Grand Committee

Tuesday 13th September 2011 Grand Committee

Tuesday, 13 September 2011.

Public Procurement as a Tool to Stimulate Innovation: Science and Technology Report

Tuesday 13th September 2011 Grand Committee

Considered in Grand Committee

15:31

Moved by

[Lord Krebs]

That the Grand Committee do consider the first report of the Science and Technology Committee, Public Procurement as a Tool to Stimulate Innovation.

Relevant Document: Public Procurement as a Tool to Stimulate Innovation (1st Report, HL Paper 148).

[Lord Krebs]

My Lords, I thank the members of the Science and Technology Select Committee for their excellent contributions to this inquiry and to the report. I also thank our specialist adviser, Dr Paul Nightingale, for his valuable expert advice. My aim in introducing the debate is to give noble Lords an overview of the nature of the inquiry and some of our principal findings. I am sure that others will consider particular aspects of the topic in more detail.

I thank the Minister for the Government’s response to our report, and later I will refer to some of the key points in this response. First, let me be clear about definitions. According to the Merriam-Webster dictionary, “to procure” has two definitions: first, to obtain by particular care and effort; secondly, to get and make available for promiscuous sexual intercourse. To avoid doubt, our inquiry concerns itself with the former definition.

By the word “innovation” in our inquiry, we mean the stimulation and exploitation of new ideas. This could encompass a novel application of an existing idea; a novel product, process or system; or the successful translation of an idea from elsewhere. An example of that last form of innovation is the Oyster card, which was successfully introduced into London’s transport system in 2003, but was based on the concept developed in Hong Kong with the Octopus card and in Singapore with its EZ-Link card.

In 2009-10, the UK public sector spent £236 billion, approximately one-seventh of GDP, on buying goods and services. It is the largest single customer in the country. The focus of our inquiry was simply this: do the Government and other public sector bodies use this massive purchasing muscle to drive innovation? Why should they? We saw two potential benefits of seeking innovative solutions in public procurement. First, it could lead to better solutions and better value for money for the public. Secondly, and not incompatibly with the first, it could stimulate innovation among UK businesses. This latter point is echoed in a very recent survey of 368 companies by Logica, which recommends,

“the introduction of a policy under which public sector contracts are awarded only to companies that demonstrate a commitment to the principles of open innovation and foster a collaborative approach with small businesses and academia”.

While we recognise that much procurement is routine and simply involves reordering the same product or service as last time, there are situations, perhaps many, in which an innovative solution to a problem is better. However, from the evidence we heard we concluded that all too often those responsible for public procurement take the tried and tested route as the default. We are by no means the first to look into this question. For example, in 2009 the Business and Enterprise Select Committee in another place and the National Audit Office both concluded that the Government could do better. The NAO said:

“Only a few departments have strategies which show that they understand where they need innovation or how to encourage and support it”.

It is not that there is a shortage of government reports relating to the question of procurement and innovation—in fact, plenty of trees have been chopped down to write about it—but the evidence we received showed that the writing has not led to action. I shall mention just a few of these reports. One is Transforming Government Procurement, published in 2007. Another is The Race to the Top, the excellent report by the noble Lord, Lord Sainsbury, also published in 2007. I quote his conclusion:

“Government departments can play an important role in stimulating innovation in the companies with which they interact, but in the absence of a clear directive and adequate resources, they are failing to meet the challenge”.

Innovation Nation, a report published in 2008, said:

“In some specific areas, government can provide more direct support using regulation, public procurement and public services to shape the market for innovative solutions”.

These reports and others have led to the establishment of specific initiatives to help to stimulate innovation, including notably the Technology Strategy Board and the Small Business Research Initiative. However, we noted that these initiatives account for only a tiny fraction—around 0.1 per cent—of the public procurement budget. We are urging that, where appropriate, innovative solutions should be embedded into the mainstream of public procurement and not sidelined into specific initiatives. We found no convincing evidence that the various reports, a small selection of which I have referred to, have led to a systematic and coherent change of culture among civil servants and others responsible for public procurement. In fact, as so often seems to happen in this country, excellent reports are placed in the filing cabinet with the “Job done” box ticked.

From our inquiry, we concluded that three important changes are needed. First, there needs to be stronger overall leadership from Ministers. We recommended that one Minister should have overall accountability across government for innovation in procurement, rather than the present split between BIS and the Cabinet Office. BIS has responsibility for innovation policy, while the Cabinet Office—particularly the Efficiency and Reform Group—deals with procurement policy, with an emphasis on streamlining processes and securing value for money. Although we were told that the Cabinet Office recognises that innovation is not an alternative to value for money, we would like to be convinced that this is properly understood by decision-makers and those responsible at all levels. We also recommended that within departments there should be a lead Minister with responsibility for innovation and procurement. That is the first thing that we felt needed to change.

Secondly, there needs to be a better link within departments between the research base—both in academia and industry—and civil servants, so that those responsible for procurement know about the whole range of potential technologies and solutions and are able to act as intelligent customers. We recommend that departmental chief scientific advisers should play a role in improving these linkages with the research base in academia and industry. We also recommend that chief scientific advisers, in improving the “intelligent customer” capability of departments, should help in horizon-scanning to anticipate long-term implications of procurement.

The Foresight programme in the Government Office for Science could play a role here in highlighting longer-term issues. To give an example, the director of group procurement at Transport for London told us that TfL’s long-term time horizon was about 20 years, which implied that procurement decisions that it made would not take into account the effects of, for example, climate change. This is an extraordinary situation, if true, for a procurer of infrastructure that may last for a century or more. Although TfL told us later that the evidence it had originally given us was incorrect, the mere fact that there was a lack of clarity within the organisation does not inspire confidence that long-term thinking is a priority in its procurement decisions. That is our second point.

Our third general point is to do with the culture of risk aversion. It is a long-standing fact, recognised in many commentaries and reports, that those responsible for public procurement are risk averse. You can see why; when a major procurement project goes wrong, people are blamed. This reinforces the view that taking risks is a bad thing. However, properly managed risk-taking, with proper intelligence to back it up, is not necessarily bad; it could be good.

The changes to which I have referred—the three points—refer primarily to central government departments. However, we must bear in mind that, as the report makes clear, most public procurement is carried out by other public bodies. There is a further crucial challenge of how to embed the changes to which I have referred in other organisations that procure goods and services.

Although the report is concerned with procurement across the public sector, we looked in more detail at the Department for Transport. Here there was bad news and good news. The bad news was that the divisional manager of procurement policy and contracts in the Department for Transport told us that the department lacked an overarching strategy for innovation in procurement. This was a view echoed by Happold Consulting. I very much hope that by now this has been rectified.

However, we also heard good news from the Department for Transport—good examples of innovation in procurement. For example, Professor Brian Collins, who was then the departmental chief scientific adviser, told us how he had facilitated the translation of new research funded by the EPSRC into the procurement for the Thameslink project, and that this new technology and innovation would improve the flow of passengers on and off trains. This example underscores our point that the departmental chief scientific advisers could play an important role. Professor Collins, because of his connections to the research world, knew who was doing relevant work and saw how it could be applied. Knowing who and what to ask is a key element of being an intelligent customer.

The Highways Agency also gave us some good examples of its incorporation of innovative solutions, including the variable speed limit system to manage congestion. It is now not only implemented in 35 schemes in the United Kingdom but implemented and sold abroad. I hope that the Minister will explain how good examples such as these are now being taken as a lead for others to follow, and what is being done to embed this kind of thinking throughout government departments and the wider public sector.

We also heard that one important obstacle to potential suppliers of innovative solutions are the cumbersome and bureaucratic processes for public procurement. Therefore, we were pleased to hear from the Minister for the Cabinet Office that the Efficiency and Reform Group is determined to simplify the procedures. However, that group is concerned with central government spend, which, as I have mentioned, accounts for only a fraction of total public sector procurement. It was not clear to us how the benefits of its reforms will be cascaded out to other public bodies. Nor was this clarified in the Government’s response to our reports. I hope the Minister will develop this a little further.

The Government’s response to the report welcomed many of the report’s recommendations and pointed to certain changes that have already been implemented—for example, the appointment of Crown representatives to lead strategic discussions with potential suppliers and thereby, we hope, foster innovative solutions in public procurement. I do not intend to go through the Government’s response in detail, but I shall mention a few key points. The potentially positive changes highlighted in the response include improved training for those involved in procurement and the use of outcome-based specifications. We welcome these changes. However, there are also disappointing aspects to the Government’s response, including their rejection of our recommendation of a single Minister in overall charge of innovation and procurement across departments.

The response also places a great deal of emphasis on the small-scale initiatives to which I referred, rather than on mainstreaming innovation thinking throughout the public sector. I would like the Minister to assure us that the Government intend to mainstream innovation thinking in procurement, not to rely solely on small and as yet unproven initiatives such as the small business research initiative. The response is also somewhat evasive on the question of how local authorities and other arm's-length bodies in general, often short of the relevant expertise, can become more expert in procuring innovative solutions. In fact, the government response deals almost entirely with central government procurement. I ask the Minister for more detail on how she feels that innovation in other parts of the public sector will be fostered. There was also, in my view, not enough to reassure the committee that departmental chief scientific advisers will, as we recommend, play a more central role in building an “intelligent customer” capability in departments. Finally, I felt that the response focused very much on value for money and did not state clearly how innovation can contribute to the objective of achieving value for money for the public sector.

The Science and Technology Committee has said that it will return to this topic in the next 12 to 18 months to find out whether anything has changed. Among other things, we will be looking for measurable indicators that the Government have indeed embedded the culture of innovation into public procurement not only in central departments but elsewhere in the public sector. It would be interesting to hear from the Minister whether the Government have ideas about indicators that they may use to assess their own progress.

It would also be good, when we return to this topic, to hear of success stories. We found it difficult to dig out good success stories of innovation in public procurement. One that was highlighted to us in the Government’s submission was the recyclable mattress in the HM Prison Service, saving £5 million over the life of the contract. I am sure your Lordships will be most relieved that those serving custodial sentences are benefiting in that way from innovative public procurement, but I hope that when we next examine the topic there will be even more inspiring examples of innovation in public procurement. I beg to move.

15:47

[Lord Hodgson of Astley Abbotts]

My Lords, let me be the first to congratulate the noble Lord, Lord Krebs, and the committee on a fascinating report that highlights some important issues of public policy. I was particularly glad to hear that his committee intends to return to the issue to see what progress has been made, so that the report does not end up as a doorstop in some department in Whitehall.

I was not a member of the committee, so I was somewhat surprised to find myself chosen first on the speakers list. I normally skulk in decent obscurity some way down, but here I am blinking in the sunlight. I begin by declaring an interest. I am chairman of a private equity firm. I have spent most of my life in the City helping to fund businesses engaged in innovation, much of which has involved work, collaboration and frustration with government departments. Last year, I chaired for the Government a task force looking into the regulatory burdens that affect small voluntary groups and charities. These are groups that offer innovative solutions to some of the most intractable problems in our society: what is known in the trade as the hard to reach 5 or 10 per cent. When we set up our committee, we asked the sector for evidence. We had more than 600 pieces of evidence, many of which are produced and referred to in our report, entitled Unshackling Good Neighbours, but a lot of the issues to which the noble Lord and his committee refer in the report are replicated from those real-life examples.

I shall focus my remarks on three areas: first, the risk aversion issue that the noble Lord, Lord Krebs, referred to; secondly, the section of the report concerned with prescriptive and burdensome procurement processes; and, finally, the need to make sure we safeguard our intellectual property properly.

While it is certainly true that risk aversion is present in the Civil Service, it is quite widespread in our society as a whole. Many years ago I attended an American university. My professor was a great anglophile. He said, “One of the great problems is that, in the US, a new idea is innocent until proved guilty. In your country, it is guilty until proved innocent.” We are inclined to say we must work with what is tried and established, and that has run through the warp and weft of our society.

A great German friend of mine who runs a private equity firm in Germany talked to me about the Millennium Dome. I do not want to talk about what went on inside the Dome, but the Dome itself was a very interesting piece of engineering, a wonderful structure. He said, “If this was Germany, we would have articles in the press about how German technology was leading the world, and how this was going to show how German innovation was there, thrusting and showing the way. What did I read in the UK? Endless articles about what a waste of time it was, how hopeless it was, how awful it was and how it cost more than expected”. As the noble Lord, Lord Krebs said, we find it hard to celebrate success.

[Lord Hunt of Chesterton]

We heard many debates on the Dome in the House of Lords. Many speeches came from the noble Lord’s side of the House criticising the Dome. Not a single speaker mentioned the technology. I was delighted by the noble Lord’s point.

[Lord Hodgson of Astley Abbotts]

I am not quite sure whether that was a pat on the back or a slap in the face. I will take it as a pat on the back.

As I said, we find it hard to celebrate success, and we will, by some behavioural brilliance, have to nudge the public into getting a different view about success and innovation. It is, of course, needed in the Civil Service. My second point is therefore about procurement processes, particularly as they affect SMEs—some charitable, some commercial—whether they operate at local or central government level. If I go into some detail, I make no apology, because this is about hard yards. We can make general statements about how to do this, that or the other, but we have to find the problem and unpick it inch by inch. That is how we will make progress.

I have four or five things I would like to get on the record for my noble friend and her Department to consider. The first is what is known as the use of pre-qualification questionnaires. These are what you have to fill in before you can go to the tender process. Some of them are hugely lengthy and involve 150 questions. None of them are ever the same, so if you are an SME dealing with different parts of government—local or national—you will have to fill in different PQQs. No attempt is made to collect information that is available to the public at Companies House and so on. These small companies and voluntary groups have to go through a process of filling in these forms for very little benefit. I hope that the Government can abandon their use. If PQQs have to be used, they should be in a standard format, so that once you have filled one in you have completed the lot.

The second issue to consider is the use of multiple tenders. Of course there is a need to safeguard and obtain value for money, but if, to safeguard your position as a commissioner, you ask for 12 tenders, 11 will lose, so the economic friction and inefficiency arising from this is very great indeed.

The third issue is that of proportionate costs for tendering and for monitoring. Very often small contracts are let. The contract documents can be as thick as a small telephone book, and the contract is worth £50,000 or £100,000. There should be yardsticks to measure the value of contracts and their tender and monitoring costs.

Local or central government should set the measurement for success and not change it during the contract. Too often, half way through the contract, the way in which success is to be measured is changed. That is extremely difficult for a small or medium-sized company.

Then there is the question of scale. Where the Government cannot work with an individual company because it is too small and they have to work through a major contractor, there need to be clear guidelines whereby the main contractor shares the risk and rewards with the subcontractor. Too often the subcontractor takes the risk and the main contractor takes the reward.

There is a final thing to consider. Worst of all is when trying to get yourself as a small charity into the tender list, and the commissioner says to you, “Now, just tell me how you’re going to do this. Tell me your innovative leading-edge idea”. The company takes a lot of time and trouble to do that but then finds that all its ideas have been put in the tender document, so all its work and innovation have been lost because everyone is competing on the same basis as it is. Since a large company can probably offer this at a similar or even lower price, the halo effect means that all the work and innovation done by the small group is lost; everyone is able to quote using the work that it has already put into the work. There are some important issues to be dealt with there, and they can be followed through specifically if the Government have the grit and determination to force that through across Whitehall.

Thirdly, I would like to talk about the safeguarding and the value of intellectual property, which is referred to in the report of the noble Lord, Lord Krebs, as the effective engagement between procurers, suppliers and academia. There are some very distinguished academics here today so I know I am treading on thin ice here, but I am afraid that I am far from convinced that universities are using our public funding effectively. I have a specific example, which the Minister has some knowledge of because I have put down Parliamentary Questions about it: the University of Manchester and the development of graphene. What is graphene? I quote from a BBC article entitled, “Is graphene a miracle material?”:

“Our research establishes graphene as the strongest material ever measured, some 200 times stronger than structural steel … It would take an elephant, balanced on a pencil, to break through a sheet of graphene the thickness of … cling film”.

Graphene was developed at the University of Manchester by two gentlemen, Mr André Geim and Mr Konstantin Novoselov, and they won the Nobel Prize for that work. According to a Parliamentary Answer, they used funding provided by the Engineering and Physical Sciences Research Council. I understand, on good authority, that the University of Manchester authorities failed to take out patents on graphene before Messrs Geim and Novoselov published their paper, and of course once it was published any IP value was lost. If the two gentlemen had funded that research themselves, that would be fair enough. I would quite understand that, it was their work, but they did not. They funded it at the expense of us, the taxpayer, so either the University of Manchester authorities were so maladroit that they did not know what was going on, or they were incompetent in funding the research without an appropriate IP protection clause in the contract.

When you look further into the BBC article, you will see that graphene was picked up quite speedily in the Far East. It talks about the work being done in Korea by Samsung, which is now working on the research:

“(Samsung has its) own roadmap where they believe there will be a dozen products (on the commercial market) using graphene in the next five years”.

Far from graphene being exploited and used for the benefit of the UK taxpayer, the science base or indeed UK industry, it is now being exploited in Korea.

I would be delighted to be told that I have got this completely wrong, but my source is a pretty reliable one. I am not asking the Minister to answer this today, but I hope that when she goes back to the department she will have a real drains-up investigation into this and other cases that I have heard of, of which this is the most blatant.

I would like to end as I began. This is a fascinating report. Stating the problem is the easy bit; correcting it will be more challenging. I look forward to my noble friend’s reply and to hearing the follow-up report from the committee of the noble Lord, Lord Krebs, in 12 months’ time.

16:00

[Lord Hunt of Chesterton]

My Lords, I, too, congratulate the noble Lord, Lord Krebs, on this report. I also welcome the remarks of the noble Lord, Lord Hodgson, with which I agree entirely. I believe the story was that the noble Lord, Lord Sainsbury, made an effort to publicise the Dome and contact was made with the Institution of Structural Engineers. It said, “We don’t publicise our work, it’s all team work”. Enough said.

I have been interested in this topic since I was an academic working on government and industrial contracts, and consulting. Then I was chief executive of the Met Office, a government agency in what was the MoD. There, we were spending more than £20 million a year on advanced technology such as satellites, computers and radar. I think it pretty fair to say that for 100 years the Met Office has adopted new technology, often quite controversially, which is what has kept it in the lead, and it provides excellent services to the UK. The history of the Met Office has been published this year by Cambridge University Press, so you can read all about it. As chief executive of the Met Office, I had no mandate to use its purchasing power to support UK industry—a point made to me over and over again—unlike, interestingly enough, the MoD, which has always taken this into account in developing its relationships with industry on a long-term basis.

Thus, in the 1990s and in the last decade, both under a Tory Government and a Labour Government, the UK participated in the very important and large geostationary satellites, MSG2 and MSG3, which were huge programmes. We made significant financial contributions, but there was no participation by UK industry because we did not spend the extra amount under these curious arrangements to get the juste retour. However, the BNSC will tell you that despite that Logica did a very good job in getting work on the software side. Nevertheless, we in UK industry did not benefit from this.

Even sadder is the fact that weather radars, which are extremely important for weather, used to be built in the UK but are no longer. There was no mandate by the head of the Met Office to do that. That is completely different in other countries. If you run the Météo-France, Deutscher Wetterdienst or the National Weather Service, your job is in part to help the industries in your country.

I raised this idea at a big meeting of 150 chief executives of government agencies to a Tory Minister. First, he said, “I really appreciate government agencies working in the community—village fetes, Sunday afternoon, that kind of stuff”. I said, “We have in mind something rather different, the importance of UK industry”. The Minister replied, after being pressed privately, “That is the sort of thing they do in France”. Quite so, and we should be doing it in the UK. They do it in other countries. The United States, the great apostle of private enterprise, uses its government agencies extremely strongly, not only in promoting technology but in software, know-how, commerce, law, et cetera.

The other important point, which this report might have overlooked and the Government seem to overlook, is that if you make sure UK know-how is used abroad, that will enable us to use it in the UK. We are an international world now. We cannot just do our own thing. If the advances are happening abroad, we are going to import them. An intelligent programme has to be international by government departments. An example of this is the UK Government and private sector developing world-leading software for air pollution modelling, especially in cities. The private sector includes the SME of which I am chairman. We set it up 25 years ago. This provides street-by-street forecasts, which are sent by SMS and the internet to identified individuals to enable them to take appropriate measures. It is interesting that this product development was highlighted by the Cabinet Office in January this year as being the most significant demonstration of the use of software and data science in the UK.

For a Tory Government, it was surprising that there was no mention of the private sector in the public statement, nor of the company that was doing much of the work. However, this innovation might feature next time around in the good list of the noble Lord, Lord Krebs. The innovation should lead to significant savings to the National Health Service. As we know, 20,000 or 30,000 people die prematurely each year from air pollution. The Health Protection Agency, which, I am glad to say, will now survive, is working to ensure that these data are available every day during the Olympic Games.

This brings me to the point that the Government should promote not only intelligent procurement but its adoption internationally. The United States Environmental Protection Agency has an office in Beijing to provide United States science and technology consultancy to China. The Environment Agency is forbidden by Defra from any overseas promotion of environmental science and technology. The same applies to water technology. By contrast, the Netherlands and Denmark, which now lead in water technology in a way in which the UK used to, benefit hugely from significant programmes in their countries and abroad. The result of such negativity is that the UK’s strengths will steadily diminish in many areas of technology. Root and branch change is required. Foreign businesses have often commented that they are astonished that UK companies survive at all and that they must be jolly good, given the policies of the UK Government.

However, I am pleased to end on an upbeat note. There is now a government web page describing many private sector projects and consultancies. Perhaps it will do more to highlight technological innovation. My recommendations are as follows. Big innovation should be international at the European level, through collaborative projects and in promoting UK developments. There must be supporting research by government departments in considering their long-range investment. There should be small but steady investment in, for example, government laboratories, as there is in the Netherlands, which has had a huge global impact in water technology. Finally, we need to introduce intelligent procurement to the job descriptions of senior officials and agencies. I hope that in future the relevant official for the Met Office will have that as the first or second point in his or her job description.

16:06

[Lord Willis of Knaresborough]

My Lords, I am a member of the Science and Technology Select Committee. I pay tribute to the leadership of the noble Lord, Lord Krebs, which has produced an absolutely excellent report.

There is an inescapable logic that, with public sector spending of more than £236 billion a year on goods and services, the Government have a unique opportunity to use their procurement to drive innovation, cut costs, improve services and develop new technologies, which will in turn generate economic growth. The power of state procurement has long been recognised across the globe. Entrepreneurs, merchants, industrialists and venture capitalists have sought government contracts as a fail-safe way of sustaining their own economic performance, as well as enhancing the quality of services or goods offered to the public. However, the perception for generations, rightly or wrongly, has been that centralised public sector procurement led to overpricing and a lack of quality, imagination and innovation. This in part fuelled the privatisation and decentralisation of public sector suppliers by the Conservative Government in particular and, indeed, the previous Labour Government.

Despite these changes, inefficiencies and lack of innovation in UK public sector procurement are well documented, with the MoD a prime culprit, followed closely by big-spending departments such as health and transport. What is more, the process favours large organisations that can afford to understand and comply with the often highly bureaucratic and overly expensive procurement processes and compliance procedures. Large suppliers in turn often hold undue power over procurers. The current state of the economy should not only drive innovation in procurement but offer huge incentives to private sector companies, not simply to bid for new contracts but to bring new ideas, technologies and systems to the attention of public sector procurement officers. Our report saw some evidence of openness to allowing SMEs to bring new ideas to departments, particularly in the MoD and the Department of Health. However, we saw precious little evidence that this was part of a wide-scale procurement culture.

The debate about procurement driving innovation is hardly new. As the noble Lord, Lord Krebs, said, the previous Government regularly returned to the theme of The Race to the Top. The innovation White Papers were major pieces of work. Shortly before the previous election, a very readable pamphlet about driving innovation through public procurement was produced by the noble Lord, Lord Drayson, then the Minister for Science, and Ian Pearson, the Economic Secretary to the Treasury. If you read the introduction to that pamphlet, the words are exactly the same as those used by civil servants in response to the committee’s report.

Following all that work by the previous Government to try to link innovation and procurement, it is hugely disappointing that our report should have reflected that but, sadly, simply reflected opportunities lost. As Colin Cram, the managing director of Marc1 Ltd, a witness to our inquiry, said, the response is weak and effectively confirms that there is no coherent use of public procurement as a tool to stimulate innovation, either in central government or the wider public sector, nor any intention to do so. That is a damning indictment of where we are. Indeed, even Iain Gray, the chief executive of the TSB, admitted to the committee that the use of government procurement to stimulate innovation was a “patchy picture” and, considering the sums involved,

“there is a lot more that could be done”.

Our conclusion that the fault lay entirely at the door of government was, for me, summed up by the decision to abandon the departmental innovation procurement plans put in at the end of the last Parliament. The IPPs were abandoned not because they were not valuable but because they were variable in quality, with some relatively strong but others rather weak. So why, I ask, were the strong performers, such as the MoD and the Department of Health, not used as the standard to drive up the quality rather than abandon any sort of performance measure? The answer appears to be that no one in government, then or now, is a driving this agenda. That is exactly why the Select Committee proposed that a Minister should have responsibility for linking procurement and innovation agendas and that each department should have a Minister in charge of the overall policy. Our recommendation was dismissed, largely because the innovation is seen by many in government merely as a tool to drive down cost and create efficiencies to address budget reductions. It is about incremental change and it is about avoiding risk.

There is nothing wrong with risk avoidance, as our report states, but the sad thing is that innovation is not seen as a tool to do things radically differently, to introduce quantum change, to drive new technologies, and to create new markets and, hence, new income streams. In fact, innovation that strays beyond cost-cutting and efficiency is seen as risky. However, sadly, without taking risks, innovation simply cannot flourish.

When Sir Martin Sweeting decided to abandon the orthodox wisdom about satellite technologies, he did not simply look to lower costs; he revolutionised the concept of large expensive-to-launch satellites by building small satellites and delivering them in clusters on the back of someone else’s rocket. Surrey Satellite Technology is now the world’s largest producer of small satellite technology with a global order book, although sadly no longer in UK ownership.

The UK has the same potential in areas of genomics, bioinformatics, stem cell technologies, energy, nanoscience and, as we have heard, graphene materials science. However, I have to say to my noble friend that the fault lay not with Manchester University and the scientists but entirely with the venture capitalists, who in this country seem to be incapable of picking up those ideas and running with them. You have to have two to tango. We saw exactly the same with plastic electronics, which were taken from Cambridge University and sold to Korea, Germany and the United States rather than developed here. We are not short of brilliant ideas but we need to turn more of those ideas into world-beating products.

Crucially, the same innovative process that created the iPod, the Dyson cleaner or the robotics used in satellites needs to be brought to the development of our infrastructure in transport, power generation and communications, and the Government are ideally placed to drive that process. Procurement without innovation should be a barrier to government contracts and not, as is so often the case, a safe option. Indeed, it is this attitude of risk aversion that has seen a huge drop-off in private sector interest in innovation, according, as we have heard, to recent surveys by Logica, the computer software company. Simply making it a condition of contract that innovation has to be shown to be present would make a huge difference to the way in which SMEs approached the whole business of getting procurement contracts. Indeed, as Birmingham Science City said to the committee,

“public sector procurement needs to be transformed so that the public sector encourages suppliers to think the unthinkable”.

Before the Minister jumps into the Thames in desperation this afternoon, I should say that there are some encouraging signs that indeed all is not quite lost. In fact, the Government's response to our report was more encouraging than the evidence they gave us. The TSB appears to be working well, the investment in new technology and innovation centres is hugely welcomed—as are the phones that are ringing in the Room at the moment—and the SBRI initiative has demonstrated real potential. However, these are extremely small initiatives that are dwarfed by what is happening in the US, Germany and France, not to mention China, India and Brazil. The SBRI, which is supposed to drive new departmental initiatives, has only really been taken up by the Department of Health and the MoD, and with a total spend of a mere £41 million represents 0.008 per cent of total public sector procurement—hardly the big idea that will change departmental procurement processes.

As for the much heralded technology and innovation centres, the TSB has a mere £200 million to establish them before they are expected to become self-sufficient. Only £20 million for each centre is hardly enough to burn huge lights in the sky. That is why a more imaginative use of the massive public sector procurement budget must be rethought. A 0.5 per cent innovation procurement levy would inject over £1 billion into the process without departments losing money, and would have the potential to draw private sector capital into the process without having to create new structures.

The Government, individual departments or NDPBs could use part of a procurement innovation levy to sponsor high-profile competitions to solve specific challenges relating to procurement or the delivery of new services—not a loss of money, just a refocusing of existing resources. The Longitude Act 1714 created a prize fund to solve the difficulty of plotting where ships were when at sea, so why not take that idea and use the TSB as a vehicle for sponsoring high-profile innovation, with prizes from a procurement levy?

Finally, the Government have rightly recognised that without a cadre of well qualified and appropriately trained procurement specialists the public sector cannot act as an intelligent customer. The capability programme set up by the Cabinet Office is welcome. The licence to operate, to source, to supply and to contract and manage are sound developments, but we must guard against window dressing that gives the appearance of activity.

The innovation launch pad is yet another good idea, but of the 300 suppliers who entered the first innovation launch pad initiative, we are down to a shortlist of some nine companies, and at the end no one is guaranteed a contract. Given the huge amount of work that goes into the process, I doubt whether many will ever return. The same criticism could be levelled at the advent of Crown representatives, which, again, is an excellent one-stop initiative aimed at bringing coherence to common procurement processes. However, given that these posts are in addition to all other duties, I fear that once again it will be the lower-level civil servants who will do the bulk of the work and who are notoriously risk averse.

Conspicuously absent from the Government's response is a key role for CSAs. Our report emphasised the importance of the CSA being part of the procurement process, particularly at an early stage where the assessment of innovative ideas or products and links with academia are absolutely essential. However, it is more important that the departmental chief scientific advisers should interface with the science, engineering and technology communities to encourage innovative ideas, such as graphene, that are coming through and that can be brought to people’s attention and used.

While CSAs continue to have a role, it is far from the prominent role that the Select Committee envisaged, and yet again sends out the signal that the end is in sight for departmental CSAs, as the Government sideline their important independent challenge function. Nowhere could this be more apparent than in the Minister's own department, which has no CSA at present and appears to have little urgency about replacing the excellent Professor Collins, who was ideally suited to the role the committee envisaged. A similar tale can be told across government, with vacancies in DCMS, the Cabinet Office, the Department for Transport and in key departments such as the Treasury, the Department for Education. “CSA” is little more than an add-on title to their current job descriptions. The committee will return to this issue in a forthcoming inquiry.

This has been a far more useful inquiry than I thought it would be when I was faced with the evidence. The Government have given a robust response and promised significant changes, and I am sure the Minister will deliver. As a Lib Dem, I am ever an optimist.

16:19

[Lord Kestenbaum]

My Lords, I congratulate the noble Lord, Lord Krebs, and his distinguished committee on this most important report. It could not have been more timely and we would do well to treat its recommendations with great urgency. I begin by declaring my own interests. Until last year I was chief executive of NESTA. I still serve on the governing board of the TSB but, perhaps most pertinent to this report, I am now the chief executive of Lord Rothschild’s family investment interests—a large and imaginative investor in UK technology businesses.

What we all learnt from this report is the increasing consensus that Governments around the world see innovation as the key component to economic growth, and they have pledged, as has our Government, to shape public policies accordingly. Therefore, right at the outset, the report conclusively debunks the sterile argument that when it comes to innovation you have two policy choices, either a constant flurry of well intentioned interventions or staying firmly out of the way.

As noble Lords have remarked, we should consider the United States. The conventional wisdom is that, in the US, government does best when it is invisible. Yet procurement was the major factor in the growth and development of Silicon Valley. Military spending funded that generation of microwave technology companies, which were a mainstay of the region before the semiconductor industry arrived. It is no exaggeration that whether it is the GPS navigation system that we all use or internet protocol technology, the public procurement of technology has been the basis of some of the most transformational global innovations of recent decades.

The noble Lord, Lord Krebs, covered the ground thoroughly, but with his permission I should like to emphasise two points. The first relates to intelligent customers. The report speaks convincingly of government as an intelligent customer, and from my perspective as an investor, and an investor in technology, I wish to stress how vital these intelligent demanding customers can be in transforming the opportunities for small entrepreneurial companies in particular—companies that at a time such as this will be the absolute lifeblood of recovery. Intelligent customers, as the TSB evidenced in the report, allow procurement to be the vehicle in which companies—technology companies in particular—can step up to the task of solving major national challenges. Surely, government departments must increasingly frame their procurement needs as challenges for small businesses to solve, rather than as bureaucratic hoops to jump through.

The noble Lord, Lord Willis, referred to the SBRI scheme as an example, and I am sure he is right in suggesting that progress is being made. It is worth noting NESTA’s evaluation of the SBRI since its relaunch in 2008: that it is beginning to deliver on its potential to provide clever new solutions for government that generate business opportunities for private sector innovators. That is certainly encouraging. I cannot help thinking that to build on this we might want to focus on one or two areas of real scale that could have great and lasting impact that would generate evidence for others and encourage imitation. NESTA has spoken of a centre of excellence for innovative procurement, and that is certainly something worth considering.

I should also welcome the Minister’s views on the issue of focus. Most obviously, the lead candidate for focus is the prospect of the NHS—an enormous customer. As a potential lead and intelligent customer, the NHS would perhaps have a strong mandate to work with the TSB. That would surely provide the health service with a real way to drive innovative solutions to healthcare challenges.

The second point that I wanted to emphasise was that of leadership. I am concerned at how such a dramatic cultural shift that the report encourages can genuinely get embedded in the procurement system without the strongest of directives and—I know they are not fashionable these days—central directives. We know that there are insufficient incentives within the system to reward the intelligent customer. We therefore seem increasingly dependent on dynamic leadership, either in government departments or in the public sector, informally to influence customer behaviour. I shall give an example, which of course can work.

Only yesterday evening in preparation for this debate, I met the winners of the Times national procurement award. The winner was an institution very close to the Minister’s heart, Plymouth University, which won the national procurement award. When I met its representatives, they told me an inspiring story of how Plymouth University, working with the city council, while not compromising on standards or value for money, transformed the prospects for innovative entrepreneurial technology companies bidding for public sector contracts. As I listened, I understood that yes, there was procurement expertise in the exercise and greater simplification—all the formulas were there—but ultimately it was driven, cajoled and inspired by the institution’s dynamic leadership, who would not take no for an answer.

So what is the point? The point is that such leadership is not always widely distributed across this field, so I respectfully ask the Minister: where appropriate departmental leadership is absent or where civil service incentives to procure intelligently are inadequate, how will the procurement revolution be driven? How will this cultural change genuinely take root? I cannot help thinking that this is an instance where the laudable aims of localism need a little more than a gentle steer.

16:26

[Baroness Warwick of Undercliffe]

My Lords, I intervene briefly to re-emphasise the importance of the report and to hope that the Government will return to the recommendations as they develop what they promise will be a significant programme of reform.

I, too, pay tribute to the noble Lord, Lord Krebs, and his eminent committee for the robust, trenchant and fearless way in which they have approached this vital issue. “Fearless” may seem an odd word to use, but many reports over the years have tried to persuade successive Governments to take this subject seriously. In this report, there are recommendations that the Government may find inconvenient but which in my view go to the heart of the problem. That is why I urge the Government to keep these recommendations in mind, even if, as their response suggests, they do not all find immediate favour.

The Government’s response to the report has some very encouraging aspirations and sentiments, but I feel that it does not yet grasp the magnitude of the persuasion, mindset change and culture shocks that will be needed to change a decades-old approach. I recall being part of the government technology foresight programme discussions, some years ago now, which started with such promise and with the engagement of commercial, industrial and small business interests. The programme had some really good outcomes and certainly encouraged a better understanding of government decision-making processes, but it would be difficult to argue that it produced the significant departmental engagement in the use of new technologies and processes that had been hoped for.

I do not think it is possible to exaggerate the importance of the report’s main themes: that a clear vision for publicly funded projects can have a huge influence on the behaviour of both purchasers and providers, and that embracing innovative ideas and processes must be embedded in the minds of all those involved in government procurement projects.

I should explain that my interest in this area stems from my involvement with the university sector and its role in developing innovative ideas, in both science and the humanities, that could aid our country’s development and prosperity. The university sector was particularly encouraged by the 2007 report of the noble Lord, Lord Sainsbury, The Race to the Top, to which the Science and Technology report refers, which showed that there had been a dramatic increase in knowledge transfer from all universities and that UK universities’ performance in this area now compares to the United States. I do not know the example used by the noble Lord, Lord Hodgson, of universities and intellectual property. I can say only that the usual criticism of universities is that they are far too ferocious in their protection of intellectual property.

I saw the previous Government’s investment in its Ten Year Science and Innovation Framework as part of its procurement framework, albeit on the supply side. On the demand said, I applauded the Sainsbury report’s encouragement of the use of departmental R&D budgets to support innovation and to harness the power of government spending to create demand for innovative products and services. However, as I know David Willetts, the Minister for Universities and Science in another place, recognises, building productive links, particularly with small and medium-sized enterprises, is problematic for universities, just as it has proved challenging for government departments in their purchasing processes to engage effectively with myriad small enterprises.

I noted that the Government in their response to the report take head-on the committee’s finding that there is conflicting evidence of the contribution of SMEs in promoting innovation. The Government clearly continue to see the engagement of SMEs as crucial, but it would be helpful to hear from the Minister what new initiatives are planned to make this happen. I certainly agree with the Government’s view that departments will need to use more open procurement methods to drive up competition. They will need to engage with industry much earlier in the procurement process, and they will need to specify the outcomes and outputs rather than the product that they believe they want to buy. I hope that the Minister will explain in more detail how that is to be achieved.

I said I wanted to be brief. I refer to two recommendations in the report to which the Government in their response have given a rather dusty answer. The report recommends that a Minister should be responsible for both procurement and innovation. The Minister would formulate a national framework and would be accountable for how well procurement decisions are made. It further recommends that there should be a lead Minister in each government department with these specific responsibilities in order to create a high-level network across government. Although I appreciate the Government’s argument that the Minister for the Cabinet Office has responsibility for central government procurement policy and that each department’s procurement activity is subject to ministerial oversight, I am tempted to say, “It was ever thus”, and therein lies the problem. Something more radical is needed. The same arguments were applied to the approach to science in government departments, and I do not think that anyone doubts the change in attitude that has followed the creation of the chief scientist post to drive the agenda, together with a senior scientific adviser in each department.

The committee of the noble Lord, Lord Krebs, has tackled a long-standing problem. It has taken advice from a range of well informed practitioners, whose only aim is to promote innovative ideas to improve our country’s effectiveness. They have looked at a plethora of reports on this subject, which all show that the present processes do not work well enough. Indeed, they do this country a disservice. So I hope that the Minister will be willing to say that she will look again at the way in which government can be held to account for how its £236 billion of public procurement funds is spent and turn to the committee’s recommendations for inspiration.

16:32

[Lord Rees of Ludlow]

My Lords, my comments this afternoon will be somewhat oblique to the main thrust of the report, but I will conclude with a specific recommendation. As the noble Lord, Lord Krebs, explained, our committee was concerned with the mindset within government, whereby innovative procurement is inhibited because it is safer to use an established contractor and a well tried technique. But sometimes there is a compelling need for something that has never been achieved before and, in these cases, innovation is a prerequisite and risk-taking is unavoidable. The key issue then is how to jumpstart or accelerate R&D.

In this context, we can perhaps learn from historical precedents dating back nearly 300 years. Specifically, we should emulate the British Government’s response to the need to determine longitude at sea, a crucial requirement both for the Navy and civilian shipping. As is well known, in 1714 the Government set up the longitude prize, which offered £20,000—equivalent to many millions in today’s money—for a method that would determine longitude to better than 30 miles, with smaller sums for achieving less precise targets. This prize was administered by one of the first quangos, the Board of Longitude. It stimulated a variety of approaches—most famously, of course, John Harrison’s accurate chronometer.

There are some more recent precedents. We have heard a lot about DARPA, run by the US Department of Defense. It is extolled in our committee’s report as an effective agent of innovation, mainly for the defence sector, but often with spin-offs of commercial or social benefit. One way DARPA has achieved all this is by offering high-profile prizes. For instance, a few years back, it organised a competition for driverless vehicles. These robotic cars had to navigate a long, complicated path in the Mojave Desert. In the first year, no competitor did more than seven miles. A year later, 22 entries did better than that. The total investment by contestants, commercial bodies and universities was far more than the $4 million offered in prizes. The net effect was to stimulate the technology and raise the profile of those who had succeeded in an engineering challenge.

DARPA is, of course, publicly funded. In the US, the powerful incentive of prizes is recognised by entrepreneurs in the private sector. Pre-eminent in such ventures is the X Prize Foundation, a wide ranging and highly professional enterprise that has the savvy and the organisational infrastructure to establish, organise and monitor grand challenge prizes on various themes. It describes its mission as,

“inspiring the revitalisation of markets which are currently stuck due to existing failures or a commonly-held belief that no solution is possible.”

First, there was the much publicised prize for suborbital space flight, which was won in 2004. Under the auspices of this foundation, this has led to a diversified menu of grand challenges, spanning not just technology but societal and social issues. There are prizes for fuel-efficient cars, cheap genome sequencing, robotics, better ways of diagnosing TB, for cleaning up oil slicks and so forth. The special virtue, or USP, of these big prizes is that they enlist the interest of many people and organisations taking diverse approaches to reach the goal. They thereby release much investment, totalling a sum far larger than the prize itself. They bring about a tremendous focus of competitive talent. To the individual, or the small company, the prize money of several million dollars is a significant incentive. To the big company, the publicity and the PR are more important. These prizes have a high public profile.

If the challenge is manifestly of public interest and importance and incremental progress can be quantified, then these prizes not only attract continuing interest from the public, but have an important educational function. They also offer PR to the engineering profession and raise the profile and the schemes of innovators.

Here in the UK, there have been modest initiatives along these lines. In 2008, ESTL ran a grand challenge competition to help design robotic systems to help ground troops seeking to probe hostile environments. Competitions run by the SBRI have led to innovative contributions to, for instance, mobile phone security. But these precedents could be more widely followed. Organisations such as the SBRI and the TSB could build on what has been done already and establish Longitude-style prizes with a mixture of public and private support, perhaps in association with learned societies and academies. Better still, could not the UK trump what is being done in America by something really high profile? How about celebrating 2012 by, for instance, a series of Olympic or Diamond Jubilee grand challenge prizes open to the world?

16:38

[Lord Warner]

My Lords, as a member of the committee, I endorse the remarks of the noble Lord, Lord Krebs, about the support we were given by our adviser and the secretariat. I also pay tribute to the noble Lord for his leadership of our inquiry.

On my way to the Committee this afternoon, I had an experience of public procurement using innovation in action. The House authorities have put a Dyson hand-dryer in the men’s loo at the other end of the Corridor. However, they have demonstrated the tried and tested approach of the public sector by retaining not one but two of the existing systems for drying your hands. We have a living example here of some of the dilemmas caused by public procurement and the use of innovation.

The Government are the largest purchaser in the UK. In spending more than £236 billion a year, they are spending on procurement more than the combined budgets of health, defence and education, so making some modest gains here could have major effects on public spending programmes.

I had some experience of dealing with the frustration of the commercial sector over public procurement when I was a Health Minister. In order to respond to the frustrations of that sector, I spent a year co-chairing with the chief executive of Smith & Nephew, a healthcare industries task force, which in the end led to the establishment of the NHS national innovation centre, which is featured in the report. That experience showed me that industry looks very strongly to public procurement as a means of developing products. It is a way to expand their products and market them overseas. The brand of the NHS is very strong overseas, so if you have a product that you can develop within the NHS, prove that it is safe and use it in the NHS, you have a strong marketing aid to sell your product.

We found in that exercise, as was borne out in the committee's inquiry, that public purchasing for quite big sums of public money is undertaken, for the most part, quite a long way down the managerial food chain. The boards and chief executives of those public bodies have only a marginal interest in many of those purchasing and procurement decisions. So we have a system in which quite senior people in the private sector are concerned about the issue but the responses are being undertaken by people quite low down in the organisation. Not surprisingly, those people are cautious about change. Why should they not be? Most of us would be if we were that far down the food chain.

You see the same thing in the Civil Service if you are a Minister. I am old enough to have joined the Civil Service under the old class structure of administrative, executive and clerical staff. The executive staff did money and procurement. They did not do policy. The Civil Service still likes to give policy to the fast-streamers, and the less fast-streamers do sordid things with money, such as buying things. We have a problem at central government level and at local level. We do not like to talk about it very much, but that culture is what the inquiry exposed.

Every so often—about every 18 months to two years—Ministers change, so unless the Minister really wants to get a grip on some of this, nothing much will change in the culture of the public service about these issues because there is no longevity in the ministerial cadre for the most part. There have, however, been Ministers in both parties—I cite Michael Heseltine and Denis Healey—who stayed in their jobs long enough to take these management issues seriously. However, they are the exceptions, rather than the rule.

In the course of this inquiry, we found some good things and some bad things. The Government’s launching of an open public services White Paper has much to commend it, building as it does on the previous Government’s policies. However, a large chunk of public procurement is decided locally and cannot simply be drawn into the centre. Therefore, a large amount of that £236 billion is spent way outside the vision and influence of Ministers. No matter what Francis Maude does in the Cabinet Office, his impact at the moment on many of these local agencies, which spend large sums of that public money, is minimal.

I understand the importance of localism to this Government, and the importance of delegating responsibilities down to local level as far as possible. Certainly, as an ex-public-sector manager, I understand that. However, the Government have some responsibility for finding out and explaining to Parliament and the public what is happening to public money at that level. It is no good saying that there are directly elected bodies in local government. A large chunk of their budget comes from centrally directed grants that are paid for by the taxpayer and sent down in the post, so to speak, from Whitehall. There is an accountability issue, but what do we find? The Government are to abolish the Audit Commission, which is one of the bodies that looked at the value for money of local government activities, and have stopped its value-for- money inquiries. Therefore, despite the protestations of the Government in their response to this inquiry, there is no mechanism for monitoring and finding out what is happening to that public money and how procurement is being used away from central government to drive innovation and best value.

There is something of a conundrum for the Government when they genuinely want to do a good job in securing the best value for taxpayers’ money. They want to drive efficiency but seem to be slightly stuck in a mindset that separates innovation from efficiency and best value. They are not contradictions; they are part of the same way of achieving improved public services. You need innovation, efficiency and best value. In my experience you are likely to get best value—certainly in the health service—if you are also driving innovation. I cannot see from the Government’s response to the committee’s inquiry how they can be sure about what is going on in procurement and innovation away from the central departments. Nor can I see how they can have any confidence whatever that a major chunk of the £236 billion of procurement includes a satisfactory element of innovation.

Not all procurement requires innovative solutions. As the Government rightly say, in many areas innovative solutions may not be needed. It may be sufficient just to get the best price for the quality of goods or services required, as Francis Maude told the committee. There may well be risks attached to innovative solutions. I would be the first to acknowledge that. That is why a degree of testing innovative solutions, often on a smaller scale before you go national in a big way, is a sensible way to proceed.

However, too often the committee was left with the impression that “tried and tested” was the default position for public procurement. There was a conspicuous absence of challenge mechanisms to that default position. We did not hear much evidence of what were the challenge mechanisms to that approach to public procurement. As I said earlier, innovation was somehow seen as being in conflict with efficiency and saving money. It is striking that in their response to the committee’s report the Government have decided to scrap the departmental innovation procurement plans, as the noble Lord, Lord Willis, said, established following the previous Government’s Innovation Nation White Paper in 2008. I found the current Government’s reasons for scrapping these plans extraordinarily curious, as I think the noble Lord did. As he said, clearly some departments produced rather good plans, and most of us who have managed things would have thought that that was a good excuse to say to the other departments that were rather less good, “Why don’t you emulate the good plans in, say, the Ministry of Defence or the Department of Health?”. But no—because some were less than good, they scrapped the whole system. What are the Government going to do to put in its place a mechanism for strengthening the weaker brethren whose plans were inadequate in their approach to innovation? Are they just going to be left to slumber contentedly with their mediocre performance or is something going to be done to drive it up?

As public expenditure gets tighter, the need for new ideas and thinking in public procurement becomes more critical. As President Obama’s former adviser, Rahm Emanuel, so graphically said:

“Never let a serious crisis go to waste”.

If we want our business sector to grow, we should be using this procurement programme to stimulate UK enterprise and innovation. That is, for example, why the previous Government brought in David Cooksey, a venture capitalist, to look at the way we try to exploit clinical research in this country. A lot of very good work was done in that area, but it took someone of eminence to drive, with Ministers, that kind of change. In my experience in the public service, the gnomes do not come in the night and just drive change. Ministers and senior civil servants have to get their hands dirty, and they have to drive that change by providing what needs to change as an example to people outside the Civil Service and the departments—and within the departments.

That is why it is disappointing that the Government have not seen a stronger role for chief scientific advisers, as we have recommended. They are a bit of grit in the oyster. They could be some of the people who would build the bridges between industry and public procurement systems. They could be the people who could innovate, and have the authority to innovate if they were given it. I hope that the Government will look again at this issue and try to come up with some ideas about who in these departments will drive change—and not just in the departments but at local level. They are the bodies which come within the general rubric of those departments and whose budgets are usually shown on the departmental public accounts. They should bring about a step change in the way that public procurement is used to drive innovation.

In conclusion, I say to the Minister in a very friendly way, as a former Minister, that these things do not change in areas such as procurement unless Ministers really want to make them change. It simply does not happen. Ministers have to be prepared. I am less concerned about the committee’s recommendation for a single Minister for innovation and procurement, although I would like that. However, if the Government are not going to pursue that course, they really must take seriously the issue of finding a Minister in each department who will drive this change, because if it is not going to be driven from the centre of Whitehall, it will need to be driven across the departments and will need political leadership to make this change happen. It will also need continuity of political leadership as Ministers come and go within different departments.

I offer that in the most friendly and constructive way to the Minister. This issue is too important to simply bat back with fairly standardised Civil Service responses—I have seen those responses to Select Committee reports. As a civil servant, I have drafted a few in my time and I recognise a fairly standardised report when I see one. There is too much money at stake at a time when this country needs to grow its industries and private sector and get best value for its public service. We need a bit more energy in political leadership on this issue.

16:54

[Viscount Hanworth]

My Lords, the report that we consider today addresses some important issues. Successive Governments have had difficulties in procuring goods and services of high scientific or technical content. The committee’s report asks what can be done to improve the situation. It proposes that clear responsibilities for stimulating innovation should be assigned to Ministers and officials, who should be held accountable for this.

One does not have to look far to find startling instances of the problems that the committee is addressing. A current example of the failure of the Government's procurement policies in respect of modern technology is provided by the virtual abandonment by the NHS of its plans to create a centralised computerised system of patient records that would be accessible throughout the service.

The national programme for IT in the NHS was initiated nine years ago. So far, £2.7 billion has been spent on the patients’ records system to no discernible advantage. Several private sector suppliers were engaged, including the American CSC company. This company failed to deliver the bulk of the systems that it was contracted to supply. Instead, it has implemented a large number of interim or stop-gap solutions. These are preponderantly off-the-shelf solutions that the company has in its inventory.

It is doubtful whether the Government can obtain adequate redress from CSC or from BT, which is the other surviving supplier. Several other suppliers have walked away, including Fujitsu in 2008. This is the company that in 1990 absorbed the rump of the British ICL Corporation, which was created in 1968 through a government initiative. In fact, ICL was intended to rival IBM. Notice that the second and third letters of ICL are adjacent in the alphabet to those of IBM.

The defence that the suppliers might offer, if the matter were to come to the courts, is that they were confronted with inappropriate specifications that were subject to revisions so numerous as to make their task incapable of fulfilment. There might be some justification in such an argument but there is a more fundamental issue at stake here.

It is clear that the gains in efficiency that could result from enhancing the computerised records systems in the NHS are considerable. It is almost inevitable that eventually there will be such a facility for instant access to a patient's records from anywhere in the country. However, the advantages of such a system will accrue to the NHS and to the nation as a whole. They should not be expected to accrue to a private supplier; nor, as far as I am aware, is there any intention that they should do so. Therefore, the private supplier has little or no incentive to bear the costs of research and development, for they cannot reap the profits.

A further mismatch between public and commercial interests is occasioned by the nature of a developing technology. The private contractor is bound to seek an engagement that has a definite duration and which will result in profits that are calculable at the outset. The client, which is the NHS in this case, has an ongoing engagement and a need to adapt continuously to changing demands by exploiting evolving technologies. In brief, it needs to rely on its own technical expertise, which must be at a high level.

The IT disaster of the NHS has been analysed in two parliamentary reports, which are readily accessible. One is from the National Audit Office and the other is from the Public Accounts Committee of the House of Commons. This debacle is only the latest in a long line of similar failures from which we might have learnt our lessons. These failures owe much to the decline of the technological and scientific culture in our country. It is almost inevitable that a country that loses its manufacturing base should have difficulty in sustaining its technological competence.

The demise of Britain manufacturing has been hastened by the failure of our export industries, which has been mainly in consequence of the overvaluation of sterling in international currency markets. A contributory factor here has been the hypertrophy of our financial sector, which has led to large inward investments in financial assets and hence to a high demand for sterling.

Britain also has a peculiar social history that has militated against the survival of its scientific and technical competence. The pursuit of science and technology in the 18th and 19th centuries was strongly associated with people of a dissenting and nonconformist tendency. For them, the pursuit of codified technical and scientific knowledge was almost a moral endeavour. The established ruling classes had very different cultural motivations. During my own schooldays, I was keenly aware of the opinion that a gentlemanly education should be based on the classics and the humanities and that it should eschew matters of science and technology. I see that others have had the same experience. Social ambition and a distaste for hard, masochistic studies led many to abandon mathematics and science, as students continue to do today.

The once powerful Civil Service, whose members played leading roles in the process of government procurements, rarely contributes nowadays to any of the Government’s decisions. Those who are in the ascendancy are civil servants who have been trained in the humanities and the social sciences, if they have not been trained to be lawyers, accountants or financiers.

Great damage was done to Britain’s scientific and technological heritage throughout the 1980s and beyond. Numerous factors contributed to this, but it was the demise of the Government’s scientific establishments that deserves particular attention in the present context. These establishments had served Britain’s industry before, during and after the Second World War. When some of their original research agendas had been fulfilled or were abandoned, new purposes were not found for them. Their disbandment was justified by the doctrine of privatisation.

Among the victims that come very readily to my mind are the Post Office Research Station at Dollis Hill, the Royal Aircraft Establishment at Farnborough, the National Gas Turbine Research Establishment at Pyestock, the Atomic Energy Research Establishment at Harwell and the Road Research Laboratory at Crowthorne. The ICL Corporation, although not a government research establishment, could be counted among these. The list can be extended to include a wide variety of medical, veterinary and agricultural research establishments, some of which survived in a severely curtailed state. The scientific research institutes that best survived the onslaught were those that adhered closely to the UK universities. Nevertheless, during the period in question they were subject to a famine of research funding.

More recently, the research assessment exercises to which they are subject have had the perverse effect of limiting their interactions with industry. The assessments are based upon research published in academic journals, and research that has immediate commercial and industrial applications cannot be published in this manner.

During the period in question, the doctrine of outsourcing was widely propagated. It proposed that organisations should concentrate on their core activities, which are the things that they do best, and that they should assign other functions that had hitherto been performed in-house to external providers possessed of specialised expertise.

A requirement of outsourcing is that there must be sufficient in-house expertise in order properly to assess the need for outside assistance and to assess the quality of whatever assistance is on offer. Moreover, given the requisite in-house expertise, outsourcing may become unnecessary. It is clear that, in the case of the procurement of computer systems by the NHS, and in other cases I could have cited, there has been insufficient in-house expertise to inform the organisation of the opportunities and of the limits of the available technology and to predict how it might evolve. Instead, grandiose wish lists were created, which have become weighty and impenetrable documents once they have been made to conform to the nostrums of European Union contract law.

The managers of the NHS have been outsmarted and bamboozled by the commercial IT providers to such an extent that they have found that they have no redress against the manifest failures to fulfil the contracts. The organisation has lacked the technical expertise that might have informed and guided the endeavour and that might have averted the disaster. The Public Accounts Committee report attributed much of the blame for the debacle to the senior management of the NHS, including its chief executive, who did not fully discharge his responsibility for the oversight of the project. This criticism is in line with the recommendations of the Science and Technology Committee report, which proposes that there should be clear lines of responsibility at a senior level for the management of technology, as well as enhanced accountability. However, I fear that this misses the point to some extent. What is required is a technical and scientific intelligence that should be widely distributed throughout the organisation.

Some of us have witnessed outstanding examples of the successful management of technology. They were provided by many of the government research establishments that no longer exist. In the main, these organisations were characterised by a lively technical discourse and a remarkable intellectual democracy that allowed intelligent and inventive ideas to be propagated rapidly throughout the organisations, regardless of where they had originated. In most respects they were the antithesis of the modern top-down organisations that nowadays predominate in our public sector. Such managerial structures have been created in response to the demands of politicians, who have required clear lines of command to enable public organisations to respond rapidly to political initiatives. However, politicians are not well placed to assess the opportunities and limits of available technologies or to predict how they might evolve.

The problems that have been dramatically illustrated by the debacle of the NHS programme could be overcome by strengthening the scientific civil service and recapturing some of the ethos of the erstwhile government research establishments. Groups of computer scientists located within the relevant departments could be relied upon to co-operate across departments in ways that rival commercial suppliers are not able to do. There are some well known and striking examples of how co-operation among widely dispersed computer scientists can achieve results that are markedly superior to the results of scientists and technicians working under the direction of commercial organisations. The Linux operating system is a prime example, as is Wikipedia.

Of course, the virtues of technical co-operation are not confined to computer scientists. They characterise much of the scientific and technical culture that our country has lost, and we urgently need to rekindle that culture.

17:05

[Lord Young of Norwood Green]

My Lords, I, too, congratulate the noble Lord, Lord Krebs, and the committee on their succinct report. That is an innovation in itself, isn’t it? You were not deterred by the sheer size and weight of it from reading right through it. I found the report fascinating, as I have found the debate. If the Minister goes through Hansard after this, as I am sure she will, she will find that there have been a number of interesting contributions with some worthwhile and constructive recommendations. I have heard on many occasions that the prize is enormous, given the size of the procurement contracts— £236 billion was quoted. If the Government do not get this right then we damage the country’s ability to deliver new business products and services.

We are not using procurement to unleash the potential of SMEs, which I know is an aspiration of this Government. I am not sure about their commitment to the target of giving 25 per cent of public procurement to SMEs, which seems now to have been downgraded to an aspiration.

The small business research initiative has been successful in generating value, and it ought to be significantly scaled up to produce further innovation and economic growth. Why the delay? I see that an evaluation of the small business research initiative and the forward commitment procurement process is planned for some time in 2012. The sooner that evaluation takes place, the better; it looks as if on a small scale both those processes are beginning to produce valuable uses for innovation and better value for money.

The noble Lord, Lord Krebs, cited mattresses. There was another case involving lighting and the Rotherham NHS Foundation Trust. The report says:

“Cundall, a multidisciplinary consulting engineering practice, is one of the bidders involved in the Rotherham energy efficiency project … They were enthusiastic about FCP. Through FCP, they said, ‘we were no longer bound by technical specifications that might not deliver what the customer actually wanted, but were free to suggest innovative solutions that could meet this outcome-based requirement ... we clubbed together with other members of the supply chain so that we could offer an optimal and innovative solution ... we believe FCP has been totally revolutionary. Rotherham NHS Trust has been offered a solution that delivers energy savings, carbon savings and a “step-change” in patient and staff experience’”.

Building on that kind of approach is worth while. I hope that this evaluation, which will be done by Professor Georghiou and Professor Edler, will not take too long.

It is interesting that the World Economic Forum’s latest global competitiveness report, published last week, ranked the UK 49th for government procurement of advanced technological products, despite it being ranked 13th for overall innovation. The report ranked the UK second for university/industry collaboration in R&D—referred to by my noble friend Lady Warwick—third for the quality of its research institutions and 13th for its capacity for innovation, but 49th for government procurement, one place behind France and 36 places behind Rwanda. The sort of thing I used to get on my school report, “Plenty of room for improvement”, applies here. The same report revealed that 13.5 per cent of businesses believed that inefficient government bureaucracy was one of the most problematic factors for doing business in the UK. That has been referred to in several contributions.

Many people have talked about the default position of the tried and tested route. In some cases that might be appropriate, but on every occasion innovation ought to be considered before one embarks on the tried and tested route. The noble Lord, Lord Krebs, talked about embedding innovation into the mainstream and a change of culture. In one of the few management courses I have ever been on, we looked at organisational culture. I remember being told that that is the hardest thing to change within any organisation.

The Government’s response talks about improved training, but we know that on its own that probably will not be enough, although I would welcome it. I know that the Government are still interested in the concept of employee engagement, where we listen to some of the good ideas that are around. I was surprised at how often management failed to recognise the good ideas that exist among their own employees. Many of the recommendations are top-down; we ought to be looking also at the bottom-up approach.

As soon as my internal search engine finds the word “apprentice” in a government report, I cannot help but be attracted to it, and I was attracted to the response to recommendation 10, which states:

“Pan-Government Apprenticeship Scheme—research is being undertaken into the feasibility of introducing a ‘Pan-Government Procurement Apprenticeship Scheme’ in 2011/12”.

I would welcome more information on that. The response continues:

“The aim would be to attract new talent into Government and creating a more skilled, flexible and productive workforce”.

I like the concept and I assume that these will be high-level apprenticeships, but I should welcome a bit more information. It sounds a good idea to bring bright young minds into Civil Service and public sector procurement.

The noble Lord, Lord Hodgson, talked about simplifying the tendering process. The Government say that they will go down that road. From the examples given, there is certainly a need for that. My noble friend Lord Hunt gave us the example of the Met Office. We seem unable to take advantage of the innovation that we have created and use it abroad in the way that France seems so good at doing.

The noble Lord, Lord Willis, reminded us that a number of reports have contained very good ideas, such as the report of the noble Lord, Lord Drayson. My noble friend Lady Warwick reminded us all of the report of the noble Lord, Lord Sainsbury. There has been a plethora of reports. The real innovation would be to seize the key recommendations and drive them forward.

Having a Minister in charge of innovation does not seem to appeal to the Government, but I think it was my noble friend Lord Warner who said they should give it some thought. Clearly, we need more drive and we need to ensure that best practice created in one government department, especially in relation to innovation, is spread across all government departments. I think the same argument would apply to chief scientific advisers in making their role more powerful.

I was very interested in Longitude by Dava Sobel, mentioned by the noble Lord, Lord Rees. It is a great read, and the wonderful clocks in the museum at Greenwich are an inspiration. Having prizes is a great idea, and I should be interested to hear the Minister’s response to that. Perhaps I may suggest one in relation to the NHS. One idea has been referred to but another one that has recently emerged is the use of catheters. I cannot remember how long ago the catheter was invented, but I think it goes back well over 100 years, and I do not think the design has changed substantially in that time. It is one of the biggest causes of infection in the NHS and, unfortunately, the longer we live the more likely it is that we will be inflicted with the curse of the catheter. It certainly happened to me on one occasion, although I am not sure that I should have revealed that in Hansard. I also liked the example of the Dyson dryer mentioned by my noble friend Lord Warner. The innovation involved was good but the element of risk aversion meant that it was not possible to resist leaving other methods of hand drying in place.

I should like to pose a couple of questions, although I have already raised some during my contribution. What progress have the Government made on their aspiration for 25 per cent of their resources to be supplied by SMEs? Although the comments on SMEs seemed to be that the jury is still out, no one said that we should not involve SMEs to a greater extent. I am pretty convinced that in that way we will get more innovation in public procurement.

What is being done to increase government procurement of advanced technology products? I must admit that I could not help groaning inwardly as we were treated by my noble friend Lord Hanworth to the history of the computerised system for patient records. I suppose that that is an example of how not to do things and, as he said, there are some painful lessons to be learnt from it. I should think that one lesson is obvious; before embarking on a large scheme, you make sure that it works on a small scale, but perhaps that it is too easy and obvious an answer.

What plans do the Government have for Labour’s successful and innovative SBRI procurement programme? They have said that they are going to evaluate it, and I would welcome hearing the timescale for that. In addition, what are the Government doing to promote more innovative procurement from the European Union and other EU member states that would benefit UK companies?

In conclusion, I again extend my thanks to the committee for its report. It has stimulated a fascinating debate and I look forward to the Minister’s response.

17:18

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I am grateful to the noble Lord, Lord Krebs, for bringing forward this debate and for highlighting the potential of public procurement to drive innovation.

The speeches of noble Lords both on and outwith the committee gave me much food for thought. We could all be here until about 7 pm if I tried to answer all the questions put forward this afternoon. I shall try to answer some as I go along, but I shall of course write regarding the others—that is, if the civil servants are still friendly enough towards some of the people around this table today. However, I am sure that I have confidence in their ability to answer those questions.

It was lovely hear about prizes—the noble Lords, Lord Hunt and Lord Rees, talked about the historical precedents here–—to get things going for the risk-taking and the jump-starting. It made me think of the most reverend Primate the Archbishop of Canterbury, who is going to stand down next year perhaps after struggling for 10 years. He started off by launching a prize for theological writing, which at the time I thought was an excellent idea. Let us see how good these prizes are in taking things forward and away from the traditional practices that we have used.

The noble Lord, Lord Young, rather shamefacedly had to spell out the sorry state of public procurement in this country. It is the system that this Government have inherited. I can assure him that by the time we have finished being in government we shall leave it in better heart than it is in now.

All public procurement must achieve value for money for the taxpayer. This is essential to managing the fiscal deficit that we face. The Government recognise that by procuring innovative products and services they can both improve the efficiency and delivery of public services and provide opportunities for UK business to grow. Both outcomes will benefit our economy.

With this in mind, the Government are currently carrying out a reform of public procurement to increase efficiency, value for money and transparency. Doing this will enable us to better plan procurements to drive innovation. It will also enable us to use more innovative procurement mechanisms that can deliver innovative products and services. This programme of reform will help to maximise the conditions for encouraging and fostering innovation that delivers value for money. I will highlight some of the key elements of this as we go through.

The noble Lord, Lord Hodgson, gave us a masterclass from the private sector investment area, and then started talking about intellectual property. As the Minister for Intellectual Property, I would be only too delighted to talk to him in my office about the way universities are going ahead and putting down what they should do. We have already had a response to that this afternoon.

The noble Lord, Lord Kestenbaum, talked about the Government as intelligent customers. I am very taken with that description. I shall take that away and, as with many of the things I have heard today, see whether we cannot benefit from some of the marvellous speeches that we have heard.

In response to the noble Lords, Lord Willis and Lord Kestenbaum, and the noble Baroness, Lady Warwick, I should say that the procurement capability of the public sector was a key feature of the Select Committee’s report. A change in culture and direction from the top must challenge this risk aversion. The new departmental board structures as detailed in the Government’s response to the committee’s report will help to drive forward this cultural change and it is a start. I hope there will be agreement on that at least.

The noble Baroness, Lady Warwick, asked what new initiatives are in place to engage SMEs in public procurement. To quote one in response, all central government contracts over £10,000 must now be advertised in Contracts Finder, central government’s procurement portal, and this will give greater visibility of procurement opportunities to SMEs. Suppliers can flag up instances of poor procurement practices, including overtly bureaucratic tender documents that lock out SMEs. The Cabinet Office will investigate these instances through its mystery shopper scheme.

The noble Lord, Lord Warner, asked about planning in best practice. The reform of public procurement that is currently under way will mean greater focus is placed on planning, on properly identifying what is needed and on how best these needs could be met by exploring different options before the formal procurement process starts. This includes thinking about long-term value for money. We will ensure best practice from these changes is shared across the various departments.

I return to the capability improvement programme and the SBRI. The programme will help to raise the level of expertise across central government to ensure that public procurers have the right skills to deliver what is expected of them. Part of it includes a commercial interchange programme, which is currently running as a pilot and is designed to facilitate two-way commercial skills and knowledge exchange between government and industry. I am sure we will find that very helpful. There have been seven placements to date, including one at the Department for Transport.

I should like to mention the small business research initiative and the forward commitment procurement model—two procurement mechanisms covered by the committee’s report. I shall update noble Lords on the small business research initiative. Since the reformed programme was launched in April 2009, various departments and other public bodies have run more than 60 competitions. These have been in many areas, including: defence, where we have sought to improve the energy efficiency of operating bases and to reduce the weight that individual soldiers need to carry; healthcare, where we have developed technologies for detecting asthma in children and the means of reducing healthcare-acquired infections; and sustainable construction, where we have installed sustainable technologies in more than 50 social housing units and developed more efficient and easily recyclable lighting technologies. To date, more than 600 contracts have been awarded to technology-based businesses to a value of just over £41 million. Sixty-seven per cent of these contracts have been awarded to micro-businesses—those with less than 10 employees—or small businesses, which have less than 50 employees. These businesses are typically the cadre of companies with which the public sector has the greatest difficulty contracting.

I should also mention that the Technology Strategy Board, which manages the small business research initiative scheme, is constantly engaging with public sector organisations to get greater engagement in the programme. The most recently launched competitions are in the areas of food security and animal research.

The committee’s report mentioned that the forward commitment procurement model is not currently as widely used as the small business research initiative. This is true, and we are seeking to expand the programme. The Government have recently started a project with the private sector to develop private-public forward commitment procurement compacts.

In addition, following the success of the zero-waste mattresses project with Her Majesty’s Prison Service, which was mentioned earlier, a second project has led to the development of an ultra-efficient lighting solution for use in hospitals, which we will demonstrate at the Building Research Establishment. We intend to use this as an opportunity to generate wider interest in this mechanism.

I turn now to the Department for Transport, which was a particular focus of the committee’s report. Since the start of the inquiry, the Department for Transport has introduced several new measures to ensure that it is able to identify opportunities for procuring innovative solutions. For example, it has established a board-level investment and commercial committee, which provides oversight and scrutiny of major commercial and investment decisions. The chief executive of the Highways Agency is a member of the committee and is therefore able to offer the benefit of the Highways Agency’s innovative thinking to the broader department—an area that was highlighted by the committee’s report.

The Department for Transport recognises that small and medium-sized enterprises are a source of innovative ideas and is keen to encourage solutions from them. It has published an action plan with specific targets and measures designed to provide real opportunities for small and medium-sized enterprises to meet its business needs. The department held a product surgery for small and medium-sized enterprises in June. It also participated in the Government’s innovation launch pad, offering mentoring support to small businesses to develop innovative solutions for public services. The department is also considering the development of supply chain charters to encourage fair treatment of small and medium-sized enterprises by prime contractors.

The noble Lord, Lord Krebs, asked how effective central government is in encouraging the take-up of these initiatives. They are being taken up across local government, so there is some hope there.

I know that this debate and the recent government response are starting to show that the Government recognise the important role of public procurement in encouraging innovative solutions in the public sector that deliver value for money.

The noble Lord, Lord Krebs, said that he will return to this topic with his committee. I am very pleased. If I could stand here and say what I personally think about a lot of things that have been said today, I would no doubt get the sack immediately. Certain things strike such a chord with me. When I started working with the Civil Service, it took me a while to realise that in the private sector, in business, where I come from, the biggest talent—certainly in a FTSE 100 company—is always in management, and writing wonderful reports and giving you all the information you need is regarded as something that you can buy in almost by the hour. You come into the Civil Service and it is completely the reverse. People who can write public policy are top of the heap and the people who do management are not.

I am not saying that one way of doing this is better than the other, but somewhere along the line, if we are to get public procurement right, we have to bring the two sides nearer to each other. It would be rude indeed to say that people are too far down the food chain to be taking such enormous decisions that have such a long-term effect. Some of the contracts that I have seen are enormously long. Some of the payment terms that I have seen have been idiotic. I have seen one that paid the main contractor on five days sight of invoice and he was paying the small businesses that contracted to him on 30 days sight of invoice. If that had happened when I was in business, he would have been out of the door tomorrow morning, but that is not how it can be run.

I have whistled through this. I have answered very few questions. We will write to answer the questions asked and when we come back the next time that the noble Lord, Lord Krebs, brings a committee report here, I hope that noble Lords will know that the Government are aware of the problems of public procurement. We will address it better than the previous Government did. As many noble Lords have said, the prize is enormous if we can get this right. I again thank the noble Lord, Lord Krebs, and his committee for bringing this debate here today.

[Lord Young of Norwood Green]

Before the Minister sits down, I could not let go her answer that I was shamefaced; I was not shamefaced about our record. It was a difficult task and we made significant improvements. I am only too happy to wish the Government success in building on those improvements. I am certainly not shamefaced about some of the initiatives that we took.

I hope that I might get an answer—if not, no doubt she will answer in writing—about the pan-apprenticeship scheme.

[Baroness Wilcox]

Ah! One moment. That I do have, and I will be delighted to give it to the noble Lord. As he knows, because we stand opposite each other many times at many times of the day and night, I certainly did not want to appear rude. It was tongue in cheek, but the truth is that his Government did not do terribly well in 10 years, and we have to make a better fist of it.

The noble Lord requested more information on the feasibility of introducing an apprenticeship scheme to improve Civil Service procurement skills. As this is a Cabinet Office lead, I will liaise with my colleagues in the department and write to the noble Lord with more details. As he knows, apprenticeships are close to both our hearts.

17:33

[Lord Krebs]

My Lords, I thank all noble Lords who have taken part in the debate this afternoon. It has been of extremely high quality. For me, particularly important is the different perspectives that have come in the debate from academia, the private sector and government organisations. I do not intend to try to summarise any points; it has all been clear. In general, the contributions in the debate have supported the conclusions and recommendations of the Select Committee. I believe that I understood that the Minister indicated her support for our recommendations although, on the face of it, the Government have not accepted all of them. I very much hope that when we come back to this in 18 months’ time we will see significant progress and understand how the Government are measuring it. We will try to establish how we might measure progress on the hugely important topic of promoting innovation in public procurement. With that, I commend the Motion.

Motion agreed.

[The Deputy Chairman of Committees (Lord Colwyn)]

I suggest that we adjourn for five minutes until 17.40.

17:35

Sitting suspended.

Relaunching the Single Market: EUC Report

Tuesday 13th September 2011 Grand Committee

Considered in Grand Committee

17:40

Moved by

[Baroness O'Cathain]

That the Grand Committee do consider the fifteenth report of the European Union Committee, Re-launching the Single Market.

Relevant document: Re-launching the Single Market (15th Report, HL Paper 129).

[Baroness O'Cathain]

My Lords, I am most grateful that we have been allocated time to debate this important subject, and particularly grateful that the debate comes only 56 working days after the publication of the Select Committee report on 4 April this year. This has to be something of a record. Unfortunately, due to pre-organised holidays, several members of Sub-Committee B are not available to take part in this debate. Holidays were arranged before we were informed that we would have a September sitting. However, it is most useful to have this debate and I hope that other people will read it in Hansard.

Before I begin to give the genesis of the inquiry, details of the process that the sub-committee adopted and the important issues raised, together with our conclusions, I want to give sincere thanks to all members of the committee who worked so diligently and engaged with the subject in such a manner as to make the inquiry a most enjoyable and interesting experience. We were particularly fortunate to have the services of John Turner, the Clerk, Michael Torrance, the policy analyst, and, for the initial scoping exercise, Laura Bonacorsi, our previous policy analyst. The committee as a whole is indebted to all three.

The House of Lords has a very long tradition of engagement with the single market. The late Lord Cockfield was instrumental in its creation during his time as a European Commissioner in the 1980s, and another Member of this House, my noble friend Lady Thatcher, was a mighty force in promoting it. Both believed that the single market was very important in the context of the whole European project and in the interests of the United Kingdom. It was regarded as important then, and it is even more important now when we are so focused on growth in the economy as one way of breaking out of the current doleful economic situation; and growth for the UK has always centred on our trade links and export effort.

When Sub-Committee B took the decision to undertake its inquiry in July 2010, the EU economy was in desperate need of a kick start. Nothing seems to have changed, unfortunately. That is why it is most appropriate that we draw attention to the absolute necessity to reignite enthusiasm in the single market, particularly as a counterbalance to the temptation of protectionism when the economic outlook is bleak.

The EU has produced a number of proposals with the aim of solving the serious economic problems. These include financial regulation, on which the EU Select Committee has already reported, and the Europe 2020 strategy, focusing on issues that were inhibiting growth and proposing measures to remove bottlenecks. The relaunch of the single market sits alongside these measures and is fundamental to future growth.

Our first witness was Professor Mario Monti, the former EU Commissioner. He explained to us that,

“the single market is not a flagship because it is neither a flag nor a ship, but”

the sea on which it floats and the wind in its sails. Professor Monti had produced a report at the behest of President Barroso detailing many ideas concerning the removal of bottlenecks that were hampering further development of the single market. A Commission consultation paper followed, entitled Towards a Single Market Act, and then finally the Single Market Act.

Our report is partly intended to inform the debate on which elements of Towards a Single Market Act should be included in the Single Market Act itself. The four main aspects that we examined were: first, the relationship between market liberalisation and social protection; secondly, the creation of a digital single market; thirdly, methods of enforcing single market rules; and fourthly, general ways in which the single market project could be relaunched. I wish to address each of these four points in turn.

Point one is the relationship between market liberalisation and social protection. Professor Monti acknowledged that the UK had been an enthusiastic advocate of the single market but was much less complimentary about other countries’ approach, which he described as,

“beset by fears about the erosion of the traditional social market economy.”

In order to overcome this reluctance he suggested that the Anglo-Saxon countries should accept greater social protection in exchange for the social market countries accepting greater liberalisation. We fundamentally disagreed with this analysis. We believe that each measure should be judged on its own merits and social measures should be the responsibility of member states. EU action should be necessary only where problems arose in liberalising measures. The posting of workers directive and the services directive fall into this category. The uncertainty surrounding the operation of the posting of workers directive and the subsequent rulings by the European Court of Justice exposed the difficulty between the right to trade in other EU member states and the right to take industrial action. This needs to be addressed and we welcomed the Commission’s intention to review the situation.

The services directive illustrates the tension between the Anglo-Saxon model and the social market model. I was glad to see that the noble Lord, Lord Hannay, had put his name down to speak in this debate. We had an interesting exchange of views on the services directive at the Select Committee. I do not know whether he will be adding anything to that subject today, but I suspect he will—I see he is nodding. I also recall that the noble Lord, Lord Liddle, had some interesting views on the services directive. I am delighted that he is speaking for the Opposition in this debate—he was a most valuable witness during the inquiry. How things change. I should mention that although the services directive was due to be implemented in December 2009, many member states have still not done so. On a more positive note, we welcomed the progress made so far, particularly in the establishment of points of single contact which assist businesses in trading abroad. However, we would like there to be speedier action to make sure that the directive is implemented properly.

Point two concerns the creation of a digital single market, which excites interest and significant progress is possible. The problem is that the regulatory conditions are not in place to enable more rapid progress to be made. The idea that 60 per cent of cross-border internet transactions in the European Union fail for one reason or another is both stupid and unacceptable. The Commission has this in its sights and I hope it will make progress speedily. Also, the objective of getting broadband to all EU citizens—thereby giving them the confidence to adopt the digital experience and benefit from the decided advantages it offers—is wholly admirable. We hope that that progress will accelerate rapidly. My noble friend Lady Wilcox, with her immense experience in consumer issues, will, I am sure, join us in welcoming the recent inclusion of digital goods within the scope of the consumer rights directive.

We did not consider mobile roaming charges but I was recently at an event in Warsaw to discuss the single market, and the issue of roaming charges was a hot topic. We in the UK and, indeed, in the EU Select Committee of your Lordships’ House can claim some credit in previously influencing the lowering of roaming charges, and I welcome the Commission’s recent proposals in this area and look forward to scrutinising them in the sub-committee in the autumn.

Point three concerns methods of enforcing single market rules. The single market must be policed more effectively. We do not believe that the Commission needs more power; it just needs to use its existing power more effectively. On the positive side, we are great supporters of SOLVIT, the online network permitting member states to solve the problems caused by the misapplication by public authorities of single market rules. We also support EU Pilot, which enables the Commission to raise problems with member states before starting informal infringement proceedings. In addition, the mutual evaluation process, used recently for the services directive, is another good thing.

Point four relates to the general ways in which the single market should be relaunched. I hope that I have convinced your Lordships that the single market is of benefit and that it has the potential to be of much greater benefit. When the arguments rage loud and long concerning whether or not we should leave the EU—which of course would be well nigh impossible now—we should counter the strident voices by pointing out that the single market is one area that we should all support, not least in our own interests. The single market can be of benefit to all citizens of the EU. It presents great opportunities for business and opportunities for jobs for the young at a time when such opportunities are so needed.

What is also needed is a concerted effort to convince EU citizens that, despite the tales of gloom and doom, we can use the single market as an engine of growth, not least in getting people back into the most important jobs of designing, producing, marketing and selling goods across the national borders of the EU member states. We must invest in projects that are relevant, properly managed and carefully audited. No more money can be wasted on projects that run over the original budget by a factor of three or more. I guess I should not say that “old Spanish practices” should be rooted out but that is the best way I know of insisting that every effort should be made to gear up our industry and businesses, particularly SMEs, to take on the ever-increasing competition from the BRICs. The old—very old—slogan of “united we stand, divided we fall” is how I see the single market.

The UK has been a champion of the single market right from the outset and I hope that this report will encourage many to champion it with renewed vigour. I beg to move.

17:52

[Lord Bradshaw]

I shall not detain your Lordships for long but I want to emphasise one point made by the noble Baroness, Lady O’Cathain, which is that infraction proceedings in the European Union should proceed at a much faster pace than they do at present.

We are members of the EU and, generally speaking, it is recognised that we are probably among the foremost in transposing EU legislation into our own law. However, there are many people who do not play by the rules. We heard yesterday of one country that was seeking to divert the money that the EU had paid it for one thing to another. This is the sort of thing that causes great impatience and of course provides a lot of opportunities for those who are against the EU to say that the proceedings are not properly or fairly conducted. I just expressed the view that, had we been more earnest within the EU in enforcing the rules relating to banking, the problems that have arisen in some countries would probably have been avoided.

Therefore, I want to make the point that infraction proceedings must be speeded up because they are most important in making sure that the EU is fair. We are well down the road with things such as advertising contracts in EU journals but, if other people are not playing by the same rules, you can be scrupulously fair on the one hand and sometimes face a chaotic situation on the other.

Therefore, my message to the Minister is very simple: I want to see something done to improve the infraction proceedings against those who choose not to implement EU law.

17:55

[Lord Hannay of Chiswick]

My Lords, it is all too easy, in this period of turbulence for the eurozone, to take one’s eye off the salience of the single market for the future prosperity and economic stability of all 27 members of the European Union. It is all too easy, too, to think that the single market was part of yesterday’s narrative, not today’s and tomorrow’s—all too easy but all too wrong, for two broad reasons.

The first reason is positive. A lot remains to be done before we have a true single market—a genuinely level playing field for our businesses, both manufacturers and services. Achieving that is not some academic or bureaucratic fancy. If noble Lords want an example, they should just look at the prescriptions that are being given to the weaker members of the eurozone—Greece, Portugal, Spain and Italy—by the IMF, the Commission and the European Central Bank. All involve programmes for getting rid of national barriers to investment and employment and removing national protections for vested interests; that is, for achieving a less imperfect single market. Moving the single market forward is therefore an integral part of making the EU capable of competing with the great emerging economies of China, India, Brazil and others.

The second reason that I suggest is the one put eloquently last week in a lecture at the London School of Economics by the president of the European Council, Herman Van Rompuy, when he said that it was the single market that had stood and continues to stand as the principal barrier against the follies of protectionism that so exacerbated the effects of the previous great economic and financial crisis in the 1930s.

This debate could not be more timely, as is the excellent report of the sub-committee, chaired by the noble Baroness, Lady O’Cathain, on which I congratulate both her and it. If the noble Baroness will forgive me one side remark, the only thing that I would suggest is never to refer to “old Spanish practices” in Brussels. I once went to a Bilderberg conference at which an Under-Secretary-General of the United Nations referred to “old Spanish practices” in front of Javier Solana, and the meeting had to be suspended for quite a long time.

What should the priorities be for the future development of the single market? Many of them are set out in the report that we are debating. First, I suggest that we need to recognise—this is the point that the noble Baroness, Lady O’Cathain, mentioned that I would get around to—that the services directive that was adopted a few years ago is a singularly imperfect and incomplete basis for a single market in what is now the largest part of all our economies. I argue that we need to go back to the drawing board as soon as this is politically feasible and start work on a second services directive to remedy at least some of, if not all, the deficiencies of the first. I hope that the Minister will give us some idea of the Government’s thinking on this point.

Secondly, I suggest that we also need to keep up the pressure for the liberalisation of energy supplies and markets, on which some progress has been made in recent years but where much remains to be done. Over the medium to long term, energy markets are tightening up and prices are set to rise as the global competition for resources increases. Europe surely needs to be making the most efficient use of those resources and to be working together collectively to maximise access to and diversification of supply, and I welcome the decision, which I believe was taken yesterday in Brussels, to give the European Union a remit to work on the diversification of supply.

Thirdly, we need a strong competition policy to underpin the single market and to roll back the increases in state aid that have been an inevitable but, in the long term, undesirable feature of the response to the current global economic and financial crisis.

If those are the priorities, we are certainly going to need allies in order to pursue them successfully—allies who go well beyond the enlistment of the majority of other member states, which is of course what you need if you are to get any piece of legislation through. We will need a strong Commission—and that was referred to by both previous speakers—ready to bring forward new liberalising proposals and ready to take a tough line on competition issues. We will need a Court of Justice whose rulings bring pressure to bear on laggard member states to implement properly the agreements reached in the Council—a point made by the noble Baroness, Lady O’Cathain, regarding the services directive still not being implemented in some member states. We will need a European Parliament ready to weigh in on the side of liberalisation when it exercises its powers of co-decision, but not to throw its weight behind protectionist amendments. Those three European institutions are not perhaps the flavours of the month in debates in this Parliament—particularly at the other end of the Corridor—but we need to realise that they are essential allies in any moves towards a more complete single market, and we need to treat them as such.

Another perhaps not very welcome point that we need to grasp is that you cannot hope to have a real single market on an à la carte basis, as some seem to think you can. An à la carte approach—picking the things you like and discarding the ones you do not—will lead to 27 different orderings of priorities and no single market at all. Therefore, when the rules of public purchasing lead to a contract going to a company in another member state, we will need to learn to resist the knee-jerk protectionist reaction. We really must not delude ourselves into thinking that a campaign to repatriate powers from the European Union is compatible with the proclaimed objective of achieving a more complete single market. It is not, and it would be a pity if we had to find that out by bitter experience rather than by applying a bit of common sense at the outset.

One final point: if the single market really is the bulwark against protectionism that Van Rompuy says it is—and I totally agree that that is the case—we need to be there to protect and to promote that bulwark in every forum available. That is why it was an error for the Government to have decided not to participate in the euro-plus pact, even when 24 out of 27 member states are in fact doing so—and a fair number of them are not in the eurozone. It is rather ironical, when our Government’s economic policies are totally consistent with those being followed and indeed applauded by eurozone Governments, that we should be absenting ourselves from a forum for discussion in which issues related to the single market will inevitably arise. I hope that over time the Government will have second thoughts about that decision and will realise that the euro-plus pact has nothing whatever to do with Britain’s decision on the euro itself, which is a separate matter that we all understand is not going to happen in the near future.

I welcome the fact that in his remarks after the G7 Finance Ministers’ meeting in Marseilles last weekend the right honourable gentleman the Chancellor of the Exchequer recognised the importance of this country being a continuing champion of the single market and of a firm competition policy. I hope he will ensure that he and his colleagues are there to do that on each and every occasion that it needs to be done.

18:04

[Lord Liddle]

My Lords, this has been a short debate but an excellent one. At least, the three speeches that we have heard so far have been excellent. I hope I shall not ruin the record. I have had three separate goes at this report. When I was first introduced to the House, the noble Baroness, Lady O’Cathain, kindly invited me to give evidence to the committee. I was then put on the Select Committee, on which I was delighted to serve. We discussed the report’s content, or some of its themes at any rate. Now it is my job to speak for the Opposition in this debate, so I have seen a lot of this report. I think it is excellent and applaud the committee for its work.

Sometimes we may think that the work of the European Union Select Committee does not get as much attention—the big attendances for debates in the House—as it perhaps should. However, from my experience I can certainly testify that outside the House—in the Civil Service and in Brussels—the reports are read with attention. This report will have a desirable impact in influential quarters.

Of course, the Labour Party supports the single market and wants to see it reinvigorated. The noble Baroness, Lady O’Cathain, was absolutely right; this is particularly relevant for the UK now, when we are in a very difficult economic situation. We all agree that we have to rebalance our economy and that we need more exports and investment. That needs a prosperous single market. There is no alternative to that. We cannot gloat at Europe’s difficulties. We must make the European Union, of which we are a part, an economic success if we are to succeed in our objectives for our own country. In this room we all agree on that.

The strengthening of the single market is also essential for our own interests. It gives our companies a huge home market from which they can tackle the challenges of globalisation. The noble Lord, Lord Hannay, was absolutely right that the single market is the cornerstone of the structural reform agenda that the member states, particularly in southern Europe—the Greeks, the Spaniards and the Italians—need to take forward if they are successfully to remain members of the euro. That is how they can improve their competitiveness and economic growth potential. The Spanish Government have certainly got that message, so I shall not join in making rude jokes about Spaniards. However, the Greeks and the Italians have some way to go.

I also agree very strongly with the noble Lord, Lord Bradshaw. If you are serious about the single market, you have to recognise that it is much more than a free trade area. It is an area of deep economic integration, which is underpinned by the supranational institutions, particularly the Commission and the Court of Justice. Britain needs, in its national interest, a strong Commission that will police the single market. It needs an effective Court of Justice that will come rapidly to decisions on the single market. Therefore, when some members of the Conservative Party attack the Commission and the Court of Justice, they undermine the very instruments that would lead to the success of their own ambitions for single market liberalisation.

Where are we on the single market? Formally we are making quite a lot of progress. The Monti report was excellent and set out an agenda for the future. The Commission is preparing a comprehensive single market Act, which is about to start on its way through the legislative procedures of the Union. However, my friends in Brussels tell me that the outlook for progress is not very good. In the Council there is essentially a deadlock between the northern liberals, of whom I suppose we count ourselves as part, and the southern protectionists.

If I have one disagreement with the noble Baroness’s committee’s report and its recommendations, it is that we as Brits should recognise more that you get somewhere in the EU only if you are prepared to contemplate a package deal. It is no good just saying, “I want this and I’m not going to give you what you want”. You have to be prepared to build alliances. That is why the Government should look favourably—if the Minister cannot respond to me now, perhaps she could do so in a letter to me later on the Government’s attitude—on the Mario Monti recommendations and the things that have been suggested, like amending the posted workers directive, that might produce a more balanced package that would ensure that the European Parliament was prepared to look again at toughening up the services directive. There are elements of the Single Market Act that could achieve what the noble Lord, Lord Hannay, wants, but they will not go through unless they are part of some package deal.

That brings me to other, wider questions of alliance-building, which are important. One group of countries who are potentially allies of the United Kingdom on single-market matters is the new member states of central and eastern Europe, particularly the Poles, who hold the presidency now. I was in Warsaw in June and I am afraid to say that the Polish Government are very upset with the British Government because of their attitude to the EU budget. I am a disciplinarian with regard to the EU budget—I am not in favour of huge increases in it—but when Britain puts forward its position of the EU budget, it must recognise that the plans for the future of Poland and other new member states in that region assume that they will have available for investment the money that they have been getting through the structural funds of the EU budget. If we go around making statements about the budget that give the impression that we think this vital infrastructure money that they are due to get will be cut off because of the British Government, that is seriously bad news for us in terms of our political influence. I urge the Government to bear this point in mind. I understand the point about budget discipline but this is important if we want to build allies.

Another point about alliance-building was made by the noble Lord, Lord Hannay. If you want to be influential in the EU, you have to be there in the room, engaged in the debate. Personally, I think it was a mistake for the British Government to steer clear of the euro-plus pact. I did not like a lot of what was in it—it is rather draconian in its approach to austerity, and I would be prepared to have a debate about that—but we should seek every opportunity to put forward our views about Europe’s future, including the need for the structural reforms to be promoted through single-market liberalisation. Therefore, I think that staying away from the euro-plus pact was a mistake. In itself, it probably does not matter that much but, if it is part of a trend, it could matter a great deal.

I am very interested in what the right honourable gentleman the Chancellor of the Exchequer has to say about the European Union. He is saying some rather interesting things. He is saying that he wants to see eurozone governance strengthened, but he recognises that this potentially puts us in a difficult position on matters to do with the single market, where in any future deals we would want to remain an equal partner with the eurozone.

That is a crucial issue for Britain. We cannot get ourselves into a position where the eurozone effectively determines its policy for the single market and then goes along to the Council saying, “This is what we’ve agreed. Under majority voting, that’s what you have to accept”. There is a real risk of that happening, and that risk is heightened if Britain adopts an approach to Europe which is unconstructive, which gloats over the eurozone’s difficulties and where people at home talk about what concessions they can screw out of the European Union as a result of its difficulties in order to loosen Britain’s relationship with Europe. That is not the way to win our objectives in Europe for a stronger, more effective single market, and I hope that we will hear from the Minister that that will never be the policy of the British Government.

18:17

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, this topic is of great importance to both the United Kingdom and the European Union in addressing the current economic situation. First, I commend the EU sub-committee under the chairmanship of my noble friend Lady O’Cathain for producing such an excellent report.

I shall start by responding quickly to a question from the noble Lord, Lord Liddle, who is quite frightening in his rise to glory through this House. He gave evidence as soon as he took his place here; he was then invited on to the Select Committee; and he is now standing opposite me speaking for Her Majesty’s Opposition. I worry about where he will be going next. However, I shall do my best. He asked whether the Government agree with the recommendations of the Mario Monti report. The answer is that we agree with many of Mr Monti’s points but, if the noble Lord does not mind, I shall write to him, with a copy to the chairman of the committee, with more detail on our thoughts about the individual recommendations, as we do not agree with them all.

The Government see the single market as one of the fundamental cornerstones in the drive for growth, as outlined by the Prime Minister in the pamphlet Let’s Choose Growth. In its report the committee raised a number of points that I should like to comment on further.

The Government agree that the social dimension of the single market should not be seen as a trade-off against market liberalisation. By removing barriers to trade, the single market opens new markets for businesses, provides consumers with greater choice, encourages innovation and, ultimately, creates jobs. It is the main driver of growth and prosperity across Europe and plays a key role in maintaining the European Union’s global competitiveness. Pressing for a deeper, more competitive and more effective single market is a key commitment of the UK Government’s Trade and Investment for Growth White Paper, which was published in February 2011.

Additionally, all EU proposals should be accompanied by impact assessments that analyse associated costs and benefits. We are working towards this aim with the Commission and other like-minded member states.

In response to the question of the noble Lord, Lord Bradshaw, infraction proceedings should proceed at a faster pace. We absolutely agree with him that infractions are too slow. Infraction proceedings under the services directive have only just started against Austria. The EU pilot cases are designed to speed up this process. I agree with him that fairness and enforcement are the watchwords here, and I thank him for that.

The services directive is central to the completion of the single market. Many providers in the UK look to Europe as a market for their services but they face restrictive regulatory practices in order to provide their services across borders. These barriers hinder service sector growth and job creation, and their proportionality needs to be rigorously assessed. Companies and individuals currently bear unnecessary costs, and consumers get less choice and lower-quality services at inflated prices. Further simplification of the administrative environment, ensuring transparent, proportionate regimes, is a crucial part of successful implementation and is vital to facilitate the growth of SMEs.

It is important where member states are shown to be lacking that any deficiency is addressed immediately by the member state or, ultimately, through the infraction process by the Commission. Ineffective implementation, transposition and enforcement will lead to potential gains not being realised.

The Government feel that the mutual evaluation process used at EU level for the first time was a valuable exercise and that member states, together with the European Commission, created a good evidence base for further improvements. The Commission and other member states feel the same way and the process will be used as an evaluation tool in other fora.

The noble Lord, Lord Hannay, asked about reopening the services directive. The United Kingdom would be open to a new services directive but there is unlikely to be sufficient support in other member states or from the Commission. We are keen to introduce a proportionality test into the current directive against which any barriers should be measured. We are also keen that the Commission should use these enforcement powers where there is blatant protectionism.

The mutual recognition of professional qualifications directive covers professionals who need to register with a regulatory body in order to practise or hold a title. The European Commission is currently reviewing this directive, with a view to proposing legislation by the end of the year. The main proposal is a professional card that can be presented to regulators. We are concerned that this could add an additional layer of bureaucracy and have asked the Commission to think through the proposal in more detail before taking action. We need to reduce regulated professions in areas where they are causing barriers. Consequently, we are pushing for member states to review their regulated professions and remove regulations that are unnecessary or disproportionate. Where necessary regulations remain, we would like more cross-EU collaboration to allow applications for recognition to be processed more smoothly.

We must also recognise the vital role that flexible labour markets play in a vibrant economy. It is important that we do not impose further EU labour regulations that undermine domestic regulatory systems and have a negative impact on labour market flexibility. The Government have taken note of the Commission’s proposals on the Single Market Act regarding the posting of workers directive. While we are happy to look at proposals to better implement the directive’s provisions, it is crucial that these proposals do not impose unreasonable burdens on business or the Exchequer.

The Government agree with the authors on the significance of a fully functioning digital single market. However, we come to a slightly different approach on assessing the recent policies of the European Commission.

We welcome that the Commission is not planning a full revision of the e-commerce directive because we are sceptical that reopening the directive would be productive. A preferred option would be to build on the fundamentals of the directive through advice and the promotion of best practice, using the existing directive to deliver more successful cross-border transactions.

My noble friend Lady O’Cathain referred to the new consumer rights directive and my background knowledge of it. Political agreement of the consumer rights directive has now been reached and the Council will formally adopt it very soon. We have supported the aims of this directive throughout because greater harmonisation of consumer rules across the European Union, particularly on distance selling, will improve the functioning of the single market. The directive also applies to digital content and will, among other things, require additional pre-contractual information such as system compatibility requirements and any technical protection mechanisms to be provided to consumers.

On intellectual property, both the European Commission and the Government have recently released strategies for future intellectual property policy. The Government’s was published in response to the Hargreaves review of intellectual property and growth. Both agree that a modern, integrated European intellectual property regime will make a major contribution to growth, job creation and economic competitiveness. Many of Hargreaves’s recommendations and European Commission proposals fall on common ground. Additionally, the Government agree with the Commission regarding other digital initiatives. These include policies that enhance the competitive deployment of high-speed broadband and the introduction of an alternative dispute resolution for online trading, which will help to overcome consumers’ difficulties in obtaining redress from businesses in other countries.

The Government believe that a common consolidated corporate tax base is unnecessary for the single market to function effectively. We will not agree to any proposals that would jeopardise the UK’s ability to shape its own tax policy or prevent the UK creating the most competitive corporate tax regime in the G20.

The noble Lords, Lord Liddle and Lord Hannay, spoke of the euro-plus pact. The noble Lord, Lord Hannay, mourned the fact that we did not join it, as did the noble Lord, Lord Liddle. It is true that we did not join the pact. However, we welcome the euro area’s determination to push forward structural reforms, which are very important for the future strength and stability of the single currency, which is firmly in the UK’s own economic interests. As we know, almost half of our exports go to the eurozone countries. The United Kingdom has its own special relationship with the European Union and the euro. We have a formal treaty opt-out from membership of the single currency. That is why we have decided not to participate formally in this pact.

The noble Lord, Lord Hannay, then referred to energy markets. My Secretary of State, Vince Cable, shares the noble Lord’s concerns regarding our energy markets. On the point that was made about competition policy, he is very interested in competition enforcers looking into the market via a market study. This is one of the enforcers’ competing priorities. They will have to make a decision on this shortly.

Looking forward, since the House of Lords inquiry took place, the agenda has not been static. On the digital single market, the Government initiated and hosted a meeting with 13 other like-minded member states in July. At that meeting, we agreed to put collective pressure on the European Commission, with clear targets and deliverables for how the Commission plans to implement the digital single market. A joint letter from the like-minded group to different EU commissioners will be sent out shortly. The next meeting of the group is scheduled for November. Following the Government’s response to the Hargreaves review we will, within the next few months, consult on the detail of how it will proceed, and will set out plans in a White Paper in spring 2012. Much of this will have consequences for the digital single market and wider European intellectual property.

We have also been working with the Polish and Danish Governments—the current and upcoming presidencies—to ensure that the single market and growth remain a priority. There are still a number of key issues to be resolved before we achieve full implementation of the services directive, but we remain optimistic that we will be able to achieve progress on this, on reducing burdens to business and on ensuring as far as possible the free movement of labour, goods, services and capital. These are the aims of the single market and are of great importance for both the United Kingdom and the growth agenda generally.

I have just realised that I have missed two questions. I think I have time in which to answer them; this will save you having to wait to receive a letter from me. One is from the noble Lord, Lord Hannay, and one is from the noble Lord, Lord Liddle. I apologise for having done that.

The noble Lord, Lord Hannay, asked a question on strong competition policy and rolling back state aid. The state aid regime is the cornerstone of the single market; it helps to ensure effective competition. The Commission rules create a level playing field for UK companies, while at the same time enabling member states to make targeted interventions aimed at correcting market failures. Whether you agree or not, that is the answer I give you today.

With regard to the query of the noble Lord, Lord Liddle, about how the United Kingdom should work with Europe, I agree with the noble Lord that the United Kingdom needs to work more collaboratively with our European partners and should take absolutely no joy from the eurozone’s current situation, given that the European Union is, as I have said before, the UK’s main trading partner. I once again thank the noble Baroness, Lady O’Cathain, for a most excellent report.

18:31

[Baroness O'Cathain]

Thank you very much. I thank all Members who participated in the debate. We may not have had the quantity but we have certainly had the quality, which has been very good.

I should like to proceed in the order of speakers. The noble Lord, Lord Bradshaw made a point about the infraction proceedings. We have not faced up to the fact but will have to consider that the backlog of work in the Court of Justice is considerable. This is one of those bottlenecks. I think we are always pussyfooting around anything to do with the judiciary—we cannot touch it because it is sacrosanct. However, there is something that the Government should do about trying to hasten the solution of these problems before the Court of Justice. The noble Lord is right about the infractions. As he knows, we wanted them addressed speedily and we will continue along that route.

I welcome very much the remarks of the noble Lord, Lord Hannay, about protectionism, which I mentioned. The big thing, when we have an economic disaster, as we have had over the past three years, is that people tend to go back into their huts and do not want to venture out. They do not think about going out and making an opportunity out of a disaster. This is a very valid point: we cannot afford to think about protectionism.

I was very sorry that the noble Lord, Lord Liddle, did not get a welcome from the Poles. They were all so kind to me when I was there a few days after the Summer Recess started. We are in dialogue with them and I am going again to Krakow in about a fortnight to take part in the chairmanship of a discussion about the single market. So I think they like our contribution and they are very genial. I will not make any comments about any other nations—I am sorry.

I should also like to thank my noble friend the Minister for her support and for her wise advice, bearing in mind her background. I would point out that professional qualifications are within the remit not of EU Sub-Committee B but of Sub-Committee G. I sat in with the chairman of Sub-Committee G at a meeting in Brussels after a meeting on the single market, so I know about the professional qualifications. This is a matter they should take up with Sub-Committee G.

Also, the point that I should like my noble friend to take back to the department is the absolute imperative to enthuse all the citizens of the European Union in this single market. There are a few quick wins we can get in doing that. One of the biggest would be—looking at the noble Lord, Lord Walpole—a total extension of broadband to every citizen in the European Union. We have had endless discussions about the black spots of the UK that still have not had broadband.

If we could go forward together and make sure that every European Union citizen was enthused about this we might get somewhere. Then the begrudgers would have very little to begrudge about and we should get somewhere. At the risk of boring everybody I repeat what I said, that I am very glad we have had this debate. I am sure that it will make good reading. I particularly want to thank again the Minister and the committee.

18:35

[Lord Walpole]

Before the chairman sits down, I want to say a brief word. One of the reasons why this committee has produced such a good report, and is going to produce another very good report fairly soon, is because our chairman looks after us so well and it is a very happy committee. We all get on with each other extremely well and that is reflected in the report. Of course it is our staff as well who help us to survive, and have written the next report already.

Motion agreed.

Committee adjourned at 6.36 pm.

House of Lords

Tuesday 13th September 2011 Lords Chamber

Tuesday, 13 September 2011.

14:30

Prayers—read by the Lord Bishop of Hereford.

Personal Statement

Tuesday 13th September 2011 Lords Chamber

14:36

[Lord Trefgarne]

My Lords, I wish to make a personal statement.

As your Lordships may be aware, there has been some recent press comment relating to a letter, now made public, which I wrote in 2007 on a private matter of a business nature. I accept that although the business interest to which the letter referred was correctly entered in your Lordships’ Register of Interests in 2003, it was removed in 2005, which was clearly premature. I also accept that the use of House of Lords writing paper was inappropriate. I apologise to your Lordships for these errors for which I take full personal responsibility.

Public Disorder: Business Damage

Tuesday 13th September 2011 Lords Chamber

Question

14:37

Asked By

[Lord Cotter]

To ask Her Majesty’s Government what progress is being made with the measures proposed to help businesses damaged or destroyed as a result of the recent riots in England.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the Government acted swiftly to set up a range of measures to support those businesses affected by the recent disturbances. Our immediate priority has been to get local communities back on their feet and to get high streets and businesses up and running again as quickly as possible. The response has been amazing. Businesses have been helping each other and there has been a great spirit abroad. My colleagues, Mark Prisk from BIS, Crispin Blunt from the Ministry of Justice, Damian Green from the Home Office and Bob Neill from the Department for Communities and Local Government, wrote to all MPs on 6 September updating them on the support for communities and businesses. I have arranged for a copy to be sent to my noble friend, as I recognise his involvement, over many years, in the concerns of small businesses.

[Lord Cotter]

I thank the Minister for her reply. It will take some time for businesses and communities to recover. I hope that the Minister will continue to monitor the situation. However, on a broader point—not just in relation to the recent riots—two-thirds of businesses nationally have been a victim of crime over the past 12 months. Can a higher profile be given to policing crimes against business, to remove the perception, which somehow seems to be the case, that these are victimless crimes and to ensure that firms are given proper advice and help?

[Baroness Wilcox]

I am only too delighted to confirm to my noble friend that this is something that the Government are looking at. These are not victimless crimes, particularly for small, family businesses, which are almost afraid to open up again. A lot of work is being done in this area. I have spoken with my noble friend Lady Browning, the Home Office Minister, who has responsibility for crime prevention. In the next few weeks, the Home Office will be releasing an improved self-assessment tool for businesses to identify their vulnerabilities, providing practical advice for how those can be overcome. That will be available through the Business Link website and, to comfort my noble friend, I shall stay in contact with him on any other areas that develop well

[Baroness Royall of Blaisdon]

My Lords, when the commission, which was appointed by the Prime Minister, and of which my noble friend Lady Sherlock, I am proud to say, is a member, goes round the country, will it take evidence from businesses as well as from those who were affected in other ways by the riots? Does the noble Baroness know whether the commission will be going to areas which were not themselves affected by the riots but which potentially could have been affected? Many people up and down the country will have views on the reasons behind the riots and it is important that their views are listened to.

[Baroness Wilcox]

Pretty well anything that the noble Baroness could suggest today that we might do to reassure people all around the country, particularly in small high streets where the businesses are not run by great consortiums but by people who have been made very nervous, I will take away. I do not know whether they are looking at all of that at the moment. However, at the core of everything that we are doing is an understanding. We have been called a nation of small shopkeepers, and this is what the Question is about. We will make sure that we do our best for them.

[Baroness Hussein-Ece]

My Lords, many small businesses that were damaged or that have closed down as a result of the recent riots may have lost, or have a lack of, complete financial records. This may prohibit them from taking advantage of the compensation that has been made available. Will the Minister reassure me and these small businesses that they will be treated fairly and with sympathy, particularly at local level?

[Baroness Wilcox]

Yes, I can assure my noble friend of this. First, all 35 affected local authorities have now indicated that they will provide support for affected businesses through the high street support scheme. Companies without insurance can seek compensation from their police authority under the Riot (Damages) Act. Her Majesty’s Revenue and Customs is delaying tax payments for businesses needing help. Companies House has agreed to an extension for affected companies unable to file accounts or other documents, and a charitable high street fund has been set up. I am delighted to answer the Question, not because riots are something that I want to talk about, but because it is marvellous to see how much help is being given all over the country. This is society at work—I will not even say the big society.

[Lord Elystan-Morgan]

My Lords, the Minister referred to the Riot (Damages) Act 1886, under which claims can be made against the police for damage to property. While it is entirely appropriate that innocent persons' property that has been damaged in that way should recover, does she not consider that now it may be appropriate that such payments should be made by the Treasury rather than by the police, bearing in mind that that Act was passed 125 years ago in circumstances very different from those prevailing at the moment?

[Baroness Wilcox]

We will look at the lessons that we can learn from this. As the noble Lord says, it is the Riot (Damages) Act 1886 that applies. It does not include vehicles: we have had a little difficulty with people who have had their vehicles damaged. However, we can always refer them on to other areas and other ways in which they can claim damages. We will learn lessons from this, as we do from all these bad things.

[Lord Cormack]

My Lords, following that supplementary question, will my noble friend assure the House that the resources made available to the businesses that have been so wantonly destroyed will be sufficient to ensure that the legacy of the riots does not include one single destroyed family business?

[Baroness Wilcox]

Yes, I can assure my noble friend that £20 million has gone into the high street support scheme. If we discover that not all the money has been used, it will not be taken back: local authorities will be able to use it to cheer people up. If any noble Lord has a good idea, I urge them to let me know. We think, as it is getting near Christmas, that any money left over could go towards the Christmas lights.

Libya

Tuesday 13th September 2011 Lords Chamber

Question

14:45

Asked By

[Lord Hoyle]

To ask Her Majesty’s Government what assessment they have made of the political views of the coalition in Libya and their policies for running the country.

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, the National Transitional Council has made a sincere commitment to a political settlement where human rights, fundamental freedoms and the rule of law are respected. We welcome its constitutional declaration which sets out a programme for conducting Libya’s political transition in a spirit of unity, moderation and reconciliation. We look forward to the formation of an interim Government, which is expected in the coming days. The United Nations will co-ordinate international community support for this transition and the UK Government will remain at the forefront of these efforts.

[Lord Hoyle]

I thank the Minister for that considered reply. Could I press him a little further about the people who are forming the Libyan Government? Many of them were members of the terrorist organisation, the Libyan Islamic Fighting Group. Although they have renounced violence, can we be sure that that they will not go back to their old ways?

[Lord Howell of Guildford]

The leaders—the chairman of the council, Mustafa Abdul Jalil, and the prime minister, Mr Mahmoud Jibril—are strong and remarkable people. Mr Jibril served under Colonel Gaddafi and was part of that regime, but he moved over. There are others who have had associations with other groups in the past. There is one prominent case, which I suspect the noble Lord has in mind, of someone who appears to have been involved in terrorist activities—that was certainly the case, so one can never be totally sure. However, there are wise heads leading the NTC and we believe that with careful pressures and support from outside we can proceed in a way which avoids the intrusion of extremism, which in Tripoli yesterday morning the prime minister was warning that he did not want to see in the new Government.

[Lord Chidgey]

My Lords, three weeks ago, the BBC reported that the joint FCO, MoD and DfID stabilisation unit had identified five long-term objectives for Libya, which included a conclusive political settlement ensuring security, the rule of law and restarting the economy. Can my noble friend say whether the Government will set out in a Statement how they intend to achieve those objectives, what resources will be deployed and what provisions have been made for a multilateral response to stabilisation from the three departments involved?

[Lord Howell of Guildford]

Those are indeed the objectives, as my noble friend acknowledges, and we will pursue them. How will we do it? We want to see the UN take the co-ordination role. A lot of co-ordination is needed, with wide international efforts for stabilisation, reconstruction and general social improvement, and recovery from the horrors of the last few months. Alongside that, we will work with all the agencies and through our own contribution to achieve these aims. I do not think that I can be more specific at this stage. In addition, as my noble friend knows, the Department for International Development is providing considerable funds to help with the reconstruction.

[The Lord Bishop of Hereford]

My Lords, I understand that Article 6 of the draft constitution emphasises the equality of citizenship before the law, but I am also aware that the constitution refers to Islam as the principal source of its jurisprudence. The two positions are not incompatible, but it would be helpful to learn about the conversations that our Government have had with the Transitional National Council in Libya regarding the protection of minorities.

[Lord Howell of Guildford]

The right reverend Prelate is absolutely right. These are very important issues, which we are raising all the time in our discussions and in the support that we are seeking to give. We do not want to cross the borderline between support and reinforcement of the new Libya, if that is what is going to emerge—the business is yet unfinished, as noble Lords know. We do not want to cross the line into telling the Libyan people what to do, as they own the procedure. However, they do respect these values, and we will certainly make those points to them in our continuing dialogue.

[Lord Triesman]

My Lords, the Libyan Prime Minister Mahmoud Jibril said on Monday that the National Transitional Council has mapped out a path forward and he added that this is no time for revenge. I note today that Donatella Rovera of Amnesty reports widespread systematic violence perpetrated by former rebel forces, including in the areas that they have controlled for over six months. It is an alarming report. Will the Minister tell the House in rather more detail what has emerged in discussion with the NTC about the main planks of its plan, whether he believes that the resources exist to deliver that plan and what the United Kingdom is saying to the NTC about violent crimes being committed by the NTC’s forces?

[Lord Howell of Guildford]

We have noted that report and the reports from the UNHCR about allegations of atrocities. We think all these things should be investigated. It is worth remembering that the International Criminal Court is remitted fully by UN Resolutions 1970 and 1973 to investigate these allegations, and we understand that it is doing so. If it is necessary, we will certainly encourage it to do so, but I think it is going ahead with the job anyway.

[Lord Avebury]

Can my noble friend say what is being done about the difficulties that the Tuaregs are having in gaining citizenship in the new Libya and whether any representations have been made on that subject by us?

[Lord Howell of Guildford]

No, I cannot. Whether the Tuaregs have come up in detailed discussions, I am not briefed to say, but I will write to my noble friend if the position of the Tuaregs has been discussed. I cannot add anything at the moment.

[Lord Anderson of Swansea]

Does the Minister agree that Libya enjoys one considerable advantage over many of its neighbours, which is that it is not in need of financial assistance? However, it is in need of massive technical assistance, particularly in ensuring that the vast oil resources go to help the many and not to oligarchs and so on. What are we doing to assist the Administration, particularly in the area of petroleum and gas resources?

[Lord Howell of Guildford]

The noble Lord is absolutely right. There will be some technical support, and we are encouraging oil experts to go back in and restart the industry. There are political and technical difficulties to overcome, but we are certainly going that way. As for resources, we have unfrozen a large number of assets which are now available to the new Government. The Libyans are the owners of this process, and it is for them to decide how to distribute the funds and resources of, I hope, a modern, democratic and settled Libya, which we all pray lies ahead.

Rainforests

Tuesday 13th September 2011 Lords Chamber

Question

14:53

Asked By

[Lord Eden of Winton]

To ask Her Majesty’s Government what is their latest assessment of the effect of logging operations in the rainforests of Africa, Asia and South America; and what is the likely impact on the indigenous human, plant and animal life.

[Baroness Verma]

My Lords, more than 1 billion people depend in varying degrees on the forests for their livelihoods with many more depending on the ecosystem services they provide. Some 350 million people who live within or adjacent to dense forests depend on them to a high degree for subsistence and income. Degradation and deforestation cause a loss of between $2 trillion and $4.5 trillion per year in ecosystems goods and services.

[Lord Eden of Winton]

Does my noble friend share my concern that while good intentions are being declared across the world, rainforest logging operations continue at a higher rate than before? Is it not just possible that funnelling loads of money through the World Bank is the wrong way to go about things? My fear is that in relying on REDD-plus and so-called sustainable forest management, fund providers are being hoodwinked? Would my noble friend and her colleagues therefore give much greater support direct to NGOs and the like which know what is happening on the ground and are much better placed to achieve early practical progress at the grass roots, where it really will make a difference?

[Baroness Verma]

My Lords, my noble friend is to be congratulated on raising this issue again. It is true that these issues will not be dealt with singly by the UK or by Governments who are not prepared fully to accept that there is a lot of work and persuasion to be done, by rule of law, that illegal logging must be stopped. However, I reassure my noble friend that we work with NGOs and are a founding member of the Global Partnership on Forest and Landscape Restoration. We are working very closely with countries such as India to help restore and recover forests. My noble friend Lord Henley has just recently participated in the Global Partnership on Forest and Landscape Restoration in Bonn. Governments can do their part and NGOs can do theirs. However, countries where this is happening also have to respond with severe penalties.

[Lord Blencathra]

Does my noble friend agree that biodiversity and loss of species are even more important than climate change? With a huge amount of resources and tremendous effort, it is possible eventually to reverse climate change, but once a species is lost, it is gone for ever, and the damage could be irreparable. Does she also agree that this is not just a matter of polar bears, tigers or even red squirrels, but that many of the boring little unsexy species that could be lost by deforestation could actually be valuable to human life and existence?

[Baroness Verma]

My noble friend has put the case perfectly for why we need to work incredibly hard. That is why the UK has supported developing countries to participate in the United Nations study on the economics of ecosystems and biodiversity which estimates, as I have said, that the financial cost is immense but the cost to species is even greater, and the initial long-term impact will be on us.

[Lord Clark of Windermere]

My Lords, does the Minister appreciate that one of the largest single sources of global emissions is actually deforestation, often illegal logging? The British Government took the initiative a number of years ago to push for reforestation, and we are one of the few countries in the world with experience of it. Can we have an assurance from the Government that they will redouble their effort for reforestation as well as stamping out illegal logging?

[Baroness Verma]

The noble Lord is absolutely right. It is about working with other countries, which we are doing aggressively. We have worked very closely to get all our partner countries to sign off the new EU timber regulation that came into force last December. It is about being persistent in our argument. I agree with the noble Lord that it is really a devastation to all countries if we do not tackle this issue right now.

[Lord Chidgey]

Is my noble friend aware that the Democratic Republic of Congo officially produces more than half a million cubic metres of timber each year, and illegally produces about the same amount each year? Is she also aware that British technology is now available to the DRC that tracks the entire supply chain of timber from standing forest trees to the wholesale timber market? What action will the Government take, therefore, to help facilitate the DRC Government’s efforts to complete negotiations with the European Union to enter into traceability agreements?

[Baroness Verma]

My noble friend is right about Congo. However, as with the previous question, it is about all partner countries being able to respond with severe penalties when they see illegal timber coming through their borders. Of course, the important thing is that these are conversations that continue. They are not had at one conference—it is a continuous conversation at many conferences, and it will arise again at the Durban conference in December.

[Lord St John of Bletso]

My Lords, can the noble Baroness give any indication as to whether our Government will be following the moves by Switzerland and Germany to investigate money-laundering of the proceeds of timber corruption by the chief minister of Sarawak in Malaysia? What other measures are being taken to identify and sanction those large international logging companies which do not ensure best practice in sustainable logging?

[Baroness Verma]

The noble Lord talks about a specific case, which I will not refer to. In a more general response, I would like to say to noble Lords that we are ensuring that we respond proactively to the difficulties we are all facing with this issue. The multinational companies that deal in illegal logging will find that the penalties for this will be severe. That is the agreement we are trying to get from all our partner countries so that it is not just a small group of countries that are willing to apply severe penalties, but that the penalties will be severe at every border that illegal timber comes through. It is about greater partnership but it is also about recognising that we are only a small cog when it comes to dealing with these issues and it is really for the whole world to respond collectively.

[Lord Avebury]

My Lords, what does my noble friend think about the UN-REDD initiative mentioned by the noble Lord, Lord Eden? Is it cost-effective, and how much does the United Kingdom contribute to it annually?

[Baroness Verma]

I cannot give my noble friend a figure on the contribution at the moment; I will write to him on it. However, I repeat that we may think that some systems are weak, but we have to strengthen those systems—review and revise them—and make countries where deforestation and illegal logging take place responsible for responding positively.

Palestine: UN General Assembly

Tuesday 13th September 2011 Lords Chamber

Question

15:01

Asked By

[Lord Wright of Richmond]

To ask Her Majesty’s Government how they propose to respond to any bid by the Palestinians for Palestinian statehood at the forthcoming United Nations General Assembly.

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, we have been clear that a Palestinian state is a legitimate goal and the best way of achieving this is through a comprehensive agreement between Israel and the Palestinians. Palestinian action at the UN looks increasingly likely. We are working with partners to build a consensus on a way forward that recognises the progress the Palestinians have made in their state-building efforts, that meets Israel’s legitimate security concerns, and that avoids confrontation in the UN. Whatever action is taken in New York it is important that this increases the prospects for a return to negotiations. This is our goal and it is President Abbas’s goal as well. We have reserved our position on outright recognition and will take a decision nearer the time if needed.

[Lord Wright of Richmond]

My Lords, I thank the Minister for that reply. Does he accept that giving Palestine statehood does not in itself—and would not in itself—preclude future negotiations with the Israeli Government? Given that there is widespread acceptance of the concept of a two-state solution, with shared capitals in Jerusalem, is not recognition of a Palestinian state entirely logical? I also ask the Minister whether he accepts that whatever decision our European, American or quartet colleagues take on this matter, Britain—the governing power of Palestine until the time of partition in 1948—has a particular moral duty to support the revival of a recognised state for the Palestinians living in peace and security with the state of Israel.

I hope your Lordships will allow me to add a very short, sad but highly topical postscript to this Question. Some of you may have read in the Times this morning an obituary of the wife of the Palestinian ambassador in London, to whom I offer my condolences. That obituary states that Mrs Hassassian, who was a permanent arguer for Palestinian rights, was not allowed to open a Palestinian stall at the international diplomatic fair in Kensington a few years ago because Palestine was not a country. I hope that nonsenses of that sort are now in the past.

[Lord Howell of Guildford]

I am grateful to the noble Lord and, of course, I share and we must all share in the condolences which he touches upon. As to his earlier questions and propositions, I agree with most of them. However, the question hangs in the air, and I hope it will be resolved, as to whether action at the United Nations will enable that move to statehood to take place. That is what we all want and that is what must proceed. We hope that action at the UN will open up a better pathway to negotiation, but if it was the opposite and it led to confrontation—if more business there closed down negotiation—then it clearly would not be such a good thing. We just have to wait and see what the texts are, how the matter is going to be approached—whether through the General Assembly or the UN Security Council—and then we will take our decision.

[Lord Dykes]

My Lords—

[The Lord Bishop of Exeter]

My Lords, while the recognition of statehood might alter the negotiating parameters and the Minister has affirmed the importance of negotiations towards achieving a final settlement, will he also affirm the important role in any ongoing negotiations of the wider Palestinian diaspora, including those who have the recognised status of refugees? Will he say what the Government are doing to ensure that the rights of such refugees are not compromised or taken away by any recognition of statehood, including their legitimate right to be heard in international fora such as the UN?

[Lord Howell of Guildford]

These are very important issues. Clearly, they would have to be included in any advance towards statehood, which we want to see, which in turn depends upon a successful negotiation, which in turn depends upon the agreements that have so far eluded us between Israel and Palestine. The question of how this UN development fits into that pattern is an open one at present. But I fully agree with the right reverend Prelate that this is an important aspect.

[Baroness Ramsay of Cartvale]

My Lords, does the Minister agree that if such a bid by Palestinians is made to the upcoming General Assembly, they should be asked if they accept the United Nations General Assembly resolution—I mean “General Assembly”; it was not a Security Council resolution—of 1948 which set up the state of Israel?

[Lord Howell of Guildford]

I am not so sure about the exact content of that but certain conditions, which are parallel and relevant to that and may be embodied in that resolution, would go with any proposition before the General Assembly. Two-thirds of the General Assembly would then have to vote on it. It might also be qualified by the requirement that Palestine would take the role of observer-state membership rather than full membership. That is a possibility. I can give the general assurance that, certainly, conditions would be attached.

[Baroness Falkner of Margravine]

My Lords, does my noble friend accept that, in deciding the UK’s position at the General Assembly, we would do well to bear two things in mind? One is the formulation of our relationship with the United States, which the Foreign Secretary has described as an essential relationship rather than a special relationship, denoting a degree of independence on our position on this matter from the US. The second point is our relationship with our European partners. Does my noble friend accept that where our European partners such as Germany may wish for historic reasons to abstain, we have a special responsibility, as the noble Lord, Lord Wright of Richmond, has pointed out, to do the right thing by the Palestinian state? Will he therefore assure the House that he will keep an extremely open mind on the position we take on both those fronts?

[Lord Howell of Guildford]

The short answer is yes. Obviously we listen to the views of the United States but my noble friend will remember that, in a recent debate on settlements, we did not find it necessary to be on the side of the US. In fact, we voted on the other side. We are perfectly capable of asserting our independence and our interests as a nation, and as a contributor to Middle East peace, by ourselves. As far as the European Union is concerned, I am afraid that there is some difference of view between the members and it is hard to get a united European Union view, although, by working over the next week, it would be a good thing if we could do so.

Housing Benefit

Tuesday 13th September 2011 Lords Chamber

Petition

15:09

[Lord Touhig]

My Lords, I beg leave to present a petition from Community Housing Cymru, on behalf of the United Kingdom housing federations and other Welsh charities. The petition prays that the House urgently call on the United Kingdom Government to reconsider the cuts to housing benefit and local housing allowance, which your petitioners believe will disproportionately affect those in greatest need—including homeless and vulnerable families, those in need of housing-related support, people with physical and mental health problems and children living in poverty—and lead to greater long-term economic and social costs for local authorities, housing associations and government. The petition bears 1,731 signatures.

Petition presented.

Draft Financial Services Bill

Tuesday 13th September 2011 Lords Chamber

Motion to Approve

15:09

Tabled By

[Lord Strathclyde]

That, notwithstanding the Resolution of this House of 21 June, it be an instruction to the Joint Committee on the Draft Financial Services Bill that it should report on the draft Bill by 16 December 2011.

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, on behalf of my noble friend, I beg to move the Motion standing in his name on the Order Paper.

Motion agreed, and a message was sent to the Commons.

Weights and Measures (Specified Quantities) (Unwrapped Bread and Intoxicating Liquor) Order 2011

Tuesday 13th September 2011 Lords Chamber

Construction Contracts (England) Exclusion Order 2011

Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011

Tuesday 13th September 2011 Lords Chamber

Motions to Approve

Moved By

[Baroness Wilcox]

That the draft orders and regulations laid before the House on 27 June and 5 July be approved. 26th and 27th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 7 September.

Motions agreed.

Arrangement of Business

Tuesday 13th September 2011 Lords Chamber

Announcement

15:10

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, before we move to the Welfare Reform Bill, I point out that 51 speakers are signed up for the Second Reading. If Back-Bench contributions are kept to seven minutes, the House should be able to rise this evening at around the target of 10 pm.

Welfare Reform Bill

Tuesday 13th September 2011 Lords Chamber

Second Reading

15:11

Moved By

[Lord Freud]

That the Bill be read a second time.

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

My Lords, I do not think that a single Member of this Chamber could stand up and say they truly believe that the welfare system is working. Personally, over the course of the past four years, I have been struck time and again by the sheer scale of the system, and therein the task we face bringing forth these reforms. Today’s benefits balance sheet tells a story of unfairness, dependency, and waste.

There are nearly 5 million people on out-of-work benefits. In 2010-11, the Government spent £201 billion on welfare and pension payments, compared to £38 billion on defence, £91 billion on education and £121 billion on health. Within that we spend £22 billion on the key out-of-work benefits and the same again on housing benefit. Working-age welfare spending has increased by over 40 per cent over the past decade, Housing benefit spend is up almost 50 per cent.

Of the 2.6 million people claiming incapacity benefits, over half have been on benefit for at least five years, and a third have been on benefit for 10 years or more. Spending on welfare has been allowed to get out of control. This Government have taken some tough decisions to restore affordability to the benefits budgets for both now and the future. Of course, welfare is about more than just numbers. Ineffective management of the benefits system has not just led to ever-increasing spending. It has also affected people’s lives. So, there are people who want to work but find they are better off on benefits, people who want to work but do not get the specialist support they need, and people who want to work but are actually hindered from doing so by the current rules. In the mean time it is the poorest and most vulnerable who suffer.

Welfare reform is first and foremost about refocusing the resources we have to help the people who need it most. This Bill contains a number of measures to address specific problems within the welfare system, to end benefit dependency and redress the balance by restoring fairness and affordability. These measures lay the groundwork for the main purpose of this Bill, the creation of universal credit, the most radical reform of the welfare system since its invention. With the creation of universal credit this Bill does not just allow for the development of a new benefit, it creates the conditions for attitudinal and behavioural change. It bridges the gulf that has opened up between unemployment and work, and delivers a benefits system that is about people not process, one that is flexible and responsive. As we debate this Bill today and in Committee over the coming weeks, we may disagree on the detail, but we must all agree on the need for reform. I know that noble Lords have a great deal of interest in these reforms. Many have been to briefing sessions on specific policies contained within this Bill and I hope this can continue throughout the Committee stage.

I shall also be publishing a great deal of detailed information provided for the Committee stage in the other place. This will include one-page notes relating to every regulation-making power in the Bill, illustrative draft regulations for some areas, and policy briefing notes. Some of these, as noble Lords may have seen, were published only yesterday. To inform our discussions, I also expect to publish updated impact assessments to reflect various announcements that have been made during the course of the Bill’s passage through Parliament.

Following further work my department has done, and the helpful report from the Delegated Powers and Regulatory Reform Committee, I am planning to bring a number of technical amendments during the Committee stage. I will ensure that noble Lords are made aware of these in good time to prepare for the debate. Today, I wish to set out for you some of the principles behind our approach and the rationale for some of the key measures included in this Bill.

At the heart of our reforms, indeed at the heart of this Bill, is the creation of universal credit. This will be a single income replacement benefit for working-age adults. It will be simple to understand and access, and crucially it will bring together in and out of work support, simplifying the current system of benefit payments and tax credits into a single payment for those out of work or on low pay. Universal credit will provide a more consistent system of support. For example, under universal credit, people remain registered with the system for two years after their claim has ended. So, someone can get a full-time job and leave universal credit completely, but if they lose their job or perhaps cannot work for a period because of a health condition, they will be able to start payments again almost instantly, ensuring that they do not have to wait for vital support.

Universal credit will also provide a more responsive system of support, because as part of these reforms we are developing a real-time tax and benefit system. Access to real time information means that we can deliver a more responsive system based on actual earnings, making the transition between benefits and work much easier. By basing support on financial need, not crude measures of employment status, we will remove some of the barriers preventing people returning to work and will provide the security of a minimum income while retaining and in fact, for many, restoring the financial incentive to work. Real-time information means that universal credit payments can be gradually reduced as earnings increase. Even for those at the bottom end of the pay scale looking to take on extra hours or a modestly paid job, there will be real financial gain. This is an important point; under the current benefits system some people can experience an immediate and almost total loss of benefits for working just a couple of extra hours a week. Under the old system, some households could lose as much as 96 pence for every extra pound they earned. Universal credit reduces this to around 76 pence for modest earners and 65 pence for low earners. This directly improves work incentives for around 700,000 people by putting extra money in their pockets if they do extra work.

The broader impacts of introducing universal credit make the argument for reform even more compelling. The original impact assessments published alongside the Bill suggested that around 2.7 million households will have higher benefit entitlements under the new regime—for over 1 million households, this will amount to more than £25 a week. These numbers remain our best estimate and will be updated in a revised impact assessment in light of the localisation of council tax benefits. Because universal credit is properly focused, 85 per cent of this increase will be in the poorest 40 per cent of households, and the commitment to transitional protection means there will be no cash losers at the point of transition, all other things being equal.

We anticipate that more people will take up benefits once the system is simplified, with the combined impact of take-up and entitlement potentially lifting 600,000 adults and 350,000 children out of poverty. The combined effects of welfare reform could lead to up to 300,000 fewer workless households. Taken together, these changes will help to end benefit dependency by creating a more active regime, which encourages people into work by making the financial gains clear and real for hundreds of thousands of people. The introduction of universal credit will restore affordability by creating a simpler benefits system, focused on those in the greatest need; and it will restore fairness for both taxpayer and claimant. A more transparent system will be more accountable to the public. A more effective system will deliver more for those who need it most.

This Welfare Reform Bill is not just about those who are claiming benefits, it is also about those who are paying into the system. We know that taxpayers want a benefits system that is fair. They want a system that does not abandon those at the bottom and a system that they can turn to if they need it. However, taxpayers also want a system that is not wasteful; a system that does not pay benefits to those who can work but choose not to; a system that is not open to abuse; and a system that is affordable and effective.

I believe this Welfare Reform Bill will deliver that system. Universal credit will generally be just one monthly payment per household, making it easier for people to understand what they are entitled to and manage their own finances. This is an important point. Currently, the experiences of unemployed people in this regard, particularly for the long-term unemployed, are very different from those of people in work. We must ensure that as many people as possible are empowered to manage their own finances and make the choices that people in work must make. We must close the gap between being out of work and having a job, so it is not such a major shift for people leaving benefits. Payments to tenants must be the default position under universal credit. That said, I am alert to the sensitivities that exist in relation to the supply of affordable housing and in particular for the social rented sector and its lenders. I am prepared to explore options that will provide some protection for this industry and I shall announce how I plan to do this in due course.

For the moment, let me say this: I am convinced that we can deliver a system that puts the full universal credit payment into a claimant's hands, empowering them to manage their own budgets and narrowing that gap between the experience of being in and out of work. At the same time, I believe we can build safeguards into the system to minimise the impact on social landlords’ incomes and reassure lenders. Universal credit payments will include additional elements for housing and childcare costs. However, as I am sure noble Lords are aware, the Government have made a decision to localise council tax support, and a consultation on the detail of this is currently under way. Much was made of this decision in the other place, so I will make a point for the record. Council tax benefit currently sits across the portfolios of two different departments. Ministers from both are determined to protect the positive work incentives and distributional impacts of universal credit and we continue to work very closely on the detail of these reforms. We have already indicated to the House that we may be minded to make some changes to universal credit design in light of this decision and we shall provide further detail in due course.

With the passing of this Bill, we anticipate the first new claims for universal credit will start in October 2013, with all existing customers moved to the new system by 2017. In the meantime, this Bill also includes some reforms to the current system. These changes will amend some of the existing rules and regulations and start to bring them into line with universal credit. One such change is the proposal to time limit employment and support allowance—ESA—to one year, paid on the basis of national insurance contributions, to people in the work-related activity group.

The basis for this change is to bring ESA rules closer to the contributory jobseeker’s allowance rules, which currently pay six months’ jobseeker’s allowance on the basis of national insurance payments. This change also supports the intention that ESA should be a temporary benefit for the vast majority of people—which indeed it is. This is particularly true of those in the work-related activity group, who are assessed as likely to recover and make an eventual return to work. There remain a number of options for the minority of people who do reach the time limit: a return to work if able; a move to income-based benefits if appropriate; and for those whose condition worsens, potentially continuing payments through the support element of contributory ESA. This is a change of principle more than convenience. Allowing people to become dependent on benefits when they do not need to be is neither fair to them nor to the taxpayer, and it is no longer affordable. This is not about removing support; it is about making sure people get the right kind of support.

This is also the case for people who have cancer. We have already amended the rules, put in place by the previous Government, so that people awaiting or in between certain chemotherapy treatments receive the support they need, and we have specifically asked Professor Harrington to look at this issue in his next review, which he has done in partnership with Macmillan Cancer Support. I know that many noble Lords are particularly interested in this subject and I can tell the House today that we have received Professor Harrington’s second report and we are considering it carefully. I will update noble Lords again in due course.

We do not underestimate the impact that this change will have on claimants. As a result, we have asked Jobcentre Plus to send out a letter to all ESA customers who could be affected by the change. The letter will be sent out over a four-week period starting on 19 September. We appreciate that it is unusual to alert customers before the Bill has been passed by Parliament, so we have been very careful about the wording of the letter, but we think it is important to provide as much information and reassurance as we can at this stage.

We must apply the same principles of fairness, affordability and ending benefit dependency across the welfare spectrum. This is why we must reform support for disabled people. Current provision of disability living allowance, or DLA, is confusing and inconsistent. Too many people think of DLA as an out-of-work benefit. In fact, DLA’s purpose is to provide financial support to contribute towards the extra costs incurred by disabled people as a result of their disability, irrespective of whether they are in or out of work. DLA awards have become inconsistent and subjective, and spending on this benefit has started to spiral out of control.

More than two-thirds of claimants receive one or both of the two DLA components indefinitely, with no systematic checks to see if their condition has changed. This is no longer acceptable. We must support people properly and that means more accurate and more regular assessments to see if their condition has changed and ensure they are receiving the right level of benefit. This means being prepared to pay more for those whose needs have increased as well as reducing the benefits of those who no longer need them. To that end, this Bill allows for the abolition of DLA and its replacement with the personal independence payment, which like DLA will be available to disabled people both in and out of work and will be non-taxable.

The key changes will be an end to automatic entitlements based on having a certain health condition or impairment, a more objective assessment, and the introduction of more regular check-ups. These reforms are designed to deliver a more responsive and sustainable benefit and to ensure support is focused on those who face the greatest challenges to take part in everyday life. They are not about taking support away from those who truly need it.

Many of you have raised with me the issue of DLA mobility payments to care home residents. We have listened to the concerns raised about mobility provision in care homes and will consider the needs of disabled people living in residential care and receiving DLA as we develop personal independence payment for introduction in 2013. Our aim is to treat disabled people fairly, regardless of their place of residence, not to reduce their ability to get out and about. We will continue to gather and consider the evidence about existing provision as we develop our plans.

The introduction of personal independence payment will restore fairness in disability benefit provision by providing support on the basis of ongoing need, and replacing DLA will bring spending in this area under control, making sure the system is affordable both now and in the future. But this is not about cutting spending. The funding for all DLA, in real terms on 2011-12 figures, was £12.1 billion in 2009-10. At the end of this Parliament in 2015-16, the funding will be slightly higher at £12.3 billion. The talk of cuts relates to projections on a benefit that was rising sharply. What we are doing is bringing it under control.

I hope that noble Lords can agree today that the spirit of these reforms is right: that it is right that we do not put people on any benefit and just leave them there, as has so often been the case with DLA; that it is right that we design a more objective assessment, one which can better take account of those with mental health conditions and learning disabilities who may also incur extra costs but which DLA is so ill designed to support; and, wider, taking this package of reforms as a whole, that it is right that we act now to reform the benefits system, restore fairness and affordability in welfare and end benefit dependency.

The reforms contained within this Bill will mean some of the poorest people in the country will benefit from more than £4 billion in welfare payments, as set out in the previous impact assessment, through increased entitlement and take-up. These reforms will lift as many as 950,000 individuals out of poverty, help 700,000 households keep more of the money they earn and cut the number of workless households by up to 300,000. These reforms will bring real change in both attitude and behaviour. This Bill marks the end of the something-for-nothing culture we have seen so recently on our streets. It is a new dawn for welfare—one of fairness, responsibility and effective support. This is something I believe we should all welcome and I commend this Bill to the House. I beg to move.

15:32

[Baroness Hayter of Kentish Town]

My Lords, I thank the Minister for opening the debate and I look forward, as does the rest of the House, to the maiden speech of the noble Lord, Lord Feldman of Elstree.

Given our support for the objective of the Bill, which is to make work pay and to simplify the system, it is deeply regrettable that it fails to achieve this. It fails partly because, despite the words we have just heard, it is taking place alongside a commitment to cut benefit expenditure and partly because it is work in progress, with far too many unanswered questions. In the previous speech, I think we heard the words “in due course” more than any other.

First, however, as vice-chair of the Webb Memorial Trust, perhaps I may quote three principles from Beatrice Webb’s 1909 minority report on the Poor Law, when she said that poverty has structural causes—it is not the fault of the individual—that the state has responsibility for preventing and alleviating poverty and that dependency should be avoided. I have no trouble with a no-dependency model of welfare, but Beatrice Webb also believed that the state is responsible for tackling the causes of poverty: the lack of jobs. Today, with 2.5 million unemployed there are six people chasing every job and in places such as Merthyr Tydfil, 84 for each vacancy. There is a responsibility on government to grow the jobs market because unemployment costs each of us—it is perhaps £500 per household—because we need jobs to enshrine a culture of work in every community, recognising the injury to childhood of a home without work, and because without jobs parents cannot return to work, no matter how hard they try.

We must help those who cannot work through age or infirmity but also assist those who have been out of work back into employment. The Work and Pensions Select Committee in another place goes further, calling on the Government to pay as much attention to getting employers to take on someone who has been out of work as they do to getting the claimant “work ready”. It is not alone in feeling that the Government are putting the onus on the individual rather than society. The most reverend Primate the Archbishop of Canterbury has written of,

“a quiet resurgence in the seductive language of ‘deserving’ and ‘undeserving’ poor”,

while the Government, I have to say even just now, seem to suggest that there is a “them and us”—taxpayers and the rest. I see it differently: we are all taxpayers, if only through VAT, and we are all potential recipients. Yes, the welfare state should reward work, but it must be there in times of crisis, where there is illness, unemployment or disability. It should be there for the vulnerable and it should be there to support families with young children, sharing the cost of the next generation throughout our life stages. We want to see a welfare system that is fair and straightforward, without the need for specialist help from hard-pressed Citizens Advice, especially with the threat to legal aid for welfare advice. We want a system that does the job, provides what is needed when it is needed and, yes, a system that is affordable. The Bill fails those tests. It is not fair or transparent, it does not help some of those most in need and it will not be affordable if it leads to homelessness, poverty, disincentives to save or family break-up.

I touch upon some of our concerns; first, childcare, especially in London, where it can cost £11,000 a year —perhaps a quarter higher than elsewhere. Childcare is key to whether parents are better off in or out of work, but in extending it to those working under 16 hours within the same fixed budget, there will be losers, with existing recipients getting less. On the savings cap, claimants will start losing universal credit with £6,000 in savings and will lose all of it with £16,000. While most claimants will never have such savings, this new rule will hit in-work families for the first time, as there is no such savings cap for tax credits. The savings cap undermines incentives to save, whether for a mortgage, tuition fees, social care or to top up one’s pension. The IFS has warned that the savings cap will give some families a strong incentive to lower their capital below £16,000.

Then there is the abolition of the discretionary Social Fund’s community care grants and crisis loans, devolving responsibility to local government, but without ring-fenced funding for cash-strapped councils—what the CABs have warned could be a return to the Poor Law. These safety nets—for cookers, beds, cots—help some of our most vulnerable in times of crisis, often as a result of family break-up. Family Action has warned that, for women setting up home after fleeing domestic violence, such financial support is precious to them and their children. Meanwhile, 22,000 people per year leave prison without accommodation. They need early help to prevent them falling into debt, with all the associated temptation to return to crime. As Sir Richard Tilt has said:

“The discretionary social fund has been the ultimate, final safety net for the poorest and most vulnerable”.

What will replace these half a million grants and 3 million loans? Food parcels instead of cash? A postcode lottery of handouts? Loan sharks instead of regulated grants? The Social Fund Commissioner has called for any replacement to be targeted at the most vulnerable, to be concentrated on one-off needs, to be fair and transparent, with national criteria, and to have an independent grievance process. So we ask the Government today: will they delay devolving responsibility until such a framework is in place?

I turn to housing. Londoners’ rent is already 50 per cent higher than the national average and 80 per cent of housing benefit recipients in private rented homes in central London face cuts in housing benefit. I have to tell the Minister that London landlords will not reduce their rents in response to this. There will be a flight from high-rent areas, regardless of the needs of the family or of children or, indeed, of the local economy; because who will do the jobs that they leave behind? Meanwhile, there are few jobs in low-rent areas. Westminster Council estimates that 5,000 households will be affected and,

“that a sizeable proportion … will need to move … Moving out of the borough is likely to be problematic for families with children at critical schooling points”,

which leads to the so-called underoccupation of social housing. Some 600,000 housing benefit claimants are deemed to need a one-bedroom property but only half that number of such properties exist. What if that family were helping to look after an ageing parent or perhaps were getting grandparent help themselves? How is this to be replaced if they are forced to move? Meanwhile, the household cap on benefit ignores variations in housing costs or, indeed, family size. The head of the Roman Catholic Church in England and Wales, the Archbishop of Westminster, identified these cuts as being likely to force thousands of poor families out of their homes. We know the likely effect of the changes to housing benefit, the underoccupation rule and the benefit cap because Eric Pickles’s private secretary helpfully told No. 10 about it, warning it that 40,000 families were likely to be made homeless. I remind the Government that even Dame Shirley Porter managed to move only 500 families when she tried her form of “social cleansing” from Westminster.

The £500 a week benefit cap will reduce the benefits of perhaps 50,000 families. This will hit carers as, unlike war widows, they will not be exempt. However, some carers will be forces’ wives whose injured husbands were fortunate enough to survive, but their carer’s allowance could go if they hit the cap. Will the Minister explain why the cap figure, mostly affecting families with three or four children in the south-east, has as its comparator the national average earnings for all families, including those with no children and those in low-wage areas? Furthermore, the comparator £26,000 income does not include child benefit, whereas the £26,000 cap does. Will the Minister agree to exempt child benefit from the new cap?

I believe that the change from DLA to the personal independence payment was probably aimed at improving the system, but—there are a lot of “buts”—it is taking place against a background of an arbitrary 20 per cent cut for some of our most vulnerable. There is as yet no decision on which rates of the daily living component of carer’s allowance will be due, but the words,

“those with the most intensive caring responsibilities”,

tend to suggest that other carers will be excluded. The qualifying period will be doubled from three to six months, but it is the first months of disability when one has lost a limb or is suffering from the effects of a stroke or serious illness when costs are highest and income falls as the ill or injured often give up work. Without PIP entitlement their carer similarly cannot qualify for carer’s allowance. The Minister suggested that he had heard concerns about the loss of mobility component for local authority-funded residents in care homes—I am not sure that he responded to them—which will make them virtual prisoners in what is, after all, their own home. How will they afford to go to weddings, funerals, shivas, christenings, bar mitzvahs, Eid prayers, the cinema, the pub, bingo or to shop for clothes without that mobility allowance? I recognise that Ministers have agreed to review this but with no terms of reference, no timetable, no involvement of disabled groups and no publication of the outcome. Will the Minister confirm what Maria Miller, the Parliamentary Under-Secretary of State for Disabled People, said:

“I can offer absolute reassurance to disabled people living in care homes … that this Government will not remove their ability to get out and about”.?

Cancer has been mentioned. We hope that the Government, particularly the Prime Minister, have now understood the concerns of Macmillan and have heard its three “asks”: first, that those on oral chemotherapy should get ESA without being reassessed; secondly, that support for cancer or stroke victims should kick in when their needs are greatest rather than having to wait six months; and, thirdly, that those taking more than 12 months to recover should not be penalised if they are not ready to return to work. After all, it is meant to be a contributory payment, often earned as a result of many years of contributions by today’s cancer sufferers. Without movement from the Government on this matter, someone’s health catastrophe will turn into a financial catastrophe.

The Bill is an assault on ambition. Without childcare support, how can parents return to work and proceed up the income ladder? The threatened cut in childcare, added to the reductions already made, will undermine the very purpose of the Bill, just as the savings cap will undermine incentives to save. This Bill is an assault on compassion. It risks watering down child poverty targets; it will force cancer patients into poverty or to seek work too early; and it risks trapping many disabled citizens in their care homes by the removal of mobility payments.

The Bill is still work in progress. It is not yet fit for purpose, yet your Lordships' House is being asked to scrutinise without the answers to some fundamental questions. We await details of the crucial element of making work pay: childcare. On PIP, the Government’s silence on the review of mobility payments has forced the Disability Alliance to launch a judicial review. The passporting of PIP to carer’s allowance will be decided only later this year. The loss of free school meals is perhaps the biggest cliff-edge disincentive to work and a blow to tackling child poverty. Council tax benefit will be localised, so its taper will be unrelated to the universal credit regime and it could vary across boroughs—a real postcode lottery.

The Bill is a leap in the dark for millions who rely on childcare to work, for the disabled and for the Government—for their IT project and their reputation—and because it appears to have no answer to the myriad questions that so worry the sick and the disabled. We support welfare to work, but for too many disabled and vulnerable people the question is: from welfare to where?

This is a bad Bill. We will seek to improve it to ensure that it becomes a better Bill, leading to a fair welfare system, rewarding effort and compassionate to those most in need.

15:47

[Lord German]

My Lords, your Lordships might expect me to take a slightly different tone about a Bill which has at its heart a universal benefits structure designed to help those who are trapped by no work and a dependency on benefits. Alongside the work programme, this is a transformational Bill—one where an alternative cannot wait. There are those who would argue that it is not an appropriate time because of the state of the economy to introduce such a Bill and to enact such changes. However, there is never a right time to make changes, but there is always a right time to ensure that better principles are put in place.

The DWP describes the current system in the documents that it has circulated as “Byzantine”. I reckon that that is a bit of an insult to Byzantium, which was, by comparison, a well ordered society. For example, there are currently seven different parts to the benefits and tax credits associated with disability. Each of those seven parts is paid at a different rate, has different qualifying conditions and is for different purposes. That is why I welcome the transformational elements of the Bill. We have a very complex system at present and we aim to make work always pay. Those are the Bill’s laudable objectives.

I congratulate the Minister on securing, at a time of great financial hardship, extra new money from the Treasury to ensure that universal credit is put in place. That is a real accomplishment in a tough economic climate. However, the question is whether the Bill provides an architecture that works, and will work for the future, to provide levers that can be pulled to improve the financial envelope as times get better.

As we change a complex system such as this, we need to be wary of two things. First, the end objective must never be forgotten. It is to reduce poverty, as the Minister said—he has given us the figures—and to increase hope and aspiration and to provide opportunity. We should not forget that those are the challenges at the basis of the Bill. Secondly, it is worth remembering that, in a complex structure, changing one part of a system could have negative effects on other parts of the system, and there are many places where that could happen. Shaping a system architecture that will stand the test of time, meet the demands of the modern economy and be a basis for a sound, compassionate and caring society is the challenge that we face.

One of the levers that I would like to see pulled as the economic system improves is the 65 per cent taper rate. That would make it even better for people to work and would be an even better challenge for them. People have suggested 60 per cent or 55 per cent—all very laudable objectives—and when the time is right that should be the first lever to be pulled.

The Bill covers a wide range of issues and touches so many individuals and families across the country. I do not recall the exact figure, but I think about 18 million people will be affected directly by the decisions that we make. It is rather like the most complex signal box that can be imagined, where you have 18 million people travelling on a journey, virtually all at the same time, with about 8.5 million places to which they can go.

A fundamental test of the Bill will be whether it can actually deliver the end goods. That is why I ask the Minister to reassure us about the technology, which is the biggest transformation of the IT system that any Government have seen and one that engages with the private sector payments structure in a way that has not been seen before. Will it really deliver the goods? Nothing could be worse for people than if they find at the end that they have not got the payments that they deserve.

Fundamentally, the Bill must support the broader, gender equality, children and family policies of the Government. That is a test that we will be making during the course of its passage through the House. Arising from that is one of the questions about the payments to households that my noble friend the Minister has already mentioned. I am grateful that he is considering this issue. One of the things that we did during the passage of the regulations on the local housing allowance was to extract a concession from the Government that they would seek to pay some tenants’ rent directly to the landlords. There will be circumstances in which rents should be paid directly. We made that commitment already once, and I hope that the Minister can assure us that that will happen in the future.

As well as looking forward to the Minister’s review of that issue, I look forward to the review of the mobility element. I believe that there is nothing wrong with the mobility element except that there may be some overlap. If there is overlap between two payments for the same thing, that should be eradicated, but we do not want to see that part of the measure lost altogether. That is why there is a need for the draft regulations, guidance and notes. I am grateful to the Minister for providing us with a great deal already, and I look forward during the scrutiny of the Bill to seeing far more.

One key issue at the heart of the family and gender equality issue must be that of childcare. I am glad to see that we will end the cliff-edge of the 16-hour working rule, which has bedevilled many people who could work for a few hours but no more. But we will need to find additional resource. The benefit of a universal credit and benefits system is that universally it becomes available to anyone without having to ask for it. There will be a bigger take-up from people who will have this element at their disposal. So far, we have had to make the current envelope of money stretch further. If we are now going to have to pay it to more people, we will need more money in the pot to make that happen. I would be grateful if the Minister could explain what he expects the additional gap to be between the current financial envelope for childcare and the extended financial envelope once universal credit is in place.

The Minister has confirmed that work will always pay, so the transitional support will be essential as well. My understanding is that “no cash losers” means that people will hold their cash benefit until it is overtaken by the increasing rate of benefit under the new system. I wonder whether there has been any modelling by the department on how long it will take for those “no cash losers” to become beneficiaries of the new system as the benefits increase.

It will be of no surprise to noble Lords that those of us on these Benches are very concerned about Clause 93(7), on the benefit cap. This is one of the examples of intended, or maybe unintended, consequences. It is clear that the clause has a sense of the vague about it. It just says that it is up to the Secretary of State to determine what the cap figure might be. Of course, I do not have any problem with the cap; the principle is fine, providing the cap fits. The problem is that the figure of £26,000 is taken as the median.

The latest data from the Family Resources Survey are as follows: the median income for households without children is £21,320 per annum; for households with children it is £30,680 per annum; and for all households the average is £27,300 per annum, whereas the Government have said £26,000. I would be grateful for an explanation from the Minister about where the figure of £26,000 has come from. What should be apparent from those figures is that £30,680 is the median income for households with children and yet we are likely to affect those families by some £3,380 if we take the £27,300 figure, which is in the Family Resources Survey data.

Of course, the differences between households are very varied across the country. Depending on where you live, there is a gap between the highest and the lowest of £12,000 per annum, which is an enormous gap between family incomes. If there is to be a move to allow people to move on to the new system, we need a cap which fits and one which is properly established and allows a period of transition. I hope that the Minister can confirm that that is his intention.

I move on to issues relating to council tax benefit and housing benefit. The Calman commission, which was the underpinning for the Scotland Bill which is before the House at the moment, says that social security benefits are the social glue which holds together a compassionate nation. I am an ardent supporter of devolution, as one might imagine, but is our social security system the one which should be universally available across all parts of our land, including Scotland, Wales, and Northern Ireland? If it is, you have to question the devolution proposal in the Bill, which is to local authorities in England, over whom this Government and this Parliament have some influence as regards the purposes for which that money might be spent. If these moneys are simply to be handed over, as the Bill suggests, to Wales and Scotland as part of the Barnett formula, for them to do with as they wish, they will have no obligations to the purposes of the Social Fund or council tax benefits, and this Government cannot insist upon them and neither can this Parliament. I believe that there is a fundamental point here about what holds our United Kingdom together. If you believe that these aspects of our system should be universally available across our country, the Government will have to find appropriate and perhaps alternative mechanisms—I might even suggest leaving them as they are.

A linked issue is the prospective changes to the housebuilding programme and household provision in our social housing sector. The new housing benefit regime outlined in the Bill presumes a change to the payments of households based upon the level of occupancy. Claimants who are in accommodation which is too large will have only three alternatives: first, to pay the extra above what the bill would be for a smaller property; secondly, to fill the spare space with a family member or a lodger; or, thirdly, to move either to the social housing sector elsewhere or into the private sector. However, housing associations have not geared up for this third choice. They have focused on providing two and three-bedroom properties. If the result of these changes is an increased demand on housing associations for smaller units of accommodation, they will need time to adjust. I would be grateful if the Minister would explain what modelling has been done on the changes to our housing stock for the social housing sector that will be needed as a result of the Bill.

I started by saying that this was a transformational Bill. The desired outcome is the lifting out of poverty of a significant proportion of our society. For me, that is an ambition worth pursuing. That is why I support the principles of the Bill: they are much needed. What we now need is to make the principles work.

16:00

[Baroness Hollins]

My Lords, there are winners and losers in life. Usually it is those who already have most who are the winners, perhaps because they are better able to advocate for themselves, and also because their needs are better understood in government. I am particularly concerned about two groups of disabled people who often lose out: people with learning disabilities and people with fluctuating mental health problems. I want to ensure that the welcome introduction of universal credit is adequately sensitive to their needs, and that they will gain from the changes.

Many mental health charities, including the Royal College of Psychiatrists, of which I am a past president, are concerned about a number of aspects of the Bill. It needs to be considered alongside other new legislation, the effects of which may be cumulative. I am thinking, for example, of the Localism Bill and the debate about housing tenancies. The Welfare Reform Bill has a heavy focus on increasing the use and severity of conditionality and sanctions. Mental health charities believe that this will be ineffective and potentially damaging for many people with mental health problems and learning disabilities. They fear that it could exacerbate the problems and have huge knock-on costs for health and social care services.

It is vital that mental health is a key consideration in the welfare reform process. Up to 40 per cent of all claimants are claiming primarily because of mental health problems. Many more experience mental health problems alongside physical illness or a disability such as a learning disability. The health and recovery of an individual must remain a focus when considering appropriate employment opportunities, because some work may be conducive to mental health and other work detrimental to it. The Bill proposes a one-year time limit on contributory employment and support allowance. However, this takes no account of the often complex issues that disabled people need to address in preparing for and finding work. The Disability Benefits Consortium makes a good case for the removal of the time limit. I understand that the Department for Work and Pensions has estimated that the vast majority of those on ESA and in the work-related activity group will take longer than a year to find work. Despite the Minister's introductory comments about people being able to move back on to universal credit quite easily, I remain unconvinced about the wisdom of the time limit.

I will explain my concerns further by giving two examples. The first concerns those with mild learning disabilities who achieve some independence from their parents and who, despite a lack of educational qualifications and limited literacy and numeracy, may be found fit for work and put in the work-related activity group. However, it is notoriously difficult for people with a learning disability to find work. Only 7 per cent of those known to social services are in employment. The paradoxical worry is that if they are found fit for work, they could lose their independence. This is a concern that I have had much correspondence about.

What about someone with a mental health problem? A person with a mental illness may be more likely to obtain employment after a period in the work-related activity group than a person with learning disabilities, but the recurring nature of their condition may make it harder for them to stay in employment. People with less severe mental impairments can often derive huge benefit from relatively minor financial assistance. Focusing resources only on those with the most substantial and tangible impairments may seem intuitively acceptable, but the risk is that many with less obvious or less severe impairments will lose benefits which have helped to prevent relapse or social deterioration.

Understanding the variable impact of fluctuating conditions in mental health is important when considering each individual’s eligibility for benefits. For example, one person with a mental health problem may find that for part of the time at work, their mood is low, that at other times they cannot concentrate or may be irritable, or that they may have to withdraw from their work setting to deal with auditory hallucinations. None of these experiences on their own may be severely incapacitating, but together they could be sufficient to affect their overall functioning in the workplace. There are real concerns about Jobcentre Plus and Atos assessing staff’s knowledge and understanding of mental health conditions. Can the Minister reassure the House that staff will have sufficient training in mental health?

More than 40 per cent of current decisions from the work capability assessment are being overturned on appeal. We could ask whether this is the fault of the appeals process or, perhaps more likely, of the original assessment? I appreciate the intent to remove benefits from people who are not genuine claimants, but reports are emerging of a lack of sensitivity for claimants with mental health problems, learning disabilities or autism when undergoing assessment for eligibility for benefits. Raising people’s employment aspirations now needs to be met with genuine opportunities for such individuals. This will require substantial efforts to address discrimination and stigma in recruitment and in the workplace.

You can imagine how difficult is it accurately to predict the sustainability of a work placement. Will the companies winning tenders to support individuals into employment, such as those that I have described, have a sustainability clause built into the contract? Without a commitment to sustainability, I think that the Government will find that this policy will prove to cost more in the longer term.

The Bill also looks to introduce regulations laying out how housing benefit costs can be integrated into the universal credit and how mortgage costs would be covered. Until recently, support for mortgage interest, the housing cost payment that people could receive under certain circumstances, enabled individuals with a learning disability, for example, to buy a property via the HOLD scheme—home ownership for people with long-term disabilities. Mencap is aware of around 1,000 people with a learning disability who have so far bought their homes through this route, but since last October this has in effect been closed down. I have brought to the attention of the Minister one case of a man with autism—there is no time to describe his circumstances—but the support for mortgage interest payment needs to continue to be available in the long term for those on income support or the equivalent under universal credit. I would welcome the Minister’s assurance that the regulations will address this.

I urge the Government to think very carefully about the impact of these proposed reforms on the wealth of some the most vulnerable in our society. My concern is upheld by the recent Institute of Fiscal Studies report which shows that the effects of the reforms will hit the poorest in society the most.

16:09

[The Lord Bishop of Leicester]

My Lords, it was Archbishop William Temple, one of Beveridge’s key associates, who first coined the term “welfare state”. He asked how one could justify an individual giving up some of his or her autonomy to the state. He contrasted the welfare state, in which Government gained legitimacy from their commitment to the welfare of the people, with the power state, epitomised by the fascist and communist totalitarianisms of his day.

These concerns remain in the minds of many today, not least those of the clergy of a diocese such as mine in Leicester and on the outer estates, who daily see desperate people turn up on their doorsteps. The church is the last resort when the inflexibilities of the welfare system have proved insurmountable. They know that many are often in the position of needing help not because of inadequacy, stupidity or fecklessness, but because they have made a mistake, lost their job, become ill or because they are children. They also know that, as the most reverend Primate the Archbishop of Canterbury said recently, it cannot be said often enough that most people in poverty—and we should be thinking of children in particular—have not chosen it. That is why the Church of England has strongly supported a just welfare system since its very beginnings as one of the key building blocks of a civilised society that cherishes mutuality at all levels and which sees each person as of equal worth.

We on these Benches recognise the principles behind this Bill: they reflect a desire on the part of the Secretary of State to see true welfare reform improving the lives of the most vulnerable children and families. We understand the department’s desire by means of universal credit to simplify a system that has become so complex that it is open to unintended mistakes and intended fraud. We endorse the principle that people’s well-being is more effectively enhanced when they are in work, but today we must put the question: how far do these reforms measure up to a national moral responsibility to ensure the well-being of the most vulnerable? In that sense, what is at stake here is the legitimacy of the state because well-being means more than cash benefits: it is about social inclusion, the bonds of strong communities under severe strain in the recent riots and the ability to live fulfilling lives.

My primary focus today as a bishop and a former chair of the Children’s Society will be on the effects on children who, by almost any measure, will be disproportionately affected by this Bill. We cannot go into a period of reform claiming to be all in this together while having our eyes closed to those who could be made homeless or could drop into the most severe poverty.

Let me raise, as other noble Lords have, some particular areas of concern. First, I underline what has been said about childcare costs. The Government want families with children to take responsibility for them by working their way out of poverty, yet it seems to me that these proposals will effectively make this impossible for many low-income families. Under the current system, the childcare element of working tax credit provides parents with support covering up to 70 per cent of eligible childcare costs up to a maximum of £175 for one child or £300 for two or more children. Significantly, because childcare costs are currently disregarded for the purposes of calculating entitlement to housing benefit and council tax benefit, some households receive help for up to 95.5 per cent of their childcare costs. The Government have presented a number of possible options outlining how to help with childcare costs, which will be integrated into the universal credit. We surely must have serious concerns that these options will leave working families facing substantial cuts to the help they receive for the childcare costs, leaving them worse off in work than under the current system. Can the Minister explain how he can guarantee that work pays for all families in view of the option to halve the current cap on eligible childcare costs?

Secondly, the proposed changes in support for disabled children will result in children with all but the most severe disabilities having their maximum level of support halved, leaving those families up to £1,400 per year worse off. Can the Minister help us clarify how the Government propose to support these families? Thirdly, there is the crucial issue of support for young carers. Sometimes the best intentions lead to perverse consequences, and the Children’s Society, which has developed specialised work with many young carers, has explained clearly that universal credit will substantially cut this support by up to £3,500 a year in some cases. It points out that this can be remedied by continuing to allow disabled parents who are child-dependent to receive support under the universal credit.

Finally, there is the effect of an overall cap on benefits entitlements and on how local housing allowance is calculated for out-of-work households. The Government have estimated that this cap will cost those families affected an average of £93 per week. The DCLG has suggested that the cap could lead to 20,000 families being made homeless. Furthermore, the Children’s Society has made it clear that the primary impact of this cap is not on adults but on children, with more than 200,000 of them affected. Can the Minister explain how this will help rebuild our communities and help people take responsibility for themselves and their children by getting back into work?

Time prevents the raising of other points today. We on these Benches have concerns about the aggregated effects of this legislation, taken alongside other changes to the National Health Service and to the legal aid system. The risk is that the reduction of financial deficit will threaten a huge social deficit, especially for the young. I hope this House will speak not just for the marginal people of so-called broken Britain but for the much greater numbers who fear the spectre of illness, unemployment and misfortune, who pay their taxes and rightly trust the state to prevent destitution. It is their voice, their fears, their understandable concerns that I hear regularly as a bishop and which I hope the Minister will attend to today.

16:16

[Lord Brooke of Sutton Mandeville]

My Lords, I congratulate my noble friend the Minister on the clarity with which he introduced and explained this remarkable measure, just as I thank his officials for the way that your Lordships’ House has been briefed throughout, including in their information packs. I welcome the noble Baroness, Lady Hayter of Kentish Town, to the Front Bench on this auspicious occasion and I congratulate her too on her own notable speech. Finally, it is a pleasure to follow the right reverend Prelate the Bishop of Leicester. It is not the first time I have followed him on a matter about which he knows much more than I do, but we share an affection for cricket and his county and mine are currently inextricably involved in the concluding matches of the County Championship, which is a happy bridge.

Now, nearly half a century of Back-Benchers have a handful of minutes each to analyse and also to celebrate the principle of a Bill whose complexities necessarily are legion and yet whose central purpose is the achievement of maximal simplicity. So here goes, and the thread of my speech will be the case of a single individual, our late immediate neighbour in rural Wiltshire. There is a symmetry to this spotlight because I also mentioned him in my maiden speech 10 years ago next month, to which I shall return shortly.

For the first five years we knew him, in the last decade of the last millennium, he was an agricultural labourer in a tied cottage on our mutual hill, working for another farmer neighbour. He had left school at 14 and was a true countryman, not just in terms of wildlife and country lore, but also in knowing the names of all the fields and precisely when they had changed hands down the centuries. When I entered some damsons at our village show, he quietly told me that they were not damsons but really rare plums, but I was not to worry as the judges would not know the difference. He was the oldest man in our hamlet to have been born there.

Disaster struck when he was 56 and was let go by his employer on grounds of disability at the shortest of notice. He came to us with all his affairs to help sort out what next he was due and how he would cope. The reason I alluded to him in my maiden speech, which was in a debate on financial services, was that 30 years earlier, on a loan to buy a car, he had been mis-sold insurance to protect him against unemployment, which he was still paying off. That was rapidly sorted out without my ever guessing that there were another, as we now know, £200 million of other such cases lurking in the financial woodwork.

Wrestling with pages and pages of material from a social security office 12 miles away revealed cruces of opaque ambiguity sufficient to perplex someone who had been a Treasury Minister and an inner-city MP, let alone a troubled man who had left school 42 years earlier. Happily, another neighbour brought in a public-spirited farmer from 25 miles away, acting for the Royal Agricultural Benevolent Institution, who sorted the benefits out as swiftly as I had sorted out the loan, and between us we were modest if unconscious forerunners of the big society. However, it all took a lot of time, and I can think of many of my former constituents who would have been defeated by a similar predicament to that which he faced. In our local case, the outcome was resources to help him in his disabled retirement, which were comfortable and reassuring. The principle of this Bill is to achieve the same result in a more streamlined and comprehensible way and, in the process, incidentally to create savings which can in the fullness of time be invested in public benefit.

Of course the battery of briefing we have received from outside honourable interested parties would make a colander of this instrument if all the concessions necessary for perfection were to be made. I appreciate that some will say that it is the wrong moment to try when financial resources are short, but we British are over-good at thinking of reasons for not doing something, the doctrine of unripe time being deep in our own DNA. Yet there is an obverse to that converse, since simplification will bring savings that in turn will bring nearer the time when we can afford the extra to do more. In the mean time, the Committee stage lies ahead of us for constructive ploughing. We shall not enjoy the sad dilemmas we are going to be told about, but I hope that we can treat as our watchword—as I sought to do when our neighbour was in the toils—that which the late noble kinsman of the noble Viscount, Lord Slim, who was here earlier, sagely repeated again and again in his remarkable Fourteenth Army tome, Defeat into Victory, that no news is ever as good or as bad as it first appears.

I would like to ask my noble friend the Minister to expand in his wind-up—in this respect I am following my noble friend Lord German—on the plusses and minuses of the computer scenario in support of this legislation. I chaired the government working party planning the government data network back in the 1980s, and I appointed the man who was Oflot to choose the architects and contractors of the National Lottery. I was always sorry that his initials were not AER, as he could have become Aeroflot. I remark on the bonus that we derived from the fact that the man we chose to lead the building of the government data network was later chosen by Oflot, with zero involvement of myself, to build the lottery, so we had the advantage of his having been through the previous experience. I am not pressing my noble friend for more than an update, but I think that your Lordships’ House will be the beneficiary if he were to do so. In the mean time, I shall not seek to be a barometer of his progress or of the legislative process, always remembering the moment when Anthony Eden’s father, an irascible rural baronet, came down to breakfast one morning when it was sheeting with rain outside, tapped the barometer which was set at “very fair”, and threw it through the French windows with the words, “Go out and see for your something self”.

Finally, I return to our neighbour, who in due course went into hospital and into sheltered accommodation, where we continued to visit him until he died. His tied cottage’s status was properly liquidated and its site value on the top of the hill went for nearly £300,000, which I hope my noble friend the Minister can regard as a happy omen. My one regret is that he did not live long enough to hear this modest narrative about him. Of course this Bill warrants profound scrutiny, but its principle also deserves our thorough support.

16:23

[Baroness Hollis of Heigham]

My Lords, I very much support the principle of universal credit. It was put in the “too difficult” box when I was a Minister and I think we can all see why. The benefit system was built in the Beveridge world where, as long as the man held on to his full-time job and his wife held on to him, the family was insured. To his contributory benefits were added, over time, category benefits for disabled people or children; means-tested benefits for emerging groups such as lone parents or emerging needs such as housing benefit; and, more recently, the different structure of tax credits.

The result is that most benefits and credits have different income thresholds, different taper rates, different back-dating rules, different eligibility criteria, different linking rules, different passporting arrangements, different savings caps and different payment patterns. Not surprisingly, therefore, we have error, fraud, underclaiming and overlapping built into the system, to say nothing of complexity, confusion and high administrative cost. The result is that it is a full-time job being poor. We need a robust, easily understood structure that reduces the risk while increasing the reward of working as the most effective route out of poverty. I am hoping that the universal credit will deliver this.

The issue is not the unemployed, three-quarters of whom are back in work within a year, but the economically inactive—the lone parents, people with some disability—who linger far too long on benefit. Will universal credit make it easy for them to work? You need self-confidence, resilience and a modest cushion of security to afford risk. Most lone parents and many disabled people quite sensibly prefer the security of a guaranteed low benefit income to the risk and uncertainty of somewhat higher wages should either their job or their health fold, which would then require an exhausting struggle to get back on to benefit while only two tins of baked beans remain in the cupboard. We must reduce risk. We do not need to whip people back into work. That is a complete fabrication. We need to strengthen their confidence to risk work and to seek it by removing the penalty for failure. I believe that universal credit can do this.

Obviously, we must make work worth while. Any work must pay, not as now when so many lone parents find that working between three hours and 16 hours on minimum wage loses every pound—even though a 10-hour job cleaning caravans, picking mushrooms or working in the launderette may be just what she and a would-be employer want. Beveridge’s world of either “work and wages” or “not in work and contributory insurance benefits” has now become one where many people much of the time, and most women most of the time, will need both work and benefits—dials, not dichotomies. Again, universal credit’s structure can do this for us.

I very much support the concept of UC. Like the noble Lord, Lord Brooke, I thank the Minister particularly for the care that he has taken in his seminars and his briefing papers. In best “Yes Minister” style, I congratulate him on his bravery, as well as his tenacity, in bringing it this far. It needs doing—it really does. We must reduce the risk as well as increase the reward for work by simplifying and recasting the structure. But, and alas it is a big “but”—this reinforces the point made by my noble friend Lady Hayter, in her admirable speech—the architecture is being undermined by the cuts agenda and we risk UC failing.

I shall give some examples. First, as regards second earners, we know that in one-third of poor families he is in work and she is not. Her second wage could lift them all out of poverty and, in a world of increasing flexibility and part-time jobs, it is misguided to use UC to get him to work even longer hours, which are probably not available, or to discourage her from work because UC has higher deduction rates for second earners. It is not sensible. It keeps them in poverty. It does not fit the labour market and discourages a better work-life balance between them. UC needs to follow the choices, not constrict them. Incidentally, any lone parent in part-time work who repartners is relegated to second-earner status and loses money. Either she will not declare it, which is fraud territory, or she will not repartner and her lone-parent status continues. It is not sensible.

A point on childcare has been made by several noble Lords. Helping more people is good but, within a cut or a capped budget, those working longer hours will find that their work is unaffordable. I accept that the cost of childcare presents a huge problem to the department but the Government’s proposals undermine the incentive for full-time work. That is undeniable.

As regards the changes to housing benefit, HB must be regularly reconnected to the 30th percentile of market rents because rents are rising far faster than CPI. I care particularly about the shared room rent housing benefit. A woman of 33 living in a one-bed flat who loses her job will potentially lose her home. It will double her stress as she spends time looking for a room which is safe, rather than searching for a job, which she needs. That, too, cannot be sensible.

Let us take savings, which several people have mentioned. Today, you lose JSA if you have savings over £16,000. With tax credits there is a notional income instead from your savings and no cap. With UC, the Government are going for the lowest common denominator, as in so many fields. If you are new to part-time work, you will get no help from UC until your savings have been run down to £16,000, and probably lower than that. So why save? Instead of savings giving you resilience and protection against risk, we have made saving itself risky—the exact opposite of what we are rightly doing with pensions. That is not sensible either.

ESA is to be means-tested after a year—not just on a man’s income and savings, but on that of his wife, who perhaps is a part-time carer and part-time worker. What would noble Lords do, if they were her? You would either cut your hours or drop out of work altogether, rather than see his benefit withdrawn. Then, you would both enter retirement the poorer. We have increased the risk of her not working, which is the reverse of what UC intends. That is the trouble with a household means test for UC. It makes entirely good sense for the young, unemployed couple on HB but, if a member of the household becomes disabled, after a year financial support for him is almost literally paid for by other working members of his family. That can destroy families, which no one wants.

Finally, there is the helpful input of the DCLG, requiring social landlords to fund the new building programme by increasing rents substantially, thus probably adding £2 billion to the DWP’s housing benefit bill. At the same time, the DCLG is undermining the work incentive by pushing out better-off tenants. We have increased rents, increased insecurity, reduced work incentives and a higher HB bill—really helpful of the DCLG—and then it is a complete idiocy for it to localise and cut council tax benefit, undermining universal credit rules. It sends an Exocet through UC. With friends like the DCLG, who needs an Opposition? I suggest that the Minister explores a useful trade-off—that he drops the benefit cap, which the DCLG and most of us do not want; and the DCLG in return drops the localising of council tax, which the DWP and no one wants. The Minister would have the better bargain.

I want UC to work, but unless we can rectify these issues in Committee, we will have badly damaged the two drivers behind UC: removing the risk and increasing the reward of working. Then we will be back exactly where we are now.

16:33

[Baroness Thomas of Winchester]

My Lords, I begin by saluting my noble friend Lord Freud and his colleagues, who have been determined to take the issue of making work pay for benefit claimants out of the “too difficult” in-tray and to create the universal credit, which is the engine driving the rest of this seven-part welfare reform train. To mix my metaphors, I just hope that the ship will not be spoilt for a ha’p’orth of tar and that some crucial matters will be addressed, such as childcare and children’s disability additions.

In view of the number of speakers in today’s debate, I shall concentrate on the personal independence payment, although I would like to have touched on the time limiting of ESA and the benefit cap, two matters about which I have profound concerns. Turning to PIP, as I shall call it, I do not intend to say anything at this stage about those in residential homes because we know that there is to be an internal review. In general, to say that many thousands of disabled people are fearful about the replacement of DLA with a new and supposedly better targeted benefit would be the understatement of the year. This is not surprising given the Government’s stated aim of wanting to save £1.45 billion in DLA/PIP expenditure by 2014-15.

I have been as critical as anyone about the process for claiming DLA, which involves the completion of a long self-assessment form—here I declare an interest because I receive the benefit. Although supporting reports from a doctor or consultant are supposed to be taken into consideration, they often seem to be ignored—I can give chapter and verse on that. The Government believe that the cumbersome process of self-assessment has meant that a great many people who should not be receiving the benefit are managing to claim it. However, I do not believe that anyone knows the true position, which presumably is why the Government want to reassess everyone. What we do know is that the vast majority of people who receive DLA find that it has made all the difference to how they live their lives, and I think that the Government are in danger of overstating the negative aspects of DLA. The form certainly needs to be overhauled and I am in favour of more face-to-face assessments, as long as they are undertaken by well-qualified and sympathetic people.

What is more than a bit chilling is, in the Government’s own phrase, that PIP is to be “better targeted”. That has the ring of means-testing about it, which we know is not the case. It also smacks of having a rather crude pecking order of disability, which could mean that people who genuinely need the benefit will be excluded. If we are living longer and more independently with our disabilities—hurrah for that—it is inevitable that spending on disability benefits will rise. DLA started in 1992 for in-work as well as out-of-work claimants, so year by year more people will be eligible as more disabled people live beyond retirement who started claiming well before retirement. There is no question that fraud, or even semi-fraud by people overstating their incapacity, is completely unacceptable and must be rooted out, but I fear that in future too many genuinely disabled people are likely to fall through the net because of the narrower criteria for PIP.

The crucial details of the scheme will be in the regulations, which I believe will be available in draft in October, but we know that the assessment,

“will take some account of aids and adaptations that an individual uses in their everyday activities”.

I find the whole question of aids, appliances and adaptations in relation to PIP puzzling. If you use an aid of any kind, does it mean that you do not need any extra funds to help you live your life? While you may have adapted to your situation by having, say, a manual wheelchair to get about, you cannot wheel yourself for miles—although perhaps the noble Baroness, Lady Grey-Thompson, can—and you might still need to lease a Motability car to which you are entitled using your higher rate mobility component, or you may need the money for adapted taxis. Many trains are still not fully accessible to wheelchair users and will not be so for many years. Underground stations are inaccessible, as are many other train stations throughout the country. As for buses, the service is so hit and miss that it has to be discounted. I know there are many adaptations which have nothing to do with mobility, such as hearing aids and guide dogs, but I shall concentrate on mobility aids because I know that there is a view that some manual wheelchair users may not get PIP, and because I know that the new rules for the work capability assessment are able to take mobility aids into account—quite misguidedly, I think, because of the lack of facilities for disabled people in many workplaces. I should be interested to hear why the aids, appliances and adaptations a disabled person uses might disqualify them from receiving PIP.

On assessments, I fear I may part company slightly from some of the disability organisations that have briefed us. Of course, it is vitally important to the DWP to use the social model of disability in its assessments, which, quite rightly, means that disabled people are not defined by their disability but assessed by how they live their lives. However, I also think there is a place for a person’s medical condition to be acknowledged during the assessment. For example, one of the characteristics of muscular dystrophy is tiredness, particularly towards the end of the day; another very different disability with distinctive characteristics is autism, which could be mistaken for an unco-operative attitude during an assessment. If medical experts write reports drawing attention to the particular characteristics of certain conditions, those should be taken fully into consideration during an assessment. I do not think contracts have yet been awarded to a company to carry out the assessments, but some recent reports of current DLA assessments are not encouraging. The Muscular Dystrophy Campaign has told me that, in the last month, 43 per cent of all advocacy cases that it received were about unfair DLA decisions, which are having to be appealed. I am not speaking at this point about the WCA—the two assessments are quite different, although a lot of people think there is a read-across.

Finally, I urge the Government to consider two other matters. First, PIP should be available in certain circumstances to those who become disabled after the age of 65, for example as the result of amputation. Secondly, PIP should be granted after three months rather than six. Many people suffer from sudden-onset disability, and making them wait for six months before financial help is available is simply not justified. I hope an amendment along these lines can be agreed.

I am grateful that PIP will still be a non-means-tested and non-taxable benefit. I know the Government are still listening to our concerns and that the Minister is as good a listener as anyone. I look forward to the future stages of the Bill.

16:43

[Lord Rix]

My Lords, it is important for the Government to recognise that any reform of the welfare system and tackling of the deficit should not be at the cost of undermining the ability of disabled people to live independently. The concerns I will refer to during my speech will be applicable to many disabled people but particularly to those with a learning disability, and I think at this moment it is appropriate to mention that I am the president of the Royal Mencap Society.

I intend to focus my comments on the Government’s proposals to replace working-age disability living allowance with the personal independent payment. The Government have declared that PIP will remain a benefit to support,

“the extra costs of overcoming the barriers faced by disabled people to leading full, active and independent lives”.

However, I and many disabled people fear that this most welcome announcement may be somewhat economical with the truth. Prior to the decision to reform DLA, your Lordships may recall that there was an announcement in the June 2010 Budget that the Government intended to make significant savings on future spending on the benefit of some 20 per cent. George Orwell’s gloomy prediction in 1984 may be true after all:

“‘Doublethink’ means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them”.

In February 2010, Mencap published the findings of a survey it conducted, which asked people with a learning disability how they use the DLA and the difference it made to their lives. Some 84 per cent of nearly 1,000 respondents spent some or all of their DLA on paying for various forms of care and support, including help around the home and support for leisure activities and transport needs. Seventy-one per cent of all respondents also said that DLA made a huge difference to their lives in providing them with the support they needed.

The tightening of eligibility criteria for social care means that many people with a learning disability who currently claim DLA receive no support from their local social services—a situation that is getting worse as even more local authorities decide to reduce the numbers eligible for support. My particular concern is for those people who may be hit twice, missing the threshold for social care and potentially losing eligibility for PIP at the same time.

The Government have also stated they will focus on those with the greatest need, which on the face of it seems perfectly laudable and a worthy intention. However, as I wrote to the Prime Minister on 24 June:

“The Government’s focus on those disabled people with the greatest need also risks excluding many disabled people who still face additional costs associated with their disability. People accessing the lowest rates of DLA are often unlikely to be able to access support elsewhere, and cuts to these groups could remove vital preventative support. In the long term, this could lead to increased pressures on both social care and NHS budgets”.

Although the figures remain unclear, Disability Alliance UK has estimated that over 750,000 disabled people could lose support as a result of the 20 per cent cut in expenditure, based on the assumption that care support for the lower rate will be abolished.

Yesterday, when I asked the Minister what lessons the Government intend to learn from the work capability assessment for PIP, he responded that the Government,

“expect to make sure that the personal independence payment is focused on the needs of the individual”,

and that:

“The assessment is much more appropriate than the DLA assessment, which is, frankly, subjective and inconsistent”.—[Official Report, 12/9/11; col. 504.]

I trust that the PIP assessment will be better, for the work capability assessment has already proven to show disadvantage towards less apparent or hidden disabilities, particularly for people with a mild or moderate learning disability, whereby the level of help and support they need for day-to-day living can be difficult to determine.

However, like many other noble Lords, my principal concern with this Bill is the proposal to remove the mobility component of the PIP from those people living in local authority-funded residential care. While the Government’s announcement that they intend to delay the implementation of this policy until March 2013 is a step in the right direction, I do not feel it goes anywhere near far enough. Under Clause 83—which I and others, I am sure, wish to see amended—disabled people living in residential care could have their mobility payments taken away. As regards the way in which mobility needs in residential care homes are met, the Government claim that the rationale for removing PIP mobility is,

“to identify and remove any overlaps”.—[Official Report, Commons, 24/5/11; col. 7P.]

However, evidence shows that very little duplication exists, and removal of this benefit would severely undermine the Government’s aim to support disabled people to lead full and independent lives.

I am also concerned about the Government’s review of this decision. At the publication of the Bill, the Government announced their intention to,

“review the support given by DLA against the responsibilities of care homes, and reflect the outcomes from this review in the PIP eligibility criteria for people in residential care homes”.

However, while this may seem welcome, your Lordships should be aware this is an internal review, with no terms of reference, no call for evidence, no sessions in public and no opportunities for the public and interested parties to submit evidence. The Government have also announced that their findings will not be published in public and there is no publicly available information about the review and its remit. I fear that the era of open, transparent and accountable government in the heart of Whitehall is still in Never Never Land. Fortunately, my noble friend Lord Low is conducting his own independent review into this proposal, with the secretariat provided by Mencap and Leonard Cheshire Disability. No doubt the noble Lord will explain all this later, and I trust the Government will consider the Low review constructive and helpful as we attempt to make progress with Ministers on this issue.

While there are many other areas of the Bill on which I could have expressed my concerns, including housing benefit reforms, I am going to finish—especially as my voice is going. However, I am sure that your Lordships will refer to some of these during your speeches. It is clear that as matters stand, unintended consequences of the Bill could have severe implications on the quality of life for many disabled people in this country. I therefore urge Ministers to listen to these concerns and, of course, to respond accordingly.

16:50

[Lord Mackay of Clashfern]

My Lords, I have great admiration for the Secretary of State and his Ministers, not least for my noble friend who is the Minister in this House. I am delighted that they have tackled the difficulties of the welfare system and glad that, in principle, the noble Baroness, Lady Hollis of Heigham, who has great expertise in this matter, has embraced that principle. However, there are of course many details in the application of that principle which demonstrate why it may have been wise in her day to have it in the “too difficult” section.

I intend to speak about a matter that is only marginally connected with the Bill. It depends primarily upon inherited legislation. My right honourable friend the Prime Minister recently roundly criticised people who were non-resident parents—he referred to them as “runaway dads”—and who simply refuse to face up to their responsibilities to their children, leaving single parents who, as the Prime Minister acknowledged,

“do a heroic job against all odds”,

to manage alone. Their plight is not new. In my early years as Lord Chancellor, now rather a long time ago, I received many calls for help from mothers who had court orders for maintenance for their children but could not enforce those orders because they could not find the defendants.

Eventually, in association with my noble friend Lord Newton of Braintree, legislation was introduced and passed as the Child Support Act 1991, which set up the Child Support Agency. Sadly, it did not perform well. After the change of Government, I happened to be travelling with Alistair Darling, whom I regard very much as a friend. He said that the formula which we were using was too complicated and that it would work better with a simpler formula. Over the years, successive Secretaries of State have tried to improve the performance of this vital service. My understanding of the present Government’s policy, as exemplified by Clauses 131 to 133 and inherited legislation in force, is that demand for this vital service should be reduced and that, to this end, charges should be made on those who resort to the service—both initially and if they use the collection system.

I am entirely in favour of parents who have encountered difficulty in their relationships, for whatever reason, trying really hard to resolve the maintenance of their children amicably. Any support that the Government can make available to that end is to be welcomed. Sadly, there is a hard core of parents who will do everything that they can to avoid their liability. It is for those who are left with the care of the children that this service is essential, as the department's research itself shows. Where the absent parent is traced, I am all in favour of his having to pay for the consequences of his attempt to evade his responsibility but I cannot see any fairness whatever in charging the parent who has been left in the lurch for that service. In view of the Prime Minister's speech and its tone, I take it that he agrees with this view.

Debating the Bill will give us an opportunity to bring in amendments which deal with this, but I cannot see that the present policy is fair to the parent left with the responsibility. For that reason I hope that we will have an opportunity of reviewing this matter in Committee, because, of course, the idea of charging is not exactly new. We have to deal with something that is, to a certain extent, already legislated for.

16:56

[Baroness Morgan of Drefelin]

My Lords, like many in this House, I, too, support welfare reform. I accept that it is very difficult indeed and I am keen, like others today, to do what I can to promote an important debate on the Bill and to ensure that, following the passage of the Bill, there are no unintended adverse consequences for the quality of life of those that it seeks to serve. In particular, like the noble Baronesses, Lady Hollins, Lady Hayter of Kentish Town, and Lady Hollis of Heigham, and, of course, the noble Lord, Lord Patel, in his very important letter in the Times yesterday, I am very concerned about the intention to introduce a one-year time limit on contributory employment and support allowance for those in the work-related activity group and the proposed increase to a six-month qualification period for the personal independence payment, alongside an additional six-month prospective test, which is, of course, as we know, an increase on the three-month qualification period for DLA. For the record, I declare an interest as chief executive of the research charity Breast Cancer Campaign and, like many here, I have a very strong personal interest, as a carer myself, in the welfare of cancer patients.

When considered together, the introduction of a time limit on contributory ESA alongside the six-month qualification period for personal independence payment seems almost to create the perception that there is, perhaps, only a brief window of time in which disabled people not in the very tightly-drawn support group require support. This, I believe, is very far from reality. These are two vital benefits with the time limits or the requirements being either introduced or becoming more significant at different ends, time limits for which it is hard to comprehend the rationale and where there appears to be limited understanding of the implications.

On looking at the limit on contributory employment and support allowance, the Minister has said that he believes it is not appropriate for employment and support allowance to be a long-term benefit for those in the work-related activity group. As the replacement for incapacity benefit, it was intended to be so only for the most severely ill or disabled people placed in the support group, for whom work is not a viable option. I question the premise that everyone in the work-related group should be assumed after only a year either to have found employment or no longer to be in need of support. I question the premise that it is appropriate to move ESA for these people towards the approach taken to jobseeker’s allowance. I do not accept that this was the settled intention at the time when the benefit was introduced. We have to remember that access to the support group is very tightly-drawn indeed. Had it been clear when the support group was identified that this would be the endgame, there would have been great deal of distress at the time.

As we have already heard from noble Lords in all parts of the House, Macmillan has done an excellent job in setting out the barriers which people with cancer face and which impact on their ability to return to work, although, of course, many try very hard to do so. The physical and psychological effects of cancer and its treatment are well known in this House and include pain, fatigue, often nausea and fever as well as all the additional costs involved in living with cancer, such as the costs involved with treatment, attending hospital, parking, which is expensive, and transport to attend hospital to undergo radiotherapy. These costs are all well understood by noble Lords. The majority of cancer patients need continuing support beyond a year, so who will miss out in the future? Macmillan Cancer Support has said that 75 per cent of people with cancer need the support provided by ESA for longer than 12 months and that a cancer patient could lose their employment and support allowance benefit when it becomes means tested if their partner earns more than £7,500 a year. These are very worrying points.

In addition, the initial qualifying period will increase from three months under disability living allowance—many noble Lords have touched on this—to six months under the personal independence payment scheme. Are we saying to people that they will not be considered sufficiently in need of help with the extra costs arising from disability to qualify for the personal independence payment within the first six months of the need arising despite there also being a requirement to meet a six-month prospective test? What is the purpose of extending this qualifying period from three months for DLA to six months for PIP? The Government have not been very clear about that, although I will read the Minister’s speech very carefully. The Government have suggested that the rationale behind extending this six-month wait is to bring eligibility in line with the long-term definition of “disability” under the Equality Act 2010. However, if we look at the definition of “disability” under the Act and the subsequent regulations, this justification does not stand up. While it is the case that for the majority of disabled people covered by the definition of “disability” in the Act there is a need to meet a long-term test, paragraph 6 of Schedule 1 to the Act, headed “Certain Medical Conditions”, states:

“Cancer, HIV infection and multiple sclerosis are each a disability”.

That is a strict definition. This provision by which people with cancer are automatically deemed disabled in accordance with the Act is confirmed in the guidance to the Act as well. That guidance states:

“The Act states that a person who has cancer, HIV infection or multiple sclerosis (MS) is a disabled person. This means that the person is protected by the Act effectively from the point of diagnosis”.

Therefore, if the Government intend to align their provision with that in the Equality Act, this is a very poor point of comparison.

Will the Government review the eligibility for PIP for people with cancer and other sudden onset conditions? If there must be a qualifying period, at the least a move towards a three-month initial qualifying period followed by a nine-month prospective test seems more humane and more people focused. As the Minister said in his eloquent opening remarks, our aim should be to focus less on arbitrary process.

Finally, I wish to raise a concern that has been raised with me by CLIC Sargent about the impact of the disability living allowance reform on 16 to 18 year-olds. We must not lose sight of the needs of young people in this age group with cancer. Can it be right that young people in this age group are being treated as adults in the move to the personal independence payment? We need to remember that DLA is at present the only benefit available to young people with a health condition such as cancer, whatever their situation. They, of course, are much less likely to have the financial independence that adults may have. I hope that the Government will think very carefully about reviewing the position of young people with cancer.

Like the noble Lord, Lord Rix, I have many concerns about a whole host of issues covered by the Bill. I look forward very much to working with others in Committee to improve the Bill.

17:05

[Baroness Tyler of Enfield]

My Lords, I support many of the objectives of the Bill, in particular the Government’s stated aim of simplifying the current, highly complex welfare benefits system and increasing fairness within it. I fully accept that for most people work is the best route out of poverty and that work must pay and be seen to pay. Therefore, I welcome the simplification of the system that will result from the introduction of universal credit and congratulate Ministers on the progress that they have made so far.

That said, I have a number of serious concerns about the impact on families and children of the changes to the benefits system, particularly the hardship that they will create for some of the neediest and most vulnerable. As with any changes to a hugely complex system, some of the consequences may be unintended, but—from my reading of the Bill—others are part of the policy intent. For this reform package to achieve widespread support it must both look and feel fair. I want to highlight, therefore, some areas which I think are socially unjust and seem to fly in the face of the Government’s other commitments to be family-friendly, to reduce child poverty, to tackle intergenerational disadvantage by early intervention and to promote social mobility.

There are many areas that I should like to talk about but in the limited time available I shall focus primarily on the impact of the benefit cap on children and families. This policy is designed to ensure that a household on benefits does not receive more income than the average working household. I understand the arguments for this, including the importance of creating incentives for work and promoting fairness between those in work and those receiving benefits, as well as the need to reduce the rapidly growing benefits bill. As we have already heard, the cap on benefits for out-of-work households is expected to be set at around £500 per week per household for couples and lone parents. The Government estimate that approximately 50,000 households will be affected by the cap, losing some £93 per week on average in benefits.

At the level at which the cap is currently set, there are serious risks in the policy which may not be properly understood and which have so far received too little public debate. What are the facts and figures? Of the 50,000 households whose benefits will be reduced by the policy, the majority will be families with children—often large numbers of children—and those who live in areas where housing costs are high. The Children’s Society, whose work is highly respected, recently estimated that the number of children affected could be more than 200,000, and that 80,000 children could be made homeless. Thus the cap will have a disproportionate impact on children. How can this be fair?

It is instructive to look at the nature of the households most likely to be affected. Broadly speaking, they are one-third couples and two-thirds single women—generally single mothers. Ninety per cent have children and 60 per cent will have more than four children. What type of communities will be most affected? Certainly, people living in places such as London, where housing is more expensive, will be affected, as will some religious and ethnic groups, as they tend to have larger families, and people in private rented accommodation. What is likely to happen as a result of the cap being set at this level? Families will be far more likely to have to move abruptly to cheaper areas, which risks children having to move school, possibly in the middle of the year, thereby disrupting their education and their current support networks. Families could end up splitting up—they may indeed decide to create two households instead of one, as both parents would then be entitled to up to £26,000 in benefits.

Two groups yet to be mentioned are foster carers, who perform such a socially valuable and vital role, and kinship carers, who might be an aunt or an uncle taking in a child from another member of the family to avoid the child having to go into care, with all the trauma and expense for the state that that creates. These people, too, may be disadvantaged. I understand that the Government are planning to make special provision for foster carers to recognise their unique role, and I look forward to hearing the details from my noble friend the Minister, particularly in relation to housing costs.

Families who can will continue to pay their rent, of course, but they will have less money to spend on food, clothes and other essential items. Families who will not be able to pay the rent may be evicted and become homeless. Children are a priority group for council housing, so that will lead to pressure on temporary accommodation. There is also a very real danger of at-risk children simply disappearing from the scene. That, as we all know, has real child protection and safeguarding issues. I would very much welcome hearing from Ministers what plans the Government have to ensure that that does not happen and that we do not have another tragedy as a result.

Finally, there will be a reduction in mixed communities, as poorer families are moved out of expensive areas. That is particularly likely to be the case in London. That may lead to social segregation between the rich and the poor which would be worrying in terms of social cohesion and pressures on public services in some poorer areas.

In summary, the cap as currently set impacts disproportionately on children, large families, women and various black and ethnic minorities. The last two groups, as we have already heard, are already having a tough time in a tough jobs market. A little discussed fact that has not been raised so far is that the benefit cap will affect couples substantially more than lone parents. Indeed it could damage incentives to enter into new relationships—for example, for two new lone parents thinking of living together and setting up a household—and it could risk breaking up families, a matter very close to my heart as chief executive of the charity Relate, which is a declared interest, and to the heart of the Government. Surely this couple penalty is an unintended consequence of these reforms. I welcome hearing the Minister's response on that point.

Like others, I am deeply concerned about the reduction in financial support to an estimated 100,000 disabled children under the universal credit, to young carers where a child is trying to look after a sick or disabled parent and the proposed reduction in support for childcare. There is no time for me to go into any detail. I would simply say, as other noble Lords have said, that support with childcare is a hugely important issue, particularly for those on benefits who need to enter the jobs market at this difficult time.

There are a number of ways in which we can mitigate some of the concerns that I have highlighted in relation to the benefit cap, particularly the level at which it is set. Those would include calculating the figure using average earnings of families with two or more children, various grace periods and transitional arrangements, perhaps linking the cap to levels of conditionality set out in the work-related requirements of the Bill and perhaps exempting certain benefits from the calculation of the cap. I look forward to hearing my noble friend's response to these points.

17:13

[Baroness Campbell of Surbiton]

My Lords, we have a mighty task on our hands. I apologise for not staying for the marathon of this debate and I thank the House, and especially the Minister, for letting me go home to bed early.

None of us are in any doubt that the welfare system is in need of reform, but we must do it with care. We have to do it with wisdom and, more importantly, reliable information—people’s human rights depend on it. It is my greatest hope that this noble House will do its very best to scrutinise and amend the Bill away from ill considered political demands and media pressure.

The Minister, the noble Lord, Lord Freud, has definitely demonstrated his desire to create a welfare system that enables all kinds of people to live with dignity and make their contributions to society. I believe that he wants a fairer, simplified system, which motivates more disabled people to take paid work and be active citizens. I am grateful that he has fought hard to taper benefits and to negotiate with the Treasury not to reduce the budget, especially that for access to work. Unfortunately, I fear he might have been less successful in his work on DLA, which is the area of the Bill that I will concentrate on today and in even more detail in Committee.

I should declare an interest as a DLA recipient. During the past 30 years, DLA, which in the olden days was called attendance allowance and mobility allowance, has enabled me to pass many milestones. Without it I would not have attended university. I used it to pay the cleaner to get me up in the morning and to put me to bed at night. That was the only allowance I had. I used it to get a job and to stop living with my parents—in short, to live independently. Along with millions of other disabled people, I will be affected by this Bill. The allowance was given to me for life and I am about to have my assessments again—I already have 25 other assessments. That is something to look forward to.

If disabled people are to be independent and take on responsibilities like work, they must be given an equal playing field. Equality legislation alone will not provide this. Providing financial support to disabled people to be equal citizens has been a fundamental principle demanded from successive Governments over my lifespan. It has lifted us from being passive recipients of care and welfare to independent people with life opportunities. It is a cultural shift that has resulted in fulfilling relationships, education, work and greater happiness for millions of British citizens.

Something must be desperately wrong to cause these same citizens to write so many letters and e-mails to Members of this House, begging us—yes, begging us—to reconsider the proposed replacing of DLA with personal independence payments. We reform to make people's lives better. So are they right to feel so scared? To be honest, I still do not know. There is so little detail regarding this reform.

Last week, I joined colleagues on the Joint Committee on Human Rights for a visit to Essex Coalition of Disabled People. The visit was part of our inquiry into independent living for disabled people, which will provide a good measure for this reform.

At this point, Baroness Grey-Thompson continued the speech for Baroness Campbell of Surbiton.

ECDP is a large, regional, disabled membership organisation, a centre for independent living. It has a remarkable record of involving and listening to large numbers of disabled people. It tailors its services to respond to the needs, wishes and experiences of those disabled people. One if its members, Hazel, was able to give the JCHR insight into the fears produced by the changes proposed in this Bill.

Hazel described her life as funded by a fragile construction of different benefits, a personal budget and voluntary support. She believes she is in danger of losing her higher rate DLA under the new proposals. She told us, “My life is like a house of straws. Once you remove one tiny straw, the house collapses. It's taken me years to feel independent and in control, to feel like an able-bodied person, to be human. If I lose out from the changes, I will stand to lose everything. Where's the sense in that?” All Hazel wants is for her human rights to be respected. Does PIP do this?

Let us start with the term “personal independence payment”. What does this mean? Can the Minister tell me whether his Government see independence as a medical barrier for assessment or a socioeconomic barrier? From what I have gleaned so far, the PIP assessment is largely a functional assessment of one's medical condition. It bears little relation to what many disabled people need to live independently, and largely ignores higher costs of living.

Physical or mental capability has only a small bearing on whether a disabled person is dependent or independent. For independent living to be a reality, a person needs choice and control in their life. Disabled people make choices about how to spend their DLA, demonstrating maximum control over their lives and thus becoming independent. For instance, the mobility component is not just about physically getting from A to B. The money might be used to pay for travel insurance, which can be astronomically more expensive for disabled people than for the non-disabled traveller, thereby inhibiting their mobility. Who on these Benches paid £1,500 for travel insurance to go on holiday this year? I did. That is the average extra cost that people with severe respiratory impairments must meet to go abroad. Assessing functionality can never determine economic inequality.

I ask the Minister to reconsider comments that he made during the 11 May debate on the new PIP assessment. He said that a person climbing Mount Kenya on prosthetic limbs should not be treated as disabled, for they are doing something that many of us cannot do. That is an extreme example, but it can be understood in two entirely different ways. I am sure that it was intended as a compliment and an acknowledgement of personal achievement. However, it tells us nothing about the additional costs of disability that people living with amputations must meet. Some amputees experience periods of excruciating phantom pain during which they are unable to work. Others experience extra costs in the form of transportation and housing adaptations. I am not sure whether the Minister believes that one can cease to be disabled by physical prowess alone.

Many consider appointment to this House to be evidence of accomplishment. Is that sufficient for the Minister to determine that I, too, am not disabled and therefore do not need DLA? Of course not—but that is what the assessment is in danger of leading us to. I do not wish to embarrass the Minister, but I will assure him that DLA has been, and continues to be, vital in enabling me to live independently and work towards my goals. Personal achievement must never be a yardstick against which we measure entitlement.

At this point, Baroness Campbell of Surbiton resumed.

From my mailbag, it is obvious that many disabled people expect to lose their independence. Do the Government believe that returning disabled people to levels of dependence last seen 30 years ago makes good economic sense? Disability Alliance and other notable organisations in the Disability Benefits Consortium have clearly demonstrated the knock-on costs to the Treasury in the form of increased health bills and a drop in revenue from those who will fall out of work. Will the Minister tell the House who is working on the cost-benefit analysis of the proposed changes? Where is their modelling? I ask him not to answer me by directing me to existing impact assessments. It is not there: they tell us nothing about this. Perhaps the impact assessments discussed in the Minister's opening remarks might address this. I am not confident, but I look forward to seeing them.

DLA reform, including the review, has not been co-produced with experts such as the National Centre for Independent Living. The Government have elected to revert to old forms of consultation, merely inviting contributions from such organisations rather than working together. The noble Lord, Lord Rix, expanded on this. I ask the Minister to read again the Government's independent living strategy. Disabled people know better than anyone the solutions to overcoming barriers to independent living and providing a good assessment framework. I ask the Minister to consider re-establishing the DLA/PIP advisory group that was sacrificed during the bonfire of the quangos. Noble Lords will remember the Government's disability rights task force that developed the most successful and significant disability legislation of this century: namely, the Disability Discrimination Act. Without the structure of co-production, I fear that we will be locked into arguments rather than shared solutions.

As I have run over my time, I will finish by saying that the term “personal independence payments” is disingenuous and should be discarded. It is obvious from the PIP proposals so far that the Government know very little about independent living. “Disability living allowance” describes the benefit well. It is about living. Let us keep the title—and keep living.

17:25

[Baroness Wilkins]

My Lords, I, too, declare an interest as I have received DLA since its inception. Luckily, having reached the age of 65, I will escape the Government’s proposals for the time being. When I became disabled in the mid-1960s, just about the only disability support on offer to take part in everyday life was an invalid trike—the blue Noddy car. For me, that symbolises what was then the extent of expected integration. Little was expected of disabled people and unless your family had money and resources you led a very limited life. Disabled people had low expectations and were not much in evidence.

Over the following years, political pressure slowly increased with the rise of the disability movement and the range of support needed by disabled people to become contributing citizens began to be addressed. The Noddy trike morphed into the mobility allowance, then into DLA, which added personal care, and that developed into incorporating people with communication needs and learning difficulties, lacking arm movement and so on, until most recently when blind people became entitled to the high rate for mobility and care.

That support is what has enabled disabled people to work and contribute to their communities. It is why you see disabled people on the streets, living independent lives. We now expect to be treated as equal citizens. The lengthy DLA claim may not be simple but it represents progress. It reflects the very real complexity and diversity of the extra support needs of disabled people’s lives. Disability living allowance is a complex benefit because disability is hugely complex and any reform needs to be done with great awareness of that complexity if it is not to leave disabled people more deprived and impoverished, denying millions the hope of living the independent lives that we have come to expect.

That awareness is sadly lacking from this Bill, as we heard from the noble Baroness, Lady Campbell, just now. As all noble Lords’ post bags and mail boxes have shown, disabled people live in great fear of it being enacted. There are many issues concerning the introduction of PIP which we will need to return to in Committee. For now, I draw attention to just one, in Clause 79. That proposes to double the current qualifying period for eligibility for support from three to six months. The Disability Benefits Consortium is concerned that this will diminish the preventive impact of DLA, pushing many more people into debt as they try to manage the costs of their impairment. As the noble Baroness, Lady Morgan of Drefelin, so eloquently pointed out, Macmillan Cancer Support and other cancer organisations are particularly concerned that it will have a devastating impact on disabled people who have sudden onset, long-term conditions such as cancer, stroke and spinal cord injury.

The first six months of these conditions can be the period when extra costs, especially for travel and parking for treatment and family visits, are greatest. Specialist treatment centres are often far from patients’ homes. Macmillan Cancer Support cites a cancer patient in Devon who regularly had to travel 125 miles for radiotherapy. The Minister for Disabled People has made it clear that the proposed change in the qualifying period is not financially driven but to align the definition of long-term disability in the Equality Act. Will the Minister reconsider allowing people with certain conditions, who face the sudden onset of a disability and immediate additional financial costs, to receive an early assessment for PIP?

There are so many aspects of this Bill which will have a disproportionate impact on disabled people and I hope to take a full part in Committee in trying to alleviate them. For now I will concentrate on the proposals for housing.

The Bill’s proposal for a household cap on benefits comes in addition to the local housing allowance caps being introduced from this year. As we have heard, according to leaks from the DCLG, officials estimate that this will make 20,000 families homeless, forcing people to move away from their support networks, moving children from school and pushing families to places with lower rents—lower rents because there are fewer jobs.

This second wave of cuts to housing benefit will undermine the housing safety net for people who lose their jobs and need temporary financial help so that they do not lose their home as well. It will affect people who are working, but who are on very low incomes, as well as those unable to work, and that, of course, means that it will disproportionately affect disabled people. Shelter, among other organisations, has called for housing benefit to be removed from the housing benefit cap. What is the Minister’s response?

There are harsh new size criteria on all working-age tenants in social housing who receive housing benefit. The Bill allows the Government to reduce the amount of housing benefit to people of working age in social housing if they are considered to be underoccupying their property. The callousness of these criteria is chilling. Each person or couple living as part of a household would be allowed one bedroom, except for under-16s of the same gender and under-10s of different genders who would be expected to share bedrooms. If the household is judged to be underoccupying its home by one bedroom it would lose 13 per cent of its housing benefit, but it would lose almost a quarter— 23 per cent—for two or more bedrooms.

Think what this means for couples who are in ill-health and are having disturbed nights from severe pain, constant coughing or laboured breathing, when the only thing that keeps that relationship from breaking is the possibility of a night's sleep. Two-thirds of the people who will be affected are disabled, which is almost 500,000 people, according to the equality impact assessment. With disability come large items of vital equipment: mobile hoists, bulky wheelchairs and their spares; exercise equipment; oxygen storage; and boxes of incontinence supplies. Where are they to be put if a couple has just one bedroom? What of disabled people who need an overnight carer? Is the carer expected to sleep on the floor? It is estimated that 100,000 of the disabled people who will be affected currently live in homes that have been specially adapted for their needs. If they are forced to move, new adaptations would have to be paid for, if they are not to be homeless, so what saving would the Government be making from this measure?

I believe that disabled people have every reason to fear this Bill. Its most alarming aspect is the Government’s willingness to risk the consequences of such a massive change. With their heavy reliance on secondary legislation, they cannot know the full impact of their proposals or how they interact with each other. We know from the equality impact assessments that disabled people will bear a disproportionate amount of the cuts and that no mitigating action is proposed. I hope that we can take that action in Committee.

17:33

[Lord Wigley]

My Lords, I hope the Minister heard and took to heart the two immensely informed contributions from the noble Baronesses, Lady Campbell and Lady Wilkins, that we just heard. I declare an interest as vice-president of Mencap Wales. Colleagues who served in the other place at the same time as me will know of my involvement with disability issues. Those initially arose because of the disability challenges that we faced as a family. I know that many noble Lords have similar and even more far-reaching experiences at first hand, as we have just heard. In our case, it was the experience of losing two sons, Alun and Geraint, who suffered from physical and mental handicap and died at the ages of 12 and 13. I know that some noble Lords have the ongoing challenge of supporting disabled children who will probably outlive their parents with all the heartache that entails. My wife Elinor and I were spared that torment. We saw closure of the direct, day-to-day struggle of coping with disability in our household, although there is truly never such a thing as closure because the experience—the joy and sadness—of parenting a disabled, dying child never leaves you.

It is this background that affords me a little insight into the desperate concerns of disabled people and their carers at the implications of the Welfare Reform Bill. We were lucky in that both our children qualified for the highest level of the then attendance allowance and mobility allowance, and that enabled us to employ a young, full-time care assistant who lived with us as a family. Without that facility, it would not have been possible for me to undertake my work or for my wife to keep in touch with her career as a professional musician, which helped both of us to bear the pressures we were under and enabled us to give our other children, Eluned and Hywel, the support they needed. After we had lost both boys by the spring of 1985, I came to realise the enormity of the cost of coping with disability. Although we had by then naturally lost the income from the various allowances to which we were entitled, I found myself for the first time in a decade able to pay my way. That is the reality of disability. Implicit with it is a very substantial day-to-day cost in coping with its consequences. That is why so many disabled people and their carers are petrified—yes, sick with worry—about the implications of this legislation.

My direct experience is now 25 years out of date, as is, I suspect, the experience of many of us who bring experience to this Chamber, but the generality of that experience still holds true and the perspective of time reinforces the message. That is why I shall be pressing the Government in Committee concerning a number of issues relating to these questions. The danger is that the new regime of personal independence payments replacing DLA will force many unwell people to submit to the indignity of yet another examination with all the insecurity and distress that that causes. I am concerned that the Government’s target is to cut the number of DLA claimants by 20 per cent when the assessed fraud level of DLA is only 0.5 per cent.

I fear that the Bill fails to address the central problem of getting people into work; namely, the lack of available suitable jobs. Job creation is a greater problem than unwillingness to work, particularly among young jobless people, and the challenge of getting appropriate work that is just not there for disabled people. The Bill needs to be amended to ensure that claimants with dependent children will not face sanctions if they are not able to work, and there is a need to challenge the Government’s intention to limit the new ESA to just 12 months, even for people suffering from long-term or variable illness, which the Government admit will hit some 700,000 people. What will be the position of young people who have been disabled from birth since they will not qualify for the contribution-based element of ESA?

Finally, no one denies the need from time to time to review the welfare benefits system to simplify it, speed it up and make it fairer. However, what would be totally unacceptable would be for vulnerable and dependent people to bear the brunt of government spending cutbacks. There are much broader shoulders in our society who can bear that pain. In the detailed consideration of this Bill, that is the angle from which I will look at the amendments and at the future of this legislation.

17:38

[Baroness Stedman-Scott]

My Lords, I begin by declaring an interest as CEO of the employment charity Tomorrow’s People which aims to help people get and keep a job and to help them to focus on their destiny rather than their history. I hope that in relation to universal credit this Bill will help people to get extra focus on their destiny. In addition, before I joined your Lordships' House, I worked on the reports, Breakdown Britain, Breakthrough Britain and Economic Dependency, all of which were undertaken in conjunction with the Centre for Social Justice.

In my experience of working with unemployed people, they want to work. As the noble Baroness, Lady Hollis, said, they do not need to be whipped. They want to be independent and to make the choices in their lives that they see those in work making. The difficulty comes when trying to make the transition from welfare to work when the system in place does not generate sufficient incentives to work. I draw noble Lords’ attention to a conversation I had with a young couple a few weeks ago. They had a child. The mother of the child had a part-time job working 19 hours a week. She wanted more hours because she wanted to be able to do more for her family. She managed to get another job which meant an increase to 29 hours a week, and she took the increased hours at the weekend so that childcare could be managed. You would think that it was something to celebrate. In front of me, her partner said, “Well, if you didn’t work, we wouldn’t have to pay the rent”. This is what we need the new system to stop. The principle of the universal credit is most welcome. It will simplify the current system, and I hope that the introduction of the new single taper, which will withdraw support as earnings rise rather than stop them altogether, will make the statement that work must pay a reality. At the moment, the withdrawal of benefits when somebody gets a job is all or nothing, resulting in people asking, “Why should I bother?”. This, I hope, changes things greatly.

However, I urge the Government to make sure that the changes which will affect unemployed people under the universal credit are communicated effectively and professionally. We must turn every stone to make sure that they are fully conversant with the flexibilities and opportunities that are presented to them, and help and support them through their journey back to work. It would be a travesty if we failed to do this. It is critical that all front-line staff, either from the DWP or indeed the various providers that interface with unemployed people on a daily basis, are well trained and that there is no opportunity for confusion or lack of clarity on these significant technical and cultural changes.

The introduction of the universal credit is long overdue, but I fear that the question we have not asked is: how are we going to support our unemployed people in the most effective way during their period of economic inactivity at the same time as introducing these changes? This is not a question for the Bill but it is something we must give thought to. If the jobs are not there, and the magic wand of the Minister cannot create them, what are we going to do to make life better for people during this period?

Like many of your Lordships, I have received several briefings on this Bill. They raise some understandable concerns and I would just like to mention one: childcare. One of the greatest obstacles faced by people looking to return to the labour market is that of affordable, quality childcare. The provision of childcare is not covered in this Bill but it will seriously affect the ability of people to take a job if it is not in place.

I greatly welcome the principles behind this Bill but it involves major changes that will need to be carefully worked out. I thank the Minister for the consideration that he has given in the briefings to the feedback we have given him. My father had the politically incorrect job of furrier—he made fur coats. He said the advice his first boss gave him, whether he was making an expensive mink coat or one of less expensive skin, was always, “Measure twice and cut once”. With all the proposed changes that this Bill brings to welfare reform, we would all do well to adhere to this advice.

17:43

[Lord Touhig]

My Lords, I will focus my remarks on Part 4 of the Bill, which will bring in a new benefit called the personal independence payment to replace disability living allowance. In particular, I will consider the impact of the changes on people with autism.

Disability living allowance is a key benefit for many people with autism, designed to meet the additional costs of their disability. The National Autistic Society has said that reform of disability living allowance could offer an opportunity to ensure that the needs of people with autism, who are some of the most vulnerable in our society, are better understood in the allocation of benefit. It has welcomed the increased focus on participation, communication and the ability to plan and make a journey, all outlined in the consultation documents on the reform as well as in the draft regulations. However, the National Autistic Society, along with other disability organisations, has serious concerns that the objective of a 20 per cent cut in projected spend on the award seems to be the main driver for change. If this is the case, a significant number of adults with a disability will lose out.

Our fear is compounded by the Government’s stated intention to focus benefit on those with greatest need, which is yet to be defined, and with the proposed introduction of a new assessment process, including face-to-face interviews. Like many noble Lords, I share the National Autistic Society’s concerns about the introduction of face-to-face assessment for the new benefit, particularly given the experience of the work capability assessment. The National Autistic Society followed a group of people with autism through the work capability assessment process and found that the medical assessment was a particular barrier to having needs fully and properly assessed. Face-to-face assessments for people with autism are problematic and can be extremely stressful.

Autism is a lifelong developmental disability that affects the way a person communicates with and relates to another person. Areas of difficulty include an inability to understand the nuances of language, facial expressions or tone of voice, and a propensity to take everything literally. In light of this, an interview with a stranger asking questions that you may not understand or be able to answer accurately due to the language barrier is hardly the best method of assessment. But the many different types of communication barrier also mean that an assessor untrained in autism may not pick up on the difficulties faced by the person with autism or Asperger’s syndrome. For example, if an individual on the autism spectrum has known about their interview for weeks, they may spend those weeks practising what to say in order to come across well in a way that will perhaps not truly reflect their actual communication struggles. They may come across as not having any noticeable communication difficulties and therefore be wrongly assessed.

People with autism also often lack insight into their condition and may not have a good understanding of what areas of their daily life they need help with. They could also fail to mention real areas of difficulty because they do not comprehend their importance or because they are eager to please. However, an assessor with no knowledge of autism is very unlikely to understand this. An effective diagnostic assessment of someone’s communication skills would often need to be carried out over a period of several hours, across different days and in different environments. A half-hour session with a stranger is far too blunt a tool to make a proper and fair assessment.

There are particular concerns, as other noble Lords have already mentioned, about who will carry out these assessments and what training their staff will have with autism. How we can be assured that the staff who will carry out the assessment will have adequate training in autism? Autism is particularly poorly understood among health professionals in this country. Indeed, research by the National Audit Office in 2009 found that 80 per cent of general practitioners did not feel that they had enough knowledge and training in autism. Can the Minister explain what the Government intend to do to ensure that adequate and specialist training for assessors is in place so that adults with autism can have their needs comprehensively and fairly assessed?

Organisations representing people with disabilities have been encouraged by government pledges in Written Answers and in response to the disability living allowance consultation that they understand that face-to-face assessments are not suitable for everyone. Indeed, the Minister stated in Lords Questions on 10 March this year that where it is not “realistic, helpful or appropriate”, the Government would not insist that applicants for personal independence payment be seen face to face. Could the Minister clarify what this means and commit to putting safeguards in the Bill to ensure that individuals for whom it is inappropriate are not put through face-to-face assessments unnecessarily?

As well as the limited timeframe, other factors make it difficult for proper scrutiny of the Bill to take place. The draft regulations provide no indications of the points that would be awarded for each of the criteria. Essentially, Parliament is being asked to scrutinise clauses for the personal independence payment on the basis of regulations that make it far from clear who will qualify for the benefit in 2013. That makes it extremely difficult to estimate what the impact on people with disabilities will be.

I therefore have two further questions for the Minister. Will he commit the Government to introducing biennial reviews of the implementation of the benefit to ensure appropriate scrutiny of the operation of the benefits in place? Will he also commit to ensuring that all regulations relating to the personal independence payment will be subject to affirmative resolutions so that this House and the other place can be given the opportunity to scrutinise the regulations?

For the sake of public finances in the medium and long term, for the sake of the integrity of the new benefit, but—most especially and in particular—for the sake of many people on the autism spectrum for whom DLA is their only lifeline, I ask the Minister to seriously and comprehensively review both the process and the assessment criteria for the new personal independence payment and ensure that, when introduced, it will be fit for purpose.

17:51

[Lord Low of Dalston]

My Lords, this is a very important Bill. It could well be a Bill which defines the coalition every bit as much as the Health and Social Care Bill. It certainly deserves the same treatment. At its heart is the introduction of universal credit, which brings together the majority of in-work and out-of-work benefits and tax credits for people on a low income, with the aim of simplifying the benefits system and getting people off welfare and into work. Allied to measures which limit the amount of time for which people can remain on contributory employment and support allowance, and benefit from more generous levels of support, this is the Government’s flagship policy for addressing poverty. As such, by incentivising work and reforming a welfare system which has kept people in a state of dependency and out of work for too long, in making it pay to be in work, this would seem to have much to commend it. But there are losers as well as gainers.

Tony Blair is reputed to have asked what you had to do to save £1 billion on welfare and been told that a million people had to lose a thousand pounds. The Government’s welfare reforms are aimed at saving £18 billion. That is an awful lot of people who have to lose a thousand pounds—or rather more if you want to reduce the number of losers. Many of these losers are disabled people, the most vulnerable in our society, whom the Government have pledged to protect. At this point I ought to declare my interest as a disabled person myself, president of the Disability Alliance and a vice-president of RNIB.

The enhanced disability premium and severe disability premium will not be replicated within universal credit. As a result, disabled people living alone without a carer will be worse off; without the disability addition, so will parents with disabled children who are out of work. Research by the think tank Demos has shown that, far from being protected from the worst of the cuts, disabled families face losses of £2,000 to £3,000 over the course of this Parliament. Overall, it estimates that disabled people will lose £9 billion in welfare support.

The Government propose that the range of premia will be replaced by two additions reflecting the ESA components, and it is intended that the weekly rate of the support component equivalent will rise in stages from £13.40 today to £74.50. But the Disability Benefits Consortium estimates that if, instead of this, the severe disability premium and the disability addition were retained, a higher proportion of the childcare costs of disabled children were met and disregards payable to certain groups were made additive—so that, for example, someone who is both a lone parent and disabled was entitled to two disregards—the losers could be protected without resulting in extra cost.

However, this would undermine the entire logic of the scheme. Incentivising work means penalising the condition of not working, and making it, in the language of the Poor Law, less eligible. The most flagrant example of this is the proposal to time-limit contributory ESA to claimants in the work related activity group to one year. The DWP estimates that, by 2015-16, around 700,000 people will lose their entitlement to contributory ESA. On average, their income is expected to drop by £36 a week. About 60 per cent of these will be able to receive income-based ESA, but the rest will lose their benefit entirely if they do not meet the means test. Indeed, 400,000 will have to lose their benefit if the Treasury is to make the planned savings of £2 billion. The loss will be more for some than others, but it is estimated that 280,000 will lose their entire benefit, currently worth £94.25 a week.

There are five things wrong with this. First, in the great majority of cases, the people we are talking about do not want to be dependent on welfare. They do not choose economic inactivity; they are not the “undeserving poor”; they want to work. Secondly, their impairments often make it very difficult for them to do so. Thirdly, where this is not the case, or the difficulties can be overcome, prejudices, or sometimes just the reasonable apprehensions of employers, can present an insuperable barrier. Fourthly, in the current state of the economy, there just are not the jobs. In all these circumstances it can be quite unrealistic to expect people to find a job within a year.

The DWP has estimated that of those on contributory ESA and in the work related activity group, 94 per cent will take longer than a year to find work. Cutting off the enhanced level of support after a year is a breach of faith with people, many of whom will only have become disabled towards the end of their working life and will have paid their national insurance contributions for perhaps 30 or 40 years. Add to this the indignity of ever more draconian assessments by people who palpably do not understand the realities of disability—highlighted so graphically and eloquently by the noble Baronesses, Lady Campbell and Lady Wilkins—and it is not difficult to understand the fear and anxiety being expressed by disabled people at the present time.

The Disability Benefits Consortium quotes a disabled person who trenchantly articulates this complex of interacting issues:

“I don’t want to be declared not fit to work as I know there is work I can do despite the problems that Parkinson’s can cause. But there is no guarantee that I will find a job in 12 months. It could take me much longer. I’ve worked all my life and have paid for decades into the system on the understanding that there will be support if I need it. To be told that all of this support could have an arbitrary time limit is both unfair and stressful”.

There are many aspects of this complex Bill that it has not been possible even to touch on. Others have and will speak about them. I am afraid that I will have to disappoint my noble friend Lord Rix for today, until my review of the funding of mobility for people in residential care is further advanced.

I have concentrated on ESA because it is so emblematic of the approach that this Government are taking toward welfare. Ministers appear oblivious to what is happening at the coal face; instead, they proceed with all the messianic zeal of Poor Law commissioners, careless of who gets rolled over by the juggernaut of reform. Indeed, the casualties are a necessary part of the reform. We will need to see many changes before this Bill is fit for purpose, but nowhere more than in relation to contributory ESA.

The Liberal Democrats have a motion before their conference next week which opposes the time-limiting of ESA. I hope that our Lib Dem colleagues will be taking note and realising that there is more about this coalition’s programme which needs eviscerating than its reforms of the NHS. I hope, too, that Ministers will be listening so that we do not have to regard the Conservative Party, this time with its Lib Dem accomplices, as the nasty party once again.

18:00

[Lord Feldman of Elstree]

My Lords, I am delighted to rise for the first time in your Lordships’ House in support of this Bill. I should like to begin by expressing my thanks to the Members of this House for their kind and generous welcome. I should also like to thank all the officials and staff for their courtesy and unfailing helpfulness to me and my family, particularly on the day of my introduction. Finally, I must thank my two supporters, my noble friends Lord Harris of Peckham and Lord Wolfson of Aspley Guise, both of whom have been an inspiration to me. They have in common a work ethic that drives them to commercial success and a strong sense of social responsibility that manifests itself in the time and energy they dedicate to their numerous charitable works.

It is a well known Jewish proverb that “God created man because he loves stories”. This place, its traditions and its Members are all about stories—stories of our nation and stories of some of the extraordinary men and women who have graced these Benches. My story is far less interesting and important than the vast majority of them. Nevertheless, I believe that it contains a small message for this debate. At the turn of the 20th century, my great-grandparents came to this country to flee the pogroms and persecution of eastern Europe. They had nothing bar the few possessions they could carry with them and the values that they carried in their hearts. My grandmother, the youngest of eight children, to this day tells of the times they spent in their small flat in the East End, sharing one bedroom and two beds—girls in one and boys in the other—sleeping head to toe.

What sustained them in those difficult times, and enabled each of them to make their mark on this country, were three values in particular. First, they had a strong work ethic not only to lift themselves out of poverty but also because they understood that a person’s work is central to their sense of who they are and their place among their community. They wanted to be the best that they could be. Secondly, they put their family at the centre of their world. It was the main support structure for the nurturing of their children and the care of the elderly. Thirdly, they understood their responsibility to the wider community; namely, those who could not work or take care of themselves either because they were too sick or too old. They took this idea very seriously and as their circumstances improved, successive generations, in particular my parents, have been involved in numerous charitable and social causes.

On both sides of the family, a common thread—if noble Lords will excuse the pun—was a connection to the clothing business, both in manufacturing and retail. I found out today that I share this history with my noble friend Lady Stedman-Scott. More than 100 years later, I am still in this business, although I have to say that my parents did everything in their power to keep me out of it. I was privately educated and I attended a fine university. I trained and practised as a barrister in the chambers of the noble Lord, Lord Grabiner. As he may well recall, it was only after my father’s sudden and unexpected illness some 15 years ago that I returned to the family firm. His advice to me at that time was clear and unequivocal. He told me to put my family first and to go and sort out the business. I am sure that my great-grandparents would have agreed with that.

By happy coincidence my co-chairman of the Conservative Party, my noble friend Lady Warsi, has a very similar story. She is the daughter of immigrants who arrived with nothing and built a successful business. She qualified and practised as a lawyer and before her entry into politics worked in the family firm. It has been my great good fortune to work with her and I thank her for her kindness and support over the past year.

The Bill before this House today is for good reason considered to be a central part of the legislative programme of this Government. It makes a start at dealing with a problem that has troubled generations of politicians and political thinkers across all parties; that is, the problem of long-term unemployment and a welfare dependency. The effects of this have been debilitating to millions of people in this country. As your Lordships are aware, there are families where no one has worked for three generations and almost 2 million children grow up in homes where nobody works.

The Secretary of State for Work and Pensions has given this serious thought. In his years in opposition, he conducted detailed research through the Centre for Social Justice. The results of his research are clear and the values underpinning this legislation mirror almost exactly the values that my family brought with them from eastern Europe, to which I referred earlier.

First, the Bill recognises that it is absolutely essential to try to place the work ethic back at the centre of people’s lives by making work pay for those able to work but who are currently dependent on state support. It does this by the introduction of the universal credit, which will help to remove the perverse incentives that make people better off sitting at home and claiming benefits than seeking a job. Benefits will be moved away from those who simply do not want to work but are skilled in working the system.

Secondly, the Bill makes an important start in placing the family back at the centre of British life by addressing the couple penalty, which heavily penalises unmarried partners who choose to live together to bring up their children. Finally, it tries to ensure that the limited resources now available to the state are used to take care of those in society whom we have a duty to protect because of disability, sickness or lack of opportunity for employment.

In my view, these reforms are well thought out and built on firm principle. They try to blend practical necessity with compassion. They look to the underlying causes of problems in our society, which were manifested most recently in the rioting in our cities; that is, the sense of rights without responsibilities and the sense of entitlement without endeavour. I believe that this Bill will place us back on the right track.

In preparation for this speech, I was drawn to an article for the Times written by the noble Lord, Lord Sacks, as a reaction to the murder of James Bulger in 1993. He reflected on the appropriate response to that tragedy. The mood at that time was strikingly similar to the mood in the country today, that of uncertainty and moral introspection. He implored:

“The worst thing we could do now would be to get lost in an argument about who is to blame: the individual or society, politicians or religious leaders. What we need is imagination, not recrimination”.

I am not sure that in 1993 or thereafter, despite the best intentions of all political parties, we displayed sufficient imagination. I believe that this time we are on a better and a bolder course.

18:06

[Baroness Meacher]

My Lords, I congratulate the noble Lord, Lord Feldman of Elstree, on his very pertinent maiden speech. With a legal background as a commercial barrister, the noble Lord’s contributions to the House will surely be incisive and hard hitting. As the former managing director and chief executive of his family’s textile manufacturing business, he brings invaluable commercial expertise, and as the organiser of the operations and fundraising for David Cameron’s leadership campaign, he is clearly someone who expects, and achieves, success. Noble Lords, particularly Cross-Benchers, will I am sure gain great confidence if they find him on their side of an argument. Again, I congratulate the noble Lord, Lord Feldman of Elstree, and welcome him to the House of Lords.

I begin my remarks on the Welfare Reform Bill by applauding the Government and, most particularly, the Minister for some of the valuable reforms in this Bill, which include: the serious attempt to simplify the system—anyone who knows about welfare benefits knows the importance of that objective; the integration of the universal credit and Inland Revenue databases enabling truly automatic benefit adjustment—what could be more important?—in response to earnings changes; and the two-year window for automatic reinstatement of benefits if a job does not work out. All three are vital changes to reduce the risk of taking a job for people, in particular those with mental health and other fluctuating disorders. I will focus my attention on those groups because I believe that they are the most difficult to help. I say clearly that I have serious and considerable concerns about the Bill, albeit that I recognise its strengths.

As other noble Lords have pointed out, one of our great difficulties in debating this Bill is in distinguishing between the impact of the cuts and the impact of the structural changes. I believe that it is a combination of both that will threaten the stability of the lives of vulnerable individuals and the very fabric of communities. The housing benefit changes are among the most threatening. Many other noble Lords will address those issues and, therefore, I will not do so.

The new personal independence payment presents very severe risks for people with mental health problems. The Minister has been clear in emphasising that benefits will be focused on those in greatest need. Who can disagree with that? But we know that assessing people with mental health problems is far harder than assessing those with physical disabilities—in part, because mental health problems fluctuate from day to day and from week to week, as everyone knows. Atos and jobcentre staff have all been confounded by these problems. I understand from the Minister that the assessments for PIP will be based on, but different from, the assessments for ESA. This gives me some assurance but I remain most concerned about this issue. How many mentally ill people will be wrongly deprived of their benefits, with disastrous consequences? That is something we need to address in discussing the Bill.

I have been involved in a small way with the excellent work of Professor Harrington and a group of mental health charities to improve the descriptors used in the assessments. I am also aware of the planned improvements in the assessment process for ESA, using a report from the claimant’s preferred clinician and having the final decision on ESA entitlement made by Jobcentre Plus staff rather than Atos. Perhaps the Minister can confirm that these elements of the assessment process for ESA will apply also to personal independence payments. I think and hope that they will.

In the end, the validity of the decisions about whether a claimant with bipolar disorder or agoraphobia should be entitled to PIP will depend considerably on intelligent decision-making by well trained and highly skilled Jobcentre Plus staff. My biggest fear is that, under financial pressure, the DWP will have underpaid, underskilled and overworked staff making these key decisions affecting people's lives.

In a discussion with carers of severely mentally ill people in east London last week, they talked about their recent reassessments for benefit and described being “terrified”—their word not mine—because the interviewers had no idea or understanding about the conditions with which they were dealing. One carer referred to a report following an assessment that completely misunderstood the mental disorder of her son. Can the Minister give some assurance about staff training and pay? You cannot get decent staff unless you pay them.

The Bill significantly increases the use of conditions and sanctions for claimants of employment and support allowance. We all know that there are individuals and families for whom a life on benefits has become the norm and for whom a strong conditions and sanctions regime is essential in their own interest to try to re-establish them in an independent life. However, such a system presents huge risks for people whose minds are not clear. A severely depressed claimant may not do what a severely physically disabled claimant would take for granted: open letters, read them, understand them, realise the need to respond and so on. For someone lying in bed wanting their life to end, none of these conditionality requirements will be met—and what then?

Certainly people using secondary mental health services most undoubtedly benefit from undertaking work-related activities, so much of this Bill is common sense and we all agree with the principles. The trouble is, when you look at the application the panic starts. Inappropriate conditionality and sanctions can easily be counterproductive and fairly disastrous. For this very substantial group of ESA claimants, the regime must be supportive, skilled but not frightening.

On a different issue, for this group of claimants the option of having the rental element of universal credit paid direct to the landlord is vital. I understand the principle of encouraging independence and getting people to pay for their own rent, but we have to find a way forward for this group and maybe others that noble Lords may highlight. Failure to find a resolution to this problem for this group will lead to more homelessness and hospital admissions. How many more psychiatric hospital beds can we afford?

The plan to limit contributory ESA to 12 months for people in the work-related activity group is a further matter of concern. The issue is perhaps assessment for the support group. If employers are not going to take people on, they will not get a job within 12 months. That needs to be part of the thinking in assessment for the support group.

I am running out of time. For claimants with mild to moderate anxiety or depression, the availability of good-quality CBT is going to be essential if the Government are to reduce radically the numbers of that group on ESA in a caring way. For people addicted to drugs or alcohol, special benefit conditions need to be established. Regular interviews and job applications simply will not work. I applaud the Minister for removing the provisions in the previous Welfare Reform Act, but we need to do more work on that group.

In conclusion, I hope we can agree solutions to these problems, without resorting to votes, through discussion and greater understanding. I look forward to working with noble Lords to improve the Bill and ameliorate the hardship which will, without any question, result if the Bill goes through as it stands.

18:15

[Baroness Sherlock]

My Lords, I want to examine the extent to which the Bill meets its objectives, particularly for families with children. My interests are in the register but I was a non-executive director of the Child Maintenance and Enforcement Commission and I was an adviser in the Treasury during the development of tax credits.

The Bill describes a revolution in the benefits system. The Minister might look an unlikely revolutionary, but he said today that this is the most radical reform of the welfare system since its invention. So a revolutionary he certainly is. I wonder whether there is a poster of Che Guevara tucked away in his office somewhere in Richmond House.

This is going to be the biggest change we have ever seen in the welfare system. The White Paper said:

“The Universal Credit will have a simple structure designed to provide a basic income for people out of work … make work pay ... and help lift people out of poverty”.

I will back a system that does those things, as will many noble Lords, but we must test whether it will. First, will universal credit be simple? No. It will be unified but not simple. By bringing together so many benefits, the process of applying for universal credit may be more complicated for some people who want access only to limited parts. I understand that. It may be inevitable as simplicity in the benefits system is often bought at the expense of fairness. Child benefit is simple but not fair, certainly if that is all there is. Tax credits are fair but even I would concede that they are not simple. Finding a single system that brings together fairness and simplicity is a great challenge. In particular, it puts a premium on smooth implementation to balance the inevitable structural complexity. Having been involved with the development of tax credits, I freely offer the Minister some advice that was hard-won by me during my time in the Treasury. Each front on which you pursue reform in a major structural change increases the chances of one of them failing and the whole thing falling over. I would urge the Minister to take that to heart and counsel him to stagger the reforms. Start, if you must, with universal credit, but get that sorted first before even contemplating moving on to the CSA or abolishing the Social Fund or introducing in-work conditionality, otherwise we risk jeopardising the entire system.

Secondly, will universal credit make work pay and support people in work? Tax credits were designed to do just that. Working tax credit was designed around people in work. It was meant to look like work. It was run by the Revenue, paid through the wage packet, based on prior year earnings, with no conditionality other than a minimum hours rule. The treatment of savings was fair, like in the tax system. Nobody was debarred for having savings but income from savings was taken into account. In merging these two systems, as my noble friend Lady Hollis pointed out so eloquently, too often the lowest common denominator has won out.

Will a father saving for a deposit on a house who is eligible for tax credits be denied any universal credit once his savings reach £16,000? What about a mother who is getting a divorce and gets some of the proceeds from the sale of the marital home but not enough to buy again any time soon? She will be expected to run down those savings, feeding her family from them, and so never getting back on the housing ladder unless she marries someone else. She had better make sure he does not have any kids or the benefit cap will kick in. What of a couple who both work part-time to share childcare. Will they face in-work conditionality when they might not have set foot in a benefits office for years? I worry about the characteristics of this system and how worker friendly they are going to be.

Will work pay? I was pleased that the Secretary of State for Work and Pensions gave a clear pledge that,

“people will be consistently and transparently better off for each hour they work and every pound they earn”.

Let me highlight two worries. Many noble Lords have mentioned childcare costs. The options that the Government have canvassed are fairly unattractive because all reduce the maximum amount of childcare help that can be claimed. The Minister may correct me, but if either option is implemented, some parents could be worse off if they increase their hours. They could be trapped in part-time work, making it hard to lift the family out of poverty and some could even find that work does not pay at all. We need specific assurances from the Minister that work will continue to pay at least as well as now, even if you have high childcare costs, and that no one will be put into the position of being forced to work more hours without being given the money to pay for the childcare they will need in order to do that.

The second area I worry about is the proposal to leave help with council tax to the discretion of local authorities. If the DWP cannot control how much council tax help is offered, how quickly it is withdrawn or how it is means tested, how will it be possible for the Secretary of State’s guarantee to be met? I should be grateful if the Minister could explain that to the House.

Will these reforms lift people out of poverty? Many noble Lords know that this week an IFS report has predicted that the people who will suffer most from tax and benefit changes are families, especially poor families with children, with the poorest decile suffering income losses of more than 8 per cent over the next three years. I want to look particularly at the effect of the benefit cap, so eloquently explained to us by the right reverend Prelate the Bishop of Leicester and by the noble Baroness, Lady Tyler. The charity Family Action has said that the cap is likely to push more families into poverty. The Children’s Society has said that it will affect nine times as many children as adults, so it is clearly a measure aimed directly at families with children. I have heard this explained as being necessary to stop, for example, a benefits scrounger living in the kind of house that no decent working family could ever afford to live in. But if we think about that for a moment, it makes no sense. There are already limits in the housing legislation on how much housing help can be given, just as there are limits on every other individual benefit. So an overall benefit cap will have a particularly unfortunate effect on those who happen to catch more than one of those tripwires. If you happen to have more than two children and live in an expensive urban area, you are the kind of person who will be hit. A Parliamentary Answer in another place revealed ministerial estimates that around 70 per cent of those who will be affected by this are already living in social housing; they are already in the cheapest accommodation. Where are those families meant to go?

Finally, I want to comment on the proposal to change dramatically the child support arrangements. The Bill and the response by the Government to their earlier consultation document make it clear that the intention is to put significant barriers in the way of any single parent who wants to make a claim through the statutory system. Those who do make it through the gateway will have to pay a fee just to be allowed to apply for the money to which they are entitled in law. If they get through and the money is then paid through the statutory system, both parents have to pay a fairly hefty proportion of that money—private money—to the DWP for the privilege of getting what is meant to be paid by one parent to the other. The noble and learned Lord, Lord Mackay of Clashfern, made a clear argument on this. There is nothing the parent with care can do to influence the other party to pay directly or to co-operate other than going through the state. Why is she then to be penalised? This is money that currently she receives directly to feed, clothe and buy shoes for her children. Why should some of that money be handed over to the state, potentially up to 32 per cent of the total amount, simply because the other party will not co-operate? That seems to be dramatically unfair.

There are many other questions that are yet unanswered, and the hour is getting late. However, I want to flag some issues that will come up during the Committee stage. What will happen to passported benefits such as free school meals? What will be the effect of stopping the automatic payment of money for children to the main carer, usually the mother? What about disabled children—potentially as many as 187,000 of them, so the charities tell us—who could lose up to £1,400 a year? What of the impact on 17 and 18 year-olds?

I understand that we cannot get all the detail right and I heard the persuasive appeal made by the noble Lord, Lord Brooke of Sutton Mandeville, that we should ensure that we do not allow the best to be the enemy of the good. I have heard the Minister say in previous briefings that we must focus on the structure, not on the detail, and that there may be more jam tomorrow. But children growing up now will be affected in the future by the incomes of their parents today. The very least we must ask of the Minister is that he should demonstrate to the House how the Government will achieve their own goals of simplicity, making work pay and tackling poverty. If he cannot do that, we are entitled to ask whether the revolution is justified. Perhaps the poster of Che Guevara should come down.

18:24

[Lord Bilimoria]

My Lords, from 1999 to 2001, I served on the New Deal Task Force of the then Department for Education and Employment, and thereafter from 2001 to 2007 I served on the National Employment Panel in the newly formed Department for Work and Pensions. When I look at Britain, I see a country that is so wealthy that we have been able to spend 50 per cent of our GDP on public spending—spending approaching £700 billion a year which enables every citizen of this country to access a welfare system and public provision that provides free school education, free health at the point of delivery, and access to all the areas covered in this Bill, including unemployment benefit, housing benefit and childcare benefit. Our welfare and pensions bill alone, as the Minister has said, is £200 billion a year, which is by far the largest element of our public expenditure.

Given our economic situation, the Government are of course trying to bring public expenditure down, but I believe that they are making cuts where they should not be. It is not appropriate, for example, to make cuts in our defence expenditure or to harm our competitive advantage in areas such as higher education. But in the area of welfare the Government are doing absolutely the right thing in attempting to reduce the giant burden of these costs, which have been escalating over the years. It is an area where, in many ways when standing back from it, a detached observer could quite reasonably ask, “Why, during the boom years until 2007, was welfare spending increasing? Why, with the advances in medicine and health, were more and more people claiming disability living allowance? Why, when reports from the Office for National Statistics show an increase in the number of workers in the UK who were born abroad from 1.9 million to 3.5 million since 1997, were there just 25,000 more British-born workers in employment in 2009 than there were in 1997?”.

During my several years working in welfare reform, it became very apparent to me that the system we had created in this country was too complicated and had resulted in a culture of welfare dependency and a culture of welfare entitlement, as the noble Lord, Lord Feldman, said in his excellent maiden speech. It was a system where, more often than not, it did not pay to work, as all the benefits combined often yielded more of an income than working. Also, the risk of taking a job and losing those benefits—in particular, housing benefit—along with the enormous bureaucracy involved in getting all the benefits back in this complicated welfare system, was a huge deterrent to working. The Government’s universal credit will try to address this, but is it going to be able to deal with the benefits trap? The Government’s plans have already been criticised for the way in which they are trying to phase in centralised control of housing benefit. At the moment these are dealt with by local authorities, but in future they will go through the universal credit. Are the Government going to be able to administer this in a fair and practical way?

Another shocking observation during my years of working in welfare reform was that our labour force in the UK showed a huge reluctance to move in order to get a job, or even travel to a job—sometimes as close as going from one borough to another in London. Do the Government believe that their proposals are going to help improve the mobility of labour? After all, we have millions of European Union workers in this country who have travelled thousands of miles to get a job.

Along with simplification, one of the objectives of these reforms is to reduce fraud and administrative costs. But to me this seems like Groundhog Day. I remember that 10 years ago we had the formation of the Department for Work and Pensions with exactly the same objectives: delinking education and employment by putting social security together with employment. Those objectives were noble and logical. As people came in to collect their welfare support, you would be able to work with and try and get those individuals back into work, and you would be able to clamp down on fraud and abuse of the system. But what is the reality 10 years later? We still have an estimated £5.2 billion in fraud and error overpayments in the benefits and tax credits system—after the billions spent on reorganising, splitting up and putting back together giant departments employing some 125,000 people. The DWP needs a huge budget of £2 billion a year just to run all this.

Where are our priorities when we are cutting the higher education teaching budget by a few billion pounds, resulting in student fees being tripled and cutting one of this country’s key competitive areas—one in which, along with the United States, we are the best in the world? In our biggest spending department, these figures would be lost in the roundings. The Government’s implementation of universal credits and all these reforms is going to require huge new IT systems. Given the track record in implementing giant IT projects—let us look no further than at the NHS—and to reinforce what was said by the noble Lord, Lord German, do the Government really believe that they can deliver all they are promising for the £2 billion that they have budgeted?

I also remember that some of the best and most effective delivery of welfare to work initiatives was by private sector firms. However, it is unclear what the Government’s plans are in regard to using the private sector to deliver their reforms. What are they?

Throughout my experience working with the Government in welfare to work, we used to refer to the “Australian Example”. I had the opportunity to meet Prime Minister John Howard, who personally explained to me how his Government made what they thought would be an unpopular decision by clamping down on the abuse of their welfare system and bringing in tough measures of getting people who could work into work, including compulsory voluntary work while they were on benefits looking for work. They found that the working, tax-paying population were really happy and supportive of the Government’s toughness—the scheme ended up being popular. Therefore, it is no surprise that a recent ONS survey showed that 53 per cent of people in this country believe that the current welfare system is too generous. That has gone up from 38 per cent a decade earlier. This should give our Government the confidence to pursue their proposals. From my experience in welfare to work, there is no question but that a working society provides, in every way, a healthier and better life; that work is not only necessary to provide and contribute to society but is good for people as such.

One of the recent Indian high commissioners here remarked to me that, in his experience of having been a diplomat around the world, he felt there was a lack of hunger and drive in this country. Although we are the most amazing and resilient country in the face of terrible adversity and tragedy—which is something that has been proved for centuries—if we look in the mirror, we will see that our welfare system now has one out of four working-age adults not working. As things stand, work often does not pay. On the other hand, we must make sure that those who genuinely cannot work—those who are disabled—are looked after, and the Government must reassure us that their plans will not jeopardise this. We have heard that a lot in this debate, and will continue to, because recently there has been justifiable criticism regarding the DLA and compensation for carers. In addition, what are the Government doing in these reforms to address the needs of veterans, both old and young?

Do the Government really have confidence that what they are proposing will not only drastically reduce this multi-billion-pound area of spending, but produce a system that provides support for those who cannot work and makes sure it does all it can—in a fair and firm manner—to ensure that those who can work do work; and that work pays?

18:33

[Lord Ahmad of Wimbledon]

My Lords, I welcome this Bill and there is a sound premise in what I say. It has noble intent; it seeks to simplify a very complex system; it seeks to decrease bureaucracy in the assessment of benefits, which has gone on for far too long; it increases transparency; but most importantly, as we have heard, it incentivises work. There is that look on a person’s face as they secure their first job, and we in this House—indeed within Parliament—must seek to do all that we can to facilitate that particular hope. I also believe that it is timely to tackle the benefits culture which, unfortunately, does prevail in many parts of society. For these reasons, I welcome the principle of the universal credit. It simplifies and confronts a creaking system before it breaks down. Most importantly, it ensures that claimants aspire to do more—it incentivises work. In very simple terms, taking six income-related benefits and replacing them by one is surely to be welcomed. It reflects and tests individual circumstances.

For this evening’s debate, I wish to focus on two elements. The first is children and childcare support. My maiden speech in your Lordships’ House was based on the need for parenting, because it determines success in early life. Early intervention is something that we have debated quite widely in the House. I know that the Minister and the Government have already said that they will continue to look at supporting children and child support, and I know that the Minister has done so. However, I would also like to hear from him that he recognises the valid and genuine concerns which have been raised over the support for, and needs of, families, in particular support for childcare, which can vary very considerably depending on where you are in Britain. Childcare support in London is markedly different from support in other parts of the country. I totally accept that the aim of the Bill is to incentivise work and to ensure that a family benefits from parents who are in work, not out of work. We need to ensure that it does, and that when both parents are working, whatever the family unit, they are not financially worse off as a result of childcare costs than if they had remained on benefits.

The second element is disability living allowance. Aside from my business interests, I spent 10 years in local government as a councillor. I have been involved in different parts of council work. However, one of the most rewarding elements is looking at our elders in society. They have done their bit and contributed to the economy of our country and it is time we took our responsibility towards them seriously. I believe quite strongly that the issue of the disability living allowance, and its mobility element, must be looked at. In many cases, this is the window to the world for those who have retired to homes and use this particular allowance to ensure their mobility, whether it is through providing wheelchairs or transport costs. We must protect this. I look forward to our discussions and debates in Committee over how we may best protect our elders—and I use that term quite deliberately, because a society is judged by its respect and reverence towards its elders. Its status in the world is judged in terms of how it deals with its elders. Britain has a proud tradition of doing that, and I hope that this Bill continues to protect that very tradition.

I do not wish to keep your Lordships’ House long, and I know that we will be discussing many matters in much more detail in Committee. However, let me reiterate that I welcome this Bill. Welfare reform is required. I also maintain, given the contributions that we have already heard from many noble Lords, across all sides of the Chamber, that this Bill will be enhanced during its passage through your Lordships’ House by the customary reasoned, measured and persuasive arguments that we see in this House. I welcome the Bill as it proposes the necessary reform of our welfare system, based on noble intent and research, and driven by the need to make our benefits systems work for the people who need it most; and because, ultimately, it is geared at incentivising work. In my view, it is both timely and necessary.

18:39

[Baroness Turner of Camden]

My Lords, this is a very complicated Bill. It is not very easy to understand since so much detail is left to regulations or to decisions by the Minister. What is clear, however, is that the Government are intent upon utilising the so-called reforms to get people into work rather than living on benefits. It is therefore not possible to consider welfare reform without reference to the economic environment in which it has to operate.

Ministers seem to find it surprising that some people find it more lucrative to live off benefits—which are not exactly large—than to take one of the jobs on offer. That indicates to me that we have a low-wage economy in this country. Small employers—and often larger ones—will often complain about employment law, but these employers are benefiting from low wages, and the taxpayer is subsidising employers who do not pay a living wage. I would make employers pay higher wages—after all, better-paid employees would spend more money and thus stimulate the economy, and there would be less reliance on benefits. I speak as a former trade union official of course, and I do not expect this Government to agree with that.

A civilised society does its best to provide support for vulnerable citizens and for those who from time to time in a working life require some form of assistance. Our present system originated with the Beveridge report following the Second World War, and subsequent Governments have generally supported that system. It does, however, need simplifying. Far too many people do not claim benefits to which they are entitled: there are said to be unclaimed benefits of around £16 billion a year. Nevertheless, the present Government claim that there is too much fraud, saying that only 7 per cent of people claiming ESA are too sick to work—therefore, they say, the welfare system is broken. This is hotly disputed by the Disability Benefits Consortium, and it points to the very large number of appeals which have been successful.

The Government seek to replace a range of benefits, as we know, with a universal credit, and there will be additions for disability. The work capability assessment will be used to assess eligibility for disability additions. Disability organisations have expressed concern at the proposed use of the WCA to assess disability additions. They say it is a blunt tool with which to measure barriers to work; it often inaccurately assesses disabled people as fit to work when they are not able to do so.

There is however a particular issue here, which requires a response from the Government. As we know, the Government clearly want people to work if they are capable of undertaking it. However, I have recently been informed that the Remploy factories which exist to provide work for hundreds of disabled people are being threatened with closure. There was a crisis meeting about this in Scotland last week, but this does not only apply in Scotland: Remploy factories throughout the UK are apparently threatened with closure. These factories provide a supportive environment in which disabled people are able to cope and to earn a living. So on the one hand we have this Bill, with the clearly expressed intention of getting disabled people into suitable work, and at the same time there is the closure of the main and highly respected employers in an era of low employment. These employers offer precisely what one would expect the Government would want to maintain. It is therefore hardly surprising that the unions—including my own, because we organise the Remploy staff—are very angry. Can we have a statement from the Minister about the Government’s intentions here?

I return to the issue of universal credit. I understand that it will be accompanied by new conditionality regulations and stricter sanctions. Claimants will have to comply with these in order to receive benefits. The fear on the part of many of the people who are disabled and have written to me is that this will result in a worsening of their conditions. The Government also intend to replace the disability living allowance with the personal independence payment. Again, there appears to be provision for a six-month qualifying period, which could leave many struggling to survive financially until accepted, and again, much of the detail is apparently to be in regulations.

A part of the Bill which has led to much correspondence is that related to housing costs. The Bill gives the Government a new power to introduce cuts to the amount of benefit people can receive if they are deemed to have additional space in their council or housing association home. For many, a spare room is a necessity. Moving to a smaller flat or house may simply not be possible. It will do nothing to cope with overcrowding—a particular problem in London—and this could hit many disabled people, some of whom have had adaptations made because of their disability. It is badly targeted, and in my opinion it should be dropped from this Bill.

It is similar to the other policy to which the Government are attracted, under which housing benefit is related to the market rate for the area concerned. This would result in large areas of London becoming places where only the very well-off could live. In my area, for example, the rent in a housing association home or a council flat is in the region of £150 a month. Similar sized accommodation in the private sector will cost £500 a week—clearly beyond most low-paid working families. This section of the Bill must be thoroughly examined.

There are many other aspects of the Bill to which we must pay attention—benefits for single and separated mothers; child benefits; benefits for the young—but I am sure that there will be the opportunity in Committee and at Report to deal with the issues about which many of us will have received detailed briefings from many organisations.

18:45

[Lord Kirkwood of Kirkhope]

My Lords, it is a pleasure to follow the noble Baroness, Lady Turner of Camden; her experience is always of great value to the House. I also congratulate the noble Lord, Lord Feldman, on his powerful maiden speech, which will repay careful study.

I arrived at this debate with a 15-minute speech as is allowed under the Companion but, as the noble Lord, Lord McNally, announced that we only have seven minutes I have cut the first eight minutes of my speech. Unfortunately, that was the half of the speech that was a paean of praise to the Minister of State, so I am left with seven minutes which will look really quite critical. That is not my fault; it is the business managers wot did it.

This has been a very good debate. It is a shame that we are only getting seven-minute contributions, because it is a very complicated Bill. I acknowledge, as others have, the energy and enthusiasm of the Minister of State. He really has put an enormous amount of his own personal time and energy into this, and so have the Bill team. I concur with others who say that we have all been able to get access to some of the complications and technicalities because of the efforts that they have made in making information available, and I hope that will continue.

I hope that we will take this Bill into Grand Committee. In Grand Committee we would have a much better chance of looking at the relative benefits between gross and net tapers—some of us spend time thinking about these things—and we could have a much better quality of consideration, particularly of the technical aspects of this Bill. However, we need time: there is no equivalent of seven-minute speeches in Committee. We have got to do this seriously, so I look to the Minister of State for support when he is confronted by the business managers to get the time that we need. If he does not give us the time, I promise him we will just take the time, so it is better to continue with his idea of co-operation, which he has been absolutely splendid in fostering so far. However, if he starts to close down debate, particularly in Committee, I for one will not take kindly to that.

I agree with the noble Baroness, Lady Hollis, when she said that she detected the fingerprints of the Treasury all over this; we have both been in this business for a long while. I agree that the structure and the architecture of the Bill are perfectly defensible—I will say a word about that in a minute—but it is at risk of being prejudiced because of the degree to which these cuts have come on the back of it. I perfectly well understand that the Treasury needed cuts because the universal credit proposed in the Bill needs funding to pump-prime it. It has not got as much money as dynamic benefits. The dynamic benefits report of 18 months ago was very compelling: it is a very robust argument about what can be achieved if you invest in the system and have tapers that really make a difference and make work pay. It is marginal as to whether this Bill will actually achieve its objective the way it is currently cast. It is open to other Governments of course, and as my noble friend Lord German was saying we have some expectation that once we get through this period of austerity, which you cannot ignore, then we might get into a better position where we can make the Bill even better than it is at the moment. The Treasury’s influence is malign, and while I myself am in favour of supporting the architecture I will do everything I can within the Committee structure to mitigate some of these cuts.

I have a word in passing about the pressure group community, which has been very good at supplying information to us in a very useful way. I counsel them to think about mitigating this Bill. Understandably, some of them are taking very high-flown positions, as if there was no economic difficulty and this was all dead easy. That is what they are there to do, and I do not criticise them. I have read all their briefings, but I have not been able to respond to them all because they have been coming at me like stuff out of a cement mixer for the last two or three weeks. I am sure that is not unusual and that all my colleagues are in the same boat. However, I counsel them to spend some time thinking about how they might help the Committee mitigate some of the worst features of the Bill in how it bears down on benefit expenditure.

This point has not been mentioned before: while it is of course a simplification to collapse benefits into the universal credit—I support that—because of its technical difficulty the benefit system will not be simple after it. I implore the Minister to make sure that he takes full advantage of the capacity of the Social Security Advisory Committee when it comes to the regulation-making stage of this Bill, because it has great knowledge in length and in depth. It has a wealth of experience, is objective and does excellent work. I have some amendments in mind for the Committee where we might think about how to integrate the work of that social security committee even better into our considerations of the Bill, because it is not just the Committee stage that we are dealing with. We will be having regulations and affirmative debates for many months and years, and the SSAC has a track record which we ignore at our peril.

I counsel the coalition Government about overclaiming. I do not really mean the Minister of State, but there are people talking about a revolution. However, integrating working-age benefits between those in work and without it is dead obvious. It is said that this is all a great revolution but people such as Professor Roy Sainsbury at York have been talking about it for years. There are a number of different ways of doing it, so there is actually nothing new about any of this. Universal credit plus the work programme is very important but let us just keep the heid, as my granny used to say in Glasgow, and not get too carried away with it.

I want to talk briefly about how we capture the volumes of money that are being spent in the welfare system. It is sensible to invest in social protection. The well-being of our population is something that I am prepared to spend money on but we talk about it in the abstract—in billions of pounds. If it is looked at in terms of the public sector percentage spend or indeed as a share of national wealth, I do not think that the spending is out of control. It has certainly ticked up in a way that Governments cannot ignore and therefore I support some bearing down on the current levels. However, when we talk about it we should be talking about the percentage of public spend. The number of pound notes in every 100 that we spend on welfare should be looked at more carefully because that gives us a much better idea of what these systems are costing. The public know nothing about the relative costs of the different benefits, so public opinion is not a helpful guide on that matter.

The IT situation concerns me; I have said that to the Minister of State privately. I have been involved in some of the past reforms and they have all fallen over when they go up in scale. The pilots always work and the professionals who design these things are always very clever and convincing. However, when it goes United Kingdom-wide—when you scale it up from a few hundred thousand cases being put through a computer to 60 million—it falls over. Doing this over the next two years is impossible. That is my view and I hope I am wrong. I have said that to the Minister in spades and his enthusiasm is still undimmed. I am lost in admiration for his confidence in what he is doing but I think it is wrong. If it all works by 2017, I will buy him a drink and apologise—and from a Scotsman, a drink is actually quite something.

I want to finish with a single thought. The noble Baroness, Lady Sherlock, my noble friend Lady Tyler and others made impassioned pleas about the benefit cap, which is a step too far for me. I give the Minister fair warning that I cannot support the benefit cap as it is currently cast and I hope that he will look at it very carefully. There are lots of reasons: for example, 70 per cent of those people are in social housing and 206,000 children will be the people who will carry the can for it. However, for me it is actually a question of principle. We have a system of entitlements in our social security system and, if you have the entitlements, you get the benefit. Here is an arbitrary system coming in and overlaying that by saying, “Well, you may well be entitled to it but we think it's too much”. Parliament should not let that pass without some comment because it cuts straight across everything that we have known in the social security system since I started coming to Parliament, when I was thinking about the supplementary benefit system, which shows your Lordships how long ago that was. That cap is not fair and is an idea which I struggle with. I understand the need for deficit reduction but I cannot follow the Minister in the direction of a household benefit cap as it is currently cast. I want there to be no doubt about that but I am happy to continue the discussion and look forward to the debates in Committee.

This is an important Bill. We have to be careful how we implement it. We are looking at an economy that is performing poorly, with inflation and people's household domestic costs rising. The social rental sector is getting worse, not better. Yet there is one situation for households in this country that would be worse than dependency, and that is hopelessness. If we are not careful, some of the low-income households in our country will be subjected to hopelessness as a result of some of the measures in this Bill.

18:56

[Baroness Howe of Idlicote]

My Lords, I join the noble Lord, Lord Kirkwood, in his concern that the traditional practice of reasonably sized contributions from noble Lords has once again been put aside and a meagre seven minutes advisory per speaker suggested in its place. I notice that he has gone well over that time limit, which gives us plenty of opportunity to follow his example. There will clearly be a great deal to do in Committee and at other stages of the Bill in your Lordships’ House—not least as much of the Bill was apparently not discussed at all during its passage in the other place.

Perhaps the most remarkable thing about this Bill, with its principal aim of simplifying benefits and making work more attractive and much more worth while than living on benefits, is that practically all welfare rights pressure groups, think tanks and involved charities and many individuals are theoretically in favour of such an approach. Rightly so, as who would want a system which continues to encourage family dependency if jobs are genuinely available and wanted?

The snags emerge when we begin to look at the detail, particularly when families and children—even more important, when disabled adults and children and those with mental health learning difficulties—are involved. The closer one examines the huge volume of evidence, including many individual histories written in fairly despairing terms, the more obvious it becomes that the most vulnerable and least able to cope will be hardest hit. Even though there may have been some unnecessary scaremongering, the concern of many third-sector organisations and others working with such families will be to hear reassurance from Ministers as to how clearly essential and necessary support will be maintained. There is also the problem that unless the local authority finance for these essential services is to be ring-fenced, a localism approach may indeed be creating a postcode lottery.

I shall mention one or two issues. On housing for example, the plan to require those in receipt of public support to move to different accommodation if they have an unused bedroom is one concern. The noble Baroness, Lady Wilkins, overwhelmingly made the case here. Reassurance from Ministers will be needed that special arrangements will be possible or extra funding available for more expensive accommodation, if the private sector is the only alternative to a compulsory move. One worry is the understanding that the severe disability premium is to be scrapped, yet surely that kind of situation is exactly where extra help is essential. This may be one of the areas being looked at, but the Children's Society’s view is that it could mean a loss of up to £2,876 per annum for such families.

There is also a need to look at other issues that will affect the likelihood of those with caring responsibilities obtaining a job and at the effect of recent positive measures. It is good news indeed, for example, that the Government are actively involving and encouraging third-sector participation, not least by ensuring that when both sectors are competing for caring contracts, the system does not allow the public sector a tax advantage.

The change in the retirement and pension age will also have a huge impact. As we know, Ministers are eager to raise the retirement age even earlier, but closing the gap between men’s and women’s retirement age also means that women must work longer and therefore will have less time for any caring role. Finding jobs that will allow time for disabled caring responsibilities will become increasingly difficult unless more positive action is taken. Have the Government, for example, thought about a scheme that would reward businesses that make special efforts to provide flexible working opportunities for such families? I would be glad of an answer from the Minister.

Again, frankly, the likelihood of older women, whether carers or not, being able to find jobs, full or part-time, into the intermediate economic future will be minimal, and that situation needs facing. Barnardo’s and its associates, which have sent your Lordships detailed briefings, are also concerned about a number of problems. Family and friend carers, for example, who are bringing up a child who would otherwise be in local authority care, should, they think, be exempted from conditionality requirements under universal credit for a year. Also, from October 2011 carers will have to be available to work when the child is five rather than seven years old, with all that that means for extra childcare costs. Childcare costs, as the Minister knows, are seen as a major obstacle to women working. So, as the Bill progresses, it will be increasingly important for the Government to convince voluntary organisations and family and friend carers that the combination of their proposed changes will not result in even higher numbers of children in care and higher overall costs for the state.

I make one final point: there will be a great need to ensure that it is the main carer of the child, the vast majority of whom will be women, who will continue to receive whatever allowance is due to the family. This is an issue of particular concern for Platform 51 and other such organisations and is vitally important when one looks back to the past and realises that this sum has often been the only money the carer has had in order to ensure that the family is fed.

19:03

[Lord Whitty]

My Lords, on the one hand, the Government must be gratified that they have received almost universal support for the final objective of the Bill: the simplification of the whole welfare system. On the other, they must be quite concerned that it has probably provoked an almost unprecedented amount of lobbying on the actual implications for particular groups of benefit claimants and for the system as a whole. The whole experience in life, for most of us, is that simplification costs money, at least in the short term. Yet the Ministry is attempting to do this at the same time as delivering to the Treasury significant savings in order to offset the deficit. It is conceivable, and desirable, that in the medium to long term this will produce savings because the incentive to go back to work will be greatly increased, and therefore those on benefit at the margin will not be on benefit any longer. However, that will take a long time, and in the present economic and social circumstances, the effects of those changes will take the Minister well beyond the point where the noble Lord, Lord Kirkwood, has just offered him a drink. At least four years needs to be added to 2017 before we will be able to see the long-term benefits. That is the problem that the Government are in.

I want to concentrate on one aspect of the Bill—and maybe draw some conclusions as to how to manage this process—namely housing benefit and related housing matters. I have always taken an interest in housing benefit. The noble Lord, Lord Brooke, referred to his maiden speech. My maiden speech referred to housing benefit and how we needed to reform it. Not a lot has been done and, as the noble Lord rightly said, the cost has significantly risen. There is, however, a difference between housing benefit and many of the other benefits that the Government are attempting to wrap in to the universal credit system. Some of the entitlements are the same, and it has some of the dysfunctions of the other benefits, but the amount spent on housing benefit is based not on the individual circumstances of the claimant, or his or her household, but on the circumstances of the housing market, or the quasi-housing market, in the area in which he or she lives. It is therefore different from the other parts of the benefits that we are folding in and it is a little difficult to propose, as a major feature of the Bill, that housing benefit should be treated the same.

There are other aspects of housing which are dealt with in the Bill. Reference has already been made to the issue of requiring benefits to be paid to the claimant rather than allowing the option of paying them direct to the landlord. I can never understand why Whitehall always thinks that if you leave more of their own money to the poor, they will manage it better. It never happens with the rich. For many poor people, having direct deduction from their benefit into their rent and council tax is the equivalent of our more bourgeois use of direct debits and standing orders. Many of our own abilities to manage our finances would be seriously undermined were we not to have that facility, but many of these people will not have the full range of bank accounts to help them with whatever they might wish to do.

Reference has also been made to council tax benefit being separated from housing benefit. That is complicated for people who have hitherto applied for both on the same basis and could lead to unfairness and to different local authorities operating it in different ways. They are, of course, effectively retaining the same basis of housing benefit for the pension part. Creating a housing credit element of pension credit will actually retain that proposition for those households who are of pensionable age, but of course that could mean differential treatment for the same amount of income for equivalent households in equivalent properties. Combined with other government proposals on altering the eligible rate criteria and effectively introducing a target for social rents in housing associations and council property of 80 per cent of the market rate, this will actually cause extreme difficulty in many areas of housing stress, particularly in central London but also in other cities and in some rural areas as well.

The Explanatory Notes explain that,

“regulations will provide for a claimant’s liability to pay rent to be treated as an amount other than the actual amount of the liability”.

In other words, as the noble Lord said earlier, we are going to pay them less than they are entitled to on some notional formula of a target and then of a cap. Meanwhile, of course, the whole benefit system is changing and the provision of social housing is also being covered in a different part of the legislative jungle, the Localism Bill, which we have been debating in recent days and which abolishes the life tenure for social housing; introduces a new system, in parallel, of affordable rents and requires a local authority to have tenancy strategies; and, indeed, changes the whole basis of social housing finance by abolishing the housing revenue account arrangements. It also does other things such as diluting local authorities’ responsibility for homelessness.

In all these interventions in the housing market there is a completely transformed situation against a background whereby every part of the housing market is seriously dysfunctional. The statistics summarising this were repeated in proceedings on the Localism Bill; namely that the formation of households is running at twice the rate at which new dwellings become available. That affects the whole range of housing tenure. It therefore affects the poorest who are attempting to retain or gain access to all three main areas of housing tenure and raises some very basic questions.

Government intervention in the housing market has shifted over the past 25 years from supporting the supply side, through the supply of council housing and home improvement and regeneration grants, to supporting the demand side by paying individuals. At the end of the 1980s the ratio was 80:20 in favour of supporting the supply side; it is now 80:20 in favour of supporting the demand side. Is that sensible? Should we not rethink the whole of government intervention in this area, certainly over the medium term? I suggest that the Government take the provisions in this Bill on housing benefit, the provisions in the Localism Bill on social housing and related matters, the changes that they are proposing in relation to planning to make housebuilding easier, put them all together and look at them carefully to determine what the totality of our housing strategy should be. If they did that, it might be easier in the long run to incorporate whatever succeeds housing benefit into the universal credit. If, however, they try to deal with one side of the matter without dealing with the other, I am afraid that they will not meet their objectives either of simplification or of saving money. I leave that thought with the Minister. He perhaps ought to set up a commission to look at the matter—I would be willing to serve on it—but we ought to look at the totality of housing. I see that I have overrun my time but I hope that the Minister will take note of what I have said.

19:12

[Lord Morris of Handsworth]

My Lords, we can all agree that an effective welfare system must be designed to promote the basic well-being of those in need. Rightly, the state demands a quid pro quo—work for those who can and support for those who cannot. However, this arrangement is not as balanced as it might sound because for the balance to be maintained work must always trump welfare, but that demands that there are jobs for people. With unemployment at 8 per cent or more, cutting benefits to make work pay is not a joke for those who are unemployed and struggling to find a job. Of course, there will always be people who try to beat the system. However, to give the impression, as did the Chancellor, that the unemployed see welfare as a lifestyle choice is plainly wrong.

I want to concentrate on the impact of the Bill on the housing sector. I declare an interest as chairman of Midland Heart Housing Association. I start by looking at what is described as “actual rent”. Actual rent is the amount paid by a tenant irrespective of whether they are in the social or private rented sector. The Bill gives powers to the Secretary of State to set the level of housing benefit with no regard to the actual rent being paid. For many housing benefit means the difference between sleeping under a roof and, in some instances, sleeping on the pavement. These new powers for the Secretary of State will have two significant consequences. First, the gap between the benefit paid and the actual rent charged will put at risk security of tenure for many. Those who rely on benefits and cannot afford to fund the shortfall will have their independence and choice further reduced. The reality will be a greater risk of people being forced into poor quality overcrowded homes or being trapped in a cycle of homelessness.

The second downside is that the gap between benefit and actual rent will mean uncertainty for social housing providers who will be left on the horns of a dilemma. What do they do? They have the choice between evicting tenants or funding the shortfall, which in turn will leave less capital to build much needed social housing. That is the dilemma which will be faced by many social housing providers.

The new draconian measure in the Bill—the underoccupation penalties—will mean that the Government can cut housing benefit for social housing tenants who have an unoccupied room. According to the DWP’s impact assessment, this will affect an estimated 670,000 social housing tenants, more than half of whom are disabled. Many disabled tenants live in adapted, specially designed, supported and sheltered housing. Will they be evicted and, if so, where will they go?

Finally, I wish to say a few words about the Social Fund. Much could be said about that fund and other benefits but no doubt our discussions in Committee will be informed by noble Lords’ practical experience. They have the expertise to deal with these issues and ensure that a Bill emerges from Committee which meets the Government’s objectives of cost reduction and supporting those in need. The Social Fund supports families and individuals in crisis when they need financial assistance. However, the Bill abolishes the discretionary Social Fund and replaces it with local provision. This vital safety net for families in severe crisis should be made into a duty on local authorities. If they are to deal with that issue, the provision needs to be secure. There is a view that this fund should be securely ring- fenced to avoid it becoming a Social Fund postcode lottery.

In conclusion, much has been said, and much will be said in Committee, with the aim of improving the Bill. However, I repeat that an effective welfare system must promote the basic well-being of those in need. Sadly, as the Bill stands, it could destroy the safety net for the very people it seeks to protect. The responsibility lies with your Lordships' House to ensure that that does not happen.

19:19

[Lord Patel]

My Lords, before I come to my main points, I should like to make a brief comment on something that the Minister said in his opening speech. He spoke of the impact of the proposals on people with cancer, mentioning Professor Harrington’s review and saying that he had listened to advice from organisations such as Macmillan Cancer Support. As welcome as the Minister’s reassurances are on the Government’s commitment to readdressing the anomaly between how people undergoing different types of treatment are dealt with, he is, I am sure, aware that this is a very different issue from another about which Macmillan has said it is seriously concerned: the time-limiting of employment and support allowance to 12 months. The concern is not that people will not be supported while they undergo treatment but that the Bill pays no regard to how long cancer patients take to recover sufficiently in order to be able to return to work. It is about this that I should like to speak.

The Government’s proposals to time-limit contributory-based employment and support allowance to 12 months are unfair and wrong. They will leave thousands of cancer patients without financial support at a time when they need it most. Before going into the impact that the proposals will have on cancer patients, I shall outline the kind of people we are talking about. Of course, people who are terminally ill or so severely debilitated that they are in the support group will be protected, and so they should be. I am talking about cancer patients who have undergone debilitating treatments such as chemotherapy or radiotherapy and are in the process of recovering from their illness.

In my experience, 12 months is simply not long enough for many cancer patients to be well enough to return to work. Yes, survival rates for cancer have improved, and for many it is no longer the death sentence that it once was, but it still takes a considerable time for a person recovering from cancer treatment to be fit again for work. Treatments such as chemotherapy and radiotherapy can be highly debilitating, often more so than the cancer they are treating. The side-effects of these treatments can be severe and long-lasting. It is not uncommon for cancer patients still to be reporting pain and extreme fatigue years after a treatment has ended. I know that many in this House will understand that.

There are also serious psychological barriers that patients have to overcome in order to be able to return to work and to support themselves. Of course, cancer patients have a particular incentive to return to work—for many, a return to work is a return to normality—but in order to do so without further risk to their physical or mental health they need the right support and they need time.

Those who have incurable cancer and are in the last two to three years of their life, but who are not yet defined as “terminally ill”, often find themselves in the work-related activity group, with no prospect of recovery. However, the Government are still proposing to take support away after one year. In defence of this proposal, Ministers in the other place have highlighted that, after one year, those who lose their contributory ESA will be eligible for continued means-tested support. But what does this mean in reality?

Many in this House will already be aware of the concerns raised by Macmillan—about which I wrote yesterday in a letter to the Times—about the serious financial impact that the change will have on many cancer patients. Macmillan has warned that an estimated 7,000 cancer patients a year, too sick to be expected to work, will lose up to £94 a week as a result. This is because anyone who has partner and who earns as little as £150 week will not be entitled to anything under the means-testing rule.

In addition to my opposition to this proposal, I also have grave concerns about how the Government intend to implement it. First, it will be retrospective. Come April 2012, anyone who has already spent a year or more in the WRAG will lose their contributory benefit immediately. Secondly, the 13-week assessment phase will count towards the time limit. Thirdly, the Government's proposals have not taken into account those with a fluctuating condition. Any time spent in the WRAG or assessment phase will be aggregated and count towards the 12-month period.

Despite the overwhelming arguments against Clause 51, the Government are pressing ahead. It is not because rigorous analysis has shown that 12 months is sufficient time for patients to be ready to return to work; the Government's own figures say that 94 per cent of people will need the benefit for longer than a year.

This is not the only worrying aspect of the Bill, which passed through the other place unchanged. Some proposals, such as the reform of the disability living allowance, will further increase the financial pressures on people diagnosed with cancer by ensuring that they have to wait twice as long before they can get crucial support with extra costs related to their condition. CLIC Sargent, the charity for children with cancer, has raised concern that the Bill is particularly hard on 16 to 18 year-olds with cancer, who will effectively be treated the same as other adults despite being far less likely to have financial independence.

Every day, 10 families are told that their children have cancer. Treatment begins straightaway, and so do the side-effects. A study found that 83 per cent of families incur significant extra costs, with 68 per cent experiencing worrying financial difficulties. Several aspects of the Bill impact negatively on 16 to 18 year- olds. The examples are: the extension of the qualifying period; changes to the disability living allowance; removal of the youth conditions for employment and support allowance; and changes to the disability premium within child tax credit, income support or universal credit.

Perhaps I may illustrate the impact of the Bill with the story of Lucia, a young lady whom I met and a person of great presence, courage and fortitude. She was diagnosed with acute lymphoblastic leukaemia when she was 15 years old. She was unable to walk more than a few metres. She was admitted to hospital. A day later, she began two-and-a-half years of chemotherapy.

All her treatment was received 40 miles away from home, with her family travelling at least once a day to care for her. While she was an inpatient, her family was informed by a CLIC Sargent social worker that they might be eligible for DLA. Although they were initially reluctant, financial pressures, with Lucia’s mother having to give up work, meant that they had to apply for a grant. Their application was successful only after an appeal. That was in spite of Lucia being unable to walk and reliant on a wheelchair, needing help with personal care, having to travel five days a week for treatment and being occasionally admitted to hospital. It was also in spite of the added cost of food, transport, clothing and home adjustments.

Being diagnosed at 15 and needing treatment at 18 meant that Lucia fell between child and adult categories. After a year of DLA, she was awarded a lower rate, as her treatment was deemed less intense. That was despite there being no change in her health status or treatment. Who makes these decisions and how are they made?

Now, four years after her treatment has ended, she needs help again. Although her leukaemia is in remission, the treatment has left her with bone damage in her knees, rendering her unable to walk or stand for any length of time. She hopes that her claim for DLA will be successful.

I hope that the Bill can be amended to reform the system for 16 to 18 year-olds, alongside reform of that for under-16s, and to extend the qualifying period of six months. I know that the Government are looking at this, particularly as it applies to cancer patients, and I hope that the Minister will have some positive answers. I hope to bring forward amendments in Committee and that other noble Lords will support them.

19:28

[Baroness Donaghy]

My Lords, I shall concentrate on the potential impact of the Bill on self-employed people, with perhaps a few words on kinship carers, referred to earlier by the noble Baroness, Lady Tyler.

The coalition has acknowledged that the self-employed are a group which “is often difficult to map”. We still have no clear indication of how they will be treated by the universal credit system. The 4 million self-employed people who contribute £21 billion in added value to the UK economy and the Federation of Small Businesses are concerned that self-employed people will be considered to be earning a set wage, calculated at the national minimum wage for reported hours worked. This is not only unrealistic, it is likely to discourage self-employment and is itself open to abuse by underreporting working hours. Small business owners starting up for the first time often do not start earning until much later. Most start-ups fail within the first three years of operation and it is essential that we support those willing, as the Federation of Small Businesses put it,

“to take that plunge into entrepreneurship”.

The coalition Government have previously stated that they encourage a more dynamic private sector. Encouraging more people to go into self-employment will help to guarantee the long-term economic growth of the UK economy and offers opportunities to reverse the current high levels of unemployment. How will the universal credit affect self-employed people and what measures will be taken to ensure that it does not act as a disincentive to set up a business? Under the current system, someone who starts up as self-employed will be entitled to full working tax credit as long as the work that they are doing is seen to be in expectation of payment—the business has to be reasonably viable. The universal credit will deem people to earn the minimum wage even if they have been unable to take a wage out of the business during the starting-up period. That means that people will lose money if they start their own business.

The only incentive here is to give up or slip into the informal economy. How often will the self-employed be expected to fill in tax returns in order to receive the universal credit, as their working hours will be outside the PAYE system? How will the Government minimise any extra work for small businesses? The Government will know that various organisations have raised concerns about the proposals for the self-employed. Citizens Advice has said that,

“this is clearly the difference between being able or not to set up in business”.

It has outlined a telling case study where one woman would be £61 a week worse off under the new system. The National Association of Welfare Rights Advisers and the Low Incomes Tax Reform Group believe that the Government should use a similar model to that already used for working tax credit which, by using a measurement of self-employed profit within the tax system, takes account of loss-making periods and investment in premises, equipment and machinery for business.

I am aware that the coalition has indicated that the rules on the treatment of the self-employed will be set out in regulations and that they are still,

“looking for the best way of doing it”.

I have some appreciation that putting this on the face of the Bill might hinder flexibility. However, when the regulations are eventually produced and if they do not tackle the issues that I have raised—namely, avoiding disincentives to self-employment, reconsidering the proposal of the minimum wage as an income floor and facilitating the collection of information about income which is easily adjustable as circumstances change—an important principle will have been lost: the Welfare Reform Bill was supposed to improve things. The new system will be worse than the current system and self-employment will have additional burdens placed on it by a supposedly red-tape-cutting Government.

We need an indication at least of intentions towards this group of people—an outline of what the regulations might say, an assurance that the definition of income from self-employment in universal credit is aligned with that used in the tax and credits system, and an absolute assurance from the Government that they are on the side of entrepreneurs.

As the noble Baroness, Lady Drake, is committed to the other parliamentary business at this time, I want to say something about kinship carers—a subject that she would have covered in more detail. There are around 200,000 kinship carers in the UK and an estimated 300,000 children who would otherwise be in care being raised by family members. Many such carers will be affected by the conditionality requirements and the cap on benefits. This will unintentionally undermine many kinship carers’ capacity to care for the children by requiring them to look for work, increase the hours that they work or cap the benefits that they can claim. If only 5 per cent of the children in kinship care were to enter the care system, it would cost the taxpayer £500 million every year. It costs £40,000 a year per child to be placed in independent foster care.

Kinship carers should be exempted from conditionality requirements under universal credit for 12 months after the children move in. The increase in the state pension age for women from 60 to 66 will mean that an increasing number of older grandmother carers will be expected to be available for work under the conditionality requirements. These people are taking on responsibility, not avoiding it. The Bill should present an opportunity to support kinship carers not add new barriers. Thank you.

19:35

[Baroness Stowell of Beeston]

My Lords, I will limit my remarks to the parts of the Bill relating to the proposed universal credit and the benefits that it replaces. In doing so, I will focus in particular on the long-term unemployed.

I do not think it is an exaggeration to say that our benefits system is broken. Indeed, from the comments made by others today, it seems that many noble Lords agree. As it stands, it establishes dependency, destroys incentives to work and entrenches poverty. That is not good for the people who receive benefits, it is not good for the people who pay for them, and it does not say a lot for the political classes presiding over the system.

The evidence shows that public opinion about our benefits system does not divide along party lines. The simple fact is that too many people who get up every day to go to work see their neighbours and others who are like them in nearly every way except that they do not get up and go out to work because they do not think, apparently, that they have to. Allowing that to happen has had a profound impact on our society in several ways. We have diminished people's willingness to support a benefits system which needs to be there to care for the genuinely vulnerable and those who find themselves suddenly and temporarily out of work. We have provided a breeding ground for hostility towards people who make their way to the UK to take advantage of our broken benefits system. What is really bad about that, let us be clear, is that the people who suffer most from that hostility are those who come to the UK to work hard and want to contribute through their drive and ambition. What is really worrying is that we have also weakened people's belief in the democratic process itself because they look at us and see that we have allowed this to happen and go on for far too long.

When we get to the Committee stage, I hope that we do not lose sight of this bigger picture because the Bill—the new universal credit, the benefit cap, which I support, the work programme and the changes that will make work pay—may finally be the first step on the road to recovery. I say first step because, while I support the Bill, I see it as only a framework for us to build from. I know that some Lords might not agree with me, but I am pleased that much of the detail will be covered by regulations and secondary legislation because I am sure that we will need to experiment and trial different aspects of the Bill over the next few years. This applies particularly to the conditions and sanctions that we set and the way that we categorise claimants.

Some people get a bit windy on the topic of conditions and sanctions, but I genuinely do not understand why. If we accept, as I think we do, that people are only reacting rationally to this current system of welfare—some people are playing the system that we have created because they can, not because they are inherently bad—if we change the incentives so that it pays to work and we apply firm conditions and sanctions to the receipt of benefits so that they are not seen as a soft option, surely people will respond just as rationally. Why would they not? My concern is making sure that the conditions that we set go far enough so that they provoke a radical shift in rational behaviour.

During our scrutiny over the next few months, we will debate anomalies and we will want to mitigate the risk of unintended consequences. During this time, we will also hear of many hard cases. Of course, we must listen and make sure that the benefits system is able to respond to them with compassion and respect. However, let us not forget the old truth that hard cases make bad law. If we build the new system by using the exceptional as the benchmark for the average, the new system will be as broken as the current one and it will not help those it is intended to support.

The Bill gives us the opportunity to show people who have been on benefits for a long time that we want to help them and that we are serious about doing so. It gives us the opportunity to show that helping people means getting them to the point where they can earn their living and other people's respect. Indeed, anyone earning their living, in whatever kind of job, not only earns other people's respect but deserves it. Just as importantly, this Bill allows us, finally, to show those already trying hard to earn a decent living that they are the ones doing the right thing.

We need, of course, to combine welfare reform with economic growth, real jobs and better education for our children. I believe that this Bill is a big step towards correcting our welfare system, which has been broken for far too long. For that reason I support the Bill.

19:41

[Baroness Gale]

My Lords, I will be focusing my speech on the impact that the provisions of the Bill will have on people with Parkinson's and their carers. I declare an interest as chair of the All-Party Parliamentary Group on Parkinson’s Disease. My concerns are that the Government’s reforms could mean that people of working age with Parkinson's will miss out on the financial support on which they now rely. Nearly 10,000 people of working age with Parkinson’s receive disability living allowance and a Parkinson’s UK survey of 2010 found that the DLA was used by people with Parkinson’s for absolute essentials. For example, it pays for the extra cost of electricity for heating the home, for support and help in the home and for transport costs. They describe it as a lifeline.

The Government propose to replace the DLA with a new benefit for those of working age, the personal independence payment. The focus of PIP will be on those with greatest need. That includes moving from the existing three DLA care rates to only two and it is possible to surmise that people with Parkinson’s on the lower DLA rate are more likely to lose out completely. Will the Minister give an assurance that no one with Parkinson’s who currently receives the DLA will lose their benefit and that the important benefits to which the DLA is linked, such as the blue badge or the mobility scheme, will now be linked to the PIP?

This is not the only way in which the reforms will impact on those with Parkinson’s. By wanting to reassess everyone of working age who receives the DLA and then reassess people routinely, rather than make indefinite or long-term awards, the Bill clearly fails to recognise the nature of a progressive, fluctuating condition such as Parkinson’s. Most people with Parkinson's are already on indefinite awards of the DLA and that is in recognition that their symptoms will not improve. To put them through a face-to-face reassessment and periodic reviews will cause anxiety and distress. As someone with Parkinson’s put it, “This is a recipe for continual harassment”. Will the Minister assure your Lordships' House that people with Parkinson’s will not be put through the anxiety of face-to-face reassessments if sufficient written evidence already exists and that, once in receipt of PIP, anyone with Parkinson’s already receiving the highest rate of PIP should not be subject to periodic retesting? Face-to-face reassessments are notoriously inaccurate for people with fluctuating conditions. People report that the assessor sees them on a good day and assumes that that is how they are all the time. Under the new proposals, assessors will not take into account life-limiting symptoms of Parkinson's, such as problems with getting out of bed, moving around indoors, the risk of falls, and night-time care.

There is much concern about the need to report changes in circumstances for a fluctuating condition such as Parkinson's. People are extremely worried about these proposals. Recently, one man wrote:

“Don't let the government take DLA away; it’s too good a benefit to lose, and a lifeline for disabled people. DLA can continue to be improved, and refined to meet any requirement. Just don't let them take it away, or abolish it, just because they couldn’t save enough money by keeping it”.

He ended by signing his name and underneath wrote:

“Severely disabled for 20 years and terrified”.

During the Summer Recess, I had the privilege of shadowing a Parkinson’s nurse in Bridgend for a day. She really impressed me. She was so dedicated and it was easy to see that she loved the work she does. I asked her whether patients had said anything about the Welfare Reform Bill and the DLA. Her answer was that they are petrified. A briefing I received recently—like other noble Lords I have received many briefings on this Bill—ended by saying:

“The situation for the sick and disabled in this country is pretty dire”.

People with Parkinson's are incensed about how people receiving benefits, such as the DLA, are being portrayed in the media, yet are fearful of being reported as frauds just because they have had a good day. One man said:

“I am sick to death of the Government, certain UK newspapers, et al ‘informing’ the nation that ‘there are so many lazy people who are not ill’. I have been called a ‘fraud’ just because I have had a good day. Anyone who is jealous of me, or thinks I am lazy, can have my DLA, as long as they take the Parkinson’s with it. I have worked all my life. I have paid into the system for an insurance I hoped I would never need—but unfortunately I do. I wish perhaps that people would just think about that”.

I hope that the Minister will think about that tonight.

What sort of coalition Government is this that people in this country are petrified and terrified of these proposals? I have never heard anyone speak this way about any government proposals or about any Government. People might be unhappy or they might not like something but on this people are saying that they are petrified and terrified. Something must be wrong for people to feel this way. I hope that the Minister will reflect on what people with disabilities such as Parkinson’s are saying as it is a progressive illness for which there is no known cure. People do not recover from Parkinson’s.

As their illness progresses, people with Parkinson’s generally have carers. Often it is a family member or friend. Informal carers stand to face a double whammy under this Bill as a carer's allowance is dependent on the person with Parkinson’s being eligible for the higher or middle rate of the DLA. The Government have done little to make the situation any clearer for carers about which rate of PIP might be linked to the carer’s allowance. Can the Minister give an assurance to carers that both new rates of daily living PIP will lead to eligibility for carer’s allowance so that no carer will lose out in the change from the DLA to the PIP? Please give them some hope so that they can continue with their caring responsibilities without all these unnecessary worries.

19:49

[Baroness Falkner of Margravine]

My Lords, I declare an interest as a non-executive director of Hyde Housing Association, as described in my entry in the register. I am also a trustee of Hyde Plus, the social regeneration charity established to provide practical assistance to some of the most vulnerable of our residents. We are a large housing association. Nevertheless, my comments tonight will be my own: I will not be speaking for either of those bodies.

Before I begin on the substantive parts of the debate, I pay tribute to the maiden speech of the noble Lord, Lord Feldman. As an immigrant who arrived on these shores some 75 years after his grandparents did, I recognise the values he spoke of extremely clearly. They are the values that many immigrants who come to these shores identify with. They will be affected by some of the provisions of the Bill. It was a fabulous maiden speech and I hope that we will retain the values articulated in it throughout our deliberations on the Bill.

This is a radical reforming Bill, designed to leave Britain's welfare state in a better state than we found it. However, its success will be measured ultimately both through its emphasis on an increase in the efficiency of the system—and surely, when one looks at the figures of what we spend, we can come to a consensus, as I think we have today in the House, that there is an element of waste in the system—and on its foundation in fairness. In his book Them and Us, Will Hutton defines fairness in Britain as a belief that one should receive one’s due deserts in proportion to whatever good or bad one has contributed. However, the emphasis must be on proportionality, and that is what on the whole the Bill does, although I have some reservations.

You cannot have fairness without accepting that life deals with us through lady luck. Those who have had the luck of a healthy life, good educational opportunities, and the good fortune to have had economic independence to make the right employment choices, are there to a great extent through their personal capabilities—I am a liberal, so you would expect me to say that—but also because of who they are and where they were born. Recognition of the element of luck in framing our lives demands that we contribute to the ill luck of those who have not enjoyed the things that we have. It was this recognition that led Beveridge—yes, I am from the party of Beveridge—to design a welfare state safety net. In the intervening years, the safety net has turned into a web of increasingly intricate, incomprehensible and untransparent rules that absorb huge amounts of the time of benefits officers, legal advice centres and other bureaucrats, while the people who need the safety net are turned into mere recipients of what are known as “entitlements”.

We know also that capitalism needs to have a relationship with concepts of justice. Just as personal worth and effort cannot be the whole story of success, so, too, we know that injustice is not a given. Much of it can arise from the lottery of life, and it is our duty to act on it and to reduce it. This is why the Bill is so important. We know that it will impact on vast numbers of people, some of whom will undoubtedly be disadvantaged in the short term by its changes. However, moving to a universal credit will be fairer and simpler, thus freeing funds in the longer term to spend more wisely. It will also work to reduce disincentives. I also welcome the change to make payments monthly, which will assist households in budgeting and prepare them for the monthly payment regime of those in employment.

My particular area of interest in the Bill is housing in general, and social housing in particular. In her opening remarks, the noble Baroness, Lady Hayter of Kentish Town, referred to the dearth of small household units. Other noble Lords referred to the overall shortage of social housing. We also know that, because of demographic changes in the composition of households, such as rising population and rising longevity, the pressure for additional social housing located in the right parts of the country will continue. We also need to acknowledge the wasted opportunity under Labour in times of plenty of not addressing the chronic overall undersupply of housing in this country. Housebuilding fell in 2009-10 to its lowest level since World War I —137,000 units. The required supply is around 200,000 units per year, according to the IPPR, leaving a gap of some 63,000 units.

The social housing sector has seen similar underinvestment, with years of diminishing investment by taxpayers in the affordable housing that is an essential element of the safety net. It is against this backdrop of tighter government grants, alongside a tightening of credit in the capital markets, that housing associations are asked to provide more affordable housing. One change—the withdrawal of the payment of housing benefit directly to landlords—will impact significantly on the social housing sector. Arrears are bound to increase with direct payments to residents. The level of risk that housing associations incur will rise. If predicted income is not guaranteed or readily quantifiable, the price of money borrowed by RSLs will also increase. Credit agencies will downgrade our status and borrowing for building in certain parts of the country might rise by as much as 100 basis points. The Government's stated desire to increase the supply of housing—in particular social housing—will not therefore be met.

I understand that the Minister is contemplating reducing the risks to housing associations by stepping in after four weeks of arrears to revert to direct payments to social landlords. This would be welcome, but would entail greater bureaucracy for both RSLs and the DWP. Its impact would have little effect on the capital markets’ or financial institutions’ assessment of risk, and therefore on borrowing costs. Several questions also arise from the proposals concerning choice, efficiency and value for money. I look forward to debating this point with the Minister in Committee.

A further issue concerns the household benefits cap. My noble friend Lord German today set out the relevant figures for households both with and without children. While I understand that the Government arrived at a cap of £26,000 per year on the basis of median income, this is far too blunt an instrument to do credit to what is in many respects a good Bill. We cannot find it fair to use a straitjacket to measure household costs, irrespective of where the household is, how large or small it is or what alternatives its members have to substitute income through employment and related means. I hope that factors such as actual housing and transport costs will also be taken into account to allow for regional if not local variation in the setting of the cap.

This bold Bill, with its radical restructuring of welfare, is very welcome. However, it is in the conviction that the scrutiny of this House will improve it further that I look forward to debating it in Committee.

19:58

[Baroness Grey-Thompson]

My Lords, I understand the need for reform of the welfare system, and I support a system that is more simplistic and better able to deliver what is required to those who need it. I am pleased to hear that the most vulnerable and those in greatest need will get the support they deserve, but it must not be at the expense of others who need it to live equally.

My concerns cover a number of areas. Like many in your Lordships’ House, I have been contacted by many disabled people who are terrified that this is the first step towards an insurance-based, perhaps Americanised system which will further discriminate against those in need. I am concerned that the Bill will leave a significant number of disabled people in a precarious position where they do not get the help and support that they require. Under the new system, those people may not be considered disabled enough to be supported, but may be considered by society to be too disabled to play a full part in it.

As many disabled people as possible should be in work, but many will still experience discrimination in the workplace, will be in the lowest paid jobs, and will struggle to reach their potential without support. The new system may provide those in low-paid work with a higher earnings disregard, but it looks likely that a narrower group will be able to access this than those currently receiving the disability element of working tax credit. We need to ensure that this group is able to make the transition into real work and to have the right support until this is possible. I believe that the ethos of support needs to change. Perhaps now is a good time. Until now, to get support has been about proving what you cannot do. We need to look at what people, whoever they are, can achieve if the correct mechanisms are in place.

Disability is not homogenous. Even two people with the same impairment—for example, with my level of spina bifida—will have very different needs, depending on their upbringing, on where they live, on their education and on what support they have around them. The Joseph Rowntree Trust has estimated that it costs 25 per cent more to be a disabled person in the UK due to housing costs, aids, transport, et cetera. Being disabled puts a great burden on the individual and their families.

The media coverage of disabled people is already varied. Disabled people are either portrayed as athletes or as work-shy benefit scroungers. There is not much in the middle. The reality is that we know that the rate of abuse of the current system is 0.5 per cent. From my own personal experience, I know that if I am recognised as “the one who used to be the athlete” or as someone in your Lordships’ House, I am generally treated extremely well. However, if I am seen as “that woman in a wheelchair”, or more usually, “that wheelchair”, then my treatment can often be somewhat less favourable. Recently, on returning to the UK by air, I had a difficult experience, when I was left sitting on the plane for a time. I was removed, left at the gate, then left sitting in an airport without any mobility and very nearly crawled through passport control because I wanted to get home. As it was, I missed my connection and an hour and a half later I managed to get to where my bags were and finally to my wheelchair.

I am very concerned that the 20 per cent cut to working-age DLA expenditure, although estimated at £1.3 billion, will affect the care and mobility support that disabled people can access, and increase reliance on council services. I have great concerns that this could radically change people’s ability to work and push the problem into other areas, such as health.

Those who will fall outside the system could be pushed into a ghetto from which it will be hard to escape. I wonder how far away we are from a point where we have the “deserving disabled”, who require support, and the “undeserving disabled”, who are left in limbo. Growing up, I did not see many disabled people. They existed but they were locked away in schools and care homes—and I never want to return to that. We have to ensure that disabled people are still allowed to be independent.

Take me, for example. I am relatively healthy—perhaps not as fit as I used to be. Without the support of DLA I might have been able to learn to drive at 17, but I would not have been able to afford a car or insurance. I would not have been independent. I would not have moved away from home. I would have found it nearly impossible to go to university and I would have struggled to become an athlete. Because of the support that I had then, I am now able to give back. I am fortunate that I am now in a position to buy the equipment and support that I need, but 99 per cent of disabled people are not.

If we are to support changes, much more needs to be done to ensure that discrimination in the workplace disappears and that there is an improvement in public transport, which outside London is not generally that accessible. If I want to travel by train, I am meant to book the exact train time 24 hours in advance. Can anyone imagine a non-disabled commuter having to do that every single day? This is the unseen reality that disabled people face.

Like many in your Lordships’ House, I am concerned about the DLA removal from residents of council-funded care homes. Many disabled people living in residential homes use this component to pay for either a mobility aid, such as a wheelchair, or travel costs to see family and friends. If this is removed, we remove people’s freedom. I listened to the Minister’s opening remarks and look forward to future discussions in this area.

We must also have faith in the PIP assessment process and, as was clear from listening to the remarks of the noble Baroness, Lady Campbell of Surbiton, disabled people do not. Many of these assessments are complicated, but they must take into account all the medical evidence that is available and use the best documentation. They must ensure it is done properly the first time, and that the use of appeals is not a delaying tactic in providing the support required.

I also have concerns about time-limiting ESA to one year. I will refrain from commenting now, with the constraints on time that we have, but I acknowledge the speeches of the noble Baronesses, Lady Hollins and Lady Morgan of Drefelin, and the noble Lord, Lord Rix. Will the Minister assure us that all disabled people will continue to get the support that they need to live equal lives? Can I have his assurance that we are not dooming a generation of disabled people to a life of hardship? Does he consider that I have disability-related costs? People like me are afraid that we will lose vital allowances. Will we?

Yes, we are in tough economic times and there is a need for change, but we need to ensure that these changes help disabled people fulfil their potential and not hold them on the first rung of the ladder.

20:05

[Baroness Healy of Primrose Hill]

My Lords, I too would like to raise an issue of grave concern to the families of adults with an autism spectrum condition. The National Autistic Society estimates that there are 350,000 working-age adults with autism in the UK, of whom just 15 per cent are in full-time employment. This Bill will have a profound impact on their lives.

Many of these adults are relying on disability living allowance, which under these proposals will be replaced by a new benefit of personal independence payment. The proposal to cut £1 billion from the projected spend on disability living allowance over the next three years is causing them and their families alarm, as my noble friend Lord Touhig has mentioned. As one parent of an adult with Asperger’s syndrome says:

“Without DLA I can say with absolute assurance my daughter would have to give up her entire independence”.

She goes on to say that this could lead to the return of her daughter’s depression and suicidal thoughts.

Families are especially concerned about the new assessment criteria and descriptors to receive the new benefit. They have grave doubts as to how the new assessment process will work and about the standard of training of the assessors. As one mother of an adult son with Asperger’s wrote to me of the PIP assessment:

“I am now very concerned that unless huge changes are made to both the questions and the way in which the assessment is carried out it will not reflect the complete needs of adults with autism”.

People with autism suffer four main areas of difficulty, which are worth restating: all forms of social communication; recognising or understanding other people’s emotions and expressing their own; understanding and predicting other people's behaviour; and sensory issues which can greatly impact on their ability to function at home and especially in the workplace. These difficulties make finding and retaining employment very challenging. Those with autism have a need for routines and an aversion to change. Periods of change cause a great deal of anxiety and can be very difficult for them to manage.

These are the reasons that people with autism and their families fear that the proposals in the WRB, however well intended, will result in real crisis for many who are struggling to participate and integrate into everyday life. The Government should not underestimate the cost of medium and long-term impacts that would be caused by people with autism losing their DLA or PIP entitlement. These would include the increased demand for mental health services, increased demand for primary care services, loss of employment, and the costs of homelessness and family breakdown. Many families feel that government-provided services make no accommodation for their loved ones’ unique set of requirements. They believe that this Bill will not improve the position of autistic adults. The Government will need to spend time assessing their needs and reassuring them that the proposals will be able fully to take into account the needs of adults with autism, some of whom are the most vulnerable in society.

The National Autistic Society estimates that over 60 per cent of adults with autism rely on their families for financial support and 40 per cent live at home with their parents. Sixty-three per cent of adults with autism report that they do not have enough support to meet their own needs. As a result of this lack of support, a third of adults with autism have developed a serious mental health problem. The parents of these adults live in fear of what the future holds for their children when they are no longer alive to care for them.

This Bill is in danger of reducing the independence, standard of life and dignity of these we as a humane society have a basic duty to protect. Many people have contacted me, as they have contacted other noble Lords, about the proposals in this Bill to express their fear of what it will mean for their lives. I have been struck not only by the severe difficulties they face but also by the sheer determination they express to get on and live useful, independent lives to the best of their ability with just a little help from the state.

If we are to learn from the mistakes of the past, the Government must acknowledge the genuine concerns of those families caring for and supporting their autistic adult members. They need to recognise that everyone with an autism spectrum condition will present differently. Some of these adults are more able than others but they all have autism, which affects them in vastly different ways. The Bill needs to reflect this reality.

There are a number of faults that need correcting. The National Autistic Society believes that the descriptors do not adequately reflect the complexity of autism conditions. This could mean adults with high-functioning autism or Asperger’s syndrome would not qualify under the criteria and would be unfairly affected. The draft regulations do not take into account some of the specific needs of people with autism and, as a result, a significant number of adults with autism will fail to qualify for the new benefit.

There are omissions from the criteria for adults with autism. Safety and the ability to understand hazards and danger are not spelt out in full in the draft regulations, and nor is the fact that some adults with autism display challenging behaviour that may result in damage to property, yet it is unclear how these would be taken into account in the current criteria. A one-off interview is not an effective diagnostic assessment of autism-spectrum conditions. Such conditions can change over hours and in different environments. Face-to-face assessments will add unnecessary anxiety to the individual, who has probably already been subject to numerous assessments and tests, as my noble friend Lord Touhig has already so eloquently explained. The pressure group Act Now points out that the purpose of the Autism Act 2009 and Fulfilling and Rewarding Lives: The Strategy for Adults with Autism in England is to lay the foundations for the change that is much needed for adults with autism, but families fear that this Bill fails to recognise the strategy by not addressing the complex needs of people with autism.

I urge the Government to consider three important improvements. First, the Bill should include an offer of a communications advocate; secondly, it should provide for a proper and detailed transition plan individually tailored to each person's needs, which is vital for people with autism; and thirdly, where expert reports are available, they should be used in place of a face-to face assessment and the intense anxiety it creates, and adults without such reports should be assessed by an appropriately trained professional who understands autism. If the Government are serious in their efforts to achieve a better system then surely they must build a structure that truly helps our citizens to lead fulfilling and rewarding lives.

20:11

[Baroness Flather]

My Lords, I found this Bill very difficult to understand. I have no experience in this field, and I am not connected to any organisation or to any of the issues that have been mentioned by many noble Lords, but, like everybody else, I have received a great deal of correspondence and I have tried my best to read as much of it as possible.

I have always felt that our welfare system should first and foremost be looking after the most vulnerable. That goes without saying. What is the welfare system for? It is to look after those who need it most. What many of us resent is feeling that it is sometimes used by people who should not be using it. It is sometimes used fraudulently, and we sometimes see people who are fit and healthy not working when jobs are available. If there are no jobs available, that is a different matter, but they have preferences and say that they will not take this job or that job, but taxpayers should have some preferences as well about who they would like to pay for.

As far as the vulnerable, the elderly and the disabled are concerned, I wholeheartedly support all of what has been said, and I look forward to the amendments that will come up to improve the Bill. My husband is very disabled, although fortunately we have not had to depend on benefits, but every little bit that he gets is helpful. It is very sad when one partner in a couple is disabled and gets worse and the other partner who tries to be a carer gets older. That is our case, because I can no longer look after my husband.

If somebody has drug dependency, they are on benefits and they also get paid for their drugs. What reason is there for them to get off drugs? Not only are they treated as disabled but they have their drugs paid for. There is no incentive to get off drugs. These sorts of things worry me, and I hope that they will be looked at.

I was extremely pleased to hear the Minister say in his opening remarks that the benefits of a person who takes a job will be protected and their universal credit can be reinstated if the job does not work out, because I have often felt that people are afraid to take a job because they are afraid that it will be very difficult to get their benefits reinstated. In fact, if I had seen the opening remarks of the Minister and the noble Baroness, Lady Hayter, I would probably have understood the Bill a lot better, but I did not hear them until I came here.

I want to introduce an utterly controversial idea. I expect that it will not find much favour, but it has been on my mind, and I am often controversial in what I say. I feel that people should not be getting the full raft of benefits for any number of children. I feel that the first two children should get a full raft of benefits, the third child should get three-quarters and the fourth child should get a half. I say this, especially after the recent riots, because we need to give responsibility for bringing up children back to the parents. It is very easy to produce a child, but it is not very easy to bring it up. I hear parents saying, “The school should teach them that,” or “The school should do that”, as if the state should take care of everything. The school has so much less time with a child than the parents do. I think it is time to make parents responsible for at least some part of bringing up their children.

The minority communities in this country, particularly the Pakistanis and the Bangladeshis, have very large numbers of children and the money that follows the child is an attraction. Nobody likes to accept that or to talk about it because it is supposed to be very politically incorrect. Well, I am politically incorrect, and there is no doubt that six or seven children give you a far larger income than three or four. I think it is about time that we stop people using children as a means of increasing the amount of money that they receive or of getting a bigger house.

In the countries of origin, these people—Pakistanis, Bangladeshis and even Indians—have large families because there is no safety net. When you get old, it is only your children who are going to look after you. That does not apply here. Every old person will have their pension and will be looked after. It is time to introduce the pattern of this country and to tell people that they must start following it. At the bottom of the education league tables are the Pakistanis and Bangladeshis, and top of the league are the Chinese and Indians. Indians have fallen into the pattern here. They do not have large families because they are like the Jews: they want their children to be educated. This is the other problem: there is no emphasis on education in the Pakistani and Bangladeshi families. If there was, there would be no problem. But we have a large number of young people, particularly young men, who have very few skills and very basic education and they are not really skilled to do any work even if the work were available.

It concerns me that we do not say anything, we do not do anything and we do not send any message that this is not acceptable. Having a child is easy; bringing up a child is difficult. The recent riots have told us that parents need to take responsibility for their children.

20:19

[Lord Boswell of Aynho]

My Lords, I welcome the Welfare Reform Bill. I believe that it represents significant progress in social policy. In particular, it will help to make work pay—an aim that is clearly shared by all sides of this House.

It is estimated that the Bill has the potential to lift 350,000 children and 600,000 adults of working age out of poverty. It will eliminate six separate benefits and reduce the opportunity for fraud and error. These are great prizes and strategic advantages. Of course, I accept that any changeover on anything remotely like this scale cannot be ideal. Whatever benefit system we have is governed by the inexorable iron triangle of the number of people covered, the rate of taper on the withdrawal of benefit and the overall Exchequer cost.

In this case there are also particular issues of timing. The first is the need for overall cuts in public spending, particularly on programmes that are prospectively exploding, like DLA. Even if the change to universal credit is going to incur substantial upfront and continuing costs, we are spending for the advantage we get. There is never an ideal time for reform but at least we have the opportunity now and the courage of the Minister and Government to devise the architecture and grasp the nettle of the basis of this change.

Another factor, of course, is that the labour market is soft but, even so, the private sector has shown some potential for creating additional jobs, just as in parallel we must support those who are coming forward to employment. There are also loose ends to be tied on the administrative side, as there are interactions with many other benefits—for example, for carers who remain formally outside the system. At the same time the universal credit is going to sweep up previously discrete benefits like housing benefit, which attempt to cover the many and varied circumstances of our lives; for example, outside the benefit system there are annually over 10 million job changes and some 3 million changes of address.

Finally, the system has to be made conceptually administerable and, through IT, technically deliverable. Like many other Members of this House, I have received extensive, thoughtful and sensitive briefings from outside bodies rehearsing a wide variety of difficulties as they see them. I accept that my noble friend the Minister, who spoke with a great deal of sensitivity and care today, is working hard to expose the issues to us and to deal with the problems as they arise, and also to explain the rationale of government decisions where there may be hard decisions to take. To be fair, I think many of the objections that have been laid have been in relation to potential notional future setbacks rather than immediate issues.

However, rather than delve into detail now, I shall just indicate my particular interest in families with children. Children are at best indirect beneficiaries of the benefit system; they cannot make their own choices or be autonomous. On enforcement of child maintenance support, I incline to the view expressed by the Select Committee in another place, and echoed eloquently by my noble and learned friend Lord Mackay of Clashfern this afternoon, that parents who have done their best should not be penalised by an administrative charge even if it means taking more off delinquent parents who have not been prepared to comply. More widely, the pattern of childcare costs varies very sharply, particularly regionally and in London. It would clearly be wrong to sanction lone parents when childcare costs for them are unaffordable.

As a former chairman of the Conservative Disability Group, I should also record that I am bound to be taking an interest in many of the disability issues that have been discussed in the context of the Bill. I will also, as an ex-Education Minister, want to say a little bit about the 16-hour rule and the changes there, and about some of the awkward transitions and interaction with the education system. I also note a point that has been mentioned by other noble Peers today about the transfer of discretionary payments to local authorities. Whatever the conceptual case for this—and Beveridge, who is often quoted, wrote a book before the First World War on the possibility of using agents for discretionary payments—if we remove the element of discretion from the Social Fund, other than simply for the budgeting of loans against expectation of benefit, we need to ask what the future of the Social Fund is. I think Ministers have sort of said something about that, but I cannot see why a clutch of regulated benefits would need separate badging.

If we are going to secure an overall beneficial outcome from the Bill we need to proceed very carefully and with no false sense of haste or triumphalism. This is perhaps my main message to Ministers. I hope that they will pay particular attention to the possibility of overlapping dates—not everything needs to start at once. They should also pay attention to the vital transitional arrangements. There needs to be within the regulations enacting the Bill sufficient flexibility if not to reverse direction—which I do not seek—then at least to be able to flex and modify policy as detailed inputs and wrinkles are revealed. We also need to build up an improving picture of the overall impacts; for example for disabled people, in the context remembering that some of their support is passported through the programmes of other government departments or agencies while their physical services, on which they may well depend, are also inevitably subject to budget stringency and present difficulties.

All this, however, is no counsel of despair. I believe strongly that the Bill provides a basis for dynamic change by tilting the scales from dependence to properly supported and incentivised work. This can bring both social and economic benefits, but if we are to scale this Everest of achievement, we cannot do it in one bound from our present base camp. The Bill sets the objectives, but it does not by itself represent the achievement. In this process, including the long and very full Committee stage we need, we will have to work out where we are going, and every step in the implementation of this must be well considered for its consequences and systematically secured as we move from base camp to camp 1 and up to the summit. In doing that, however, it is the right thing to do and we must be resolute in pressing its direction.

20:26

[Lord McAvoy]

My Lords, we have had a number of really excellent contributions from very experienced people this evening—in particular from my noble colleague Lord Kirkwood, whose contribution was certainly worth listening to. I intend to concentrate on housing and hope to cut two or three minutes off my speech, and if the noble Lord, Lord Kirkwood, would regard those few minutes as off-setting his, I hope he will regard them as a gift from me—although some of his colleagues may say, “Beware of Tommy bearing gifts”. But you never know.

Like many colleagues, I, too, have a number of briefing notes, particularly from Scotland. There was one from Sense Scotland with which I certainly agree. It said: “We are concerned that the focus in the Welfare Reform Bill as proposed is on cutting costs rather than on the principles of a fair and equal society, although reference is made to fairness in the proposals without specifying what it means for people in their day to day lives”. We have been told this evening that the country cannot afford to pay for benefits; we have been told that the country is in a terrible state financially, so therefore these measures have got to be taken. There was not a word about the bankers, not a word about the people in the financial world who brought this situation about and still get their large bonuses, not a word about tackling them. It is all about tackling the people on benefits; that indicates the priorities of the Government.

I said that I was going to concentrate on the housing aspect of the Bill, and another briefing note I received was from Caritas Social Action Network. It says that,

“the Bill will enable the Government, through secondary legislation, to enact proposals relating to housing benefits”.

That is what I want to deal with. The noble Lord, Lord Freud, wrote in a letter to Archbishop Nichols in July 2011 that,

“based on the most recent impact assessment, the Government is still unable to estimate how many people will be left without accommodation”.

As for under-occupancy, I was brought up with my mother from the age of seven and we lived in a house which, in the current situation, would have been taken from us. We would have been forced to move because of the under-occupancy rule. We would have had to leave the community in which my mother and I were born and brought up. God knows where we would have gone or the condition of the house to which we would have been sent.

The under-occupancy rules will result in a large group of people being prodded and poked out of their houses and made to go elsewhere because they cannot afford to stay. Their housing benefit will be cut because they allegedly have been given too much. I am not sure whether the Government realise that the social engineering in which they are participating will create a large group of people who will be alienated from and by society. They will be treated differently and as people who are not quite of society or of the country. Severe discrimination could take place and it would be criminal. I will be blunt. The situation will affect people who have no understanding of how a whole swathe of working class people live. I am no social liberal and do not condone benefit fraud—I am quite hard-line on that—but I have to say that, measured on the scale of the situation created by the bankers and financiers, this is an overreaction. This is setting up an Aunt Sally. It will single people out and society will pay a price for it.

I am well aware of the limitations of this place. I support this place as a revising Chamber and not as a place for defeating the Government of the day. The noble Baroness, Lady Meacher, is correct, and we hope that there will not be any votes in Committee or at any further stages because changes will already have been made. I was also pleased to hear the noble Lord, Lord Kirkwood, mention the time factor, although I do not think that he will have to push too hard. The noble Lord, Lord Freud, has indicated that he favours 12 days in Committee, with which I would go along.

In short, I hope, as the noble Baroness said, that we get change. I feel frustrated and angry about the owner-occupancy rules but I accept the limitations of this place. I hope that the two minutes that I have cut will go some way to helping my colleagues.

20:32

[The Earl of Listowel]

My Lords, in the brief time available, I should like to address the principle of universal credit, the impact of the Bill on foster carers, and the training and support of staff dealing with adults with mental health issues. There will not be time for me to speak about housing benefit but I am concerned about the impact of the changes on families, although I welcome the introduction in the other place of a commission to look at those changes. I believe that I am right in that.

I am very grateful to the noble Baroness, Lady Hollis, for so eloquently putting the principle of universal credit and explaining its importance in getting adults into work. My noble friend Lord Bilimoria, among others, spoke about the importance of work to the soul and to the spirit. I have no doubt that there is work and work, but in terms of breaking the isolation that many people experience and of giving people a sense of purpose and feeling that they have a contribution to make, work is very important to our society. That aspect of this Bill is extremely welcome and has been too long delayed.

Perhaps I may give an example. Tomorrow evening, at the Tallow Chandlers Hall, some of us will celebrate the work of the National Grid young offender programme. Over the years, it has trained more than 1,500 young people from the criminal justice system. It has taken them into employment as fork lift drivers and pipe layers. Among these young men, reoffending has reduced from 70 per cent to well below 7 per cent. For the first time, many of them have found in their mentors—older men who have taken an interest in developing their skills—a kind of father figure and a good, positive male role model. One sees these young men, perhaps fathers with young children, and thinks to oneself that they will be there for their children and will set the right example. Of course, this will also take families out of poverty.

Several years ago, the noble Baroness, Lady Hollis, talked about the importance of ensuring that mothers get into employment. If mothers are employed, it is far more likely that their daughters will themselves enter employment in their teenage years. There is so much to welcome in this aspect.

I am concerned about the impact on foster carers. Children are taken into care because of abuse in their family, which may include neglect, or because of particular disabilities they may have. Sometimes they have to be fostered because of the impact that the care system has had on them. There has been a long-standing shortage of foster carers and we need an adequate range to get the right placement for the right child. We need foster carers who are prepared to take sibling groups. It is a challenging prospect, but many families around the care system have large families and it is important to keep siblings together where possible.

I turn to social work support. We still have a shortage of social workers and variable quality, though it is improving. We still have social workers tied down, spending 80 per cent of their time on paperwork rather than dealing with families. I welcome the attention that the Government have given to the concerns of foster carers. I welcome the letter from the Minister, Tim Loughton, to Robert Tapsfield, the chief executive of the Fostering Network, the voice of foster carers in England and Wales. He assured him that the Bill will not have an adverse impact on foster carers. Robert Tapsfield met the noble Lord, Lord Freud, recently and I welcome the statement yesterday evening addressing a number of his concerns.

Two outstanding issues remain. One concerns the under-occupancy penalty. I would be grateful for the Minister’s reassurance that foster carers will not be penalised. They need to keep one or two spare rooms for their foster children. I would also like reassurance about staff. There should be statutory guidance on training them to deal with foster carers. They are a small group within the larger system and need particular attention and treatment.

I shall say a little more about staff who deal with mental health issues and foster carers. My noble friend Lady Meacher spoke eloquently about the need to care for often vulnerable adults and to train and support staff properly. I was grateful that the Minister arranged for my social worker colleague to speak to Ross James in his department about training and supporting staff. The culture of the organisation is so important in terms of ensuring that people continue to show compassion and understanding to these vulnerable groups. One looks at the success of the Youth Justice Board over the past 10 years and how the treatment of young people in the criminal justice system has been turned around. At the top of that institution is a board whose directors include the chief executive of the Children’s Society, Bob Reitemeier, and a judge from the youth court, and it is led by a former chief executive of a local authority. These are people who know social care issues well.

If one looks at the immigration system, where there are perhaps similar issues about encouraging people to return to their country of origin if their asylum claim has been disallowed, there is again experience on which we can draw. We can also learn from mistakes, such as at Yarl’s Wood, where the prison service was given charge of these families with their children without any input from the social care arena.

This sort of work can be draining for people on the front line—we see this particularly in the health service —and they need support. They become so fatigued that they can no longer use their discretion in an appropriate way. They must not be overworked and underpaid in the way described by my noble friend. I would be grateful for an opportunity to meet some of the staff who will be delivering this service, as well as the senior management of these agencies, in order to learn more about the culture that surrounds the payments made and the provision of help in this area.

I conclude by saying that, as the noble Baroness, Lady Hollis, pointed out, we need to give people in this situation the confidence to go into work. Most will want to work and to break the dreadful culture of dependency. Work is important to the human spirit. It combats isolation, which can lead to all sorts of mental health issues. It is important for people to feel that their life has a purpose. I welcome the Bill and the principle behind it, although I have many concerns about its application. I look forward to working with colleagues and the Minister in Committee.

20:40

[Lord Skelmersdale]

My Lords, I am rather tempted to start my speech with that part of his speech that the noble Lord, Lord Kirkwood, left out. Be that as it may, many noble Lords have made the point that this Bill starts the greatest single reform to the social security system since 1942. I note that the Minister and indeed Barnardo’s, in its excellent brief, called it “radical”. I would call it revolutionary. It is not, of course, that there have been no reforms since 1942. We have, though, arrived at a system that is costly, confusing and error prone both to the potential recipients and DWP staff. I agree completely with the noble Baroness, Lady Meacher, in her plea for good training of DWP staff. My noble friend Lord German and my former temporary boss, my noble friend Lord Brooke of Sutton Mandeville, also made the point about the difficulty of operating social security for recipients and DWP staff alike.

Looking at the Beveridge report, from whence modern social security arose, two things struck me. Paragraph 9 of the introduction states that:

“The state, in organising security, should not stifle incentive, opportunity [and] responsibility”.

I am grateful to my noble friend Lord Feldman, in his excellent and philosophic speech, and to the noble Lord, Lord Bilimoria, for speaking on this point. A little later, in paragraph 22, the report makes the point that:

“The insured persons should not feel that income for idleness, however caused, can come from a bottomless purse”.

Of course we would not use these exact words now, political correctness being what it is, but the points are nevertheless well made and form the basis of this Bill. The Government, very naturally, want to steer as many benefit recipients as possible into work, a policy which was adopted by the last Labour Government. That will not be easy as people are wedded to their current entitlements and the various add-ons and passported benefits that have crept into the system over the years. We have heard about many of them in this debate, not least from the noble Baroness, Lady Hayter.

What we have in this Bill is a system that is simple and easy to operate, which is something that no one can say of the current situation. The important thing about these new arrangements is that financially, even at the minimum wage, the withdrawal taper is reduced so that a single person is always better off in work, and a couple with two children only loses out, on my calculations, by working between 17 and 18 hours a week. Working for 16 or 19 hours is okay, but 17 or 18 hours is not—or at least that is what the White Paper says. So to all intents and purposes, as my noble friend Lord Freud almost said, the benefit trap disappears. Not only that, but it is intended that the introduction of universal credit will not mean a reduction in a recipient’s current benefit. To me, as my noble friend Lord Freud knows, the trick has always been to achieve a single out-of-work benefit coupled with the adoption of a permanent disability benefit. That is why I am not troubled by the proposal to limit contributory employment and support allowance to one year as opposed to the current two years. After one year, it should be possible to assess whether the incapacity is permanent for, say, the next three or five years before a new assessment is made. I was struck by something said by the noble Baroness, Lady Hollis. She spoke, as I understood her, as if the withdrawal of contributory ESA would mean that there would no longer be any state financial support. That, of course, is quite wrong.

I accept though, that there are debates to be had and questions to be answered on when the reassessment should start. Should it, for example, be after nine months with no change of benefits until the 12 months is up; or should it be after the full 12 months, in which case what happens to the benefits until the assessment is made? For myself, I prefer the former, but like so much in this Bill, I await developments once we see the statutory instruments that flow from it. In this connection, I am grateful to my noble friend for saying that we will be able to see as much information as is available, well before our consideration is completed.

A certain amount has been said about working mothers. Of course, this is a subject that we are returning to after dealing with it previously in the Bill and statutory instrument, which I am sure the noble Lord, Lord McKenzie of Luton, will remember well. The key for working mothers, of course, is affordable childcare. The noble Baronesses, Lady Meacher and Lady Hollis, I and others asked—or quizzed, I should say—the then Minister as to whether this would be available. He said words to the effect of, “Don’t bother your little heads about it, all will be well”. I ask my noble friend Lord Freud whether that statement has borne fruit, and the situation is such as the noble Lord, Lord McKenzie of Luton, predicated.

This debate has shown that the House is in favour of a universal benefit. The noble Baroness, Lady Hollis, put it well and most of us have followed her. That is fine, but the noble Baroness uttered a very loud “but”. This reminded me of a phrase I uttered in a pantomime in my amateur dramatics days: “But me no buts”. I know enough of my noble friend Lord Freud to know that he will examine all our buts, to which he knows we will all require answers if he is to secure his Bill. I look forward to receiving them in the remaining stages.

I make one plea to the Minister, for him to abide by an acronym that I invented last night. The beauty of universal credit is in its simplicity. I urge him therefore to abide by KISISS, which stands for Keep it Simple in Social Security.

20:48

[Baroness King of Bow]

My Lords, we all believe in welfare reform, making work pay and simplifying the benefits system; and I am sure none of us envies the Minister his job. However, these reforms cut benefits to the point where they undermine the principles of the welfare state and remove the final safety net from some of the most vulnerable people in Britain. I confess I am shocked by the Bill’s consequences as it currently stands. I also have another confession: I am one of those Labour politicians who knows there are genuinely enlightened Conservative politicians. That is something I simply would not have believed as a child. Lib Dems, of course, have often espoused the same progressive social policies that I believe in. In fact, I remember many occasions when Lib Dem MPs stood alongside me and other Labour Back-Benchers between 1997 and 2005 to challenge our Labour Government’s record on housing—in particular they lambasted Ministers for not doing enough to support private tenants, especially those on housing benefit.

What are we to make of those same Lib Dems now backing Tory plans to drive a coach and horses through the housing safety net? This Bill will, in effect, drive the poor out of inner London; it will leave thousands facing eviction and homelessness. Do not take it from me: research done by the University of Cambridge for Shelter found that cuts to LHA will lead to 134,000 households either being evicted or forced to move. Or take it from Conservative Mayor Boris Johnson, who was moved to describe these cuts as “Kosovo-style social cleansing”. I thought that was taking it a bit far, but DCLG seemed to back up some of his concerns. Its modelling calculated a likely 20,000 extra homelessness acceptances as a result of the total benefit cap—and that comes on top of the 20,000 additional acceptances already anticipated as a result of the other changes to housing benefit. DCLG helpfully summarised the situation, saying that,

“it is likely that the policy as it stands will generate a net cost”.

So there we go. Not only is it going to cause untold human suffering by forcing people out of their homes, but it is going to cost us money. It just does not add up.

This dose of truth obviously did not go down too well at the DWP. The Minister even took the trouble to write to my own local newspaper, the East London Advertiser. I am sure he was writing to local newspapers up and down the country, but none the less the East London Advertiser got news, fresh from the horse’s mouth, that:

“Scare stories that housing benefit changes will force thousands of London families from their homes are nonsense and are causing unnecessary distress”.

And yet his own department’s impact assessment tells a different story. It is a story of unnecessary distress, and it will ruin lives. In Tower Hamlets, the DWP impact assessment shows 1,900 households affected by the move from the median to the thirtieth percentile of local rents. In English, that means those households lose on average £20 to £30 a week.

The impact assessment also shows that 970 families were affected by the caps already introduced in April. Those households lose, on average, £20 to £30 a week, depending on property size. I know the Minister has suggested that these families will be able to negotiate a lower rent with their landlord. If he genuinely believes this, I implore him to give us some evidence. If he feels that this may not be the case, that landlords will not will not just throw up their hands and say, ‘Oh, okay, I’ll lower your rent’, I say in all sincerity that maybe he will give those tenants some rights to challenge their landlords, because otherwise he is literally casting them adrift. He might also wish to let them know whether, if they cannot make up that shortfall, they should use their jobseeker’s allowance or child benefit to cover these shortfalls.

The week before the Minister’s letter appeared in the East London Advertiser, in the Answer to a Written Question I tabled on the numbers affected by his reform to the shared room rate of local housing allowance, he stated that,

“320 claimants in Tower Hamlets would have their local housing allowance reduced”,

adding that:

“The average loss per loser is estimated at £109 per week”.—[Official Report, 29/6/11; col. WA 440.]

Can the Minister tell me how someone on jobseeker’s allowance of £65 per week can find an extra £109 per week to pay their rent? With all respect, I truly believe the Minister is not inhabiting the real world. That is the most respectful way I can put that issue. I suspect the Minister may fall back on the usual claim that these single people should all move into shared housing, or that his £20 million discretionary housing payment fund will help them bridge the gap, but neither claim bears scrutiny and if I had more time I would explain why. Should the Minister wish to let me describe the reasons why I do not feel they stack up, I would be delighted.

The Minister has made a small concession to help a few hundred vulnerable, homeless Londoners living in hostels. That is very important, and I welcome it, but again what about everybody else? In Tower Hamlets, the pressure on the discretionary housing payment budget is already so intense that the initial length of awards has already been cut from 10 months to just four months, and that is before a lot of the other cuts have impacted. Whatever its theoretical advantages, the universal cap of £26,000 introduced by Chapter 1 of this Bill will undoubtedly make a bad situation far worse. I recognise that this cap is superficially attractive in its simplicity, and I am attracted to it myself. It is the level of the cap that I disagree with, and as my noble friend Lady Sherlock stated concisely, fairness has been sacrificed for simplicity. It just is not fair that parents will be left with the stark choice of paying their rent or feeding their kids. It also is not fair that Clause 68 increases the local housing allowance in line with CPI inflation, meaning that in real terms the costs of private rented housing will not be covered. That puts claimants on the rack and tightens the screw year on year.

However, there is something in this Bill that I object to even more strongly: the unforgivable scrapping of the discretionary social fund and its replacement with a system of hand-me-down or in-kind charity. As someone who helped many constituents make those applications, I understand the benefits and weaknesses of those schemes but let us be clear that the benefits far outweigh the weaknesses. The reforms which Yvette Cooper suggested last March were adequate to address those problems. Instead, the Bill pushes the poorest further into debt.

The argument should not and cannot be reduced to deficit reduction. I accept the need for deficit reduction. What I reject with some outrage is that the Bill seeks to reduce our national debt by increasing the personal debt of the very poorest. If you are going to take money from people’s pockets, take it from people like us in this Chamber. Do not take it from people who have not got the money to buy a bed, a fridge, a cooker or a cot because if you do, you either force these people to live in conditions that shame this country—like those of the family I visited, where the baby sleeps in the bath—or force them into the hands of loan sharks and an inescapable debt trap. The Government have dumped the responsibility for this on local authorities without any guarantee of funding or any requirement to continue the current eligibility criteria.

I will discard the last page because I understand that I have reached the time limit. I am sorry to get exercised about this but it is like watching a slow-motion legislative car crash. I have not even had time to touch on a plethora of desperately worrying issues: the unfair repeat assessments for the long-term sick and disabled; the impact on foster carers and kinship carers; or the use of a private company, Unum insurance, which was found guilty in America of harassing and defrauding social security claimants.

Putting all that to one side, my final point is directly to the Minister. I am sure that he did not come into politics to disadvantage Britain's poorest kids, force people out of their homes, reduce the childcare support for hard-pushed parents or strike genuine fear and despair into the hearts of disabled people up and down the country—but that is what this Bill currently allows for and it is the legacy which the Minister risks. If safeguards are not forthcoming, social historians may look back on the history of the welfare state and pinpoint this Bill as the tipping point in the slide towards a feral state. I sincerely and genuinely hope that the Minister will take account of the grave concern in this Chamber and make significant changes to the Bill.

20:58

[Baroness Murphy]

My Lords, having worked so happily with the noble Baroness, Lady King of Bow, in east London I am sorry to tell her that I disagree with almost all the points that she has just made. I support the provisions of the Bill. The Government are promoting the necessary cultural change in the benefits system which the vast majority of people in this country want to see. We need a shift in the expectations of what the state will do for us, and a radical shift in attitudes to choices enabled by the state which generate unintentional moral hazard. However, one thing that we seem not to have talked about sufficiently is the fluidity of dependency in populations and how quickly behaviours change as opportunities and threats change. I am talking not about changes in people’s levels of disability but about population changes and how they respond to situations.

The vast majority of people in receipt of benefits are merely making ends meet in ways that make legitimate sense to them. They have no alternative but to depend on the benefits to which they are entitled. However, there are huge numbers of people who do not consciously think about alternatives, because they do not have to and at present have too little support to do so. In my professional life as a psychiatrist I have witnessed many people with mild and more serious mental health problems who had to give up work during a very bad period, but who should have been assisted and coerced—in the best sense of the word; there is such a thing as good coercion—back into the workplace for the sake of their future health; and whose life has been blighted for many years after a brief episode of illness by a system which allowed them to remain unwell and workless, and indeed insisted that they should, in order to qualify for help. I have also seen in my own family how a modest chronic disability can unconsciously perpetuate dependence. Of course, the vast majority of people in receipt of benefits do not consciously make these choices, but some unconsciously make choices that are in no one’s best interests—if I can pray in aid another Freud.

I have a slightly different approach to the conditionality issues. The major problem with implementing conditionality—which can be so helpful for people to move them on to a different state, and remind them of the threat of this thing which will move them on to a different place—is how it is implemented in the DWP outposts in jobcentres and so on, by staff. Putting in the universal credit system—which we all want to see; it is very noble and sensible—and implementing it fairly will be a challenge. My noble friend Lady Meacher has articulated very well the difficulties with training, particularly in relation to some mental health problems, autism and some mild degrees of learning disability, where people are trying to access work and so on. Those problems are so serious that it is not just the culture of the dependent population that needs assistance to change; it is the dependence of the officers—of those who apply the system—that needs to change. If some of the assessment doctors continue to be reported as being unlistening, dismissive, unsympathetic and poorly trained, the Bill will not work.

I turn to the specifics in changes in disability provisions. I have, of course, read the multiple briefings from organisations working with people with various types of disability and I am surprised that more of them do not welcome the shift from disability living allowance to the more personalised personal independence payment, which is better focused on people’s individual circumstances and does not assume that disability is a fixed, unchanging matter. I have to say that I do not think that the disability support organisations have necessarily been very helpful in assisting people through the realities of how this will work. Enormous anxiety has been generated about the assessment and its efficacy, the interpretation of regulations and how sensitive the assessment tools and descriptors can be made. Of course, it is going to be difficult to get it completely right and we look forward to hearing how Professor Harrington’s second report, which is now apparently available, will change matters again.

There are quite marked differences in the proportions of different populations within the United Kingdom on DLA, which needs some thought. We have heard about the increasing level of the use of disability living allowance. For example, in Scotland there are, I think, something like 6 per cent more people on DLA. It is said that this is because of a different population level of disability in Scotland, due to cardiovascular and cerebrovascular disease, but the age range of disabilities simply does not add up. The reality is that there is different interpretation of the rules north of the border. In many other parts of the country there are variations which do not take account of the fact that we need better assessment and recurrent assessment. I do not think it is right that people should be assessed once and left where they are. You lose all opportunities to continue to implement effective support if you do not assess people on a regular basis. Therefore, I completely disagree with the notion that people should not have to go through an assessment, because it gives them an opportunity to get the help that they need.

The housing benefit system has received much attention so I shall keep my remarks on it brief. I have looked at the analysis of the situation in London carried out by Shelter and the University of Cambridge Centre for Housing and Planning Research. I think that 100,000 households in London that are on housing benefit may theoretically be obliged to move to lower rental areas. However, the analysis does not take sufficient account of the possibility of the rental sector changing its rents. In fact, the map that has been drawn up shows that only three boroughs are affected—one is the City of London, which is a very tiny place where very few people live, and the others are Kensington and Chelsea and Westminster. I suggest that many noble Lords in this House cannot afford to live in Kensington and Chelsea or Westminster.

I see that the noble Baroness, Lady Turner of Camden, is in her place. In fact, it has been demonstrated that Camden is one of those areas where the people we are discussing will still be able to afford to live. There is ample opportunity to assist people through a transitional phase. However, I hope that the Minister will say how that might be done. Much has been made of the polarisation of rich and poor neighbourhoods but that has been going on in London since the early 18th century. A mixed neighbourhood does not comprise exceedingly wealthy pockets being situated next door to profoundly impoverished pockets; that does not seem to me a mixed community. After all, these social goods of a mixed community are not available to working people on low wages who are paying taxes and trying to live in London but who do not receive benefits. I find it difficult to understand why the noble Baroness thinks that that social good should be made available to those who are dependent on benefit.

We need the cultural shift that I have mentioned. Many changes need to be made to the Bill but its basics are profoundly right and I support it.

21:08

[Lord Sheikh]

My Lords, this Bill is one of the boldest attempts to repair and restructure a welfare system that has essentially failed taxpayers and jobseekers. Welfare reform is an important plank of this Government’s programme. The current system has resulted in welfare provision that is not always distributed to the recipients who are most in need. It is also a system that favours reluctance among some people to work rather than to seek employment. That system is simply not sustainable.

The centrepiece of this Bill is the universal credit award. It has been reported that the universal credit has the potential to lift more than 350,000 children and 500,000 adults out of poverty. In streamlining the current system, the universal credit will provide clarity and accountability as opposed to the multifaceted approach. A simplified system will make a valuable contribution towards the fight against benefit fraud. It has been estimated that this type of fraud costs the taxpayer £1.5 billion per year.

I welcome the clearly defined boundaries within Part 1 of the Bill, as it details the sanctions that will be put in place if claimants fail to comply with the requirements of the universal credit award. I support the Government's efforts to tackle the current situation surrounding housing benefit, which has seen claims rise by £10 billion over the past 10 years. A move towards an annual uprating in line with the consumer prices index will contribute towards greater stability in rents. It has been estimated that the change will generate savings of approximately £300 million a year. The current system unintentionally allows a number of registered social landlords to encourage welfare dependency among clients for their own financial gain.

It can be argued that the most significant aspect of the universal credit is its potential to encourage unemployed people to find work while ensuring that they are not left out of pocket by doing so. Much debate has focused on the conditionality to be introduced with universal credit, requiring claimants to look for work with appropriate sanctions. As an employer and chairman of companies, I feel that we need to encourage people to work. People should work principally for two reasons: first, to earn a living and, secondly, to obtain job satisfaction. I shall therefore concentrate on matters relating to work.

Our welfare system should align incentives to ensure that those who demonstrate a willingness to work are not less well off than those who resist opportunities to earn. It is a tragedy that nearly 5 million people of working age in the United Kingdom are on out-of-work benefits, with almost 1.5 million having received them for more than 10 years.

We have one of the largest workless populations in Europe, and just under 2 million children living in households with nobody working. The current system penalises people for looking for work. The majority of people on benefits do not wish to be recipients for the remainder of their lives, but we need to consider carefully the process of transition so that they are not penalised in the interim period.

The most effective mechanism for relieving poverty is work. Work is good for people's mental health, their physical health and their general well-being. These benefits have been demonstrated repeatedly. Dependency is not liberating; it constrains people and prevents them achieving their ambitions. People have become trapped in our welfare system and they need to be freed.

This Government have shown their commitment to helping individuals find long-term employment through the work programme. Approximately 2 million children are living in households where those of working age are unemployed. Unemployment and a heavy reliance on benefits have devastating effects on our economy and our wider society. These adverse effects often include high levels of personal debt, anti-social behaviour and solvent abuse. The current system fosters a dangerous culture of dependency and lethargy.

The Department for Work and Pensions has estimated that the reforms proposed by the Bill could reduce by 300,000 the number of households where those of working age are unemployed. It is also thought that the changes could improve the net incomes of 700,000 of the country's lowest paid workers, as they will be able to keep a greater portion of their earnings. The Bill encourages social mobility while tackling the causes and effects of poverty and unemployment.

I turn to the new sanctions regime in the Bill. I welcome the fact that all those claiming benefits will have to sign a claimant contract, including a pledge to turn up for appointments and interviews and take up reasonable offers of work. By introducing more appropriate financial sanctions, the new regime will provide the necessary spur to the minority of claimants who fail to comply.

The provisions in the Bill encourage social mobility while tackling the causes and effects of poverty and unemployment. These elements suggest that there will be wider gains to the British economy. The Bill raises questions not of political allegiances, but of fairness. I welcome the Bill and the Government's resolve to get this right.

21:15

[Lord Knight of Weymouth]

My Lords, I start by paying tribute to the ambition of the Minister and his Bill. I know that the Minister is motivated by the very best of intentions in trying to tackle a system that is complex and needs continual reform. Certainly, the principles of the Bill are difficult to argue with, although it feels as if they have been ranked. He listed the three principles. I would rank them in the order of affordability, because he has to answer to the Treasury, followed by dealing with dependency, which is important. I am afraid that fairness appears to come third.

My worry for him and for the reform is that, to coin a phrase, it is too far too fast. As a department, as well as focusing on welfare reform, the Minister should focus on employment and work. The clue is in the title. We have an unemployment problem and if we really want to bring down the benefit bill, tackling unemployment is something that we need to take seriously. He should look, for example, at what the noble Lord, Lord Hall, has published in terms of the evaluation of the Future Jobs Fund in London with the Culture Quarter Programme, which had a 73 per cent success rate in getting people into permanent employment or full-time training. I substantially agree with the noble Lord, Lord Sheikh, and with the excellent maiden speech of the noble Lord, Lord Feldman of Elstree—I pay tribute to him—who said that work works. I think that the noble Lord, Lord Bilimoria, said the same. The Minister also needs to concentrate on the work programme. A lot of other things must be done alongside this important reform.

When we were in Government, we were committed to a single working age benefit. That should be the staging post for a more prudent and pragmatic way of going forward—tackling all those things that I described and then trying to simplify the benefit system before then taking something that is assessed on the basis of households and merging it with a taxation system that is based on personal assessment, which complicates things unduly. I will come to that.

I hope that the universal credit works. The noble Lord, Lord Skelmersdale, paid tribute to its simplicity. In many ways, the Minister is trying to design a swan—something that looks beautiful in its simplicity, but we all know underneath will be working frantically in a complicated way to move forward. Other noble Lords have spoken about those who will potentially lose out as a result of this reform if what looks like an ugly duckling grows up to be a duck rather than a swan. I hope it becomes a swan.

Rather than repeat some of the points that have been made—I thank all those who have corresponded with me principally by e-mail—I want to focus on the risks that need to be addressed in the context of delivery. There are two. The first relates to merging household and personal assessment, which particularly relates to IT. The Government have produced some excellent briefing and I thank them for that. I remember that in his first emergency Budget the Chancellor announced huge savings by cutting consultancies and big IT projects. I genuinely hope that, with this enormous IT project, on which this whole set of reforms is dependent, he is employing some good consultants. I hope that he is ignoring Francis Maude and getting some good capacity in. Much as I believe that in Joe Harley, the CIO at DWP, he has a really good guy who can help the Minister to oversee this from the department's point of view, he will need all the help he can get to make this work.

The briefing that the department has given me talks about agile development for the IT system. Certainly, I do not have a problem with developing the IT and business solutions together so that you can get the IT designed as you go along. Then you can do the things that you know will happen right from the outset rather than waiting for the whole thing to be designed, producing a specification and having a long delay. I certainly agree with digital by default, although it has to answer some questions around inclusion and ensuring that there are still people who can deal face-to-face with those who have complex needs and those who are struggling to do things digitally.

Other questions remain. The system that is being developed in respect of benefits has to bolt in with HMRC’s real-time information system which, I gather, is on track to be up and running for October 2012. We all know that Governments have had some problems with IT in the past—the NHS is the best possible example. However, the tax credits system is another one. It is a great system, at the root of this reform, to make work pay, but we have problems with it. In the end, as an MP, I knew more about the problems than I knew about the successes, even though there were many great things that we got out of tax credits.

Once you bolt together HMRC and DWP, you create vulnerabilities in terms of risk. Then you add into that the other system that is being developed which is for self-employed people so that they can self-declare income. That will be the fallback IT system if the HMRC system does not work. We can ask questions about whether self-declaration of employment in real time will work and whether it will deal with possible fraud and error, but the integration of those three IT systems against a very tight timetable needs close scrutiny. I hope that the Minister will look at the report from the Public Accounts Committee in the other place, which was published today. I hope that he is learning lessons from the NHS IT programme and from the problems that we had with that and with tax credits. I hope that, ultimately, he will produce and publish for us to scrutinise an analysis of the risks that are attached to the IT programme. The Permanent Secretary in his evidence to the Public Accounts Committee had a bit of a Rumsfeld moment when he talked about the unknown unknowns in respect of risk when you are doing something in a way that Whitehall has not done before. If that risk register can be published, if the project milestones and the target dates attached to those milestones can be published and there is a report to Parliament on the progress, I am sure that this House will be very grateful to the Minister for giving us some confidence about how this crucial part of the process goes.

I shall quickly touch on one other subject, which is the centralisation of housing benefit as part of these reforms. Yes, I worry about those staff working in local authority offices who are doing benefit assessment, but I understand that there may be a significant saving that has already been scored with the Treasury through centralisation. My worry is that individuals will have crucial documents to prove their identity and their income, which they will have to send off to a DWP processing centre with the potential for those to be lost. We know from casework and from our interaction with the real world that that happens. I worry that there will be a duplication of some of the information that local councils will have to gather in respect of council tax benefit, which is now being localised, thanks to Eric Pickles. I worry about the complex cases of some individuals, where a default to online with support from telephony might not be sufficient to understand their needs. I also worry about some loss of local expertise.

I ask the Minister to consider whether individuals could go to council offices with their key documents, as we do when we take our documents to the post office to submit an application for a passport, to get them checked for their council tax benefit applications. That information can be collected electronically and put into the wonderful IT system which I think I have already said I hope will be a success. You would have a halfway house between some sensitivity around local processing and a central system. When the individuals in local council offices who are doing the interviews spot someone who has complex issues attached to their case, they could set up an appointment there and then with someone locally from the DWP, or perhaps from Jobcentre Plus, who can come and do a one-to-one interview to make sure that we get it right first time. We all know that in difficult cases, if we get it right first time it makes things a hell of a lot easier than trying to fix it after we have got it wrong.

With those comments, I will sit down. I wish the Minister well in his reforms and wish the House well in amending the Bill and the reforms so that, to some extent, we slow it down to get it right.

21:25

[Baroness Finlay of Llandaff]

My Lords, there have been many admirable speeches tonight. They must have given the Minister much food for thought. As a patron of Foodbank Cymru, I fear that we will see a rise in the number of people who beat a path to our door because they are in financial crisis and cannot even put food on the table.

In the short time allocated, I will address the situation of people who become suddenly and catastrophically ill, and what happens to them and their families. Before I do that, I will say that the clear aim of the Bill is to get more people into work. This principle was underpinned by the very elegant speech of the noble Lord, Lord Feldman, whom we all welcome. The Bill refers to assessment in considering a person's physical or mental condition. Of course, these are so often integrally linked, which is why the findings of Sir Donald Acheson’s independent inquiry into inequalities in health are so relevant. He states:

“Some of the excess morbidity and mortality associated with unemployment may be a result of people in poorer health being more likely to become unemployed, rather than vice versa … It does … illustrate the double disadvantage that people with chronic sickness or disability may face: their ill-health puts them at greater risk of unemployment, and the experience of unemployment in turn may damage their health still further”.

My noble friends Lord Patel and Lady Morgan of Drefelin highlighted the problem for young people who suddenly find themselves ill with life-threatening disease. They referred to the mismatch for 16 to 18 year- olds that must be addressed. I am sure that amendments will be tabled to that effect.

I understand that those with cancer, HIV and MS will be eligible for PIPs from the time of diagnosis; that is when the clock will start ticking. However, what about those with other neurological diseases, those with massive injuries such as head injuries, the loss of a limb or any sudden, catastrophic disease, or those who are seriously ill with conditions that are difficult to pin down at the time of diagnosis but which fluctuate and make progress rapidly? Huge expense is often incurred at the moment that people lose their health, particularly with a diagnosis such as cancer, which demands punishing chemotherapy, often very rapidly, or where there has been a road accident and massive injury has occurred. The costs of heating, transport, food and childcare suddenly rise in an uncontrollable way. Waiting three months for the DLA is already hard enough. Why make it much harder by creating a six-month qualifying period? Many have argued tonight for the year to be redefined as a three-month qualifying period followed by a nine-month prospective test period. It would cost the same. I hope that the Minister will take away the consistent message that has emerged in the debate.

The mobility component of the DLA is critical to keeping people well. Those in residential care are not being double funded. The joint report of 27 charities, Don’t Limit Mobility, makes that clear. For some who live in residential homes and the young, severely disabled people in supported residence, taking away the mobility allowance is like locking the door and throwing away the key. One person said:

“Without it, I would be severely depressed like I used to be … My independence is my most prized possession”.

One case that we must consider is that of the young single parent who suddenly becomes ill and whose ex-spouse does not provide child maintenance. In Wales, 68,500 parents—half of all single-parent families—need the Child Support Agency to obtain child maintenance. According to the Bill, such parents will now have to pay a registration fee and a levy on each payment, suddenly making their situation even worse, while they will have to wait six months to be eligible for PIP if they become suddenly ill. If that young parent needs an electric wheelchair to carry on coping with his or her family, they will not be able to get one without the mobility component. The noble Lord, Lord Kirkwood, spoke of hopelessness. Indeed, that is a real danger, as so many people are terrified of how they will be able to live, fearing becoming imprisoned by their condition. They fear the assessment process, rather than believing that a personal independence payment will help them to keep living.

Carers of the seriously ill are not mentioned in the initial impact assessment. Can the Minister tell us how many of the current 500,000 recipients are likely to lose carers’ allowance and how many of those will be women, given that 73 per cent of those claiming carers’ allowance are women? Can he also explain how the three levels of DLA transferred over to the two levels of standard and enhanced in PIP will act as a gateway to carers’ allowance in the future?

The tripwire of all this change will be how the assessments are done. Many feel that ATOS is not fit for purpose—harsh words, I know, but 40 per cent of its rejection decisions go to appeal and 70 per cent are overturned. Many find the assessments humiliating and degrading, and medical statements are often ignored. Some die before lengthy appeals are heard. I hope that the new assessment processes will be better. Sometimes, one thinks that they could not get much worse. Even the pilots are revealingly complex, showing that a subtle nuancing is required to meet individuals’ needs.

Concluding on a positive note, I am glad that the Government have continued with the DS1500 principle. The terminally ill cannot wait for assessments and their changing conditions mean that a single snapshot assessment is not appropriate. But as the Royal College of Physicians told the Select Committee of the noble and learned Lord, Lord Mackay, prognosis is a probabilistic art. Sometimes those with fluctuating conditions appear to be dying, imminently, but do not die at the time anticipated—al-Megrahi is a clear public example of this. Can the Minister reassure us that under the new system those in receipt of the benefit will not find it stopped if they happen to be alive at six months and will not be expected to repay it if they live longer? Also, should they go into an unexpected remission and cease claiming, will they be eligible again when they face dying? The intention behind this Bill is to make our welfare system affordable but it will be the traps that we have to address.

21:33

[Baroness Gardner of Parkes]

There is nothing left to say on this Bill. Everyone has made the most marvellous, wide-ranging statements. A theme that is coming through clearly—that people should be encouraged to work, do their best, have an aspiration and stand on their own feet wherever possible—is in theory a wonderful idea. We all know that that is true. The difficulty is when it comes to applying these things. I have always declared that I have a daughter with a physical disability and another family member with learning difficulties. My daughter tells me that every form that you have to fill in now is 35 pages long. As a dentist, I remember that people had to fill in 25 pages if they wanted help with their set of false teeth. At the end of the 25 pages, you were told how many prison visits that you could have. It was a sort of one-form-covers-everything—many pages that were totally irrelevant to a lot of people. They had no idea how to fill it in. They always brought it in and you had to do it for them.

In those days, another issue was whether the payment came straight to the dentist or went to the patient. When it went to the patient, you often did not see it. I can understand the suggestion now that housing benefit might go straight to the landlord. That is a terrible situation, particularly for those on housing benefit with private landlords who are in some cases crooked and demanding a great deal of extra money in cash from them, as well as their housing benefit. Landlords are getting eviction orders against them all. When you go into an estate agent, as I did with someone who has just had a notice that they have to move out and that the bailiffs will be coming shortly, the estate agent makes very clear that, even if the rent is within the £250 a week, no private landlord wants to have anything to do with housing benefit cases. That is terrible, and something must be done about it. It worries me that if the money is going to be paid directly to the landlord, the tenant cannot in any way pretend that they are not a housing benefit case because the landlord will see that when the money comes. It is very difficult. I think it might be wise to bring in flexibility about whether the money goes directly to the tenant or to the landlord. It is a major problem. I have had this from local councils as well. They have told me that they have done research and found that in central London landlords do not want to know you, so I am very worried for people who will be hard hit by housing benefit changes.

Returning to the principle of the Bill, my noble friend Lady Stedman-Scott made an excellent speech. She has worked at finding jobs for people who have often been out of work for a long time. I think that is wonderful. My noble friend Lord Sheikh said how good it is for people to work. That is true. There are advantages in having a job not only physically but in the morale-building effect it has on you because you feel you are making a contribution to society and to your own life.

A point made by other noble Lords is so true: we should hasten slowly. The noble Baroness, Lady King, made this point. If we try to do everything in five seconds, we are not going to succeed. It is so complicated that it will take a tremendous amount of work to sort it out. The noble Baroness, Lady Finlay, made the point that we are going to need a degree of flexibility. There are going to be cases that come suddenly out of the blue, and someone will have to look after those people. We cannot rely on charities to do it because they are finding it harder and harder to cope. It is a problem.

On mobility and the new personal independence payment, it is terribly important that people should be encouraged to be independent, but there has to be recognition of things we have mentioned, such as heating costs. I have raised them in Questions in your Lordships' House over many years, and the Answer is always that it is all taken into account in the money you get. Whether we are paying our own bills or someone else is helping us with them, heating costs are alarming if they are jumping at 18 per cent, 20 per cent or more. It is really quite concerning because a lot of people, particularly people who are a bit immobile, can easily die of hypothermia.

Years ago when I was on the local council here in Westminster, we introduced the free bus pass. Now I know that Ken very cleverly called it the Freedom Pass and everyone thinks he started it, but we had it going at least 10 years before that but were not smart enough to get the credit for it. Our main reason for doing it and for everyone getting it free, because at one time we talked about charging people for it, was that it was going to cost so much to assess people that it was cheaper just to give them the pass. We also thought it was better than any social service to keep people mobile and able to move around. I still hold the view today that if you can keep people able to go and do their own shopping, it is much better than having to give them a carer to help them do it, but where the carer is the only answer, we have to do that.

I am always very impressed when the Minister answers any questions on these issues. He has very clear thinking and understanding, but he has a huge job on his hands to satisfy the world and the people in this House. The job ahead will have to be done very thoroughly. As my noble friend Lady Stedman-Scott said earlier, her father, the furrier, said you want to cut only once, not twice.

21:39

[Baroness Lister of Burtersett]

My Lords, as a member of the night shift, I will inevitably cover issues already eloquently discussed by other noble Lords, but I shall do so by focusing on some of the Bill’s gender implications and drawing on the work of the Women’s Budget Group, of which I am a member.

First, simplification is one of the main aims of the Bill and has long been the holy grail of social security reform. The Bill bears out an earlier warning from the Social Security Advisory Committee that there is a limit to the simplification that is possible with means-tested benefits. The closer we study it, the more we see how new complexities spring up, hydra-like. While the Minister may be a self-styled revolutionary, in the words of my noble friend Lady Sherlock, I fear that he is no Heracles. Where universal credit represents a welcome breakthrough is in the integration of in-work and out-of-work support, thereby potentially reducing the insecurities associated with the transition into and out of paid work. That is very important. That is about the only positive thing I am going to say, I am afraid.

Means-testing will be extended as a result of the arbitrary time-limiting of employment and support allowance for those in the work-related activity group. A disabled woman who has written to me—one of many—voicing her fears about the Bill’s overall impact on sick and disabled people, asks, “What do we do then?”. The Government’s answer is: claim income-related ESA. However, 34 per cent of men and 46 per cent of women affected will not be eligible. Where they have to depend on a working partner instead, their financial autonomy will be eroded. This matters to people. Indeed, Professor Roy Sainsbury told the Public Bill Committee in the other place that in research with claimants,

“individual assessment spontaneously arose as a thing that people were very keen on”.—[Official Report, Commons, Welfare Reform Bill Committee, 23/3/11; col. 16.]

Women’s financial autonomy is also likely to be eroded as a result of measures that reduce incentives for some second earners, as my noble friend Lady Hollis of Heigham has already talked about. A new separate earnings disregard for second earners would go some way towards addressing this and I would welcome the Minister’s views on that possibility.

We should also note Carers UK’s concerns about the loss of a bespoke disregard for carers. Furthermore, we still do not know what is proposed for childcare costs, which is one of many gaping holes in the Bill that must be filled before Committee. The attempt to fit a childcare quart into a funding pint pot will aggravate the work disincentive for second earners and lone parents, as we have already heard. The disincentives faced by many second earners will encourage what we academics call a male breadwinner model. This sits uneasily with the Government’s very welcome goal of encouraging shared parenting. It is also very short-sighted from a dynamic perspective. If a woman is in paid work while living with a partner, she is better equipped to remain in the labour market should that relationship break down.

Research demonstrates the extent to which women remain the main managers of poverty. This means that women are likely to bear much of the burden of measures such as the abolition of part of the Social Fund and the introduction of a benefits cap. I am concerned about both, but will focus for now on the cap. I have been struck by the number of noble Lords from across the House who have raised very serious concerns about this cap. I hope that the Minister is getting the message. The 50,000 or so households that stand to be affected will receive less than Parliament has decided is necessary to meet their basic needs, as the noble Lord, Lord Kirkwood, has eloquently explained. The Secretary of State has justified the cap in the name of fairness, claiming that it is about those who we believe should be able to go to work but are not doing so. However, it will apply to some groups that are not even expected to work.

In the other place the Minister claimed that the cap is about ensuring that there is a level playing field for everyone, but this is not a level playing field. The benefits and tax credits received by working families are being ignored. If they were all taken into account, official figures show hardly anybody would be affected by the cap. As a number of noble Lords have said, it is particularly unfair that child benefit is not added to the comparator earnings but is treated as income for the purposes of the cap. Could the Minister please explain to the House how this can possibly be justified?

The Minister also assured the committee in the other place that the cap is not about creating hardship, but hardship will be created, as the Centre for Social Justice has pointed out. Hardship could also result from the proposal to pay benefit monthly rather than fortnightly on the grounds that this is in line with the demands of modern life, and we have to prepare people for paid work. However, over a fifth of workers—and a higher proportion of low-paid workers—are still paid weekly or fortnightly, according to the department’s own figures. While the earlier switch from weekly to fortnightly payments may have caused few difficulties, the leap from fortnightly to monthly is much greater.

Nearly two in five families with children—the lowest income fifth—already run out of money regularly. So this is not a problem for a small minority to be solved as proposed by appropriate budgeting support and more frequent payments in exceptional circumstances. Again, it is women, as the managers of poverty, who will bear the main brunt. I hope that the Minister will be open to persuasion on an administrative matter that has significant consequences.

Another payment issue of great concern to many organisations is that the whole of the universal credit will be paid to one partner with, in particular, no routine provision for payments for children to be paid to the main carer, usually still the mother. Not only will this in many cases represent a further erosion of women’s financial autonomy, but also research that I and others have carried out shows that income is not always shared fairly within families and that money labelled for children and paid to the main carer is more likely to be spent on the children. As Fran Bennett of Oxford University warns, payment into a joint account—a so-called “nudge”, as the Minister has said—is not necessarily the answer, because research shows that joint accounts do not guarantee both partners equal access.

We see here an inconsistent approach to public and private dependency which could undermine some of the Government’s own objectives. A driving motivation behind the Bill, as we heard from a number of noble Lords, is to address what in my view is a damagingly inflated problem of public welfare dependency without any regard for the consequences of private economic dependency within the family. This could create a new couple penalty as the fear of a loss of financial autonomy and security could discourage women from committing to a new relationship.

In conclusion, while I was focused on the Bill’s potentially damaging impact on women, this also has implications for children, given the link between women’s and children’s poverty. I hope that in this House we will be able to deliver the concessions necessary to protect women, children and disabled people and achieve the fairness that the Minister assures us this legislation is supposed to be about, but at present signally fails to deliver.

21:48

[Lord Best]

My Lords, my set-piece speech was going to cover a number of housing issues. To my slight surprise, housing has featured in an awful lot of your Lordships’ contributions and my speech is virtually redundant. Even at this late hour, however, I might be able to add one or two new points, because a couple of new reports have come out in the past 48 hours, specifically to help our debate today, dealing with housing benefit reforms, the restrictions and the cuts. Having a total benefit cap which impacts on housing is probably the seventh, or just possibly the eighth, restriction on housing benefit. With this underlying intention of the Government of saving some £2 billion per annum from the housing benefit bill, the question has always been: will that burden of an extra £2 billion fall on the tenants or on the landlords? The hope has been that the landlords will reduce rents to the new levels and that it will not be the tenants, who are, after all, some of the poorest people in this country, who will suffer from the benefit reductions.

The report that came out yesterday from the British Property Federation and the Chartered Institute of Housing looks at whether benefit reductions will lead to landlords reducing rents. The report takes it on a historic basis as well as a contemporary one. I am afraid that, although we must await the much more extensive research project which the Minister has put very properly in hand—I have congratulated him on doing so—it does not appear that benefit reductions will lead landlords to reduce rents. Therefore, the burden and the pain of cuts will fall upon very poor households and may impact on homelessness.

The second ingredient I was going to explore concerns the payment direct of housing benefit to social housing landlords or the local housing allowance to private landlords and the new measure which involves the benefit being paid instead to the tenant. The tenant would handle the money and would have to pass it on to the landlord in due course. A National Housing Federation report that came out today has done an opinion poll of tenants to see how they feel about the independence that this would give them and the preparation for work that this might help with. However, the outcome of this opinion poll is that 93 per cent of tenants felt strongly that their rent should go to their landlord. Perhaps they think that they do not want the temptation of using that rent for something else or simply want the convenience that the rest of us have with mortgage payments being made by direct debit to the building society and thus not giving us the temptation of handling that money.

We have to reckon that some people have difficulties of their own and that their budgeting could be very complicated. Some will have debts and sometimes people who are after them to repay those debts will be a lot nastier than social landlords. Today’s opinion poll confirms that paying rent to the landlord is a sensible option. Picking up on something said by the noble Baroness, Lady Gardner of Parkes, is it so likely that landlords will accept tenants at all unless the rent is paid directly to that landlord?

The third ingredient on which I was going to speak at more length is the penalty if one is found to have a spare room somewhere in one’s property in social housing if you are under pensionable age. It is expected that 670,000 households will be discovered to have a spare room and will be required therefore to downsize to something smaller or to face the cost of a reduction in their benefit, averaging between £8 and £11 a week. It will be taken from the other benefits that they receive and will be calculated without regard to any housing costs. Those averages are, of course, averages and in some areas the cost per week would be very much higher.

This seems to be a cruel reduction in people’s entitlements when one bears in mind that it may be physically impossible for some people to move to a smaller home. Of the people affected, 180,000 are in two-bedroom accommodation and would be required to move to a single-bedroom place. But, last year, there were only 68,000 vacancies in social housing in one-bedroom accommodation. Even if we allocated all the one-bedroom accommodation to people who were downsizing, which we cannot do because we have a lot of other people in priority need, it would take several years before people could move down from their two-bedroom property to a one-bedroom property. In the mean time, to penalise them seems very unfair. I am afraid that I do not have a new report out to tell noble Lords about that third ingredient.

I hope that the Minister will take account of the fact that so many of your Lordships today have hit upon housing and housing benefit reforms as a really important aspect of this Bill. Indeed, we will put amendments before him, which we hope he will consider favourably.

21:55

[Lord Kennedy of Southwark]

My Lords, as noble Lords on these Benches have said, the Opposition support many of the broad principles in the Welfare Reform Bill. On the face of it, these Benches could agree with many of the opening remarks of the noble Lord, Lord Freud. Universal credit is a welcome simplification of the benefits system. We all want measures to support people getting back into work, we support sanctions for people who persist in refusing to look for work, and we can support careful, considered reform of disability living allowance. All these reforms can build on the actions the Labour Government took to make work pay.

However, the Bill is a lost opportunity for real progress. I sincerely hope that the noble Lord, Lord Freud, is in listening mode. These Benches have major concerns about how the reforms have been proposed and the negative effect they will have on the living standards of millions of families and children. The Bill is not clearly thought through and in reality is an attack on family budgets which will have billions of pounds taken away under a smokescreen of reform. I hope the noble Lord, Lord Freud can explain why the Government have chosen to bring forward legislation which is so light on detail. Would it not have been better to wait and detail the proposals more clearly? We all want to get people quickly back into work, but to achieve that you need some jobs for them to get into. Failure to provide realistic opportunities for employment throughout the UK will mean that unemployment levels will rise and the welfare bill will be difficult to rein in.

Noble Lords will recall that we have been here before. It is very simple. If we can get people back into work, that will reduce welfare costs, but the Bill does not help in that regard either. The number of people chasing each vacancy can vary greatly, but even in areas that have more jobs on offer, you can be looking at one person chasing every five or six vacancies. So I worry that the Bill just does not take into account the reality of the situation people can find themselves in but instead takes a blinkered view.

There are a number of other issues. As the noble Lord, Lord Best, said, direct payment to claimants is not always in the interest of the benefit recipient. There is much to be said for payment to providers on behalf of the claimants. We have to recognise that people sometimes struggle to keep a grip of their household budget. Rising prices and the change in benefit rates from RPI to CPI all add to pressures on families. With direct payments of benefits into bank accounts, have the Government considered the problem of banks levying charges when account holders are overdrawn and recovering them as soon as funds from the DWP appear in the account? Charges taken direct from the claimant’s account will mean people will have even less money with which to meet their obligations. How will that help a family which is struggling to make ends meet?

As my noble friend Lord Knight of Weymouth said, proposals to remove local authorities from administering the housing benefit elements of universal credit need detailed scrutiny by your Lordships’ House. At present, the proposals run the risk of not saving money but actually costing more and increasing hardship and worry. At present, local authorities have achieved a high level of performance, which has reduced errors and speeded up claims. Should the Government not be allowing more localisation and less centralisation? The Institute of Revenues, Rating and Valuation, in evidence to the Department for Work and Pensions, urged the Government to listen, take a realistic approach and use local authorities in this regard. They have a track record of delivering and have the necessary skills and expertise. Can the noble Lord, Lord Freud, tell the House how a reformed administration of the system, overseen directly by the Department for Work and Pensions, will improve on the situation at present? How does the noble Lord envisage that measures to mitigate risks in the change will be implemented? What will be the process for the DWP to start a new claim? Will all new claimants be expected to send all their documents to the DWP? What if documents go missing? How will the new system mitigate against fraud? Does the Minister not understand the problem that over or underpayment will cause to claimants, as people seek to budget effectively?

Often housing benefit services are combined with council tax benefit and other benefits as part of a general benefit service. Can the noble Lord, Lord Freud, confirm that these local authority contracts will be allowed to run their course and local authorities will not be placed in the invidious position of having to seek to end these contracts early with all the resultant expense that that will entail. At this stage, I fail to see how not allowing local authorities to retain responsibility for administering the housing benefit element of universal credit is not a good thing. The system is administered well. If we move away from that expertise, the Government must put in place protections for people so that they are not disadvantaged and the situation made worse by this change.

In conclusion, I ask the noble Lord, Lord Freud, where the Government took soundings from before they brought these proposals to Parliament. Did they look at how systems are operated abroad? If they did, which systems did they look at? Much could be done with this Bill if the Government are prepared to listen and to work with noble Lords. There could be much merit in these proposals, but the devil is in the detail and the consequences for individuals and families on the lowest incomes appear to be grave indeed.

22:00

[Lord McKenzie of Luton]

My Lords, this has been a powerful, knowledgeable and passionate debate, as it should be, given the issues at hand. I congratulate the noble Lord, Lord Feldman of Elstree, on a very impressive maiden speech, and I look forward in the future to more of his contributions, and indeed to his stories. I had expected to hear about the iron triangle, but not from the noble Lord, Lord Boswell. I had not expected to hear a treatise on the family sizes of the Pakistani and Bangladeshi communities, and hope that I do not again.

I thank the noble Lord, Lord Freud, for the manner in which he introduced the Bill, for the extensive surrounding briefings and for the accessibility of the Bill team. I thank him again for his promise of further information, and it would be good to have a schedule of what is upcoming, particularly in relation to the Committee timetable. We acknowledge that the Minister is a pioneer and a true believer in the universal credit, and someone who is always evidence-led in his approach to policy. But his difficulty is that what is before us is a proposed credit that is not universal, and a universe in which there are too many black holes. I see the noble Lord not so much as a Che Guevara but perhaps as a Captain Kirk boldly going forth with a few warp factors involved. Of course, the universal credit provisions sit alongside measures that are known and which are deeply concerning. These arise in the context of the £18 billion of cuts to benefits before the universal credit sees the light of day, so assurances that there will be no losers, frankly, ring a little hollow.

We have had the timely and devastating report from the IFS which concludes that the Government’s economic strategy will give rise to greater inequality and rising child poverty, putting into reverse progress made in the years of the last Government. Indeed, if unchanged, the Bill will help to deliver this outcome for the Government. It is an outcome that, apart from those right at the very top of the income scale, will see the poorest 30 per cent hit the hardest. As my noble friend Lady Hayter reminded us in a fantastic speech from the Front Bench, the rhetoric of parts of Government—I exonerate the noble Lord from this—is increasingly in danger of stigmatising benefit recipients with a benchmarking always made against “hardworking families who pay their taxes”. I am bound to say we heard a little of that from the noble Baroness, Lady Stowell, implying that in order to receive benefits, you must be feckless, workshy and happy to live off the state, no matter that your circumstances may have changed because of a family bereavement, ill health, the worsening of a disability, the closure of a workplace or being forced to move because of housing benefit changes—or, as the right reverend Prelate the Bishop of Leicester said, because of simply making a mistake.

We are in support of a welfare system that recognises the benefits of work, supports people into work or closer to the labour market, and with an obligation on people to engage with the system and sanctions for those who refuse to look for work. These principles underpinned our approach to welfare reform when in government, with advice, of course, from the noble Lord, Lord Freud, in his former life. We know that the vast majority of claimants want to work, but they face job shortages and barriers to employment, so the Government have their part to play in promoting growth and job creation.

Of course, these barriers are not only lack of jobs but lack of skills, and sometimes employer attitudes to employing people with disabilities. A benefits system that provides in- and out-of-work support, and that has a single taper rate, a simple system of disregard and a single payment has the ingredients that could forge a political consensus, as my noble friend Lady Hollis said. However, having these components does not of itself justify the claim by the Secretary of State that there will be no losers and that work will always pay. It depends on the detail. There is a limit to simplicity, because the system must respond to the complexity of the lives of claimants, as we heard from my noble friends Lady Lister and Lady Sherlock; and of course, as my noble friend Lord Whitty said, simplification costs money.

We know that we have a taper rate of 65 per cent rather than 55 per cent, as the noble Lord, Lord German, would wish, because it was imposed by the Treasury; and that nearly 2 million workers will have a worse marginal effective tax rate as a consequence. We know that the savings cap will take thousands out of universal credit altogether, which is why we will seek to remove it during the passage of this Bill. Many noble Lords have commented on the lack of clarity about childcare—what we tragically do not see is a recognition of childcare as an investment to help parents access employment, reduce reliance on benefits and enable career development. We will continue to press for answers in Committee.

We also have no answers on how passporting to other benefits would work, although the passport in from PIP in respect of carers’ allowance is, as I understand it, work in progress. As my noble friend Lady Donaghy said, there is a lack of detail around self-employment, other than the unreal notion that someone starting a business will earn at the minimum wage from day one. We know that the Government have more work to do on payment issues, especially for joint claims, to take account of unequal distributions of finance in some households and to ensure that money allocated for children actually reaches them.

We have the outstanding issue of how direct payments to RSLs in respect of housing support can be made. It is only when these matters, and many others, are resolved that we can make our judgment on the universal credit. Although there are benefits in having a single payment source, it places even greater emphasis on the delivery systems being robust, because it is all or nothing. We have heard concerns expressed by the noble Lords, Lord Kirkwood and Lord Bilimoria; and my noble friend Lord Knight, in a very incisive contribution, effectively made the case for Parliament having reassurance before this finally proceeds.

Separating council tax benefit and housing benefit creates the worst of all worlds: a credit that is not universal, and the need to unpick local authority systems currently coping well with both—many of which, as my noble friend has just said, have been jointly outsourced. Local authorities are having to cope with this at the same time as the challenges of huge cuts in resources, increased homelessness and while picking up the pieces of the discretionary Social Fund—the latter without ring-fenced resources. Can the Minister tell me what assessment has been made of the capacity of local government to respond to these challenges, including that of devising new rebate systems with 10 per cent less money? How will this fragmentation help individuals access specific advice? The calculation of housing costs within the universal credit is delegated to regulations, but we know that this facilitates the uprating of housing allowance by CPI, separating actual rent levels from the housing support available.

The Bill covers just some of the changes to housing benefit that this Government have introduced. Our debate today has illustrated the extent to which noble Lords are appalled by the so-called under-occupancy provisions relating to social housing, ignoring the needs of foster carers, irrespective of where there is available smaller accommodation with equivalent security of tenure, regardless of whether people can afford to move and ignoring the expense to follow from replicating adaptations when disabled people are forced to move. These are illogical, wretched provisions that must be exposed and opposed. Even Mr Pickles has recognised that this will increase homelessness and cost money.

Many noble Lords have also commented on the benefit cap, an arbitrary measure which lacks an evidence base or indeed a clearly stated aim. We must use Committee to clearly challenge the basis for the figures and the perversity of including housing support in the calculation. There can be no more damning critique of this proposal than that of the Children’s Society, which says that 200,000 children would be affected by the proposal, and more than 80,000 children made homeless. I simply cannot believe that the Minister himself will find this acceptable, or the Treasury that it is cost effective.

We have heard from many noble Lords in this debate the fears that the policy in this Bill will have a massive impact on the lives of disabled children and adults, people with long-term conditions and their carers. These concerns have been highlighted by reforms to DLA set in the context of a reduction target of 20 per cent in expenditure mentioned by the noble Lord, Lord Rix. We are not unsupportive of reform to DLA, provided it is undertaken fairly, but what is important—and we have heard this from many noble Lords—is that there is a full opportunity in Committee and otherwise to scrutinise the proposed assessment criteria, the process and the structure of the benefits. As the noble Baroness, Lady Campbell, said, the lack of coproduction in this is to be regretted.

Many noble Lords again expressed particular concerns about the assessment process. The noble Baronesses, Lady Meacher, Lady Campbell and Lady Grey-Thompson, the noble Lord, Lord Wigley, and my noble friends Lord Touhig and Lady Healy raised questions about how the assessment would work in issues relating to people with mental health, fluctuating conditions, autism and Parkinson’s disease. I am bound to say I had a sense of déjà vu in all this. When we were discussing the work capability assessment we had a team of excellent officials from the department and extensive work with stakeholder groups testing the process, but we know what history tells us about what happened to the WCA and the extent to which it has taken time to put it together. We do not want a replication of that. We will also want to know how it works before it has been applied to existing DLA recipients.

The noble Baroness, Lady Hollins, my noble friends Lady Hollis and Lady Morgan and others gave us graphic descriptions of the effect of proposing a one-year time limit on contributory ESA—a limit which is to be imposed retrospectively. As we did in the other place, we will seek to get this extended to two years. We will further seek support for the qualifying period for PIP to be three months, as is currently the case for DLA. It is time for an end to the lingering confusion of DLA mobility for those in residential homes, and to ensure that it is protected.

Under the universal credit, the gateway to extra support for adults with a disability will be through the ESA. What this means is that there is no extra help within universal credit for those found fit for work regardless of their level of disability. The demise of the severe disability premium means less help for disabled people if they live on their own without a carer, and parents of all but the most severely disabled children will have their means-tested extra support cut in half. Moreover, the higher proportion of childcare costs of disabled children in less well-off families will be lost. Whatever the final proposals on childcare, does the Minister accept that these families are currently likely to miss out? We will seek to amend the Bill to ensure that any new disability addition to the universal credit for disabled children is no lower than that they currently receive in the child tax credit system.

Several noble Lords raised the issue of child maintenance: the noble Baroness, Lady Finlay, the noble Lord, Lord Boswell, the noble and learned Lord, Lord Mackay of Clashfern, and my noble friend Lady Sherlock. The legislative basis on which charging could proceed in fact is set down in the Child Maintenance and Other Payments Act 2008, but we will not allow our legislation to be prayed in aid for charging PWCs for routine access to the statutory system on a basis which will inevitably deter parents with care from using a lifeline to maintenance. We will also challenge the veto which non-resident parents have been given over a right to prevent PWCs accessing the statutory system. Of course, we support the encouraging of parents to reach their own arrangements but not for the gateway to act as a barrier to that system. Perhaps the Minister can tell us about the research which underpins the approach that the Government have adopted and the extent of the support services which can be brought to bear.

This is a great upheaval of the benefit system and it is being accompanied by a legal aid Bill which puts welfare benefits and employment out of scope, while limiting housing advice—quite unbelievable. The Bill presents us with many challenges. If it proceeds through your Lordships' House unamended, some of the most vulnerable people in our society will face serious hardship. Their day-to-day existence and their aspirations for the future will be diminished. Our task is to confront the Government with the consequences of what they propose, pursue the detail of the glaring gaps in the universal credit, scrutinise what detail is available on the PIP and the draft regulations and amend the Bill where we can—and to continue to argue the case for a fair, progressive, compassionate and sustainable welfare benefits system.

22:16

[Lord Freud]

My Lords, I thank everybody who has spoken today. There have been some truly excellent contributions. I need to congratulate my noble friend Lord Feldman on his remarkable maiden speech, which I think we all enjoyed. We look forward to many more equivalent contributions.

The Bill deals with some really important matters and I am extremely pleased that the debate has been both informed and committed. I may not have enjoyed some of the things I heard but it has certainly been extraordinarily well considered. I think I can claim that we share a consensus on the need for reform and that there has been a great deal of general support for the principles underpinning the Bill. We all believe that the welfare system should be fair; we all agree that it should be affordable; and we all share the aspiration of a welfare system that incentivises people to work, releases people from the net of benefit dependency and ensures that work pays. There has been a little debate about the order of priority from the noble Lord, Lord Knight, among others, but I think that we can all agree with those main principles.

The discussion is about how we get from here to there and I know that the detail of that will be heavily scrutinised in Committee, which is absolutely right. I also expect that our debates in Committee will be just as informed as they have been today, and I assure noble Lords right around the House that I will be listening with extraordinary care to the informed views of its Members. I have had a large number of specific questions relating to particular clauses and scenarios. There is no way that I can deal with them all in the time that I have today but clearly we will have ample opportunity to go into great depth in all those areas, so to the extent that I do not deal with an issue now I know that we will come back to it.

Perhaps I may remind the House of the commitment that I made in my opening remarks. Over the next few weeks I shall publish a great deal of detailed information which was previously provided in Committee in another place. It will include notes on every regulation-making power in the Bill, full policy briefing notes and, where possible, illustrative draft regulations which will go into considerably more detail than has previously been published. In addition, as we approach each section of debate in Committee I will ensure that officials from the Department for Work and Pensions are available to host briefing meetings for noble Lords. These sessions will be a further opportunity to go over the detail of each clause before it is debated in Committee. I hope that both these sessions and the additional information that will be published will be of use to the House and will go a reasonable way to answering many of the questions and specific points raised today. Clearly, we will pick up the outstanding issues in Committee.

Let me try now to summarise in my closing remarks some of the identifiable themes that emerged this evening. The most disturbing thing that I heard today was the concerns of many noble Lords about the anxiety of disabled people. The noble Baronesses, Lady Murphy and Lady Gale, talked about how people were terrified, or petrified, and that worries me more than anything I heard. We are committed to supporting disabled people to exercise choice and control and to lead independent lives. There has been a growing consensus that the disability living allowance has not been delivering and, as I said in my opening remarks—actually, I think that I said it yesterday—it is inconsistent and confusing and does not reflect, in particular, the needs of people with non-physical impairments, such as mental health conditions. Our intention is that the personal independence payment will focus support on those individuals who experience the greatest barriers to remaining independent and leading full, active and independent lives. The intention of the reforms is to ensure that the benefit is sustainable for the longer term, with a more objective assessment of individual need, and that it will be responsive to changes in people’s conditions.

In answer to the question that was raised by a number of noble Lords, including the noble Baroness, Lady Finlay, and the noble Lord, Lord McKenzie, about the relationship with the carer’s allowance, I can reassure the House that the personal independence payment’s daily living component will be part of the gateway for receipt of carer’s allowance, but only when we have completed the modelling and testing of the assessment criteria will we be able to update the impact of the new PIP assessment on carer’s allowance recipients and the rate of daily living allowance to be actually used. We published the initial draft of those assessment criteria in May. These were developed in collaboration with a group of independent specialists in health, social care and disability and we drew on a wide range of relevant expertise. The aim of the criteria was to look at the ability of individuals to carry out a range of everyday activities. I think that there are currently 11 separate criteria and, for example, the introduction of communication will ensure that we take the effect of impairment of hearing, speech and language comprehension into account much better.

My noble friend Lady Thomas asked what account the assessment criteria will take of the successful use of aids and appliances. We recognise that aids do not remove an individual’s disability and that there may be ongoing costs. We know that it is vital to get these assessment criteria right. Over the summer we heard the views of disabled people and organisations. We met with around 60 organisations and received about 170 other written responses. We tested the draft criteria by reviewing them with 1,000 people who are on DLA to see how they worked. The findings and the testing will be used to produce a second draft of the assessment criteria and the regulations later in the autumn in time for us to use them when we consider the relevant clauses in Committee.

The noble Baroness, Lady Meacher, asked who will make the final decision on the assessment. I can confirm that that will be the DWP decision-maker and not the medical assessor. I can also confirm that all claimants, particularly those with mental health conditions, can be accompanied at the face-to-face assessment. As I have said in the past, the default position is a face-to-face assessment but I am conscious that in some circumstances that is counterproductive. A number of Peers are worried about autism and how that will be handled.

Several noble Lords have commented on the extension of the qualifying period of PIP to six months. While there has been reasonable support for the principle of an overall qualifying period of 12 months, there is concern that a longer qualifying period will adversely affect certain groups of disabled people, particularly people who have had strokes and those with a recent diagnosis of cancer. My honourable friend the Minister for Disabled People and officials have engaged with disability groups during the summer and the Government are continuing to look closely at the issues they have raised in regard to this change.

The other issue that is of great concern to noble Lords is the time limiting of ESA for those in a WRAG, particularly for cancer patients. The noble Lord, Lord Patel, with his direct experience of this issue, made a moving speech on it. The contributory ESA was always intended to be a benefit which provided temporary support for those in work-related activity. With the right support it is reasonable to expect people in this group to return to work; that is what this definition aims to do. In our view a time limit of one year strikes the right balance between the need to restrict access to contributory benefits for those under pension age while allowing those with longer term illnesses to adjust to their health condition. It is, of course, double the length of time for which the contributory JSA applies. I must emphasise that severely ill or disabled people in the support group, which includes many people with cancer, are fully protected and will continue to receive contributory ESA indefinitely. Income-related ESA will also be available for those with little or no alternative resources. My department has been working with Macmillan Cancer Support and others to ensure that we support people who are diagnosed with cancer in the most sensitive, fair and appropriate way.

A number of noble Lords raised deliverability and IT—I am thinking in particular of my noble friends Lord German, Lord Kirkwood and Lord Brooke, and the noble Lord, Lord Knight. I am aiming as soon as I can to give a much more extensive demonstration of the IT, because what is happening is very interesting—it will not be in the Chamber because a lot of graphics are involved. Our aim is to process and implement the majority of claims automatically. By pulling the benefits and credits together, we break the factor of so many different organisations delivering them. It will not require large-scale IT, and it is absolutely not an IT development on the scale of that the NHS, which was cited by a number of noble Lords. We are already under way on the design and development. The agile process means that, rather than delivering the system in one go and then testing it, we are constantly testing how it works. The scale of the IT is similar to that for the ESA, which was successfully delivered by the previous Government on time and on budget in October 2008. We will not rely on last-minute testing. It is a fascinating area, and I commit to doing something quite elaborate on it.

Another area that received considerable attention today was the benefit cap. Powerful contributions were made by the noble Baronesses, Lady King and Lady Lister, and my noble friend Lord Kirkwood, who is amazingly still in his place tonight despite his bad back. Let me be clear: the cap is being introduced for a number of reasons. It will address some of the problems of welfare dependency, add to the incentives to move into work and promote fairness between those people who are out of work and rely on the benefits system and taxpayers in work who pay for it. There is an important principle here: people should not expect a life on benefits getting more money from the state than people in similar circumstances could earn in work. This is the legacy of a system where people are not always better off when they get a job, which is one of the fundamental problems that we are trying to fix with the universal credit. The introduction of a benefit cap will mean that households on out-of-work benefits will have to make the same decisions as families in work with regard to the lives they lead and the areas they can live in. People will have to take responsibility for their decisions in the light of what they can afford. We have said that we will consider ways of easing the transition for families on existing benefits and are looking at exactly what might be needed. In doing so, we shall be mindful of the points that have been made on this issue today and throughout the passage of the Bill to date.

Housing has provoked much more interest around the House than is normally the case, possibly to the slight surprise of specialists such as the noble Lord, Lord Best, who is one of the gurus on the topic. Over the past 10 years, housing benefit expenditure has roughly doubled in cash terms. The Government are convinced that it is absolutely necessary to take steps to manage this expenditure. We have already introduced legislation to ensure that people who make new claims for housing benefit in the private rented sector are prevented from claiming excessive rates of local housing allowance. The Welfare Reform Bill introduces further measures to control expenditure and to ensure that housing benefit is fair and affordable.

Noble Lords have spoken about the changes that we are making to housing benefit in the social rented sector. In England alone, around 5 million people are on the social housing waiting list and over a quarter of a million households are in overcrowded conditions within the social rented sector. Yet at the same time, something approaching nearly 1 million extra bedrooms are being paid for by housing benefit. That is simply a luxury that we can no longer afford.

It is not fair to the taxpayer and not fair to those in housing need. The demand is such that we must do all that we can to make better use of our limited social housing stock. We need to do more to tackle the high rate of under-occupation, encourage more people to move as well as help those who want to move but have so far been unable to do so. If people continue to live in a property larger than they need, we will expect them to make a reasonable contribution to its cost through a reduction in housing benefit.

On the connection between the CPI and the LHA uprates, I must point out that we are committed to that measure for two years; 2013-14 and 2014-15. If it then becomes apparent that local housing allowance rates and rents are out of step, they can be reconsidered.

Many noble Lords including my noble friends Lady Stedman-Scott and Lord Ahmad, the noble Baroness, Lady Hollis, and the right reverend Prelate the Bishop of Leicester, raised concerns about childcare and how it fitted with the universal credit. It is a critical issue and we are taking the time to ensure that we get it right. The impact assessment showed that an average family with children is more likely to have a higher entitlement under universal credit, and the combination of higher disregards and a single taper will make work pay. If childcare costs are taken into account, some families may face a higher effective marginal deduction rate, but that is the same as happens in the existing system. It is not because of the universal credit. But I absolutely accept the point that noble Lords have made right around the House that we need to get this right and make sure that the way that we structure and fit in childcare is absolutely optimised.

The impact of this Welfare Reform Bill will be greater than the sum of its parts. The introduction of the universal credit will mean around 2.7 million households will have a higher benefit entitlement. For more than 1 million households, that will amount to more than £25 per week. We anticipate that introducing a simplified welfare system will lead to greater take-up of benefits, potentially lifting 600,000 adults and 350,000 children out of poverty. The combined effects of welfare reform could mean up to 300,000 fewer workless households. That is at the core. The reason for this is as the noble Baroness, Lady Hollis, said so eloquently: we are de-risking being out of work compared with being in work.

A point that I think noble Lords still have not really accepted—or perhaps not on the other Benches—is that when the pure universal credit comes in, in its entirety, it will put more than £4 billion each year into the pockets of the poorest people in this country. I know that there are other cuts which noble Lords do not like, but on the universal credit, we have had to invest a lot of money each year and the Treasury has supported that to make the system work.

The welfare reform and the contents of this Bill are about much more than money. The reform is aimed at changing the state of our nation. Taken together, these measures will radically alter the mindset of dependency. They will create work incentives to drive positive behaviour. They will deliver a welfare system that is fair, flexible and firm. In essence, it will bring real, lasting change by directly affecting attitudes and behaviour. This Bill is a real opportunity to make a difference to the lives of some of the poorest, the neediest and the most vulnerable people in our society. It is an important and necessary piece of legislation. I commend the Bill to the House and ask for it to be given a Second Reading.

Bill read a second time.

House adjourned at 10.42 pm.