Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013
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Baroness Lister of Burtersett (Lab)
My Lords, there are many issues raised by the claims and payments regulations, but I plan to focus on the two that I raised in our debates on the Bill itself: monthly payments and payment into single accounts. These are lumped together in the guidance on personal budgeting support in a way that is not very helpful, because there are different issues at stake—a point to which I will return. Nevertheless, some questions relate to both matters: most fundamentally on both, the Government have rejected the arguments made by many noble Lords for choice about payment arrangements in favour of a convoluted system of personal budgeting support, which I suspect is going to be pretty difficult and staff-intensive to administer.
The clear injunction in the guidance that alternative payment arrangements are not available through choice would appear to contradict the earlier claim in the guidance that they would be claimant-centric—that is, done with, rather than to, the claimant. While I am pleased that the policy is no longer couched in the language of exceptions and vulnerability, designed to make a claimant feel different, this still appears to be the underlying philosophy.
This is also revealed in the argument that alternative payment arrangements should be temporary, to avoid labelling claimants as financially incapable. However, it is the Government who are in effect labelling them as such, by requiring claimants, who may be managing as well as can be expected, to adapt to payment systems that might simply be inappropriate for their circumstances. This determination to change claimants’ behaviour smacks of the kind of social engineering that sits uneasily with both traditional Conservative and liberal philosophy.
In our previous debate on regulations, the Minister said that he would be able to provide more information about the department’s working assumptions on the number and proportion of claimants likely to be deemed to require personal budgeting support,
“as we work our way through”.—[Official Report, 13/2/13; col. 755.]
As that was eight months ago, is the Minister now in a position to provide more information, as requested by my noble friend Lord McKenzie of Luton in his excellent and passionate opening speech? In particular, will he provide the information regarding those requiring monthly or split payments? Does he accept SSAC’s warning that the range of claimants who require these facilities may be greater than anticipated?
Will the Minister also explain how personal budgeting support will work with couples? In the case of joint claimants, will just one or both need to demonstrate the facts as listed in the annexe to the guidance? Will the decision about whether it is needed be based on a joint interview? Will money advice be offered to both members of a couple and will the Minister also advise us about the progress made with financial products such as jam jar accounts, which he earlier presented as a solution to just about all payment problems?
In July, the Minister was still able to tell the Work and Pensions Select Committee only that he hoped to be,
“coming up with something in the not-too-distant future”.
That is not very encouraging. Has he also taken on board the Social Market Foundation’s warning that jam jar accounts, while potentially beneficial,
“have only partial applicability across the claimant population”,
because of strong resistance from a significant number? Part, though not all, this resistance was because of the likely cost to the claimant. As the Communities and Local Government Select Committee observed:
“More information is needed … on how these accounts would work and who would pay for them”.
The Social Market Foundation cites evidence from the financial inclusion taskforce of the lack of appetite for financial products among about half of the unbanked. Those without a bank or Post Office account will be able to use the Simple Payment service to receive their benefit. As the Minister confirmed in a Written Answer, the problem with this is that it requires claimants to withdraw the whole amount, and not part, of each benefit payment at the same time, up to a limit of £600. This is potentially a lot of cash to withdraw in one go and leaves the claimant vulnerable to both robbery and temptation. Although it is estimated that only about 60,000 working-age claimants will be paid in this way, it is a cause for concern. Why is it not possible to draw part of the payment, as this would surely often be the responsible thing to do?
This brings me to the question of monthly payments, because if it were a more frequent payment, this would not be such an issue. Since noble Lords from across the House first raised concerns about monthly payments, evidence has been mounting to demonstrate just how un-claimant-centric this policy is. It is clear, from both government and independent research, that a significant number of claimants—particularly those out of work—see this as posing a real risk to their financial security. They fear it will upset their budgeting strategies and leave them running out of money.
In a DWP press release about early findings from the direct payment demonstration projects, the Minister acknowledged that the findings,
“show that most people on low incomes manage their money well.”
As SSAC has noted, one of the key lessons was that:
“Budgeting support needs to recognise that people on low incomes often budget on a fortnightly or weekly basis.”
Has it not occurred to the noble Lord that there is a connection here? As the demonstration projects show, many people on low incomes use fortnightly or weekly budgeting strategies as a means of managing their money well. Research shows that mothers, in particular, often take great pride in doing so. By forcing them to change their budgeting strategies, the Government could be setting them up to fail, a message that comes across clearly from the SMF study cited by my noble friend.
That is likely to have an adverse impact on morale, as well as living standards and, in doing so, could undermine the very objective of making claimants more work-ready. Where a more frequent payment is agreed, it will be paid in arrears, in addition to the new seven-day waiting period for some claimants. As the Women’s Budget Group has pointed out, this means that,
“claimants would be paid only half what they are owed for the month seven days after the end of that month and will then wait another half month for the remaining half. This would seem to contradict the Government’s wish to help those who find monthly payment most difficult and can result in hardship cases and requests for advance payments.”
Women’s Aid, to which I am grateful for its briefing, warns that most survivors fleeing domestic violence will have no alternative to claiming a budgeting advance. I appreciate why the Government are not keen to make a half payment in advance, but does the Minister accept that it would create fewer problems than paying in arrears?
As I said earlier, the question of payment into a single account versus a split payment raises rather different issues to that of monthly payment, even if both are likely to have adverse gendered impact. It is about access to, and control over, money rather than about managing it. The erroneous treatment of split payments as a management issue is illustrated by the guidance on when to review alternative payments. It says that the adviser,
“will decide that the claimant is now capable of managing the standard monthly payment.”
Where a split payment has been granted because of domestic violence, as opposed to a partner’s financial mismanagement, such advice is surely irrelevant. On what basis will a decision whether to continue a split payment be made? Does the Minister accept that there may be some situations where it cannot be treated as a temporary measure?
At present, the guidance seems to suggest that split payments will be an option only in cases of financial abuse or domestic violence. Can the Minister confirm that they will not necessarily be restricted to such cases? With whom will an adviser discuss this question and, even more importantly, the initial decision to make a split payment? Will it be both partners, and if so, will it be discussed separately or together, or will it be just the partner in need of diversion? If the latter, what will the other partner be told about the interview? How will advisers negotiate with gendered power relations which are likely to be at work between the partners to ensure that they have a true picture of the situation?
The department’s study of the implementation of JSA DB easement revealed a reluctance to disclose domestic violence to advisers, a concern that was raised by SSAC. This is likely to be the case here too. How will advisers detect domestic abuse, particularly when it is not manifested physically? Where a male partner uses the threat of abuse of various kinds to control a female partner, it could well be kept hidden. What steps can be taken to ensure that a split payment, which reduces the money paid to the perpetrator, does not provoke further domestic violence? Will the Minister indicate what training in financial abuse and domestic violence is proposed for universal credit advisers? More generally, what is the department’s response to SSAC’s recommendation for an effective training programme designed to ensure that advisers have a sufficient understanding and capability to manage the complex and dynamic nature of risk and vulnerability within universal credit?
It is important that the evaluation does not conflate the effects of wrapping up a number of benefits in one payment with payment into a single account under the rubric of a single payment, as did earlier departmental research.
At present, the guidance seems to suggest that split payments will be an option only in cases of financial abuse or domestic violence. Can the Minister confirm that they will not necessarily be restricted to such cases? It is not always possible to foresee situations in which they might be appropriate, and it would therefore be wrong to rule out other scenarios in advance. Indeed, Fran Bennett, to whom I am grateful for her briefing, suggested adding the scenario where a lone parent with children from a previous relationship takes an unemployed new partner into her rented accommodation. It may not be conducive to the success of a new relationship if one partner has control of all their joint universal credit.
I apologise for asking so many questions, but I cannot find the answers in the public advice and guidance. Reading that guidance, I am not convinced that the department fully appreciates how delicate and difficult an issue this is in any couple where there are difficulties of any kind with regard to control over money. Indeed, only last week, in discussing other regulations, the Minister drew attention to the extent of domestic abuse. If the fears of organisations such as Women’s Aid are realised, I suspect that the Government will have to revisit the policy and rethink the default position to ensure that both members of a couple have direct access to their share of universal credit, if they want it.
The Government’s refusal to listen to reason on these key payment issues could derail the successful implementation of universal credit, which is already looking somewhat shaky, to put it kindly. During the passage of the Bill the noble Lord, Lord Boswell, said,
“if this is the nail in the shoe that gets the whole thing discredited because it does not work or gives rise to disturbing social consequences, we will have lost the great prize of universal credit that many of us want”.—[Official Report, 10/10/11; col. GC 434.]
We should remember the lessons from the child support legislation, when widespread consensus about key principles meant that insufficient scrutiny of the practical details led to one of the worst examples of social policy-making in recent history. I hope that even at this late stage, the Minister will take heed and remove the payments nail from the universal credit shoe.
Lord German (LD)
My Lords, I agree with some of the sentiments that we have just heard from the noble Baroness, Lady Lister, and with some of those that we heard in the opening speech of the noble Lord, Lord McKenzie. It seems that there are questions which need to be asked and questions which are still outstanding. However, perhaps some of the clues to the answers that we need to those questions can be found within the noble Lord’s opening speech. He said that we do not yet have the evidence from the rollout of universal credit to give us the learning pattern that we need to establish the route forward for some of the detailed questions which lie before us. They are real issues.
Mesothelioma Bill [HL]
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Lord Selsdon
My Lords, last time I declared an interest as someone who had worked in the asbestos industry and I made a suggestion to the noble Lord, Lord Alton, which I have researched further. That is that the amount of clean-up that will have to take place over many years is the perfect target for a levy that might be placed upon it for research purposes.
Lord German
My Lords, before I seek the same dispensation that the noble Lord, Lord Howarth, sought at the beginning of his speech, I will say a few words about the amendments which are before us in order to give my noble friend time to locate the answers to them.
I appreciate all the work that the noble Lord, Lord Browne, has done to get to this point. He referred to remote and hypothetical places where things might occur. I hope that what I will say is not hypothetical, although I suspect that it will be remote. I am worried about the omission of the words,
“at the time of the person’s exposure to asbestos”,
from the new provisions now proposed as Clause 2(1)(ca) and Clause 3(1)(ba). The hypothetical, or rather remote situation, is the following. A company at the time of a person’s exposure did not have employer’s liability insurance—it was behaving negligently—and subsequently, when that person had left that company’s employment, it secured employer’s liability insurance in order to become compliant. As this is written, that would mean that there could be a possible—or not possible—claim against that employer’s liability insurance, which was subsequent to that person’s period of employment. That very remote case leads me to wonder about the omission of those words from the second part of each of those clauses and whether they need to be inserted, or rather made clear. Of course, maybe this could occur in the regulations that may follow from the rules of the scheme that pursues this.
I will quickly say a few words about the Bill. As regards the achievements that noble Lords have made in this House and the work they have done towards the changes that have been made to the Bill, in each of those three or four key issues there has been a change and a degree of success which we ought to recognise. I will first address independence and oversight, which was raised by noble Lords from all sides of this Chamber. They are both very important: the first ensures that the people who manage the process do not rule the way it operates, and the second ensures that there is a degree of observation of how it is run by all those who are, if you like, the actors on the stage who are affected by this dreadful disease.
The second issue is that of research. The noble Lord, Lord Alton, has already referred to the work which is being done by the two Ministers present today, my noble friends Lord Howe and Lord Freud. Clearly, there are differences of view as to how that might happen—statutory versus non-statutory. That is probably the way this House deals with issues: they have been raised, and although the solutions may not be the same ones that noble Lords wanted, they are, none the less, an approach to doing research into this disease.
One way in which we can keep track of what is happening in this area is by scrutiny of Ministers. It is not a matter of whether the Minister who follows is a good Minister—to rephrase the words of the noble Lord, Lord Alton—but of being able to hold Ministers to account. That is what Parliament can and should do. These things should not be kept from the public eye. I am sure that, in years to come, noble Lords will pursue this issue strongly with Ministers of whatever persuasion, from whichever part of the House they come, in order to ensure that we better understand this dreadful disease and how it can be treated and ameliorated. It is important also to take an international approach and work with those who suffer from this dreadful disease in other parts of the world.
The third area that has been of importance to your Lordships’ House during the course of the Bill is the level of compensation. Clearly, a major issue at the beginning was the percentage of civil damages that was to be given, according to a ratio or tariff. Noble Lords sought to raise the bar. There was some success, and, given the public interest in these matters, clearly on one side you wish to ensure as much compensation as you can, quite rightly, for sufferers who cannot trace their employer or their employer’s insurance company. However, you do not want to put another burden on companies that are not responsible for what happened, which would in turn pass on the costs to customers, who would have to pay them. We may not have reached the right balance but I pay tribute to the Minister for moving the bar upwards against all the pressure he was put under during the passage of the Bill.
There are ways in which the Bill can become a model for dealing with other forms of industrial illness relating to asbestos, and with other industrial diseases. The situations may not be exactly the same because, appropriately, this measure is directed at a unique and terminal illness that is dreadful in every aspect. However, it may be that we can derive other models from some of the work that has been done in the Bill.
Finally, I congratulate the Minister on his personal commitment. Many noble Lords will know that he has personally taken this as a challenge that he will see to its conclusion. The job was started by the previous Government, and the noble Lord has obviously taken it a step forward from where it was left by that Government. I pay tribute to the starting point. However, to see it to its completion, having undertaken what must have been horrendous negotiations with people who were not responsible but who had to pay for the people who were responsible and had disappeared off the scene, cannot have been easy. When eventually the fly on the wall in those meeting rooms publishes its memoirs, I am sure that we will be able to see the level of pressure brought by the Minister. From these Benches, I congratulate him and say that it was a job well done. We have taken a step that will lead us in future to deal with problems associated with this disease in an appropriate way. I hope that we will see an early start to implementation, so that people will no longer have to wait for compensation in cases where their former employer, or its insurance company, has gone out of business.
Mesothelioma Bill [HL]: Impact
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Lord Freud
My Lords, I know that everyone in this House would agree with the proposition that we want to get as much money as we possibly can to mesothelioma sufferers, particularly those who, through no fault of their own, have not been able to trace the insurer that should be paying them the employers’ liability compensation. The reality is that we cannot trace the insurer in roughly 10% of cases. We are trying to make sure that we trace as many as possible. They will get the full amount, and then get a payment—not quite as much as I would want, but a safe, sustainable payment, for this group of people, and that is a lot better than the nothing they are getting currently.
Lord German
My Lords, I congratulate the Minister on bringing the good insurance companies to provide compensation for this fatal industrial disease for those who are non-traceable or wayward in their insurance. Will my noble friend tell me what guarantees he has that the insurance companies will not simply pass on the costs to their customers in their bills? If he has no guarantee of that, it might well happen anyway. Surely it would be worth the little extra it would cost to bring that 70% closer to 100% in order to be able to give compensation and help to sufferers and their suffering families.
Lord Freud
My Lords, as my noble friend pointed out, this scheme is based on a levy on insurers who are active in the market today, not those who may have actually been responsible for the historic liability. It is very difficult to assess who takes the real burden of the cost. I have been very anxious to get to a position where I am as assured as I can be that the bulk of that cost is carried by the insurance industry, not by British industry as a whole. The risk is that if the levy is too high, the amount would have to be passed on by the industry.
Mesothelioma Bill [HL]
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Lord German
Following that point, I will quote from a House of Commons document, Mesothelioma: Civil Court Claims, dated 22 March 2011. Under the section marked, “Claimants other than employees”, it reads as follows:
“In a number of cases, claims have been made by those, including family members, who have contracted mesothelioma following secondary exposure to asbestos. Each case is determined on its own facts”.
I dread to quote the following fact:
“For example, the Ministry of Defence admitted liability for the transmission of mesothelioma to Mrs Debbie Brewer, whose father died from small-cell lung cancer … after a career as a lagger at the Devonport Dockyard. He had greeted his daughter each evening whilst wearing dusty overalls from which she is believed to have inhaled the fibres that caused her disease”.
It goes on to cite another case. There have obviously been some cases. The one I have quoted admittedly has the Government as the employer, but there is one involving another company further on.
Lord Freud
My Lords, I am grateful for those observations. I am sure that we will have a chance to discuss this in more detail later. I now move to—
Lord German
My Lords, I am grateful to the noble Lord, Lord Howarth, for raising these issues, because it gives me an opportunity to raise some of the questions around legal costs and about the work that has to go into preparing a case under the proposed scheme.
My first question concerns civil cases and the information that has been provided to us in the tariff about the awards. Is it net or gross, and does it include the legal costs? Have they been excluded from the awards or do they come on top? If they are on top, we need to know what kind of money has been paid to lawyers when a claimant has been awarded in order to be able to judge whether the figures in the documentation before us are accurate. I had always assumed that the impact assessment would provide accurate information, so I was rather stunned to realise that the figures of £7,000 for a successful applicant, £9,000 for an unsuccessful applicant downgraded to £2,000, is something of a leap. If you are a sufferer or the relative of a sufferer, engaging a lawyer to do the preliminary work that is necessary to undertake this sort of action presents some sort of risk if the application fails. I want to explore that area as well.
The impact assessment gives an estimate of unsuccessful legal fees as £3 million out of a total of £24 million. A rough division shows that one case in every eight is unsuccessful, so if you are the one person out of the eight, presumably in a civil case action you are going to have to find those fees, unless of course you can find a no-win no-fee lawyer. I raised this issue at Second Reading. It seems that if you were about to embark upon this legal route, unless there is some form of support guaranteed at the end of it it would be the no-win no-fee lawyer to whom you would have to turn. I would be grateful if my noble friend could confirm that or tell us what alternatives there are.
The issue of evidence that requires a lawyer is quite substantial. Having now had the benefit of seeing the draft rules for the scheme, Part 1 paragraph 2 lists the evidence that an applicant may be required to provide. It is quite substantial and includes the history of employment and the companies to which the applicant is referring. In civil cases the courts have made it clear that you have to prove negligence, and three tests are given in the Appeal Court judgment. Three measures have to be satisfied in order to prove negligence. My second question, therefore, is: does the applicant have to prove negligence? That would be far more difficult to do in a case where the company or insurer is not present, unless the word of the applicant is determined to be acceptable.
Mesothelioma Bill [HL]
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Lord German
My Lords, first, I congratulate my noble friend the Minister on bringing the Bill forward in this form today. If noble Lords read the response to the consultation from the insurance industry, they will see an almost opposite view to that expressed within the Bill. I congratulate my noble friend on turning the British insurance industry around to support this Bill. It builds on a voluntary code and the consultation. I also echo the tribute to the noble Lord, Lord McKenzie, who has been steadfast in bringing these matters forward. I see this as a continuation of his work.
There are issues where this Bill needs questioning and we need to develop our understanding further. However, the other important factor resulting from this Bill is that the process will be speeded up. Where a civil process now takes perhaps two years, we should see a much more speedy process in place for all claimants of around four to five months when it is put together. That is the ambition of this Bill and the opportunity that arises from the portal.
Unfortunately, we need this Bill for a longer period. It may have a finite lifespan but that may be 30 years or even more. The British Lung Foundation suggests 30 years but it may well be that this Bill needs to be in place longer. For that reason, it is important that Parliament maintains its connection with the scheme. There will undoubtedly be inevitable changes and tweaks over the coming decades as the scheme beds in and the initial detail on the implementation will require careful scrutiny to minimise the potential for future change and to maximise certainty as far as possible. Therefore, it is a little strange to see that Clause 1 makes no reference to Parliament when we know that there is much detail still to be determined. I hope that my noble friend Lady Thomas’s Delegated Legislation Committee will be able to report on this matter before we reach the later stages of the Bill.
There are some scoping issues which need discussion. First, there is the date of implementation. It is inevitable that some sufferers and their dependants will fall outside the timeframe for involvement in the scheme. We have already heard that from the noble Lord, Lord McKenzie, and my noble friend the Minister. I understand, of course, that the insurance industry had to be brought onboard with these proposals and it was essential to attain its commitment to the funding levy. However, with average claims coming in at £150,000 plus costs, it is a bitter blow to those who may fall just outside the dateline for the new scheme. I would be grateful if my noble friend the Minister could inform your Lordships’ House of the balance of issues which led to the choice of 25 July 2012 as the starting date for this new scheme. It is, of course, the date on which the Government announced their intentions in respect of the scheme but that in turn was more than two years after the department’s consultation had ended.
I listened very carefully to my noble friend’s explanation about other diseases and I very much appreciate that mesothelioma is a unique disease that has a long tail and is virtually always fatal but there are some similarities with other industrial diseases, not least pneumoconiosis. This scheme could therefore act as a model for others. Indeed, the Association of British Insurers said:
“If it proves successful then the Secretary of State can make provisions to extend it to look at other disease types”.
Does my noble friend the Minister support that view, and can he give an indication as to whether a new scheme would require primary legislation?
The second issue referred to is the 70% threshold. We need to understand how this figure has been arrived at. Why is it not 75% or 80%? I understand the need for a tariff-based system, but surely this would keep the incentive to go through the solvent employer/known insurance route even if it was higher. There is a curious statement from the Association of British Insurers on why this level was set:
“As the payments will be made based on a straightforward tariff, some people will receive more compensation under the scheme than they would have received in civil compensation, and the aim is to set the tariff at a level that means this will only happen in a small number of cases”.
This indicates that the overall level of the tariff in the proposed scheme, expressed as a percentage of civil claims, will always be set at a level where very few claimants will get more than a civil claim. Would it not have been better and fairer to raise the percentage value but to put a cap on the amount which would have kept it at or below a civil-system payment? I am told that the current average payment under the existing system is in the range of £150,000 plus costs. A 70% tariff will mean that the average payment under the proposed scheme will be £105,000 to £108,000. Surely that is far more of a differential than what is required simply to avoid claimants taking this new scheme course, rather than following the solvent-employer or known-insurer route?
There are some issues relating to legal matters. Although my noble friend the Minister said that they were not interdependent, they are closely related. Two of them involve information that noble Lords might need at this stage. One concerns up-front costs. Legal costs are not a part of the Bill, but the MoJ is about to make an announcement on its proposals. However, the successful outcome of a claim under the current system is virtually certain of having an award of costs with it. Implicit in the new scheme is support from a solicitor. The very helpful diagram from the ABI of how this will all work actually puts the instruction of a solicitor into the structure. Given that there is always a cost to instructing a solicitor, it would appear that this scheme structure is an encouragement to participation by no-win no-fee lawyers.
Secondly, will the level of evidence needed be the same as in civil proceedings? Cases do not always succeed and the Court of Appeal ruled in 2007 that workers making a civil claim for compensation for mesothelioma must first prove employer negligence. I would be grateful if my noble friend the Minister could tell me whether that judgment has been overturned subsequently by the courts. If not—and more generally—proving employer negligence where neither the employing company nor the insurer are traceable will certainly be a more difficult task.
The British Lung Foundation points out the appalling record of investment into research into this terrible disease prior to 2010. Four insurance companies then put money into a three-year scheme investing £3 million in total. Now, with that scheme near its end and the four insurers saying it is unfair that this research funding is spread so thinly across so few insurance companies, surely my noble friend would agree that it is time for a rethink. Naturally, the insurance industry will say that the Government must play a big part but the Bill provides a new impetus for insurers to work collectively in the broader public interest. A small annual contribution from each would secure consistent and long-term research into this dreadful disease and its consequences. Perhaps it is time to add a small top-up levy to secure this fundamentally humane objective.
This is a milestone Bill. It provides the architecture for an end to the current compensation process, which is rather like a lottery. It provides a response which is the sign of a compassionate and caring society. The architecture of the Bill is correct. The direction of travel is absolutely correct. I commend my noble friend the Minister for bringing it before us.
Housing Benefit
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Lord Freud
My Lords, we are looking to protect people in difficult circumstances by looking to the local authorities to apply the discretionary housing payments, which have gone up enormously. Overall, they are running at £150 million this year, and at £360 million for the SRS. Our expectation is that these hard cases will be looked after locally.
Lord German
My Lords, as my noble friend the Minister has just explained, there are a large number of exemptions which are made through local authority discretion. The Government have, however, insisted on a certain number of exemptions, and one of the most welcome is the recent exemption given to a disabled child who was unable to share a bedroom. Will the Minister extend that commitment to include a disabled adult who is unable to share a bedroom, and so put this matter beyond doubt, rather than leave it to the discretion of local authorities?
Lord Freud
My Lords, we are looking for local authorities to deal with this matter with adults. We think that there is a difference between disabled children and disabled adults in that disabled children cannot know whether they pose a risk to themselves or to another child whereas adults and couples are able to exercise choice in how they run their lives.
UK: Poverty
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Lord Freud
My Lords, we have a benefits system that is designed to provide the basic needs of people who are poor. Clearly, there is increasing local provision of food banks. Actually, it expanded very dramatically under the previous Government. Interestingly, the really big expansion has been since September 2011 when jobcentre advisers were allowed for the first time to direct people towards them.
Lord German
My Lords, relative measures of poverty sometimes have bizarre consequences. An example has happened recently. As the economy contracted, hundreds of thousands of children were notionally lifted out of poverty. What credence does the Minister give to a better and wider form of measurement of poverty that looks at interventions and at ways of removing barriers for children, such as that proposed by Save the Children, which would allow things such as the pupil premium to be included in the measure so that we fully understand the impact that these things have on child poverty?
Lord Freud
My noble friend makes an important point. I should make it clear that I believe in the relative poverty measure, which is a way of measuring what happens over the medium-term period, although there have been some rather perverse impacts in the past couple of years in the current recession. What is really important is that we drive our attention to the underlying causes of poverty. That is what the current consultation is about. We will be reporting on how to tackle it in the spring/summer.
Jobseekers (Back to Work Schemes) Bill
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Lord German
My Lords, I want to address the Bill itself, but before I do that I want to make a few comments on the amendment before us today. When I first read the amendment’s text last evening, when it was produced, I had a bit of a flashback to earlier student days when you had composite Motions and amendments and the call for separate votes to be able to unpick the various parts. While I acknowledge that there are issues fundamental to this Bill that need to be raised, they are appropriately the issues that would and should be raised in Committee on Monday. I expect that we will deal with those issues, so the amendment as a composite presents a very difficult picture for people to decide upon. However, there is one crucial factor running throughout the amendment: the issues raised by the Constitution Committee of this House on retrospection and fast-tracking. Before I ask my noble friend to comment on that, I refer to two paragraphs in the Constitution Committee’s report—the last in respect of retrospection, and paragraph 12, which says:
“it is incumbent upon the Government to explain to Parliament why they have chosen to proceed by means of fast-track legislation and to reject the alternative options”.
I listened very carefully to my noble friend at the outset, and I hope that he comes back to that matter in his summing-up, when he may be able to give this House an explanation.
Subject to the Government providing those explanations, I support the Bill for exactly the same reasons as the Front-Bench Labour spokespeople in the other place, who said that they,
“do not want to risk an additional £130 million cut to benefit spending over the period ahead … Nor do we want to be in a position in which people who were sanctioned months ago—in many cases, well over a year ago—have to be refunded”.—[Official Report, Commons, 19/3/13; col. 825.]
I agree with the Labour Party Front Bench on those issues and why the Bill is before us today.
I want to say something about the nature of secondary legislation and its scrutiny. It is Parliament that passes and scrutinises regulations, and it will probably be Parliament that has to decide how it does those things in the light of any subsequent changes brought about by the courts. Of course we are not at the end of this process yet, as I have said already. There are important lessons to learn from these problems to see how we can move on in a better way.
The court determined on narrow issues and on insufficient detail and content of the schemes and regulations, and that the notices given to claimants did not specify the range of sanctions that could be used, but it upheld the policy intentions of the Government’s work schemes and backed the right to require people to take part in programmes that would help to set them into work. Up to 1 September last year, 200,000 people found work through the Government’s Work Programme. Appropriate work experience is a good thing, and it helps to build the confidence of jobseekers. Increasing employment levels in our country since May 2010 have meant that since that time nearly 250,000 fewer people now claim out-of-work benefits, in a period of huge economic difficulty. However, I wish to discuss the operation of these schemes. We know that there are no targets and no league tables for Jobcentre Plus on sanctions. Therefore, the key question I want to probe is how we can better undertake these tasks, which is fundamental to ensuring that we get the best out of existing programmes.
We know from the evidence provided by the DWP that the overwhelming majority of those who have been on the Work Programme are satisfied with it, but, of course, there is always room for improvement. Three-quarters of those who attended the programme said that they believed they were more attractive to potential employers and that their personal confidence had increased as a result. That is a powerful outcome for a group of people who are some distance from the labour market. Clearly, the majority think that they have got closer to it. However, the programmes could offer better outcomes in many cases. The first of these areas concerns engagement with the third sector. When the main contractors were appointed to run the Work Programme, there was much discussion about subcontracting to the third sector. I would be grateful if, when he sums up, my noble friend could tell us to what extent that engagement has occurred given the unusual skills of people in the third sector in dealing with individuals who find themselves in difficulty.
The second area that we ought to probe is the change of culture within Jobcentre Plus. There is a balance to be struck between codifying everything passed on to the JCP and giving advisers the discretion to interpret issues in the light of claimants’ circumstances. There is a question to be asked about the level of top-down instruction, which in the past has been very much the way of working. I looked up the instruction manual to ascertain what constitutes good reason or good cause for people not undertaking to do things they have been asked to do. You can read through 16 pages of guidance, plus another chapter. However, if you ask people in general what they would do in such circumstances, they reveal an all-embracing understanding of the issues. It is a very complex area and a vigorous interpretation of the guidance has led to the problems being experienced in some offices, particularly in relation to targets for sanctions, which have been mentioned today.
Ministers have had to come down hard on clear misinterpretation, but have signalled that they are pursuing the empowerment of decision-makers as a critical cultural change. There must be a role in all this for flexibility, discretion and sensitivity. The legal case behind today’s Bill has thrown up other cases. As regards the cultural shift that Ministers have outlined, a basic structure needs to be provided vis-à-vis the way Work Programme claimants are handled. That structure should have three components. First, there should be a meeting with the provider or JCP contractor. Often there is no face to face meeting between the provider and the claimant. However, it is necessary to have an intelligent conversation about their future needs. Those needs should be clearly communicated and agreed. The outcome also needs to be agreed between both parties, rather like the new contracts proposed for universal credit.
Secondly, it is important to try to fit the placement to the person. It is important to establish the work habit, obviously, but an appropriate placement is needed that suits the requirements of both parties. Thirdly, the Government should not get in the way of serious job opportunities. They need to give people space to find their own placements. Just yesterday, I heard a case of someone with a qualification in photography who was offered a job in a do-it-yourself shop but found a more appropriate placement in a photography shop, which was accepted as an appropriate placement. I welcome the independent review process. We now need to see new detailed terms of reference. I always make the plea to my noble friend the Minister that any evaluation, rather than being considered a milestone, should be rolling so that you can learn lessons as information comes before you. I hope that we will hear more about that later. I look forward to hearing the Minister meet the concerns of the Constitution Committee, but otherwise I am happy to support the Bill.
Lord Foulkes of Cumnock
Could the noble Lord help me? I remember when the Liberal Democrats were on this side of the House all the handwringing about retrospection and fast-tracking of legislation. I am not clear from what the noble Lord said whether he is in favour of the Constitution Committee’s report or supports the Government on both retrospection and fast-tracking. Could he make that clear to the House?
Lord German
Yes, I will. It is perfectly obvious that the noble Lord’s party did the same thing when it was in power. There was retrospection in legislation. I can think of the videogames legislation, which has some very great similarities to this Bill. My plea to the Government is to answer the questions posed to them by the Constitution Committee in this debate so that we can have that explanation. I quoted the two paragraphs of the report. I am sure the noble Lord has that in front of him, so he can look at paragraphs 12 and 15. Those are the two questions I want answered.
Baroness Hollis of Heigham
In the opening stages of the noble Lord’s speech, which was very interesting, he referred to remarks from the Front Bench in the debate. I have the Hansard here. Could he give me the column reference for his quotation?
Lord German
Certainly. It was col. 825, about half way down towards the bottom of the page.
Lord Crickhowell
On the point about paragraph 12, as a member of the Constitution Committee I raise the point that in paragraph 5, and in footnote 8 beneath it, we made clear that the Government provided, both in the Explanatory Notes on the Bill and in the letter to the noble Lord, Lord McKenzie, that has been circulated, an explanation of why this fast-tracking was necessary. We were also clear that we made no comment in the report about the policy of the Bill and that this was a purely constitutional point.
Lord German
I fully accept that. The issue raised by paragraph 12 is why the Government rejected the other options.
Guardian’s Allowance Up-rating Order 2013
Lord German Excerpts(11 years, 1 month ago)
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Lord Eatwell
My Lords, I am grateful to the Minister for introducing these statutory instruments. He concentrated, as indeed I will, on the uprating of tax credits. He said little about the guardian allowance uprating, which is the only issue that gives rise to the traditional debate between RPI and CPI, which I shall certainly leave aside. Enough has been said about that to expose the Government’s use of that device to extract money from the welfare system.
The noble Lord pointed out in his introductory remarks that the measures that he described were withdrawing a total of £2.7 billion, I think it was, from the pockets of the poorest in this country. These contemptible measures represent a fundamental economic failure and a fundamental misunderstanding of the role of tax credits and of the security system in our economy. He referred extensively to the idea that this was somehow fair. In particular, when addressing the issue of working tax credits he justified what is being done by referring to the personal allowance change, from which the noble Lord himself benefits; from the fuel duty change, from which the noble Lord himself benefits; and from the freezing of council tax, from which the noble Lord himself benefits.
My point relates not to the motivations of the noble Lord but to the fact that these benefits benefit everybody in the economy. The changed personal allowance benefits 24 million people, which is just about every taxpayer, including the noble Lord and me. These measures are no justification whatever for withdrawing support from those who are on the lowest incomes and who need support the most.
I was struck by the table of the decline in benefits that was attached to the Explanatory Memorandum for these measures. The basic element of tax credits is down by £45 in real terms. The second adult element is down by £25 in real terms. The lone parent element is down by £25 in real terms. For child tax credits, the family element is down by £15, the child element is down by £30 and the disabled child element is down by £30. These may seem trivial sums, but for families who are absolutely on the edge of survival they are absolutely fundamental. The £2.7 billion that the Government are extracting from this part of our community in order to attempt to reduce the deficit is a direct attack on targeted benefits that were actually associated with the poorest in our community.
The Government have also, perhaps unintentionally, weakened a fundamental aspect of the Chancellor’s economic policy. The Chancellor has referred on several occasions to the fact that his measures are designed to attack the structural deficit and not the deficit as it occurs from year to year, as it may be affected by fluctuations in economic activity. There, the Chancellor has pointed out, the effects of any decline in activity are mitigated by what are called the automatic stabilisers: the fact that benefits rise automatically as people become more impoverished and are reduced automatically as the economy grows, although the Chancellor has of course not experienced that. Now we are weakening the automatic stabilisers.
Have the Government calculated the effect on the overall multiplier consequences on government expenditure of the weakening of social security payments that we have before us? Can the noble Lord tell us what the overall impact will be of this reduction in spending for the poor on the level of activity in the economy, now that we know, by virtue of the IMF, that the multiplier consequences of reducing government expenditure are much higher than was contained in either the Treasury’s or the OBR’s calculations? Can he tell us the impact of this on the overall level of activity and the consequential impact on the increase in the deficit that these spending changes will bring about? It is a trivial economic error to look at first-round effects and not to look at subsequent consequences on levels of activity and revenue.
We have before us the first step in a steady attack on the welfare system, which is to be progressed year after year over the next three or four years. I find it a dispiriting image of our country that we are prepared to do this in the most dire economic circumstances, attacking those who are the weakest while simultaneously, from this April, reducing the top rate of tax for those with the highest levels of income, over £150,000, from 50% to 45%. The noble Lord referred to this group, telling us that the top 20% are contributing a major share of tax revenue to the reduction in the deficit. Does he not realise that, arithmetically, that arises because they are so darn rich compared with everybody else?
The distribution of income in this country has deteriorated and become so skewed that the higher tax revenues contributed by those on higher incomes are a direct function of the extraordinarily high pre-tax incomes observed in the top portions of our society. The Minister’s references to the proportion of revenues now being derived from the purchase of £3 million houses, or from the impact on £1.25 million pension pots, will seem like a Hollywood fantasy to the people with whom we are dealing in these measures.
Will the Minister also confirm that the reduction in real incomes of the lowest two deciles in the economy is greater in proportion than that of the top decile, once one takes out the tax increase introduced by Alistair Darling, which the Government always put into their calculations in order to produce the spurious argument that the top decile has contributed most? Once one strips out the measures taken by the previous Labour Government in the March 2010 Budget, the proportionately larger contribution of the top decile disappears.
These measures directly attack the weakest members of our society and reduce the overall welfare budget at a time when it is needed more than anything else. It is not only inequitable but economically illiterate, because it reduces the transfer of funds to that section of society that provides the overwhelming economic benefit of spending every penny it gets, thereby helping to sustain activity in the overall economy. These are vicious measures from an economically illiterate Government.
Lord German
My Lords, I had hoped that we would not have a second round of our debate in the Chamber about the welfare uprating Bill, but clearly we have just had it. It slightly disappoints me because we will be re-rehearsing similar arguments. However, I must say to the noble Lord, Lord Eatwell, that I support interventions that help people in their lives. I support very much the pupil premium, and investing heavily in helping young people, particularly young children, to find a better way of life. I also support the uprating and raising of tax thresholds, because we can raise the bottom tax threshold and adjust other tax thresholds in a different direction.
I note also, by way of a second round in this debate, that I heard no answer to the question about savings, except the £100 million according to the OBR, which was the only example that we heard of another way of saving money. In order to get this concretely in my mind, I would be grateful if my noble friend would say, for the year 2013-14, what the savings will be from the freezing of tax credits and from the elements that are before us in these regulations when they are added together. We can then compare them with the £100 million offer that we have just heard.
I have two further small questions. First, the Government are obliged under the Tax Credits Act 2002 to review the level of tax credit payments. They have done so for 2013-14, but while the review may have been made public it is not very easy to find. Perhaps my noble friend would either point me in the direction of the report or send me a link so that I can have a close look at it. I should add something in response to the noble Lord, Lord Eatwell, who talked just now about the freezing of council tax benefits. I live in a Labour-run authority and my council tax has gone up. It does not benefit me at all. It is also managed by a Labour-run administration.
The second part of my question relates to the guardian’s allowance. I can understand why it has been excluded, given that the majority of people who are guardians will tend to be of an older age. I wonder whether that is the only logic or whether there is another logic behind uprating fully by CPI. I welcome the move, but I just want to understand why it has been taken.
Loss of Tax Credits Regulations 2013
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Lord Eatwell
My Lords, I am grateful to the Minister for introducing these regulations. Broadly, from this side of the Committee, we support them wholeheartedly. However, they raise a number of questions in my mind which I would be grateful if the noble Lord could answer.
On my first, broad-brush, question, the Minister referred to the scale of benefit fraud as £1.9 billion a year. Can he tell the Committee how this compares to the Treasury’s estimate of the losses due to tax avoidance and evasion? I think he will find that the estimate of losses in those areas is many, many times greater than that for benefit fraud, even though there is, quite rightly, a condemnation of benefit fraud.
The specific measure, as the Minister told us, removes benefit from those who have been fraudulently claiming it. Has the department or the Treasury investigated whether those people from whom benefit is being removed actually needed the money, and whether there are those who did not need the money? If a relatively wealthy crook is pursuing benefit fraud, taking the benefit away from them costs them nothing. They have just taken a punt on a particular scam and now they have lost out, so this measure does not really matter very much. However, if they were people who were actually impoverished but for some reason or other were not adequately covered by existing regulations and were then behaving fraudulently, they may not now have anything to live on. What are they supposed to do? Do we have an estimate, among these fraudsters who are depriving us of £1.9 billion, of those who needed the money and those who did not?
I raise this particularly because the Minister’s welcome remarks on child tax credit suggest that there is a feeling, perhaps not in the Treasury but in the department, that people may need the money; the Treasury never thinks that anybody needs any money. I am a bit puzzled as to the nature of this penalty. Of course, if somebody is fraudulently extracting funds from the Government, from the taxpayer, they should be stopped from doing so. However, if it so happens that this person will then be completely impoverished, we must ask what our society will do about them. This comes back to whether they needed the money. How many of these fraudsters are in fact quite well off crooks from whom this is a trivial change, and how many of them are people whose circumstances are so desperate that they are willing to break the law? Of course we should not allow them to break the law, but can we consider what the circumstances of such families might be once the appropriate penalty is applied?
Lord German
My Lords, I, too, welcome these regulations, but again they are a round two as they match the Social Security (Loss of Benefit) (Amendment) Regulations 2013. I have a number of questions. The first relates to what happens under universal credit to the various sets of regulations that we have been discussing today, which also have their mirror in regulations brought forward by the DWP. It may be a bit of a heresy to say this, but if we are to have separate regulations from separate departments, might it not be a little more useful if we were to back to back them in the same slot so that we could at least look at them together and perhaps save a fair bit of time and effort? Universal credit gives us that opportunity, since we will be looking at these regimes in the round.
My second question relates to the three-year sanction, which is the heaviest of all the sanctions, and the use of the words “deliberative or organised offences”. Has that definition of what is a deliberative offence and what is an organised offence been codified in the handbook and regulations given to decision-makers—both those in the Treasury and obviously those who are to be responsible for universal credit—in order that the level of understanding is of a high nature? When someone goes to court and gets a sentence, we can see that being clearly identified. However, there may be occasions when this is dealt with outside the court through an administrative procedure, in which case there needs to be a clear understanding of when these heavier sanctions will be applied.
I understand that the decision-makers will also be given a level of discretion about the boundaries between some of these sanction periods. Can my noble friend say a little more about the nature of that discretion and whether a framework will be given to the decision-makers in each of these cases, so that we have some certainty that the worst and most difficult offenders will be given the heavier sentences? Will there be any form of appeal internally, apart from the normal tribunal case, where someone has appealed against their sanction? Perhaps my noble friend could give us some idea of how that mechanism will work.
Lord Freud
My Lords, let me try to deal with the points raised. There was a rather interesting question from the noble Lord, Lord Eatwell, about the division between what I think he would call the crooks and the desperate. The best way I can approach that is to look at the way in which fraud develops. I think it is right to say that 80% of the fraud develops out of people not informing of a change of circumstance. There is a drift there that indicates that we are not talking about that many who are desperate because, in one circumstance, people were clearly functioning at a certain level of benefit or tax credit. They then got supplemental income elsewhere and kept the extra, to which they were not entitled. That is quite a typical fraud, so on balance we are talking about crooks here. That is the best figure that I can give the noble Lord. I certainly have not seen anything better, and as your Lordships can imagine I see quite a lot of data.
One of the points that my noble friend made at the end of his last question was about discretion. I must make the point that we are now talking not about the conditionality sanctions, which this can often be confused with, but about people who have committed fraud, have usually gone to court and have had a punishment laid down by the court. There is no doubt about that and it is not in the discretion of our decision-makers. That is not true at the margins, where people accept an administrative penalty, which is at a much lower level. However, as you move up the scale, with repeat offences and the serious offences that we are most concerned about, it becomes a court matter and, to that extent, is not a matter of our codification. The serious offences that I am talking about are laid down in regulations. I speak from memory but I think we are talking about £50,000 offences, serious identity fraud such as trying to pass yourself off with a different identity: that kind of thing.
On my noble friend’s last point, we are bringing the regulations on working tax credit closely together with what happens to today’s benefit system, with a view to pulling both of those into the UC sanction regime. They are being pulled together with a view to there being relatively little change in the overall approach and amount when UC comes into effect for particular people.
I think that covers all the issues that have been raised. The amount of money, £1.9 billion, is substantial, and we want to make sure that it is fully realised that this is not acceptable or safe behaviour. I do not have to hand a comparison with our estimates on tax evasion and tax avoidance. Tax avoidance, as the noble Lord, Lord Eatwell, will be fully aware, is a different matter from tax evasion, but our concern about tax evasion is at absolutely the same level—it is the same offence as defrauding the benefits system.
We need to send out a strong message that this type of fraud is not tolerated. We also believe that, although fraudsters must be promptly and severely dealt with, innocent parties should be protected, which is why this relates only to working tax credit and not to child tax credit, and why we will only reduce working tax credit by 50% in households where one member of a couple has not committed an offence.
I seek the support of noble Lords for these regulations. Indeed, I hear that I have it and I commend them to the Committee.