Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
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Lord McKenzie of Luton
My Lords, we have a degree of sympathy with the amendment moved by my noble friend Lord Touhig and spoken to by the noble Countess, Lady Mar, and the noble Lord, Lord Wigley. As I understand it, it goes with the grain of what the Government are seeking to do. When we debated similar issues last week, I thought the term “exceptional circumstances” was somewhat broader than a strict reading of it might lead one to conclude. Therefore, I ask the Minister to expand on that when dealing with this amendment and to say whether he accepts the proposition that there will be those with long-term degenerative conditions that are unlikely to improve.
The noble Lord, Lord Skelmersdale, makes the reasonable point that we never know if there might be medical scientific breakthroughs, but, as my noble friend said, these matters could always be revisited. It seems to be important to try to give some comfort to people whose condition is sadly not going to improve. What is the purpose of bringing them in simply to pile stress on to their lives and use resources that could be deployed elsewhere?
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we think it is right that an individual’s benefit entitlement is based on the degree to which he or she is participating in society. This level of participation can vary as health conditions or impairments improve or deteriorate, their impact changes or individuals adapt to their circumstances. We want the benefit accurately to reflect relevant changes in circumstances to ensure that people receive the right level of support. The 2004-05 national benefit review found that about £630 million a year of DLA is overpaid as a result of unreported changes in circumstances. This cannot be right. However, it is equally about ensuring that, when people’s circumstances deteriorate, the benefit keeps track with them.
The same study estimated that around £190 million of DLA is underpaid each year—vital money that is not reaching the people for whom it was intended. There is no one-size-fits-all answer; our approach will involve a combination of awards that, in some cases, will be fixed for a short time and in others will be longer term, depending on the individual, the impact of their disability and the extent to which they are able to live independently. In many circumstances, this can change for better or indeed for worse during someone’s lifetime, and this will be different for different people. We think that an active management regime that involves planned reviews is the most appropriate way of responding to this.
However, it is important—and on this I feel we agree—that we do not undertake inappropriate or unnecessary assessments and interventions where there is unlikely to be a change in award. Key to this is ensuring that decisions on award duration and interventions are evidence based. Here I refer back to comments I made during the debate on the noble Lord’s previous amendments. In PIP assessment, we want to get the best mix of evidence from a variety of sources. This will be partly about what the claimants tell us about themselves, partly what can be gathered at face-to-face consultations and partly what we can obtain from relevant people who support them. Moreover, as I said, we want individuals to tell us who is best placed to advise us on these matters.
Therefore, I think we are fundamentally in the same place as the noble Lords and the noble Baroness. The one key difference is that we do not think that an individual’s type of health condition or impairment matters—for example, whether or not it is a lifelong condition; what matters is the likely impact of the condition going forwards and whether it is likely to affect benefit entitlement. Conditions and impairments—even ones that are usually degenerative—can affect people in very different ways. That is why we want decisions on award durations to be based on individual circumstances following consideration of all the evidence of the case.
Lord Wigley
The Minister said a moment ago that he was looking for the maximum degree of flexibility and not to have reviews where they were patently not necessary. Am I right in recalling that in the earlier debates he indicated that the first tier of any review might be with the professionals without impinging on the beneficiary so as not to cause unnecessary worry and that, if the professional—the GP or whoever—advised that there was no change, there would be no need at all for the beneficiary to be aware of this?
Lord Freud
Yes, my Lords. That is what I said and it has not changed. Noble Lords might be reassured by the fact that, even where awards are fixed term and periodic reassessment is required, this does not have to be burdensome. As I have just said, in some cases the assessments will involve scrutiny of paper evidence only and will not require a face-to-face consultation. This will especially be the case where there is considerable supporting evidence on which to base decisions. Conditions or impairments which are life-long and/or degenerative are particularly likely to have such supporting evidence.
We will provide guidance on the duration of an award, including when an ongoing award would be appropriate and with what frequency that award would be reviewed. We are committed to developing the duration assessment in consultation with disabled people and their representatives to ensure that we get it right. We recognise how important this is to ensure that the process of deciding award durations remains both fair and transparent.
I should also like to tackle a misconception that seems to have built up in relation to this issue—that is, that there will be a requirement for everyone to be reviewed on a yearly basis. This is simply not true. While some people will receive one-year awards where their circumstances warrant it, the vast majority of awards are likely to be longer than this, with some being much longer and some indefinite.
I hope that I have reassured noble Lords that we are in the same place as them on this issue. We want award durations to be based on individuals’ circumstances and the likelihood of change; we do not want unnecessary reviews or assessments; and we want decisions on these issues to be based on the best evidence, including that from the professionals involved in supporting claimants. On that basis, I urge the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
Can the Minister clarify one point? He said that some awards might be long- term and some short-term. Can he give us an inkling as to the department’s thinking about that spectrum and what long-term awards may mean?
Lord Freud
My Lords, it would be premature for me to go into much more detail here. Clearly, we are aiming to build up the award duration in consultation, and I would not want to pre-empt that consultative process.
Lord Touhig
My Lords, I thank all noble Lords for their contributions to this very short but useful and important debate. The noble Lord, Lord Wigley, pointed out that we have sought to be flexible in these amendments. I am sorry that the noble Lord, Lord Skelmersdale, thinks that we are being somewhat restrictive. However, that is not the intention; we are trying to be flexible, recognising that there will be circumstances where it will not be appropriate for a lifetime award to be made.
The noble Countess, Lady Mar, made an important point in speaking about someone with experience of an illness that will not improve. Putting someone through all the problems and distress of a review will not be helpful at all. We all hope to God that many of these problems can be solved as time goes on. My noble friend Lord McAvoy made the point that, if what we are asking for were in the Bill and there were some considerable improvement in one area or another, we would obviously need to change the law if that were appropriate. Therefore, I think that we need to be flexible on that.
The Minister made the important point that £630 million had been overpaid in DLA. However, from my experience of sitting on the Public Accounts Committee in the other place, I would say that one really has to look into how that happened. Very often, it was due to failure by the department and not because someone’s condition had changed. The National Audit Office reports point this out. Indeed, on one occasion I had a case where a constituent had to complete a form and there was a box to be ticked against the question, “Have you received income support in the past year?”. She ticked it and underneath wrote, “But it ceased on X date”. However, because the form was scanned in, the department’s system could not read the words underneath, so it continued to overpay her and then demanded the money back. I fear that the problem of overpayment is often caused not by the person making the claim but by the system, in any event.
I thank the noble Lord for his clarity on a number of points and for the encouragement that he gave. I feel that can we make progress, as the way that we are working in this Committee and in this House helps us to improve the quality of legislation because of the backgrounds, knowledge and expertise that so many noble Lords have on a whole range of matters. I believe that by collaborating, we will protect those who are perhaps the most vulnerable—certainly, those who concern those of us who tabled this amendment—so that they will not have to go through all the trauma and difficulties associated with constant review of their benefit once it is awarded, if their condition is such that it will not improve. Having said that, I thank the Minister for his comments and I am sure that we will enter into more dialogue about this in future. I beg leave to withdraw the amendment.
Lord Rix
My Lords, the purpose of this amendment and Amendment 88 would be to introduce a biennial independent review of the personal independence payment for the first six years after it comes into force. The amendments also aim to require the report within two years of PIP being implemented, not the three years as proposed in the Bill. As your Lordships will be aware, the Bill already provides for a single independent review of the PIP assessment, with a report that must be presented to Parliament. While this is welcome, given the impact of the new assessment on many disabled people—particularly those with a learning disability—I believe that more than one review would be necessary.
Indeed, the precedent for having more than one review has already been established. The work capability assessment is subject to an annual independent review for the first five years of its operation, as laid out in the Welfare Reform Act 2007. The experience of the work capability assessment has shown the benefits of an ongoing independent review, although I acknowledge that the yearly requirement has meant insufficient time for the introduction of one review’s proposals before the next commences. Hence, I am calling for the PIP review to take place on a biennial basis only. During discussion on this matter in the Commons, it was noted by the Government that the proposed one-off report is just one way of “close working and testing” the implementation of the new measure. However, I am concerned that this does not necessarily guarantee a fully fit-for-purpose assessment.
The independent review of the WCA has shown a process that is not working as it should be. If a similar scenario is revealed for the PIP assessment, the Government should act swiftly to ensure that disabled people are appropriately supported and not denied the assistance they need to live more independently. I believe a biennial review would help to make this happen. Indeed, on a more positive note, if PIP is to be as successful as the Government claim it is going to be, Ministers would then have a valuable opportunity to showcase this in Parliament and more widely across the country, which—in these rather hard-pressed times for the Government on this Bill—must surely be a welcome boost both to the Government and to Ministers. I beg to move.
Lord Freud
My Lords, perhaps I may be permitted to make an early intervention here in order to offer to take this matter away and return on Report. The Government fully agree with noble Lords on the need for robust independent evaluation of how the assessment works in practice and of the value that Professor Harrington has added through his reviews of the work capability assessment. While we had not intended legislating for multiple reviews of PIP, we are not averse to them. Given the strength of opinion that I know exists on this issue, I will take it away to see what I can do before Report. Although I cannot promise here and now that I can agree to exactly the formulation in these amendments, I will do all that I can to satisfy noble Lords on this matter.
I hope that this statement also deals with my noble friend Lord German’s concern, which I believe may lie behind his Amendments 98ZA and 98ZB. Given this assurance, I urge noble Lords to withdraw their amendments.
Lord Wigley
My Lords, as my fire has been taken away from me by the Minister, perhaps I may at least be allowed to say thank you. In consideration of this matter—and obviously consideration can come to a positive outcome, but not necessarily—the one initial fact that I would ask the Minister to take on board is that other circumstances can change in parallel with this—the general economy and other legislation—which may make it beneficial for reviews to take place more frequently. However, I will not press an open door.
Lord Freud
Lord Freud
My Lords, the amendments in this group serve two purposes: to remove a number of consequential amendments relating to tax provisions for claimants of personal independence payment, and to align the benefit with common provisions on appealing against payability decisions when someone is imprisoned or detained in legal custody. I do not wish to dwell on the latter provision, as it is merely intended to extend common rules to personal independence payment, but I should like to offer some reassurances around the amendments that we are proposing against tax provisions.
First, let me say that these amendments do not reflect any change in the Government’s plans for either welfare or taxation. The amendments are purely a procedural matter. They will remove the tax amendments from the Welfare Reform Bill so that suitable tax amendments can be made by a future Finance Bill or by Treasury order if appropriate. It may be helpful if I give an example of one of the tax-related provisions. Currently, Schedule 7A to the Finance Act 1994 makes provision for the letting of a vehicle to be exempt from insurance premium tax. This provision applies where the contract is made on qualifying terms, one of which is that the disabled person leasing the vehicle receives the DLA mobility component at either rate.
I should like to reassure noble Lords that, although we are removing these provisions from the Bill, the Government have committed to maintain the current passporting arrangements wherever possible. These amendments will not make anyone worse off. They do not reflect any change in the Government’s plans for either welfare or taxation; they are purely procedural. The provisions will remove the tax amendments from the Welfare Reform Bill, so that suitable tax amendments can be made in future finance legislation. This will enable the tax position, including potential knock-on consequences for other parts of tax legislation, to be considered in the round.
The Government have been very clear that personal independence payment, like DLA, will be a tax-free benefit. In recognition of that absolute commitment, we have therefore decided to retain provision within this Bill to provide absolute certainty that these payments will be free of tax. I beg to move.
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of these amendments, which I think I understand and accept. I wondered at first when I saw them whether we had done something to upset Treasury Ministers, and they no longer wanted to come before us. To be clear, we have provisions in here relating to tax which we are simply moving out of the Bill because they are going to go back in a Finance Act. If they remained in the Bill in their current form, would that in any way invalidate them? There might be a procedural issue that has gone awry in this case, but I am still a little unclear as to why it is necessary in the event, given that those provisions are there, they could not remain.
More importantly, I am anxious that if these provisions come out of this Bill, there is certainty that they will end up in a Finance Bill. Can the Minister give us any assurance as to which Bill that is likely to be and what processes, given the oversight that we dealt with a couple of Committee sittings ago, there are in place to make sure that these are followed through and put into effect?
Lord Freud
When you look at these detailed measures, which is something that I do not encourage anyone to do who wants to retain their sang-froid, you can see that they are closely associated with taxation and trust funds. It is much more coherent for them to be dealt with in a Finance Bill or another finance Act rather than one dealing with welfare reform. That is simply the reason, because it means that if you restructure a piece of tax trust law, you can do the whole thing in one, rather than having to go to different Acts. That is the reason.
Lord Freud
Lord McKenzie of Luton
My Lords, these are useful probing amendments to understand fully what is happening or proposed in respect of this group of young people. I imagine that the Minister will say that, as the Bill stands, there are already powers to make regulations as proposed for 16 to 24 year-olds, but it is an opportunity to get something on the record. We certainly support the thrust of this and the needs for regulations that are affirmative—not just the first set. I think that we will hear from the noble Lord, Lord German, on that in a moment.
The age 16 already has ramifications in the DLA system. Below that age, young people cannot qualify for the lower-rate care component via the cooking test, and there are additional tests for the lower-rate mobility test. So there is already a potentially stressful transition under DLA that could be compounded with the transition to PIP. The figures that have been mentioned are that over the next three years 173,000 disabled children will turn 16. If they have to seek or apply for PIP immediately, that is a big challenge. There was a hint in the other place when this was debated that that would not necessarily be the case and that, in the scheduling of young people in this age group, they would go directly on to PIP. Perhaps we can have the Minister’s reassurance or an update on that point.
The briefing note that we got from the DWP sets out the work undertaken to date, seeking to base the assessment on the education health and care plan that is being developed across government, which we would support. But I am not quite sure how it fits together on timing, particularly over the next couple of years, with PIP being relatively close by and due to be with us shortly. Can the Minister confirm to us the process of assessment for young adults and say what the likely migration process is? What happens to 16 year-olds who are on DLA at the point when PIP is introduced?
Lord Freud
My Lords, I am grateful to the noble Lord, Lord Patel, for tabling these amendments and to the noble Baroness, Lady Sherlock, for moving them in his absence. The amendments allow me to set out the Government’s position on how we will deliver PIP effectively for young disabled people in a way that is sensitive to their needs. Noble Lords may be aware that the Government published a briefing document that specifically considered the position of young people. The briefing document set out some of the main insights that we have learned from them and their representatives, which are informing our design work.
Let me be clear from the outset. I know that there are particular issues and sensitivities when dealing with disabled young adults at what can be a particularly challenging period of their life. That is why we have been working closely with people aged 16 to 24 and their representative organisations in order to understand how we can ensure that the benefit is administered in a way that best meets their needs. Two main considerations that young people have raised with us are: whether 16 is too young an age to begin the process of moving from DLA to PIP; and making sure that the transition arrangements for moving on to the new benefit are easy to understand and transparent—the role of advocates and information needs, for example, being particularly important.
Under current arrangements for DLA, the child-related rules fall away at the age of 16 and the entitlement conditions to the care component are extended. The age of 16 therefore forms a natural touch-point to re-examine entitlement and take young people through to entitlement and receipt of DLA in their own right, where that is appropriate. Paying young people directly gives them direct control over how the benefit can enable them to live independent lives. It is our firm belief that the principle of giving individuals control over how they can tackle the barriers to their independence should be brought forward into PIP.
In developing our proposals for PIP, we know that there are particular issues that we need to address concerning its delivery to young adults. For example, young disabled people can expect to go through a number of assessments as they move from childhood to adulthood, and many of them will require varying degrees of support to negotiate those assessments. That is why we will ensure that all young people who claim, or transition on to, PIP will have the appropriate support to allow them fully to express their needs. This could be, for example, by allowing a parent, advocate or friend to accompany them to their face-to-face consultation.
We are fully involving young disabled people and their representatives as we design and build the delivery mechanisms. For example, we are working with user-led organisations through the PIP implementation development group, which is made up of a wide range of organisations including those that represent young people. We have also begun work with focus groups and have conducted one-to-one interviews directly with young people, appointees and their representatives to inform both the way in which PIP will be delivered and the transition arrangements for those moving from DLA to PIP.
As I mentioned, the transition from childhood to adulthood brings with it numerous assessments at different ages. We are therefore also working across government, in particular with the Department of Education, to see what more we may be able to join up and share information with the proposed single assessment process for education, health and social care. This means, for example, that if an individual is still in education or training, exploring whether we may be able to use evidence from special educational needs assessments or information from the school or college to inform the determination of a PIP claim. But we need to look carefully at this so that we get the right balance between not overassessing someone and having an approach that is too general to identify a person’s specific needs. My officials are therefore working closely with officials in the Department of Education so that we get this right.
To ensure transparency, credibility and a smooth transition from DLA to PIP, we know that we will need to build in processes, with appropriate information and engagement, that let young people and their families know what to expect and understand what they have to do. Our intention is to ensure continuity of payment, with no gap between DLA ending and PIP starting when an individual makes a claim and subject to their meeting the eligibility conditions. We are continuing to consider how the detailed rules should work and, as with all the changes that we are making, we will continue to involve disabled people and their representatives in the design.
Lord McKenzie of Luton
Could the Minister clarify a point? I apologise if I have missed this. In the case of someone who at the moment is under 16 and on DLA, if they reach the age of 16 before PIP is introduced, will they undergo the normal reassessment to adult DLA? If they reach 16 after PIP has been introduced, will they automatically go through the PIP process, or could they potentially stay on the DLA adult process for a period, whatever that may be?
Lord Freud
My Lords, we have not done a detailed migration strategy. When people are effectively on adult DLA, even though they have transitioned from child DLA, we will have to work out the exact timings for when to take them. We do not have those precise details yet.
Lord McKenzie of Luton
I am grateful for that. The Minister will see that the issue that that highlights is the one that was probed: if people reaching 16 are going to go straight on to PIP, given what is going to happen with the number of young people achieving the age of 16 over the next couple of years, they are in large measure going to be first through the gate for PIP. That was the concern.
Lord Freud
Clearly, if they go through their birthday when PIP is in position, we will have the arrangements that I was describing. If they have already gone through the gateway because PIP was not yet in position, we will have to decide on the precise migration strategy regarding whether they get priority or at what stage we would take them. That is something we need to determine a little later.
Baroness Sherlock
My Lords, I thank the Minister for giving such a comprehensive account of the Government’s approach to this group of young people. I also thank him for his offer to write to the noble Lord, Lord Patel, and to me. I hope that, if he does, he will pick up the point made at the very end by my noble friend Lord McKenzie and try to address what happens to those young people who may be first through the gate and how the system can deal with them. In the light of that, I beg leave to withdraw the amendment.
Lord Freud
Lord Freud
My Lords, these amendments seek to increase the amount of welfare benefits that households which are out of work will be able to receive to above the level that we have said we will be introducing for the new benefit cap. Before I speak to the specific points that they raise, I need to make it clear that the coalition Government believe that there has to be a limit on the overall levels of benefit that it is appropriate for the state to provide to those who are not working. Indeed, I understand from the comment of Liam Byrne MP in yesterday’s Observer that this is also the position of the Opposition. Perhaps the noble Lord, Lord McKenzie, will be happy to confirm that.
A welfare system that provides payment at unrestricted rates ultimately serves nobody—not those paying taxes to fund it and often not those it traps in welfare dependency by providing little or no incentive to move off benefit and into employment. It is important that the benefits system is fair and is seen to be fair. We do not believe that it is appropriate that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households.
We believe that the cap for lone-parent and couple households should be around £500 a week, which is the level of median household earnings. This is the equivalent of a net salary of £26,000 per year, or a gross figure of £35,000 per year. There will be a cap of around £350 per week for single-adult households. Therefore, even within the limits of the cap, households will still be able to receive significant amounts of financial assistance from state welfare payments—an amount equal to the median national wage without going out to work. To make that explicit, it is the equivalent of what more than half the households in the country are earning.
The right reverend Prelate’s Amendment 99ZA and several of his other amendments seek to differentiate and improve the position of families with children in the way that the cap is calculated and applied. I acknowledge that, because of in-work benefits, there will be some working households that earn at the level of the average weekly wage whose total income will exceed the level that we are setting for the cap. However, we believe that work should always pay more than out-of-work benefits. That is one of the driving principles of the Bill and at the heart of our welfare reform.
When we introduce the cap, we intend to use a method that looks at median earnings after tax and national insurance for all working families, which will strike the right balance between providing support for families, promoting fairness between those out of work on benefits and those in work and, crucially, ensuring that there are clear financial incentives to work because work is the best route out of poverty. The benefit cap provides a clear, simple message that there has to be a maximum level of financial support that claimants can expect the state to provide. The aim of this policy is to achieve positive effects through changed attitudes to welfare, responsible life choices and strong work incentives. People must be encouraged to take responsibility for their decisions in light of what they can afford. I accept that a case can be made for making the estimate in a variety of ways. However, I should make it clear that the clause would provide us with flexibility, should it be necessary in future to adapt how we estimate average earnings if it is felt that we are no longer achieving the correct balance.
I will address Amendments 99ABAA, 99AC and 99ACA together, as they are all concerned with housing-related benefits. Each of these amendments would undermine the fundamental principles underpinning the cap—that, ultimately, there must be a limit to the amount of benefit that a household can receive and that work should pay. It is not right that some families on benefits have been able to live in homes that most working families could not afford. With the introduction of the cap, people receiving benefit will have to make the same choices about their housing that people who do not get benefit make.
The noble Lord, Lord Best, raised a point about whether the cap will force families to move. It will not necessarily mean that people need to move but they will have to make the same choices about affordability as those in work. While some may well choose to move, there are a number of ways in which they might be able to meet any such shortfall, such as moving into employment, trying to negotiate a reduction in their rent—I accept the noble Lord’s point that in some cases that may not be possible—and meeting it from other income or capital. The Government are looking at ways of easing the transition for families and providing assistance in hard cases. We recognise that there are households for which it would be inappropriate to restrict the amount of benefit that they can receive. We have announced the groups that we intend to exempt and will discuss these groups further as we move on to the next debate.
The noble Lord, Lord McKenzie, asked about childcare—specifically whether those working a small number of hours will be eligible for support for childcare costs through the universal credit. I confirm that support for childcare through the universal credit will not be affected by the cap.
Lord McKenzie of Luton
Could the noble Lord clarify whether he is saying that it will not be included in the total of benefits that is judged against the cap, or whether it cannot be withdrawn from that component of the benefit?
Lord Freud
It is the former. It may be helpful if I explain now that we feel that the best way to support these households is to exempt them completely from the impacts of the cap, rather than attempt, as these amendments do, to alter its design to accommodate their particular circumstances. For the groups to whom the cap applies, this measure creates a very strong incentive to work. The most effective way of smoothing transition will be to engage closely with those families likely to be affected by the cap in the year before it is implemented. We are having initial discussions with local authorities and will provide them with guidance on the implications of the caps so that they can take account of this when working with affected households, especially those affected by the LHA cap.
On the council tax benefit question, I confirm that we are looking at the implications of localised support for council tax, including the implications of decisions taken by the devolved Administrations.
Baroness Hollis of Heigham
If the Minister is staying on this point then I will sit down, but before he goes on to another point, could he please clarify further? Say that there are two households in band D in two different local authorities for which the council tax charge in one borough is £20 a week and in the other is £30 a week. In the first borough, the localised benefits system effectively allows a rebate of £15 out of the £20, but in the other borough facing £30 a week there is a localised council tax benefit of only half that sum, which is also £15. When it comes to calculating the universal credit, what elements of that mess will the Minister take into account? Will he look at the putative council tax that should be paid and the benefit or the net sum paid? What counts as income? What counts as cost? How will this be done when everyone will have a different calculation to be made locally?
Lord Freud
The noble Baroness is, as always, way ahead of the curve. As I hope I explained, there are several things that have to happen before we come to deciding some of those issues, and we need to know the shape of any replacement for council tax or the impact of localising council tax, which as yet we do not. I am left with my previous observation that we will take that information into account when we have it, but we have all the powers to do that so there is no issue here regarding our not being able to do it.
Baroness Hollis of Heigham
I understand the dilemma that the Minister faces and that it is not a dilemma of his making, so I have great sympathy with him. Will he expect income to be the council tax benefit, or the council tax benefit minus whatever element the individual may be expected to pay? In other words, are we dealing with gross or net? It could vary by £15 or £20 a week between two different households with similar income in adjacent boroughs, and that will make a lot of difference to their actual outgoings.
Lord Freud
Regrettably, yes, it may or it may not. That will depend on how we reach our design by taking in the implications of localised support. I cannot design a system on the spot when we do not know several of the components, but we have the powers here to take that into account and we are planning to do so.
Lord McKenzie of Luton
Will discretionary housing payments be included as benefits for these purposes?
Lord Freud
They will not be included. Moving on, with regard to the couple penalty, we should not assume any automatic link between the benefit cap and family breakdown. One of the key drivers of family breakdown is long-term unemployment, which puts considerable pressure on vulnerable families. One of the most supportive things that we can do for these families is ensure that work always pays and that the transition to work is as smooth as possible.
The benefit cap is intended to support our new universal credit, which will improve the incentive to work and the level of support for many low-income families, especially couples with children in rented accommodation. At the same time, we will also look to offer additional support through Jobcentre Plus. This would include working with local providers to support claimants with budgeting and the management of their housing costs, and encouraging families affected to engage with more employment support, particularly the work programme. We have always made clear that we would look at ways of easing the transition for families and providing assistance in hard cases.
Picking up the remarks of my noble friend Lord German, where he read from a putative letter—
Lord Freud
Putative is a good word. The figures to which he was referring came from internal modelling from the Department for Communities and Local Government which had not been externally validated. That analysis was out of date, having been produced in January and before we announced that we were looking at transitional arrangements for dealing with particularly hard cases. It is not possible to predict robustly the effects of this policy on homelessness as we cannot anticipate the resulting behaviours of tenants or their landlords. We will think carefully about all these matters, but the clause is drafted so that we have all the powers we need to ensure, through regulations, that the cap achieves its purpose in the fairest way possible.
Picking up the question of the noble Lord, Lord McKenzie, on the devolved Administrations, under Clause 93(9) we will be able to reduce only payments that are the responsibility of the United Kingdom Parliament. No payments that are within the legislative competence of the Scottish Parliament, the National Assembly for Wales or the Welsh Ministers will be reduced by the cap.
Lord McKenzie of Luton
I understand that; I have read the clause. I was trying to understand what might be included in the items that cannot be capped in Wales and Scotland.
Lord Freud
Such payments could, however, be taken into account when determining whether the cap itself should apply and whether the non-devolved payment should be reduced. Presently, we expect the cap to apply to housing benefit and ultimately to universal credit, which are the responsibility of the UK Parliament.
The next, or rather the last, question put by the noble Lord, Lord McKenzie, was on whether the Government accept that there would be an increased burden on local authorities as a result of this measure. The impact assessment recognised that there could be a cost to local authorities in connection with temporary accommodation. That is why we intend to work closely with local authorities on the implementation of the cap.
Baroness Sherlock
Could I just press the Minister for a moment on that? Have the Government looked into what other costs there might be for local authorities? For example, what if families with children were forced to move only to boroughs such as Haringey or Redbridge? Has the Minister looked into the matter and, if so, could he tell the Committee what would happen about the availability of school places or of other forms of support or social services, in those boroughs? Could he share the information with us?
Lord Freud
My Lords, the principle, as noble Lords will know, is that the grants to particular local authorities reflect the number of people living in those authorities. Therefore, there is an automatic adjustment process. I accept there are some timing issues if there are sudden movements, but the DWP is talking very closely to DCLG about these practical implementation matters.
I come to an end with this question. As I understand it, certainly the parties in the Committee—I am not sure whether that covers all the Back-Benchers—are all signed up to the principle of the cap. We believe that the cap is the right approach. In the light of these comments, I hope that the right reverend Prelate and the other noble Lords will withdraw their amendments.
Lord McKenzie of Luton
My Lords, I thank the Minister as ever for his detailed response but there are still a few questions left unanswered. I can confirm that he correctly sets out the position of the Labour Party in respect of the cap, but we want to see something that is evidence-based, properly analysed and fair to people. This is our great concern with what is on the table at the moment. The Minister did not deal with the analysis of the 50,000 households to be affected by this and the extent to which they are in a group which is subject to full work conditionality. If a big thrust of this is to look at work incentives but it then applies only to a minority of those people, where does that leave the policy?
Lord Freud
I think that we have a scattering of figures in this area. It is a minority, which I think is around 10 per cent. If the noble Lord is after a detailed response, I ought to offer to write on that matter if it would be satisfactory to him.
Lord McKenzie of Luton
That would certainly be satisfactory but even if that 10 per cent estimate is roughly right, it means that 90 per cent of the people who will be affected by this cap are under no obligation, under the Government's policies, to have full work conditionality. How does that square with the big thrust of this being about work incentives? I should also like to follow up on another point which the Minister did not touch upon: the profile of those, again within that 50,000, who would be tenants and paying rent of one sort or another. Is it the case that a significant proportion of that 50,000 are tenants of social landlords, RSLs or councils?
Baroness Lister of Burtersett
While the noble Lord is conferring, can he perhaps explain to the Committee what behavioural effects the Government are trying to achieve in the case of those who are not required to seek work?
Lord Freud
On the figures, one reason why I am slightly betwixt and between is that we are looking at that impact assessment, which is now somewhat dated, with a view to updating it and providing fresher figures when we can. That work is in progress and we are getting some more detail. All that I can do is to offer to provide some of that extra detail as soon as we get it. I am not completely sure yet of its timetable but there is ongoing work there, which is why I am slightly hazy about exactly what some of these figures will end up being, for which I apologise.
Baroness Sherlock
Before we leave this point, my noble friend Lady Lister just asked what is for me the crucial question: what behavioural impact does the Minister want this to have? He told the Committee earlier that if people did not want to be forced to move house, they could do one of three things: they could negotiate their rent down, but he acknowledged to the noble Lord, Lord Best, that that might not be possible; they could move into work, but he has just told the noble Lord, Lord McKenzie, that 90 per cent of them are not required to work; or they could use savings. We know from discussions earlier in Committee that most people in this situation have almost no savings. What is he trying to achieve?
Lord Freud
My Lords, I am going to revert to principle here. The principle of our policy sets out that the equivalent of £35,000 of earned income is a reasonable maximum amount of benefits for the state to pay someone who is living on them. Clearly, we are aware of concerns about the impact of a cap in some specific circumstances, and the clause is drafted as it is in order to give us the power to set the cap so that it achieves the purpose in the fairest possible way.
Lord McKenzie of Luton
I am sorry to press the Minister but, for us, the percentage of people affected by the cap who might be tenants of social landlords is a hugely important issue. I accept that the information has been updated but perhaps he can at least confirm the original estimate. Does he not understand that it is impossible for those people to get lower-cost housing? Generally you cannot get housing that costs less than social housing, so what are those people meant to do?
Lord Freud
The best I can say is that according to the current published impact assessment roughly 70 per cent of those affected are in social housing. However, the direction of travel of those figures in the new assessment is downwards, although I do not know by how much.
Baroness Hollis of Heigham
I am not sure that I have an answer that I fully understand. The noble Lord, Lord Best, raised the question of affordable housing, which, as we know, is to be set at 80 per cent of market rents. The market rent for a three or four-bedroomed family house not in central London but in some of the outer suburbs might well be £1,200 a month or £300 a week. Social housing with an affordable rent would therefore have to be 80 per cent of that £300, which is £240 a week. Let us assume that a family consists of a husband and wife with two or three children. He is in work and is paying an affordable rent, then his job collapses and he goes on to UC. He then finds that £240 a week has to come out of his benefit and he is up against the cap. Precisely what is he going to do? Obviously he is going to search for work but what does he do in the meanwhile? This is an affordable rent, being 80 per cent of a market rent, yet this is social housing, so there is nowhere else for him to go. What does he do? As my noble friend said, the probability is that he has very modest savings, otherwise he would not be in that sector in the first place, and he has children in school. It may well be that he cannot reasonably expect to get a job within the next six months, however frantically he tries, and he is then up against a benefit cap while in social housing with children. What does he do?
Lord Freud
My Lords, I have made it clear how we ease the transition for families, and that is one of the things that we are looking at.
Baroness Hollis of Heigham
Can the Minister at least help the Committee by indicating the shape—I shall not try to hold him to the precise details—of that transitional arrangement? Will it be over three years, or alternatively will extra resources be available through the discretionary housing allowance via the DCLG in order to allow local authorities to smooth that transitional arrangement? Would there be exceptions for particular payments, such as higher housing rent, because we are talking about social housing and affordable rents? Alternatively, would the Minister suggest to the DCLG that that rent could go from being affordable to the average social rent, even though that would then inhibit the ability to carry on with new building? I can think of three or four ways of doing it but what does the noble Lord have in mind?
Lord Freud
Regrettably, I am not in a position to be drawn. All I can say is that we are looking at how we can ease the position for families and how we can provide assistance for hard cases. I know that the noble Baroness has already created four different scenarios and ways of doing it, for which we are grateful, but that is all I can say at this point.
Baroness Hollis of Heigham
But it is a problem of the Government’s own creation. This is the difficulty—there is no evidence that this will have any longer-term savings cost.
Lord Freud
I should like to engage in a detailed debate on this, but all I can tell noble Lords at this stage is that we are looking at how we ease the transition for families, and we are looking at providing assistance in hard cases.
The Lord Bishop of Ripon and Leeds
I have two points. First, do I understand that now, in contrast to the research done some months ago, a far lower proportion of those affected by the cap are in social housing? If so, where have they gone—the people who were in social housing a few months ago but who no longer are?
Going back to the original amendment that we are, in a way, discussing, my second, unconnected, question is that I have still not quite understood why it is inappropriate, when looking at the cap, to look at families with children separately from couples. We have the distinction between singles and couples. Surely, in any discussion of how a cap should operate, children are fundamental and families with children are fundamentally different from those who do not have children. Should that not somewhere come into the way in which the cap, and therefore this clause, are established?
Lord Freud
As to the first question asked by the right reverend Prelate on where all the people in social housing have gone, the situation is, to be honest, probably nothing more than a result of greater depth of analysis. I do not think that there is any real movement there but, as we have homed in and obtained more information, that is our understanding.
On his second question, the interesting reality is that childless couples have higher earnings than couples with kids. Perversely, therefore, having a differentiation based on what actually happens would have the opposite effect to the one that I imagine the right reverend Prelate wants. That is the point. It is not a useful approach because it would do exactly the opposite.
Lord McKenzie of Luton
My Lords, is that right? It might be right if you are looking at earnings, but if you are looking at income, which was part of the proposition, it might not be the case.
Lord Freud
I very elegantly have a wonderful piece of paper to hand. On the median, it works for total income—all gross and net household income—and it works for the mean. I can give noble Lords all the figures but it would bore them.
Baroness Hollis of Heigham
If the Minister could circulate those figures to all Members of the Committee, it would be very useful.
Lord Freud
I am sure that noble Lords probably have them at their fingertips anyway. They are meant to be accessible figures, but if noble Lords would like some help and for me to use up another Scandinavian forest, I will circulate them. I will put them in an e-mail instead. That would be cheaper.
Lord McKenzie of Luton
I am sorry to come back to this but there are still some unanswered questions. I do not think the noble Lord dealt with the definition of “in-work” and when the cap will apply. Is the threshold set at 16 hours, as it is for working tax credit at the moment? How will that change from April? I think for couples there is a joint requirement for 24 hours a week, rather than 16. How will that all work?
Lord Freud
That is a matter that we will look at very closely. We want to encourage work and one of the main aspects of universal credit is to encourage smaller amounts of work. We will look at that issue very precisely.
Lord McKenzie of Luton
In which case, I have one final question. In relation to homelessness, I asked whether we might have a detailed note setting out all the obligations of local authorities when people present as homeless or when they are evicted.
Baroness Hollis of Heigham
Will the Minister ensure that his colleagues in the DCLG do not give guidance to local authorities that anyone unable to pay their rent by virtue of these changes is therefore deemed intentionally homeless? That is absolutely key.
Lord Freud
As I said, we are working very closely with the DCLG on the implementation of the benefit cap. We will work through those issues in detail.
Baroness Hollis of Heigham
When may we know the answer to that point? Conventionally, under homelessness legislation, anyone who loses their home by virtue of a failure to pay their rent is regarded as intentionally homeless. If they have children, they may get some help on grounds of vulnerability and the local authority may temporarily rehouse them. However, in future the local authority has only to give them guidance into the private rented sector, where they will be stuck. It is not a casual question. Unless we redefine the homelessness legislation from 1972 onwards, these families will be crucified.
Lord Freud
It is for local authorities to make decisions on individual homelessness applications, as they do now. Under homelessness legislation, if the only reason for the person’s homelessness is a reduction in benefit that is outside their control, they should not be considered intentionally homeless by their local authority.
The Lord Bishop of Ripon and Leeds
Perhaps I may just thank everyone for all the contributions that have been made. I also thank the Minister for his engagement with the collection of questions that have been asked of him over the past half-hour or so. I retain considerable disappointment in terms of moving forward in this area. There is clearly considerable disquiet among your Lordships over how this is developing. We have not yet pursued far enough issues such as the couple penalty, which the noble Baroness, Lady Tyler, spoke about. We have been exploring homelessness but have not got all that far. It might grow as a result of the cap. The noble Lord, Lord German, and others made points about children. I do not detect any likelihood that the amendment will be accepted unanimously by this Committee but it is with considerable reluctance that I withdraw it. I know that a number of these debates will need to go on behind the scenes if we are not to have the debate all over again on Report. I beg leave to withdraw the amendment.
Unemployment: Young People
Lord Freud Excerpts(12 years, 6 months ago)
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Lord Peston
To ask Her Majesty’s Government when they expect the level of youth unemployment to begin to fall.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
The most recent forecast from the independent Office for Budget Responsibility is for unemployment to level out and then fall from the second half of 2012. There is no separate forecast for youth unemployment, but this would be expected to follow a broadly similar trend.
Lord Peston
Am I to understand, when thanking the Minister for that Answer, that the Treasury does not look specifically at youth unemployment when considering its policies? Is it the case that no Minister in the Treasury, no official and none of its excellent economists or statisticians has a view on when the rate of increase in unemployment, especially for young people, will become a rate of decrease?
Lord Freud
Well, my Lords, the forecasts have now gone to the Office for Budget Responsibility and are the basis for planning. Clearly, the forecast that I have just given noble Lords is somewhat out of date and we are looking to have another later this month. Clearly, the implication of what the Governor of the Bank of England has just said is that growth will, on his forecast, run at 1 per cent this year and next, and this will be built into those kinds of forecasts.
Lord Roberts of Llandudno
My Lords, faced with the tremendously high rate of youth unemployment, is it not time that both parties accept that under both of them youth unemployment has increased? Is it not time that we put by party differences and had a united effort to tackle the problem of youth unemployment?
Lord Freud
Yes, my Lords. It is very easy to get tied up with the tyranny of round numbers. The reality is that we have a genuine structural problem that has grown over the last decade and needs handling in a comprehensive way.
Lord Howarth of Newport
Is it not the case, particularly in old industrial areas, which have found it very hard to attract new private sector investment, that by withdrawing public sector expenditure too fast and abandoning regional development strategies, the Government are condemning young people to continuing unemployment?
Lord Freud
My Lords, of course we are not withdrawing regional support. We have put in a £1.4 billion growth fund and have a series of programmes designed to help young people. We have help in terms of work experience, the sector-based work academies and the work programme, which will together provide support for 350,000 youngsters over the next two years.
The Lord Bishop of Blackburn
My Lords, I am grateful to the Minister that he refused to adopt a false optimism in his reply. We all know from previous recessions that the impact on young people, particularly their morale and self-respect, lingers long after the recession is ended and creates ongoing social problems. Would the Minister agree that, instead of decimating youth services at this time, the Government should be seriously investing more in such work so that we have some chance of avoiding the loss of a whole generation to cynicism and hopelessness?
Lord Freud
My Lords, I was very impressed, as I am sure many noble Lords were, with the report by Professor Wolf on what has been going wrong for young people. Her conclusion was that there are four things that young people need: a job, proper educational qualifications, apprenticeships or work experience. This Government are trying to concentrate on really effective solutions for young people.
Lord Knight of Weymouth
My Lords, the Government inherited falling youth unemployment, yet this is the eighth consecutive monthly rise in unemployment and precedes the eurozone crisis. This crisis is down to this Government’s decisions to scrap the EMA, to cut post-16 education funding and to scrap the future jobs fund, and an austerity plan that has choked off growth. How bad will it get before the Government realise that you reduce the deficit by growing jobs, thereby cutting the cost of benefits and increasing tax receipts? When will we get a credible jobs plan, or will it take another million youngsters on the scrapheap before the Government finally get it?
Lord Freud
My Lords, let me assure you that we get it all right. We have inherited a really poor structural position of youth unemployment—
Lord Freud
No—let me tell you the real figures. The total number of unemployed and inactive youngsters went up from 1.4 million in 1997 to 1.45 million now and 1.39 million last year. That was an increase during the longest boom that this country has ever seen. Why did that happen? That was not cyclical, it was structural.
Lord Roberts of Conwy
My Lords, my noble friend will be well aware of the even higher youth unemployment rates in Europe, particularly in Spain. He will also be aware of the comparatively low youth unemployment rate in Germany. Is there not a great deal that we can learn from the Germans in this?
Lord Freud
Indeed, my Lords. The Germans have had a long tradition of apprenticeships and that is something that we need to copy and build on. We have put in money to fund an additional 250,000 apprenticeships over this spending review; we had 442,000 apprenticeships starting last year, an increase of 50,000; and we are putting in measures today to encourage smaller firms to take on apprentices.
Lord Martin of Springburn
My Lords, apprenticeships and the initiatives that the Government are embarking on are good news for young apprentices. However, will these apprenticeship schemes be spread evenly throughout the country?
Lord Freud
My Lords, clearly our intention is to put support where it is most required. Therefore, the schemes will be widespread but naturally there will be an emphasis on the areas that need most support.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, if I may intervene briefly, I promised on Monday to provide some timetabling indicators of provision of information about entitlement thresholds for PIP and passporting arrangements for carers. I am happy to confirm our intention to provide entitlement thresholds for PIP and information on the likely impact of these ahead of the consideration of this part at Report stage.
Noble Lords will wish to be aware that we are looking carefully at the interaction between universal credit and carers’ allowance. In the interests of providing a smooth taper of benefit provision as carers return to work, a carers’ element is included within the universal credit structure, which of course removes the cliff-edge effect. That is why we have done that. In order for noble Lords to have the fullest possible picture of provision for carers as we debate universal credit, I will also aim to provide more information about the passporting arrangements from PIP to carers’ allowance prior to the start of Report stage. Thank you for your indulgence.
Lord McKenzie of Luton
I thank the Minister for that statement. It is very helpful in being able to schedule and make progress on Report.
Lord McKenzie of Luton
My Lord, this is an important group of amendments which addresses aspects of the assessment process. As we have heard, some of the underlining concerns which the amendments seek to address are drawn from experience of the work capability assessment and the difficulties which this has created for disabled people. They all raise points which deserve our support, although I expect the Minister will say that, at least in part, they can be covered in regulations. To the extent that he does so, I hope the noble Lord will take the opportunity to put clearly on the record how each of these matters will be addressed.
The noble Baroness, Lady Grey-Thompson, cited WCA examples to emphasise the importance of evidence from the claimant’s healthcare professionals being part of the assessment process, with the obligation on the DWP to organise this. Notwithstanding that we now have a bio-psycho-social model and that the condition or impairment that an individual has may in some cases be of limited value in assessing an individual’s ability to participate in society, this will not always be the case, and there is a clear risk that without it the assessment could be significantly adrift. A process which does not incur the kind of charges which individuals face, to which the noble Baroness, referred, is important.
The amendment of the noble Lord, Lord German, concerning advocacy is also to be supported. As he acknowledged, the explanatory note to the draft assessment criteria is clear that an individual will be able to bring a friend or advocate to a face-to-face consultation. The implication is that such a person could be there to help with the process and not be just silent company. Indeed, I believe that was confirmed by the Minister in the other place when the matter was raised there. Presumably training for staff will enable assessors to sort out advocates who are trying to lead individuals. Claimants must be entitled to know that there is a right for them to be accompanied.
On Monday, my noble friend Lord Touhig gave a clear example of how this could be important. He raised the example of when someone was asked about a bus journey and gave an answer, which of itself would have been extremely unhelpful and misleading to the assessment process. Having an advocate there to help with that explanation would have been hugely important.
The noble Lord, Lord Addington, is a consistent advocate for those with autism and I have no doubt that his plea that those undertaking assessments should be properly trained in mental, intellectual and cognitive disorders will be supported by the Minister. Can the Minister confirm that this will be the case for decision-makers? Perhaps he can also say what is the planned position in respect of access to specialists, which is another key component of the noble Lord’s amendment.
It is understood that the department has recently begun a tendering exercise for the assessments to be undertaken by a third-party supplier. Will the Minister say what specifically is being sought in respect of access to this type of expertise? Presumably, the specification has been developed at this stage. Therefore, can he also tell us what that specification indicates in respect of the numbers, the likely volume of face-to-face assessments and the numbers of likely exceptions to those face-to-face assessments? Perhaps he can also say something about the overall numbers. When this issue was debated in another place, reference was made to the prospect of some of the assessments being able to be undertaken at home—a more comforting and aware environment for some claimants. Perhaps the Minister can update us on this and also say how it is being dealt with in the specification.
We had a number of detailed and knowledgeable explanations from those concerned with autism, including from my noble friends Lord Touhig and Lady Healy and again, this afternoon, from the noble Lord, Lord Wigley. Their amendments seek relief from face-to-face assessment in certain circumstances where there is sufficient medical and other evidence on which to base a clear judgment. The challenges which face-to-face interviews can present for individuals with an autism spectrum condition were graphically described by my noble friend Lady Healy. She said that it is not just the nervousness or anxiety that is experienced at the approach of a difficult event, but dread and terror. The Minister demonstrated sympathy with this point of view at Second Reading. We hope that these amendments will enable him to say a little more in support of that proposition.
Lord Freud
My Lords, I would like to start by responding to the noble Baroness, Lady Grey-Thompson, on her Amendment 86ZZZUA. Obtaining the right evidence for assessors and decision-makers will be a key part of the assessment process for personal independence payment, enabling us to make the best decisions regarding an individual’s claim. Such evidence might come from a range of sources, but in particular from the healthcare professionals involved in supporting disabled people on a regular basis. This may sometimes be the individual’s GP, but in other cases will not be. Many individuals, particularly those with longer-term conditions, may not have not seen their GP for some time and another professional might be much more relevant. This is why we want individuals to tell us who we should be seeking evidence from, as they will know best.
We will encourage individuals to provide this evidence to support their claim or, if they cannot, to let us know who it would be best for us to approach directly. We do not wish to create a two-tier system, as feared by the noble Baroness. However, I do not necessarily think that we need to gather such evidence in every case. In some cases what the claimant has already told us, or provided alongside their claim, will be sufficient. In other cases, information from a health professional might be likely to add only limited value. We must remember here that what the condition or impairment is, or its severity, is often not critical in the assessment; it is the impact of it that matters. The gathering of additional evidence should be decided on the merits of individual cases.
The noble Baroness referred to learning from the work capability assessment used in employment and support allowance. Although it is important to be clear that ESA and personal independence payment are very different benefits paid for very different reasons, we are seeking to learn from the experience of delivering the work capability assessment. As part of this we are looking closely at the findings of the independent review of the assessment carried out by Professor Malcolm Harrington to see where we can improve the design of the personal independence payment claim and assessment processes. For example, we recognise the need to ensure that these processes are empathetic, that we gather the best possible evidence and that assessors are given the training and support they need.
I turn now to the amendments tabled by the noble Lord, Lord Touhig, and the noble Baroness, Lady Gardner. Evidence will also enable us to make the best decisions about how an individual's claim should be dealt with, including whether a face-to-face consultation is necessary.
We recognise the importance of the assessment process being carried out sensitively and proportionately. We have made it clear that we believe that face-to-face consultations should form part of the claim process for most individuals. Consultation will play a key role in creating a fairer, more objective and transparent assessment, providing individuals with the opportunity to put across their views on how their impairment affects their everyday lives.
However, where there is already sufficient evidence on which to make a decision on entitlement, we completely agree with noble Lords who argue that a face-to-face consultation should not be required. In such cases, entitlement would be considered on the basis of paper evidence only, and we have the flexibility in legislation to allow for that.
In doing so, we are ensuring that we will have a tiered assessment—as recommended by the National Autistic Society, and referred to by the noble Baroness, Lady Healy and the noble Lord, Lord Wigley—a process where we consider evidence provided by the claimant first, then any additional evidence gathered and then carry out a face-to-face consultation only if needed.
However, we do not agree that there should be different rules or processes for different groups of people, and especially not on the basis of impairment type. Exempting individuals from the face-to-face consultation on the basis of their impairment would undermine one of the key principles of the new benefit, which is to treat the individual as an individual. The noble Lord, Lord Touhig, argued the point well when he said that when you have seen one person with autism, you have seen only one person and that no two people with autism are the same.
The only exception to that principle is where individuals are claiming under the terminal illness provisions, whom we will not expect to attend face-to-face consultations. I am sure that all noble Lords will accept the need to make an exception under those circumstances.
Picking up the point made by the noble Lord, Lord Wigley, on the frequency of reassessments, we will take a personalised approach to setting the length of awards, varying the frequency and formats of awards and reviews depending on the individual’s needs and the likelihood of the impact of their health condition or impairment changing. Some people will have short-term awards; others longer; and some will receive ongoing awards. It is also important to state that reviews may not always necessarily involve face-to-face consultation. We recognise that it will be important to ensure that the review process is applied sensitively and appropriately.
Having discussed the need for face-to-face consultation, I feel that this is an appropriate juncture at which to turn our attention to my noble friend Lord German’s amendment regarding the attendance at a face-to-face consultation of a suitable person alongside the claimant. We appreciate that some individuals will be able to participate in a face-to-face consultation only with the additional support of someone whom they know and trust. It has always been our intention that individuals should be advised that they can bring with them another person—be it a relation, friend or professional who supports them—in order to help them or to remove any anxiety that they may feel in undertaking a face-to-face consultation. Indeed, the Minister for Disabled People made that exact point during debate in the Commons. That will apply to all claimants.
I agree with my noble friend that the suitable person should not just be a bystander to proceedings. They should be able to play an active role in supporting the claimant and ensuring that they understand the assessor’s questions and requests in order to help them to answer them on their own. Where the claimant is not able to speak for themselves as they should, with the claimant’s consent, they should be able to engage with, and respond to, the assessor directly to ensure that they are provided with the necessary information—particularly in the context of all of our concerns with the community on the autistic spectrum. I hope that that reassures my noble friend and noble Lords more generally on this critical point.
This important measure does not need legislation. We have already made a clear commitment to it and are building it into our processes, guidance and within the commercial framework with the successful assessment supplier.
Baroness Thomas of Winchester
Will the Minister also respond to my question, when I asked whether the sentence:
“Decision Makers will change erroneous decisions rather than send them to a Tribunal”
is a change from the present system?
Lord Freud
My Lords, taking those questions in the order that I fancy, let me start with the noble Lord, Lord Low. If I did not make it unequivocally clear, let me do so: where the written evidence is unequivocal, we will take decisions on the written evidence and continue to do so. I hope that that is absolutely clear, and I am sorry that I did not say that with enough emphasis.
On the point made by the noble Lord, Lord Wigley, the National Autistic Society is undertaking some extremely good initiatives. I was just considering one in Northern Ireland with Jobcentre Plus. To be honest, I was not aware of that particular one mentioned by the noble Lord, but that is exactly the kind of initiative that we will want to incorporate as we build the programme. We understand that the issue of autism is important.
My noble friend Lady Thomas refers to how the WCA works, rather than how the PIP might work, because we have not completely developed it. The best I can do on that issue is to write to her setting out the position precisely. I hope that that is satisfactory for her.
The Earl of Listowel
My Lords, I support the amendment. Does the Minister think that it might be worth while if he made a few comments on the issues of continuity and supervision of staff? I hesitate to ask because I am unfamiliar with this area but in the areas of the asylum and immigration process, which has some similarities, and in social work and work with vulnerable children and families, the two themes seem to be, first, continuity of relationship wherever possible and, secondly, good quality supervision.
Lord Freud
I apologise to the noble Earl, Lord Listowel, for not responding to that point previously and I intervene to do so. There is a huge difference between a one-off assessment—which you may not repeat for another five or 10 years or never again—and an ongoing relationship in the Immigration Service. It is not a relevant analogy at all.
The Earl of Listowel
I suspected it might not be. For people with fluctuating conditions, where there is a likelihood of their going back on repeated occasions, perhaps one could sort out within a particular group individuals who would benefit from having regular contact with the same person. In the spirit of co-production, some individuals who are going to be assessed on a repeated basis may perhaps like to choose the person they deal with. However, as I say, I do not know how it works in practice at the moment so this may be by the by.
On listening to this debate, the question of the supervision which takes place in the social care arena seems to be pertinent. I am grateful to the Minister for making it possible for a social worker to visit the officials working on this and to discuss matters of supervision. In social care it is very important for front-line staff to receive quality supervision on a regular basis for three purposes: first, to check that they are doing the right job; secondly, to check that they are receiving the right continual professional development; and, thirdly, to ensure that they are not responding inappropriately to the clients.
On the third purpose, we all come to life with our experiences, and some assessors may find it difficult to work with particular clients who rub them up the wrong way. They need to be able to go to their supervisor and say, “Look, I feel really uncomfortable working with this person. I am not sure it is actually anything to do with them. Can you help me to sort this out?” They need a sounding board, if you like. That is one aspect.
On the continuing professional development side, this is a training aspect to check that they are continually building on their understanding of, let us say, autism. They will start from a point of ignorance but, in the course of years of experience, they will learn more and more. They are helped to do so and their supervisor ensures that they get the opportunities for that learning and enrichment. It is a draining job and the people doing it need to be recognised, supported and enriched. I have covered those three points but, as I say, I am not sure it is pertinent.
The proposal for a trial arrangement might allow an opportunity for us to find the most effective kind of supervision we can afford to provide and where there are opportunities to build continuity of relationship with clients.
I have an amendment later in the Bill which relates to how one manages the system and the culture in this area. If the people at the very top of some of these organisations had experience of social care—if one could be confident that there was a senior social worker at the top of the Jobcentre Plus arrangements, or whatever—they would have the necessary insight and the understanding to help people on the front line who will need a system of this kind to assist them in working with vulnerable adults. In that way, even with limited resources, the best outcomes could be achieved in the circumstances.
However, I will come to that amendment later. I look forward to the Minister’s reply.
Lord McKenzie of Luton
My Lords, a compelling case has been made for a trial period before the system goes live in its fullest extent. When this was debated at the other end there was some debate around the difference between a pilot and testing, and what that meant in government legalese. The proposition seems very clear: we want to see it working in practice before it is more widely available, for all the reasons that have been advanced by noble Lords about confidence, which I link with the issues of co-production, value for money and testing the capacity of providers. If it is to be meaningful, this would have to be done together with whoever will end up being the provider. It could not be done just with DWP staff, with providers coming in later. We acknowledge what is clear from the documentation we have: there has been an enormous amount of testing and engagement to date. However, that is not the same as or a substitute for having the final subject of the trial criteria in place and knowing where the thresholds are.
The amendment says that the trial period should be in respect only of those new claimants. I wonder quite why we are adopting that cut-off point. Is there not also going to be an issue for existing DLA recipients who have to go through the process and how that is handled, with all the communications and sensitivities around that? In particular, I think we know there will be some who are in receipt of DLA at the moment who will go through an assessment process and not be able to end up on PIP. I would be interested in the noble Baroness’s view on why she has pitched it at just new claimants, rather than people currently on DLA who will have to, in a sense, be recycled through the new process.
I want to make a point about capacity as well. We do not know who the new providers will be. Certainly, if they can earn the sums that my noble friend Lady Wilkins referred to, you would think that there should not be a capacity issue—certainly not in terms of numbers. However, I recall an instance a couple of years ago when, for industrial injuries benefit, the condition of miner’s knee was recognised as something that had to be compensated. Trying to pull in capacity to get those assessments done was, frankly, the devil’s own job because the existing providers did not have enough people to help out, certainly not in the timeframe that was wanted. Although, in a sense, the system will not be fully up and running even in that one-year trial period, this seems to be an important opportunity to test that capacity—not only in terms of the numbers but the processes and how people are being dealt with, and the levels of expertise that we expect to be available. This is a real opportunity to try it.
One thing that strikes me—it has been part of the whole debate over this Bill—is how pervasive the problems with the WCA are right across the spectrum. If we knew when that was introduced what we know now, there would have been much more careful testing of it, as is requested and sought by this amendment. Therefore, I do believe it is important to see how it is happening in practice before it is rolled out more widely, whether that is over one year or a different period.
Lord Freud
Let me take each of the noble Baroness’s amendments in turn. On the trialling of the assessment, I am sure that noble Lords are aware that it is possible to test out and evaluate the assessment process without trialling it. There is, indeed, an advantage to testing over trialling, because the former can be done without affecting an individual’s entitlement to benefit.
The noble Baroness will be aware of the testing we undertook throughout the summer with more than 900 disabled volunteers, and the informal consultation that took place alongside it. Both were very effective, and allowed us to review, revise and improve the draft assessment criteria from the draft published in May to the draft with which noble Lords have recently been provided. We are now seeking further views on that.
For our testing, using independent experts has demonstrated that our proposed approach to assessment is both reliable and valid. This testing included individuals on the autistic spectrum. This is not the end of the matter, though, as we believe the development of the benefit processes, including the assessment, should be and will be an iterative process. Therefore, in addition to testing of the assessment, we have created a specific development group to engage with a broad spectrum of disability organisations, to understand their views on a range of issues related to the delivery of the benefit. We have also created a number of customer research panels made up of groups of disabled people who share similar characteristics. We will seek to test our processes in a model office environment, allowing us to see how they work without affecting individuals. These processes will be vital in helping us gather insight first-hand from individuals on whom the process may impact.
Turning to the independent review of the trial referred to in the amendment, I first state that I do appreciate the importance of such reviews, and will talk about that in more detail later. However, undertaking this after only one year of operation would not provide adequate time for the assessment process to bed in. It would not allow enough time for sufficient data to be captured, as it requires people to go through the full claims process in this time, and there are inevitable lags in the production of statistics. Any subsequent analysis would therefore provide an unrealistic impression of how the benefit was operating.
There are, of course, other means by which we seek to evaluate and improve the operation of the new assessment. The assessment and its associated process will remain living tools, and we will continually carry out internal evaluation work to monitor their performance. We will therefore not have to wait for the outcome of the independent review to learn from and take action based on operational and individual experiences.
The second element of the noble Baroness’s amendment is the involvement of disabled people’s organisations in the assessment process. Let me assure the noble Baroness that we have involved disabled people’s organisations in the development of this policy from day one. We are trying to approach this work in a co-produced way, seeking the views of disabled people and their organisations at each stage. I have mentioned in earlier debates that our assessment development group comprises members of Equality 2025 and Radar. Both have provided critical support, direction and challenge throughout the process of developing the assessment criteria.
We also held a 16-week informal consultation on our initial draft of the assessment criteria, which sought the views and opinions of disabled people and their organisations. This process helped us to revise the initial draft assessment criteria and develop the second draft, which has lately been made available. Most of the changes that we have made have been as a direct result of the input of disability organisations. We are now seeking views on the second draft and, importantly, the proposed weightings, before we reach any firm views on the entitlement thresholds. We then intend to carry out a full consultation on the entire assessment criteria, including the weightings and thresholds.
Equally, we are involving disabled people and the organisations that represent them as we design the operational processes for personal independence payment. To achieve this, we have created a dedicated working group specifically for this purpose. The group’s membership has been drawn from a wide number of national and grass-roots, user-led organisations, and it is currently working with us on a range of operational issues. We also see disabled people’s organisations playing a key role in the delivery of the new benefit, helping to inform individuals and guide them through the process. This could include assisting them in making claims, providing evidence to help support their case and/or attending assessments with them to provide support and reassurance. We are undertaking work to strengthen and expand our partnership arrangements with local organisations that represent disabled people and ensure that they have all the relevant information about PIP.
Meanwhile, there is nothing in the legislation to prevent disabled people’s organisations being involved in the delivery of assessments. The key for us is ensuring that, regardless of which organisation or organisations deliver the assessment, they have the capacity to do so, and that individual assessors have the requisite skills and experience. Disability organisations have been free to participate in the procurement exercise for the assessment, which is now under way, either as prime contractors or as partners of such organisations. Whatever the outcome of this exercise, we will ask the assessment provider to work with disability organisations and seek their input, so that we can deliver the best possible service to claimants.
The final element of the noble Baroness’s amendment is intended to ensure that individuals whose condition is unlikely to change over five years should not have to undergo an assessment more often than once every five years. We will discuss this issue in more detail in a later group of amendments. However, we know that disabled people’s lives are varied and that health conditions and impairments affect people in many different ways. As I have said before, we therefore do not feel it would be appropriate to make blanket rules for particular groups of people.
Under personal independence payment, we want individuals’ treatment to be tailored to fit their personal circumstances. This includes our approach to award length and review date, which should also be personalised. Such an approach would be able to take into account the likelihood of the impact of an individual’s health condition or impairment changing. We know that for some people a shorter-term award might be appropriate. For others, a longer-term award might be appropriate, while, for those with the severest disabilities, an ongoing award might be right. We absolutely do not want unnecessary reviews of claims, both to reduce the impact on individuals and to ensure that we do not waste money.
The noble Baroness, Lady Wilkins, raised the question of the overall cost of delivering DLA reform over three years. This was included in the 2010 Budget Red Book at £675 million.
Baroness Wilkins
I asked about the cost of reassessing people with conditions that will not improve or where there will be no difference.
Lord Freud
My point is that we will try to minimise those costs by not having reassessments in those circumstances. I cannot put a precise figure on it but I can tell the noble Baroness that our ambition is to have as low a cost as possible in those circumstances. Assessors and decision-makers should be empowered to make these decisions based on the circumstances of the case and with the aid of departmental guidance. These matters should not be prescribed by the Government through legislation. Only by doing it that way will we achieve the personalised approach we desire.
Baroness Hollis of Heigham
My Lords, can I make one proposal to the Minister? He may not feel able to accept this amendment—although given the strength of feeling in Committee I hope very much he takes it back and reflects on whether he can move more than he has been able to do today, otherwise I am sure it will come up on Report. Can he at least consider, as a fall-back position, that for a year new applicants who have been refused and existing applicants who are currently on DLA who will lose entitlement under the proposed new PIP would have a further personal review stage put into the system? This would involve not just the decision-maker but the disability organisations so they can work through the material themselves to see whether they would uphold the decision.
The Minister and the department will need additional knowledge-building within the decision-making process. The best way to do that in that first year may be to look at the cases that are being refused or declined and reconsider them before the applicant is notified. This would ensure that errors have not been made and that the decision-maker understands fully—in the light of real expertise coming from the relevant associations and organisations—where that may take him or her. I would suggest a further stage of at least 12 months of a review process within the department in which rejections are analysed a second time around with the help of representatives from disability organisations which are experienced in these matters so that we build up expertise.
Lord Freud
My Lords, I am very happy to reflect on that rather interesting point. I will go back and think about that very hard.
Lord McKenzie of Luton
I wonder if the Minister just could deal with this point also. In his response he explained—and I think we would accept—that a lot of testing, engagement and assessment is going on. That is what you would expect of the noble Lord. However, what it does not achieve—and I think the amendment is trying to—is a gentle start to the process, so that it does not start fully over a condensed period. A key lesson from the WCA is not so much its background philosophy or some of the assessment processes, although they have been refined by Harrington, but what happened in practice. There was a disconnect between the two to a certain extent. The thrust of this and perhaps the challenge is calling it a trial period. It is really the timeframe in which it is introduced which seems to be particularly important.
Lord Freud
My Lords, I am very sympathetic to the thrust of the noble Lord’s point. Noble Lords will be aware that when we designed the universal credit we did it on a trajectory. It is really important that we get the right trajectory on all these introductions. In that context, rather than having a formal trial which has some very specific implications around that process, I take the point about a trajectory of introduction. Indeed, we are looking very hard at the optimum trajectory of introduction.
Baroness Campbell of Surbiton
I thank the Minister for his response. There is a lot in it, so I will deal with each part in turn. I thank other noble Lords for their contribution to this amendment. They have expanded it and given it colour, depth and breadth, and I am very grateful to them for that. I was particularly grateful to the noble Lord, Lord Boswell, for saying that this is a process of discovery. It is a process of discovery, not just for the assessor but for the disabled person.
Noble Lords will understand that this is a very old, tried and tested benefit which has enormously benefited disabled people in making them more emancipated and independent. For me, as an old researcher, not to trial this seems absolutely crazy. I was heartened to hear the Minister’s comments with regard to the testing that went on over the summer. I am aware of it and I have tried to get as much information about it as I can. It is still a bit secretive, but I will do my best to get hold of more information. However, it is not a trial. It is not the real thing. The 900 test assessments are just testing out questions and testing the ground, not the life that a person will have to lead after they have been given their award. I still believe that a proper controlled trial is very important for this incredibly complex benefit. It seems simple but what it gives people is complicated.
That takes me to the contribution of the noble Baroness, Lady Howe, who pointed out that the reliance on judgment in relation to people with learning difficulties and people with mental health problems would itself be tested. Again, I am in a bit of a conundrum here as the Government have stated again and again that one of the reasons for reforming this benefit is so that they can better target people with mental health problems and people with learning difficulties, who are not necessarily seen as recipients of disability living allowance as they can walk, talk, leave the house without a wheelchair and move around. I am afraid that the assessors will still see disabled people in terms of their medical condition. Independence will be seen in terms of whether someone can give an affirmative answer to the questions: Can you walk? Can you see? Can you pick up a cup? Can you go down the road? If we are to target a significant group who have probably not benefited from DLA in the way that people with physical impairments have done in the past, that is another reason to hold a trial.
I know that the Minister and the Government are very keen to involve disabled people in the process and have done their best to co-produce, but the few people who have been involved are the very people who have come back to me to say, “Jane, we must have a trial, because this is a very big step for both the assessors and disabled people”.
For all those reasons, I am keen that we return to the issue of a trial. The trajectory might be a way to slow the process down. The reason why we decided to table the amendment just for first-time claimants, not for those going for their reassessment, was because that would be manageable. There would be another year for those of us who are awaiting this change to look at what is going on and how it would affect current recipients. So it was a practical issue.
For all those reasons, we will need to return to the issue of trialling, analysis and evaluation. In the mean time, I will do my best to get hold of all those testing papers in the depths of the DWP and then, we hope, we will not feel that it is so necessary to have a trial. For now, I beg to withdraw the amendment.
Lord McKenzie of Luton
My Lords, it is with a degree of trepidation that I rise to speak, having just heard those contributions. This issue presents a real conundrum. There is an argument that asks, if the social model is to identify the broader challenges to living that confront disabled people, is it unreasonable to take account of provisions and innovations of aids and appliances that society has developed to help people in their daily living? However, it is easy to state that; as the contributions we have just heard made clear, there is a question of what that will mean in practice.
We could recognise that the use of aids and appliances will not always remove the barriers that people face; we have certainly heard that explained. We should also recognise that not everyone will have access to aids and appliances, or indeed adaptations, which could enhance their quality of life. There is a conundrum that is recognised in the November 2011 Explanatory Note. If account is taken only of aids and appliances that people have and—other things being equal—that produces a low award, there is a potential disincentive to acquire those very aids and appliances that will improve people’s lives.
As I understand, what is currently proposed—as the noble Baroness, Lady Thomas, identified, this mirrors the current DLA formulation—is that the assessment will take account of aids and appliances that are normally used and can reasonably be expected to be worn or used. This seems to penalise those who have not yet acquired those aids and appliances. They will have a zero or low award, and not have the money to acquire the facilities. I wonder if it would not be a more reasonable approach, if there is to be some recognition of aids and appliances in the assessment, to take account of what people have initially, with some acknowledgement that, at a reassessment at some stage in the future, you might add those that people might be reasonably expected to use. At least that way, there is a transition.
We know that some aids can be differentiated from others on the basis that in themselves they do not overcome all the issues of mobility. Attaching higher scores for these circumstances—although we do not know what the tariff will be—does not seem unreasonable. The more I have thought about this, and the more contributions I have heard, the more difficult an issue I think it is.
Lord Freud
My Lords, I owe my noble friend Lady Thomas an apology and a clarification. I incorrectly attributed her question about reconsiderations in the previous group to ESA, when of course it applied to PIP. The new provisions on reconsiderations contained in Clause 99 will make a difference, but I suggest that we have a separate debate on that later clause, as it is a wider issue than just in relation to PIP.
Baroness Hollis of Heigham
How many points do you need altogether if one produces 10 and the other produces 12?
Lord Freud
My Lords, this is a matter to be revealed at a somewhat later date. I am pleased to have provided a timetable of when this matter will become clear. However, the direction of travel is clear: the maximum number of points on that one is 15.
I almost want to call the noble Baroness, Lady Campbell, my noble friend, but I am not allowed to do so. I invite the noble Baroness to join me; I have to find an appropriate enticement so that I can call her my noble friend. However, I must disagree with her concerns. I suggest that she is likely to score very highly in the assessment by way of the very aids and appliances that she has highlighted. As I said, electric wheelchairs are right at the top of that measure at 15 points. We will produce case studies by the time PIP is debated on Report which clearly illustrate how individuals who successfully use aids and appliances will continue to receive PIP in a similar way as they do with DLA.
I turn to the noble Baroness’s second amendment. We are committed to personal independence payment, like disability living allowance, being an extra-costs benefit for disabled people, to spend on whatever they see fit. Our experience of DLA tells us that in some cases the money will go towards the cost and upkeep of specific purchases or activities, such as aids or appliances, or that it may simply become part of the disabled person’s budget paying for things as and when they come up, such as the need for shopping deliveries or taxis. The clear intent is that the mobility component should be used to help improve the disabled person’s ability to get around but we have no wish to prescribe how they should spend the money.
Given that the purpose of the benefit is to contribute to disability-related costs such as aids and appliances, and that there are other support means available, we do not think we should be paying for aids and appliances in addition to this. Given these comments and the reassurances that I hope I have given on how aids and appliances will be treated in the assessment, I urge the noble Baroness to withdraw her amendments.
Lord McKenzie of Luton
I do not think that the noble Lord has helped me with my conundrum. Is it not the case that the assessment will take account of aids and appliances that people have as well as aids and appliances that it might be reasonable for them to have? If that is the case, in that latter category is that not a double whammy as, other things being equal, people would get a lower assessment and a lower or zero award, and therefore would not have the wherewithal to acquire some of the aids and appliances which would positively improve their lives?
Lord Freud
This is the Catch-22 that a number of noble Lords have pointed out today and in the past, whereby denying oneself an obvious aid is used as a method or device to maintain a higher level of PIP. Clearly, we want to discourage that because we want people to maximise their opportunities in life. The noble Lord referred to a period in which to obtain an aid. However, that drives straight down the other path of starting to multiply the number of reassessments, which we do not want to do. There is a balance to be struck here but most people are able to get aids and appliances. They may not get the four-and-a-half kilo device of the noble Baroness, Lady Grey-Thompson. That is half the weight of my bike.
Baroness Grey-Thompson
My Lords, if I might interject, one of the issues is the cost of aids and equipment. You can buy a fairly okay wheelchair for £250. You can buy a semi-custom fit chair for about £3,500 and you can probably spend £6,000 on a chair. However, some aids and adaptations are very difficult to get, such as a stair lift, which costs £2,500. I tried to get one fitted in my house when I was pregnant but no company in the country would fit a stair lift in my house as the stair lift was not insured to carry two people, and as a pregnant woman I counted as two people. However, there were companies that were prepared to put one in for someone who wanted to carry their dog up the stairs. A through-the-floor lift costs £18,000. If you live in the south-east of England, moving to a bungalow is just not an option because it is so expensive. There are all these costs that keep adding up, and it is very difficult for disabled people even to think about getting the right equipment because of the huge cost.
Lord Freud
Clearly, one has to be absolutely sympathetic to this point. As we all know, levels of equipment can vary hugely. However, the point on this particular issue is that we will look at only readily available, cheap aids and appliances, which can be reasonably used. That will be the definition and it is the definition used today in DLA, so we are effectively porting that approach over. I think I have already asked for the amendment to be withdrawn.
Baroness Thomas of Winchester
My Lords, I think that proves my point about the confusion over this issue. This has been an extremely illuminating debate. I am very grateful to my fellow Peers along this Bench. We have heard about special shoes, small chair-lifts for small chairs, stair lifts, carpets, lifts in the House of Lords, cushions and so on. I fear that the confusion in my mind over how aids and appliances will be taken into consideration has not been entirely removed. I shall read what the Minister said with care. If I were younger, I would go to my assessment having borrowed the electric wheelchair of the noble Baroness, Lady Wilkins. That would be the answer. I could cross my fingers behind my back and say that it was mine, and I would then get all the points that I needed. There are some real problems.
However, I end on a note that the Minister might enjoy. The prize for the best disabled lavatory that I have ever come across goes to one in the Department for Work and Pensions in Caxton House. It should be open to the public for general inspection. I hope my noble friend will pay it an official visit at his convenience. It has an electric control that you press, which means that it goes up and down without any effort on the part of the user. As an example of a brilliant adaptation, it takes the top prize. For the moment, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, we have had a powerful set of contributions on the amendments. I hope that the Minister will have ringing in his ears the important question: if it is not about cost savings, why on earth are the Government seeking to do this? We have heard powerful presentations, especially from my noble friend Lady Morgan, about the costs that confront people. My noble friend Lady Lister has just made an extremely important point about the interrelation of this with the benefit, as well as the other challenges that come with the proposals.
The amendments are intended to deal, first, with the issue of fluctuating conditions; and, secondly, to alter the assessment period for access to personal independence payments. Looking first at fluctuating conditions, the amendments would ensure that those whose physical or mental condition limits their ability for the majority of the time, rather than continuously, would still be eligible. As drafted, the Bill suggests that people with fluctuating conditions would not qualify if they are not consistently ill for the required length of time, regardless of the severity of their condition. That is the case with the current work capability assessment, which, as we know, consistently fails people with fluctuating conditions such as mental health problems or multiple sclerosis.
The new draft criteria published on Friday contain some welcome recognition of the need to ensure that people with fluctuating conditions are not disadvantaged under the PIP assessment, so that where someone needs more than one descriptor within an activity, the time period can be counted cumulatively towards the thresholds of 50 per cent of days needed to satisfy one descriptor. However, what evidence is there to show that the method of taking account of the needs of people with fluctuating conditions will be both accurate and fair while meeting the aim of not disadvantaging those people during the assessment?
The Bill will extend the qualifying period before claimants can receive PIP from the current three months under DLA to six months. People will continue to have to demonstrate that their impairment or health condition will last through a further six months to qualify. That increases the total period for which individuals will have to demonstrate need from nine months to one year. The amendments would retain the one-year period, but split it so that claimants will have a three-month waiting period only but will have to demonstrate that their impairment is likely to last for an additional nine months. We support the amendments.
A wide range of organisations have expressed their concerns about that change. As the Disability Benefits Consortium put it, DLA eligibility is based on individuals experiencing additional costs as a consequence of their impairment or health condition.
“Making people wait longer will place further burdens on those adjusting to sudden onset conditions such as stroke, or people who experience the immediate debilitating effects of treatment such as cancer”—
we have heard strong testimony to that this afternoon—
“as well as penalising those whose impairment or condition has gradually worsened over a period of time and have already had to deal with additional costs prior to passing the threshold for PIP. To require additional costs to exist for six months before offering any financial assistance will push even more disabled people into debt”.
The noble Baroness, Lady Thomas, made that point very strongly.
If applied to disabled children, it will also place increased pressure on families trying to adjust to their child's impairment or health needs. The Government have stated that that change will not bring about any significant savings, but we believe that it will have a significant impact on disabled people. As we have heard, the Equality and Human Rights Commission has also raised concerns in this area, stating that the change from a three to a six-month waiting period may also undermine the Government's stated aim to support disabled people into work and enable them to remain in work. Further, newly disabled people without support for the six months may not be able to continue in their current employment or be able to find suitable alternatives.
Macmillan has highlighted the particular problems of people with cancer, as did my noble friend Lady Morgan. Macmillan states:
“For people with cancer, where treatment and its debilitating effects can begin very quickly after diagnosis, support needs are often immediate. Macmillan believes people with sudden-onset, long-term conditions should be able to claim support as soon as their support needs arise. We are flatly opposed to increasing the qualifying period from three to six months”.
Macmillan also points out that DLA is the only non-means-tested support available to cover the immediate costs of a person’s illness or disability during this period, and says:
“The outcome of delaying payment by yet another three months will be that cancer patients who are struggling to pay their bills or mortgage payments will face more debt and more stress”.
As we have heard, the Government’s policy briefing note for this proposal gives the justification for this change that of aligning the definition of disability with that used in attendance allowance, and with that,
“generally used for the Equality Act 2010”.
The guidance in the Equality Act in fact specifies that someone is to be considered as having a disability if they have an impairment that will last at least 12 months, or for the rest of their life, but this says nothing about how long somebody should have to wait before they are assessed as having this disability.
The policy briefing note also states:
“While we acknowledge that some impairments or conditions may appear long-term at their outset, and that additional costs may arise as a result, this may not always be the case. Where disability-related costs do arise early on, for instance as a result of having to make frequent hospital visits for treatment, additional support mechanisms provide an element of coverage before the qualifying period is satisfied, for example through the NHS travel costs scheme or other social security benefits”.
However, as Macmillan states, these types of support are usually means tested, unlike disability living allowance—or PIP, which is intended to meet the additional costs that arise through a disability for somebody, whatever their income level. Will the Minister please list the types of support that the Government think will be available to people in this situation, and which will be available to those people who have built up savings which exclude them from normal means-tested benefits? Can the Minister say whether any additional cost would be expected from changing from a six-month waiting period and a six-month expected disability to a three-month waiting period and a nine-month expected disability? If this would not be an additional cost, what on earth is the rationale for asking people to wait an additional three months in order to receive vital support?
Lord Freud
My Lords, I thank noble Lords for tabling these amendments and welcome the opportunity to respond on this important feature of personal independence payment. The required period condition has given rise to a great deal of considered and reasoned debate today. The debate has also been informed by the not inconsiderable assistance of briefing provided by the likes of Macmillan Cancer Support and the Disability Benefits Consortium, as well as many others over the past few months.
The amendments seek primarily to shorten the qualifying period before the personal independence payment can be paid. They also increase the onward period over which someone must be expected to satisfy the conditions of entitlement and modify how someone can satisfy the required period condition. Taken together, I was pleased to see that Amendments 86A to D preserve the overall required period condition of 12 months. I therefore welcome the fact that these amendments explicitly accept the principle that personal independence payment should be paid only to people whose needs arise from long-term conditions. This is a fundamental aim of personal independence payment and ties our definition of long-term disability in with that used in the Equality Act.
Under disability living allowance, people currently have to satisfy a three-month qualifying period and a six-month prospective test. These rules were put in place when the old attendance allowance and mobility allowance were merged to form DLA in 1992. However, for personal independence payment we are designing a new benefit; one fit for the 21st century, so it is only right that we looked at what it is the most appropriate length of the qualifying period and prospective test.
I know how much these changes to the qualifying period have worried certain groups of disabled people and their representatives, most particularly those representing people who have been diagnosed with cancer or who have experienced sudden-onset conditions. Noble Lords may be interested to learn that the changes found support in our consultation, in particular the link with the Equality Act definition.
Perhaps it may help to reassure noble Lords further if I set out that the required period condition is not a money-saving measure, nor is it meant to deny disabled people support where the impact of their condition is long-term. This is about having a mechanism which can identify, assess and pay a valuable cash benefit to individuals who have a long-term health condition or impairment which results in burdensome financial costs, regardless of income. Personal independence payment is not designed to assist individuals dealing with short-term needs.
Where there are immediate and ongoing costs which can cause financial difficulties, or have an effect on someone’s ability to participate fully so that their levels of independence may begin to suffer, there is a range of means-tested and non-means-tested support to help people through some of the shorter-term burdens, both financial and practical. I acknowledge that this help may not be available to all, but all provision has to be dictated by balancing need and an individual’s capacity to meet it from their own resources.
Baroness Hollis of Heigham
Can the noble Lord give us examples of that? Like others, I have nursed people through cancer—three people, including my late husband—and what we need is what does not exist, which is an upfront grant to cover costs until the condition has stabilised. During those six months, in his situation, I was all right, as I could throw money at it, but I noticed that in the waiting rooms for chemo and radio, then back to chemo and then to radio, a constant theme for the people there—some were feisty, some were broken, some were defeated and some were coping—was the huge financial pressures, particularly on those who did not have an adequate income or adequate family support to allow them to cope. If the Minister cannot move in this direction, he has to come up with something that will do the same job.
Lord Freud
My Lords, among the elements available in the shorter term are healthcare, travel costs, free prescriptions or aids and appliances provided by the NHS or the local authority. Following the request by the noble Lord, Lord McKenzie, it may be easier for me to write with a list of particular supports.
Baroness Morgan of Drefelin
If the Minister is going to write, would he also look at explaining how many of those are dependent on local authority provision? Much of the kind of help that he is talking about is sometimes dependent on having DLA.
Lord Freud
My Lords, when I write I will try to do a full breakdown of what is available.
Lord Boswell of Aynho
Picking up the point made by the noble Baroness, Lady Lister, perhaps my noble friend could also indicate any of those benefits which might be susceptible to the benefit cap under the proposals of this legislation.
Lord Freud
I will do that. However, it would be preferable to look at that issue in the context of the benefit cap rather than this context. We will be looking at that soon—I was hoping to say very soon.
I will go through those social security benefits. I should mention in this context of additional support—I pay tribute to Macmillan for its highly motivated campaign—that parking charges at hospitals are increasingly being waived for people attending treatment who have been diagnosed with cancer. I appreciate that some of these support functions can take a while to be assessed and put into place, and that they may not be available in all areas, but I suspect that that may be a debate for a different day and, indeed, a different forum. For example, if there is a delay in putting in place financial assistance to help someone meet transport costs necessary to go to and from out-patient treatment, that is a matter for primary care trusts to resolve. It is not the place for a long-term benefit for long-term needs to step in to meet shortfalls or delays in such provision.
I have also listened with interest to the arguments presented in support of those who suffer sudden-onset conditions such as stroke or traumatic injury. While the immediate effects of such a sudden-onset condition may be highly debilitating, it is important that we consider the role that the National Health Service plays. Following a sudden-onset condition, it is doctors and nurses who will be caring, stabilising and treating the individual while their condition remains acute, and it is the hospital which will be responsible for the individual’s disability-related needs in their entirety during treatment.
Baroness Morgan of Drefelin
I am sorry to interrupt the Minister again. Does he agree that one of the thrusts of modern health care—particularly in cancer care, where I have an interest—is to try to keep people at home for as long as possible and not requiring hospitalisation? One of the brilliant aspects of the DLA that I was trying to describe means that determined, independent people going through tough treatment can stay at home, saving the NHS thousands and thousands of pounds on hotel fees. We have to look at this issue in a joined up way.
Lord Freud
I am trying to make the point that it is the responsibility of the NHS to deal with rehabilitation and treatment issues. It is not the function of DLA to do that, nor will it be the function of PIP. It is a different support mechanism. It may be that noble Lords would like to put in a particular support function in those circumstances, but it is not what PIP is meant to be.
Baroness Morgan of Drefelin
In that case, perhaps I may ask another question. If this is not what it is for, we need to understand what the implications are. People who have DLA now and are being treated for cancer—to give an example of a sudden-onset condition—are utilising the benefit in that way. As I understand it, DLA is meant to be used in a way decided by the client. It is important for people to keep their independence—to stay at home and look after themselves—and to stay positive. Surely we want to encourage that.
I understand the Minister says that that is not the purpose of the benefit, but I am confused: it is a product of the benefit which is of benefit to all of us. If it is being changed, we need to understand the implications and the evidence of what the knock-on effects might be elsewhere in the system.
Lord Freud
Let me go on a little further and try to pull this issue back. Noble Lords have said that, in practice, DLA is being used in a slightly different way to the long-term intention, and that that is tied to three months as opposed to six months. I have said that it is not a matter of money but of coherence. I have heard many strong views expressed in Committee about noble Lords’ discomfort with the move to six months and so I will take this matter back—that might be a slight overstatement—and look very closely at what we are hearing, not only from here but from elsewhere. This is not one-way traffic; some people are more concerned that if you go to an earlier assessment it implies that you will have more reassessments, which some groups dislike rather more. So it is not all one-way traffic for people who are affected.
Baroness Lister of Burtersett
I apologise for interrupting the noble Lord. I am sure that the Committee is extremely pleased to hear him say that he will take this away. I hear what he says about it not being one-way traffic but, given that the Minister is writing to the Committee already on this issue, it might be helpful if he could list the organisations which are supporting the move to six months and those organisations who are against it, so that the Committee can weigh the balance of opinion for itself.
Lord Freud
No, no, no. The Treasury is not a disability organisation, let me assure you. Those who know the Treasury well will be absolutely confident in that description.
As I said, it is not a cost matter. It is a matter where people’s sensitivities have been very clearly expressed. We will go away to look at that very, very closely. Some of the observations in this room today will help us in that consideration.
I do not know if there are any other points I really need to make. I just reassure or assure the noble Baroness, Lady Howe, that the required-period condition will not be a snapshot in time. The legislation makes that quite clear by talking about the likelihood of the assessment being met on any particular day. It means that if someone is likely to meet the conditions for the majority of the time, they can safely be taken as being more likely than not to meet them than if we were just randomly to pick a day.
The other issue I need just to touch on, which is often misunderstood, is that during people’s stay in hospital, when the cost of their disability-related needs are being met, individuals will already be fulfilling the required-period condition for personal independence payment. The noble Baroness, Lady Campbell, was concerned that filling in your DLA or PIP assessment form was not the first thing on your mind.
That means that when someone is able to leave hospital, perhaps with a care plan in place and further rehabilitation scheduled, they may well have satisfied some or even all of the qualifying period. That currently exists for DLA and is often misunderstood, with people thinking that they become entitled only after they have filled in and submitted the form. The qualifying date starts on the day that the needs arise—the day you have the accident that has caused a particular problem, for instance—not from when the claim form is submitted. I acknowledge that some conditions that arise gradually and it is very difficult to pinpoint the precise day.
With those observations and commitments to reflect, I ask the noble Baroness to withdraw the amendment.
Baroness Howe of Idlicote
My Lords, it has certainly been a very interesting series of questions—and some answers—with different issues under the different amendments within this group. I will certainly want to reflect on what has been said about my amendments, as well as on some of the issues that have arisen, as to whether they have been as satisfactorily answered as they could be.
The noble Baroness, Lady Morgan, made the point about parking costs and so on. We know that some hospitals have begun to make exceptions, but it is fairly appalling that it is going on at all. We would all like to know how widespread is the removal of the requirement to pay for parking if you are going in for a number of cancer treatments.
My other point is that we are not just talking about the actual sufferer but the effect on the entire family—the husband or wife who may very well be put in a position where their own finances are being appallingly hit. There is a lot more that we are going to want to talk about, perhaps on Report, but perhaps by then there will be rather clearer instructions that we will all be able to say meet our points. I hope so. Perhaps I am being a bit over optimistic. Under those circumstances I will, for the moment, withdraw my amendment.
Lord McKenzie of Luton
My Lords, I can be brief on this. The noble Baroness has covered pretty much every point that I had in my script. We support this and the proposition that it should be in the Bill.
I take the opportunity to ask a couple of questions. In terms of transition, what is the position of someone aged 65 or over who is in receipt of DLA, which expires because it is time-limited? Will somebody in those circumstances be able to refresh that claim, including a mobility element, or will they have to move on to PIP or attendance allowance? In respect of attendance allowance, is it the intention to align the lower and higher rates of that benefit with the enhanced and standard daily living components of PIP?
Lord Freud
My Lords, we have made a number of commitments in relation to people aged 65 and over. Noble Lords may be aware that alongside the Government’s response to the consultation on DLA reform, we also published a policy briefing in May that set out our policy objectives and proposals. We intend to make regulations for personal independence payment that will allow people who have reached the upper age limit to continue to receive personal independence payment. Our priority is to support those individuals with established, long-term health conditions or impairments that would put them at a financial disadvantage over a long period. We fully understand that receiving this benefit is important for those aged 65 and over, particularly for those in receipt of the mobility component. We also know about their concern that the loss of entitlement could affect their independence.
The intention behind this amendment is to ensure ongoing support throughout later life for individuals whose abilities are limited earlier in life, recognising that they may have had less opportunity to earn and save for later life. I can assure noble Lords that this is also our intention and that it can be achieved without amendment to the Bill, but instead through regulations. As it currently stands, the amendment would potentially widen the scope of the personal independence payment and undermine our intention of creating a more affordable and sustainable benefit.
Turning to the current rules, broadly speaking, current DLA provisions have a one-year linking rule. This allows individuals over 65 to renew an award within one year of their previous award without losing DLA entitlement. Similarly, we intend to allow a linking period for PIP. This will support those individuals who reach the upper age limit and have a break in their claim through temporary improvement, provided the individual makes a claim within a defined period and continues to fulfil the eligibility criteria for PIP. As with DLA, there will be restrictions on new and existing claims for those over the age of 65. As I have said, our priority is to target support, through PIP, on disabled individuals with established, long-term health conditions or impairments, who may incur extra costs throughout their early lives and would have had less opportunity to save for retirement. Those individuals who develop care needs later in life, as part of the natural ageing process, will continue to be able to claim attendance allowance provided they meet the eligibility criteria.
Under Clause 81 we already have a power to make secondary legislation and to provide for exceptions. By setting out these provisions in regulations we can ensure that the legislation can be adapted in response to any future changes in the social care system which might affect pensioners. The Personal Independence Payment Implementation Development Group will strive to ensure that policy design and delivery in respect of people aged 65 and over is informed by disabled people and their representatives.
On the question raised by the noble Lord, Lord McKenzie, on what happens to DLA recipients over the age of 65 whose fixed term expires, we have made it clear that they will not be within the scope of PIP for the time being. That means that existing recipients of DLA aged 64 or over at April 2013 would be invited to reclaim DLA towards the end of an existing fixed-term award. At this stage we have made no decisions on the rates of PIP or how these will compare with other benefits.
Baroness Hollis of Heigham
In that case, how does the Minister establish any smooth movement on to attendance allowance, given that attendance allowance is not coming within UC?
Lord Freud
Clearly, that will be one of the issues we will need to take into account when we sit down to establish these rates. Given these reassurances on our approach, I urge the noble Baroness to withdraw this amendment.
Lord McKenzie of Luton
My Lords, I am happy to give way to the Minister, who I think wants to say something.
Lord Freud
If the noble Lord agrees, it might be valuable if I make clear where we stand on this issue. We have already announced that we will not remove the mobility component of DLA from people in residential care from October 2012, as was originally planned. We have also said that we will review the position on the personal independence payment. This is precisely what we have done. We are now considering the findings of the recently published review into provision for the mobility needs of care home residents by the noble Lord, Lord Low, before we announce our final decision.
We have listened to what disabled people and organisations of and for people with disabilities have said. I will ensure that, when we introduce the personal independence payment from April 2013, disabled people are treated fairly regardless of their place of residence. Our final decision will take account of this, of the findings from the Low review and of our own work within the department. I am sorry that I am unable to give noble Lords the final decision today but—I will not use “soon” or “very soon”—I hope to get it to them in the not too distant future. With this reassurance, I urge the noble Lord to withdraw the amendment at the appropriate moment.
Lord Freud
My Lords, I am sorry for the delay. I was trying to work out whether we were sympathetic or very sympathetic to the report from the noble Lord, Lord Low; I think it is somewhere between those two.
Lord McKenzie of Luton
This is a rather odd process where we have the answers before the proposition; perhaps we should move to that procedure.
I shall try to truncate what I was going to say because we take encouragement from what the Minister said. I start by asking when we get to hear the announcement. The Minister has given us a very clear indication about that. I hope that it will reflect the clear findings of the review of the noble Lord, Lord Low: that removing the mobility component of disability living allowance from those in residential care would be unfair and irrational.
The justification given for the policy proposal is that there has been an overlap with the support provided by local authorities to help with mobility costs, but the review has shown comprehensively that no such overlap exists. Having received responses from 46 local authorities, with an impressive total of 828 written submissions, the review found that, in general, the support provided by local authorities was aimed at meeting a different category of mobility need from that supported by DLA mobility. It states:
“Local authority funding for mobility focused on the support needed to meet assessed care needs, for example travel to a day service, rather than a personal need like visiting friends and family. There was therefore no overlap between the support provided by DLA mobility and that offered by local authorities”.
The review also found that DLA mobility is key to meeting the personal mobility needs of care, stating that the evidence received by the review overwhelmingly showed that DLA offers personalised support and provides the individual with choice and control over how their mobility needs are met. As the review concludes,
“it is DLA mobility that provides the most appropriate means of meeting personal mobility needs. If the rights of disabled people are to be preserved then it is vital that DLA mobility, and its successor under PIP, are retained for people living in residential care”.
I will not develop that point further, although we should place on record our appreciation to the noble Lord, Lord Low, for all the work that has gone into the review, including the clarity of the conclusion and analysis included in the report.
I shall deal with just one further point. We hear a lot about the Government having no money throughout this Committee stage. We should remind ourselves, especially in view of the encouragement that the Minister has just given us, that savings to the tune of £160 million a year from 2013-14 onwards have been booked in respect of this matter. There was a hint from the debate in the other place that those savings were, if not specifically arising from this proposal, of a general nature and, in so far as they could not be achieved by changes to the mobility payments would otherwise have to be met by DLA claimants. Can the Minister be clear on that? If the Government are persuaded to change their stance on mobility payments, will any budgetary shortfall have to be met from elsewhere within the DLA/PIP projections, or will additional funding be provided elsewhere by the Government to meet the fact that that saving, which was never real, will not arise?
Lord Freud
My Lords, that is a leading question, as I have learnt to appreciate from the noble Lord, Lord McKenzie. Clearly, it is a substantial amount of money and one reason that it is so difficult to come up with the early warmth and sympathy that people want to hear is because this is tough to find. We have been doing a lot of work in this area. As your Lordships saw with the restructuring of the universal credit, we took all of our projections in a unit and it is completely impossible to balance them all off. You could pick anything on the balancing act but there is no specific direct link into DLA overall because, as I said, we are doing PIP on a bottom-up basis, not the top-down basis of a target. We are trying to find the level at which people need genuine support. It is not a link in the budgetary, top-down way implied by what is behind that question: have we just taken it from another bit of the DLA? No, we have not.
Lord McKenzie of Luton
In which case, I am doubly grateful for the Minister’s response. I think that was clear in relation to the budgetary item, although I will read the record to make sure that my understanding is correct. However, I am sure that the tenor of his indications will be warmly and widely welcomed. It would be helpful, particularly for all those people who have been made very fearful by the original proposals, if those conclusions could be announced as soon as possible. In which case, I beg leave to withdraw the amendment.
Baroness Hollins
My Lords, the purpose of this amendment is to seek clarity from the Government about future eligibility for carers’ allowance. I know that there has been earlier discussion about passporting with respect to carers’ allowance and I apologise if there has been any discussion of it today. Unfortunately, I have had to attend to amendments on the Health and Social Care Bill and I have not been able to listen to earlier parts of the debate today.
Of the 6 million carers in the UK, 72 per cent of them are financially worse off because of their decision to become carers. The high living costs that illness and disability bring, coupled with the loss of earnings, result in a heavy financial burden on most carers. More than half said that they were in debt as a result of caring and two- thirds said that they used their own income to pay for the care of the person they looked after. Given that the unpaid work they do contributes an estimated £119 billion to the United Kingdom, we ought to do more to help carers.
If I might give the Committee an example, Tony gave up work to care for his wife Laura, who is partially blind and has memory problems following a car accident. They have two young children. Laura needs Tony to be there to help her to wash, dress and use the toilet and she struggles to prepare food on her own. Tony would love to go back to work but does not wish to leave Laura on her own during the day. Tony claims carers’ allowance and Laura receives the middle-rate care component of disability living allowance. The family has had support from social services cut, because their council has just raised its eligibility criteria to critical and Laura has been assessed as having only substantial needs, not critical needs. If, following assessment for the new PIP, Laura received the standard rate of the PIP daily living component, and if this did not provide a gateway to carers’ allowance for Tony, the family would stand to lose more than £55 a week, or £222 a month. Tony would have lost his only income and would be forced to claim jobseeker’s allowance, even though he knows he cannot work because of the care and support his family need.
Under the current system, eligibility for carers’ allowance is established through the middle or higher rate care components of the disability living allowance. The transfer from disability living allowance will see these three rates—lower, middle and higher—replaced by only two under the personal independence payment. Although we know that PIP will be used as the gateway for carers’ allowance, the Welfare Reform Bill currently does not make clear how claimants currently claiming through DLA will be categorised. It is disappointing at this late stage of the Bill’s progress that such information remains unavailable.
Many families rely on DLA to cover basic living costs, additional care and support, transport, aids and adaptations, as has been extensively debated here. To put this help at risk because of a lack of clarity is unforgivable. I hope that the amendment will give us an opportunity to scrutinise this area of the Bill, particularly in regard to carers’ allowance and its relationship to personal independence payments.
Were it to be decided that entitlement to carers’ allowance would be established only through the enhanced rate of personal independence payment, it would be reasonable to assume that thousands of carers would no longer be eligible for carers’ allowance. It is likely that the Government’s proposed cut of 20 per cent to the budget for DLA will have an impact on claimants of carers’ allowance because the benefits received by the person they care for will be affected, and setting the eligibility rate at enhanced only will amplify the effect.
It is therefore of great importance to ensure that those who are on the middle or higher-rate care components at present continue to receive benefits, regardless of how they will be classified under the new system. We cannot allow thousands of carers to lose their benefits because of these changes. We owe it to carers not only to clarify what is currently unclear but to guarantee that those receiving benefits at the moment will not have them taken away under the new classification—a kind of double whammy.
A statement from the Government confirming which of the daily living component levels will passport to carers’ allowance would be welcome, and a commitment to ensuring that both levels of the PIP daily living component will act as gateways to carers’ allowance eligibility even more so. I beg to move.
Lord Freud
My Lords, perhaps I might again interpose slightly out of order in the interests of clarity. I am grateful to the noble Baroness, Lady Hollins, for tabling the amendment and for making some valid points. I revert to my opening comments today on the timing of the information. We aim to get more information on the passporting arrangements from PIP to carers’ allowance prior to the start of the Report stage, which I hope will satisfy the request. I should add that we are sympathetic to the position of carers—which I hope is recognisable code—and the Government recognise the important role that people with caring responsibilities have in our society. We are continuing to listen very carefully to the contributions that we receive.
I cannot at this stage add anything further. I therefore urge the noble Baroness to withdraw her amendment, which clearly we will be able to consider in more detail in a little while.
Baroness Hollis of Heigham
My Lords, I apologise to the Minister for being fractionally late and therefore missing his statement. Had I been here, I would no doubt have been pushing him on the questions I now want to raise.
Although we welcome and very much appreciate that the passporting arrangements will be with us before the start of Report, we also need to know the statistics, the numbers. In other words, to what extent will the existing case load of people on middle and higher-rate DLA go through into PIP? Will some of those on the lower rate now come into PIP? If carers are passported, as the Minister gave us hope to believe, from both rates of PIP, will that mean there will be more carers in future because some lower-rate carers will be joining them, or will some disabled people on what is currently the middle rate of DLA, which entitles their carer to receive carers’ allowance, fall out of PIP altogether?
Until we know the mapping of the numbers we cannot understand the implications of the very helpful information the Minister is going to make available. The crude fact is that any carer who is now on CA who finds that the person they are caring for will fall out of middle-rate DLA—therefore they may fall out of even a relatively supportive interpretation of the new PIP arrangements with both tiers entitling you on to it—will then find themselves suddenly excluded from having carers’ allowance. Because they are caring for someone for 35 hours a week, that will vanish. As a result they will be exposed to full, in-work conditionality even though the care needs of that person—35 hours a week—will not disappear.
We need to know those numbers and they are issues that we are going to have to reflect on in Committee before we get to the relevant clauses associated with DLA and ESA. Will the noble Lord kindly say whether he will be able not just to tell us before Report, as I hope, that both the upper and lower rate of PIP will entitle you to carers’ allowance but how those two populations rub on to the two existing populations? Will there be losers as well as possibly gainers among carers with all the possible implications they will be exposed to? The Minister may be able to tell us what happens to disabled people and the numbers coming into the PIP framework.
Lord Freud
My Lords, as always, the questioning is pinpoint in its precision to rip open any veils that I may be draping over myself. I speak in the spirit of Salome. As I said, before Report begins, I will provide more information about the passporting arrangements from PIP to carers’ allowance. I cannot say more than that today or in practice, as noble Lords are aware, I would end up making the announcement, which I am not in a position to do. Threshold information for PIP will be available prior to the specific Report discussion on that part of the Bill.
Baroness Hollis of Heigham
Does the Minister accept the point that my noble friend made very fully, that we cannot do it that way around? It is back to front. We have to know what the thresholds are for PIP to know which and how many carers will be passported on, on either assumption, whether it is one band or both bands. The Minister has been very sympathetic on this, but unless we have that information, the information on carers will tell us only the mechanism, not the effect. We have to know the effect.
Lord Freud
My Lords, I feel slightly as though I have trapped myself, and I will explain exactly why. I spent a lot of time on the carers’ allowance. I was very worried about the cliff edge at £100 earnings, and so I reinserted a carers’ element into the universal credit, very deliberately, to get rid of that and to have a smoothed effect. I have spent some money—or we the taxpayers have spent some money; it is not out of my own pocket—and I find myself slightly hoist on my own petard by the noble Baroness, Lady Hollis, by making a subtle connection between the universal credit and the carers’ allowance. This was not there originally, when it was a carers’ allowance.
I see that there is a connection—I have created it, but it is fairly narrow—to get that taper to work. It does not undermine the way in which we think about carers and the way in which we look at the universal credit. As I say, I will be able to explain the principles of how the allowance will work right at the start. We will see the actual numbers later when we start to look at the real carers’ allowance. I think noble Lords should be more tolerant of me than they are being.
Baroness Hollis of Heigham
I should be very tolerant of the Minister if he had answered the question. However, my question was not about tapers and the interplay of carers’ allowance; that is a genuine set of questions, but not the one I was trying to explore. I was saying that because carers’ allowance is a passported benefit, we have to discuss, and have to know, how many people will be entitled to the original benefit, from which carers are passported, to calculate how many carers will or will not continue to qualify for carers’ allowance. If they do not qualify for it absolutely, then they come into the in-work conditionality issues that some of us are worried they may be exposed to. For once I think the Minister has not understood where I was coming from on this, which was not about tapers and the interplay; that is a separate bundle of issues that we will no doubt seek to tease out.
Let us assume that both levels of PIP, standard and enhanced, entitle you to a carers’ allowance. That would be very good news. However, we need to know how many disabled people are entitled to the standard rate of PIP, and whether it is just the people currently on the middle rate, or some of the people currently on the lower rate as well, or fewer people than who are on the middle rate now, who will be entitled to that lower rate. Only then can we work out how many carers will be affected, numerically. We cannot discuss, therefore, the extent and the value of a passported benefit until we know the original client group on whom that passport is dependent.
Lord Freud
My Lords, as I have tried to explain, we will introduce PIP from the bottom up. We will try to find the people who need the money and there will be winners and losers in that process. In particular, the PIP process is far more understanding of mental health issues. I do not think looking at absolute numbers undermines the principles of how you create the universal credit. It does not undermine our considerations of the principles of the universal credit but we need to understand the impact of PIP and the carers’ allowance in relation to it. We shall have that information in time and debate it in great depth. I am committing to providing those figures at the right time. It is not a trivial but a hard commitment. The timing has been produced under pressure from the Committee and I hope that it is accepted in the spirit with which it has been obtained.
Baroness Hollins
My Lords, I know that the Minister is genuinely concerned about carers and I take some comfort from the code carefully contained in his earlier response. Carers UK and other groups representing carers are concerned, but they are also very aware and advocate for a better deal for carers. For a long time carers have not had enough financial and other support and it is important that someone should speak up for them in this respect.
I look forward with great interest to further developments. I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the noble Baroness is seeking to replace the name “personal independence payment” with “disability living costs allowance”. We have also had my noble friend’s suggestion that we replace it with “personal disability costs payment”. I am very grateful for all the contributions on this genuinely important issue. Before dealing with the noble Baroness’s amendment, I should like to take the opportunity to talk about why we are reforming the disability living allowance and the Government’s policy intentions that underpin the personal independence payment. We believe that now is the right time to replace DLA by creating an affordable and sustainable system to support those disabled people who experience the greatest barriers to living full, active and independent lives. DLA has failed to keep pace with the changing approach to disability in society. It lacks consistency in the way it supports disabled people with similar needs, and we know from feedback received from claimants and their representatives that the application process is unduly complex.
Personal independence payment will be different from its predecessor. It will be a more dynamic, objectively assessed and transparent benefit based upon people’s daily living and/or mobility needs. It will consider the impact an individual’s impairment or health condition has on their daily life. It will take account of changes in individual circumstances and in the impact of underlying disabilities. It will reflect the wider changes in society that have taken place since 1992, when DLA was introduced, such as social attitudes, advances in aids and adaptations, and equality legislation. We will prioritise support on those individuals who face the greatest day-to-day challenges and who are therefore likely to experience higher costs.
The changes we are making through the introduction of personal independence payment will ensure that the benefit remains sustainable for the future. Currently, 3.2 million people receive DLA. This is an increase of around 30 per cent in the past eight years and it is important to note that for the DLA caseload overall only around one-third of that 30 per cent growth can be attributed to demographic factors. Personal independence payment will not be linked to an individual’s impairment, but will instead focus on the ability of an individual to carry out a range of activities necessary for everyday life and the extra costs arising because of their impairment. It will be payable to people who are in work as well as to those who are out of work.
I turn to the noble Baroness’s amendment, the name “personal independence payment” is intended to communicate the purpose of a benefit that continues to make a contribution to the extra costs that some disabled people face to help them to lead full, active and independent lives. I can reassure the noble Baroness that we have not yet incurred artwork costs for personal independence payment, nor, I need to confess, did we invest heavily in private sector consultants to come up with options for the change of name. I guess one can be excoriated and congratulated on both those facts.
Before announcing our plans for personal independence payment, we conducted a series of focus group sessions in which we were able to discuss the name of the new benefit. People felt that the word “disability”, although broadly understood and accepted as an umbrella term, was generally seen as relating to physical disability and was a more difficult term for mental health conditions. As noble Lords know, one of the big changes in personal independence payment is the swing in favour of people with mental health conditions. “Living” was felt simply to imply existing or surviving, and ‘allowance’ was deemed to be old-fashioned and paternalistic, as my noble friend Lord Skelmersdale suggested. It was because of these negative connotations that we decided, as part of the reform of DLA, to rename the benefit. Clearly, people will continue to have mixed views on the name “personal independence payment”, but it has found favour in many quarters. Through the DLA reform consultation, we received some positive comments on the new name for the benefit. I will quote one correspondent—if I do not, I suspect that no one else in the Committee will—who stated:
“I love the new name”,
and added that it seemed,
“more dignified than being given an ‘allowance’ for being disabled”.
We have always been clear that we will have greater regard for the social model when reforming DLA. The name “personal independence payment” reflects that intent rather than focusing on medical model terminology.
It is clear that noble Lords have differing views on the name of the benefit. I emphasise that our view is that “personal independence payment” reflects the principles and intention of the benefit. However, having heard the debate today, I am happy to take back noble Lords’ views, which were put very powerfully, to the Minister for Disabled People. I will ask her to consider how we might seek further feedback from disabled people on the proposed name. On that basis, I urge the noble Baroness to withdraw the amendment.
Lord McKenzie of Luton
In responding to the debate, on a couple of occasions the Minister used the formulation “greatest barriers”, which carried the implication that people who face lesser barriers will fall outside the help of the new benefit. Could he be more specific about who is likely to fall into that category?
Lord Freud
My Lords, as the noble Lord knows, we have published the criteria and weightings but have not yet gone into any further definition of how the system might work in terms of thresholds. I will aim to bring some more definition around that by Report.
Baroness Hollis of Heigham
Could the noble Lord bring back not just definitions but examples? He talked about a “dynamic” version. I do not understand that, except that “dynamic” is a sexy word. Perhaps he could describe how the situation of somebody who is currently on middle-rate DLA would change under PIP.
Baroness Morgan of Drefelin
My Lords, I listened very carefully to the debate. Will the noble Lord respond to what I thought was the very important point about sending out a message? Many noble Lords talked about the name sending out a message, and the fact that the change should be understood in the right way. Disabled people are very fearful about the changes that are taking place. There is concern that removing the word “disability” from the title of the benefit might make it more comfortable for the Government for whatever reasons to abolish it in the future. That sentiment has been voiced in this debate. Will the Minister come back on the point?
Lord Freud
My Lords, the point is wrong in the following sense. What we are trying to do with funds that are inevitably limited is to make sure that we focus them on areas of real need and on where they should be focused. That is something that most people would agree with and it is the intention of the benefit. It is meant to be a more efficient way of getting money to the right people. So I do not agree at all with that concern. Some people express concern at the words we have used. As I have sought to describe, we have tried to get feedback and customer insight, and we have tried to get rid of some of the old medical stereotypes to move towards the social model. That is what we are trying to do with the name that we have suggested.
Baroness Wilkins
To follow up on that, perhaps I may press the Minister on press reports. Is his department, or are Ministers, ready to undertake some counteracting of what is going on in the press? On a previous day in Committee, he said that we do not control the press. Of course, the department does not control the press but there is a strong suspicion that stories such as the one that appeared last Friday in the Daily Mail and the Daily Telegraph with the same words may have been leaked from the department to the right-wing press. If Ministers cannot control the press, it would ease the fears of disabled people immensely if they could come up with some very positive comments for the radio and television media where they have some control to counteract the appalling image that is being put across about disabled people.
Lord Freud
My Lords, I am very sympathetic to that point. The trouble is that when I and my colleagues—and, I am sure, the noble Lord, Lord McKenzie, and the opposite side of the Chamber when it was in power—try to make positive stories, it is terribly hard to get any coverage at all. That is the trouble. The press is very hard to use in this way. I could use some emollient language here. I am genuinely concerned at the difficulties that we have as a department in getting a balanced view. Journalists tend to write unbalanced stories. I am conscious of and very concerned about that. I take it and I will try to get some counterspin, if you like, working. I think you are absolutely right that we are in danger of seeing the position of disabled people undermined by the media coverage and it behoves us to try to get that rebalanced. I accept the commission, if that is what it is, and will try to do something about it.
The Countess of Mar
Perhaps the Minister can put out some publicity about the very few people who claim this benefit fraudulently—it is less than 1 per cent, I believe.
Lord Freud
My Lords, the real trouble with the benefit is that it has been so loosely applied that it is impossible to take it fraudulently. I exaggerate slightly to make the point but that is the reason. The last time it was looked at in detail—I think it was 2004-05; I am plucking figures slightly from memory—I think there were overpayments of around £630 million and underpayments of around £250 million or £270 million. I am ahead of my team. It was around that figure. It was not because people were being fraudulent, it was just because it was no longer the right rate and you could not tell whether it had not been the right rate the day before or the day after. Fraud is not the issue with the DLA. The issue is the looseness of its application.
The Countess of Mar
The press go to town on people who are living in nice bungalows in Spain on their DLA. Yet, the very fact that it is loose is not the fault of the people who have been claiming the benefit but those who are administering it.
Lord Freud
My Lords, I cannot agree more. It has not been properly delivered. It has not been a proper gateway. It needs a new benefit and that is what we are trying to introduce.
Let me just get those figures correctly for you— it is £600 million overpayment and £190 million underpayment. I, like the noble Lord, Lord Touhig, am as concerned about the underpayment as the overpayment.
Baroness Campbell of Surbiton
My Lords, I thank the Minister and all noble Lords who have contributed to this debate. In fact, I am quite overwhelmed—I did not expect such enthusiasm for this first amendment, although it is a very important one. I have to say again that this is not about a name; it is about intent. I believed, and I stand by it, the noble Lord, Lord Newton—who is now in this Room—when he said back in 1990 that the DLA was better assistance with the extra cost of being disabled. The DLA helps deliver that cost. I think it applied then and I am sorry it applies now. There is intent and it is important to get this name right.
I am so pleased that so many noble Lords have given their personal experiences and examples of the use of the DLA and that other noble Lords have talked about their experience of understanding the needs of other disabled people who may not be in this Room, such as people with hidden impairments and mental health conditions. Yes, we must reform the DLA so it meets the extra costs of all disabled people in this country not just those with physical impairments.
I do not know what focus groups the Minister was at when the name was discussed but it certainly was not with the disabled people that I have been talking to over the last couple of months. I do not want to boast, but I know rather a lot of disabled people. I have been working alongside disabled people for 30 years and I am tapped in to some of the biggest organisations for disabled people in this country which have a long history and authority in this area. So I trump the noble Lord when it comes to knowing what disabled people think about this amendment and its intent.
I am of course pleased that we might think of looking at the name again and I am thrilled that the Minister will be going back to the Minister for Disabled People in another place to discuss this. But I have to say that I rather like the proposal of the noble Lord, Lord Skelmersdale, of the “personal disability costs payment”. I am not crazy about the word “allowance” either, so I am happy to discard it and go with what disabled people feel comfortable with. Let us remember that it is what disabled people are most comfortable with that is most important. They have suffered from the most awful six months of media vitriol on disability allowance, and I know that for most of the people who use it, it is not about them. I feel really depressed when I open the Daily Mail in my mother’s house—I want to make that point—and I have to say that I feel a bit got at. But if I feel a bit depressed, think of what it is doing to hundreds of other disabled people.
I am glad that we have kicked off with a debate about the name because it has got all of us in the Room really focused on the issue, but having heard the debate, for now I beg leave to withdraw the amendment.
Lord Newton of Braintree
I can understand that; that is where the noble Baroness is more up to date than I am. The Minister must be the most up to date of all.
Lord Freud
My Lords, I apologise that the information about the second draft criteria was not available earlier and I apologise for ruining a lot of weekends. What is the reason? We had a large volume of feedback to our informal consultation and we have made a significant amount of changes. It took some time—rather longer than we hoped—to work through it all. It is crucial that we get this right. One of the reasons—as noble Lords have pointed out already—is that there is a lot of sensitivity around this. If we put things out that are not right, we will create concerns where we should not. Misleading impressions here are very dangerous.
As I said, we aim to have the thresholds available for the Report stage of our consideration of this—not before the whole of the Report stage, but in good time for when we reach these matters at Report.
Baroness Hollis of Heigham
My Lords—if the noble Lord will allow me to intervene again—I am sorry, but that really will not do. Too much depends on how you align the two rates of disability allowance; the passporting of carer’s allowance will depend on it; and, in turn whole issues such as couple conditionality, in-work payments and the like will depend on that. We cannot deal with earlier sections of the Bill if we do not know what the implications of this are. It will not do to leave this until Report. We have to have it before we start the Report stage.
Lord Freud
My Lords, I regret to say that I am not in a position to say that we will have the implications for carers ready for Report as well as the threshold information, which is another roll-on. We will be discussing the carer’s element in a later amendment, so I shall deal with that more fully then. I am looking at the timings of the information that I have. There is a large amount of co-production going on in the development of PIP, where we are talking to disabled people and disabled groups. That is what is taking the time to get to where we need to get to.
Baroness Hayter of Kentish Town
This is obviously more a matter for the usual channels. Having just asked that discussions should happen with representatives of disabled people, the other way of meeting the major problem is by delaying Report and not starting it before Christmas. There are two reasons for that. The first is that we do not have the information and the second is the difficulty of trying to get disabled groups to give us the feedback that we need over Christmas when many offices close down. We will not be as informed as I know the Minister would want us to be. The possibility is that we should not start Report. I know that this is well beyond the Minister’s decision, but there are two ways of cracking it.
Lord Freud
My Lords, the proposition is that we need to have this locked down ahead of the rest of the Bill. Regrettably, we are not expecting to have the passporting elements of this ready for the time we consider it. I will go into some detail. The timing issue is that there would be no gain, if that is the real concern, in pulling this information earlier and hurrying the consideration process artificially.
Lord McKenzie of Luton
I think that it would be very helpful if immediately following today’s sitting we have an update on what is and is not going to be ready because there are serious issues about consideration. Rather than prolong the process today, if the Minister would undertake to do that, it would be helpful.
Lord Freud
Perhaps I could undertake to do that ahead of Wednesday’s sitting and go through what we are expecting to have when.
Baroness Hollis of Heigham
If the Minister were able to say, for example, that carer’s allowance will be attached to both rates, whatever they may turn out to be in terms of eligibility, some of our concerns would be removed. If he cannot say even that, I think half of Chapter 1, nearly all of Chapter 2 and quite a fair amount of Chapter 3 are affected by the passporting decision for carers.
Lord Freud
My Lords, I will give a full report on Wednesday, but I have already indicated where I am pretty sure we are. We are looking at passporting in a much wider way. We are having the SSAC report in January with its recommendations. There will undoubtedly be a lot of work around that. It would indeed be foolish to look at one aspect of passporting without taking the whole of passporting together. As noble Lords know, this is a framework Bill. There will be plenty of time to consider all these elements as we go through the regulations when we will be doing things in the fullest possible way. I imagine noble Lords in this Room will be taking a very full interest in all these aspects. Let me leave it that I will come back with the timetable at our next sitting.
These amendments seek to broaden the scope of PIP—I do not know whether my noble friend’s formulation of the personal disability costs payment has found favour, but I will stick with PIP, like the noble Baroness, Lady Hayter, for the purposes of this—by introducing an additional tier to the daily living component. When we consulted on the overall framework to personal independence payment, we stated our intention to move to a structure that has two components paid at two rates. We decided on this structure for three key reasons: to simplify the overall structure by reducing possible award outcomes from 11 to eight; to make it easier to understand and administer; and to ensure that it reflects the range of individual needs and provides appropriate levels of support.
We also made it clear that the overall design of personal independence payment is intended to ensure that the benefit is fairer, more transparent and focused on the individuals who are least able to live independently. It also provides an affordable and sustainable platform of provision for the future.
In responding to our consultations, most organisations said that they supported the move to broader definitions for both components as they were a better reflection of the real experience of disabled people’s daily lives. Our view, therefore, is that a daily living component paid at one of two rates will enable us to better reflect the impact of impairment on an individual’s ability to participate. I appreciate the concerns of the noble Baroness that people will receive lower levels or no support under our reforms and that her amendments are intended to prevent that. However, that fails to deal with one of our fundamental aims, which is to give more consideration to whom we prioritise for support.
The Government have been clear here. We intend to protect those who are most in need and will prioritise support for individuals whose impairment has most impact on their ability to participate. That aim, and the way in which we intend to deliver it through the new assessment criteria, may necessarily result in shifts in provision. Some people will receive more support under our proposals; some the same; and some less. This is not an exercise in simply making arbitrary cuts to existing provision; it is about refocusing benefit provision so that it reflects disability impairments and barriers to participation in the 21st century.
Lord Wigley
The Minister mentioned a shift in provision. Did he look at the responsibility falling on other people? I am thinking particularly of it falling on social service departments of local authorities.
Lord Freud
My Lords, clearly an enormous amount of work has been done on this within both government and consumer organisations. When we refine the criteria—which is the process that we are going through—we look at all those aspects to ensure that we focus the money on where it will have most effect in supporting people to live independent lives.
On the question raised by the noble Baroness, Lady Grey-Thompson, on how we will assess people, the version of criteria that we published on Friday looked at a range of key, everyday activities. The main question is to look at what support an individual needs. It is much more holistic than the test described by my noble friend Lord Newton of how to boil a kettle. Our testing results through the summer demonstrated that our approach is both reliable and valid. On the question raised on the cost of getting evidence from GPs, we are discussing PIP plans with the Department of Health but have not yet made any estimate of the specific costs of obtaining evidence from GPs. However, evidence gathering will be a critical part of PIP and we recognise that disabled people will want to present information from a wide range of sources, not just GPs. We will ensure that they are able to do this.
Let me pick up the point made by the noble Baroness on the 652,000 so-called losers. That assumes that all the people currently receiving the lowest rate of DLA care would receive nothing under the PIP. We have not yet completed the detailed assessment of the impact of our changes on the current DLA caseload, and will do that on Report. It is likely that we will see significant movement in the new benefit. I suspect that some people will receive more support because of the improved assessment; some will receive broadly the same; some will receive less; and some will leave benefit altogether. The most important thing is that these results should accurately reflect the level of need of the individuals concerned so that the money will go where it is most needed. From what we have seen so far, the draft assessment is working to achieve this.
In the proposed criteria we have demonstrated that we have not simply removed the lowest rate of DLA. The concepts of needing assistance and how individuals prepare food, as described by the noble Baroness, Lady Hayter, are very much part of the criteria. We are aiming to ensure that passports to provisions elsewhere, such as vehicle excise duty exemption and the blue badge scheme, continue. Where necessary, we are working with other government departments and the devolved Administrations to ensure that the new PIP arrangements match closely their arrangements to ensure continued support for disabled people. It is our intention that the personal independence payment will provide part of the gateway for receipt of carer’s allowance in the way that DLA currently does. I have dealt with the timing issue.
In conclusion, let me assure the noble Baroness that our proposals to move to a two-tier daily living component is not about reducing support or cutting costs. It is a principled move that will help us deliver a benefit that will focus on those least able to participate. It will do that in a way that will make it fairer, clearer for everyone to understand, simpler to administer, and affordable and sustainable into the future. The Government have spent a considerable time developing and consulting on the provisions that the noble Baroness wishes to amend. Our view is that they are the right way to progress our aims. I therefore cannot support the amendment and I urge the noble Baroness to withdraw it.
Baroness Hollins
My Lords, the second draft of the assessment regulations is very interesting but it does not help in the consideration of what we are talking about. It does not tell us the threshold, so we cannot assess how many points you would need in order to reach a level of having a limited ability to carry out daily living activities and so on. Will the Minister explain how we could use these to judge what he has just been talking about?
Lord Freud
My Lords, let me start with the numbers. Large numbers are being thrown around about what is meant to be a 20 per cent cut. In practice, it is a cut from a projection because the benefit was rising very steeply, so measures were taken to get it under control. The whole caseload in 2009-10 was running at £3.1 million and now £3.2 million. In 2015-16 our projection is for it to run at more or less £3.1 million—£3.059 million. In terms of money, this is cash money. We are looking at a figure of £11.5 billion rising to £13.7 billion in 2015-16—and that is cash, not real. That was the projection we inherited and it is from that that we are cutting £1.3 billion. So from £13.6 billion we will take £1.3 billion, which will leave £12.3 billion.
Baroness Hollis of Heigham
I am very interested in this point and it is exactly what I want to press the Minister on. Earlier he said that this was irrespective of—net of, if you like—demographic changes. Is he still saying that that is true for these figures? Certainly, all my assumptions based on his impact analysis and all the rest of it, and from what most of us know about this, are that people are getting their DLA and carrying it through into older age, and there is increased eligibility for attendance allowance by virtue of people living longer. So what one really wants to know is where he thinks the extra cost is coming from and whether, rather like pension costs, it reflects what is happening demographically and does not show any “looseness” in the financial gateways to the benefit.
Lord Freud
My Lords, as I said earlier, the history of this is that only 30 per cent of the gain that we have seen in recent years has been due to demographics. The rest has been the result of a drive in demand. I do not think that there was any assumption of a huge change in expectation in the projection. I am sure that once she has gone through Hansard, the noble Baroness will work it out.
I shall take the question on transitional protection put by my noble friend Lord Newton that I failed to answer. He had to ask it again, and I apologise for that. We do not have any plans to introduce such protection for people who currently receive DLA and may not be entitled to PIP. While I accept that they may have been entitled to it for some time, it would be strange to continue to pay a benefit to people who no longer met the entitlement criteria. So there is no difference between this and the similar 2004-05 exercise where 12 per cent of people were found no longer to be entitled.
I turn now to the question raised by the noble Baroness, Lady Hollins, on the difficulty of working out what the assessments we published on Friday mean. That was an exercise in showing the weightings and how the criteria might work to prioritise relative need. We know that there are strong views on these relative weightings. That is why we have published them: so that we can now discuss and fine-tune them to the extent that we need to. As I said, we will be able to move on this when we come to these clauses on Report, having done the exercise and worked out what it means in terms of entitlement thresholds.
Baroness Hayter of Kentish Town
Will the Minister explain whether the department, having done that, will put everyone on a list depending on the number of points they have and then say, “Right, we have a fixed amount of money so we will adjust the levels accordingly”? Or will the divisions be based on a real assessment of people and will the Government then find the money come what may if people meet the thresholds?
The Minister did not answer my earlier question about the assumptions the DWP must already have made about the number of people who are likely to lose out. He said some will gain, some will stay the same and some will get less. After all the modelling that the department has done, there must be an assumption about this. It may need changing in the light of the thresholds, but it would be useful for it to be shared.
Lord Freud
My Lords, I will pick up the point of the noble Baroness, Lady Hayter. I have no figures on how many people may or may not lose, mainly because we have not yet locked down the thresholds. However, I assure her that this is a bottom-up exercise based on assessing people's real needs. We are working at it that way round rather than working to a budget. That is what some of the testing we did over the summer was about.
The noble Baroness, Lady Morgan, asked about the work we have done on some passported benefits. We had detailed discussions with colleagues in the Department for Transport about passporting disabled people to the blue badge scheme. We will include key outcomes from the discussions in the updated impact assessment that we will publish in time for Report.
Baroness Grey-Thompson
My Lords, I thank all noble Lords for their contributions this afternoon. I took over the amendment from the noble Baroness, Lady Campbell of Surbiton, and I am responding as such. I absolutely understand the need to prioritise the money that is available, and the fact that choices have to be made. I understand that the Government want to support those most in need. I, too, want that. However, the people currently seen to be not in greatest need will become those in need because they will not be able to carry out the daily tasks that DLA enables them to do. We may be storing up trouble for later. I look forward to seeing the more detailed information that is required to understand what the new landscape may be; and I look forward to having many more weekends taken up with reading.
I agree wholeheartedly with the comments of the noble Baroness, Lady Hollins, on the difficulty of assessments, and with those of the noble Lord, Lord Newton, on transition. The barriers are still significant to those who may not be considered so disabled in the wider context of disability.
I think of this in terms of sport—and specifically athletics, which I know well. If life as a disabled person is a race and the finish line is full integration into society where DLA is not required, disabled people are not at the start of the 100 metres but spread out at different points along the marathon course. Many disabled people are still in the warm-up area and a few were left on the bus. Of course, this should not stop our attempts to remove barriers, but we should be very careful about the choices that we make. I have concerns that we are simply pushing this issue into other areas and I look forward to continuing the discussion with the Minister, especially around the projection figures of the Department for Work and Pensions, of which I take a slightly different view. I will come back to this at a later stage. At the moment, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, these amendments are about encompassing the social model in the Bill. We support them. I have come to this issue somewhat later than some noble Lords here such as the noble Lord, Lord Wigley, my noble friend Lady Wilkins and others. I found the Scope document, which has been referred to, particularly helpful not only because it laid out a route to a different process of assessment, but because it took the assessment and criteria in the DWP’s document and tried to point out in practical terms why they may not have encompassed these wider issues. I say to the Minister, as others have said, that this should not be a difficulty for the Government because they have on the record their commitment to the social model. It is in Hansard for 30 November 2010. I think it was the Minister, Maria Miller. It is clearly on the record and not a matter of dispute.
Indeed, the DLA consultation paper referred to the social model in the following terms:
“The social model of disability says that disability is created by barriers in society. These barriers generally fall into three categories: the environment—including inaccessible buildings and services…people’s attitudes—stereotyping, discrimination and prejudice…organisations—inflexible policies, practices and procedures”.
Of course, the model argues that these barriers can be changed or removed. We accept that dealing with these barriers is not just a matter for a DLA or PIP or whatever it is called, but the consequences of these barriers need to be taken into account in assessing entitlement. I ask the Minister how the approach to PIP is reflected in the social model of disability and how the Government would counter criticisms that their approach is still driven by the medical model which concentrated on the inability to undertake activities due to a physical, mental or cognitive impairment.
Paragraph 4.9 on page 29 of the explanatory notes to the second draft of the assessment criteria says,
“Furthermore, we remain concerned that taking greater account of issues such as housing, access to transport, informal support and utilities would make the assessment more subjective and lead to inconsistent outcomes for individuals. Many of these issues will be dependent on local circumstances and availability of services, meaning that results might differ depending on location across the country”.
Of course we understand the difficulty that taking account of a wider range of factors would involve an expanded and different process. However, any process that involves a points-based approach will have a degree of subjectivity to it.
The Minister will be aware of proposals from Scope, which other noble Lords have mentioned, that recommend the trial of a more extensive process that has co-operation with the claimant at its heart. I will not run through the detail except perhaps to comment on the last bit of the process as it sees it, which is the production of a local support plan to capture the evidence and information brought up over the course of the assessment process in order to help highlight where in the individual’s life the barriers and the needs tend to arise. This could help the claimant to identify particular areas in which PIP might provide valuable support in meeting disability costs, but would not take the form of an outcome-based agreement binding the individual to use their PIP for specific purposes. Do the Government have any plans to test this approach, together with input from disability groups? We acknowledge that a good deal of work, thought and engagement has gone into updating the assessment criteria, and this has also been recognised by the Disability Benefits Consortium, but inevitably questions arise about the rules of engagement going forward, what further consultation will be taking place, and particularly about why the Government are confident that the current proposals will take account of the full range of barriers and costs that disabled people face. I think that that is a particular bone of contention that may have been eased by the current document, but that has certainly not been fully answered. That is why it is important to have these issues in the Bill.
Lord Freud
My Lords, the noble Baroness is seeking to ensure that the assessment for PIP reflects the social model of disability, which would mean that assessors would not just consider the impact of impairment on an individual, but also the social, practical and environmental barriers they face. On the question raised on the support we have, I should say that we have the Assessment Development Group whose role is to advise on the detail of the new criteria we are developing, so the group is necessarily technical in nature. However, the members of the group have a wide range of experience in working with and supporting disabled people, including two representatives of disabled people and disability organisations. Several of the group members are disabled people. The group includes individuals from a range of professions including occupational therapists, psychiatrists, physiotherapists, expert social workers and GPs. We also have representatives from RADAR and Equality 2025. We know it is important to hear wider views, which is why we have been talking to disability organisations throughout the development of the assessment and why we will continue to do so.
The amendment reflects a commonly held view that the assessment we are developing is a medical assessment. I am pleased to have this opportunity to state that that is not the case. The assessment is not fully based on the medical model, with the impairment or health condition that the individual has or its severity determining the entitlement. Indeed, the type of condition or impairment an individual has is of limited relevance as this assessment focuses on the activities essential to daily living and on outcomes. By looking at holistic activities and participation outcomes, this assessment will better reflect the social model of disability than did previous assessments. I do accept that it is not a full social model assessment; it is not intended to be. However, neither is it a medical model. The reality is that it is somewhere in between. It is perhaps more of a bio-psycho-social model. That is not a term that I have coined; it was coined by Professor Gordon Waddle whose work in the field of health and disability we have discussed in this House before. It recognises that there are biological, psychological and social factors to disability, which we have tried to capture in the assessment.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
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Lord Skelmersdale
My Lords, these are all clearly very relevant questions, but I would like to ask the Minister whether he construes “work experience” or “work placement” in the same way as he does “work preparation requirements” in proposed new Section 11(3)(c) in Clause 56?
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this summer we increased conditionality for ESA claimants in the work-related activity group with the introduction of the work-related activity regulations. For the first time, those who are able to prepare for a return to work will be required to do so, where it is reasonable.
This measure is another aspect of work-related activity, and thus those groups—such as support group claimants, lone parents with children under the age of five and those with caring responsibilities—who are not required to undertake work-related activity will not be required to do work experience or work placements.
Noble Lords asked, in relation to Clause 16, whether this measure extends the definition of work-related activity, which is one of the questions asked by the noble Lord, Lord McKenzie. The Bill seeks to clarify what may be included by way of work-related activity, rather than extend its meaning. Work-related activity is already defined in the Welfare Reform Act 2007 as,
“activity which makes it more likely that the person will obtain or remain in work or be able to do so”,
and Clause 54 makes expressly clear that this may include work experience or a work placement.
However, an adviser will only place a claimant on a work experience placement if he judges that it will help support the claimant back to work, and if it is suitable. If a claimant feels that the requirements placed upon them are unreasonable, they can request that the adviser reconsider whether an activity is appropriate. Claimants are also able to follow a rigorous complaints procedure if they do not think that they are receiving a satisfactory service. I hope that that explains what the formal protections are to the noble Lord, Lord McKenzie.
The focus of work experience and work placements will be on learning new skills and gaining valuable experience to get a flavour of the workplace environment. They will provide claimants who may have a limited work history with the opportunity to increase their confidence and employability. The precise nature of such placements will depend on what is deemed suitable for the individual, bearing in mind their physical and mental capabilities, and ensuring that necessary adjustments are made.
Placements would normally be short term, but there is currently no set duration, and this will normally be agreed between the adviser and the customer. Work experience and placements must be appropriate to the individual’s circumstances and need not be full-time. For instance, if a person’s health condition means that their mobility and pain levels improve over the course of the day, an adviser might find them a placement for two or three hours in the afternoon. This is quite different from the more challenging demands of paid work, which would normally be a longer-term and less flexible commitment with higher expectations placed on the worker.
The requirement to undertake work experience or work placements will be used flexibly by advisers as part of a range of work-related activities. It is not intended that such placements would necessarily replace other aspects of work preparation. It may be one of a number of work-related activities required of an individual which, in combination, best support a claimant to move closer to the labour market.
In response to concerns that work experience may be used to judge whether an individual is in fact capable of work, this is not the case. A claimant cannot be found capable of work unless they are found capable following a work capability assessment. This new measure will therefore not affect anyone’s underlying entitlement to benefit.
On the question raised by the noble Lord, Lord McKenzie, on access to work, the answer is that it is not available to claimants undertaking work-related activity. For claimants participating in sector-based work academies, funding will be available to help with reasonable adjustments during their participation in that provision. For work experience arranged through alternative sources, reasonable adjustments will be made where necessary to ensure that claimants are able to undertake any work experience or work placement in a safe environment which meets the needs of the claimant. Where necessary, Jobcentre Plus could assist employers with reasonable adjustments, using the flexible fund which is available to an adviser.
I shall clarify the issue of job outcomes for work programme providers. Work programme providers will not be paid for work placements and, therefore, there is no incentive for the provider to encourage a claimant to undertake long-term unpaid work experience, which I think is the underlying concern that the noble Lord has in raising this point. Payment arises for work placement providers only if a sustained, paid, full job outcome is achieved. Furthermore, sustainment payments also ensure that it is not profitable for providers to encourage claimants to undertake unreasonable work-related activity with the aim of making them enter the labour market before they are ready, as that is unlikely to lead to a positive long-term job outcome. I hope that I have described a series of formal protections but also an incentive structure that means that this is not going to lead to any abuse or, if it did, that it would be smack against the financial incentives that we have set up.
In response to my noble friend Lord Skelmersdale’s question on substitute Section 11(3)(c) in Clause 56, I can confirm that the definition of “work preparation” will be the same and will include work experience or a work placement in both clauses.
I owe the noble Earl, Lord Listowel, an answer on mentors. I wish to express our interest in mentors. I am absolutely with him on the importance of mentoring, and as he may or may not know, I have developed my own project with CSV, called Grandmentors, where we test how older, retired people can support youngsters making the transition to adulthood, along precisely that thinking. That project, which I think is one of the very few formal projects with research around it, tries to establish the real economic value to the country of mentoring. I have put my own wallet behind it. I look forward to reporting to him when I have some decent findings.
Lord McKenzie of Luton
I am grateful to the Minister for that reply. I am comforted that my concern was not so much about what providers might be up to as about whether work and work experience generally might be almost a way round the WCA for those who are otherwise in the WRAG. I think that the Minister has given us enough comfort on the key distinctions between work experience and work placements, although I note that he said that they do not necessarily need to be full time and that normally paid work would be more onerous. I accept the generality of what he says and that gives me the comfort that I was seeking. I am not sure whether he dealt with the question of employment rights, which is an interesting one, and presumably part of the distinction between work and work placements, but that is satisfactory for my purposes.
Baroness Howe of Idlicote
My Lords, I had not intended to speak but, listening to the debate, I think that the opposition expressed by the noble Lord, Lord McKenzie, would provide the necessary time to reconsider the effects that the Bill will have in this respect. I also agree with my noble friend that the business about child support is a problem. Quite apart from the cost, the quality has come under quite a lot of doubt recently. The major point that I want to make is about stress on parents. I invite your Lordships to think about how stressed all of you have been by the extensive amount of work we have all had to consider recently, and bear that in mind when you come to consider whether or not to support this amendment.
Lord Freud
My Lords, with regard to the point made by the noble Baroness, Lady Howe, on how we could take it slightly easier, I regret that I cannot apply it to myself because my children have gone way past that age, although they do not seem to be any less stressful.
Our policies for lone parents are based on the key principle that work is the surest and most sustainable route out of poverty. In June last year we announced our intention to align the age at which lone parents could reasonably be expected to work with the time their youngest child enters school. Current legislation, yet to come into force, provides that income support must be made available to lone parents with a child under the age of seven. This clause lowers that age to five so that lone parents with children aged five or over will no longer be entitled to income support solely on grounds of lone parenthood. We would effect this change through regulations, and implement it drawing largely on the experience of having progressively lowered the age from 16. Support for these lone parents will be available through jobseeker’s allowance or employment and support allowance if they meet the relevant conditions of entitlement, or through income support if they qualify on grounds other than lone parenthood, most notably if they are carers.
We want to encourage lone parents to enter work but not at the expense of the crucial role they play as parents. We intend to carry forward the current safeguard that allows those with children aged 12 or under to restrict their availability for work to school hours. It is worth reminding noble Lords of the powerful impact that this policy has. When the age was brought down to 12, 16 per cent of lone parents leaving income support went straight into work and 56 per cent went on to JSA, many of whom will have subsequently gone in to work. We estimate that bringing the age down to five could lead to an extra 20,000 to 25,000 lone parents in work. Children in workless lone parent households are almost three times more likely to be in relative poverty than those where the lone parent works part-time, and five times more likely to be living in relative poverty than children of lone parents working full-time.
The noble Lord, Lord McKenzie, asked about flexible work. The Government are keen to promote flexible working and have a strong commitment to greater family-friendly working practices. We have committed in the coalition agreement to consult on extending the right to request flexible working to all employees. The public consultation process ended recently and we intend to respond to the comments by the end of the year. We understand that stimulating real culture change to make flexible working practices the norm across the whole labour market requires more than just regulatory change on the right to request. There also needs to be help for employers to operate in a more flexible way and demonstration of the benefits it can bring to them and their employees. The Government have a role in leading culture change. This is why we are working with business leaders and employers to promote the business case for flexible working and ensure that employers know where to go to find support to implement practices in their organisation.
This clause also amends Section 8 of the Welfare Reform Act 2009, which relates to the possibility of requiring work-related activity from certain lone parents with children aged under seven. Section 8 as it stands would require regulations in this respect to be subject to the affirmative resolution procedure. This clause lowers that age from seven to five, in alignment with the lowering of the age for withdrawal of income support on grounds of lone parenthood alone. The key question asked by the noble Lord, Lord McKenzie, was whether it is right to make this change now rather than waiting for the introduction of universal credit. Introducing this change before introducing universal credit will help more lone parents into work, with knock-on reductions on child poverty.
A recent evaluation of lone parents’ experiences of moving into work also found that working had had a number of positive effects on their children, both direct and indirect. These range from children having the opportunity to go on school trips because of extra family income to observing the good example of a working parent and greater independence, both financially for the parent, once in work, and for the child, in terms of their role in the household. Help with childcare costs is currently available through tax credits and the flexibilities in JSA mean that childcare responsibilities are taken into account. There are a range of flexibilities available: lone parents with a child aged under 13 can restrict their job search and availability to their child's school hours, while lone parents will not be sanctioned for failing to meet requirements if they had good reason for the failure. Access to appropriate childcare will be taken into account before a decision is made.
On the state of the economy, we have to bear in mind that even in difficult times—which I accept that we are in—Jobcentre Plus holds an average of 275,000 unfilled vacancies at any one time, around a quarter of which are part-time opportunities. Clearly those figures are a snapshot which hides the number of new job opportunities that come up all the time. On average, about 10,000 new vacancies are reported to Jobcentre Plus alone every working day, while many more come up through other recruitment channels. It is not worth getting into a huge debate about the meaning of these figures but, as noble Lords understand, much of our approach to the work programme is aimed at trying to help the people who have not managed to get a job reasonably early back into the market. As the numbers of unemployed get bigger, one factor we are looking at is the average length of time that people are unemployed. As I say, there are flows all the time and many lone parents have excellent opportunities to find a job. Even in difficult times, there are still jobs going. On that basis, I commend Clause 57 to the Committee.
The Earl of Listowel
My Lords, I thank the Minister for his helpful reply. I want to check with him about the question of school hours. Does that really mean “school hours”, and will the adviser take into account that the person will have to travel for an hour or an hour and a half to get to work, and back again at the end of the day, so that it will go over school hours? Does it also mean that if a job requires someone to work in the school holidays as well, that will be seen as an inappropriate job for that person? I would guess that it clearly means that, but I would appreciate a response to my first question.
Lord Freud
On working in school hours, it is quite clear that the working includes the travelling time. It is incorporated in that and it is clear in the legislation. To refer back to the noble Lord’s earlier reading of the e-mail, I could not resist making the point that we still remain grateful to the Egyptians for inventing papyrus. Maybe in another couple of years we will have dumped it.
Baroness Sherlock
My Lords, perhaps I may pick up on the second part of the question asked by the noble Earl, Lord Listowel. Would someone be required to work during the school holidays? I shall let the officials think about that while I pose a couple of other questions. I was pleased to hear the noble Lord say that the Government appreciate that there are two objectives here: the care of children and the importance of work. He has explained the figures and the research the Government have done into the impact of work. Can he share with us their research into the impact on children of parents working at the point at which they have to make the transition into school?
Lord Freud
My Lords, I cannot bring to mind a particular piece of research on that question, but I suspect that the noble Baroness, Lady Lister, probably went into this in great detail when she was working on her piece of research for the CSJ. If I can find something which pinpoints that particular question, I will certainly give the noble Baroness the reference. But the general point I sought to make is that a range of research in this area shows the great benefits for families of working, and if I can give a particular answer to her question, I will.
Baroness Lister of Burtersett
I suspect that that was research done for the department by Millar and Ridge. It absolutely did show positives, but it also revealed some of the strains placed on mothers and on children. If I remember rightly—I have to admit that my memory for research is waning—in some cases mothers moved out of work again because of those strains. The research showed both sides of the issue.
Lord Freud
Let us not debate research none of us can remember. I will have a look at this and if I can provide anything more solid, I will do so. On the point about school holidays, under the regulations, if a lone parent had to leave a job because no appropriate childcare was available in the holidays, that would be taken into account for good reason. Technically it is good cause, but it would become good reason.
Baroness Sherlock
My Lords, I am so sorry, but in that case I need to clarify this. As I understood it, the question posed by the noble Earl was not whether someone would be sanctioned for being unable to get suitable childcare, but whether they would be allowed only to choose to take a job that enabled them to stay at home with their children during the holidays. The summer holidays last a long time and children might never see their lone parent during working hours. I think the point that the noble Earl was trying to clarify is this: if I am a lone parent and the only job I can find is one that requires me to work during the school holidays and I do not take it, is that good reason?
Lord Freud
I think it would be good reason. As I have just said, if someone cannot find appropriate childcare in the holidays—
Baroness Sherlock
My Lords, I am so sorry, but I must be expressing myself badly. I am assuming that childcare is available during the holidays, but if for reasons due to my own strange peccadilloes I want to spend the holidays with my child and the only job available is one that would require me to work all year round—during school hours in term time is fair enough, but also during school hours in the holidays—in those circumstances would I as a lone parent have to take that job, even if it meant that my child would have to spend the whole of the school holidays in childcare? Would the noble Lord clarify that point?
Lord Freud
Yes, my Lords, the picture the noble Baroness draws is correct. If a job is available and there is appropriate childcare, the lone parent would be obliged to take that job.
Baroness Sherlock
I thank the noble Lord for that clarification, if not for the answer, which I am very disappointed with. I accept that the noble Lord does not have research on the question of transition available to him at the moment. I just want to lodge a concern that the point of transition for children either moving into school at all or moving from junior to secondary school is difficult, and there is research out there to support that. The research looks at the impact in later life if those transition points are not well handled. I would be grateful, before we get to Report, if the noble Lord would give some thought to whether he could give us some comfort that the Government would want to give a clear policy steer that they would expect their advisers to look kindly on lone parents who, for good reason, want to support their children during the key transition point into school. I have one final question. If a five year-old were not in school—I will not go into it; there may be reasons why a five year-old may not yet have started school—would that lone parent still be required to go out to work?
Baroness Hollis of Heigham
My Lords, could I also ask a question, which is to turn the comments and questions made by the noble Baroness, Lady Sherlock, around the other way? If a lone parent has found a job as a dinner lady, precisely because her hours fit those of her young children, and she is therefore not being paid and not working over the holiday periods, is she at all exposed to the issue of work conditionality?
The second issue is on transition. Again, speaking from personal experience—and we all brought our children through school—many children sail through and love that first year of school. However, many children who suddenly go into what they regard as “big school” can find it very stressful. They revert to bed-wetting, have disturbed nights, are fearful, actually hide under the table when the school bus comes, and so on. In those situations, the lone parent needs to be on hand and available to go into the school if necessary, to collect the child from the school, during that first year of settling down. Most of us can talk from personal experience in that respect. The noble Lord would be very wise to listen to the point about transition—whether it is for one year, or ideally for two years, before the full conditionality comes in.
Lord Freud
My Lords, on the first question on whether the child happens not to be in school on their fifth birthday, there will be a small number of lone parents that we are aware of whose youngest child is aged five but who has not yet started school. We are therefore going to expand the existing flexibilities within jobseeker’s allowance to support these lone parents through the short period of time until their child enters school or reaches compulsory school age, whichever comes sooner.
On the question raised by the noble Baroness, Lady Hollis, about the dinner lady—people who are employed through the school year—where the dinner lady is presumably on a contract through the process then clearly she has a job and would escape conditionality in holiday periods because she would be working in a long-term job. As one gets to short term fillings-in I expect that it becomes a bit more detailed and dependent on particular circumstances. The broad position, however, would be that they would be within the job for that period.
Baroness Hollis of Heigham
Thank you, I am very grateful for that. If I understand the Minister rightly, that means that through the period of the school holidays, for example, the dinner lady will go up the ladder—or down, whichever way you want to put it—to increase the amount of universal credit during that period, to compensate her for lack of income, and it would then be readjusted when she goes back to being a dinner lady in the school term.
Lord Freud
Yes, the noble Baroness is way ahead of us, as usual, as we structure how we do the universal credit. We are currently looking at that very closely in terms of how we do it. We have not settled this, but my view is to look at it in fairly cash-in-the-month terms, as she is implying. That is where I would come from as we started to devise it. However, I cannot give a commitment or go further than say how we would do that. I am not keen to elaborate averaging-out processes because I think that gets overcomplicated.
Baroness Lister of Burtersett
I am very grateful to hear that. In order to dot the “i”s and cross the “t”s, could the noble Lord confirm that a dinner lady, or someone in that position, would not be subjected to in-work conditionality rules? The fact that there is a contract means that they are still in work. I may have misunderstood.
Lord Freud
Let me just try to pin down the point on transitions and whether people should be in work. There is little evidence relating to the effects of maternal employment on children's cognitive and behavioural outcomes in the UK, but what there is suggests that there are few negative effects of maternal employment once the child is aged over 18 months. If I can find some more research, I shall get it to noble Lord post-haste.
Baroness Sherlock
I will not trade research, but I think it would be helpful to come back to this on Report. I just want to put down a marker that some of the research around the impact of maternal work centres around two things. The two outstanding issues are, first, the quality of substitute care and how you control that in evaluating the impact on child development; and, secondly, the degree to which the mother wishes to work, which has always been a significant issue. There has been some work suggesting that if the mother wants to work, the effect on the mother can be positive, and that that is communicated to the child and, if that is not the situation, the opposite is communicated. Until now our regime has not required lone parents or partners to go out to work against their wishes in those circumstances. Obviously it is a little harder to do. Perhaps in his research the noble Lord might look at what might be the nearest parallel to that. Perhaps we should have a coffee and discuss research at a later date.
Lord Freud
The point that the noble Baroness, Lady Sherlock, makes is an incredibly complicated and central one because people’s way of thinking about themselves is shaped by many things, not least by the expectations that others and the state have on them. We are trying to develop a really complicated socio-psychological set of impacts with the system. There is not an easy answer. We are trying to make people want to work because that is the expectation and that is the norm. That is what we are trying to achieve with our reforms.
Baroness Sherlock
My Lords, I understand that. The fact is that the noble Lord is not trying to make people want to work but telling them that they have to work. The evidence may be complicated. For me, the point of the objective is simple. I do not think that the state should be substituting its judgment for that of a parent of a young child as to when it is better to go out to work. That should be left to the parent.
The Earl of Listowel
My Lords, at the last Conservative Party conference the right honourable Iain Duncan Smith talked about 1 million children in this country being born into families where the parents are either substance misusers or misusing alcohol, so clearly it is key that we address this problem from the point of view of the welfare of children. Perhaps this is a good time to offer my congratulations to the Government’s drug treatment agencies and the UK Border Agency on the reduction in the use of class A drugs in recent years. However, it is still a very significant problem, while of course alcohol figures strongly in incidents of domestic violence, which is terrible for children to experience. So I hope that the Minister can give a strong assurance in his reply that robust mechanisms will be in place to offer help to job applicants who are suffering from these issues because a lot of the current provision is being cut back due to the recession. Particularly, how is capacity in the voluntary sector being harnessed in order to make the best use of those resources? I look forward to the Minister’s reply.
Lord Freud
My Lords, Clause 59 repeals provisions introduced by Section 11 of and Schedule 3 to the Welfare Reform Act 2009. These provisions would have applied to claimants of jobseeker’s allowance and employment and support allowance where their dependence on alcohol or drugs affects their prospects of finding or remaining in work. The regulation-making powers inserted by Schedule 3 to the 2009 Act could have been used to require JSA claimants to undertake a range of activities, including answering questions about whether they are dependent on or at risk of misusing drugs, and attending drug-related assessments or drugs interviews that would involve testing unless the claimant agreed to provide a sample that could be tested. Claimants could then enter a voluntary rehabilitation plan which might involve treatment. If claimants did not agree to enter the voluntary rehabilitation plan they could be required to enter a mandatory rehabilitation plan. Although a mandatory rehabilitation plan would not require a claimant to undergo treatment it could, for example, require the claimant to attend an educational programme or take part in interviews and assessments. These provisions also extended to alcohol dependency. Equivalent provisions were introduced for ESA claimants who are members of the work-related activity group. The mandatory requirements would have been enforced by using regulation-making powers to sanction a claimant’s benefit if they failed to comply.
These provisions, as the noble Lord, Lord McKenzie, suggested, have never been commenced. The previous Government produced draft regulations for a pilot scheme to run for two years from October 2010. Those regulations were considered by the Social Security Advisory Committee in March 2010. The committee’s report, published in May last year, raised significant concerns. It recommended that the pilot scheme should not go ahead as drafted. The committee considered that the pilots were unlikely to be effective, contained a number of significant flaws and would not produce robust results. Having listened to SSAC’s concerns and having undertaken their own work on drugs, in December last year the Government published their drugs strategy, Reducing demand, restricting supply, building recovery. The strategy recognises that work is a key contributor to sustained recovery from addiction, but we also recognise that the previous Government’s approach of mandating drug testing and assessments, and requiring claimants to undertake a rehabilitation plan on pain of losing benefit, is not the right one. We say it is not the right approach in particular for the following three reasons.
First, it mandates claimants to do something, such as being tested for drugs, that is not directly about helping people to approach the labour market. That does not mean that entering treatment is not the right approach to help many claimants who are substance dependent to address their barriers to work, but—and this leads to my second reason—claimants enter treatment for a series of complex reasons, and whether or not they succeed also depends on a series of complex reasons. Forcing claimants to answer, for example, questions about possible drug use, requiring them to attend substance-related assessments about drug use and insisting that claimants enter a mandatory rehabilitation plan if they decline to enter treatment voluntarily would be asking them to do something a large proportion of them would not want to do. If we took the approach of the previous Government, we would create a high risk of those claimants immediately failing these requirements and having to be sanctioned.
Perhaps I could pick a trick that the Opposition have enjoyed using on me on occasion. I am aware that there may have been some differences within the previous Government regarding their attitude to this legislation. I am enjoying watching on the faces of some of the people opposite a similar smile to the one that I sometimes have to use.
Finally, we consider that the previous Government’s approach towards substance or alcohol-dependent claimants would be one that all the evidence from treatment providers and agencies who are experts in this area, as well as SSAC which consulted with those organisations, say would not succeed.
On the question asked by the noble Lord, Lord McKenzie, about our alcohol strategy and what service will be available, the Department of Health will be publishing a new alcohol strategy early next year which will set out what services we plan to have available.
Baroness Hayter of Kentish Town
Perhaps I may ask the noble Lord when is “early next year”. I know that he likes dates. I had understood that it was going to be by the end of this year, but he is bringing us fresh news, if it is to be early next year.
Lord Freud
My Lords, I like to be able to flesh out these adverbs—no, they are not adverbs. My grammar is slightly frail. The answer is that I cannot be any more specific. If that is news, I am not in a position to provide any more definition.
Clause 59 removes Section 11 and Schedule 3 from the 2009 Act, and also removes the provisions which Schedule 3 inserted into the Jobseekers Act 1995 and the Welfare Reform Act 2007. We know that the vast majority of people with substance dependency issues eventually want to break free of their addiction. The National Treatment Agency reports that, last year, more than 200,000 people in England entered treatment. That represents about two-thirds of all those with dependency issues. In 2010-11, 27,969 adults left treatment in England free of dependency, which is an increase of 150 per cent compared with 2005-06. Waiting times continue to reduce—96 per cent get into treatment within three weeks of referral. In England, we spend more than £400 million on drug treatment and this budget has not been cut. We want to build on that. We believe that the right approach is to offer support and encouragement for those who want to tackle their substance addiction. We are therefore ensuring that our advisers have the confidence to engage in the often difficult conversations with those who they believe have dependency problems, that they understand the issues that addicts face and that they work in partnership with local treatment agencies to improve referral rates. By encouraging closer working between Jobcentre advisers and treatment service providers we will increase the number of people moving into sustained recovery.
If claimants decide to take up the treatment opportunities available to them, we will look to ensure that they have the opportunity to focus on that treatment and make it succeed. This is not being soft on addicts. The choice to tackle addiction is not an easy one, as anyone who has tried will confirm. Claimants who decline the offer of treatment will be expected to comply with their ordinary full labour-market conditions as a requirement for continuing to be entitled to their benefit.
The noble Lord, Lord McKenzie, asked about universal credit. We are clear that the imposition of work-related requirements under universal credit must not conflict with an individual’s treatment regime. We want to maximise every individual’s chances of an early move into work. For those with substance dependency, the first logical step will often to be to confront their addition, and we do not want simultaneously to impose labour market requirements that make it challenging or even impossible to complete treatment. This will be our guiding principle under universal credit and we will make sure that this can be achieved. The structure of universal credit legislation makes this relatively straightforward. We have considerable flexibility in the powers we are taking in the Bill to ensure that we can tailor work-related requirements to fit with the circumstances and capability of an individual. We will be considering how best this can be done as we develop regulations.
The provisions inserted by the Welfare Reform Act 2009 are inappropriate and likely to have unintended adverse consequences for substance or alcohol-dependent claimants, their communities and the public purse. The provisions have not been commenced and do not reflect this Government’s direction of travel in dealing with the very difficult question of drug and alcohol addiction, nor do they take account of the introduction of universal credit, which will replace both the income-related strands of JSA and ESA in due course. Hence we seek to repeal them. I beg to move that Clause 59 stand part of the Bill.
Lord McKenzie of Luton
I am grateful to the Minister. I should say that the purpose of raising this issue was not to mourn the passing of Schedule 3 but to understand where the Government were heading in its place. Perhaps the noble Lord dealt with it by saying that this can be accomplished by regulations, but the strategy says that those who are undertaking residential treatment would be deemed as not having been in the work-related activity group or its equivalent in universal credit. Would he say that the Bill provides the necessary flexibility to achieve that or is something else expected to deal with that?
Perhaps the Minister could also say something about the protections, which was one of the important features of the 2009 Act, that if somebody declares that they have a drug dependency—effectively owning up to something that could be a criminal offence—what safeguards does the noble Lord have in the current arrangements that would provide protections for individuals in those circumstances, assuming that the noble Lord believes that those protections should be there?
Lord Freud
To take the first question, we already have amended the regulations. We did that from 28 March 2011, amending the regulations relating to employment and support allowance. It is clear that those in residential rehabilitation for alcohol or drugs should be automatically treated as having limited capability for work while they are in residential rehabilitation, and this will help them have access to benefit at a time when they are focusing on their treatment.
On the matter of the protections, I am going to have to offer to write to the noble Lord. That is a pretty complicated matter. When we are not doing the things for which the protections were incorporated, it is difficult to understand where we might need some protections. I will have a think about that and write to the noble Lord.
Lord McKenzie of Luton
I am grateful to the Minister for that and I think that this deals satisfactorily with the purpose of the probe.
Lord Freud
Lord Freud
My Lords, this is purely a minor technical amendment to remove references to specific maximum amounts of weekly benefit payable for successive accidents and prescribed diseases for persons under the age of 18. The present amounts specified as subject to uprating have changed since the Bill was introduced. The figures currently specified in Clause 64 were correct on the Bill’s introduction but have since been amended by the uprating order—and it is likely that they will change again before the provision comes into force. I beg to move.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for introducing the amendment, which will remove the significance of the age of 18 in industrial injuries benefits legislation. It will mean that all existing and new claims by persons under 18 will be paid at normal industrial injuries disability benefit rates. That is a very welcome move. I have no problem with the government amendment permitting the maximum amount to be specified in regulations rather than in the Bill. However, I will pose a couple of questions.
First, will the Minister put on record that the Government are not intending to reduce the maximum amount payable under this provision? Secondly, will he say whether, assuming the amounts will be in regulations, the regulations will be subject to the affirmative resolution procedure? Young workers who have suffered industrial injury may constitute a small group, but they are vulnerable and it would be useful to know whether the House will have an opportunity to debate the matter.
Thirdly, will the Minister let the Committee know whether payments made under the scheme will count as benefits under the proposed benefit cap? Our understanding is that they will be so included. Obviously, we will debate the benefit cap when we get to Clause 93. However, it seems that to include these payments, which are compensation for injuries at work, within a calculation of the total support that a family could receive from the state, would be somewhat unfair. It would mean that for a young person living with their family, any such support would be taken away from the total family entitlement, which would effectively turn the benefit into a means-tested benefit.
Lord Freud
My Lords, I will pick up on those points. I am grateful that the noble Baroness said that she welcomed the amendment. Clearly, the main thrust of it is to simplify. In this case she will have been delighted to see that we levelled up rather than anything else. It is always nice to be able to give money away occasionally. I confirm that we are not intending to reduce the maximum amount, which will be specified in the uprating order. We are working on the precise treatment of different elements—I apologise for the technical terms—and looking at the interplay between different benefits. We will treat some as the equivalent of earnings, some as the equivalent of benefit, which will knock out the right to universal credit, and some benefits will be disallowed. Clearly, that will be specified in the regulations. We can discuss that entire area when we look at the whole range of benefits. The principle is that generally, where something is the equivalent of state support, one does not want to double up state support. Sorry, I should clarify. When I said that it is in the uprating order, that is subject to affirmative procedure, so it will be affirmative.
Lord Freud
Lord Freud
“( ) In section 176(1) of that Act (Parliamentary control), after paragraph (aa) there is inserted—
“(ab) the first regulations made by virtue of section 130A(5) or (6);”.”
Lord Freud
My Lords, the current discretionary Social Fund is clearly in need of reform, as several noble Lords agreed today. From 2006 to 2011, the number of crisis loan awards tripled. The evidence does not suggest, however, that this increase reflected an underlying increase in genuine need, as it was largely independent of the recession. Analysis of the increased demand showed that it was driven by young single people on jobseeker’s allowance, many of them still living at home, rather than reflecting a more general trend across all benefit client groups. Strong action has already been taken to get spending under control, and demand has already reduced markedly.
Analysis of the current community care grants scheme shows that the remote operation of a highly discretionary scheme may not deliver the best use of a limited resource. The scheme is often poorly targeted due to the lack of integration with the wider social care agenda. Local authorities and the devolved Administrations are better placed to determine and support the needs of local vulnerable people than the current centralised system.
Clause 69 paves the way for reform of the discretionary Social Fund. Community care grants and crisis loans for general living expenses will be replaced by new local provision designed and delivered by local authorities in England and the devolved Administrations in Scotland and Wales. Budgeting loans and crisis loans for alignment to benefit or wages will be replaced by a national system of advances of benefit through the payments-on-account provisions set out in Clause 98. So the majority of the discretionary element of the Social Fund money will still be administered at national level because it is closely aligned to the ongoing benefit system: that is the most efficient way to do it. That discretionary loan fund pot at national level, which revolves, is currently standing, I believe, at £1.2 billion. I compare that with the £178 million going locally which is divided into grants, currently at £141 million, and general living expenses at £36 million. That does not add up to the full £178 million because there is another £1 million of transition funding.
Lord McKenzie of Luton
Will the Minister explain where the figure of £36 million comes from? The 2009-10 figure for crisis loans for general living expenses is £67 million. The Minister is clearly one year on from that, but has the figure halved over that period?
Lord Freud
If the noble Lord looks at page 11 of the government response document, it shows that the tripling was clearly driven by a phone-based service. As I said, we are getting that more under control. The 10-year average spend is £30 million, and clearly we are aiming to get back down to more sensible levels through this method, as I said.
Baroness Sherlock
The Minister obviously has access to in-year figures, which we do not. If he were to project forward from the most recent figures that he has, what would he expect the spend to be?
Lord Freud
There is a downward trajectory, and the measures that we are putting into effect do not reflect that full amount. The full amount is £60 million, but the underlying figure is coming down by more than that if you annualise the latest set of figures.
Baroness Sherlock
I am very grateful to the Minister. I just wanted to be sure that I had understood, for the record, that he is proposing to halve the amount being spent on crisis loans for general expenditure as a result of this change. I thank him very much for that clarity.
Lord Freud
I will make it absolutely clear that this is not a halving on an annualised basis when one considers the decline in trend. I would like that on the record as well.
I will take the question raised by the noble Baroness, Lady Lister, on the risk of high-cost lenders, or loan sharks as she referred to them. We recognise the danger that illegal and high-cost lenders pose to vulnerable people, who can become very dangerously indebted if they are driven to use such services. We are committed to continuing to provide an interest-free lending facility for those who are least likely to be able to access mainstream credit. We call the process “budgeting advances”. That is a national provision of payment on account that will replace Social Fund budgeting loans. The budgeting advance will be paid to those vulnerable people least likely to access mainstream lending, to help ensure that they are not driven to use illegal lenders. That process, when we put it into the universal credit, will have a much different feel to the paper-driven process that we have today. The two systems of budgeting advances will run in parallel while we introduce the universal credit.
Baroness Hollis of Heigham
I note the Minister’s figures—which startled me—about what he thinks will happen to the crisis loan for general living expenses. Given that those are loans, does he expect there to be any virement? In other words, will the budgeting loans, the alignment process and the rise to 1,500 and so on meet some of the suppressed demand that will, in future, exist for crisis loans?
Lord Freud
My Lords, I am not sure that I got the point of the question. Would the noble Baroness repeat it?
Baroness Hollis of Heigham
Yes, by all means. Crisis loans are for general living expenses. There is therefore a close connection between them and general budgeting loans, which also deal with those expenses—unlike community care grants, which are in a different category altogether, and which can be completely ring-fenced. Do the Government expect any virement between the two funding headings? The depressed figure that was responded to by my noble friend Lady Sherlock, which appears to suggest that about £60 million was coming down to £30 million, would none the less be offset by an appropriate increase in the budgeting loans that he is talking about as payment on account.
Lord Freud
My Lords, the straightforward answer is that currently we are not seeing that alignment, based on the measures that we are taking.
Baroness Lister of Burtersett
My Lords, perhaps I, too, may ask a question on the crisis loan budget. As I understand it, at present, if there were a disaster, people could get help from crisis loans. If there were a disaster, for example a flood—and more and more flooding is taking place—would local authorities get additional money to help out, or would they have to use the money that has already been transferred from the DWP, which may already have been spent on other things for that ring-fencing? Will there be provision to help people in the case of disasters?
Lord Freud
In the case of disasters, other measures would be introduced. This will not be a core methodology to deal with particular localised disasters.
Baroness Lister of Burtersett
At present, people can turn to discretionary crisis loans in such cases. I would feel more reassured if the Minister could tell us what that provision would be.
Lord Freud
I will have to fall back on offering to write on that particular matter. I do not know exactly how we finance local disasters. In practice, the Social Fund has not been much used in that area. However, I will have to write on how funding for local disasters works.
Baroness Hollis of Heigham
Perhaps I may give the noble Lord an example. It may not be as extensive as flooding, but a not untypical example is a gas explosion in a high-rise block of flats that results in 80 or 100 families having to be rehoused and needing financial support to buy furniture and this, that and the other. Is it expected that that will come from this provision or will there be additional allocations?
Lord Freud
The obligations of the local authorities are centred on housing provision. There are a number of duties around what local authorities have to do to rehouse people according to their homelessness obligations. That is where some of the crises would be dealt with. Local authorities could look to provide the support using some of the Social Fund money that they have available. In practice it will be a more efficient use of money because we will have a one-stop shop for that kind of problem in the housing area.
Lord Boswell of Aynho
My Lords, would it not also be reasonable, in cases of very substantial disasters extending perhaps beyond the compass of a single block of flats—although that would be a serious local tragedy—to look at the Bellwin scheme, which as I understand it is designed to deal not with the initial tranche of costs but with the substantial extra costs that local authorities will face if they are confronted by a major natural or physical disaster?
Baroness Lister of Burtersett
I raise this to ask not so much about housing but about people's white goods and furniture that may have been destroyed for whatever reason. My understanding is that, at present, they can turn to discretionary crisis loans in such cases.
Lord Freud
As I say, that is not a major use of the fund. Clearly, the local authority with its housing obligations is very well placed to manage that on a holistic basis. In the case of that example, there would be a better and more efficient use of funding than we have today.
The amendments in this group seek to place constraints on the changes to the discretionary Social Fund that would undermine the much-needed reforms and prevent the needs of vulnerable people being addressed in an effective way. In line with our commitment to localism, and to allow local authorities to make the best decisions for their respective areas based on their more detailed knowledge of local concerns and requirements, we do not propose to ring-fence the funding given to local authorities in England and in the devolved Administrations of Scotland and Wales. Local authorities have entered very positively into discussions with us and have come forward with interesting and innovative ideas on how support can be delivered. For example, one large rural authority is considering using some funding to pay the delivery fees charged by an existing provider to deliver free goods to the vulnerable people they need to reach.
The noble Baroness, Lady Hollis, asked whether the funding would go to the upper or lower tier. The funding will be allocated to upper-tier local authorities in order to provide the greatest possible flexibility to local areas. From our discussions with local authorities, we know that a range of delivery models is being considered. Some of these models will result in funding being devolved to lower-tier services such as housing. Decisions about the ultimate funding route for each area will be determined by a range of local factors, including the location and the nature of existing services and how these align with areas of deprivation and need, and the level of funding that will be devolved. In less deprived areas it may not be necessary or practical to operate a number of services.
Baroness Hollis of Heigham
I simply do not understand that answer. It will go to upper-tier authorities: then what?
Lord Freud
As I was trying to explain, the upper-tier authorities will then design their services in different ways. Some will decide that the most efficient thing to do is to give it to a group of lower-tier authorities; some will do it themselves; some will devolve it to the housing operations within lower tiers. What I am trying to say is that there will be various responses.
Baroness Hollis of Heigham
So it would be entirely up to the county council as to how they distribute this money, if they distribute it at all, and whether they actually use it for the services that are proposed.
Lord Freud
My Lords, on the argument between the upper and lower tiers, yes. I will come back to the issue around ring-fencing, where there has been some pretty powerful argumentation. That is what Amendment 86ZZZB seeks to ring-fence. At one level, that will restrict such innovative thinking. Ring-fencing could also prevent pooling of funding streams and ultimately limit the ability of each local authority to devise schemes that best address the specific needs in their respective areas.
We have had some excellent contributions. I think the best one—no, that was invidious—very enjoyable one was from my noble friend Lord Brooke with his reminiscences of Degsy Hatton. It is quite clear that we need to make sure, if we are putting money out for vulnerable people, that it goes to vulnerable people and is not diverted elsewhere. We are localising this funding for sound reasons, because the closer to the ground you can get with this funding the better it is likely to be spent. Local authorities clearly already have duties to provide assistance to vulnerable people.
There is clearly a great weight of feeling in this Committee, very well expressed—brilliantly expressed in many cases—and I will take those thoughts away, reflect on them and come back with an answer about where those reflections have gone. Reflection can be a fairly external matter. However, we will be setting out the purpose of the funding in a settlement letter from the Secretary of State for Work and Pensions. Clearly, at one level at least, that provides sufficient clarity on the purpose of the funding for local authorities. Picking up the point made by the noble Baroness, Lady Lister, on cash for emergencies, that cash is meant for emergencies. Of course, with local disasters, there comes a point when they are overwhelmed but I shall reply in writing on that.
Amendment 86ZZZD would require local authorities to provide victims of domestic violence with financial support. Local authorities, along with other specialist support services, often already provide more tailored support than the current community care grant scheme offers. Where an individual requires household items, it may be better to offer furnished accommodation in such circumstances. Local authorities will have the appropriate support services on the ground and be in the best position to assess what type and level of support is required. On top of this, they already have a duty to provide support and accommodation to anyone made homeless as a result of domestic violence, and this complements a wide range of assistance which is also available at local level.
Baroness Hollis of Heigham
My Lords, that is a district council function, not a county council one. When half the local authorities in England are split between two tiers, it really is not going to work like that.
Lord Freud
My Lords, I know that the noble Baroness is very concerned about this issue and it may be that there is a breakdown in some particular circumstances. But there is a duty on authorities to meet these duties. In my reflections, I will look at this because it may be connected with how we might find a solution to the more general concerns.
Lord Boswell of Aynho
Would the Minister also consider having talks with the Local Government Association, possibly in conjunction with his ministerial colleagues, about at least reaching some form of understanding or issuing guidance that might be given to the superior local authorities in dealing with their constituent districts? That would bring in some sensible rules of engagement or criteria for assessment of adequate performance.
Lord Freud
My Lords, I am just pausing while I think about the reflection process. Can I ask my noble friend to leave the reflective process as open as possible? I do not want to be over-circumscribed in how we reflect.
It is also worth noting that even under the current system, community care grants do not support those in the process of fleeing domestic violence. Under the current scheme, victims of domestic violence must have already fled the family home to qualify for support from the discretionary Social Fund to set up home.
I turn now to Amendment 86ZZZE which requires the Secretary of State to,
“conduct a review into the impact ”
of these reforms, and to commence,
“one year from the coming into force of this Act”,
and that there should be subsequent annual reviews which should be published. Eligibility for an award under the current scheme depends on an extensive range of factors so that identifying those who would previously have been eligible is not a simple matter. This would therefore place an almost impossible task on the Secretary of State. Comparing the recipients of support from the existing scheme with those under a wide range of new local support seems to miss the point that the driver for these reforms is better targeting. We would expect certain under-represented groups such as pensioners to be better served by a more local approach. Local authorities will want to consider ways of monitoring and reporting on their activities to provide transparency to those they serve.
Baroness Lister of Burtersett
My Lords, if the Government are successful in their desire to open up the scheme more to pensioners, it will mean that less money will be available for non-pensioners. What are the Government’s thoughts on that?
Lord Freud
Well, my Lords, local authorities will have to provide support for vulnerable people in their areas. They have a difficult balancing act to perform, particularly in the difficult economic circumstances we are in. Exactly how they spend the money is, in the context of the ring-fencing question, something for them.
Baroness Lister of Burtersett
I am sorry if I am being a little dense here. When the Minister says that local authorities will have to provide support, if there is no statutory duty to do so, what validity will this have? What power would central government have to make sure that local government provide support if they place no statutory duty to do so in the legislation?
Lord Freud
Local authorities have a number of duties under which they are bound, and those are the duties to which I am referring. Let me continue.
Lord McKenzie of Luton
Could we ask the Minister to provide us with a list of the duties and the statutory references to them so that we have them on the record? We will then be able to see clearly what is covered and what is not.
Lord Freud
I would be highly delighted to provide that list of duties. The new national provision of payments on account will be monitored by the department to ensure that it is working effectively and efficiently. We are confident that the combination of this national provision and the new local provision will be a better way of providing support to those who need it most.
Amendment 86ZZZEB seeks to standardise the delivery by local authorities of the new provision and appeals, and introduce an independent tier of review for local authority decisions. This would defeat the purpose of our proposed reforms by, in effect, requiring local authorities to administer a national scheme. It is not clear whether this is intended to cover only English local authorities or to extend the responsibility to local authorities in Scotland and Wales. The whole reason for devolving assistance to the local level in England is to enable decisions to be made at the most appropriate level to effectively identify and target those in greatest need. It will be the responsibility of local authorities in England to decide on appropriate arrangements for internal review. As already discussed, local authorities are answerable for the services they provide and have a range of duties towards vulnerable people that they are required to meet, which I will list.
Lord Freud
Picking up on the powerful point made by my noble friend Lord Kirkwood on the Independent Review Service, that service review’s decision is made on whether to award discretionary Social Fund payment. These decisions must have been subject to an internal Jobcentre Plus review before being passed to the Independent Review Service. The reforms to the discretionary Social Fund will mean that the Independent Review Service’s workload will diminish and eventually come to an end. It would not be appropriate or feasible to have a national review scheme to deal with the diversity of new provision delivered by local authorities and the Welsh and Scottish Governments. Local authorities will set up their own internal review mechanisms if they think it appropriate to do so. In addition, the Local Government Ombudsman is fair and impartial, and is available to people dissatisfied with decisions made by their local authority.
Amendment 86ZZZF would delay the introduction of new systems until universal credit is fully rolled out and has achieved prescribed performance targets. This would delay the benefits of a more localised approach to the discretionary support. Performance standards are already in place for the current benefit regime, for which the Secretary of State is accountable, and this will continue to be the case for universal credit. The business plan for 2011-15 confirms that the department will continue to publish a range of indicators on the performance of delivery businesses, including claims processing, customer and employer satisfaction and labour market services. With these measures already in place, we do not see the need for regulations to set out the performance targets or standards for universal credit which the amendment would require.
On the question raised by my noble friend Lord Kirkwood on cuts-driven reform, the White Paper on universal credit gave the commitment that this was not a cost-cutting measure and that costs would be funded. The initial funding allocation is fixed for the rest of the spending review period and future allocations will take account of changes in need.
Baroness Hollis of Heigham
Will the noble Lord also circulate to us in a letter what the future funding allocations will be by subheading, including that held centrally and that going out to local authorities over the rest of the spending review period?
Lord Freud
My Lords, I hesitate to commit to that. If it is available at a reasonable price, I will do it but I will not if it is not.
Baroness Hollis of Heigham
I am sorry but the noble Lord has just given a commitment that this is not a fixed money measure and that funding will continue at a certain level until the end of the CSR, so he must know what those figures are.
Lord Freud
Yes, my Lords, the figure is £178 million per year, which I think is in the documentation, until the end of the spending review.
Baroness Hollis of Heigham
But we also need to see the breakdown within those headings.
Lord Freud
Could the noble Baroness make it clear what breakdown she means? I think she meant by area.
Lord McKenzie of Luton
I think there are two issues. First, what is the total pot for the rest of the spending review? I think the noble Lord has confirmed that that is £178 million—fixed or to be uprated by inflation?
Lord McKenzie of Luton
So it is declining in real terms. The second issue is how it is allocated among local authorities. Will it be done as part of the general revenue support grant, so that it gets mixed up with all the other things, or will it be dealt with separately?
Lord Freud
I understand that it is fixed for two years, which takes us to the end of this spending review.
I turn now to a number of questions raised by my noble friend Lord German, who asked about the devolution aspects. The Scottish Government have consulted on the approach that they might take to deliver the new local provision. They considered local as well as Scotland-wide approaches and they now have to decide whether the local approach, in line with the English approach, or the centralised approach is best. If the Scottish Government decide to go down the centralised route, that would be an interesting test case of whether devolving down to the local level, to populations of between 12,000 in the City of London and 1.4 million in Kent, or centralised to cover 5.2 million people across Scotland, is the best way to administer this sort of discretionary support. Clearly, we have taken the view that the closer to the populations served, the better.
If the Scottish Government choose to divert funding from other sources to top up the funding they receive from the UK Government, that is their choice, but they will have to tell the Scottish people from where the money has been diverted. My noble friend asked about legislative consent motions, but those are not necessarily for Social Fund reform. On the accounting officer question, for the national payments on account provisions that will clearly be the DWP Permanent Secretary. I shall come back to him on the devolved moneys.
I hope that I have adequately explained why these amendments are necessary. I shall reflect on the points that have been made so powerfully. Meanwhile, I would urge the noble Baroness to withdraw her amendment.
Baroness Lister of Burtersett
I thank the Minister for his full response. Unless I missed it, I do not think he dealt with one amendment, but I shall come to that. I thank noble Lords for their very helpful contributions to the debate. The noble Lord, Lord Kirkwood, gave a cautionary tale of what happened in the 1980s. I cannot speak for the noble Lord, but the Minister’s response that local authorities will set up an internal review mechanism if they think it is appropriate is not the kind of positive response that, for instance, the noble Lord, Lord Newton, in his former incarnation made when similar points were being made about going from single payments to the Social Fund. Perhaps on his behalf I could say that I am disappointed with that response.
A number of noble Lords made the point about the money that would be available in the future. One thing that we have not talked about is that, at present, the crisis loans bit of it has money recycling, but money will not be recycling because there will not be any loans. Presumably, that will also mean, not just that it is not going up with inflation, but that there is no money coming back into the system. Again, that will make less money available for local authorities.
The noble Lord, Lord Kirkwood, made a very powerful point when he read out the principles that the Social Fund Commissioner set out and then compared and contrasted them, in good student essay style, with what the Government produced. My noble friend Lord McKenzie made another good point when he asked where the vision was for what the Government want to achieve. I am no clearer about that vision. We have talked about the importance of local decisions. The noble Lord reiterated the point about decision-making at local level but did not address the point that it is possible that these decisions will not be made at local level. If Westminster can send its emergency decision-making up to Scotland, what guarantee do we have that decision-making on “daughter of Social Fund” will be taken locally? If that is the vision and purpose, perhaps the Government need to make it clear and set down that those decisions must be made locally—otherwise we might not have localism at all. We need more reassurance on that.
The noble Lord, Lord German, made some important points about accountability. The Minister responded but did not explain what the reporting-back mechanism will be. Accounting officers may be accountable to the Permanent Secretary at the DWP, but how will they be accountable if there are no reporting-back mechanisms and no requirement to report on how the money is being used? Again, a bottom line must be written into this.
I welcome the fact that the noble Lord said that he will reflect on some of these issues, particularly ring-fencing. He said that he would like the reflection process to be as open as possible—so no ring-fencing around that reflection process. He made a very important statement, which will be on the record. He said that the Government would have to make sure that money will go to vulnerable people and will not be diverted elsewhere. I am pleased by that because we are clearly in agreement. However, I am not clear how we can achieve it without ring-fencing. If on reflection he could come back and satisfy the Committee that this can be achieved without ring-fencing, I am sure that we would all be very happy and impressed. However, I find it very difficult to see how it can be achieved without some form of ring-fencing. I remain to be surprised and impressed.
On domestic violence, the noble Lord made the point that someone must already have left home in order to get help from the Social Fund. I understand that, but does he not accept that some women will be afraid to leave their home if they are not sure that there will be help for them when they take their children into the great unknown? At present at least they know that there is a very good chance that they will get help from the Social Fund. There is a real danger here.
Lord Freud
I will make this absolutely clear. Where one gets help from in those circumstances is the responsibility of local authorities under their homelessness obligations. The Social Fund plays a part way down the track. It was not the solution to that problem, so nothing is changing in that area. I would like noble Lords to understand that that is not an issue that arises from this change.
Baroness Lister of Burtersett
I thank the noble Lord for that, but that is certainly not how Women’s Aid sees it. It talks about it being a lifeline, and this lifeline is being taken away. Obviously the housing itself is the most important thing, but for a house to be a home it needs furnishings and the worry is that those furnishings will not be there for people. Perhaps in his reflections he can come back with better reassurance about that than at present.
I do not think the noble Lord has said anything about local connections. If he did, I apologise. The point was made that there should be no form of local connection test. Did the Minister say anything about that? I quoted from the other place, where the Secretary of State answered this by saying there will be a moral duty on local authorities to meet needs, but there are a lot of people who are going to be leaving institutional care. I refer not just to people fleeing domestic violence; they could be ex-prisoners or members of the Armed Forces. There are all sorts of reasons why someone might not have what is recognised as a bona fide local connection. The worry is that they could be left high and dry and we could be back into a kind of Poor Law situation where people are pushed around as they try to find somebody who will help them. Perhaps the Minister could say something about that.
Baroness Lister of Burtersett
In that case, I look forward to this letter. I particularly look forward to the list of statutory duties and whether it will put flesh on that moral duty to provide a safety net that the Secretary of State talked about. I am not aware that local authorities have that statutory duty, but I look forward to seeing it when the Minister’s little list appears.
I acknowledge the fact that the Minister has accepted the spirit of the amendment on ring-fencing with his very strong statement about what must not happen. I look forward to the outcome of this reflective process and I hope that it will go some way—all the way, actually—to meeting the Committee’s concerns. We have had a very strong statement from the noble Lord, Lord Kirkwood, about his bottom line on this, which I am sure is ringing in the Minister’s ears, much more than anything I have said would ring in his ears. On that basis, I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Deputy Chairman of Committees (Baroness Gould of Potternewton)
My Lords, may I remind you of the new procedure during Grand Committee on this Bill for Divisions in the Chamber. Members who have registered with the Clerk of the Parliaments may vote in their places in the Grand Committee, provided they are present in the Grand Committee when the Question is put in the Chamber after three minutes. Members who have not registered or who are not here at the three-minute mark will not be able to vote in their places. I also remind Members to be sure that they speak up but do not touch the microphones. Before I call the first amendment, the noble Lord, Lord Freud, wishes to say something.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thought it would be convenient to touch on the timetable. There has been discussion between the usual channels on the best way to take the rest of proceedings. We have agreed, subject to our best endeavours and without overriding anything, that there will be 17 Committee sittings, finishing on 28 November. The main items will be taken as follows. ESA time-limiting will be debated today; the Social Fund issues on 10 November; the PIP on 14 and 16 November; the benefit cap on 21 November; fraud and error on 23 November; and child maintenance and changes to the Child Poverty Commission on the last day, 28 November. I will circulate this timetable to all Peers after today.
Lord McKenzie of Luton
My Lords, I thank the noble Lord, Lord Freud, for running through that timetable. Our Front Bench is signed up to using our best intentions to make sure that we stick to it. It is helpful for those who are not necessarily here for every bit of the Bill to know roughly what the schedule is. My Whip, my noble friend Lord McAvoy, has asked me to stress that these are firm intentions but not a straitjacket.
Lord Freud
My Lords, I must start off by saying that the contributions of noble Lords today are highly informed and very moving. But let me try and respond as much as I possibly can to those many points.
Employment and support allowance for those in the work-related activity group was never intended to be a long-term benefit, but an interim measure for those who are expected to return to work. I know that there have been concerns that restricting contributory ESA to a year may disadvantage people with longer-term health conditions or disabilities. However, we remain of the view that this is the right approach. The benefits system has to be fair to all those who contribute to it as well as those who draw support from it. We expect people on benefit to take up the help and support available, through Jobcentre Plus or the work programme, to move off benefit and into work.
Dependent on individual circumstances, other benefits, such as housing benefit and disability living allowance, may be available to those claimants affected by the introduction of a time limit to the income-related employment and support allowance. It ought to be available to those on lower incomes.
Introducing a limit on the length of time people in the work-related activity group are entitled to contribution-based employment and support allowance is more consistent with the rules for contribution-based jobseeker’s allowance, which has a time limit of six months, while recognising the different nature of employment and support allowance recipients and the purpose of the benefit. People receiving income-related ESA will not have their benefit time limited, nor will people with the most severe conditions or disabilities in the support group.
What is more, we expect 60 per cent of the people who leave contributory ESA as a result of the time limit to be fully or partially compensated by income-related ESA.
In response to the noble Lord, Lord McKenzie, that 60 per cent can be decomposed into two sets of 30 per cent. 30 per cent of those affected are expected to claim both income-related and contributory ESA. So when the time limit applies, they will continue to receive income-related ESA. The majority will therefore see no change to the total amount of ESA received. The other 30 per cent are expected to become eligible for income-related ESA, some of them at the same rate. They will become eligible for passported benefits, such as the full housing benefit and council tax benefit and free prescriptions.
Lord Freud
My Lords, I had just begun to address the question raised by the noble Lord, Lord McKenzie, on national insurance contributions. The person who has transferred to contributory benefit from incapacity benefit will be treated as having met the contribution conditions from the point of migration. Claimants will be entitled for a year to ESA if they are placed in the work-related activity group. National insurance credits will continue to be awarded to people who continue to have limited capacity for work, even if they receive no ESA at all.
Through these changes we are sending out a clear message. To the most vulnerable, we will provide the support when it is needed for as long as it is needed.
Lord McKenzie of Luton
If the Minister has moved on from national insurance, perhaps he might just address this point of circumstances where somebody starts off in the WRAG and at the start of their claim meets the national insurance contributions, because they have been both credited in and paid sufficient in one of those years. That claim is terminated or ceases after 365 days and the person then moves into the support group. Would that be a new claim for the purposes of attachment to the national insurance contributions? If people had to look afresh at that point, they may well have been credited insufficiently, but they would not be able to pay in, because they would not have been in the labour market and would not have had earnings. They would therefore be disconnected from contributory ESA.
Baroness Lister of Burtersett
I shall ask the Minister another question, so that he can get his breath back. I very much welcome what he said about credits. This may reflect my ignorance of the mechanics of it, but could he explain how people get credited, if they cease to be part of the system and have no entitlement to anything?
Lord Freud
My Lords, clearly, the detailed mechanics of that is something that we will need to work out and set out in regulation. I am not absolutely convinced that we have it locked down—we might, but I simply do not know. But clearly we will make that clear.
I shall come on to the question asked by the noble Lord, Lord McKenzie. The run-ons in practice are rather complicated. I shall come on and deal with that in a little while.
For the most vulnerable, we will provide the support when it is needed for as long as needed. When people can work, they should be expected to; a lifetime on benefits is no longer an option.
Amendments 72 and 76 are technical amendments that seek to restore the original policy intent for Clauses 51 and 52. The current wording of those clauses meant that days in the assessment phase before the determination that the claimant should be placed in the support group must count towards the calculation of the 365-day limit. This would not of course affect a claimant who remains in the support group throughout their ESA award, but it would affect those claimants who moved to the work-related activity group from the support group, at which point they would be entitled only to the balance of the 365 days after deducting the day spent in the assessment phase. This was never our intention and I urge noble Lords to accept this amendment.
I shall now address Amendments 71M, 72A, 73, 74, 75 and 75A. Amendment 71M would increase the time limit for claimants receiving contributory ESA in the work-related activity group from 365 days to a prescribed minimum of 730 days. We disagree that two years is the right approach. The noble Lord, Lord McKenzie suggested that this was a modest change. It would, in fact, cost a total of £1.6 billion by 2016-17.
Baroness Hollis of Heigham
It would be more helpful and reasonable if we had annual figures, not roll-up figures.
Baroness Hayter of Kentish Town
I think that the noble Lord wanted a big figure.
Lord Freud
It is a single figure. We believe that our one-year time limit is not arbitrary; rather, it strikes the right balance between restricting access to contributory benefits and allowing those with longer-term illnesses to adjust to their health condition and surrounding circumstances. In recognition of that, it is double the length of time allowed for contributory JSA and is one of a number of difficult decisions that the Government have had to make in view of the current fiscal climate.
Given that I was asked about the single figure, perhaps I may take the opportunity to read out the per annum figures. Next year, the change would cost £270 million; in the following year, 2013-14, it would be £420 million; the figure would be the same the following year; in 2015-16, we think that the cost would be £360 million; and it would be £140 million in 2016-17.
Baroness Hollis of Heigham
Do those interesting figures mean that by 2020 the figure could be expected to be below, say, £50 million?
Lord Freud
My Lords, I am not sure what the extrapolation would be. Those are the figures we have. If I have a longer run at it, I will make the figures available when, or if, I have them. I am sorry, but we do not have any figures stretching out beyond that point.
Baroness Hollis of Heigham
The Minister accepts that point that it looks as though there is a reverse bell curve here. It would be interesting to know, perhaps at Report, some information as to how that would pan out.
Lord Freud
My Lords, one can clearly see the process here, as you move through the bulge, of stopping as you take on the transfer from IB to ESA. You can see that the effect of moving from one year to two years is a reduction as you go through that group—the bell curve, as the noble Baroness described it.
Baroness Morgan of Drefelin
I wish to be sure that I understand what the Minister has just said. He said that there are two reasons for choosing the 12-month period and that it is therefore not arbitrary. Therefore, the choice was made, first, due to the need to make financial savings and, secondly, because 12 months was sufficient time for people to adjust to their illness and make arrangements. Did I get that right?
Lord Freud
My Lords, no. I am making a different argument here. It is an argument about cost. However, I will come back to the “arbitrary” issue from the perspective of what happens elsewhere. Other countries do not have benefits which precisely mirror the design of the ESA, but a number of countries already impose time limits on eligibility for both sickness benefit, which covers temporary incapacity for work, and invalidity benefit covering long-term or permanent incapacity. For example, Austria, Belgium, France, Denmark, Ireland, Spain and Sweden all impose 52-week time limits on their citizens.
Baroness Hollis of Heigham
I think that the noble Lord will also note from comparative research that their replacement earnings benefit, whether you call it JSA, IS or whatever, is a much higher proportion of earnings than is the case in the UK.
Lord Freud
My Lords, as noble Lords know, direct comparisons of systems are terribly difficult to make.
Lord Freud
Although we have what seems to be a rather modest level of primary benefit, whether it is JSA or ESA, we pile up a lot of other “elements”, we might call them, in terms of housing benefit to get substantial figures. Therefore, making a comparison internationally is not straightforward at all. I am not making a straightforward comparison of amounts; I am making a straightforward comparison of the timing issue. I am saying that the 52-week limit falls into line with much international practice in countries whose systems we generally admire. I am arguing that, to that extent, the accusation that this is arbitrary simply does not stand. We are conforming with norms which are followed very broadly internationally.
Baroness Hollis of Heigham
That may well be right and I would not disagree with the noble Lord’s point about time and the comparison that he made there. However, the point is that that time limit, although it may or may not be regarded as arbitrary, is not threatening if the drop-down from that limit to the alternative income, which is income-related, is not particularly significant. That is the point that some of us were seeking to make.
Lord Freud
My Lords, in practice, other countries in northern Europe, as noble Lords will know, have a very much more contribution-based system, and the support for people who fall outside that system or are immigrants who never got into it is much lower than with our support systems, which are pretty good for people who are not in the economic system. Therefore, I am not sure that I accept that point at all.
Baroness Hollis of Heigham
I am sorry to intervene again but this is Committee stage. The point there is precisely the aim behind this set of amendments. Most of the European countries that I have studied—and I have looked at the Bradshaw research and so on—have a much higher commitment to the contributory principle. Therefore, this covers people for much longer at a much higher level with a sense of entitlement. This issue goes back to the very powerful arguments put forward by my noble friend Lady Lister. With a strong commitment to a contributory principle, even if you have a relatively short time limit for sickness benefit, because of the resulting contributory benefits to remaining unemployed, the drop-downs are therefore not threatening. That is surely the point that some of us have been seeking to make.
Lord Freud
My Lords, I think that we could debate this issue for a long time. The point that I am simply trying to make is that the arbitrary nature which this time limit has been accused of looks much less arbitrary when it seems to be the time norm chosen by a whole range of countries. Other countries such as Canada, Germany, Poland and Australia also feel that it is right that there should be some limit to the state’s support for those who have an illness.
Lord McAvoy
I am grateful to the noble Lord, who has given way a lot, as we all recognise. However, I am sure he recognises that this is a very complicated and emotive subject. I do not have the mastery of detail that the Minister or my Front Bench team have. How can a 12-month period be applicable to someone who is suffering from cancer? It is an arbitrary decision.
Lord Freud
My Lords, I shall come to the point about cancer, which is clearly very important. The powerful speech of the noble Lord, Lord Patel, on his amendment had to do with that. I shall deal with it as a whole. I am trying to make one point at a time. The point I am making is that our proposals are not out of kilter with the arrangements in many other countries. We still provide unconditional support to those in the support group and income-related benefits for the poorest.
I shall just pick up the point of the noble Baroness, Lady Lister, on the expectations of contributors to national insurance. National insurance contributions are used to pay for a wide range of contingencies. These include working-age benefits, the state pension and the NHS. The overwhelming proportion of expenditure—some £60 billion a year—goes on the state pension. This is in contrast to around £6 billion on ESA and incapacity benefit and around £1 billion on jobseeker’s allowance. There have been numerous changes to national insurance and the benefits system over the years to take account of changes in society and demographic factors. For example, far more women now pay national insurance than when contributory benefits were first created. As I have said, we believe that the adjustments we are making are fair and reasonable.
Baroness Lister of Burtersett
Will the Minister acknowledge the point that has been made by several noble Lords? Some people will not see the pension that they have paid their contributions towards. Therefore, they feel particularly aggrieved that, having paid contributions all their life, the contributory ESA is being snatched away from them just like that.
Lord Freud
My Lords, let me come back to that. It is to do with the debate about who should be in the unlimited support category for an unlimited time and who should not be in it. As I just said, we support the poorest on an income basis and those who are the most ill in the support group indefinitely.
Amendment 71N introduces another regulation-making power to the Bill. It would enable the Government, or a future Government, to exempt certain groups from the 365-day limit for those in the WRAG. This point was also raised by the noble Baroness, Lady Meacher. We believe that it is for the WCA to distinguish between those who are in the WRAG and those who should be placed in the support group and therefore be exempted from the time limit. As noble Lords will know, Professor Harrington has been working with Macmillan and other stakeholders to help us make sure that people are placed in the appropriate groups. Therefore, an amendment along the lines proposed by the noble Baroness is not necessary.
Amendment 71P introduces a new provision, which would mean that people whose contributory ESA exhausts after 365 days would be able to requalify for the support group if their condition deteriorates. However, this could mean benefits being reinstated 10 or more years after the claimant last worked, which is not reasonable. Moreover, we already have a series of safeguards in place that would protect people in this position. First, if the claimant leaves ESA before their contributory ESA exhausts, we have the linking rule, which enables the claimant to return to that contributory ESA within 12 weeks of leaving it.
Secondly, we already have within the ESA regulations an easement allowing a claimant to satisfy the first contribution condition for ESA if they have paid contributions in any tax year at a certain rate, and they had received a contributory ESA award in the last complete tax year before the current benefit year when they are claiming again. If it is decided that a person has limited capability for work-related activity, they will, of course, be placed in the support group. In addition, if someone qualifies for income-related ESA—as some 60 per cent of claimants will—eligibility for ESA can be reinstated automatically.
On the point raised by the noble Baroness, Lady Morgan, regarding protection for those who qualify under exceptional circumstances, time-limiting will apply in the same way as in all other cases. Those in the work-related activity group will be time-limited; those in the support group will be unaffected. Consideration of exceptional circumstances applies to those who do not have limited capability for work.
For those for whom work is simply not an option, we would expect them to be in the support group and not affected by time-limiting.
Baroness Morgan of Drefelin
Perhaps I may reassure the noble Lord that there are many people who would not be in the support groups specifically because of the way that a support group is designed. Some people with deteriorating conditions—perhaps motor neurone disease—can look forward to a time when they know that they will become increasingly ill, but on that day they are not in the support group. It is a difficult issue.
Lord Freud
I hear the point being made by the noble Baroness. What we are looking at in the WCA, in particular with regard to cancer patients, is to work our way through that position. We are expecting a report from Professor Harrington before Report stage. This is a very important point, also made by my noble friend Lord German, about how getting the right people into the support group, using the WCA mechanism, is such a key part of this system. I think that virtually everyone in this Committee Room would say that if the WCA test worked absolutely perfectly we would not have a problem. There are some concerns about getting that test absolutely right, and I hear those concerns; but that is the way to address these issues, and that is what we are planning to do.
Baroness Morgan of Drefelin
Perhaps I may make a small point before we move off this issue completely. I am also concerned about the definition of terminal. There is a question here. I cannot remember the correct terminology, and if the noble Baroness, Lady Finlay, were here she would tell me instantly, but during the six-month deadline or prognosis period, things may perhaps be moving on. Perhaps for some people we need to think about that period being longer than six months.
Baroness Wilkins
Does the Minister also accept that any recommendations made by Professor Harrington will take some time to put into effect—until 2014 at least? In this amendment, we are talking about this measure coming into effect next April.
Lord Freud
My Lords, that is a little premature. It is literally too early to look at the timetable of introducing any recommendations, whatever they may be? However, there may be elements that can be brought in sooner rather than later. I do not think that there is an impossible timeline here.
There is a real issue about these particular people who are suffering from cancers and other similar illnesses. You might look at the kind of experience that they will have in practice, because it is easy to look at the one-year ESA in isolation.
In practice, many people will first go through six months of sickness pay, whether it is occupational or statutory sick pay. That is a 28-week period in which many people will undergo much of their treatment. Then there is a one-year period if one is on the WRAG. Many people will go for a period on the support when they are going through treatment. We are seeking to precisely define which types of treatment they can go through. So there is a period on support and then a period on the WRAG. So the idea that there is an arbitrary one year, spinning down the track, from people being ill, is not the reality. There are a lot of stages to go through in our system, which people go through at different times and in different ways. I do not think it is right to think of it in a rather simple way; our system is more complicated.
Lord Patel
Sorry to disturb the Minister’s train of thought. I am grateful for the comments he made earlier, and the sympathetic way in which he made them. He may look forward to Professor Harrington’s report. I hope the interpretation of that report will be the important aspect. I gave the example of patients who are on intravenous chemotherapy, who are regarded as different. Equally, for people who are on oral chemotherapy or radiation treatment, it is a very debilitating form of treatment that exhausts one’s body completely. If you ask any patients who are undergoing this treatment, they will tell you that it does.
The second comment that the Minister just made concerns the different amount of money that is available to different people. But it still applies within the 12-month period, unless I have misunderstood.
Lord Freud
No, let me make that clear. I will take the points one by one.
Professor Harrington is looking very closely at cancer treatments and is working very closely with Macmillan in particular, to which I must pay testimony; it has provided a lot of extraordinarily valuable background data that we have been grateful for and are using. So there is a process going on.
The point I was making about the timescales is that clearly there is a time when not absolutely all but the bulk of all cancer sufferers going through treatment will be on the support, which is unlimited. They will have gone through that process, then they start the WRAG process, which is time-limited, after that. So it is not “one year for your illness”, if you like; it is one year on these particular benefits.
The noble Lord made a most effective speech at Second Reading, which I remember vividly. I am sure everyone else does as well. He was making the point about how tough it is getting through the experience of cancer—and we are worrying about that in detail. But I also want to give reassurance on the example the noble Lord used, when you get to a year and you are still having a tough time. That is probably not likely to happen in practice very much because of the different phases.
Baroness Hollis of Heigham
What the Minister is saying, which is a welcome elaboration of policy, is that new entrants into the system who have the sorts of conditions that the noble Lord, Lord Patel, and others described, may very well be reassured by the fact that they have up to two years or longer on non-means-tested benefits. Does that not therefore put into even sharper concern the situation of the retrospective nature for people already on those benefits raised by the noble Baroness, Lady Meacher? Does it not suggest that by comparison the situation is that much the harsher?
Lord Freud
I will come back to that issue and argue strongly that there is no retrospection. I will make that argument in a coherent way. No, the people who will have been on support will be in a position where there will be no difference between the existing group and the new group. There will not be that difference. As the noble Lord, who has infinitely more experience than I have, said, with cancer there is a differential experience, and some people literally sail through the process—the really lucky ones. Maybe that is slightly over the top, but they get through the process in a reasonable time, pretty fast, while others find it very tough indeed. If we put everyone in the same category by definition a type of illness, we get back to the problems that we have with treating people who need help to work and everything else—we are excluding them from that. Of course, once you set a precedent in that area, it rolls on and on. That is why we are going about this using the WCA as the route to putting people in different categories.
I was also asked about support to work. Support to find work will be widely available for all ESA claimants from the outset of their claim, irrespective of their health condition. Following the work capability assessment for most ESA claimants placed in the work-related activity group, that support will be mandatory either through Jobcentre Plus or through the work programme once their prognosis is down to a particular number of months.
The vast majority of ESA claimants who want the more intensive support offered by the work programme will be able to access it as soon as the outcome of the WCA is known. That includes contributory ESA claimants who can remain on the programme after their benefit has come to an end—to meet the point raised by the noble Baroness, Lady Lister. That ensures that they receive all the support they need to help them to return to work. Clearly, that was a conscious decision in the design of the work programme because it is clearly not supported by any sort of delaying switch. This is a straight investment in helping those individuals back into work.
Baroness Lister of Burtersett
I thank the Minister. I am pleased to hear that. So that I am absolutely sure that I have understood, can he confirm that this would also apply to someone who does not qualify for income-related ESA? Is it simply enough that they have received contributory ESA in the past and that that is the ticket to the work programme for the future?
Lord Freud
The noble Baroness has got that absolutely right. It is both for people who are currently on income-related ESA and those who have been recipients of contributory ESA.
There will clearly be a financial cost to Amendment 71P, but I am afraid that in the short time available I have not been able to produce a robust costing.
Lord McKenzie of Luton
I thought the Minister said in his earlier remarks that, effectively, these things did not need the amendment because they were dealt with by way of easement. Therefore, presumably they are already factored into the cost and no additional cost would arise from this. Is that not what he said?
Lord Freud
No, that is not what I am saying. The noble Lord’s amendment raises the example of someone who has been in the WRAG for a year, falls off it and in five years’ time falls ill. The amendment would allow them to go onto the contributory support element of ESA as of right. That carries a cost for which I do not have the exact figure. We are working on it.
Lord McKenzie of Luton
I am sorry but I thought the noble Lord, in responding earlier, said that there were easements to address this so that you effectively reconnected people because of their national insurance contributions. That was the issue that was being raised. We are dealing here with people who, but for the 365-day time-limiting, would currently have a continual claim to ESA.
Lord Freud
My Lords, I am convinced that I did not say that this particular easement was built in. I was talking about national insurance contributions. Once they are through the time-limited period, individuals cannot then switch back into the support group on a contributory basis.
Lord McKenzie of Luton
Forgive me, but that means that people in the support group are disadvantaged by these provisions, contrary to the Government’s assertion.
Lord Freud
My Lords, people in the WRAG who have gone through their time-limited period do not then have a right to go into the support group on a contributory basis. Clearly, they have a right to go into it on an income-related basis, but not on a contributory basis.
Baroness Hollis of Heigham
I am now completely baffled. I thought the argument was that if somebody had not exhausted their time on the contributory basis and had, for whatever reason, been able to get back into work, which then collapsed or folded, they would be able to get back into the support group using some of the contributions that were still available. The noble Lord ran against this the argument that this might be five years away and was therefore unrealistic in terms of connection. The point that I was going to press was that, in that case, the Minister was saying that one of the easements that we currently have is the 12-weeks’ linking rule. I was going to come back and suggest that in these circumstances it would be sensible to have something more like a 12-month linking rule so that there was a realistic time in which, if either the job or the person’s health folded again, they could come back and use up their unused period of contributory benefit.
Lord Freud
My Lords, clearly, they can use up time that they have not used. Therefore, if you are nine months down in the period of the contributory WRAG but go to work and come back, and are due to go into the support group, you can do so. However, if you have used up your contributory element of WRAG, there are, as I was trying to describe, some quite complicated effects. In practice, there may be up to a two-year period to do that. We have an easement, allowing a claimant to satisfy the first contribution condition for ESA if they have paid contributions in any tax year at a certain rate and have received a contributory ESA award in the last complete tax year, before the current benefit year in which they are claiming again.
It is quite a complicated situation. In practice, the easement for many people will work for about two years in those circumstances but no longer. It will not, as Amendment 71P is looking to do, make it unlimited. There may be different costs to having an easement of five or 10 years but we have not had a chance to look at the costs of this amendment. So I cannot accept that we make this amendment and urge that it is not pressed.
I am completely lost in my brief.
Baroness Hollis of Heigham
Perhaps we should have a tea break. The votes were so demanding that we have not had time for one.
Lord Freud
Moving swiftly on—Amendments 72A and 73 exclude from time-limiting any days contributory ESA claimants in the WRAG have received ESA for before this clause comes into effect. We expect that around 100,000 people will have been in receipt of contributory ESA in the WRAG for more than 12 months by April 2012, plus an additional 100,000 who will reach 12 months’ duration in the WRAG during the rest of 2012-13.
On the issue raised by my noble friend Lady Thomas on retrospection, a benefit claimant has no right to receive ESA indefinitely if the conditions of entitlement change or their circumstances change and they no longer meet the conditions of entitlement. Through the amendments made by the Bill, we are changing the conditions of entitlement for the future so that entitlement will not end until Clauses 51 and 52 is commenced. This will not affect any entitlement that has already arisen. I assure noble Lords that we are not seeking to recover past ESA payments that claimants have received correctly, but merely defining their future entitlement to ESA on the basis of whether at the time the clause is commenced they have had ESA already and if so for how long, and whether they are in the WRAG. We took the decision to issue 115,000 notification letters to all claimants potentially affected by this change to ensure that they were given sufficient notice. This generated around 4,200 inquiries from claimants in response.
We wish to strike a balance between fairness of treatment for all those affected and complexity. We do not think that it is reasonable that people in the WRAG who have already received contributory ESA before Clause 51 comes into force should continue to do so for an additional year after the clause is commenced. This would be unfair to new claimants; we want as many people as possible to receive benefit for the same period of time. Given the very difficult financial position that we inherited from the previous Administration, this is another difficult decision that we have had to make to ensure that the economic well-being of our country is protected.
Baroness Meacher
Can I just raise a question? The Minister talks about the unfairness about those in the future and those in the past, but that issue exists anyway. People who started claiming 18 months or two years ago, or whatever, clearly had a different length of contributory ESA to those people who claimed any time from 1 April last year in the Government’s terms. What I was suggesting was that the conditions are changing as of 1 April next year, and it is retrospective to suggest that the conditions change from 12 months previously. That is what is retrospective. Of course, you will always have unfairnesses between the past and the future when you change laws. It is not logical to suggest that there is some sort of inequity between past and future and, therefore, there is no retrospection. I think that the Minister has to accept that there is retrospection here.
Baroness Hollis of Heigham
My Lords, perhaps I may add to the Minister’s woes. He will no doubt be aware that previous Administrations faced this difficulty when we moved from IVB—invalidity benefit—to incapacity benefit. What happened was that people on invalidity benefit remained on that benefit and only new entrants went onto incapacity benefit. That is one path. I can quite see that allowing long-term claimants to have two or three different paths is technically complicated and administratively undesirable, but it is what is most supportive and decent to the individuals concerned. Their expectations are not suddenly changed part-way through their later years.
The second path that the noble Lord could adopt would be to say that from now on, at a certain date, this will be a common rule for all new and existing applicants. That would be the middle path. What would clearly be wrong would be to say that this will apply only to new applicants and that we will knock off existing claimants who have come up to the time barrier. I have never known that in social security before—ever.
Lord Freud
My Lords, the accepted convention on retrospection is that it applies from the announcement of a measure. When the price of petrol goes up in the Budget, it goes up that night or the next night and then the Finance Bill becomes an Act four or five months later. That is the convention—you go from the date of announcement. We announced this move from October 2010.
Baroness Meacher
Perhaps I may suggest that the Budget is a completely different kettle of fish, because you absolutely have to implement financial changes on the day of the announcement—otherwise all sorts of people will play games and use the delay to do all sorts of things. However, social security is completely different. You are talking about vulnerable people dependent on benefits, and that is why the convention in the social security field is totally different from the convention regarding the Budget.
Lord Kirkwood of Kirkhope
Can I just make a point? As to the Minister’s explanation of when things start from, this announcement was made in 2010. If logic is to stay on his side, implementation should have started in 2010.
Lord Freud
Well, my Lords, what was written in the document that my noble friend Lady Thomas referred to was posited on the notice given in it, which allowed people to prepare for this change. The notice was given in—
Baroness Lister of Burtersett
Can the Minister explain what this preparation is supposed to be? How do you prepare for the loss of a benefit if you are unable to take paid work? Is it preparation for your partner to give up work? I am not sure what preparation people are supposed to be making.
Lord Freud
My Lords, one of the clear preparations is to understand whether you are now entitled instead to income-related ESA on the WRAG, or to take steps to get into a job, or whatever it is. There are a number of things, but preparation would cover all of them. However, the documents written in October 2010 were saying that this change was coming in April 2012, effectively giving 17 or 18 months’ notice that this change would apply. That is what was intended by the document.
We have taken steps to give people whose awards will end, either when the clause comes into force or shortly after, time to assess their circumstances and adjust to the change. We have written to all existing contributory ESA claimants who could be affected to make them aware of this change. It is important to remember that claimants in the support group and those claiming income-related ESA will not be affected. The noble Baroness, Lady Hayter, raised the issue of the impact on the lowest deciles. The analysis in the impact assessment shows that although many people affected are in the lowest deciles, they will tend to be fully or partially compensated by income-related ESA and those who will not be eligible for income-related benefits are typically in the middle or higher deciles.
The government amendments I have already outlined ensure that days in the assessment phase for a claimant subsequently placed in the support group are excluded from the 365-day total. Amendment 74 would go further than this; it would mean the 365-day limit for all contributory ESA claimants, including those placed in the WRAG, begins only from day 92 of the claim. This would therefore give an extra 13 weeks of contributory ESA to WRAG members, increasing their overall award to 15 months. Another effect of the amendment would be that, if claimants have repeated short-term claims and as a result they are not medically assessed via the WCA, these claims might never individually go beyond the 13-week assessment phase. If so, the 365-day time limit might never apply to their contributory ESA award. This amendment could therefore create a perverse incentive for claimants to terminate the award before the end of the assessment phase; they may also try to delay attending the WCA. We do not believe that such behaviour should be encouraged.
Amendment 75 would allow claimants receiving contributory ESA who move in and out of the support group, to start a fresh 365-day period each time they move from the support group back to the WRAG. For those claimants moving between the two groups regularly, it is likely to mean they would be able to remain on contributory ESA indefinitely. This amendment would lead to inconsistent periods on benefit for claimants. For some, time spent in the WRAG would count towards the 365-day limit while for others it would not. This is unfair. We believe that everyone should be treated the same, irrespective of when they are placed in the WRAG. I understand the noble Lords’ concern about fluctuating conditions, which may have prompted this amendment. We recognise the importance of the role the WCA plays for people with fluctuating medical conditions, as I have discussed.
To pick up one more point on the cancer issue, I want to make it absolutely clear that the present position is that anyone who is diagnosed as terminally ill and who is expected to die within six months will automatically be placed on the support group.
Baroness Hollis of Heigham
I am sorry, but could someone be diagnosed as terminally ill as a result of the biopsy and be given a life expectancy of 11 to 12 months, which may be accurate almost to the week, yet not be deemed under this condition to be terminally ill?
Lord Freud
That is correct. That is the current position but the reality is that the treatment provision is likely to catch most of those people.
Lord Freud
My Lords, I know that this is a very emotive matter and I have said that we are looking very closely at the recommendations from Professor Harrington. I have picked up the concerns on this matter, and I think that that is as far as I can go today.
Amendment 75A would introduce an additional income disregard for partners when calculating an award of income-related ESA. Based on the current annual personal allowance for income tax of £7,475, this disregard would amount to a gross weekly amount of £143.75. Currently, when calculating an award of income-related ESA, we provide disregards on partner’s earnings of £20 per week and a disregard of between £10 and £20 for other specified income. This contrasts with universal credit, where a disabled person would have a minimum earnings disregard of £40 per week.
The practical effect of this amendment would be that the DWP would be forced to amend existing DWP regulations to remove existing disregards and make new regulations to disregard a minimum of what, under current tax allowances, would be £143.75 per week of a claimant’s partner’s gross income when calculating entitlement to income-related ESA. If we did not amend the existing disregards, the excess would then be subject to an additional £10 to £20 disregard where appropriate. In total, this would potentially increase expenditure on the ESA by up to £500 million per year.
We do not think that this approach would be reasonable. Introducing a significant new disregard for ESA claimants would be unfair to others receiving other income-related benefits, such as claimants whose partners claim income-based jobseeker’s allowance, where the earnings disregard is currently set at £10 per week, and ESA claimants who have no partner.
At this point, perhaps I may introduce the question of what happens to payments of contributory benefits—
Baroness Hollis of Heigham
Returning to the previous point on Amendment 75A, will the Minister confirm, for clarity, that the figure of £500 million per year was related to the cost of this amendment only, not to changing other disregards? I was not clear about that from what he said.
Baroness Hollis of Heigham
Therefore, having this exclusion for this group would cost £500 million a year with no knock-on consequences for other disregards for people on JSA or whichever benefit the Minister cited. I just wish to be clear on this.
Lord Freud
We have done a relatively simple sum on this and this is the change. We have not rebuilt the whole system to make it consistent.
Baroness Hollis of Heigham
Is it therefore also net of the actual disregard that people will get, which will be £20 plus possibly some other amount?
Baroness Hollis of Heigham
In that case, before the Minister goes on to a different point, why does he think that the situation of someone whose partner is on JSA, but with no history of disability or whatever in the family, is identical to the situation of a partner who is managing to care for a person for possibly 20 hours a week or more—that is why they are on those benefits anyway—and is, on top of that, hanging on by her fingertips in the world of work? Incidentally, we have now established that this will, first, not make it pay for her and, secondly, will almost certainly encourage her to leave the labour market. Why does the Minister think that there is any equitable comparison whatsoever between that and JSA? I am all in favour of establishing simple parameters so that people know where they stand, but I should have thought that the noble Lord would accept that someone who is disabled and has a partner, or possibly a wife, caring for them for 20 hours a week and in a part-time job is none the less in a very different situation from a young couple in their 20s who are on combined JSA.
Lord Freud
My Lords, at that kind of annual cost this really is an expensive amendment. Whereas one can clearly look at elements and disregards in the system later when there is some money—I have made this point before—this is a lot of money.
Baroness Hollis of Heigham
Can the Minister then tell us what the total saving on the ESA is going to be overall so that we can see what percentage this represents?
Lord Freud
Yes. I am speaking slightly from memory but the running rate is about £1.7 billion a year. I am sorry—I have tripped myself up on that.
Baroness Hollis of Heigham
It cannot possibly be. You cannot have £500 million a year and £1.7 billion in total. That does not work, but I would be happy for the noble Lord to refer to it later.
Lord Freud
I will refer to it in a minute. Let me gather my forces. I come to the point made by the noble Baroness, Lady Lister, on ESA contribution and universal credit. We are looking to simplify the payment arrangements for cases where there is entitlement to both universal credit and contributory benefits. Customer insight research suggested that claimants would prefer a single payment of universal credit rather than two separate payments, but no final decisions have been made. The key point is that contributory ESA and JSA will continue as individual entitlements. In other words, as now, they will not be affected in any way by the circumstances of the partner.
Baroness Lister of Burtersett
I thank the Minister for his answer, for I realise it is slightly off the main amendments, but I am glad that no final decision has been made. I do not know the nature of the customer insight research but on qualitative research with individuals in couples I know, having done that kind of research myself, that you need to talk to individuals separately within couples for them to be able to talk freely to a researcher. For many women, it is important to have control over a certain amount of income. As the noble Lord said, it is not simply an administrative matter. There is a matter of principle here about having paid into the system as an individual and being able to draw out from the system as an individual, rather than having that benefit paid to your partner. I just hope that the Minister will take that point away and think about it seriously before a final decision is made.
Lord Freud
My Lords, we have had this discussion before. I come back to the point that one of the most interesting opportunities in the universal credit is the budgeting support. When I talk about budgeting support there is an element there of how you run your household finances, which we are just beginning to explore. There is huge potential in that and I am just beginning to think about what that could imply and what it means, so we will come back to this in the months to come because it has enormous promise in the areas that the noble Baroness is worried about.
Let me go through the AME savings, which were raised by the noble Baroness, Lady Hollis. Running each year from 2012, they are: £420 million; £780 million; £1,090 million; £1,330 million; and £1,380 million. The £500 million—
Lord Freud
They are the AME savings from Clause 51. The £500 million cost that we are talking about of this amendment is calculated on the basis of applying the disregard to all ESA claimants, not just those affected by time-limiting. We would have to apply it to everyone.
Baroness Hollis of Heigham
Is the Minister saying that the £500 million cost of Amendment 75A exceeds the total amount of savings on all these changes in 2012?
Lord Freud
Yes. This is the ESA income-related claimants. I think that has a £500 million average cost per year spread over that period, but it is a per year cost. No, I am sorry; it is a steady-state £500 million, so it should be looked at against the £1.3 billion or £1.4 billion figures as a proportion.
Baroness Hollis of Heigham
These figures seem deeply implausible to me, but we will work on them. Thank you.
Lord Freud
Additionally, the amendment would likely weaken the financial incentive for a benefit claimant’s partner to take up full-time work. It would increase the number of people who qualify for income- related ESA and therefore give them automatic entitlement to housing benefit and/or council tax benefit at a cost of approximately £50 million per year.
In addition, if Amendment 75A were accepted and we did not mirror that larger disregard in the housing benefit and council tax regulations, it would mean disparate treatment between those claimants passported automatically on to housing benefit or council tax benefit because they are entitled to income-related ESA, and those who claim housing benefit or council tax benefit on low-income grounds. That would be unfair. We estimate that it would cost approximately £50 million per year to mirror this amendment in the housing benefit regulations. That is in addition to the £50 million previously mentioned.
If the amendments tabled by noble Lords were accepted, either singularly or collectively, it would significantly reduce the expected benefit savings of these measures. If Clause 51 did not stand part of the Bill, the entire savings projected by this measure would be lost. That amounts to around £5 billion in total by 2016-17, and we went through the individual years.
Baroness Hollis of Heigham
I am sorry; the Minister said £5 billion went through the individual years. My figures add up to £3.5 billion.
Baroness Hollis of Heigham
That is £420 million, £780 million, £1,090 million and £1,380 million.
Lord Freud
You missed out £1,330 million. I have £420 million, £780 million, £1,090 million, £1,330 million and £1,380 million. That is nearly £5 billion.
Accepting Amendment 71M would reduce the total savings by around a third by 2016-17, which is £1.6 billion. Accepting Amendments 72A or 73 would reduce savings by around £420 million, which represents the entire savings forecast projected for 2012-13. Amendment 74 would reduce savings by around £430 million in total by 2016-17.
Baroness Lister of Burtersett
I apologise if I missed this because I know that the Minister has had an awful lot of ground to cover on so many different amendments, but did he explain why the assessment period is being included? The way that the policy has been put across is that if you are in the WRAG, you will get contributory ESA for only a year. But actually that is a year minus 13 weeks because you get a lower rate of benefit for that. Apart from cost, and by 2016-17 only a third minus 3 per cent of the savings would be forgone—I realise it is more up front, but it diminishes—what is the principal reason for including the assessment period?
Lord Freud
The reason is that we never intended to take it out in the first place. If someone is waiting to go into the support group it is not appropriate to have them assessed as if they are in the WRAG group.
Baroness Lister of Burtersett
But this is someone who is going into the WRAG group, so they are getting only a year's contributory benefit. It will be a year minus the assessment period. What is the point in principle for cutting short what many people are already calling an arbitrary time limit on their entitlement?
Lord Freud
It is interesting that noble Lords are looking at the assessment phase as a different benefit, which it is not. It is the same benefit. It is just a phase. You go on the ESA assessment phase and then it discovers what type of support you are on—the support group or the WRAG group. That is what the assessment phase is doing.
Baroness Lister of Burtersett
Forgive me if I am wrong and I expose the frailness of my knowledge of social security, but I thought that claimants got a lower rate during the assessment phase. Therefore it may be called the same benefit but, in terms of the money people get, it is less. That period is not being included. That is why I am saying that it is a year minus 13 weeks. Yes, they are getting a benefit but at a lower rate.
Lord Freud
The assessment phase would last beyond 13 weeks. It can sometimes be a long period, but claimants are always paid the full rate from week 14 of their claim.
Baroness Lister of Burtersett
Is the noble Lord saying that you can get backdated money for the assessment period?
Lord McKenzie of Luton
Surely that is not right. Is it backdated to the end of the assessment period?
Baroness Hollis of Heigham
Is the Minister saying that after 13 weeks you get paid a higher rate even if you have not been assessed because the assessment is taking longer than your 13 weeks? It might take 20 weeks or 25 weeks. Is that what he is saying; that it is okay for part of the period to get the higher rates but the lower rate period counts in the run-up to that? Is that what he is saying?
Baroness Hollis of Heigham
Forgive me, but that seems to be a very confused position.
Lord Freud
Whether it is confused or not, the position is that, when you are claiming the ESA rate, the first 13 weeks you are in the assessment phase you are on the lower rate. Then you go on to the standard WRAG rate from week 14.
Baroness Lister of Burtersett
What is the principal reason for that? How does the Minister justify it?
Lord Freud
I have to admit that I am not particularly happy about the assessment phase of ESA and how it is working. It is becoming a separate benefit in practice. I would like to look at it. It is difficult to have a set of principles around something that one is somewhat unhappy about.
I shall go on with the costs. Amendment 74 would reduce savings by around £430 million in total by 2016-17. Amendment 75A would increase expenditure on ESA by approximately £500 million per year, plus up to £50 million more on other income-related benefits. I cannot accept that we should make these amendments. They would place a very high financial cost on us in the current fiscal climate. I believe our proposed changes are right in principle and fair to the taxpayer. I urge noble Lords not to press these amendments.
Lord McKenzie of Luton
My Lords, I thank the Minister for his very extensive reply dealing with a whole host of interruptions. That must certainly be a record for this Committee.
Lord McAvoy
I am not as sympathetic as the noble Baroness, Lady Hollis, on this because we co-operated in getting the groupings and the Minister knew the groupings that were coming. That sounds uncharitable, but there is no doubt that he has made absolutely every effort. That it has taken so long to answer questions demonstrates the complexity of the whole group of amendments.
Lord Freud
I feel drawn to say, in response to the noble Baroness, that I was very happy with how the amendments were grouped, because it allowed me to deal with a complicated set of issues in their entirety. When amendments are degrouped you very often find that you are arguing one thing at one time and then miss a key part of your argument and have to repeat it. So I would plead with the noble Baroness to accept that at least I was very happy with how it was done and that we got through a very difficult set of issues—I know how difficult they are—in reasonable order.
The Deputy Chairman of Committees (The Countess of Mar)
My Lords, if I could offer some guidance, the groupings are informal and noble Lords are perfectly at liberty to decouple amendments if they are not happy.
Lord McKenzie of Luton
Driven by bankers—thankfully not accountants. With great respect, I normally find the Minister convincing but he was not convincing on the assessment period, and at the end of the day acknowledged that he had concerns about that. As to the definition of whether the proposal is backdated or not, starting this process up to 12 months before the legislation comes into effect is a very unusual way to proceed.
Part of the reason why we are going down this path is that the Minister said right at the start of his response that we should expect people to avail themselves of the help and support available. He also said that a lifetime on benefits is no longer an option. I would not disagree one iota with that, but no one is arguing for a lifetime on benefits—certainly not for those who can move closer to the labour market and into work. That is not a matter between us, but the noble Lord did not deal with the point about the WCA, around which there is a lot of discussion. We all want it to work as it should do, but is there not, when people are allocated to the WRAG or the support group—certainly the WRAG—a prognosis that goes with them that says how long they are likely to be in that group and, therefore, when they are likely to be fit to join what is currently the JSA group? That is the hope and that is how it works. The Minister has said that in the past and told us that that prognosis is tested before someone is moved off benefit. We therefore have a process by which an individual judgment is made about how long people will be assumed to be in the WRAG, and then ultimately, when that time is up, whether they should remain in the WRAG, go into the support group or join JSA. We have an individualised process, do we not? Why can that not be used?
This is where we fundamentally differ from the Government: if the object is to ensure that people can stay in the WRAG for as long as they need to and have the benefit of the contributory ESA system for as long as is necessary, is that not a fair way of proceeding? On the other hand—I think that this is probably the Government’s position because we need to save money—is the Minister saying, “We do not care how long you need to stay in the WRAG; after a period your contributory benefit will be chopped”? It seems that the position is not related in the Government’s mind to how long people should need support in the WRAG.
Lord Freud
If the noble Lord would like me to, I can give him a little information on that. The latest data show that among all those assessed to be in the work-related activity group at their initial WCA, 91 per cent have a prognosis of 12 months or less. However, it is placing an awful lot of weight on such a prognosis to build a system around it. I would personally feel pretty uncomfortable about it. However, the data make the point about the expectation that the curve is rather similar to what you would expect regarding the potential for people to come off—certainly, the WRAG element—on that prognosis.
Lord McKenzie of Luton
Is it not the case that the same prognosis is used for remuneration of providers in the work programme because that determines which remuneration slot they are in?
Lord Freud
The standard position on the work programme is that people whose prognosis goes into the three-month phase then go into work programme, which provides a heavy incentive at that stage to help those people back into the workplace.
Lord McKenzie of Luton
Perhaps I might move on. The noble Lord has stacked up the costs of these various amendments. However, the Government have not reflected on who is bearing those costs. That is a point made by several noble Lords during the debate. It is not just spread equally across the population or pro rata to resources across the population. It is concentrated on a range of people who are in the work-related activity group, who we want to move closer to the labour market but who are currently neither in work nor, according to the analysis, fit for work. That is the fundamental issue that we are trying to get to grips with. I am sure that the amendments that we have discussed in Grand Committee today will all be withdrawn but I have no doubt that we will revisit them in one form or another when we get to Report.
I thought that the noble Lord had reassured me on the decoupling of people in the support group when he first spoke. When we followed that up, I was much less reassured. The claim that this does not affect people in the support group could be difficult to sustain in circumstances where they get disconnected by the national insurance rules. I urge the Minister at least to reflect on that to see whether there should be some change in or expansion of the linking rules. We are dealing here with a situation where, currently, there would be a continual claim whether someone was in the WRAG or the support group. We seek only to establish that if that link in the WRAG is broken because of the 365-day rule, when people end up in the support group they are not disconnected from those earlier national insurance contribution conditions, particularly the first one. We will certainly want to come back to that in detail.
We will not have a meeting of minds on this today but I am sure the Minister will reflect, as he always does, on the data, facts and arguments that have been put to him. It seems very clear today that, overwhelmingly, those arguments have been against what the Government are proposing. Having said that, I beg leave to withdraw the amendment.
Lord Freud
“(3) In calculating for the purposes of subsection (1) the length of the period for which a person is entitled to a contributory allowance, the following are not to be counted—
(a) days in which the person is a member of the support group, (b) days not falling within paragraph (a) in respect of which the person is entitled to the support component referred to in section 2(1)(b), and(c) days in the assessment phase, where the days immediately following that phase fall within paragraph (a) or (b).(4) In calculating for the purposes of subsection (1) the length of the period for which a person is entitled to a contributory allowance, days occurring before the coming into force of this section are to be counted (as well as those occurring afterwards).”
Lord Freud
“(5) In calculating for the purposes of subsection (4) the length of the period for which a person is entitled to an employment and support allowance, the following are not to be counted—
(a) days in which the person is a member of the support group (within the meaning of Part 1 of the Welfare Reform Act 2007), (b) days not falling within paragraph (a) in respect of which the person is entitled to the support component referred to in section 2(1)(b) of the Welfare Reform Act 2007, and(c) days in the assessment phase (within the meaning of Part 1 of the Welfare Reform Act 2007), where the days immediately following that phase fall within paragraph (a) or (b).(6) In calculating for the purposes of subsection (4) the length of the period for which a person is entitled to an employment and support allowance, days occurring before the coming into force of this section are to be counted (as well as those occurring afterwards).”
Lord McKenzie of Luton
My Lords, on this occasion I am happy to be at one with my noble friend Lady Lister and the noble Lord, Lord Patel. I am not sure that I am happy to be reminded about being assailed from the left by the noble Lord, Lord Skelmersdale; I try to put those memories far behind me. These are two important amendments and I hope that the Government will consider them seriously and take them on board. As my honourable friend Stephen Timms said in another place, it is,
“very hard to understand the Government’s justification for abolishing ESA for those people”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 645.]
He said that it is a measure that seems “unreasonably punitive”. I agree.
Lord Freud
My Lords, I shall briefly explain what the existing rules are for young people. Special conditions for young people who are exempt from meeting the usual PAYE national insurance conditions are set out in paragraph 4 to Schedule 1 to the Welfare Reform Act 2007. These provide that a person aged 16 to 19, or 20 to 25 in certain prescribed circumstances, who is not in full-time education and has had a limited capability for work for 196 consecutive days, will be entitled to contributory ESA. No other age group can qualify for contributory ESA without having paid or being treated as having paid national insurance contributions. Nor does any other contributory benefit have similar arrangements. The vast majority of claimants who presently receive contributory ESA on the grounds of youth—around 90 per cent—are expected to receive income-related ESA. Those who do not qualify for income-related ESA are likely to have capital in excess of £16,000 or a partner in full-time work who may be entitled to working tax credit. Clause 52 removes these special rules.
Lord Freud
My Lords, this may be a convenient moment for the Committee to adjourn until Thursday at 2 pm.
Benefits: EU Nationals
Lord Freud Excerpts(12 years, 6 months ago)
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Lord Empey
To ask Her Majesty’s Government whether they propose to change the rules under which citizens of other European Union member states have access to the United Kingdom benefits system.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we do not propose to change the way DWP determines benefit entitlement for EU nationals, but we are considering the details of a European Commission reasoned opinion against the right to reside test. While we accept our responsibility in supporting EU nationals who work and contribute here, it is absolutely necessary that we protect our welfare system from those who come here with no intention of working or looking for work.
Lord Empey
I fully understand the point the Minister makes but it is nevertheless a fact that on 29 September 2011 a reasoned opinion was issued which states that the EU Commission believes that we are contravening EU law. What steps do the Government intend to take in order to protect our system from additional and currently unaffordable demands?
Lord Freud
My Lords, we are moving in two directions. First, we are looking hard at the Commission’s opinion and considering whether we should go to court. We have two months in which to take that decision and the likelihood is that we will take it through the full legal process. The second area is the political one. We are talking to other countries which are also deeply disturbed about this. Some 13 countries have signed a motion calling for a minute statement and for a policy debate on this matter.
Lord German
My Lords since some 900,000 UK citizens are migrants in other European Union countries, I am sure my noble friend the Minister would like to protect the reciprocity which exists for both EU citizens and others coming here, as well as our citizens in other countries. Will he comment on the information we have received from the European Commission about the intention to extend reciprocity to North African countries? Can he tell us what line he will take with the European Commission on this matter?
Lord Freud
My Lords, we are going to take a pretty robust line on this matter. We have an opt-out from the Lisbon treaty which we have been using for African nationals where there are third-country agreements, in particular Morocco, Algeria and Tunisia. Again, currently we have legal differences with the Commission on this matter, which is looking for ways to get around our opt-out, but we are determined that we will retain it.
Lord McKenzie of Luton
My Lords, can the Minister tell us what the uprating arrangements are for benefits that are exported? We are aware that by generally switching uprating to CPI, the Government are seeking to reduce the income mostly of poor people by some £10 billion a year in 2015-16. Will the Minister take this opportunity to denounce any suggestion that benefit uprating in the UK for upcoming years will not at least keep pace with CPI?
Lord Freud
My Lords, we have had this discussion during the Committee stage of the Welfare Reform Bill and I have made it absolutely clear that I am not going to comment on that particular question in any way.
Lord Forsyth of Drumlean
My Lords, can my noble friend comment on the fact that EU law requires equal treatment between citizens of member states, but not within member states? So we have the absurd position in Scotland, for example, where English, Welsh and Irish residents have to pay university fees of £36,000 while for Scottish students, along with French, German, Italian and other European students, they are free. Is that not grossly unfair and should not the law be changed so that residents in other parts of the United Kingdom are treated in the same way as EU citizens?
Lord Freud
My Lords, I am being taken well off my brief which is concerned with benefits, so I will not comment on that question either.
Lord McAvoy
My Lords, the issue of reciprocity was mentioned by the noble Lord, Lord German. Have the Government ever calculated the cost of reciprocity in terms of how much it costs the United Kingdom to pay benefits to EU nationals and what our 900,000 people get back?
Lord Freud
My Lords, amazingly, we do not have those data, but that is clearly not the present Government’s problem as we are looking to get those data. Our concern is that, if we let in benefit tourists in the way the Commission is looking for us to do, the costs of doing that could be up to £2.5 billion a year. Noble Lords will be absolutely aware that we have many better ways of spending that money on people who are in this country and who have been making a contribution to this country.
Lord Campbell-Savours
When are the Government going to comment on the uprating? A lot of people out there in the country will want to know.
Baroness Symons of Vernham Dean
My Lords, everybody has sympathy with a Minister when they are taken off brief, but does the Minister understand that, in this House, he answers not just for his department but for the Government? I think we would all be grateful if he would undertake to give the noble Lord, Lord Forsyth, an answer, perhaps in written form at a later date. Is the Minister aware that he is accountable to this House and that, when he is asked a question which is reasonable, it is not up to him to say that he is just not going to answer it?
Lord Freud
My Lords, my responsibility is to answer questions in this particular area, which I am very happy to do. If noble Lords have a question in this area, I will be delighted to answer it.
Lord Foulkes of Cumnock
In this particular area, the Minister still has not answered the question put by two of my colleagues. They did not ask whether benefits are going to be uprated by 5.2 per cent, as they should be, but when the Government are going to tell us. It is the time that we want to know; not a definitive statement now. Will he now answer that question?
Lord Freud
My Lords, as noble Lords will be well aware, there is an autumn Statement where these things are declared. That is the answer.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
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Baroness Hayter of Kentish Town
My Lords, this amendment seeks to tackle the introduction, under UC, of a poor work incentive for second earners who, as the noble Baroness, Lady Howe, has said, are mostly women. As my noble friend Lady Lister said, 300,000 second earners will see increased marginal deduction rates as opposed to only one-third of those who will see reduced MDRs. The policy to make work pay does not appear to extend, therefore, to a third of these affected second earners. According to the impact assessment:
“It is possible that in some families, second earners may choose to reduce or rebalance their hours or to leave work. In these cases, the improved ability of the main earner to support his or her family will increase options available for families to strike their preferred work/life balance”.
As my noble friend Lady Lister has said, it is not clear how this will improve options for families who prefer to have a more equal working relationship, where both partners combine work and child rearing. It also seems to be in conflict with other bits of coalition policy, such as the BIS modern workplace consultation, which sets out options for families to share parental leave more evenly between men and women. Perhaps, in responding, the Minister can let us know what discussions he has had with BIS about whether the incentives within universal credit support the BIS policy.
The reduced incentives for second earners to work come on the heels of the April cuts in childcare and therefore, as has been said, further reduce the incentive for anyone with a child to take a job, not to mention other little things such as cuts to the baby element of the child tax credit, the health in pregnancy grant, the Sure Start maternity grant and the freeze in child benefit.
As my noble friend Lady Lister said, the pay of second earners is crucial in keeping families out of poverty. If I may be forgiven for repeating her figures, which I hope I have right, child poverty is at 19 per cent where there is one full-time earner but it drops to 5 per cent with two earners and down to 2 per cent with two full-time earners. Therefore, second earnings are absolutely key to the Government’s objective of reducing joblessness, child poverty, dependence on universal credit and increasing the tax take. I look forward to the Minister’s answer to whether it was the gross cost after taking account of tax take which led to the projected cost of this.
Childcare has already been mentioned and is clearly particularly important in two sorts of families. One is obviously lone-parent families, and the other is where there is a second earner, with both parents tending to be out of the house at certain times. The disincentive to work increases where there are child costs to be met. As has already been said, childcare will cover only 70 per cent of costs, and that leaves 30 per cent to be found from earnings, which is already a high enough take from the second earner’s pay. Therefore, without an earning disregard of their own, the second earner has a very high deduction rate where there are child costs to be met, effectively making the taking of a job financially unviable. Yet, as I have said, second earnings are crucial in keeping households out of poverty. They will be even more important if, as we read today in the Financial Times, there is any truth in the rumour that when times get tough it is the poor whom this Government will seek to make pay. According to these press reports, the Chancellor is looking at cutting further billions from benefits by scrapping inflation-linked uprates, even—this beggars belief—freezing some payments. We read in the same article:
“The Liberal Democrats will oppose anything that suggests the coalition is unfairly passing the burden of deficit reduction on to struggling families”.
We look forward to hearing whether the Minister can say whether the Financial Times is accurate. Perhaps he can also ask those sitting alongside him—maybe they could pass him a note—whether they would like to place on record their opposition to any attempt to pass on any cutbacks to struggling families. They must know that the rich can pay far easier than the poor. Are they going to use their bargaining power, such as it is, in the coalition to protect the very weakest in society?
These amendments are about reducing poverty and increasing the take-up of work, and it would be useful to know on which side the Lib Dem/Tory coalition sits on this. Later today, we shall reach Amendment 75A to Clause 51 standing in the names of the noble Lords, Lord German, Lord Stoneham and Lord Kirkwood, and the noble Baroness, Lady Thomas, which effectively asks for an earnings disregard from the second earner where the first earner is now too ill to work. We very much welcome that amendment, but it would useful to know whether the same principle could be more widely adopted, as this amendment seeks to do.
The Minister may well be forgiven for wanting to reduce the number of working women on this side of the Committee but perhaps he would make it clear that that is not the intention with universal credit by ensuring that second earners really will be better off in work.
Lord Freud
My Lords, I have enjoyed what we are calling the bevy of ladies on the other side. Their intellectual prowess has left me stunned on my heels. Let me go into this amendment, which proposes that we create a disregard for the second earner in a joint claim. This proposal was raised in Amendment 52DB, which we have already debated, so I am going to be reasonably brief.
First, this is not a matter of principle. We acknowledge that it would be desirable to incentivise both members of a couple to work. However, we have limited funding and we have chosen to focus that on creating a strong incentive for at least one member of each couple to work, in order to limit the number of workless households. This is clearly a difficult choice. We have discussed these choices, in response to the noble Baroness, Lady Lister, with other departments on a regular basis, and we are very aware of links to other programmes.
Clearly, this is something that, if we had some money, we could revisit at a future point, but let me give noble Lords the figures. If couples who were both in work were entitled to an additional disregard of £700 a year, for example, the cost would be £240 million.
Baroness Hollis of Heigham
Could the Minister be very detailed in his costings? When he says an additional £750—
Lord Freud
There was a question around that, so I will endeavour to supply all the information I possibly can. A sum of £700 a year in addition would cost £240 million; if the disregard were £1,000 a year, the cost would be £350 million. We simply do not have the money in our present envelope. There is no real difference between gross and net in those figures because they are below the personal tax threshold, so there is no tax effect to set off. We are doing all sums on a non-dynamic basis anyway, so there is not a dynamic effect. From the point of view of the architects of the universal credit, we would have liked to incorporate more dynamic effects, but there are certain other interests in the Government that take a very straightforward view of money.
Let me deal with the other issue—that making the lack of a disregard for second earners makes the universal credit bad for women. That is the underlying argument here and clearly one that would concern us very greatly. But it is clearly not the case. Universal credit has many features that will improve the position of women, most obviously in support for mini-jobs and childcare. We have a duty, as the noble Baroness, Lady Lister, asked, to look at the impacts of policy changes on a range of particular groups, including the impact on men and women, and we are satisfied that our policy here is the right approach and that we can justify the impact. That is why I was able to sign the ECHR statement for this Bill.
Our impact assessments and equality impact assessments show that women in general are more likely to gain than to lose from universal credit, that this is also true for lone parents and couples with children and that lone parents benefit the most in both absolute and relative terms from the likely increase in take-up.
Baroness Hayter of Kentish Town
Before the Minister stands up, as I think he might like to get everything together, there were two questions posed that he did not respond to. One was whether he had had discussions with BIS. I had also given him the opportunity to refute the story in the Financial Times. I hope he might use this moment to do that.
Lord Freud
My Lords, let me try to pick up some of those points. Picking up the point of the noble Baroness, Lady Hollis, I hope that she is hearing that I am sympathetic to this point. I hope that noble Lords have heard that this is about money. We do not have this money. We have a very sharp choice to make, about whether to reduce workless households or to look after second earners with a disregard. We have taken this decision, and we have also taken a decision, when we do find some more money, to do something about childcare, which is another issue that I know greatly concerns noble Lords.
There are two clear issues when we look to improve this system, as we see dynamic effects coming through which are provable. We had a debate the other day on why we need to test things. Two of the obvious things to test will be second earner disregards and taper. Those are the first two things that everyone in this Room, I think, would like to know about as we get the system under way. Therefore, to the extent to which I am being asked “Will we look at it?”, yes, we will be looking at this. I am not going to make any assurances, because we should find the answers, but that is exactly the kind of question we want to have answered.
I shall take up the points of the noble Baroness, Lady Sherlock, on MDRs. You can freight all kinds of things on to MDRs if you want to, with different costs, and I am sure that you can create a position where the overall costs come up to high MDRs. The simple point that I would like to make is that with the universal credit itself, the MDRs come down.
On whether we will force people to take a job which leaves the household poorer, we made the point when we discussed this that we take these things into account when we set up the obligations of claimants.
Baroness Sherlock
My Lords, I am grateful to the Minister. I hear very clearly his sympathy for this issue. If it is simply a question of money and therefore timing, one of the things he could do, to put everyone’s minds at ease, is to say, “Until we can afford it, we will not force a household to be worse off by forcing them into work or sanctioning them”. He could then review the situation when he found the money down the back of the sofa next time.
Lord Freud
Stop teasing me. The noble Lord, Lord Beecham, made the point about VAT; there is clearly a missing element there, and I acknowledge that there is a difference between the gross and the net.
I thought I had answered the point made by the noble Baroness, Lady Hayter, on talking to other departments. Yes, we are talking to BIS. As to the FT story: as you would expect me to say—it is something between, “Pick the normal stuff”, “I do not comment on press articles” and, “It is a matter for the uprating Statement”. Pick any one of those you want. I am not answering the question. [Laughter.]
Baroness Hollis of Heigham
I congratulate the Minister on his nimble footwork; it was very impressive. However, what happens to Bhavna in this situation, where her childcare completely mops up £19 out of her £20 addition to the family earnings?
Lord Freud
In this example, there is a 65 per cent taper. Thereby, extra earnings produce an increased income of about £20. The effect of childcare costs would depend on the amount of the childcare costs. Under our current proposals, the parent is clearly expected to meet 70 per cent of allowable costs, and the state will cover the rest.
Baroness Hollis of Heigham
I understand that. I thought that that was exactly the point I made. The question was regarding the result of that calculation. She earns £60 and adds £20 net after universal credit, and £19 of that will, on any reasonable estimate, go on her share of childcare costs. That is before you take travel costs into account. Why work?
Lord Freud
We are going round in circles. We all know the point that is being made. We all know the reality of the iron triangle. We are wrestling with it. This is what we can afford to do right now. Some people may be caught in such a position and we make the point that some people will have higher MDRs—a lot will not. As we improve the position when we have funding, and have proof of the dynamic benefits that may free up main funding, we will be able to apply them. However, this is the best we can do right now. I would love to do more, but I cannot find any more money.
Baroness Lister of Burtersett
My Lords, I thank noble Lords who have supported the amendment with some helpful additions to the argument. I do not know whether any other noble Lords spotted it, but the Minister asked the “noble Lord” to withdraw the amendment. I do not know if he was making a Freudian slip and trying to reduce the bevy of Baronesses opposite him.
I should like to make a couple of more critical points before I come to a more positive one. I can understand the Minister’s frustrations that there are other parts of government that will not allow the department to do its calculations on a dynamic basis, but I was a bit disappointed that the department’s thinking was not dynamic in relation to this matter and it was not prepared to acknowledge that there could actually be positive dynamic effects through a second-earner disregard—whether they be anti-poverty or paid work effects, and all the things that the department is in favour of. I do not know whether these are just the noble Lord’s own arguments or those that are simply in the brief that comes from the various documents we have been given, but it seemed to me that there was still the unitary-household approach and an inability to understand that while couples are couples, they are also individuals within couples. I ask the noble Lord to go away and think about that a bit more and about the importance of individual autonomy within the context of coupledom. I would have been even happier if he had been able to go one step further and commit himself on the second-earner disregard in the longer term.
We have, however, made progress today. What the Minister has said takes us beyond some of the other things which have been said. I now take it as the official departmental view that it will, in the fullness of time, consider improving incentives for second earners, either through a second disregard or through the taper, as and when resources permit. I therefore beg leave to withdraw the amendment.
Lord Freud
My Lords, Amendment 52D would take a power to disregard the full amount of any pension contributions from the assessment of both single and joint claimants’ income. In the universal credit White Paper, we set out our intention to disregard 50 per cent of contributions to an occupational private pension from the income assessment. This balances our commitment to encourage pension saving with fairness to the taxpayer and it is the current treatment in the benefits system. It is true that in tax credits 100 per cent of pension contributions are ignored, but tax credits are based on gross income. This is not therefore directly comparable with the 50 per cent disregard in the benefits system.
In addition to the disregard, universal credit claimants will also have tax relief on their pension contributions. This means that for each pound that goes into the pension pot of an employee who is a basic rate taxpayer and in receipt of universal credit, the take-home income is reduced by only 34 pence after minimum employer contributions, tax relief and increased universal credit payments are taken into account. It would cost approximately an additional £200 million a year to move from 50 per cent to a full disregard. While this would no doubt be welcomed by claimants on low incomes, not all taxpayers who do not claim benefits have the advantage of a private or occupational pension. We must therefore take a balanced approach to the disregard of pension contributions, and we believe that 50 per cent is the appropriate level.
Pension contributions are disregarded from the income assessment in tax credits. We have taken the view that this is one of several areas in which tax credits have been excessively generous to claimants when the position of the average taxpayer is taken into account.
On the operational point, we are already operating a 50 per cent disregard, including a payment towards personal pensions. The rules will operate in a similar way to the way that they do now, but clearly we will not be able to do all this through RTI, so there will need to be some direct reporting.
Picking up the point that the noble Baroness, Lady Drake, made about what we are doing for asset accumulation, I can point to a series of measures that the Government are taking in that area, not least the support being provided to lower-income houses to purchase a home. In universal credit, households are able to save up to £6,000 with no impact on the universal credit award. I should point out that an average household with a working-age adult has average savings of £300.
The convention is that “two Baronesses” makes “noble Lords”. If I made a mistake during debate on the previous amendment, I was possibly slurring my “s”. In this case, I can ask the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
I was slightly taken aback by the Minister saying that he thought 100 per cent disregards in tax credits were regarded as overgenerous, when at the same time no mention is made of what we are paying in higher-rate tax relief. Currently, out of the £26 billion we spend on tax relief, some £8 billion to £10 billion is going to higher-rate tax relief. If we follow the Minister’s line, apparently we need only to incentivise the rich to save; the poor are being overincentivised and we are being overgenerous.
Lord Freud
My Lords, I think I am caught being slightly puzzled. I was strongly under the impression that pensions were removed from the higher rates of tax relief. I hope I am not wrong on that.
Lord Freud
On that basis, I am probably the wrong person to interrogate on this matter.
Baroness Hollis of Heigham
There is a limit on how much of your pot can attract higher-rate tax rates, which is the £50,000 figure. There have been some changes, but £50,000 of pension contributions is still tax free.
Lord Freud
I think we are now into the realms of minutiae. This has been subject to a substantial change. It was unlimited. Noble Lords can see that my personal interest in this is not as great as it might be. One can make comparisons and political points all over the place; let us stay with the business in hand.
Lord McKenzie of Luton
Can the Minister help us on one point? I am interested in the practicalities and operation. He said that we could not do all this through the RTI system. I am trying to understand how much of it can be done, given that the RTI system is going to produce either a gross income figure or a net of tax and national insurance figure.
Lord Freud
My Lords, we had a session earlier today trying to go through what the universal credit shows. Without being overprecise, a lot more information is available but effectively you need the net and the gross figures. Clearly, the personal pensions are not captured on that payslip, but the pension contributions through auto-enrolment, for example, would be captured.
Lord McKenzie of Luton
I accept that you might have the net and the gross figures, but do you not now need another figure, which is half the occupational pension payment? That is not readily thrown up in the pay-as-you-earn system or any other system.
Baroness Drake
I appreciate that the Minister has to give the Government’s reasoning behind this decision, but I am absolutely aghast at the argument that it will cost £200 million to restore 50 to 100 per cent of the pension contributions being deducted. There was a pension settlement, which said that the state pension age had to go up but the earnings-related element would be removed from the state system and go flat rate, and that individuals, supported by their employer, would have to take on greater responsibility for personal saving. They would be auto-enrolled, and that was part of them taking responsibility for a sustainable pension system over the long term. As part of that, the incentive to save had to be right; that was a huge debate. In the third leg, between the state pension age going up, flat-rating the state system and moving private savings up and earnings-related out of the state system, the incentive to save had to be right.
At the time, there was a huge debate and a huge argument that it would not work unless you got the incentives to save right. At the lower end, how the benefit system interfaced with the pensions savings system was a very important part of the payback. It was also a very important part of the explanation to people—including shadow Conservative Ministers at the time, who were very vocal on this issue—that this was what the payback would look like, with incentivisations to saving that came through the tax credit system. This is what I mean about incremental decisions. Now somebody says, “Well, we can just remove a chunk of the payback for a particular group of people and save £200 million by reducing the figure from 100 to 50 per cent”. I really struggle with that because it is saying, “Never mind what the strategic analysis was or where we are trying to go; this convenient incremental policy will save us £200 million”—and somehow it is a fairer deal for the taxpayer. Maybe in 30 years’ time it will not be a fairer deal for the taxpayer if more people present themselves for benefits. I struggle with that line of reasoning for doing this for that group of people. Okay, it is £200 million. I am not avoiding the need to make tough decisions, but again one stands back and looks at the contribution that the taxpayer makes to the incentive to save across the piece.
My noble friend Lady Hollis is right. You can get £50,000 per annum incentivised right up to 50 per cent tax relief. I know that the noble Lord is going to shout at me that this will allow more people to keep their income and that it is a different analysis, but I do not accept that, particularly in the context of a sustainable pension strategy. We have all sorts of tax advantage savings arrangements that the well-off can take advantage of. You can fund a tax advantage stakeholder account for your child. You can fund a tax advantage ISA for your child or your non-waged spouse. I have taken advantage of some of these for my children. However, I struggle against the decisions on the incentive to save for low-to-moderate-income groups, which was inextricably linked to the in-work benefit system, when somebody says, “It saves £200 million. Just undermine the incentive to save and the payback for this arrangement”. It just does not stack up intellectually. It does not stack up when there is a consensus which says that everyone should buy into a pension solution that holds over the very long term. We have just taken £10 billion from a group of women who should not be bearing that level of savings, and we are now going to take £200 million out of low-to-moderate-income earners. My argument is losing subtlety because the quality of what I am pushing back on is unsustainable. It is £200 million for an irrational reason. Extremely reluctantly, I beg leave to withdraw the amendment, although I am sure I shall be coming back to this.
Lord Freud
My Lords, I am well aware of the work of my noble friend Lady Thomas on this, although perhaps not quite as well aware of it as the noble Lord, Lord McKenzie. Clearly, the amendment is intended to improve the position of disabled people on benefits who participate in service user groups. Changes in the regulations to do just that were made towards the end of the last Parliament, and universal credit will carry these forward. Nothing in universal credit will worsen the position of participants in service user groups.
Looking purely at the earnings element—the fee element, not the expenses element—the structure of universal credit will improve the general position for participants. The earnings taper will ensure that any fees which are beyond the claimant’s earnings disregard will still make the claimant better off overall. The removal of the 16-hour permitted work rule and the personalised conditionality regime will see to it that the claimant will not fall out of the benefit if they undertake a modest amount of voluntary or paid activity. That is as far as the earnings element is concerned.
The amendments to the social security regulations made in 2009 exempted individuals covered by the definition of service user from the notional income rules and ensured that any expenses they received would be disregarded in the benefit calculation. I think that all parties welcomed these improvements when they were introduced. Therefore, my noble friend’s amendment seeks simply to build on those 2009 changes.
This is a matter for regulations, and there will always be scope to make further changes where these are needed. However, we need to ensure that any definition is clear and can easily be applied by administrators. The current definition was drafted on that basis. Like the noble Lord, Lord McKenzie, I am not convinced that it will be feasible to broaden the current definition in the way proposed by the amendment, but I am very pleased to meet my noble friend on this, as she requested, and I think that we shall be able to get this right.
In the current regulations, the definition of service user is limited to consultation for specified purposes. In all cases, the consultation with service users is required by law. The intention here was to avoid extending the easements to the activities of commercial enterprises. We also need to ensure that benefit claimants are not able to deprive themselves of regular earnings and so remain on benefit while operating as consultants to research bodies. These protections remain valid from the Government’s point of view, so any new regulations need to protect the Government in some of these areas.
On the general question of expenses, we will apply the same disregards in universal credit as in the existing benefits. We would not want claimants in work to see their universal credit fall as a result of their receiving payments as reimbursement for expenses that they have incurred solely in carrying out their job. To do so would reduce the incentive to take a job, which would undermine the core purpose of universal credit. Briefing note number 9 was intended to clarify that work-related expenses could continue to be disregarded in the same circumstances as apply now.
We also intend, as now, to exempt reimbursement of expenses made to volunteers who give their time to charities and voluntary organisations from the calculation of claimants’ unearned income.
I hope that this account will reassure noble Lords about our intentions for the treatment of expenses in universal credit generally. I think that there can now be a process of refining and enabling service user groups to make their valuable contribution in the fullest possible way, and that is what I shall be aiming to do with my noble friend when we meet. However, these are not matters for primary legislation; they are matters to get right in regulations. That is what we will be aiming to do and I hope that, on that basis, my noble friend will be content to withdraw the amendment.
Baroness Hollis of Heigham
My Lords, perhaps I may ask the Minister a question. I chair a housing association, as I have declared previously, and we pay a very modest sum per year to our tenant board members. One of them was on disability benefits and preferred not to take the very modest emolument because of the interaction with his disability benefits and the problem that he would have of resuming them as and when the emoluments ended. However, because he could have drawn that emolument, it was assumed under benefit rules that he had done so and he could not make that move. I ask the Minister to look at this point. This was, after all, a sort of charitable housing association and he was stuck.
Lord Freud
My Lords, I will look at it, but I am not sure I need to study it very hard. As I understand it, the fear of that individual is that if they earn too much money they get taken off their benefit structure entirely. Because they are earning too much, they are outside the disability benefit structure and they must therefore get on another one and they then have a terrible problem. That does not apply under the universal credit. The worst that could happen is that the universal credit goes down in the period, reflecting the emolument, but they are better off overall. That acute fear of being left stranded goes. In that particular case, and many others like it, the desperate cliff-edge position which currently exists is not there under universal credit.
Baroness Thomas of Winchester
I thank the noble Lord, Lord McKenzie, for his support, as does my noble friend Lady Wilkins. I would like to take up my noble friend’s offer of a meeting before the Bill reaches the next stage, because we were told specifically by the officials of the noble Lord, Lord McKenzie, when he was Minister, that they could not extend this to bona fide NHS research—nothing to do with commercial interests—unless there was a peg in legislation on which to hang the regulations. I therefore do not accept my noble friend’s statement that everything can be done by regulations, because we found that this particular matter could not be done. We are not talking about people who can get a job; we are talking about severely disabled people, who are a million miles from the job market, but they have specific conditions which are needed for vital research. I hope this can be sorted out before the Bill goes any further. We need this peg, and it is not too late to put it in this Bill. I will take up the offer of a meeting, which I have done on many occasions when I have withdrawn this sort of amendment—and, of course, it finally bore fruit.
Lord Freud
We do not need a legislative peg in primary legislation to make changes here. That was a reference to NHS legislation. How we define and work through the different types of income is something which we are going to do in regulation. I can assure my noble friend that, although this is something which is slightly complicated to do, it does not have the desperate urgency that requires it to be done in the next couple of weeks.
Baroness Thomas of Winchester
I am caught between two pieces of advice: one is that we do need legislation and one is that we do not. I am somewhat conflicted, and I would like to get this sorted out before Third Reading. We have been told that for the rules that I read out from the statutory instrument, there was a peg on which to hang it, and that is why they were there. We were told that because there is nothing for NHS research we could not extend it. I shall withdraw the amendment now, but hope that we can resolve this before Third Reading, if not Report.
Lord McKenzie of Luton
Could the noble Lord arrange to send us copies of the earlier advice, because there is some confusion and I am not clear in my mind?
Lord Freud
My Lords, I will have an early meeting with my noble friend on this, and we will take it from there. Subject to that meeting, I will provide that particular advice, otherwise we may go round the houses on this very technical matter. I hope it is one we can resolve pretty fast, with a letter.
Lord Freud
My Lords, the intention is that the housing credit will broadly follow the current rules that apply in housing benefit. For someone to be entitled to the housing credit element of pension credit they will need to live in Great Britain, have reached the pension credit qualifying age and be liable for housing costs that relate to the accommodation they live in. The extent to which a person is liable for the housing costs, what constitutes the accommodation, how we treat temporary absences from home and how we calculate the amount of the housing credit will also be included in regulations.
A person may be entitled to the housing credit whether or not they receive the guarantee credit or saving credit element of pension credit. This schedule also enables us to specify that rates of support may differ by area. So, for example, different housing allowance rates can apply in different parts of the country.
In introducing the new housing credit we will, however, look for opportunities to streamline the benefit and align rules wherever possible. This includes extending pension credit provisions to the housing credit wherever possible. One such area includes assessed income periods. These are specified periods during which a customer is not required to report any changes in their requirement provision—namely, their occupational pensions and capital.
The schedule provides us with the flexibility to determine in what circumstances retirement provision will not be fixed in relation to the housing credit regulations, which will be subject to the appropriate level of scrutiny. The schedule also contains the consequential amendments to other legislation needed as a result of the abolition of housing benefit and the introduction of the housing credit.
This probing amendment would remove flexibility and would work to the detriment of those who, through no fault of their own, require assistance with their housing costs while at the same time making the system vulnerable to manipulation.
The noble Lord asked a large number of detailed questions on this matter. I can deal with some of them but I will answer most by way of a letter. On direct payments to landlords, it is not our intention that pensioners would be part of that regime, which is for working-age people. We are not planning to change the SMI arrangements for pensioners. Uprating will be done by CPI, as it will be with working age. We need capital limits in the system overall, clearly, and we need to determine what the right rates should be. They should be at a level where we do not see a substantial change in practice. As the noble Lord pointed out, this is now done by a tariff income process and, as we move towards an overall position in the housing credit, we need to get the equivalence.
I think that deals with the bulk of the questions. There are one or two more, which I will answer by letter, but, given the assurances about how we intend to use these powers, I urge the noble Lord to withdraw the amendment.
Baroness Lister of Burtersett
My Lords, will the Minister make sure that that letter includes the answer to a question which was asked a few sessions ago but to which the Committee never received an answer? It was not specifically about pensioners but was a more general question about whether mortgage interest will be paid as part of the universal credit or to the lender.
Lord Freud
We are looking very closely at the support for mortgage interest. I can let the Committee know that we are planning to consult on how we do that. Rather than include that point in the letter, I will make sure that noble Lords are informed when that consultation paper comes out.
Lord McKenzie of Luton
I am most grateful to the noble Lord for a number of detailed replies, with some follow-up, but can he just be a little more specific around the capital rules? From his answer, it was very unclear what is intended. We have two systems for housing benefit: we have the cut-off at £16,000, whereas for the pension credit we do not. I am not sure whether those two systems will sit side by side in the new arrangements, or whether there will be some common approach to capital, and whether that will adopt the pension credit approach or the current housing benefit approach.
Lord Freud
My Lords, it will go somewhere in between. It will be a capital limit as opposed to a tariff income approach, but it will be a higher capital limit than that for working-age claimants.
Lord McKenzie of Luton
As I understand it, that will operate for pension credit as well as the housing component.
Lord McKenzie of Luton
I am grateful for that—well, I am grateful for the answer, not necessarily the information. It is the lowest common denominator again. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
Indeed. Perhaps I may finish off with a question. I think that earlier in our deliberations we touched on what would happen if someone sought to challenge the WCA determination, as well as concerns about the fact that their benefit would be withheld during that process. I do not know whether the Minister has anything further to say on that. I think that there was an exchange in the Commons on which I had a note on a piece of paper, which I have lost, but it seemed to give some credence to press reports that people were being actively discouraged from going to appeal. If that were the case, it would be an absolute disgrace.
I think that there is great merit in the amendment. Like the noble Lord, Lord Wigley, and perhaps some other noble Lords, I would not accept it quite as it says. However, when someone says that a person should be in the WRAG group but they should be capable of coming out of it in three months or six months, there ought to be a test of what they would be capable of at that point and whether that would amount to work under this sort of description. I should be interested in the noble Lord’s comments on that.
Lord Freud
My Lords, I should start by making a point about the overall attitude of the Government to people who are disabled or who have difficult medical conditions. We are committed to unequivocal support for those people, and that is what the support group is about. There is extra funding for the group and we are absolutely determined to provide that support. In the midst of the concerns about particular things, and as we try to make sure that the gateway works and that we can find the people who really need our support, that fact can be lost. However, I want noble Lords in this Committee Room to be under no illusion that we want to support the people who need our support. I have already expressed my concern about the fear factor, which I find very disturbing. I also acknowledge that the press in this country sometimes writes articles that none of us in this room find appropriate. I certainly do not find them appropriate and my colleagues in the department find them deeply disturbing. We do not control the press, regrettably, and things are written that we do not like to see. However, I am pleased to put on the record where we stand.
We debate the WCA a lot. We have debated it in this Committee and elsewhere, but, if noble Lords will forgive me, on this occasion I want to try to keep the debate in the context of the Bill.
The work capability assessment uses a number of specific, measurable criteria, covering all types of disability and health conditions, to provide an assessment of whether an individual has limited capability for work. The assessment was designed to take account of chronic and fluctuating conditions. It is not intended to be a snapshot but looks at what someone can do reliably, repeatedly and safely. It takes account of the effects of pain and fatigue. The healthcare professionals conducting the assessment are fully trained in understanding fluctuating conditions. Claimants get a full opportunity to explain how their condition varies over time.
The criteria were developed in conjunction with disability experts, medical professionals and a significant number of disability representative groups. They focus on physical and mental function. Examples of criteria include whether someone can stand or sit for periods of time, their ability to lift and reach, how they learn new tasks and whether they have problems engaging socially. The criteria fully take account of the fluctuating nature of many conditions. The training and guidance for the assessment is clear that where an individual is unable to complete an activity repeatedly or reliably, they will score points against the relevant criteria.
Baroness Wilkins
Does the Minister accept that he has not yet received the report of Professor Harrington’s working party on fluctuating conditions? There may well be recommendations that he has to make in that regard.
Lord Freud
Yes, Professor Harrington is currently looking at two areas: mental health conditions and fluctuating conditions. We have received one but not the other. We will clearly take those into account and look at them closely when they come in. To that extent, the debate today is slightly premature. It may not be later in the process of the Bill.
To pick up on the point of the noble Baroness, Lady Wilkins, on the medical evidence used, all available evidence, including that from GPs or specialists, is fully considered by the department’s decision-makers. The final decision is with the department. It gets a recommendation from Atos and takes that into account with all this other information. Following recommendations by Professor Harrington, decision-makers are now phoning claimants to ensure that they understand the process and can submit any additional medical evidence that they feel is relevant. However, GPs and specialists are not experts in disability assessment. Often, as advocates for their patients, they are not best placed to make a decision that affects benefit entitlement. We would not want to undermine the role of GPs as advocates for their patients.
As a result, the criteria provide a reliable, nuanced and measurable way of assessing limited capability for work. This ensures that a full understanding is gained of an individual’s disability or health condition, the effects of that disability or health condition, how these effects may vary over time and whether it would be reasonable for that person to work or not.
The amendment suggests that an additional test with additional criteria is added to the assessment of limited capability for work. However, the criteria suggested are not readily measurable or nuanced. It would, for instance, be impossible to measure the potential excessiveness of any workplace adjustments because they will vary depending on the size and capacity of the employer concerned.
An additional test would also not provide an objective or more accurate assessment of an individual’s limitations—and in some instances could hinder it. For instance, it would be difficult to provide strong evidence of whether someone currently out of work could work for 26 weeks without significant time off without knowing the type of job they would be in and their health circumstances at the time. Such judgements are difficult to make and, as a result, the criteria would risk being inconsistently applied.
Lord Wigley
May I press the Minister a little further on the position of people who might be capable of work if they have assistance? To the extent that the assistance is not available, would that be a definitive reason why they should not lose their benefits?
Lord Freud
It is clear that a lot of changes are going on and I am not surprised that people do not understand them all. One of the things that we have done means that claimants in the support group can volunteer to go straight on to the work programme, where there is substantial help for them to get back into work. That is one way in which we are helping people who may find themselves in the worst possible position to get into work. We have made a very straightforward mechanism.
I pick up the point of the noble Lord, Lord McKenzie. We are instigating a process whereby people, if they are in the WRAG with a prognosis, are asked by work providers whether they would like to come in at any point—I think at six months. They are then encouraged to volunteer for the process early. They do not move from the WRAG to JSA until there is another WCA. We are talking about a process here; it is a dial for these people, as the noble Lord said, but it has to be understood in the context of how the work programme operates as well as how the WCA operates.
Baroness Hollis of Heigham
My Lords, may I ask the Minister a couple of questions? The first is about Atos. I was slightly taken aback by his statement that he did not want GPs’ and consultants’ evidence going to Atos because they were the patients’ advocates and this was the proper role of the decision-maker. Behind this and other remarks that the noble Lord has made when talking about DLA, for example, is the belief that somehow there is an objective assessment that is to be much preferred to a “subjective” assessment—for example, the sort of diaries that disabled people are encouraged to keep when trying to determine what level of award they would get on DLA. Does the Minister accept the point that two people can have identical physical conditions but very different capacities for work by virtue of their education, mental health, family support networks and, frankly, the savings and income that they have behind them? That dowry of resource would allow someone in an identical physical situation to someone else to go into work when the other person could not.
The Minister seems to believe that there is something objective about this and that it must therefore be left with Atos because there is a sort of box-ticking going on here that is reliable. He believes that the GP, who has extended knowledge of the patient or applicant concerned, is somehow on the patient’s side and is a subjective advocate whose view should not be taken into account. I find that approach wrong. Why, given that Atos is medically qualified, should it not receive advice from other medically qualified practitioners who know the patient’s ability in certain situations of stress?
My second question has nothing to do with that and is about Croydon. From the sound of it, the Government’s Croydon centre is breaking the law of the DDA. Could the Minister follow that up?
Lord Freud
My Lords, I will follow up the Croydon situation. I was not aware of it, even though I was brought up in south Croydon.
Let me try to make this absolutely clear. The whole point of the assessment is to judge whether someone is functionally able to do the job, which is exactly what the noble Baroness was asking for. The point is that it can be done coherently and consistently by people who are experts in that function, whereas GPs and specialists are trained in diagnosis and treatments which are entirely different; it is not their job to see people and make those judgments day in, day out on a consistent basis. But that is what we are looking for. Atos Healthcare professionals are trained in disability assessment, which is assessing the functional effects of a person’s condition or disability. That is exactly what the noble Baroness is asking for.
Baroness Howe of Idlicote
My Lords, this has certainly been a very wide-ranging and passionate debate on these issues, with good reason. I am certain that my noble friend Lady Mar will read it with considerable interest and will no doubt have plenty of issues to raise at a later stage of the Bill, when I hope she will be available. We obviously have to wait for Professor Harrington’s final report, which will be extremely helpful. The various questions that were raised makes one realise how complicated the way through these things will be. Above all, we will need to reassure people with these fluctuating conditions that they will be treated fairly. On my noble friend’s behalf, I thank all noble Lords who have taken part in the debate and beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, we should thank the noble Lord, Lord Wigley, for reminding us of the scope there is in the Bill and the profound consequences that it may have, not only for the universal credit but for all the other parts that are before us today and will be before us in subsequent Committees. I thought the noble Lord, Lord German, was on the point of distinguishing between relevant Ministers and irrelevant Ministers, but he did not quite go there.
We saw today—I am afraid I did not see it all—some of the detailed work that has gone on in preparation for, certainly, a big part of what is in the Bill. However, the point has been made by both previous speakers that it is not only about DWP and England; there is lots of work for others to do, particularly local authorities, who are about to reel under the impact of the Localism Bill and all that Mr Pickles has sought to visit on them.
Questions were raised about new burdens and how they work. It is important that that is factored in and that there is fairness and equity in how these matters are rolled out.
I acknowledge receipt of the Low review. Unlike the noble Lord, Lord Wigley, I have not had a chance to read it yet or to quote from it, but it looks to be a particularly valuable document. I hope I have a chance to read it before we get to DLA later in the Bill.
Lord Freud
My Lords, I am also looking forward to reading the Low review but I have been listening with great intensity to everything said in this Committee today. Social security is a reserved matter, although it will clearly have a limited, tangential impact on areas of policy where the Welsh Assembly and Scottish Parliament have competence, the obvious examples being childcare and housing. It does not, however, include DLA, which was one of the issues raised by the noble Lord, Lord Wigley.
I can reassure noble Lords that we have held, and will continue to hold, regular discussions with Ministers in the devolved Administrations and their officials. We are committed to the smooth and successful implementation of universal credit. To achieve that we are working closely with devolved Administrations and relevant local authorities to help them identify and address the impact that the introduction of universal credit will have on any services that they deliver. We are doing so in line with devolution guidance. My department is continuing to work through the detailed design aspects of universal credit which will be covered in regulations. Throughout this process they will continue to have discussions with the devolved Administrations, as appropriate, on these provisions and on others in the Bill. I can assure the noble Lord, Lord Wigley, that whatever I am saying here is relevant to the whole of the Bill.
I am concerned that this amendment would introduce a new and unnecessary level of bureaucracy. My noble friend Lord German hinted at some of the problems that it would result in. In practice, that would hamper progress and potentially delay the introduction of universal credit, let alone other aspects of the Bill.
Lord Freud
The issue is that if there is an additional, formal process, requiring a formal level of discussion at a formal time before you can clear particular things, that is another element of delay to negotiate when we already have a huge number. We are on a very precise plan of implementation here. Those noble Lords who were able to see the presentation of how we are introducing and implementing universal credit will be aware of the importance of a smooth process. I am concerned to avoid delays due to artificial elements of bureaucracy. Our ongoing discussions with devolved Administrations are the best way to address any impact on devolved services and achieve the successful implementation of these reforms. With that reassurance, I beg the noble Lord to withdraw his amendment.
Lord Wigley
I am grateful to the Minister for his response. I am intrigued by the way in which this bureaucracy is going to be such an imposition. If there are meaningful, ongoing discussions with the Administrations in Cardiff and Edinburgh involving a two-way flow of discussion, after which there is either a meeting of minds or not, that is not an extra level of bureaucracy. If that is not happening and it would be an extra imposition, I would be very concerned because the reassurances we are getting would be insufficient.
Lord Freud
My Lords, let me make myself utterly clear. If we had a statutory duty to discuss and if a devolved Minister were, for any particular reason, unavailable—my noble friend Lord German made my point here—our progress could be slowed. That unavailability could, potentially, be deliberate. We do not want another problem to negotiate when we already have a formal set of agreements on how we relate to devolved Administrations. We are sticking to those and we are talking regularly and informally on how best to get this through.
Lord Wigley
I note what the Minister says. He suggests that there could be some deliberate refusal to engage in such discussions. Does he seriously have examples of that happening that he could cite to the Committee, or is it something that he is imagining?
Lord Freud
My Lords, I could not reveal any confidences about the discussions that I have had with Ministers in devolved Administrations. Therefore, regrettably, I cannot answer that question.
Lord Wigley
I understand where the Minister is coming from. However, the point is that there may well be a difference of opinion between what is perceived as good public policy in Cardiff and Edinburgh and what is perceived as good public policy in his department under his Government. After all, they are different Governments of different political complexion, which will have different priorities. That is true of the current Government in Cardiff and the coalition Government who were there before them. The whole point is that we need some understanding on this.
Lord Wigley
That would indeed be interesting. No doubt we will hear if that is the case. However, on this amendment I was also pressing for assurances—it may well be that the Minister was giving them in the words that he used—with regard to the application of the concordat. I assume from his words that the concordat—I quoted from paragraph 17—is fully applicable and will be in the context of these negotiations; and, likewise, that the assurances of “no surprises” that have been given to local government will also be applied. If there are any direct relationships between his department and local government in Wales, which there could be in the context of housing benefit because there is a direct relationship, will those assurances apply equally? I am sure that the Minister is about to nod that that is his understanding, but I should be grateful if that could be put in writing.
Lord Freud
I repeat my point: we are absolutely moving in line with devolution guidance. We have no intention of doing anything other than that.
Lord Wigley
I have probably got as far as I will get by rattling around this set of bones but this is clearly a matter of some concern. We will not know for certain until the Bill becomes an Act and how this works is turned into reality. However, I very much hope that if, in that reality, it transpires that significant additional costs are landing on local government in England or the devolved Administrations in Wales and Scotland, the Government will pick up the bill in the spirit of the concordat and the other devices that they have if it is their actions that are causing those additional costs. On that basis, I beg leave to withdraw the amendment.
Lord Kirkwood of Kirkhope
I have no idea—it was a thought in my bath. I confessed that at the beginning. However, it is worth reflecting on. Of course the noble Lord is absolutely right—as soon you start thinking about it, you start putting in layers of complexity. I think a challenge to Ministers is not a bad idea, even if it was just on the wall or behind the desk—I would settle for that. I beg to move.
Lord Freud
My Lords, in some areas I broadly agree with the Delegated Powers and Regulatory Reform Committee’s suggestions, and the Government have brought forward amendments to make these changes. Where key principles are established the first time the powers are used, these amendments will make the regulations subject to the affirmative procedure in the first instance. As to Amendment 66, Clause 6(1)(a) allows for regulations to set out circumstances in which a claimant will not be entitled to universal credit even though they meet the conditions of entitlement. I am grateful for the opportunity to reassure the Committee that the negative procedure will afford Parliament adequate control over the use of this power.
As I set out during our debate on Clause 6, there will be a number of specific groups who will not be able to access universal credit. These may include certain prisoners and children leaving full-time care who remain the responsibility of the local authority where payment of universal credit would lead to duplication of provision. This will broadly reflect similar rules in current benefits.
Similarly, I would like to reassure noble Lords that it is appropriate for the regulations on hardship and claimants falling into the no work-related requirements group to be subject to the affirmative procedure only in the first instance. In both cases, our intention is that the initial set of regulations will clearly establish the key principles of the new system. We have already provided noble Lords with a draft of the regulations to be made under Clause 19(2)(d). We have also published a briefing note on the conditionality threshold. We have debated these matters at some length earlier in Committee. Once the system that we have set out is in place, it is unlikely that the regulations will change significantly, and I hope that is the assurance that my noble friend Lord German was looking for.
There are three areas where I am unable to accept the committee’s recommendations or the noble Lord’s amendments. First, the committee and the noble Lord have suggested that Clause 47 should be removed from the Bill. Clause 47 relates to the parliamentary procedure for regulations relating to the requirements on jobseeker’s allowance claimants to be actively seeking, and available for, work. These powers are currently subject to the affirmative procedure. The clause makes them subject to the negative procedure.
These powers were groundbreaking when first introduced in 1995, as the noble Lord pointed out. However, the House now has had more than 15 years experience of how these powers are used. There is a wide understanding of what the phrases “actively seeking” and “available for work” mean; in fact, it fundamentally underpins our active labour market approach. We believe that this experience means that it is now far more appropriate that this power is subject to the negative procedure. Their use is now well established and we have no intention of departing from that precedent.
Secondly, Clauses 33 and 89 allow for supplementary, incidental, transitional and consequential amendments to other legislation to be made through regulations. To pick up on the point that my noble friend made about the Scottish Government, who have powers under Clause 33 to make consequential amendments in their area of remit, they specifically requested that these regulations be made by affirmative procedure in the Scottish Parliament. This was the result of one of our helpful non-statutory discussions, which I am sure an FOI request will show in all its glory. Amendments 70 and 99 would make any regulations that amend primary legislation subject to the affirmative procedure.
It is likely that a large number of minor amendments to other legislation will be necessary as a result of the importance and scale of the changes that the Bill introduces. It is not unusual for some of these changes to be made through secondary legislation, and such consequential powers are usually subject to the negative procedure. Moving away from this precedent would take up a very significant amount of parliamentary time and could pose a risk to the timetables for both universal credit and personal independence payment. We therefore feel that the negative procedure remains appropriate.
Amendments 55E to 55G and 69ZA seek to make regulations that contain definitions of “disabled”, “severely disabled” or “work” subject to the affirmative resolution procedure. It inserts a new subsection into Clause 43 and consequential amendments to the terms where they arise in Clause 41. I can reassure the noble Lord that these amendments are not necessary. Clause 43(3) already provides that a wide range of regulations will be subject to the affirmative procedure the first time that the power is exercised. This includes the regulations to be made under Clause 12 providing for additional amounts that will include the definitions of the terms mentioned in the amendment. Noble Lords may recall that the illustrative draft regulations on elements provided to your Lordships already contain a draft definition of “disabled” and “severely disabled”.
Under Amendment 69ZA, the noble Lord seeks to significantly widen the scope of regulations subject to debate in both Houses, covering consequential amendments and changes to working age benefits and pension credit. It would be completely impractical for this House to debate the numerous consequential amendments being made to both primary and secondary legislation, and a poor use of parliamentary time. I have already explained why it is more appropriate that Clause 33 should remain subject to negative procedures, but none of the other provisions identified by this amendment was covered by the report of the Delegated Powers and Regulatory Reform Committee. We are therefore satisfied that the negative procedure is appropriate.
With regard to universal credit, I should also point out that all the regulations on entitlement, awards and claimant responsibilities will be in a single set of regulations. They will necessarily be affirmative in the first instance because if any regulations within a set are affirmative they all are. So, even if the Bill does not require the affirmative procedure for specific points, it will apply in practice.
Amendment 71 would introduce a different form of scrutiny for universal credit regulations requiring the Secretary of State to avoid creating any unnecessary complexity into the system. I strongly support the spirit of the amendment in the name of the noble Lord, Lord Kirkwood. A key aim of universal credit is to simplify the benefit system. Simplification is a publicly stated, fundamental principle that has guided the design of the new system. Any requirement for simplicity would have to be finely balanced against other considerations, such as affordability or easing the transition to work. I acknowledge that this is a probing amendment, but perhaps a duty to consider the simplicity of any changes, as suggested by the noble Lord, would be a better approach than that in the amendment. However, any Government would clearly have to be concerned about the detailed interpretation of simplicity, which, as the noble Lord, Lord McKenzie, took delight in pointing out, is a subjective term.
Nevertheless, I will look at this idea very closely. I can assure the noble Lord that we will put in place a number of non-legislative safeguards to protect universal credit from unnecessary complexity. These include governance processes to ensure simplification and consistency in policy design, and working with claimants to ensure that universal credit is simple to understand and administer.
Given these explanations, I urge noble Lords to withdraw or not move their amendments.
Lord McKenzie of Luton
My Lords, I am happy to do so. However, I should like to comment on the issue of avoidable complexity. The Minister said that he had to balance that against issues of affordability and ease in transition. I accept that, but you also have to strike a balance around issues of fairness. One of the problems of simplicity and standard systems is that they do not necessarily take account of some of the individual circumstances that have to be addressed. You see it perhaps more acutely in the tax system, but it applies equally to the benefits system. Although I clearly support getting things as simple and straightforward as they can be, fairness should also be one of the balancing factors. I beg leave to withdraw the amendment.
Lord Freud
My Lords, I share the noble Lord’s concern that the benefits system must be fair, efficient and affordable, which is indeed why this Bill is before the Committee today—to ensure that benefits are well targeted and fair and the system is simple to understand and simple to administer.
The first of these amendments would introduce a claimant regulatory body for universal credit. We are committed to involving claimants throughout the development of universal credit. This involvement will ensure that issues are known, understood and mitigated as universal credit is being built. As part of this, we are already conducting a programme of research among a broad range of future claimants and are testing the design of the claimant commitment with claimants, front-line staff and stakeholders. This process will continue over the coming months to ensure that claimants have real and sustained input into the creation of the new benefit.
The other amendment in this group would create a wider office for social protection, looking at the benefits system as a whole. There are already a number of other bodies with oversight of the benefits system and any changes made, not least the Social Security Advisory Committee. As well as scrutinising regulations, the committee comments on a range of operational matters, especially in relation to claimants’ interests. While I am grateful for the contributions of the noble Baroness, Lady Lister, and my noble friend Lord Kirkwood, I am not convinced that another body is needed. The coalition Government are committed to reducing the number and cost of quangos, and increasing accountability by transferring the responsibility for key decisions on public policy back to Ministers. Ministers are held to account in Parliament, including by powerful committees such as the Public Accounts Committee and the Work and Pensions Select Committee, not to say the Chamber of the House itself.
I do not intend to reverse this direction of travel, and I would urge the noble Lord to withdraw his amendments.
Baroness Lister of Burtersett
My Lords, before the Minister sits down I would like to make clear that I was not arguing for a separate body. I was arguing that Social Security Advisory Committee could perhaps be asked specifically to consider, on a regular basis, the issues contained in the noble Lord’s amendment—possibly in its annual report—namely the adequacy of the different elements of the system, the sustainability and the way the different elements of the system fit together. It would be very helpful to have that kind of annual overview. Perhaps the Minister can take that away and consider it.
Lord Freud
My Lords, I know it is not our House, but I point out that the Work and Pensions Select Committee has that remit—a very direct remit to look at the system overall. If you are looking at how individual claimants are treated, we have a process of tribunal and independent review. There are a whole number of different processes.
Baroness Morgan of Drefelin
Can the noble Lord tell us who would be responsible for promoting and funding research into these questions? If there is not a body which is taking an interest in evaluating the impact of changes in social security, who will be funding, gathering and evaluating independent evidence looking at the impact of these changes or changes like this?
Lord Freud
My Lords, how we research changing universal credit is something that I am taking an active interest in getting on top of now, as I discussed on a previous day. Clearly there is a lot of research. The department puts out an enormous amount of research every year. Huge tomes come out monthly, and I know noble Lords enjoy reading them all. There is no lack of adequacy of independent research on DWP matters.
Lord Kirkwood of Kirkhope
My Lords, my main priority is to get back to my bath as soon as possible. If I do not get my 7 pm train I will not do that, so I thank the Minister for his reply, and I am happy to withdraw the amendment.
Lord Freud
“Pilot schemes
(1) Any power to make—
(a) regulations under this Part,(b) regulations under the Social Security Administration Act 1992 relating to universal credit, or(c) regulations under the Social Security Act 1998 relating to universal credit,may be exercised so as to make provision for piloting purposes. (2) In subsection (1), “piloting purposes”, in relation to any provision, means the purposes of testing—
(a) the extent to which the provision is likely to make universal credit simpler to understand or to administer,(b) the extent to which the provision is likely to promote—(i) people remaining in work, or(ii) people obtaining or being able to obtain work (or more work or better-paid work), or(c) the extent to which, and how, the provision is likely to affect the conduct of claimants or other people in any other way.(3) Regulations made by virtue of this section are in the remainder of this section referred to as a “pilot scheme”.
(4) A pilot scheme may be limited in its application to—
(a) one or more areas;(b) one or more classes of person;(c) persons selected—(i) by reference to prescribed criteria, or(ii) on a sampling basis.(5) A pilot scheme may not have effect for a period exceeding three years, but—
(a) the Secretary of State may by order made by statutory instrument provide that the pilot scheme is to continue to have effect after the time when it would otherwise expire for a period not exceeding twelve months (and may make more than one such order);(b) a pilot scheme may be replaced by a further pilot scheme making the same or similar provision. (6) A pilot scheme may include consequential or transitional provision in relation to its expiry.”
Lord Freud
“( ) section 4(7) (acceptance of claimant commitment);”
Lord Freud
Lord Freud
“( ) section 18(3) and (5) (work availability requirement);”
Lord Freud
Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton
My Lords, I will speak briefly in support of the thrust of the amendment. It raises issues about the right age at which full conditionality should apply, and perhaps takes us back to debates we had on another Bill. Perhaps today is not the occasion to revisit them. However, I am not sure that we have debated thus far in the Bill the basic conditions for accessing universal credit. This is predicated on the fact that somebody is within the system and subject to full conditionality. This is what the amendment seeks to ameliorate. One basic condition for accessing universal credit is that somebody should not be receiving education. I presume that that is meant to cover broadly the same arrangements as exist under JSA. Perhaps the Minister will clarify that.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we recognise the value of further education and training. In England, the Department for Education is committed to fully funding education and training for all young people up to the age of 19. Everyone aged 19 and over is eligible for fully funded provision to achieve basic literacy and numeracy as a minimum to the equivalent of five GCSEs at grades A* to C. This is funded by the Department for Business, Innovation and Skills.
Higher education, as noble Lords will be well aware, is funded through a system of loans and grants intended to cover the cost not just of courses but of living expenses. Typically, the benefit system does not allow students in full-time education to claim benefits. That is in recognition that such individuals have access to other forms of financial support, either through the education system itself or because they are living at home with their parents. However, the existing system recognises that there are some circumstances where additional financial support is necessary. In particular, in income support, certain young people, for example, those who are estranged from their parents or lone parents with a child under seven, may be entitled to benefit while studying. Students who are themselves parents can also claim child tax credits.
Under universal credit, we are looking to maintain the status quo. I hope that that gives some reassurance to the noble Lord.
Baroness Hollis of Heigham
I am sorry to intervene so early, but unless I am badly out of date, there are two further circumstances in which you can continue to be on benefit while having education which have not been enumerated by the noble Lord. One of these is if you are a young person in FE and your FE contact hours are less than 16 hours a week and that is therefore thought not to impede your search for work, although your study time at home may be a multiple of that time. That is a key group, because most FE courses do not involve more than 16 hours a week of face-to-face contact, which therefore exempts quite a lot of the people my noble friend was talking about. The second exemption, as I recall, is that if you are more than halfway through a period of training—if it is an 18-week period of training and you have done at least nine sessions—you are allowed to continue even if you still receive JSA. Will the Minister confirm that those other two exemptions also apply to people on JSA or IS?
Lord Freud
Yes, my Lords, I am pleased to confirm that it is our intention to maintain those exemptions.
Baroness Hollis of Heigham
Forgive me. Would not the first of those neatly fit my noble friend's concerns?
Lord Freud
Yes, I am trying to drive to that point, if I am allowed to give the full picture. I was trying to do so formally so that it was on the record. I am trying to give a general level of reassurance. I am very sympathetic to the points that the noble Baronesses, Lady Lister and Lady Meacher, are making. I am not a “work first” devotee; I think that human capital is of value. In the work programme and the design of universal credit, we are trying to pull those two things, which have been very far apart in the system, back together. I understand the points being made and I am trying to describe how, in what is a difficult balancing act, we are trying to optimise the position.
Let me continue. As I was, I hope, reassuring noble Lords, we are aiming to maintain the status quo, and that includes carefully considering transitional protection for students currently entitled to claim income support as the age of the youngest child is brought down to five. Exceptions to the general rule will be set out in regulations in due course. Where a claimant is in full-time education and entitled to universal credit, they will fall into the group subject to no work-related requirements and, of course, not be required to search for or be available for work.
Beyond that group, we have made it clear that, in the absence of any other barriers, claimants with youngest children aged over five are expected to search for and be available for work. They can access any of the free training to which they may be eligible, but will need to fit that around compliance with the work-related requirements, so, typically, any training will be done part-time or through evening classes. I emphasise that they may be eligible for support with their childcare costs, because work and training are not mutually exclusive activities.
On the human capital point made by the noble Baroness, Lady Meacher, we are committed to improving skills at all levels. The new next steps service, the careers advice service and Jobcentre Plus are there to help people both in and out of work with their choices of jobs, careers and training. Funding for workplace training in England will be prioritised on small to medium-sized enterprises, to help employers with small workforces train lower-skilled staff.
Where training is required to address a skills gap that prevents an individual from entering work, work-related requirements will be adjusted or lifted as appropriate. This matches the current system in JSA, where claimants can be referred to qualifying full-time training to help them move into work, and are treated as having met work search and availability requirements. I hope that this makes our position clear, and on that basis I urge the noble Baroness to withdraw her amendment.
Lord Boswell of Aynho
Further to that intervention, will the Minister also comment on the thought that occurs to me? It is that the test should be the value added from the education sought, at whatever level that happens to be.
Lord Freud
There is a lot of change going on in this area, as noble Lords will know. We are committed to picking up the recommendations of Professor Wolf, who wrote a stunningly important report—one of the best reports in this area that I have ever read. There are some principles in there about funding following the individual which have not been fully worked out. I am not discussing a static situation here. On the question of the check-out counter and fitting it around A-levels, as things currently stand the position is that the person would have to take the check-out job and fit the A-level around that. However—I hope that noble Lords can read between the lines—this situation has movement in it in the years to come, given what the Department for Education is determining to do around the Wolf report. I do not think that this is the last word on the matter but it is the last word as far as this Bill is concerned at this particular time.
Baroness Meacher
Would the Minister take this away and think about how to word the legislation here and at DWP in order to allow for flexibility in, one hopes, not too many years’ time in response to the education ministry?
Lord Freud
I will take that on board. This is a very important point. It is not one that I would cavalierly dismiss at all. How we raise human capital among people who have perhaps not had as good a start in life as we would want them to have is a central point. I will think about it and try to make sure that the way we design the structure will allow the flexibility to incorporate future developments. I am grateful for this particular amendment.
Baroness Hollis of Heigham
My Lords, I would like to add a further comment to the noble Lord’s open-mindedness on this, which is appreciated very much. A lot of research shows that work is the best form of training in the first 12 months or so at an entry point. If you roll forward, six or seven years down the line, those who have invested earlier in education at the expense of early access to work find they are able to float themselves off the bottom and get off universal credit. The key question is not whether the best education or training either follows or precedes work but over what time scale this is judged. All the research shows that, if you are patient enough and give it about six years, it is the amount of education you have had, rather than work-based training, that allows you to lift yourself off the benefit track.
Lord Freud
My Lords, we are getting into philosophy here. I accept the point and have always been uncomfortable with the “work first” philosophy. It worked in the short term, as the noble Baroness has said, but the evidence is that, in relative terms, we have a poor workforce because we have too many people with no skills and too few with intermediate skills by comparison with our main competitors. We have to think about the balance between “work first”—which does get people a job—and the risk that training is sometimes used as an excuse to do nothing. There is a difficult balance here. We have not got it right. We had a welfare-to-work system that got it completely wrong. We are trying to pull it together. I do not think that this is going to be a rapid process but everyone in this room knows that it is very important to get this right. It will take some years to get it right but we are beginning to travel in the right direction.
Baroness Lister of Burtersett
My Lords, I thank all the noble Lords who have spoken in support of this amendment and who have helped to push the Minister slightly further than he had intended to go when originally reading from his brief. I am pleased to know the Minister is not a “work first” devotee. I was going to say, “You could have fooled me”, but his response to the noble Baroness, Lady Meacher, has confirmed that is the case and I welcome the spirit in which the Minister has responded. Even I am beginning to pick up the ministerial nuances to understand that was a helpful response.
My noble friend Lady Hollis helpfully reminded the Committee of some of the exemptions that exist and it is helpful to have on record that those exemptions will continue. The noble Lord said that it is always possible to do training in the evening. If you are a lone mother, trying to bring up children, trying to do your job and support them in their education, and to keep them off the streets, is it realistic to think that you are also going to do training as well? It is asking too much of lone mothers when we already ask too much of them. We expect them to be responsible, in paid work, in education, keeping their kids off the street and so forth. I hope the noble Lord will come back at Report with some response to what the noble Baroness, Lady Meacher, suggested in terms of opening up the potential for the future in the flexibility of this clause.
The noble Baroness also raised a question about the context of government expenditure cuts. It is not clear that this is going to cost very much to extend beyond the exemptions that already exist for this group. It would be helpful to know what the cost would be of doing it now rather than at some future date. Perhaps the noble Lord could let the Committee know. I suspect it would not be very much at all. In the spirit of the human capital approach, I am not sure what the stumbling block is to doing it sooner rather than later. I beg leave to withdraw the amendment.
The Lord Bishop of Bath and Wells
My Lords, I enter the debate with a little trepidation. Like other Members of this Committee, I am sure, a number of letters have been sent to me and various cases put. I have had a particularly heart-rending one, running to several pages as so often these letters do, from someone who has fairly severe mental disabilities, according to the letter, and who has responsibilities at the same time, it seems, for a disabled mother. My understanding of the principle of conditionality at the moment in relation to unemployment benefit is that she could be penalised under this process. I would like some assurance that where severe disability is in place, as it were, we will be sure to safeguard the well-being of such people and that they should not be penalised in these circumstances.
Lord Freud
My Lords, currently when a single JSA claimant is sanctioned we stop payment of the entire benefit, which is usually around £67 a week. Under the universal credit, sanctions will reduce the award rather than stop payment. The amount of the reduction will be set with reference to the standard allowance.
Lord McKenzie of Luton
If the Minister will permit me, is that not simply because the housing component is added in as part of the universal credit? The sanction would not apply to housing benefit currently, it is the core standard amount which is equivalent to the JSA amount.
Lord Freud
Yes, the noble Lord has got it precisely right and I am grateful to him for summarising it for me. Where a claimant is in receipt of the maximum amount of universal credit, that universal credit will not be reduced below any amount included in their maximum amount for housing, children, disability and so forth. However, where a claimant is earning money and has other earnings over the disregard levels, the sanctionable amount will be a fixed amount not dependent on the level of the award. In circumstances where a claimant’s award is less than their maximum amount because of earnings, a sanction could reduce universal credit to less than the additional amounts for children and housing included in it. That, I hope, is obvious from the numerical examples I shared with noble Lords yesterday. Claimants’ other income will offset such reductions.
Fundamentally, the sanctions regime is designed to do what it does currently, albeit within the universal credit structure. We want to create a clearer and stronger system which provides clarity about the consequences of non-compliance and a more effective deterrent against repeated non-compliance. I can confirm to the noble Lord, Lord McKenzie, that the sanction regime and a sanction decision will not be contracted out. Clause 29, headed, “Delegation and contracting out”, does not include sanctions.
Clause 26 provides for higher-level sanctions of up to three years for claimants subject to all work-related requirements who fail to meet their most important requirements such as accepting a job offer. Failures sanctionable under Clause 26 clearly damage a claimant’s employment prospects and it is right that we have strong sanctions in place to deter such behaviour. Amendment 51FZD seeks to limit the duration of higher-level sanctions to one year. I can assure the Committee that we expect that three-year sanctions will apply only to a very small proportion of claimants who have repeatedly breached their most important requirements and where earlier sanctions have not worked to change behaviour.
Lord Boswell of Aynho
If there is repeat offending and therefore a series of sanctions is imposed, can that extend beyond the three-year period as one shades into another or is there a maximum term of three years?
Lord Freud
In the way it is structured, there is a maximum if you are on a particular level. It absorbs the other sanctions, if you like. As to why we have an escalating sanctions regime, the reason is very simple. The current sanctions regime is difficult for claimants to understand. It is important that there is a real escalation so that behaviour is changed. That is why we have created this structure, and why it is different. Also, as people see very evidently what the repercussions of not complying are, as they start to see the costs quite plainly, we do see a change in behaviour. That is why we expect only a small number of people actually to hit the higher level of sanctions.
Baroness Hollis of Heigham
May I add to that? I was going to wait until the Minister finished, but I wish to add two points which are germane to this discussion. First, the noble Lord is assuming—I absolutely understand why he would—that people respond rationally to sanctions. However, the group with whom he may well be dealing are those whose lives are feckless, chaotic and without much shape. In my experience, those people are semi-literate and probably do not understand what is going on when the sanction is imposed. It is just one of those things that happen to them in a passive way, which means that a high obligation is placed on staff, with the aid of easy-to-read literature and all the rest of it, to make very clear what is going on and what the nature of those sanctions are. My experience of people who have been sanctioned is that they do not know why they have been sanctioned.
Secondly—I was waiting to hear the noble Lord refer to this but he has not done so, so perhaps he will go on to do so, in which case I apologise for anticipating him—we have always had a hardship category in relation to sanctions. For example, if you have dependent children the level of sanctions is limited so that, because of your hardship, you are not sanctioned all the way. Disabled people and those with a mental health problem would in my view come into the category of vulnerable people entitled to a hardship adjustment so that their benefit is not completely wiped out. Again, this requires high levels of training and support from the very people who the noble Baroness, Lady Thomas, identified; namely, the disability employment advisers in Jobcentre Plus offices. Perhaps the noble Lord can reassure us on those two points. First, can he assume that people with such chaotic lives will understand the rationality of a sanctions system? Secondly, will the hardship regime apply to some of the people who were identified by previous contributors to this debate?
Lord Freud
My Lords, let me deal with the questions asked by the noble Baroness, Lady Hollis, straight away. Claimants who fail to meet their responsibilities will have an opportunity to explain why they have done so and show good reason before a decision to sanction is made. After a decision to reduce the claimant’s award amount is made and processed we expect that, as now, a letter will automatically be sent to claimants setting out their appeal rights and details of how to request information on why they have been sanctioned. We will also communicate the amount and duration of the award reduction and, in the case of lower-level failures, what the claimant can do to re-engage and bring the open-ended part of the sanction to an end. We will not sanction claimants with limited capability for work, or those who have learning difficulties or mental health conditions, without first making every effort to contact them, their carer or healthcare professional to ensure that they have fully understood the requirement placed on them and had no good reason for failing to meet it.
On hardship, we are addressing the hardship arrangements in a later group but we are looking to maintain a hardship regime which will act in a similar way, although we will probably make some adjustments to it. However, we can discuss that a little later. I should clarify the point about the overlapping of different sanctions. Where a claimant subject to one sanction receives another, both sanctions run concurrently with one reduction suppressed. This means that for the period in which two sanctions overlap, the second sanction has no impact, as I said earlier. Under universal credit, where a claimant subject to one sanction receives another, the period of the second sanction would be added to the total outstanding reduction period. A claimant’s award amounts would be reduced for the entire duration of both sanctions. This ensures that claimants will always face the full consequences of failing to meet their responsibilities. There will be a change from the current system to the universal credit system. I apologise if I slightly misled the Committee on that.
Amendment 51FZZA seeks to prevent the imposition of higher-level sanctions on disabled claimants until such time as a disability employment adviser has been consulted. First, I assure noble Lords that we recognise that high-level sanctions of up to three years are not appropriate for all failures. Disabled claimants with limited capability for work will not be subject to requirements that are sanctionable at the higher level. Clause 27 provides for appropriate sanctions for failures that should not be subject to high-level sanctions, such as failures to attend a work-focus interview or a training course.
Disability employment advisers play an important role. I will pick up on the point made by my noble friend Lady Thomas. I hope that my answer will get to the nub of her acute question. The role of disability employment advisers is to assist claimants with a disability or health condition who need extra support to gain or retain employment. It is decision-makers who will look at all the available evidence and consider whether a sanction should be imposed. It is right that we should retain the clarity of roles in the system. I will not talk about the training of disability employment advisers because it is not strictly relevant in this context. If the noble Baroness would like a letter describing it, I will write to her, but it is not the point here. What matters is the training of the decision-makers. They will receive in-depth training. This will include how to assess evidence and determine whether a claimant has demonstrated good reason. Where necessary, decision-makers may seek additional advice from specialists, including medical professionals, with the consent of claimants.
Lord Boswell of Aynho
As I read my noble friend, he is saying that if a decision-maker were considering the case of a person subject to a sanction, the representations made by that person about the problems they had in complying with their programme would automatically be taken into account, even if they were rejected on their merits by the decision-maker.
Lord Freud
I thank my noble friend for looking for clarity. There is a layer of protections here. We have a highly trained decision-maker with a specific job of making the decision. Also, the claimant can look for reconsideration within that office. Beyond that, they can look to reduce a sanction by going to an independent tribunal. There are layers of protection. The objective is that claimants who demonstrate good reason will not be sanctioned.
We will also maintain other protections. One is that we will continue to visit the homes of claimants with limited capability for work and a mental health condition or learning disability, to help us understand why they did not meet their requirement.
Baroness Howe of Idlicote
My Lords, I remain worried by the point that was raised about a basic understanding of what I call the coalface: in other words, when you are in a face-to-face situation. It is important to have some training and understanding, not least in the example that the Minister gave of a well known and common complaint. It worries me that this will be dealt with by experts at various levels of appeal rather than being sorted out much earlier in the process.
Lord Freud
My Lords, it is important that the coalface does not do the sanctioning. It is important that there are really well trained people doing this. This is a complicated area that needs to be got right. These are some of the most highly skilled people in Jobcentre Plus aiming to do that with all these supports.
In response to the concerns raised by the noble Lord, Lord McKenzie, on Amendment 51FB, I want to make it absolutely clear that there are no benchmarks and no targets for sanctions referrals. Jobcentre Plus gathers a range of management information to support its work, as you would expect us to do. On the issue of numbers, over the last year, the number of sanctions and disentitlements rose by around 270,000 from approximately 490,000 in 2009-10 to around 760,000 in 2010-11. There are a complex range of reasons for this increase, including the introduction of new requirements, a slight increase in the average claim duration and a refreshed approach to monitoring compliance with requirements designed to maximise claimants’ chances of finding work. A particular reason is due to the 2010 rule change that led to a sanction rather than disentitlement for failing to attend an employment interview. The number of sanction referrals to decision-makers is a key piece of management information. It helps local mangers assess how consistently JSA conditionality and sanctions are being administered in their area. Managers may compare rates of referrals across different areas when analysing the data, but there is no benchmark and certainly no right or wrong level of referrals. The collection of management information also allows the department to monitor and evaluate the impact of sanctions. I urge the noble Lord, Lord McKenzie, to withdraw the amendments.
Baroness Lister of Burtersett
My Lords, my attention may have strayed, but did the Minister answer the question of the noble Lord, Lord Boswell, about the reports over the weekend that fines deducted from benefits are going up to £25, which seems to be a draconian response in the context of the riots in which we read about it? Is this something that can be done by regulation, or will it be an amendment to this piece of legislation? It is an issue about which some of us are very concerned.
Lord Freud
My Lords, the press reports were about the level of deductions to pay fines and whether the current limit was right for people who had committed a crime and been fined. Although this is breaking news, this is not an area I am confident we will consider in this particular Bill because it is about fines. It is not a matter today that we will need to consider.
Baroness Sherlock
My Lords, I want to ask the Minister two questions. The first is related to the questions asked by my noble friend Lady Lister and the noble Lord, Lord Boswell. I remind the Committee that I am a member of the Communities and Victims Panel looking at the impact of the riots, although my question is not specifically about the riots.
On the question of fines, what account can be taken of any fines the claimant may be committed to paying when making a decision to sanction the benefit. For example, it may be the intention to only sanction or remove the standard element but if the household is already committed to paying fines, inevitably that is going to be taken out of elements that are intended for children or housing, so the effect will be to eat into those. Could the Minister explain how that will be taken into account?
The second question returns to what I think I heard him saying in response to my noble friend Lord McKenzie in relation to the final amendment in this group. I believe that he said there would be no targets or benchmarks for sanctions. Could he reassure the Committee a little further? Are there any targets, performance indicators, measures or benchmarks that would have the effect of incentivising an increase in the number of sanctions? I would be happy to repeat that if it would be helpful.
Baroness Sherlock
I am not sure I can, frankly, but maybe Hansard can. I talk too quickly even for myself sometimes.
The Minister was kind enough to say in response to my noble friend that there were no targets that were designed to incentivise an increase in the number of sanctions. Are there any targets, performance indicators, measures or benchmarks—he will know the language better—that would have the effect of creating an incentive to increase the number of sanctions? The Minister probably knows what I am getting at; one does not have to be directly incentivised to sanction people. If, for example, there were pressure on the department to reduce either the number of people claiming certain benefits or the cost of the programme element of the budget and therefore the cost of those benefits, one way to achieve that might be sanctions. I am not suggesting that they would do so but inevitably, once there are measures, someone responds. There might be other ways of doing that. Could he answer that for us?
Lord Freud
I shall deal with the second point from the noble Baroness, Lady Sherlock, first. The point that noble Lords are concerned about is whether we are going to have any more private traffic-warden incentive systems—that is the issue. That is why noble Lords are concerned that we do not incentivise people to “clamp” claimants. I make an absolute assurance that we understand how unacceptable that is or would be, and we are determined that there will be no incentivisation in Jobcentre Plus to sanction. We have trained our advisers—the decision-makers, rather—to make these decisions in as neutral and considered a way as possible, in the interests of changing the behaviour of the individuals to make them do something that in the end will be of benefit to them. Getting them into a job is vital, and we are keeping the regime of conditionality. I make that assurance to noble Lords.
On the noble Baroness’s second question—or rather the first one, if I learn to count—we are able to vary the rate of recovery depending on personal circumstances so we would be able to take that into account and, conversely, courts would be able to take that into account.
Lord McKenzie of Luton
My Lords, I thank the Minister for his detailed response. I am comforted—indeed, I recognise some of the script—about the protections that are in the system to support disabled people, people with mental health problems and particularly those with fluctuating conditions; that has been a long-running theme in our debates over a number of years. I accept that the disability employment advisers are not necessarily the right people to do this, for so long as there is capacity in the system, it is part of the process.
I also accept what the Minister says about no targets or any other incentives to encourage sanctions, but we are entitled to a better explanation of what I understood the figures to be: last year the number of people sanctioned was 490,000, while now it is 760,000. Something is happening out there, is it not? The schedule that I have, which was a Parliamentary Answer that looked at the 40 per cent increase over that period—March 2010 to September 2010—is headed “Sanctions and Disallowance Decisions”, so the switch between sanctions and disallowance that the Minister prayed in aid does not seem to have affected that outcome. It is, in anyone’s language, quite a dramatic increase. We should remain very worried about that. I accept the point that my amendment in relation to people with disabilities was focused on Clause 26 but it is within Clause 27 that their work-related activity falls.
Could the Minister also take us through the various sanctions and say in respect of each what happens to conditionality while the sanction is being applied? Is there an ongoing obligation to comply? What is the sanction if you do not? In what circumstances can those sanctions be switched off—and which of them can be—by re-engagement and rejoining conditionality by individuals? Particularly for the longer sanctions, if there were no obligation to engage in conditionality over that period, what ramifications would that have for, for example, on the job programme? Could the Minister let us have his views on that?
I was going to raise the issue of the £25 additional possible deduction in relation to the next amendment on hardship payments and may revisit that. The Minister made reference to people’s rights of reconsideration and appeal. How would he judge the impact of the impending changes to legal aid cuts, where there will no support to go to an independent tribunal because legal aid for help in welfare benefits is being removed entirely? What compensating arrangements are proposed to address that quite vital withdrawal?
Lord Freud
First, one of the drivers of the increase in sanctions was the introduction and phased roll-out first of the jobseeker’s regime and then of flexible New Deal. In one way, we are looking at the history of some of the changes made by the last Government. Secondly, conditionality still applies through the sanctions regime.
Next, the noble Lord asked for a breakdown of the different sanctions regimes. That is rather complicated. I can send him a table of that, rather than going through it in great detail. The summary is that the lower-level sanctions switch off on compliance. Those are one-week to three-week sanctions—rather short by comparison with the higher-level sanctions. Those are essentially grouped around the more vulnerable people. They take those and when they start to comply the sanction comes off and there is a short period. I should remind your Lordships that the table I suggested is sitting there in front of the noble Lord. It is beautiful that he is so far ahead of me. I will not go through that in entire detail. I remember that it took a long time to assemble that table. I spent a lot of time on it.
On legal aid, the point is that one does not need legal issues to be debated here with all the paraphernalia of a legal case. These are practical, fact-finding tribunals where, in our view, one does not need that paraphernalia. It is not particularly helpful.
Lord McKenzie of Luton
Will the noble Lord accept that people in those circumstances may need advocacy, which is being withdrawn?
Lord Freud
My Lords, they may need advocacy but they can find supporters and bring them along. However, it is not a legal process; it is a fact-finding process.
Baroness Hollis of Heigham
Did the noble Lord say that for somebody who was sanctioned, for example by the removal of benefit for three years, conditionality will still apply while the sanction operates? How will it apply if there are no benefits left to sanction?
Baroness Hollis of Heigham
That might be the expectation, but how would they be sanctioned?
Lord Freud
This is an extraordinarily small group. In extremes, we would look to run to more sanctions on top. I described how sanctions would work concurrently. We are looking at a sanctions regime that will replace the current regime, which states that people are not entitled to JSA because they are not complying at all with their conditions. In some ways it is a rather lighter regime than the current one.
Baroness Hollis of Heigham
Perhaps I could suggest to the Minister that the most successful use of sanctions is when there is a very close connection between behaviour, the sanction and the ability to lift the sanction by changing behaviour. I urge him to think again about running sanctions for very long periods and still expecting conditionality to apply. Frankly, that is in the clouds. If you are going to change behaviour, you need sanctions that will get switched off if there is compliance for a certain period of time. That is the way to get changes in behaviour to stick, which is what we all want. If it seems that nothing you can do can make any difference for at least two years, nothing will happen.
Lord Freud
My Lords, we are talking about a sanction that, to put it bluntly, is there as a deterrent. We are not anticipating that more than a handful of people will move into that position. One can get overinvolved in what it means. The point of having a regime that builds up is to act as a very powerful deterrent.
Baroness Hollis of Heigham
Will the noble Lord not accept the principle that if you want to change behaviour, you want that behaviour to have some positive effect—namely, to switch off the sanction?
Lord Freud
Clearly, I am interested in behaviour change. However, I would hope that before we get into these regions we will have had the behaviour change. There will have to have been a very bad failure in circumstances where we impose a three-year sanction.
Baroness Sherlock
Perhaps I may try to understand this. I apologise if I have not grasped it until now. Let us assume that someone has refused to co-operate and perhaps has a drug problem that has not been identified until this point. Something happens, possibly even as a result of the shock of the sanction, and they get themselves into a position where they are enabled finally to begin the process of engaging and searching. At that point, will the adviser simply stop the sanction and put them back into compliance? Even at its simplest, if somebody has no income they cannot look for a job, unless it is next door.
Lord Freud
My Lords, we are moving now into the area of ill health. That is where decision-makers come in and look very hard at what is happening. This is aimed at the person who has not got a mental health problem or a chronic illness. We are looking at someone who simply refuses to become part of the regime.
Lord Boswell of Aynho
I am sorry for the Minister being put under, I think, unreasonable sanctions or pressure himself, but I suggest that it might be unwise to get into a situation either where we were softies and were not prepared to take these things seriously or where, in circumstances where someone had been sanctioned, if they were to get into the frame of mind of saying, “There is nothing to be lost; I shall carry on because it’s going to happen to me anyway”. There ought to be at least an opportunity for at least a negotiation on a restart of compliance.
Lord Freud
I think that I can give good news and bad news. There are two issues here. The first is the person who had a disguised problem which then emerges. We have a solution to that: if it emerges that there was good reason, the decision-maker can reverse the position. The bad news is that we do not have a position where, once someone recants, they are forgiven instantly.
Lord McKenzie of Luton
I thank my noble friends for raising additional issues, following on from our earlier debate. My noble friend Lady Hollis seems to have posed a fundamental question which, with respect, the Minister has not fully dealt with. The question was posed to be helpful to the Government, not to try to undermine what they are seeking to achieve.
To the noble Lord, Lord Boswell, I say that no one is talking about being a “softie” in all this. We are upfront; we recognise that sanctions have a role to play in reinforcing conditionality.
The issue about a small group of people who might be sanctioned for three years, with the withdrawal of their benefit unaffected whatever they do in terms of recanting, puts them in a desperate situation. It means that they will be further away from the workplace. I do not know whether they can volunteer or would be involved in the work programme—these are issues that we can pick up in due course—but I urge the Minister to reconsider around this issue because there is something that could benefit the Government in what they are trying to achieve.
Having said that to the Minister and suggested that he might frame his diagram and put it alongside the Pensions Bill that he got last night, I beg leave to withdraw the amendment.
Baroness Meacher
I rise very briefly to add my support to this. Many years ago, I wrote a book about the withdrawal of benefits after four weeks from people who had been in difficulty. The book clearly showed that 90 per cent of them or more went straight into more crime. This is just another obvious, simple situation where that is all that the Government will do. I know that the Minister will not wish that to happen. I plead for him to take this away and think about it.
Lord Freud
We are looking carefully at the system of hardship payments we want to put in place under universal credit. We want to ensure that there remains a financial safety net for claimants who have been sanctioned—that is what hardship payments are about. However, we want to avoid the existence of such a safety net undermining the deterrent effect of sanctions. It is clearly a rather delicate balancing act. I should make the point that, under universal credit, hardship is only available following a sanction, not at the start of a claim. It will no longer be necessary within the structure of universal credit. We are looking at a payment for people who have been sanctioned.
We are still considering how best to achieve this but believe that the ability to make some payments recoverable is one way of continuing to support those most in need while ensuring hardship payments are not seen as a simple replacement for sanctioned benefit. In other words, we want to make sure that sanctions continue to keep having an impact. We are still considering our approach to recovery that will ensure adequate safeguards are in place. This includes the arrangements in more complex situations of the kind the noble Lord, Lord McKenzie, pointed out, such as when a couple has separated. Regrettably, I can not give hard answers to his, as usual, specific and beautifully placed questions. Those are issues that we need to address and are addressing.
Lord Freud
At the risk of being a little repetitious, I will try to summarise. Obviously, hardship payments are there to ensure that claimants and their dependants are not left in hardship as a consequence of a sanction. We do not want the existence of those payments to make people feel that they can ignore their responsibilities. That is why we are looking at what reform we can make to the current system. We will continue to provide the safety net for claimants and their children.
Lord McKenzie of Luton
My Lords, I welcome the Minister's response. I think it indicates some going slow on the issue, and that is the right course of action. The Minister said that there had to be a financial safety net for individuals. I certainly agree with that. If the financial safety net is 60 per cent of the basic amount, just under £40, I suggest that there is really no room to pursue any repayments of the hardship payment. The noble Lord's assertion that they would not start until after the sanction period had ended is to be welcomed, but that rather reinforces the point made by the noble Lord, Lord Kirkwood. It is all very well for the Prime Minister out in Australia to make great pronouncements about docking £25 from people's benefits. That is another example—we see too much of it from some members of this Government; although I certainly do not include the noble Lord in this—of using those sort of issues to get headlines and to berate people on benefits. That is deeply unpalatable.
Lord Freud
I cannot let the Prime Minister go undefended. He was emphasising the fact that unless a financial penalty for a crime actually hurts the person and has the impact of a punishment, it is not doing its job. He is concerned that the very modest rate of £5 a week is hardly an impact. Although I glow with delight at the separation that the noble Lord is trying to put between me and notional hard statements, I must say that the Prime Minister is clearly right in this matter.
Lord McKenzie of Luton
The noble Lord is secure in his position but, to be honest, he is anyway, given all the good work that he has done on the universal credit. Five pounds may not seem very much, but if, because you have been sanctioned, you are down to 40 quid a week or less, £5 will be very difficult to find; £25 impossible. We ought to have this debate at a much more mature level. Having said that, I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
My Lords, when I spoke at Second Reading, one point that I made was my deep concern that there could be considerable problems, considerable hardship caused to people if changes were made that were not thought through properly. Many noble Lords who spoke at Second Reading and who have spoken during Grand Committee have been clear about their support for the principle of universal credit, and I am one of them.
The noble Lord, Lord Freud, will be aware that I have asked a number of Written Questions on these matters. My amendments in this group are intended to ensure that there is some form of piloting of the proposals, so that we can assess their effect and make informed decisions having looked at the reality of what is happening on the ground.
I still have considerable concerns, but I was very pleased to see, first, the Minister himself opposing the question that Clause 30 stand part of the Bill and then the amendments he has tabled; Amendments 56A and 69A. It would be very sensible if we moved on to consider those and probed the Minister's proposals in this group. They are a welcome step in the right direction. I thank him for that and I am very pleased. They may need further refinement, and I am sure that we will have more to say about that in Grand Committee and at Report on the Floor of the House.
I leave it there with a view to quickly getting on to the Minister’s proposals. I am sure that that is what the Grand Committee wants. I beg to move.
Lord Freud
My Lords, we will ensure that the full universal credit system is extensively tested with claimants before the new benefit is introduced. However, this will not take the form of a pilot scheme as this would add extra costs and delays to the introduction of universal credit. It is vital that we are able continuously to test, improve and evolve the universal credit system after it is introduced. It is key element that we should have the flexibility to respond to change and ensure that the system does not stagnate while the world develops around it. The amendments I tabled will achieve this constant evolution.
The original wording of Clause 30 provided for piloting measures only to see if they would improve a claimant's chances of entering work, or of finding more or better-paid work. While this is a key objective, universal credit will also simplify the benefits system, improve work incentives and change behaviour. Amendments 56A and 69A will ensure that we are able to test approaches that cover these wider principles.
If we are to ensure that we have the flexibility to develop and continuously improve universal credit, we must ensure that piloting can also include the testing of changes to the structure, design and delivery of the benefit. The ability to run controlled pilots of tests—for example, of whether advances in technology could improve the structure or delivery of universal credit—will be a fundamental part of the evolution of the benefit and of its ability to remain responsive to claimants' needs.
I will add that the inspiration for this measure came from thinking about what happened to NHS hospitals when they were brought into state control in 1948. Their service levels were almost frozen. It is vital, with a big state system, constantly to move, change and evolve it. This is the mechanism to ensure that we have a responsive system. If we do not have this kind of power, we could find ourselves with a system that is perfectly in tune with what we require in 2011 but by 2030 is absolutely out of touch with what society needs.
I recognise that any pilot must be transparent and timely, which is why the clause includes a number of safeguards. For example, we have time-limited each future pilot scheme to three years. Through Amendment 69A we will ensure that any pilot regulations will be subject to the affirmative resolution procedure. I hope that noble Lords on all sides will support this enthusiastically, and I urge the noble Lord to withdraw his amendment.
Lord Boswell of Aynho
My Lords, I warmly support the arguments of the Minister. Might I have an assurance from him that as the past record of the department—no names, no pack drill: I suspect that it is a political sharing of honours, or dishonours—shows that it has sometimes anticipated the results of pilots by introducing substantive schemes before their conclusion, he will at least start with the working assumption that the pilot will come first, then the evidence, and the decision thereafter?
Baroness Hayter of Kentish Town
My Lords, the Committee will know that my noble friend Lord McKenzie and I have added our names to this amendment, but we are delighted that it has been overtaken by the Minister’s own amendments. I am getting a bit of a record for doing this. Last night I commended the Government on their move on the Housing Ombudsman, and I am doing the same today. However, I have a couple of questions. Whether this is to be piloting or testing throws up exactly what I wanted to ask: what is the purpose of each of these pilots? Are they to test whether the principle of a particular part of the Bill is right—in other words, that the aim of each part of the Bill is being met—or are they simply to determine how best to implement each proposal?
We always welcome piloting and testing of whatever it may be, but the exact purpose of a pilot needs to be absolutely clear at the start, particularly for those who have to design and implement it, as well as for all the participants and evaluators. What is the pilot meant to achieve, and therefore how should it be monitored and evaluated? That is because whether it is simply to find the best way of making something happen or to see if the idea behind it is right is quite an important distinction.
We hope that the Government will be confident enough not to assume automatically that what they think will work, will work—whether to incentivise people or to simplify systems—and that they will use these pilots in order to test the assumptions underpinning particular proposals in the Bill. That means being confident enough to design the pilots accordingly to see whether the particular objectives behind the proposals in what will by then be the Act are being met. That is asking quite a lot of a Government. We are saying, “Are you confident enough and in a sense big enough to be able to call it a day if the end results of any particular pilot call for a big re-engineering?”. I believe that pilots of this sort will be worth their weight in gold to the Government in financial and administrative terms and to claimants, landlords, employers, carers and providers, all of whom are going to be affected by different parts of the legislation. The pilots can play a role in creating the sort of welfare system that is able to meet the demands made of it. We would ask the Government to be as adventurous as they can with these pilots by putting the difficult questions. Also, following up on what my noble friend Lady Hollis said, the results should be transparent.
Who is going to oversee the design and delivery of the pilots? Who will decide, under subsection (5)(b) of the proposed new clause, that pilots may be replaced or extended, and on what grounds? To whom will the evaluators report? That is more or less the same question as that posed by my noble friend Lady Hollis. How will Parliament be able to ensure that the lessons from such pilots are learnt?
Lord Freud
I thank noble Lords for their support. At this stage we are taking legislative powers in order to be able to do this. How it is done is something that we will actively develop. I will tell noble Lords what I think we should be doing without necessarily locking down that that is to be the process, because we have not developed it.
Universal credit is the most amazing social science laboratory that I suspect we have ever seen, and I wonder how many other people will see it. Under universal credit you can change different aspects of people’s support.
As such, it needs a unit built in which is constantly looking at how to improve it and optimise it or to adapt it to different circumstances. I anticipate, in answer to the question from the noble Baroness, Lady Hayter, that we would have a series of real questions. Many of the questions raised by noble Lords in the Committee—should we have a second earner disregard; should we have a lower taper; what happens when you move disregards up or down?—are real, basic questions. They are all being put in the form of amendments, but here, we can have a series of tests of different aspects, or tests in combination, to find out what really optimises the system. Clearly, it is impossible to get it absolutely right first time. No one would claim to do that, but this is an architecture which would allow us to optimise it.
The Deputy Chairman of Committees
My Lords, I think that all the important people are back.
Lord Freud
I think that I had completed everything I need to say about these piloting powers and ask the noble Lord to withdraw his amendment.
Lord Kennedy of Southwark
I thank the Minister for his response. As he says, it is important that we are able to respond to changed situations—that certainly is progress—but we still have some way to go. I agree with the comments made by my noble friends Lady Hollis and Lady Hayter, and by the noble Lord, Lord Boswell. The integrity and transparency of the process is paramount. As noble Lords have said, it is possible that what comes back will not support the aims or proposals of the Government. With that, I beg leave to withdraw the amendment.
Lord Freud
My Lords, we learn more every Sitting. We learn that the mother of the noble Baroness, Lady Hayter, is really a Conservative, and therefore that she is. We had the admission the other day from the noble Baroness, Lady Lister, that she actually was a Conservative. I can only say: “You are very welcome back any time; I would prefer you to come back very soon”.
I know that the noble Baroness was mathematically challenged over the past week. I can offer only my noble friend Lord German, whose ability to sort out the sums of Labour politicians is now famous; I am sure that he will help her sort everything out.
I have to be absolutely clear about the date when October happens. October happens when the Committee gets towards the PIP clauses. That is the definition. The fact that that has moved is due only to the extraordinary assiduity of Members of the Committee, for which I know that we are all grateful.
I should just deal with the council tax, which strayed into this. It is not possible to analyse how different tapers will work because we do not know how the council tax will work. We will find that out. One issue behind any restructuring is that we are determined that it will not undermine work incentives; in the universal credit, we are dealing with that by enlarging the disregards.
I must pay tribute to carers. I want to put on the record that they do a terrific job. We know that, and we have been very conscious of it as we develop the universal credit. Taking Amendment 52B first, we have looked at how we support carers. Rather than going through the complexity of the separate disregard route, we have provided an additional element that is included in the gross amount of the universal credit for carers. That is a change from carer’s allowance. This additional element will not be withdrawn when the claimant’s working hours pass a particular threshold, which is what happens now. Instead, the claimant’s award will reduce gradually as earnings increase due to the effect of the single earnings taper.
The structure of earnings disregards in universal credit is not the same as that in current out-of-work benefits. We do not propose to carry forward the weekly £20 disregard that applies to carers in income support currently. In practice, many carers will receive an earnings disregard that is higher than £20 because they are lone parents or members of couples or if they or their partner are disabled. All carers will have the earnings taper applied to earnings beyond the relevant disregard. These measures will significantly enhance work incentives for carers in the vast majority of circumstances. We have taken the decision to standardise the provision for single non-disabled people in universal credit so that all claimants in this group will have £700 of their annual earnings disregarded. Simplifying measures such as this are essential if universal credit is not to replicate the complications of the current system, which breeds confusion and error for both claimants and administrators.
Baroness Hollis of Heigham
My Lords, I am following the Minister with as much attention as I can muster on a very complex subject. We share and appreciate his remarks about carers, of course, but does he not recognise the difference between a single person who may, for example, be a young man going into the labour market with an earnings disregard on his universal credit and the situation of a carer who may be caring for 40 hours a week and therefore has limited opportunities for work? If she does not have a disregard, it will actually not be worth her working at all, but the level of her caring responsibilities, although they do not qualify her for CA, will mean that she is unable to meet the work conditions and earn a living. What would the Minister have her do?
Lord Freud
My Lords, I turn to the example raised by the noble Baroness, Lady Lister. With great skill she has found precisely an area of loss within a general position of substantial improvement. Let us take a single non-disabled carer. If they work between roughly two and five hours at the national minimum wage, they may have a marginally lower net income as a result of this structure. The maximum possible reduction in those circumstances is around £4.25 a week, which is in line with the noble Baroness’s example. But at only marginally higher earnings, work incentives increase significantly under universal credit. For example, at only eight hours a week, such carers would be over £5 a week better off, and at 12 hours a week they would gain nearly £15. So there is a stronger incentive to get back into work than the flat £20 flat disregard in income support.
I shall pick up the point made by the noble Baroness, Lady Hayter—
Baroness Hollis of Heigham
I still do not understand how she could be expected to add those hours of work to her hours of caring, even though the hours of caring do not qualify her for CA. Therefore you invoke not just four, six or eight hours, but full conditionality.
Lord Freud
You do not when there are caring responsibilities. We have discussed this. There is a responsive set of conditionalities for people who have other obligations. If you exclude people with very few hours—many will do those few hours for rather more than the minimum wage—they are actually much better off than under the current circumstances because we have done it through addition rather than as an extra disregard.
The noble Baroness, Lady Hayter, said that an estimated 50,000 carers will be worse off under the universal credit. That is not correct. That figure was an estimate of the number of single and non-disabled benefit claimants who are carers. Only those whose earnings fall within the very narrow band of two to five hours at the national minimum wage could experience a very slightly lower income under universal credit.
I turn to Amendment 52DB. The universal credit is designed to help improve work incentives to break cycles of worklessness. A couple will jointly benefit from a single earnings disregard set at the highest amount to which either person is entitled. In practice, this may mean that only the earnings of the first earner are disregarded. Given the financial constraints within which we are delivering universal credit, it is best to focus on the clear aim of reducing worklessness for the household as a whole rather than spreading the available resources among different earners in one household.
To revert back to an earlier amendment on piloting, this is clearly something that we can test. If that gets a better result, it can be changed when a Government have adequate money. This is not a matter of principle but of affordability. We estimate that if couples who were both in work were entitled to—
Baroness Meacher
Again, will there be flexibility within the legislation? As the Minister said, if the Government pilot this and find that the taxpayer is losing more money because fewer of these second earners go out to work, he will want to introduce a second disregard. Will there be the flexibility within the legislation to enable the Government to do that?
Lord Freud
Absolutely. We are discussing a framework piece of legislation that will allow us to bring in the regulations. I am sure that next year many of us will discuss the detail of this for many months. It is an introductory, not a locked-in proposition. I have tried to explain, and hope that I have explained, that this system is an architecture and it can roll and improve. We may find in many areas that a change will pay for itself in its own terms, both in what the benefit system costs and the benefit to the economy. We will be able to test those propositions. A lot of what I talk about when we lay out the structures is simply what is affordable within a very difficult financial environment where we have had to put a proposition that we can float and that works. I have made the point before that that is within a context where we are injecting £4 billion into the pockets of the poorest people. Every time someone says, “Do that” or “Do the next thing”, they are adding to that figure. We can either take something else away or provide that. That is where we have come out. Later on, when the financial situation is more suitable or we establish that changing something pays for itself in its own terms, we can make changes and improvements. I labour the point only because we can spend a lot of time arguing whether this is better than a disregard or addition. The answer is that none of us knows but I hope that in the medium term we will.
In the example, we estimate that if couples who are both in work were entitled to an additional disregard of £700 a year, the cost would be £240 million. If the disregard was £1,000 a year, the cost would be £350 million. This is real money. We took the decision that it would be better spent, for instance, on childcare, where we had to find an extra £300 million. In current out-of-work benefits, there are no additional disregards for second earners. Similarly, working tax credit makes no additional provision for second earners. It is true that members of a couple may qualify for the disability elements of working tax credit if both are working and disabled. Equally, when a disabled person is not in work, no disability element can be paid. Indeed, working tax credit may not be payable at all.
I turn to the proposal that lone parents, disabled people and second earners should receive the sum of two earnings disregards if their circumstances entitle them to each, rather than the higher of the two as we propose. Many people on low incomes will have substantially more support under universal credit because of the earnings disregards that we propose. The standard weekly disregard in current out-of-work benefits for these groups is only £20, after which benefit is withdrawn pound for pound. Some people on employment and support allowance may benefit from the permitted work rule with a disregard of up to £95 per week. However, this provision is available only for one year, after which the disregard returns to £20 for most claimants. Crucially, earnings disregards are not added together in current out-of-work benefits.
In working tax credits, various elements can be added together. However, that does not differ from the way elements in universal credit build up to a total award. The earnings disregards in universal credit are more generous than those in the current system for lone parents and disabled people, helping in particular those working a small number of hours. For instance, a disabled person working 12 hours a week at the national minimum wage will be more than £50 a week better off, and a lone parent will be more than £60 a week better off in work because of the disregards in universal credit. This will provide a stronger incentive to work than exists in the current system.
For most people claiming universal credit, the main financial incentive to work will be provided by the taper. Our proposals for a structure of disregards are intended to provide an additional incentive for those who need it most. If additional funding were available, we would need to consider the taper as well as the disregards. Adding together two or more disregards simply because the claimant falls into a number of categories would be inconsistent with the approach that we have adopted. If the earnings disregards worked in this way, we would not have the funding to set each at the level that we have. Universal credit must be delivered within the financial envelope we have available. I hope that this explanation will persuade the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I will raise a couple of points—and not simply to defend my aunt. I said that she worked at the Conservative club. She was the barmaid and cleaner. The noble Lord is very lucky that she is no longer with us.
Lord Freud
I shall try to answer the questions. To pick up the point from the noble Baroness, Lady Hayter, there is not an impact assessment on carers, but if we are talking about an entire universe of 50,000 and then we have to narrow it down to this very small group who are working two to five hours at national minimum wage, we are talking about a very small number. Do not forget that there is an element of the system that people change behaviour to fit around. You can see the encouragement here, as I was showing noble Lords, to start earning a little more than the five hours. The reality is that this is a very small impact. There are winners and losers all the way through the universal credit because we are putting in a new system.
To pick up the question from my noble friend Lady Thomas, the tax credits will no longer exist once the universal credit is introduced. As we stated in the revised policy briefing note—she has spotted this with her eagle eye—we aim to have a single assessment as the gateway to limited capability for work elements and the earnings disregard for disabled people. This assessment will be based on the work capability assessment and we are considering that this process may need to be modified in the context of the universal credit. We will have a chance at a later stage of the Bill to discuss the WCA in a little more detail.
Baroness Hollis of Heigham
The Minister has been very full in his efforts to answer our questions. Could he have his staff prepare for us one of the very helpful briefing notes that we have had on the situation of carers in the various scenarios that have been outlined over the past few Committee days—carers who are one of a couple, single carers, carers who may be able to work a few hours, carers who are not on CA and are therefore exposed to work conditionality, and carers who are on CA? That is eight or 10 possible permutations, and that would be helpful. This is before we get to council tax benefit and its screwy effects on the whole system. It would be very helpful if the Minister did us a briefing paper as soon as was practicable on the situations that carers could find themselves in.
Lord Freud
I cannot absolutely commit to that, mainly because I have a department working at full tilt. However, I will look at whether that is the kind of work we can do without disturbing all the other demands on people’s time.
Baroness Hollis of Heigham
I am grateful to the noble Lord because it is an issue that is dear to their Lordships’ hearts.
Lord McKenzie of Luton
My Lords, I support the very powerful case that my noble friend Lady Donaghy made, and what the noble Lord, Lord Wigley, said. The case of self-employment is clearly very substantial. My noble friend Lady Donaghy spoke about two issues: how the self-employed should be treated, and the problems of those who are not technically self-employed but who are treated as such. I confirm that my noble friend wrote a very important and powerful report that she presented to the DWP. It gave the Minister at the time a lot of food for thought, from which he has not totally recovered.
I will press the Minister on a couple of points that my noble friend raised. What will the process be for self-employment? Will it be based on the accounting profits of the business or on the tax profits? The noble Lord will be aware that they do not necessarily amount to the same thing in the same time period: for example, because of depreciation allowances for plant and machinery. How will that work? For example, if a start-up records a loss in year 1, that will be a zero rather than a minus for universal credit purposes—but does the minus get carried forward to year 2 to reduce year 2 profits? Generally it would be for tax purposes, but will it for universal credit purposes?
The period of assessment that will be taken into account—the reporting process for self-employment—clearly is a significant issue. I am very unclear about the plans, and in particular whether they will specify tax profits or profits computed for tax purposes. Obviously over time the two ought to align, but they will not necessarily align in the same period. How they are treated for universal credit purposes will be of significance.
Lord Freud
My Lords, after spending four years writing the Lex column, I am absolutely aware that I cannot answer the question of the noble Lord, Lord McKenzie, off the top of my head. The definition of profits is a knotty and complicated issue that he is absolutely right to focus on. We need to get it right after detailed consideration. Of course it is a long-standing policy that people should be treated as having income or capital in cases of deliberate deprivation. This will continue under universal credit. However, we also think that it is right in principle to apply a minimum income floor to claimants who choose to be self-employed but whose earnings do not make them financially self-sufficient. Because universal credit is a benefit for people in and out of work, the issues around self-employment are different from the issues faced in the current system.
The Deputy Chairman of Committees (Viscount Ullswater)
My Lords, there is a Division in the House. The Committee will adjourn for 10 minutes.
Lord Freud
My Lords, because universal credit is a benefit for people in and out of work, the issues of self-employment are different from those faced under the current system. We need to have clear rules—in particular, on when conditionality requirements do or do not apply to people who are working for themselves and so have a degree of control over their hours and earnings.
Clearly, we need to avoid requirements that will add unnecessary burdens, especially for people who are starting out in business, but we cannot have a situation where people can be treated as being in full-time work for the conditionality purpose but, because they declare no earnings, receive as much benefit as if they were not working at all.
I appreciate that noble Lords have many questions about the detailed rules on the treatment of self-employment income. This is a complex area and we are still working through all the details. The experts in this field are in HMRC and we are working closely with them to develop our proposals. I can confirm that the level of assumed earnings will not be based on the number of hours that the claimant works. Instead, we would assume that a claimant’s earnings are at the level we would expect of claimants with similar circumstances in employed work. In response to the question by the noble Baroness, Lady Donaghy, and the observation of the noble Lord, Lord Wigley, this includes whether they are disabled. As part of our work with HMRC we are considering the assessment of self-employed earnings. It will be important to determine which rules from the current benefit and tax credit systems give the most appropriate framework for universal credit.
The rules on the treatment of self-employed claimants will be set out in regulations and the Bill provides expressly that the regulations on the minimum income floor will be subject to the affirmative procedure in the first instance. The House will have the opportunity to scrutinise the details in this area at a future date.
With regard to the noble Baroness’s amendment, the wider application of notional income capital rules rightly considers whether the claimant has manipulated their income in order to become eligible for universal credit. We believe that different issues arise in relation to self-employment and it would not be right to limit the scope to assume a minimum income in this way. I hope this explanation will allow the noble Baroness to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I wonder if the Minister can help us further. In a situation where you have a start-up, where an individual sole trader is working all the hours there are to make a success of the business, doing all sorts of groundwork that often needs to be done, how is an assessment going to be made by the department that this is insufficient? What judgments are going to be made and how is that going to proceed?
Lord Freud
My Lords, the noble Lord makes a very important point and it is related to the point of the noble Baroness, Lady Donaghy. There are two areas where we will have to have specific rules. First, in the start-up phase, what are the rules for that and how long does one allow for it? Secondly, in the period when something goes badly wrong, when you have had a business going very well with profits and then you have a sudden collapse, what do you do about that period? That was the example that the noble Baroness, Lady Donaghy, raised. Those are two of the issues that we are looking at very closely and how to get that right.
One of the things we want to get out of this is the most business-friendly suite of support that we can put together. In this sense, working tax credit for the self-employed does become a support for entrepreneurial endeavour, tied with other support for new business such as the new enterprise allowance.
Lord McAvoy
My Lords, on the small businesses aspect—and I declare an interest as I am “lucky” to own a public house although I am a teetotaller and they are closing down all over the place in Scotland—
Lord Freud
My Lords, I am looking forward to my invitation to the McAvoy public house. I hope that it is called “The Lord McAvoy” with a nice—
Lord Freud
And I hope that it has a nice picture of him. I look forward to going there.
Lord Freud
The basic way to get information from the self-employed is this: they will put in the information in the universal credit system, or an equivalent system, which will potentially match up later with the information that they provide either to the VAT authorities or to HMRC. There is a process of reporting.
To get back to the point, there is an opportunity to provide real support for entrepreneurial business, but as the noble Baroness, Lady Donaghy, so shrewdly said, we must not be an open cheque book for people who are not running genuine businesses. We need to get that right.
Baroness Hollis of Heigham
Something has been puzzling me. We are talking about self-employed as if it were a self-employed single person. What happens if you have a small family business—not quite the corner shop—where the income from that self-employed business in which the partner, say the wife, is doing some part-time book-keeping, answering the telephone, and so on and contributing to fairly low profits? How will you assess whether conditionality applies to her?
Lord Freud
My Lords, universal credit is particularly well suited to that situation because it is a household income. We will have rules on the two benefit recipients in a two-person household, so we should be able to adapt to that reasonably straightforwardly. Clearly there will be circumstances when one person is in paid employment and the other is self-employed, and we need to mix that. We are working on defining all those situations so that we can make universal credit work appropriately.
Lord Wigley
To follow that point through a little, I understood that the intention was not to take the circumstances when one was in paid employment, but when both might be employed or self-employed in their business and both getting their income. Presumably there would need to be some attention to those rules as well.
Lord Freud
My Lords, I am sorry. I probably broadened the point that should have remained narrow. When two people are working on one endeavour, because universal credit is a household payment, it can accommodate that without any distortion.
Lord McKenzie of Luton
I do not usually come to the Minister’s aid but if you have two people in business together, that would be a partnership and you would typically look at each person’s share of the profits and presumably aggregate those if they are part of the same household, not if they are in different households.
Lord Freud
My Lords, this is one area where a single earner disregard makes life rather easy. I hope that we will be congratulated on that structure.
Lord McKenzie of Luton
Can I just make one other point? It is wrong of us to press the Minister as I know that this is embryonic and a lot of work is going on. If the process is to be some early report in that has to be assessed against what is eventually a tax assessment or consistent with VAT accounts, that sort of presupposes that there has to be some look-back or process of adjustment—in a sense the tax credit-type arrangement, which is quite different from the real-time earnings for employed people. Does the noble Lord envisage that as part of the system?
Lord Freud
It is clear that we cannot use real-time information for the self-employed. It is another system. It will be much closer to the kind of reporting systems for tax credits in this area—and for that reason.
Lord Wigley
A disabled person might have feared going self-employed in the past because of the possibility of losing benefits and not being able to get them back at some future date. That would have been a psychological barrier. Could the Minister confirm—I am sure that he can and will be eager to—that that problem should be overcome by this system? It should be sympathetic to, and encouraging of, people becoming self-employed.
Lord Freud
Yes, the system is absolutely straightforward for a disabled person who goes into employment, where it is unequivocally much safer. There is a difference in self-employment in that, in cases of low earnings, we will look for an element of potential conditionality and a relationship with that person when they do not want to observe the minimum income floor. You have a choice: either have a minimum income floor and then there is not conditionality; or you come below it and there is a conditionality regime. That does not mean there is an instruction saying, “It is out to work. Stop what you are doing”. It absolutely does not mean that. It means that we know what people are doing and, after discussing it with them, can reach an assessment of what they should be doing. In many cases we will be absolutely happy for them to continue that regime. It offers us an opportunity to know what is really happening out there—I suspect in a way that we do not know now.
Baroness Donaghy
I am extremely grateful to the noble Lords who took part in this discussion—the noble Lord, Lord Wigley, and my noble friends Lord McKenzie, Lord McAvoy and Lady Hollis. I have learnt something today. I did not know that my noble friend Lord McAvoy owned a pub. I do not know if that makes him a licensee. I thought that I was the only licensee in the House of Lords. I was one for 16 years. We must obviously now compare notes.
I am also extremely grateful to the Minister. I take assurances from some of the things that he said. He accepted that the self-employed are different and that their situation is complex in relation to this subject. He is determined to produce clear rules—I have written that down: “clear rules”. I do not know if those rules will be as clear as those in Amendment 52B from the noble Baroness, Lady Howe, and my noble friend Lady Lister, which was just debated. Let us hope that they are really clear.
I take assurance from the Minister saying that we cannot use real-time information. I am aware that this is work in progress. I have some worries about the when. In my contribution I asked when this information was going to be available. I am pleased that we will have the opportunity to look at this in terms of the affirmative situation to which he referred. We will have another chance to look at the regulations. He acknowledged that specific rules will try to cope with things like the start dates and what happens when things go badly wrong. Again, I welcome the fact that he has tried to cover the entire patch.
I understand why he baulked at mentioning the issue of bogus self-employment. It is a big subject but I must come back to the comment that some of the real abuses are around the edges of the twilight zone of informal economy, bogus self-employment and people who abuse the system—sometimes all three. The sooner we can get some co-ordination in our systems, the better for everyone. I may come back to haunt the Minister about this whole area on another occasion but in the light of those positions, although still with some question marks, I beg leave to withdraw the amendment.
Pensions Bill
Lord Freud Excerpts(12 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“6th January 1954 to 5th February 1954 : 6th May 2019
6th February 1954 to 5th March 1954 : 6th July 2019
6th March 1954 to 5th April 1954 : 6th September 2019
6th April 1954 to 5th May 1954 : 6th November 2019
6th May 1954 to 5th June 1954 : 6th January 2020
6th June 1954 to 5th July 1954 : 6th March 2020
6th July 1954 to 5th August 1954 : 6th May 2020
6th August 1954 to 5th September 1954 : 6th July 2020
6th September 1954 to 5th October 1954 : 6th September 2020””
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I beg to move that this House do agree with the Commons in their Amendment 1. I shall speak also to Amendments 2, 1B, 1C and 1D.
However, before I discuss the amendments, I wish to place on the record my appreciation for one of the department’s officials, Evelyn Arnold, who is retiring after 36 years in the department. In fact today, by some coincidence, we are here on her final day. I am sure that with many an ex-DWP Minister present today noble Lords will share my thanks as we bid farewell to Evelyn and, I hope, to this Bill.
Today we have a further opportunity to discuss what has proved to be the most contentious aspect of this Bill. I hope on this occasion we may emerge with something like consensus. All sides of the House accept that projected average life expectancy has increased significantly since we agreed in 2007 to raise the pension age to 66 by 2026. The latest projections published only last week confirm that with no change to the 2007 timetable, men retiring at 66 in 2026 would receive their pension for an additional 18 months and women for an additional 19 months.
This demonstrates the very challenge we are facing, for we have been on quite a journey with this clause. That we have this opportunity further to debate the Government’s transitional arrangements is to no small extent due to the considered and thoughtful arguments made during our debates on Clause 1. I thank the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, for tabling the alternative timetable, which has continued to reappear both here and in another place. However, it is £11 billion—and this fact will remain irrespective of the number of times that the proposition is tabled, since £11 billion is simply too much, even in terms of the inflated figures that we quite often bandy around when debating the heady world of pensions.
I pay sincere tribute to the noble Baroness, Lady Greengross, who recognised that this sum of money is too great a burden for the system to bear and sought to propose an alternative timetable at a fraction of the cost. Her suggestion provided a more reasonable financial cost while assisting those most affected by the original Bill timetable. Our amendment takes her amendment as the starting point and provides the same notice for the first women affected by a one-year rise, five years and four months from Royal Assent. Our amendment smooths the rise from 65 to 66, taking six months longer than we originally proposed, and provides a revised pension age for men and women born between 6 January 1954 and 5 October 1954. It benefits a similar number of people—about half a million, under the noble Baroness’s amendment, and around 485,000 under ours, although in the case of our amendment nearly half of those are men. That is because we equalised the pension ages first before starting the rise to 66. We have found that there was no alternative to equalising first that would not risk breaching the European equal treatment directive by delaying equalisation beyond the date that we set ourselves in 1995. That is why men will also benefit—but that is, of course, incidental to our primary goal, which is to mitigate the impact on those women who would otherwise face an increase of more than 18 months.
We have listened, we did reconsider, and we have done what is right for these women and the country—and it has not gone unnoticed. Michelle Mitchell, the director of Age UK, welcomed the Government’s amendment, saying that Age UK appreciated that,
“it is a significant financial commitment from the Government at a difficult time. This will give a much needed six-month respite to all the women who would have had to work an extra two years”.
Although Age UK would have liked the changes to go further, it has none the less acknowledged that the Government have listened to concerns. In its briefing sent to noble Lords for this debate, it said:
“We ask all Members of the House of Lords to support the government amendment to Clause 1 of the Pensions Bill”.
These are not my words but those of Age UK.
The issue has never been whether the original timetable is to be brought forward. The issue is about the precise timing and whether it is appropriate to rewrite the timetable, set more than 15 years ago, for levelling the pension ages at 65, to bring about 66 in 2020. We have always been clear on the matter. My right honourable friend the Secretary of State said in another place that,
“we are committed to the state pension age being equalised in 2018 and rising to 66 in 2020”.—[Official Report, Commons, 20/6/11; col. 51.]
These amendments do not alter our timetable for pension age equalisation and maintain our original intention to implement the rise to 66 in 2020, but we have reduced the impact of our original plans by up to six months for those facing the biggest increase. This is what we call a compromise.
This transitional arrangement has a significant price tag attached. Net spending on pensions and benefits will increase by £1.1 billion compared to our original proposals over the two years 2019-20 and 2020-21. Under our amended proposals, we will therefore deliver £30.6 billion of savings. This is not small change that falls down the back of the sofa, but vital savings for the long-term fiscal sustainability of our economy. We must not forget the bigger picture. Savings are not just important but necessary. The independent Office for Budget Responsibility has some very helpful forecasts. They show that by 2060—50 years’ time—age-related public expenditure is set to increase by more than 2.5 percentage points of GDP, with the largest proportion of spend on older people being on health and state pensions. This 2.5 per cent is the equivalent in today’s economy of £40 billion.
The point I am making is that it is tough to save money and this country faces a significant near-term challenge to do so. It was suggested by some Members in another place that the public sector net debt of £1.4 trillion in 2015-16 forecast by the Office for Budget Responsibility is so monumental that £10 billion or so here or there will not make much difference. I would like to think that in this House we take a more realistic view. With figures like this, even £1 billion is an important sum of money to spend, and this is only one-tenth of the cost of the proposals advanced by noble Lords opposite.
The fact is that the fiscal impact of their amendment falls on six years not 10 and within that period—2016-17 to 2021-22—nearly £2 billion would need to be found in 2018-19 and nearly £3 billion in each of the years 2019-20 and 2020-2021. In the context of the Office for Budget Responsibility figures, ours is the fiscally responsible approach.
I accept that some will continue to argue that our amendment does not go far enough. However, I would urge noble Lords to reflect upon the process that has got us to this point. Noble Lords scrutinised the Bill many months ago and the Government listened to concerns. The elected House has had its turn, as is the process, and has responded with these amendments, which balance the concerns of those women most affected with longer-term fiscal responsibility. I beg to move.
Amendment to the Motion
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank noble Lords for speaking with the expertise and knowledge that we have grown accustomed to in this Chamber. I am particularly grateful for the mathematical expertise of my noble friend Lord German.
As I have already mentioned, the Government have acknowledged that the original timetable was too harsh on some women and have amended this. We have listened. We have amended. This is the very point of the legislative process. The elected Chamber brought forward and agreed Amendments 1 and 2 after significant and lengthy debate. Due consideration has been paid to the issue and I believe that we have reached an agreeable and responsible conclusion.
Indeed, I confess that I am slightly perplexed. We find ourselves considering a timetable that has already been proposed and defeated in a vote by both Houses. We appear to be back at square one. This should not be the case. The Government have reconsidered their original proposal and brought forward a reasonable amendment. Yet, the noble Lord opposite has still reinserted his familiar friend. I feel that we have offered a hand here and the noble Lord, like Beowulf, treats me like Grendel and tries to rip my arm off.
We have heard many of the issues today, but we have been here before and the facts have not changed. We are still talking about an £11 billion reduction in savings that the Opposition are proposing. In terms of fiscal sustainability, I hope that noble Lords can agree that this is simply not feasible.
Several issues have been raised and I want to touch on some of them. One that is of great concern was raised by the noble Lord, Lord McKenzie, and by the noble Baronesses, Lady Howe and Lady Drake, in respect of the burden on women who are carers. Only around 3 per cent of women in the 55 to 59 age group are currently entitled to carers’ allowance.
Baroness Hollis of Heigham
There are 6 million carers and only about 500,000 of those qualify for carers’ allowance because of the very high hurdles: you have to care for at least 30 hours per week for one person in order to receive the carers’ allowance for somebody who is on middle or higher rate DLA. Those are very tough hurdles. Very many other women—hundreds of thousands—are, I know, actively caring in ways that do not permit them to be full time in the labour market or build a pension, but they do not meet those very high hurdles.
Lord Freud
My Lords, we do not have the figures on more informal care; we do not know how many are in this age group. That is not broken down—I certainly do not have the figures to hand. I am providing the figures for the women most affected with full-time caring responsibilities.
Baroness Howe of Idlicote
Could the Minister answer the point that I was trying to make concerning the earlier period in women’s lives, when they were caring? That also will have had a huge effect on their capacity to find employment; certainly these days it is not an easy task.
Lord Freud
My Lords, I am plucking the figures slightly from my memory, but I am fairly confident that the number of women in this cohort who have already retired is 4 per cent. I know that there are arguments about how many are part time or full time and adjusting their lives, but that gives you a context for that particular issue. Of course, our concerns for the women that the noble Baroness has just described have driven us to make this amendment. That is our concern as a Government, to take away what we regarded as too harsh a provision and to offer up this amendment.
I would like to spend a little time on the point raised by the noble Baroness, Lady Hollis, about the charm of our lawyers, which she has obviously experienced rather more than I have. We have spent a lot of time with the lawyers on this issue and we have not just accepted the first or even the second proposition from them. As noble Lords will acknowledge and realise, we have spent a lot of time—many months—on this particular amendment and we are confident that there are significant levels of risk in doing it the way proposed by the original amendment tabled by the noble Baroness, Lady Greengross, which was to try to concentrate on the group of women alone. Trying to tough it out would expose us to the risk of the European Commission bringing infraction proceedings, which clearly would be unwise. If we were found in breach, we would at a minimum have to rectify the pension position for those already affected and leave the pension position for many people in limbo for several years as proceedings made their way through court. Clearly we could also be fined; the fine could be substantial and it is very difficult to put any kind of estimate on it.
My noble friend Lord German asked about future changes to the pension system. We are still considering responses to our consultation paper, which were in general very favourable to making a major reform along the lines of the single tier. We are aiming to bring forward our proposals in due course. A number of noble Lords raised the issue of the future. I am grateful for the questions asked by my noble friend Lord Boswell and the noble Baronesses, Lady Greengross and Lady Drake, about what is to happen in future. There was broad agreement in this House that increasing life expectancy needs to be reflected in the state pension age. I think this House acknowledges that the state pension age needs to rise so that we have a sustainable state pension system which fulfils its primary purpose—to provide a decent threshold income in retirement. Following our recent consultation, A State Pension for the 21st Century, we are currently considering how best to achieve this. Therefore, I urge noble Lords to agree with the Commons in their Amendments 1 and 2.
Lord Freud
That the House do agree with the Commons in their Amendments 3 to 17.
Lord Freud: My Lords, with Amendment 3 it will be convenient to consider Amendments 4 to 17.
Today we enter the final stages of an ambitious programme of legislation to transform the saving habits of working people in this country. Before we begin the debate, I pay tribute to the noble Lord, Lord McKenzie, and the noble Baronesses, Lady Drake and Lady Hollis, who throughout this detailed process have brought such value, wisdom and breadth of experience of proceedings to get us this far. Governments have benefited from a significant degree of consensus during the passage of this legislation. Our consensus has sometimes been stretched, but I hope that during this debate we will retain that consensual approach and a common goal to reshape retirement provisions fit for the next decades.
Many of my contributions to our pension debates have started with the words “Automatic enrolment”, and today is no exception. However, I stress one core feature. Automatic enrolment into a workplace pension scheme is an enduring duty: employers must put workers who satisfy age and earnings tests into a pension savings scheme and keep them in a scheme unless the individual chooses to leave. Employers may, of course, choose to close or change a scheme but, if they do, or the scheme ceases to qualify, there is a clear duty in the Bill to maintain scheme membership for all the jobholders affected by providing a replacement qualifying scheme if necessary. Employers may not induce someone to leave a scheme so that it can be closed unless they put them into another one. This is the core enduring duty.
Amendments 3 to 8 and Amendment 10 are technical amendments to make those continuity of membership provisions work as intended and make some minor technical corrections. They ensure that the automatic re-enrolment duty applies straightaway in situations where an employer, or any other third party, causes an individual to lose their membership. It also aligns this obligation to all active members irrespective of age. As a consequence we need to realign the key compliance provision in the Act that prescribes inducement with the automatic re-enrolment duty.
We also take the opportunity, with Amendments 5 and 6, to remove a redundant reference to the old style postponement provisions in the Pensions Act 2008 and amend a cross-reference in the uprating clauses which had inadvertently linked uprating to the jobholder age test rather than the automatic re-enrolment trigger. I remain grateful to the noble Baroness, Lady Drake, ably assisted by the noble Lord, Lord McKenzie, whose eagle eyes identified this mistake in Committee.
Noble Lords will recall that self-certification for defined contribution schemes was subjected to detailed consideration in this House. I am pleased that we were eventually able to reach agreement. Amendment 14 extends self-certification to employers using defined contribution schemes that have their main administration in another European Economic Area member state. EEA schemes are subject to the same European directives as UK schemes so members’ benefits should be similarly protected. We believe that putting EEA schemes on a comparable footing with UK schemes complies with our European Union treaty obligations.
Amendment 13 is minor, purely technical and consequential. It amends the title of Section 28 of the Pensions Act 2008 to reflect changes to the certification requirements introduced by Amendment 14, which extends the facility to EEA schemes.
Amendment 12 is a technical amendment which provides for a new test scheme standard for defined benefit schemes. This has been wrongly categorised as hybrid in the original clause. The new test standard does not alter the quality requirements for schemes but provides for them through the legislation relating to defined benefit schemes.
Amendments 15 and 16 are technical amendments to clarify the duty for employers with an existing defined benefit scheme to protect individuals. They align the rules on back payment of contributions when an employer moves a jobholder from a defined benefit scheme to a money purchase or personal pension scheme. Employers who have an open defined benefit or hybrid scheme may defer the automatic enrolment date for up to four years provided that the scheme remains open and the jobholder is still entitled to join it. Where this changes, the employer must enrol the jobholder into an alternative scheme and pay up to four years of back contributions. As drafted, the Act does not allow the employer to use a workplace personal pension as an alternative. These amendments fix that omission and ensure that the jobholder is not charged for the back payments.
Amendment 11 extends the reserve power in the Pensions Act 2008 to regulate to cap charges for deferred members in qualifying schemes. The current power to cap charges, should the need arise, applies only to active members who are paying contributions into the scheme; it does not apply to deferred members who have a dormant pension pot administered by the pension provider. It would not be fair to deferred members to be charged inappropriately high charges simply because they have moved jobs. Evidence suggests that the vast majority of schemes currently have low fund charges. However, savers may not understand the full impact that charges can have on their retirement pot. The risk that high charges could erode pension savings and bring pension saving itself into disrepute could increase as we make saving the default decision. The amendment provides a safety net for both active and deferred members in qualifying pension schemes. If we see charges creeping up after automatic enrolment, we will be able to intervene to set a cap to ensure that people’s savings are not eaten up by unreasonable charges. If such an intervention becomes necessary we will of course look at the impact across the pensions industry.
It is critical to the success of the workplace pension reforms that possible barriers to employer compliance are addressed before automatic enrolment starts. There is a potential overlap between the cross-border regulations, which deal with the provision of services by a pension scheme based in the UK with respect to an employee who is subject to the social and labour laws of another EEA state, and the automatic enrolment duty. This overlap could compromise the employer’s ability to comply with the duty. It can be complex and costly for schemes to accommodate pension rights acquired by individuals working in another EEA state and there is no obligation for schemes to do so. Amendment 17 provides for regulations that would exclude individuals who fall under the cross-border regulations from automatic enrolment. Without such a power we may find, when it is too late to address, that some employers will be unable to comply with the employer duties. Draft regulations would of course be subject to formal consultation and we would provide detail on the application of the exemption.
Additionally, the Pensions Regulator already provides guidance for employers and schemes covering the circumstances in which employees may be subject to the social and labour laws of other EEA member states and how this may make the employer a “European employer”. Should the Government make regulations, in practice the employer would need to take a view as to whether or not he is a “European employer” in relation to the employment of an individual and accordingly as to whether he should enrol that individual. I beg to move.
Baroness Drake
My Lords, in the consensual approach that we are invited to take by the Minister, I rise to support government Amendment 11. I am absolutely delighted and welcome the opportunity to return the compliment to the Minister in acknowledging that the Government are extending the powers in Section 16 of the Pensions Act 2008 to allow the Secretary of State to set a cap on charges to deferred members. That is significant progress, to my mind. I see that the Minister, Steve Webb, is here today, and I take the opportunity to say, “Well done”. I am taking this opportunity, too, to press him further.
As we know, with the advent of the new employer duty in October 2012, we will see millions of new savers being auto-enrolled into pension schemes. These workers will change their jobs on average 11 times over their lifetime and, in some occupations, that will be even higher. This means that, when workers leaves their job and their employer’s pension scheme, they are likely to leave a pot of pension saving that is still being administered by the pension provider but is not under the employer’s scheme. The pension pots of these deferred members, which are often modest in size, can be complex, costly and difficult to transfer and will be vulnerable to higher charges and poor governance over investment decisions.
I urge the Government, when they take the power to cap charges to deferred members, which Amendment 11 will allow them to do, not to wait to see what happens, because this is already an area that needs to be addressed. The capping or controlling of charges on deferred members by the Secretary of State should be undertaken through the microscope of the saver. If a provider cannot look after a deferred member’s pot of savings at low charges, it is for the Government to impose protection and, ideally, to facilitate the transfer of modest pension pots to NEST, where they will be looked after at a 0.3 per cent annual management charge, with very high standards of governance. Using the stakeholder cap on charges—the 1.5 to 1 per cent formula—is far too high a charge level for moderate to low income earners and should not be seen as an acceptable level for deferred members. That level of charges eats up far too much of the pension savings of low to moderate income earners. When millions of workers are automatically enrolled, the majority are unlikely actively to engage with their pension arrangements. Therefore, it is important that the Government have a very clear view of what a good pension scheme should look like and important that the Secretary of State uses the powers given under the Pensions Act 2008 to ensure that quality standards are set and met.
As to charges on pension savings, there are few barriers to entry to the market of private pension provision, and the Government need to make clear their expectations to monitor the situation to see whether those expectations are met and be prepared to respond quickly to address adverse developments. When a worker leaving a job leaves a pot of pension saving to be administered by the contract provider and is no longer in that employer’s scheme, who will exercise a duty of care in managing the worker’s investment? Who has the duty of care to ensure that the worker is not subject to high or excessive charges? This is territory within the framework of pensions reform that is much in need of further attention.
Another important area is the ability of workers who are deferred members to aggregate their different pension pots through a simple transfer process and that any charges for doing so are low or negligible. The administrative process of transfer must be made as simple as possible without significant charges being levied, and the ban on transfers to the National Employment Savings Trust should be lifted. I cannot see any gain for workers with moderate pots from that ban on transfers; I struggle to find any suggestion that it does—it can support only the industry, not the employee. I am not contradicted in that view by Paul Johnson, who was appointed by the Government to undertake the review of auto-enrolment policy. As for employers dealing with the issue of charges, transfers and the restrictions on NEST, it is not putting a burden on them. On the contrary, it will reduce the complexity they face when they are trying to do the best by their workers.
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of this group of amendments, the helpful background he has given us and his kind words. As the Minister said, the amendments focus on the auto-enrolment provisions, and we put on record our support for the Government’s commitment to take these forward. My noble friend Lady Drake asked the question that I was going to ask, about timing. Could the Minister confirm that it is on track? I do not know whether the Minister can update us on issues around self-certification arrangements, and whether any progress has been made, but maybe that is a matter for correspondence outside the debate.
We remain unhappy with some of the changes to the scheme introduced by the Bill, particularly the hike in the earnings threshold, but now, frankly, is the time to make progress. Turning to the specific amendments, there are just a few points. Amendment 3 deals with continuity of scheme membership and achieves this by requiring automatic re-enrolment to take effect from the day after the day on which the jobholder ceases to be an active member of a qualifying scheme. However, the alternative of allowing a period of time for re-enrolment is preserved whereby the Secretary of State can allow for that period. Given the “day after” requirement, when is the alternative approach likely to be invoked? A similar point arises in connection with Amendment 7.
We support the extended protections dealt with by Amendments 4 and 8. My noble friend Lady Drake has given her welcome to Amendment 11, which has my welcome as well. She talked authoritatively about how important this issue is and about the changes happening in the marketplace. That is therefore a particularly important amendment.
We have no problems with Amendment 12, which deals with a test scheme for certain types of defined benefit schemes, or with Amendments 13 and 14, which deal with certification of schemes where the main administration is within the EEA.
A clarification on protections of back payments for jobholders enrolled into workplace personal pension schemes obviously has our support, but perhaps the Minister could provide us with a little more detail about the scope of Amendment 17, which provides a regulation-making power to exempt employers from auto-enrolment duties where a person is a European employer. What assurances do we have that employers would not be able to organise in such a way as to bring themselves within those “European employer” provisions and therefore be outwith auto-enrolment? An assurance on that point would be helpful but, subject to anything arising from these points, we are content and will support these amendments.
Lord Freud
First, I thank noble Lords for their stamina in listening to this debate on a very technical set of amendments indeed. They are about making sure that the legislation works, as the devil is in the detail. I repeat my thanks for all the help and support that I have had across the House on some of that detail. The important principle underpinning these refinements to automatic enrolment is that we ensure that individuals are preparing and saving for their retirement. Automatic enrolment will mean that 5 million to 8 million people will start newly saving, or saving more. This is a positive move, on which I know there is consensus across the House.
Turning to the specific questions, I will start with timing, which was raised by the noble Baroness, Lady Drake. She asked when the new duty for employers will come in. I am happy to confirm that automatic enrolment will begin, as planned, next year. On self-certification, which was raised by the noble Lord, Lord McKenzie, we recently finished a formal consultation on draft regulations, which are on track to be in place for next year.
On the issue raised by the noble Baroness, Lady Drake, of the deferred member charge cap, we are extending a reserve power which we have to set a charge cap for pension schemes used for automatic enrolment. This reserve power is intended to be a safety net and to allow the Government to step in and protect all members of automatic enrolment schemes from inappropriate high charges. I am sure noble Lords will agree that it is not right that members are charged higher fees just because they move jobs. We remain vigilant about charges in the pensions industry. We see the market as broadly competitive at the moment, with the majority of workplace pension schemes having annual management charges of less than 1 per cent. We expect NEST and competitive forces to keep the downward pressure on charges but this power will enable us to intervene if necessary and make sure that members are not charged excessive fees. The stakeholder group Which? has strongly supported this amendment. I thank the noble Baroness for her support on this important issue and am confident that it will gain support across the House.
The noble Baronesses, Lady Drake and Lady Hollis, raised the issue of small pension pots, which perhaps goes slightly wider than this set of amendments and on which we spent a lot of time in Committee. On average, individuals will change employers 11 times during their working lives. DWP modelling suggests that after 2017 this will lead to in excess of 200,000 small pension pots of less than £2,000 being created each year. We want to ensure that people can get control of their pensions, build up a single substantive pot and be able to purchase a good annuity. In the interim government response to the call for evidence on regulatory differences that we have published, we have committed to setting out a decision on short-service refunds and addressing small pension pots. We know that this will be difficult, which is why need to work with employers, the pensions industry and consumer organisations on tackling this. For this reason, we intend to publish the full set of proposals in the autumn and to consult widely on possible options. These will include considering whether an individual’s pension pot could follow them from job to job as they move employers. The action for this would be behind the scenes and would require little action from the individual. Perhaps it is too early to say whether this will be possible, but this is an important issue, as the noble Baronesses pointed out, and one that we need to get right.
I turn to some of the more technical issues on which the noble Lord, Lord McKenzie, sought assurances. Continuity in automatic enrolment is covered by Amendments 3 and 7 to Clause 4. They create the default position that, in continuity of scheme membership cases—where an individual ceases to be a member of a qualifying scheme through no fault of their own—an employer must automatically re-enrol the jobholder from the day after the day on which they ceased to be a member of a qualifying scheme. The clause, as amended, still allows for a period to be prescribed during which the enrolment must occur. We do not intend to prescribe a period. This is purely a precaution in case it becomes clear that circumstances exist in which it is not possible for an employer to comply within the one-day timescale.
The noble Lord, Lord McKenzie, was also looking for an assurance on cross-border provision around Amendment 17. The amendment provides for a power to make regulations. It does not change our policy on automatic enrolment. If the power is exercised, the regulations will exclude a jobholder from automatic enrolment only if they are an individual in relation to whom their employer is a European employer, as set out in regulations under the 2004 Act. An employer is a European employer only if he has worker who, by virtue of his contract of employment, is sufficiently located in another EEA state for the social and labour laws relevant to the occupational pensions of that state to apply. The risk of a jobholder being in this position is relatively small. The definition does not cover workers who are posted to another EEA state for a limited period to work in that state for their UK-based employer.
Lord McKenzie of Luton
I think the Minister said that auto-enrolment was due to start on time next year? Could he confirm that the proposed and published timetable for staging will remain as it is?
Lord Freud
My Lords, yes, I can confirm that we currently plan to move along the timetable as set out.
Lord Freud
My Lords, in discussing Amendment 18, it is convenient also to discuss Amendments 19 to 28. These amendments are about the revaluation and indexation of pensions—that is, revaluing deferred pensions at the point at which they are put into payment and indexing pensions once they are in payment. The first five amendments relate to the change to using the consumer prices index as a measure of inflation and the others are about the indexation of cash balance schemes. The changes to Clause 15 are a positive response to the consultation on the change to using the CPI as the measure of inflation. The consultation ended in March and we published the Government’s response on 16 June. There were more than 150 responses, many of which were technical and detailed.
The areas that attracted the most comments were the CPI underpin and revaluation. There were also concerns about the CPI underpin provision already there for indexation. Respondents suggested that this was too restrictive and unhelpful for corporate restructuring. Removing the CPI underpin for the revaluation of deferred pensions was not originally covered because the different ways indexation and revaluation work means that the likelihood of the CPI acting as underpin for revaluation is small. However, we have listened to the consultation responses, which indicated that even a small risk has consequences for administration and investment costs. The amendment adds a new method of calculating a revaluating addition to Schedule 3 to the Pension Schemes Act 1993. Some schemes will be able to continue calculating revaluation additions using the retail prices index. They will not be obliged to undertake additional calculations using the CPI as well.
We also made easier the application of the CPI underpin exception for pensions in payment. The test now targets whether RPI-based increases have actually been paid rather than whether the rules require RPI-based increases. The amendments also make sure that the application of the CPI underpin exception survives transfers. We do not want the possibility of a CPI underpin to become a barrier to scheme restructuring. The amendment ensures that the provision to address the underpin problem survives a transfer if the result is that the member has received RPI-based increases since the start of 2011 and will continue to do so.
I turn to Amendments 24 to 28 to Clause 17, which removes the requirements for cash balance scheme annuities to have a limited price index. Amendment 24 does not represent any change in policy; it simply makes a technical change to clarify that schemes that are or were contracted out on a defined benefit basis are still subject to indexation requirements. Amendments 25 to 28 remove the potential for confusion. They ensure that schemes that pay a pension commencement lump sum, or allow a survivor’s benefit of a set percentage of the member’s benefit, can be included in the definition of cash balance schemes and can benefit from this easement. They also ensure that the existing indexation requirements continue to apply to career average schemes or schemes that guarantee a member a pension calculated as a percentage of the lump sum. It was never the intention to exclude these types of scheme from the indexation requirement. I beg to move.
Baroness Drake
My Lords, I can see the purpose of Amendments 18 to 23, particularly the need to address the consequences of the Government’s decision to use the CPI for the statutory revaluation of pension benefits, yet not proceeding to introduce a statutory override to pension schemes whose rules explicitly provide for the revaluation additions to be calculated by reference to the RPI. I recognise that where the statutory method uses the CPI, there is an inconsistency for schemes that apply the RPI in the very infrequent event that the CPI exceeds the RPI in a particular year. In such a situation, schemes paying the RPI would, without these amendments, be faced with a statutory underpin of CPI. In effect, the rules of schemes that apply RPI would be interpreted to mean that revaluation is calculated by reference to the CPI or the RPI, whichever is the greater.
This amendment would remove that underpin requirement and allow schemes to continue to revalue by reference to the RPI, which would seem sensible and reasonable. While the Government are to be congratulated on not imposing a statutory override on pension scheme rules to apply the CPI rather than the RPI, where the rules so explicitly provide, the need for these amendments occur in part because of the open-ended decision by the Government to substitute the CPI for the RPI in the uprating of most benefits. It is with some regret that the Government did not put a time limit on that switch from RPI to CPI. There is scope for a review because I am sure that over the long term, when the economy returns to strong growth and earnings outstrip prices, and the price of key items is excluded from the indexation, the Government will need to revisit this matter.
That is particularly so for pensions, although I doubt that the Government will revisit this now. The change to the CPI from the RPI for evaluation effects a switch of assets and benefits from scheme members to scheme sponsors and does not directly impact the public deficit. None the less, it is clear that these amendments are a necessary flow-through from the Government’s decision, and I can see no reason to oppose them.
Amendments 24 to 28 are technical in nature and address matters relating to the indexing of the guaranteed minimum pension. Again, I see no reason to disagree with them.
Baroness Turner of Camden
My Lords, during our discussions on the Bill, one of the issues that raised a lot of controversy was the report that the Government intended to tell occupational pension schemes that in future they must apply the CPI rather than the retail prices index. That certainly led to a lot of opposition from people in occupational schemes. It also led to a lot of opposition from people in public sector schemes, because I gather that the Government are applying the CPI to public sector schemes instead of the retail prices index, which of course produces—currently, anyway—much larger increases than the CPI. I should therefore be grateful for confirmation from the Government that if an occupational scheme desires to continue with the RPI it will not be forced to apply the CPI, and that if it wishes to apply the retail prices index it will be able to do so, even though that is likely to produce—and will continue to be likely to produce—larger increases than the CPI.
Lord Freud
My Lords, this group of amendments cover Part 3 of the Bill. I am most grateful to the noble Baroness, Lady Drake, for her remark that the amendments are technical in nature and that she has no problem with them.
Perhaps I may pick up the point made by the noble Baroness, Lady Turner, on private occupational pension schemes. I can confirm that these underpin arrangements are about the ability of such schemes to maintain their own arrangements. There is no legislative pressure on them in that way.
(2) After section 181A of that Act insert—
Money purchase benefits: supplementary (1) This section applies for the purposes of the definition of “money purchase benefits” in section 181(1).(2) A benefit other than a pension in payment falls within this section if its rate or amount is calculated solely by reference to assets which (because of the nature of the calculation) must necessarily suffice for the purposes of its provision to or in respect of the member.(3) A benefit which is a pension in payment falls within this section if—(a) its provision to or in respect of the member is secured by an annuity contract or insurance policy made or taken out with an insurer, and (b) at all times before coming into payment the pension was a benefit falling within this section by virtue of subsection (2).(4) For the purposes of subsection (2) it is immaterial if the calculation of the rate or amount of the benefit includes deductions for administrative expenses or commission.(5) In this section references to a pension do not include income withdrawal or dependants’ income withdrawal (within the meaning of paragraphs 7 and 21 of Schedule 28 to the Finance Act 2004).”(3) In section 99 of the Pensions Act 2008 (interpretation) in the definition of “money purchase benefits” for “which are not average salary benefits” substitute “which fall within section 99A”.
(4) After that section insert—
Money purchase benefits: supplementary(1) This section applies for the purposes of the definition of “money purchase benefits” in section 99.(2) A benefit other than a pension in payment falls within this section if its rate or amount is calculated solely by reference to assets which (because of the nature of the calculation) must necessarily suffice for the purposes of its provision to or in respect of the member.(3) A benefit which is a pension in payment falls within this section if—(a) its provision to or in respect of the member is secured by an annuity contract or insurance policy made or taken out with an insurer, and (b) at all times before coming into payment the pension was a benefit falling within this section by virtue of subsection (2).(4) For the purposes of subsection (2) it is immaterial if the calculation of the rate or amount of the benefit includes deductions for administrative expenses or commission.(5) In this section references to a pension do not include income withdrawal or dependants’ income withdrawal (within the meaning of paragraphs 7 and 21 of Schedule 28 to the Finance Act 2004).”(5) In paragraph 1(2) of Schedule 10A to the Building Societies Act 1986 (disclosures about directors etc), in the definition of “money purchase benefits”, for “which are not average salary benefits” substitute “which fall within paragraph 1A”.
(6) In that Schedule, after paragraph 1 insert—
“1A (1) This paragraph applies for the purposes of the definition of “money purchase benefits” in paragraph 1(2).(2) A benefit other than a pension in payment falls within this paragraph if its rate or amount is calculated solely by reference to assets which (because of the nature of the calculation) must necessarily suffice for the purposes of its provision to or in respect of the director.(3) A benefit which is a pension in payment falls within this paragraph if—(a) its provision to or in respect of the director is secured by an annuity contract or insurance policy made or taken out with an insurer, and (b) at all times before coming into payment the pension was a benefit falling within this paragraph by virtue of sub-paragraph (2).(4) For the purposes of sub-paragraph (2) it is immaterial if the calculation of the rate or amount of the benefit includes deductions for administrative expenses or commission.(5) In this paragraph references to a pension do not include income withdrawal or dependants’ income withdrawal (within the meaning of paragraphs 7 and 21 of Schedule 28 to the Finance Act 2004).”(7) The amendments made by subsections (1) and (2) are to be regarded as having come into force on 1 January 1997.
(8) The amendments made by subsections (3) and (4) are to be regarded as having come into force at the same time as section 99 of the Pensions Act 2008.”
Lord Freud
My Lords, on 27 July 2011, the Supreme Court handed down judgment in Bridge Trustees v Houldsworth and another. This was the first occupational pension scheme case considered at the Supreme Court and dealt with the meaning of “money purchase benefit” in pensions law. This definition is a fundamental concept underpinning the design of the regulatory framework for pensions, and it is vital that trustees, employers and members are all clear about the meaning of the term.
Despite accepting that Parliament and Ministers had legislated over a number of years on the assumption that a money purchase benefit could not develop a funding deficit or surplus, the Supreme Court decided that certain benefits that could develop funding deficits or surpluses could still fall within the definition of money purchase benefit. This means that the judgment will result in some schemes being regarded as money purchase benefits under the current legislation, even if it is possible for funding deficits to arise in respect of those benefits. For example, under the judgment, even when benefits are subject to a guarantee in the build-up phase, they should be considered to be money purchase benefits, or where schemes use money purchase rights to provide a pension from the scheme itself, rather than to purchase annuities from an insurer, the pensions should be considered to be money purchase.
The judgment will place some benefits outside the scope of a wide range of legislation that was put in place to safeguard members’ benefits. Money purchase benefits are not covered by scheme funding or employer debt requirements; nor do they have access to the Pension Protection Fund or the financial assistance scheme. If the judgment stands, the members will not be protected for certain sorts of benefits in the event of the scheme not being able to pay out; yet these workers thought that their rights were protected. For example, if you get a pension from the scheme rather than from an annuity provider, you expect to continue to get that pension, irrespective of what happens to your former employer. This position has been put in doubt by the judgment and it is important to act quickly to provide clarity and certainty for those workers.
Following the judgment, the Government announced the intention to legislate as soon as possible to provide clarity for trustees, employers and members. I appreciate that noble Lords may consider it unusual for the Government to bring forward such amendments at this stage in the Bill, but we consider it necessary that we legislate to protect members immediately. The pensions industry expected this amendment, and it wants certainty so as to be able to operate and advise schemes. Indeed, the Society of Pension Consultants urged us to make an amendment to this Bill. It said:
“We can understand the government's decision to legislate in the way it intends. However, we would ask that the government passes the necessary legislation as soon as practicable, perhaps as an addition to the Pensions Bill”.
These amendments clarify the definition of “money purchase benefit”. They also take associated regulation-making powers. I take this opportunity to assure noble Lords that these powers will be subject to public consultation and the affirmative procedure—both stakeholders and Parliament will have the opportunity to scrutinise the regulations.
Law is based on words, and having a common understanding of what the law means is essential not just for law-makers but for society as a whole. If trustees, employers and members are unclear about what sort of benefits their scheme is providing, that simply produces uncertainty and confusion.
Section 181 of the Pension Schemes Act 1993 defines money purchase for the purpose of that Act. This is the core definition of money purchase benefit on which subsequent law builds. Amendment 29 amends Section 181 to restore the definition of money purchase benefit to the meaning that it was widely believed to bear before the Bridge litigation. The revised definition makes it clear that only a benefit that is calculated solely by reference to the relevant assets—or, where the benefit is a pension in payment, that is backed by a matching annuity contract or insurance policy—is a money purchase benefit.
If there is any additional form of “promise” in relation to a benefit, it cannot be a money purchase benefit. For example, if there is a guaranteed investment return in the build-up phase, that is not a money purchase benefit; or if a scheme has promised to pay a set rate of annuity that is not backed by a matching asset such as an insurance policy, that is not a money purchase benefit. It is simple; if there is a promise, there needs to be something to back it up.
A money purchase benefit is one derived solely from the relevant assets. In other words, the member gets the value of the contributions, plus the real investment return, less any administrative expenses. The previous definition stated that average salary benefits were not a money purchase benefit. This reference has been removed because, following these amendments, it is not necessary explicitly to exclude one type of non-money purchase benefit from the definition.
The proposed new clause also amends similar definitions of money purchase benefit at Section 99 of the Pensions Act 2008 and in Schedule 10A to the Building Societies Act 1986. Amendment 30 enables the Secretary of State to make transitional arrangements for specified types of schemes.
Baroness Drake
My Lords, I shall speak also to Amendment 32. The purpose of Amendment 29A is to give absolute clarity to the legal meaning of a money purchase benefit in so far as it relates to pensions in payment. As the Minister said, the Government’s Amendment 29 is addressing the consequences of the Supreme Court’s decision in Bridge and restoring the legal meaning of money purchase benefits to that narrower meaning it was understood by most observers to have before the litigation. In doing this, it is restoring what was understood to be the extent of protection to scheme members and beneficiaries when their pension benefits could face funding deficits and preserving their potential access to the Pension Protection Fund. It is the Government’s intention that a pension in payment is a money purchase benefit if its provision is secured by an annuity contract or insurance policy. I do not disagree with that intention.
My concern is that the legislation should make it absolutely clear that any annuity purchase for a pension in payment must explicitly be in the name of that member and ring-fenced for them. I am not confident that the wording of subsection 3(a) of the new Section 181B inserted by the Government’s Amendment 29, which is before us, does that. My amendment simply adds the words,
“in the name of the member”,
to make crystal clear that the annuity must be ring-fenced for that member. The Government’s view, with which I have no disagreement, is that normally pensions in payment within a scheme are not money purchase benefits as the amount of the liability of that pension is unlikely to be matched exactly by assets held by the scheme. That being the case, there will always be scope for a deficit or a surplus in the funding of those pensions in payment. The exception, which the Government’s amendment allows for and which they propose to include within the definition of money purchase benefit is pensions in payment secured by annuity. Again, I have no disagreement with that proposal.
I repeat that my concern is that, in purchasing those annuities and insurance policies, schemes might not necessarily have ring-fenced such policies for the members concerned. They may have been secured as assets of the scheme as a whole and not for the named pensioner in receipt of a pension, which would not be unusual. Should that be the case, it would mean that those with a pension in payment would not have an automatic right to those assets in the event that there was an employer default on an underfunded scheme. Members could lose out if the scheme was wound up or underfunded.
I know that the Government’s intention is that the definition of money purchase is such that members should have the benefits of these annuities ring-fenced to them, but I am concerned that the Government’s amendment still leaves room for ambiguity because it does not, to use layman’s words, nail the point that the annuity must be held in the name of the member. My amendment simply seeks to provide that nail and so adds the phrase,
“in the name of the member”.
Current legislation has allowed the Supreme Court decision to arise notwithstanding the intention of policymakers, so if we are to avoid Lady Bracknell’s descriptive distinction between two comparable events, I believe it is appropriate to tighten the wording of the definition of money purchase benefits to reduce the likelihood of a similar problem in the future.
My amendment does not question the intention of the Government’s Amendment 29. I agree with them. All I am trying to do by the deployment of a few words is to make absolutely clear that a pension in payment is a money purchase benefit only if it is secured by an annuity or insurance policy in the name of that member.
Amendment 32 confers upon the Government the power to change the definition of money purchase benefit in the future, and one can see the common sense reason for this. Having been faced with a Supreme Court decision which ran contrary to what most observers thought was the definition, it is better to reserve powers to address a simple or comparable problem should it arise in the future—and other complexities may arise. The definition of a money purchase benefit is important because money purchase benefits are not subject to the regulation designed to mitigate deficits in a pension fund and to extend particular protections to pension scheme members.
What I am concerned about is the breadth of the power conferred on the Government or the Secretary of State by Amendment 32. I am particularly concerned that it could be used retrospectively to remove access to Pension Protection Fund protection from scheme members and beneficiaries by broadening the definition of money purchase benefit. I have similar concerns in respect of people having access to the financial assistance scheme.
The Pension Protection Fund exists to offer a level of protection to members of occupational pension schemes, unless they are excluded for certain reasons, the main ones being the existence of a crown guarantee; the trustees having compromised a fund debt; and that it is a money purchase scheme.
I am sure that the Government have no intention to use the power conferred by their Amendment 32 to remove Pension Protection Fund protection from schemes or members as currently defined. None the less, it would appear that the powers extended to the Government in Amendment 32 would allow such a possibility in the future. It is not clear to me what other existing statutory provisions, if any, would overlay the Government’s ability to use these powers. Put simply: what would limit a Government’s freedom to use the power conferred by Amendment 32 in a way that meant pension scheme members and beneficiaries would lose out?
I ask the Minister, if this amendment is made to the Bill, what, if any, limits would there be on the Government’s power retrospectively to remove protections from members and beneficiaries of funded pension schemes facing deficit and/or default. In respect of the other amendments in this group, they are largely technical in nature and I see no reason to disagree or query them. I beg to move.
Lord Freud
My Lords, I pay tribute to the noble Baroness, Lady Drake, for her precision analysis in this area, which—I say this as a compliment—has had the team seriously thinking about the issues involved. I also pay tribute to the noble Baroness, Lady Thomas, and the Delegated Powers and Regulatory Reform Committee, for applying such scrutiny to the powers contained within the Bill. I trust that noble Lords are as content with the Government’s amendments, even though they have some broad powers within them, as the committee was after its consideration.
Let me turn now to Amendment 29A. The noble Baroness, Lady Drake, highlights a key question. How do we ensure that those people whose benefits are classified as money purchase benefits in payment, because their scheme has bought an annuity to match the liability, actually benefit from that annuity? The Government share the noble Baroness’s aim in laying this amendment, but the issue is how one ensures the right outcome. I have concerns that the way this amendment is designed could have desirable consequences and place an unnecessary regulatory burden on schemes.
Baroness Hollis of Heigham
I think that perhaps the noble Lord meant “undesirable” consequences.
Lord Freud
My Lords, when I look down at my notes, which perhaps I should do more frequently, I do notice that the word is “undesirable” and not “desirable”. I am most grateful that we have the record absolutely correct on this.