 2012. This House has been, and will continue to be, invaluable in shaping our reforms, whether on PIP or universal credit.
While some areas of the regulations are necessarily quite technical and detailed, at the core of our reforms we are creating a new relationship between the individual and the state. These regulations will introduce the universal credit that lies at the heart of our welfare reform programme—a single, income-related benefit for working-age adults.
Universal credit is intended to be radically simpler than the complex web of tax credits and benefits that it replaces. We have made a deliberate choice in this. It would be all too easy to replicate the current system in all its complexity. Some noble Lords have criticised us for relying too heavily on a rational model of human behaviour. We know that incentives work only if people can understand them and can see that with each and every hour of extra earnings they will be better off. Therefore, these regulations deliver a single taper of 65% instead of multiple and sometimes overlapping tapers, and an end to people cycling between different benefits and tax credits when their circumstances change.
Given the undoubted importance of these reforms, when draft regulations were ready in June last year, my right honourable friend the Secretary of State invited the Social Security Advisory Committee to undertake a special exercise to scrutinise them. The committee undertook a public consultation exercise as part of its review and produced a very helpful report. In our response, published on 10 December, we accepted most of the committee’s 36 recommendations and welcomed the acknowledgement that the Government’s proposals for simplifying the benefit system have the broad support of a significant number of consultation respondents.
The Earl of Listowel
My Lords, I shall share some concerns with your Lordships about the regulations but, first, I underline my support for the principle behind the introduction of universal credit. I recall, when I first entered this House, the work of Louise Casey, who was then the rough sleepers’ tsar, appointed by the then Prime Minister. A key part of her successful programme in reducing the number of rough sleepers on the streets was to find purposeful activity for those who had been homeless. It seems to me such a curse that many people are not finding useful things to do with their time and are allowed to fester, sometimes for generations, without being actively involved and engaged in productive work on a daily basis. I welcome the fact that the legislation will make that more possible for more people.
My concern is about vulnerable families. I recall for your Lordships what my chemistry teacher used to say to me. He talked about dynamic equilibriums. I suggest that vulnerable families are subject to a dynamic equilibrium. If they are given the right support, they can thrive and do well. We saw that recently again with the work of Louise Casey, who has been tasked by the right honourable gentleman Iain Duncan Smith, I think—or at least by the Government—with looking at the 120,000 most troubled families and making a difference in their lives. Through her work supporting those 120,000 families, she has managed to decrease significantly the level of domestic violence in their homes and to increase significantly the number of their children attending school on a regular basis. It is possible to act on the positive side of that equilibrium and make a difference to families.
On the other hand, one can see that if one puts those families under too much stress, they can fail. I was reminded recently of that experience when I visited Feltham young offender institution and spoke to prison officers. I had not visited for 10 years, but the same theme came through: so many of the young men with whom they were dealing had never known their fathers—had never had fathers—and the officers found that they had to adopt that role for those young men.
It is critical to support those vulnerable families in the best way that we can. I thank the noble Lord, Lord Eden, for his speech. In this extremely difficult time, when local authority funding is being cut by 28%—and there will be further cuts to services—which is impacting very heavily on services for vulnerable families and their children, a complex change such as this has to be carefully considered to minimise any adverse impact on those families.
So I welcome the principle, but I have concerns about various issues. They have all been raised this afternoon, so I need not go into detail. I was grateful for what the Minister said about the monthly payment of housing benefit to families. There is the payment exemption scheme, which he described, and he is paying particular attention to drug and alcohol misusing families and those with gambling problems. I welcome that, but I share the continuing concern of the noble Baroness, Lady Hollis, that that may well not go far enough. I found what she said very persuasive: there is a danger of underestimating the chaos in many of those families and their inability to manage their finances in the way that we and the Minister would like.
With regard to childcare, important questions have been raised about significant increases in the cost of childcare to families. The changes to housing benefit and the limit on the number of bedrooms that families can have is clearly putting a lot of stress on some of our most vulnerable families and may cause some of them to have to uproot and move to new areas and communities in which they know no one. They may easily feel isolated and, again, are at risk of collapse. I am particularly concerned about the ability of foster carers to keep a room open for a fostered child. In the past, the Minister has gone quite a long way in reassuring me on that point but I would be grateful if he could go further in reiterating that today.
Finally, the right reverend Prelate the Bishop of Worcester and others alluded to the concern raised by the Children’s Society, and by my noble friend Lady Grey-Thompson in her report, about how this all impacts on children with a disability. He was concerned that these are often the poorest families, struggling to make ends meet. Given that 100,000 of these children will be up to £28 worse off under the new arrangements, that is a very real cause for concern. I hope that the Minister can say something about how he will monitor the situation for these children carefully and that he will go as far as he can in offering me reassurance on this point.
To conclude, in my experience vulnerable families exist in a dynamic equilibrium. Given the right support, many of them can do a lot better and their children may perhaps break through the generational failure that that family may have experienced. Without the right support, however, particularly in such difficult times, one will often find that their children will fail and possibly end up at Feltham young offender institution, costing the public purse well over £40,000 or £50,000 a year to maintain them there. It is crucial that we get this right and I look forward to the Minister’s response.
Lord Freud
My Lords, I give really sincere thanks to everyone who has spoken because I do not often hear a debate where people have worked quite so hard to understand the issues. I might not agree with everything that people have said but the quality of debate has been pretty extraordinary, given the complexity of the issues we are dealing with. I hope that your Lordships all know now that I listen very hard—and I steal or plagiarise as much as I can—so a lot of what your Lordships have said has fallen on fertile ground.
Let me deal with the amendment proposed by the noble Lady, Baroness Sherlock. There are some serious misconceptions in it about what universal credit will do. First, on work incentives, the fact is that universal credit will change them out of all recognition—and manifestly for the better because it will reduce participation tax rates and take away some of the scandalously high rates under the current system, which may be 91% or even 100% in some cases. There are some losers but they are losing, on average, a rather modest 4 percentage points. In many cases, the increased marginal deduction rate is because people are being brought into entitlement for UC, so they are actually better off. They may have a higher marginal deduction rate but have become better off because they have been brought into universal credit.
I do not agree that universal credit penalises savers. In practice, it corrects an overgenerosity in the current tax credit system. It must be right to focus our resources on those households with the fewest resources. Under universal credit, claimants will be able to save up to £6,000 without any impact on their entitlement, in contrast to the typical working-age household, which has £300 in savings.
We are not cutting childcare support; we are investing an additional £200 million in it when we remove the 16-hour rule, which we think will help an additional 100,000 families. The combination of childcare support, higher work allowances and a single taper rate will provide a clear financial incentive that rewards work.
We estimate that around 3.1 million households will have a higher entitlement as a result of universal credit. It is true that, on a static analysis, some households will receive less benefit; however, in practice, we expect that people will adjust their working patterns where they can and will be able to gain—as they can under universal credit. I cannot agree that universal credit is bad for women and lone parents. We know from the experience of tax credits that, in practice, lone parents are among the groups most likely to respond to the financial incentives in the system. In any case, even on a static analysis, in the 3.1 million households that gain there are 2.6 million women. Lone parents will on average gain around £5 per month.
Throughout the passage of the welfare Bill and in recent months, we have debated at length the support for disabled people. We recognise the concern about the impact of the severe disability premium but our aim here is to target additional support on those who have the most severe disabilities or health conditions and who are unable to work, or to work full-time. On average, disabled households will gain by £8 a month. Responsibility for assessing and meeting significant care needs sits with local government. This week, we have set out proposals to put the longer-term funding of such care on a better footing. However, I put on record again my personal commitment to ensuring that we carefully monitor and evaluate the impacts of UC on disabled people.
Universal credit provides appropriate support to self-employed people but only in so far as self-employment is the best route for them to become self-sufficient. As I said in my opening remarks, we have carried out extensive engagement with groups representing businesses and the self-employed, and have responded to their concerns.
In relation to housing, universal credit provides fairness and responsiveness to the housing choices that working families faced already. The best protection against homelessness is a job. Universal credit will provide work incentives and support people in moving into work. Discretionary housing payments are available to help those at risk of being homeless.
The amendment implies that the objective of universal credit is as a savings measure. Nothing could be further from the truth. We are spending more and have huge ambitions to change people’s lives. In any case, we will be monitoring outcomes very carefully. We published a high-level evaluation framework in December 2012, which sets out our proposed evaluation approach and our key aims and objectives. I am happy to reassure the noble Baroness, Lady Lister, that the evaluation of universal credit comprises part of a continuous programme of analysis. It provides real-time evidence and information, as well as a measure of overall impact and success further down the line, although it will take time to assess how different groups experience universal credit and to build up a clear evidence base.
Implementing a system that is dynamic and responsive is at the heart of these reforms. That is why the welfare Act contains a provision to enable the piloting of changes to the system that aim to achieve simplification or change claimant behaviour to improve their labour market outcomes. I am happy to reassure my noble friend Lord Kirkwood that I will personally value continuing the dialogue with this House. I know that this House knows how much it has put into the creation of universal credit.
There were a huge number of points and I will do my best in the limited time to touch on them. The noble Lord, Lord Touhig, requested a lot of detailed figures on IT. I think I will write to him with details, as I have dealt with quite a few of those points in recent PQs, but I will make sure that the noble Lord has an up-to-date list of exactly what we are spending in each year. As I said, I will not go into detail, but we are on time and on budget, we are pushing ahead and we are starting with a pathfinder, to make it work, in April.
The Earl of Listowel
Before the Minister sits down, if it is in order in this procedure of the House, may I ask him a question? I was grateful for his reassuring reply to the noble Lord, Lord Eden, about the great efforts he is making in looking at the administrators and the support and training they need. If he will write to me with some idea of the minimum standards for the supervision of administrators that he might be considering, I will appreciate it.
Baroness Sherlock
My Lords, I thank the Minister for trying to answer our questions. Of course he could not answer them all in the time because there were so many. I have never been through a two-and-a-quarter-hour debate over one set of regulations with so many powerful speeches from every set of Benches in this House. I understand it is complicated, but we are running out of time. This is not simply a rough sketch of the architecture; these regulations describe what will happen to real claimants when the system starts operating in April. I understand that the Government are doing something that will revolutionise payments to all working-age claimants. We support that principle, but we cannot experiment on the lives of ordinary men and women in this country and on their children. The Minister has been unable to answer, despite his best efforts, concerns from all around the House about the impact on disabled people, childcare, free school meals, vulnerable people, of forcing people to claim online and so much more. We have to let these regulations go through because that is the nature of our House, but we do not have to allow them to go through without making a very clear signal to the Government that they need to get these things right. To that end, I wish to test the opinion of the House. I urge all noble Lords to come with me.
Jobseeker’s Allowance Regulations 2013
Lord Freud Excerpts(11 years, 3 months ago)
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Lord Freud
That the draft regulations laid before the House on 10 December 2012 be approved.
Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I can confirm that, in my view, the statutory instrument is compatible with the European Convention on Human Rights. These regulations are designed to work alongside the introduction of universal credit by removing all the existing income-related provisions from jobseeker’s allowance. They also work alongside the Welfare Reform Act 2012, which removed the existing income-related provisions from other Acts.
Under JSA, there are currently two elements—namely, a contribution-based element and an income-based element. The first element is for people who have paid sufficient national insurance contributions. The second element is for people who have low or no incomes. From this April, the income-related elements of JSA will gradually be phased out for any cases where universal credit has been rolled out. The new regulations will remove the income-related elements and make provision for an award of JSA based solely on national insurance contributions.
In addition, to further align with universal credit, the regulations will introduce revised conditionality and sanctions regimes into JSA. We have of course already largely aligned the JSA sanctions regime with the universal credit sanctions model. Noble Lords will recall that last October, we introduced a number of changes to JSA, including sanctions of up to three years for those who persistently fail to comply with the most important job-search requirements. The changes we made last year have helped staff and claimants to prepare for the introduction of UC and for the revised JSA regime. These regulations now complete the alignment with universal credit.
However, beyond these changes people will find that the effect of the existing JSA benefit regime is unaltered. Noble Lords may find it helpful if I provide more detail on how these changes will be applied. As noble Lords will know, JSA is a benefit payable to people who are out of work and seeking employment. The work-related requirements in these regulations will apply where the claimant claims only jobseeker’s allowance. Where a claimant receives both jobseeker’s allowance under these regulations and universal credit, the work-related requirements provided under the universal credit regulations will apply. That will ensure that even where a claimant is in receipt of the two benefits, they will have only one clear set of requirements placed on them at any time. As these regulations align JSA to UC, there will be little difference between the respective conditionality regimes if they move between the two benefits.
People claiming JSA under these regulations will, as with UC claimants, generally be expected to be available for full-time work immediately, depending on their commitments and capabilities, and to treat their day-to-day work search as if it were a full-time job. This means that they will be expected normally to demonstrate that they are spending 35 hours per week finding a job. However, requirements can be tailored to meet a wide range of circumstances. For example, their requirements can be reduced if the claimant is a carer or disabled, or has recently been a victim of domestic violence.
Under these regulations there will be three levels of sanctions in the JSA regime—high, medium and low level. These sanctions will broadly work in the same way as equivalent sanctions within the universal credit regime. The universal credit sanctions regime, which is mirrored in these JSA provisions, is designed to provide greater clarity for claimants and to ensure that there are proportionate consequences for failing to meet requirements, especially repeat failures. For example, to act as a deterrent, the sanction periods escalate where a claimant repeatedly fails without good reason to comply with a reasonable requirement. This more robust but proportionate model is designed to be more effective in encouraging claimants to engage with the requirements which help them to move into or to prepare for work.
It is important to remember that our focus will not be on imposing sanctions but on ensuring that claimants meet the requirements that will support them into or towards work. The requirements expected of claimants should be reasonable and will help claimants to understand and meet the requirements so that they can move into work as soon as they are able to do so. Using the claimant commitment, we will clearly communicate both requirements and the sanction consequences of not meeting them. Only if they fail to meet a suitable requirement without good reason will a sanction be imposed.
These regulations were subject to statutory formal consideration by the Social Security Advisory Committee. The committee decided that formal referral was not necessary but raised a number of points, all of which were considered, and changes were made where appropriate. As the sanctions and conditionality rules for JSA were being brought broadly into line with universal credit, these regulations were included as part of the Social Security Advisory Committee’s wider universal credit consultation exercise.
Therefore, the views expressed during the consultation period regarding the proposals for the universal credit conditionality and sanctions regime also applied to the reform of JSA. Those views were considered and changes were made. For example, we decided to remove a reference to long-term impairments in Regulation 9 of the JSA regulations. This change takes into account a range of physical and mental impairments that a claimant may have when considering any limitations that may be placed on a JSA claimant’s work-related requirements.
I should also like to thank the Secondary Legislation Scrutiny Committee for its earlier consideration and analysis of these regulations. As noble Lords will be aware, the committee drew attention to the importance of guidance for our staff in operating a fair and effective conditionality and sanctions policy. Therefore, we have placed in the House Library copies in draft of key chapters of the guidance covering approaches, including that for good reason for sanctions. Today we have published a draft of the claimant commitment.
In conclusion, I can assure noble Lords that, beyond the changes I have outlined, the rules for the new-style JSA will be very similar to the existing rules for the contributory element of JSA. In particular, there have been no changes to the national insurance contribution conditions which need to be satisfied to qualify for entitlement and the fundamental structure of JSA remains untouched. I seek noble Lords’ approval of the regulations and commend them to the House.
Baroness Donaghy
The Minister will remember that I raised a number of issues in the debate on 17 January concerning the self-employed and the quasi self-employed. These were mainly around the requirement for monthly reporting, the burden of different systems being applied for tax and benefit purposes, and the need to recognise that not all self-employed people were in a position to choose their employment status. If I had had time, I also would have raised the problems caused by the different criteria used by HMRC and the DWP for claiming reasonable expenses, as well as the need to recognise seasonal variations for those working in agriculture and preparation periods for freelance writers.
I made the point that under generally accepted accounting principles, a true and fair statement of how a business is doing involves accounting for business receipts and expenditure over a period to which they relate. The huge advantage of working tax credits was that this principle was also adopted, enabling claimants to draw up one set of accounts that keeps administration costs down and matches the support given by the benefits system to the actual state of the business. The universal credit regulations have departed completely from these generally accepted principles by requiring a month by month reporting system and not allowing any carryover of a previous month’s loss. This artificially short period does not present a true and fair picture and does not allow for events beyond the claimant’s control.
No provisions have been made in the regulations for seasonal gains and losses or periods of economic difficulty, and there is no recognition that a business may experience low or no profits. Added to this, there is no facility for carrying forward a loss made in one month to subsequent months. This is a fundamental flaw in the design of the regulations for the self-employed. The Government see the need for this facility, but have not made any changes, because the IT system has not been designed to allow carry-forward. In reply to the point about carryover in January, the noble Lord, Lord Freud, assured the House that,
“I am aiming to introduce something for that to work efficiently; that will be in time for when the people who need it will be using it”.—[Official Report, 17/01/13; col. 832.]
The noble Lord made a similar remark earlier this evening. I believe that the Minister is looking for a solution, but it is not yet there and I have a number of real concerns.
My first concern is the Minister’s statement that, “It will be in time for when the people who need it will be using it”. I am not so sure that the Government have the luxury of the six months’ grace or the year’s lag. What happens if the wife or husband of the self-employed person puts in a claim for universal credit first? Surely the information on the self-employed person’s earnings will be required straight away. Secondly, the regulations could have a damaging impact on particular industries. I use the example of farmers and the farm industry, although other examples could be writers and actors. A farm could have a negative cash flow for eight or nine months a year, as cited in the Social Security Advisory Committee’s recent report, and its entire income could be concentrated in a three or four-month period when the farm’s produce is sold. Even a quarterly reconciliation would not work in these cases, let alone monthly assessment.
There are also a range of factors beyond the farmer’s control, such as the weather and inability to move stock, which would affect the profitability of a farm. In answer to a Parliamentary Question on 28 February last year, we find that in excess of 90% of farmers in England and Wales are self-employed; and between 31% and 43% of all farmers earned less than the national minimum wage over the past five years. Imagine the scene at the assessment interview, where there is a framed motto on the wall which reads:
“Universal Credit should support people to be self-employed but only insofar as self-employment is the best route for them to become financially self-sufficient”.
This is a point that the Minister has already raised. I realise that it is a long motto to have on the wall, but it is important to quote the Government’s response to the Social Security Advisory Committee in full.
So the farm worker, possibly self-employed or technically self-employed, is sitting there and told by the assessor that his way of life is not “the best route for them to become self-sufficient” and that he should go back and look for work. Remember that 60% of farmers’ income already comes from taxpayer subsidies. That is the self-employed in the farming industry down the pan for starters. Obviously we should not accept that a third of all farmers should seek alternative work without considering a number of factors, many of which I have mentioned. How qualified will the assessors be in making these judgments, and how detailed will the guidelines need to be to ensure consistent standards of application? The Government have apparently turned their back on a pilot scheme, which is regrettable.
A third concern is the construction industry, where bogus or quasi self-employment is anything from 40% to 90%. It suits the contractor because it gives flexibility to hire and fire and it sometimes suits the individual for tax reasons. Other workers accept self-employed status as the only way to get a job. Contractors must submit monthly returns detailing all their subcontractors’ pay during the tax month and certifying that none of them is an employee. The view of the Business, Innovation and Skills Committee in 2008 was that,
“the questions asked of a contractor to establish whether any of their sub-contractors are self-employed, are remarkably similar to the criteria used for identifying direct employment”.
As I said in my report on the underlying causes of fatal accidents in construction, the current system,
“relies too much on HMRC monitoring and enforcement resources which are likely to come under pressure in any economic down-turn”.
Lord Freud
My Lords, I again thank noble Lords for a somewhat briefer debate although the quality remained high. Clearly, I do not have to remind the House what these regulations do. They remove the income-related element and make provision for an award of JSA based solely on national insurance contributions.
I will touch on some of the questions that were raised. I start with the issues raised by the noble Baroness, Lady Donaghy. She brought some matters to the discussion which are entirely irrelevant to this set of regulations, thereby rather skilfully avoiding the shorter answers that I suspect would have been given in the previous debate, given the pressure of time. I therefore take my hat off to her. She made one or two very valuable suggestions, which I have stolen from her, as she knows. I shall go on doing that. There are some interesting issues on timing. For example, do we have the luxury of time with the self-employed? I am very conscious that we may get the odd one or two people coming in, who I suspect are probably not on the pathfinder, because one of the things that the noble Baroness, Lady Sherlock, teased me on as regards our exclusions was that they made this provision difficult for a self-employed couple to obtain. We therefore have a little time plus the six-months’ grace. Given that we are starting with people probably even in the next phase who are coming in and will find a self-employed job, we would give them the year. All I am saying is that I am absolutely conscious of the noble Baroness’s main point relating to the one-month period and the need for a carryover. I have been looking at that closely, and what she said gave me a good hint about how long that carryover should last, which in her view should be a year. Noble Lords will be pleased to know that that is the kind of period that I am currently exploring.
I am talking to Defra, which is working with the NFU, on how all this works for farmers generally, and so I am very conscious of that issue. As regards the point on the construction industry, which is one of the more interesting industries, what I heard from the noble Baroness was, “Don’t get a Catch-22 situation here about people because of the way we define things”. That is a good point and one of the benefits of guidance is that we can quite flexibly get that in. I commit here to making sure that in that guidance we do not have a Catch-22 situation for this industry which I know has some odd things. If you are working, it should not matter how the position is actually defined if people are making the effort. I will look at that matter seriously.
We have dealt with the irrelevant stuff and I will now move on to the points made by my noble friend Lord Kirkwood. It is interesting, when you look at the figures, that of the approximately 1.5 million on income-related JSA or UC, only 200,000 receive the contracted amount that we are talking about, based on their contributions. Of those, only 70,000 receive it on its own, without a UC or income-related top-up. We have therefore moved a long way into means-testing, as my noble friend observed.
My noble friend’s point about feeling in control was smack right. You do not get a response of the kind that you want if people do not feel part of it. If they do not understand and have not been part of the process that has generated it, the sanction will not work as well and create the right behavioural response. That is what the claimant commitment is doing. Interestingly, the early trials of the claimant commitment are finding that it is working much better than our existing contract.
The noble Baroness, Lady Lister, asked me for another guarantee. I will give the noble Baroness a guarantee that any changes to the ESA and JSA as part of UC would require regulations. There will therefore be a chance to debate that. As to the point about having a contributor on a different platform, the reality is that any Government looking ahead would want to have as few platforms as possible. One will probably end up with the same platform but approval of the process of who gets paid and how would have to go through this House.
In response to the question of the noble Lord, Lord McKenzie, the two areas that were not carried forward were those where the time allowance to attend an interview was moved from seven days to 48 hours. Claimants with children over the age of 13 are expected to show that they have reasonable prospects of getting a job, but they can still have tailored requirements in line with their caring responsibilities. Those are the two specific changes. Regarding the point about national insurance credits, everyone on universal credit will have national insurance credits that count towards the state pension. The difference is that there are class 3 credits for UC, whereas JSA claimants currently get class 1 credits.
Lord McKenzie of Luton
Will the Minister drop me a line on the point he made about class 1 and class 3 contributions? I should like to reflect on it because I am not sure that I understood the import of it.
Lord Freud
Yes, I would be pleased to provide a letter laying that out for the noble Lord to consider in depth.
We started last year to align the JSA regime and universal credit with the sanctions model. These changes pull them even closer together. We will thereby have a clearer system of requirements and sanctions that are robust and appropriate, underpinned by safeguards for claimants. I seek approval of the regulations and commend them to the House.