Welfare Reform Bill

Baroness Donaghy Excerpts

Monday 23rd January 2012 Lords Chamber

Moved by

[Baroness Donaghy]

58C: Clause 94, page 63, line 22, at end insert “except for industrial injuries benefit awards”

[Baroness Donaghy]

My Lords, as I said in Committee, I appreciate that this is by way of an interval in the big picture, but it is on a subject that is work related. There has been insufficient consideration of work-related issues in the Bill and I have consistently raised issues such as: what happens to the self-employed; what happens with the redeployment of 20,000 local authority staff on housing benefits; and, the third area, what happens to those who have worked hard all their lives, have been injured at work and have received an industrial injuries compensation—a civilised scheme that is jointly agreed between trade unions and employers, where it is likely that the benefit cap will affect those in receipt of such compensation.

I think that this is about signals. If the Government want to emphasise that this is about concentrating on people at work and encouraging and giving incentives to those on work-related benefits, consideration should be given to my amendment, which covers those on industrial injuries disablement benefit. After Second Reading and Committee, the Minister was unable to say whether they would be exempt, so as far as we know they would still be included. The only part which would be exempt would be the constant attendance allowance within this benefit. However, that is only 1 per cent of the total figure. Although we are very grateful for that concession, it does not cover many people or much money.

Benefits under the industrial injuries scheme are different in character from the rest of the benefits system. Whereas other benefits are designed to prevent or ameliorate poverty, help people to cope with extra costs or substitute for lost income, the industrial injuries scheme is a system of no-fault compensation. In November 2010, the Industrial Injuries Advisory Council wrote to the Minister to argue that the industrial injuries disablement benefit should not count towards the cap for just that reason. As I said, employers and unions both support the industrial injuries scheme, which eliminates the need for an adversarial approach to compensating a large number of injuries and diseases that are agreed to be a risk of employment. Damages won through civil litigation are a closer parallel to the industrial injuries scheme than disability or other benefits. Including damages awarded by the courts in the total that is subject to the cap would be plainly unfair, but industrial injuries disablement benefit is also a form of compensation, and including it is just as unfair. Payments under the vaccine damages payment scheme are not to count towards the cap, but they, too, are a form of compensation.

The Government have put forward three reasons for the benefit cap, and all of them are weak arguments for including the IIDB. They have said that they are introducing the cap partly to reduce the benefit expenditure, but IIDB accounts for a very small part of social security expenditure: 0.58 per cent of DWP annually managed expenditure last year. IIDB will account for an even smaller proportion of benefit cap savings, most of which will affect large younger families, especially those in receipt of housing benefit. Claimants of benefits from the industrial injuries scheme tend to be older—50.9 per cent of expenditure is on people over pension age—and will therefore account for significantly less than 0.58 per cent of the budget. It is unlikely that counting IIDB towards the benefit cap would save as much as £1 million a year.

The Government’s equality impact assessment states that a further purpose is to “improve work incentives” for those on benefits. It must be emphasised that industrial injuries disablement benefit does not create a work disincentive. Half of all spending on it is accounted for by pensioners, and working age claimants can continue to receive the benefit if they stay in or find work.

Ministers have given greatest prominence to the argument that it is not fair for a workless family to receive more in benefits than an average family would receive in wages. In last year's spending review, the Treasury listed the benefit cap under the heading:

“Fairness … Reducing the deficit fairly while protecting the vulnerable”,

but a working family one of whose members had suffered an industrial disease or injury would not be in a worse position than a workless family; they would have the same right to IIDB.

The Government have not said a good deal about why IIDB should count towards the cap. The Minister has made a distinction between recipients of disability living allowance and IIDB claimants. People do not get industrial injuries disablement benefit to meet extra costs, which can be dealt with by an award of DLA if necessary. He has used this difference to justify excluding DLA but not IIDB. The argument is not a sufficient rebuttal because it fails to address the point that I have made about the nature of the industrial injuries scheme. Furthermore, if having extra costs were the reason for excluding a benefit, how would we explain the decision to exclude retirement pension and pension credit?

--- Later in debate ---

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

My Lords, before I speak to the specific amendment, I would like to make some general points about the rationale for the household benefit cap. First, there is a principled point that households should not be able to receive more on benefits than the average working family in Great Britain earns in work. Secondly, people on benefits should face the same choices as working families, including about where they can afford to live. Thirdly, someone in work should always be better off than someone on benefits. The proposed cap of £500 a week is equivalent to an annual salary of £35,000 a year before tax. We have set the cap at the median earned income for working families after tax and national insurance. We think this is a reasonable representation of average household earnings.

I ask noble Lords to consider how well these principles are received by the public at large. They will have seen press reports of a YouGov survey that found that 76 per cent of the public are in favour of the benefits cap. The overwhelming majority of people think there should be a limit to the amount of benefit those out of work can receive. We have received many representations that we are pitching the level of the cap far too high. In fact, only 7 per cent of respondents in today’s YouGov survey think that the cap should be higher than £26,000. Another 9 per cent think there should be no cap, so of the people who answered the survey, 69 per cent thought that the cap as we have set it or below that amount is the right figure. Of those who expressed an opinion, the figure is above 80 per cent, or above four-fifths. The truth is that people do not understand why we pay claimants more money when they are out of work than they could reasonably expect to earn from working full time.

I accept that arguments can be made for special treatment for a whole range of groups and benefit payments. Indeed, many such arguments were eloquently expressed previously in Grand Committee, and this amendment moved by the noble Baroness, Lady Donaghy, is an example. However, we must be wary of such arguments clouding the bigger picture of the need to reform a complex benefits system, which is failing those people on benefit who want to work but, equally importantly, is placing a costly burden on the taxpayers in work who pay for it.

We have today published an updated impact assessment with more detailed and robust estimates for the numbers and characteristics of people who may be affected by the cap. The high-level figures are broadly in line with the figures in the previous assessment, but there are some important differences. In particular, we now estimate that in nearly 40 per cent of households the claimant will be subject to JSA conditionality. We also estimate that the proportion of social rented sector households is 44 per cent, which is substantially less than we thought previously. The new figures are derived from the administrative records held by the department on benefit recipients. Thus, they are much more robust than the previous survey-based estimates. They provide a much firmer basis than before for considering transitional measures. Crucially, the methodology here means that we know who is likely to be affected by the cap and can start working with them and local authorities to minimise the problems for individual households when the cap is introduced.

Amendment 58C would require us to disregard payments of industrial injuries disablement benefits when operating the benefit cap. The noble Baroness, Lady Donaghy, has argued that these payments are worthy of special consideration because they take the form of compensation payments in lieu of injury or disability caused at work. I recognise the nature in which these payments are made, but I am afraid that I do not believe that it should override the need for a limit to the amount of welfare payments households should receive. Disregarding payments of IIDB would serve only to undermine that fundamental principle and create a precedent for others to argue for such special treatment.

We have previously been asked to reconsider the position of IIDB recipients in light of the fact that we have announced that we will fully exempt from the cap recipients of disability living allowance, personal independence payment, attendance allowance and constant attendance allowance. I have to say that I do not find these groups analogous. DLA, PIP and equivalent benefits are paid to people to help with the extra costs arising from their disability. Their receipt provides an appropriate means of identifying those disabled people who should be exempted from the cap. Many people receiving industrial injuries benefits will be exempt because they get constant attendance allowance as part of their industrial injuries entitlement or DLA.

I take the point about vaccine damage payments raised by the noble Baroness, Lady Donaghy. These lump-sum payments will be taken into account as capital and not income in assessing means-tested benefits. In other words, vaccine damage payments are not comparable to weekly income payments through IIDB. But, as has been said in debate today, the basic IIDB payments are compensation payments and do not reflect whether the disability or illness necessarily brings extra financial costs. I cannot agree that there is any reason to provide an automatic exemption in these circumstances.

On the disincentive to work, any IIDB recipient in work who is entitled to working tax credit will be exempt from the cap, as will any households in receipt of working tax credit. The cap of course will not apply to pensioners. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Donaghy]

I thank the Minister for that reply. I was beginning to think that he had moved straight to the big picture and that my interval was not even going to be considered—that we were all off buying our popcorn and he had started the big picture. At least the last few minutes of his reply tackled the subject that I have raised. As I have said, this amendment is about signals and hard-working people who, through no fault of their own, have been injured at work and, with the support of unions and employers, have been given compensation. I do not suppose that that would have been easy to achieve or that the bureaucracy is particularly easy. Having achieved that compensation those people will now be told that it will not be exempt from the cap.

With all due respect, I think that the Minister is so concerned about undermining the principle of the big picture that these people are being victimised. I do not believe that any precedent whatever would be set as regards the debates that are going to take place later. They would probably be only too happy to go back to work, having spent their lives in work. If only the YouGov survey to which the Minister referred had asked a question about industrial injuries benefits, we might have got a clearer picture of what people really felt.

I am aware from a previous reply that there will be an opportunity to talk about regulations at some stage. In the circumstances, I shall withdraw the amendment, but we will come back to the issue when it comes to discussing regulations.

Amendment 58C withdrawn.