National Employment Savings Trust (Amendment) Order 2013

Lord German Excerpts

Thursday 28th February 2013 Grand Committee

Finally, the order corrects some minor inaccurate cross-references. I hope that noble Lords will see that a range of different amendments is brought into effect via this order but it is a series of technical changes. I therefore commend the order to the Committee and I beg to move.

[Lord German]

My Lords, I have only one question in relation to the changes in this order. I suppose that I should declare an interest in that my wife works for a small charity which is seeking to become a member of NEST for its employees. However, I do not think that I really have an interest in the sense that I am relating my question to the technical change removing the requirement for the trustee to consider next of kin. Therefore, it is a general question rather than being specifically about me.

The Explanatory Memorandum talks about rules, with a small “r”, in England and Wales, Northern Ireland and Scotland, but further on it talks about doing something differently in accordance with Rules with a capital “R”. In terms of next of kin, what is being changed here in respect of those to whom payments should be made? Why is there a £5,000 limit on death benefits being transferred, and what Rules, with a capital “R”, will apply when the trustee looks at the question of those to whom they should pay sums of less than £5,000?

[Lord McKenzie of Luton]

My Lords, I thank the Minister for introducing this order and I say upfront that we will be supporting it. Perhaps I may revert to an item touched upon by the noble Lord, Lord German, which I was going to raise in our previous debate concerning people’s expectations of pensions, the importance of auto-enrolment and certainly the importance of NEST as a key component of that. When the Turner commission looked at the prospect of auto-enrolment and how employer pensions were to be organised in future, I think that the criteria around contribution levels and the band of earnings to which they applied were struck so that over a working lifetime the required level of replacement earnings would be produced. I am bound to say that with what has happened to the band of earnings, contribution levels have not shifted. I have not seen an update of that calculation and I do not know whether there is one—I think that it is an adjunct to this order—but if there is, it would be interesting to see it.

I have one or two questions in respect of some of the detail. We understand why the discretionary period to allow self-enrolling members to be accommodated is necessary, but can the Minister update us on the current elongated process for enrolment? I do not have that fully in my mind. What is the position of new self-enrolling members at the end of that period? Do they have an unfettered right to enrol? Perhaps we can use this occasion, given that NEST has been up and running for a little while now, although with regard to auto-enrolment larger employers are involved first, to find out whether we have any early numbers for the employers and employees who are enrolled.

We support the lifting of the obligation dealing with cross-border obligations and the other essentially technical amendments. I have a small point on terms and conditions. The Minister said that the proposed change would mean that self-enrolment individuals, as others, do not have to agree to members’ terms and conditions, so what is the purpose of those conditions? What relevance do they have? As for multiple jobs, again we support the change that has been outlined, but what is the position on multiple jobs within the same employer group? There is a maximum of 4,400 but, if that can be exceeded and there can be multiple jobs, are there any constraints if those multiple jobs are within the same group, possibly on a specifically organised basis to circumvent the limit?

With those few small inquiries, I say again that we support the order and are pleased to see that NEST is making progress.

Guaranteed Minimum Pensions Increase Order 2013

Lord German Excerpts

Thursday 28th February 2013 Grand Committee

[Baroness Stowell of Beeston]

I shall also speak to the Social Security Benefits Up-rating Order 2013. These orders were laid before the House on 28 January 2013, and I am satisfied that they are compatible with the European Convention on Human Rights.

I will start by touching briefly on the Guaranteed Minimum Pensions Increase Order 2013. This order provides for contracted-out defined benefits schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 2.2%, in line with inflation as at September 2012.

On the Social Security Benefits Up-rating Order 2013, I shall start with the increase in the basic state pension. One of this Government’s first acts was to restore the earnings link to the basic state pension. Indeed, we went a step further and secured a triple lock for pensioners: a commitment from the Government to increase the basic state pension each year by earnings, prices or 2.5%, whichever is the highest. This year, that third element of the triple lock will have an effect for the first time. The basic state pension will be uprated by 2.5%, a level above both earnings and prices. This means that millions of pensioners will see an above-inflation cash increase of £2.70 a week, taking the new level of the basic state pension to £110.15 a week; and that from April 2013 the basic state pension is forecast to be around 18% of average earnings, a higher share of average earnings than at any time in the past 20 years. I can confirm that additional state pensions will rise in line with inflation at 2.2% in 2013-14, which means that the total state pension increase for someone with a full basic pension and an average additional pension will be around £175 a year.

On pension credit, we have taken an important decision to ensure that the poorest pensioners are able to benefit from the effects of our triple lock. That means that rather than rising in line with earnings at 1.6%, the minimum required by legislation, the standard minimum guarantee credit in pension credit will be increased by 1.9% to ensure that the poorest pensioners benefit from the full £2.70 cash increase in the basic state pension.

Consistent with our approach last year, the resources needed to pay for that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase. The decisions that we have taken on pensioners reflect the Government’s belief that even in exceptional economic times it is important to protect those who are less able to increase their spending power.

However, noble Lords will also be aware that this order takes forward a number of decisions that are a lot harder to make. Some tough choices are necessary if we are to restore our public finances. The working-age welfare budget, which accounts for about £1 in every £8 that government spends, cannot be immune from these tough choices. That is why, having regard to the national economic situation, we have decided that the working-age personal allowances in jobseeker’s allowance, income support, housing benefit and employment and support allowance, along with the work-related activity component of employment and support allowance, will be uprated by 1% next year. On the same basis, this 1% uprating will also apply to statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory sick pay. This will save around £200 million in 2013-14, savings that are crucial as we continue to pay down the deficit.

We do not take such decisions lightly. Wherever we have been able to do so, we have sought to protect those who have the greatest difficulty increasing their spending power. The benefits that reflect the additional costs that disabled people face will be uprated in line with inflation. These include disability living allowance, attendance allowance, the disability premiums in working-age benefits, and the support component of the employment and support allowance. This is true of the carer’s allowance and the carer premium as well, both of which will be uprated in line with inflation.

In previous debates this week I have spoken of the need to strike a balance. At a time of great economic difficulty we have had to find savings, but we have sought to balance these with key protections wherever we can. This order is also about balancing our commitment to the here and now with our commitment to the long term. We have a responsibility to the next generation to secure a stable and growing economy, and I do not believe we can achieve that without taking these difficult decisions. Of course, we have a responsibility to those who will be affected by this order today, and we take that responsibility seriously.

It is worth noting that at a time when the nation’s finances remain under real pressure, through this order the Government will be spending an extra £2.8 billion in 2013-14 as part of our drive to ensure that the people who are least able to change their incomes are protected against increases in the cost of living. Of that £2.8 billion, about £2.1 billion is for the state pension, including an above-inflation increase for the basic pension. Nearly £500 million will go to disabled people and their carers, and nearly £300 million will go to people of working age. I believe that this is the right decision for families now and in the long term, and it is on that basis that I commend these orders to the House. I beg to move.

[Lord German]

My Lords, I start by saying that I hope we will not have a reprise of the Second Reading debate of the Welfare Benefits Up-rating Bill, because there would be many arguments to espouse.

I add my welcome to the triple-lock pensions increase that has been put into this measure again, and as the Minister has indicated, using 2.5% as the third trigger—the third lock that is being used for the first time—means once again that pensioners are benefiting from an increase that is above inflation.

What is interesting from the information that has been presented to us, and from my noble friend’s introductory comments, is that from April 2013 the basic state pension will be about 18% of average earnings. I have two points to make about that. First, it is a higher percentage than at any time in the past 20 years; and, secondly, it is only 18%. Recent research conducted by the pensions industry indicates that many people approaching retirement say that they need 50% of their average earnings—that is the rough figure they say they need—and they believe that they will get 50%, which in the nature of these things is obviously not true at present. It demonstrates the importance of the new flat-rate pension and that auto-enrolment will be decisive in helping people to meet their own aspirations for retirement. However, in the interim, the pension credit increase in line with the triple lock, as opposed to average earnings, goes a little way to helping Britain’s poorest pensioners.

I turn now to the uprating by 1% of all benefits apart from those protected because of disability or age. I still find that the issue of personal allowances indicates that there is an underpinning rationale, which has not yet been fully demonstrated to me, in having the personal allowance element of the employment support allowance being the same personal allowance that applies for housing benefit and anything else. Can my noble friend the Minister first outline why those personal allowances have to be the same for each allowance? It interests me to know what the rationale is behind that.

Welfare Benefits Up-rating Bill

Lord German Excerpts

Monday 25th February 2013 Lords Chamber

[Baroness Meacher]

My Lords, I support Amendment 2, moved by the noble Lord, Lord McKenzie, to which I added my name, and Amendment 3, spoken to by the noble Lord, Lord Low. The Minister, the noble Lord, Lord Freud, consistently argued during the passage of the Welfare Reform Bill that there were two fundamental principles to the Government’s welfare reform provisions. One was to make sure that people in work had an incentive to remain in work and that those out of work had an incentive to move into work. The second principle was that the money available, however much there was available, should be focused as far as possible on those in greatest need. Throughout the debates on the previous Bill, I found myself very much in agreement with those two principles. It seemed to me that if money is short, at least one should abide by those two principles. That seemed very reasonable.

I find myself therefore confused that in this Bill those two principles appear to be breached. It does not seem that you are focusing on those in greatest need if there is an impact that reduces in real terms the living standards of people who are severely disabled. You are certainly not increasing the incentive to work if you reduce the benefit of people who have not a chance in hell of returning to work. We know that a lot of people who in any normal view of things would not really be able to work have been put into benefit categories such as jobseeker’s allowance, where they are expected to work, although they would regard this as being beyond their wildest dreams, much as they might like to. That is not the point that I wanted to make; I simply want to ask the Minister how she squares the provisions of this Bill with the principles so eloquently and consistently laid out by the noble Lord, Lord Freud.

[Lord German]

My Lords, at Second Reading I said that this Bill had some rough edges, and the amendment moved by the noble Lord, Lord McKenzie, is directed at one of those rough edges. Can my noble friend the Minister tell the House whether a deliberate step was taken to exclude the personal allowance part of the support group to meet the budgetary requirements? Was this matter overlooked in the discussion that may have taken place on the principle espoused both in this House by the noble Lord, Lord Freud, and by the Secretary of State in the other place that those who are unable to do something to help themselves should not be penalised in this way? That is why the example of DLA and PIP has been given.

It may be, though, that in the words of the noble Lord, Lord McKenzie, people are generally not able to access the labour market. Can my noble friend the Minister tell us what the actual cost would be of reinstating the non-1% cap on the personal allowance part of the support group, given that people are in the support group because they obviously need support and cannot do things for themselves? That is the nature of the word. Has the department given any thought whatever to finding ways of ensuring that what is clearly not in the spirit of the statements made about providing for people who cannot help themselves will be carried through, if perhaps in some other way than by the amendment proposed by the noble Lord, Lord McKenzie? In other words, is there another way of dealing with this apart from using the methodology provided in the noble Lord’s amendment?

Social Security (Personal Independence Payment) Regulations 2013

Lord German Excerpts

Wednesday 13th February 2013 Lords Chamber

[Baroness Howe of Idlicote]

My Lords, it is a great pleasure to follow the powerful speech of my noble friend Lord Alton. I share many of the concerns that have been raised in the amendment proposed by the noble Lord, Lord McKenzie.

I want to say a few words about the impact of PIP on deaf people. I gather that deaf people who are unable to understand verbal information without communication support will not be entitled to PIP. Support will be restricted to those who are unable to understand “basic” information. “Complex” information appears to be broadly defined as anything longer than a sentence. As this definition could apply to everyday conversation, I am aware that some people find the term “complex” in this context to be somewhat disingenuous. I hope that the Minister will set out exactly what this is likely to mean in practice.

Fears have been expressed to me that many deaf people who need communication support will find themselves without money to pay for it under these changes. If accurate, that does not seem to be consistent with promoting personal independence. We have heard much about how the Government wish to target resources, rightly, at those who face the greatest barriers. I feel sure that it is not the Minister’s view that deaf people are not among those facing the greatest barriers or that deaf people do not need or deserve support to be independent. This is another area where I hope he will reassure me, and others who apparently feel this, on this point.

I am particularly concerned about the impact of these changes on young deaf people who have just turned 16. Many of these young people will barely have begun their transition to adulthood. How will the department ensure that such young people are managed sensitively when they apply for PIP? How will they be supported if they are not eligible for this new benefit?

I ask the Minister to outline what plans there are, if any, to reform the disability living allowance for children. I understand that this may well be reviewed in future. We know that some 600,000 disabled adults over 16 will see their DLA cut. There is considerable anxiety that a similar proportion of disabled children will also see cuts once the new review gets under way. The consequences of that would be severe.

I, too, have greatly admired the Minister’s dedication to his increasingly difficult and complex brief, not least in working out the details of these regulations. I much admire him for that and know him to be a fair-minded individual as well, with a great deal of knowledge in this area. I hope that I can look forward to a sympathetic, just and kind response.

[Lord German]

My Lords, I would like to raise the issue of sufferers of Crohn’s disease and colitis, who may not have been able to put their case as strongly as they might have in this whole arena of the development of PIP. There are around 240,000 people in the UK who are sufferers of Crohn’s disease or ulcerative colitis—collectively known, of course, as inflammatory bowel disease. They are lifelong conditions that most commonly present first in the teens or early 20s, and the intestines become swollen, ulcerated and inflamed.

The concern that these sufferers have is around Activity 5 in the descriptor list, which is about managing toilet needs or incontinence. The “continence” descriptor is limited. It fails to take into account the impact of the frequency and urgency experienced 24 hours a day by people living with conditions such as inflammatory bowel disease, as well as difficulties in reaching a toilet, both at home and outside the home, cleaning up after using the toilet or an episode of incontinence. The descriptor is phrased around the need for prompting or assistance to manage continence. Although this reflects the barriers imposed by people who have learning disabilities and musculoskeletal difficulties, it does not account for the severe difficulties faced by some people with inflammatory bowel disease in relation to controlling their bowels, who are otherwise physically well.

People with inflammatory bowel disease may experience additional costs associated with buying food and drink, which are currently ignored by the descriptor. These may include the need to buy expensive, nutrient-rich foods to address deficiencies, the need to modify their diet to avoid other foods or additives or the need for frequent and urgent access to a toilet, while the fatigue associated with IBD may require a taxi to and from the shops or the use of online shopping facilities. Consideration is not currently given to the additional cost of utilities for people who may be forced, because of this disability, to live more frequently within their home, and laundry or high utility costs are often incurred by people with IBD who have to wash or replace their clothes more frequently due to soiling or extreme fluctuations in weight. Can my noble friend the Minister explain how IBD sufferers are currently handled within DLA and whether the descriptor as it now stands can be looked at again to reflect the needs of sufferers of this not-well-understood disease?

Universal Credit Regulations 2013

Lord German Excerpts

Wednesday 13th February 2013 Lords Chamber

There is so much more that I want to ask, but I know that other noble Lords want to speak and we have much to get through. There are some major questions to be answered about the way that the regulations operationalise universal credit. Is the IT up and running? Will work pay for all? Will doing more hours always pay? Will claimants be sanctioned for not being able to find decent childcare? Can disabled people afford to work? There is so much more. I very much look forward to questions from other noble Lords and to the Minister’s answers. I beg to move.

[Lord German]

My Lords, I congratulate the noble Baroness, Lady Sherlock, on asking a broad range of questions. I was going to ask some of them myself and so I will not repeat them. A lot of other questions need to be raised. I am grateful also to the Secondary Legislation Scrutiny Committee, which advised us:

“We … hope that DWP will ensure that sufficient time is allowed for members to absorb fully the content”,

of the regulations,

“prior to the debate”.

My absorption rate may be generally high, but having received about an hour ago a further five and a half pages of information, I am doing my very best. We have had so much material to look at and so it is very important that we discover very swiftly the intentions of the regulations.

The support that we as Liberal Democrats give to the introduction of universal credit is constant, but the architecture now being put in place raises a large number of questions about much of the detail. I appreciate that much of it has been in guidance rather than in the regulations themselves. We do not have all the guidance at present and some of it is stamped “Not official” but is guidance for guidance that may well become official in days to come.

I start with the back end of the regulations, which is monitoring and evaluation. Noble Lords who sat through the process of the Welfare Reform Bill becoming an Act will know that that is an issue with which we vexed ourselves greatly at the time. I am pleased to have received the programme produced by the Government, which tells us that we will be engaged in what is called the theory of change model. How far does that proposal vary from the traditional route for evaluation methodologies used by the Department for Work and Pensions—in fact, used by the Government as a whole—particularly in respect of behavioural change? If there is one thing that we must learn from the regulations, it is that they need to be continually reviewed and changed. I am pleased that the guidance on some of the sets of regulations that we are debating today says that they will be continually updated. However, we need to know what the process is for that and particularly to have some sense of a timeline and of how Parliament can be engaged with the outcomes, and not just in the set-piece debates and milestones that have been the fairly traditional route for this Parliament to deal with these matters.

Welfare Benefits Up-rating Bill

Lord German Excerpts

Monday 11th February 2013 Lords Chamber

[Lord German]

My Lords, it will not surprise the House that I start from a different place from the noble Lord, Lord McKenzie. I will refer later to the use of the word “language”. I hope that your Lordships’ House will join us in saying that we should not use language that tries to segregate different groups of people. I shall illustrate that later. My starting point in examining this Bill is to ask whether it meets the policy objectives that it sets for itself and whether it is a proportionate response to the problem that it attempts to solve. As the principal policy objective that it seeks to fulfil is to make an impact on the underlying structural deficit that this country faces, it is an impossible analysis if we do not start with an examination of that factor.

In 2010, the Government set themselves the objective of eliminating the inherited structural budget deficit by the end of this Parliament—that is, by 2015. However, external circumstances, such as the problems within the eurozone, intervened which made that a much more difficult task to accomplish. So the Government took the decision to slow down the elimination of the structural deficit from five years to seven years, to 2017-18. Of course, they could have chosen to meet their original target date by imposing even more challenges to government expenditure—by increasing the tax take and by digging deep into the health and education budgets, and presumably further into the welfare budget as well. They chose not to do so. The consequence of that is a need to take further steps in budget reduction and this measure does that. It is aimed at 2015-16, the last of the financial years that will be determined before the next general election.

My first point is that sticking to the original timescale for deficit reduction would have meant a much more challenging debate than the one we are having today. Clearly, many noble Lords are concerned about the welfare budget reductions contained in the Bill. I can understand that concern. It is never easy reducing welfare payments; it is very uncomfortable and something which gives me concern as well. However, it would have been a lot worse if the Government had not slowed down the deficit reduction programme.

There are, and will continue to be, very difficult decisions to be made, and this Bill is one of them. However, those who object to the budget reductions in the Bill must say whether they are in favour of either a further extension of the already extended deficit reduction programme—slowing it down even further, going beyond the planned seven years and increasing the level of borrowing substantially—or taking money from some other source. It would be helpful to know where noble Lords stand on this matter. I listened very carefully, but I was unable to detect where that money might come from. The Bill cannot stand alone in some sort of splendid financial isolation. When there are hard choices to be made, it is important to know whether others are prepared to face up to them. There are also further tax measures to come if the Government are to meet the new seven-year timetable. We can take some comfort from the IFS Green Budget scrutiny, which, taking this Bill into account, determined:

“The whole set of tax and benefit changes introduced between the start of 2010 and 2015-16 will hit the richest households hardest”.

My second point is about proportionality. Many noble Lords will recall debates in this House where the figure of an additional £10 billion reduction was bandied about. The Chancellor of the Exchequer said last year that,

“we will have to find greater savings in the welfare Bill. £10 billion of welfare savings by the first full year of the next Parliament. Iain Duncan Smith and I are committed to finding these savings”.

However, the cumulative figure that this measure provides is not £10 billion but £3.6 billion—and that includes this year’s uprating order. That accords with the approximately £1 in every £3 of public expenditure that goes on welfare. Therefore, it could have been far worse for the welfare budget.

I am pleased that arguments made by those on the Liberal Democrat Benches have been taken on board by the Government. There will be no capping of child benefit at two children; there will be no cessation of housing benefit for the under 25s; and there will be no absolute freeze on working-age benefits. Thankfully, that is not the trajectory of this measure.

Spreading the burden across the years and taking relatively small amounts of money from a large number of people is a sensible approach. A lot of people paying a little is better than the alternative of a small number of people losing a lot of money in a single year. Here, I am talking about the welfare budget. Some have suggested taking out child benefit and tax credits from the Bill, but this would wipe out £1.5 billion of the £3.6 billion of savings, which would once again have to be found elsewhere.

Given the budget restraint, the Bill takes a sensible approach. It is sensible because, since the financial crisis, out-of-work benefits have risen twice as fast as average earnings—by 20% compared to 10%. For many, the effects will be short-term, as most people out of work find work again within three to six months. Also, the Government have capped public sector increases at 1%, so there is also an element of fairness to the measure. Besides, the shadow Secretary of State for Work and Pensions recently said that he wished to see incomes rise faster than benefits.

This measure is temporary. It is time-limited to end in the financial year 2015-16. Unless changed again by an incoming Government, the present arrangements for annual uprating will apply once more. However, there are some rough edges to the Bill. I hope that the Government will explain and debate these in detail in Committee. It is right to have sweeping exemptions for pensioners, the sick and the disabled—but some anomalies will need explanation, justification and perhaps amendment.

I said that I would say a little more about the language used in discussions and debates on these matters. The word “shirkers” has been used already in the debate. I do not find it helpful. It is not just one side who are saying this. According to the Labour Benches, it was the Chancellor who used the word “shirkers”. However, the word was also used by the shadow Secretary of State for Work and Pensions in a speech last year at the London School of Economics. I hope that noble Lords from all parts of the House will support the notion that we have to be extremely careful not to negatively categorise people. It does no good at all to use inflammatory language to distinguish between those in work and those out of work. The benefits trap itself is to be deplored. That is why there is so much to be gained by the new universal credit. The principal message I take from this is that as a country we must offer a helping hand, rather than deprecate the people who are trapped by the current benefits regime, which soon will be radically altered.

I want to say a word about child poverty, because I read so often of the figures produced by pressure groups that have written to many noble Lords in relation to this Bill. The child poverty measure, as I discovered when there was a committee inquiry in the National Assembly for Wales, is very difficult to sustain both internationally and in this country. In the first year of this Government, the numbers in child poverty—according to the international measure—fell substantially in the United Kingdom. That is because the median is used as the measure in this country. It is time that we had a new measure if we want to see what is happening in respect of children in poverty in this country and in other countries. I hope that noble Lords from all sides of the House would agree that continuing to use the current measure is no way to examine this issue, despite the fact that it substantially benefits the Government’s argument.

Finally, I hope that the Bill puts to an end any further reductions in the welfare budget before the next general election. Of course, there may be minor, necessary adjustments, but these past few years have really been a difficult time, with very hard decisions having to be taken about the size of the welfare budget. I hope that, in his response, the Minister will offer your Lordships some reassurance that this area of spending reduction has now reached its conclusion for the continuing length of this Parliament.

Taxation: Families

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Thursday 17th January 2013 Lords Chamber

[Lord German]

My Lords, I pay tribute to the noble Baroness, Lady Hollis, for securing this debate today. I do not think anyone in your Lordships’ House does not understand her dedication to these issues. Without wanting to trade figures with her—which is obviously a dangerous trade and I will not upset some of the interpretations she places on those figures—it is, of course, important that your Lordships hear the sort of scrutiny that she brings to these issues. The noble Baroness has secured a full debate on a very important matter for the House to consider.

I am pleased to have this debate, especially as it ranges over the benefits and tax systems together. They are inseparable in any discussion of welfare issues in our country. This Government’s actions in this area have been a mix of major policy changes—some on a very large scale—coupled with the need to reduce the budget. That is a difficult balancing act, but the Government have done well to shift the policy agenda at the same time as having to make sharp reductions in public expenditure. It is worth remembering that if you take the relevant tax and benefits expenditure together, the total welfare bill of this country represents nearly £1 in every £3 of public expenditure. That is more than the total expenditure on health, education and defence added together across the whole of our country. Therefore, it is impossible to escape the need for cost reduction in the welfare bill in our deficit-burdened country.

I wish there was greater political honesty around this matter. It was certainly not helpful when, a couple of weeks ago, the Labour Front Bench in the House of Commons outlined a new idea to divert funds from pension tax relief to a jobs guarantee. In an earlier announcement, Labour had already allocated that same money to reversing changes to tax credits. This does no credit to politicians in general or to debates on these issues. The fiscal burden is a reality that cannot be escaped.

Nevertheless, it is pleasing to note that in the Autumn Statement we were able to reduce the hit on the overall welfare bill. There was much talk of the need to make a reduction of £10 billion; indeed, it was frequently talked about in debates in your Lordships’ House. The eventual reduction figure announced was much less: £3.8 billion. Even so, it still requires tough and difficult decisions. Any reductions in the welfare bill have to be fair and proportionate. When money is tight, spreading the impact over a large number of people who lose a small amount of money is fairer than targeting specific groups for larger cuts. The average loss from the changes made in the Autumn Statement will be in the region of £3 a week.

I am pleased that the Government have reduced the hit on the bill and, in particular, avoided some of the more unpleasant proposals put forward in the lead-up to the Autumn Statement. Those aged under 25 will still be eligible for housing benefit, benefits will not be frozen and families will not have their child benefit capped if they have more than two children. It is also clear that the 1% cap is a temporary measure. However, the most beneficial change, which comes in from April this year, is the increase in the personal tax allowance. The amount earned before paying tax increases from £8,105 to £9,440. That is the largest real-terms increase in the personal allowance for 30 years. It will give the average worker an increase in their pay of nearly £600, and—of particular relevance to this debate—59% of the 2.2 million people taken out of tax altogether from April will be women. This is a much more effective and efficient way of putting money into people’s pockets than the hand-back system of tax credits.

The tax credits system is so complex that it led to more than £10 billion in fraud and error. From this April, the changes will benefit 23 million workers in our country but not the 1.8 million of our richest people who will pay more as a result of the changes. Someone working full-time on the minimum wage will see their income tax bill cut in half compared to what it was under the previous Government. It is getting fairer but I hope the Government’s ambition is that no one on the minimum wage should pay income tax at all. I very much hope that the Government will go further in this direction.

Our welfare system provides the safety net. Any decent society must do this but I believe that it should do more. It should help those people who are able to improve their lives and their life chances. Giving people a helping hand to do better is also a key role for a modern welfare system. That is why trapping people in a benefits culture is a bad idea. It offers no solutions and no way out for those who are able. The hand-back tax credit system has had the impact of increasing reliance on state support instead of providing an increase in personal confidence and self-reliance. Taking away tax first is the way that we should proceed, which is what this Government have been doing. People will not have to hand it back; they will see their money in their pocket.

The complex mix of benefits and tax credits created by the previous Government has meant that far too many people are not better off in work. Changing that aspiration and making sure that people are better off in work is the great hope that I am sure your Lordships’ House shares for universal credit. Working for just a few hours a week will mean that you are better off. I should be grateful if the Minister would give this House an update on progress towards implementation of universal credit so that we can see how all this will come into effect this year.

One of the tricky issues that universal credit brought forward was that of childcare under a universal credit system. Since universal credit will give an opportunity to bring more people into a system of balancing their tax and benefits together, it will obviously be received by more people. Spreading the same amount of money across more people could mean a reduction in the amount of childcare funding that would be provided. I was very pleased that the Government managed to find an extra £300 million in order to bridge some of that gap.

The difficulties that we face with funding mean that the levers within the future system should allow for more incentive to be provided within it. I know that the Minister shares the ambition that the taper rates should be such that people should be able to keep more in years to come. I hope that he might also comment on that when he responds to this debate.

I very much agree with the noble Baroness, Lady Hollis, about language. Care must be taken over the language that we use in all these issues. Stigmatising people by language and by the difference and distinction between those in work and those out of work does not aid encouragement and support for improvement in people’s quality of life. The fact is that the vast majority of people want to work and are working hard in order to do so. More than half the people who claim jobseeker’s allowance do so for six months or less. I am afraid that both sides of the political divide have been guilty of this sort of rhetoric. I hope today that your Lordships can agree that this distasteful practice must end.

In conclusion, I give two examples of how, if the universal credit system works as we all hope it will, it will lead to change for families in our country. A typical one-earner couple with two children who are renting will be £761 better off under universal credit if they come into the system this year. I wonder whether that is a sign that the change we bring will support families. A one-earner family with an income of £20,000 and two children will gain £223 from the personal allowance increase. They will obviously lose tax credits of £150 and child benefits of £39, but under universal credit they will still make a net gain of £34. When my noble friend sums up on the ambitions for universal credit, could he support these examples and show us that universal credit will make sure that work will always pay and families will always be better off?

Health: Atos

Lord German Excerpts

Monday 26th November 2012 Lords Chamber

[Lord Freud]

My Lords, over the past month Atos has been running at about 200,000 assessments; its average is about 100,000. There are 962 full-time-equivalent healthcare professionals working on them. We inherited this review and have now had four subsequent reviews: one internal and three from Professor Harrington. We have basically accepted and largely implemented 40 of the recommendations from Professor Harrington, who said in his latest review, last week, that significant and lasting improvements are coming.

[Lord German]

My Lords, is it not terrible that one in four of the premises that Atos uses for its assessments does not have flat-level disabled access and that wheelchair users cannot access these assessments? Can my noble friend tell the House whether the original specification for the Atos assessment centres contains any references to disability access? In view of the terrible circumstances in which many people in wheelchairs now find themselves, when will the Government be able to complete ensuring that all people needing wheelchair access have access to these assessment centres?

[Lord Freud]

I am not aware of the fine print of that particular contract, as it was done under a previous Government. A proportion of the assessment centres—currently 31, I believe—are not on the ground floor and lifts must be used. If there is then an emergency, such as a fire, those people will have to go down the stairs, which is obviously not satisfactory. To the extent that people are concerned about that, we make other arrangements: they are visited on the ground floor, somewhere else or at home.

Benefit Cap (Housing Benefit) Regulations 2012

Lord German Excerpts

Tuesday 6th November 2012 Grand Committee

These are some of the question that we have arising from these regulations and the cap. We believe that they are ill-thought through and should be withdrawn for further consideration.

[Lord German]

My Lords, I want to examine the two areas of change which took place during the final days of the passage of the Welfare Reform Act. These were, of course, the extra £120 million of discretionary housing payment and the nine-month grace period. However, I start by saying that my party opposes regional pay in this country—as does the Labour Party in Wales—very strongly indeed. Ipso facto, for the same reasons we oppose regional benefits. The reason given by the Welsh Labour Party for the opposition to regional benefits is that they trap people in poverty. In this case, we in my party find ourselves on a similar message: having uniformity of these issues around the country helps to encourage prosperity across the country. I hope that that message will be borne out. However, I recognise that the major difficulties of the benefit cap relate to London, as the impact assessment clearly states.

I do not wish to add to the huge array of all very valuable questions that the noble Lord, Lord McKenzie, has just outlined. However, it is very important that the guidance for local authorities and customers is made available in as open and detailed a manner as possible. I note the very friendly document titled Benefit Cap—Frequently Asked Questions for Local Authorities, in which local authorities would expect to find answers to some of these questions. Nowhere in this document does the DWP reference any information about the discretionary housing payment. Will my noble friend tell me where, when and in what format that detailed guidance to local authorities is going to appear, so that people can be aware of the answers to some of these questions? Perhaps the issue of distribution of discretionary housing payment needs to be well known as well. I presume—although I have not been able to find the exact percentages and figures given—that it is related to the impact of the cap on housing benefit in each local borough and local authority. Perhaps my noble friend could clarify that.

I further note from the impact assessment that the figure of 56,000—considerably less, of course, than the number we were led to believe would be affected by the cap from the earlier impact assessment—takes no account of behavioural change. Could my noble friend tell me how, in his expectation, that behavioural change is likely to play out? Is it likely to reduce the numbers substantially, or just in a minor way? Has any work has been done by the department on that change?

One key issue that my noble friend mentioned was the ability to exempt oneself from the cap by making oneself available for working tax credit. There is always a process in getting oneself into work and into a working tax credit position. I wonder whether that period of transition, which may not take place until such time as the cap actually hits, will be taken into account through some support process by the department. Could my noble friend explain that?

I am also interested in the impact upon London. I would not want to say that it is a very strange place, but it is a very different place in terms of housing. I can only quote my own example. I just renewed my two-year rental on a flat in London, and my rent went up by £2.50 per week after two years of being stable. I just could not understand; I was expecting it to be much larger than that.

Housing Benefit (Amendment) Regulations 2012

Lord German Excerpts

Tuesday 6th November 2012 Lords Chamber

[Lord German]

My Lords, I apologise to your Lordships’ House for missing the first few minutes of this debate. I was involved in another debate in the Moses Room at the time and it was difficult to shift sufficiently speedily between that Room and the Chamber.

I can well understand why many noble Lords want to reprise our lengthy debates on the Welfare Reform Bill. I also understand why people still have major concerns in this area. I do not think that any noble Lord present would say that these changes will be easy to accommodate. Difficult decisions will have to be made. As we all know, the changes are intended to relieve some of the strain on the housing benefit budget. However, the only fair element is that the benefit we are discussing will be brought into line with the local housing allowance.

Some noble Lords share my concern about the future of housebuilding. As the noble Lord, Lord Smith of Leigh, said, the previous Government did not meet housing demand. I only hope that the present Government will be able to build extremely quickly the number of houses that are needed to cope with society’s demand for them. We await action as regards achieving the number of houses that are needed.

There are two major concerns about the way these regulations will be implemented. The first is the ability of the housing stock to adapt and provide accommodation of the size needed in each area in order to allow those who wish to move to a different sized property to do so. The second issue relates to the changes affecting specific groups of people. I would like to ask some questions in relation to both those issues. I preface my remarks with mention of behavioural change. I have heard it said frequently in your Lordships’ House and in Committee that people’s behaviour in this area is of the worst kind. However, people do not always behave in a way that leads to the worst outcome for them. Some people behave differently.

There are two key issues I would like to ask questions about. My first question to my noble friend is: what assessment has the Department for Work and Pensions made, given the contact it now has had with people who will be affected by this measure, about the likely outcomes and the directions people will take as a result of what is happening? There undoubtedly will be, of course, some people who will wish to move. The issue then is the ability of the housing stock to be adapted very swiftly. Can my noble friend tell us what discussions there have been with housing associations, local authorities and private landlords to see whether adaptations can be made for people to move, probably into smaller properties, where house building has moved onto larger properties? Where are we in readiness for the sort of behavioural changes? I hope my noble friend the Minister can tell us.

I also wanted to ask about the £30 million of DHP—the £25 million for adapted properties and the £5 million for foster carers. This was an issue we pursued at some length during the course of the passage of the Welfare Reform Act. This was a very welcome area but I would like to really understand the Government’s dynamic on adapted properties. Will £25 million be provided over a longer period and what assessment has been made of the need for that length of time? Will £25 million be sufficient to cope with what it is thought will be the behavioural arrangements for people who live in adapted property where it would make no sense whatever for them to be moved on?

The second area I would like to investigate is rurality and rural housing, mentioned by the right reverend Prelate the Bishop of Norwich. Having spent some considerable time as an elected Member trying to get more social housing into rural communities, I do not underestimate the difficulties there have been in building social housing in rural communities. It is very much more difficult if people want to move to have to move away from a rural community into a quite different environment altogether. What estimate has my noble friend the Minister made of the demand and the pressures there will be on rural housing? Has he taken into account the community shift that would have to take place given the shortage of accommodation in rural areas and often the very high price of private sector rented accommodation there?

I also want to examine the issue of redesignation of properties. This is also one of the approaches that some housing associations are looking at. For example is a bedroom really a study or is a partition wall not really a partition wall? Have there been any discussions with housing associations and social landlords about the role and about designation, and about who has the authority to redesignate housing in this area? There is undoubtedly some scope for action for here. There is no national register of what is a room size. It would very difficult and probably a bureaucratic nightmare to try to create such a reference document. However, is it possible to look at the way in which housing associations can define their property differently where the circumstances provide and who would have the authority to undertake the redesignation, which may take some of the pressure off the ability to find appropriate housing? I do not envy the job of the Government and my noble friend the Minister in undertaking this obviously difficult task and I would be grateful if he could give me some answers to those questions.

[Lord Freud]

My Lords, this has been a powerful debate and I will do my best to answer the questions. We dealt with an enormous number of questions in Grand Committee and so, rather than me going on for a very long time, I would like to suggest that I confine my responses to the new issues that I have not already dealt with and then leave my responses on the other matters that are on the record in Hansard.

The noble Lord, Lord McKenzie, referred to the NAO report and to 2 million households receiving lower benefits. That assumes that claimants will not adjust their behaviour by doing the things that we are hoping they will do, such as taking on work, moving to more affordable or more appropriate accommodation, and so on. We are beginning to see evidence from local housing associations that with the change from 50% to 30% people are changing their behaviour.

As regards the point about the pressure on the supply of affordable housing, the early signs from the LHA are that there is no discernable impact on the levels of homelessness, which have remained steady. The housing benefit claims from people renting in the private rented sector are increasing, which suggests that people are able to find affordable accommodation.

The noble Baroness, Lady Lister, referred to the NAO report and to its observations on the monitoring of discretionary housing payments. We are currently considering the recommendations in the report and will look at how feasible it is to monitor the way that DHPs are used.

I have dealt with the point raised by the noble Lords, Lord McKenzie and Lord Smith, about movements. There are movements of people from underoccupied homes, presumably to smaller homes, which will allow larger families, if they are being supported in the private sector, to have cheaper accommodation and gain from making that exchange.

As regards the issue of room sizes, raised by the noble Lords, Lord McKenzie and Lord Best, and whether there should be an adjustment for single bedrooms, we wanted to keep the system simple and did not want to introduce something that might require landlords to go around measuring rooms. Indeed, the stakeholders, including the National Housing Federation, have welcomed that. It is therefore up to landlords and tenants to decide between them whether a property is appropriate for their needs.

When it comes to designation of what exactly constitutes a property, it is up to landlords to take that decision. They are unlikely to do that on a wholesale basis, but there will be individual properties where it makes sense for landlords to redesignate them as not being appropriate. There may be an individual property for which it is straightforward to do that. To be honest, we are not expecting there to be a massive effect, but there may be some instances of that.

The noble Baroness, Lady Turner, asked about temporary changes of circumstances. There are housing benefit rules to protect households from either temporary absence, such as going into hospital or being on remand, or where the death of a member of the household would result in the reduction of housing benefit. For example, housing benefit provides up to 12 months’ protection from rent restrictions if there is a bereavement in the family.

The right reverend Prelate the Bishop of Norwich asked about non-resident children. Where the tenant has non-resident children, housing benefit may already be paying for a room for the child or children in the place where they usually reside. It would be double provision potentially to fund an additional room in both parents’ properties.

The issue of rural impact was raised by the right reverend Prelate and my noble friend Lord German. The use of the percentage reduction, rather than a flat rate, means that the impact, because it is proportionate, is likely to be lower because rents are likely to be less in rural areas. On the specific question asked by my noble friend Lord German on the approximate amounts, roughly 10% of the impact is likely to be seen in rural areas.

As to my noble friend’s question on what evidence we have received so far, the responses by local authorities and housing associations indicate that there is a lot of activity—whether you are talking about the West Midlands making best use of a stock partnership that brings together seven local authorities and 11 housing associations in finding people the right number of bedrooms, speed dating in the London Borough of Southwark, or the Stockport homes initiative to look for joint tenancies. Indeed, Wigan Council, the council of the noble Lord, Lord Smith of Leigh, and Wigan CAB have developed Wigan Housing Solutions, which acts as a social lettings agency and is a natural progression from the existing bond-guarantee scheme. It is a bridge between the private and social sectors, with Wigan Housing Solutions helping to relieve pressure on the housing waiting list. There is a lot of activity.