Welfare Reform Bill

Baroness Donaghy Excerpts

Wednesday 26th October 2011 Grand Committee

[Baroness Donaghy]

My Lords, I would like to raise a philosophical point about the Government wandering into the world of employment relationships. I am not sure whether philosophy is allowed but I will have a go. Employment relationships are complex, and I am not just talking about the legal implications. A bargain is reached between the employer and the employee about how each will conduct themselves. Any external factor can easily upset the applecart. I give a hypothetical example to illustrate that. I know from being a former chair of ACAS that its helpline receives a million calls a year from both employees and employers. ACAS staff outline what avenues the caller can pursue but stop short of giving actual advice. Human nature being what it is, this is often interpreted as strong advice. If the information is used in the wrong circumstances, it can cause trouble rather than solve a potential problem.

We all sift the information that we hear, so an employee who has had a work conditionality interview, as it were, with the local Jobcentre Plus could go straight to their employer and say, “The social says you’ve got to give me more money or increase my hours”. There may well be thousands of philanthropists out there just waiting for the opportunity to pour largesse over their employees’ heads, but this situation could also lead to real difficulties in the employment relationship. Some employees are clinging on to work by their fingertips right now. I cannot help thinking that this measure is a precedent in terms of government relations with the world of work.

I read what Chris Grayling said in the other place and it all sounded terribly reasonable. He said that “they”; that is, claimants,

“would come back into the jobcentre from time to time—periodically, every few months—to talk about their prospects, and that we would seek to put some additional conditionality on them, as and when it became possible to do so, to move to a job with longer hours”.

An example was given where a lone parent could move to a job with longer hours as the children grew up. That was called,

“a degree of push within the system”.—[Official Report, Commons, Welfare Reform Bill Committee, 5/4/11; col. 412.]

How grown up would the children have to be? Would the extent of unemployment in the area be taken into account, as the noble Baroness, Lady Drake, has asked? Is it really the Government’s intention to force people to give up one job to pursue another? How would this affect self-employed people? Would they be in danger if they showed that they had made no profit in a particular year? Would they be advised to give up their business in order to take up higher-paid work elsewhere? I know from my seven years in ACAS that the employment relationship is a very delicate one. I worry about how this issue is going to be handled.

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

My Lords, I wish to pick up the points raised by a number of noble Lords about how we manage ourselves in this Committee. One of the issues is that the briefings that we are supplying are arriving shortly before the sitting when we are debating the relevant matter, so that noble Lords get to see changes and new amendments too late. I will try to ensure that we run background briefings a week in advance, say, of the relevant Committee sitting rather than immediately before it. I think that might sort out some of the problems and maintain the depth of our discussions. I know that that is rather a two-edged sword, as the noble Lord, Lord McKenzie, warned me that it would be, in that supplying more briefing leads to better questions being asked, or at least more questions being asked. However, I accept that that is part of the process.

I turn to the amendment, which I understand is a probing amendment. We believe it is critical that this Bill provides the framework to apply conditionality to in-work claimants. I take this opportunity to explain exactly why that is. One of the things that I know all noble Lords from all round the Committee welcome is that universal credit will remove the distinction between in- and out-of-work benefits. That is at the heart of what we are doing here. In particular, it will remove what have been described by many noble Lords as the arbitrary hours rules, particularly the 16-hour rule in jobseeker’s allowance. Under universal credit claimants will have entitlement regardless of the hours that they work. This is clearly a positive but it does mean that we may be paying benefit to claimants who are clearly capable of working or earning more. We think conditionality can play an important role in encouraging and supporting such claimants to do more to support themselves. In practice, we are looking for conditionality to take up some of the impacts that before we were relying on the separation between tax credits and benefits to provide.

The noble Lord, Lord McKenzie, raised the question of micromanagement. In our briefing on in-work conditionality, we said that we would be guided in the main by claimant choice, in particular whether claimants want to increase their work with their current employer, look for an additional job or look for an entirely new job. It is not about micromanagement of claimants’ careers but about supporting and encouraging them to progress. I would turn round the evidence presented by the noble Baroness, Lady Lister, about how, with the right encouragement, people can increase and sustain their earnings, and say that this is the kind of impact that we want. Indeed, when we look later at how this is interrelated with the work programme, there are clearly opportunities in the medium term to help people improve their lives.

You only have to think about this for a few seconds to realise what the issue is. Once we have got rid of the distinction between in-work and out-of-work benefits, if there was not some kind of conditionality regime, we could get into a position where a claimant who is doing literally one or two hours of work but who is capable of working full-time would receive their benefit condition-free. This is obviously way softer than the current regime. The current regime means that you can work up to 16 hours maintaining full conditionality and losing all the extra hours. It is not surprising that not many people actually do that. That is the issue.

The question then becomes when conditionality should cease. With no break between the different benefits, there is no obvious point for this to happen. As noble Lords know, we have published a briefing note explaining how we intend to set those conditionality thresholds, and we are defining those by the number of hours we expect each individual in a benefit unit to work, taking account of their particular capability and circumstances, and multiplying it by the relevant national minimum wage. Otherwise, we are left with the tyranny of an hours rule and all the complications of reporting, testing and checking, and the intrusiveness of that, which is why we as a department have gone towards doing it in this way as a clean earnings figure.

For a single claimant who we expect to work full-time, this would give a threshold of around £210 per week. For a lone parent, who we might expect to work only 20 hours a week because of caring responsibilities, the threshold would be around £120. To pick up the point made by the noble Baroness, Lady Hollis, on lone parent conditionality, already with JSA lone parents must be available for work for as many hours as their caring responsibilities allow. If their child is in school we would expect this to be something like 20 or 25 hours. For lone parents with a child over 12 on the universal credit, full-time work will be the default as now, and we will allow limitations to this on a case-by-case basis, as required by the claimant’s circumstances.

I shall pick up the point raised by the noble Lord, Lord McKenzie, on self-employment. If a self-employed claimant falls below the threshold, then we will expect them to take steps to increase their earnings and reduce their dependency on benefits. How we do this will in large part depend on the claimant. If they want to focus on their self-employed business, we expect to give them an appropriate time to do this; alternatively, we may expect them to look for employment to supplement their earnings. As with all such issues, this is an area we continue to consider and develop.

Where the benefit unit earns more than the threshold amount, we will not impose work-related requirements on either member of that benefit unit. Where earnings are lower, we will have the ability to do so. This means that we will be able to impose work-related requirements on claimants working less than we could reasonably expect in benefit units falling under the threshold. We believe this is the right approach and the right way to define the cut-off point for conditionality.

In answer to a question put by the noble Lord, Lord McKenzie, I say that we have chosen gross earnings because that is easily understood and simple to assess. If we were to take off elements such as pension contributions, that would only add to the complexity of the system. That said, we are only too aware what a difficult area this is. It is worth stressing that although we will be able to impose conditionality on those in work, we will not be obliged to do so. Clearly, that is important. Although we believe conditionality can play a key role in getting in-work claimants to progress, we do not yet have a final view as to how or when this is best done.

As noble Lords clearly appreciate, there are a range of complicated issues to work through. Critically, we will need to build our understanding of what can help claimants progress—when we should require claimants to look for more work and what role other interventions, such as skills assessments or career advice sessions, can play.

I turn now to the question raised by the noble Lord, Lord McKenzie, on the work programme and the conflicts there. I can assure him that it is not the case that, by setting a higher threshold, we make the current work programme structures invalid. The programme can continue as now, looking to move claimants from being out of work into some work. Once claimants have left the work programme, we could then look to continue working with them to help them progress. We are currently considering the interaction with a future work programme and the timing of migration. That will be an area of considerable opportunity when we have the system in place and we start rolling over to the second set of work programmes.

Clearly, we need to look at the skills and training our advisers will need. Indeed, we need to consider whether there is a role for third-party providers. To respond to the noble Baroness, Lady Drake, I say that we will need to consider what we can afford in that area. We recognise that the circumstances in which we could require a claimant engaged in some work to move to a new job are particularly sensitive. We are clear that any actions that we impose will be reasonable and proportionate. We have made a public commitment that advisers will take into account other benefits of the claimant’s current employment before imposing any requirement to take an alternative job. This is especially important where those benefits are particularly relevant to the claimant's circumstances: for example, where someone with caring responsibilities has an existing flexible working pattern or where someone has built up a significant pension entitlement. We are developing our proposals in this area and in due course we will provide more detailed guidance on how the system will operate in practice.