Welfare Reform and Work Bill

Debate between Lord Freud and Lord Bishop of Durham

Wednesday 27th January 2016 Lords Chamber

[The Lord Bishop of Durham]

Could I ask for some clarity on what the Minister has just said? It sounded to me as though there was concern about the length of time that might be involved and so on and so forth, but his tone of voice sounded as though there might be willingness to at least explore the possibility. I am just teasing out whether he meant that he really was not willing to consider this, or whether there may be a possibility of exploring it further, particularly around domestic violence.

[Lord Freud]

We have a regulatory process where these exemptions will be gone through in detail. I can make a commitment today where I can do so, but I assure noble Lords, including the right reverend Prelate, that the machinery of government is not in a place which allows me to say anything more about anything else at this stage. However, the process of setting out regulations will take place some months from now, and we will be exploring in great detail how they work. If the right reverend Prelate is asking me whether there are going to be more opportunities to put pressure on the Government, I would imagine that there will be.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord Bishop of Durham

Monday 25th January 2016 Lords Chamber

[Lord Freud]

We had this debate in Committee. We all measure this in the same way; we are the only country in the world that has put it in an Act. We are now moving to how other countries treat these statistics. The behaviour of other countries supports in practice what we are doing in leaving these as national statistics, with the commitment I have just made to make sure that they continue to be published.

I have spent time on these points because this Government believe that the measures we opt for really matter. Let none of us be in any doubt that there is an important choice to make with this amendment and with Amendments 8 and 11, which follow. Resources are finite and it is crucial that we prioritise the actions that will make the biggest difference for our children. Do we choose income measures which would disincentivise a range of actions which will actually help improve the life chances of children, and incentivise others which will not tackle the underlying factors at play? Or do we put our wholehearted effort into the areas which can help transform children’s prospects—worklessness and educational attainment? Indeed, I was pleased to note that the right reverend Prelate the Bishop of Durham prioritised his daughter’s graduation, showing what he thinks of educational attainment compared with anything else, for which I commend him. This amendment would end up taking resources away from these areas. I firmly believe that it would end up being detrimental to the transformational actions we want to see.

I think noble Lords will agree that these are the key drivers which the Government must focus on. The evidence behind this is set out in our published 2014 evidence review and I have spoken at length on it on previous occasions and now. The statutory life chances measures of educational attainment and worklessness are the right measures that will incentivise government to bring about real change in children’s lives.

I urge the right reverend Prelate to withdraw the amendment.

[The Lord Bishop of Durham]

I thank the Minister for his very full response, for which I am grateful. If the amendment is technically faulty, my understanding is that it could be redrafted, so that is not a reason for not pressing it. I am grateful to the noble Earl, Lord Listowel, for his support and was moved by his story about Ms Sculley. I am also grateful to the noble Baronesses, Lady Lister, Lady Hollis and Lady Sherlock, for their expressions of support and the points that they made. I hope that the comment of the noble Lord, Lord Northbourne, on family was addressed by the noble Earl, Lord Listowel.

I will not go through all the points that the Minister made, because I think that we fundamentally disagree about the importance of reporting on income statistics. This amendment would not in any way detract from the drivers that the Minister wants around worklessness and educational attainment; those would absolutely still be there. This is simply about a reporting mechanism which we believe is important as part of the monitoring. I say “we” because I have consulted with bodies such as the Child Poverty Action Group, the Children’s Society and many others which work with children and families in poverty day in and day out and are still convinced that this is important information to have alongside tackling the other drivers. Therefore, although I know that the Minister will not be pleased with me, I wish to test the opinion of the House.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord Bishop of Durham

Monday 21st December 2015 Lords Chamber

[Lord Freud]

There is a difference between having a specific provision that does not require people to work and having one that actually financially incentivises people to work. That is the difference. As the noble Baroness pointed out, we do not require anyone with a child under three to go to work, but people often go into work with a child much younger than that. When people look at this measure on balance, they may think that it is the appropriate thing for them. That is my best answer to this question.

This is a peculiar process and I am running incredibly late now, but I think that noble Lords would prefer me to finish. I have just had so much dialogue, and that is rather unusual.

[The Lord Bishop of Durham]

Will the Minister accept that he has just proved my point that children get ignored? I asked him a specific question about whether or not that happens, and he has not answered it.

[Lord Freud]

I apologise to the right reverend Prelate. The only reason why I have not answered by now is that I am taking an intolerably long time to get through this speech. I will come to his point. I crave noble Lords’ indulgence to let me get through and then, right at the end, if they have some outstanding questions, we will have another—

Welfare Reform and Work Bill

Debate between Lord Freud and Lord Bishop of Durham

Monday 21st December 2015 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, I start by responding to Amendment 103A, which would keep the waiting period at 13 weeks. The background to this is well known. Claimants receiving income-related benefits may claim help towards the cost of their mortgage interest payments. Apart from those receiving state pension credit, claimants must serve a waiting period before entitlement to help with mortgage interest begins. Before 2009, the waiting period for the majority of working-age claimants was 39 weeks. In January 2009, temporary arrangements were introduced that reduced this period to 13 weeks. This was to provide additional protection to those who lost their jobs during the recession. At the same time, the maximum value of mortgage for which support is available, known as the capital limit, was doubled to £200,000. In the summer Budget, it was announced that from April 2016 the waiting period will return to the pre-recession length of 39 weeks although the capital limit of £200,000 will be maintained.

This amendment would remove the current broad powers in the Bill that allow the waiting period for support for mortgage interest to be set out in regulations, replacing them with a narrowly defined 13-week waiting period, but I suspect it is a probing amendment. We wish to retain the ability to act quickly in different circumstances, and putting this in primary legislation would prevent that.

Let me be clear about why we help owner-occupiers with mortgage interest payments. The purpose is not to secure their asset or to reduce any outstanding payments owed to lenders. The purpose is simply to mitigate the risk of repossession. The CML now says that it believes the 39-week waiting period will drive repossessions, but it is unable to quantify the number of repossessions. We will work with the CML to assess any such impacts in terms of repossessions, but we do not believe that they will be significant, particularly at the current level of house prices. There is no evidence to suggest that lenders will do anything other than exercise the same degree of forbearance that they did prior to 2009 when the 39-week waiting period was last applied, particularly as we are maintaining the higher capital limit.

Amendment 104 seeks to change the way in which SMI loans are recovered from the equity in the claimant’s home. The intention is that a charge registered by a local authority to reclaim deferred payments for social care would always take precedence over a charge registered by the DWP to recover an SMI loan. As the Bill stands, the Government can require that a loan be secured by a charge over the claimant’s property. Under provisions in the Land Registration Act 2002, charges are recovered in the order in which they are registered. If the SMI charge was registered on the property before any deferred payment arrangement, it will have prior claim to any equity when the property is sold. The legal charge will therefore be subordinate to any existing charges on the property, including the mortgage. That answers one of the questions asked by the noble Baroness, Lady Sherlock.

We envisage that advice would normally be given via a telephone conversation and would cover the following areas: the claimant’s financial position now and in future, their understanding of the terms of the loan, and encouragement for them to engage with any heirs they might have. The delivery of that financial advice will be outsourced to a third-party provider.

Section 34 of the Care Act 2014 obliges local authorities, in prescribed circumstances, to offer DPAs. The intention is that people should not be forced to sell their home in their lifetime to pay for their care. If there is no equity in the property—a subject raised by the noble Baroness, Lady Sherlock—the family would be able to apply for a funeral payment from the Social Fund.

I pick up on the question asked by my noble friend Lord Young. Local authorities are not required to make such an offer where there is a pre-existing charge on the property. Recipients of SMI loans by definition have a pre-existing charge—their mortgage—so in such cases there is no obligation to offer deferred payments. The registering of a charge in respect of an SMI loan does not, therefore, directly interfere with the policy intent of the Care Act.

The noble Baroness, Lady Manzoor, asked about the types of property on which it is possible to secure a loan. Charges can be secured on the claimant’s equity share in shared ownership and on leasehold properties.

I turn back to local authority provision. Local authorities are not precluded from offering DPAs where there is an existing charge so long as they are satisfied that there is adequate security. This means that they may still consider offering deferred payments if, after taking account of the outstanding mortgage, the remaining equity would be sufficient to cover an individual’s likely care costs. It is arguable that in some circumstances the existence of a charge in respect of an SMI may make authorities less inclined to agree to defer payments in such cases. However, it is important to note that deferred payments are available only where the person enters residential care. In such circumstances, payments of income-related benefits cease, including payments of SMI. As the claimant will have no means to meet their mortgage payments, it is probable that the property would have to be sold anyway. I should be clear that the position as I have just described it is not a consequence of changing SMI into a loan; it is inherent in the current system.

Amendment 104A is intended to exempt disabled claimants from the provision that introduces SMI loans and allow them to continue to receive this help in the form of a non-recoverable benefit. The purpose of providing SMI is to protect owner-occupiers from the risk of repossession and allow them to remain in their homes. In almost all cases, these payments are sent direct to lenders rather than to the claimant. When Clause 16 comes into effect, the level of support will remain the same as now—the point made by my noble friend Lord Young—and payments will continue to be sent direct to lenders. Neither lenders nor claimants will see any difference in the way the system works, so exempting any particular group would not have any impact on the level of protection they were afforded. The difference is that under the loans scheme the payments will be recoverable, but recovery will not be sought until the property is sold. So the day-to-day income of disabled people will not be affected.

SMI supports individuals in the accrual of a significant asset. Many taxpayers who are providing that support cannot afford to buy their own homes. It is only fair that this support is recouped where equity is available when the property is sold. I do not believe there is a sustainable argument that people with disabilities should be exempted from refunding some of the equity that the taxpayer helped them to accrue, while other people supported during periods of financial need should not.

The amendment is defective, in that it does not make a consequential amendment that would continue existing SMI entitlement for the group that the amendment is designed to protect—but let us leave technical issues aside.

Lastly, Amendment 104AZA would prevent the Government from changing support for mortgage interest into a loan for those on state pension credit, and allow them to continue to receive help with their mortgage interest as a benefit rather than a loan indefinitely. This would be unsustainable and unfair on the taxpayer. As I have previously said, it is not right that taxpayers, many of whom cannot afford to buy their own home, are subsidising the acquisition of a substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides, and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not them but the beneficiaries of their will.

Pensioners will have the same access to support that the current system provides, and the Government will seek to recover the debt only up to the level of available equity when the property is sold. In response to questions from the noble Baronesses, Lady Sherlock and Lady Manzoor, I say that any outstanding debt at that point will be written off. Owner-occupation involves the acquisition of a potentially valuable asset that often increases in value over time. It is right and sustainable that the taxpayer reclaims their contribution to this asset.

The amendment would also introduce a waiting period for pensioners before they could receive help with their mortgage interest payments. There is currently no waiting period for help with mortgage interest for pensioner claimants, and it is not the Government’s intention to introduce one.

I cannot go into great detail on the questions from the noble Baroness, Lady Hollis, but to the extent that more support will be required for people, this is a far more sustainable way for the state to provide it than through grants. We are still considering our response to the DPRRC line on whether the procedure is negative or affirmative. With these explanations, I urge noble Lords not to press their amendments.

[The Lord Bishop of Durham]

I have genuinely been listening to the debate. I believe the Minister did not answer one point raised by the noble Baroness, Lady Sherlock, which struck me as important. The Minister assured us that the financial advice would be independent and outsourced to a third party, but the noble Baroness’s question was not whether it would be outsourced but whether it would be independent of those who would provide the loans, so that independent advice would be separate from the loan giver. I am not sure that the Minister assured us that they would be separate.