Social Security (Claims and Payments) Amendment (No. 2) Regulations 2010

Lord McKenzie of Luton Excerpts

Monday 21st June 2010 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I start by thanking the noble Lord, Lord Lucas, for the opportunity to discuss these regulations. As other speakers have said, he has joined the exclusive band of those involved in Motions of Regret, one that I myself have joined, although I have been on the receiving end of several. I should say that I find myself in the rather unusual position of dealing with regulations that were promulgated under the previous Government and for which I would have had some responsibility in terms of explaining and defending, but a responsibility from which I am now free.

In his introduction, the noble Lord, Lord Lucas, talked about how these regulations would persecute poor people. If that was what they were about, the Government of which I was a member would have had nothing to do with them, and I am sure that that runs for the Minister, the noble Lord, Lord Freud. The noble Lord also said that people can only end up in a worse position. Again, if that were the case it would not be something that I or the former Government would have wanted to have any truck with. This does not inevitably have to involve that position because it is a voluntary scheme with maximum amounts, and of course collecting debt in this way is cost-free to the individual, although there may well be administrative costs for HMRC and the DWP. One of the other ironies we are faced with is that my noble friend Lord Rosser, who joins me on the Front Bench, was previously chair of the Merits Committee. I think that he preceded the noble Lord, Lord Goodlad, and in his time has been responsible for various Exocets, of which this may have been one.

I cannot support the Motion tabled by the noble Lord, Lord Lucas, because I do not think that he has made his case, but I accept that the explanations given in the Explanatory Memorandum and initially to the Social Security Advisory Committee and the Merits Committee could have done more to set out the detail of the proposal, especially the methodology and the evaluation, but in our view the response of Steve Webb, Minister of State for Pensions—I still have to pinch myself when I say that—to the Merits Committee has, in our view, gone some way to rectify that.

However, we have a timely opportunity to reflect on these regulations and to take the coalition Government’s mind on them. As the noble Baroness, Lady Thomas, and the noble Lord, Lord Kirkwood, both mentioned, Steve Webb’s response indicated the possibility that the Government may choose not to proceed with the pilot at this time. Can the Minister give us an update on this and indicate the factors that will be taken into account in making any decision to defer? The proposed trial is of course partly focused on the recovery of tax credit overpayments. I am bound to say that, as I understand it, they do not inevitably flow from official errors—they are not necessarily the only cause—but we will have to see the extent to which the proposals might be affected by the cuts in tax credits that the Government are poised to announce tomorrow. We have heard the coalition promise to reform the administration of tax credits so as to reduce fraud and overpayments, and again we will have to see what that means in practice. If it can be accomplished in a fair way and without impairing take-up, all well and good, but the emphasis should be on the “if”.

It is accepted that the transition from work to benefits is a difficult one and can pose problems with budgeting for the repayment of existing debt, so these proposals offer help to those who cannot afford to settle their debts in one go. They provide a nil cost method of payment and are in addition to the other methods of payment available. Given our debate this evening, can the Minister tell us more about these other methods and whether there are any proposals to extend or restrict them? The principle of an additional voluntary method for people to repay tax overpayments has been welcomed by the SSAC and the respondents to the consultation undertaken by the committee were positive about the proposals.

One of the concerns expressed by the SSAC was the proposed maximum level of deduction for tax credits—three times the 5 per cent of the single over-25 rate for income support. The committee pointed out that this was greater than the maximum individual deduction under the third party deduction scheme. Although other recommendations were accepted, this was one area where the previous Government were unable to accept the SSAC recommendation, which was to limit the maximum amount deducted to 5 per cent of the income support rate. Have the current Government a different view on this? We know from our debates on the Welfare Reform Bill that the Minister is exercised about the impact of cash deductions from benefit levels—this was in the then context of sanctions—and he hinted at the prospect of other types of sanctions, possibly vouchers. Has the thinking developed further? How would such a system sit alongside the TPD scheme and these proposals—or can we take it that vouchers have been ruled out?

In its report in February to the then Secretary of State, the SSAC reflected on the history of the TPD scheme—and we have heard it from the noble Lord, Lord Kirkwood, today—where the type of deductions allowed from benefits has grown over the years. The last DWP response to the request for a review of the scheme was rejected, with the assertion that it had a twofold purpose: to provide last-resort rescue where a claimant is struggling with arrears of essential household outgoings, and to impose compliance with social and monetary obligations. Is this still the position of the Government?

We would all agree, I hope, that it is important that the manner in which the trials are conducted makes it clear that it is voluntary and that participants can withdraw at any time. It is also vital, as was envisaged when the proposals were devised, that the repayment from benefits should not be seen as the easy or default option for dealing with HMRC debts. In particular, it should not displace the HMRC code of practice which provides for overpayments to be written off in cases of extreme hardship. Access to advice therefore remains paramount. If the proposed free national advice service is to go on the back burner, then continued funding for those agencies, national and local, which work tirelessly at the moment to fill that gap will be critical.

As we have heard, the Merits Committee under the incisive chairmanship of my noble friend Lord Rosser did not question the objective of the regulations and the proposed trials but was concerned whether the proposed methodology would deliver sufficiently meaningful data to support its extension. I think that is the thrust of the Motion of the noble Lord, Lord Lucas. Concerns were expressed around the control groups, the percentage take-up from those contacted, minimum levels and time spent on benefits. Like the SSAC, the Merits Committee was anxious to know what advice had been sought on the design of the pilots. Frankly, I think the reply from Steve Webb of 31 May covered these matters and should allay the fears of the Merits Committee, the SSAC and, indeed, the noble Lord, Lord Lucas.

The nature of the communication inviting individuals to participate in the trial is recognised as being critical to both emphasise the voluntary nature of the trial and to help individuals understand the impact on their income of signing up for trials. This was one of the SSAC recommendations which we accepted. We also agreed to share copies of proposed communications with the SSAC. I trust this agreement will endure with the new Government.

At the end of the day, whatever the methodology, what matters is implementation. Neither HMRC nor DWP lacks experience in implementing pilots, but these require resources and training. As the matters we are discussing by definition impact on the poorest and the most vulnerable—those which the coalition Government have pledged to protect—we seek reassurance that any pilot will be properly resourced.

Although we cannot support the noble Lord’s Motion, we agree on the importance of the department providing good information, generally in explanatory memoranda, and its engagement with SSAC and the Merits Committee—which might have obviated the necessity for our interesting discussion.