Welfare Reform Bill
Lord Freud Excerpts(12 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Donaghy
My Lords, I would like to raise a philosophical point about the Government wandering into the world of employment relationships. I am not sure whether philosophy is allowed but I will have a go. Employment relationships are complex, and I am not just talking about the legal implications. A bargain is reached between the employer and the employee about how each will conduct themselves. Any external factor can easily upset the applecart. I give a hypothetical example to illustrate that. I know from being a former chair of ACAS that its helpline receives a million calls a year from both employees and employers. ACAS staff outline what avenues the caller can pursue but stop short of giving actual advice. Human nature being what it is, this is often interpreted as strong advice. If the information is used in the wrong circumstances, it can cause trouble rather than solve a potential problem.
We all sift the information that we hear, so an employee who has had a work conditionality interview, as it were, with the local Jobcentre Plus could go straight to their employer and say, “The social says you’ve got to give me more money or increase my hours”. There may well be thousands of philanthropists out there just waiting for the opportunity to pour largesse over their employees’ heads, but this situation could also lead to real difficulties in the employment relationship. Some employees are clinging on to work by their fingertips right now. I cannot help thinking that this measure is a precedent in terms of government relations with the world of work.
I read what Chris Grayling said in the other place and it all sounded terribly reasonable. He said that “they”; that is, claimants,
“would come back into the jobcentre from time to time—periodically, every few months—to talk about their prospects, and that we would seek to put some additional conditionality on them, as and when it became possible to do so, to move to a job with longer hours”.
An example was given where a lone parent could move to a job with longer hours as the children grew up. That was called,
“a degree of push within the system”.—[Official Report, Commons, Welfare Reform Bill Committee, 5/4/11; col. 412.]
How grown up would the children have to be? Would the extent of unemployment in the area be taken into account, as the noble Baroness, Lady Drake, has asked? Is it really the Government’s intention to force people to give up one job to pursue another? How would this affect self-employed people? Would they be in danger if they showed that they had made no profit in a particular year? Would they be advised to give up their business in order to take up higher-paid work elsewhere? I know from my seven years in ACAS that the employment relationship is a very delicate one. I worry about how this issue is going to be handled.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I wish to pick up the points raised by a number of noble Lords about how we manage ourselves in this Committee. One of the issues is that the briefings that we are supplying are arriving shortly before the sitting when we are debating the relevant matter, so that noble Lords get to see changes and new amendments too late. I will try to ensure that we run background briefings a week in advance, say, of the relevant Committee sitting rather than immediately before it. I think that might sort out some of the problems and maintain the depth of our discussions. I know that that is rather a two-edged sword, as the noble Lord, Lord McKenzie, warned me that it would be, in that supplying more briefing leads to better questions being asked, or at least more questions being asked. However, I accept that that is part of the process.
I turn to the amendment, which I understand is a probing amendment. We believe it is critical that this Bill provides the framework to apply conditionality to in-work claimants. I take this opportunity to explain exactly why that is. One of the things that I know all noble Lords from all round the Committee welcome is that universal credit will remove the distinction between in- and out-of-work benefits. That is at the heart of what we are doing here. In particular, it will remove what have been described by many noble Lords as the arbitrary hours rules, particularly the 16-hour rule in jobseeker’s allowance. Under universal credit claimants will have entitlement regardless of the hours that they work. This is clearly a positive but it does mean that we may be paying benefit to claimants who are clearly capable of working or earning more. We think conditionality can play an important role in encouraging and supporting such claimants to do more to support themselves. In practice, we are looking for conditionality to take up some of the impacts that before we were relying on the separation between tax credits and benefits to provide.
The noble Lord, Lord McKenzie, raised the question of micromanagement. In our briefing on in-work conditionality, we said that we would be guided in the main by claimant choice, in particular whether claimants want to increase their work with their current employer, look for an additional job or look for an entirely new job. It is not about micromanagement of claimants’ careers but about supporting and encouraging them to progress. I would turn round the evidence presented by the noble Baroness, Lady Lister, about how, with the right encouragement, people can increase and sustain their earnings, and say that this is the kind of impact that we want. Indeed, when we look later at how this is interrelated with the work programme, there are clearly opportunities in the medium term to help people improve their lives.
You only have to think about this for a few seconds to realise what the issue is. Once we have got rid of the distinction between in-work and out-of-work benefits, if there was not some kind of conditionality regime, we could get into a position where a claimant who is doing literally one or two hours of work but who is capable of working full-time would receive their benefit condition-free. This is obviously way softer than the current regime. The current regime means that you can work up to 16 hours maintaining full conditionality and losing all the extra hours. It is not surprising that not many people actually do that. That is the issue.
The question then becomes when conditionality should cease. With no break between the different benefits, there is no obvious point for this to happen. As noble Lords know, we have published a briefing note explaining how we intend to set those conditionality thresholds, and we are defining those by the number of hours we expect each individual in a benefit unit to work, taking account of their particular capability and circumstances, and multiplying it by the relevant national minimum wage. Otherwise, we are left with the tyranny of an hours rule and all the complications of reporting, testing and checking, and the intrusiveness of that, which is why we as a department have gone towards doing it in this way as a clean earnings figure.
For a single claimant who we expect to work full-time, this would give a threshold of around £210 per week. For a lone parent, who we might expect to work only 20 hours a week because of caring responsibilities, the threshold would be around £120. To pick up the point made by the noble Baroness, Lady Hollis, on lone parent conditionality, already with JSA lone parents must be available for work for as many hours as their caring responsibilities allow. If their child is in school we would expect this to be something like 20 or 25 hours. For lone parents with a child over 12 on the universal credit, full-time work will be the default as now, and we will allow limitations to this on a case-by-case basis, as required by the claimant’s circumstances.
I shall pick up the point raised by the noble Lord, Lord McKenzie, on self-employment. If a self-employed claimant falls below the threshold, then we will expect them to take steps to increase their earnings and reduce their dependency on benefits. How we do this will in large part depend on the claimant. If they want to focus on their self-employed business, we expect to give them an appropriate time to do this; alternatively, we may expect them to look for employment to supplement their earnings. As with all such issues, this is an area we continue to consider and develop.
Where the benefit unit earns more than the threshold amount, we will not impose work-related requirements on either member of that benefit unit. Where earnings are lower, we will have the ability to do so. This means that we will be able to impose work-related requirements on claimants working less than we could reasonably expect in benefit units falling under the threshold. We believe this is the right approach and the right way to define the cut-off point for conditionality.
In answer to a question put by the noble Lord, Lord McKenzie, I say that we have chosen gross earnings because that is easily understood and simple to assess. If we were to take off elements such as pension contributions, that would only add to the complexity of the system. That said, we are only too aware what a difficult area this is. It is worth stressing that although we will be able to impose conditionality on those in work, we will not be obliged to do so. Clearly, that is important. Although we believe conditionality can play a key role in getting in-work claimants to progress, we do not yet have a final view as to how or when this is best done.
As noble Lords clearly appreciate, there are a range of complicated issues to work through. Critically, we will need to build our understanding of what can help claimants progress—when we should require claimants to look for more work and what role other interventions, such as skills assessments or career advice sessions, can play.
I turn now to the question raised by the noble Lord, Lord McKenzie, on the work programme and the conflicts there. I can assure him that it is not the case that, by setting a higher threshold, we make the current work programme structures invalid. The programme can continue as now, looking to move claimants from being out of work into some work. Once claimants have left the work programme, we could then look to continue working with them to help them progress. We are currently considering the interaction with a future work programme and the timing of migration. That will be an area of considerable opportunity when we have the system in place and we start rolling over to the second set of work programmes.
Clearly, we need to look at the skills and training our advisers will need. Indeed, we need to consider whether there is a role for third-party providers. To respond to the noble Baroness, Lady Drake, I say that we will need to consider what we can afford in that area. We recognise that the circumstances in which we could require a claimant engaged in some work to move to a new job are particularly sensitive. We are clear that any actions that we impose will be reasonable and proportionate. We have made a public commitment that advisers will take into account other benefits of the claimant’s current employment before imposing any requirement to take an alternative job. This is especially important where those benefits are particularly relevant to the claimant's circumstances: for example, where someone with caring responsibilities has an existing flexible working pattern or where someone has built up a significant pension entitlement. We are developing our proposals in this area and in due course we will provide more detailed guidance on how the system will operate in practice.
The Earl of Listowel
My Lords, I apologise for coming so late into this Committee debate. Earlier in the discussions on the Bill, I referred to research in the United States which looked at the effect of parental employment on educational outcomes for children. It found that within the younger group, five to 12 or so, outcomes were better when parents were in employment, but that in the older age group—and I am not quite sure of the cut-off point—outcomes for children in school were poorer when their parents were in employment.
I do not have the details, and I am sure there is much more context to it than this. Does the Minister know what the research says about the impact of parental employment on children’s outcomes at school, and is there separate research into the impact of lone-parent employment on the outcomes for children in school, post-13?
Lord Freud
The first point I make to the noble Baroness, Lady Sherlock, is to assure her that full-time is not the default setting. The default setting is that we look at the circumstances of the claimant, particularly taking into account their caring responsibilities and available care, and reach a reasonable position. That is the position. On that basis, a lot of her concerns surrounding her point fall away. Of course we are not looking to have latch-key children.
On flexible working, I made the point earlier that we understand that when we look at the value of a job, the monetary implications are not the only measure; and that the gains of flexibility, in terms of how the employer behaves, and the relationship, are key and critical factors and have to be taken into account.
Baroness Hollis of Heigham
I do apologise, as I know the Minister has taken care to answer my noble friend. Does that mean that conditionality would not apply where a lone parent or a partner in a couple with primary caring responsibilities was able to work—or felt they could or should work—only during school hours, given the suggestion from my noble friend of the situations families find themselves in? Most of us have been through that. Therefore the default position for a lone parent of a teenager or, to gender-stereotype, the mother in a couple would be that one of those two need be available for work within school hours only?
Lord Freud
No, my Lords. I am sure that the noble Baroness, Lady Hollis, knows how the legislation works. That legislation now goes up to that 12/13 point and the formal protection around school hours. However, as I explained, the default setting remains that it depends more generally on the caring requirements of that parent, whether lone or in a couple, and their particular circumstances.
Baroness Hollis of Heigham
How then do you avoid the question posed by my noble friend of latch-key children if you cannot ensure that the homecoming of the parent with primary care for the children coincides pretty approximately with that of the teenaged children?
Lord Freud
As I say, that will depend on the particular circumstances of that family. That is the point I am endeavouring to make.
I would like to finish with the point about the cost to the claimant of being employed. That is an issue that we are going to pick up in later amendments so I will not go into it in great detail. However, we recognise the need to take account of those employment costs, and I will pick that up more generally later.
Lord McKenzie of Luton
My Lords, I thank the Minister for his responses to a lot of detailed questions. I will just touch upon the issue of the management of our affairs. As the noble Lord has said, the proximity of briefings to Committee sittings has not helped. The situation was not helped by accelerating our start in Committee. I accept the point made by the noble Lord, Lord Wigley, that putting amendments down late in the day does not help our deliberations. I suggest—and this will send shivers down the spine of usual channels—that we ought to defer next Tuesday’s sitting so we could spend the time getting on an even keel and perhaps get back to business as usual. I offer that to the Minister without any great expectation that he may be tempted by it.
I thank all noble Lords who have participated in this debate. The noble Lord, Lord Skelmersdale, posed the question of whether this would be claimant-driven or Jobcentre Plus- or provider-driven. I understand, and I think the Minister confirmed, that this goes into the claimant commitment right on day one. There might be a discussion around that but it is something that is very much going to be driven by Jobcentre Plus or the providers.
Lord Wigley
I shall speak briefly in relation to the third of the amendments that has been put forward to Clause 17—that about, on page 8,
“creating and maintaining an online profile”.
I can see the merits of having that available but it might become an imposition. Many people who may be looking for work would be scared stiff of that approach, particularly the older ones or those who have restricted abilities. To be imposing or suggesting that this is a requirement surely should not be written on to the face of a Bill. I would be glad to hear the Minister’s justification for it.
Lord Freud
My Lords, not all claimants will be required to carry out all or indeed any of the actions listed in these clauses. They are meant as illustrations of the type of actions that may be imposed. Taking “improving personal presentation” first, we already require this of jobseeker’s allowance claimants where their appearance is proving to be a significant barrier to work. Advisers handle such cases sensitively and directions are used sparingly and as a last resort. It is not about impinging on an individual’s basic right to express themselves with their appearance but, where a claimant is actively putting off potential employers, such as with poor personal hygiene or turning up to interviews with holes in their clothes, we need to be able to address it.
On work experience and work placements, I would like to emphasise how valuable these can be as an opportunity for claimants to experience all aspects of being in a work environment, to develop skills and confidence in preparation for future employment or further work preparation, and to improve their CV and marketability to employers. This is particularly important for jobseekers who have limited or no experience of the workplace. For many it represents the main barrier preventing them from getting a job.
For claimants who have limited capability for work, we believe that appropriate work experience and work placements can help them to understand more about their career options and skills, increase confidence and provide valuable experience that they may need to get started in a job in future. The amount, duration and timing of any work experience or placement will be tailored to the needs of the individual and will not necessarily be more demanding than other actions they might be expected to take to prepare for work.
These activities could take many forms and do not need to be full-time; for example, work shadowing could be suitable for some claimants with limited capability for work. We want to ensure that claimants in the work preparation group can access valuable support and experience that could help them move into work in the future. To do this, advisers need to have the flexibility to specify the actions that they think give a claimant the best prospects of moving towards employment and be clear that in some cases this may include work experience or a work placement.
Finally, as you know, we are developing our own online service that will enable the claimant to create and maintain a personal profile, complete job-search activity including automatic job-matching when new vacancies are registered, and apply for jobs. We intend that this information will be available for the department to monitor the claimant’s activity and assist in checking compliance with their claimant commitment. There will be robust data protection, security and privacy measures in place; for example, claimants applying for jobs would remain anonymous from employers and recruiters until they accept an invitation to interview or contact them directly themselves. Access to jobseeker records by DWP staff will continue to be audited and existing user restrictions and business needs will determine which members of staff can see customer data.
It would be a waste of investment in a quality service for claimants, and severely hamper our ability to monitor compliance, if we were not able to require claimants to use the system. However, taking out this requirement would apply not just to our system, but to other online job-search sites. Increasingly, as many employers only recruit online, it is critical that claimants engage with online services that increase their chances of finding and moving into work. Of course, if a claimant is in the minority who cannot use or be helped to use online services, or if there is another compelling reason, this requirement will not be imposed. I hope that gives the noble Lord, Lord Wigley, some small reassurance.
Lord Wigley
Before the Minister sits down, perhaps I may press that a little further. I am interpreting what he says as implying that there might be circumstances where someone refuses to use the online system and could lose benefits as a result. Is that the case?
Lord Freud
My Lords, clearly there are circumstances where the main barrier to an individual getting work is an inability or reluctance to interface with online systems. They may need some pressure, because people sometimes do need pressure. We find that mandatory processes get much higher outputs that voluntary ones in many cases. In those circumstances, I can imagine that outright refusal could earn a sanction. However, it will not be used in circumstances where clearly it is not appropriate or where there is a genuine inability to use those services. On that basis, I urge the noble Lord to withdraw the amendment.
Lord McKenzie of Luton
I am grateful to the Minister for his explanation but I would like to press him on a few points. I share the concerns of the noble Lord, Lord Wigley, concerning the online profile. The Minister said that this would not be imposed on somebody, but if it is going to be such a valuable tool to help people into the labour market there is still the residual question of what support is going to be given to people who do not have the innate ability.
Lord Freud
At the risk of the noble Lord, Lord McKenzie, saying that we have not developed the whole system, I should say that it has not sprung, like Athena out of Zeus’s head, fully formed.
Lord Freud
Aphrodite was in the seashell. I think Athena was the daughter of Metis, who was swallowed by Zeus, but there we are.
We are working really intensively now to get the customer interface with our IT system for the universal credit right. We are spending a lot of time on the support that we will be providing for that and the categories of people who cannot be expected to do it themselves but need other ways of being helped. In practice, we will wrap this up with the much bigger exercise.
Lord McKenzie of Luton
I thank the Minister for that and I understand his explanation of personal presentation. However, I press him on issues of work experience and work placement, because I do not believe that he Minister dealt with the question I posed about Clause 54, where an amendment to the Welfare Reform Act 2007 states:
“The reference to activity in subsection (7) includes work experience or a work placement.”
That adds something to that description, which presumably is done for a purpose. We would all, I am sure, recognise the benefit of work experience and work placements; but the issue is the extent to which those people who have limited capability for work, but are capable of work-related activity, can be caused to undertake them. That would be a departure from the current position. Are those part of what ESA claimants can be encouraged to do? I am trying to understand what the distinction between those and work is. When we debated issues of work for benefits under, I think, the Welfare Reform Act 2009, we debated workfare and the benefits or otherwise of all of that—generally otherwise—and the extent to which that was close to or tied up with work placements and work experience. If those issues relate to those who are fit for work, that is one thing; but is there not a risk that, under this legislation, we are importing that into another group, after those people have gone through the WCA assessment? That is my concern.
Lord Freud
My Lords, clearly preparing for work shades across a number of aspects. Perhaps the most interesting area here is the way that some work providers in the work programme actually help people. One of provider actually sets up the whole experience of work in its own operation. The actual experience of work for people who are in the WRAG group, if it is properly controlled in terms of work experience and work placement—I know the noble Lord will have concerns on this—and does not become a work substitute, is part of the building-up for that person; just as developing some skills would be. That could be an immensely valuable stepping stone for people, and that is the stepping stone we are aiming to introduce in this legislation.
Lord McKenzie of Luton
I understand that point, and I think we share an understanding of the benefits of those sorts of arrangements. However, we are here introducing a term that has hitherto largely been attached to those who are in work, without any protections around it. In so far as work placements can effectively be the same as work—at least at one end of the spectrum—what is to stop providers putting people in the WRAG group through that process, and thereby effectively causing them to work, when the designation under the WCA is that they should not be in that group?
Lord Freud
My Lords, I cannot write in protections today but I give the assurance that this measure is intended to be a building block for the individual, not a substitute for work. I will think about how we can make that absolutely clear to offer comfort in that regard. I might be able to do that through a formal statement. I want noble Lords to be absolutely clear that this measure is a supportive element. It is not designed to be anything but supportive in allowing the claimant to take key steps to get back into the workplace.
Lord McKenzie of Luton
I thank the Minister for those comments and look forward to a fuller response on the protections later, as I remain concerned that we are opening a gate as regards people not being required to undertake work. This is effectively a step in that direction, if not in some instances a step into it. There are issues about how those protections might be organised. If we are going down the route of work placements, what assurances do we have in respect of providers of those work placements that they are not simply using this measure to churn staff and not do what they should do, which is to employ them properly in the first place? However, perhaps those issues can be dealt with further down the track, given that the Minister has given an undertaking to see how he can provide us with assurances in that regard. Having said that—
Lord Wigley
Before the noble Lord withdraws the amendment, which I suspect he was about to do, I return again to the provisions in Clause 17. They really are draconian. We have not only the provision highlighted in paragraph (c) of subsection (3),
“creating and maintaining an online profile”,
but paragraph (f) states,
“any action prescribed for the purpose in subsection (1)”,
which could be anything at all. To give these powers without some strong safeguards on the way on how used fills me with absolute horror. With respect to the online profile, that states that there can be an order for the person seeking work requiring him or her to create their own online profile and to maintain it. If they are either incapable of creating it, or are not diligent in maintaining it, they could lose their benefits. This would not be a problem for my four year-old granddaughter’s generation, as they pick up this technology easily, but I know of teachers approaching retirement age or perhaps losing their jobs who would be incapable of doing this on a computer. To make that a requirement in the Bill strikes me as absolute nonsense. Surely, this measure should be looked at again.
Lord Freud
Yes, soothe fears but also put this matter into context. We are essentially importing the existing arrangements, subject to the work experience issue that the noble Lord, Lord McKenzie, raised. We have drawn up an illustrative list. The noble Lord, Lord Wigley, referred to a draconian power. That is the structure that we have imported into this Bill. That structure has been debated thoroughly by many noble Lords in this Room over a number of Bills, so we are not trying to do anything dramatically new here, albeit with a nudge towards work experience. I said to the noble Lord, Lord McKenzie, that I would make absolutely clear what the protections are and how we intend to run the system. I think that the noble Lord, Lord Wigley, is looking at the whole thing as if it was a dramatically new and draconian way of doing things, but it is not. We are importing the existing methodology into the context of the universal credit.
Lord McKenzie of Luton
My noble friend says that it is all my fault; I am not sure I ever introduced anything like this, but perhaps she did.
The key issue here is that the requirements are not necessarily blanket impositions on individuals, and where they are particularly beneficial there is support for those who are not able, without that support, to benefit from them. Otherwise they could be excluded from some job opportunities.
We have given these amendments a good run through. I look forward to the follow-up from the Minister, but beg leave to withdraw.
Lord McKenzie of Luton
My Lords, I will be brief. The amendment is intended to ensure that actions taken by or on behalf of the Secretary of State relating to work preparation requirements are determined after consultation with the claimant, and take account of activity the claimant is already undertaking which contributes to gaining experience, skills and aptitude for work.
Reflecting on our deliberations at the last Committee sitting, I should stress that this should involve consultation. It does not have to be a process of agreement, although hopefully it would be. This has special relevance in relation to volunteering. For example, we have had material, as I am sure other noble Lords have, from an organisation called Catch22, which refers to its intensive volunteering programmes with young people. They contribute to preparing young people for work.
We acknowledge that Jobcentre Plus should not be required to take account of every pastime or whim of individual claimants, but structured programmes, such as the volunteering opportunities identified, appear helpful. It must be better to work with the grain of such activity. That is all that the amendment seeks to achieve. I beg to move.
Lord Freud
My Lords, work preparation requirements will be imposed only where it is appropriate in the circumstances of the claimant. This will always involve a discussion between an adviser and the claimant, to determine any barriers to work and the steps required to address them. Where a claimant has already taken steps to improve their experience, skills and aptitude for work, this will of course be reflected in the requirements placed on them.
We will ask claimants only to do things that we believe will make it more likely that they will move into work. Asking them to go on a course to gain skills that they already have, for example, would be a waste of the claimant’s time and, indeed, of our scarce resources. We therefore agree with the spirit of this amendment. We disagree on whether it is necessary to put it into primary legislation. We do not have provisions of this kind in legislation now, and, similarly, we do not think it appropriate for universal credit.
On the volunteering point, clearly we have expanded or enlarged the opportunity for work search claimants to volunteer, as long as it does not affect their ability to continue to search for work. I therefore urge the noble Lord to withdraw this amendment.
Lord McKenzie of Luton
I thank the Minister for his reply and will certainly withdraw the amendment. One point pressed on us was that if there is a recognition that volunteering programmes can be beneficial, perhaps that could be recognised by Jobcentre Plus in the other programmes that it is structuring for individuals. There have been suggestions that sometimes people slip out of volunteering programmes because they cannot keep the commitments, because they have work-focused interviews or other mandatory activity.
Baroness Sherlock
Perhaps I may ask one question. The noble Lord will be aware of this issue. We have heard about it from many claimants and I am sure that other noble Lords have had similar experiences to mine. At least one organisation that works with lone parents has complained to me about cases where lone parents have been sanctioned for failing to take jobs. They were confident of the veracity of the accounts they had been given, and it was clear that the claimant could not possibly have made it to the job and taken their children to childcare. There did not seem to be any malice involved, but the adviser did not understand what was involved in trying to get two or more children to different kinds of childcare in very tight timescales, in a context where being a few minutes late can mean either that you are fined by a nursery or that your child’s place is given to somebody else. How will the Minister protect claimants in that situation? Will he make sure that the guidance is sufficiently clear?
I am concerned because, as I understand it from our briefings, decisions like that can be challenged and referred to another adviser, but the only independent recourse a claimant has if the decision goes against them is to refuse to take the job, be sanctioned and then go to a tribunal to challenge it. This is not efficient. I quite see that it is not the Minister’s intention, but how can he reassure us and those claimants that they will not be in that position?
Lord Freud
My Lords, I start by expressing a degree of envy at the ability of the noble Lord, Lord McKenzie, to commandeer a ministerial car in the past. In these straitened times I am reduced to a bicycle. However, in case noble Lords are anxious, I can confirm that the Ortleib pannier manages to contain a ministerial Box—and I have two panniers.
Turning to the amendments, as noble Lords know, we recently announced that jobseekers will be expected to look for suitable work within a 90-minute commute from their home. This is the default position in jobseeker’s allowance at the moment. The intention is to ensure that claimants search in a sufficiently wide geographic area while keeping the requirements reasonable. The old position was that JSA claimants could restrict travel time to 60 minutes, but only for the first 13 weeks and only if they had a reasonable prospect of work. Otherwise, the 90 minutes of travel time did apply. Therefore, this is not a huge change, although I understand the challenge that the noble Baroness, Lady Sherlock, has given me when she said that the existing system could operate a little better. I accept that challenge. Our briefing note on the work search and availability requirements for universal credit explained that this would continue to be the normal position for claimants. However, we also explained that limitations will be applied to the work that a claimant has to look for to take into account any relevant circumstances, particularly childcare. For example, we are clear that a claimant who is the lead carer for a child under 13 need only look for work that will fit around school hours. This would include any necessary travel time.
A claimant with young children may be asked to take a job 90 minutes away, but only if the job had working hours that allowed the claimant to get the children to and from school and still get to work on time. Similarly, if a commute of any time up to 90 minutes is too far given caring responsibilities or health issues—for instance, the need to stay close to a child with ill health—we would be able to take that into account. Picking up the point made by the noble Lord, Lord McKenzie, about the widening of the job goal, that is not intended to refer to a geographic or time widening, but refers to the type of work and remuneration. The travel time remains at 90 minutes.
Baroness Sherlock
Perhaps I may clarify something. I may have misheard the noble Lord and I apologise for delaying the Committee. Did he say in his response that there might be circumstances in which somebody would not be better off, but that they should take a job anyway? I see that he did. I will quote from the right honourable Iain Duncan Smith, the Secretary of State for Work and Pensions. In his introduction to the Green Paper he referred to people of working age and stated:
“We will help them to find work and make sure work pays when they do. They in return will be expected to seek work and take work when it is available”.
Was that not the contract he laid before the British people? What the Minister said appears to contradict it.
Lord Freud
I will pick up on that last point from the noble Baroness, Lady Sherlock. There may be special circumstances. There are no blanket absolutes about taking a job.
Lord Freud
My Lords, I was finishing my response to the noble Baroness, Lady Sherlock. We are fixing a broken system in structural terms so that the benefit system which currently does not reward work will now do so. There will be a consistent taper and more generous disregards, so this is a big move. One can overcomplicate it but that is a sterile debate which we do not need to go into.
I shall turn to the question raised by the noble Baroness, Lady Hollis, on the importance of how skilled Jobcentre Plus advisers are. This is an important point and one that the noble Baroness will have recognised from her time in the department. We are now positioning Jobcentre Plus advisory services as a profession with a clear career path, accredited learning and ongoing professional development while delivering to a set of standards recognised as best in class. The learning programme for Jobcentre Plus advisers is regularly updated to reflect changes in policy. This ensures that they have up to date skills to deal with any claimant interaction and supports them in making relevant and appropriate decisions in individual cases.
We are making sure that a range of supportive products, guidance, assessment tools and management frameworks are produced to assist understanding and aid delivery of a more personalised service. As I said the other day, the satisfaction of claimants is now running at 88 per cent, and clearly the objective is to get that figure as high as we possibly can.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply, and all noble Lords who participated in this short debate. I think he would have heard the issues about difficulties with travel and costs from my noble friend Lady Hollis, my noble friend Lady Sherlock, and the noble Lord, Lord Wigley. We take the point that these things need to be looked at on a case-by-case basis, and that there will be elements of discretion and judgment in that, but my noble friend Lady Hollis pressed on the issue of training. I do not know how hot the news is that the Minister has just given us, but the professionalisation of Jobcentre Plus is to be welcomed. Is he going to tell me that he started this a couple of years ago?
Lord McKenzie of Luton
It is a good move, because it is important. However, I do not think I can let the noble Lord get away with the constant assertion that the current system that they are seeking to replace by universal credit does not reflect the fact that work can pay. Overwhelmingly, is it not the case that it does? It may be that a very complicated calculation has to be gone through in order to prove it. I accept entirely that simplification of how to deal with the in-work, out-work issue is to be welcomed and is something we support. However, I do not think it is right to say that, overwhelmingly, work under the current system does not pay.
I would hang on to the point that if there is to be discretion in the system, then why is there not protection at the individual level so that someone cannot be forced to undertake work that would make them worse off? Is there going to be some reassurance at the individual level? There can be regulations which have appropriate caveats around timing issues; it is not beyond the wit of the Government to do that. In all of this change and uncertainty which still has to be resolved in many areas, would it not be reassuring to individuals that if it was clear that they would be worse off, they could not be forced down a path? That seems entirely reasonable to me.
Baroness Hollis of Heigham
I wonder if I could come in on this. I absolutely see the dilemma and I can quite understand why you may want someone to start in on something in the hope and expectation that a year down the line, that entry into low-paid work will have paid off. I put it to the noble Lord—I think he might be horrified by the possible complexity of it, but I have been looking at the additional material and trying to get my head around how disregards work—that the disregard is relatively modest for a single young person. I wonder, following the point made by my noble friend—I can see already that there may be too much downside to this and the arguments against it—whether the Minister could look at the issue of whether in such circumstances you could adjust the disregard to ensure that, even where it does not appear to pay, you could construct it so that at least someone is not worse off through working until the point at which the hoped-for job progression that we all want to see has taken them into the pathway. I would ask the Minister to take this away. It may be that this is too complicated, but making someone worse off is going to be hard to defend, is it not?
Lord Freud
My Lords, the best answer I can give on the whole area is to encourage us to wait until we get to the piloting powers before we have this debate. Let me explain it. We want to test every aspect of this system on a continuing basis. Rather than having a debate about whether we should make this little change, make that little change, do this or do that—we all like to design a system—I think the way to develop this system, which will not and cannot be perfect on day one because it is just too tough, is to have a process of constant improvement. That is my real answer. We should have the constructive debate on these issues when we get to the clause—I forget which one it is, but it is not very far away. I do not think that we will arrive there today—
Lord McKenzie of Luton
The noble Lord makes a fair point and we will be perfectly happy to pick up the discussion on these issues when we debate the clause. However, the noble Lord for his part might like to recognise a couple of suggestions that have come forward. He might like to add them to the list of things that will be included in the pilots. In the mean time, I beg leave to withdraw the amendment.
Lord Newton of Braintree
My Lords, I will say a brief word to defend myself against this onslaught. I do not think that there is a lot between us. I do not disagree with a word spoken by either of the two noble Baronesses about what our objectives should be. I hope that I indicated that. I simply do not think—this is my attempt to curry favour with the Minister—that the amendment achieves the objective in a satisfactory way. Can we be friends again?
Lord Freud
On that note, I shall take this opportunity to respond. My first point is that we are all in general agreement that it is vital to balance the requirements placed on claimants with any childcare responsibilities they may have. The amendments raise the concern that we will not take these responsibilities into account. I hope that I will be able to reassure noble Lords that this is not the case.
As is the case now, legislation will provide clear safeguards. We are committed in particular to ensuring that the same safeguards exist for lone parents as are currently in place. Our legislation will ensure that no claimant who is responsible for a child under five can be made to look for or take a job. These claimants will be required only to attend work-focused interviews. If they fail to meet this basic requirement for no good reason, they will be subject to the lowest level of open-ended sanction. The sanctionable amount for this group will be capped at 40 per cent of the sanctionable amount for other claimants.
No claimant with a child under 13 will be required to look for a job that does not fit in with their child's school's hours, including a reasonable allowance for travel time. Such restrictions will mean that a claimant will not be required to apply for or accept a job that would mean that they could not care for their child outside school hours. Advisers will take into account the care needs of older children so that work search requirements can continue to be restricted where this is appropriate.
Lord McAvoy
How will those applications be checked? Will there be a system to verify that what the claimant says is accurate?
Lord Freud
I take it that the noble Lord, Lord McAvoy, means checking that the claimant is working and using childcare.
Lord McAvoy
And the arrangements for going to school, with all the timings involved as well.
Lord Freud
That would be done through a conversation between the claimant and the adviser. Clearly, what is a reasonable amount of time is not that complicated an issue when you know where someone works and what their route should be. I am sure that they will be able to reach a reasonable agreement on that.
To the extent that childcare may be needed to help claimants meet work availability requirements, for example in school holidays, advisers will work with parents to help them identify childcare options. Currently, this would include referring claimants to the local family information service.
I take the important point raised by the noble Baroness, Lady Hollis, on the role of relatives in caring for children. Clearly their role is important as it allows parents to work and supports them. My best response is that we will keep it very much in mind as we develop our thinking and put the system into a state of implementation. We agree with the principle that childcare must be acceptable to the parent and even the child, despite what my noble friend Lord Newton said.
Baroness Hollis of Heigham
If they have good reason, we should listen to them.
Lord Freud
I am laughing at the memory of my own children’s disapproval of their minders. Jobcentre Plus does not dictate to parents the type of childcare or which provider they should use, or make any presumption that a childcare provider is suitable for the parent and child in question. The noble Baroness, Lady Hayter, asked whether childcare costs would be taken as good reason. This goes back to my previous response: there is no blanket rule. We will consider each case and look at all the benefits of work. Clearly, we will elaborate the detail on that in due course.
Advisers will continue to have an important role in both challenging and supporting parents who may have preconceived ideas about childcare, who may have had previous experiences or who have not used the services before. The circumstances of all parents and the needs of their children vary, and advisers will continue to take this into account.
Several noble Lords raised the question of the availability of childcare. We should bear in mind that local authorities have a duty under the Childcare Act 2006 to secure, as far as is reasonably practicable, sufficient childcare for working parents of children aged from birth to 14, and from birth to 18 in the case of disabled children. They must formally assess sufficiency in their area every three years. Local authority decisions on what they regard as “reasonably practicable” should be documented and published to allow scrutiny and challenge. Parents who feel that their needs have not been met can complain to the local authority. In the event that they are not satisfied with the way that their complaint has been dealt with, they may make a complaint to the Local Government Ombudsman. I will borrow the claim of the noble Baroness, Lady Hayter, about the perfection of all things under the previous Government. This is after all the system that they put in place, so I am sure that she is absolutely satisfied with the arrangements.
A parent who considers that childcare is not available will need to demonstrate to the adviser that they have taken reasonable steps to secure such care. If childcare is available but the parent considers that it is not appropriate, he or she will need to provide information indicating that they have discussed their concerns with the service provider and give reasons why they do not consider the provision to be appropriate. Parents will need to demonstrate that there are no alternative arrangements that it would be reasonable for them to make. Where the adviser considers that the parent has not taken reasonable steps to identify or access appropriate childcare they will refer the question to a decision-maker. The sanction will only be imposed if the claimant does not have a good reason. In considering whether there is good reason, we will consider all relevant matters raised by the claimant, which would include the individual circumstances of the parent and children, and the availability of suitable childcare. Of course, any sanction decision can be appealed to an independent appeals tribunal for review.
Ultimately, we believe that in the vast majority of cases it is best for children if their parents are in work. Research into child poverty and workless households highlighted that:
“Parental employment is the key route out of poverty and disadvantage. Growing up in a workless household and/or in poverty can have a significant negative effect on a child’s development.”
That is from the 2004 Treasury document, Choice for Parents, The Best Start for Children.
The Earl of Listowel
Before the noble Baroness withdraws the amendment, I want to take this opportunity to thank the noble Lord, Lord Newton of Braintree, and the Minister for their very kind words. If praises are our wages in this House, I feel well paid today—I wish I were more worthy of what has been said. I am grateful to the Minister for his careful response. It is reassuring to be reminded how important it is to children and their success that their parents are in work. Shall I wind up?
Lord Freud
My Lords, there are two questions here. The noble Earl, Lord Listowel, asked whether our provision could be improved and integrated more closely. Clearly we do have links with the family service that I was describing. What we are doing in Jobcentre Plus is trying to co-locate services, so there may be something there to look at very closely.
The noble Baroness, Lady Hollis, made a point about unpaid childcare by grandparents and others, which I was able to think about in the break. It is deceptively easy to say, “Oh, yes”, but actually it is very complicated. There is a whole load of things happening: increasing longevity; much later childbirth; and in some cases much earlier childbirth, especially in some of the groups we are discussing here. There is a lot of social change going on, including the pension provision, so this is pretty difficult to do much about. I could say consolingly that we will look at it—and I will look at it, I am quite interested in this area—but solutions here are very difficult and would be hard to find. I will look at it but I am not expecting huge things to come out of that look.
Baroness Hollis of Heigham
It is very interesting that the noble Lord should say that, because it was exactly the advice I had from civil servants at the time. None the less, it did not stop us introducing NI credits for grandparents who did more than 20 hours’ care a week for their daughter, releasing her to work. If you can do it for national insurance and pensions, you can certainly do it for childcare, and it would be much easier to do it with conditionality.
Baroness Sherlock
My Lords, perhaps I could suggest to the Minister that Jobcentre Plus could encourage the grandparent to train as a childminder. The daughter could then claim help through universal credit to pay the grandparent for childcare. You could simply cycle the money round that way—it might be a better way to do it.
Lord Freud
My Lords, I am really grateful to the noble Baroness, Lady Sherlock, for her imaginative way of manipulating the system. I am sure that it is something we should look at very closely. No, come on; I will look at this. This is very difficult so I am not promising anything, but I will look at it.
Baroness Hollis of Heigham
It is already the case that grandparents can mind a grandchild if they are a registered childminder, with the childcare taking place in their own home, and look after at least one other child. That is already done.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for his response, and the speakers who contributed to the debate. I especially thank the noble Lord, Lord Newton of Braintree, who is not in his place at the moment. Perhaps other noble Lords could pass on to him that he would never incur my wrath—the Minister’s, yes, but never mine.
The one thing that we have to take account of when we use words like “trust” and “availability” is that the debate is taking place within a much broader overall government policy. We have already mentioned in Committee that unemployment is at a 17-year high. There are already cuts to childcare. It is estimated that 32,000 people have already given up work because of the reduction in childcare allowance—at a cost of £50 million to the Exchequer, I gather, so the Treasury will not be very happy about that. Of course, it demonstrates yet again that if affordable childcare is not available, people do not go to work—fairly obvious, but there you are.
Unfortunately the noble Baroness, Lady Grey-Thompson, is not in her place. I was a little worried after what the noble Earl said about being an untrained play-scheme worker that maybe we were all untrained carers today for her daughter. At least with her mother here, I assume the child was in safe hands. As a grandparent, I very much appreciate the comments made about the contribution of grandparents. I am in the other position: with very new grandchildren, all the grandparents line up and vie to look after them. I am assured that this soon gets a bit too much and problems set in. Short-term care is much more easily set up than long-term grandparenting, unless the sort of help that my noble friend Lady Hollis mentioned is available.
I will make a couple of comments. First, I thank the Minister very much not only for saying that he will look very carefully at the suggestions made by my noble friend Lady Hollis but for the commitments he gave about including current protections. However, he did not answer one of my comments about whether they will apply to couples. He mentioned lone parents but not couples.
Lord Freud
Let me clarify that for the record. The protection includes couples as well.
Baroness Hayter of Kentish Town
This is getting better. I have one more question and I wonder if I can risk it. The Minister was also helpful on the question of school hours. He did not mention the point about being available for work during school holidays and whether those protections will remain. But given that he is in such a generous mood, my estimation is that he will reassure me on this.
Lord Freud
It is my delight to be able to reassure the noble Baroness that those protections will remain.
Baroness Hayter of Kentish Town
I am twitchy about one more thing, because I know that the Minister will say no. Although we are happy about the responsibility being put on local authorities with regard to childcare, I cannot let the moment go without saying that their funding has been cut. I know that that is not within his department, but some of these things cost money.
Lord Freud
My Lords, noble Lords will be aware that we intend to use the power in subsection (2)(d) to establish the conditionality threshold. In summary, the threshold will be defined by establishing the hours we expect each individual in a benefit unit to work, taking account of their particular capability and circumstances, and multiplying this by the relevant national minimum wage. We believe that setting their threshold in this way is the right thing to do. It will mean that we can impose work-related requirements only on those claimants working less than we could reasonably expect in benefit units falling under the threshold and it ensures that we take full account of a claimant’s circumstances and capability. As we have discussed, we believe that we must have the power to encourage and support such claimants to do more to support themselves. Without a threshold many more working claimants would fall into the all work-related requirements group. We do not want to bring into conditionality those claimants who are working as much as we can reasonably expect. Having a threshold is essential for this.
Finally, we intend to use this power to do more than set the conditionality threshold. We will also use this to add other categories of claimant to the no work-related requirements group, ensuring that particular groups of claimant are treated appropriately. This includes working claimants on jury service, claimants on adoption leave and claimants who are over state pension age. It is clearly important that such claimants remain out of conditionality. I should make clear to my noble friend Lord Skelmersdale that paragraph (d) is a protective measure. If we did not have it, we would not be able to protect those people from conditionality.
Lord Skelmersdale
My Lords, may I come back to my noble friend the Minister? I totally—surprise, surprise—trust this Government but one day there will be another Government, perhaps not even comprised of the party of the noble Lord, Lord McKenzie. That Government may use this power in ways that we cannot now foresee, which is why I do not like it.
Lord Freud
I thank my noble friend for that, although I think in practice paragraph (d) allows a Government not to impose conditionality. This measure protects the individual. Of course, I absolutely understand my noble friend’s suspicion that the measure might overrestrict what another Government might do, which would not favour getting people into work. I am sorry; that was meant to be a joke.
Let me come back to the matter in hand. Given that we expect the first use to set the principles and to remain broadly unchanged, I hope I can assure noble Lords that affirmative for the first use is appropriate. We have set out how we intend to use this power. We define a threshold, as we have set out in our note, and add in the additional groups, as in the draft regulations. I can assure the noble Lord, Lord McKenzie, that we do not expect significant changes to this. For this reason, I ask him to withdraw this particular amendment.
Lord McKenzie of Luton
I thank the Minister for that reply. As we discussed earlier, we understand the need for the sort of thresholds that are envisaged here, and why they are there. We also understand the need for scope for a further category of claimants who will be subject to no work-related requirements at all.
The noble Lord, Lord Skelmersdale, is right that this is a fairly broad power. I would not put it in quite the terms that the noble Lord does, and I am not sure why, if he envisages that there may be a different Government in the future, it might not be made up of people on this side of the Chamber, although perhaps that is a debate for another day.
This was raised because we wanted to focus on the issue that subsequent uses of the power will only make minor adjustments—since that was what the Delegated Powers and Regulatory Reform Committee were seeking in the noble Lord’s answer—particularly in relation to thresholds of hours-worked earnings, and the amount of universal credit payable. If the assurance is that it will only move in a minor way from the starting position, then it addresses precisely the issue that we were probing. On that basis, I beg leave to withdraw the amendment.
Lord Freud
My Lords, without wishing to go against normal procedure, it might be valuable if I came in straightaway to say where I stand on this, because it might enable us to move the debate on if noble Lords know what I am saying before rather than afterwards.
I recognise the valuable job that families and friends, kinship carers, do and I recognise the difficult circumstances that they face. I had a recent meeting with kinship care organisations to understand their priorities. I am absolutely convinced that this is a key area and am currently looking closely at ensuring that this group is treated appropriately under the universal credit. There is ongoing work, in which I am deeply involved, on how they should be treated for conditionality purposes; and, indeed, there are other areas where we can talk to other departments. What the noble Baroness, Lady Drake, said resonates with me.
Formally, there are safeguards and flexibilities for this group, and, as a minimum, family-and-friends carers are covered by the same safeguards as any other parent under universal credit; with the normal limitations against imposing full-time search and availability requirements on the carers of younger children and so on. Where the work-related requirements apply, the work-related advisers have broad discretion. However, there are circumstances where it is not reasonable to expect a person to meet even a limited work search or availability requirement. Among other things, advisers will have the scope to temporarily lift the requirements for any period when a child’s needs are such that the claimant must be able to provide full-time care. The point where the older child first moves into a household can often be a very difficult period of adjustment. There is a problem, which is not directly in the hands of DWP, with holding on to a job. That is a matter of concern, especially where you have advice, often from social workers, that the job must go. The noble Baroness, Lady Drake, gave one such example. The least that will happen is that we will look at easements on a case-by-case basis, given the difficulty of having blanket rules. However, we recognise that clarity of treatment and a clear legislative exemption could be of value. As I said, I am actively considering this area, and if further legislation is required, we already have scope to make regulations, as necessary.
Given the ongoing thought that we are giving to this area, I will ask the noble Baroness to withdraw her amendment. I have jumped in early so that any other noble Lords who want to discuss this area know where I am coming from, rather than trying to convince me where I should be coming from. I suspect that I will just say, “Yes, yes, yes”, to a lot of what people are going to say, so other things would be useful.
Baroness Lister of Burtersett
I very much welcome the positive response of the Minister and the fact that he has clearly been talking with kinship carers and thinking about how to address the issues raised by the amendment tabled by my noble friend Lady Drake.
I just press him on his final point about doing this on a case-by-case basis. One of the recurrent themes of our discussions is the extension of discretion. I understand the value of discretion, but as the noble Lord himself has acknowledged, it does not provide the clarity of treatment that something in legislation would do. I get the sense that there may be something in future in regulations. I cannot speak on behalf of my noble friend but it would be valuable if there could be a firm commitment before the Bill leaves this House, even if it is not in the Bill, that it will be in regulation. I will not say all that I was going to say because the noble Lord clearly does not need convincing of the importance of this issue. It is one that I have become aware of only fairly recently, partly at the all-Peers meeting where a member of a kinship carers’ association spoke to us. I was very struck by their case in the way that the Minister has clearly been.
I also want to mention, if only to get it on the record, that I was at a conference at the Law Society at the weekend on economic and social human rights. A presentation was made there by the Poverty Truth Commission from Scotland. Some of its members are people with experience of poverty, some of whom are kinship carers. I was struck that it said one of the key issues was kinship care. I will not quote as much as I was going to, but the commission states:
“Kinship carers have been supporting each other and struggling for recognition and justice for many years”.
Recognition is very important for people living in poverty. This is something I have become aware of through my work on the Commission on Poverty, Participation and Power, which also involved people with experience of poverty. The kind of amendment that my noble friend proposes would have both symbolic and practical significance. It would provide that recognition that simply saying, “We will look at it on a case-by-case basis”, would not do. Having said that, for once I can hear the ministerial nuances and I know when to say thank you very much.
Baroness Drake
First, I will respond to the comments made by the Minister. I fully recognise that he has shown a real interest in this community of family-and-friend carers; and that his interest was shown before any prompting by this amendment. It seeks to ensure that his resolve stays firm and to push him firmly into including something in the Bill to address this community. I welcome his positive response this evening.
Guidance does not do it; it will not be acceptable. It may be imposed, but that is not where I, or those who are interested in this issue, want to be. Nor do we want case-by-case consideration. It does not give the clarity of treatment, the confidence, or the protection that this community should have when they take on children. I agree with my noble friend Lady Lister that if something firm could come from the Government on this before the Bill leaves the House, it would be warmly welcomed. I wish to push the Minister, between now and the appropriate stage of the Bill, to reflect on something firm that could be placed on the record.
In response to my noble friend Lady Sherlock’s point, I must be honest and say that in drafting the amendment I was conscious of balancing the needs of a community with people’s concerns about more informal arrangements for the care of the child. This amendment specifically addresses a community of carers where there is a legal order.
My noble friend is right that, particularly if parents are, for instance, taken to prison, there could be an immediate effect of children needing to be looked after, even if subsequently there is a legal process to follow. Perhaps the Minister could reflect on the weakness of my amendment, which I will address at a later stage.
Lord Freud
If I can wrap up, in anticipation of the noble Baroness, Lady Drake, wrapping up: I take on board the points. In fact I make a point which should cheer up noble Lords, in that the DWP process is more flexible than these legal orders. We can do things to support kinship carers without this huge paraphernalia, and that is one of the areas I am looking at. We can do it just by understanding that that is where the child is, and we do not need all these processes.
In that way, we are doing something way ahead of the concerns of this particular amendment. I know I am being pushed; I am not sure about timing, because of negotiations, but I can do something narrow. To the extent that we want to go broader for this community, these things take time but I am on the case. That is all I can say.
Baroness Drake
At the request of the Minister that I wrap up, I duly wrap up, and agree to withdraw my amendment.
Lord McKenzie of Luton
This is another set of amendments that are probing amendments only, and should be straightforward for the Minister. It may be easier for him to commit to write. The probe is about getting clarity on conditionality and couples. It relates to the whole hierarchy of the circumstances where there is no work-related requirement, there are work-focused interview requirements, work preparation, work search and work availability.
We understand that the principle is that each member of a couple will have an independent conditionality determined according to their circumstances, although there will be situations—for example, for couples with young children between the ages of five and 12—where couples can nominate a principal carer to be treated as a lone parent for conditionality purposes. That seems to be the situation as I understand it, even in circumstances where the one with the more onerous conditionality requirements can opt for that position. As we discussed earlier, this is notwithstanding that the joint income of the couple is taken into account; for example, in determining whether the conditionality threshold is reached. Sanctions will apply on an individual basis but obviously will be withheld from the couple claim.
There are doubtless all sorts of other nuances in this. I am just keen to get clarity on all of those things. If it is easier for the Minister to write, so be it but if he has got something there, that would be good. I beg to move.
Lord Freud
My Lords, given the time, rather than try to rush the next amendment, instead of writing I will go through the answers on this probing amendment.
As we increase support to make work pay, it is right that, where they are able, individual claimants do everything they reasonably can to find or prepare for work. In the current system, the support people can access and the requirements they have to meet depend to too great an extent on the benefit they or their partner claim. In the out-of-work benefits it is often the case that one member of a couple makes the claim and will be subject to conditionality. But their partner is not really considered and is not subject to any meaningful conditionality; for example, the partner of an ESA claimant may be fully capable of work but we do not ask them to take steps to find employment. Clearly this cannot be right.
Under universal credit we want to change this. We want to encourage and support all claimants who can work to take all reasonable steps to do so. Consequently, under universal credit conditionality will be applied to claimants on an individual basis. We will be able to ask each member of a couple, in a benefit unit that falls under the conditionality threshold, to meet work-related requirements. These will be tailored in line with their personal capability and circumstances. This includes taking account of any physical or mental conditions or caring responsibilities an individual may have.
Where a couple have children, they will be able to choose a nominated carer who will have access to the same limitations to requirements as a lone parent; for example, where the child is under five the nominated carer will fall into the group subject to a work-focused interview requirement only. Where they are work-ready, the other member of the couple will fall into the group subject to all work-related requirements and be expected to look and be available for work. As indicated in the policy briefing note published on work search and availability requirements, a couple may choose not to nominate, allowing scope for couples to share childcare and work responsibilities.
We are carefully considering the detail of how the nomination process will be implemented and, where necessary, we have scope to draft regulations. However, we do not believe any additional regulations are necessary to operate a conditionality regime where requirements are applied to claimants as individuals. To try and spell out in legislation all the permutations of different couples’ requirements would be complicated and inflexible. I hope I have explained the context of this adequately. If there are other issues, we can go to writing but I thought it was worth getting the core of this on the record. On this basis, I beg the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that response. I am happy 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
Lord McKenzie of Luton
My Lords, I support each of these amendments. Perhaps I could start with a reply that was given by Mr Chris Grayling to Stephen Timms in the other place about the cost of this. He said:
“It is estimated that this policy could save up to £100 million over this spending review. Because of the interaction with other changes to support pensioners, which are still being developed, we are not yet able”,
to produce,
“a firm estimate for a long run figure for savings”.—[Official Report, Commons, 18/10/11; col. 936W.]
Notwithstanding the fact that the Government have apparently argued in favour of this policy, because it brings working-age claimants within the conditionality regime, that is the thrust behind this as I understand it.
We heard from my noble friend Lady Drake and the noble Baroness, Lady Greengross, about the possible cost implications for individuals who would have been within the pension credit regime now being forced into the universal credit regime and the losses that could produce. There are not necessarily losses for everyone. Yet the original proposition in the White Paper, as I understand it, was for there to be a choice: that in these circumstances a couple could choose universal credit if they wanted to, or otherwise stay within the pension credit regime. This matter was raised in the other place and I do not think that a satisfactory answer was given for that change of policy which was, by and large, unannounced. A number of points arise. I think it has been confirmed that those who are already in receipt of pension credit when these provisions are introduced will not have to back out of it. Perhaps the Minister can confirm that, but what about if there is a change in circumstances for somebody in that position? If they were perhaps dipping in and out of pension credit because of the savings threshold—or for any other reason—and if they were in at one stage, would they be able to stay in?
My noble friend Lady Drake dealt with the impact of savings. You could have somebody who has just retired and who would have been within the pension credit regime, and maybe just taking a tax-free sum from their pension scheme, now being precluded from being within pension credit and forced out of universal credit as well. On that point, there is a provision in the Bill—I think it is Clause 64—which lays the groundwork for caps to be introduced on capital amounts within pension credit. I am not clear whether that is just to address the issue of housing benefit being attached to pension credit in the future, which has a capital limit attached to it, or to bring the generality of pension credit within the regime that is otherwise going to operate. Perhaps the Minister will take the opportunity to clarify matters on that.
We heard about the impact of passporting, particularly with pension credit currently being a full passport to housing benefit and council tax benefit. However, if in fact the working-age partner does not have to be subject to any conditionality because of a caring responsibility, or for any other reason—perhaps they are subject to no work-related requirements under the assessments that take place—why then would the Government still force that couple through universal credit? If the rationale of using the universal credit to bring people within conditionality falls away, why should those couples not then have the opportunity of remaining in pension credit if they choose? It does not make any sense to say, “We are doing this because we want people to be subjected to conditionality”. If the conditionality rules do not impose any work-related activity or requirement on those individuals, why should they not be able to remain in the pension credit regime?
As has been mentioned, this provision is discriminating against somebody not on their age but on the age of their partner, which is somewhat of a departure from previous policy. I hope that the Minister will address these issues. I fear that this is something which we will have to come back to at Report, because it cannot rest as it stands.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, Amendments 50A and 53 concern couples where one member is above qualifying age for pension credit, and the other below. The Bill provides that such couples will in future claim universal credit rather than pension credit. I should stress that this change will not affect couples already in receipt of pension credit. It will apply only to new cases. The effect will therefore build up slowly and existing cases will not be disturbed.
In response to the point made by the noble Lord, Lord McKenzie, we still need to decide how to deal with cases which move on and off pension credit in future. To pick up on the point made by the noble Baroness, Lady Drake, about the impact assessment, this shows the long-term effect, and not the immediate impact.
I am grateful to the noble Baroness, Lady Greengross, for clarifying that she is not opposed to this change of emphasis in principle. The rationale is that while one member of the couple may be over the qualifying age for pension credit, the other member of the couple is of working age. Since all people of working age who can work should be expected to do so and there are no work-related requirements associated with pension credit, it follows that universal credit is the appropriate benefit. I should stress that the work-related requirements would apply only to the working-age partner.
I am grateful to the noble Baroness, Lady Greengross, for also acknowledging that in some cases the more generous earnings rules in universal credit may mean that it is a more advantageous benefit than pension credit. The disregards and earnings tapers in universal credit will mean that if one or both of the couple does work, they will keep much more of their earnings than they would in pension credit where earnings over £10 a week are deducted pound for pound from the guarantee credit.
The issue is about the rate of universal credit and how this compares with pension credit. Noble Lords will be aware that the levels of support through pension credit are significantly higher than levels of current benefits for people of working age. This is due in particular to the way in which pension-age benefits have been uprated at a faster rate than working-age benefits in recent years.
Lord Foulkes of Cumnock
As usual I am not up to speed on everything. Could the noble Lord say exactly what he means in this context by “working age”?
Lord Freud
My Lords, I am not often baffled, but by “working age” I mean someone below the state pension age, which is moving currently. But that is a formal definition.
Lord Foulkes of Cumnock
I am grateful to the Minister. In other words, as the age of eligibility for a state pension increases, under the definition in this Bill “working age” will increase at the same time with it. Is that right?
Lord Freud
Yes, I can confirm to the noble Lord that that is absolutely what is happening here. Clearly, we have debated the changes in pension age. That is to do with the very welcome increase in longevity and the length of people’s healthy lives. Returning to the point, the noble Baroness’s amendment would deal with the difference between pension credit levels and universal credit levels by including an additional amount in universal credit where a claimant is over the state pension qualifying age. I understand the reasoning—and indeed there are currently pensioner premiums along these lines in income support and jobseeker’s allowance. In designing universal credit, however, we have not included any additions specifically for people over pension age. There are two main reasons for this.
First, we think that it could reduce the work incentives for the working-age partner if they are paid a higher rate of benefit simply because they have an older partner. We are already including additions for specific reasons such as caring, or limited capability for work, where people are likely to have longer durations on benefit. Clearly, we are raising some of those levels appreciably. If in a particular case these additions are not appropriate, there ought, in principle, to be as much scope for the working-age partner to work as in any other case, so it is not clear why a higher rate of benefit should be paid.
Secondly, as the noble Baronesses, Lady Drake and Lady Hollis, rightly pointed out, there is a significant programme of change under way for people over pension age. Following the Chancellor’s announcement in the Budget of 23 March, the Government published the Green Paper A State Pension for the 21st Century in April. That paper set out options for reforming the state pension system for future pensioners. In the light of the responses to the Green Paper, we are currently developing proposals for changing the state pension system and at the same time are considering how pension credit may need to change to best meet the needs of future pensioners under any reformed state pension. It would clearly be important to make sure that any arrangements for pensioners dovetail closely with universal credit to ensure a smooth interface and also to ensure that we deal fairly with couples where one person is over pension age and the other is under it. Until our thinking is further developed, we have only one side of the equation. We need both sides of the equation to consider this issue fully. I should just add that clearly once there is a migration on changing pensions the migration strategy into universal credit and the timing of how we take different groups into it will also be hugely relevant. That goes to the heart of the very perceptive question asked by the noble Baroness, Lady Hollis.
Baroness Hollis of Heigham
I am grateful for the Minister’s very full reply on that. He clearly anticipated the question coming up. When will he be in a position to tell the Committee about the two timetables? There is the universal credit timetable and people coming over to that and the new pension timetable. When will we be in a position to see? Frankly, if there is only a year or so’s difference between them, that raises a question mark about putting this extra weight on to the complexities of UC for a very short period before it is overtaken in turn by the changes to pensions, at least for the older partner in such a relationship. Can he give us some indication? I suspect that this is probably not worth doing.
Lord Freud
My Lords, I do not think I can give a precise time on this because there are quite a lot of moving parts at the moment. All I can do is assure the Committee that we really do have this issue front and centre if we have these two sets of changes. I hope I have explained how we are planning to proceed, and I ask the noble Baroness, Lady Greengross, to withdraw her amendment.
Lord McKenzie of Luton
Will the Minister follow up on two points? First, in a situation where the Secretary of State cannot impose the work-related requirement on a claimant because the claimant has limited capability for work and work-related activity, there is nothing in forcing people away from pension credit and into universal credit because the working-age partner is not going to be subject to conditionality in any event. What is the rationale then for preventing people being in pension credit? It seems to me that it falls away completely.
There is a separate question about the impact of capital. My noble friend Lady Drake made the point that currently there is a big difference between the capital rules in pension credit and the capital rules that will operate in universal credit, but there is a provision in the Bill that looks as though a capital limit will be introduced for state pension credit. I do not know whether it is intended that that capital limit will mirror the £6,000 and £16,000 limits that are going to operate generally. If it is, I am not sure that I had cottoned on to that fact before. Or is it simply to deal with the housing component that is obviously going to be brought in and will work alongside pension credit?
Lord Freud
I think that I am safe in confirming to the noble Lord that we are bringing in capital limits. They are related to the housing issue, although I think that my colleague Chris Grayling said that they will be at a substantially higher level than those for universal credit. The noble Lord also probed the issue of people where no work conditionality is imposed. Clearly, within universal credit, other additions are going on. It is not a straight comparison. Under universal credit, the other person is likely to have a series of additions as well, so the imbalance is nothing like as great as the simple one.
Lord McKenzie of Luton
I accept that point entirely. But under those circumstances why should the option not be available to people, to couples, to go into one or the other, which I think was the original proposition in the White Paper?
Lord Freud
That is the nub of the change. When we looked at it, we thought that the appropriate policy was to put everyone below working age in that category. On looking at the noble Lord’s question of why do it when there is not work conditionality, there we have support in universal credit through the additions and the ability to keep a rather simple set of definitions working. That is the rationale.
Baroness Greengross
I thank the Minister for responding. Obviously, I am disappointed because I think that it would work in a society where at the age of 55 one could just go and get a job, but we know that that is not the case. Unfortunately, there is a still a lot of discrimination and barriers to older people who try to get a job. More flexibility would be very welcome. I think that the noble Lord said that he cannot do more but that he is still looking to see if things can be improved for these couples. I have hopes that he will look at this again and try to improve on something that seems fairly minor but which would help a lot of people.
Lord Freud
I am happy to send a letter around. We should deal with capital limits in its entirety when we come to Clause 74, which we may get to if we hurry along.
Baroness Greengross
My Lords, I apologise for the fact that I am about to chair a meeting on health and rather rudely have got to go. I hope that noble Lords will excuse me for rushing off to Millbank. I beg leave to withdraw the amendment.
Baroness Thomas of Winchester
A long time ago, during the last welfare reform Bill, when the noble Lord, Lord McKenzie, was the Minister, I moved an amendment in favour of free school meals full stop. I think it was the highest kite I have ever flown. I was very much in favour of the benefits that it had. One of them is the startling fact that research has borne out that children concentrate far more in the afternoon if they have a good hot meal inside them, which may be the only meal of the day. This is an extremely important issue.
The other day I discovered that some boroughs are giving children free school meals in primary schools and I think that Suffolk is one of them, so good for it. I shall be interested to hear the Minister's reply.
Lord Freud
These amendments would provide a cash amount for school meals and health costs within the universal credit award as opposed to the current system of passported benefits, which are often given as a benefit in kind. Clearly, I understand that to be by way of a probe rather than a specific direction. This is a very complex area and I think all of us in this Committee Room have agreed today what these problems are. Defining entitlement to passported benefits is the responsibility of several government departments and the devolved Administrations. Entitlement and the value of benefits can vary by county or by area. My department is taking a keen interest in the work under way to consider passported benefits across the piece.
Lord Wigley
I apologise very much to the Committee that my five-hour journey from Wales took six hours and that I was late in arriving. The Minister referred to a consultation with the devolved Administrations. Clearly, some of the criteria for passported benefits may vary within the responsibilities of those devolved Administrations. Will the report that he is referring to, and which he will be bringing forward shortly, cover that point in adequate depth to make sure that there is no falling between two stools?
Lord Freud
Yes. I thank the noble Lord for that question. I have specifically asked the SSAC to cover the point of working with devolved Administrations when it comes up with its recommendations so that will be incorporated in its original review, let alone in our subsequent review.
Baroness Hayter of Kentish Town
My Lords, having learnt last week that the Minister is not a bad man, this week we learn that spring comes after winter and before summer. I have discovered that my education is absolutely complete. We welcome very much the assurance that at the point when he gets the report, he will be looking at this firm of the view that passported benefits should not undermine the incentives to work in the rest of the Bill. It may be no surprise but it is nice to have that—and the acknowledgement of the importance of making sure that any such passported benefits are spent on what they are needed for. Of course, the comment that these will not count towards the benefit cap is particularly welcome. With that, I beg leave to withdraw this amendment.
Baroness Sherlock
I want to intervene briefly to ask the Minister a couple of specific questions. There is very little to add to the speech made by my noble friend Lord Knight of Weymouth. The Minister should hope that this does not go badly because he may find that speech being quoted back at him. He has been warned, and very eloquently too.
I have huge sympathy for the Minister. As I have said before in this Committee, I was involved as a special adviser during the development of tax credits, and I watched Ministers seek and receive all assurances that it would be reasonable for a Minister in those circumstances to have. I would not for one moment suggest that the officials with whom they worked, all of whom I was hugely respectful of, did anything other than give the best assurances they could. However, until a system is up and running one never really knows how it will respond to the realities of the information within it, so we all know this is a risk.
I want to ask the Minister about what kind of assurances he has been seeking and receiving and, in particular, whether he has been getting any independent assurance on the development and management of this project. As I understand it, the DWP’s development of its system is going to be dependent on the revenue’s system. Has the Minister received any assurance from the Treasury that has enabled him to progress, given the interdependence of those two things? Has he received assurances from the Treasury or from HMRC, in particular, about the nature of their systems so that he can make plans on the back of them? Secondly, what assurance has he about whether his plans are robust enough? If he will not tell us what it is, what is the nature of the assurance that was sought and from whom was it sought? I am aware that by and large large-scale government projects of this nature often seek some kind of independent assurance, perhaps from an independent auditor, whether internally or externally procured. Can the Minister assure us that the department has been through that process and can he reassure us on the basis of the reassurance that he has been given?
Thirdly, I am interested in how plan B will work. I am very sorry to say that I cannot make the briefing on 3 November. That is a genuine disappointment on my part. I am in the anorak category as well. I am afraid I am engaged with a communities and victims panel looking at the impact of the riots, and that takes me elsewhere on that day. Can the Minister explain very briefly how plan B will work? For example, is it the intention that businesses will report real-time information manually monthly or that individuals will report? Is the assumption that the DWP part of the game, where it matches up the different packets of real-time information from different employers in relation to individuals or households, will be done automatically as it is now? How will that work? Is it the intention that the new child maintenance system will be dependent on the same HMRC real-time information system? If so, is there any priority about which of these projects gets first dibs on the HMRC data, should it come under pressure?
If the Minister can answer only one question, I am really interested in the assurance question, so he will save me getting up again. Finally, if there is reporting under plan B, has he been able to get advice on what additional pressure that will put on the system? I am conscious that automated systems often put on much less pressure than processing individually and manually entered data, whether from businesses or elsewhere. Is that something that has been factored in?
Lord Freud
My Lords, before I respond to the amendment, I want to deal with the issues about what universal credit does and some of its impacts because the noble Lord, Lord Knight, implied that it has a perverse impact on poverty when exactly the opposite is the case. The IFS noted that it is progressive and pointed out that the bottom two quintiles gain £11 and £10 per week respectively and that 80 per cent of the gainers are from those bottom two quintiles. In fact, its estimate is that child poverty will reduce by rather more than our estimate. Our estimate is 350,000 when the system is in; its estimate was 450,000.
I do not want to go over the economic stuff, otherwise we will stay here all day. I want to deal with this issue. I can assure noble Lords that as part of the work to build the universal credit system we are undertaking a level of testing fully commensurate with a programme of this scale. Prior to the main go-live date in October 2013, there will be significant levels of testing specifically focused on ensuring that the various components work effectively together, including realistic business testing. For this project, we are adopting the Agile method of development, which creates and tests working IT components at an early stage. We are actually testing them now, and I shall show them to Members who can attend on 3 November. Instead of building very big sections of the IT system slowly, we are building small pieces more quickly. We are confident that this approach will provide a stable and fully proven system that will allow us to successfully deliver universal credit. I assure my noble friend Lord Boswell that the system will be sized to cater for the worst case volumes and will be robustly tested for performance at peak times. But I do not believe that it is necessary to introduce the additional step of a formal report, with the additional cost to the taxpayer and inherent time delays this would entail.
Baroness Sherlock
I thank the Minister for that. At the outset, obviously that kind of assurance will give confidence in the nature of the planning. Is he receiving independent assurance, as the programme goes on? The fact that he is, very unusually, a member of the programme board as a Minister, is certainly a sign of his own commitment to the project. It makes independent assurance even more important, because part of the point of independent assurance is to give an outside view in case those who are too close to the project may not see pitfalls as they develop.
Lord Freud
Yes, I am absolutely aware of that. The Major Projects Authority is looking at the process, and coming up in November or December is the next major independent look through the whole project. It is genuinely independent and quite a tough set of governance.
Lord Knight of Weymouth
I am grateful to the Minister. Can he tell us when those reviews will be published and whether they will continue to be published?
Lord Freud
The responsibility for those reviews is with the Cabinet Office. It is slightly hazy—I think that is the best word. They seem to get out, but I am not sure of the exact process. I take the point of that question and I will explore and report back to the Committee exactly how that information will be published. It may well be that we would look at extracts. Leave it with me. I take the point and will come back and say exactly how that information will be treated.
I want to clarify for the noble Lord, Lord Knight, his questions on costs because there are a lot of different figures flying around. One of the confusing things is that the figure of £2 billion has genuinely attached itself to two or three different parts of the project so it is easy to get confused. If you see £2 billion you think it is that £2 billion. The first £2 billion is all the costs associated with the implementation and operation of universal credit across the SR10 years, which is not just purely an IT investment. Some £1.5 billion of that is investment in systems, people, estates and other resources to allow the creation of the model. On top of that, there is another £0.5 billion for transitional and future running costs following the launch in October 2013. That £2 billion is a separate £2 billion to the net extra AME costs when it is all in operation compared with the current system. I apologise for the various £2 billions. There are some more running around but let us not get into those.
Baroness Sherlock
I am sorry, but I would like the Minister’s help in understanding which £2 billion the Public Accounts Committee was talking about in its report. It said,
“Approximately £628 million of the £2 billion set aside for Universal Credit is capital expenditure and a further £400 million is to cover the increased benefits … So less than half of the funds … will be available for staff costs”.
Is that the £2 billion that he was just talking about?
Lord Freud
Yes, that is the £2 billion of the implementation. The £628 million was within the £1.5 billion figure that I was talking about. I apologise for the confusion. There are a lot of figures. There are too many £2 billions. This is the oddest topic to joke about that I have ever come across, but there we are.
The noble Lord raised an issue about the complexity of universal credit in comparison with the ESA. This is a large project. There is no doubt about that. It breaks down to three different projects from the one that the noble Lord, Lord Knight, was talking about. The first is the universal credit administration platform. That is a DWP responsibility. That incorporates large elements that have already been developed, such as the payment accounting system. The next thing is the universal credit real-time earnings calculation and the payment and accounting system. That is basically the front end of the system and the rules engine behind it. Then there is the feed, which is the HMRC RTI system. You are looking almost at two components there: the supply of the information, which is being piloted—those pilots are getting going—and the data cleansing because, as the noble Lord rightly pointed out, getting the data through in a way that is readable and matchable is the key. Currently, the HMRC is working really hard on getting that right. It has got up to a data cleanse of 98.3 per cent and its aim is to push that higher and higher.
On data security, we will use our secure file transfer system, which is already in place between DWP and HMRC and is currently used for national insurance systems as well. We have recently had an independent assessment, which is an extra piece of independent scrutiny, undertaken by IBM on that technology plan. I should add on data sharing, as there was a question from my noble friend Lord German on data standards, that we are using the relevant information—the ISO standard. In fact, it is not a question of having it to be used for universal credit; we are already doing so and it is in place today.
We have a robust governance process with the Major Projects Authority. There is a commitment from me to keep noble Lords well informed on this matter, and I can make that commitment from a stronger position than most Lords Ministers because I am responsible for it. I make that commitment informally and I make it formally. The development can also be monitored by Select Committees in another place—the Work and Pensions Select Committee or the Public Accounts Committee—and they indeed look at it. All the structures are in place to ensure that the introduction of universal credit is properly scrutinised and on that basis I ask the noble Lord not to press this amendment.
Lord Knight of Weymouth
My Lords, in my view we have had a useful debate and I hope that others agree. Some helpful and important points were made. The noble Lord, Lord German, talked about the data daisy-chain. Clearly, I hope that he is one of those who will be able to attend at 11.30 am in Room 3A on 3 November to help us scrutinise this. The points that he made about bank accounts and financial inclusion are things that the Minister can take away and reflect on.
The point made by the noble Lord, Lord Boswell, about getting errors seen to quickly and easily—they will inevitably arise—is equally important. I was perhaps clumsily trying to make a point there in respect to the link with rising unemployment, although it is not perhaps directly relevant to universal credit beyond there being potentially more claimants and more volume. That may well not affect the systems but there may well be an increase in the individual cases of error that the system would have to deal with. The substantial worry in increased unemployment is of the capacity of the department itself to oversee the programme when it is distracted by having to deal with the recessionary impacts on it that I outlined. My noble friend Lady Sherlock's points about independent assurance went right to the heart of the issue.
I was reassured, as ever, by the Minister’s detail. The bit I am worried about is that that is what he is focusing on exclusively. I am trying to make the point that there are times when you need to rise above the detail and look at the overall environment in which this is being introduced, and to do your own health check on whether this is the right time—given the economic cycle—to introduce such an ambitious and important reform.
I am reassured by his informal and formal promises to keep this House up to date. In an ideal world, I would ask him, through a Written Ministerial Statement perhaps, to publish the major milestones of the project so that we could anticipate further Written Ministerial Statements in response to each of those milestones as they were reached so that we could have real transparency over the scrutiny. He said there is something hazy around the Major Projects Authority reviews being published and admitted that they tend to come out anyway, so when he looks at that, I hope he decides that, given that they are going to come out anyway, he might as well publish them, then he can take the credit for being an open and transparent Minister, rather than them having to dribble out. Finally, given the confusion around £2 billion and the succession of £2 billions, I would value a note from him to clarify how that works. My guess is that if he copied that to the Committee, it would be gratefully received. On that basis, I am happy to withdraw the amendment.
Baroness Meacher
I rise to speak to Amendments 51CB, 51CC, 71C and 71D on behalf of the noble Lord, Lord Skelmersdale, who sends his apologies to the Committee because he cannot be in his place today. It is a little unusual for me to speak to amendments on behalf of a Conservative Peer, but it is a pleasure to do so.
Before I refer to the comments of the noble Lord on these amendments, I would like to support the comments of the noble Lord, Lord McKenzie, in relation to the claimant commitment and the importance of that containing the responsibilities of the Secretary of State as well as the responsibilities of the claimants themselves, and the importance of specialist Jobcentre Plus staff. I will also speak about those two points in the next group. The groups were together but now they are apart.
The noble Lord, Lord Skelmersdale, has given me his notes on these amendments, which I will try to reflect in my remarks. He says that we heard a lot on the Health and Social Care Bill about the myth that the Secretary of State for Health is in total control of the National Health Service. The situation is not very different in the DWP, is it, he asks. I emphasise the fact that the noble Lord said that because it is more interesting that he makes these comments than if I were to make them. We all know that, although technically it is the Secretary of State who is occasionally involved in tribunal and court cases, it is really one of his officers who does the work and occasionally is found to be at fault—or, says the noble Lord, in the case of the employment and support allowance, not so occasionally.
The noble Lord was alarmed to discover that for ESA alone, there have been around 518,000 fit-for-work decisions between October 2008, when it started, and November 2010. The rate of appeal was around 40 per cent and, in that percentage, 40 per cent were successful in their appeals. The reason for all those successful appeals is not solely the Atos computer; the desk officers and DWP staff generally share the blame, although perhaps not to the same extent. The noble Lord has, with difficulty, discovered the success rate of appeals against decisions relating to other benefits from April to August this year. They are 15 per cent for JSA and 27 per cent for income support. Those are probably the nearest thing we have to the universal credit arrangements in the Bill and they give us a guide to what we might expect, not least because the fault, if fault there is, will be with DWP staff rather than computers. This all brings us to the noble Lord’s amendments: it must be vitally important that staff are not only trained, which to some extent they are, but monitored as well. The 24th report of the Merits Committee also raises these issues.
I share those concerns of the noble Lord, Lord Skelmersdale, but perhaps I might add a few remarks of my own. I am aware that the Minister has been determined to reduce the appeals success rate and that he has in fact had some considerable success. If I understand it correctly, this has been in part as a result of introducing a review process, prior to appeal hearings, which has enabled errors to be picked up earlier. Perhaps the Minister can explain the average length of time between the initial decision and the review decision following an appeal, and how that average time gap compares with that between a benefit entitlement decision and an appeal hearing, as we had them before the reviews came into play—we still have them, of course. In other words, has the introduction of the review process significantly improved the position for claimants by providing a significantly earlier opportunity to have wrong decisions righted or overturned? Also, does the Minister know what proportion of successful appeals, whether at review or ultimate appeal hearing, apply to claimants with mental health problems?
Lord Freud
My Lords, the form and content of the claimant commitment is of the utmost importance and we are working hard to get it right. I hope that the illustrative claimant commitments provided to noble Lords have proved helpful in this regard. We are introducing the claimant commitment to improve compliance, bringing together in one place a clear statement of the requirements a claimant is expected to meet. What we need to bear in mind is that the claimant commitment is for every recipient of universal credit, many of whom will not be subject to work-related requirements. For these individuals the contents of the claimant commitment will be minimal, including the duty only to report relevant change of circumstances. In this case, the amendments we are discussing would not be relevant.
Even for claimants who have work-related requirements placed on them, certain requirements are simply not open to negotiation. A claimant in the “all work-related requirements” group must look and be available for work. A claimant in the “work-focused interviews only” group must attend work-focused interviews. These very basic requirements are not open to negotiation. When establishing the detail of requirements, for example, and the type of work that someone has to look for, I agree completely that there should be dialogue and consultation between the adviser and the claimant. This is not to say that we will not be tough on some jobseekers but, for the majority, we expect this to be done in co-operation. If a claimant is unhappy with specific requirements, they will be able to ask for another adviser to review them. This happens now under jobseeker’s allowance; there will be an appropriate review procedure under universal credit as well.
The basic work requirements, which are not negotiable—such as that the jobseeker must look for work—clearly would not and could not be the subject of such a review requested by a claimant. Similarly, in terms of the support we provide, we envisage there being a wide range of support available to help claimants prepare for and move into work. It is intended to meet the needs of individuals and target the right support at the right time. The issue raised by both the noble Earl, Lord Listowel, and the noble Lord, Lord McKenzie, of what we are doing for the hardest to help and on creaming and parking is one that we have endeavoured to answer in the structure of the work programme, where we are trying to deal with it by price differentiation.
We have minimum standards for prime providers. If they breach those it is treated as a breach of contract, so we do have some powerful tools. At the same time, we have much more active management provider performance than ever before, and to the extent that providers are under-performing, we will shift market share by claimant group to the best performing providers in each area. This means that claimants will be moved to where they are most likely to get the best support to help them deal with their particular barriers to work. These are systems that we have created within an overall black-box approach, which would clearly break down entirely if we then imported a series of regulations and requirements such as were implied by the noble Lord, Lord McKenzie.
Lord Boswell of Aynho
I am grateful to the noble Lord for the explanation he is giving. But in that context, while these decisions remain within the black box, can he give the Committee some assurance as to the extent to which they are inhibited by the law of contract, in respect of shifting the workload between different providers? If an issue develops about the level of remuneration—or level of difficulty against the remuneration—how much can he vire that within the contract? It is obviously desirable that he should be able to do these things, but equally providers need, I presume, some measure of stability and understanding.
Lord Freud
Yes. There are two or three issues wrapped up in that seemingly simple question around whether we got the differential pricing right when we set the contract terms up. The answer is that we do not know and we will not know. I doubt if they are completely perfect—that would be very surprising. But as we learn and get information, we will be able to adjust them. In practice, looking at the timescales of this, with the next set of contracts, which will be out in about five to seven years, you effectively have to start negotiating in four years’ time. By the time we have all the information on this, I suspect the reality is that it will not really be a question of changing existing contracts; it will go into the design of the next round. That is how it will happen in practice.
Let me now explain how much differentiation there really is, when you are looking at a regime for everyone. When you look at those who come off the system as jobseekers, half leave the benefit system within three months, and three-quarters within six months—the majority, to put it bluntly, with very little help from the state. So it would not be appropriate to offer support to all claimants early in their claim and, clearly, it would clearly be much too costly to do so. I am very comfortable in believing that those who have sat in my chair before me will be very aware of the dead weight issues of running that kind of system.
Baroness Hollis of Heigham
Does that mean that with the sharing of this insight, the Minister will therefore look more favourably at amendments trying to protect those who are temporarily caught in the housing benefit underoccupancy trap by virtue of suddenly losing a job?
Lord Freud
My Lords, I very much remember the debates we had last week. I am thinking very deeply about some of the observations made by noble Lords in this Committee, and I think that is probably as far as I should go today.
We operate in a world of finite resources, and we need to target them appropriately. Clearly, at the moment, we do not refer all claimants to the work programme until 12 months into their claim. We pull some further forward. So we need to ensure we continue to have flexibility to allocate resources in the most effective way.
The noble Lord, Lord McKenzie, asked what is happening to work-focused health-related assessments—WFHRAs. The suspension of the WFHRA allows us time to re-evaluate the assessment, particularly in the light of the new work programme, and to consider whether its operation can be improved better to support claimants or whether this support should continue to be provided in other ways. I do not propose to second-guess the outcome of that review or to place constraints on our ability to take the best course of action on that.
On training, we already have a system in place for the professional development and upskilling of advisers. This includes access to a learning framework endorsed by Edexcel, the UK’s largest qualification-awarding body, which will be updated to reflect changes in policy ahead of universal credit. We strongly believe that our advisers are up to the task of personalising requirements and support. We have some very experienced professionals in Jobcentre Plus and their decisions are supported by relevant training, tools and guidance. In a Jobcentre Plus customer survey carried out this year, 88 per cent of claimants reported that they were satisfied or very satisfied with their experience of Jobcentre Plus. The changes we are making in Jobcentre Plus are precisely intended to allow district managers and their advisory teams more freedom and autonomy rather than having to follow a tick-box, process-driven approach. It is critical that we maintain flexibility in legislation to tailor training and tools according to business need and developing strategy. For all the reasons outlined here, I urge the noble Earl to withdraw the amendment.
Lord McKenzie of Luton
I thank the Minister for his reply. I shall follow up on one or two points. I asked him if he would take us through the claimant journey at the moment, and he did that partially by saying that it is 12 months before claimants get into the work programme, although I am not sure whether that is right for everyone.
Lord Freud
I am sorry. I realise I did not answer that question fully. It is quite complicated, and it is probably easier to see on a graphic, which we have. I commit to making it available afterwards. I also realise that I failed to answer the series of questions asked by the noble Baroness, Lady Meacher, about the timing of the review process after the adjustments. It is pretty early days for those adjustments but, rather than detailing them again, I shall add them to the same letter and make that available.
Lord McKenzie of Luton
I thank the Minister for that. I revert to issues around the black box or the equivalent period before people are in the work programme. I was not arguing for lots of conditions other than, I guess, robust contractual conditions imposed upon providers, but providers within the flexibility that the black box gives them should be particularising in individual cases how they are going to support individuals. It is that that ought to be spelled out in some way.
Lord Freud
There is a genuine difference of approach with the work programme. I know that we agree that what we have done with it is evolutionary, and in some ways it is very evolutionary. We have learnt a lot from what has happened in the past decade. In particular, one of the things the work programme builds on is the employment zones, which were by far the best performing welfare-to-work programme in the past decade. That is the experience. The issue is that if you have a payment-by-results system, I strongly believe that it forces providers to provide an individualised service. What matters is that you get that one person in. I can say exactly what drove this insight for me, and it might have been someone from the Shaw Trust. They said to me, “If somebody needs these eight steps to get back into work, it is no good if you have a top-down system that says ‘these are the six things you have to do for everyone’. You can do those six things but that person who needed eight things will still not get into work”. That insight drove me towards payment by results as the model. If you want to get that person into work, you will need a particularised, individualised process to do that. You cannot legislate for that at the centre. It cannot be laid down. We must not put too many central requirements because it changes all the time. That is a difference of philosophy and the one that lies behind this issue.
Lord McKenzie of Luton
I do not think that we are apart on that issue. I am not arguing for six constraints to be placed on every provider which must be carried out in every case. The point is that if the black box enables eight steps to be provided in a particular case to get someone into work, that is fine, but why could not the provider simply ensure that those are set out for the claimant? What is so difficult in doing that so that the claimant has the reassurance of the journey that they will go through to get into work? There could be flexibility over that. It does not need to stay at those eight steps for ever. But if that is what the provider has concluded is needed to get someone into work, why should they not give an undertaking or commitment to the claims?
Lord Freud
My Lords, there is a simple answer to that. You start off on a journey thinking that there are eight steps, which you might write down. If it is a formalised process and you decide after three weeks that, “Actually, I do not need to do these two steps or I need to add another two”, you might change it. You might change it weekly, as people change. If we have an overformalised process, we just make that in management terms impossible and very expensive. I would resist it on those principles.
Lord McKenzie of Luton
I do not think that we are going to agree on this issue. But one is not arguing for rigidity: one is simply arguing for the fact that claimants ought to understand the process that they are being asked to go through. If some steps can be missed out or other steps added, that would be fine. No one is saying that that should not happen. Put simply, there should be some obligation as regards the claimants, who should know what is going on and what the provider is seeking to help and to support them with. Perhaps this is an issue on which we will not settle today and to which we will have to come back.
Part of the debate from the noble Baroness, Lady Meacher, who read the script of the noble Lord, Lord Skelmersdale, was about ESA. In a sense, it is a forerunner to the determinations that we are talking about because the categories that people find themselves in are a consequence of that WCA process. The claimant programme moves on from that, which I hope we will discuss in more depth later in our deliberations on Clause 38. On behalf of the noble Lord, the noble Baroness, Lady Meacher, made the point that Jobcentre Plus staff are well trained and highly qualified, which I accept entirely. We hope that providers would have robust training programmes. But what information from the WCA will they have before them when they are seeking to devise the individual programmes?
Lord Freud
The medical information in the WCA is sensitive and personal, which is gathered at an assessment. It informs benefit entitlement and does not provide comprehensive information about readiness or not. In practice, it is likely to be of limited use to advisers and, for that reason, is not shared.
Baroness Meacher
I very strongly support the comments of the noble Lord, Lord McKenzie, because it seems to me that we are talking about oiling the wheels and enabling the system to work. It seems to me that part of that is transparency to the claimant, which is the noble Lord's previous point, but also transparency for the provider. If I understood this right, the assessment and the clinical report on the claimants will not be provided to the provider, who then has to prepare all this activity to enable the person to return to work. If that is really so, I appeal to the Minister to take that back and think about it because I cannot see the system working.
Lord Freud
Let me clarify what information goes over. The former WCA is confidential and does not go over. How does the adviser build the revised requirements with the claimant? The evidence that he uses includes the claimant’s fit note, advice from Atos—not the former WCA, but some advice can go over—and other medical evidence. Those things come together to form the basis on which agreement is reached.
Lord McKenzie of Luton
My Lords, we have probably taken this as far as we can this afternoon. I would certainly like to read the record and reflect on it. We ended on a high note. The Minister made reference to a fit note, which is most welcome. There is a conundrum here which I do not think that we have bottomed out this afternoon. We propose to take it away and I imagine that we will wish to return to it on Report.
Lord Freud
There are quite a few moving parts to this. I have talked about the WFHRAs reviewing that and there is also a review coming out on the sickness absence regime in the not too distant future. There are areas that need to be brought together, which impact on this reasonably specifically.
The Earl of Listowel
I thank the noble Lord, Lord McKenzie of Luton, for his support and the Minister for his helpful reply. Clearly, he has a great depth of knowledge of this area and I am grateful to learn from him this afternoon. I have a couple of brief points to raise. I also have an aside which is that his black-box approach sounds very familiar, in terms of the young offender programme for National Grid and Transco, to which I referred. It was developed for National Grid and Transco by Dr Mary Harris, who is an astrophysicist by background. Her approach was very much testing and incrementally trying things out until she got a method that seemed to work very well for young people. Maybe there is some read-across there to what is being discussed this afternoon.
The Select Committee for the Department for Work and Pensions looked at the work programme, and although it welcomed it, it had this to say:
“However, there is a risk that creaming and parking may still take place under this model”—
the work programme model—
“since it remains open to providers to continue to focus on the easier to help participants within each customer group”.
Perhaps the Minister could write to me, or say now to the Committee, whether he is aware of that particular problem and what needs to be done within each of the tranches.
The second issue that I would like to raise with the Minister—and I would like to think more about this—is where he talks about attending being a fundamental requirement. One just has to attend if one is going to get anywhere through this process. I can imagine for some young people that even attending would be a big step to take. I do not want to push it too far, but if you have someone coming out of the criminal justice system who is very oppositional and who has complete distrust for authority of any kind, you might need to woo them a little bit before you can even get them in a meeting—but it would be well worth while wooing them in terms of the outcomes at the end. That is the first point; I will go back and think about the second.
Lord Freud
To save the department writing a letter, I actually think that “creaming and parking” is not desperately helpful, although I know that it is a very popular phrase. I shall explain exactly why. Within a black-box approach, if you are a provider you are clearly trying to spend your money on an outcome that will be successful. Our job is to ensure that we put the amounts of money into the right level. There will be people who are ready and worth while investing in and people for whom it is not the right time—you need to wait. There is quite a sophisticated judgment there, and you can get those judgments too crudely wrapped up with what are basically terms of abuse in “creaming and parking”. That is how I would respond to that, and I hope that that has saved us a letter.
The Earl of Listowel
I thank the Minister and beg leave to withdraw the amendment.
The Earl of Listowel
My Lords, I apologise. I should have put a couple of questions to the Minister. How will care leavers be treated in this system, and what additional support and flexibility might they expect to be shown? Perhaps he might prefer to write to me on those two points.
Lord Freud
Before I start on the amendment formally, it is worth making it crystal clear that the structure of the changes we have made bear in mind some of the real issues that we are talking about. I am particularly conscious of people with learning difficulties and fluctuating conditions, or a nest of other problems. I want to spend one minute on the design of the new welfare system, when it comes out like Aphrodite coming out of the sea near Paphos. The first point is the design of the work programme, where the rewards are not to get someone into a job and to keep them there, as it used to be, for 13 weeks. When you think about it, that is not what we want; we want someone to be in a long-term job. The structure, particularly for the hardest to help, is that the real rewards for the provider are when someone is in work for more than two years—it is two years and three months. You do not get someone into a job for two years and three months if it is inappropriate. That simply is not going to happen so when we are talking about the work programme, the incentive on the providers is to match people up with jobs that they can do in a way that the current system simply does not.
The second structural change that we are making, and which is really relevant in this area, is in how the universal credit works. By pulling together the two systems, the out-of-work benefits system and the in-work tax credit system, you do not have this desperate problem that we have today where if you take a risk and try to get a job and it did not work, you go back to go—and now try to get your benefits again. It is a nightmare but there have been bits of sticking plaster on it.
If you are in a fluctuating condition and this week you cannot work—let us say you have a job where there is a little flexibility—all that would happen would be that you would slide up the taper. Nothing would have changed in the nature of your benefit. There is just an adjustment in your universal credit payment and when you can work more, you get more. Those two things are big structural changes to bear in mind when we deal with these areas. They will help a lot because much of what people are rightly so concerned about are some of the incredible blocks that are in the current system and which make it so difficult for people to partake. It is why we have excluded so many people from having a full life, because in modern western society being part of the economy of the country is having a full life. They have been excluded and there is all the depression that results, so there are some really strong underlying changes that should help.
Lord Wigley
I am very grateful. Would the system that he is describing take on board the fact that the claimant may not be in a position to express, have the confidence to express, or know how to express the reasons that he or she cannot make that case? Therefore there is the need for access to professional advice.
Lord Freud
As I said in the previous debate, taking on board advice from a claimant’s own medical practitioner and other sources is part of the process here. To pick up the point raised by the noble Baroness, Lady Hollins, for claimants in the work preparation group, we intend to carry forward the current system of home visits to claimants with mental health problems to ensure we understand why they fail to comply. Of course, all sanction decisions can be referred to an independent tribunal, helping ensure we get it right. But equally, we intend to move away from extensive—and ultimately incomplete—lists and regulations. It is impractical for legislation to catch all the relevant matters that may arise in every single case of non-compliance, and the lengthy JSA regulations—which have matters that must and may be taken into account in determining whether a claimant has good reason—are not actually helpful for decision-makers or claimants.
To pick up the point from the noble Baronesses, Lady Meacher and Lady Hollins, on the work capability assessment, we do rely on the WCA and therefore Professor Harrington’s review is critical to help us get it right. Claimants should be placed only in a work preparation or a work-related requirements group where they are capable of meeting these very basic requirements. Once in those groups, clients will need to take account of their health condition. They are designed to take on board all the available evidence on that individual.
The noble Baroness, Lady Hollins, asked what happened with the Harrington review. As noble Lords know, we took on board the entirety of Malcolm Harrington’s first recommendations. The main thing was to empower decision makers to make the right decisions. In response to the question asked by the noble Baroness, Lady Meacher, we have introduced a mental health co-ordinator in each district who has an outward-facing role working with mental health services and an inward-facing role developing the knowledge and confidence of advisers. The other area of Professor Harrington’s advice that was taken up was on improving our communications so that claimants understand the process and the result and are able to add additional evidence if they need to. In response, we have also made improvements in mental health with mental function champions across the network at Atos. Professor Harrington is currently undertaking his second independent review. We are waiting for it, and we will then look very hard at what to do with those recommendations. We will take them very seriously.
Turning to Amendment 51E on work-focused health-related assessments, the noble Baroness, Lady Hollins, will know that these assessments have been suspended because they were not working as intended. We will re-evaluate, as I have already said. I have already offered to write to the noble Earl, Lord Listowel, on care leavers, and I will add that topic to that letter.
I do not want noble Lords to feel that I am being negative in this area, and it is over-easy to think that I am. I have valued the contributions noble Lords have made. I do not see these things as appropriate for the Bill, but I am clearly going to consider deeply the points that have been made today with the aim of applying them appropriately as we implement the system. I value what noble Lords have said. It resonates. We need to get it right. On that basis, I ask the noble Baroness to withdraw her amendment.
Baroness Wilkins
I totally take the fact that the Minister is setting out a system in which claimants should be confident that they are being helped and that that is the purpose of the system. However, does he accept that existing claimants have to overcome an enormous amount of negative experience because of the Atos system so there is an enormous mountain to climb?
Lord Freud
The noble Baroness, Lady Wilkins, makes a point, which we have actually discussed in the Chamber in the past. She knows my concern about this. I think that the Atos and WCA process is genuinely improving now, with the changes that have been made. A lot of the stories that we have are of the system as it was, unreformed. It is gradually improving. That is not to say that it is now perfect—that is not my claim. We are committed to getting the process right, and we inherited that process. I know the concerns that there are, seeing them at first hand in many cases. It is a terrible balance between abandoning people and saying, “You’re out of the economic life of this country” and then trying to pull them in in a coherent way. Getting that balance right, as all noble Lords here today understand, is complicated and a path that we are moving down. But I am determined that we will get to a position where we are doing it with the right balance.
Baroness Hollins
My Lords, I am grateful to the Minister for his response, particularly for saying that he is going to consider these amendments deeply as we move towards implementation. There were three things that the amendments were trying to do. One was to try to ensure that evidence from claimants’ own health professionals would be properly taken into account at an early enough stage to prevent some of the distress that is currently affecting some claimants. The second one was about reasonable adjustments, which are a requirement under the law but are perhaps not fully understood. It is about an individualised approach, is it not? The third one was ensuring that the impact of a health condition on a candidate’s ability to comply was properly assessed and understood. It is not about asking for a rigid list of things in the claimant commitment. What it is really about is asking for joined-up work between different departments with different responsibilities and joined-up care for people with health conditions with the NHS and the DWP. There is no reason why Jobcentre Plus staff and existing specialist NHS staff could not share some information for the benefit of the claimant, both at the assessment stage and during their progression into work, which is what we would all like to see.
Although decision makers are required to take information into account, there is evidence that they are not always doing that. Yes, of course people can appeal, but appeals are very distressing, not just for the individual but also for their families. These amendments were intended to make the system work better both for claimants, so that they are more likely to succeed, but also because it is much more satisfying for staff to work in a system that they know is working fairly. So I am hoping that the Minister will find a way to ensure that the spirit of the amendment is taken on board. I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton
My Lords, I shall endeavour to speak up, George. I am not sure whether it is this camera that you want me to speak to.
This is by way of a probing amendment. It was prompted by an article in the Times of 14 October. The article suggested that people were to be denied their benefits if they appealed against the determination. That seemed to be in the context of the reassessment of incapacity benefit claimants, particularly those who were denied ESA— the work-related activity group— who could therefore qualify for jobseeker’s allowance. The article stated:
“Hundreds of thousands of welfare claimants face losing their benefits for months if they challenge a ruling that they are fit to work. Ministers are looking at removing payments during the appeals process in an attempt to slash the number of challenges that are threatening to derail the Government’s benefits reforms. The unprecedented move is being considered as one way to unclog the courts which are set to be inundated with appeals as the Government attempts to reduce the annual £7 billion incapacity benefit bill. A reassessment of all 1.6 million incapacity benefit claimants began in April, with ministers promising to move them on to a new system with narrower eligibility criteria for the sick and stricter requirements to find work. However, concerns over both the reliability of the test to find out whether people are ready for work and the scale of the project has prompted fears of a mountain of appeals. Judges have said privately that they could be facing 500,000 cases a year, some taking more than nine months to resolve”.
In view of the concerns that an article like that can generate, we consider it appropriate to give the Minister an early opportunity to set the record straight, and hopefully deny that that is the Government’s intent. To be clear, do the Government have any plans or otherwise contemplate, by amendment to this Bill or otherwise through regulation, the prospect of denying individuals their benefit should they appeal against a determination that denies them incapacity benefits or employment and support allowance?
At present, where there is an appeal against a decision not to include somebody in the work-related activity group, that causes benefit to be paid at the assessment period rate only, which is the JSA rate. Is this the type of arrangement which the Government are seeking to replicate, or are they proposing to go further and to deny benefit altogether? This raises wider issues which we shall come on to in subsequent clauses, but what conditionality would apply during the period when the appeal is outstanding? I hope that the Minister can set the record straight and clear on this. If he proposes to confirm that the article has some validity, we have some additional questions which we would pose to him. I will give him the opportunity to set the record straight and deny that this article identifies something which the Government propose to take forward. I beg to move.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the amendment is slightly different from the question posed, and I shall deal with the question posed. The changes to the current appeal system are being taken forward in this Bill, as expressed in Clauses 99 and 100, so we will have an opportunity to discuss those in that consideration. We are, in those clauses, looking to introduce a period of reconsideration, or a reconsideration process, prior to a full appeal. We can have further discussion at that point, but regardless of what an article in a newspaper might say, clearly the practical difference, if one was to be extended in the way described, is purely a difference of conditionality, because as the noble Lord, Lord McKenzie, pointed out, the actual payment rate of the assessment phase of ESA is the same as JSA. That article has put out a lot of misinformation.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister if he is saying that what is being contemplated in effect replicates what currently exists. When an appeal is outstanding, the assessment period rate, which I think is the JSA rate, applies. If that is what is going to be replicated in the new world, I understand that and can see that the article was misleading on that basis. Broader questions are raised, however, given that there is going to be a universal credit, components of which would in due course be held back during an appeal. If we are talking just about the work-related activity equivalent components, I can understand parity with the existing situation, but obviously other components will go into that, including housing issues. However, I am happy to leave that debate for when we reach Clauses 99 and 100, supposing that we do reach them at some stage in our deliberations. I think the Minister has dealt fairly with the principal concern that the article generated, and I beg leave to withdraw.
Lord Freud
My Lords, the size criteria measure marks a significant change in our approach to housing benefit for claimants living in the social rented sector. The current housing benefit system is not fair; it is not right that families on benefit in the private rented sector have been able to live in homes that most working families could not afford, and we have already begun to tackle that unfairness through changes to the local housing allowance. It is also not fair that, in the social rented sector, housing benefit pays out the full rent on properties that are larger than required by those who live in them, while at the same time over 250,000 households in England are overcrowded.
To pick up one of the many points made by the noble Baroness, Lady Hollis, on the bedroom standard, that standard actually expects children aged over 16 to share a room with children of the same gender until they are 21. That is a rather tougher requirement than that of the DWP and the LHA, which allows separate bedrooms for a child of the same gender, aged 16 and over.
Baroness Hollis of Heigham
My Lords, that was why I specified a 15 year-old in my illustration of bedroom size.
Lord Freud
I shall continue. By 2014-15, the annual savings achieved as a result of housing benefit reform as a whole will exceed £2 billion. It is right that the social rented sector plays its part in achieving those savings. The size criteria measure itself will achieve around £0.5 billion of savings each year from 2013-14.
On the point made by the noble Lord, Lord McAvoy, about room size—the example that he used was his nearby city of Glasgow and its tenements—the size of rooms is something that we are looking at with stakeholders as part of the implementation planning. That concern is shared by the noble Baroness, Lady Hollis. It is an issue that we are looking at.
Lord Foulkes of Cumnock
Could the Minister describe what he means by a bedroom?
Lord Freud
My Lords, I am tempted to ask the noble Baroness, Lady Thomas, to come and save me from bullying by the noble Lord, Lord Foulkes.
Lord Foulkes of Cumnock
I will make it easier for the Minister then, since he is finding it difficult. In my city of Edinburgh, there are a lot of houses with rooms that do not have external windows—they are box rooms. Some occasionally have a small skylight. Is that within the definition of a bedroom? Another example might be studio flats, or studio flats that may then have an extra bedroom attached to them. Is that a two-bedroom or a one-bedroom flat? Another might be my study. Is my study a bedroom or is it a study? It was used as a bedroom by the previous occupier, but now it is a study. These are just three examples of difficulties from the very start and the most simple part of the Bill: that is, the description of a bedroom.
Lord Freud
Certainly, the study of the noble Lord, Lord Foulkes, would seem to me to be a bedroom. However, box rooms without opening windows normally would not count as bedrooms. There is a series of rules that we will go through as we work through the implementation planning with stakeholders.
Lord Foulkes of Cumnock
Then you tempt tenants to board up their windows, as some owners used to do when there were window taxes.
Lord Freud
The coalition Government, my Lords, are not Queen Anne and we will resist any of those blocked up windows, which still blight many villages and which I know the noble Lord is very concerned about.
This is more than just a savings exercise. Housing benefit payments in both sectors will become more balanced in a way that will restore fairness, encourage better use of our existing social housing stock and encourage more people into employment.
The noble Baroness, Lady Sherlock, asked about the impact on children in particular. The impact assessment shows that claimants with children are less likely to be affected by the measure than those without children. Only around a third of the claimants potentially affected have children living with them. DWP officials have been working very closely in this area with officials from DCLG, the Department for Education and HMT.
It is reasonable to expect people living in the social rented sector to make choices about the affordability and the size of their accommodation, just as those in the private sector, and those who are not on benefit, have to.
My noble friend Lord Kirkwood spoke about transition and phasing. I should remind the Committee that these measures were announced in the summer of 2010 with a view to their taking effect, as has been observed, in April 2013. We think that this provides adequate lead-in time and we aim to have regulations in place by April 2012 to allow for a full year of implementation. If you like, you can look at that period as the transition phase, as people make appropriate arrangements.
Let me move on to Amendment 48, which comes in two parts. The first part would place a duty on social landlords to find suitable alternative accommodation for claimants who are underoccupying their property. If a smaller property cannot be offered to the claimant’s household, the size criteria measure would not apply. The second part relates to those who live in significantly adapted accommodation, and I will come on to that shortly. We are working closely with the Department for Communities and Local Government, and others, as we explore ways to best support landlords, local authorities and tenants, leading up to the implementation of this measure. That work is ongoing, and we will look at how we can work to ensure that claimants’ options are clearly set out, well in advance of the measure coming into force in April 2013.
It is important that local authorities and other providers of social housing make more effective use of their stock, and this measure, alongside the Localism Bill, will provide not only a greater incentive but a means for achieving that. This measure is about asking people on benefit to make realistic choices about the affordability of their accommodation when it is larger than they need. It is in the interests of social landlords to make the best use of their stock in order to make sure that tenants are able to pay their rent. For this reason most landlords would try to offer alternative housing options whenever they could. The specific duty on social landlords in Amendment 48 is therefore unnecessary and would raise important concerns around control, classification and enforceability. We do not want to impose regulations on to social landlords just for the sake of it.
The Government are providing funding to councils—£13 million over four years until 2015-16—to assist them in supporting underoccupying tenants who wish to move, as well as funding an action team within the Chartered Institute of Housing to work with all social landlords to help them to promote moves. The Government are investing £4.5 billion to help to deliver up to 170,000 new, affordable homes over the next four years.
This amendment would also exempt claimants from the measures where no suitable alternative accommodation is available. However, we expect that many people will decide to remain in their existing property, and make up the shortfall, even if an alternative offer of smaller accommodation is available, so it is likely that such an exemption would be an expensive waste of money in many cases. Of course, without a definition of suitable alternative accommodation, it is not easy to estimate how much this exemption would cost, but let us be clear that it would be extremely complex to deliver, and undoubtedly place a significant dent in the expected savings that would need to be found from elsewhere. I do not think this is a sensible way forward.
I understand that there are concerns about the supply of smaller properties. Claimants affected by this measure will have to decide whether to meet any shortfall themselves—from their earnings for example, or they could take in a lodger, or someone they know, to fill the extra bedrooms. If they do decide that moving to a smaller property is the only option to avoid getting into arrears, the social rented sector should not be seen as the only option. Private renting may be an appropriate alternative for some of those affected.
Changes being taken forward by the Department for Communities and Local Government through the Localism Bill will make it easier for councils and housing associations to move underoccupying tenants. However, this is not just about landlords. Some tenants can, and perhaps should, take more responsibility for arranging a move themselves. The new national homeswap scheme, Home Exchange Direct, will increase opportunities for social tenants looking to move through mutual exchange. Home Exchange Direct brings together the four internet providers of mutual exchange services to offer tenants more choice over where they live. Ultimately, landlords in Northern Ireland, Scotland and Wales will also be able to join the new scheme.
Amendment 34A also probes the availability of suitably sized accommodation. The provisions in subsection (3) will restrict how the other powers relating to the provision of housing costs may be used. Adding a line in subsection (3) to take into account the availability of suitable accommodation will not limit the way in which those other powers can be used. I take it that this amendment is really intended to ensure that claimants are unaffected by the size criteria in circumstances where no suitable alternative accommodation is available, and I have already made my thoughts clear on that. I recognise that, for some households in certain circumstances, moving may not be appropriate or should be delayed. Local housing authorities are best placed to take into account individual households’ circumstances. Where it is appropriate, they may offer help to meet a rent shortfall through the discretionary housing payment scheme.
The question of how people might respond was raised by my noble friend Lord German and the noble Baroness, Lady Hollis, who I congratulate on her speech. She has made a series of excellent speeches. The most up-to-date evidence is the survey by the Housing Futures Network on claimants’ behaviour, which came out recently. It showed a variety of initial reactions. Twenty-five per cent of respondents said that they were quite or very likely to downsize; 50 per cent said that they were unlikely to consider moving; 29 per cent said they would be quite or very likely to move into work or increase their hours; and around 15 per cent said that they were quite or very likely to take in a lodger or offer a spare room to a family member. Therefore, around 65 per cent of the survey’s respondent group are looking to change their behaviour. In the interests of full reporting of that survey, I should add that 35 per cent said that they were quite or very likely to run into arrears. Clearly, over the next couple of years we will look at putting strategies in place to make sure that that does not happen.
The second part of the amendment would provide an exemption from the size criterion measure for those living in significantly adapted accommodation. I appreciate that within this amendment there is acknowledgment of the need to draw a line somewhere and not just exempt all claimants in any form of adapted accommodation. I have noted the different views put forward in this Committee on how we might begin to do that.
The noble Baroness, Lady Lister, raised the question of disabled children. We are looking at ways to limit the impact on disabled children effectively and in an affordable way. I am sure she will understand that I do not want to comment today on the specifics of that, but I can assure her that very active consideration is going on. I should add the reminder that over this SR period we are already spending a lot of money—a total of £190 million, of which £130 million is for discretionary housing payments.
Since the measure was debated in the other House in May—I think the noble Baroness, Lady Hayter, was right about that—we have looked in detail at the possibility of an exemption for a tightly drawn group living in adapted accommodation. The work that we have undertaken to look at this in detail, in conjunction with various stakeholders, has revealed that such an approach is complex and has drawbacks. The issues that have been highlighted are finely balanced, so I should like to take a little more time to deal with them. My department is working closely with officials from the DCLG. We are continuing to talk to stakeholders as we do so. I hope to return to this matter when we debate Clause 68, and certainly by the time we get to Report if that is too tight.
My response to the question of my noble friend Lord German on the evaluation of the reforms is that we intend to undertake independent monitoring and evaluation to assess the impact of this set of measures and the changes in the social rented sector, and we expect the research to be undertaken over a two-year period, 2013-14, with preparatory work starting in 2012-30.
With that in mind and the assurances I have given more generally, I ask the noble Baroness to withdraw her amendment.
Lord Freud
My Lords, this has been a very good debate. I am not saying I have welcomed anything anyone has said, but I am saying the quality of the debate has been very high. I thank noble Lords for the great expertise they have brought to these issues. In response to the request of my noble friend Lord Kirkwood and the noble Lord, Lord McKenzie, I shall try to answer on each of these amendments and justify the idea that we can group them and get the right answers through. I am grateful for the indulgence of Committee members in allowing some big groups to come through, which should help us, but I aim to answer all of these issues.
To go back to the essential core point, housing support is a critical element of universal credit. It will help people pay their housing costs and help prevent homelessness. It will recognise that people need support across a range of different tenure types whether they live in the private rented sector, the social sector or whether they are owner occupiers. However, to repeat the point I made earlier, it also needs to be affordable to the taxpayer. My noble friend Lord German made the point about the increases in pure cash terms—it is up from £11 billion to £22 billion in a decade, which is 40 per cent in real terms—and that rise was going to continue if we did nothing.
The noble Lord, Lord McKenzie, asked why is it this community that is taking the £2 billion saving we are looking at. I remind Committee Members that the way we are designing many of these particular housing reductions is not directed wholly or even mostly at tenants. Clearly, we are looking for landlords to take the strain in the private sector—I am on record as saying that—although we expect other responses in the social area which I have gone through.
Lord McKenzie of Luton
I quoted the figure of £2 billion. I thought that figure was for several years and related to these underoccupancy provisions. Is that right or is it a broader range?
Lord Freud
No, the figure of £2 billion applies to the total saving by the end of the period in 2015 of all the benefit changes, and the particular change here is £0.5 billion per annum on the social sector from 2013-14.
Tackling housing benefit expenditure is vital to our combined efforts to reduce the economic deficit. The measures within Clause 68 will help to deliver significant savings affecting housing benefit claims for those living in both the private and social rented sector. Clause 11 will allow us to carry these measures through into universal credit.
Starting with Amendment 36 from my noble friend Lord Kirkwood and the noble Lord, Lord Kennedy, I confess that it surprises me because it appears to call for a return to something akin to the local reference rent. This was a system that was difficult for claimants to understand, led to delays as individual rent officer determinations were sought, and it was expensive. It needed an army of rent officers to carry out these case-specific determinations. It is not a system that I would willingly go back to. This amendment would also maintain the status quo for housing benefit in the social rented sector, ignoring a property size in relation to the size of the household. As I have set out, we must take control of housing benefit expenditure across both sectors, but this amendment would do neither. In fact, it would increase costs.
I turn to my noble friend’s point on CPI. We will discuss this in more detail in a later group. The CPI uprating will apply across the spending review period, and if it becomes apparent that LHA rates and rents are moving out of step, they can be reconsidered at that point.
Amendments 38 and 79 would exclude anyone from this measure who is disabled and lives in adapted accommodation. Unlike Amendment 48 in the name of the noble Baroness, Lady Hollis, this exemption would apply regardless of the extent of the adaptations that have been made. It would also exempt anyone in accommodation who is “particularly suited” to the needs of that person. These are extremely broad categories. We have already heard in some detail the issues surrounding claimants living in adapted and specially suited accommodation. The terms of the exemption suggested in these amendments are simply too broad brush. However, as I said in relation to Amendment 48, I want to return to this matter once we have considered it further.
Amendments 43 and 83 also touch on similar issues to those discussed in relation to Amendment 48. They would exempt claimants where there is no suitable alternative accommodation, which is classified in the amendment as social rented housing that is also within the claimant’s locality. We cannot contemplate such a wide-ranging exemption. It would be costly to administer and would no doubt apply to those who would, in fact, have paid the shortfall regardless.
On Amendments 39 and 80, we estimate that around 200,000 claimants, where only they or their partner receive disability living allowance, will potentially be affected by the size criteria measure. However, this figure does not include other members of the household such as children and non-dependants. An exemption is simply not affordable and may well include many cases for whom an exemption would not be necessary, while missing out other hard cases. To provide a blanket exemption where claimants and partners receive DLA would lead to a reduction in savings of approximately between £130 million and £140 million in 2013-14, and this amendment goes further even than that.
Amendment 48C and the peculiarly titled Amendment 86ZZZA would exclude all households where there is a disabled child and again reduce the savings significantly and provide too broad an exemption. In response to the point made by my noble friend Lord German about exemptions for people who require an extra room as a result of a medical condition, we are looking at ways to potentially limit the impact of these changes in a way that is effective and affordable. The most appropriate course of action for the tenant and landlord in such cases will vary, depending on the individual circumstances of the claimant and his or her household. They may choose, for example, to apply for a discretionary housing payment.
As for the point raised by the noble Baroness, Lady Campbell, on fluctuating health conditions, local authorities can and do use discretionary housing payments for precisely that purpose. I can inform her that we have worked with the Department of Health on the extra room for a non-resident carer, which will cover that point in the guidance we issue to local authorities.
Amendments 40, 41 and 81 are relevant to foster carers. Within universal credit, our intention is to ignore any fostering income and therefore not to include any foster children within the assessment unit. To do otherwise, by treating the child as a family member and the fostering allowance as income, could result in the family being considerably worse off, and as such act as a deterrent to fostering.
Baroness Hollis of Heigham
My Lords, perhaps I may press the Minister on that key point. He has quoted a figure of £500 million for HB savings. The impact analysis that I think most of us were working off gave a figure of £700 million. If that figure is correct—it may have been overtaken by further refinement from the DWP—it would mean that, for less than half the cost of the savings, he would take some 80 per cent of those worst affected out of the equation. That seems to be very good value.
Lord Freud
My Lords, without us rambling through the papers, I think that the figure is £500 million, of which £300 million is a very substantial proportion.
The Deputy Speaker (Lord Haskel)
My Lords, a Division has been called in the House. The Committee stands adjourned for 10 minutes.
Lord Freud
My Lords, perhaps I may conclude on the point raised by the noble Baroness, Lady Hollis. The confusion is between the £0.5 billion that we start to save annually in 2013-14 and the £770 million figure that she quoted from the impact assessment. It represents two years of savings on a GB basis, which is appropriately discounted and deflated.
Baroness Hollis of Heigham
My Lords, it is nice of the Minister to give us those figures, but is his £300 million the amount set off against the £500 million, or is it set off against the £770 million?
Lord Freud
No, it is £300 million set against £500 million—so 60 per cent.
I have already talked about the behavioural responses. I move to the point raised by the noble Lord, Lord Rix, about the number of bedrooms, the size of the rooms and box rooms. Again, we discussed that issue briefly in the previous set of amendments when the noble Lord, Lord Foulkes, raised the window tax. It is the social landlord’s responsibility to specify the number of bedrooms in a property but, as I said, we are looking at this, including the size of the bedrooms, to explore whether it is an issue.
Amendment 35 of the noble Lord, Lord Rix, relates to support for mortgage interest payments and is connected with Schedule 4, concerning the payment of housing costs for pensioners. I understand only too well why noble Lords are seeking reassurance that assistance with eligible mortgage interest costs will continue to be provided for homeowners, including those with long-term disabilities. In fact, I met only yesterday representatives from Mencap to discuss these matters.
Approximately 430 claimants have purchased their properties through the shared ownership scheme known as HOLD—rather less than the 1,000 figure that has more generally been quoted. The Government want disabled people to continue to access suitably adapted homes, whether through a mortgage or housing benefit. The Homes and Communities Agency continues to support the provision of shared-ownership homes where this is a local priority, including shared-ownership homes under HOLD. The agency is holding ongoing discussions with lenders on the provision of mortgages for HOLD. Support for mortgage interest is intended to provide a reasonable level of help for homeowners but has never been intended to cover all of a person’s housing liabilities. As noble Lords can see from the draft regulations, help will continue for homeowners. So I see no need to set out in the Bill specific reference to mortgage interest payments. We propose to continue using the same standard mortgage interest rate for all claimants. As to Schedule 4, a housing credit element with broadly the same rules as housing benefit will be introduced into pension credit to ensure that low-income pensioners continue to receive help with their rent.
Regarding the point raised by the noble Lord, Lord Best, on providing incentives for pensioners to move, our approach to this issue will, over the long term, help to ensure that people are in suitably sized accommodation before they become pensioners. Our expectation is that the proportion of pensioners needing to downsize will in future be lower than it is now. As several noble Lords mentioned, the Localism Bill includes measures specifically aimed at helping pensioners to downsize and will help to increase mobility in the social rented sector for this group.
Baroness Hollis of Heigham
Could the Minister at some point, not necessarily today but in due course, set out the stats on the number of pensioners underoccupying and what his projection is of the time it will take for numbers to diminish?
Lord Freud
I would be happy to circulate the information to noble Lords.
On the social sector size criteria measure that we are introducing through Clause 68, we will use the time before its introduction in April 2013, as we are already doing, to explore fully the implications for claimants and landlords. We acknowledge that the impact will not be the same across all regions; we will work with stakeholders to look at those variations as we move towards implementation.
Let me repeat: I value these debates and hope that they continue on a constructive level as we move forward.
Baroness Wilkins
Could I just return to the issue of disabled people? I am delighted to hear that he is willing to think again about fostering, but I am very disappointed by his reaction in relation to disabled people and feel that he has failed to recognise their situation. He says that the amendments have been drawn too widely. Could I press him on what he would feel was acceptable?
Lord Freud
My Lords, I hope that I am indicating that we are looking very hard at what proposition we can bring forward later on in this process of considering this Bill to deal with that particular set of problems that noble Lords have raised. So I will have something to say later on in the process.
The Earl of Listowel
I am very grateful to the Minister for reassuring the Committee that he will think carefully about the treatment of foster carers. That is welcome. However, I have a strong concern about a number of issues in this area. I have two questions. I wonder if he could drop me a letter on this, if he cannot reply now. Those registered foster carers who may have one, two or possibly even three rooms vacant, who do not have foster children with them at the moment but are waiting for them, and because of that are not getting an allowance and are on benefit, are hit by that—it is a bad situation for them. So reassurance on their position would be good. I am grateful to him for his response with regard to those parents who have their children removed from them. I think he was saying that for a short period it would be acceptable to give those families where the child has been removed an exemption in certain circumstances. I feel very worried about those families, which are very dysfunctional by definition. To have one’s children taken away is a very serious situation, and to lose a child and then to have an extra room or two rooms and to be further hit—that does worry me. Reassurance on that point, what happens to them, would be welcome.
Lord Freud
I will repeat the two points. The first point is exactly the issue that we want to deal with and the one that the foster community is worried about—the voids area. That is something that we are aiming to address. My response to the second point was, and remains, that this is where we would expect discretionary housing payments to come into play. It is exactly the complex set of judgments that need to be made, and local authorities are best placed to make them.
Baroness Hollins
I apologise for this, but I think that the Minister said that the same mortgage rates would be applicable as for everybody else. From my understanding, in the example that I gave of Theo, the mortgage rates had changed from the previous preferential rates, leading to a gap in the costs of his housing that he cannot meet.
Lord Freud
I think that this is the same case where I spent time with the family, so I am reasonably familiar with it. There was never any preferential treatment within HOLD; it used the standard rates. What has happened is to some extent a bit of a breakdown in the financing market in this area, among other breakdowns, after the worst financial crisis that any of us has ever seen.
So we are looking at a dysfunctional mortgage market with huge deposits required. There was never any special provision here: they were using the standard provision. We pulled it down from a little over 6 per cent to, as the noble Lord correctly said, 3.63 per cent and, if we had used the formula pre-crisis, we would have gone down to a rate of 2.08 per cent, which would have left people in an even worse position. To some extent, by moving the way that we do this, we have been more generous than the previous formula, but we have not changed the goalposts in any way. The issue is whether the market revives naturally—I know that it is shut at the moment—or whether, frankly, we need to think again about what is the appropriate level of support and how it should be delivered.
Baroness Sherlock
May I press the Minister on one more point? I understood that his argument in response to the amendments up to Amendment 83 was that he could not accept such a broad exclusion because it would encompass people who would otherwise have paid the shortfall. That is probably the dead weight argument. I was in the Treasury. Dead weight is much loved as an argument by the Treasury and despised by pretty much everyone outside it. You can see that it makes perfect sense, if you are in the Treasury, to think, “You are already paying this, why on earth would I want to do it?”. If you are on the other end of the telescope, it looks rather different.
Does the Minister accept that the fact that a claimant may stay put and pay the difference does not necessarily mean that they can afford to pay it? That point was made by the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel. Someone who can see no alternative suitable accommodation may stay put, pay the difference—or at least accept that they must pay the difference and get into debt, with all the consequences that has for the family. Does the Minister accept that point and, if so, how will he address it?
Lord Freud
My Lords, it was interesting that there was a range of responses to our survey. Different people will do different things depending on the circumstances. That is the point. That is the problem with all the broadly defined exemptions that we have discussed today, which we have explored in great detail in the department: none of them works to define eloquently and adequately the people whom we want to protect. We need other ways to do that. I know that people like to attack the Treasury on every conceivable opportunity—
Baroness Sherlock
The Treasury employed me for many years; I would do no such thing.
Lord Freud
It did not sound like that.
Some people will choose to pay £11 and £12 extra for an extra bedroom perfectly rationally and other people will make other responses; a wide range of response is likely. A lot of people would regard it as a bargain to spend that amount on an extra bedroom. As noble Lords will be aware, spending to get that extra accommodation in the outside world—whether through a mortgage or through renting—would cost a lot more.
Baroness Sherlock
Forgive me, in the interests of levity, I was not being clear enough. The people I am concerned about are not those who could afford it but declined to stay, or those who are staying put and are happy to pay the money. The Minister mentioned statistics earlier about the number of people who would move, downsize or stay put and pay the difference. I am concerned about the rump who remain, which I think is sizeable—perhaps he will remind us of the percentage. I tease him about dead weight only because that argument works only if the Government are willing to accept that the price is borne by those who are not capable of making the difference. I am trying to tease out exactly how big is that price, who is paying it and what price the Minister would regard as acceptable for people who are forced into debt in order to make it work for everyone else.
Lord Freud
My Lords, I said earlier that we are working on the detailed implementation of this. It would be premature to make judgments on that. We need to develop strategies to ensure that those problems do not arise.
Baroness Hollis of Heigham
In that case, can I ask the Minister to amplify his stats for us when he writes to us next? He has talked several times, over the few Committee days we have had, about a £60 million discretionary housing fund, and how it is going up threefold, and so on. I am not keeping a tight list, but I think we have now overspent that by approximately five times. Could he tell us—given that there are some 400 local authorities—even on a per capita basis, how it works out? On average an authority can only help 700 families, out of—for instance, in the Norwich situation—some 20,000-odd families that are in rented accommodation.
I believe that those people affected, who will not readily afford it, are probably more like 7,000 rather than 700. Could the Minister give us the assumptions, or the stats, behind that £60 million figure as to what this would mean in a typical local authority, per 1,000 rented homes, for a period of, say, six months, or what percentage of those families you could typically expect to support? So that, per 1,000, that £60 million would extend to 20 families for six months, or 50 families for six months. Then we can get some idea of how that money connects to all the various issues for which this will, apparently, be the solution.
Lord Freud
Yes. I always prefer to answer rather than write, but I think I will on this occasion go to paper. It may be that the noble Baroness prefers paper.
The Earl of Listowel
My Lords, I was grateful, as I said before, that the Minister is giving this issue of arrears careful consideration. I think it might be helpful to the Committee if he could provide some reassurance that by Report we will have considerably more detail on what the plight will be of those who face arrears under the new arrangement. Can he give any assurance on that point?
Lord Wigley
My Lords, I speak at the request of my noble friend Lord Rix, who has had to leave the Committee, because we have now been going for well over four hours. I think he anticipated that we would have finished before now, and he has had to go to a 7.30 pm engagement outside the House. He has asked me, as I have my name on the amendment that led this bank of amendments, if I could respond briefly.
In doing so, I will touch on three points. In reverse order, taking up the point made by the noble Baroness, Lady Hollis of Heigham, a moment ago, with regard to the cost implication of the discretionary payments that are to be made by local government, has an assurance been given by the devolved Administrations that they have the resources to be able to do this? We are dealing with a non-devolved subject but are looking to devolved authorities, from a devolved budget, to fund the counterbalancing money that is required. If that answer is not available now, perhaps there will be an opportunity at some later stage to deal with that. It is clearly a matter that will be of concern, not only to the devolved Administrations, but to local authorities in Wales and Scotland.
Lord Freud
I can answer the noble Lord pretty rapidly on that. This is not a devolved area, so the discretionary housing payments are not devolved.
Lord Wigley
Of course—that is the whole point. The housing benefit is not a devolved area, but local government money is, unless there is going to be payment made from Westminster sources—Whitehall sources—to the local authorities in Wales. From the indication I get, payments will be made directly to local authorities, or via the Assembly to local authorities. In which case, fair enough, if enough money is going to be there; but if it has to come from their general pools, then that is from a devolved budget and will cause them problems.
Lord Freud
All I can confirm is that, just as anywhere else in the country, in those Administrations, the money will go by formula to those local authorities, in the same way that it currently does.
Lord Wigley
I accept entirely, of course, that housing benefit is run by the local authorities as a non-devolved portfolio, coming under Whitehall. However, the general funds that they have, unless there is additional funding coming from Whitehall to those local authorities and bypassing the Assembly, it would otherwise come out of the Assembly budget. All I was asking was whether that had been agreed with either the Assembly, or in the case of Wales, the Welsh Local Government Association? The Minister might be able to confirm that.
Lord Freud
What I can confirm is that the DHPs go directly to the local authorities, not through the local Assemblies.
Lord Wigley
Therefore, will any additional resources for discretionary payments that will be made, in line with the numerous references to discretionary payments that we have heard over the past few days, go directly and be over and above the payments that will otherwise be made.
Lord Wigley
We can put a marker down on that clear answer, for which I am very grateful.
Secondly, on one of the banks of amendments that dealt with disability and tried to get exclusions for people in certain categories of disability, the Minister, if I recall rightly, said that it would cost far too much, possibly £180 million. If that is the cost of excluding disabled families from the provisions of the Bill, it is, equally, the additional cost being faced by disabled families as a consequence of the Bill. That is an enormous cost. If it is a large sum for the Treasury budget, how much larger a sum must it be for disabled people trying to find it from their own domestic budgets? That is something that I suspect we shall need to come back to for clarification on Report. I hope that will be possible. I do not expect the Minister to respond at this point.
My third point is in regard to Amendment 35 in my name and that of my friend, the noble Lord, Lord Rix, which concerns home ownership among people with long-term disabilities. The Minister mentioned that only 400 people were affected by this. I am sure he is not decrying the importance of the scheme for the 400 people that it has helped; every single one is important in its own right.
Lord Freud
My Lords, may I make that absolutely clear? There are 430 people currently on the HOLD scheme. The bulk of them have an arrangement with a mortgage provider, Kent Reliance, which means that they can continue to pay the required rate of 3.63 per cent. Therefore, only a handful of people on the HOLD scheme are affected by any change.
Lord Wigley
Yes indeed, those 430 may well be safeguarded but there is the question of whether other people, who might in the past have come on to that scheme, will not be able to do so in the future. More importantly, the Minister referred to having had a meeting yesterday with people from Mencap to discuss this. From having a brief word with the noble Lord, Lord Rix, before he left, I understand that the people at Mencap are hoping that the Minister will at some stage, if not today, come back with some provision that will cover the requirements of this important group of people who are being helped by the scheme. I do not know whether they misunderstood that or whether the Minister will look at it again before Report to see what can be done. However, I very much hope that he will take on board the serious points that have been made by the noble Baroness and others, including the noble Lord, Lord Rix, about this important group.
We have gone well beyond our time. I put it to noble Lords that we ought to consider whether this is the most sensible way of undertaking our responsibilities, when the Committee runs for more than four hours without a break, we have disabled colleagues here and there are disabled people who want to follow our proceedings. I beg leave to withdraw the amendment.
Housing Benefit (Amendment) Regulations 2011
Lord Freud Excerpts(12 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State (Lord Freud)
My Lords, I thank the noble Lord, Lord Kirkwood of Kirkhope, for providing this opportunity to discuss planned changes to housing benefit that will affect certain young people currently living in the private sector in self-contained accommodation. These changes are contained in the regulations we are debating.
The change to the shared accommodation rate was announced last October as part of the spending review in the context of reining back welfare expenditure in general and housing benefit in particular. Difficult decisions have had to be made about spending priorities. At the heart of those decisions is fairness and affordability. We need to be fair to taxpayers and mindful of the choices those not in receipt of benefits make when considering what they can afford to pay in rent and the type of accommodation they choose to live in.
The shared accommodation rate reflects local private sector rent levels of accommodation where at least one facility is shared, for example a bathroom, kitchen or living room. The current rules for under-25s avoids the situation in which those in receipt of housing benefit could afford a level of accommodation that they would not be able to maintain were they employed. It also reflects the fact that sharing accommodation is common among younger people. We want work to be people’s first choice and do not think it unreasonable to extend the application of this rate from those aged up to 25 to those aged up to 35 for those who have recourse to public funds. This will realise savings of around £200 million per annum from 2013. That does not necessarily mean that people will have to move, although it is likely that some will need to do so—they will have to make the same sorts of choices about affordability as those who are not on benefits.
Many in this age group already share. Over one-third of the 25 to 34 year-old local housing allowance claimants who are potentially affected by this measure are already choosing shared accommodation and claiming the shared rate. In this age group, 40 per cent of private renters who are not on benefits also share. The Social Security Advisory Committee put forward the view that the majority of older sharers are either professionals or mature students, but the 40 per cent figure that I just cited specifically excludes students, and our survey data indicate that there are people sharing across all types of occupations.
The recent report by the Merits Committee posed the question: if savings are to be made, why choose the age of 35? Why not go higher? Such a move would not be supported by the evidence, which shows that sharing accommodation tails off significantly after age 35. Our equality impact assessment looked at the accommodation arrangements of all single and childless adults. Less than half of 25 to 34 year-olds have their own place, and a third live with their parents. When we look at those over 35, we find that 84 per cent have their own place and that only 6 per cent live with their parents.
We realise that, for some, it is neither desirable nor appropriate to live in shared accommodation. There are already a number of exemptions from the shared accommodation rate for those in vulnerable situations, such as care leavers below the age of 22, those entitled to the severe disability premium and those who have an extra bedroom for a non-resident carer with a home elsewhere who provides overnight care. Those living in social housing and in certain types of supported accommodation are also not subject to that rate. Those exemptions will continue to apply, where appropriate, to claimants in the increased age group of 25 to 34.
Since the announcement of the measure, we have been listening to people's concerns. I and my officials have met with interested parties, and the Social Security Advisory Committee has consulted and reported on the draft regulations. We decided to introduce two further exemptions for the extended age group. Those have been welcomed by several commentators and organisations, as well as by noble Lords who have spoken today.
The first additional exemption is for those who have lived for at least three months in a specialist hostel for the homeless and, while living there, received support to resettle in the community. That exemption addresses the concerns raised by several commentators about the impact of the changes on rough sleepers—in particular, the silting up of hostel accommodation. We accept that, without that exemption, it would be difficult to secure suitable move-on accommodation for that group to help them into a more settled way of life, which could undermine our ambition to end rough sleeping.
That exemption has been targeted at people aged over 25, who are at greater risk of rough sleeping. We believe that the current exemption is well targeted at people who are ready to move on to an independent life, but those people leaving hostels will have to have undergone some support and rehabilitation. That strikes the right balance between cost and fairness. We think that many former rough sleepers will be helped by that.
My noble friend Lord Kirkwood asked about the ministerial homelessness committee, of which I am a member. It was with that ministerial hat on that we framed this support, working closely with my colleague Grant Shapps.
The second new exemption is for those ex-offenders who present a serious risk to the public and who are subject to active multi-agency management under the multi-agency public protection arrangements—MAPPA—in England and Wales or are considered to present similar risks in Scotland. That exemption covers a very small group of ex-offenders who are to be excluded on the grounds of public safety. It is not extended to all ex-offenders because many of them pose no risk to the public. Perversely, the risk is that one might provide an incentive to commit modest crime, which we would not want to encourage.
Other specific groups have been put forward as needing exemption. They include people with disabilities, those with mental health problems, those with a history of substance misuse and those seeking to maintain contact arrangements with their children. The case for those who have shared care of children is complex. We estimate that, of those who will be affected by this measure, around 10,000 have some contact with a child who lives elsewhere. Of these, it is not known how many would normally stay overnight, so the numbers are relatively low. But living in shared accommodation should not preclude both parents from playing a full part in a child’s life. Parents living in hostels or other non-mainstream accommodation will, I am sure, be striving to maintain quality relationships with their children. Ultimately, it is for individual maintenance and custody arrangements to reflect living arrangements, and it is not appropriate for the state to fund two homes for a child. To pick up the question that my noble friend Lord Kirkwood asked, I can assure him that this arrangement does not contravene Article 9 of the UN convention.
We thought long and hard about other exemptions, but the blunt answer is that our analysis suggested that it is better to rely on discretionary housing payments than on specific exemptions because of the difficulty in defining and administering them. Our belief is that the local authority is best placed to consider individual circumstances.
The point raised by my noble friend Lady Browning about the autistic is very moving. I have had a chance to read the letter sent to her from Mrs—
Baroness Browning
I am sorry to interrupt the Minister, but I quite deliberately did not mention the person’s name.
Lord Freud
I muttered it. The letter was very moving and was about a particular individual.
Clearly, people on the autistic spectrum who are receiving severe disability premium are exempt from this measure. But not everyone, as my noble friend pointed out, is categorised as severely disabled. The question is: how does one best get support? Our basic view is that the local authorities are best placed to identify this group. Indeed, they have a duty to identify this group, unlike other groups. It is our view that discretionary housing payments to that group are the way to go. Clearly, it would be hugely in the interests of local authorities to make sure that happened because, as my noble friend pointed out, the ongoing costs of getting this wrong in particular cases are much larger than the DHP support. So there is a real incentive for local authorities to get this right.
Baroness Hollis of Heigham
I apologise for not speaking in the debate. I did not do so deliberately, because I thought that we would go through a lot of these issues tomorrow, and it would be more sensible to wait until I had heard some of the arguments addressed. One quick point for the Minister is that, by the time that we have counted up the number of referrals to the local housing allowance of £60 million, I suspect that it will have been overspent by fivefold, but we will see.
The Minister made the point in response to the noble Lord, Lord Kirkwood, that a lot of people between the ages of 25 and 35 choose to share accommodation, which I entirely accept, and it is not right that people who are not in work should have separate accommodation when people in work cannot afford that. To my mind, the key question that has not been identified is how large that shared accommodation is. Clearly, it is reasonable for two people who are not connected to each other in an emotional or sexual partnership to share a two-bedroom flat, but the Minister seemed to be suggesting earlier that single people in a one-bedroom flat, rather than going down to shared accommodation, could take someone in and thereby go into shared accommodation. Can he help us with the statistics on how many instances there are of two people who are not sexually connected who share a one-bedroom flat, which is the obvious analogy, rather than a two-bedroom flat where they have separate accommodation within that flat?
Lord Freud
My Lords, I do not have that precise information to hand, but if I can find it I will make it available and write to the noble Baroness. I can say that, in 60 per cent of cases, two people claiming the shared accommodation rate would be more than the two-bedroom accommodation rate. There are many areas where sharing gets the group of people more money than if they formally join up as a couple and go for the same accommodation.
Baroness Hollis of Heigham
Sorry, is the noble Lord saying that someone who is in single-bedroom accommodation and now finds that they are subject to SAR because they are 33, should, instead of going down to a shared room, actually seek a larger two-person two-bedroom flat with another person, thus possibly increasing the HB bill?
Lord Freud
There will be quite a lot of flexing around, and people do accommodate to systems. According to the figures that I have, regarding shared rates, in 60 per cent of localities the two-bedroom LHA rate is less than twice the shared rate. In 90 per cent of localities the shared rate would cover the relevant share of the three or four-bedroom rate. The point is that, when you are looking at pressure on the market, which noble Lords and the SSAC have been concerned about, fundamentally we are taking pressure off the market by looking for more sharing. Clearly, there are local adjustments but, as I have said, this has proven to be a very flexible market in the past, and we have no reason to expect it not to continue to be.
The question raised by my noble friend Lord Stoneham about the shortfalls in London—the difference between the one-bedroom rate and the shared accommodation rate—reflects the generally higher rents in London. The ability of those not on benefits to live in self-contained accommodation in these areas is also very limited, and many, therefore, already choose to share. Indeed, as my noble friend Lady Thomas pointed out, it is for exactly that reason that such decisions have been taken for very many years in London. I think I can join her in that experience.
It has been suggested that the Government are doing little to encourage the development of houses in multiple occupation. Landlords make commercial decisions about whether to provide such accommodation, and government’s influence on those decisions is limited. We do, however, have a role in setting the planning framework and licensing requirements. Communities and Local Government Ministers have considered whether the licensing regime, which places added burdens on landlords to comply with various health and safety measures, should be relaxed. However, with more people likely to require this kind of accommodation, they do not think it appropriate to remove or reduce this protection.
We also have the rent-a-room scheme, which is an income tax relief introduced in 1992 intended to boost the private rented sector. It encourages individuals to offer spare accommodation in their own homes at affordable rents to low-income groups. Homeowners and tenants who let furnished accommodation in their own homes are exempt from income tax on rental income of up to £4,250 a year.
As I said earlier, it is too soon to know how claimants might react to these changes. Those who will be affected by this change will have to consider their alternatives and make decisions about where and how they live. Some may decide to share with others, move back or stay with their family, or they may manage to find employment that allows them to stay in self-contained accommodation. These are the decisions that people in lower-paid work but not on benefits have to make, and those on benefit should not be sheltered by the state from this sort of responsibility. Picking up the point made by the noble Lord, Lord McAvoy, on work incentives, there is clearly no incentive to work if someone is in a property that is unaffordable for those who are in work. We have at the same time the issue of fairness if someone who is not on benefits is unable to afford a house that someone on benefits can afford.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 7 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, this is one of three amendments about capital. I shall start by explaining our intentions for the capital rules and universal credit. I will then be able to be briefer on that context and background when we come to the next two groups. The rules for the current income-rated benefits will be carried forward into universal credit. We intend to limit eligibility for universal credit to claimants who have less than £16,000 of capital. Claimants may save up to £6,000 before there is any impact whatever on their entitlement to universal credit. If they have between £6,000 and £16,000, we would assume a tariff income from this capital. These rules ensure that support is focused on those who really need it rather than on people who have significant resources on which they can draw. This is an important principle, which is essential to ensure that the system remains affordable. As noble Lords have pointed out, there is a slightly opaque area here in the sense that capital can be deferred income and vice versa. It is important to have some rules around the appropriate capital.
In order to be fair to the taxpayer, we have assessed how much families typically save. While nearly one in three pensioner households have savings in excess of £16,000, only 13 per cent of households with a working age adult in them have this much savings. A typical working age household has only £300 in savings. On the point about importing the tax credit system to universal credit, the noble Lord, Lord McKenzie, asked why it is this way around. The answer is simply that it would be unaffordable.
The first group of amendments seek to amend the financial conditions for universal credit by requiring capital derived from the sale of the claimant’s primary home to be excluded from the calculation of capital for up to 12 months when held in a deposit or a prescribed account. However, it is already our intention to provide claimants who have capital from the recent sale of their main home with a significant level of protection. This is clear from the illustrative draft regulations on capital and income recently shared with Peers. The illustrative schedule on capital to be disregarded sets out our intentions on this point.
Capital from the sale of the claimant’s main home received within the previous 26 weeks will be disregarded, which is to be used for the purchase of their new home. That period may be extended where the decision-maker determines that it will be reasonable to do so in the circumstances of the case. An example would be where accommodation suitable for a disabled member of the family has not yet been found. We believe that this approach balances our duty to be fair to the claimant with the need to safeguard universal credit.
Turning to the power in Schedule 1 to treat a claimant as having or not having capital, this is simply taken in order to replicate the notional capital rules that existed in the current benefits system and that guard against claimants deliberately depriving themselves of capital. The exemptions for types of capital covered by the rules in the existing benefits system will be maintained. Some types of payments cited by the noble Baroness, Lady Drake, are classed as income. It is not necessary to add a specific power taken by Amendment 52A. As I have said, the illustrative draft regulations demonstrate that we already have the power to limit the time period for which claimants are treated as having or not having capital where we choose to do so. I hope that this account has clarified the Government’s proposals for protecting the capital of claimants who have recently sold their main home and therefore explains why we could not support Amendments 22A, 22E and 52A.
Lord McKenzie of Luton
Perhaps the noble Lord can help me a little on some of the practicalities of that. We are saying that the existing exemption operates when someone has disposed of their main residence and reapplies it within a 26-week period. Is it a requirement that it is wholly reapplied for the purchase of a property? My noble friend Lady Turner made a point about someone who wanted to save some of that because they were downsizing for carers. Is this looked at retrospectively? Will someone look after the event and see as a matter of fact that it was so applied and, if it was not, what the ramifications are for the application of the universal credit?
Lord Freud
Yes, my Lords. The way it works is that the amount of money that is being reserved for the purchase of a new house is the amount of capital that would be exempted. Other capital would not be exempted. We are currently working on the exact workings of the system and getting these regulations—the next iteration—right. Therefore, I am not currently in a position to lay down clearly, as the noble Lord rightly says, the practical applications and fine tuning of how we apply this. That will come at the appropriate time.
Baroness Hollis of Heigham
My Lords, I wonder whether the noble Lord can help me with some stats. It was interesting that in his reply he told us that the current percentage of people who have savings above £16,000 is 13 per cent. However, when you start netting the figure and taking into account the notional income derived from that tariff, and given that something like 85 per cent of people on JSA expect to get back to work within nine months to a year, what does he think the real savings, or loss of savings, would be were he in a broader sense to accept that, with the integration of the two benefits, one should go for the tax credit system rather than the JSA system? Can he help us on that? In the light of that, we can perhaps press him further, but what real savings is he expecting to generate, given that most people who come on to JSA will be back in work within the year? In their first six months their benefit is contributory, so they are not affected and they will go back to work very quickly within the next six months. Therefore, if they have those savings and you say that because they are over £16,000 they will get not a penny of JSA, in real terms what net savings do you expect to garner? I would like to press the Minister on a further point, if I may.
Lord Freud
My Lords, I have to confess to the noble Baroness that I do not have my hands on that particular figure. I am not sure that I can find it out. We have other figures around the costs, but I am not convinced that I have that particular figure readily to hand. Can I leave it that I will try to find it out and supply it in the fullness of time?
Baroness Hollis of Heigham
My Lords, I do not want “the fullness of time”; I want very soon, just as with childcare—the day after, if the Minister would be so kind. This is the key figure. The key stat is the real net cost of going for the more generous alignment with tax credits rather than bringing people down to the harsher alignment with JSA. That is the pivotal figure. I am surprised that this has not been brought into play in the Minister’s response. People coming out of work on to JSA are desperate to get back into work. Anything we do to make it difficult for them to get back into work is counterproductive. Anything that runs down their savings and that they are worried about, or anything that risks them when they go from work to benefit as opposed to from benefit to work is surely to be deplored. I suggest to the Minister that this is very unwise social policy.
Lord Freud
My Lords, I withdraw my previous reluctance to provide a figure. In much less time than I thought, I am now in a position to let noble Lords know that if we removed the cap limit entirely, the cost would be £500 million per annum.
Baroness Hollis of Heigham
Forgive me, but that is the net cost. If you removed the cap entirely and instead took into account notional income from those savings, given the stat of 13 per cent being over £16,000, as the noble Lord said, as well as people being in a range of between £6,000 and £16,000, and taking into account that they will have their benefit cut by virtue of their notional income, I take it that the £500 million includes that figure. It seems unlikely on the face of it, but it may well be the case. I suspect that it is a gross figure, not a net figure. I could be wrong, but we need to know the cost in effect of substituting one system over the other, not simply the cost of not having any savings rules at all.
Lord Freud
My Lords, I can clarify. That is a gross figure. Behavioural changes, clearly—
Lord Freud
My Lords, I will complete my response to the questions. If we were to take a £50,000 limit with the tariff rules—in other words, starting at £6,000 and moving up on the tariff rules from £1 for every £250—the cost would be £90 million; so if we were to take the cap off completely, it would be a little, but probably not a lot, more. The £16,000 cap that we propose will affect 200,000 people in total. However, currently only 100,000 are on tax credits. That is the universe that we are talking about. I point out the political choices that we are making. We are designing universal credit to be for the poorest people and putting constraints higher up the income scale. That is entirely deliberate.
Baroness Hollis of Heigham
I am grateful to the Minister for giving us the figures. Perhaps he could make it clear that embedded in them is the scatter of JSA claimants who will return to work at different intervals. The first six months will be contributory. Thereafter, most of those coming on to JSA for the first time in that year will be back to work within three months or so on average after their contributory benefit has ended. Has the distributional factor of how long people stay on JSA been taken into account? I am talking not about existing JSA claimants but new claimants. What will the implications be?
Lord Freud
Yes, my Lords, a careful assessment has been done of how it will work in practice, which incorporates those kinds of effects.
The Earl of Listowel
My Lords, I hope that the Minister will forgive me if I ask his help on a point of detail. It may come up during fine-tuning, but it might be helpful to flag it up now. I refer to young people who leave the local authority care system and win an award against their authority because in their time in care they were not properly cared for. Therefore, they have a capital sum that they might need to use for education, therapy or something else. What circumstance will they find themselves in under these arrangements?
Lord Freud
My Lords, I will have to write to the noble Earl, Lord Listowel, with precise information on that.
Baroness Drake
My Lords, on the point about people who sell their houses and have capital from that, current rules allow the discretion to extend to 12 months. The provision is already there, so I do not see why one could not have efficiencies in the system since the cost of applying discretion is reduced to the difference between six and 12 months and people are given greater clarity in what is a complicated market for buying and selling houses. Also, the rules are being applied to a population that would not previously have been subjected to them. Millions of people will be impacted over time, and this is not a difficult alteration to make in the rules.
On the definitive set of rules setting out what capital or earned and unearned income is or is not going to be taken into account, the exchange with my noble friends has indicated why people are concerned to see and understand the list as soon as possible—again, particularly the application of those rules to the in-work population. For the moment, however, I beg leave to withdraw the amendment.
Baroness Sherlock
My Lords, I would like to add one final word. Could the Minister reflect for us briefly on one of the wider consequences of this move? When tax credits were set up, they were, as he will know, designed to replicate work in many ways and to replicate the tax system, so it is not the case that having savings is not taken into account at all. Under tax credits, genuine income from savings is taken into account, and that is the way it should be, but under this new system it is not just the very richest who are affected. Once people reach £6,000 worth of savings, they will face, as my noble friend Lady Drake described, a heavily punitive rate of effective taxation on that. I wonder what the effect of that is on the marginal deduction rates as they move into work.
I ask the noble Lord to do two things. One is to comment on how he has factored that into the effective incentives to move into work in a whole variety of situations. Secondly, could he say whether he is not worried at all that it might push people back into an approach of dependency on the state as opposed to their trying to share that responsibility between themselves and the state, which the tax credits system encourages them to do?
Lord Freud
My Lords, Amendments 22B and 22F would exclude from the calculation of capital any savings placed into an individual savings account or other prescribed accounts of a claimant who is in work, or who has been in work in the past 12 months, up to a maximum limit to be set no lower than £50,000. It begs a really very simple question: should the taxpayer support someone who has savings of £50,000? That is the question that is being asked here, and I think it is a question about amounts. The figures we are using were taken over from the existing benefits system, and they were raised a little over five years ago in April 2006. Those figures were doubled from £8,000 at the top to £16,000, and the starting rate from £3,000 to £6,000, so those figures do move around. I accept that determining what the right figure is here is not an exact science. Indeed, one of the things I am keen to have is a responsive system that starts to get research and understand judgments such as what the right figure is here.
I understand exactly the motivation of the two amendments, which is to encourage low-income workers to save. The argument comes down to how much we and the taxpayer can afford. I gave some figures when we debated the previous group of amendments. I will remind noble Lords that if we had an upper capital limit of £50,000, it would cost £90 million a year, which we simply do not have. Under our proposals, only when a claimant, or joint claimants, has £16,000 or more will the entitlement to universal credit cease; and only 13 per cent of households have this much in savings. That is why the figure is not as arbitrary as some noble Lords indicated.
I was asked a series of questions. I will have to add to my letter to the noble Earl, Lord Listowel, to get right the position of children leaving care. Clearly, a child's income and capital are wholly disregarded in the system. The noble Lord, Lord McKenzie, asked about the treatment of ISA interest. Universal credit will replicate the capital rules for means-tested benefits by using a tariff income. It is not possible to read across from the tax credit system. As noble Lords know, tariff income is not—and is not meant to be—the equivalent of the actual income that you might earn on that amount of capital. The figure includes an estimate of how much you should be prepared to run down your capital while you look for support from the state.
Lord McKenzie of Luton
Will the Minister confirm that tax credits and ISA income are not included but are exempt? Is that right or not?
Lord Freud
I will have to write to the noble Lord on ISA income in tax credits. I do not know the exact position. I hope that that explains why we cannot support Amendments 22B and 22F. I ask the noble Lord to withdraw his amendment.
Baroness Hollis of Heigham
My Lords, the noble Lord started off with a question that I suspect was meant to be rhetorical, but I think he is entitled to an answer. Is it right for the taxpayer to support someone who has £50,000 in savings? That was the noble Lord’s opening sentence. I agree with him that that is the key question. However, given the responses that he has heard today, the answer should be, “Yes, in certain circumstances”. The key question is, “What are the circumstances?”. There is no absolute yes or no answer.
The circumstances mentioned so far include whether this will help sustain savings and the savings habit. The answer is yes. Would it help people get back to work earlier than they otherwise would, and therefore depend less on benefits? Possibly, yes. Would it help families avoid falling into debt and thus lose even the tariff income that they would otherwise expect to enjoy between £6,000 and £16,000? Possibly. Should it be for a limited time so that it is not an unending commitment? Certainly. That is surely the way in which we should approach the question. It should not be, “£50K or not?”, but, “What are the circumstances in which it is reasonable to support people?”. Otherwise, we will make short-term savings at the expense of longer-term losses, which will come from keeping people on benefits longer than they need to be because they have gone into debt by having run down their savings. Surely that is the right question to ask rather than the bald one that does not take into account the very different situation of people who are marginal, who are in and out of the labour market but who hope to stay there with the help of savings to smooth out these movements.
Baroness Drake
The Minister opened by asking whether the taxpayer should support someone with £50,000 in savings. My initial reaction to that is that the taxpayer supports people on £500,000 because there is 40 per cent to 50 per cent tax relief up to the value of £1.8 million and £50,000 per annum for pension savings. Actually, the taxpayer supports people on much higher levels of income, and we can think of lots of other incentivised examples. There is no limit on the ability to use the advantageous tax opportunities of ISAs year on year depending on what capital is held in other places. I am not sure that that would withstand the test of rigorous intellectual analysis.
Lord Freud
I am sorry, but I cannot not respond to that because there is a difference. I think everyone in the Room will appreciate the difference between not taking someone’s own money away from them and giving them money from the taxpayer, which is the comparison that the noble Baroness has just made.
Baroness Drake
I do not accept that defence because tax relief on pension savings is not taking money away from people; it is giving them their tax back.
The other point is that even on ISAs, those who are well off can take every member of their family, their spouse and children, and give them ISAs, thus taking taxpayers’ money for the incentivised advantage that that brings. So the taxpayer supports all sorts of people, some of whom are more worthy than others. On that basis, if the exam question is whether the taxpayer should support someone who has £50,000, I should like to get the whole list of incentivised savings and do some comparative analysis.
The effect of this policy is that people in hard-working families will be disincentivised to save and will face greater risk in managing a labour market that the Government themselves want to deregulate further but do not want to support people in managing that deregulated labour market. As my noble friend Lady Sherlock has said, there is not just the issue of the £16,000. For all those low and moderate-income people who have more than £6,000—
Baroness Sherlock
I would like to make one brief point about the sums of money that are increasingly needed to save for a house. It was reported in the Guardian on 17 September this year that the average deposit has gone up tenfold in the last 20 years, from £6,793 in 1990 to over £65,000 now. The same article went on to quote a banker from First Direct, which I presume must know these things, who said:
“The average deposit … has actually risen more than twice as fast as house prices and almost four times as fast as income”.
Could the Minister therefore think for a moment about whether the inflation in the savings limit properly takes account of the specific house-related inflation, and within that the specific deposit-related inflation, that we are seeing?
Lord Freud
My Lords, Amendments 22C and 22D would exclude from the calculation of capital prescribed amounts saved for a deposit on the purchase of accommodation for personal use where the claimant is in work or has been in work in the previous 12 months. I can of course see the benefits of encouraging low-earning families to become homeowners, but at present these amendments would be difficult if not impossible to implement efficiently in practice. As the noble Baroness, Lady Drake, pre-empted my argumentation, I will not go into this in depth, but I must say that one would need both the provision of a savings vehicle, which would in effect be exclusively for the purchase of a house, as well as adequate numbers of people wanting to save in this particular way, for that market to work. I do not think there is any necessary block on creating a vehicle like that at some stage in the future, and it would be up to a Government to look at that in the future. Right now, given our constraints, I do not think we are in a position to do it. As noble Lords have heard and as the noble Baroness suggested, these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. I remind noble Lords that we have obtained an envelope of £4 billion per annum to give to people in receipt of universal credit. I am not netting it off against other changes, but that is what the universal credit does. Finding extra money for this, that and the other cannot be done just by a wave of the hand. It will be tough to get extra money for desirable things.
It is essential that we get the architecture of a structure that we can use to help and motivate people. If we cannot afford particular things or it would be desirable to develop particular processes, that is fine and we can do it, but right now we do not have those resources. For that core reason, I hope noble Lords will appreciate why we do not support these amendments, and I ask the noble Baroness to withdraw her amendment.
Lord McKenzie of Luton
The noble Lord may need to write to us to flesh out some detail about the £4 billion, a figure that he has used on several occasions. I accept that it is probably a gross figure and that there are some nettings off. Presumably the baseline for that is after taking account of the previous two Budgets and the spending review, and all the hits that occurred there.
Lord Freud
My Lords, I need not write to the noble Lord on this matter because I am trustful that the impact assessment that holds these figures will be on its way—
Lord Freud
I was going to say today. In fact, I can say more. I have copies in the Room. I can do better; I can ceremoniously deliver the impact assessment to the noble Lord with that figure explained.
Baroness Drake
In response to the Minister, I am able to pre-empt his arguments because the quality of the DWP briefings is so good that I can see where he is likely to be coming from. The fact that I can anticipate is an indirect compliment. On the substance of his comments, he argues that it is important to get the architecture in. The problem is that the architecture has opted for a very harsh and anti-savings regime, and for applying it to those in work. I am not sure that I would want that element of the architecture to be in, but at least some of my amendments seek to say not, “Oh, let’s find bits of money”, but that if one chooses to take that harsh anti-savings regime—quite clearly, as I have quoted, I am supported in that view by the CSJ—some of the consequences are so perverse that you have to address them not as bits of money but as perverse outcomes of that choice of architecture.
We have dealt with one of the outcomes, but another is that when this comes in a population of people who are currently in work, who may be in work in the future, and who have got savings, are going to find that those hard-earned savings for a deposit on a house are now going to result in an adjustment of their benefit entitlement. That strikes me as unfair and perverse. If one is looking for fairness, one needs to have intergenerational sympathy for the combination of factors that young people face in the current market, which I have tried to spell out one by one. This, to me, becomes an even more compelling argument for saying, “Are you going to put this on their shoulders as well?”.
I accept that there may be process or product design challenges around this, but I have every faith in the creative ability of the Minister and the DWP team to find a process route through this and still urge them to allow all these people who are saving for their houses not to suddenly find that they have to draw down on their savings or lose benefit. I withdraw my amendment.
Lord Freud
My Lords, I will speak to Amendments 23 and 24. Amendment 23 removes the power to make regulations for there to be no entitlement to universal credit in prescribed circumstances. Amendment 24 removes a power for regulations to be made for there to be exceptions to any limited entitlement or waiting day rules. It might be helpful if I indicate the types of circumstances in which we envisage these powers being used.
The regulation-making power in subsection 1(a) will provide that there is no entitlement to universal credit in certain cases where the usual conditions of entitlement are otherwise satisfied. As is the case now, a number of specified groups 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 may include people involved in trade disputes. Amendment 23 would prevent us being able to restrict entitlement to people in these circumstances. This would result in duplication of provision in some cases, which I am sure is not the intention.
I will address the questions of the noble Lord, Lord McKenzie, about waiting days, which constituted the main thrust of his comments. Housing benefit is dependent on entitlement to means-tested benefit, which involves waiting days—for example, jobseeker’s allowance or employment and support allowance. There is also a waiting period in practice for housing benefits. In addition, where benefits such as housing benefit are paid for in complete weeks, there is no provision for short claims of a few days. In practice, when we move from the application of waiting days in the reality of the universal credit world, there will be far fewer instances of this start-up arrangement because people will go on to universal credit for their entire application and will stay on it.
The noble Lord asked about linking rules. Our intention is that people will work their way off the system—that would be a very good outcome—but would remain effectively known to the system for another two years. So that is effectively how the linking rules would work: you would come back onto your taper on an automatic basis. I have not actually thought this through. I imagine—I will check carefully now—that waiting days will not apply when you are on the system and it will be a kind of run-on effective link. I will double-check that waiting days will not apply in those circumstances because my understanding currently is that there is a run-on and that is the same effective claim. So the whole concern around waiting days would be very much diminished. In fact, I am reassured almost instantly that the intention is not to have waiting days as people move on and off the system in those circumstances. As to the question of when Clause 6(1)(b) would apply if not at the start of the claim, it would apply to the entire claim if it covered less than seven days.
Amendment 24 would prevent us having exceptions if we make provision for waiting days or to prevent very short periods of entitlement. We envisage that regulations under Clause 6(3) might be used in a claimant’s favour: for example, where there is only a short break between periods of entitlement, a claimant may not have to serve waiting days before becoming entitled again. I am sorry that I am repeating that point. Although we have made several changes moving from negative to affirmative resolutions, on this one we propose to stay with negative ones. Given this explanation, I hope that noble Lords will not press their amendments.
Lord McKenzie of Luton
I am grateful to the Minister for that response on the issue of negative or affirmative, to which we may wish to return. In order to be clear, perhaps I may use the trade disputes issue as an example. Under current arrangements, there are certain trade disputes under which benefits can be withheld. Under the universal credit, there is an amalgam of benefits, including housing. As regards the sort of exemption that it is envisaged would apply under Clause 6, does it cover all the separate benefits that could give rise to similar exclusions now? For example, would housing being included in the universal credit still be subject to the same trade dispute rules, or will separate rules apply to that? That is not a very elegant way of phrasing the question.
Lord Freud
My Lords, our intention is to have it broadly the same. We have to work through the exact detail of the regulations but our intention is not to change the main thrust of that set of regulations.
Lord McKenzie of Luton
Specifically, if housing benefit were not currently subject to those rules, how would that be unpicked? Perhaps the answer is that it is.
Lord Freud
We would wrap them together in the universal credit but maintain the same regime for trading disputes. That would be the intention. Clearly, we have not written this regulation in detail and we will have a chance to look at it in some detail before we do.
Lord McKenzie of Luton
I am grateful again to the Minister. We should like to reflect and read the record on that issue, and it is something to which we may wish to return. In the mean time, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I support the amendment of my noble friend Lady Lister and congratulate her on an incredibly impressive first amendment. We look forward to many more. I hope that the Minister can see that we are here to help. He has heard not only the voice of experience today but particular proposals from my noble friend Lady Hollis to help him on housing benefit issues. I hope that this well of experience and good will will enable us to move forward on universal credit.
One thing that came across very clearly in the debate was the almost universal voice of experience, whether it was people’s own household experience or that of people such as my noble friend Lord McAvoy who worked with poor people and helped them claim their benefits in the existing maze of complexity. We have heard powerful voices warning of the risks of imposing on everyone the monthly payment basis, for all the reasons that have been heard.
There are particular issues for women. My noble friend Lady Lister said that it is largely mothers who manage poverty in the household. The noble Lord, Lord Kirkwood, was on the same page on that. Studies show that by and large the male member of the household is more likely to be responsible for monthly bills, whereas women tend to do the weekly shop. Therefore, women are potentially particularly disadvantaged by these proposals.
A lot of work has gone into producing real-time data from HMRC. That is at the heart of delivering the universal credit project. Obviously, that is predicated on the formula of monthly payments. As a practical matter, how difficult would it be either to flex on to fortnightly payments or for people to have a choice? I am surprised by those who argue against choice. We all accept the benefits of simplicity, for the reasons that we have debated and will continue to debate. However, a balance must be struck. Simplicity can shut out fairness in a range of circumstances. That is perhaps the dilemma that the Minister faces today.
I think it was the noble Lord, Lord Boswell, who said that it would be a pity if we got this wrong and in doing so undermined the prize of the universal credit, and I very much agree with that. I hope that the Minister will listen to all those who have spoken. The noble Earl, Lord Listowel, spoke about his particular experience of dealing with poor and disadvantaged, chaotic families, as did the noble Lord, Lord Kirkwood, and my noble friend Lady Sherlock. What would happen if one partner spent unwisely in that relationship? What would be the outcome, particularly for children? I hope that the Minister has heard a powerful message today and that it will genuinely influence him in looking at this again. If we want universal credit to work, this could be the key stumbling block.
Lord Freud
My Lords, I start by congratulating the noble Baroness, Lady Lister, on her first amendment, and I hope that she does not have too many like it. I was very impressed when she said that she was a conservative, which was obviously supported because my noble friend Lord Kirkwood called her his noble friend. Clearly we have some cross-dressing going on.
In the policy briefing note published on 12 September, we confirmed that the universal credit will be paid monthly. However, we do not intend to specify the payment frequency in primary legislation. As with all existing benefits, this will be dealt with in regulations made under the existing powers in the Social Security Administration Act 1992. That approach gave us the flexibility, for example, to increase payment periods from weekly to two-weekly for most out-of-work benefits. The amended provision would require the Government to pay universal credit more frequently than monthly. Amendment 27, for instance, goes on to provide that in some cases payments would be made twice monthly.
I need to make the point about the difference between assessment periods and payment periods, which is important to bear in mind. Currently, existing out-of-work benefits are made on an assessment period of a week, with a fortnightly payment cycle. That is fairly typical. The universal credit benefit represents a new approach focused clearly on work, which encourages out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life. The figures have already been used. Currently, 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year receive earnings monthly. In addition, monthly direct debits for household bills are often cheaper than more frequent billing options.
Many noble Lords raised the evidence base. As noble Lords know, we are conducting qualitative and quantitative research with claimants on many issues but particularly on the payment frequency issue. As some noble Lords have pointed out, on 7 October we published a report, Perceptions of welfare reform and Universal Credit. This outlines findings from research we conducted with claimants, the public, employers and staff in December 2010 and January 2011. There were critical findings in that piece of research that we are looking at with great attention.
I understand that many people on low incomes will be used to managing the fortnightly payment of benefits, and I am determined to ensure that there will be appropriate budgeting support to meet the needs of claimants. We want families to be able to manage their financial affairs in a manner that best reflects the demands of modern life, whether they are in work or out of work, and we are working with stakeholders and benefit experts to that end. We are setting up a series of demonstrator projects, as they are called, with housing associations and local authorities to look at how to structure the payment of rents to landlords. These demonstrator projects will look at a wide range of budgeting support. We need to make sure that budgeting advice and support is available for those who need it in order to help them manage the change.
We also need to consider those exceptional circumstances where more frequent payments will be required. To pick up the point made by the noble Baroness, Lady Campbell, people with mental health problems are an example of a group that may need an exceptional service. To pick up the point made by the noble Earl, Lord Listowel, where there is proven abuse or risk to other members of the family, one would have to look at the payment arrangements.
If you separate assessment from payment, the monthly assessment is intended to reduce the burden on claimants and reduce the risk of overpayments compared with a system where benefits are reassessed on a weekly basis, so there is a separation between the assessment period and the payment period. To pick up a question from my noble friend Lord Kirkwood on the impact assessment—
Baroness Hayter of Kentish Town
My Lords, the Minister suggested that payments for those with mental health problems, for example, could be looked at. Could he address how that might stigmatise a certain group; that is, when not everyone can choose to be paid fortnightly, just those with mental health problems?
Lord Freud
My Lords, I was coming to this issue. The universal credit is a rather differently structured benefit system. We have talked in the past about much greater flexibility with earlier draw-downs and an automatic repayment system. We are looking at these kinds of structures. When I talk about budgeting support, I am not just talking about education, advisers and that kind of support, I am also talking about a degree of flexibility in the system that simply does not and cannot exist now. I do not think there would be any stigmatisation at all in how people use this system. We have not worked out all the detail of this, and noble Lords have given me personally quite a bit of food for thought. How we develop these regulations and get them right so that we do not run into the kind of problems which noble Lords have so powerfully raised today is something that we will look at very closely. On the stigmatisation point, my intention would be that it would be invisible, and within the universal credit system, it can be invisible.
Let me revert to the question put by my noble friend Lord Kirkwood about the impact assessment. I have to tell him that payment frequency is not one of the issues in the impact assessment. It was referred to in the equality impact assessment where we said we were carefully considering the claimant welfare implications of the options, so that is where it is.
Lord Kirkwood of Kirkhope
May I clarify the point for the avoidance of doubt? Is there a technical issue about frequency of payments? I understand and am listening carefully to what he is saying about assessment periods versus payment periods. Are his new computers going to be agile enough to pay fortnightly rather than monthly?
Lord Freud
I think the noble Lord, with his normal subtlety in his amendment, has made a distinction between bi-monthly and fortnightly. This is one of those issues, to be honest, where if you start delving into it, you will end up with daily rates because of the arbitrariness of both weeks and months. It is not a straightforward thing to do. Clearly, at one level all the utility systems are driven on a monthly basis, while other areas are driven on a weekly basis. With this system, we are one of the drivers of the way people behave and of social change. We should not forget that; how we do this will shape the norm, so it is not just a question of saying, “This is what everyone does. We must adapt to it”. There is an element of saying, “If we do it like this, we will shape the way people arrange their lives”.
Lord Freud
My Lords, in the spirit of developing a system together, which we seem to have moved into, we can look at a greater amount of flexibility. Some things are not that expensive to do, but others are. Payment systems are not necessarily hugely difficult. I do not have my computer gurus sitting around me whispering how much things cost, but my feeling is that there are areas of flexibility here which we are going to explore in great detail in the next year or so in order to get this right. We can be flexible and make changes if we feel that things are not right.
I turn now to the series of questions raised by the noble Baroness, Lady Hollis, on the relationship with housing benefit. I will try to deal with them one by one. The universal credit will be an itemised statement. It is being developed and at the moment comprises three layers. You will see the summary on the top sheet, so to speak, and a somewhat more elaborated thing when you hit the button for the next level, and then you see pages of the stuff at the third level, which we do not think a lot of people will go to. However, we give them the option to do that. The statement is simple; it itemises the intention. The structure that we have arrived at has been the subject of a lot of toing and froing with the customer insight people. A couple of weeks ago I sat on one side of a piece of glass watching how people were using the system. That is where we have ended up in that particular bit.
I was asked whether this process would be slowed down to the rate of the slowest element. Where you have some decided elements, the JSA rate and so on, we should be able to get that going straight away without tying it up. We will be able to separate out elements with new claims involving big new changes rather than the whole claim waiting for the last little bit of evidence on, say, housing to come through. We are looking at tackling this matter much more flexibly.
Baroness Hollis of Heigham
I am very grateful for the care and attention that the Minister has given to the questions. However, oddly enough, if you can fragment that way, you can certainly fragment in terms of payment rhythms.
Lord Freud
My Lords, I thought I had delicately hinted that there could be some flexibility around that. In future, I will be less delicate in making my points.
We have discussed the other elements. The noble Baroness, Lady Hollis, directed a bit of abuse at the Warrington call centre. We are developing the system in Warrington, but that does not mean that the call centre in Warrington will do it all. We will have a much more sophisticated system. Indeed, the noble Baroness’s thoughts on using ATLAS, and the experience of housing benefit staff around the country in that regard, are very good. We are talking to local authorities to get the detail of this right. It would not make sense to lose the expertise of housing benefit staff, so we are involving them as we develop the process. It is too early to describe the system because it is not yet developed. However, the noble Baroness’s advice chimes with the way we are going about this, and we are grateful for it.
Amendment 28 would require the Secretary of State to conduct an annual review into the impact on claimants of monthly payments. I have already set out our firm commitment to safeguards, such as providing budgeting support and the facility to make more frequent payments where necessary or appropriate. I can assure noble Lords that in addition to this we will continue to monitor the impact of these policies after they are introduced. I urge noble Lords not to press these amendments.
Baroness Lister of Burtersett
My Lords, I am very grateful to my noble friends and noble Lords for their support. I am struck by the extent to which noble Lords throughout the Committee share my concerns and have made important points in support of these amendments. There is perhaps a slight disagreement over whether we should be pushing for fortnightly payments or for choice. My preference would be for fortnightly payments, as argued for by the noble Lord, Lord Skelmersdale. However, I tabled a menu of amendments thinking that choice would probably be more acceptable to the department than what I prefer, which is the status quo. Perhaps that is the one way in which I am a conservative. But as I have argued, and according to the Financial Times, the panoply of flexibility and special assistance which the Minister talked about will bring in complexity if we go down the route of monthly payments, and we have not heard what the costs will be. I am very disappointed with the Minister's response because he has not really engaged with the arguments that I put. Therefore, my supposed flirtation with conservatism has been very short-lived indeed.
The Minister made great play of the distinction between the assessment period and the payment period, and I understand that. However, the argument seems to support my position rather than his because paying a benefit more frequently does not affect proposals to assess it on a monthly basis. One could have a monthly payment that is paid in two tranches, which would make it easier for people to manage. The only hope that I got from the Minister was the statement that we had given him food for thought. I hope that it will not be too indigestible for him—actually, I hope that it will be indigestible, because he will then think seriously about it.
He has not answered some of the most basic questions. I know that the special assistance will not only be budgeting advice. The papers have said that it will “include” budgeting advice. However, it is still not clear who is going to provide this. Will it be officials? If I were a claimant, I am not sure that I would want officials advising me on how to budget. Or will it be the poor old voluntary sector/big society, which will be on its knees anyway because of cuts, the effects of the legal aid Bill and so forth? I am not at all reassured by vague talk about flexibility and budgeting support.
The Minister said that the Government would look at areas of flexibility after the next year or so. I am sorry, but I want to know what the position is by the Report stage. While I have made clear that I realise it is not appropriate to write into the Bill itself the frequency of payments, given the strength of feeling that has been expressed on all sides, it is not good enough that we should have to wait a year; the Bill will be an Act by then. We want to know before the Bill goes back to the other place what is going to be done to ensure that the kind of problems that I and other noble Lords have raised will be adequately addressed. One of these amendments must be the way to do it.
Lord Freud
My Lords, Amendment 29 specifies that deductions from the claimant’s maximum amount of universal credit should include an amount in respect of prescribed types of unearned income calculated in the same way as the deductions made in respect of earnings. As drafted, Clause 8 allows for a reduction in respect of unearned income to be calculated “in the prescribed manner”. The Bill therefore already allows for the manner of such reductions to be specified in regulations. This could include, where appropriate, the same calculation as for earnings.
As we set out in the White Paper, claimants will have their universal credit withdrawn according to a single taper rate after appropriate disregards. The latest assumptions on the earnings disregard have been set out in a new policy briefing note which was published today. Further analysis is provided in an updated version of the impact assessment for universal credit, which was published not very soon, but this afternoon.
With regard to income other than earnings, we have today released a new policy briefing note which confirms that statutory sick pay and statutory maternity, paternity and adoption pay will be treated as earnings. We do not intend to treat either ESA—or ESA equivalent—or maternity allowance as earnings. They are not treated as earnings in the current system; they are benefits and are treated as such. Nor do we propose to alter the current treatment of maternity allowance in the benefits system, where it is taken into account in full. This is because maternity allowance is one of a number of benefits which exist to replace income for people who are out of work. It therefore addresses the same need as universal credit for mothers who cannot work because they are giving birth to their children. We do not believe it is right for the Government to pay twice to meet the same need.
The income briefing note also explains our wider approach. In general, where a claimant has income at their disposal to meet their living costs, such as spousal maintenance or payouts from an occupational pension, these payments will be taken fully into account. However, we need to make exceptions to this general rule while ensuring that the system is kept as simple as possible. We will therefore disregard certain income types in full where they are paid due to additional costs or expenses that a claimant has. This would apply to additional payments due to being disabled, such as DLA or various local authority payments, or for looking after children, including child benefit and fostering allowances. We will also disregard in full certain payments which would be disproportionately costly to take into account. These will include the value of payments in kind or charitable payments.
I turn now to the proposed subsections in Amendment 30 which would require the Secretary of State to carry out and publish a review of the impact of a taper rate on universal credit claimants and their work incentives one year after the Act comes into force. As the revised impact assessment sets out, we expect the single taper together with the earnings disregards to improve work incentives significantly. With regard to the participation tax rate, the number of households who lose between 70 per cent and all their earnings through taxation and benefit withdrawal on moving into 10 hours of work will fall by 1.2 million under universal credit. Under the current system, around half a million individuals in low-paid work would lose more than 80 per cent of an increase in their earnings because of higher tax or withdrawn benefits. Virtually no households would lose 80 per cent under universal credit. On reasonable assumptions, the combined impact of take-up and entitlements will lift around 900,000 individuals out of poverty, including more than 350,000 children and 550,000 working-age adults.
These are significant outcomes and we will be monitoring and evaluating universal credit to confirm that they are achieved. However, this is an ongoing process and we expect that it will take longer than a year to develop a sufficient body of evidence on which to draw firm conclusions. As a result, we do not think it appropriate—
Baroness Sherlock
I thank the Minister. I am trying to look through the revised impact assessment, as I am sure will other noble Lords. I hope he has had the opportunity to read it before I have; I would be very disappointed if he had not. I wonder, therefore, if he would give us the benefit of that experience. Regarding the figure he has just cited of 200,000 children being lifted out of poverty by entitlement alone—and I see he has had to resort to modelling take-up which he has always previously refused to do on the grounds that it was not necessary—could he remind us what the previous estimate was of the number of children being lifted out of poverty?
Lord Freud
Yes, I can help noble Lords. There is a small decline for adults in this impact assessment compared with the last one. It is down from 600,000 to 550,000. However, the figure for children is unchanged at 350,000.
Lord Freud
Yes, for children lifted out of poverty, the figure 350,000 is unchanged. I am sorry; I can only tell noble Lords what is in the document, which I confirm that I did read over the weekend. Let me nail down the reason why I do not want a formal annual review process. I do not think that that is the right way to go when we have something as sophisticated as the universal credit, given the impact of the different delivery mechanisms, taper rates, disregards and conditionality. I will be talking to the Committee quite soon about how we could assess the system most effectively. I accept assessment and regular assessment, and I am looking for support from this Committee in that process.
Baroness Sherlock
I thank the Minister. I wanted to phrase my question more precisely because I think I may have confused him. The improvised impact assessment says on page 18 that changes in modelled entitlements will lift approximately 200,000 children out of poverty. The figure of 350,000 children that he quoted included take-up modelling. My understanding is that previously he has given us figures that did not include take-up modelling. I am trying to contrast the current steady state figure without any assumed change in take-up compared to the previous steady state figure.
Lord Freud
I can absolutely confirm that the figures included take-up and are the same figures, so there is no change there.
Baroness Sherlock
I am so sorry. What was the previous figure, not including take-up modelling?
Lord Freud
They are exactly the same—200,000 and 400,000 adults. Those figures have not changed. Let me come back to the issue raised by the noble Baroness, Lady Hayter, on the target rate of the taper. I do not think it is right to have a target rate of what the optimum figure is, and I will not talk about the iron triangle today. I will spare the Committee. A lot of factors are involved in what the optimum rate will be. We do not know, so it would be foolish to set a target, whether it is 55 or 65 per cent. If noble Lords want my opinion, I think 65 per cent is too high and a future Government—when they have some money—would be smart to lower it. But by then I would hope that we would know exactly what the optimum figures were. When we know that, a smart Government would move to it. It would be wrong to set a target when we do not know what the optimum figure is. I agree that we need to be very sophisticated in our understanding of how people behave and the impacts of universal credit. I take on board the spirit of this amendment in the sense that we do need to assess it. I do not think this is the right way and I hope to be able to discuss with this Committee better ways of assessing it. I am hoping for some real enthusiasm behind those ways as well.
I hope that these answers have helped to clarify our intentions in these areas. They are really important areas, and I urge noble Lords not to press their amendments.
Lord Skelmersdale
My Lords, my noble friend will no doubt remember that many years ago I was the Minister for War Pensions in the days when war pensions were looked after by the then Department of Personal Health and Social Security, and then Social Security, since when they have been transferred to the MoD. Many local authorities provide a war pensioner’s discount on housing benefit. I wonder whether this will be added to his list of discounts, because he did not mention it.
Lord Freud
I did not mention it for a very good reason. I am currently consulting across government on how best to recognise war pensions and other payments to veterans, war widows and dependants. The reason this is not straightforward is because the practice across all the different benefits varies wildly. When you create one single clean system, you have to go nap on one approach. What I am looking at doing is getting the right approach which recognises that someone in receipt of a war pension is owed an extra reward for that experience. We have to work out the optimum way of doing that. As I say, I am consulting on that.
Lord Newton of Braintree
Before my noble friend sits down, since this seems to be the time for Tory interventions, and his remarks just now seemed to lead straight into this one, if variation between local authorities in what they do in respect of Armed Forces pensions is a problem in the way that he described, although we are all no doubt very supportive, what will happen if we have 400 different council tax rebate social security systems all varying wildly between 400 local authorities? I have a lot of sympathy with his line of argument. He may even be sad to know—I hope that he will be pleased to know this—that I think he is right to resist these amendments. He is right to put the emphasis on assessing what happens once all this is in place. However, we will need to take into account the effect of what is happening as regards council tax benefit as well as all the other things.
Lord Freud
My Lords, I will just have to take that point on board. After our previous session, I know that—
Welfare Reform Bill
Lord Freud Excerpts(12 years, 7 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, Amendment 2 would define the purposes of universal credit as,
“to support work for those who can and provide security for those who cannot”.
In Tuesday’s debate on Amendment 1, several noble Lords stressed the importance of language and risk. I am not sure that a definition that divides the caseload between people who can and cannot work is particularly helpful in that respect. However, it clearly is the purpose of universal credit to support people in or out of work, provide security and remove risk.
With regard to supporting people into work, I hope that it is already clear that work is at the centre of the new benefit. In designing universal credit our clear aim is to make work pay. In Tuesday’s debate I referred to the significant improvements that we expect, overall, in terms of participation tax rates, marginal deduction rates and levels of worklessness. Key to this is the single taper, which will ensure that claimants see the benefit of every extra hour worked. We will debate the level of the taper in a later session. For now, I hope your Lordships will agree that the principle of replacing the current tangle of overlapping tapers is the right one and a major step forward.
Other key elements of the work focus of universal credit are the work-related requirements set out in the Bill, the work programme and support for childcare. I said on Tuesday that I hope soon—very soon, in fact—to be able to give more details about the childcare element of universal credit. This is clearly an essential part of supporting parents in work.
Baroness Hollis of Heigham
My Lords, if “soon” is around a week, is “very soon” around a day? An hour?
Lord Freud
“Soon”, you can measure in weeks; “very soon”, you can measure in days. Well, let us say that noble Lords in this Committee can.
To pick up the point made by the noble Lord, Lord McKenzie, on the application of conditionality; in the Bill conditionality is linked only to employment outcomes, but any responsible Government will always want to look at options for achieving other outcomes for individuals, taxpayers and society as a whole. Indeed, I remind the noble Lord that the previous Government tried sanctions as a way to improve compliance with community sentences.
On the related point of the noble Baroness, Lady Hollis, on IB and ESA numbers, I need to point out that the numbers were pretty much the same in 2008 and 1997. I welcome her focus on reducing inactivity. That is exactly the right thing. One can get pretty historical going over who is to blame or who is not to blame. This is the situation we are in and I do not think that any Peer in this Room would disagree with the proposition that we now have a benefits system that traps people in inactivity through its structure, and certainly one that does not apply substantial help to people to get out of that trap. She asked me to acknowledge the continuity between the two Governments, and I am pleased to do that. I can absolutely confirm that the design of the work programme, for instance, is very much based on the fact that the employment zones pilot initiated by the previous Government was clearly the most successful pilot. We picked that up, effectively, in the work programme and made it a national programme.
While the aim is clearly to help as many people into work as we can, universal credit will also provide for those who cannot work. We have ensured that it is specified in the Bill that a number of groups will receive unconditional support without having to meet any labour market requirements. This will include those assessed as having limited capability for work and work-related activity; claimants with regular and substantial caring responsibilities; and lone parents or nominated carers with a child under the age of one.
In terms of benefit payments, the structure of the benefit is similar to existing provision for people who are out of work. We have announced changes where we believe change is needed, and the Committee will be looking closely at specific points, such as disability support, housing benefit and the household benefit cap, when we reach the appropriate clauses.
It is important to be clear from the outset that universal credit is overwhelmingly not about taking money away from people who are out of work. That much is very clear from the impact assessment, which shows that the majority of losers are people in work, many of whom have higher earnings. As I said on Tuesday, I hope that an updated impact assessment will be available soon, but the fact is that most workless people are not losers and the overall impact of the reform is progressive.
I shall here refer to the important matter raised in particular by the noble Baronesses, Lady Campbell and Lady Wilkins, of the work capability assessment. We continue to work with Professor Harrington to ensure that that assessment works effectively. Clearly, he is involving disability groups in that development in a very proactive way. I obviously know the concerns of disability organisations in this area and I will aim to explain that in much more detail when we get to Clause 12, if that would be acceptable to noble Lords. It is also slightly misleading to talk about losers when we have a package of transitional protection to ensure that there are no cash losers as a direct result of the migration to universal credit, where circumstances remain the same. I understand that noble Lords are concerned that any claimants should be worse off under universal credit, but the fact is that we cannot simplify the system while retaining each and every element of all the existing benefits. That would be simply unaffordable.
If I can touch on the introduction of the PIP on carers, which was raised by the noble Baroness, Lady Hollis, and my noble friend Lord Newton—
Baroness Wilkins
Does the Minister not accept that some disabled people in work are going to be significant losers as a result of the universal credit? They will be deprived of what they currently get—the £55 a week severe disability premium. That is why the organisations are so concerned. While there may be transitional arrangements, what about the people who come after the transition? The transition is only for now.
Lord Freud
As we restructure the benefits, the out-of-work benefits remain essentially the same. We are making some changes to simplify those, which we will come to in some detail, but rather than taking one aspect I would like to deal with the whole of this at the right time and take it through. I take the point and I will go through it in great detail when we come to the adjustments in the structure of disability benefits. I think it will become a bit random if I just deal with that now. I hope the noble Baroness will forgive me. I am not dodging it; I just want to put it in the proper context.
I want to pick up the point about the entitlement for carers related to PIP and how that will work. Today, all I can say is that we are looking at this issue very carefully. Again, I propose to discuss this in great detail when we get to Clause 75. It is a most important issue in this legislation.
We cannot afford not to simplify, as there is clear evidence that complexity within the existing system is acting as a barrier to work. It is also, interestingly, a barrier to take–up—again the impact assessment shows the clear gains for thousands of individuals that we expect from increased take-up. The analysis of the existing impact assessment shows that two-thirds of the reduction in poverty that we are looking at is a result of take-up rather than the structure of the Bill. We are not expecting that effect to change significantly when we have the new impact assessment soon.
In our proposals for a simpler benefit we think we have got the balance right between promoting work and providing security. I understand that noble Lords may disagree with us on specific issues, but I hope they will accept that the overall purpose is not in doubt. On that basis I would urge the noble Lord, Lord McKenzie, and the noble Baroness, Lady Hayter, to withdraw their amendment.
Lord McKenzie of Luton
I thank the Minister for that detailed reply. Of course I will be withdrawing the amendment. I thank all noble Lords who have spoken in favour of it and even the noble Lord, Lord Newton, for occasionally being a loyalist. It would be helpful if he did not do it too often on my amendments. We will return in some detail to a lot of the issues that the amendment touches on over the weeks, if not months, ahead. I also accept that the precise wording of the amendment could be subject to challenge. If someone wants to offer an alternative, I am happy with that. It is an attempt to put something in which is trying to be indicative of what the universal credit is about, with the focus not only on work but also on support for those who are not opposed to moving closer to the labour market and, as the noble Lord, Lord Wigley, pointed out, for those who are very keen to get back into the labour market, but for whom there are no jobs.
A common feature of many noble Lords who contributed to the debate is about the WCA and concerns over how it is being used in the universal credit for access to the disability additions. I also raise the point about how I understand that it is being used in relation to the work programme. If there are concerns about how Atos is making assessments on whether somebody is fit for work, in the work-related activity group or the support group and is struggling to do that on a basis that people find acceptable, then the added precision that apparently it is being asked to provide about whether that person is going to be fit for work in three months or six months, which drives how some of them will enter the work programme, seems to me another dimension to what it is being asked to do and therefore somewhat worrying.
When we had a briefing from officials, I asked whether any of the appeals that had taken place were around that prognosis rather than the designation that was temporarily being visited on somebody. I am not quite sure what the answer to that is. If the work programme is a key part of helping people into work, which we agree is the intention of universal credit, how Atos or the work capability assessment features in that is of some importance. The noble Baroness, Lady Campbell, raised the concern that the current assessment processes have not been co-produced. We share some of the thinking about how the WCA has been developed. It was introduced under our legislation. A lot of effort went into focusing on it, just like the effort that is going into the assessment of DLA and PIP. But when it came to the practice of it, it turned out to be quite different. I accept that it is an evolving situation, but one can understand the fear that has been expressed today and how it represents the views of disabled people more generally about how this is featuring and working in the universal credit.
The Minister did not respond to the questions around the work programme. Would he like to do that now and give us an update on how it is progressing? That is particularly important at this juncture. The previous programmes we have talked about—my noble friend Lady Hollis mentioned some of their origins—by and large were developed in an economically vibrant situation where unemployment was reducing. We are not in that environment now.
Lord Freud
I can tell noble Lords that, regrettably, at this stage it is very early days. The noble Lord will be aware that it was launched on 10 June. I do not have any meaningful data to supply him. I am not sure when I will have some, but when I do, I will let the Committee know.
Lord McKenzie of Luton
Might I ask the Minister to use his best endeavours to see that we get that data soon?
Lord McKenzie of Luton
Perhaps I can press on one or two other matters. I was interested in the noble Lord’s response about conditionality being associated with work-related activity. I accept the assurance that in respect of this Bill, that is what the focus is, but am I right in getting the hint that there may be some wider plans following this Bill where that conditionality might be applied more generally, not just in a work-related context? Perhaps the Minister would like to say something more about that.
Lord Freud
I have no information on any plans in that area at present. This Bill is about conditionality for employment purposes, and I have no information on any other such plans.
Lord McKenzie of Luton
Perhaps the Minister will let us have some information as soon as it is available to him. We are going to return to many of these issues in our further deliberations on this Bill.
The issue of travel costs has been released. Perhaps the Minister might reflect on the assertion that people should now be prepared to routinely travel an hour and a half each way to take up possibly low-paid work and how that fits with someone being better off in work if the costs of that travel are not covered or dealt with in some way.
We also had a bit of an historical debate about what various Governments did. My noble friend Lady Hollis was very clear about what happened on our watch, and as I said, the Minister was involved in some of that. I accept the assertion of the noble Lord, Lord Newton, that under his watch he did not just sit there and let the number of people on incapacity benefit accumulate. On that basis we should be in agreement that the Prime Minister’s statement was wholly misleading. It is a political point, and noble Lords may think it is a cheap political point, but it matters when the most senior politician in the land is happy to use language and examples that are simply not true. The impact of this is to stigmatise people on benefits, and we should be deeply worried about that.
Lord Freud
Let me just make it absolutely clear what the Prime Minister was saying in the slightly more technical language that we understand in this Committee. The Prime Minister was making the point that we had created a series of inactive benefits onto which people were put and then left without any route back into the workplace. That was a dereliction of duty by Government. Our understanding has now transformed. We know that work is part of the solution for people with disabilities, not part of the problem. A key thing that we are trying to do in this Bill is to integrate the work process for people, whether they have disabilities—whoever they are. That is what the Prime Minister was saying. We are making an enormous effort to get people back into the workforce, and we are spending a lot of money—up to £14,000—on the people who are hardest to help, many of whom will have a disability. Underneath the political rhetoric, I think all noble Lords would agree with that sentiment.
Baroness Turner of Camden
Was the Prime Minister not speaking in support of the continuation of Remploy?
Lord Freud
I think we had the discussion about Remploy yesterday, and I will not go on about it again today.
Lord McKenzie of Luton
My Lords, I would just remark that if that is what the Prime Minister was intending to say, his usual high command of the English language eluded him on that occasion. My noble friend Baroness Wilkins emphasised the fear that people have about this process and about the WCA. My noble friend Lady Hollis was quite right to refer to carers. In fact, my shorthand amendment was meant to encompass that and I entirely accept the point. I am increasingly concerned about the impact of this on young carers as well. The noble Lord, Lord Wigley, referred to support for work. He is right, it should not only be about supporting people linked to the labour market. It is a question of how we are going to increase growth and create jobs as well, which is a much wider debate.
My noble friend Lord Beecham made reference to the housing benefit changes and the impact that those will have on labour mobility. I think that the noble Lord referred to people not losing out from universal credit. When you look at the impact of universal credit and some other measures in the Bill, particularly the benefit cap and housing changes, I am not sure that that assertion would necessarily hold true. Having had a good start to proceedings today, we will revisit many of these issues.
Lord McKenzie of Luton
I thank my noble friend Lord Foulkes for picking up the baton from the noble Lord, Lord Kirkwood, so that we have the chance to have the explanation of the points that were put by my noble friend and by the noble Lord, Lord Wigley. Doubtless the Minister will be able to tell us what consultation and engagement has taken place, but I think that the request is that it is not simply done at some formal stage, perhaps when policy is being formulated, but that we consider it as an integral part of our consideration of this Bill. If we can get nothing other than that from this amendment it will have been worthwhile preserving it for our brief debate.
Lord Freud
My Lords, I will deal with Amendment 3, which is the one noble Lords have concentrated on. Amendment 3 would introduce a requirement to consult the devolved Administrations before the introduction of universal credit. I must point out that social security is a reserved matter in Great Britain but the implementation of universal credit will have an impact on some matters of policy which are devolved, for example, housing, skills provision and childcare. For that reason, we are working closely with the devolved Administrations on the implementation of measures in the Bill and will continue to do so to ensure that the introduction of universal credit goes smoothly.
We have been discussing aspects of the Bill since well before its introduction during the latter part of 2010. The Secretary of State and I have had a number of meetings with Ministers in the devolved Administrations. A formal role has also been established for the Scottish, Welsh and Northern Irish Governments and for the Scottish and Welsh local authority associations on the universal credit senior stakeholder board. We have a concordat between DWP and the Scottish Government that sets out the commitment on communication and consultation; indeed, the Secretary of State met Scottish Ministers most recently a fortnight ago. I therefore hope that noble Lords will be reassured with regard to the concerns they have expressed. We are addressing these issues, we are consulting thoroughly, and on that basis—
Lord Wigley
Before the Minister sits down—although he perhaps cannot give a reply now—would he consider at some stage during the passage of this Bill the possibility of introducing a new clause or subsection? This could perhaps come towards the end, where questions such as extent arise, and propose that there should be a duty on Ministers to consult not only with regard to the primary legislation, but with regard to the impact of the orders that will be coming from the primary legislation. If it is in the Bill, there will be no excuse for not consulting at the appropriate time.
Lord Freud
Currently, my understanding is that there is not a formal duty, but I have a commitment, and I am informing the Committee that we have an intense consultation process and we will continue that. I think it is an entirely unnecessary, bureaucratic thing to change that. The Committee has my assurance that that process will continue with a great intensity, as it has up to now.
Lord Newton of Braintree
Having been restrained by my noble friend Lord Kirkwood from what would have been some inflammatory remarks at an earlier stage, can I ask two questions at this stage before my noble friend sits down? First, if we are to go down this path, can we also have an obligation imposed on the devolved Administrations to consult on legislation they pass that has a significant knock-on effect in England, of which we have just heard another example in the housing field? Secondly, and quite separately, could he say a word about Northern Ireland, which to my recollection did not accept UK legislation but passed the same thing through its own procedures? Is that going to be the future situation as well?
Lord Freud
Yes, my Lords. In Northern Ireland they have a system of what they call parity. In practice they pick up Great British legislation.
Lord Newton of Braintree
It is not an exempted issue but they do the same thing.
Lord Freud
They do the same thing. It is a different arrangement. I have gone to Northern Ireland particularly on this matter. I am anyway, as you might imagine, not in a position to offer duties of this or that either way. However, I would not want to go back and try to do it under any kind of pressure because we are talking about the implementation of a very complex set of changes. Having a bureaucratic to-and-fro process is exactly the wrong way to do it. The right way to do it is the way that we are doing it, which is in intense dialogue and working it through. If noble Lords are interested in practical implementation of complicated transformative changes to our social welfare, they should allow us to do it this way because that is the best way that it will be achieved to time, to budget and to the betterment of the people in all the countries that we are talking about. I beg the noble Lords to withdraw the amendment.
Lord Foulkes of Cumnock
My Lords, there seems to be some encouragement from the other side.
Lord McKenzie of Luton
My Lords, I am not quite sure what was in the mind of the noble Lord, Lord Kirkwood, when he drafted the amendment. He may want to take the opportunity to enlighten us. But looking at the distinction between “awarded” and “paid”, our attention was drawn in particular to Schedule 1, paragraph 6. This paragraph enables an award of universal credit to be paid in whole or in part by means of provision of a voucher. Perhaps the Minister could expand on the intention behind this paragraph, and on the circumstances in which it might apply. I am aware, of course, that there are existing programmes where vouchers are used: in health, for example, for specs and contact lenses and for the Healthy Start food initiative. I know that the Minister has turned his mind to vouchers in the past. I think it was in connection with the sanctions regime on an earlier piece of legislation we were debating. Does this provision herald a new approach, or does it simply look to replicate existing arrangements? If so, what are they? I beg to move.
Lord Freud
My Lords, regarding the reference to vouchers in paragraph 6 that the noble Lord, Lord McKenzie, picked up—very sharp-eyed, as I would expect—we are looking at an option of paying childcare through vouchers. It is similar to some of the ways currently used by employers. It allows the flexibility of a parallel system with the employer system. I have to tell noble Lords that it is not the approach we are expecting to use. It is very much an option, but as I intimated earlier, we will announce our childcare proposals very soon.
On the voucher system, we have used the term “award” here because it is widely used across social security legislation and therefore makes a link to other legislation that provides for claims, payments and appeals. Changing the word would remove those links and require major changes in legislation across the piece. For that reason I ask for the amendment to be withdrawn.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for that explanation. I have no particular problem with the term “award”: it was just the passing reference to the use of vouchers. I took it from the Minister’s reply that it is only in relation to childcare that this is to be developed, and that does not look as though it is the front runner. We will know that soon. The only plea I would make is that if we go down the path of vouchers, we should do so sensitively. The prospect of stigmatising people who access facilities by paying cash or providing a DWP voucher has significant ramifications. It appears from what the Minister says that we will not have to face that in practice. On that basis, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I will speak briefly on this issue in support of the amendment proposed by my noble friend Lady Hollis and the exceptionally powerful case made by her and by pretty much every other the noble Lord who has spoken on the issue. The noble Lord, Lord Skelmersdale, raised an interesting point about how you would extract the payment. My noble friend Lady Turner asked whether it was a rebate, a discount or quite what it was.
I recollect that she pressed us in Government on behalf of the Royal British Legion, who were campaigning to have the term rebate replacing the benefit. We all signed up to that at the time. I am not quite sure what progress was made. I think that it went to local authorities. However, I remember that there was a potential price tag of tens of millions of pounds to local authorities just for that one system change. These are not inexpensive projects that we are dealing with. I cannot believe that this is what the noble Lord or the DWP want. The noble Lord is an exceptionally logical person. He analyses things. The scale of the problems that the localisation of council tax would bring seems to me to be totally out of kilter with all of the work and analysis that has gone on in producing plans for the universal credit. As everyone has said, it undermines the universal credit—the benefits of the single taper in particular. With all the raft of issues about how people would understand what their position was, the simplicity of the system would fall away.
We had a meeting with officials. As ever they were very helpful. We explored this issue a little bit. My understanding is that it was not until March of this year that the department started to contact local authorities to get their minds around how it would work. To produce something in a Bill and develop a policy on an assumption that this component can be dealt with separately without any clear knowledge as to how that will work in practice seems unusually foolhardy. Again, I cannot believe that the Minister believes that this is the best way forward. There are lots of practical issues. We know lots of local authorities will have outsourced their arrangements in respect of housing and council tax benefits. You would have to break the costs involved in the multiplicity of contracts. I do not know if the Minister has any idea of what would be involved in that exercise.
What we are seeing here is what we have seen in the Localism Bill writ large. There have been a lot of instances where the Government and the Secretary of State have said that they want to devolve power and give more freedoms to local authorities, but have then realised the consequences and drawn those back with all sorts of regulation powers, which, as my noble friend Lady Hollis said, would have to be there if you were going to make any sort of sense of this proposal to have any sort of understanding of whether it is regional systems, which are common.
There is another component as well. It relates to the cut in the total amount available. I agree with the noble Lord, Lord German, that in a sense there are two issues: the financing and what cash sum is available, and how it should be dealt with. This Government have a record of imposing on local authorities and getting them to take the pain, the heat and the difficult decisions, and seeking to walk away scot free. We will see and debate what is going to happen with the social fund. That is another example—no duties on local authorities and no ring-fenced funding from it.
My noble friend Lady Hollis made a telling point. If our understanding is correct—and the Minister will doubtless confirm this—this is switching AME to DEL, the reverse of what I think the Minister himself negotiated so effectively when he was dealing with work programmes. It does not make any sense. I know that the Minister has to do his job. We have all been in the position of defending the indefensible before. However, I cannot believe that it is going to end up as currently proposed because it would seriously undermine the universal credit and all the good work that the Government are trying to do on that.
Lord Freud
My Lords, I am grateful to noble Lords for raising this series of amendments. Clearly a point of real substance has been discussed this afternoon. The group of amendments would have the effect of incorporating help with council tax for those on low incomes into universal credit and state pension credit.
Noble Lords will be aware that we are proposing to abolish council tax benefit and replace it with localised schemes of support to be set up and run by local authorities. The Department for Communities and Local Government is currently consulting on proposals for local schemes in England, as a number of noble Lords have pointed out. This approach will allow local authorities, who determine and administer this tax, to have a say in how the burden of paying for services is shared across their local community, taking account of local priorities.
The Government’s approach addresses concerns that have often been expressed about the complexity of council tax benefit and, particularly, that council tax support should not be part of the social security system at all. Nevertheless, in localising support, we need to ensure that the improved work incentives that universal credit will bring are not undermined in any way. We believe that the key principles required to incentivise work can be delivered through local schemes and therefore that localisation is the right approach.
Lord Freud
As I was about to say, we will soon publish an impact assessment on the universal credit that incorporates this approach. As noble Lords will be aware, the existing impact assessment assumes council tax in the system. This one will assume council tax out of the system.
Lord Skelmersdale
My Lords, does that mean that in this impact assessment, there will be an assumption that the taper will be the same? That seems to me to be all-important.
Lord Freud
I ask my noble friend to resist pressing me, which I know he enjoys doing, at this moment. Let us wait for the new impact assessment.
Lord Freud
The impact assessment that I am talking about is the one on universal credit and how it will respond to the exclusion of council tax. We will not have an impact assessment from DCLG available for some time. I do not know when we will have that impact assessment, but I will write to the DCLG and find out.
Lord Newton of Braintree
That means that this impact assessment will not be an impact assessment of the effect of these proposals on poor people.
Lord Newton of Braintree
I am not going to press my noble friend further, but that is what it means.
Lord Freud
I think noble Lords will be somewhat relieved at the approach and will get quite a lot of information from the impact assessment on universal credit on its own. If it comes out soon, as I expect, there will be an opportunity to debate it again, perhaps around Clause 11, or possibly Clause 8, when we can look at the taper, so there will be a chance reasonably soon to look at the implications again.
Lord McAvoy
Before the Minister passes on to the next issue—that may have been a Freudian slip—he has charmingly used the words “soon” and “very soon” to, quite frankly, parry requests for a wee bit more detail on timing. Can he give us an idea whether the assessments that he keeps referring to are operating at a normal pace? Is there an expectation about how long that should take? Are these assessments that we are waiting on taking longer than he would expect?
Lord Freud
No, we had anticipated that this impact assessment would come out during Committee stage, and I think we said that. I hope I gave noble Lords a reasonable clue when I suggested the opportunities we might have to debate it because I referred to a couple of clauses that, depending on our speed of progress, we will get to soon.
I shall return to the main topic and the question of pensioners. Noble Lords will be aware that there have been persistent concerns about the low level of take-up of council tax benefit among pensioners. I know that the noble Baroness, Lady Turner, has had this as her absolute central focus. As the noble Lord, Lord McKenzie, pointed out, there was cross-party consensus on the word “rebate” a couple of years ago. Many have argued that the reasons that pensioners are reluctant to claim are because it is an income-related benefit and because they believe that the process for claiming it is complicated and intrusive. We believe that there is a strong and persuasive case that council tax support for pensioners will be better delivered through localised schemes of support. Noble Lords will have seen that DCLG’s consultation paper stresses that the position of current and future pensioners should be fully protected.
I will take the opportunity to answer the specific questions raised by my noble friend Lord Newton. The allocation of cash to local authorities will be based on existing CTB expenditure, less 10 per cent. The current cost of delivering housing benefit and CTB is £500 million per year. I am not able to say what the new system will cost, mainly because the consultation that DCLG is conducting has not been concluded.
My noble friend raised the appeal process. The consultation paper does not set out a final view on what that process might be, and it is the subject of one of the consultation questions. The nature of the appeals system will depend on the final design of the system.
To summarise, the approach the Government are taking on the aspects that this amendment raises is the right one. Therefore, I thank noble Lords—
Lord Wigley
Is the Minister going to respond to the point made by Lord German earlier about the application in Wales, Scotland and Northern Ireland? I am sorry to come back to that like a bad penny, and I will try not to do it all the time, but in this instance, it is of direct material consequence, particularly this week when one is aware that the money to freeze council tax, so far as England is concerned, when transferred to Wales, will not be used for that purpose. Will the resource that the Minister sees going to local government in Wales go directly to local government or via the Assembly? Has he discussed this with the Welsh Local Government Association and Assembly Ministers?
Lord Freud
My Lords, without being over-coy on that question, this matter is out for consultation and we expect the responses from Scotland and Wales to be incorporated as part of it. So the answer, I guess, is that it will be looked at in that context. With that, I ask the noble Baroness to withdraw the amendment. I am sure that we will return to the some of the substance later.
Baroness Hollis of Heigham
Yes. Before coming back to some of the main themes that your Lordships have adduced, could I thank everybody who has taken part, because all sorts of issues have come up that I had not fully clicked on? I now have an even clearer sense of indignation at what these proposals might mean for—as the noble Lord, Lord Newton, rightly said—the poorest people in the land. I appreciate your Lordships’ contributions.
I am sure that the noble Lord, Lord Freud, will take this Committee’s views back to his close working colleague Mr Pickles. Bar a couple of open questions, I think they were unanimous in being deeply concerned both about the effect on the individual and on universal credit.
Lord McKenzie of Luton
My Lords, this is a probing amendment, which would delete subsection (2), which states:
“Regulations may specify circumstances in which a member of a couple may make a claim as a single person”.
As I say, it is a probing amendment to seek some clarity as to the likely scope of such regulations. I accept that the Notes to the Bill refer to circumstances where one member of a couple does not have the right to reside in the UK and is not entitled, so the other member will be able to make a claim as a single person. My question is: what other circumstances might be envisaged? It is understood from the notes circulated that further work is ongoing in this regard, but perhaps the Minister can help us with the following questions. When, for example, a couple are in the process of separation or divorce, will they be treated as being a couple or two individuals? Under what circumstances will members of a couple be legally entitled to live separately and receive universal credit independently of each other? In particular, will there be any scope for individuals who are in an abusive relationship to receive universal credit independently of their partner?
These sorts of issues highlight how convoluted some people’s lives can be. There are circumstances where, under existing provisions, people are treated as no longer being a couple: for example, if either or both is in custody, has been released on temporary licence from prison or is a compulsory inpatient detained in hospital under mental health provisions. Those sorts of arrangements exist at the moment. Are they going to be built in to universal credit? In what other circumstances might a member of a couple claim as an individual? I beg to move.
Lord Freud
My Lords, to summarise, the general principle is that a couple should make a joint claim for universal credit to ensure that both members of the couple take responsibility for the claim and obtain support to find work, where appropriate. This principle is already established in jobseeker’s allowance for joint claims, and we are extending it to universal credit, so that both members of a couple will have equal opportunity to access the support.
As explained in the briefing material sent to Peers last week, there will be a fairly limited range of circumstances in which only one member of a couple is eligible for universal credit, such as the example that the noble Lord, Lord McKenzie, raised where a claimant’s partner is a person from abroad who has no right to reside here. However, there are other circumstances, such as when people are students and so forth, when they will not be eligible for benefit support.
This amendment would remove our ability to make these exemptions. I understand that it is a probing amendment implying a series of questions. We are currently developing detailed regulations on this. There is no intention to change some of the existing protections—the noble Lord mentioned people in custody and people detained in hospital. In the work we are doing, as we build a coherent single system, it is fascinating to see how many different definitions of the same thing there are scattered through the current system. One thing we are doing is trying to get a consistent definition. We have four meanings of the word “work”—or is it five? When you are writing a computer program in code, that kind of thing needs to be precise.
We are going to have to get the timing of when people separate and all that precisely right, and that is work in progress. We are aware of the issue. It is being addressed, and it will be much more coherent than it has been in the past for that reason. Therefore, I ask the noble Lord to withdraw this helpful probing amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that information. I am going to have to allocate a bit more of the weekend to catching up on all the briefing material that we have. I understand that there is no basic intent to change the current provisions. I am interested in the range of different definitions. The next group of amendments will touch on that a little as well. I beg leave to withdraw the amendment.
Lord McAvoy
My Lords, I ask the Minister for some brief clarification. If I am picking it up correctly, the definitive removal of any option for anybody aged 16 to apply for these benefits under the special circumstances is proposed. I have the benefit—it might not have seemed like a benefit at the time—of 23 years of parliamentary surgeries as a former Member of the other place. There is one thing these surgeries teach you, and that is that there can be no definitives in dealing with human beings. I can certainly recall occasions—not hundreds but certainly scores over the years—when people of that age had special circumstances. I am worried about the reasons for removing the possibility of applying, and about the alternatives being brought into legislation to account for that option being removed. I always worry about definitives and a lack of options, and I would like to hear what the Minister has to say on that.
Lord Freud
My Lords, Amendments 18 and 19 seek to amend the basic conditions of entitlement to universal credit and would in effect limit our ability to provide for exceptions to those conditions. Amendment 20 would create a new regulation-making power to set out circumstances in which certain groups are to be treated as not receiving education: specifically, young people, parents and disabled students. Clause 4 sets out the basic conditions that must be met in order to be entitled to universal credit. These basic conditions are designed to be simple and easily understood, fitting together with the support for people in education and for older people through state pension credit. However, as I am sure noble Lords will agree, there are always exceptions to the general rule, and it has never been our intention that these basic conditions will be so prescriptive as to prevent certain groups of people being entitled to universal credit. In that sense, we are entirely in accordance with the sentiments just expressed by the noble Lord, Lord McAvoy.
Amendment 17 seeks to make universal credit adopt the principle that entitlement to support begins at 16 rather than at 18. We intend to maintain the current rules where 18 is the minimum age. This is consistent with the approach taken by the previous Administration, and we see no reason to change it. Equally, however, there are circumstances where people aged 16 or 17 should be entitled to universal credit in their own right. This includes people with responsibility for a child, disabled people and people estranged from their parents. Sixteen and 17 year-olds should be in education or training and not living on benefits. If we were to set the lower age limit to 16, we would send the wrong message to young people and their parents about the value of education and the strength of the family unit.
We will continue to support young people who find themselves in straitened and difficult circumstances through leaving care, family break-up or whatever, at the age of 16. We are not planning to change the rules for care leavers in any way. However, as a result of the last Government’s Children (Leaving Care) Act, care leavers cannot usually claim benefits until the age of 18. That is why the Bill makes provision in subsection (3) of this clause, and why I do not think that the amendment is necessary.
Amendment 18 seeks to remove the regulation-making powers that will allow us to provide for exceptions to the basic conditions. While we would still be able to specify some of them through other subsections of the clause, the amendment would limit our ability to make provision in all cases. I am sure that noble Lords will appreciate the importance of flexibility in these matters. The power can in any event be used only to extend eligibility, not restrict it.
Amendment 19 would remove subsection (5), which allows us to make regulations in respect of residence and presence. We have been clear that migrants will generally be able to claim universal credit only if they have a right to reside here and are habitually resident. This position has not changed—and was reiterated by the Secretary of State and Minister for Employment just last week. In the tough financial conditions we currently face, it is particularly important that UK taxpayers should not have to subsidise people with very tenuous links to this country. “In Great Britain” is the same formulation as in the primary legislation for income support. Nothing sinister is implied by the wording.
On the question of the noble Lord, Lord McKenzie, about the EU ramifications, we do not expect to have to renegotiate social security treaties, although he will be aware that there is considerable movement currently going on about export of benefits, which we are concerned about. Removing the powers in this subsection would also prevent us providing for circumstances in which a person can be treated as being in Great Britain although they are temporarily absent. Current provisions allow us, for example, to pay benefits to people who may have gone abroad for a short period of time to receive medical treatment for themselves or their children. They also, in the case of tax credits, ensure that service personnel and their families are not prevented from claiming because they have been posted overseas. We want to replicate this position within universal credit. The amendment would prevent us doing that. This is a valuable thing for us to be able to do: I am sure that that is not a contentious claim to make in this Committee.
Amendment 20 would require the Secretary of State to specify the circumstances in which certain groups will not be treated as receiving education. There is a long-standing principle that in general the benefits system should not be a source of financial support for those within the education system. Young people are primarily the responsibility of their parents until they leave school. Students in higher education have access to a comprehensive system of student loans and grants. However, there have always been exceptions to the general rule and, as the Minister for Employment made clear during debate in the other place—and I am happy to repeat here—the current boundaries that exist in relation to income-related benefits will not be redrawn.
We do not wish to widen the extent of support for those in education. Nor do we intend to remove support from those groups of young people and students who currently receive it under the current system, such as lone parents, disabled students and youngsters in non-advanced education who are living independently. The powers we need to do this are already contained in subsections (2) and (6)(b) of the clause. We do not need to make the extra provision that this amendment would provide.
I apologise if that was a lengthy summary of our position. I need to track back a little bit because I may have inadvertently misled noble Lords on the point of support for care leavers. I want to make absolutely clear with regard to care leavers that our support is constrained by the previous Government’s Children (Leaving Care) Act, which starts the clock for them at 18. I think that I inadvertently said 16 earlier and want to make sure that that is absolutely clear and on the record. With that explanation and assurance, I urge the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that explanation. As I hope I explained, these were probing amendments to get answers on the record.
I shall follow up on two points. On Amendment 17 concerning16 and 17 year-olds, there are currently different rules for different benefits. There is the JSA rule and rules for other means-tested benefits. For the latter, you must be in a vulnerable group: for JSA, you must be facing severe hardship. Given that we end up with just one benefit, universal credit—plus a bit of council tax—will all the easements for 16 and 17 year-olds be reflected in the universal credit, or only some of them? As I understand it—I am not sure that I have my mind fully round this—there is currently a patchwork of provision, and it is a question of seeing whether that is brought forward in its totality.
That is the first question. I will pose a second one as I see that the team are working hard at the back there. In relation to definitions around residence, I think that the noble Lord said that “in Great Britain” is used for income support. Certainly, the text that I have is that you must satisfy the “habitual residence” and “right to reside” tests and be “present in Great Britain”. I accept that there is nothing sinister in it, but I am trying to understand what “in Great Britain” actually means. Does it mean physically here, and that you have to remain physically in Great Britain throughout the period for which you are seeking to claim? What about periods abroad for whatever reason? It looks to me as though that is a change of formulation. It may just be an attempt to simplify the language, but I am a little mystified by it. Perhaps the Minister can help.
Lord Freud
Yes. On the first question about all the rules, our intention, from the policy principle area, is to reflect the current rules. I am hesitant to make an absolute commitment because I am conscious of our work to smooth them out, and there may be some wrinkles. Wrinkles do appear in this area, surprisingly. The main principle and direction will be to take them over in their entirety in the universal credit. Clearly, to the extent that there are wrinkles, when we get to regulations—in some time—we will end up discussing them. We will be able to look at that and discuss it at the appropriate time, but that is the general policy intention.
The expression “habitual residence” is the one used in secondary legislation. That reflects what the primary legislation says, which is “present in Great Britain”. That is the relationship. Clearly, “present in Great Britain” now has a case-law framework around it to define what it really means. Can you pop over to Calais for lunch and still be present in Great Britain?
Lord Freud
There are some very cheap fares now; £12 return on P&O, I think. So maybe even on JSA you can have the occasional treat. Joking apart, there is a context and an understanding. We are not planning to change that. Clearly, when one abandons those key words it has a lot of ripple effects, not least in the social security treaty network that we have.
Lord McKenzie of Luton
I am grateful to the Minister for each of those additional explanations. I understand the point about the terminology being primary and the secondary legislation having these other descriptions. Could I ask the noble Lord about this current debate on the exportability of benefits and their components? How, if at all, does he see the universal credit fitting in to that debate?
Lord Freud
We expect the universal credit to be treated as social assistance, which is within the rules, so we can keep a reasonable amount of control over it. This is something that is causing great concern to countries throughout Europe. The European Commission is taking infraction proceedings against us. Twenty members have expressed strong concern. Fourteen member states have joined the UK in calling for a debate on the matter with a view to amending EU social security rules as soon as possible. This is a live and changing issue but currently, as we understand it—nothing is locked down in this area—we have designed the universal credit in a way that it is protected from some of the exportability concerns. That is our intention.
Baroness Hollis of Heigham
Could the Minister help us a bit further? It might be more helpful to have a letter on this later on. The benefits that he is bringing together have different rules—or they had different rules—according to whether they were regarded as coming within the free movement of labour and the support for this through some of the tax credit rules and some of the other benefits that were localised and related only to being present and so on. By bringing them all together, does this mean that, for the first time, universal credit, with a much bigger price tag—so to speak—on the individual entitlement, could now be freely exported to people who are coming to work in this country and whose family members are living in other European countries?
Baroness Hollis of Heigham
If the Committee will excuse me, I have one further point. One of the things that I thought was deeply unfair, but about which we could do nothing, was that a British citizen who took her child to Bangladesh, Pakistan or India for 12 weeks or so thereby lost her child benefit. However, if a worker from one of the eastern European countries came here, and their family had never even visited the UK and their wife and children and so on remained in their home country, they were able to continue to enjoy such benefits.
Lord Freud
I am slightly at a loss to respond, mainly because the noble Baroness has opened the door to such an enormous area. It is so complicated that I have spent quite a long time going through it. Yes, there are lots of anomalies because it is not a stable area of law, but the bottom-line point is we do not think that with universal credit we are putting ourselves in any worse a position than that we are currently in.
Lord McKenzie of Luton
I am grateful to the Minister for those explanations. At some stage may we have a little note which sets out the existing benefits and components that are going to go in to universal credit and what the exportability issues and access by non-residents are? That would be helpful to us. We accept that this is a moveable feast, but a note based on our best understanding as of today?
Lord Freud
Having checked with my officials, I am happy to provide a letter summarising the position. I have had a reasonably recent brief on it, and although I cannot remember the detail, I will get the salient points circulated.
Lord McKenzie of Luton
I am grateful for that and for the other explanations we have received. I beg leave to withdraw the amendment.
Lord Freud
My Lords, these amendments would require a formal consultation on the operation of the claimant commitment and a yearly review on its impact. We will have the opportunity to discuss the claimant commitment in detail when we reach Clause 14, so right now I would like to make some specific points. Before I do that, I would like to make a more general response to some of the general points that the noble Baroness, Lady Hayter, made around the mutual obligations she said are not there and the argument that this is a one-sided commitment. Clearly, it is not one-sided. Part of the Government’s side of this is to pay the benefit to the claimant. The other part of it is to help claimants to find work through, in the case of Jobcentre Plus, adviser interviews and, more importantly, through the investment in the work programme which is, as noble Lords know, a very substantial investment in this country to help people back into the workplace. I will not go further on childcare costs, which the noble Baroness thought would be revealed very soon. Let us have some facts, and then have a discussion on them.
There is genuine mutuality, a two-sided commitment, in the claimant commitment. It is intended to be of benefit to claimants. It will provide all claimants with a single, clear statement of their responsibilities. This will ensure that claimants understand those responsibilities from the very start of their claim and help to improve compliance. Indeed, I am spending quite a lot of time to make sure that the commitment is helpful, understandable and specific to an individual. We are spending a lot of time and energy doing that because, up to now, similar measures have been rather vague and more general.
The content of a claimant commitment will include the hours the claimant is expected to work and it is drawn up between the claimant and the adviser in dialogue. The threshold for things such as the time spent on job search per week will be set according to personal capability and circumstances rather than being prescribed in legislation. The regulations set out only the maximum limit beyond which we will never apply conditionality, so some of the newspaper articles—I am not sure whether this was an upmarket favourite read or in a more downmarket one—apply to the maximum expectation. Clause 17 sets out the kinds of activities we might expect claimants to undertake, and we will get to it later.
We will ensure that the process of accepting a commitment is not onerous. For those claimants who have limited responsibilities—for example, where the only requirement placed on the claimant is to report changes of circumstance—the commitment will be an integrated part of the claims process and could be accepted online or via the telephone. For other claimants, primarily those we would require to look for work, their requirements will need to be discussed with an adviser face to face. They will be able to accept their commitment at their first meeting.
However, we recognise that there may be some very exceptional cases where the claimant cannot fulfil the requirement to accept a commitment: for example, where the claimant is suddenly incapacitated through illness or where the office we were expecting a claimant to attend is forced to close as a result of flood or fire. We will be using regulations under subsection (7) of this clause to cover such circumstances and enable us to treat the claimant as having accepted the commitment. Noble Lords may have spotted that we have responded to the Delegated Powers Committee and agreed to make these regulations affirmative for their first use.
My third and final point is that the claimant commitment is not an entirely new invention. It builds on similar products in the existing benefits regime, most notably the jobseekers’ agreement which JSA claimants must agree to as a condition of entitlement. Operationally, we already have good experience of the use and implementation of such products. Obviously we feel that the claimant commitment is an improvement on the jobseekers’ agreement. Most notably it will bring together all the requirements placed on the claimant, while the jobseekers’ agreement covers only some requirements. We intend to introduce and implement the claimant commitment in JSA in advance of universal credit, and we will, of course, be looking to learn from that experience in advance of universal credit. As I said, I will be able to explain more about this process later as we get to those clauses. I urge the noble Baroness to withdraw this amendment.
Baroness Hayter of Kentish Town
I thank the Minister for that reply, and, through him, I thank his officials for the examples they sent through of the individual claimant. I have only two points to make. First, the Minister said that part of the Government’s commitment is to pay the claimant. Many of these benefits are earned and contributed and are something that people have paid for, so it is not quite the act of generosity and philanthropy that he made it sound.
Secondly, on the individual threshold and the negotiation to make sure that the claimant commitment is tailored to particular needs, I echo a point that was made by at least two other noble Lords about the training of staff. Getting that right will be key to this and is important. As we go through, I look forward to further discussions on this. As I said, such a commitment is not new, but we want to make sure that it does what it is intended to do, which is to assist someone in finding their way into work or back into work rather than to be an excuse for sanctions as an end in themselves. I beg leave to withdraw the amendment.
Remploy
Lord Freud Excerpts(12 years, 7 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Turner of Camden
To ask Her Majesty’s Government what action they propose to take regarding the future of the Remploy factories.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, no decision has been made on the future strategy for Remploy. The Government are currently consulting on the recommendations of the Sayce report. This consultation closes on 17 October 2011.
Baroness Turner of Camden
I thank the Minister for that response, but is he aware that hundreds of disabled people who rely on Remploy to provide them with employment are very worried about the continuation of their employment prospects? Remploy has a reputation for, and experience of, providing supportive work for people who want to work but who otherwise have difficulty in doing so. Would the Government please give support to this worthwhile enterprise?
Lord Freud
My Lords, we are aiming to support disabled people in employment, and we have to do that in the most cost-effective way that we can find. There is a remarkable difference emerging between the support to get disabled people into mainstream employment, which, when Remploy Employment Services does it, costs £3,600 a time on a one-off basis—the company is now getting 20,000 people in a year—and the cost of more than £25,000, year on year on year, to keep them employed in the factory services.
Baroness Sharples
Will the Minister tell us what Remploy produces now? I am lucky; I have a torn ligament and I have a super belt for it that came from Remploy.
Lord Freud
My Lords, Remploy has about 54 different factory outlets doing various things, including packaging, logistics and CCTV—a wide variety of endeavours. That is exactly the point: what a Remploy factory operation needs to be successful is to be run as a profitable entrepreneurial unit. At the moment many of them are loss-making, and indeed across the piece only 50 per cent of people are doing productive work.
Baroness Howe of Idlicote
Bearing in mind what the Minister has said, would he also please take into account the fact that Remploy is very flexible with the needs of some disabled people and those who have difficulties with learning? It can accommodate them, which makes a huge difference. I hope that that will be put into the decision that is taken.
Lord Freud
My Lords, I must emphasise that what Remploy Employment Services has done in the past few years is genuinely remarkable. In the latest financial year, it has put 20,000 disabled people into mainstream jobs and it is aiming to do that for 30,000 next year. This signifies real change for these people, and that is something on which we must congratulate Remploy.
Lord McConnell of Glenscorrodale
My Lords, will the Minister join me in congratulating Ian Russell and the board of Remploy on their terrific achievement in ensuring that thousands more disabled people go into mainstream employment and get the support they need in order to do that? However, does he also recognise the importance for some disabled people of stable factory-based employment which gives them continuity in their lives that they have perhaps enjoyed for 10 or 20 years, and that it would be helpful for them and for society generally to be able to enjoy that in future? A mixed programme of investment to help these people into mainstream employment but also to provide some factory-based employment for those who need it is the best way forward. The Government should continue to support the strategy that the board has followed over recent years.
Lord Freud
My Lords, I must repeat that no decisions have yet been taken on the Sayce review. We are in consultation until later this month. However, I must point out that it is vital that the work is real. We are looking at the Sayce recommendations to see whether those factories can be turned into social enterprises where there is real and genuine long-lasting work. Make-work jobs are no solution for anyone.
Lord Campbell of Alloway
My Lords, speaking from this Bench, may I respectfully ask my noble friend whether he will take this Question back for further consideration as it does imply amendments to employment law which may cause considerable inhibition as regards the recovery of the economy?
Lord Freud
My Lords, clearly, that is a mixed question from my noble friend. I will look very closely at the optimal way of getting disabled people to take a full part in the economy of this country. I will certainly look very hard at that issue.
Lord Addington
My Lords, I draw the House’s attention to my declaration of interests. Can the Minister give us some idea how successful Remploy has been in making sure that people who work in its factories find jobs in the outside world, as this is probably the ultimate test of how good it is? If he can give us an assurance in that regard, many of these problems will be seen in the correct light.
Lord Freud
Yes, my Lords, I have the up-to-date data for the voluntary redundancy programme which took place in 2008. Of the people who chose to look for re-employment, there was a 90 per cent success rate in getting them jobs.
Lord Morgan
My Lords, we have been considering this properly from the point of view of the workers in Remploy. The other side, of course, is the advantages to business and productive industry. I have in mind industries, particularly printing and the industries connected with publishing, where Remploy workers have unique skills. Should we not seek to retain them?
Lord Freud
My Lords, that is precisely the point. Where there is a viable business proposition we would expect social enterprise or other forms of enterprise to pick up those units, make them viable and keep them viable into the long term on a sustainable basis.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)
My Lords, before we continue, perhaps I may explain something to noble Lords that may help our sound broadcaster. The Room has been set up so that nobody needs to touch anything. Noble Lords do not have to switch anything on or off. The Room has been set up so that we can all speak without anybody having to touch anything. I offer that explanation to noble Lords.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, before I deal with the amendment, the stand part debate and the clause, I have to take on board what the noble Baroness, Lady Campbell, said, and her expression of concern. I do not have an answer for her now, but I will go back and get one and make sure that her concerns are addressed in the most thorough way possible. If things have not gone appropriately, I apologise unreservedly.
Before I turn to the amendment in the name of my noble friend Lord Kirkwood, let me talk a bit about the universal credit. Clause 1 establishes universal credit as a new benefit under the provisions of Part 1 of the Bill. This is a modern, simplified benefit, available both to people who are in work and those who are out of work, instead of claiming a number of benefits and tax credits from different sources, as happens currently.
As the Committee will know, the Government are determined to reform the welfare system to make it fairer and more affordable while addressing the problems of poverty and dependency on welfare. Universal credit is at the heart of this strategy. I welcome the support from the noble Lord, Lord McKenzie, for the principle of universal credit. While I am on that point, a number of noble Lords have thanked my Bill team for their accessibility and requested that that continue and I can again give an assurance that we will lean over backwards to continue that accessible approach. The reason is entirely one of self-interest, and when I say self-interest, I mean the interest of the governance of this country. It is vital that we have a proper debate on this very important Bill. A number of noble Lords have pointed out that this is a really important, transformative Bill and it is important that we address the issues properly and with full knowledge. That is why we have this very accessible approach.
We are currently updating the impact assessment—we have been working with a rather out-of-date one—and I am hopeful that we will be publishing that soon.
Baroness Hollis of Heigham
Could the noble Lord help us a little more? Some of us, in our amendments, are relying quite heavily on the impact assessment figures and we would not want to mislead the Committee by using figures that will be replaced quite quickly.
Lord Freud
Yes, I think that they will be replaced quite quickly. I cannot give the actual date or time now, but I think I am safe to say, “Soon”.
Lord Freud
We will get a code. But even the current impact assessment shows the transformative effect of universal credit when it is fully implemented. The combined impact of take-up and entitlements may lift hundreds of thousands of individuals out of poverty, including as many as 350,000 children. The vast majority of gains from universal credit will go straight to the poorest households.
I shall pick up the point made by the noble Lord, Lord Wigley, and the noble Baroness, Lady Meacher, on risk. By combining, effectively, out-of-work benefits and in-work tax credits, we effectively de-risk moving from one category to the other and that is a very powerful incentive for the poorest people to take a risk. One other aspect of it which I have been very conscious of as we develop the whole approach is that it is the best way of dealing with fluctuating conditions. You can move, take a risk and work for some months without being terrified that, if it does not work out, you have lost your benefit support structure, because you are just moving up and down the taper. So, from the aspect of risk, universal credit has huge advantages and it is one of the main drivers of our expectation to see many fewer workless households.
Baroness Meacher
I agree with the Minister that that is one of the great things about the universal credit—on the assumption, and this is the second point that I made, that the systems are properly integrated. As I understand it, this wonderful moving in and out of work, with your benefit going up and down as your earnings do the opposite, depends on the integration of those computer systems. My concern is that if the Bill goes through and the universal credit comes in but the IT systems are not ready, then I would have thought that the whole thing would be undermined. I would be interested to know the Minister’s response.
Lord Freud
I thank the noble Baroness. I will leave that till a little later; a number of noble Lords have raised concerns about the IT infrastructure.
To return to the structure of the universal credit itself, the single taper on earnings means that claimants will clearly see how the universal credit award decreases as income from earnings rises, making work financially rewarding for everyone. Alongside the work programme, universal credit will ensure that claimants have a route out of poverty through work rather than a lifetime on benefits—or on social security, depending on language; I will touch on language in a minute as well. I hope, and I hear from noble Lords in terms of principle, that there is general support for this approach.
The participation tax rate assesses the proportion of earnings that are effectively lost through tax and benefits on starting work. The dynamic effect of universal credit means that over 1 million fewer households will face participation tax rates over 70 per cent.
We will also tackle the issue of high marginal deduction rates, which undermine the incentive to increase earnings or hours once someone is working. Under the current welfare system, people in work can gain as little as a 4p increase in their take-home pay for every £1 increase in earnings, and people on out-of-work benefits could see a pound-for-pound reduction on their benefit.
On the questions raised in this area by the noble Lord, Lord McKenzie, regarding the numbers of people who face higher and lower marginal deduction rates, the impact assessment confirmed that 2.1 million individuals will have higher rates under universal credit but that the median increase will be comparatively small, at about 4 percentage points, and many of those will be households with above-average income for universal credit claimants, moving from a marginal deduction rate of 73 per cent to 76.2 per cent. Some 330,000 second earners will face higher rates, compared with 140,000 with reduced rates. The median increase is higher for this group, reflecting the fact that second earners already tend to have lower marginal deduction rates. As the Committee will know, the impact assessment also addressed the issue that some second earners might move out of work, but we are still expecting the net effect to be a large reduction in those who are workless.
On my noble friend Lord Newton’s concern about child benefit and the debate around that, the best that I can do today is to commit to taking that up with Treasury colleagues and find out what the process is. Again, I will revert.
I return to the universal credit. The way that it will tackle the problem of very high marginal deduction and participation rates is to have a consistent taper of 65 per cent. Overall, this produces substantial improvement in those marginal deduction rates. About 700,000 people who currently have rates above 80 per cent will benefit from it. I turn to IT.
Baroness Hollis of Heigham
I reinforce my noble friend’s point. As every council tax taper will differ from district to district, and there are some 300 to 400 of them, it will be impossible for anyone to predict who gets what.
Lord Freud
We will have a debate on this matter rather soon, but maybe not today. The only way I can respond is to point out that, depending on how we adjust the system to have what is effectively a tax rebate system outside the universal credit, we could see different effects. Rather than prejudging this, I will reserve that information for another day. We will have plenty of time to deal with it.
I have been asked about IT by a number of noble Lords, including my noble friend Lord Newton, the noble Lord, Lord McKenzie, and the noble Baroness, Lady Meacher, among a few others who have some concerns. We have gone through a huge process of external assessment by the Major Projects Authority, which is a continuous process in stages. The most recent independent review stated a high level of confidence that the expert teams that we have assembled will see us deliver the programme. The review team said that we had made an impressively strong start.
The programme is on time and on budget. It is being developed in a radically new way to government programmes. The difference is that in a traditional government programme the whole system is built, trialled for a few months and then introduced. This system is being built in layers so that we can trial each layer as it develops and test it with customer insight. That process is happening. One of the things that we can do today is take some particular claimant types through the system. I am planning a demonstration for noble Lords later this month to take them through this process, because when they start to see the different elements coming together there will be a much better basis for understanding.
In my confidence, I can quote only these external sources; my own views are perhaps less relevant. The external sources are holding the programme up as an exemplar of how the Government should develop IT. We will be getting these external reviews regularly at each of the difference gateways, so it will be monitored externally very carefully. I have no knowledge of where this is on anyone’s risk register, so I cannot answer that particular question put by the noble Lord, Lord McKenzie. Obviously, though, any big programme is going to be looked at to ensure that it is being done to time and to budget. That is just governance.
I think there is a lot of confusion in the external world between what is an appropriate level of governance and external monitoring of an important, big programme, and the fact that there are always risks involved in developing it. I responded to the article in the Telegraph, saying that this was a programme on time and on budget. Basically, the article was misleading and I stand by that letter.
Baroness Meacher
I wanted to turn the question around another way. The Minister rightly says that there are always risks in these things. If, in fact, the IT system is not ready when the plan is for this Bill to be implemented, will the Minister give an assurance that there will then be a delay in the implementation of the Bill until the IT system is ready? If not, I go back to my other point about the risks, fears and so on. If there is a lot of change and reassessment, which we know are going on anyway, it would be helpful to have an assurance that, as he says, they would then have a system that would deal with a lot of the problems of the current system. It would be extremely helpful if the Minister could give us that assurance.
Lord Freud
I thank the noble Baroness, Lady Meacher, for that. I am at a slight loss at how to respond, in case it is an “Am I beating my wife?” question. I am getting some help from the Box. The universal credit will be built on a computer system, or rather a pair of medium-sized computer systems. We have a careful introduction process. One of the options we had, if I can explain it in layman’s terms, was that we could have picked everyone up electronically out of current systems, moved them over and dropped them into the universal credit, with effectively a Big Bang approach—go for it.
That would have been the conceptual framework in which the noble Baroness asked her question. We are not doing that. We are moving people into the system over an extended period. We will start with the flow in October 2013, and then as we get the system working we will have some managed migrations over a four-year period. It is not the Big Bang approach—where you wait for the thing to go, and then you throw everyone in—that one might envisage. It is a much more considered, steady, incremental approach. Indeed, we are developing the actual IT by using elements and units of what we have much more incrementally than it might seem from outside. That is one of the things that I will try to show noble Lords when we have the presentation; indeed, it will be a wider presentation for all parliamentarians. I see that a few in the Room may be very interested.
Baroness Howe of Idlicote
I am trying to visualise in my mind what you are doing with your groups. What worries me is the older group, who may not be quite as alert to the modern methods of IT and may find it not as easy to move around and get the right information via an IT system. It would be helpful if you could answer that point, or take it into account when setting up your demonstration.
Lord Freud
Yes. Picking up on that point from the noble Baroness, Lady Howe, one of the most complicated areas in practice is not the development of the IT system; it is the interface between the user and that system. We must develop, and are developing, a sophisticated set of gateways. There are a lot of issues to get right surrounding identity assurance, ease of use—which we are doing a lot of work on—and where you go to get access when you do not have broadband in your home or do not necessarily understand how to use programs. Getting that help right and balanced is something that we are spending a lot of time and energy on. I accept the noble Baroness’s point: that is one of the key issues to get right.
Lord McKenzie of Luton
The noble Lord is clearly impressively knowledgeable around all this. He said that the systems were being built in layers, and that he would be able to demonstrate to us that some of them are actually working now. Are they working on the basis of collecting real-time information for the individuals represented in those layers?
Lord Freud
No. I shall explain to the noble Lord, Lord McKenzie, exactly how this works. We are building a system so that certain types of people can apply and run their universal credit. That is not a small trial; that is the mainframe system equivalent. The first type is a simple claim; I think he is personified as “Tom”—I forget his surname. We have pulled in a lot of Toms and run a customer insight with them to run through how they would interrelate with the system. The next stage has been to work out how we have a joint claim. Yasmin and Liam are the two joint applicants. They are both committing as a joint claim because it is a household claim.
Noble Lords who are interested in this area—I suspect that quite a few are—will find this fascinating as we run through it. I am waving my hands to try to give the Committee an image, but I cannot do it. I much prefer to have a screen to run through things on.
I want to leave noble Lords with a reassurance that this is happening. The programme is going to time, and it is going to budget.
Lord Newton of Braintree
I wonder if I could intervene from a sedentary position. I think all that the noble Baroness, Lady Meacher, was seeking was a simple assurance: if at some stage it becomes clear that the next bit will not work, will Ministers change the timetable? That is not a “beating your wife” question. It is simple and straightforward.
Lord Freud
It is never that black and white. When you build a system in stages, the issue is how partial or complete the system is. There is a decision to be taken around the level of partiality. If there were to be a delay—and as I say, there is not—clearly, one would have to be realistic. If there were some other problem and it did not work at all, again one would have to be realistic.
Lord Freud
I am most grateful to my noble friend. I shall continue dealing with the questions. My noble friend Lord Kirkwood was interested in the interrelationship with the Social Security Advisory Committee, which, as he pointed out, has a statutory duty to examine all social security regulations. Any regulations for universal credit that rely on existing legislation—for example, those relating to claims, and awards and payments to joint claimants—will therefore be subject to full SSAC examination. I accept that there are large parts of the Bill that introduce new regulation-making powers. In these areas, the committee may not have its former role, but I assure noble Lords that we will continue to talk to the committee and use the arrangements currently in place allowing us to provide it with information on new powers and the regulations made, within six months of the commencement of those powers.
On the question raised by the noble Lord, Lord McKenzie, on how the system will cope with, for instance, a self-employed and an employed member of a household, any earnings received through the PAYE system will automatically be taken into account even though they may be from one or more PAYE sources. We will clearly need to take assessment of non-PAYE earnings through some other tool, and we are looking at developing a self-reporting tool to provide us with earnings information.
A number of noble Lords raised the issue of language, including my noble friends Lord Kirkwood and Lord Newton and the noble Baronesses, Lady Hollis and Lady Campbell. I have to agree that language is extremely important. There are quite a few issues around it; some involve European legislation on exportability, so sometimes there are some constrictions. I see universal credit as a support for those who need it, whether they are unemployed, disabled, a lone parent or working for a relatively low income. We want universal credit to support as many people into work as possible.
I will come to the language issue around the name “universal credit”. One of the things about the word “credit” is that it carries with it a sense of entitlement, and I know that a lot of noble Lords are concerned about that. There is some language around that, and that is why the term was chosen in the case of tax credits. There is a sense in which it is a credit; there is an entitlement there.
I was asked by the noble Baroness, Lady Meacher, about allowances for training of staff—clearly, one does not have a transformative project such as this without having properly trained staff. The total budget that has been set aside to fund the transition, including administration costs, is £2 billion. Training is a crucial element of that.
Amendment 1, raised by my noble friend Lord Kirkwood, would rename universal credit. His title, “working age entitlement”, is a straw man, as he said. It is fair to ask where “universal credit” comes from. It has its origins in the financial dynamics paper, although the noble Lord will know if he remembers that paper well that there were two different credits. In this case, they were boiled down into a single credit for all people on working-age, means-tested benefit. That is where its universality resides: it captures everyone in that category.
One of the attractions of having one word to capture all working-age benefits is that we have two systems today, an out-of-work benefit system and an in-work tax credit system, and the differentiation between them has made it harder to move from one to the other. That is where the discrimination and the differentiation are; that is where the apartheid—if one wants to use an ugly word—lies. That is the gap that we are trying to remove. There is not a real gap, as noble Lords have pointed out today, between those who are unfortunate enough to be out of work, or those who have a disability or fluctuating condition that means that they cannot reliably go into work, and those in work. There is no hard line between the two, nor do we want there to be. We want people to be able to flow across easily. It is because we have two different systems that we have made it so much harder. That is what we are doing with the universal credit, and that is what lies behind our reason for calling it that. As the noble Lord said, what’s in a name? It may seem rather a wide name—“universal”—but it reflects the fact that a whole range of needs will now be met through a single payment rather than by a piecemeal and confusing jumble of benefits and credits. I therefore urge the noble Lord to withdraw his amendment.
Baroness Hayter of Kentish Town
I have two questions arising from what the Minister has said. The first is on the current impact assessment—we look forward to the new one soon—of the number of children who will be helped. I think that the figure was 350,000. Was that figure reached before other changes to the benefits system were taken into account, given that the IFS has estimated that child poverty will rise in 2013? The second question, briefly, is on IT. I was involved with some of the IT systems for automatic enrolment with NEST. I should like the comfort of knowing that these two will also be well connected.
Lord Newton of Braintree
Before the Minister responds to that, may I chip in? The one thing that has not been touched on—I noticed that the noble Baroness, Lady Howe, was a bit agitated about this as well—is childcare costs. There was no comment on this.
Lord Freud
The noble Baroness, Lady Hayter, asked two questions. The child poverty impact that I cited from the impact assessment refers to the universal credit alone. It does not incorporate the other changes that there may be. On IT, we are working very hard to make these systems work together smoothly. The third issue, raised by my noble friend Lord Newton, was on childcare. I have had a supportive word from the Box, which I shall seize and use: I hope to be able to inform him and other noble Lords soon about our childcare arrangements.
Lord Freud
I think we have developed a code for “soon”, which I need not go on about again.
Lord Newton of Braintree
On this occasion I will accept not just realism but good will.
Lord Kirkwood of Kirkhope
I am grateful to all colleagues who have taken part in this debate. I hope it has fulfilled its purpose of scoping out exactly where the Committee is going. I understand that colleagues want to finish at 7.30 pm. I cannot but welcome my mentor, the noble Lord, Lord Newton, who was Secretary of State for Health and Social Security under Margaret Thatcher and succeeded in spite of all these things. It is a particular delight. I should like the Minister of State to pay particular attention to what the noble Lord says because he knows what he is talking about. I know this because I have followed his career for many years.
We obviously need a code for this. An Enigma machine might be purchased so that we can understand what “soon” really means, and issues of that kind. That will help the Committee. I certainly want to sign up for the demonstration of Yasmin and Liam when it comes. Apart from anything else, I have a drink riding on this. If this system works, I owe the Minister of State at least a double whisky or whatever his poison is. I want to be deeply involved in all these processes related to IT.
I have two other very quick points. It is true to say, and reassuring to hear, that SSAC has that role, and that the Minister clearly understands its importance in this process. He will know that it has never had the same formal process of review over tax credits that it had over the benefits system. We need to be careful about that. If the Government are not careful and start hiding behind that technicality, it may be more difficult for SSAC to look at the successor benefits to tax credits and working tax credit, which would be a shame. I would not mind some reassurance on that.
Just for amusement, I discovered that the word “regulations” appears 380 times in the Bill.
Lord Freud
My noble friend asked for some reassurance in the area of tax credits. Under the universal credit, it will effectively become part of the responsibility of the DWP and therefore become overviewable and reviewable by SSAC. Whereas I might have been a little coy in giving some other assurances today, I can be absolutely uncoy about this one.
Lord Kirkwood of Kirkhope
There is no need for code for “coy”. In the last minute available to me, the one thing I want to say is that if we are getting this level of co-operation from the Bill team, I am willing to do more work. We do not normally do it this way. With new, technical social security Bills, the default position is to table amendments to clarify and bring the thing into focus. Speaking for myself—I speak for nobody else—I am willing to do more of that work with the Bill team if they are available. As the noble Lord, Lord McKenzie, said, we often share rhetoric but we should, as a Committee, try to drill into the dozen issues that are the real hot spots. I think that is what the pressure groups are hoping for with this Bill. I am certainly up for that. That is a much better way to proceed than splattering amendments, as I did with Clause 1 and for which I apologise; I will not do that again. We will take the length of time that we need to take, but if we get the hot spots ironed out sensibly it will be to the benefit of not just the Committee but the whole House and the implementation of this policy, which it is so important that we get right.
Again, I am grateful to colleagues who have taken part and to the Minister for being so generous in responding. We are now a minute late. I now withdraw the amendment.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That it be an instruction to the Grand Committee to which the Welfare Reform Bill has been committed that it considers the Bill in the following order:
Clauses 1 to 31, Schedule 1 , Clause 32, Schedule 2, Clauses 33 and 34, Schedule 3, Clause 35, Schedule 4, Clause 36, Schedule 5, Clause 37, Schedule 6, Clauses 38 to 48, Schedule 7, Clauses 49 to 69, Schedule 8, Clauses 70 to 88, Schedule 9, Clauses 89 and 90, Schedule 10, Clauses 91 to 99, Schedule 11, Clause 100, Schedule 12, Clauses 101 to 136, Schedule 13, Clause 137, Schedule 14, Clauses 138 to 141.
Lord Foulkes of Cumnock
My Lords, in the debate on this yesterday, the government Chief Whip said:
“I hope that it is noticed that I am stressing Grand Committee, not the Moses Room … I fully recognise that a number of noble Lords who use wheelchairs and have other mobility restrictions would find the Moses Room difficult, and I therefore discarded that as an option”.—[Official Report, 14/9/11; col. 753.]
She went on to describe the options that were being considered by the Director of Facilities. I know that a number of Members, particularly on the Cross Benches, supported the Government on the basis of that assurance. Just before I came into the Chamber, I was told that this information was wrong and in fact the Moses Room is going to have to be used. On the basis that the House made its decision on misinformation, I hope that this matter can now be reconsidered. I hope that the noble Lord the Leader of the House will give an assurance to the House that since we made that decision on the basis of totally incorrect information, it is now right for the House to consider the matter again.
Welfare Reform Bill
Lord Freud Excerpts(12 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I do not think that a single Member of this Chamber could stand up and say they truly believe that the welfare system is working. Personally, over the course of the past four years, I have been struck time and again by the sheer scale of the system, and therein the task we face bringing forth these reforms. Today’s benefits balance sheet tells a story of unfairness, dependency, and waste.
There are nearly 5 million people on out-of-work benefits. In 2010-11, the Government spent £201 billion on welfare and pension payments, compared to £38 billion on defence, £91 billion on education and £121 billion on health. Within that we spend £22 billion on the key out-of-work benefits and the same again on housing benefit. Working-age welfare spending has increased by over 40 per cent over the past decade, Housing benefit spend is up almost 50 per cent.
Of the 2.6 million people claiming incapacity benefits, over half have been on benefit for at least five years, and a third have been on benefit for 10 years or more. Spending on welfare has been allowed to get out of control. This Government have taken some tough decisions to restore affordability to the benefits budgets for both now and the future. Of course, welfare is about more than just numbers. Ineffective management of the benefits system has not just led to ever-increasing spending. It has also affected people’s lives. So, there are people who want to work but find they are better off on benefits, people who want to work but do not get the specialist support they need, and people who want to work but are actually hindered from doing so by the current rules. In the mean time it is the poorest and most vulnerable who suffer.
Welfare reform is first and foremost about refocusing the resources we have to help the people who need it most. This Bill contains a number of measures to address specific problems within the welfare system, to end benefit dependency and redress the balance by restoring fairness and affordability. These measures lay the groundwork for the main purpose of this Bill, the creation of universal credit, the most radical reform of the welfare system since its invention. With the creation of universal credit this Bill does not just allow for the development of a new benefit, it creates the conditions for attitudinal and behavioural change. It bridges the gulf that has opened up between unemployment and work, and delivers a benefits system that is about people not process, one that is flexible and responsive. As we debate this Bill today and in Committee over the coming weeks, we may disagree on the detail, but we must all agree on the need for reform. I know that noble Lords have a great deal of interest in these reforms. Many have been to briefing sessions on specific policies contained within this Bill and I hope this can continue throughout the Committee stage.
I shall also be publishing a great deal of detailed information provided for the Committee stage in the other place. This will include one-page notes relating to every regulation-making power in the Bill, illustrative draft regulations for some areas, and policy briefing notes. Some of these, as noble Lords may have seen, were published only yesterday. To inform our discussions, I also expect to publish updated impact assessments to reflect various announcements that have been made during the course of the Bill’s passage through Parliament.
Following further work my department has done, and the helpful report from the Delegated Powers and Regulatory Reform Committee, I am planning to bring a number of technical amendments during the Committee stage. I will ensure that noble Lords are made aware of these in good time to prepare for the debate. Today, I wish to set out for you some of the principles behind our approach and the rationale for some of the key measures included in this Bill.
At the heart of our reforms, indeed at the heart of this Bill, is the creation of universal credit. This will be a single income replacement benefit for working-age adults. It will be simple to understand and access, and crucially it will bring together in and out of work support, simplifying the current system of benefit payments and tax credits into a single payment for those out of work or on low pay. Universal credit will provide a more consistent system of support. For example, under universal credit, people remain registered with the system for two years after their claim has ended. So, someone can get a full-time job and leave universal credit completely, but if they lose their job or perhaps cannot work for a period because of a health condition, they will be able to start payments again almost instantly, ensuring that they do not have to wait for vital support.
Universal credit will also provide a more responsive system of support, because as part of these reforms we are developing a real-time tax and benefit system. Access to real time information means that we can deliver a more responsive system based on actual earnings, making the transition between benefits and work much easier. By basing support on financial need, not crude measures of employment status, we will remove some of the barriers preventing people returning to work and will provide the security of a minimum income while retaining and in fact, for many, restoring the financial incentive to work. Real-time information means that universal credit payments can be gradually reduced as earnings increase. Even for those at the bottom end of the pay scale looking to take on extra hours or a modestly paid job, there will be real financial gain. This is an important point; under the current benefits system some people can experience an immediate and almost total loss of benefits for working just a couple of extra hours a week. Under the old system, some households could lose as much as 96 pence for every extra pound they earned. Universal credit reduces this to around 76 pence for modest earners and 65 pence for low earners. This directly improves work incentives for around 700,000 people by putting extra money in their pockets if they do extra work.
The broader impacts of introducing universal credit make the argument for reform even more compelling. The original impact assessments published alongside the Bill suggested that around 2.7 million households will have higher benefit entitlements under the new regime—for over 1 million households, this will amount to more than £25 a week. These numbers remain our best estimate and will be updated in a revised impact assessment in light of the localisation of council tax benefits. Because universal credit is properly focused, 85 per cent of this increase will be in the poorest 40 per cent of households, and the commitment to transitional protection means there will be no cash losers at the point of transition, all other things being equal.
We anticipate that more people will take up benefits once the system is simplified, with the combined impact of take-up and entitlement potentially lifting 600,000 adults and 350,000 children out of poverty. The combined effects of welfare reform could lead to up to 300,000 fewer workless households. Taken together, these changes will help to end benefit dependency by creating a more active regime, which encourages people into work by making the financial gains clear and real for hundreds of thousands of people. The introduction of universal credit will restore affordability by creating a simpler benefits system, focused on those in the greatest need; and it will restore fairness for both taxpayer and claimant. A more transparent system will be more accountable to the public. A more effective system will deliver more for those who need it most.
This Welfare Reform Bill is not just about those who are claiming benefits, it is also about those who are paying into the system. We know that taxpayers want a benefits system that is fair. They want a system that does not abandon those at the bottom and a system that they can turn to if they need it. However, taxpayers also want a system that is not wasteful; a system that does not pay benefits to those who can work but choose not to; a system that is not open to abuse; and a system that is affordable and effective.
I believe this Welfare Reform Bill will deliver that system. Universal credit will generally be just one monthly payment per household, making it easier for people to understand what they are entitled to and manage their own finances. This is an important point. Currently, the experiences of unemployed people in this regard, particularly for the long-term unemployed, are very different from those of people in work. We must ensure that as many people as possible are empowered to manage their own finances and make the choices that people in work must make. We must close the gap between being out of work and having a job, so it is not such a major shift for people leaving benefits. Payments to tenants must be the default position under universal credit. That said, I am alert to the sensitivities that exist in relation to the supply of affordable housing and in particular for the social rented sector and its lenders. I am prepared to explore options that will provide some protection for this industry and I shall announce how I plan to do this in due course.
For the moment, let me say this: I am convinced that we can deliver a system that puts the full universal credit payment into a claimant's hands, empowering them to manage their own budgets and narrowing that gap between the experience of being in and out of work. At the same time, I believe we can build safeguards into the system to minimise the impact on social landlords’ incomes and reassure lenders. Universal credit payments will include additional elements for housing and childcare costs. However, as I am sure noble Lords are aware, the Government have made a decision to localise council tax support, and a consultation on the detail of this is currently under way. Much was made of this decision in the other place, so I will make a point for the record. Council tax benefit currently sits across the portfolios of two different departments. Ministers from both are determined to protect the positive work incentives and distributional impacts of universal credit and we continue to work very closely on the detail of these reforms. We have already indicated to the House that we may be minded to make some changes to universal credit design in light of this decision and we shall provide further detail in due course.
With the passing of this Bill, we anticipate the first new claims for universal credit will start in October 2013, with all existing customers moved to the new system by 2017. In the meantime, this Bill also includes some reforms to the current system. These changes will amend some of the existing rules and regulations and start to bring them into line with universal credit. One such change is the proposal to time limit employment and support allowance—ESA—to one year, paid on the basis of national insurance contributions, to people in the work-related activity group.
The basis for this change is to bring ESA rules closer to the contributory jobseeker’s allowance rules, which currently pay six months’ jobseeker’s allowance on the basis of national insurance payments. This change also supports the intention that ESA should be a temporary benefit for the vast majority of people—which indeed it is. This is particularly true of those in the work-related activity group, who are assessed as likely to recover and make an eventual return to work. There remain a number of options for the minority of people who do reach the time limit: a return to work if able; a move to income-based benefits if appropriate; and for those whose condition worsens, potentially continuing payments through the support element of contributory ESA. This is a change of principle more than convenience. Allowing people to become dependent on benefits when they do not need to be is neither fair to them nor to the taxpayer, and it is no longer affordable. This is not about removing support; it is about making sure people get the right kind of support.
This is also the case for people who have cancer. We have already amended the rules, put in place by the previous Government, so that people awaiting or in between certain chemotherapy treatments receive the support they need, and we have specifically asked Professor Harrington to look at this issue in his next review, which he has done in partnership with Macmillan Cancer Support. I know that many noble Lords are particularly interested in this subject and I can tell the House today that we have received Professor Harrington’s second report and we are considering it carefully. I will update noble Lords again in due course.
We do not underestimate the impact that this change will have on claimants. As a result, we have asked Jobcentre Plus to send out a letter to all ESA customers who could be affected by the change. The letter will be sent out over a four-week period starting on 19 September. We appreciate that it is unusual to alert customers before the Bill has been passed by Parliament, so we have been very careful about the wording of the letter, but we think it is important to provide as much information and reassurance as we can at this stage.
We must apply the same principles of fairness, affordability and ending benefit dependency across the welfare spectrum. This is why we must reform support for disabled people. Current provision of disability living allowance, or DLA, is confusing and inconsistent. Too many people think of DLA as an out-of-work benefit. In fact, DLA’s purpose is to provide financial support to contribute towards the extra costs incurred by disabled people as a result of their disability, irrespective of whether they are in or out of work. DLA awards have become inconsistent and subjective, and spending on this benefit has started to spiral out of control.
More than two-thirds of claimants receive one or both of the two DLA components indefinitely, with no systematic checks to see if their condition has changed. This is no longer acceptable. We must support people properly and that means more accurate and more regular assessments to see if their condition has changed and ensure they are receiving the right level of benefit. This means being prepared to pay more for those whose needs have increased as well as reducing the benefits of those who no longer need them. To that end, this Bill allows for the abolition of DLA and its replacement with the personal independence payment, which like DLA will be available to disabled people both in and out of work and will be non-taxable.
The key changes will be an end to automatic entitlements based on having a certain health condition or impairment, a more objective assessment, and the introduction of more regular check-ups. These reforms are designed to deliver a more responsive and sustainable benefit and to ensure support is focused on those who face the greatest challenges to take part in everyday life. They are not about taking support away from those who truly need it.
Many of you have raised with me the issue of DLA mobility payments to care home residents. We have listened to the concerns raised about mobility provision in care homes and will consider the needs of disabled people living in residential care and receiving DLA as we develop personal independence payment for introduction in 2013. Our aim is to treat disabled people fairly, regardless of their place of residence, not to reduce their ability to get out and about. We will continue to gather and consider the evidence about existing provision as we develop our plans.
The introduction of personal independence payment will restore fairness in disability benefit provision by providing support on the basis of ongoing need, and replacing DLA will bring spending in this area under control, making sure the system is affordable both now and in the future. But this is not about cutting spending. The funding for all DLA, in real terms on 2011-12 figures, was £12.1 billion in 2009-10. At the end of this Parliament in 2015-16, the funding will be slightly higher at £12.3 billion. The talk of cuts relates to projections on a benefit that was rising sharply. What we are doing is bringing it under control.
I hope that noble Lords can agree today that the spirit of these reforms is right: that it is right that we do not put people on any benefit and just leave them there, as has so often been the case with DLA; that it is right that we design a more objective assessment, one which can better take account of those with mental health conditions and learning disabilities who may also incur extra costs but which DLA is so ill designed to support; and, wider, taking this package of reforms as a whole, that it is right that we act now to reform the benefits system, restore fairness and affordability in welfare and end benefit dependency.
The reforms contained within this Bill will mean some of the poorest people in the country will benefit from more than £4 billion in welfare payments, as set out in the previous impact assessment, through increased entitlement and take-up. These reforms will lift as many as 950,000 individuals out of poverty, help 700,000 households keep more of the money they earn and cut the number of workless households by up to 300,000. These reforms will bring real change in both attitude and behaviour. This Bill marks the end of the something-for-nothing culture we have seen so recently on our streets. It is a new dawn for welfare—one of fairness, responsibility and effective support. This is something I believe we should all welcome and I commend this Bill to the House. I beg to move.
Lord Freud
My Lords, I thank everybody who has spoken today. There have been some truly excellent contributions. I need to congratulate my noble friend Lord Feldman on his remarkable maiden speech, which I think we all enjoyed. We look forward to many more equivalent contributions.
The Bill deals with some really important matters and I am extremely pleased that the debate has been both informed and committed. I may not have enjoyed some of the things I heard but it has certainly been extraordinarily well considered. I think I can claim that we share a consensus on the need for reform and that there has been a great deal of general support for the principles underpinning the Bill. We all believe that the welfare system should be fair; we all agree that it should be affordable; and we all share the aspiration of a welfare system that incentivises people to work, releases people from the net of benefit dependency and ensures that work pays. There has been a little debate about the order of priority from the noble Lord, Lord Knight, among others, but I think that we can all agree with those main principles.
The discussion is about how we get from here to there and I know that the detail of that will be heavily scrutinised in Committee, which is absolutely right. I also expect that our debates in Committee will be just as informed as they have been today, and I assure noble Lords right around the House that I will be listening with extraordinary care to the informed views of its Members. I have had a large number of specific questions relating to particular clauses and scenarios. There is no way that I can deal with them all in the time that I have today but clearly we will have ample opportunity to go into great depth in all those areas, so to the extent that I do not deal with an issue now I know that we will come back to it.
Perhaps I may remind the House of the commitment that I made in my opening remarks. Over the next few weeks I shall publish a great deal of detailed information which was previously provided in Committee in another place. It will include notes on every regulation-making power in the Bill, full policy briefing notes and, where possible, illustrative draft regulations which will go into considerably more detail than has previously been published. In addition, as we approach each section of debate in Committee I will ensure that officials from the Department for Work and Pensions are available to host briefing meetings for noble Lords. These sessions will be a further opportunity to go over the detail of each clause before it is debated in Committee. I hope that both these sessions and the additional information that will be published will be of use to the House and will go a reasonable way to answering many of the questions and specific points raised today. Clearly, we will pick up the outstanding issues in Committee.
Let me try now to summarise in my closing remarks some of the identifiable themes that emerged this evening. The most disturbing thing that I heard today was the concerns of many noble Lords about the anxiety of disabled people. The noble Baronesses, Lady Murphy and Lady Gale, talked about how people were terrified, or petrified, and that worries me more than anything I heard. We are committed to supporting disabled people to exercise choice and control and to lead independent lives. There has been a growing consensus that the disability living allowance has not been delivering and, as I said in my opening remarks—actually, I think that I said it yesterday—it is inconsistent and confusing and does not reflect, in particular, the needs of people with non-physical impairments, such as mental health conditions. Our intention is that the personal independence payment will focus support on those individuals who experience the greatest barriers to remaining independent and leading full, active and independent lives. The intention of the reforms is to ensure that the benefit is sustainable for the longer term, with a more objective assessment of individual need, and that it will be responsive to changes in people’s conditions.
In answer to the question that was raised by a number of noble Lords, including the noble Baroness, Lady Finlay, and the noble Lord, Lord McKenzie, about the relationship with the carer’s allowance, I can reassure the House that the personal independence payment’s daily living component will be part of the gateway for receipt of carer’s allowance, but only when we have completed the modelling and testing of the assessment criteria will we be able to update the impact of the new PIP assessment on carer’s allowance recipients and the rate of daily living allowance to be actually used. We published the initial draft of those assessment criteria in May. These were developed in collaboration with a group of independent specialists in health, social care and disability and we drew on a wide range of relevant expertise. The aim of the criteria was to look at the ability of individuals to carry out a range of everyday activities. I think that there are currently 11 separate criteria and, for example, the introduction of communication will ensure that we take the effect of impairment of hearing, speech and language comprehension into account much better.
My noble friend Lady Thomas asked what account the assessment criteria will take of the successful use of aids and appliances. We recognise that aids do not remove an individual’s disability and that there may be ongoing costs. We know that it is vital to get these assessment criteria right. Over the summer we heard the views of disabled people and organisations. We met with around 60 organisations and received about 170 other written responses. We tested the draft criteria by reviewing them with 1,000 people who are on DLA to see how they worked. The findings and the testing will be used to produce a second draft of the assessment criteria and the regulations later in the autumn in time for us to use them when we consider the relevant clauses in Committee.
The noble Baroness, Lady Meacher, asked who will make the final decision on the assessment. I can confirm that that will be the DWP decision-maker and not the medical assessor. I can also confirm that all claimants, particularly those with mental health conditions, can be accompanied at the face-to-face assessment. As I have said in the past, the default position is a face-to-face assessment but I am conscious that in some circumstances that is counterproductive. A number of Peers are worried about autism and how that will be handled.
Several noble Lords have commented on the extension of the qualifying period of PIP to six months. While there has been reasonable support for the principle of an overall qualifying period of 12 months, there is concern that a longer qualifying period will adversely affect certain groups of disabled people, particularly people who have had strokes and those with a recent diagnosis of cancer. My honourable friend the Minister for Disabled People and officials have engaged with disability groups during the summer and the Government are continuing to look closely at the issues they have raised in regard to this change.
The other issue that is of great concern to noble Lords is the time limiting of ESA for those in a WRAG, particularly for cancer patients. The noble Lord, Lord Patel, with his direct experience of this issue, made a moving speech on it. The contributory ESA was always intended to be a benefit which provided temporary support for those in work-related activity. With the right support it is reasonable to expect people in this group to return to work; that is what this definition aims to do. In our view a time limit of one year strikes the right balance between the need to restrict access to contributory benefits for those under pension age while allowing those with longer term illnesses to adjust to their health condition. It is, of course, double the length of time for which the contributory JSA applies. I must emphasise that severely ill or disabled people in the support group, which includes many people with cancer, are fully protected and will continue to receive contributory ESA indefinitely. Income-related ESA will also be available for those with little or no alternative resources. My department has been working with Macmillan Cancer Support and others to ensure that we support people who are diagnosed with cancer in the most sensitive, fair and appropriate way.
A number of noble Lords raised deliverability and IT—I am thinking in particular of my noble friends Lord German, Lord Kirkwood and Lord Brooke, and the noble Lord, Lord Knight. I am aiming as soon as I can to give a much more extensive demonstration of the IT, because what is happening is very interesting—it will not be in the Chamber because a lot of graphics are involved. Our aim is to process and implement the majority of claims automatically. By pulling the benefits and credits together, we break the factor of so many different organisations delivering them. It will not require large-scale IT, and it is absolutely not an IT development on the scale of that the NHS, which was cited by a number of noble Lords. We are already under way on the design and development. The agile process means that, rather than delivering the system in one go and then testing it, we are constantly testing how it works. The scale of the IT is similar to that for the ESA, which was successfully delivered by the previous Government on time and on budget in October 2008. We will not rely on last-minute testing. It is a fascinating area, and I commit to doing something quite elaborate on it.
Another area that received considerable attention today was the benefit cap. Powerful contributions were made by the noble Baronesses, Lady King and Lady Lister, and my noble friend Lord Kirkwood, who is amazingly still in his place tonight despite his bad back. Let me be clear: the cap is being introduced for a number of reasons. It will address some of the problems of welfare dependency, add to the incentives to move into work and promote fairness between those people who are out of work and rely on the benefits system and taxpayers in work who pay for it. There is an important principle here: people should not expect a life on benefits getting more money from the state than people in similar circumstances could earn in work. This is the legacy of a system where people are not always better off when they get a job, which is one of the fundamental problems that we are trying to fix with the universal credit. The introduction of a benefit cap will mean that households on out-of-work benefits will have to make the same decisions as families in work with regard to the lives they lead and the areas they can live in. People will have to take responsibility for their decisions in the light of what they can afford. We have said that we will consider ways of easing the transition for families on existing benefits and are looking at exactly what might be needed. In doing so, we shall be mindful of the points that have been made on this issue today and throughout the passage of the Bill to date.
Housing has provoked much more interest around the House than is normally the case, possibly to the slight surprise of specialists such as the noble Lord, Lord Best, who is one of the gurus on the topic. Over the past 10 years, housing benefit expenditure has roughly doubled in cash terms. The Government are convinced that it is absolutely necessary to take steps to manage this expenditure. We have already introduced legislation to ensure that people who make new claims for housing benefit in the private rented sector are prevented from claiming excessive rates of local housing allowance. The Welfare Reform Bill introduces further measures to control expenditure and to ensure that housing benefit is fair and affordable.
Noble Lords have spoken about the changes that we are making to housing benefit in the social rented sector. In England alone, around 5 million people are on the social housing waiting list and over a quarter of a million households are in overcrowded conditions within the social rented sector. Yet at the same time, something approaching nearly 1 million extra bedrooms are being paid for by housing benefit. That is simply a luxury that we can no longer afford.
It is not fair to the taxpayer and not fair to those in housing need. The demand is such that we must do all that we can to make better use of our limited social housing stock. We need to do more to tackle the high rate of under-occupation, encourage more people to move as well as help those who want to move but have so far been unable to do so. If people continue to live in a property larger than they need, we will expect them to make a reasonable contribution to its cost through a reduction in housing benefit.
On the connection between the CPI and the LHA uprates, I must point out that we are committed to that measure for two years; 2013-14 and 2014-15. If it then becomes apparent that local housing allowance rates and rents are out of step, they can be reconsidered.
Many noble Lords including my noble friends Lady Stedman-Scott and Lord Ahmad, the noble Baroness, Lady Hollis, and the right reverend Prelate the Bishop of Leicester, raised concerns about childcare and how it fitted with the universal credit. It is a critical issue and we are taking the time to ensure that we get it right. The impact assessment showed that an average family with children is more likely to have a higher entitlement under universal credit, and the combination of higher disregards and a single taper will make work pay. If childcare costs are taken into account, some families may face a higher effective marginal deduction rate, but that is the same as happens in the existing system. It is not because of the universal credit. But I absolutely accept the point that noble Lords have made right around the House that we need to get this right and make sure that the way that we structure and fit in childcare is absolutely optimised.
The impact of this Welfare Reform Bill will be greater than the sum of its parts. The introduction of the universal credit will mean around 2.7 million households will have a higher benefit entitlement. For more than 1 million households, that will amount to more than £25 per week. We anticipate that introducing a simplified welfare system will lead to greater take-up of benefits, potentially lifting 600,000 adults and 350,000 children out of poverty. The combined effects of welfare reform could mean up to 300,000 fewer workless households. That is at the core. The reason for this is as the noble Baroness, Lady Hollis, said so eloquently: we are de-risking being out of work compared with being in work.
A point that I think noble Lords still have not really accepted—or perhaps not on the other Benches—is that when the pure universal credit comes in, in its entirety, it will put more than £4 billion each year into the pockets of the poorest people in this country. I know that there are other cuts which noble Lords do not like, but on the universal credit, we have had to invest a lot of money each year and the Treasury has supported that to make the system work.
The welfare reform and the contents of this Bill are about much more than money. The reform is aimed at changing the state of our nation. Taken together, these measures will radically alter the mindset of dependency. They will create work incentives to drive positive behaviour. They will deliver a welfare system that is fair, flexible and firm. In essence, it will bring real, lasting change by directly affecting attitudes and behaviour. This Bill is a real opportunity to make a difference to the lives of some of the poorest, the neediest and the most vulnerable people in our society. It is an important and necessary piece of legislation. I commend the Bill to the House and ask for it to be given a Second Reading.