Grand Committee

Tuesday 8th November 2011 Grand Committee

Tuesday, 8 November 2011

Welfare Reform Bill

Tuesday 8th November 2011 Grand Committee

Committee (11th Day)

15:30

[The Deputy Chairman of Committees (Baroness Gould of Potternewton)]

My Lords, may I remind you of the new procedure during Grand Committee on this Bill for Divisions in the Chamber. Members who have registered with the Clerk of the Parliaments may vote in their places in the Grand Committee, provided they are present in the Grand Committee when the Question is put in the Chamber after three minutes. Members who have not registered or who are not here at the three-minute mark will not be able to vote in their places. I also remind Members to be sure that they speak up but do not touch the microphones. Before I call the first amendment, the noble Lord, Lord Freud, wishes to say something.

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

My Lords, I thought it would be convenient to touch on the timetable. There has been discussion between the usual channels on the best way to take the rest of proceedings. We have agreed, subject to our best endeavours and without overriding anything, that there will be 17 Committee sittings, finishing on 28 November. The main items will be taken as follows. ESA time-limiting will be debated today; the Social Fund issues on 10 November; the PIP on 14 and 16 November; the benefit cap on 21 November; fraud and error on 23 November; and child maintenance and changes to the Child Poverty Commission on the last day, 28 November. I will circulate this timetable to all Peers after today.

[Lord McKenzie of Luton]

My Lords, I thank the noble Lord, Lord Freud, for running through that timetable. Our Front Bench is signed up to using our best intentions to make sure that we stick to it. It is helpful for those who are not necessarily here for every bit of the Bill to know roughly what the schedule is. My Whip, my noble friend Lord McAvoy, has asked me to stress that these are firm intentions but not a straitjacket.

[Baroness Morgan of Drefelin]

My Lords, it is incredibly helpful for those of us on the Cross Benches to hear from the Minister what the timetable for the subject matter for debates might be. Can I also point out how difficult it might be for some of us, with the Health and Social Care Bill being in Committee at the same time as the Welfare Reform Bill? I have amendments down for both Bills and it will be difficult. I know that is true for many Peers.

[The Deputy Chairman of Committees]

My Lords, before I call the noble Lord, Lord McKenzie of Luton, can I point out that within this group is government Amendment 72? I have to inform your Lordships that if that amendment is carried, Amendments 73 and 74 will then not be spoken to because of pre-emption.

Clause 51 : Period of entitlement to contributory allowance

Amendment 71M

Moved by

[Lord McKenzie of Luton]

71M: Clause 51, page 36, line 19, leave out “365 days” and insert “a prescribed number of days which must be at least 730”

[Lord McKenzie of Luton]

My Lords, in speaking to Amendment 71M, I shall speak also to Amendment 71P. I shall speak to the other amendments in this group when they have been introduced.

Clause 51 is one of the most controversial and unfair provisions in the Bill. It seeks to limit contributory ESA to 365 days in aggregate in respect of the same reference period. The clause further seeks to have the clock running for this currently so that days of receipt to date count towards the total. Our amendment is modest in that it seeks to remove the reference to 365 days and replaces it with an order-making power for which the prescribed number of days must be at least 730—that is, two years. This formulation provides the route to ensuring that any time-limiting of contributory ESA must be based on a proper analysis and evidence, rather than the arbitrary approach that the Bill adopts.

To justify a time limit for ESA we need to be satisfied that it is reasonable to expect people to return to work within the period, or to be fit for work and transfer to the JSA regime or be subject to work-related requirements in the universal credit regime. This judgment is not without difficulty, given the multiplicity of circumstances that cause individuals to be allocated to the work-related activity group—the WRAG. They include mental health and fluctuating conditions and depend on the level of support that is available to individuals. No one is arguing for a system that enables individuals to stay in the WRAG for ever without making any effort to move closer to the labour market. However, is it not the case that, when placed in the WRAG, there is a prognosis of how long somebody will stay there, and that prognosis is reviewed for its appropriateness before a claimant is moved to the JSA regime or, in the future, to the all work-related requirements of universal credit or, indeed, to the support group?

Therefore, in essence, the system has an individualised assessment of how long somebody may need to remain in receipt of contributory ESA if the national insurance conditions are satisfied. If the Government have confidence in the WCA process, why not rely and build on this approach? Is not the answer that this is really not about fairness or making reasonable judgments about how long people need to remain in the WRAG but all about cost savings and removing entitlements to which individuals may have contributed throughout their working lives?

A lot of figures have been swirling around this matter but we know that government estimates show that by 2015-16 700,000 people will be affected by time-limiting. Forty per cent of these will not qualify for means-tested benefit. Of those who do, can the Minister give us an estimate of those who will receive maximum income-related ESA and possibly the distribution of those who will not? We know that 94 per cent of contributing ESA claimants in the WRAG have a claim, the duration of which is 12 months or more. From the Pathways programme, we know that between 2005-06 and 2008-09 only between 25 and 30 per cent of participants found work within 12 months. There are strong representations, for example, from Macmillan to the effect that for many cancer patients 12 months is not a long enough period before they return to work. It maintains that three-quarters of people with cancer placed in the WRAG still claim the benefit 12 months later.

Of course, the Government’s defence of all this is that income-related ESA will still be available. However, the thresholds for the means-tested benefit is low, and entitlement could be denied if a person’s partner earned as little as £7,500 a year or worked more than 24 hours a week. That is another couple penalty and a significant disincentive to work. The Government’s own assessment is that the average change in income for those who lose out from time-limiting is a loss of £52 a week—a staggering amount—with some losing as much as £94 a week.

We can accept that, as with JSA, an argument can be made for contributory ESA to be subject to a time limit, but the line must be drawn at a point where it is reasonable to expect that people will be able to move on from the support and protection of the work-related activity regime. Three hundred and sixty-five days is clearly far too short a time for this yardstick. Seven hundred and thirty days is, it is accepted, an arbitrary figure to an extent, but the real task is to do the analysis, produce the evidence and do the work so that a proper time limit can be established. This evidence-based approach is what the DWP is usually so good at, and it is to be regretted that it is being abandoned in this situation.

Although not spoken to yet, we wholeheartedly support the proposition that the assessment phase should not feature in the number of days counted for any limitation period. The basic JSA rate is all that is received during this period and claimants do not know whether they will end up in either the WRAG or the support group.

Similarly, we support the amendments that prevent any days arising prior to the introduction of the legislation counting towards any limitation period. Can the Minister tell us how many people will lose contributory ESA at the point that these provisions in the Bill come into effect? Writing to tell people that this restriction is probably on its way—and we will have to see the resolve of the Liberal Democrats on this issue when we have the opportunity to vote—is all very well but helpful advice to the effect that the DWP cannot offer any guidance before the legislation becomes law must have been received with some consternation. Perhaps we can ask what feedback has been received.

I have not spoken to Amendment 71P, which is by way of a probe. The notes provided by the DWP state that people in the support group will not be affected by the proposals. Is this correct? Take the case of someone who starts in the WRAG but because of a deteriorating condition transfers to the support group. Prior to any time limit in legislation taking effect, contributory ESA would have been payable throughout, based on satisfying the first and second contribution conditions at the start of the claim. But if entitlement ceases as a result of the time-limiting rule, will the claimant not have to satisfy the contribution conditions afresh? Satisfying the second contribution condition may not be a problem because of crediting, but the claimant could be out of time to take advantage of the last tax year in which the national insurance contributions were paid, the last time when the individual was actually earning in excess of the LEL.

I have a couple of further questions. When somebody is migrated on to the ESA from contributory incapacity benefit, will the national insurance contribution conditions be treated as satisfied or will they have to be met again? The Minister will recognise that somebody who in later years has been treated as having limited capability for work may well have been credited with sufficient national insurance contributions to satisfy the second condition, but may struggle to satisfy the first condition of paying contributions amounting to 25 times LEL within the previous three complete tax years. When somebody is transferred from contributory incapacity benefit to contributory ESA, is it intended that the 365-day clock starts at that point? What analysis has been undertaken in respect of this in planning transfers to ESA? What is the position of somebody who is no longer in the WRAG because they are considered to be fit for work and currently, therefore, are on JSA? Will they be eligible for contributory JSA, albeit for a maximum of six months? Further, policy briefing note 4 makes it clear that further changes are planned to the employment and support allowance to align the earnings rules and taper with universal credit. With contributory ESA in steady state, accepting for this purpose the 365-day time limit, what analysis has been undertaken of the costs and benefits of this? Is it intended to be cost-neutral?

We have a number of other amendments to consider. I have no doubt that we will hear the refrain from the Minister, “There is no money. These changes are vital for deficit reduction”. But there is always choice. The question is: why make these particular cuts and why is this particular burden to be borne by those who by definition are not currently able to work and, moreover, have paid their dues in the past? I beg to move.

[Lord Wigley]

My Lords, I must say that I have considerable reservations about this clause in general, and these amendments touch on a number of them. I have concern about the provision for time-limiting the contribution-related ESA to 12 months, as is provided by this clause. It means that ESA claimants with a spouse or partner working 24 hours a week or more will not be eligible for the benefit. I believe that the time-limiting ESA is a serious disincentive to work for the partners and carers of ESA claimants, which leads to a situation in which unemployment is more financially sustainable than work, which must be a considerable worry to us all.

I further believe that the time-limiting of ESA punishes working families where one member is claiming ESA. Does the Minister accept that those with a working partner or with other income or capital, possibly up to as many as 400,000 people, will lose entitlement to the benefit completely if these provisions go forward? I urge the Government to think again on this.

15:45

[Baroness Morgan of Drefelin]

My Lords, I have the second amendment in this group, Amendment 71N. It is a big and complicated group. I have also put my name to Amendments 73, 74 and 75. I am not going to say too much about those because the noble Lord, Lord Patel, is going to introduce them in some detail. I support his opposition to clause stand part, and I am sure that we will come to discuss that more generally.

Many people who are placed in the work-related activity group have a deteriorating condition—say, Parkinson’s disease. Some people with motor neurone disease or some forms of cancer have been told that they have only two or three years to live, so it is possible to be in the work-related activity group and still have a very limited prognosis. The purpose of this amendment is to allow certain groups to be exempt from time-limiting of contributory employment and support allowance. This is a probing amendment in many ways, but I would prefer there to be no time-limiting at all, to be clear. If we do have time-limiting, this amendment is intended to safeguard support for people who have had to give up work due to a degenerative condition or terminal illness—for example, Parkinson’s disease, motor neurone disease or cancer. This measure will affect people with a degenerative condition who qualify for the work-related activity group but whose benefit expires before their condition deteriorates, to the extent that they would be eligible for the support group. It will also affect people with a terminal prognosis of over six months who will qualify for ESA under exceptional circumstances.

The Government had originally promised those whose contributory ESA claim had ended at 365 days as their condition deteriorated that, if they qualified for the support group on either functional or terminal illness grounds, they would become eligible again for ESA. This commitment was made in response to a question from Dame Anne Begg MP by Chris Grayling MP. However, there are currently no provisions in the Bill that will allow for someone to restart a contributory claim after their 365 days have expired. Many people with degenerative conditions or a terminal prognosis of more than six months will find themselves without support in the final stages of their illness if they have savings or a partner in work, and therefore cannot seek support from means-tested benefits. People with a degenerative condition will face the impossible predicament of trying to remain in work for as long as possible in order to ensure that they enter the support group within a year of beginning their claim, or having to stop work and focus on managing their condition and thus risk seeing their benefit run out after one year. What a position that we contemplate these people being in.

I use the example of a person with Parkinson’s disease that was lent to me by the Parkinson’s UK charity. It described the following client. He had worked until the symptoms of his condition became too severe for him to continue. He explained that although he had good days, he had bad days. He would only have good days if he carefully conserved his energy. He said,

“but I’m better when I’m not doing anything. It sounds like a skiver’s charter but what it means is that the energy or concentration reserves needed to do simple physical or mental tasks are quite low so any difficulty encountered quickly drains those reserves and I get into a sort of ‘closing down state’. My thoughts slow down. My movements slow down. My breathing gets laboured. I want to sleep. I find it hard to swallow properly. I get headaches and experience a feeling of desperation”.

This proposal promises to create a two-tier system. The rules around national insurance contributions are extremely complicated. I do not claim to be an expert in any way, so it is hard to present a hard-and-fast case, but one scenario that might occur is that someone whose condition deteriorates to the extent that they are eligible for the support group on day 365 of their claim receives indefinite support, while someone who becomes eligible on day 366 gets nothing. What action is the Minister taking to ensure that the Government honour their commitment that those who become eligible for the support group after their 365 days’ claim has expired can receive support through contributory ESA?

I understand that there are exceptional circumstances which are catered for in legislation, in the Employment and Support Allowance Regulations 2008. Someone with a life-threatening condition who would not meet the normal criteria for ESA can qualify under exceptional circumstances and be placed in the work-related activity group. The example given in the guidance for healthcare professionals carrying out the assessment is someone with motor neurone disease. As I have said, we know that the average life expectancy post-diagnosis for someone with motor neurone disease is one to four years. A 62 year-old client of a citizens advice bureau in the south-east had worked all his life, until he became too ill to carry on. He was diagnosed with motor neurone disease and experienced chronic fatigue and reduced mobility. He applied for ESA and was placed in the work-related activity group. What does the Minister intend to do to ensure that people in that situation, who qualify for ESA under these exceptional circumstances, do not lose out as time-limiting is introduced?

The equality impact assessment accompanying the proposal to limit payment of employment and support allowance to people in the work-related activity group partly justifies that measure on the basis that ESA is a “temporary benefit”. This ignores the reality that it is impractical to expect someone with a terminal prognosis to return to work. We are seeing people with a terminal prognosis being put in a work-related activity group, which is being classified as a temporary benefit. If ESA is a temporary benefit, what action is the Minister planning to take to support those for whom a return to work is not an option?

I, like many here, find these clauses desperately unfair to some of the most vulnerable people in our society. I oppose time-limiting for 12 months for ESA, which appears to me to be completely arbitrary. It is not appropriate that we should be looking at this implementation retrospectively. The assessment period should not count towards any time-limiting and it is not appropriate that people coming out of the support group, if they only have a month left of their time-limiting, should be expected to find work in a month. This is an extremely important debate and I hope very much that the Minister will be able to come back fully with answers to my questions.

[Baroness Thomas of Winchester]

My Lords, at this stage, I am not going to go into all the arguments about the time-limiting of ESA to one year. My noble friend Lord German will address the main issues in a short while. I shall speak to my Amendment 72A to my noble friend the Minister’s Amendment 72, the purpose of which is to question the whole business of the retrospective nature of this provision. Under this part of the new clause, the clock has already started ticking for existing claimants, regarding their entitlement to contribution-based ESA in the work-related activity group rather than in the support group, who have been receiving the benefit for 12 months or more. For them, their claim will stop as soon as the Bill becomes law, which is estimated to be April of next year. By starting the clock well before Parliament has made its decision on the Bill, the Government seem to be acting like a private insurance company that changes the rules of someone’s policy after they have made the claim.

However, this does not seem to have been the plan in October last year. If one looks at the Spending Review 2010’s policy costings, published in October last year, on page 6—it is repeated in the Library briefing pack on the Bill—it is stated at the first bullet point that,

“for existing contributory ESA customers, the time limit will apply at the point they reach one year including the assessment phase. Those with a claim duration of one year or more when legislation comes into effect will have their benefit time-limited immediately and will have at least 12 months to prepare for the change”.

Perhaps the Minister can throw some light on why and when the Government changed their minds and decided to make this provision retrospective—thus allowing hardly any time at all for some claimants to prepare for change. Just to be clear, someone whose claim started in April this year may find by the time the Bill becomes law in April next year that their claim will cease immediately.

Parliament has always deplored retrospective legislation. In 2009, the Constitution Committee of your Lordships' House, in its report on the Banking Bill, drew attention to the need for there to be,

“a compelling reason in the public interest for a departure from the general principle that retrospective legislation is undesirable”.

At least the letter to claimants that was sent out recently by the DWP is headed:

“Possible changes to your ESA”,

and states that the changes the Government want to make have not yet been approved by Parliament. The letter continues by providing the ramifications of the change. I gather that many claimants who have received such a letter are telling citizens advice bureaux up and down the country that they do not know what this letter means for them, and that they are very worried by it. They have good cause to be worried. Not only are the Government breaking the understanding that national insurance contributions—perhaps paid for years and years—protected a person against the loss of employment on health grounds, but many claimants, as we have heard, are likely to be left with only their partner’s extremely modest income, which may push them out of eligibility under the means-tested ESA.

I turn back to the policy costings document of October 2010. Under the heading, “Uncertainty”, we read that the migration from IB to ESA was the cause of particular uncertainty. We now know that a high proportion of IB claimants are being found to be fit for work as a result of the migration to ESA, in spite of appeals. I therefore ask my noble friend whether the Government can now start to quantify savings that might be made on the ESA bill, in spite of an increasing JSA bill—given high unemployment—and whether they will consider reverting to their original plan and drop the retrospective nature of this clause.

We all know of the need for the Government to cut public spending by an eye-watering amount as soon as possible. The Government’s argument may be that JSA is time-limited, so why not ESA? However, in my view, a claimant’s health is a much more emotive subject for their employment—or lack of it—and being ill can be a very expensive business. Using retrospection in this way, when it directly affects someone’s income in an unforeseeable way, seems to be thoroughly bad practice. Is it really good governance to cut massive corners by bringing in this policy in such haste?

16:00

[Lord Patel]

My Lords, I thank noble Lords who have supported my amendments. There are three amendments in my name: one to ensure that any period of time-limiting contributory ESA restarts following any period a person spends in a support group, one to ensure that the assessment phase is not included in any time limit of contributory ESA, and one to ensure that time-limiting contributory ESA for those in the WRAG is not applied retrospectively.

Many groups, including Macmillan, Disability Alliance and others, oppose the introduction of a 12-month limit to the amount of time someone is able to claim contributory-based employment and support allowance for those in the work-related activity group. Macmillan, the Disability Benefits Consortium and others in the wider disability sector oppose the principle of time limiting ESA. People with a disability or illness who have paid into the system should be able to receive support for as long as they meet the eligibility criteria for ESA and are unable to work due to their condition.

Clause 51 amends the Welfare Reform Act 2007 to introduce a 12-month limit to the amount of time a person is entitled to contributory ESA for those in the WRAG. In my view, Clause 51 should be removed from the Bill. Removing this clause would ensure that disabled people would continue to receive critical financial support for as long as their disability or long-term condition limits their ability to work.

The Government’s own figures show that 94 per cent of people in the WRAG will need ESA for longer than 12 months. Those affected, including 7,000 cancer patients, will lose up to £94 a week in vital support. The Government’s proposal is based on their objective to make savings. However, they have provided no evidence to demonstrate that a 12-month time limit is reflective of the amount of time people in the WRAG need in order to be able to return to work.

The coalition agreement promised, I believe, to protect the vulnerable from spending cuts. In his first party conference speech, the Prime Minister last autumn said:

“People who are sick, who are vulnerable, the elderly—I want you to know we will always look after you. That's the sign of a civilised society, and it's what I believe”.

It cannot be right for the Government to propose such a significant policy change without providing evidence that the measure is appropriate and reasonable. Can the Government publish evidence to demonstrate that a 12-month time limit reflects the likely needs of people in the WRAG? What organisations or experts were consulted before the decision was taken to introduce a time limit for contributory ESA?

The time limit will be imposed on people who are in the WRAG. Those in the WRAG are people who, following a work capability assessment, have been found to be not fit for work due to their disability or illness. While those in the WRAG are expected to carry out some work-related activities in order to help them return to work, they are still considered to be not fit for work. If following the WCA they had been found to be fit for work they would be ineligible for ESA and placed on jobseeker’s allowance.

People in the WRAG could still be severely disabled or disabled, as is the case with people recovering from aggressive cancer treatment and other debilitating conditions. I have one example. Martin was diagnosed with primary progressive MS in February 2007. He continued to work until November 2009, albeit with difficulty. He cannot walk or stand up, has incontinence problems and suffers badly with fatigue and muscular weakness in his legs and back. Martin recently received a letter from the DWP outlining how the Government are seeking to change the rules of ESA and impose a time limit on the benefit. He said:

“The real sting in the tail is that the ‘clock’ starts ticking from the date you first ever started receiving the benefit. In my case that is since June 2009, so some 27 months, so in their eyes I am 15 months over the limit! Therefore, my payments would stop immediately once the policy comes into force next year”.

Poor old Martin. What is he going to do?

Currently, no one is placed in the WRAG indefinitely. Only those who meet the strict eligibility criteria for ESA and are unable to work will be able to continue to receive ESA. People in the WRAG can be called for an assessment at any time and will lose the benefit if they are found fit to work. The government proposals will affect only those vulnerable people who are too unwell to work. The vast majority, patients with cancers and others, want to work if they are able to and do not need an incentive. Unlike incapacity benefit, the WRAG or ESA is clearly focused on supporting people into work and receipt of the benefit is conditional on claimants taking agreed steps on activity to move towards work. That can include training, education or condition management. Claimants who take the agreed steps to return to work should not be penalised simply because they need longer than one year.

Many disabled people will simply not be fit enough to return to work after just one year. For example, people with cancer will often experience side-effects of their condition and treatment, such as severe fatigue or depression, for many months and in some cases years, even after their treatment is finished. People with cancer face a range of barriers that impact on their ability to return to work. They can experience debilitating physical and psychological effects from cancer and its treatment, including severe pain, fatigue, nausea, fever and diarrhoea. The majority, 53 per cent, are not advised by medical professionals about the impact of their cancer diagnosis on their working lives and how they can manage their condition. They are not routinely offered the range of back-to-work services they need, such as counselling, retraining and workplace advocacy. They are less successful in securing workplace adjustments to which they are legally entitled and which would help them return to work. This is likely to be linked to the fact that just 43 per cent of employers know that people with cancer have legal protection against discrimination.

Means-testing thresholds are such that thousands of people will lose all their ESA if their partner earns as little as £150 a week. The Government’s own estimates predict that 700,000 people will be affected by time-limiting by 2015-16. Of those who actually lose out, 51 per cent are in the lowest third centile for income; the average drop in income would be £52 a week, but for those in the lowest centile—the lowest third—this figure is £35 a week, a significant amount of money for people struggling to make ends meet. What estimate has the department made of the number of people who will fall into poverty as a result of time-limiting contributory ESA?

Furthermore, people who are currently covered by special rules and can reasonably be expected to die within six months are automatically placed by the support group and will not be affected by time-limiting. However, people who have a terminal diagnosis but who are expected to live for longer than six months currently can still be placed in the WRAG and will therefore be subject to time-limiting. This means someone who has a prognosis of two years and is placed in the WRAG could lose their support after one year, even though they may have only one year left to live. Many of these people will not go on to claim a pension and therefore may receive only 12 months of ESA for all their national insurance contributions. People who lose their contributory ESA due to time-limiting will not be able to claim contributory ESA if they have subsequently become terminally ill and are covered by special rules. This is despite the assurances given by the Government that people who are terminally ill will not be affected by time-limiting.

The Government have claimed that there are alternative means of support available for those who lose their ESA, such as housing benefit or tax credits. However, these are dependent on personal circumstances and many cancer patients will be ineligible. For instance, a couple without children who own their home will not be eligible for housing benefit and they will qualify for tax credits only if the working partner works more than 30 hours, which may not be possible due to caring commitments. My question, therefore, is: can the Government publish evidence to demonstrate what alternative means of support is available for people who lose ESA and give the number of people who are eligible for this support?

For cancer patients, financial worries are second only to worries about their condition and treatment. I have serious concerns about the impact that time-limiting will have on the psychological well-being of sick and disabled people who might already be experiencing depression and anxiety. This will also put pressure on mental health services funded by local authorities. What assessment have Ministers made of the impact that time-limiting will have on health and social care budgets and services, and what discussions have they had with the Department of Health?

Calls for a rethink on the time limit have not been limited to people with cancer and certain disabilities. Concerns about the impact of the proposal is widespread. I noticed that at the Liberal Democrat conference in September delegates voted unanimously to make it Lib Dem party policy to oppose an arbitrary time limit on ESA. I wonder what discussions the Minister has had with his Lib Dem colleagues about alternatives to the 12-month time limit following the Liberal Democrat vote at the party conference, about which no doubt Liberal Democrat noble Lords will correct me if I am wrong.

It is to be welcomed that the Government have recognised the need to make changes to the work capability assessment, and I commend them for at least recognising that. However, I look forward to the Government’s proposal to make more widely available the automatic entitlement to support groups which is currently available to groups such as patients receiving intravenous chemotherapy. As I said, I commend them for that. However, the necessary changes will take time to be implemented, and that will not improve the situation for cancer patients who have finished their treatment and need sufficient time to recover before they are well enough to return to work.

It is widely recognised that the WCA needs to be significantly improved before it is fit for purpose. The introduction of a 12-month time limit for ESA will compound the existing problems relating to the WCA. Instead of taking away support from sick and disabled people who are still unable to work, the Government should be working with disability organisations to design back-to-work programmes that offer personalised support appropriate to customers’ needs. I sincerely hope that the Minister will be sympathetic to the cause and that we will have some proposals from the Government that are encouraging to them.

[Baroness Lister of Burtersett]

My Lords, I am pleased to rise in support of the vital amendments tabled by the noble Lord, Lord Patel, and in opposition to the Question that Clause 51 stand part of the Bill. I am afraid that this will be another of my rather long speeches but this is such an important issue that it is essential that we spend time on it.

The noble Lord, Lord Patel, speaks from his considerable experience as a clinician, particularly with regard to cancer patients. The cause of cancer patients has also been well served by Macmillan Cancer Support, which has done so much to bring this issue to public attention and to brief noble Lords. I shall not focus on this particular group because I cannot possibly bring to the matter the same level of expertise as that of the noble Lord. Instead, I shall discuss some of the wider implications for our social security system, including the gender implications of relying on income-related ESA as an alternative to contributory ESA.

In the other place, the Minister of State told the Public Bill Committee:

“It is a long-standing principle of our contributory system and the JSA system that we allow those who have paid in to draw back out money for a period of time, but that there is a limit to the amount that they can draw out again”.

He continued:

“There has been an enormous inconsistency between JSA and ESA and its predecessors, in that somebody who manages to get themselves on to our sickness benefits is there indefinitely, whereas somebody who is on JSA is there only temporarily. That creates a perverse incentive in the system”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 650.]

16:15

It is also a long-standing principle of our contributory system that those unable to take paid work because of sickness or disability should be able to rely on the contributory benefit system so long as they are in that position. That support was never intended to be temporary. The impact assessment tells us that time-limiting is about:

“Embedding a culture that ESA is a temporary benefit for the majority of claimants”.

Yet, as noted by the noble Baroness, Lady Morgan, and the noble Lord, Lord Patel, the Government’s own figures show that the great majority of recipients in the WRAG will still need ESA after a year. Surely the point of ESA is to address the perverse incentive mentioned by Mr Grayling, in so far as it exists, through the separation out into the support group and WRAG, and the transfer of those able to work immediately to JSA through the work capability assessment. The noble Lord, Lord Patel, spoke about that. The additional imposition of an arbitrary time limit on top of the work capability assessment is a form of double jeopardy. Moreover, it was my understanding that those not eligible for income-related ESA would no longer be able to access the support to find work through the work programme provided through contributory ESA. At the briefing that we received, I was told that they could access that help voluntarily, although it is possible that I misunderstood. I would be grateful if the Minister would confirm that people who lose all entitlement will be able to access the work programme, should they so wish. If not, that is surely a perverse outcome unless the Government do not care that this group’s chances of finding work could be diminished if they no longer have to provide benefit for them. Also, can the Minister clarify the situation with regard to credited contributions for those who cease to have any entitlement to ESA at all?

I remind noble Lords of another long-standing principle in our social security system, the contributory principle. That principle was reviewed by the Social Security Select Committee in the other place in 2000; I am sure that the noble Lord, Lord Kirkwood of Kirkhope, will remember the report well as he was the much respected chair of that committee at the time. It started with the observation that the contributory principle,

“was the cornerstone of the post-war social security settlement, intended to provide social protection for all through a collective fund to which everyone contributed”.

The report continued:

“Today that system is being eroded”,

and the committee’s investigation,

“grew out of an unease that the system of National Insurance is disappearing by default”.

Clause 51 represents a significant further stage in that process in this the centenary year of the National Insurance Act 1911, which first established the contributory principle in this country.

Universal credit policy briefing note 4 acknowledges that:

“Claimants recognise and strongly support the contributory principle and the Government believes it is right that people are able to access support after paying into the system”.

Yet they are now reneging on the contract made with citizens through the national insurance system.

The conclusion to the Social Security Select Committee’s report was couched in terms of the purpose of social security and what it is trying to achieve. It stated that,

“social security has a wider role than simply providing a safety net for the poor… as social insurance”,

it,

“should help protect individuals against the adverse consequences, including a drift into poverty, as a result of unexpected life events such as illness or injury”.

The more policy talks about,

“targeting support on the poorest”,

as the impact assessment does with reference to the policy objectives behind the measure, the more social security’s wider role is undermined.

In Committee in the other place, the Minister of State explained that the decision to impose a time limit after a year was,

“not based on an estimate of a typical recovery time”.

Here we have a clear admission that the policy was not based on medical evidence. Instead it was based,

“on the principle that these are people who have other means of financial support”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 652.]

I am not quite sure that that is a principle, but never mind. So much for the social protection that the contributory system was supposed to provide.

At Second Reading, I quoted from a letter that I had received from a disabled woman who said that she felt,

“desperately worried and frightened for my future”.

She was happy for me to use anything that she said anonymously as, she said,

“it would make me feel as though I, and all of us, have a voice”.

I cannot be that voice but I can do my best to act as a conduit for it and the voices of some of the other disabled people who have written to me and, I know, to other noble Lords. This woman asked, “What do we do then”, once the time limit is applied? The Government’s answer, of course, is to claim income-related ESA but, as the gender impact assessment shows, about a third of men and 46 per cent of women—nearly half—will not be eligible. It reassures us that these women,

“will generally either have a working partner or capital over £16,000 so will not be left without income”.

However, where they have to depend on a partner, they will be left without an independent income. These women, and quite a few men, will have their financial autonomy eroded. As I said at Second Reading, this matters to people. An individual benefit paid in one’s own right provides women with a degree of economic power and control. Citizenship rights which come at second hand, via a partner, are compromised. As an aside, I am alarmed at hints—fuelled by a recent Written Answer in the other place to Karen Buck MP—that in some cases any contributory benefit entitlement might be paid through the universal credit because this could mean that a woman's contributory benefit, for which she has paid contributions, is paid to her partner. I would be very grateful if the Minister could say categorically today that this will not happen.

I return to the matter in hand. Mind argues that non-means tested benefits,

“for people with long-term mental health problems are an essential part of the system. Many such people rely on personal and emotional support from partners to be able to live in the community. Making partners wholly responsible for their financial support as well seems both unjust and self-defeating”.

It goes on to say:

“It seems highly likely that the change would result in family breakdown in many cases and increased rates of hospitalisation and institutionalisation”.

Among letters I have received from disabled people who are extremely anxious about this change are two which are illustrative of cases that are supposedly unproblematic because of the presence of a working spouse—in these instances, the wife. One is from the wife of a 49 year-old man who has been in full-time employment for over 30 years. She is 45 and has also been in employment for nearly 30 years. Last year her husband was diagnosed with a slow-growing brain tumour and a benign tumour in the ear. Following an operation, he has been unable to return to his former employment as a pipe-organ builder because, she says, the illness,

“limits his strength and stamina and overall capability of the use of machinery and scaffolding”.

He has applied for countless part-time jobs and is helping out at the local Barnardo's shop and animal sanctuary,

“to preserve his work ethic and to gain new experience with the hope of maybe gaining employment in a less physical position”.

Her husband has received the famous—or infamous—letter informing him that his ESA may stop in April 2012. She writes:

“We were shocked at this time limit”,

because someone who, as in her husband's case,

“has contributed all his adult life, is given such a short time to get his life back on track after such a serious illness. I may add an illness that is never going to get better; he has just got to learn to adapt his life to living with his condition and … doing his utmost to battle through this and get back to some ‘normality’. If this plan goes through, my husband and I am sure many like him will lose his ESA and because I myself am”,

in full-time employment,

“he will not be able to make a claim on earnings based”—

I think that she means income-related, of course—

“thus adding to his problems and no doubt putting back his recovery”.

The second letter is from a blind man, who is married with a seven year-old daughter and who used to work as a psychiatric nurse. He sees no prospect of finding work at present. He writes that,

“removing my benefit will affect my whole family placing a greater financial burden on my wife. It will also damage me as an individual. If I lose this benefit I have concerns about my family's ability to continue to pay”,

household bills,

“and the cost of raising a child. At best, I will become totally dependent on others. I would actually be better off financially living alone. Over recent months benefits have been referred to as a trap, in my case this is far from the truth. It is a much needed part of my family's income. This situation is causing unnecessary stress to me and other blind people. I hope you can use your position as a member of the House of Lords to stop these proposed changes going through”.

Amendment 75A, which we will hear about in a moment, should help people in this position, but it will not address the concerns raised by another person who I have heard from whom I want to quote. I received a long letter from a woman who described herself as,

“a disabled person with a long term mental illness”.

She wrote that the news of the time limit,

“came as a massive shock to me. I have found it so hard to come to terms with the fact that the government can be so cruel”.

She said that,

“throughout the length of time I have been in receipt of incapacity benefit, I have tried my utmost (and so far succeeded) to survive without recourse to means tested benefits. This has included, in the past, paying the whole of my rent … It is of the utmost importance to me not to have to rely on means-tested benefits because my housing and support needs are complex”.

This is a 50-year old woman with complex mental health problems which she has been advised will last her lifetime. She clearly gets stressed very easily—

16:27

Sitting suspended for a Division in the House.

16:37

[Baroness Lister of Burtersett]

I was just quoting from a letter I received from a 50 year-old woman with complex mental health problems. She wrote that,

“my life revolves around trying to be as well as possible. I cannot stress enough how frightening it is to feel that you are not able to work, will not be put into the support group”,

she fears,

“and will be left to use up everything you have until eligible for means-tested benefits … My medicine prescription has been increased 4-fold and been supplemented with extra medication since the time limit was announced”.

As someone who has campaigned and argued for a more inclusive social security system for 40 years, I feel that I have to use the luxury of being a Back-Bencher to oppose this clause on principle. My noble friends on the Front Bench know and understand my position. However, if time-limiting goes ahead, it must be done on the fairest possible basis. Therefore, I hope that the Minister will look favourably on the proposed amendments in the name of the noble Lord, Lord Patel, which would aim to achieve that in three main ways.

First, I hope that action will be taken so as not to penalise people with fluctuating conditions who go on to the support group after the contributory ESA has expired. I know that that is a particular concern of Macmillan Cancer Support. Secondly, I could not believe at first that the rule would be applied retrospectively. The case against that has been made extremely eloquently by the noble Baroness, Lady Thomas of Winchester. As a result of this, the letter has gone out to existing recipients. According to one who wrote to me, far from providing the reassurance mentioned by the Minister in his opening remarks at Second Reading, that will, she warns, “strike fear” into the hearts of those affected. Could the Minister state whether there is a precedent for such a letter to go out before Parliament has agreed such a controversial change?

Thirdly, I was also dismayed when I realised that the 13-week assessment phase is included in the one-year time limit, which in effect means that full contributory ESA will last for a year minus 13 weeks. In Committee in the other place, the Minister of State agreed to look again at this issue in response to concerns expressed by a Liberal Democrat MP. What was the outcome of this further look? According to a Written Answer that I received, if the assessment phase were excluded it would reduce the savings by £100 million in 2012-13, rising to £120 million by 2014-15, but falling to only £40 million by 2016-17. Here is the nub: this clause is not about making social security fairer; it is about saving money, as my noble friend Lord McKenzie has already stated.

I have some sympathy with the Minister. He is extolling the virtues of universal credit at every opportunity, yet universal credit is in danger of being contaminated by sharing a Bill with unfair, cost-cutting measures such as this one. I hope, therefore, at the very least, that the Minister will think very hard about how to mitigate this unfairness through the kind of amendments before us.

[Baroness Meacher]

I rise to speak to Amendments 71M, 71N, 71P, 72A and 73. First, I thank the noble Lord, Lord German, for kindly allowing me to speak a little earlier than I had planned because I have to leave the Committee briefly at 5 pm. I apologise to the Minister and the Bill team that I have not been able to attend the briefing sessions. They are a wonderful idea and I had hoped and assumed that I would attend every one, but life has not been quite like that.

I also apologise for not having had quite the time I would have wished to prepare for this debate. Having said that, I have major concerns about the plan to limit entitlement to contributory ESA to one year. I understand from the CAB service that the DWP has estimated that, of those on contributory ESA and in the work-related activity group, 94 per cent will remain on the benefit from more than a year, so it is estimated that by 2015-16 700,000 people will be affected by limiting contributory ESA. Some will lose their entire benefit payment, currently worth £94.25 a week. I know that the Minister will correct me if that is wrong. It sounds astonishing. The rationale for this change is, I suppose, twofold. First, it is to give maximum incentive to people to return to work and, secondly, it is to save taxpayers’ money. I will refer to those two points briefly.

It is particularly difficult to support the employment incentive argument at present, when even able-bodied people and remarkably highly skilled people are finding it very difficult to find work. As we said, we think that about 94 per cent of those with disabilities will remain on this benefit beyond their contributory entitlement. I would welcome the Minister’s views on the fairness of this provision in relation to an individual with—obviously in terms of my own concerns—ongoing and fluctuating symptoms. He is very keen to work and does not need any incentive, but no doubt he will be given lots of incentives through the mechanics of the work-related activity group. But the fact is that he cannot persuade an employer to take him on. I know that the Minister is aware that there are very large numbers of people on ESA who want to work and cannot persuade an employer to take them. In other words, these people are very much the deserving unemployed. They used to be called the deserving poor. I happen to know hundreds of people personally who fall into that category. I would be grateful for the Minister's views on that.

If we consider for a moment the need to protect taxpayers’ money, I happen to believe that taxpayers would recognise that this group—people who are disabled and sick on benefits—should be entitled to their benefit, having contributed, many of them, for decades. Politically, I do not believe that this is something that one can possibly justify. It is very hard to argue that savings to taxpayers’ money should be made with this particular group—sick and disabled people—rather than at the expense of other groups in society with much broader shoulders. There are all sorts of cuts that a Government could make that would seem much fairer than this one.

Amendment 71M, tabled by the noble Lord, Lord McKenzie, would at least be a great deal fairer. In a sense you could say that it is all rather arbitrary— 365 days or some other number of days. Really, it is just not justified to cut contributory benefit at any stage for many of these people, but I suppose that that would be better than the alternative.

16:45

Another approach is that of Amendment 71N, tabled by the noble Baroness, Lady Morgan. In terms of cuts, squeezing and reducing expenditure, this would at least be a very cost-effective way forward, assuming one could identify certain groups who would clearly need ongoing support. I know that the Minister could perfectly well identify lots of groups of disabled or sick people who should be exempt from the 365-day provision. I do not think I need to challenge him on that; I know that he could do it. The added advantage of this approach is that it would cost less than the extension of 365 days to all. Certainly, there are some obvious groups. The noble Baroness, Lady Morgan, referred to cancer sufferers with a limited life expectancy, as did my noble friend Lord Patel. How can any Government justify terminating someone’s contributory benefit right towards the end of their life when they have contributed all their life and, as my noble friend Lord Patel said, will not even claim a pension? They are a terrific bargain to the state. I had not thought of that point but it is a powerful one about anyone whose life expectancy is limited and will not be claiming the pension to which they might have contributed for 40 years. I think we can all agree on that.

I turn to my passion, although it is no greater than my passion for the groups I have already mentioned. Let us take just one case to illustrate the situation of those with mental health disorders. Again, there are groups within that category that you could pull out and say have to be exempt from this provision. Tom suffers from obsessive compulsive disorder and depression. He is almost entirely housebound. His condition leads him to perform daily rituals in which he constantly checks that electronic appliances are turned off and that doors and windows are shut and locked. He is compelled to clean surfaces in his home time and again, through the day and night. He gets very little sleep and has all sorts of resulting and related problems. Tom has support or treatment three times a week from his mental health community team. Anyone who receives support from a community mental health team three times a week is very severely ill. The resources do not run to that for almost anybody. No doubt a psychiatrist or psychologist could give a good estimate of the minimum length of time before which this person could not possibly be considered for employment. They probably could not give a maximum time but they could certainly give a minimum. For someone like this, my guess is that it is way beyond a year.

I should like to ask the Minister whether the option of identifying groups for exemption from this provision has been given careful thought by the department. If this has not been done, might he take this back and have some work done to see whether some sensible decisions could be made in identifying such groups before we come back on Report?

The other amendment to which I want briefly to refer is that of the noble Baroness, Lady Thomas, which raises a moral issue. The only possible rationale for making the introduction of a 365-day ESA entitlement limit retrospective is to save money. As the noble Baroness has argued, there is a very strong convention that no legislation should be retrospective. Is it not extraordinary that we should break that very strong convention to deprive sick and disabled people of money? I find this very difficult to take. I am sure that we will come back to this on Report. I look forward to the Minister’s comments.

[Lord German]

My Lords, I shall speak to Amendment 75A in my name. I start by saying that the important thing is to get the work capability assessment right. That was a point made by the noble Lord, Lord McKenzie. It is important that people are accurately placed in one or another of the categories. That means that rapid progress needs to be made with the improvements that have been suggested by and are being adopted from Professor Harrington’s report. It seems that the work capability assessment is a crucial first part in ensuring that the whole system works effectively and properly.

The purpose of this amendment is to protect the most vulnerable and the poorest, and to take a slightly different approach from those suggested so far. I should like to start by looking at the context of two words that many noble Lords have used so far in this discussion—“arbitrary” and “temporary”. There is a difference. The noble Baroness, Lady Meacher, referred to any date being arbitrary. It is indeed an arbitrary decision, and if you have some form of illness that will take you beyond 720 days or whatever, then it is an arbitrary cut-off date one way or the other. That is our principal concern—the provision does not address the issues relating to the people concerned.

I of course recognise that there is an issue to which many noble Lords have referred regarding the cost-saving measure in this proposal. I should like to ask the Minister why the savings now being predicted are between £1.3 billion and £1.4 billion, given that in the comprehensive spending review the Chancellor of the Exchequer said that the savings would be £2 billion a year. This is a question that my noble friend Lady Thomas raised—to try to identify why there was a change of procedure from the announcement made by the Chancellor of the Exchequer, who stated that that there would be no backdating and that the provision would not be retrospective, when this proposal is for some form of retrospection.

When you examine the ways in which you can have a non-arbitrary system that deals with people’s needs, and when you look for a system that in our view deals with the most vulnerable and poorest in our society, there is a variety of ways in which you can do it. Obviously, through medical assessment, you could potentially re-examine people at some stage and say whether their medical condition had improved or was changing, or whether the condition would require that the payment should continue. The problem with reassessment is: when do you reassess and how long does that take? If you understand the meaning that I have already put on the word “arbitrary”, then, whether it is 18, 13, 12, nine or six months, you will see that it really is a question of the individual’s circumstances.

[Lord McKenzie of Luton]

I am sorry to interrupt the noble Lord, but if the process is that when someone is put into the work-related activity group there is a prognosis as to how long they are likely to remain there—this is the basis on which referrals to the work programme are made, for example—does he accept that that is a natural and clear point for reassessment?

[Lord German]

It is a point of assessment, but the problem is that people’s medical conditions can alter—they can get worse or better, and there is the issue of fluctuating conditions that noble Lords have also recognised. The point that I am making is that there is a problem with a single point, and you need to have a progression of points if you are going to use medical assessment.

The other approach that has already been referred to in this debate is exemption by groups. Once again, identifying groups of people is very tricky because people can fall into different categories within a particular group. There is also the danger that, if you identify one group, another group might be left out. In this amendment, we are therefore proposing to look at ways in which—while we cannot wreck the Government’s proposals to make savings and reach the overall budget targets that they have set—we can ensure that the most vulnerable are protected from the effects of any time-limiting contributory ESA. This essentially means protecting the poorest and the sickest. The objective, therefore, is to focus the protection of those who are least able to support themselves. I know that that aim is shared by the Government, and we recognise that they are not time-limiting those in the support group, or even those on income-related ESA—to which I shall return in a moment.

However, we are not fully convinced of the thresholds at which income-related ESA apply, or that they are set at a level that will adequately protect low-income claimants—especially those with working partners. It is interesting to note from the impact assessment that 62 per cent of all those who would not be able to claim income-related ESA at the end of 12 months could not do so because of their employment. I want to come back to that issue of income. I know that we are talking here about a form of means-testing but, even so, we are talking about the main reason why people’s payments cannot continue.

We know that the Government are keen to ensure that there are no disincentives to work and that work will always pay. I am also aware that the Conservative Party in the Government wants to strongly support family ties through the tax and benefits regime. As such, it seems odd to us that the narrowness of the ESA means test risks undermining both these objectives, since it can present an incentive for a certain group to give up work. Paragraph 24 of the impact assessment states:

“Those with the most incentive to give up work are partners earning less than £150 a week, as their net income could potentially only be a few pounds less if they gave up work. An indicative analysis shows that 10% of all partners are in this position”.

If that is the case, these are the 10 per cent who are obviously the poorest and the most threatened by the change which is before them. With that 10 per cent of people in mind, this amendment seeks to set in law a floor beneath which the means test cannot apply. We are probing the Government to see whether they think that the test, as currently applied, is adequate to protect the lowest income households.

The amendment is set in terms not of the hours worked, because that is quite difficult to assess, but of the actual paid income. We know that the new universal credit system will enable the DWP to indentify the income of the partner. I am attracted to an income-based level because it is a clearer marker of actual income than hours worked.

Nevertheless, we would like to hear the Minister’s view on alternative methods of measuring income for a means test. We have chosen in this amendment the income tax personal allowance threshold divided by 52, for simply making it a weekly income measure rather than an annual. This is an external marker and thus less arbitrary than plucking a figure from thin air to write into legislation. If you divide the current rate of £7,475, the figure comes to £143.75 a week, which is very close to the £150 figure mentioned in paragraph 24 on page 11 of the Government’s impact assessment. This level therefore almost equates to the £150 figure. The Government’s own assessment notes that this is the level below which there exists a disincentive for people to work. We are trying to address that disincentive.

We—those who tabled this amendment—cannot be committed to a particular bar or level to set. But I am keen—I hope noble Lords will agree—to set in place an architecture for the future. My noble friend the Minister has used many times the argument that the taper can move with time as circumstances permit, but I want a means-test bar from which one can fluctuate as government income increases. We are aware that the Government have expressed the intention to raise the personal allowance threshold and we are very pleased with that. But it seems to us that if the Government think one should keep one’s earnings and not lose them to the taxman below a certain level, the same logic might also be applied to earnings and to one’s partner’s ESA. I welcome the Government’s response to the future impact of this amendment in light of the changes to the tax threshold which are before us in the next few years.

There are two other issues on which I should like to probe the Government. If they were to look at what happens immediately after the 12-month period is up, and if the income-related ESA is not available—because of the bar or the fact it is means-tested, or for any other reason, capital perhaps—will the Minister allow people who would otherwise have been eligible for income-related ESA to have the national insurance contributions credits applied to them? That would allow them to get the passported benefits that came with that purpose and therefore additional benefits would flow. At its minimum level, that would be a level of support that people could look to.

17:00

The second probing question that I have for my noble friend is about the protection of the support group. The rhetoric behind the Government's announcement has always been that we will protect people who are in the support group. Already, noble Lords have mentioned what happens when you come back to the support group for a second time. Essentially, someone could have a change of claim where for a year under the present proposals they had a condition such as arthritis or stress from which they were presumably intended to get better as time went on. Then, after the 12 months were up, they developed a life-threatening condition. Both could have placed them in the support group—perhaps not the first condition, but certainly the second one—but they would not be eligible. They are eligible to get the ESA that they expected, but they have already exhausted those 12 months of contribution credits in the first year. Perhaps the Government need to rethink the wording of the statement that those in the support group will always be supported. There will be examples where people will fall out of that circumstance.

Noble Lords will note from debate on this amendment the impression that the Government need to rethink some of the ways that this will impact on the poorest and most vulnerable in our society. We certainly do not want to be a Government who provide a terrible time for people in the last months of their lives. The amendment proposes a way for the Government to set a bar at an appropriate level to the financial circumstances, but which could be improved over time. It will give the support that is needed to the most vulnerable.

[Baroness Morgan of Drefelin]

Before the noble Lord sits down, he said that there was a sense that the work capacity assessment needs to be right and that he was thinking about arbitrary cut-offs and temporary classifications. Is he saying that, in order to get this right, we have to look again at the support group? Because of the functional impairment or prognosis of the people whom I am concerned about—those who are known to be facing a terminal prognosis of two years—perhaps they should automatically be in the support group. If that were the case, there would not be a problem

[Lord German]

I can answer that question by simply stating that the work capability assessment, if done accurately enough, should place people in the most appropriate group. Of course, one of the questions in the work capability assessment is, “What are you capable of?”; “capability” is in the title. If you are capable, with an illness, to do some work, and if you know that that will diminish over time, logic tells me that you need to think again about the way that that group of people is affected by such a proposal.

In a sense, what it means is that a clear definition between support on one side and being work ready on the other is not necessarily the only appropriate distinction you can make. It is part of the issue about having clear cut-offs and clear decisions of this sort. You need to be flexible for the people who need it most and whose circumstances will have changed.

[Baroness Hollis of Heigham]

I shall be brief because we have had some very full and powerful speeches from people who are intimately involved and who have specialist knowledge in this field. Like others, as I am sure my noble friends will go on to say, I would prefer not to see this clause in the Bill at all. I very much support the whole range of amendments that have been tabled.

However, I want to add my particular support to Amendment 75A. This is something that many of us referred to at Second Reading. It is the amendment that, leaving aside the issue of the disabled person, most protects the position of the other partner in the relationship, and it is therefore consistent with universal credit. In my view, it is the amendment that, if the Minister seeks to retain consistency with universal credit, he will do his best to support. Basically, we are again running the sort of arguments that we were having over second incomes and disregards, where the question was, “What is the return to work?”, and the Minister told us that he could not afford to run a disregard, even though the costs of childcare might eat up the earnings.

Here, we have the same problem in an even more aggravated form because here, above all, we need if we possibly can to keep the working partner attached to the labour market. We know that if somebody needs to care for more than about 20 hours a week, they probably cannot combine that with anything other than a part-time job. The ingenuity of the Lib Dem amendment is that it allows for something like 24 hours a week at minimum wage or thereabouts, which is pretty much at the tipping point where somebody leaves a full-time labour market and can manage only part-time work in order to make a generous and graceful contribution to caring responsibilities.

If the Minister cannot accept the push of this amendment—I will not say “understand” because I know that he understands it perfectly well—he will be saying to a woman in this position, who may be the working partner: “We are going to make it so unattractive for you to stay in the labour market and work that you, who may very well be tired because of your caring responsibilities, may have financial pressures and may yourself have minor complaints, will want to come out”. It would be infinitely better for her poverty, her health, her connections to the labour market, her sense of self-esteem and her social gregariousness to have a wider life that we should do our absolute damnedest to support her in the labour market—even if on only a part-time basis—and ensure that she kept that money. That is not a huge sum but it would lift her, as a parent, out of poverty and keep her in the labour market. If her partner’s condition deteriorated, we might be very glad that she had that earnings capacity behind her. If he died, we should be very glad that she had remained attached to the labour market and could, after a period of grieving, re-enter it. If he got well, and we would expect to attach conditionality to her, we would be very glad that she had remained attached to the labour market. On all possible outcomes of their partnership, it is in our public interest—the Government’s included—that we keep her attached to the labour market.

I feel very strongly that we have real problems with couples’ earnings. We have seen that before in amendments moved by my noble friend Lady Lister. Here, it seems even more damaging if we go down the parsimonious route of trying to peel off every pound that the woman earns against the partner’s benefit income. I hope very much not only that the Minister will take this away and think about it but, if he is unable to move, that the Lib Dems, who have come up with a decent and ingenious amendment addressing a very real problem—though it is not sufficient to deal with all the problems that disabled people face on the ESA, which need other amendments—will not retreat from the courage of their convictions and will pursue this through.

[Baroness Gibson of Market Rasen]

My Lords, perhaps I may explain why I am briefly entering the Bill at this stage. I did not speak at Second Reading and was not planning to speak in the debates but I have chosen to speak today because I received a letter from an old school friend. He went to school with me when I attended Caistor Grammar School in Lincolnshire many years ago. This friend knows a lot about disability because he is himself disabled. In mid-life, he went into hospital to have what was expected to be a very straightforward operation but unfortunately came out having lost his sight. When Derek wrote to me, I took his letter very seriously and I wish to speak briefly on his behalf today.

My friend is very worried indeed about Clause 51, particularly about the one-year time-limit on contributory ESA, which we have heard a lot about this afternoon, and the replacement of the working-age disability living allowance. With regard to the limit on contributory ESA, he points out that it takes no account of the often very complex issues that disabled people need to address in preparing for and finding work. I understand that the Government have estimated that 94 per cent of those on ESA and in the work-related activity group would take over a year to find work. That would mean that by 2015-16 700,000 people would be affected and 280,000 could have lost their entire benefit payment. The new criteria focus on a much narrower range of support than DLA and appear to fail to recognise the barriers that prevent blind and partially sighted people being able to participate fully in society.

The Disability Benefits Consortium, which is a national coalition of more than 50 disability and welfare charities and other organisations committed to working towards a fair benefits system, also wishes to see Clause 51 removed from the Bill to ensure that disabled people continue to receive the critical financial support that they so deserve. The Disability Benefits Consortium included in its briefing a moving statement from a woman who has Parkinson’s disease. She says:

“I’ve worked all my life and paid for decades into the system on the understanding that there’ll 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”.

I agree. Clause 51 is very flawed and this would be a better Bill if it were removed.

[Baroness Hayter of Kentish Town]

My Lords, I am not replying on behalf of the Front Bench at this stage. My noble friend Lord McKenzie will no doubt do that after the Minister has spoken to his amendment. I am particularly pleased to rise after my noble friend Lady Gibson and want to comment on what the Lord, Lord German, said, although he is unfortunately not in his place at the moment. No doubt he can read my comments at a future moment.

Like my noble friend Lady Hollis, I very much support the amendment to which the noble Lord, Lord German, spoke. However, I should think he finds it rather easier to speak to it here today, in the Committee, than at the Lib Dem conference. I do not think it would answer the party’s desire to get rid of arbitrary time limits. It will, to some extent, help the very poorest but it does not address the fundamental issue that has been raised.

As my noble friend Lord McKenzie said in opening the debate, this will affect some 700,000 people. I should like to talk about just a few of these, particularly older women with breast cancer who have paid into the insurance system for their whole working lives. I quote in particular Dawn Sheldon, who wrote to me. She said:

“I am terminally ill with breast cancer which has spread to the lung. I am in receipt of benefits, without which, I would have no income whatsoever. Under the proposed reforms, I would have to find employment. My concerns are that although reasonably qualified, I’d be applying for jobs against other applicants with a clean bill of health and a long life expectancy who would be more attractive than my own CV”.

As has already been mentioned, in addition to being ill with the cancer itself, breast cancer sufferers take very strong medication, sometimes for up to five years, with very unpleasant side-effects. Dawn says that without benefits she probably would not be able to pay her mortgage and fears that she would become homeless.

Other breast cancer sufferers have also written to me. Similarly, having been on strong medication for 18 months, one woman feels that she would be a cripple if she carried on using it. Therefore, she asks what benefits she should have, and she might come off the medication. That is some indication of how dreadful some of the side-effects are for some people. Another woman writes that she has a lot of pain in her joints at night. She has an eight year-old, so she is taking whatever she can to be here for him. The consultant said that it is a balance—quality of live versus length of life. She says that when she takes her painkillers her boss can tell that she is not able to work as well as she does normally. However, she wants to be there to see her son grow up.

These women have asked me to plead with the Government not to reduce their benefits. They are pleased that their tumours have been removed but they are not fit and well; they are struggling to keep going. While they have not yet been diagnosed as being terminally ill, it would be wrong to think that they are able to return to work. They have a choice to make about whether to take drugs to live longer and see their children grow up but, with that medication, perhaps be even less fit for work. The question that they pose is: if you were a prospective employer, would you want to employ someone with a history of cancer or someone who had to take medication to the point that they could be ineffective in their work—at least, at certain times? These women feel that the new medical assessment is a “ploy”—their word—so that they can simply be told what the Government want to hear: that they are fit for work, disregarding the reports of qualified medical staff.

17:15

Along with the Lib Dem conference, this group opposes an arbitrary time limit on how long claimants can claim their contributory ESA. A 59 year-old man who is currently on contributory ESA has written that it is the only benefit that he can claim because his wife is working. He has worked and paid into the system since he was 15 years of age—that is, for 44 years. Now, when his health is failing, he will be left on the poverty line. He writes:

“It would be better if my wife stopped working then perhaps I could claim income-related ESA—just like any person who has never worked”.

I return to Dawn Sheldon, whom I quoted at the beginning. She says:

“I have paid tax and National Insurance since 1976, and always told people I did not mind paying it as it would be there for me if I ever needed it. As I was on a low income, it would provide a pension for me in my old age. I will not now be drawing that pension, as I will not be reaching 65. So the Government have saved money there”,

as the noble Lord, Lord Patel, mentioned earlier. She continued:

“But to deny myself and other terminally ill patients welfare benefits? I can only conclude tax and National Insurance is a scam”.

She is a brave lady because she goes on to write:

“I truly have to say that I am glad to be leaving this world. I do not want to live in a country that will stand by and watch its own sick people suffer; that is not a country I can be proud of”.

I should add that, despite being quite ill, this woman has a sense of humour. After I had exchanged a few e-mails with her, she sent me an additional little note:

“I am reassured there are people out there fighting our cause. In return, when it is time for me to go, I promise you I will be doing quite a bit of haunting at certain residences in Downing Street”.

I do not think that there are many people like Dawn. The other people who have written all say much the same. They make comments such as:

“I’ve worked all my life … paid for decades .. expected support when I needed it … now an ARBITRARY time limit”.

Another writes:

“I’ve worked all my life and paid into the system but this doesn’t seem to mean anything”.

Similarly, MS sufferers in the WRAG will lose contributory benefit after a year, even if they have paid NI for years.

Therefore, can the Minister tell the Committee, first, whether he thinks that this is fair and, secondly, whether the Government have given due regard to this group, whose members have contributed throughout their working lives—perhaps for 30 or 40 years—yet now find that the help they had anticipated, as an earned right, is not there when they need it? Have the Government considered other options, such as a longer period of ESA for those who have, via what they thought was a national insurance system, paid their premiums for years and now find that an arbitrary 12-month limit is imposed? The Government have said that they want a “something for something” approach and that they want people to take responsibility for their future. That is what these women thought they were doing by paying national insurance and PAYE.

There are other quotations and some have already been mentioned, particularly those from people who suffer from multiple sclerosis. These people have worked all their lives and one says that he has reduced his working hours only to be made redundant. He was moved to the support group when his condition deteriorated but is now back in the WRAG only to be told that his benefit will stop next year. He is 51 years of age and has a degenerative condition. Having worked and paid contributions for so long, he considers that he is being penalised. He simply cannot understand why he paid those contributions if it means nothing.

There are many others in that age group who have worked in the same job for many years, particularly manual workers, and who now feel, partly because of their age, they will find it really hard to get new employment. As the noble Lord, Lord Patel, said earlier, the large majority of people who will be affected by this will be in the lowest three deciles.

This is not the time for humour in this debate. When I was young, I used to sing a song, “It’s the rich what gets the pleasure, it’s the poor what gets the blame”. And it was the bankers and others who did very well out of the good times. But it is the poor and the infirm who are now being asked to pay.

[Noble Lords]

Hear hear.

[Lord Freud]

My Lords, I must start off by saying that the contributions of noble Lords today are highly informed and very moving. But let me try and respond as much as I possibly can to those many points.

Employment and support allowance for those in the work-related activity group was never intended to be a long-term benefit, but an interim measure for those who are expected to return to work. I know that there have been concerns that restricting contributory ESA to a year may disadvantage people with longer-term health conditions or disabilities. However, we remain of the view that this is the right approach. The benefits system has to be fair to all those who contribute to it as well as those who draw support from it. We expect people on benefit to take up the help and support available, through Jobcentre Plus or the work programme, to move off benefit and into work.

Dependent on individual circumstances, other benefits, such as housing benefit and disability living allowance, may be available to those claimants affected by the introduction of a time limit to the income-related employment and support allowance. It ought to be available to those on lower incomes.

Introducing a limit on the length of time people in the work-related activity group are entitled to contribution-based employment and support allowance is more consistent with the rules for contribution-based jobseeker’s allowance, which has a time limit of six months, while recognising the different nature of employment and support allowance recipients and the purpose of the benefit. People receiving income-related ESA will not have their benefit time limited, nor will people with the most severe conditions or disabilities in the support group.

What is more, we expect 60 per cent of the people who leave contributory ESA as a result of the time limit to be fully or partially compensated by income-related ESA.

In response to the noble Lord, Lord McKenzie, that 60 per cent can be decomposed into two sets of 30 per cent. 30 per cent of those affected are expected to claim both income-related and contributory ESA. So when the time limit applies, they will continue to receive income-related ESA. The majority will therefore see no change to the total amount of ESA received. The other 30 per cent are expected to become eligible for income-related ESA, some of them at the same rate. They will become eligible for passported benefits, such as the full housing benefit and council tax benefit and free prescriptions.

17:25

Sitting suspended for a Division in the House.

17:35

[Lord Freud]

My Lords, I had just begun to address the question raised by the noble Lord, Lord McKenzie, on national insurance contributions. The person who has transferred to contributory benefit from incapacity benefit will be treated as having met the contribution conditions from the point of migration. Claimants will be entitled for a year to ESA if they are placed in the work-related activity group. National insurance credits will continue to be awarded to people who continue to have limited capacity for work, even if they receive no ESA at all.

Through these changes we are sending out a clear message. To the most vulnerable, we will provide the support when it is needed for as long as it is needed.

[Lord McKenzie of Luton]

If the Minister has moved on from national insurance, perhaps he might just address this point of circumstances where somebody starts off in the WRAG and at the start of their claim meets the national insurance contributions, because they have been both credited in and paid sufficient in one of those years. That claim is terminated or ceases after 365 days and the person then moves into the support group. Would that be a new claim for the purposes of attachment to the national insurance contributions? If people had to look afresh at that point, they may well have been credited insufficiently, but they would not be able to pay in, because they would not have been in the labour market and would not have had earnings. They would therefore be disconnected from contributory ESA.

[Baroness Lister of Burtersett]

I shall ask the Minister another question, so that he can get his breath back. I very much welcome what he said about credits. This may reflect my ignorance of the mechanics of it, but could he explain how people get credited, if they cease to be part of the system and have no entitlement to anything?

[Lord Freud]

My Lords, clearly, the detailed mechanics of that is something that we will need to work out and set out in regulation. I am not absolutely convinced that we have it locked down—we might, but I simply do not know. But clearly we will make that clear.

I shall come on to the question asked by the noble Lord, Lord McKenzie. The run-ons in practice are rather complicated. I shall come on and deal with that in a little while.

For the most vulnerable, we will provide the support when it is needed for as long as needed. When people can work, they should be expected to; a lifetime on benefits is no longer an option.

Amendments 72 and 76 are technical amendments that seek to restore the original policy intent for Clauses 51 and 52. The current wording of those clauses meant that days in the assessment phase before the determination that the claimant should be placed in the support group must count towards the calculation of the 365-day limit. This would not of course affect a claimant who remains in the support group throughout their ESA award, but it would affect those claimants who moved to the work-related activity group from the support group, at which point they would be entitled only to the balance of the 365 days after deducting the day spent in the assessment phase. This was never our intention and I urge noble Lords to accept this amendment.

I shall now address Amendments 71M, 72A, 73, 74, 75 and 75A. Amendment 71M would increase the time limit for claimants receiving contributory ESA in the work-related activity group from 365 days to a prescribed minimum of 730 days. We disagree that two years is the right approach. The noble Lord, Lord McKenzie suggested that this was a modest change. It would, in fact, cost a total of £1.6 billion by 2016-17.

[Baroness Hollis of Heigham]

Is that per year, not a roll-up?

[Lord Freud]

No, that is the total up to 2016-17—a roll-up.

[Baroness Hollis of Heigham]

It would be more helpful and reasonable if we had annual figures, not roll-up figures.

[Lord Freud]

I will be supplying annual figures later on. I wanted a single figure.

[Baroness Hayter of Kentish Town]

I think that the noble Lord wanted a big figure.

[Lord Freud]

It is a single figure. We believe that our one-year time limit is not arbitrary; rather, it strikes the right balance between restricting access to contributory benefits and allowing those with longer-term illnesses to adjust to their health condition and surrounding circumstances. In recognition of that, it is double the length of time allowed for contributory JSA and is one of a number of difficult decisions that the Government have had to make in view of the current fiscal climate.

Given that I was asked about the single figure, perhaps I may take the opportunity to read out the per annum figures. Next year, the change would cost £270 million; in the following year, 2013-14, it would be £420 million; the figure would be the same the following year; in 2015-16, we think that the cost would be £360 million; and it would be £140 million in 2016-17.

[Baroness Hollis of Heigham]

Do those interesting figures mean that by 2020 the figure could be expected to be below, say, £50 million?

[Lord Freud]

My Lords, I am not sure what the extrapolation would be. Those are the figures we have. If I have a longer run at it, I will make the figures available when, or if, I have them. I am sorry, but we do not have any figures stretching out beyond that point.

[Baroness Hollis of Heigham]

The Minister accepts that point that it looks as though there is a reverse bell curve here. It would be interesting to know, perhaps at Report, some information as to how that would pan out.

[Lord Freud]

My Lords, one can clearly see the process here, as you move through the bulge, of stopping as you take on the transfer from IB to ESA. You can see that the effect of moving from one year to two years is a reduction as you go through that group—the bell curve, as the noble Baroness described it.

[Baroness Morgan of Drefelin]

I wish to be sure that I understand what the Minister has just said. He said that there are two reasons for choosing the 12-month period and that it is therefore not arbitrary. Therefore, the choice was made, first, due to the need to make financial savings and, secondly, because 12 months was sufficient time for people to adjust to their illness and make arrangements. Did I get that right?

[Lord Freud]

My Lords, no. I am making a different argument here. It is an argument about cost. However, I will come back to the “arbitrary” issue from the perspective of what happens elsewhere. Other countries do not have benefits which precisely mirror the design of the ESA, but a number of countries already impose time limits on eligibility for both sickness benefit, which covers temporary incapacity for work, and invalidity benefit covering long-term or permanent incapacity. For example, Austria, Belgium, France, Denmark, Ireland, Spain and Sweden all impose 52-week time limits on their citizens.

17:45

[Baroness Hollis of Heigham]

I think that the noble Lord will also note from comparative research that their replacement earnings benefit, whether you call it JSA, IS or whatever, is a much higher proportion of earnings than is the case in the UK.

[Lord Freud]

My Lords, as noble Lords know, direct comparisons of systems are terribly difficult to make.

[Baroness Hollis of Heigham]

That is the point that we are making, I think.

[Lord Freud]

Although we have what seems to be a rather modest level of primary benefit, whether it is JSA or ESA, we pile up a lot of other “elements”, we might call them, in terms of housing benefit to get substantial figures. Therefore, making a comparison internationally is not straightforward at all. I am not making a straightforward comparison of amounts; I am making a straightforward comparison of the timing issue. I am saying that the 52-week limit falls into line with much international practice in countries whose systems we generally admire. I am arguing that, to that extent, the accusation that this is arbitrary simply does not stand. We are conforming with norms which are followed very broadly internationally.

[Baroness Hollis of Heigham]

That may well be right and I would not disagree with the noble Lord’s point about time and the comparison that he made there. However, the point is that that time limit, although it may or may not be regarded as arbitrary, is not threatening if the drop-down from that limit to the alternative income, which is income-related, is not particularly significant. That is the point that some of us were seeking to make.

[Lord Freud]

My Lords, in practice, other countries in northern Europe, as noble Lords will know, have a very much more contribution-based system, and the support for people who fall outside that system or are immigrants who never got into it is much lower than with our support systems, which are pretty good for people who are not in the economic system. Therefore, I am not sure that I accept that point at all.

[Baroness Hollis of Heigham]

I am sorry to intervene again but this is Committee stage. The point there is precisely the aim behind this set of amendments. Most of the European countries that I have studied—and I have looked at the Bradshaw research and so on—have a much higher commitment to the contributory principle. Therefore, this covers people for much longer at a much higher level with a sense of entitlement. This issue goes back to the very powerful arguments put forward by my noble friend Lady Lister. With a strong commitment to a contributory principle, even if you have a relatively short time limit for sickness benefit, because of the resulting contributory benefits to remaining unemployed, the drop-downs are therefore not threatening. That is surely the point that some of us have been seeking to make.

[Lord Freud]

My Lords, I think that we could debate this issue for a long time. The point that I am simply trying to make is that the arbitrary nature which this time limit has been accused of looks much less arbitrary when it seems to be the time norm chosen by a whole range of countries. Other countries such as Canada, Germany, Poland and Australia also feel that it is right that there should be some limit to the state’s support for those who have an illness.

[Lord McAvoy]

I am grateful to the noble Lord, who has given way a lot, as we all recognise. However, I am sure he recognises that this is a very complicated and emotive subject. I do not have the mastery of detail that the Minister or my Front Bench team have. How can a 12-month period be applicable to someone who is suffering from cancer? It is an arbitrary decision.

[Lord Freud]

My Lords, I shall come to the point about cancer, which is clearly very important. The powerful speech of the noble Lord, Lord Patel, on his amendment had to do with that. I shall deal with it as a whole. I am trying to make one point at a time. The point I am making is that our proposals are not out of kilter with the arrangements in many other countries. We still provide unconditional support to those in the support group and income-related benefits for the poorest.

I shall just pick up the point of the noble Baroness, Lady Lister, on the expectations of contributors to national insurance. National insurance contributions are used to pay for a wide range of contingencies. These include working-age benefits, the state pension and the NHS. The overwhelming proportion of expenditure—some £60 billion a year—goes on the state pension. This is in contrast to around £6 billion on ESA and incapacity benefit and around £1 billion on jobseeker’s allowance. There have been numerous changes to national insurance and the benefits system over the years to take account of changes in society and demographic factors. For example, far more women now pay national insurance than when contributory benefits were first created. As I have said, we believe that the adjustments we are making are fair and reasonable.

[Baroness Lister of Burtersett]

Will the Minister acknowledge the point that has been made by several noble Lords? Some people will not see the pension that they have paid their contributions towards. Therefore, they feel particularly aggrieved that, having paid contributions all their life, the contributory ESA is being snatched away from them just like that.

[Lord Freud]

My Lords, let me come back to that. It is to do with the debate about who should be in the unlimited support category for an unlimited time and who should not be in it. As I just said, we support the poorest on an income basis and those who are the most ill in the support group indefinitely.

Amendment 71N introduces another regulation-making power to the Bill. It would enable the Government, or a future Government, to exempt certain groups from the 365-day limit for those in the WRAG. This point was also raised by the noble Baroness, Lady Meacher. We believe that it is for the WCA to distinguish between those who are in the WRAG and those who should be placed in the support group and therefore be exempted from the time limit. As noble Lords will know, Professor Harrington has been working with Macmillan and other stakeholders to help us make sure that people are placed in the appropriate groups. Therefore, an amendment along the lines proposed by the noble Baroness is not necessary.

Amendment 71P introduces a new provision, which would mean that people whose contributory ESA exhausts after 365 days would be able to requalify for the support group if their condition deteriorates. However, this could mean benefits being reinstated 10 or more years after the claimant last worked, which is not reasonable. Moreover, we already have a series of safeguards in place that would protect people in this position. First, if the claimant leaves ESA before their contributory ESA exhausts, we have the linking rule, which enables the claimant to return to that contributory ESA within 12 weeks of leaving it.

Secondly, we already have within the ESA regulations an easement allowing a claimant to satisfy the first contribution condition for ESA if they have paid contributions in any tax year at a certain rate, and they had received a contributory ESA award in the last complete tax year before the current benefit year when they are claiming again. If it is decided that a person has limited capability for work-related activity, they will, of course, be placed in the support group. In addition, if someone qualifies for income-related ESA—as some 60 per cent of claimants will—eligibility for ESA can be reinstated automatically.

On the point raised by the noble Baroness, Lady Morgan, regarding protection for those who qualify under exceptional circumstances, time-limiting will apply in the same way as in all other cases. Those in the work-related activity group will be time-limited; those in the support group will be unaffected. Consideration of exceptional circumstances applies to those who do not have limited capability for work.

For those for whom work is simply not an option, we would expect them to be in the support group and not affected by time-limiting.

[Baroness Morgan of Drefelin]

Perhaps I may reassure the noble Lord that there are many people who would not be in the support groups specifically because of the way that a support group is designed. Some people with deteriorating conditions—perhaps motor neurone disease—can look forward to a time when they know that they will become increasingly ill, but on that day they are not in the support group. It is a difficult issue.

[Lord Freud]

I hear the point being made by the noble Baroness. What we are looking at in the WCA, in particular with regard to cancer patients, is to work our way through that position. We are expecting a report from Professor Harrington before Report stage. This is a very important point, also made by my noble friend Lord German, about how getting the right people into the support group, using the WCA mechanism, is such a key part of this system. I think that virtually everyone in this Committee Room would say that if the WCA test worked absolutely perfectly we would not have a problem. There are some concerns about getting that test absolutely right, and I hear those concerns; but that is the way to address these issues, and that is what we are planning to do.

[Baroness Morgan of Drefelin]

Perhaps I may make a small point before we move off this issue completely. I am also concerned about the definition of terminal. There is a question here. I cannot remember the correct terminology, and if the noble Baroness, Lady Finlay, were here she would tell me instantly, but during the six-month deadline or prognosis period, things may perhaps be moving on. Perhaps for some people we need to think about that period being longer than six months.

[Baroness Wilkins]

Does the Minister also accept that any recommendations made by Professor Harrington will take some time to put into effect—until 2014 at least? In this amendment, we are talking about this measure coming into effect next April.

[Lord Freud]

My Lords, that is a little premature. It is literally too early to look at the timetable of introducing any recommendations, whatever they may be? However, there may be elements that can be brought in sooner rather than later. I do not think that there is an impossible timeline here.

There is a real issue about these particular people who are suffering from cancers and other similar illnesses. You might look at the kind of experience that they will have in practice, because it is easy to look at the one-year ESA in isolation.

In practice, many people will first go through six months of sickness pay, whether it is occupational or statutory sick pay. That is a 28-week period in which many people will undergo much of their treatment. Then there is a one-year period if one is on the WRAG. Many people will go for a period on the support when they are going through treatment. We are seeking to precisely define which types of treatment they can go through. So there is a period on support and then a period on the WRAG. So the idea that there is an arbitrary one year, spinning down the track, from people being ill, is not the reality. There are a lot of stages to go through in our system, which people go through at different times and in different ways. I do not think it is right to think of it in a rather simple way; our system is more complicated.

[Lord Patel]

Sorry to disturb the Minister’s train of thought. I am grateful for the comments he made earlier, and the sympathetic way in which he made them. He may look forward to Professor Harrington’s report. I hope the interpretation of that report will be the important aspect. I gave the example of patients who are on intravenous chemotherapy, who are regarded as different. Equally, for people who are on oral chemotherapy or radiation treatment, it is a very debilitating form of treatment that exhausts one’s body completely. If you ask any patients who are undergoing this treatment, they will tell you that it does.

The second comment that the Minister just made concerns the different amount of money that is available to different people. But it still applies within the 12-month period, unless I have misunderstood.

[Lord Freud]

No, let me make that clear. I will take the points one by one.

Professor Harrington is looking very closely at cancer treatments and is working very closely with Macmillan in particular, to which I must pay testimony; it has provided a lot of extraordinarily valuable background data that we have been grateful for and are using. So there is a process going on.

The point I was making about the timescales is that clearly there is a time when not absolutely all but the bulk of all cancer sufferers going through treatment will be on the support, which is unlimited. They will have gone through that process, then they start the WRAG process, which is time-limited, after that. So it is not “one year for your illness”, if you like; it is one year on these particular benefits.

The noble Lord made a most effective speech at Second Reading, which I remember vividly. I am sure everyone else does as well. He was making the point about how tough it is getting through the experience of cancer—and we are worrying about that in detail. But I also want to give reassurance on the example the noble Lord used, when you get to a year and you are still having a tough time. That is probably not likely to happen in practice very much because of the different phases.

[Baroness Hollis of Heigham]

What the Minister is saying, which is a welcome elaboration of policy, is that new entrants into the system who have the sorts of conditions that the noble Lord, Lord Patel, and others described, may very well be reassured by the fact that they have up to two years or longer on non-means-tested benefits. Does that not therefore put into even sharper concern the situation of the retrospective nature for people already on those benefits raised by the noble Baroness, Lady Meacher? Does it not suggest that by comparison the situation is that much the harsher?

[Lord Freud]

I will come back to that issue and argue strongly that there is no retrospection. I will make that argument in a coherent way. No, the people who will have been on support will be in a position where there will be no difference between the existing group and the new group. There will not be that difference. As the noble Lord, who has infinitely more experience than I have, said, with cancer there is a differential experience, and some people literally sail through the process—the really lucky ones. Maybe that is slightly over the top, but they get through the process in a reasonable time, pretty fast, while others find it very tough indeed. If we put everyone in the same category by definition a type of illness, we get back to the problems that we have with treating people who need help to work and everything else—we are excluding them from that. Of course, once you set a precedent in that area, it rolls on and on. That is why we are going about this using the WCA as the route to putting people in different categories.

I was also asked about support to work. Support to find work will be widely available for all ESA claimants from the outset of their claim, irrespective of their health condition. Following the work capability assessment for most ESA claimants placed in the work-related activity group, that support will be mandatory either through Jobcentre Plus or through the work programme once their prognosis is down to a particular number of months.

The vast majority of ESA claimants who want the more intensive support offered by the work programme will be able to access it as soon as the outcome of the WCA is known. That includes contributory ESA claimants who can remain on the programme after their benefit has come to an end—to meet the point raised by the noble Baroness, Lady Lister. That ensures that they receive all the support they need to help them to return to work. Clearly, that was a conscious decision in the design of the work programme because it is clearly not supported by any sort of delaying switch. This is a straight investment in helping those individuals back into work.

[Baroness Lister of Burtersett]

I thank the Minister. I am pleased to hear that. So that I am absolutely sure that I have understood, can he confirm that this would also apply to someone who does not qualify for income-related ESA? Is it simply enough that they have received contributory ESA in the past and that that is the ticket to the work programme for the future?

[Lord Freud]

The noble Baroness has got that absolutely right. It is both for people who are currently on income-related ESA and those who have been recipients of contributory ESA.

There will clearly be a financial cost to Amendment 71P, but I am afraid that in the short time available I have not been able to produce a robust costing.

[Lord McKenzie of Luton]

I thought the Minister said in his earlier remarks that, effectively, these things did not need the amendment because they were dealt with by way of easement. Therefore, presumably they are already factored into the cost and no additional cost would arise from this. Is that not what he said?

[Lord Freud]

No, that is not what I am saying. The noble Lord’s amendment raises the example of someone who has been in the WRAG for a year, falls off it and in five years’ time falls ill. The amendment would allow them to go onto the contributory support element of ESA as of right. That carries a cost for which I do not have the exact figure. We are working on it.

[Lord McKenzie of Luton]

I am sorry but I thought the noble Lord, in responding earlier, said that there were easements to address this so that you effectively reconnected people because of their national insurance contributions. That was the issue that was being raised. We are dealing here with people who, but for the 365-day time-limiting, would currently have a continual claim to ESA.

[Lord Freud]

My Lords, I am convinced that I did not say that this particular easement was built in. I was talking about national insurance contributions. Once they are through the time-limited period, individuals cannot then switch back into the support group on a contributory basis.

[Lord McKenzie of Luton]

Forgive me, but that means that people in the support group are disadvantaged by these provisions, contrary to the Government’s assertion.

[Lord Freud]

My Lords, people in the WRAG who have gone through their time-limited period do not then have a right to go into the support group on a contributory basis. Clearly, they have a right to go into it on an income-related basis, but not on a contributory basis.

[Baroness Hollis of Heigham]

I am now completely baffled. I thought the argument was that if somebody had not exhausted their time on the contributory basis and had, for whatever reason, been able to get back into work, which then collapsed or folded, they would be able to get back into the support group using some of the contributions that were still available. The noble Lord ran against this the argument that this might be five years away and was therefore unrealistic in terms of connection. The point that I was going to press was that, in that case, the Minister was saying that one of the easements that we currently have is the 12-weeks’ linking rule. I was going to come back and suggest that in these circumstances it would be sensible to have something more like a 12-month linking rule so that there was a realistic time in which, if either the job or the person’s health folded again, they could come back and use up their unused period of contributory benefit.

[Lord Freud]

My Lords, clearly, they can use up time that they have not used. Therefore, if you are nine months down in the period of the contributory WRAG but go to work and come back, and are due to go into the support group, you can do so. However, if you have used up your contributory element of WRAG, there are, as I was trying to describe, some quite complicated effects. In practice, there may be up to a two-year period to do that. We have an easement, allowing a claimant to satisfy the first contribution condition for ESA if they have paid contributions in any tax year at a certain rate and have received a contributory ESA award in the last complete tax year, before the current benefit year in which they are claiming again.

It is quite a complicated situation. In practice, the easement for many people will work for about two years in those circumstances but no longer. It will not, as Amendment 71P is looking to do, make it unlimited. There may be different costs to having an easement of five or 10 years but we have not had a chance to look at the costs of this amendment. So I cannot accept that we make this amendment and urge that it is not pressed.

I am completely lost in my brief.

18:15

[Baroness Hollis of Heigham]

Perhaps we should have a tea break. The votes were so demanding that we have not had time for one.

[Lord Freud]

Moving swiftly on—Amendments 72A and 73 exclude from time-limiting any days contributory ESA claimants in the WRAG have received ESA for before this clause comes into effect. We expect that around 100,000 people will have been in receipt of contributory ESA in the WRAG for more than 12 months by April 2012, plus an additional 100,000 who will reach 12 months’ duration in the WRAG during the rest of 2012-13.

On the issue raised by my noble friend Lady Thomas on retrospection, a benefit claimant has no right to receive ESA indefinitely if the conditions of entitlement change or their circumstances change and they no longer meet the conditions of entitlement. Through the amendments made by the Bill, we are changing the conditions of entitlement for the future so that entitlement will not end until Clauses 51 and 52 is commenced. This will not affect any entitlement that has already arisen. I assure noble Lords that we are not seeking to recover past ESA payments that claimants have received correctly, but merely defining their future entitlement to ESA on the basis of whether at the time the clause is commenced they have had ESA already and if so for how long, and whether they are in the WRAG. We took the decision to issue 115,000 notification letters to all claimants potentially affected by this change to ensure that they were given sufficient notice. This generated around 4,200 inquiries from claimants in response.

We wish to strike a balance between fairness of treatment for all those affected and complexity. We do not think that it is reasonable that people in the WRAG who have already received contributory ESA before Clause 51 comes into force should continue to do so for an additional year after the clause is commenced. This would be unfair to new claimants; we want as many people as possible to receive benefit for the same period of time. Given the very difficult financial position that we inherited from the previous Administration, this is another difficult decision that we have had to make to ensure that the economic well-being of our country is protected.

[Baroness Meacher]

Can I just raise a question? The Minister talks about the unfairness about those in the future and those in the past, but that issue exists anyway. People who started claiming 18 months or two years ago, or whatever, clearly had a different length of contributory ESA to those people who claimed any time from 1 April last year in the Government’s terms. What I was suggesting was that the conditions are changing as of 1 April next year, and it is retrospective to suggest that the conditions change from 12 months previously. That is what is retrospective. Of course, you will always have unfairnesses between the past and the future when you change laws. It is not logical to suggest that there is some sort of inequity between past and future and, therefore, there is no retrospection. I think that the Minister has to accept that there is retrospection here.

[Baroness Hollis of Heigham]

My Lords, perhaps I may add to the Minister’s woes. He will no doubt be aware that previous Administrations faced this difficulty when we moved from IVB—invalidity benefit—to incapacity benefit. What happened was that people on invalidity benefit remained on that benefit and only new entrants went onto incapacity benefit. That is one path. I can quite see that allowing long-term claimants to have two or three different paths is technically complicated and administratively undesirable, but it is what is most supportive and decent to the individuals concerned. Their expectations are not suddenly changed part-way through their later years.

The second path that the noble Lord could adopt would be to say that from now on, at a certain date, this will be a common rule for all new and existing applicants. That would be the middle path. What would clearly be wrong would be to say that this will apply only to new applicants and that we will knock off existing claimants who have come up to the time barrier. I have never known that in social security before—ever.

[Lord Freud]

My Lords, the accepted convention on retrospection is that it applies from the announcement of a measure. When the price of petrol goes up in the Budget, it goes up that night or the next night and then the Finance Bill becomes an Act four or five months later. That is the convention—you go from the date of announcement. We announced this move from October 2010.

[Baroness Meacher]

Perhaps I may suggest that the Budget is a completely different kettle of fish, because you absolutely have to implement financial changes on the day of the announcement—otherwise all sorts of people will play games and use the delay to do all sorts of things. However, social security is completely different. You are talking about vulnerable people dependent on benefits, and that is why the convention in the social security field is totally different from the convention regarding the Budget.

[Lord Kirkwood of Kirkhope]

Can I just make a point? As to the Minister’s explanation of when things start from, this announcement was made in 2010. If logic is to stay on his side, implementation should have started in 2010.

[Lord Freud]

Well, my Lords, what was written in the document that my noble friend Lady Thomas referred to was posited on the notice given in it, which allowed people to prepare for this change. The notice was given in—

[Baroness Lister of Burtersett]

Can the Minister explain what this preparation is supposed to be? How do you prepare for the loss of a benefit if you are unable to take paid work? Is it preparation for your partner to give up work? I am not sure what preparation people are supposed to be making.

[Lord Freud]

My Lords, one of the clear preparations is to understand whether you are now entitled instead to income-related ESA on the WRAG, or to take steps to get into a job, or whatever it is. There are a number of things, but preparation would cover all of them. However, the documents written in October 2010 were saying that this change was coming in April 2012, effectively giving 17 or 18 months’ notice that this change would apply. That is what was intended by the document.

We have taken steps to give people whose awards will end, either when the clause comes into force or shortly after, time to assess their circumstances and adjust to the change. We have written to all existing contributory ESA claimants who could be affected to make them aware of this change. It is important to remember that claimants in the support group and those claiming income-related ESA will not be affected. The noble Baroness, Lady Hayter, raised the issue of the impact on the lowest deciles. The analysis in the impact assessment shows that although many people affected are in the lowest deciles, they will tend to be fully or partially compensated by income-related ESA and those who will not be eligible for income-related benefits are typically in the middle or higher deciles.

The government amendments I have already outlined ensure that days in the assessment phase for a claimant subsequently placed in the support group are excluded from the 365-day total. Amendment 74 would go further than this; it would mean the 365-day limit for all contributory ESA claimants, including those placed in the WRAG, begins only from day 92 of the claim. This would therefore give an extra 13 weeks of contributory ESA to WRAG members, increasing their overall award to 15 months. Another effect of the amendment would be that, if claimants have repeated short-term claims and as a result they are not medically assessed via the WCA, these claims might never individually go beyond the 13-week assessment phase. If so, the 365-day time limit might never apply to their contributory ESA award. This amendment could therefore create a perverse incentive for claimants to terminate the award before the end of the assessment phase; they may also try to delay attending the WCA. We do not believe that such behaviour should be encouraged.

Amendment 75 would allow claimants receiving contributory ESA who move in and out of the support group, to start a fresh 365-day period each time they move from the support group back to the WRAG. For those claimants moving between the two groups regularly, it is likely to mean they would be able to remain on contributory ESA indefinitely. This amendment would lead to inconsistent periods on benefit for claimants. For some, time spent in the WRAG would count towards the 365-day limit while for others it would not. This is unfair. We believe that everyone should be treated the same, irrespective of when they are placed in the WRAG. I understand the noble Lords’ concern about fluctuating conditions, which may have prompted this amendment. We recognise the importance of the role the WCA plays for people with fluctuating medical conditions, as I have discussed.

To pick up one more point on the cancer issue, I want to make it absolutely clear that the present position is that anyone who is diagnosed as terminally ill and who is expected to die within six months will automatically be placed on the support group.

[Baroness Hollis of Heigham]

I am sorry, but could someone be diagnosed as terminally ill as a result of the biopsy and be given a life expectancy of 11 to 12 months, which may be accurate almost to the week, yet not be deemed under this condition to be terminally ill?

[Lord Freud]

That is correct. That is the current position but the reality is that the treatment provision is likely to catch most of those people.

[Lord Patel]

Earlier the question was asked if we could have a definition of “terminally ill”. I do not think there is one. This definition that you will die within six months applies where the allowance is available. But as I tried to point out in my presentation, you might be terminally ill and not die within six months. Although you might be pretty sick and even near to death, you would not qualify for the allowance.

18:30

[Lord Freud]

My Lords, I know that this is a very emotive matter and I have said that we are looking very closely at the recommendations from Professor Harrington. I have picked up the concerns on this matter, and I think that that is as far as I can go today.

Amendment 75A would introduce an additional income disregard for partners when calculating an award of income-related ESA. Based on the current annual personal allowance for income tax of £7,475, this disregard would amount to a gross weekly amount of £143.75. Currently, when calculating an award of income-related ESA, we provide disregards on partner’s earnings of £20 per week and a disregard of between £10 and £20 for other specified income. This contrasts with universal credit, where a disabled person would have a minimum earnings disregard of £40 per week.

The practical effect of this amendment would be that the DWP would be forced to amend existing DWP regulations to remove existing disregards and make new regulations to disregard a minimum of what, under current tax allowances, would be £143.75 per week of a claimant’s partner’s gross income when calculating entitlement to income-related ESA. If we did not amend the existing disregards, the excess would then be subject to an additional £10 to £20 disregard where appropriate. In total, this would potentially increase expenditure on the ESA by up to £500 million per year.

We do not think that this approach would be reasonable. Introducing a significant new disregard for ESA claimants would be unfair to others receiving other income-related benefits, such as claimants whose partners claim income-based jobseeker’s allowance, where the earnings disregard is currently set at £10 per week, and ESA claimants who have no partner.

At this point, perhaps I may introduce the question of what happens to payments of contributory benefits—

[Baroness Hollis of Heigham]

Returning to the previous point on Amendment 75A, will the Minister confirm, for clarity, that the figure of £500 million per year was related to the cost of this amendment only, not to changing other disregards? I was not clear about that from what he said.

[Lord Freud]

Yes, it applies to this amendment only.

[Baroness Hollis of Heigham]

Therefore, having this exclusion for this group would cost £500 million a year with no knock-on consequences for other disregards for people on JSA or whichever benefit the Minister cited. I just wish to be clear on this.

[Lord Freud]

We have done a relatively simple sum on this and this is the change. We have not rebuilt the whole system to make it consistent.

[Baroness Hollis of Heigham]

Is it therefore also net of the actual disregard that people will get, which will be £20 plus possibly some other amount?

[Lord Freud]

We have put it on top of that £10 disregard.

[Baroness Hollis of Heigham]

In that case, before the Minister goes on to a different point, why does he think that the situation of someone whose partner is on JSA, but with no history of disability or whatever in the family, is identical to the situation of a partner who is managing to care for a person for possibly 20 hours a week or more—that is why they are on those benefits anyway—and is, on top of that, hanging on by her fingertips in the world of work? Incidentally, we have now established that this will, first, not make it pay for her and, secondly, will almost certainly encourage her to leave the labour market. Why does the Minister think that there is any equitable comparison whatsoever between that and JSA? I am all in favour of establishing simple parameters so that people know where they stand, but I should have thought that the noble Lord would accept that someone who is disabled and has a partner, or possibly a wife, caring for them for 20 hours a week and in a part-time job is none the less in a very different situation from a young couple in their 20s who are on combined JSA.

[Lord Freud]

My Lords, at that kind of annual cost this really is an expensive amendment. Whereas one can clearly look at elements and disregards in the system later when there is some money—I have made this point before—this is a lot of money.

[Baroness Hollis of Heigham]

Can the Minister then tell us what the total saving on the ESA is going to be overall so that we can see what percentage this represents?

[Lord Freud]

Yes. I am speaking slightly from memory but the running rate is about £1.7 billion a year. I am sorry—I have tripped myself up on that.

[Baroness Hollis of Heigham]

It cannot possibly be. You cannot have £500 million a year and £1.7 billion in total. That does not work, but I would be happy for the noble Lord to refer to it later.

[Lord Freud]

I will refer to it in a minute. Let me gather my forces. I come to the point made by the noble Baroness, Lady Lister, on ESA contribution and universal credit. We are looking to simplify the payment arrangements for cases where there is entitlement to both universal credit and contributory benefits. Customer insight research suggested that claimants would prefer a single payment of universal credit rather than two separate payments, but no final decisions have been made. The key point is that contributory ESA and JSA will continue as individual entitlements. In other words, as now, they will not be affected in any way by the circumstances of the partner.

[Baroness Lister of Burtersett]

I thank the Minister for his answer, for I realise it is slightly off the main amendments, but I am glad that no final decision has been made. I do not know the nature of the customer insight research but on qualitative research with individuals in couples I know, having done that kind of research myself, that you need to talk to individuals separately within couples for them to be able to talk freely to a researcher. For many women, it is important to have control over a certain amount of income. As the noble Lord said, it is not simply an administrative matter. There is a matter of principle here about having paid into the system as an individual and being able to draw out from the system as an individual, rather than having that benefit paid to your partner. I just hope that the Minister will take that point away and think about it seriously before a final decision is made.

[Lord Freud]

My Lords, we have had this discussion before. I come back to the point that one of the most interesting opportunities in the universal credit is the budgeting support. When I talk about budgeting support there is an element there of how you run your household finances, which we are just beginning to explore. There is huge potential in that and I am just beginning to think about what that could imply and what it means, so we will come back to this in the months to come because it has enormous promise in the areas that the noble Baroness is worried about.

Let me go through the AME savings, which were raised by the noble Baroness, Lady Hollis. Running each year from 2012, they are: £420 million; £780 million; £1,090 million; £1,330 million; and £1,380 million. The £500 million—

[Baroness Hollis of Heigham]

What are those the savings on?

[Lord Freud]

They are the AME savings from Clause 51. The £500 million cost that we are talking about of this amendment is calculated on the basis of applying the disregard to all ESA claimants, not just those affected by time-limiting. We would have to apply it to everyone.

[Baroness Hollis of Heigham]

Is the Minister saying that the £500 million cost of Amendment 75A exceeds the total amount of savings on all these changes in 2012?

[Lord Freud]

Yes. This is the ESA income-related claimants. I think that has a £500 million average cost per year spread over that period, but it is a per year cost. No, I am sorry; it is a steady-state £500 million, so it should be looked at against the £1.3 billion or £1.4 billion figures as a proportion.

[Baroness Hollis of Heigham]

These figures seem deeply implausible to me, but we will work on them. Thank you.

[Lord Freud]

Additionally, the amendment would likely weaken the financial incentive for a benefit claimant’s partner to take up full-time work. It would increase the number of people who qualify for income- related ESA and therefore give them automatic entitlement to housing benefit and/or council tax benefit at a cost of approximately £50 million per year.

In addition, if Amendment 75A were accepted and we did not mirror that larger disregard in the housing benefit and council tax regulations, it would mean disparate treatment between those claimants passported automatically on to housing benefit or council tax benefit because they are entitled to income-related ESA, and those who claim housing benefit or council tax benefit on low-income grounds. That would be unfair. We estimate that it would cost approximately £50 million per year to mirror this amendment in the housing benefit regulations. That is in addition to the £50 million previously mentioned.

If the amendments tabled by noble Lords were accepted, either singularly or collectively, it would significantly reduce the expected benefit savings of these measures. If Clause 51 did not stand part of the Bill, the entire savings projected by this measure would be lost. That amounts to around £5 billion in total by 2016-17, and we went through the individual years.

[Baroness Hollis of Heigham]

I am sorry; the Minister said £5 billion went through the individual years. My figures add up to £3.5 billion.

[Lord Freud]

Well, I make it nearly £5 billion to 2016-17.

[Baroness Hollis of Heigham]

That is £420 million, £780 million, £1,090 million and £1,380 million.

[Lord Freud]

You missed out £1,330 million. I have £420 million, £780 million, £1,090 million, £1,330 million and £1,380 million. That is nearly £5 billion.

Accepting Amendment 71M would reduce the total savings by around a third by 2016-17, which is £1.6 billion. Accepting Amendments 72A or 73 would reduce savings by around £420 million, which represents the entire savings forecast projected for 2012-13. Amendment 74 would reduce savings by around £430 million in total by 2016-17.

[Baroness Lister of Burtersett]

I apologise if I missed this because I know that the Minister has had an awful lot of ground to cover on so many different amendments, but did he explain why the assessment period is being included? The way that the policy has been put across is that if you are in the WRAG, you will get contributory ESA for only a year. But actually that is a year minus 13 weeks because you get a lower rate of benefit for that. Apart from cost, and by 2016-17 only a third minus 3 per cent of the savings would be forgone—I realise it is more up front, but it diminishes—what is the principal reason for including the assessment period?

[Lord Freud]

The reason is that we never intended to take it out in the first place. If someone is waiting to go into the support group it is not appropriate to have them assessed as if they are in the WRAG group.

[Baroness Lister of Burtersett]

But this is someone who is going into the WRAG group, so they are getting only a year's contributory benefit. It will be a year minus the assessment period. What is the point in principle for cutting short what many people are already calling an arbitrary time limit on their entitlement?

[Lord Freud]

It is interesting that noble Lords are looking at the assessment phase as a different benefit, which it is not. It is the same benefit. It is just a phase. You go on the ESA assessment phase and then it discovers what type of support you are on—the support group or the WRAG group. That is what the assessment phase is doing.

[Baroness Lister of Burtersett]

Forgive me if I am wrong and I expose the frailness of my knowledge of social security, but I thought that claimants got a lower rate during the assessment phase. Therefore it may be called the same benefit but, in terms of the money people get, it is less. That period is not being included. That is why I am saying that it is a year minus 13 weeks. Yes, they are getting a benefit but at a lower rate.

[Lord McKenzie of Luton]

I can support my noble friend: as I understand it, people get the basic JSA rate in the assessment period.

[Baroness Hollis of Heigham]

You might as well be on JSA and be done with it.

18:45

[Lord Freud]

The assessment phase would last beyond 13 weeks. It can sometimes be a long period, but claimants are always paid the full rate from week 14 of their claim.

[Baroness Lister of Burtersett]

Is the noble Lord saying that you can get backdated money for the assessment period?

[Lord Freud]

Yes, that is precisely the position.

[Lord McKenzie of Luton]

Surely that is not right. Is it backdated to the end of the assessment period?

[Lord Freud]

Sorry, I withdraw that.

[Baroness Hollis of Heigham]

Is the Minister saying that after 13 weeks you get paid a higher rate even if you have not been assessed because the assessment is taking longer than your 13 weeks? It might take 20 weeks or 25 weeks. Is that what he is saying; that it is okay for part of the period to get the higher rates but the lower rate period counts in the run-up to that? Is that what he is saying?

[Lord Freud]

Yes.

[Baroness Hollis of Heigham]

Forgive me, but that seems to be a very confused position.

[Lord Freud]

Whether it is confused or not, the position is that, when you are claiming the ESA rate, the first 13 weeks you are in the assessment phase you are on the lower rate. Then you go on to the standard WRAG rate from week 14.

[Baroness Hollis of Heigham]

My noble friend’s point is entirely valid. You are nominally, on paper, entitled to 12 months of the WRAG money, but in practice it is actually 12 months minus 13 weeks—three months—because for that period you are on a benefit that for all purposes might just as well be JSA, because it is at a lower rate and therefore should not realistically count.

[Baroness Lister of Burtersett]

What is the principal reason for that? How does the Minister justify it?

[Lord Freud]

I have to admit that I am not particularly happy about the assessment phase of ESA and how it is working. It is becoming a separate benefit in practice. I would like to look at it. It is difficult to have a set of principles around something that one is somewhat unhappy about.

I shall go on with the costs. Amendment 74 would reduce savings by around £430 million in total by 2016-17. Amendment 75A would increase expenditure on ESA by approximately £500 million per year, plus up to £50 million more on other income-related benefits. I cannot accept that we should make these amendments. They would place a very high financial cost on us in the current fiscal climate. I believe our proposed changes are right in principle and fair to the taxpayer. I urge noble Lords not to press these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his very extensive reply dealing with a whole host of interruptions. That must certainly be a record for this Committee.

[Baroness Hollis of Heigham]

I wonder if my noble friend will allow me to ask him a question? Does he not agree that this shows the undesirability of having one vast grouping all day, which means that we are constantly interrupting the Minister because he is about to move on to something else and we cannot have a discussion on different topics? It would have been perfectly simple to have turned it into something like four groups on the different issues. We could have had a coherent discussion on each of those and then gone on to a wider discussion at the end. This way, we have been to-ing and fro-ing trying to get information. No wonder the Minister has sometimes had to shuffle his papers. It is because of the way that this has been grouped. It is madness.

[Noble Lords]

Hear, hear.

[Lord McAvoy]

I am not as sympathetic as the noble Baroness, Lady Hollis, on this because we co-operated in getting the groupings and the Minister knew the groupings that were coming. That sounds uncharitable, but there is no doubt that he has made absolutely every effort. That it has taken so long to answer questions demonstrates the complexity of the whole group of amendments.

[Lord Freud]

I feel drawn to say, in response to the noble Baroness, that I was very happy with how the amendments were grouped, because it allowed me to deal with a complicated set of issues in their entirety. When amendments are degrouped you very often find that you are arguing one thing at one time and then miss a key part of your argument and have to repeat it. So I would plead with the noble Baroness to accept that at least I was very happy with how it was done and that we got through a very difficult set of issues—I know how difficult they are—in reasonable order.

[The Deputy Chairman of Committees (The Countess of Mar)]

My Lords, if I could offer some guidance, the groupings are informal and noble Lords are perfectly at liberty to decouple amendments if they are not happy.

[Baroness Hollis of Heigham]

The noble Baroness the Deputy Chairman of Committees is absolutely right, but you do have to lead on the amendment group to have that right.

[Lord McKenzie of Luton]

To satisfy both my noble friends, there is a balance to be struck between making decent progress on the Bill and having coherent discussions. I hope that we have achieved both, or will achieve both, today.

I come back to the Minister’s response, but will comment on what other noble Lords have said. The overall tenor of our very powerful debate this afternoon is clearly to the effect that people are extremely unhappy with these provisions. Comments have ranged from suggesting that we should not have them at all, with Clause 51 not standing part, to a series of detailed amendments. Noble Lords have made a range of extremely pertinent points. The noble Baroness, Lady Meacher, talked about job prospects and asked where the fairness was in this. My noble friend Lady Lister talked about the value of the contributory principle and making sure that it does not get lost, as well as the quality impact assessment and the challenges of denying people an independent source of income.

The noble Baroness, Lady Thomas, talked about the changing of the rules. We do not have an answer yet as to why the Government changed their mind on that, and the Minister may wish to respond further in due course. The noble Baroness, Lady Morgan, raised a range of concerns focused on how the WCA works, and how people access the support group, particularly those who are terminally ill. The noble Lord, Lord Wigley, was one of those noble Lords concerned about whether Clause 51 should exist at all, while the noble Lord, Lord German, talked about the WCA getting it right. I absolutely agree, and we have common cause on that, but we should get it right irrespective of these provisions as it serves a purpose around conditionality and support that should be available to people.

As for what is arbitrary and what is not, I warm to the Minister’s definition—it is what others do, so it is not arbitrary. On that basis, we might almost apply to join the euro, but I do not think that the Minister would suggest that.

Our amendment fundamentally looked at these things being dealt with by way of orders, so you could build an evidence base as to what was appropriate. Yes, we had a two-year minimum, which one would accept was not based on the most robust of evidence. My noble friend Lady Hollis warmed to the thrust of the amendment, as it was one way to ameliorate some of the impacts of the provisions, although it does not deal with them entirely. For example, it does not deal with the independent source of income, which my noble friend Lady Lister was concerned about.

My noble friend Lady Gibson was also concerned about the very existence of Clause 51, and there were some very moving examples from my noble friend Lady Hayter. The noble Lord, Lord Patel, led the charge on the challenge that the assessment period should not be included, that Clause 51 should not be there at all and that there should not be a start to this before the legislation comes into force. There was an interesting reference to Lib Dem conference resolutions, which we might keep in our sights.

However, we should thank the Minister for a very full series of exchanges on a lot of detailed points. Fundamentally, this comes back to costs, which he always quotes at us. I agree that we shall have to study Hansard and get into the figures. He could not resist the jibe about the deficit, although I wish he had because I could have resisted pointing out that we have had an international financial crisis that has affected all major economies.

[Baroness Hollis of Heigham]

Driven by bankers in their former lives.

[Lord McKenzie of Luton]

Driven by bankers—thankfully not accountants. With great respect, I normally find the Minister convincing but he was not convincing on the assessment period, and at the end of the day acknowledged that he had concerns about that. As to the definition of whether the proposal is backdated or not, starting this process up to 12 months before the legislation comes into effect is a very unusual way to proceed.

Part of the reason why we are going down this path is that the Minister said right at the start of his response that we should expect people to avail themselves of the help and support available. He also said that a lifetime on benefits is no longer an option. I would not disagree one iota with that, but no one is arguing for a lifetime on benefits—certainly not for those who can move closer to the labour market and into work. That is not a matter between us, but the noble Lord did not deal with the point about the WCA, around which there is a lot of discussion. We all want it to work as it should do, but is there not, when people are allocated to the WRAG or the support group—certainly the WRAG—a prognosis that goes with them that says how long they are likely to be in that group and, therefore, when they are likely to be fit to join what is currently the JSA group? That is the hope and that is how it works. The Minister has said that in the past and told us that that prognosis is tested before someone is moved off benefit. We therefore have a process by which an individual judgment is made about how long people will be assumed to be in the WRAG, and then ultimately, when that time is up, whether they should remain in the WRAG, go into the support group or join JSA. We have an individualised process, do we not? Why can that not be used?

This is where we fundamentally differ from the Government: if the object is to ensure that people can stay in the WRAG for as long as they need to and have the benefit of the contributory ESA system for as long as is necessary, is that not a fair way of proceeding? On the other hand—I think that this is probably the Government’s position because we need to save money—is the Minister saying, “We do not care how long you need to stay in the WRAG; after a period your contributory benefit will be chopped”? It seems that the position is not related in the Government’s mind to how long people should need support in the WRAG.

[Lord Freud]

If the noble Lord would like me to, I can give him a little information on that. The latest data show that among all those assessed to be in the work-related activity group at their initial WCA, 91 per cent have a prognosis of 12 months or less. However, it is placing an awful lot of weight on such a prognosis to build a system around it. I would personally feel pretty uncomfortable about it. However, the data make the point about the expectation that the curve is rather similar to what you would expect regarding the potential for people to come off—certainly, the WRAG element—on that prognosis.

19:00

[Lord McKenzie of Luton]

Is it not the case that the same prognosis is used for remuneration of providers in the work programme because that determines which remuneration slot they are in?

[Lord Freud]

The standard position on the work programme is that people whose prognosis goes into the three-month phase then go into work programme, which provides a heavy incentive at that stage to help those people back into the workplace.

[Lord McKenzie of Luton]

Perhaps I might move on. The noble Lord has stacked up the costs of these various amendments. However, the Government have not reflected on who is bearing those costs. That is a point made by several noble Lords during the debate. It is not just spread equally across the population or pro rata to resources across the population. It is concentrated on a range of people who are in the work-related activity group, who we want to move closer to the labour market but who are currently neither in work nor, according to the analysis, fit for work. That is the fundamental issue that we are trying to get to grips with. I am sure that the amendments that we have discussed in Grand Committee today will all be withdrawn but I have no doubt that we will revisit them in one form or another when we get to Report.

I thought that the noble Lord had reassured me on the decoupling of people in the support group when he first spoke. When we followed that up, I was much less reassured. The claim that this does not affect people in the support group could be difficult to sustain in circumstances where they get disconnected by the national insurance rules. I urge the Minister at least to reflect on that to see whether there should be some change in or expansion of the linking rules. We are dealing here with a situation where, currently, there would be a continual claim whether someone was in the WRAG or the support group. We seek only to establish that if that link in the WRAG is broken because of the 365-day rule, when people end up in the support group they are not disconnected from those earlier national insurance contribution conditions, particularly the first one. We will certainly want to come back to that in detail.

We will not have a meeting of minds on this today but I am sure the Minister will reflect, as he always does, on the data, facts and arguments that have been put to him. It seems very clear today that, overwhelmingly, those arguments have been against what the Government are proposing. Having said that, I beg leave to withdraw the amendment.

Amendment 71M withdrawn.

Amendments 71N and 71P not moved.

Amendment 72

Moved by

[Lord Freud]

72: Clause 51, page 36, leave out lines 31 to 35 and insert—
“(3) In calculating for the purposes of subsection (1) the length of the period for which a person is entitled to a contributory allowance, the following are not to be counted—
(a) days in which the person is a member of the support group, (b) days not falling within paragraph (a) in respect of which the person is entitled to the support component referred to in section 2(1)(b), and(c) days in the assessment phase, where the days immediately following that phase fall within paragraph (a) or (b).(4) In calculating for the purposes of subsection (1) the length of the period for which a person is entitled to a contributory allowance, days occurring before the coming into force of this section are to be counted (as well as those occurring afterwards).”

Amendment 72A (to Amendment 72) not moved.

Amendment 72 agreed.

Amendments 73 to 75A not moved.

Clause 51, as amended, agreed.

Clause 52 : Condition relating to youth

Amendment 76

Moved by

[Lord Freud]

76: Clause 52, page 37, line 10, leave out subsection (5) and insert—
“(5) In calculating for the purposes of subsection (4) the length of the period for which a person is entitled to an employment and support allowance, the following are not to be counted—
(a) days in which the person is a member of the support group (within the meaning of Part 1 of the Welfare Reform Act 2007), (b) days not falling within paragraph (a) in respect of which the person is entitled to the support component referred to in section 2(1)(b) of the Welfare Reform Act 2007, and(c) days in the assessment phase (within the meaning of Part 1 of the Welfare Reform Act 2007), where the days immediately following that phase fall within paragraph (a) or (b).(6) In calculating for the purposes of subsection (4) the length of the period for which a person is entitled to an employment and support allowance, days occurring before the coming into force of this section are to be counted (as well as those occurring afterwards).”

Amendment 76 agreed.

Amendment 76ZA

Moved by

[Baroness Lister of Burtersett]

76ZA: Clause 52, leave out Clause 52 and insert the following new Clause—
“Condition relating to youth
For paragraph 4 of Schedule 1 to the Welfare Reform Act 2007 (condition relating to youth) substitute—“4 The third condition is that—
(a) the claimant has limited capability for work-related activity;(b) he was under 20 when the relevant period of limited capability for work began; and(c) he has had limited capability for work for at least 28 weeks.””

[Baroness Lister of Burtersett]

I rise to speak relatively briefly, the Committee will be relieved to hear, to move the amendment and to support the noble Lord, Lord Patel, in opposing the Question that Clause 52 stand part of the Bill.

Currently, people who are disabled from birth or early in life may claim ESA in youth from age 16. This has, in different guises, been a feature of the social security system since 1975. When it was incorporated into ESA in the Welfare Reform Act 2007, I understand that the then Opposition did not question the inclusion of young people. Indeed, during the Lords Committee stage, the noble Lord, Lord Skelmersdale, from the Front Bench, asked my noble friend Lord McKenzie of Luton why young people should receive a lower rate of ESA during the initial assessment phase. The implication was that the Conservatives not only supported the inclusion of young people, but thought they should be included on more generous terms. Similarly, Liberal Democrat spokespersons in both Houses, one of whom was Danny Alexander—now in the Treasury—were at that time pushing for more generous treatment of young people.

It thus seems rather strange that in the other place, the Minister commented that,

“It seems to be an oddity that a young person with a disability or a health challenge, regardless of their circumstances, should automatically be able to migrate to contributory ESA even if they have never worked”.

As the Minister acknowledged:

“This may not have been debated hotly in the past”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/2011; col. 654.]

I would suggest that this is because it has been accepted for nearly 40 years that it is fair and proper to include disabled young people in the contributory system.

The availability of contributory ESA provides those who become severely disabled in youth with a sustainable income to support their transition to independent adulthood in particularly difficult circumstances. It has long been accepted that the normal contribution conditions should not apply in order not to exclude a group whose members have not had the opportunity to build up a contribution record and may well not have that opportunity in the future through no fault of their own. For those who are hung up on the “something for something” principle, I think we can agree that it can be suspended in these circumstances. Instead, the removal of this long-standing right will undermine the goal shared by all of us of supporting disabled people to live independent lives.

In fact, the justification that we have received for ending the long-standing consensus on this matter is nothing to do with principles or even costs, unlike Clause 51. It is primarily, I understand, about administrative simplicity. It is stated that abolition of the youth concession is a simplification and will create consistency in the run-up to the introduction of universal credit. I am not sure that any policy that increases reliance on means-tested benefits, which the impact statement acknowledges will be the case, adds to the sum of simplicity in the benefits system. I do not think that tidy alignment for administrative purposes is a good enough reason to withdraw a long-standing right, not least because alignment of the rules with those for contributory ESA would be another option open to the Government.

A rather more persuasive argument on first sight is that those receiving contributory ESA are not automatically entitled to passported benefits, to which they would be entitled were they receiving income-related ESA. However, this is true of those receiving contributory ESA generally, not just young people. Therefore, it is a problem that should be resolved for all this group as part of the current review of passported benefits. Can the Minister assure us that those who would have qualified for income-related ESA under the present system will continue to receive passported benefits under the new regime? If he cannot give us this assurance now—and I understand about SSAC looking at all this—then this justification is rather weakened.

The availability of contributory ESA is of particular importance to certain groups of disabled young people. I am grateful to the Child Poverty Action Group for providing me with a number of case studies that illustrate the kind of people particularly affected.

First, there are young disabled people who have been temporarily in and out of local authority care or have moved areas, as it provides a secure, independent income. I know that there are a number of noble Lords here who have particular concerns about this group of young people generally. I do not think that the names I shall use are real but they are real examples. Sanjeet, who is in foster care, is at school and planning to go to college. He is aged 18, severely disabled and lives with foster carers. He was advised to claim ESA in youth to give him some of the extra income and independence that he needs. We should note that a severely disabled young person such as Sanjeet may have limited earnings capacity during his life and may not have parents who can provide financial support. If he has to rely on a means-tested benefit, he will never be able to build up savings beyond the £16,000 limit to help him with equipment, housing and so on for independent living.

Another example is Anna, who lives with a kinship carer. She is 16 and has been living with her grandmother since her mother died. Anna has severe problems with depression and post-traumatic stress. She is not working or in education. Her grandmother is struggling to support her out of her pension. Anna was advised to claim ESA in youth to provide her with her own independent income.

Another group is young disabled people who have built up savings to be used for an adapted car, disability equipment, a deposit on a property or future care needs. In the absence of non-means-tested support, using savings for basic daily living costs will have long-term implications for the welfare state when these people’s carers—usually elderly parents—are no longer able to provide care and accommodation.

An example of this group is Jackie, who is 19 and in full-time education. She has Down’s syndrome and gets the DLA highest-rate care component and lower-rate mobility component. When her parents stop claiming benefit for her, she can claim ESA in youth as her own independent income. Jackie’s parents think that their daughter will never work and she will not have an inheritance from them, so having a contributory benefit of her own means that she will have the option of saving from her DLA towards the cost of future disability-related needs. If her parents were able to leave her some money, she would be able to keep it to fall back on if she had contributory ESA in youth but not if she had to rely on income-related ESA with the capital limit.

Another group is young disabled people who may be vulnerable to forming unsuitable relationships or may avoid forming a suitable relationship due to fears about losing an independent income. The case study is Caitlin, who has learning difficulties and is aged 20. She gets DLA and is attending a life skills course at college. To move towards independence, she is advised to claim ESA in youth, topped up by income-related ESA. Caitlin is currently living at home with her parents. Having a contributory benefit of her own means that she could in the future choose to form a relationship without fear of losing her independent income.

Moving on to young disabled people in education, the example is Nadia, who has cystic fibrosis. She is at university and gets ESA in youth. She has tried to work but has been unsuccessful because of the effect on her health. Unlike other students, she cannot support herself through university by working during the year or in the vacations. Her ESA in youth helps to make up for this. Because it is contributory, it is not reduced because of her student loan. Had she needed to claim income-related ESA instead, she would have been entitled to little or nothing during the year because of the means test.

The CPAG is also concerned about young disabled people trying out work. It says that the removal of contributory ESA in youth would bring young disabled people into the universal credit system. The current permitted work rules for ESA provide a useful opportunity for young disabled people to try work without having an effect on their benefits, in some cases for an indefinite period. There are concerns that the transfer to the universal credit system will increase complexity and reduce the incentive to work for people whose main objective is stability and security of income. The impact assessment says that there may be a “positive employment impact” from this change, but it does not explain how and why, so perhaps the Minister could do so.

The impact assessment also says that about 15,000 people a year are likely to be affected. A fifth of these, who have no other income, will receive the same amount of benefit in income-related ESA. It is estimated that a further 70 per cent will qualify for income-related ESA, either at the same rate or at a lower rate, with an estimated average loss of £25 a week. That is not an insubstantial amount, even if it does open up eligibility to passported benefits.

Finally, one in 10, or 1,500 a year, will lose all entitlement to benefit, probably because they have a partner in full-time work. This is a small group. I hesitate to use the word vulnerable because the noble Baroness, Lady Campbell of Surbiton, has reminded us that disabled people are not intrinsically vulnerable but made vulnerable by disabling institutions and circumstances. This clause will increase the vulnerability faced by a small group of young disabled people, particularly those in the kind of difficult circumstances I have mentioned. The savings are miniscule: an estimated £11 million net per year.

Who was consulted on the likely impact of what I am afraid I see as a mean-minded little measure? I find it difficult to believe that the Minister is comfortable justifying it. I hope that he will therefore be able to give us some indication that he is prepared to reconsider and, at the very least, that he will look favourably on this amendment, which would at least retain contributory ESA for young people in the support group. This would be consistent with the exemption of this group from the one-year time limit. I beg to move.

19:15

[Lord Patel]

My Lords, I support the amendment moved by the noble Baroness, Lady Lister, but I would also remove Clause 52 from standing part of the Bill. Many charities including CLIC Sargent, a charity which supports children with cancer, and other disability charities are also against this clause. The charities, such as that leading charity for young people with cancer, have serious concerns because of the negative impact that proposals in the Bill will have on young cancer patients and other disabled young people. I believe the Government must undertake a proper assessment of the financial support available to those young people with long-term health conditions and/or disabilities before making these changes, as well as considering the cumulative impact of their programme of welfare reform on this age group.

I emphasise that my proposals do not seek to secure higher rates of benefit for those aged 16-24 but simply to ensure a more level playing field in relation to access to benefits and financial support. For example, I believe it is wrong that students with a long-term illness must already be in receipt of DLA to be eligible for income-related ESA. These proposals are supported by other charities too, particularly young disabled peoples’ charities.

As far as cancer is concerned, every day 10 families are told that their child has cancer. A study in 2007 found that 83 per cent of families incur significant extra costs associated with their child’s cancer treatment, with 68 per cent of families experiencing worrying financial difficulties. New research, published last December, found that on average young people with cancer spent £277 each month over and above their normal expenses, as a result of their illness. Half of those young cancer patients surveyed had to borrow money as a result of their illness. More than one in five had borrowed over £1,000, with almost one in 10 borrowing over £2,000. The top two expenses were travel and clothing.

My proposal would retain the youth provisions for contributions-based employment and support allowance and would ensure that young people with long-term health conditions and/or disabilities are not disadvantaged under the proposed new arrangements for ESA. The reason for these proposals is clear; under the youth provision, a person under the age of 20 who is not in full-time education and who has had a “limited capability for work” for 196 consecutive days can gain entitlement to contributory ESA despite not having reached the contributions threshold. ESA youth claimants are disabled people who are aged 16-19 inclusive or who satisfy the age exception rule, which revolves around rules for education or training, if aged between 20 and 25; they have at least 28 weeks of continuous medical evidence to support a claim for ESA; they are not in full-time education; they have been resident and present in Great Britain for 26 out of 52 weeks prior to the claim; and they do not meet the normal national insurance contribution requirements.

The youth rules were introduced for incapacity benefit in April 2001 as a result of provisions in the Welfare Reform and Pensions Act 1999, which were intended to,

“refocus benefit on people disabled early in life who have never had the opportunity to work and gain entitlement to incapacity benefits through the payment of contributions”.—[Official Report, Commons, 6/11/00; col. 96W.]

The rules were carried over into ESA following the Welfare Reform Act 2007, again to ensure that young people who might not have had the opportunity to build up a sufficient contribution record would not be excluded from the non-means-tested allowance.

The Government intend to abolish the youth condition as part of the Welfare Reform Bill, as well as time-limiting its receipt to 12 months for existing claimants. The justification for this change, as set out in the impact assessment, is that it will simplify the benefits system and ensure consistency of treatment for those claiming ESA. This assessment completely fails to recognise that young people with long-term health conditions and/or disabilities are already in a place of disadvantage in comparison with older adults, hence the introduction of the youth condition in the first place, and that this change will entrench this disadvantage. This will mean that young people, including those unable to work because of cancer, for instance, will be extremely unlikely to be able to access the contributory element of ESA and will have recourse only to the means-tested income-related element to be subsumed into universal credit. Young people who are ineligible for the income-related component, which will include those with a partner who works more than 24 hours a week and some full-time students, could therefore lose up to just under £100 a week. This will have a devastating impact on those who are unable to work and are struggling with the significant additional costs of a cancer diagnosis.

The eligibility of young people for benefits is extremely dependent on their circumstances, particularly in relation to their education status. There are serious concerns, for example, about how students are treated under the system. Full-time students are able to claim income-related ESA only if they are already in receipt of DLA. I can give noble Lords a case study. This is another example of how the eligibility rules currently disadvantage young people. I am also concerned about the knock-on effect of many young cancer patients who are students becoming ineligible for DLA as a result of the introduction of PIP, removing their eligibility for ESA. It is critical that the Government ensure that the eligibility of students with long-term health conditions and/or disabilities for ESA is not dependent on their receipt of DLA.

I shall give noble Lords an example of a student. A young woman of 20, who was a full-time university student, was diagnosed with an aggressive sarcoma and came home to have treatment. Her mother is a single parent on income support with a younger child. The mother’s former partner died of cancer during the young woman’s treatment, meaning that the mother no longer received child maintenance for a younger child. The young woman was refused DLA initially and, as a result, was ineligible for ESA. In addition, this meant that the mother was not eligible for carer’s allowance, nor did the patient have access to a student loan, as she had taken a year out from university to have treatment. The family of three was therefore living on the mother’s income support alone and was in huge financial trouble, completely unable to pay the bills and under a lot of stress. The social worker, supported by CLIC Sargent, applied for a reconsideration and the patient was awarded DLA, which meant that she could get ESA, her mum got carer’s allowance and they got some housing and council tax benefit. Without the DLA and other benefits, this family would simply not have been able to cope financially.

A further 10 per cent of people will lose almost £100 a week by virtue of not qualifying for income-related ESA. Over a year, this amounts to £5,000. Only 20 per cent, or just under 3,000 claimants, will get exactly the same amount of income-related ESA that they would have got under the youth provisions. Based on government estimates, this loss of income may affect as many as 10,000 people by 2015-16. It is wrong that this saving should be levied from such a small group of vulnerable young people. Indeed, the department’s own impact assessment notes:

“The abolition of the ESA ‘Youth’ provisions is more likely to have an impact on disabled people because ESA is directly targeted at people with health conditions that limit their ability to work. There is a risk that the affected group will be more likely to need more support because of their condition than all ESA customers”.

My amendment is linked to my subsequent amendments in that they all seek to create a more level playing field for those young people with long-term health conditions and disabilities who require support through the benefits system.

[Baroness Hollis of Heigham]

I wanted to say only that I support the very moving amendments of my noble friend Lady Lister and the noble Lord, Lord Patel. When we introduced the 1999 Act, which I remember vividly, and replaced invalidity benefit with incapacity benefit, we considered and decided against the proposals that are now being introduced. This was primarily on the grounds of decency, but behind that lay another argument. The group that we were most concerned about at that time was not so much the cancer patients to whom the noble Lord, Lord Patel, referred, but those people with severe learning difficulties who would never find their way fully into the labour market and, as a result, could never build up contributions or savings. They might at some point receive a modest legacy or something that would help them but we did not want contributory IB to be dependent on that lottery. Therefore, we did not go down that road. Given the very small sums of money involved, in the interests of decency and given that such young people cannot build up the financial resources—and often the practical resilience, with the help of partners and so on—to allow them to cope, I very much hope that the Minister will think strongly about reconsidering the approach taken in Clause 52.

[The Earl of Listowel]

My Lords, briefly, I join in the request for the Minister to think very carefully about these matters. I have been moved by the speeches on this amendment. Reference was made to children leaving care, which certainly resonated with me. We know that disabled children are greatly overrepresented among children in care. We know that the transition from care is very difficult for many children without disabilities, so those with disabilities may be doubly disadvantaged as they make that transition into adulthood. Furthermore, we also know that for children with disabilities, in the general run, the turnover of social workers and many disturbances mean that the transition to adulthood and adult services is often very problematic. There are many good reasons why this amendment should be given careful consideration. I look forward to what I hope will be a sympathetic response from the Minister.

[Lord McKenzie of Luton]

My Lords, on this occasion I am happy to be at one with my noble friend Lady Lister and the noble Lord, Lord Patel. I am not sure that I am happy to be reminded about being assailed from the left by the noble Lord, Lord Skelmersdale; I try to put those memories far behind me. These are two important amendments and I hope that the Government will consider them seriously and take them on board. As my honourable friend Stephen Timms said in another place, it is,

“very hard to understand the Government’s justification for abolishing ESA for those people”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 645.]

He said that it is a measure that seems “unreasonably punitive”. I agree.

[Lord Freud]

My Lords, I shall briefly explain what the existing rules are for young people. Special conditions for young people who are exempt from meeting the usual PAYE national insurance conditions are set out in paragraph 4 to Schedule 1 to the Welfare Reform Act 2007. These provide that a person aged 16 to 19, or 20 to 25 in certain prescribed circumstances, who is not in full-time education and has had a limited capability for work for 196 consecutive days, will be entitled to contributory ESA. No other age group can qualify for contributory ESA without having paid or being treated as having paid national insurance contributions. Nor does any other contributory benefit have similar arrangements. The vast majority of claimants who presently receive contributory ESA on the grounds of youth—around 90 per cent—are expected to receive income-related ESA. Those who do not qualify for income-related ESA are likely to have capital in excess of £16,000 or a partner in full-time work who may be entitled to working tax credit. Clause 52 removes these special rules.

19:30

Amendment 76ZA seeks to retain these measures. It would retain the provision for people who are in the support group who have limited capability for work-related activity. The amendment extends further than the existing provisions in that it extends the youth provisions to claimants in full-time education and to more persons living outside Great Britain by the removal of the residence and presence rules. We do not think it is right that people who do not have a recent link to Great Britain should be eligible for our benefits.

We want to ensure equal treatment for all groups when establishing entitlement to contributory benefit. We believe our proposals have built-in support for this group of claimants. The vast majority of this group, around 90 per cent, are expected to receive income-related ESA. The amendment would add complexity to the benefit system because it would allow full-time students in this group to be entitled to ESA. It is not intended to be paid to students in full-time education. Income-related ESA is made available because of entitlement to DLA. This is because we do not want the benefits system to support students. We believe that linking eligibility to DLA enables those with continuing conditions to receive additional financial support. This provision will continue.

Importantly, this amendment would add complexity by exempting this group from our well established rules on residence and presence in Great Britain. The amendment would also disadvantage ESA youth claimants by requiring limited capability for work-related activity to be demonstrated before someone was entitled to ESA on grounds of youth. Under this amendment, we would not be able to pay ESA until the WCA had been carried out.

I pick up the point from the noble Baroness, Lady Lister, on passported benefits. One of the positive consequences of the abolition of the ESA youth provision is that young people who qualify for income-related ESA instead will automatically qualify for passported benefits such as free NHS prescription charges, rather than having to claim such help separately. As the noble Baroness mentioned, we have asked the Social Security Advisory Committee to let us have a report about the eligibility for passported benefits, and we have not yet received that report. It would therefore be somewhat premature at this stage for me to say precisely what the future arrangements for passporting would be under the universal credit.

If this amendment was accepted it would reduce the expected cumulative benefit savings by around £10 million by 2015-16. I ask the noble Baroness to withdraw her amendment.

[Baroness Lister of Burtersett]

My Lords, perhaps it is the lateness of the hour but I did not think that the Minister read his brief with his customary gusto. I hope that that reflected his embarrassment at trying to justify what I called a mean-minded measure. I did not know that the previous Government had considered this, and I am very glad that they decided not to take it further, as my noble friend said, on the basis of decency. We are talking about decency here and this is an indecent clause. The amendment is purely a fall-back amendment. It would be much preferable if the Minister simply said, “We will continue with the status quo”. Therefore, the amendment would not be necessary. It is a minimalist amendment and, if it creates new problems, they could of course be considered. However, if the clause were to be withdrawn, we would not have to worry about the amendment.

I take the point about why the Minister cannot give us an assurance now about passported benefits, but I suggest that that should not therefore be used as a justification for this measure, given that we do not know who will be receiving passported benefits under universal credit. The Minister said that no other age group has this kind of concession. Of course there is no other age group because any other age group would normally be in paid work and be able to get their contributions. The whole point is that this group cannot be in paid work to get their contributions. I have to say that I am disappointed by the Minister’s response and I hope that perhaps he will reflect on what has been said and think again about this. He then came back and said that there would be a cumulative saving of £10 million. I mean, really—£10 million is absolute peanuts in public spending terms.

[Baroness Hollis of Heigham]

It is a margin of error.

[Baroness Lister of Burtersett]

A margin of error—I thank my noble friend. We are told that this is not about saving money. Therefore, it is totally inappropriate to say what the cumulative savings will be if it is not about saving money. With a heavy heart, I beg leave to withdraw the amendment.

Amendment 76ZA withdrawn.

Clause 52, as amended, agreed.

[Lord Freud]

My Lords, this may be a convenient moment for the Committee to adjourn until Thursday at 2 pm.

Committee adjourned at 7.36 pm.