Welfare Reform Bill
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Baroness Sherlock
My Lords, I have a couple of brief points to add. One is addressed to the noble Lord, Lord Hamilton. Perhaps he would like to reflect on the fact that what the Minister is doing in this Bill is taking two completely separate systems of support, one for those in work and one for those out of work, and creating a single seamless new product. However, for that to work, it must meet the needs of both sets of people. I think that was the point that the noble Lord, Lord Kirkwood, was making just now—that the Minister may want to effect a culture change for those who are in work, or whom he would like to be in work, but universal credit is also available to support many people who are not required to work, who may never be required to work and who may never be capable of working. Why should they be forced to go through a culture change to no end? Is there really a strong case and can the Minister explain it to us?
Secondly, I want to pick up on the very good point made by the right reverend Prelate the Bishop of Leicester that it takes a lot of time, energy and skill to manage on a very small amount of money. It also takes a lot of intelligence and aptitude to be able to budget well on that. Perhaps the Minister could reflect on what may seem to be simply a matter of timing. If one has plenty of money it is much easier; it is also easier if one has a pot of working capital, so if something goes wrong one month the consequences are simply that you dip into your savings. I spent some years working with single parents and most of them had almost no cushion at all, so if they got it wrong they had nothing to fall back on. For many poor people, their friends are also poor, their families are poor; they do not have the kind of networks where you simply go and borrow from somebody else or you to go the bank and ask it to lend the money, because it will not. The consequences for those families of getting that budgeting wrong can be very severe. Given what is happening in other areas to the Social Fund and the other kinds of support, we really do not want to be driving people into the arms of moneylenders.
Finally, within that group there are some people who, because of their particular circumstances, have very strong reasons why they need to be paid regularly. It is a point I made in Committee but I think it bears repeating here. I have worked with families where, for example, the husband had a problem with drugs or alcohol and went off on a bender and spent the week’s wages; the mother would have to find a way of feeding the children until the next benefit cheque arrived. If that happens in one week, it is difficult; if it is happening in two weeks, it is difficult; but as the noble Lord, Lord Boswell, will appreciate, if it is not a matter of “life after next Tuesday” but “life for the three weeks that follow next Tuesday until the end of the month”, how does she manage?
The question the Minister has to answer is not whether he would like to do this; I have no doubt that he would. Rather, it is: is the price that will be paid by some of the poorest people really worth the culture change he wants to achieve?
Lord German
My Lords, I am always staggered to find out more about my noble friend Lord Kirkwood. In Committee we learnt what he did in the bath, and now we have learnt that he goes around arresting bank accounts. We have been having some very interesting debates. However, I am slightly less sanguine about this issue than he is, perhaps largely because many of your Lordships have said that we have to look at people for what they can do and what their ambitions are. People, and groups of people, are not all the same. It strikes me that this is not about going in one direction or another, and that we are treating people as having exactly the same ability to manage their own money.
I also heard in Committee the Minister’s ambitions for looking at other methods of dealing with payments. I looked back over the last four to five years of the growth in the Post Office card account and in basic bank accounts, which of course is where you would expect to find the sorts of people who make and deal with money in this manner. And there has been growth; in fact, 12 per cent of the whole population—according to the appropriate survey done by the DWP, which is published on their website—is using one of those two bank accounts.
It also struck me that the price that we are paying for the Post Office card account is frighteningly expensive for what we get as a country. It is a bank of this country, and a bank, JP Morgan, underwrites it, and it charges the state for managing these Post Office card accounts. I believe that we pay something like £50 each a year—£142 million per annum—have those accounts run for us. It strikes me that we perhaps need a presumption to ensure that we put things of this nature in place by giving people the appropriate support, but at the same time ensuring assistance for those who cannot. The language that I have heard many Lordships use, which seems to come from the documents, is the “chaotic family syndrome”, where people just cannot manage and need to have some different form of assistance. That is why I started by saying that we should not treat everyone in the same way.
The Post Office card account is a bank account. It does not come with what we might normally expect a bank account to have, but why not, when we are paying so much money for it? Why are people not able to make payments from it for their utilities and gain benefits and savings? I guess that most noble Lords do this because of the way in which they pay for their heating, electricity and gas at the present time. Surely we should be offering that opportunity and using that ability to help people in that manner. We also should not think that people should not be able to separate out their money in the way in which they pay it to themselves. However, in order to do that you have to have appropriate levels of support.
My question to the Minister is: if you are pursuing the idea of developing the facilities which a large number of people currently use for payment, will you also be able to offer advice and support to assist those people who might wish to avail themselves of an enhanced system that allows them to pay their utility bills monthly by a straight payment or direct debit, thus allowing them to get the benefits of reduced charges?
I noticed that the Cabinet Office issued a press release for those who live in England, which says that £16.8 million of support will be given for free debt advice in this country. Does the Minister regard that as being some of the funding that he intends to use for the support that might go with these enhanced accounts?
I know that over the years there has been considerable discussion about the use of the Post Office card account, primarily, of course, in the context of trying to support the local post office in each of our communities. Surely, however, if we were able to do more with it and to provide that advice, perhaps even at the Post Office, it might even be better to do that with the funding that might be available.
There is the problem that many people, or some people, will not be able to manage and will need alternative forms of assistance and advice. My noble friend Lord Boswell was saying that we ought to move in one direction, but it strikes me that we must be wary and understand that there are people who will not be able to manage. We must be able to assist those people properly.
Welfare Reform Bill
Lord German Excerpts(12 years, 5 months ago)
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Lord German
My Lords, I do not intend to turn my back on what I said in Committee; in fact, I intend to repeat some of it, so I hope that noble Lords will bear with me. If you believe that council tax benefit is a universal benefit and part of the social security system, clearly you need to ensure that it is delivered everywhere within our country and on a uniform basis so that people will know the rules and the benefit they are going to get.
The noble Baroness, Lady Hollis, has talked about England, but I want to talk, as noble Lords know I frequently do, about the other parts of the United Kingdom that will also be affected by this. I start with a big question to the Minister. He wrote to me about this issue when I asked him how it would work in Wales and Scotland. I was told that the money would be given with a 10 per cent saving—that is a crucial sentence because we can reflect on that and on how we can manage the budget within a council tax benefit structure—and that the saving would be given to the devolved Administrations to enable them to bring forward their own arrangements for help with council tax.
The next sentence was about the powers that they would need to bring forward their own arrangements for help with council tax, and it says that these arrangements must fall within existing competence. This is a crucial question; if there is one thing that I know about, it is that the demand for competence is very important. Clearly it is not primary competence because it is not primary legislation that is being transferred, but executive devolution powers must be being given to both the Scottish Parliament and the Welsh Assembly to be able to achieve that. I would like to know which executive powers have been given, because both Scotland and Wales could refuse to have those powers, which would be a perfectly reasonable thing for them to do. If they think that this is not something that they can manage or want to do, they can refuse to take those competences.
Even if Scotland were to accept those powers, and I have made this point in Committee, I wonder what game we would be playing into in Scotland alone. Remember that the basis of the Scotland Bill that is before your Lordships’ House is that social security should not be devolved; it is part of the glue that holds the United Kingdom together. Say that you do not give the social security competence but you obviously give some competence to the Scottish Government. If you give them that money, my guess, and it is purely a guess, is that they will take the money, convert it by putting a bit of Alex Salmond paste on top of it and make it into a Scottish system. They will then use that as an argument to say, “If you think you want a social security system in Scotland but that we can’t cope with it, here we are, doing a better job than they are in England”. There is a danger to the unity of the United Kingdom in this matter, which is why we ought to consider very seriously what the effects of this change will be.
I am told that Clause 11 gives powers to take the competences back. There is no doubt that there is considerable anguish about this matter, but if you believe that it is a universal system, surely it makes sense to use the funding as part of the universal benefit but also to take the hit that has to come with the budget reduction. After all, if the DCLG is going to be able to allocate the money with the budget reduction, that budget reduction could just as easily be done by the DWP. Obviously it would not be a nice, friendly or comfortable process, but as with all levers you have not damaged the social security structure of this country at the same time.
My question to the Minister is this: if you are to retrieve these competences from Wales and Scotland, which competences are you retrieving, and where does Clause 11 give the power to the other place to bring back the powers into the social security structure? The most important feature that we have to decide here in your Lordships’ House is whether it is better placed, with the appropriate cut, inside the universal credit or inside a social security system for our country as a whole, or whether we wish absolutely and once and for all to abolish council tax credit and have what might be called a local support scheme in whatever the local authority can provide with the money that is provided for it if you cannot even call it a benefit.
I worry greatly about this prospect, and I ask my noble friend the Minister to reassure me that we can bring this back and to tell me how we can bring it back and how we get it back from Scotland and Wales.
Lord McKenzie of Luton
My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.
My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.
Welfare Reform Bill
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Lord German
Lord German
This group of amendments was designed to test the arrangements that we have in Parliament for reviewing and looking in detail at the operation of PIP. In view of the offer that we have just had from the Minister to take back all the reviewing and reporting arrangements for the whole of PIP, I think that it would be unwise of me to move the amendment.
Lord Skelmersdale
My Lords, as I understand it, everyone with children gets child benefit, so you can cut that out quite regularly because you know that it is going to come under subsection (4)(c)—that is inevitable. As I said at the beginning, we will find out from my noble friend what exceptions the Government are currently planning in order to change what the noble Baroness, Lady Hollis, calls apples and pears into apples and apples or perhaps pears and pears.
Lord German
I hope that I have followed your Lordships’ normal pathway by allowing those who have put their names to amendments to speak first. I understand that that is what your Lordships’ House wants and therefore I have done the appropriate thing. If I had had an amendment in my name, I would have spoken earlier. However, I am quite happy to speak now if your Lordships will permit me. I pay tribute to the right reverend Prelate the Bishop of Ripon and Leeds for introducing this issue, and particularly for his amendment relating to children. That is probably the subject on which I shall focus primarily. It is also an issue where there are unintended consequences, on which some of this debate will focus.
I think it is worth starting with what is in the impact assessment for this proposal, which outlays the Government’s objectives in achieving some policy ambitions and states quite clearly that it is intended to deliver fiscal savings. The other two matters relate to dealing with the fundamental unfairness of working families seeing families on benefits living in homes which they cannot themselves afford, and the incentives to help people to work.
I believe that a cap is an appropriate device for accomplishing ambitions of this sort and later I shall give some of my reasons for saying that. However, it is important that whatever the cap or caps may be, they must fit the heads on which they are placed. I do not believe that the cap as currently constructed does the job or serves the purpose that the impact assessment lays out. That is because there are of course some unintended and perverse consequences as a result of the way that it is currently being calculated and laid out. As currently crafted, the cap produces a number of these unintended consequences but exploring them does not negate the importance of having a cap or caps. The evidence demonstrates that the current approach will need amendment in order to fulfil its intended purposes.
I should like to address the issue of fiscal savings. I am sure that all noble Lords will have seen the letter from the Secretary of State for Communities and Local Government to the Prime Minister, sent via their Private Secretaries, in which the Secretary of State says of this proposal that there are,
“serious practical issues for DCLG priorities”.
The letter continues by stating that an additional 20,000 people will be accepted as homeless, according to the DCLG modelling. That is presumably done by those who would know what the outcome would be in a set of circumstances described by government. The letter goes on to say that this would mean additional expenditure in dealing with homelessness and for temporary accommodation, and further that the £270 million savings that the DWP budgets expects to make would be negated by the additional expenditure elsewhere. That is not my interpretation—those are the words I have read. There would, indeed be a net cost to the taxpayer. If these figures stand up to scrutiny—and I certainly have not seen any rebuttal of those figures—the cap as crafted will be at an additional cost to the taxpayer. I should like my noble friend the Minister to tell me: has there been or is there a rebuttal of the figures from the Secretary of State for Communities and Local Government?
However, that does not deal with the second policy objective that we have to face: the unfairness of working families seeing benefit recipients living in homes that they could not themselves afford. The challenge is to satisfy this need and at the same time avoid the consequential homelessness that the Secretary of State for Communities and Local Government has indicated. This issue has been left to fester for far too long. The previous Government placed it in the “too hot to handle” or “too difficult” category, or put it in the long grass pile—whatever metaphor you wish to use. However, as is always the case with very difficult issues such as this, they will simply not go away without some form of policy intervention.
Lord Boswell of Aynho: I regret that I was unable to attend the earlier part of this discussion, although I am very interested in what is being said. On the matter that my noble friend just raised, has he been able to discern a clear position from Her Majesty’s Opposition as to the principle and, further, as to the levels or basis of execution of policies in this area of benefit cap? I am not sure where they stand.
Lord German: I have not been able to get a clear position. However, I was somewhat interested to hear yesterday the Shadow Chancellor declare that his party is in favour of having limits. Perhaps other noble Lords might explain what those limits are. However, as the Secretary of State for Work and Pensions said in the House of Commons—as I believe I am now allowed to call it—the benefit cap,
“is about those who we believe should be able to go to work but are not doing so”.—[Official Report, Commons, 15/6/11; col. 882.]
Therefore, the purpose of this set of clauses seems to be to try and achieve a balance of fairnesses. Very importantly, we cannot see a rise in costly homelessness that penalises mainly children who are in large families and in high-rental areas.
The cap, as proposed, would punish children for the decisions of their parents. Children have little or no control over the upbringing they receive. I wonder whether the current cap, as defined here, could encourage family breakdown as families split up in order to get their benefit entitlement under the cap level. In terms of maintaining family structures, this surely cannot be right.
The first issue to be tackled is the one mentioned by the right reverend Prelate the Bishop of Ripon of Leeds—mean and median. The Bill clearly refers to,
“the average weekly earnings of a working household in Great Britain net of tax and national insurance contributions”.
However, as many noble Lords have pointed out, there are of course working households with children and working households without children. Working households with children also receive child benefit and possibly tax credits, and other benefits as well. Therefore, if you do the mathematics, a cap measured across average earnings based on working families with and without children can only be tougher on those households with children and easier on those households without children.
Welfare Reform Bill
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Lord German
My Lords, I shall speak to Amendment 86ZZZX in my name. I hope that I am pushing at an open door on this matter. The amendment asks for a suitable person to be informed about and to accompany people to their face-to-face or telephone interviews. I note that page 10 of the explanatory notes that we received from DWP on Friday states that while DWP is still developing the second draft of the assessment criteria, it is able to be clear on a few points. One of the bullet points is that individuals will be able to bring another person, such as a family member, friend, carer or advocate, with them to the face-to-face consultation where they would find that helpful.
That is very welcome, but behind a simple bullet point there lies a number of other questions. The most important is whether the person who is accompanying the person being assessed is able to be an active member of the assessment exercise. That is largely because in the WCA assessment exercise, anyone who accompanies the person being assessed is not allowed to take an active part or to communicate. There are some concerns. We are told that the reason is because the assessors say that the accompanying person could give a false impression of the claimant’s needs. It is good that it looks likely that an explicit right to bring someone along will be built into the regulations, but we need to be clear. People with some conditions, such as autism, mental illness, deafness or many other forms of disability, have communication problems. People with those conditions might not be able to communicate their needs, particularly given the level of anxiety in an assessment of this sort. For many people, it will be the first time that they have been assessed or had a face-to-face interview—I will come some to other forms of assessment in a moment.
Having someone there to support you is helpful, but the person, whether they are a family member, a carer, an advocate or whoever, must have the ability to intervene to give a clear account of the claimant’s situation. In my view, an advocate means someone who can give voice to the feelings of the person being assessed. The worry that I am hoping the Minister can put to one side is that carers might be able to attend the meetings but not be able to speak because they might interfere with the assessment process. In reality, they will give a clearer account of the claimant’s issues. There is some history on this matter. People have been present but have been unable to speak for part of the assessment process. I suppose I am asking the Minister to explain the relationship in the communication criteria which are being assessed and whether someone will be able to speak for a person who is being assessed in that area. I do not know quite how that will play out. The second area of communication problems could be if the assessment is being done on the telephone. There are circumstances when the assessment exercise can be carried out by telephone, and we understand that officials at DWP have said that that can mean that an accompanying person can engage in the same way as at a face-to-face interview.
In conclusion, is this meant to be a real open process where the advocate, the friend, the family member or the carer is able to take a full part in that process to ensure that the communication exercise is done in the most appropriate and holistic manner and that the anxiety levels are reduced?
Lord Addington
My Lords, my amendment in this group follows a similar vein but is slightly more specific—unusually for someone who usually prefers a broad brush. It is inspired by the National Autistic Society. Here it is asking for specialist knowledge to be available when somebody is assessed—specifically those in the spectrum that contains autism and Asperger’s syndrome.
Why is this a good example? It was put to me at my party conference at a fringe meeting by somebody whose name I have forgotten—and I apologise to them for that—that autism is not only a spectrum but a three-dimensional one where everything interacts differently. It is incredibly difficult for somebody who is not an expert to take part and assess what is going on and work out how these interactions occur and interact with the outside world.
As we are at the stage of probing amendments, I use that as probably the best example but there are very few packages of disability that do not have elements of that. Degenerative and varying conditions are an obvious example where we are asking a hell of a lot of an assessor who is not specifically trained in that area to get it right. This is not a new subject. Anybody who has been around this knows this has happened for a long, long time and it seems to be something that anybody who is on the Treasury Bench has a problem with.
The previous Government did. The issue was raised on numerous occasions and indeed the noble Baroness, Lady Hollis, and I got into a little dance about this at one point. It was a case of her saying, “We are going to give them lots of training”, then me saying, “Are you going to give them the ability to go and get a real expert in individual cases?” and her saying, “But we will give them lots of training”. The noble Baroness was a very thorough and professional Minister. I think her attitudes might have slightly changed but as she is not here we will wait for another occasion.
You need expertise to get things right and to try to get away from the number of times assessments are challenged and the results overturned. People may say that 60 per cent of assessments are not being overturned—40 per cent are. Calling in expertise will probably save money in the long term. It will cut down stress. I do not know what benefit that would be to the administration of the system if things were not automatically challenged but calling in the right people at the right time is what we are calling for here. I hope the Minister will be able to give us a positive response because if we carry on as we are at the moment we are simply going to cause more grief and waste money.
Welfare Reform Bill
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Baroness Sherlock
My Lords, I hesitate to lower the tone after that marvellous exposition by St Sebastian—by the noble Lord. Perhaps the Minister will answer some questions for me. I have been reading the very large and very helpful response to the consultation exercise that the department kindly provided. I wonder whether he would help me with the sums. His Treasury and City background might help me to understand this. I am grateful for the briefing from Family Action and I take that briefing very seriously. I noticed that it had been giving out grants to people in need since 1869—even longer than the Social Fund—so it has some knowledge whereof it speaks. When organisations like that warn that things are about to get very bad, we need to listen, because they know what they are talking about.
Perhaps the Minister could help me to understand. I gather that in terms of crisis loans, during 2010-11, £152.9 million will be disbursed, and it is intended that from 2013-14 that will be replaced by the amount of £36 million, which will be transferred to local authorities. I am assuming that cannot literally be a cut of £160 million, or 76 per cent. I presume that there is a gross and net issue here. Perhaps he would help me to understand the effect of that transition.
Secondly, will the Minister tell us what work the department has done in estimating the impact of this recession, or other recessions, on demand going forward? Perhaps he could help us by looking at what happened previously. I note that the briefing from the Government in response to the consultation denies that the recession or youth unemployment had any part to play in the increased demand, although the fact that it started in 2008-09 would seem to imply a coincidence because that was around the same time as GDP began to go downwards. I wonder whether he could help us to understand that as well.
Thirdly, perhaps he could help me to understand how the new system will respond to changes? For example, how flexible can it be to changes in the profile of need in a particular local authority area? For example, if another of his policies such as the benefit cap were to have the unfortunate consequence of causing significant numbers of poor people to move from one area to another—I am not suggesting that it will, this is just for the sake of argument—how would that be affected by a local authority in that circumstance, or a circumstance like that?
I have one final question. Does he have any concerns about the consequences of what seems to me to be a move between what is currently annually managed expenditure to something that effectively becomes—albeit indirectly—a form of DEL? The only reason I ask is because one reason why something like this is part of the social security system is because it responds—and is managed and funded by central government to respond—to the changing profile of the labour market and the people in need because of changes in circumstances. How will government finances handle that in future?
Lord German
My Lords, I shall add some further questions about process. I shall not to go over the same ground that we have just covered, but I am very grateful to the noble Baroness, Lady Lister, and to my noble friend Lord Kirkwood for the historical background. This morning I started reading a report by her colleague, the Assembly Member for Cardiff West, on this very issue and on Labour's history in it in the past few years. In his report on this issue, the pride of place in the new Labour era goes directly to the noble Baroness, Lady Lister, with a major quote about the need for reform of the system. He then traces the whole history of the Labour Party's involvement and engagement with the Social Fund during the previous Government, and ends with a quote from the last document which we have, the DWP document of March 2010, which says that,
“the Social Fund has remained largely unchanged in the two decades since its introduction”,
that the existing scheme was “passive”, doing,
“little to help people build up personal financial management skills”,
and that it was “short-term”, “complex”, and presented a series of “delivery challenges” if the system were to,
“provide better value for money for the tax payer”.
I have no idea whether that is an accurate recording but he took his starting point from the noble Baroness, Lady Lister, and his end point is that there is a problem which has not been dealt with, so reform is obviously essential.
The second piece of quite interesting information which I took from this document is on the report of the Calman commission. I do not want to appear like a cracked record here but I shall refer to an amendment in a moment. It is not clear to me which country we are talking about and whether “national” means England. However, one issue considered by the Calman commission, which was of course set up by the three parties represented around the centre of this Committee, was to recommend to the Government that the discretionary elements of the Social Fund should be devolved. The previous Government, in their response, said “We'll think about it”. I presume that the thinking has now moved on, which is why this issue may well be before us in terms of devolution. In a moment, I want to trace what I think is going to happen in Scotland and Wales because, although there is not yet a clear picture, there is a sense of direction in Scotland, and one beginning to emerge in Wales, as to what will happen.
First, Calman treated this as not being part of the major social security network. He regarded it as a different animal. Another quote which I liked, because I had the greatest respect for this Labour politician, is when the late Donald Dewar said that the Social Fund was,
“flawed in concept and arbitrary in its impact”.
Reform was therefore essential, but that essential reform is still on the table. What is likely to happen in Scotland is that its Government, as I thought, are likely to add an element of their own funding to this sort of money and to create their own scheme, so that there will be a different scheme in Scotland, administered by I do not know whom—possibly by the third sector—and managed on a whole-Scotland basis. The argument that is developing in Wales is very similar: there will be a possibility of an all-Wales scheme, delivered by and responsible to the National Assembly for Wales.
In that context, we therefore have to be clear that most of the questions and discussion which we have had so far are about what happens in England. I respect that and it is very important, because that is probably where there is now the greatest area of concern about how it will all work. I am sure that in Amendment 86ZZZEB, tabled by the noble Lord, Lord McKenzie, proposed new subsection (5A)(a) and (b) refer to England, and that the word “national” in “uniform national appeals process” in new subsection (5A)(c) again refers to England.
We have this problem because we refer to nations. We have a National Assembly for Wales. That means that Wales is a nation. I am not certain how we refer to England at the moment. Presumably that is what the amendment needs. There has to be concern about how this will be delivered. It is appropriate to leave the structure and nature of the business to Governments in Scotland and Wales for them to shape in a way that is appropriate to them because they will have the legislative and financial competence. Of course, this Parliament will have no competence in that matter because the formula will be moved on through a structure that will eventually end up in the Barnett formula. It is important perhaps to look at models that we can share across the United Kingdom. The one for England is not yet absolutely clear.
Before I leave the issue of Scotland and Wales, I ask the Minister whether there has been any mention in Scotland and Wales of the use of the legislative consent motion. That is the device by which a devolved Administration can either ask for or accept permission to legislate, or give the permission to this Parliament. It works in both directions. I wonder whether that has happened. There is still some concern about the nature of what the Administrations want to do.
I will not repeat the arguments on the ring-fencing issue, but in England it is also the case that where you have accountability for funds that emanate from Parliament, there must be some accountability to Parliament. I will start by asking the Minister about the issue of the accounting officer. If discretionary funds are moved in the way that is described, am I right in believing that the accounting officer for those funds will be the Permanent Secretary of the Department for Work and Pensions? We should remember that by definition this is the person whom Parliament may call to account for the stewardship of the resources within their control. How on earth will the Permanent Secretary of the DWP account for money that has been spent without any ring-fencing or contract of any sort by local authorities throughout England? I would be grateful for an answer to that.
The Bill has no lines of accountability across departments. I would like to know what the line of accountability across departments is. If the Permanent Secretary of the Department for Communities and Local Government were the accounting officer, would they be the accounting officer for some parts of the fund, with the DWP Permanent Secretary having responsibility for others? What are the lines of accountability across departments? Or will accountability be split between various departments? In other words, who should Parliament call to account for these moneys.
The second issue is about reporting back. We have heard about ring-fencing going in one direction. If there is to be an accounting officer and Parliament is to call them to account for those moneys, what will be the reporting back mechanism from local authorities in England to the accounting officer in whichever department it is? If that is not described, clearly we will lose the sense of being able to account for public money. I certainly worry about that.
I have asked a range of questions that need to be answered. I start from the premise that I have worked from this wonderful document. I will give a reference to the noble Baroness, Lady Lister, on this matter. It seems to me that we started with a problem many years ago and ended up with a problem that is still there. We need to find an answer but in so doing we need to ensure that we have covered all the possible corners that may be preventing us getting to the most appropriate solution.
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Lord German
My Lords, I shall speak to Amendment 75A in my name. I start by saying that the important thing is to get the work capability assessment right. That was a point made by the noble Lord, Lord McKenzie. It is important that people are accurately placed in one or another of the categories. That means that rapid progress needs to be made with the improvements that have been suggested by and are being adopted from Professor Harrington’s report. It seems that the work capability assessment is a crucial first part in ensuring that the whole system works effectively and properly.
The purpose of this amendment is to protect the most vulnerable and the poorest, and to take a slightly different approach from those suggested so far. I should like to start by looking at the context of two words that many noble Lords have used so far in this discussion—“arbitrary” and “temporary”. There is a difference. The noble Baroness, Lady Meacher, referred to any date being arbitrary. It is indeed an arbitrary decision, and if you have some form of illness that will take you beyond 720 days or whatever, then it is an arbitrary cut-off date one way or the other. That is our principal concern—the provision does not address the issues relating to the people concerned.
I of course recognise that there is an issue to which many noble Lords have referred regarding the cost-saving measure in this proposal. I should like to ask the Minister why the savings now being predicted are between £1.3 billion and £1.4 billion, given that in the comprehensive spending review the Chancellor of the Exchequer said that the savings would be £2 billion a year. This is a question that my noble friend Lady Thomas raised—to try to identify why there was a change of procedure from the announcement made by the Chancellor of the Exchequer, who stated that that there would be no backdating and that the provision would not be retrospective, when this proposal is for some form of retrospection.
When you examine the ways in which you can have a non-arbitrary system that deals with people’s needs, and when you look for a system that in our view deals with the most vulnerable and poorest in our society, there is a variety of ways in which you can do it. Obviously, through medical assessment, you could potentially re-examine people at some stage and say whether their medical condition had improved or was changing, or whether the condition would require that the payment should continue. The problem with reassessment is: when do you reassess and how long does that take? If you understand the meaning that I have already put on the word “arbitrary”, then, whether it is 18, 13, 12, nine or six months, you will see that it really is a question of the individual’s circumstances.
Lord McKenzie of Luton
I am sorry to interrupt the noble Lord, but if the process is that when someone is put into the work-related activity group there is a prognosis as to how long they are likely to remain there—this is the basis on which referrals to the work programme are made, for example—does he accept that that is a natural and clear point for reassessment?
Lord German
It is a point of assessment, but the problem is that people’s medical conditions can alter—they can get worse or better, and there is the issue of fluctuating conditions that noble Lords have also recognised. The point that I am making is that there is a problem with a single point, and you need to have a progression of points if you are going to use medical assessment.
The other approach that has already been referred to in this debate is exemption by groups. Once again, identifying groups of people is very tricky because people can fall into different categories within a particular group. There is also the danger that, if you identify one group, another group might be left out. In this amendment, we are therefore proposing to look at ways in which—while we cannot wreck the Government’s proposals to make savings and reach the overall budget targets that they have set—we can ensure that the most vulnerable are protected from the effects of any time-limiting contributory ESA. This essentially means protecting the poorest and the sickest. The objective, therefore, is to focus the protection of those who are least able to support themselves. I know that that aim is shared by the Government, and we recognise that they are not time-limiting those in the support group, or even those on income-related ESA—to which I shall return in a moment.
However, we are not fully convinced of the thresholds at which income-related ESA apply, or that they are set at a level that will adequately protect low-income claimants—especially those with working partners. It is interesting to note from the impact assessment that 62 per cent of all those who would not be able to claim income-related ESA at the end of 12 months could not do so because of their employment. I want to come back to that issue of income. I know that we are talking here about a form of means-testing but, even so, we are talking about the main reason why people’s payments cannot continue.
We know that the Government are keen to ensure that there are no disincentives to work and that work will always pay. I am also aware that the Conservative Party in the Government wants to strongly support family ties through the tax and benefits regime. As such, it seems odd to us that the narrowness of the ESA means test risks undermining both these objectives, since it can present an incentive for a certain group to give up work. Paragraph 24 of the impact assessment states:
“Those with the most incentive to give up work are partners earning less than £150 a week, as their net income could potentially only be a few pounds less if they gave up work. An indicative analysis shows that 10% of all partners are in this position”.
If that is the case, these are the 10 per cent who are obviously the poorest and the most threatened by the change which is before them. With that 10 per cent of people in mind, this amendment seeks to set in law a floor beneath which the means test cannot apply. We are probing the Government to see whether they think that the test, as currently applied, is adequate to protect the lowest income households.
The amendment is set in terms not of the hours worked, because that is quite difficult to assess, but of the actual paid income. We know that the new universal credit system will enable the DWP to indentify the income of the partner. I am attracted to an income-based level because it is a clearer marker of actual income than hours worked.
Nevertheless, we would like to hear the Minister’s view on alternative methods of measuring income for a means test. We have chosen in this amendment the income tax personal allowance threshold divided by 52, for simply making it a weekly income measure rather than an annual. This is an external marker and thus less arbitrary than plucking a figure from thin air to write into legislation. If you divide the current rate of £7,475, the figure comes to £143.75 a week, which is very close to the £150 figure mentioned in paragraph 24 on page 11 of the Government’s impact assessment. This level therefore almost equates to the £150 figure. The Government’s own assessment notes that this is the level below which there exists a disincentive for people to work. We are trying to address that disincentive.
We—those who tabled this amendment—cannot be committed to a particular bar or level to set. But I am keen—I hope noble Lords will agree—to set in place an architecture for the future. My noble friend the Minister has used many times the argument that the taper can move with time as circumstances permit, but I want a means-test bar from which one can fluctuate as government income increases. We are aware that the Government have expressed the intention to raise the personal allowance threshold and we are very pleased with that. But it seems to us that if the Government think one should keep one’s earnings and not lose them to the taxman below a certain level, the same logic might also be applied to earnings and to one’s partner’s ESA. I welcome the Government’s response to the future impact of this amendment in light of the changes to the tax threshold which are before us in the next few years.
There are two other issues on which I should like to probe the Government. If they were to look at what happens immediately after the 12-month period is up, and if the income-related ESA is not available—because of the bar or the fact it is means-tested, or for any other reason, capital perhaps—will the Minister allow people who would otherwise have been eligible for income-related ESA to have the national insurance contributions credits applied to them? That would allow them to get the passported benefits that came with that purpose and therefore additional benefits would flow. At its minimum level, that would be a level of support that people could look to.
Baroness Morgan of Drefelin
Before the noble Lord sits down, he said that there was a sense that the work capacity assessment needs to be right and that he was thinking about arbitrary cut-offs and temporary classifications. Is he saying that, in order to get this right, we have to look again at the support group? Because of the functional impairment or prognosis of the people whom I am concerned about—those who are known to be facing a terminal prognosis of two years—perhaps they should automatically be in the support group. If that were the case, there would not be a problem
Lord German
I can answer that question by simply stating that the work capability assessment, if done accurately enough, should place people in the most appropriate group. Of course, one of the questions in the work capability assessment is, “What are you capable of?”; “capability” is in the title. If you are capable, with an illness, to do some work, and if you know that that will diminish over time, logic tells me that you need to think again about the way that that group of people is affected by such a proposal.
In a sense, what it means is that a clear definition between support on one side and being work ready on the other is not necessarily the only appropriate distinction you can make. It is part of the issue about having clear cut-offs and clear decisions of this sort. You need to be flexible for the people who need it most and whose circumstances will have changed.
Baroness Hollis of Heigham
I shall be brief because we have had some very full and powerful speeches from people who are intimately involved and who have specialist knowledge in this field. Like others, as I am sure my noble friends will go on to say, I would prefer not to see this clause in the Bill at all. I very much support the whole range of amendments that have been tabled.
However, I want to add my particular support to Amendment 75A. This is something that many of us referred to at Second Reading. It is the amendment that, leaving aside the issue of the disabled person, most protects the position of the other partner in the relationship, and it is therefore consistent with universal credit. In my view, it is the amendment that, if the Minister seeks to retain consistency with universal credit, he will do his best to support. Basically, we are again running the sort of arguments that we were having over second incomes and disregards, where the question was, “What is the return to work?”, and the Minister told us that he could not afford to run a disregard, even though the costs of childcare might eat up the earnings.
Here, we have the same problem in an even more aggravated form because here, above all, we need if we possibly can to keep the working partner attached to the labour market. We know that if somebody needs to care for more than about 20 hours a week, they probably cannot combine that with anything other than a part-time job. The ingenuity of the Lib Dem amendment is that it allows for something like 24 hours a week at minimum wage or thereabouts, which is pretty much at the tipping point where somebody leaves a full-time labour market and can manage only part-time work in order to make a generous and graceful contribution to caring responsibilities.
If the Minister cannot accept the push of this amendment—I will not say “understand” because I know that he understands it perfectly well—he will be saying to a woman in this position, who may be the working partner: “We are going to make it so unattractive for you to stay in the labour market and work that you, who may very well be tired because of your caring responsibilities, may have financial pressures and may yourself have minor complaints, will want to come out”. It would be infinitely better for her poverty, her health, her connections to the labour market, her sense of self-esteem and her social gregariousness to have a wider life that we should do our absolute damnedest to support her in the labour market—even if on only a part-time basis—and ensure that she kept that money. That is not a huge sum but it would lift her, as a parent, out of poverty and keep her in the labour market. If her partner’s condition deteriorated, we might be very glad that she had that earnings capacity behind her. If he died, we should be very glad that she had remained attached to the labour market and could, after a period of grieving, re-enter it. If he got well, and we would expect to attach conditionality to her, we would be very glad that she had remained attached to the labour market. On all possible outcomes of their partnership, it is in our public interest—the Government’s included—that we keep her attached to the labour market.
I feel very strongly that we have real problems with couples’ earnings. We have seen that before in amendments moved by my noble friend Lady Lister. Here, it seems even more damaging if we go down the parsimonious route of trying to peel off every pound that the woman earns against the partner’s benefit income. I hope very much not only that the Minister will take this away and think about it but, if he is unable to move, that the Lib Dems, who have come up with a decent and ingenious amendment addressing a very real problem—though it is not sufficient to deal with all the problems that disabled people face on the ESA, which need other amendments—will not retreat from the courage of their convictions and will pursue this through.
Benefits: EU Nationals
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Lord Freud
My Lords, we are moving in two directions. First, we are looking hard at the Commission’s opinion and considering whether we should go to court. We have two months in which to take that decision and the likelihood is that we will take it through the full legal process. The second area is the political one. We are talking to other countries which are also deeply disturbed about this. Some 13 countries have signed a motion calling for a minute statement and for a policy debate on this matter.
Lord German
My Lords since some 900,000 UK citizens are migrants in other European Union countries, I am sure my noble friend the Minister would like to protect the reciprocity which exists for both EU citizens and others coming here, as well as our citizens in other countries. Will he comment on the information we have received from the European Commission about the intention to extend reciprocity to North African countries? Can he tell us what line he will take with the European Commission on this matter?
Lord Freud
My Lords, we are going to take a pretty robust line on this matter. We have an opt-out from the Lisbon treaty which we have been using for African nationals where there are third-country agreements, in particular Morocco, Algeria and Tunisia. Again, currently we have legal differences with the Commission on this matter, which is looking for ways to get around our opt-out, but we are determined that we will retain it.
Welfare Reform Bill
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Lord German
My Lords, I am not able to support the amendment in the format in which the noble Lord has presented it. The wording states that matters should be discussed with relevant Ministers. The problem is that there are relevant Ministers—the noble Lord will know some of the people I refer to—who would probably say, “I am not going to discuss this with you”, and that would be the end of the game. The amendment, of course, is about consultation.
I should like to make two additional points. Much of what is in this Bill requires action by local authorities which, as I have said before, cannot be undertaken by this Government and this Parliament. This means that the actions necessary to enact many parts of the Bill will be requirements on others.
There is also a two-way dialogue in this. Let us take, for example, the housing issue, which was debated in earlier clauses, and the need for appropriate housing stock and its reshaping to match the changes that are about to take place in housing benefit, and the underoccupancy rules in particular. This will mean that the Government will not have any control over the level of investment in housing stock, the shaping of it or even, in a sense, the policy that will drive it forward.
It is crucial that, in the one direction, if this policy is to be implemented, there is a successful negotiation, not only with Northern Ireland—about which we heard earlier—but with the other parts of the United Kingdom. However, if you look at it the other way round, you may find issues where the legislative competence may not exist at the moment to undertake all the tasks being given to the devolved Administrations. Has any consideration been given to the legislative consequences? It may mean consent Motions being passed in other Parliaments to give action to some of the work that is going on.
We have now a very complex arrangement in the United Kingdom. I have already declared my hand— I think that social security is one of the pieces of glue that holds the United Kingdom together—but to make it work we must work together, closely align ourselves and understand the competencies which are not with this Parliament. We need an update on where we are with the current level of negotiation with both Scotland and Wales, which I suspect is different at present.
Lord McKenzie of Luton
My Lords, we should thank the noble Lord, Lord Wigley, for reminding us of the scope there is in the Bill and the profound consequences that it may have, not only for the universal credit but for all the other parts that are before us today and will be before us in subsequent Committees. I thought the noble Lord, Lord German, was on the point of distinguishing between relevant Ministers and irrelevant Ministers, but he did not quite go there.
We saw today—I am afraid I did not see it all—some of the detailed work that has gone on in preparation for, certainly, a big part of what is in the Bill. However, the point has been made by both previous speakers that it is not only about DWP and England; there is lots of work for others to do, particularly local authorities, who are about to reel under the impact of the Localism Bill and all that Mr Pickles has sought to visit on them.
Questions were raised about new burdens and how they work. It is important that that is factored in and that there is fairness and equity in how these matters are rolled out.
I acknowledge receipt of the Low review. Unlike the noble Lord, Lord Wigley, I have not had a chance to read it yet or to quote from it, but it looks to be a particularly valuable document. I hope I have a chance to read it before we get to DLA later in the Bill.
Lord McKenzie of Luton
My Lords, I shall speak also to our other amendments in this group, Amendments 55G, 56B and 69ZA. These amendments relate to the desirability of making a greater number of regulations under the Bill subject to the affirmative resolution procedure to facilitate better scrutiny of any changes that affect claimants and future claimants of the benefits system. In particular, future attempts by regulation to define the meaning of the terms “disabled”, “severely disabled” and “work” should be submitted to both Houses of Parliament for approval. There are several other amendments in this group, which I might speak or respond to after others have spoken to them. I beg to move.
Lord German
My Lords, I shall speak to the amendments in my name, Amendments 59, 61, 63, 64, 65, 66, 67, 68, 69, 70, 77, 96, 99, 101 and 106, and to whether Clause 47 should stand part of the Bill. It will not take a wizard to note that these recommendations are based on the report to this House of the Delegated Powers and Regulatory Reform Committee. Before I give a general perspective on why I have tabled these amendments and my response to individual amendments, I shall simply look at the rationale that runs through the Delegated Powers and Regulatory Reform Committee’s reasoning for these recommendations.
The first thing it says—and I think we all agree with this—is that this is a detailed and complex piece of legislation and that it needs to make provision for as wide a range of personal circumstances as is practicable, but it has a perceived need for adaptability. That is fundamental. It comments that this is a significant revision of social security means-tested benefits since at least 1986. It also comments on the way in which there has to be an opportunity for subsequent amendment and for views on the way in which this is being implemented. Clearly, as we all know, this is a skeleton Bill, and the regulations put the flesh on the bones. That is why it is very important that we get the arrangements right, particularly bearing in mind those key principles that I have just outlined.
The Government have accepted some of the amendments, so I will not dwell on them. They have accepted Amendment 59. Amendment 63 proposes the removal of claimants subject to no work-related requirements. This was an issue that came up earlier this afternoon. This amendment removes the requirement from the affirmative procedure only for the first set of regulations and later puts it back into affirmative every time it occurs. I notice that the Government have not yet responded to this amendment, and I hope that they will deal later with the question of whether it should be affirmative throughout. It falls into the category where we may wish subsequent amendments to be dealt with by the affirmative process because they have such a substantial impact on the clients who fall under these no work-related requirements.
Similarly, there is the issue of hardship, and I have done the same thing there. I have taken that from being affirmative for the first occasion only, and in a later amendment I suggest that it should be wholly affirmative. Amendment 65 proposes that the basic conditions be subject to the affirmative procedure throughout. These basic conditions set out by Section 4 and the regulations beyond it specify certain circumstances in which a person has been treated as having accepted the claimant commitment. The basic conditions are laid out in Section 4(1). These are the bare bones of universal credit and should be subject to the affirmative procedure because they are part of the fundamental structure of the Bill. These basic conditions may well change. There will be a requirement for some flexibility, knowing how the system will pan out over time. As the people who are going to be affected by this will be the more vulnerable, it seems to me that we should have an affirmative resolution for those regulations throughout.
On Amendment 66, the Delegated Powers Committee—whose report I read very carefully—said that if the Government could convince it that the negative procedure would satisfy it, that would be sufficient. In their response, the Government said that they would seek to reassure the committee that the negative procedure would be sufficient. I wait to be convinced, as I suppose do many other noble Lords. I am grateful that the Government have changed from a negative to a first-time affirmative procedure, but the amendment questions whether that is significant. I believe that the powers are significant, and the Delegated Powers Committee worried about the restrictions put on claimants and about whether they would be suitable for differing personal circumstances. The Bill and the documents that we already have seem to allude to using these measures in a positive way—something that I support—suggesting that restrictions on types of work will allow claimants to look for work in sectors in which they are interested or for hours that are appropriate for them. Quite clearly, it is an area with significant and changeable circumstances. If it is the view that the negative procedure should be used for routine matters, then, when these policies proceed, there should be an affirmative process.
Amendment 68 relates to the claimants who are subject to no work-related requirements. The Government said that they would make that subject to the affirmative procedure for the first regulations. Once again, the Regulatory Reform Committee asked whether the Government would confirm that there would be only minor adjustments after that first set, and I think that we might be content with that.
With Amendment 69, it is exactly the same process. The Government have put in the affirmative procedure for the first time. If they can assure us that the regulations set out in the first instance are unlikely to change a great deal thereafter, I think that that will be satisfactory as well.
Amendments 70 and 99 would remove the words “Scottish Ministers”. That would not only create equality between the rest of the country and Scotland but ensure that, because Scotland would be doing these regulations by affirmative procedure, the rest of the country would be doing them that way as well. I did not understand why it was not.
Clause 47 provides that regulations under Sections 6 and 7 of the Jobseekers Act 1995 should require only the negative procedure. As of now, they have the affirmative procedure, and the regulations concern claimant conditionality and the requirements for claimants to be available for and actively seeking work on which their jobseeker’s allowance is dependent. The predecessor committee that looked at the matter in 1995 for the Jobseekers Bill considered the provisions concerning availability for work and actively seeking work to be of fundamental importance to the Bill and recommended that regulations about them should require the affirmative procedure whenever made. The DWP memorandum on this topic says:
“Regulations such as this are generally advantageous to JSA claimants. The Department has increasingly found that having to use the affirmative procedure makes implementing the changes more onerous than it needs to be”.
Can the Minister say what “more onerous” means? Does it mean that you have to have open consultation, which seems to me important? The Government rejected the recommendation from the Delegated Powers Committee, saying that moving to the negative procedure was absolutely necessary. I think we would like to know a bit more about what was absolutely necessary.
With the introduction of universal credit, there are bound to be uncertainties that really should not be left to the negative procedure in this matter. Some changes are envisaged in the regulations using the negative procedure, meaning that the Secretary of State can restrict the conditions on a claimant so that they are searching for a job that they want or may not want or one that is near them or is paying well. The precedent set by the previous legislation in this area—in fact, all legislative matters in this area in the past—has required the affirmative procedure to be used for issues of this kind. I wonder whether the Minister can convince us that we need to move in a different direction.
The Government have accepted Amendments 77 and 96, while they have put down an amendment to the part of the Bill covered by Amendment 101, and they have also agreed to Amendment 106.
With a Bill of this magnitude, which has such importance for a great number of people, over the years to come we should be absolutely clear that we are going to have a fully transparent process to allow the debate to occur, not just this year or next year but for the length of time that this Bill survives before changes are made and whenever these matters become important to the public. We need to have that public debate, and I think that Parliament deserves the affirmative resolution in the areas that I have outlined.
Lord Kirkwood of Kirkhope
My Lords, I find to my surprise that I have an amendment in the middle of this group, Amendment 71, which I am sure I conceived of in a reflective moment in my bath a long time ago. The amendment proposes a new clause entitled “Universal credit: requirement for simplicity”. It says:
“Nothing in the regulations giving effect to this Part shall introduce avoidable complexity to the claiming, calculation or payment of universal credit.”
I do not think that anyone in the Room is in favour of avoidable complexity. However, the point that I wanted to make, as we come to the end of the universal credit part of the Bill, was that, with a bit of determination, for the first time you can achieve simplicity. Even if unavoidable complexity were engrained in the legacy systems and the rest of it, perhaps it would be positive to have a statutory duty. There might be another Government in due course—you never know what might happen—and you could foresee circumstances in which there might be some back-sliding in terms of some of the gains that we have made with universal credit. If it is possible to do it—and I think that there have been signal successes in this direction, and they are demonstrated in the legislation that we have in front of us—maybe it would help to put in perpetuity for future Ministers a duty to avoid unnecessary complexity. It is something that could always be argued if future Governments came up with other unnecessarily complex systems. Perhaps I am talking to myself here, but the point is at least worth considering.
This is, rather obviously, a probing amendment, but I would like to hear the Minister’s thoughts: is it a completely daft idea, or might there be some merit in trying to get Ministers—the noble Lord’s heirs and successors—always to think carefully about unavoidable complexity in future iterations and reforms, particularly of the universal credit? It would be so easy to lose a lot of the advantages if we started making it—as we always have done, for the past 30 years—piecemeal and patchwork, with special pleading for special cases. We end up with incoherence, which is avoidable.
Pensions Bill
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Baroness Greengross
My Lords, I thank the Minister, particularly for his amendment. However, I want to emphasise that the real winners here are the half million or so men and women who are going to get their pensions earlier than they would have done without this amendment. I was not the only Member of your Lordships’ House who felt that this was very unjust, but I congratulate the noble Lord because he recognised this with great sensitivity. I agree with the noble Lord, Lord Boswell, that this is a compromise and that there were various constraints. It is not what we all wanted; it has not gone as far as we would have liked, but there were constraints that made that very difficult.
I tried in the amendment that I put forward to do something about what those of us who tried to change things we saw as a tremendous injustice to 300,000 older women—those who found they had to wait an extra 18 months or even more to get their pensions and 33,000 who had to wait an extra two years. Now, because of this amendment, 245,000 of those women, and a similar number of men, will see their pension age reduced between one and six months. It was not all that some of us, including Age UK, would have liked, but I am pleased to support the amendment as a victory for common sense and I thank the Minister for his sensitive approach.
With regard to going further, at this stage I just hope that no further changes will occur without due notice to everybody concerned and appropriate time for people to prepare for a huge change in their circumstances. That is very difficult to cope with at that stage in one’s life—particularly for women, who find it hard to get into the job market at all at that age or even to remain in the job market. I very much support what the Government have done, and thank the Minister again.
Lord German
My Lords, I also add my congratulations to the Minister and the Government for recognising what was the most important part of this Bill—certainly the most controversial part. When it left this House it left it unamended but, if one had taken the temperature of your Lordships’ House, it would have been quite clear that the Government had to do something to ameliorate the problem which was so well put in very many amendments. The Government have listened, and taken on board that message. They went away and came up with a compromise for which we have to be grateful. I pay tribute to the noble Baroness, Lady Greengross, who put down the amendment that paved a way, in a sense, for the sort of direction that the Government have adopted; it might have cost another £1 billion, but, as they say in musical terms, it was close enough for jazz.
The key issue here is that we have to recognise that, though the Government have taken this on board, it will mean a substantial improvement for women who might otherwise have been expected to work for an additional two years. As we have heard, these changes will cost £1.1 billion and affect 250,000 men and just under 250,000 women. I do not regard that as a sticking-plaster solution. It has not been put in place simply to hold the breach in the dam. Another part of the Age UK statement says that it is a big step forward. It states:
“We can’t emphasise enough the great achievement”—
the great achievement—
“that this change represents as it will cost the government £1 billion in lost cuts to expenditure”.
In fact, it will be just over £1 billion.
Welfare Reform Bill
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Lord Knight of Weymouth
Certainly, it is important that individuals such as the noble Lord can apply successfully for their state pension online. We have seen some great successes across government in being able to use digital as the default route—in particular, the student loan application process, and vehicle licensing and road tax services are excellent. The Department for Transport should be a model on how this is being done. But still a significant proportion of the population is not online, despite the best efforts of Martha Lane Fox and the rest, who I wholeheartedly support. The Government need to set out what they are going to do. In education, I introduced a home access programme that got 167,000 families online but it cost quite a lot of money. It was a fantastic, fraud-free scheme using prepaid credit cards. It was great but, I repeat, it cost a lot of money. I would ask the Minister whether he has got the money in his back pocket.
There are big questions around the delivery of IT. I am looking forward to the briefing. The Minister is evangelistic in his enthusiasm for how it will work, which is impressive, and I want to know more. But, at its basic level, what concerns me is that in essence it seems that we will have three IT systems being developed. There is the IT system within DWP to integrate the benefits side of things. As I understand it, it is not much more complicated—it might even be less complicated—than the IT project that the department successfully delivered in respect of ESA, which gives the department considerable confidence. As I think I said at Second Reading, the chief information officer at the DWP, who is one of the better-rewarded civil servants across Whitehall, is an excellent official and deserves every penny of what he gets because he delivers for the taxpayer in this regard.
That complicated database is quite possibly within the capacity of DWP to deliver successfully. However, it has to integrate with another database which is being developed by Her Majesty’s Revenue and Customs for real time information around employers who will have to report in real time how much they are paying their staff. The two databases will have to integrate in order for universal credit to work. That is not just the complication of an integration of two databases.
I know, for example, from the SATs crisis—I was the Minister who oversaw it—that that crisis was as a result of three databases interlocking, corruptions occurring and the data letting us down. In developing this real time information system, HMRC is also developing something based on a tax system, which looks at our personal tax, that has to integrate with a benefits system database, which looks at household tax. You have to make sure that all the data have enough alignment around the identifiers to make sure that the right individuals and households all fit together properly. That seems quite a tall order.
Now I also understand that there is a contingency plan; at last the Government have a plan B. This is good. That is the contingency plan around whether or not the real-time information database at HMRC will work. It can then fall back on the third database, which has to be developed, for self-employed people, who will be self-reporting into a database at HMRC their changes in income and circumstances so that they can be eligible for universal credit. That might be fine in terms of database integration, but it raises a consequent question. If plan B is to work, it needs us to believe that all the employers up and down the land will happily self-report in real time without error or fraud to the HMRC in order for universal credit to be paid accurately. Of course, we all know what happens when either the database falls down or the information going into the database is inaccurate from our experience of tax credits, which in part we are looking to replace through universal credit. As a Member of Parliament, I found that quite a significant proportion of my case work and the work that my staff did for me and my constituents was chasing up problems with tax credits—over payments, when individual families were weighed down with debt to HMRC, which was then at times quite aggressive in chasing it and needed a phone call or a letter from an MP’s office to get it to calm down and be reasonable. We do not want universal credit to suffer reputational damage and cause real problems for families in that way.
If noble Lords are interested in any of this, they may be interested in the Public Accounts Committee report from the other place. Its third recommendation says:
“The Department admits that there are substantial risks attached to implementing major welfare reforms while at the same time reducing its costs. The successful transition to Universal Credit, for example, will depend heavily on the development of a new IT system with HM Revenue and Customs to a very tight timetable. We have often seen problems with delivering new IT to time, budget and specification. The Department should allocate clear responsibility for scrutinising progress of the welfare reforms alongside cost reductions, develop a clear understanding of the risks to each and how they will be managed and encourage staff to report any emerging problems early”.
That is at the root of this amendment. The Public Accounts Committee is saying that there should be clear responsibility for scrutinising progress of the reforms, and that is what I want for Parliament. I want parliamentary scrutiny of the progress of these reforms.
I have mentioned the efficacy of the self-employed database and the plan B for real time information in the HMRC system. I have, in a previous debate in this Committee, mentioned my worries about documentation and housing benefit local delivery, which will be answered in the famous meeting that we are going to have on 3 November. I am sure that there are many more delivery risks that others can think of, but I shall not take up the Committee’s time in going into them. I repeat that I want this to work, but I want it to work in a way that is fair. The Minister, understandably, has to spend time with his head under a towel working out the details, but he also needs to get out and have a look around at the environment into which he is going to introduce this. It is the worst possible economic environment in which to carry out this massive welfare reform; it adds huge risk, as the DWP has to lead the response to a worsening situation in the employment market with limited, effectively capped, resources. I believe that it is a perfect storm, and it is therefore right for this House to demand absolute transparency on the risk assessment and risk management and the delivery of the various milestones in the programme. Indeed, it may be prudent for the Minister to reflect and say, “Let’s get the legislation through, but let’s adjust the delivery timetable until the employment situation has stabilised and we can be confident that the work programme will be able to be delivered successfully, because jobs will then be created by the private sector in order to make that programme a success”. All my worries will then dissipate.
Finally, I want noble Lords to imagine the consequences of this programme going wrong, with people already moving from fortnightly to monthly budgeting having to manage without getting into rent arrears, and so on, then getting no money and facing recovery action. They are already the poorest and most disadvantaged, in part because of policies from other departments having no money; they will have to beg at the door of impoverished local councils for social fund money. That does not bear thinking about in human terms. We know that local authorities will run out of that social fund money and then where will they go? All of that is a scandal, a year or so out from a general election. I am giving political advice to the Minister: that it is in his best interests and in the coalition Government’s interest to take this seriously and to think about the delivery timeline, which may have made sense when it was first written, but I do not believe it makes sense now, given what is going on in the economy.
Lord German
My Lords, I thank the noble Lord, Lord Knight, for his self-declaration. He is an enthusiast for IT and the changes that it can produce, but he also recognises the difficulties which could overtake anyone who is trying to undertake such a major change as this. It is very difficult. I shall not repeat much of what he said, but his last point is: what happens if we fail with an IT structure that does not deliver the welfare reform that we are looking for? I think that, more than anyone else getting the blame, the political class as a whole will get the blame for a structure under which individuals would suffer. So it is very important to get it right.
Unfortunately, we tend to roll a number of words together. I suppose you might say that the universal credit depends on a substantial, reliable, appropriate and functioning IT system. I have used the phrase “IT system”, which is probably not the correct phrase because we tend to throw these words around. I use a series of analogies, and I hope that noble Lords will bear with me. I used the phrase “daisy chain” because it is the easiest way to describe linking between one system and the next. In essence, there is a number of inputs into the IT structure, some of them from employers and some from potential claimants, and all those pieces of data have to be linked together—hence the phrase “daisy chain”. If you break the daisy change, clearly you do not complete the circle and the person does not get paid at the end.
None of those changes will be possible without substantial shifts, in recent years, in the IT platforms that we have available to us in order to deliver such as programme. If we are going to make this work, we have to ensure that all those parts are working. Of course, there are—most noble Lords would recognise this—two substantial departments of government, both of which have a hand in ensuring that this works. I do not know, but there are plenty of people who will tell me, whether the relationship between the two big departments, Her Majesty’s Treasury and DWP, works as one might hope. If that were the case, you would be looking for the sort of regime where one department was trying to exercise responsibility over another. I hope that that has not happened. I hope that there is genuine cross-departmental working. My first question for my noble friend is: who is taking responsibility? Is DWP sitting in the driving seat, as that is the hub from which all this will happen, and is HMRC material coming across to it in the way that DWP prescribes in order to achieve the result?
My second question relates to the passing on of data. One of the lessons that we and the world have learnt about the passing on of individual items of data connected together is that there is now an international standard for data passing. I would like reassurance from the Minister that we are using the correct ISO standard for the passing on of data. If we are, we can be reassured that not only are we able to pass it on from one department to another, but that it can be passed on to any other part of the system in the public or private sectors, or whoever else wants that piece of data, and that it has the same level of acceptability from one to the other. I would like a reassurance—particularly on what happens at the end, the starting point of which is this data from employers—that we are going to be using and transferring the employer’s data at that ISO level, and that there will be no “Well, we’ll do it this way to start with and move on to a better way later”. I want to be reassured that that happens, because without it we would have some difficulty in achieving the result we want to see.