The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these amendments seek to provide exemptions on the face of the Bill from the application of the benefit cap for a wide range of different groups. I would like to start by repeating what I said on Monday. We have always been clear that we will look at ways of easing the transition for families and providing assistance in hard cases. We are very aware of concerns about the impact of the cap in specific scenarios. We have always said that we will take account of the sort of issues raised in this debate when preparing the regulations next year. The clause has been drafted to give us powers to set a cap that achieves its purpose in the fairest way possible.
Let me take this early opportunity to assure the noble Baroness, Lady Lister, that I have considered the requirements of the Human Rights Act and the European Convention on Human Rights in respect of this policy. I am content that the way in which we will implement these clauses will meet those requirements.
Let me also clarify early on the point about behavioural change and the logic of applying the cap to people with reduced conditionality—a question raised by the noble Lord, Lord McKenzie. Our policy aim is to achieve a range of positive effects through changing attitudes and expectations. Clearly, we intend in particular to improve work incentives and reinforce the expectation that people of working age should work. However, it is perfectly reasonable to encourage and help people towards employment even if they are not currently expected to work.
I said on Monday that our original estimate was that only about 10 per cent of the households that might be capped would be subject to full conditionality, through the JSA regime. However, it is wrong to say that the remainder will have no work-related requirements. A significant proportion will be people subject to work-focused interviews or work preparation and who will be building towards work. I said on Monday that I would provide the Committee with a breakdown of the caseload of households which might be capped. I also said that we are in the process of updating our figures. These indicate that a higher proportion, about a third, will be subject to full conditionality. I will provide the full set of figures as soon as they become available.
The key point is that if we are to tackle the negative effects of the current system then it makes no sense to exempt people from the cap simply because they are not currently subject to full work-related conditionality. That would not change attitudes and would be very likely to further entrench the problems of worklessness and dependency that we are trying to address. We have therefore been very careful in providing exemptions and deliberately kept the list short.
We have always said that we will exempt households that are entitled to working tax credit and that there will be an exemption for working households on universal credit. I have already explained that I am not yet in a position to provide details of this, but I can assure the noble Baroness, Lady Lister, that we are very conscious of the issue of cliff edges and the need to consider the impact of thresholds on households whose earnings fall.
We have always said that we will exempt war widows and widowers and that we will exempt households with someone in receipt of DLA or constant attendance allowance completely from the effects of the cap. I can confirm that this exemption will also extend to those in receipt of attendance allowance and PIP when it is introduced.
I am aware of representations already made that recipients of industrial injuries disablement benefit should be exempt from the cap in the same way as recipients of DLA. However, I do not think that these groups are in exactly the same position. DLA is paid to people to help with the extra costs arising from their disability. Other than through constant attendance allowance, industrial injuries disablement benefits do not reflect whether the recipient’s disability or illness necessarily brings extra financial costs.
We will be exempting people who are in receipt of constant attendance allowance because it serves the same purpose as DLA, but that does not apply to other industrial injuries payments.
I welcome the remarks of the noble Baroness, Lady Hollins, on the important issue of carers. The DLA exemption will mean that the cap does not affect a carer in a case where, as she said, the person being cared for is a partner or dependent child. Households where a member receives carer’s allowance but no members receive DLA or PIP will however not be exempt. In cases where the recipient of DLA is not deemed to be in the same household as the recipient of carer’s allowance both will be looked at separately and for benefit cap purposes their individual entitlements will be assessed independently. We have also said that we will look at ways to ease the transition for families and provide assistance in hard cases.
On the passport, as I said, I will seek to set out our intention for the passporting arrangements for PIP to carer’s allowance before the start of Report stage. I hope that that is adequate assurance for the noble Baroness, Lady Hollis.
Baroness Hollis of Heigham
No, my Lords. The Minister made that clear at the last sitting, but unless we know the actual numbers, as opposed to the structure, we will not know how many carers currently enjoying carer’s allowance, if I may use that word, will lose it and, as a result, become subject to full in-work conditionality—a clause in the Bill that we have to deal with before we get to carer’s benefits.
Lord Freud
By the time that I am able to set out these arrangements Committee Members will have a tight band in which to make a judgment. Although it will not be precise I hope that there will be a reasonable degree of precision to enable Members to reach key judgments.
As I confirmed on Monday, support for childcare—
Baroness Lister of Burtersett
The Minister seems to be moving off PIP. When we discussed PIP earlier I asked a question and the Minister said that it would be appropriate to discuss it as part of the benefit cap. I do not think that he has addressed the question. How many people does he estimate will be affected by the cap as a result of the PIP waiting period going up from three months to six months, and will he consider backdating entitlement for those who then become eligible for PIP?
Lord Freud
Yes, my Lords; that is an excellent question in this sense. I have made clear that we are looking at transitional arrangements, and I will look at precisely this issue of the timing with PIP in the light of those transitional arrangements as people move through. Clearly I have already committed to looking at the three months and the six months, so I have something of a three-handed chess operation to get through, but I hope to come back with the pieces in the right place—or, rather, although the pieces might be in position, they might not be in the right place as far as the noble Baroness is concerned. It will at least be a clear understanding of the position. I absolutely bear in mind the point that she has made.
The noble Baroness’s other question was on school meals. I am happy to commit that, however we restructure the provision of the passported benefit of school meals, it will remain outside the cap in the same way as childcare.
With regard to the kinship care amendment, we have already discussed and recognised in Committee the valuable role that kinship carers fulfil. I made a personal commitment, supported by the Secretary of State, to look at a range of issues affecting this group. I have already had a number of meetings with organisations that support kinship carers to help me better understand their priorities. These carers are able to receive support for the children in their care through the benefit system as, unlike approved foster carers, they have access to child benefit and child tax credit on the same basis as parents. Any payments they receive from the local authority will be disregarded. This parity of treatment with parents will be continued with the introduction of universal credit.
Baroness Hollis of Heigham
That is very helpful and clear, but the point being made by the noble Baroness, Lady Hollins, and others was that kinship carers very often take on children additional to those already in their family. Therefore, we are much more likely to see fairly large households with possibly five or six children and, as a result, those families could immediately be up against the benefit cap. How would the noble Lord suggest that is going to be addressed?
Lord Freud
My Lords, I accept the importance of this issue. There are a lot of angles to it, but I fully accept its importance and the argument that discouraging kinship carers could actually have a perverse effect, certainly in terms of cost.
The noble Baroness, Lady Sherlock, raised the issue of children at risk. We as a Government take our responsibilities to vulnerable children and vulnerable parents very seriously. It is clear that such families are likely to have multiple problems that may not be solved by benefit payments alone. The noble Baroness is concerned that the benefit cap will force such households to be constantly on the move, which will make it harder for local authorities and support services to keep track of them. We recognise that a more co-ordinated cross-government response is needed, and so last December the Prime Minister announced a new national campaign to try to turn around the lives of the most troubled families in England—there are around 120,000 of them—by the end of this Parliament. Local areas are being encouraged to develop a new approach to supporting these families. It involves redesigning services so that each of the most troubled families is supported by a single key worker who helps them turn their lives around and engage successfully with education and employment. I can assure noble Lords that my officials will work closely with other departments to support the Prime Minister’s plan for these vulnerable families and ensure that those who may be subject to the cap will be given all the help and information available.
Baroness Sherlock
My Lords, I thank the Minister for that important information about the 120,000 or so problem families—I think that is the term being used. The three categories in Amendment 99B, which was tabled in my name and that of the noble Earl, Lord Listowel, were children who were subject to a child protection plan, a child in need assessment or a common assessment framework team. Does he believe that those three categories are covered by the 120,000 problem families definition? I confess that this is not my specialist area, but the reason I ask is that I understand that those families, at whom that policy is targeted, are people who are presumed to be taking significant funds from a large range of public agencies. It is quite possible for a child to have a potential vulnerability that a social service department is looking at without the family necessarily being in that position. The questions I was raising were about vulnerable children, not necessarily the children the Minister is describing, but I may have misunderstood. Perhaps he can help me.
Lord Freud
My Lords, I am not quite sure, off the top of my head, how the mapping of these vulnerable families is worked. The sign just made to me by the noble Baroness, which normally is a sign for “Can I have the bill please?”, we can convert to mean, “Can I have a letter?” and I will be pleased to do that.
Baroness Sherlock
I would settle for a few million but a letter will do nicely.
Lord Freud
On the child benefit cap, Amendment 99ZB would require us to exclude child benefit when calculating a household’s total entitlement to welfare benefits for the purposes of applying the benefit cap. Amendment 99AD would go further and require that we exclude all-child related benefits. Both would result in household’s being able to receive benefits at a level above that which we have announced for the benefit cap. We believe that ultimately there has to be a limit to the overall amount of financial support that households in receipt of out-of-work benefits can expect to receive in welfare payments. Like other welfare benefits, benefits for children provided by the state are funded by taxpayers and should be taken into account along with other state benefits when applying the cap.
Baroness Lister of Burtersett
My Lords, perhaps the Minister will say more about that. I do not know about other noble Lords but I am afraid that I do not find that enough. I understand the broader argument about the limits and, as the Minister knows, I disagree. There has been talk about a level playing field. Will he explain to the Committee how the Government justify the fact that child benefit is being taken into account on one side of the equation and not on the other when we know that all those families on median earnings are getting child benefit? That is what I do not understand. In the previous session, I think it was my noble friend Lady Hollis who referred to comparing apples and pears. We are not comparing like with like.
Lord Freud
My Lords, I acknowledge that we are not comparing like with like. We are looking at a sensible level at which to put the maximum benefit payment. The level that we are looking at is the equivalent of a household earning £35,000. I think that one can overelaborate the logic, which I will not attempt to do here.
Amendment 99AA, in the name of the noble Lord, Lord Best, would introduce a grace period. I accept that there will be occasions when changes occur that are beyond a household’s control. We have said that we are looking at what transitional arrangements might be appropriate. The arguments that I was laying around the PIP are equally applicable here.
Lord Boswell of Aynho
Perhaps my noble friend will assist me. I have been worried a couple of times in this debate, both the other day and today. I would be grateful if he could clarify what seems to me to be a certain ambiguity in the use of the word “transition”—of course, not necessarily from his lips. This can mean one of two things: it can mean either a running-in arrangement to make it softer and more acceptable, and better understood before the policy is introduced, as it were, in macro; or it can mean the micro issue about how one deals with the individual case which is to be handled in a humane way. Does he agree that those are both important but distinctive characteristics? As we develop this argument perhaps into the next stage of the Bill, can we make sure that we keep them both in mind and address them separately?
Lord Freud
Yes, my Lords. Empson wrote a book called Seven Types of Ambiguity and my noble friend has cited two of them. I can clear up this particular dual ambiguity: the word “transition” here applies both to the running-in of the system and to the timing of how it will affect particular people when the system is fully run in.
Baroness Hollis of Heigham
Some of the Minister’s common phrases are “soon” and “very soon” and we are beginning to decode them. Another one is about the possibility of discretionary housing allowance being extended to plug all possible gaps in the system, and we have had some discussion on that. It would be very helpful if he could circulate a paper to us on all the areas where he has assured us that there are going to be transitional arrangements so that we can see what they will look like.
Lord Freud
My Lords, I do not think that I am in a position to do that. I think that I will have to leave it to Hansard to pick up where I have applied the phrase “transitional arrangement”.
Baroness Hollis of Heigham
Forgive me, the question was not how many times the noble Lord has used the phrase but what it means in practice. Is there a three-year run-in? What are we talking about here?
Lord Freud
All I am able to say at this moment is that there will be transitional arrangements and help for hard cases.
Lord McKenzie of Luton
The noble Lord again raises the issue of help in hard cases. Can he give us some indication of what he counts as hard cases, and of which, within the potential group of people who will be hit by the cap, he would say were soft cases?
Lord Freud
My Lords, I am being enticed by the velvet tones of the noble Lord. I am afraid that as we build the regulations to tackle the issue of hard cases, I can only say that we are looking at transitional arrangements. I am sorry but I cannot go any further at this stage.
Lord McKenzie of Luton
I think that we understand that. However, does the Minister recognise the dilemma with which the Committee is faced? We have a broad framework which the Minister says gives the opportunity of reducing the cap, but we have none of the detail which is absolutely crucial to understanding how it will work and who it will impact. Without providing that he is facing the Committee with an impossible dilemma. Perhaps the noble Lord, Lord Kirkwood, is right and these clauses are irredeemable.
Baroness Hollis of Heigham
My Lords, it also means that the noble Lord will face a lot of amendments on Report, which he would not need to face, calling for breathing spaces or a transitional period of one year for people who suddenly lose their jobs or are suddenly exposed, at 27 or 28, to living in a single room, and so on. If he were able to give some clarity about what he proposes, he could wipe out possibly a dozen amendments.
Lord Freud
My Lords, I have been set a challenge and a reward. It would be lovely to collect on that, but I cannot make any further assurances.
I shall continue to speak to the amendment in the name of the noble Lord, Lord Best. Apart from the transitional arrangements that I have talked about, the underlying position is to ensure that people understand that they have to take responsibility for the decisions that they make in their lives in the light of what they can afford, and they cannot always look forward to the state stepping in to make good any financial shortfall.
I shall continue on to the more technical areas raised by the noble Lord, Lord Best, on temporary accommodation and supported and sheltered housing. The amendments provide an exemption for households to which local authorities owe a duty because they are homeless, or threatened with homelessness, and for those living in supported or sheltered accommodation. As I said on Monday, discretionary housing payments will not be included as part of the cap, but in wider terms it is too early to say how we shall treat those cases for housing cost purposes in 2013 and beyond. We are exploring options for the treatment of housing benefit for people living in temporary accommodation within universal credit and the overall benefit cap.
Noble Lords may be aware that we recently consulted on high-level proposals to change the method by which help with rent is calculated for those who live in certain supported housing in the social and voluntary sector. As the noble Baroness, Lady Hollis, indicated, there is a series of issues here. We are working very closely with local authorities, housing associations and other government departments, including the devolved Administrations, on these very issues. Our considerations will, obviously, include possible interactions with the benefit cap.
Finally, Amendment 99C, in the name of the right reverend Prelate the Bishop of Ripon and Leeds, would place a requirement on the face of the Bill for exemptions for a range of groups. These include groups that we will provide exemptions for through regulations, and others that we have already discussed during the course of our debates today. The amendment also includes an exemption for lone parents with a child under five. I have made it clear that the cap is intended to act as an incentive to work. I acknowledge that we currently do not require lone parents with children under seven to work, although we are seeking to reduce this to five, but that does not mean that we do not want to encourage them to find employment Indeed that is the very reason why we provide extra support through work-focused interviews.
Each of these amendments would undermine the fundamental principles underpinning the cap—that ultimately there has to be a limit to the amount of benefit that a household can receive and that work should always pay. I have listened carefully to the measured and detailed arguments put forward today and will take them into account when deciding on the final design of the cap. In the mean time, I urge the noble Lords and the right reverend Prelate not to press their amendments.
Lord McKenzie of Luton
If I may say so, several questions remain unanswered by the Minister. First, if it were established that the cost and consequences of the cap outweighed the benefits savings, would he still support and seek to introduce the cap?
Lord Freud
My Lords, we have done an estimate of the cost and benefits savings of the cap and we have looked clearly at the wider ramifications. The question is theoretical in practice. Clearly the message that we are trying to get over is a behavioural one much more than a cost-based one.
Lord McKenzie of Luton
If that is the case, and the Minister has made that point on several occasions, what does the benefit cap provide that is not catered for within the new world of universal credit? I thought that universal credit was all about merging in and out of work benefits, simplicity, making sure that work always pays and changing people's attitudes to work. That is all that the universal credit is about. How does the cap sit with that and what does it produce in terms of policy outcomes in addition to what the universal credit produces?
Lord Freud
My Lords, the main difference is the simple message behind the cap: in the end, there is a limit to how much the state is prepared to support someone. That is a clear and simple message that can be readily understood in a way that, however simple universal credit is, that message would not be.
Lord McKenzie of Luton
One accepts that it is a simple message, but I am trying to understand the policy outcomes that the Government expect to achieve from that, which are different and in addition to the policy outcomes that they expect from universal credit.
Lord Freud
My Lords, what we are looking at now is a three-tier persuasion towards behavioural change. We have a conditionality regime; we have a universal credit that removes the concern of many welfare recipients that if they go to work they will be worse off; and we have a specific limit on how much benefit people can actually earn. That acts as a very precise work incentive, which is a long-term work incentive.
Lord Oakeshott of Seagrove Bay
Perhaps I could help the Minister. Surely the answer is that when the universal credit comes in fully it will deal with exactly the point that the noble Lord, Lord McKenzie, is making. That is why it is such a good idea, but it will take a long time and cost a lot of money so this is an interim arrangement. Is that not the position?
Lord Freud
I welcome my noble friend’s support because he has expressed the argument much better than I possibly could.
Lord McKenzie of Luton
Is the Minister telling us that this is just an interim, transitional arrangement? I thought it was a permanent proposition.
Lord Freud
I return to the principle. As I understand it, this is a principle with which the Opposition agree: that there should be a limit on the amount of benefit a household can obtain. We have set that limit at the equivalent of £35,000 of earnings before tax and national insurance.
Baroness Lister of Burtersett
I do not know whether the noble Lord, Lord Kirkwood—of wherever he is of—would comment, if he were here, but he spelt out a very powerful argument of principle about entitlement. I have not heard the noble Lord address that argument and, in his absence, I would be very grateful if he could do so.
Baroness Hollis of Heigham
Basically, the noble Lord is constructing universal credit based on meeting several different objectives and many of us support this very strongly. However, he then artificially reduces the amount that some people will get under the very structure he has set out to meet the objectives he has outlined. It is that inconsistency of a deliberate cut to an entitlement, constructed by himself through universal credit, that we find unacceptable—so far it has not been explained to us—particularly when some of the consequences may cost us more.
Lord Freud
My Lords, the best piece of information I can provide the Committee on that question is that it is the noble Lord, Lord Kirkwood of Kirkhope. I think I am reduced to going back to the basic principle that there should be a limit and we have set that limit at the equivalent of £35,000. We are going round in circles slightly.
Lord Best
I thank the Minister for helpful and hopeful words about the transitional arrangements—the 26-week period of grace that was the subject of my amendment. On my other amendments relating to excluding sheltered and supported housing and temporary accommodation, I think the Minister was saying that that was still a work in progress, so my hopes are not dashed on that.
The overarching point that I have repeated a little here is that it is fair enough to have a limit, if the Government, for political or wider reasons, believe it to be necessary, but the limit affects people in very random ways. If you live in a nice three-bedroomed council house in Wales—as I described it earlier—costing £85 a week, you will have £415 left to spend on other things. If you live in a crummy flat in the East End of London at a rent of £325 a week, you will have an awful lot less to spend out of your £500 on all the other things you need. The cap hits people in a rather random way, which is why I have been arguing that we should take housing out of the equation and look at the other factors where the fairness principle might have greater applicability.
The underlying question I would leave with the Minister is: how are we going to manage the movement of people from a high-rent area of the country—they may be in privately rented property or have a number of children—to the cheaper areas of the country? We are looking at something like 200,000 people and 50,000 households. The Minister has suggested that some people will deploy savings, but savings will run out quite quickly if they are being dipped into at an average rate of £93, and for some people up to £150, per week. Such people do not have large amounts of savings and their savings will run out quite quickly. We know it is rather improbable that landlords will drop rents dramatically to cover these and other benefit caps.
In most cases we do not expect people to be going out to work—90 per cent of them are not required to go out to work—so although some might be coerced or incentivised to go out to work, the great majority of the 50,000 will still be in homes where they will not be able to stay because the gap between what they will receive to pay their rent and the rent itself is too wide. They will have to leave. Are we making contingency plans for this movement of a couple of hundred thousand people from the more expensive parts of the south-east and south-west to the inexpensive parts of the country? The move will be expensive.
I pick up on the point made by the noble Lord, Lord McKenzie, about the cost of this cap. If people stay put and wait until they are evicted, an eviction will cost the housing association or social landlord something like £9,000. It is not just the legal costs but the fact that when the people move out you have to redecorate the house and you have a period of vacancy. All those things add up. We reckon that an eviction costs about £9,000, but if people go voluntarily and we can move in at the right time and do things in a more sensible way, the cost is about £2,500. However, on average you are looking at the landlord paying several thousand pounds when people move out.
There is also the question of providing education. When people arrive in new areas, their children will need to attend new schools. Social services departments will have to be notified if children are under the care of social workers. All these things will cost an awful lot of money, let alone just the simple transportation of people’s belongings, the cost of their rail fares and the costs involved in searching for a new home. All this is incredibly expensive. If we are to move 200,000 people because we feel, for whatever reason, that it is not fair for them to continue to occupy homes in expensive areas, are we putting in place the contingency plans that the local authorities in particular will need to get their heads around?
Lord Freud
My Lords, I thank the noble Lord, Lord Best, for that area of inquiry. We are looking to get early support for families in a number of ways well before the cap comes in. We are looking at a process whereby families on benefit face the same choices that low-income working families face. We are looking to achieve significant behavioural change through this measure. I assure the noble Lord that we are working hard with local authorities and other departments as well as with the devolved Administrations on the implementation of this measure.
Lord Wigley
I find it fairly disturbing that the Minister accepts that 200,000 people will be moving to places where low rents are charged—the noble Lord, Lord Best, referred to that—such as Wales. Is this a land clearance from central London to rural Wales?
Lord Freud
I wish to make it clear that I absolutely do not accept that figure. I have said that we are introducing a lot of measures in advance to make sure that that figure does not arise.
The Lord Bishop of Ripon and Leeds
My Lords, will the Minister develop a little further the argument as regards Amendment 99C, which concerns the lone parent with a child under the age of five? It seems to me that there needs to be more discussion about the whole question of whether people in those circumstances —this would apply to kinship carers as well—are being encouraged to seek work or to move back into work. It is often argued that they should not be working and that the important thing is that they look after their child under the age of five, or, if they are kinship carers, that they give up work in order to take on that responsibility, which may have suddenly arisen. It seems to me that we ought, therefore, to take much more seriously the possibility that they ought to be exempted because we do not, as a society or a Government, want them to be working.
Lord Freud
My Lords, I hope I made clear my sympathy on the kinship carer point. I am looking at it in the round. On the lone parent point, I am afraid I am reduced to the underlying principle that there is a level of pay for people, which we have set at the equivalent of earnings of £35,000. Do not forget that, by definition, half the households in the country receive less than that amount because it is the median amount, and that is why we have fixed on that figure.
Lord Northbourne
I wonder whether the Minister can give some sort of comfort to those of us who feel, as the right reverend Prelate does, that raising children under five is a business very often for the mother or the father and that they are providing a much more important service to society and to the world, as well as to their child and themselves, if they concentrate on doing that instead of trying to do two things at once in order to keep up with the regulations in this proposed Bill?
Lord Freud
My Lords, I think I am reduced to making the mainstream point that the amount that such families can look to is the equivalent of what up to half the households in the country earn, which is £35,000.
Lord McKenzie of Luton
My Lords, the noble Lord, Lord Best, spelled out the challenges that some 200,000 people could face. The Minister may dispute the precise numbers, but he said that we are looking at a lot of measures to make sure that it is not 200,000 people. Can the Minister explain what types of measures are involved? What sort of measures are going to alleviate the challenges that the noble Lord, Lord Best, spelled out?
Lord Freud
Clearly one of the most important areas of support that we can supply is helping people find work. One of the areas of support here is clearly Jobcentre Plus, and we are exploring that area pretty actively.
Lord McKenzie of Luton
Are we seriously saying that, whether it is 90 per cent or two-thirds of the people affected by this who, under all the other rules and constructs that the Government have brought forward, are not required to get in to work, they are going to use this as a lever to force them in to work? Is that what they are saying?
Lord Freud
That is one of the areas of support. If we have about one-third of families who are subject to full conditionality and others subject to partial conditionality, by which we mean moving towards work over a period, a very substantial proportion of the group can be helped into the workplace.
Baroness Lister of Burtersett
Is the Minister really saying that it would be supporting, say, a lone mother who has a baby to, in effect, require her to take a job as the only way she can avoid the benefit cap or to move to an area where she does not know people and has not got the support network she needs for her baby? I cannot believe that that is what the Minister is saying.
Lord Freud
There is a combination there. Those are the choices that half of the low income working families need to take, although they are not even low income families—this is pretty high income. I am not specifying any more, but we will look at hard cases. I do not want to be “loaves and fishes” about hard cases either, which I know the noble Baroness would want to accuse me of, but those are the two areas relevant to that case study.
Lord Wigley
We seem to be getting into a bigger hole on this. If the idea is that 200,000 people, or whatever the lower figure is—I accept that the Minister has a figure and we would be very glad to know what it is—will move to areas of low rent in order to get work there, does the Minister not realise that the reason the rents are low there is that people do not have work?
Lord Freud
My Lords, we are going round in circles. Noble Lords seem not to like this, although my understanding is that, as a principle, the Opposition approve of the benefit cap. There is a general level of support for it. I want to lay out the ground that working people with earnings of less than £35,000 already face these kinds of choices with regard to housing. Noble Lords seem to be arguing that people who are not working should be in a better position than those in work by protecting them from having to make this kind of choice. Bluntly, it was that kind of approach that has created or has been partially the cause of the high level of dependency that we have in this country.
I have, bluntly, said all that I can in this area. We can go round and round, but I am not in a position to offer very much more in the way of elaboration.
Baroness Hollis of Heigham
I just want to pick up on my noble friend Lady Lister's point. We know that most lone parents come out of a relationship: very often out of a marriage. These are not people who are regarded by others on the estate as shirkers who need to be driven—that sort of mentality. We could have a situation where, before they separated, the total household earned income was perhaps over £30,000 and there was some housing benefit because it was a three-bedroom property in an inner city area at a fairly high cost. He then leaves and she is left with three small children under the age of five in their existing home, which is rented. As a result, they are facing the benefit cap. How on earth do we think that any of these proposals under universal credit or the benefit cap could or should alter that behaviour, the judgments that they have to make and the possibilities open to them? All it can do is turf them out and send them up to Middlesbrough, as far as I can see.
Lord McKenzie of Luton
My Lords, I suspect that we have taken this as far as we can today, but I am sure that we will return to it on Report—perhaps we should already be thinking of booking an extra couple of days for that. I have a technical question for the Minister. As I understand it, before we get to universal credit, the variety of benefits that people have will be looked at. That will go into the calculation on one side. We will compare that with the earnings comparator and the difference will be withdrawn by way of reduction of housing benefit. Is that right? So that will be administered by local authorities.
What if people are in receipt of mortgage interest support or the housing benefit element is not necessarily sufficient to cover the shortfall? What happens with all the local authorities that have outsourced their housing benefit and council tax arrangements? There are a lot of them. Have they been engaged? Presumably, there are extracontractual costs because they will be required to do things in excess of current entitlements.
On universal credit, is it likely that the withdrawal will be in respect of only the housing component of the credit or will the broader range of support that is in universal credit be subject to the clawback?
Lord Freud
No; we have made it clear that it would apply to housing benefit and not to other benefits. The cap will not have full coverage until universal credit comes in.
Baroness Drake
I did not get the chance to mention this when other issues were being discussed. The Minister gave a blunt message on what had caused benefit dependency. But the Bill is also setting the welfare system for people who have no record of benefit dependency. They are hard-working people who from time to time experience difficulty. We know that the Government are considering greater flexibility in the labour market. The newspapers have rumours about making group redundancies easier. Large-scale redundancies are much easier because it cuts the amount of consultation and makes it easier to dismiss people. I should like to push the Minister on the point that, notwithstanding the Government’s position on a cap, the transition to that cap needs to be considered so that the principle of the cap is not broken when hard-working people who do not have a record of benefit dependency are trying to engage in the labour market.
Lord Freud
I fully accept that point, as I have already indicated. I shall bear that point very much in mind as we go through the next stages.
Baroness Donaghy
My Lords, I deliberately did not intervene on the industrial injuries benefit interval because I did not want to interrupt the flow of the debate. The Minister will not be surprised that I was disappointed by his response to my amendment. This is about signals. I was very moved by the contribution by the noble Baroness, Lady Meacher, on the distinction that people make between hard-working people and so-called scroungers. My amendment concerns working people—of course, not all are still working—who were injured in the course of their working lives. I do not think it is adequate just to say that it is different from disability living allowance.
To pick up a point made by my noble friend, Lady Drake, if the Government are trying to get over messages, they must be seen to support those who have spent their lives working, and even those who have been injured in the course of that work. I ask him whether he would be prepared to reconsider. I am not talking about the amounts of money, as we all know that in this area they are very small, but there is an important point of principle here and this is an opportunity for the Government to reinforce their message.
Lord Freud
My Lords, I will not make any promises on this but I will have another look at it. That is the weakest of possible promises. In fact, I am trying to say that it is not a promise at all. The signal I am giving is that I will have another look at it, but that is no guarantee of anything happening.
The Lord Bishop of Ripon and Leeds
My Lords, I am very grateful to all those who have taken part in this long and detailed debate on this group of amendments. I am grateful to the Minister for the way in which he has engaged with the discussions. I take a certain amount of hope from some of the things that he has said about taking account of the arguments, which we have shared, and about some specifics, such as references to attendance allowance, to childcare costs, repeatedly, and to free school meals, that there will be exemptions which we can see in those areas. I am also encouraged by the beginnings of a discussion on the issue of carers, in particular kinship carers. I very much hope that that can be taken further in our debates. I am rather less encouraged by the comments on housing benefit, but I hope that there can be ways in which, at least in terms of transitional arrangements, we can move forward on those as well.
The area in which I am least encouraged relates to the amendment on child benefit. We still have not got a real answer to the question of why child benefit counts on one side of the scales and not on the other, a point that the noble Baroness, Lady Lister, has made several times in this debate. We can only use the figure £35,000 on the basis that we are not comparing like with like, otherwise it does not make sense as a figure to be used. That seems to me to be regrettable and I hope that the Minister will be prepared to have another look at this and to discuss just what the place of child benefit—perhaps the key benefit—is within the whole of our society, over many years, in terms of the cap. Having said that, I beg leave to withdraw the amendment.
Lord Freud
“( ) A statutory instrument containing the first regulations under section 93 may not be made unless a draft of the instrument has been laid before, and approved by resolution of, each House of Parliament.”
Lord Freud
Lord Freud
My Lords, Clause 97 provides that in the case of a benefit awarded jointly, such as universal credit, it can be paid to whichever person in a household they themselves nominate, or for all or part of it to be paid to either person regardless of their nomination.
Amendment 102A seeks to ensure that the child and childcare elements of universal credit are paid to the responsible carer within a household. Amendment 102ZA also seeks to ensure that the child and childcare elements of universal credit are paid to the responsible carer and that the housing element is paid to the partner responsible for housing costs.
Under universal credit, couples living in the same household will make a joint claim for the benefit payment. It is not correct to think of, as has been said, a man claiming for the household. In couples, both will be claimants, which is an important change under universal credit. We have outlined our intention to make universal credit a single payment to a household. This decision will ensure that the household can see clearly the effect of their decisions about work on total household income and ensure that claimants can take responsibility for budgeting. Households budget and organise their finances in different ways, so we want to enable couples to decide between them where their payment should go. It is not for the Government to dictate how a family arranges its finances.
We recognise, however, that there may be cases which require alternative arrangements and the Government intend to retain powers to split payments to couples as a safeguard. We are still considering the circumstances in which we would split payments and further details will be included in regulations. Examples of when the power is used could include where there is proven abuse of the money by one partner or where children are deemed to be at risk.
On the point made by the noble Baronesses, Lady Hayter and Lady Howe, on domestic violence, where there is abuse or children at risk we will have the power to split payments and we are talking to stakeholders about how this should work in practice. Let me try to be clear: when it becomes apparent that one partner is not managing money properly, we have the ability to switch the money entirely to the other partner, which is the appropriate safeguard.
The Government will also have the power to pay the housing element of universal credit direct to the landlord in exceptional cases. We are currently considering with stakeholders the specific circumstances in which this power could be exercised and again will set out further detail in regulations.
Lord Freud
However, in circumstances where a universal credit award is split, neither party will receive specific elements such as housing or childcare. They will each receive a proportion of the total award and decide for themselves how best to use the money. This adheres to one of the key principles of universal credit, which is that claimants must be responsible for their own budgeting.
In answer to the specific question from the noble Baroness, Lady Lister, contributory benefits will continue to be individualised entitlements, but we are looking at options for payment of benefit in cases where a household has entitlement to both contributory benefits and universal credit. It may be simpler to make a single payment of universal credit in that situation, but that is just one possible option and we have the power to cover different approaches.
We are, however, committed to ensuring that people can access support to manage their payment and help them budget effectively. This is likely to include access to nationally available advice and guidance, locally delivered targeted support and improved access to budgeting products.
Budgeting products, I know, mystify the noble Baroness. It is easy to think about universal credit and such areas in slightly Victorian terms. When we look at what universal credit is and the support mechanisms that are under it and wrap it up, we see that there are a huge number of options. I am actively looking at those and interested in encouraging access to what are popularly known as jam jar accounts. Those accounts allow partners to allocate part of their payment for specific purposes, particularly the ones that need to go to utility bills and rent. Such accounts incorporate direct debits and such things. There is a lot of work to be done in this area and I hope to be able to share that with noble Lords as we develop it.
We are talking to a lot of people about this. As well as to the banks and the financial services industry, we are talking to local authorities, housing associations and the voluntary sector about how to deliver this. I may have some more information about how this will start to work. I hope that it will break us out of what could be a 20-year debate into the opportunities offered by modern technology. I hope that I will be able to keep noble Lords updated.
Baroness Lister of Burtersett
Will the Minister be able to update us before we get to this on Report? I am sure that we will want to return to this on Report.
Lord Freud
I would like to. I have people working on this and we are beginning to think quite differently about how these issues can be addressed—what is universal credit, what is a banking product and where is the join. We must not forget that, at a simple level, a universal credit is a payment stream with budgeting advances. It does not take a lot of imagination to see how it could join up with a more formal banking product and we have to work out where the line is drawn.
Turning to Amendment 102B, I appreciate that the intention behind it is to demonstrate that the taper can be applied to individual elements within the overall universal credit award so that payment of—
Lord Freud
My Lords, I was just tidying up on Amendment 102B. We are not looking to put the taper on individual elements, and I have described why we do not want to go down that route because it is quite different from what universal credit is. With these explanations, I urge the noble Lord to withdraw the amendment.
Baroness Lister of Burtersett
To save the Minister jumping up and down, I asked him a specific question about monitoring the impact on the distribution of income within households which I would be grateful if he would answer. I do not think he answered it, although the reply has been so fragmented because of the Divisions that we may have missed it.
Lord Freud
On the first question, I think we should look at this rather differently. It is one payment to the household. On whether we can look at how the household can do different things with that payment, I am very happy to look at all the budgeting supporting mechanisms. I am actively looking at them, and I hope I will get some more information on that.
To be honest, I have not got on the top of my head the detail on the monitoring. We will be looking at it very closely when that comes in and will be devising a structure to do that. As noble Lords know, we are planning to have a very substantial research exercise around universal credit, mainly because it is an almost unique research laboratory opportunity in that we can capture in one place all the different behaviours. I am looking very closely at how we can get world-class research behind many aspects of the universal credit.
Baroness Sherlock
This is the last time I shall intervene, I promise—and that is a strong promise rather than a weak one, I can assure the Minister. I understood him to be saying that the state does not want to intervene more than it has to in the financial affairs of families, and I can see that and agree with it, but if putting different amounts of money into different subsets of a bank account is going to encourage people to budget, somebody is still going to have to go through the process of working out which elements of the total award relate to different elements—children, rent et cetera—and deal with the complicated bit of that, which is understanding how tapers apply. When the Minister thinks about this again, will he consider whether the assessment can be for a household but when you get the answer, you simply split the amount and give it in two different directions? Is that not much easier than the Minister getting embroiled with the FSA or the FCA and complicated financial services market products?
Lord Freud
I am thinking about this area. I do not think I am thinking in quite the same way as the noble Baroness, but I am looking at it and hope I will be able to have a vigorous conversation with her on where that comes in at a later stage.
Baroness Hayter of Kentish Town
I thank the Minister for his responses, although I may not like their content. I also thank the noble Baronesses, Lady Howe, Lady Lister and Lady Sherlock, for their support on these issues, which are very real. My guess is that there will come a time when the Government will have to revisit this when they see the results.
The words of the noble Baroness, Lady Howe, ought to be resonating around. She spoke about vulnerable women and inequalities within households. She said:
“These are women fighting for their children”.
We are talking about people without great access to income needing to feed their children. Very often, it will be a mother living with a man who is not the father of those children. This is great—I am a stepmum and well used to these relationships. But we have to understand that we are very often talking about not the idealised couple but the couple struggling to get their relationship together. Not to enable the woman as a right to have access to that, I find a little strange.
Lord McKenzie of Luton
My Lords, I imagine that this will be extremely brief. This is a genuinely probing amendment on a point of detail. Clause 98 covers payments on account and under the Bill there are three different legs under which those payments can be made. The first mirrors the existing provision of SSAA 1992. The second provides for payment to be made where a claimant is in need. Examples of how it might be applied apparently include where benefit has been claimed but the first pay day has not yet been reached. Regulations will provide the detail of the test of need. New Section 5(1)(r)(iii) enables the Secretary of State to make a payment on account where, again, subject to criteria set out in regulations, it can reasonably be expected to be recovered. I think such payments will replace the existing social fund budgeting loans. However, part of what this clause does is to repeal Section 22 of the Welfare Reform Act 2009, a provision which is not yet commenced.
The thrust of the question really springs from a sentence in the Explanatory Notes which says in respect of that provision that, had it been commenced,
“it would have extended the range of situations in which a payment on account could be made beyond the existing section 5(1)(r) … It would have extended making payments on account to situations similar to those that will be covered by new section 5(1)(r)(ii)”.
My question is: is there anything that Section 22 of the Welfare Reform Act 2009 would have permitted in terms of payments on account which are not now facilitated by those three legs in Clause 98? I beg to move.
Lord Freud
In the interests of time, I can give an assurance that there is nothing extra to worry about.
Lord McKenzie of Luton
Nothing extra to worry about is good enough to worry about with this Bill. I am grateful for that. Perhaps it can be dealt with in correspondence. It was a genuine inquiry about whether that swapping of the provisions precluded something which would have been allowed. I accept the noble Lord’s assurance on that. I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, as I have often said, my education on these issues has grown thanks to the Minister, but I am afraid that today he was trumped by the noble Lord, Lord Ramsbotham, from whom I learned that one may use the word “baloney” in your Lordships’ Committee. Given his reputation, I am slightly hesitant about speaking on this, but I will add a few comments. I must say that the last time that the noble Lord, Lord Brooke, told us his story about Degsy in Liverpool, we got significant movement from the Minister, so I hope that his charm will work equally well today.
The amendment seeks to ensure that people who are coming out of custody get swift access to the benefits to which they are entitled. The Prison Reform Trust report, Time is Money, stated that eight out of 10 former prisoners claim benefits. Obviously, delays in accessing them can lead to enormous financial hardship and stress. It can also increase the risk of reoffending. We also know—although I am sure not as well as the noble Lord, Lord Ramsbotham—how many people in prison have multiple needs.
The transitions of entering or leaving prison, or becoming homeless, often lead to both personal and financial crisis. We think of coming out of prison as very positive, but it can be traumatic for people with multiple needs. With no financial contingencies, these people usually rely on a benefit system that they experience as complicated, slow and unhelpful. In extremis, some return to crime, as that was their proven source of income. The report found many problems experienced by people who were just out of prison, such as: delays of up to four weeks before the first payments, with little or no explanation; problems with claims that had been started before they had gone to prison, and which had to be resolved before any new claims could be made; problems of claims being delayed because they had no fixed address; disputes over prison admission and release dates, where timings can be crucial; and problems caused by not closing down a claim on entry to prison, resulting in a fraud investigation and the suspension of the new claim. Many of the people we are talking about have multiple needs. About one-third of people in prison do not have a bank account, which makes the payment of a deposit for housing or to cover early expenses even harder to organise on release.
As the noble Lord said, help beforehand with immediate access to benefits is key if the person is not to feel the need to return to using other people's money simply to survive. It emphasises the point that has been made about the need for help and advice while in prison. This will be particularly the case over the next few years, when the whole benefit system will have changed; the one that they knew on going into prison will be quite different from the UC world when they come out. We also know that in one survey that about half the prisoners had debts that awaited clearance on release, and one in three owed money for housing. That gets them started on a real problem of owing money on existing housing. It also touches on an earlier amendment about splitting a joint universal credit if they return to a partner with children and then want to take over responsibility for the housing amount. There could be some difficult readjustment or re-entry. When publishing a book about returning from the war in 1945—I remind noble Lords on that side of the table that we had a really good election result that year—it was interesting that it was difficult for stable, loving marriages when a man came home from the war and wanted to take over financial responsibility. So these things affect whole swathes of people. It is a stressful time, and getting benefits lined up early is really important.
The Centre for Social Justice, which is often mentioned in this Committee, has also highlighted the problems faced by people leaving custody. Its report, Locked Up Potential, recognised that delays in processing benefits meant that many people who are discharged have no source of income when it is most urgently needed. I am sure that the Minister is very familiar with its recommendations, which are that:
“To bridge the finance gap, with the objective of reducing the resulting crime which it can fuel, we recommend that all prison employment and benefits advisors be required by the Department of Work and Pensions … and the MOJ to initiate core benefit applications at least three weeks prior to a prisoner’s nominated release date”.
It would be helpful if the Minister could let us know what discussions the DWP has had with the MoJ about responding to the recommendations in that report and ensuring that those leaving prison are not left with gaps and delays in getting the financial support that may be essential to them in starting a new life outside custody.
We know that the coalition Government have decided not to continue with the progress to work scheme, which provided support to ex-offenders. That support will be provided through the work programme, although as we have heard there will be some difficulties there. It would be useful to know what decisions have been made about access to work programmes for ex-offenders and whether they will be fast-tracked to receive this support. If not, what alternative arrangements are being put in place to ensure that they receive the tailored employment support that they might need? While I hope that the Minister will respond to discussions for talk, I also hope that it will not just be talking the talk but walking the walk and that we will get some progress.
Lord Freud
My Lords, I have listened with interest to the noble Lord’s remarks and acknowledge his expertise on penal policy. I can also say that I am utterly delighted to meet the noble Lord. I can say now that I do not accept his amendments and I hope that what I describe of what we are actually doing will leave him joyful, both after what I describe here and after our meeting, which will happen as soon as we can. I believe that the route that we are going down will prove more beneficial in the long run than what he has suggested in this amendment, which is more expensive and resource-intensive, in terms of in-prison assessments.
Baroness Hollis of Heigham
Regarding the payment on account, I do not know whether it is exactly the way to go forward, but I think it is the only way you can make this work. However, on the assumption that most people coming out of prison may well be under the age of 35, will the Minister confirm that he expects the payment to include at least the HB single room rent, as well as the jobseeker’s allowance? At £67, the jobseeker’s allowance will not go very far in paying rent. Therefore, the payment on account benefit of UC would include a putative amount for both elements—both what we know is called JSA and what we currently call housing allowance.
Lord Freud
My Lords, there are two things here: budgeting advances and a process of how we move people on to the system that we are looking at. I cannot set that out in detail, but we will be doing so in regulations as we elaborate that system.
Lord Ramsbotham
My Lords, I thank the Minister for that reply and I also thank those who have contributed to the debate. I have to admit that I am encouraged. However, there is a “but”, and my “buts” are always about the maintenance of momentum. The noble Lord mentioned those on the work programme, but what about those who are not and what about those who are falling between the cracks? When we meet, I should like to explore the question of all the people whom one finds in prison, such as the one that the noble Lord, Lord Brooke, quoted, who fall through the cracks and do not get picked up.
I take issue with the business of leaving things until late. The Prison Service is notoriously bad at leaving things until they are late, and it is the same with housing and debt management. The sooner you can start work on it, the better. It will not be expensive because it can be done by the people in prison, provided that they are brought into the process. It should not be left.
I am very grateful for the Minister’s offer of a meeting. I look forward to it because there is obviously more to discuss, and indeed I shall have one or two examples of that in my Amendment 107, which we shall come to later. That amendment is connected with what happens to people when they come out of prison. In the mean time, in the spirit of the Minister’s reply, and with my thanks for its comprehensive nature, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, as has been set out my noble friends and other noble Baronesses, the amendments relate to how and in what circumstances the state will seek to recover overpayment of universal credit from claimants. As many here, although not me, will remember, the issue of overpayments caused a considerable headache for the previous Government when tax credits were introduced, so it is vital that the present Government get this part of the Bill right. I am sure that anyone with those memories will support this.
In this Bill we have the added complication that, in addition to overpayments being recoverable from the claimant, they will also be recoverable, as the noble Baroness, Lady Hollins, has mentioned, from landlords in certain situations. I am not talking about dodgy landlords but those who are blissfully unaware that the rent they were receiving was not from their tenant but was due to some sort of overpayment, whether by accident or design on the part of the tenant claimant or by error on the part of the DWP. We know that at present there are some cases of overpaid housing benefit that can be recovered from a landlord. Could the Minister tell the Committee whether this clause widens the set of circumstances in which benefits can be recovered? Also, what type of benefit could be recovered from landlords, rather than from claimants? What consultation has taken place on this proposal with the NLA or any other representative of landlords?
I have certainly heard anecdotal remarks from both actual and potential landlords. By the way, I am not someone who thinks that lots of anecdotes add up to evidence. However, I have heard that the idea that landlords might be asked to make good some overpayment made to a tenant when they have no way of recouping it from the tenant is a further disincentive to entering or remaining in this market. I remind the Minister that this comes just at a time when access to private rented accommodation, especially the one-bedroom type quite favoured by small landlords, is so needed due to the housing shortage; to take in the swathe of refugees from the social housing sector as his policy on underoccupation kicks in; and as families may be forced to leave high-rent London for far distant places, as we heard earlier today. We need to encourage landlords to make properties available, not threaten them that they may be left paying for overpayment of a tenant’s claims.
Amendment 103ZZA seeks to ensure that the recovery of any overpayment leaves the claimant with the correct entitlement based on their circumstances, as my noble friend Lady Lister spelt out. Again, this draws on the experience of tax credits, where in some cases claimants were asked to pay back overpayments on the one hand while applying for additional entitlement because of a change in circumstances on the other. The amendment would make sure that the end result is that the claimant receives the payment to which he or she is entitled.
Amendments 103ZZB, 103ZZC, 103ZZD and 103ZZE seek to replace references to earnings with those to income, and then to ensure that the recovery of overpaid benefits cannot leave a claimant without sufficient income on which to live. As has been said, within the current system protections of this type are in place, setting limits on the amount by which the DWP, local authority or HMRC can reduce benefit payments to recover an overpayment. Could the Minister let us know what limits the department intends to place on the recovery of universal credit, and whether they will meet the aim of ensuring that claimants retain a minimum amount on which to live?
Amendment 103ZA ensures that benefits overpaid as a result of official error cannot be recovered when the claimant could not reasonably be expected to know that he or she was being overpaid. In explaining new Section 115C in Clause 113, the DWP says that negligence constitutes not exercising the care which the circumstances demand; that is, being careless. It gives the example of not checking statements made in a claim. However, this amendment is quite different. It is not about lack of care; it is about lack of knowledge. The claimant cannot be expected to know that the amount they were receiving was in fact an overpayment.
Each of us, perhaps even some very rich people in this Room, would know whether £1 million came into our bank accounts as opposed to the £1,000 that we were expecting. However, I have to confess that when the DWP pays my pension I have no idea whether the amount is correct. It is difficult to determine that, partly because I do not get a monthly statement—the equivalent of a pay slip—from the DWP and partly because it is four-weekly and every now and again there is a month when I receive two payments. If that happened to fall in January and then perhaps in October and I got a double payment, I am afraid that I would have absolutely no idea whether that was the correct timing for my extra bonus month—it is always very nice—or whether it was an error, and I have precious little way of checking. This amendment is about ensuring that any overpayment which the claimant could not be expected to know was wrong should not be clawed back. I promise noble Lords that it is not intended to protect my own position; it is tabled simply in the interests of fairness.
Lord Freud
My Lords, I am delighted to hear such full-hearted support for monthly payments. First, I would like to speak to Amendment 103ZZA in my name. This amendment is technical in nature and seeks to restore the policy intent and simple premise that where a claimant has a debt, the debt should be recoverable from them. In the majority of cases, overpayments of benefit, penalties, payments on account and certain hardship payments will be recoverable from the claimant and will be recovered by deduction from the benefit that is paid to them. As the Bill is drafted, however, the Secretary of State is prevented from recovering such payments where the claimant’s benefit is paid directly to a third party, for example a landlord. This means that recovery from a claimant is limited to deduction from those benefits paid directly to them. This is unintended and so this amendment seeks to ensure that where a claimant’s benefit that is subject to recovery is paid to a third party, recovery may be made from that benefit.
This ensures that the DWP maintains the same powers of recovery as it does presently for recovery by deduction from housing benefit where it is paid directly to a landlord. Although the claimant may have other benefits from which deductions could be made, to do so adds both cost and complexity to the recovery process. In such cases, where no benefit is payable other than that paid to the third party, the DWP would be reliant on negotiating repayment from non-benefit income or potentially using direct earnings attachments to recover from debtors who are in pay-as-you-earn employment.
The situation becomes even more difficult where the debtor will not negotiate repayment, has no benefits paid directly to them and is not in pay-as-you-earn employment. Without the amendment, this would result in a situation where the DWP or local authorities have no effective way to recover the overpayment or penalty. I am sure noble Lords will agree with me that where there is an obligation to repay benefit debt, the fullest possible powers should be available to the relevant authorities to make recovery by the most efficient means.
I shall now address Amendments 103ZZB, 103ZZC, 103ZZD, 103ZZE, 103ZA and 103ZZZA. These opposition amendments seek to achieve a number of objectives, but are primarily concerned with protecting debtors. I am sure that there is no disagreement over the need for safeguards for vulnerable claimants and those in financial difficulty. We recognise, like the noble Baroness, Lady Lister, that protection needs to extend to the calculation of overpayments as well as their recovery. In common with the noble Baroness, we recognise that such a provision has value in ensuring that an overpayment reflects the true loss of public funds and for this very reason, such a provision already exists in secondary legislation relating to the recovery of overpayments of current benefits.
Like the noble Baroness, we believe that similar provisions should apply here, but feel that such a provision sits more happily in secondary legislation. For that reason, I am happy to offer my assurances that it is our intention to make provision for such a calculation in the regulations to be made under Clause 102, new Section 71ZB(4), which allows regulations to provide that recoverable amounts,
“are to be calculated or estimated in a prescribed manner”.
Placing the provision in secondary legislation allows for both flexibility and review.
Concerning the other issues raised within these amendments, I believe that future overpayment recovery from working-age claimants will be more streamlined and efficient than it is presently. Recovery will thus provide both greater returns and better value for money for taxpayers. For example, under the previous Administration, it was believed that there was a right under common law to recover overpayments occurring due to official error, and the DWP thus requested repayment of those overpayments on that basis. I see that noble Lords who may have been responsible for those requests are in agreement. The Supreme Court, however, ruled that there was no such right and that is why we are legislating to bring the law for working-age benefits back in line with the policy of the previous administration—a policy that we support.
Prescribing that an overpayment caused by official error would not be recoverable if the claimant could not reasonably be expected to know that they were being overpaid brings forward a need to make subjective assessment of the debtor’s capacity to understand entitlement before the overpayment is determined. Although I sympathise with the lack of understanding of the noble Baroness, Lady Hayter, about all the incredible overpayments that she gets and the £1 million that goes into her bank account on a regular basis, I have to say that that is not workable in this context. The DWP will not be prescribing those circumstances for the discretionary write-off or non-recovery of an overpayment. Cases will be considered carefully on their individual merits because each case is different.
As mentioned earlier, the code of practice will outline the policy as to whether recovery should be pursued, and lead to considered, consistent decision making. in response to the noble Baroness, Lady Lister, I am happy to confirm that that will be published in the form of a leaflet.
Considering whether an overpayment can, or should be recovered, the DWP will look at a number of factors, not solely whether the claimant received the money in good faith. It will have regard to ensuring that deductions from benefit or earnings—
Baroness Meacher
Will the code of practice be available to us before Report so that we know whether we have a reasonable situation?
Lord Freud
Yes, I am pleased to confirm that it will be available in draft. I want to avoid the cost of printing up a leaflet.
We will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor to suffer undue hardship. That remains a cornerstone of our overpayment recovery policy. As presently, future benefit recovery will be subject to regulations that provide for a maximum rate of recovery. In many instances, however, this maximum rate of recovery may still prove unaffordable for some claimants. In such cases, the DWP will discuss an alternative repayment rate.
Baroness Hollis of Heigham
I realise that the Minister is going fast, but let us be quite clear. In the past, and I stand to be corrected, my understanding is that when there has been official error and overpayment we would request a repayment. If that request was not responded to or met, effectively, that was pretty much the end of the story. In particular, somebody with a history of disability, poor health, financial pressures and so forth, almost invariably would not reply.
We need to hear from the Minister whether he is moving from request to require; whether he is moving the discourse from the first to the second. I thought that the first was reasonable, so that if they could afford it, they should repay, but if it was unreasonable, then they did not. If he is going from request to require, we need another step in the procedures to try to ensure that those from whom he will require the repayment of debt are in a reasonable position to do so. He cannot just change the words. He has to institute another procedure and another step in the equation. I know that the Minister is going fast but perhaps he might reflect on this and write to us so that we can take this up later. That must be the case.
Lord Freud
I am going to come on to that point, which is critical. Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits within the scope of Clause 102 will be recoverable upon application, DWP will consider a claimant’s means, income or expenditure if the debtor considers that they are in hardship.
Baroness Hollis of Heigham
The point is that under the previous system the recipient determined what would happen. What the Minister is suggesting is that the DWP will determine whether recovery takes place.
Lord Freud
No. I think what I said is that if the debtor considers that they are in hardship, they can say that and then there is a process built on that.
Baroness Hollis of Heigham
I am sorry to take up the Committee’s time, but previously if the recipient said that they were not going to do it, that ended it. There was not an assumption that there was space for negotiation. What the Minister seems to be suggesting is that there will be a requirement, and then the claimant has to opt out rather than the old arrangement, which is that if the recipient said that they were not in a position to repay, that ended the matter. It is a question of where the power lies. Under the old system, the power of refusal lay with the claimant. The Minister is suggesting that it will lie with the DWP, and only if the DWP is persuaded will the claimant be allowed to opt out.
Lord Freud
Yes, that is the process. It becomes a requirement, and then if the claimant says, “Look, I can’t afford that rate, I’m in hardship”, then it is adjusted. That is a regular process. In practice, only half the people now make repayments at the maximum rate. That is a very well established process which works pretty well, and I do not think we need to put in extra processes.
My noble friend Lord Kirkwood—Kirkwood of Kirkhope, some people were unaware—asked about an independent appeal right. There is just a general appeal right here for overpayments, and I think that covers this as much as anything else.
Baroness Hayter of Kentish Town
Is that an appeal that is open to landlords as well?
Lord Freud
What we are talking about, and what I was describing, is where a payment would be going directly to a landlord, but it is for the rent. There would be recovery from that, so then the obligation becomes the debtor’s to replace that amount for the landlord, so, no, the landlord does not have a right to appeal because it is not his money. It is just a direct payment device.
As my noble friend recognised with his amendments, claimants may have other debts that are being repaid that will impact their ability to repay their DWP debt. In such an instance, we may agree that recovery should be suspended until a particular financial commitment of the debtor ends. Additionally, because we recognise that hardship need not solely be financial, these considerations will include whether recovery is likely to be a threat to the health and welfare of not only the debtor but their immediate family. Exceptionally, where it is warranted, DWP may decide not to pursue or to stop pursuing recovery. These hardship situations are well established and balance the needs of the debtor and those of the taxpayer. I believe that this approach is more effective than the prescriptive considerations set out in the amendments. This approach ensures that those claimants who are able to meet the repayment obligations do so and recognises that in some instances there is a need to take into account a claimant’s specific personal circumstances. I trust I have assured noble Lords that these amendments are unnecessary as we already have protections in place to ensure that a debtor does not suffer undue hardship when deductions from benefits or earnings are made and that, where appropriate, a claimant’s individual circumstances will be fully considered.
The noble Baroness, Lady Hayter, asked about limits on universal credit recovery. Recovery will be subject to a maximum rate, as it is currently. This will differ depending on whether the payment is wholly universal credit or a combination of universal credit and earnings. We still have well established hardship considerations. If repayment causes difficulty in those circumstances, we will be able to discuss it. I therefore urge noble Lords not to press these amendments.
The noble Lord, Lord McKenzie, has given notice of his intention to oppose the Question that Clause 105 stand part of the Bill. Clause 105 clarifies that the Limitation Act does not apply to the recovery of benefit overpayments and of social fund and tax credit debts by methods other than court action. It ensures that recovery of such debts by deduction from ongoing entitlement can continue beyond the six-year limitation period for bringing court action. DWP has long taken the view that the statute of limitations has no application to the recovery of benefit overpayments or social fund debts by means other than court action, including by deduction from continuing benefit entitlement.
However, in a 2009 case involving recovery of a housing benefit overpayment by a local authority the High Court came to a different view. DWP was not involved in that case, but given that it could be read as applying also to the recovery of other benefit overpayments and of social fund payments, we believe it is necessary to introduce this measure so that we remain able to balance the recovery of public funds against the financial circumstances of the debtor. In many cases, seeking to recover social security or tax credit debt by means of deduction in a period of no more than six years would place an unfair or impossible burden on the debtor and their family.
We are not proposing anything new; Clause 105 merely clarifies a long-standing and well accepted interpretation of the application of the Limitation Act limitation to the recovery of social security and tax credit debt. The provision ensures that all deductions of benefit made more than six years after the debt became due since Section 9 of the Limitation Act came into force were, or will be deemed to be, legitimately made. It is retrospective to cover the legality of recoveries of six years of debt already made under the presumption that that was the legal position.
By contrast, without this clause—Egyptian calligraphy is very complicated—we may be forced to endeavour to recover all overpayments within six years, and this would imply higher recovery rates and potentially hardship for claimants affected. We have made this measure retrospective to cover all recoveries already made, as I have already said. I hope this clarification will convince the noble Lord and the noble Baroness to allow Clause 105 to stand part of the Bill. I beg to move.
Lord Freud