Jobseeker’s Allowance (Work Experience) (Amendment) Regulations 2011

Lord German Excerpts

Wednesday 2nd March 2011 Grand Committee

[Lord German]

My Lords, I thank the Minister for introducing the regulations. My noble friend has outlined some of the key issues relating to why these amendments and changes are necessary. I certainly welcome them.

I shall start by explaining why, in my view, work experience is so valuable. If experience is the key word, then what is the most valuable experience that anybody looking for a job can have? It is surely the experience of real work. I shall come back to mandation, or the mandatory element, in a moment because, in any real work there is an element of mandatoriness—you turn up in the morning and, if you do not turn up very regularly, the employer does not wish to have your services for much longer. Even if the employer who gives you a work placement is not hiring, the job that you do will help you to get the key skills that are so valuable to boost employability in the future and to raise the chances of getting a job somewhere else.

When these amendments to the existing regulations were laid, I looked up the criticisms at the time of the previous set of regulations relating to this matter. I turned to the editorial of Personnel Today issued in September 2009. It seems to me that I can do no better than to quote a couple of key sentences in this editorial, written by the deputy editor. He said:

“It seems completely illogical that young people who show initiative and arrange work experience placements off their own back should be ineligible for jobseeker’s allowance”.

That is certainly the case. Why would you want to engage in this great experience if you are losing money? I echo the noble Lord’s sentiment: if you are going to lose money, why would you want to take on an experience of that sort? The editorial continued:

“The current set-up makes the presumption that if an individual is undertaking work experience then they are not actively seeking a job”.

This is, indeed, nonsense. We need to ensure that people who are getting the experience are on that ladder and pathway towards a job.

“And it also risks creating a two-tier system, where unpaid opportunities are only enjoyed by the more affluent”.

There are certainly examples of people trading off an opportunity to get their son or daughter into a form of work experience, where the jobseeker’s allowance does not matter to the jobseeker. However, there is a quid pro quo. The last sentence of the editorial says:

“But employers also need to look at their own policies and not use young people on work experience as a ready source of cheap or unpaid labour”.

That raises some key issues. First, as the editorial says, if the experience is to reflect what is in fact a real work opportunity and to give people an opportunity to see work in every aspect, are these regulations either too heavy or too lean on the mandation? I think that the Minister has got it just about right. If you turn up and find on day one or two that the job is not really what you have an interest in or is totally alien to you—in which case someone has failed to help you further down the line—you can turn away from it without penalty. However, when you stick it out for your first week and carry on with it, if you fail to undertake the normal aspects of being at work, you will clearly be subject to the same relationship as if you were at work. I think that that brings just about the right level of flexibility into mandation.

I have a number of questions about what constitutes work, where the work is placed and what a workplace is. Clearly, it is important that we place people in the best experience, which will help them to seek employment. This Government are particularly anxious that we should encourage the voluntary or third sector to engage. Do placements inside the voluntary or third sector constitute a place of work?

I also welcome but would like a bit more explanation of the flexibility of Jobcentre Plus in helping people to arrange work experience. The ability of the person to arrange their own work experience, to work with Jobcentre Plus to come to it together or for Jobcentre Plus to make the appropriate placement at a local level is crucial. Do we have the sort of experience and guidance for Jobcentre Plus employees to work in partnership with jobseekers and not simply to find them a place? The difficulty is also that, if the target for Jobcentre Plus is to get as many people into work experience as possible, you choose those who are easiest to get into placement. I have represented Merthyr Tydfil and Ebbw Vale, which compete with each other to be the most difficult places in the country to get people into work; these are places where long-term unemployment is a feature. My experience is that it is often the low-hanging fruit that makes these things difficult to achieve. I like to think that Jobcentre Plus will not focus only on those who are easy to get into these placements. We need rather to encourage this to work on a wholesale basis. Perhaps the Minister could reflect on that.

Finally, I go back to the editorial and the issue of whether employers will truly use the opportunity to give experience of work rather than simply finding someone who is an extra pair of hands to do a job that does not necessarily provide the right level of experience. I am talking about quality assurance. Will the Minister reflect on the nature of quality assurance that we will need to get from Jobcentre Plus staff when they seek to carry out these placements? These are a worthy set of amendment regulations and I trust that, with the appropriate guidance, the Minister will see success with their implementation.

[Baroness Thomas of Winchester]

My Lords, I shall add one or two comments. I, too, very much welcome these regulations. I was interested that the Minister said that they were aimed primarily at 18 to 21 year-olds. That presumably means that the Jobcentre Plus advisers have some discretion and that the only thing that is absolutely laid down is that the person must be over 18. Will that be known by all the Jobcentre Plus advisers so that they do not prevent anyone from getting a work experience placement if they are, say, 25? Someone may have had a very chequered career and may have been in and out of work; they might quite like to be involved in this scheme but may be over 21. Can the Minister clarify that? Furthermore, why did the Minister alight on the time span of two months? I would rather like one of these work experience people myself, but I suppose that the House of Lords is not an employer. It is a pity—maybe we should be.

Pensions Bill [HL]

Lord German Excerpts

Tuesday 1st March 2011 Grand Committee

[Baroness Murphy]

My Lords, I very much support the amendment of the noble Lord, Lord McKenzie, but I have to say I am very attracted to the halfway position, as it were, of the noble Lord, Lord Boswell. The difficulty is, as Machiavelli said, that you should not have a second line of defence—that you should just go straight through—so I am nervous in saying that I like the compromise idea but there is a basic serious unfairness to a very small group of women. We are talking about a one-off event over a period of three to four years, I think it is, and it would be a good idea to address this. If the halfway house makes more sense in overall financial terms, though, I would support that.

[Lord German]

There is a general sense that there is a group of people who are being treated unfairly because of the rate of acceleration, although maybe I will explain later that they shall actually be decelerating towards their pension. The general aspect here is that something needs to be done to ameliorate that unfairness. One of the key ways where that could take place, and I hope that the Government are minded to tell us about this, is to seek an upward revision and a much enhanced state pension as a right for all. That is an issue that would affect people in a much more radical way if it were the case. I have read many of the newspaper articles about the uprating of the state pension, but this seems to be almost a hand-in-glove issue. If you use the financing that comes from this measure and put it into a pot, you will be doing something to ameliorate the situation.

I am keen to examine the issue raised by my noble friend Lord Boswell about trying to make sure that we do not overly deal badly and unfairly with a particular cohort of people. The issue primarily relates to a singular group of women. This is a one-off group, because there will not normally be a similar group of people who are so badly affected by the one-year to two-year increase in such a rapid space of time. After all, there is an acceleration of something like three months in age and four months in pension age. You could not get much faster than that, unless you went to three months and 29 days, or whatever; you would be talking shades. It is a very fast rate of acceleration for a particular cohort of women, who will disappear when the system has worked its way through. That acceleration will not be apparent.

There must therefore be some measure which the Government can take to either improve the post-retirement abilities of women in this cohort or lengthen the timetable somewhat to accommodate the interests of a particularly badly-done-by group. When two people whose ages differ by as little as three, four or eight months, or whatever, stand shoulder to shoulder within a year, they will find that the differential in the rate of change in their retirement age is magnified. I hope that the Minister will reflect upon the amendments before us and try to see whether measures can be taken to ameliorate the situation of this group of women.

[Baroness Hollis of Heigham]

My Lords, like everyone else who has spoken, I support the amendment of my noble friend. We all agree—and I am sure that we will come back to this issue, following the point made by the noble Lord, Lord German—that what we also need is a decent state pension: the £140 pension espoused by his honourable friend Steve Webb in the other place, which would be transforming for both men and women in retirement. However, that does not address the issue here, which is about not just equalisation—no one disputes that—but the speeding up of that equalisation, including the very speedy additional year.

First, I suggest that that makes some easy assumptions that are false. Secondly, it has some unintended consequences that have perhaps not been considered. The first easy assumption is that because we are all living longer, we must work longer to support our old age. One understands the stats about the number of workers relative to the number of pensioners and the additional costs in the future of long-term care. However, increased longevity is not actually accompanied by increased years of full and healthy living, whereby one enjoys leisure, holidays and time with grandchildren. All the research shows that those extra years of longevity come with extra infirmity, particularly for those who are worse off. It is very much a class, as well as a gender, issue. Since the Black report, the health inequalities of those in the bottom E and D classes have widened, not narrowed, relatively—not absolutely, as obviously they have improved for us all.

Those extra years come with extra infirmity—fortunately not bed-bound infirmity necessarily requiring residential care but second-order infirmity, including the need for help with, for example, cleaning, transport, aids, appliances and care to allow you to stay in your own home. The implication is that the healthy years of retirement will be squeezed and reduced as retirement age increases, because you will not enjoy extra years of healthy living at the other end as a result of increased longevity. The first thing to address is the fact that we are squeezing the number of years people, particularly poorer people, can hope to expect to enjoy in retirement. The second assumption or myth is that women, as a result, will stay in the labour market longer and until they retire. That retirement age will increase first to 65 and then to 66. I do not know why we think that this will happen because it has not just been connected to the state retirement pension or even to the fact that employers have traditionally got rid of people at the age of 65. It has never been true for men. The majority of men leave the labour market at around 62 or 63 years old. It is even lower in Europe. In other words, half of all men have been on benefit for at least a year, sometimes two years or more, before they draw their state pension. Men compared to women have more secure and better paid employment. Therefore, they have more incentive to stay on until the age of 65. But they cannot and they do not.

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Moved by

[Lord German]

8: After Clause 1, insert the following new Clause—
“Additional financial support for certain women
The Secretary of State shall by regulations provide additional financial support for women born between the months of July 1953 and September 1955 to include one or a combination of the following— (a) pension credit adjustment;(b) providing for women with serious illness;(c) by slowing the rate of acceleration for a particular group of women.”

[Lord German]

My Lords, I declare an interest as a trustee of a pension fund for the National Assembly for Wales. I am not clear as to whether I should declare this at this particular point in the agenda, or whether I should do so at every occasion, but for the avoidance of doubt I will do so. There are five parliamentary procedures in this United Kingdom, and the one that I am used to would require me to declare an interest, and I hope that is the case and that it is the wish of this House that I do so as well.

This amendment is wide in its ability for interpretation, but very narrow in the group of people whom it affects. It is done that way on purpose. Whatever way you look at it, there is a particular group of women, in a particular age bracket, born between particular years, who are going to be adversely affected in a way that those who are outside that age bracket are not. It is that particular interest group to whom I want to address my remarks in respect of this amendment. The fact that this is the group who are accelerated more than anyone else is the reason for the amendment. I accept that, no matter what timetable you have for any acceleration, there is bound to be a group that will be more or less affected, and that there are bound to be some winners and some losers in that acceleration. However, as I described earlier, you could really not see a faster acceleration process in play than this, where a three-month increase in your age means a four-month horizon for your pension arrival date.

Already we have debated quite considerably the use of timetabling as a device by which to assist that particular cohort of people, but this amendment looks to provide support for particular groups. It does not specify which groups, clearly because there may be more groups that may be divisible in different ways, and there may be more groups than the Government can think of. Already this afternoon the noble Baroness, Lady Hollis, has described a characteristic that we could apply to the list, when she talked about her age-related premium in addition to JSA or ESA. It is not intended to do more than to provide a way for the Government to look at this particular group of women, who are finding themselves more disadvantaged than advantaged in the acceleration process that is going ahead.

It is rather like walking along a road with your colleagues and seeing the horizon in the distance, and, as you walk along, the horizon moves further from you, but the people who are walking along the pathway with you, who may be slightly older or slightly younger, see the horizon moving away at a different rate. It is the group that is seeing it move away furthest and fastest to whom this amendment is addressed. The impact assessment from the DWP quite clearly specifies that that group of people who are most disadvantaged will have the biggest financial hit. The summary of impacts says:

“A rise in State Pension age of one year is projected to decrease the lifetime pension income … by between 3 per cent and 5 per cent … based on DWP modelling … However, if they work to the new pension age”—

I shall come back to the mitigations that are already in place in the changes that the Government are proposing in the universal credit and the work programme—

“and save into a private pension, they would recover about half of this loss of lifetime pension income. For those individuals who will experience the maximum increase in State Pension age of two years, the potential loss is between 7 per cent and 9 per cent”.

Again, if you mitigate that by saving in a private pension scheme and working for those extra two years, you suffer a loss of about half of that. A one-year and two-year acceleration is quite different. If you follow my metaphor of moving along the pathway towards the horizon, those who are seeing the horizon moving away the fastest would suffer financially disproportionately to the others. It is that experience that I shall dwell upon in this amendment.

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[Lord Freud]

I thank my noble friend Lord German for tabling the amendment. We have covered a lot of the ground in relation to it already, so I shall try not to be repetitious. We are talking about what has been variously described as an acceleration bubble, a moving horizon or a squidgy balloon—as the noble Baroness, Lady Drake, said. We are effectively looking at concessions for women born between July 1953 and September 1955.

I am not in a position at this stage to provide any additional information about discussions on a single tier, which I referred to at Second Reading, but one of the issues here is clearly that when one looks at the complexity of the architecture, one has to have an eye to whatever might or might not emerge from those discussions. We have already talked about freezing or delaying the increase in the pension credit qualifying age for people affected by the changes in state pension age. We are not going to make a song and dance about technical drafting here, although the noble Baroness, Lady Drake, made the point about the application of the amendment to women, when it would actually have to apply to men. However, let us put that to one side.

The issue that I aimed to emphasise in the previous discussion was that pitching the pension credit qualifying age at a point below the state pension age for a specific group would undermine fundamental welfare reforms. However, it is not about just the structure—and I accept that this is about a temporary change—or purely the money; it is complex for customers and complex to administer. That is one of the reasons why that solution is difficult, if not undesirable.

In response to the request of the noble Baroness, Lady Hollis, for me to write to her on the costs of paying people in between the old and the new pension ages, I am happy to look at those costs and to write to interested noble Lords. I imagine that that includes most of us in the Room.

I move on to the issue of serious illness and emphasise that we have great sympathy for those with ill health, including those in this particular cohort of women. However, I must point out that help and benefits are already available for people with health problems and I do not therefore accept that we need to provide additional financial support, whether that is in the form of a payment above what we already pay out or some bespoke pension age arrangement.

The final option suggested by the amendment is slowing the acceleration of the pension age increase for these women.

I can assure noble Lords that, when we were considering how to bring forward the increase to 66, we looked at whether we could start that change for men slightly earlier than for women, to avoid altering women’s state pension age before 2020. The reason that we have not done this is because it would be unfair to increase the difference in treatment between men and women. It would also be unfair to prolong the difference in treatment beyond the period already agreed. I will take this opportunity to explain why, and I am picking up the question raised by my noble friend Lord Boswell earlier in the afternoon. The equal treatment directive allows the setting of the state pension age to be a limited exception to the overarching rule that men and women must be treated equally in social security matters. This exemption, or exception, is only temporary to give member states time to adjust their state pension ages so as to bring women’s state pension age into line with men’s. As we know, the legislation in 1995 set out a timetable for equalising the state pension ages between 2010 and 2020, so anything we do now will be measured against that timeline. That is why we decided that we must increase the state pension age to 66 only after women’s state pension age has reached 65. I therefore urge the noble Lord to withdraw his amendment.

[Lord German]

My Lords, when I started writing this amendment, I was trying to answer what seemed to me a fairly straightforward and simple question. There is a group of women, born between these years, who will suffer financially more than those who are roughly the same age on either side of them. The question I was seeking to answer was whether the Government will find a way of helping them. It is as simple as that. I was seeking to give the Government as much of an open hand as they wished, in order to say that they recognised that some of the people in this cohort will be suffering financially more than others, simply because of the date of their birth, which was the factor I wanted to take into account. I was not wanting to dwell on the method of operation, but I was seeking to find a way in which the Government might come forward with some opportunity for making sure that they redressed that financial imbalance in a way which they thought was reasonable, effective, and did not cost as much as the £7 billion or £10 billion which the Minister has already adhered to. I hope that, during the course of the future weeks before we reach Report, the Minister will reflect on that matter. There has been a widespread agreement around this Committee, from all sides, that there needs to be some form of redress for a particular group of women in a particular way which needs to be defined, and perhaps the department can look at that. I hope that the Minister will think of coming back to that matter by Report, with a view on how that might be addressed.

Amendment 8 withdrawn.

Pensions Bill [HL]

Lord German Excerpts

Tuesday 15th February 2011 Lords Chamber

[Lord German]

My Lords, I begin by stating my interest as a pension trustee for the National Assembly for Wales pension fund. I also thank the Library here for its detailed note on this Bill, along with the many organisations and bodies, some of which have been referred to already, which have provided some briefing on and support and criticisms of the matters which are now before us. One must start, I suppose, by looking at the work of the noble Lord, Lord Turner, and his view on this issue, which started in train the changes from which we are seeing some conclusions today. His conclusion was about longer life and I am grateful to the Minister for informing me that I am now a year younger than I was. Perhaps that will mean that I will no longer be able to claim the state pension this year. Maybe the Minister will want to refer to that context later.

The conception that the noble Lord, Lord Turner, had was that a variety of different tools were available to us to make the necessary changes to deal with the longer time that we are going to be spending alive in this world. The first option was to make pensioners poorer; I think that everyone concluded that that was not realistic—a conclusion which we would all want to share. The second option was that taxes would rise or that there would be cutbacks in expenditure on other public goods and services. There were the options, thirdly, that savings would rise and, fourthly, that retirement ages would rise. His conclusion, which has subsequently been resolved through many debates in this place and the other place, was that there is a range of choices but that a combination of the three factors—tax rises or service cuts, rises in personal savings and rises in retirement ages—is necessary.

The demographic challenge, which has been referred to, is the fundamental that we all need. From the work that has already been concluded, both by the previous Government and in the commissions that have taken place, I suspect that there is a general acceptance that the number of years should bear some sense of how long we can expect to live after retirement. In other words, there should be a life expectancy general rule which seems to be a thread throughout these changes. That is why we are bound to revisit this matter. The noble Baroness, Lady Drake, said that this is undoubtedly something that we will have to come back to since, if the trend continues, we will have to alter the state pension age.

However, it cannot be looked at in isolation without including the potential and announced changes to the basic state pension. I come now to the question of deficit reduction, to which the noble Baroness, Lady Drake, referred. She said that we will not see the savings in terms of a contribution to deficit reduction until 2016. What we can do is use some of these changes to assist in ensuring that we have a fundamental review and a fundamentally improved basic state pension. While we have already put in place the triple lock from this April to ensure that pensioners will not be worse off, I have read in the newspapers and other publications that ambitious changes are proposed for the basic state pension. That is a consequence of these measures as well, and I hope we will be able to say something about it at the same time.

There is, however, the issue of acceleration in respect of one group of women. I call it the acceleration bubble. One group of women will bear more of the brunt of the changes than others—those who were born around 1954. On the shoulders of that bubble, it will affect those born between 1953 and 1956. Those women who are still travelling along the same road as people of roughly the same age will see the horizon moving further away from them faster than those around them will. In the most extreme case under these proposals, two women who were born one year apart could see a three-year difference in their pension ages. The crucial thing about this bubble is the extra working months that some women will have to put in, compared to those who are nearly the same age. That is a genuine concern: there is a cohort of women who will be treated differently.

While the announced and prospective changes to the basic state pension will assist us, the Government should give careful consideration to this group of women who will be more affected by the changes—those within the biggest area of that acceleration bubble. Rather than say that the acceleration must be slowed down, there are changes that the Government could make for that specific group of women because it is a one-off. They could, for example, start by making exemptions or providing additional support for those who are seriously ill. They could make adjustments to the pension credit arrangements, which might make a difference for that group of women. They could make changes that affected the whole cohort born between 1953 and 1957, rather than only those who were born in 1954. There is a difference of effect between people with different years of birth.

The Government could also look at some of the other measures that are not a consequence of this Bill but where longevity has produced policy issues that need addressing. The most important of those is health inequalities. Where people live longer, some will do so because of the inequality in their life as a whole. That could be something to do with work opportunities and is usually also to do with poor housing. There are areas that the Government should address in those respects to reduce such health inequalities, particularly in older age.

On age discrimination, both in and outside the workplace, I welcome the removal of the retirement age. It means that people will be treated with dignity whatever age they wish to work to. A basic state pension should be the crucial tool to take people out of poverty. I hope that the changes which are likely to be announced will provide that help. Fundamentally, we must protect those with disabilities or caring responsibilities.

I accept the Government’s need to remove the cost of auto-enrolment to business as we want to encourage as many as possible to participate. However, as regards the three-month waiting period, the key issue for the Government to address is the right to opt in. The Bill states that you can opt in during that three-month period, but to be able to do so you need to have received clear information from your employer. Is the Minister prepared to consider introducing legislation to enable that information to be provided as of right to people in companies affected by the waiting period? Migrating between jobs also affects auto-enrolment if the threshold is not reached—for example, if you work a different number of hours from month to month and your wages fall below the threshold one month and above it the next. The key issue is whether that three-month period has to be consecutive, or will the waiting period end as soon as three qualifying months have been achieved, even if they are not consecutive? I welcome clarification from the Minister on that.

One of the big problems with re-enrolment is that there is a two-year period in which an employer can simply return the contributions which a member has made in a pension fund during that period, excluding the employer’s contribution. The member does not have the right to reinvest the contributions and re-enrol in the scheme. Members who defer their pensions from these pots are often charged an extra 1 per cent in service charges. Over a lifespan, that can amount to a considerable sum. Is there a role here for the FSA to regulate to ensure that those people get a fair deal? What benchmarking will be put in place to enable a scheme to be approved for auto-enrolment? Clarity is needed in that regard. We need to be given assurances about the quality of a scheme so that a NEST scheme can be compared with others. Employers need to be able to assure their workforce that a quality standard is in place with regard to pension funds.

The legislation is silent on the previous commitment to remove the contributions cap, which will be £3,600 in 2017, moving up to about £4,270 at present-day prices. In the previous legislation that cap was due to be removed in 2017. I hope that that will be possible because this affects a group of workers who often have very small pots of money which they need to reinvest and who want to avoid the bureaucratic burden of moving their pension pot every time they change job. I understand the concerns of the pensions industry regarding the restriction on transfers to the new pension fund but a balance has to be struck between meeting the needs of the pensions industry and those of the workers and those companies that are paying their contributions to ensure that a fair deal is arrived at which works for everyone.

As regards the RPI/CPI impact of the Bill, as the Minister said, no housing costs are included in the CPI. He said that only 7 per cent of pensioners have mortgages. However, 21 per cent of pensioners pay rent, which is the other important housing statistic. Pensioners who pay rent and are on low incomes are protected by housing benefit. However, I understand that the Government wish to include some housing costs in future CPI arrangements. I should be grateful if the Minister could tell me when the Bank of England will return to this matter and advise the Government on it. It is welcome, by the way, that there is no override on pension funds where the scheme specifies that RPI will be the measure of increase, and that the Government do not intend to override these private pension schemes.

It is clear from the figures presented in the impact assessment and by companies and bodies that have advised us on the Bill that some defined benefit schemes may now be able to continue if they switch to CPI. The Pensions Policy Institute believes that this could affect between 20 per cent and 40 per cent of schemes. I hope that the Government will monitor that effect, because it would be useful to obtain a quick evaluation of whether schemes that have been in severe difficulty will be able to retain the rights for their pensioners. The overall change will benefit poorer pensioners, but we may find that richer pensioners have to pay a bit more. I do not know whether other Members of this House consider that to be acceptable or not, but I believe it is the right way to do things.

I noticed that the noble Baroness, Lady Drake, did not refer to judges’ pensions, but I will poke in my toe to test the water. This matter is clearly out of kilter with the current culture of saving for the future, and there is a need for transparency. There is a place not too far from this Chamber where pay awards were made and refused by others on their behalf, and consequently other measures were included in a sort of compensation package that caused a lot of trouble for Members of the other place. It should be clear that if the question is about there being no pension contribution because it is a reflection of a lower salary, it would be much better to improve the salary, and that would be transparent for the public to see. I hope that the Minister can advise us on this matter.

Finally, this is a compendium Bill, in the sense that it has a broad title—the Pensions Bill—and the Minister might consider other measures that are not in the Bill. One of those is of course the rights of pensioners to receive information from those who manage their pensions on their behalf, particularly the need for an annual report to pension holders and a report that can be passed down the food chain on the risks inherent in the investment strategy of pension funds, whereby those affected by pension change will know those risks. It is a world in which people have little knowledge of what is happening on their behalf. Perhaps if they were given more information, the level of awareness would be raised for those who are about to receive pensions or will receive them in the future.

In conclusion, this is undoubtedly an area to which we will return. I expect to see changes in the basic state pension, and I expect that the review by the noble Lord, Lord Hutton, of public sector pensions will undoubtedly attract discussion here. As the Minister said, longer life goes on.

Disabled People: Disability Living Allowance

Lord German Excerpts

Monday 7th February 2011 Lords Chamber

[Lord Freud]

My Lords, I disagree entirely with that premise. The personal independence payment is a new assessment of people’s needs and is designed to help people to live independent lives and to give them mobility. To that extent there can be no presumption about what is happening to existing rates. We will set these rates based on people’s requirements to live independent lives.

[Lord German]

My Lords, it seems to me that the consultation paper can be read in one of two ways. Can the Minister tell us whether the purpose of the PIP is to extend the level of adaptations and aids that will be available to people—to facilitate greater access and ensure that everyone who needs the payment can get it?

[Lord Freud]

My Lords, I can respond to that question positively in the sense that times have moved on: adaptations and aids have moved on since the DLA was introduced, and we are looking at a different environment in which people can be helped to live pretty normal lives with those adaptations. It is important that we have an assessment process and a personal independence payment that reflect what is really happening to people’s lives.

Unemployment

Lord German Excerpts

Wednesday 26th January 2011 Lords Chamber

[Lord Martin of Springburn]

My Lords—

[Lord German]

My Lords—

[Noble Lords]

This side!

[Lord German]

My Lords, in the year 2009-10, there was a 99 per cent increase in the number of people who were taking the job seekers allowance for more than 24 months. Among that group, who are the hardest to get into work, there must be a significant number of young people without qualifications. What actions are the Minister and the Government taking to deal with many of these people who were parked by training providers because they were too difficult to deal with?

[Lord Freud]

My Lords, I thank my noble friend for that question. Essentially, we are going to rely on the work programme and differential pricing to help the hardest to help.

Housing Benefit (Amendment) Regulations 2010

Lord German Excerpts

Monday 24th January 2011 Lords Chamber

[Lord Best]

My Lords, I shall speak to all three of these Motions, but in particular, to the third one standing in my name. I share the concerns of the noble Lord, Lord Knight of Weymouth, that the changes introduced by the regulations and the order are likely to have very serious consequences. The Government expect the cumulative effect of the eight caps, reductions and restrictions on housing benefit and local housing allowances, of which two are the subject of regulations before us today, to achieve savings of over £2 billion each year by 2015. What is not certain is where the impact of these changes will fall, as the noble Lord, Lord Knight, indicated.

The charities working in this field have produced excellent briefings for us. Those have come from Shelter, Crisis, Citizens Advice, Homeless Link, Barnardos, Family Action, along with the Chartered Institute of Housing and the National Housing Federation, with support from the Local Government Association and some impressive work once again from the Greater London Authority. These bodies all note the likelihood of several thousand tenants facing homelessness. Apart from this wrecking the life chances of the families concerned, the charities point out that the extra costs of homelessness could more than outweigh the housing benefit savings. Homeless Link notes that, on conservative estimates, if even one quarter of those identified as at severe risk were to become homeless, then all the gains from the housing benefit cuts would be lost.

The charities also point out, as has the noble Lord, Lord Knight, that a greater number—over 900,000—of tenants who stay put when their benefits are cut could be forced to find the balance from their very low incomes: state pensions; incapacity benefits; jobseeker’s allowance; or, for a fifth or so of these tenants who are in low-paid work, from their very modest earnings. I do not believe it is the intention of Ministers to increase the number of homeless households, which would, in any case, be self-defeating and counterproductive, nor do I believe that the Government intend to impoverish nearly 1 million very poor households with the equivalent of a cut in their pensions and other benefits of an average of £12 a week for each household. If that was the outcome, set against the coalition Government’s commitment that the effects of reducing the deficit should not fall disproportionately on those least able to take the strain, then the housing benefit changes would have to be deemed a terrible failure.

Rather, it is hoped that, away from the very high-value areas that claimants will have to leave, landlords will reduce rents to accommodate all or most of the fall in housing benefit/LHA payments. If so, to a large extent it will be landlords not tenants who take the hit. This would certainly be a desirable outcome where landlords are abusing the HB arrangements. The analysis by the Department for Work and Pensions suggests that 13 per cent of the rise in housing benefit is attributable to greedy landlords increasing rents to squeeze more out of the system. Thirteen per cent is not a huge proportion of the rise in costs, but nevertheless, it is worth addressing.

I think the new measures will indeed lead to some landlords reducing their rents. In some parts of the UK, particularly where unemployment has been very high and may go higher, a very high proportion of tenants are in receipt of housing benefit. If landlords are not to risk serious arrears, they will have to adjust to lower rents. In some places, current market conditions mean that the alternative of selling the rented property into owner-occupation will not be an option. Landlords may be resentful, they may even lose money—I fear they will not be investing and improving their properties—but, like it or not, they will have to go with the lower rents if that is all the tenants can pay.

Just how widespread will this be? In how many cases will it be the landlord not the tenant who absorbs the cost of the cuts? Talking to private landlords from different areas, I think there are opportunities for rent reductions where the local housing allowance is paid direct to landlords—as is facilitated by these regulations, avoiding the danger of arrears, which can lead to evictions that are costly for landlords as well as traumatic for tenants—and where the required reduction is relatively small, say 5 per cent of the rent. In such cases, good will toward good tenants, combined with the hassle and costs of replacing tenants, will incline many landlords to make modest rental concessions, particularly in not raising rents as soon as the opportunity arises, but there are definitely finite limits on the extent of this restraint. Even a 5 per cent rent reduction will be a problem for a lot of landlords. Five per cent of rent might exceed the margin, the profit from letting, after taking account of mortgage repayments, management and maintenance costs, an allowance for vacancies and so on. Some buy-to-let landlords with relatively high debts on their property could be in difficulty if they were to cuts rents by 5 per cent. Moreover, the figures in the DWP's impact assessment indicate that a 5 per cent rent reduction would not be enough to close the gap, to remove the new shortfall between benefit and rent, in the great majority of cases. It would appear to cover less than 90,000 cases out of a total of well over 900,000.

There is another reason to fear that landlords will not implement the hoped-for rent reductions. Since demand outstrips supply in so many areas, landlords can simply opt to reject those on benefit. Already a high proportion of landlords and their agents will not accept those on HB. These tenants cannot put down a deposit or pay rent in advance. Local authorities, unhappily, often take some time to process HB applications and early arrears can mount. Rent is paid on a four-weekly basis while landlords expect it on a calendar monthly basis and, however unfounded, there are fears by landlords and their agents that those on HB will be troublesome tenants. The compensation has been that LHA can pay up to the level of the middle rent for the area, the 50 per cent marker, but now that the maximum is to be reset at 30 per cent, this advantage is lost. Where they can, it seems likely that more landlords and managing/letting agents will avoid letting to those in receipt of HB. I am told by the staff in local authorities who seek to secure privately rented accommodation for vulnerable households in their area that previously helpful landlords are already pulling back, even where the council guarantees the rent and gives back-up support for tenants.

The underlying problem is, of course, the overall acute shortages of available homes. With more demand than supply, experts, such as Professor Michael Ball at Reading University, predict rent rises, not rent reductions. Until mortgages are plentiful again without requirements for large deposits, the private rented sector will have a ready market of young people who cannot buy. If landlords stop letting to those on benefit, properties will be available to absorb some of this growing demand, but that would, in the absence of sufficient housing, exacerbate the problems for those reliant on benefit.

It is very far from certain that many landlords will reduce rents, and it is possible that more landlords will withdraw from letting to those in receipt of these lower benefits. Since we now rely on the private rented sector to house nearly a million poorer households, this would be very bad news, but, as the Merits Committee notes, the DWP's impact assessments states that,

“it is impossible to quantify the indirect impact of the measures with any degree of certainty as it is not possible to predict the behavioural effects on tenants or landlords.”

It is for this reason that I have brought forward the resolution in my name that is before your Lordships today.

The resolution proposes a wholly independent, rigorous review reporting to both Houses of Parliament on the impact of the HB changes: on children; on homelessness; on whether mitigating measures, including the modest sums available in discretionary housing payments, are making a difference; on whether local authorities are being put under intolerable pressure, not least in handling the extra social and welfare costs if there is an influx of low-income households into their area; and so on. Thankfully, existing tenants are being given an extra nine months before facing these HB changes, with none affected before December 2012, so a first review one year from now can cover only new lettings, not the existing stock. The feared mass migration out of central London will not have begun in earnest before 2013 but I suspect it will become apparent quite early if landlords are not reletting vacant properties to those on the new benefit levels, in which case the review would enable Government to take corrective action. We know from the concessions made in response to the highly critical Social Security Advisory Committee’s report that swift action can be taken if required.

Last week I met the Minister and I believe he shares some of my concerns. I am hopeful he will be willing to make a significant statement today in response to the proposition in my resolution. An independent report next year could provide the basis for the Government to make “in-flight” corrections to amend or suspend some of these regulations and to prevent the dramatic changes to the HB system, leading to a potential national tragedy for so many low-income households.

[Lord German]

My Lords, I thank the noble Lord, Lord Knight, for his agreement that he is not going to pursue the annulment and also for his support of the noble Lord, Lord Best. The Motion will meet the problem we are all facing—what might happen in the future. In some ways, it is like trying to judge between those who know the next winner of the Grand National and those who believe that it is an art form to study the form and decide which direction to take. Essentially, this whole issue rises or falls on an assessment of how the market will behave.

I want to consider the agreement between the former Labour Government and what the Government are trying to do today. The noble Lord, Lord Knight, said that we should go ahead with the £15 that was made available to people who could negotiate a smaller rent and we should take that away. That was a proposal that he quite rightly made while in government. There is a general agreement that the costs of local housing allowance and housing benefit must be reduced and contained. There is a question which we are all struggling with about the speed with which we do it. There probably will be a consensus in the overall ambition but a difference in the speed by which we achieve that.

There is an agreement that the current expenditure trends, as shown in the impact assessment by the DWP, are unacceptable and unsustainable. Continuing as we are from the evidence that we are given, private sector rents will be driven up, the gap between housing benefit paid in social housing and in the private housing sectors will be extended, and the difference between average earnings and private sector subsidised rents will be widened. That is unacceptable. We know from the figures that the average impact of these measures on households in the private sector will be £12 a week, but of course there are great disparities in that. The figure is £12 a week across the whole of Great Britain but if you look at the difference between Blackpool and London, you get a huge variation. That was a figure which the previous Labour Government alighted on as one of the reductions they would make, but for a much smaller group of people than that which is proposed now. So it sounds remarkably like we are moving in a direction in which people want to travel but not necessarily at the speed at which everybody wants to go.

There has been the critical Social Security Advisory Committee report and its priority is the impact of the regulations. That is its job, not dealing with deficit reduction. Nevertheless, the report quite rightly said, “Do not implement this, but if you are choosing to implement it, here is a range of things you should do to make these changes work”. I am pleased that the Government have accepted the majority of these, in particular the delaying and phasing for current recipients of housing benefit.

There is a quite distinct issue relating to London in this variation. One in four of housing benefit households in London is affected by these measures and the primary impact in London is that the average figure across London for the change in rent to be paid by these allowances is £22. However, 17,000 of the 21,000 losers as a result of a cap on the rent are located in London, so there is a London issue which is almost unique within Great Britain. I read in the other place the evidence given in the form of the committee report and the committee discussion and there was a sense that people were seeing the whole of Great Britain through the prism of London. That is a dangerous process and we may have to look at London separately because in the rest of Great Britain the average impact of these changes on rents is £9.84 a week. In a period when landlords have low interest rates on mortgages, this may be the right time for them to absorb this change.

I will return to the London problem later. First, I would like to look more closely at the impact this figure of £9.84 will have on household rentals around the rest of Great Britain. Essentially, the difference of view which I hear on this issue is around this central question. The noble Lord, Lord Best, said it just now. Will landlords reduce their rents to meet the new levels set by Government? This is fundamentally an issue about the operation of the private rented sector market.

The Government essentially influence about 40 per cent of rents in Great Britain. In terms of pure economics, the state must surely have a prime influence on the level of general rents because it pays the rents of 40 per cent of the properties. It is not quite a monopolistic situation, but the Government are a major purchaser of tenancies in the country.

How has this market operated until now? On the one hand, it seems that tenants have found properties for rents at levels which they know the Government will pay; on the other hand, landlords have set their rents at the level which the Government will pay. There is no incentive on either side to adjust or to deal with this matter. In straightforward terms, it is a market in which the principal and largest purchaser has not really had much influence over the price paid.

Will the changes make a difference? I sincerely hope so, but we are talking of market behaviour. It cannot be an exact science. That is why it is essential that the spirit of the Motion of the noble Lord, Lord Best, is followed and a full evaluation and measurement of the impact are carried out just as soon as the first complete annual cycle of the new regime has ended. We need to know whether the desired changes which it is assumed will be brought about as a result of the measures have taken place.

The market is more likely to work in the direction that the Government want if the state enters the market as a negotiator. Currently, there is no incentive for the state to get the best rental price. We are talking about an incentive that is, first, a copper-bottomed guarantee of rental income, which the Government can provide—the Government are backing the money being provided—and, secondly, a direct payment to the landlord if they accommodate the changes. That is an important concession which the Government have made as a result of the report by the Social Security Advisory Committee.

I welcome the additional funding for housing benefit specialists to intervene in negotiations with landlords, but I have to ask the Minister two questions. First, do those people have the right skills to enter a negotiation market where previously they dealt with a different set of criteria and a different environment? Secondly, is the funding which they are making available to enable the negotiation to take place sufficient?

The big question for London is: is there a ready supply of non-housing benefit tenants ready to fill the properties if landlords are not prepared to reduce their rents? That is why I suppose that such a huge portion of the new funding for discretionary housing benefit and assistance is going to London. Will the Minister confirm that the Government will ensure that the most vulnerable are protected and recognise the distinct market pressures which make London so different?

I accept, of course, that there is mobility of tenancies in London. As a relatively new Member here who has had to seek to rent a property in London during the week, I have found that tenancies move very quickly—you will not expect to take a long time looking over a property as you might normally do in other parts of the country. A quarter of a million moves take place each year in inner London alone, which demonstrates to me that people seem to want to move rapidly. Having moved several times in my life, I must say that it has been the most horrendous part of my life that I can remember; I would prefer not to move at all because it is such an unpleasant exercise. I suppose that there is a different quality to life in London which means that people like to move around more rapidly.

However we judge this matter, we have to recognise that the reason for pressure on the funding of private sector rents is a shortage of social housing in this country. I hope that the Government’s ambitions for the net number of new properties in the social sector will be achieved, but much more can be done in this field by way of other arrangements with private funding. Much more imaginative use of private funding can be made to create more units of social sector housing. We need to dwell on that matter because this is an equation. If we want to make sure that the balance of the equation is right, we need more social housing in our country. We must remember above all else that people need and deserve a proper roof over their heads. In all the initiatives that we take to keep public expenditure under control, we must not lose sight of this fundamental aspect of a decent society.

[The Lord Bishop of Hereford]

My Lords, I recognise with others who have spoken a need to reform the present arrangements for housing benefit but I also express my concern about the measures that are before us. The noble Lords, Lord Best and Lord Knight, presented some alarming figures which, even if we perhaps dismiss the more extreme end, nevertheless give rise to considerable grounds for concern.

The noble Lord, Lord Best, referred to a number of charities that have supplied him with briefing papers; I have been involved with a number of others. Housing Justice expresses fear that the arrangements being proposed would significantly increase the number of homeless people, particularly within London but elsewhere in the country as well.

A reduction in housing benefit at a time when we are facing all the uncertainty and the outworking of the comprehensive spending review compounds the complications of the system and risks therefore greater harm being done to those who are most vulnerable. It is so difficult, as I think everyone who has spoken already acknowledges, for us to assess the outcomes of the proposals both for those on housing benefit and for others in the system.

Benefits

Lord German Excerpts

Monday 20th December 2010 Lords Chamber

Asked By

[Lord German]

To ask Her Majesty’s Government what are their proposals for tailoring the benefits system to individuals’ needs.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, the Government’s reforms to the welfare-to-work system will make it more responsive to the needs of individuals. Jobcentre Plus advisers and providers of the work programme will have flexibility to tailor support to customers’ needs, rather than having support prescribed by central government. Under our plans for a universal credit, individuals will keep more of their benefits when working and will see a clear gain in working compared to not working at all.

[Lord German]

I thank my noble friend for that Answer. The whole purpose of the benefit reforms that the Government are undertaking is to provide those who can with the dignity of work and those who need support with the knowledge that they have the full support of the state behind them. The experience of government so far has not been too good in some cases. The Harrington review found that the system was,

“impersonal, mechanistic and lacking in clarity”.

Will my noble friend tell us when the recommendations of the Harrington review will be implemented and when changes will be brought into effect that will give people that dignity and the support that the state can provide?

[Lord Freud]

My Lords, I thank my noble friend for that question. The work capability assessment has been looked at once internally and now by Professor Harrington. We are committed to bringing in those reforms as quickly as possible—ideally, all of them by the time we have all the existing IB claimants reassessed with a view to going over to ESA.

Housing Benefit

Lord German Excerpts

Monday 6th December 2010 Lords Chamber

[Lord Freud]

My Lords, the Government are fully aware that some people will have to make adjustments in their living arrangements. That is why we have put a large amount of resource into helping that transition process. The current figure, which we announced last week, has been increased by another £50 million to a total of £190 million over the SR 2010 period.

[Lord German]

My Lords, the Government have told us how many people will be affected in the private rental sector by the changes that they have laid. On the other side the argument now seems to be that, if you take out issues around London, no one will see their rent reduced and they will therefore be turfed out on their ear. Meanwhile, the Government believe that the private sector will reduce its rents. Why is the Minister so convinced that the private sector will reduce its rents?

[Lord Freud]

My Lords, I thank my noble friend for that question, which gets to the heart of the issue. There are three reasons why we think there will be an adjustment in the marketplace. First, we as taxpayers represent 40 per cent of the private rental market. Secondly, there have been some surveys of landlord attitudes; roughly half say that they are prepared to reduce rates. Obviously, they are sending a message back to the main buyer. Thirdly, last week we put in place a mechanism to help that adjustment process. We are prepared to pay direct rents to landlords where they are prepared to show flexibility in helping people to stay in their homes.

Health and Safety: Common Sense Common Safety

Lord German Excerpts

Thursday 25th November 2010 Lords Chamber

[Lord German]

My Lords, I thank my noble friend Lord Young for his report and, in particular, for the wide range of aspects that it covers because of the range of interests that have to be accommodated in this very complex process, which needs to be simpler. A good health and safety regime must be able to get the balance right, and it is that balance that I will talk about first. Two watchwords that have been mentioned already are protection and proportion: the need to protect people in the workplace and to provide a proportionate response to risk. Getting the balance right between risk and the cost of precaution is the important challenge for us all.

Of course, saving lives and preventing injury must be in the forefront of everything that we do. In practice, as we all know, many people are getting the balance wrong. We have heard indications of that this morning. Some people are going too far, which leads to the sort of myths that we have regularly heard about and seen. We have just heard about pancakes. I suspect that many noble Lords will remember the story about mortarboards. Metro reported that students on graduation were not allowed to throw their mortarboards into the air, for fear that the sharp points might damage their heads when they came down. Just this month, the Liverpool Daily Post reported that potted plants would not be permitted because they were a health hazard. On the other hand, although these are myths, people are still being hurt in easily preventable accidents because not enough has been done to ensure safety. We need to draw the right balance.

I am very glad that my noble friend stated that the problem is not health and safety legislation, but its application and interpretation. He said that, alas, he could not find a problem with European legislation, and I hope that he and his colleagues will take that to heart. It is not European legislation but perhaps its transposition to the UK that is sometimes at fault. The noble Lord, Lord Bhattacharyya, talked about gold plating. Sometimes we have difficulty identifying gold plating in legislation that has been transposed. Are we providing a belt and braces or adding extra things that do not need to be there? Perhaps the Minister will comment on these issues.

My one concern about the report is the emphasis that it places firmly and primarily on the demands and pressures that health and safety legislation imposes on business. I would have preferred a report in which first principles were laid out: a discussion at the head of the report laying out the key issues, such as the purpose of such legislation and how we achieve a proportionate response. One thing missing, I find, is an indication of how many opportunities are lost in life as a result of the legislation—in particular, the play opportunities for young people, many of which have been lost because of health and safety concerns. These overarching issues are raised in the report, so it is a matter of emphasis and where they occur. I welcome the fact that the report covers the issues, but the emphasis is strongly on business, which unbalances the detailed arguments.

I agree that, in that balance, there must be a smaller burden on small and medium-sized enterprises. The compensation culture, with its no-win, no-fee cheques, must be curbed, but we must balance this with a life and injury-saving safety culture in all places of work. Worker safety is a serious matter that risks being trivialised by the often-quoted tales, some of which I referred to just now, which are reported frequently in the media and often turn out to be absolute myths.

However, as with many aspects of life and society—and the noble Lord said this at the outset—perception is all. Perception of a compensation culture has made business fearful of being sued. That perception has been fuelled by aggressive advertising and, for example, by those firms that make it their business to scan road traffic accident and court reports so that they can approach the injured party to seek business. I have no idea how successful such firms are in getting business, but it is clear to me that, if such approaches did not provide an income for claims firms and the associated legal companies that take on the cases, those firms would not engage in this sort of cold-canvass advertising, so there must be a profit in it. The recommendation to which the noble Lord referred for a simplified system for personal injuries in accidents of this sort is very much to be welcomed.

I want to touch on a couple of specific issues. The first concerns training for consultants. It is very important that we provide a qualification structure for those who work in this area. One of the consequences of having a partly unqualified workforce in this area is that people who are unqualified are likely to say, “Let’s strip out all risk from the workplace”, when in fact that is not quite straightforward and it is certainly not the intention behind the legislation.

Secondly, I want to say one or two words of caution about combining local authority health and safety and food safety inspectors. I draw on my experience of the E. coli outbreak in south Wales last year and the subsequent Pennington review, which made it quite clear that there were major faults in the food safety regime. I want to make sure that we do not lose those sorts of skills by combining functions.

Overall, however, I welcome the report. The challenge for the Government now must be to produce a well-rounded response—I am sure that they will do so—that looks beyond the report’s emphasis on the cost to business and takes a wide perspective on the issues raised as a whole. Therefore, when the Minister comes to sum up the debate, I would welcome his views on the need for a multifocused response.

Welfare Reform

Lord German Excerpts

Tuesday 16th November 2010 Lords Chamber

[Lord Freud]

My Lords, if I have forgotten what is in the White Paper, I stand reprimanded. In practice, we are looking to take elements of the hardship payments and the Social Fund generally and to localise them, including some of the loans. We are also looking at putting other elements into the universal credit. No hard decisions have yet been taken in this area. We are looking to finalise the restructuring of the Social Fund as we go into the next few weeks and introduce the Bill.

[Lord German]

My Lords, I am not surprised that the Minister has found that the ILO agreement suits the welfare reform proposals before us. However, does he agree that a symbol of a good welfare system is not how many people are locked and trapped within it but how many can be helped to get out of it? Is that not the reason why the welfare reform proposals are before us?

[Lord Freud]

My Lords, I thank my noble friend for putting his finger right on the point of these proposals: this is a measure to help people back into work. I should point out that a very similar measure, the Work for your Benefit scheme introduced by the previous Administration, was looked at by the Human Rights Joint Committee in the light of Article 4 of the ECHR, and it was found that it in no way went against people’s human rights or constituted forced labour.