Enterprise and Regulatory Reform Bill
Baroness Donaghy Excerpts(11 years, 10 months ago)
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Baroness Donaghy
My Lords, I declare an interest as the author of a report in 2009 to the then Secretary of State for Work and Pensions on the underlying causes of construction fatal accidents.
My first question is to ask the Minister why this clause was inserted into the Bill at Report on 16 October last year without proper scrutiny. The clause will not take away an employer’s obligation to take health and safety seriously. It will simply make it virtually impossible for a worker who is injured or whose family breadwinner is deceased to go through the complex and uncertain process of claiming compensation. It is a charter for rogue employers to avoid their obligations. Make no mistake about it: if a cowboy is not afraid of sanctions he will carry on behaving like a cowboy. The government Amendment 28ZE was an attempt to head us off at the pass and does not deal with the fundamental change which is being proposed.
As the All-Party Parliamentary Group on Occupational Safety and Health has said:
“Since 1898 the law on claiming compensation for work-place injury, where the employer has breached their statutory duty, has been very clear. This change will not only put the clock back over 100 years, it will create considerable legal uncertainty”.
Strict liability was introduced over a century ago for good reason—to recognise that there was a different balance of power between employee and employers. It would be entirely unfair and most likely impossible to expect an injured employee to be able to show that their employer had not taken reasonable care leading to injury from defective or hazardous equipment. Such duties have helped to prevent future workplace deaths and injury. This is particularly the case on a building site, where the majority of people are sub-contractors and/or self-employed. If the principal contractor were not strictly liable, there would be even greater carnage in the construction industry.
The amendment will not reduce compliance costs for the prudent employer but bizarrely may well have the unintended impact of benefiting the unscrupulous employer. Breaches of workplace regulations are currently almost invariably currently enforced through civil claims procedures, as has been said. Due to limited resources, the Health and Safety Executive is able to prosecute only 0.1%, if that, of breaches and health and safety law. This clause should be removed from the Bill on the basis that the Government should review and consult on the issues of strict liability in an open and transparent manner, inviting submissions from all affected parties.
I am also concerned that the good work carried out by Professor Ragnar Löfstedt has been prayed in aid for this shoddy piece of work. We all know the phrase, “if you give an inch they will take a mile”. In this case Löfstedt recommended that regulatory provisions that impose strict liability should be reviewed by June 2013. He took the view that regulation should be qualified with “reasonably practicable” where strict liability is not absolutely necessary, or amended to prevent civil liability from attaching to a breach of those provisions. He did not recommend a blanket removal of strict liability from health and safety law. The review that he recommended does not seem to have been conducted beyond a simple impact assessment by officials. There was no consultation on the proposals before they were introduced in Clause 61.
As the noble Baroness, Lady Whitaker, has said, health and safety regulation has always contained a balance between different types of obligation, including a majority qualified by “reasonably practicable”, as well as some that are strict. This balance has existed since the Factories Act 1937 and been considered to represent a fair balance. Although “reasonable practicability” has been the main driver for health and safety regulation it has always contained a balance between different approaches to liability.
With some regulations, if a worker is injured and can prove that the employer has breached their statutory duty, the worker is entitled to claim compensation. This is the basis on which health and safety legislation has been introduced by Parliament, with the twin aim of setting out the criminal law and giving people who have been injured as a result of breach of that law a right to compensation. Without this legal provision the injured person would be obliged to rely only on the law of negligence to claim compensation. It is unclear territory. More importantly, cost moves from the employer to the worker.
As I have said, the amendment will not change the fact that the employer will have broken the criminal law. They will still be liable to prosecution in court. All that changes is that the victim will now be denied the right to compensation. The All-Party Parliamentary Group on Occupational Safety and Health is very concerned that this will have a negative effect on preventing injuries in the workplace, as compensation claims have always helped to drive forward improvements to help to ensure that such incidents are not repeated.
Let me turn to the transient nature of the construction industry, where the majority of workers are self-employed—either genuine or bogus self-employed. In London and the south-east it is about 90%. This adds risk to the industry because the self-employed can never be genuine apprentices nor could they take on the role of safety representatives. Some claim that under-reporting of accidents is because the self-employed tend not to report them as they do not receive benefits. The cost of any permanent injury to a self-employed person is probably met by the state and some claimed that they were less likely to report unsafe practices because they wanted a job next Monday. In other words, they were less secure in their employment.
I met a number of families of workers who had been killed on construction sites. Their dignity was impressive and their proposals were centred on future prevention rather than vengeance or compensation. Let me quote two of them: “I brought up my son to be law-abiding. You go to work for the things that you want. They were killed by someone more interested in money. People think that they are safe at work. Sometimes I would have to get him up at 4.30 am”. Another person said, “Everyone was responsible for every bit of the site except the bit my husband was on. I am sure responsibility would have moved if it had been a different part of the site; 350 men have died since my husband died. In any other profession there would have been an outcry.”
I firmly believe that this legislation keeps people alive on building sites. I equally believe that it is not strong enough and yet the Government are attempting to weaken it. One young woman, Jennifer Deeney, lost her husband Kieron after only five months of marriage. The employer accepted liability and so it was only a question of compensation. It took five years for the case to be heard at the Old Bailey. I was privileged to attend the hearing, at the end of a long process, where some justice was done. There were delays at the coroner's office and obstruction from solicitors acting for the employer. The judge in the case said,
“Somebody needs to address these long delays … In essence it is not a complex case”.
I wish we could find a better procedure.
If it took five years to settle this case, which was not complex and where the employer had accepted liability, imagine the impact of having to go through an initial process of proving negligence. This will be a green light to some employers to further evade their responsibilities. At the time of my report, around 50 construction workers died on-site each year, not counting the injured and not counting the 20 tradesmen, electricians and plumbers, and so on, who die every week from asbestos-related disease. A further 12 construction workers die every week from silica-related lung cancer and will continue to do so over the next 40 years unless we increase our health and safety vigilance and not downgrade it.
There was no sense of shock at the regular toll of fatalities in the industry. This clause shows that the Government are not shocked either. I should like to ask the Minister what assessment the Government have made about the impact of amending Section 47 of the Health and Safety at Work etc Act on the ability of an employee to enforce a civil claim for workplace injury. I should also like to ask: will the Government commit to look again at the impact of the Bill on health and safety at work practices to ensure that we are delivering maximum protection for employees?
To conclude, this is not a debate about the compensation culture. It could be a matter of life and death. If strict liability is taken away, it will not be just a few workers affected in terms of compensation; it will affect whole industries, which will take it as a signal to relax vigilance.
Jennifer Deeney did not just collect her compensation for losing Kieron and move on; she has campaigned ever since for improved safety on sites. She was also selected as one of the torchbearers in the lead up to the Olympic Games. I hope that the debate that she is now witnessing will show that her efforts have not been in vain.
Welfare Reform Bill
Baroness Donaghy Excerpts(12 years, 10 months ago)
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Baroness Donaghy
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?
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.
Welfare Reform Bill
Baroness Donaghy Excerpts(12 years, 11 months ago)
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Baroness Donaghy
Baroness Donaghy
My Lords, the amendment was in the first grouping on the first day of Report, when we were all bright-eyed and bushy-tailed. I asked for this to be degrouped, and I therefore accept my punishment with good grace.
I asked for the amendment to be degrouped because the issue of self-employed people is extremely important and deserves a slot on its own. The purpose of the amendment is to recognise the particular needs of the self-employed. It will ensure that the power to prescribe a minimum level of income applies only to those self-employed claimants if they under-declare their earned income with a view to maximising their entitlement to universal credit.
While it is important to prevent abuse of the system, it is equally important not to discourage the genuine self-employed claimant with a potentially viable business in the early stages of development or in financial difficulty. There are some 4 million self-employed people in the UK and that number is likely to grow as employment becomes more difficult. They are an enormously varied group who face a greater degree of risk than traditional employees. Profits are affected by any number of events—the loss of a key customer, the sickness of the sole proprietor, a bad debt, the accumulation of slow payers, or even taking on a new employee.
The measurement of self-employed income for universal credit purposes should follow generally accepted accountancy principles and aim at a true and fair view of a business’s profits. The welfare system needs to support business through such periods, not discourage them by imposing unrealistic levels of deemed income such as the minimum income floor. My amendment recognises that real abuse should be directly targeted. If you impose a minimum income floor for each hour worked, that in itself will open the floodgates for abuse. That view is supported by the National Farmers’ Union, the Tenant Farmers’ Association and the Federation of Small Businesses, as well as Community Link, Citizens Advice and the Child Poverty Action Group.
There are those with a disability or medical condition which makes it difficult for them to take traditional employment. Indeed, it is often difficult for the disabled to find employment. Being self-employed allows the disabled to work at their own pace and according to a pattern which suits their circumstances.
What steps are the Government taking to minimise the compliance burden on the self-employed? The current system requires only one set of accounts to be prepared, which is accepted for both tax and tax credits. That allows the individual to get on with running their business. If a different measure of self-employed income were to apply for universal credit, the burden would be increased by having to assess profits for tax purposes according to one measure; and income for universal credit purposes according to another, quite different measure. If income is to be based on reported hours, the harder a self-employed individual works to get their business on its feet, the more they could lose from their universal credit entitlement.
It would be unfortunate if the measure were to put off genuine claimants from taking the risks inherent in self-employment, when its purpose was to deter a minority from underdeclaring their profits. One real example, which I gave in Committee, was of an arable farmer whose crop was completely destroyed. I was going to give another detailed example of livestock farmers who could not move them if they were under BTB restrictions, but in view of the hour, I will not.
There are already regulatory powers to counteract moves by claimants to underdeclare their income for tax credit. For benefit purposes, under the income deprivation rules, a person is deemed still to have income of which they have divested themselves to maximise their claim to benefit or tax credit. Where the Government perceive that abuse, surely the right course is to enforce existing powers rather than to invent new ones which will discourage genuine cases.
This brings me to a group who are in practically every sense of the word employees, but where individuals are treated as self-employed because the alternative is no job at all. They are often referred to as bogus self-employed. The Government's difficulty in drawing up criteria to deal with the genuine self-employed may be alleviated by proper enforcement of the tax laws by HMRC and employment laws by the BIS department, with all the resources that that implies. It also means a greatly increased level of interdepartmental co-operation in Whitehall.
As I said earlier, self-employment entails a greater risk than traditional employment. The self-employed must often choose between taking drawings for themselves or reinvesting in the business to enable it to grow. Welfare policy must reflect those different needs if it is to succeed in promoting work through self-employment. The success of working tax credit in encouraging work and, in particular, self-employment, rests on its recognition, in alignment with the tax system, of the economic reality of how a business is doing—particularly with regard to investment in business equipment and trading losses. Will the Minister indicate what guidelines will be issued and when? I ask him to accept my amendment, which aims at the real target, rather than those struggling to survive in these deeply difficult times. I beg to move.
Lord McKenzie of Luton
My Lords, my noble friend Lady Donaghy has made a very strong case, and I look forward to the Minister's response. What she said warmed the cockles of my heart. She referred to generally accepted accounting principles—the true and fair view—and it took me back to another life, but she raises a real issue: rather than having artificial rules for assessing what people are deemed to earn, is it not better to try to capture the actual profits and to target resources on those who seek to abuse the position? That seems a very straightforward matter.
My noble friend raises once more, as she did in Committee, the matter of bogus self-employment. We all know that that is a continuing issue. I have always believed that it rests particularly with HMRC, together with BIS and other departments of government, to make progress on that. It is primarily HMRC that could begin to make a real difference. She wrote reports for the Government, as did the Minister, on the construction sector, and health and safety in particular. There is bogus self-employment in that sector, so she is an expert on that matter. We support the thrust of her amendment.
Baroness Donaghy
I thank the Minister for that response, and I look forward to seeing the regulations. However, I still have a concern and refer again to my example of a farmer who cannot move his livestock and is therefore getting no income. He is having to work harder than ever but will not be able to get a part-time job.
Lord Freud
My Lords, I forgot to say something. There are two areas where we need to get really smart. One is the start-up period and the other is when a business hits a problem. The questions there are how long the process should be and what one allows. That is another area that we are actively looking at.
Baroness Donaghy
I am reassured by that. I certainly agree with the Minister that this is a very complex area and, as I said in moving the amendment, it involves a very varied set of problems. I look forward to seeing the regulations and beg leave to withdraw the amendment.
Welfare Reform Bill
Baroness Donaghy Excerpts(13 years ago)
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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.
Welfare Reform Bill
Baroness Donaghy Excerpts(13 years ago)
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Baroness Donaghy
My Lords, Amendment 99ZC is by way of an interval in the big picture, but I hope that noble Lords will not go out and get an ice-cream while I am speaking.
This is a probing amendment to ensure that industrial injuries disablement benefit is not counted towards the benefit cap. At present, industrial injuries will be among the benefits that count towards total benefit income for benefit cap purposes. The Government have indicated that the constant attendance allowance under the industrial injuries scheme will be exempted in the same way as disability living allowance, and I shall say a little more about constant attendance allowance later.
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, to help people to cope with extra costs or to substitute for lost income, the industrial injuries scheme is a system of no-fault compensation. In November last year, the Industrial Injuries Advisory Council wrote to the Minister to argue that IIDB should not count towards the cap for just this reason.
Employers and unions both support the industrial injuries scheme, which eliminates the need for an adversarial approach to compensating for a large number of injuries and diseases that are agreed to be a risk to 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 plainly be 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.
On 10 November in this Committee, my noble friend Lady Hayter took the opportunity to raise a number of questions and she put the issue very well. She said,
“it seems that to include these payments, which are compensation for injuries at work, within a calculation of the total support that a family could receive from the state would be somewhat unfair. It would mean that for a young person living with their family, any such support would be taken away from the total family entitlement, which would effectively turn the benefit into a means-tested benefit”.
The Minister replied:
“We can discuss that entire area when we look at the whole range of benefits”. —[Official Report, 10/11/11; col.112.]
Well, my Lords, the time is now.
The Government have put forward three reasons for introducing the benefit cap. All these reasons are weak when one looks at the industrial injuries disablement benefit. The Government have said that they are introducing the benefit cap partly to reduce benefit expenditure but IIDB accounts for a very small amount of social security expenditure. It stood at 0.58 per cent of DWP annually managed expenditure in 2010-11. However, 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 who are over pension age—and will therefore count for significantly less than the 0.58 per cent. It is unlikely that counting IIDB towards the benefit cap would save as much as £1 million a year, but I appreciate that I am really talking about an issue of principle here and not just expenditure.
The Government’s equality impact assessment also indicated that a further purpose is to improve working incentives for those on benefits. It must be emphasised that IIDB 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 work or find work.
Ministers have given great 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 of “Fairness … Reducing the deficit fairly while protecting the vulnerable”. However, a working family, one of whose members has 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 great deal about why it 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 benefit to meet extra costs, which can be dealt with by an award of DLA if necessary, and the Minister has used this difference to justify excluding DLA but not IIDB. This argument is not a sufficient rebuttal because it fails to address the point that I made about the nature of the industrial injuries scheme. Furthermore, if having extra costs were to be the reason for excluding the benefit, how would we explain the decision to exclude retirement pension and pension credit?
Informally, officials sometimes argue that excluding IIDB would open the floodgates for a long list of special cases, which would complicate the benefit cap. I hope that tidiness is never the deciding factor in matters like this and that simplicity is not a sufficient reason for proceeding with an unfair change.
The Government’s decision to exclude constant attendance allowance is of course welcome. It is worth remembering, however, that this is one of the industrial injury scheme benefits abolished by the previous Conservative Government and there are now comparatively few claimants. In fact, the cost of the constant attendance allowance is just 1 per cent of the industrial injuries scheme. I hope that the Government will agree with me that the industrial injuries disablement benefit should not be counted towards the benefit cap.
Baroness Hollins
My Lords, Amendment 99A calls for a new exemption from the benefit cap for households in which a resident claims carers’ allowance and for carers in receipt of the additional amount in universal credit for those with caring responsibilities. I am grateful to my noble friend Lady Meacher, the noble Baroness, Lady Hayter, and the noble Lord, Lord McKenzie, who have added their names to the amendment.
Why is it wrong to cap carers’ benefits? Carers UK and the Disability Benefits Consortium, representing more than 50 disability charities, are concerned that, as it stands, a cap could be devastating for some carers. It would also send out an extremely negative message about how the Government value family care and risk the perverse outcomes of disincentivising family care and potentially making caring for older or disabled relatives financially untenable for some families.
Carers make a huge contribution to society, estimated this year by Carers UK and the University of Leeds to be £119 billion each year. From the Minister’s response to an earlier amendment, we know how much the Government value that contribution. However, that only emphasises the fundamental unfairness of including carers’ allowance within this cap. This is perhaps best illustrated by the justification given by the Secretary of State for Work and Pensions when he introduced the Bill in the Commons, stating that the benefit cap was,
“a matter of fairness, so that those who are working hard and paying their taxes do not feel that someone else will benefit more by not playing a full part in society”.—[Official Report, Commons, 9/3/11; col. 922.]
If this cap is designed to be fair to individuals who are working hard and playing a full part in society, then it cannot be right that it applies to carers.
In order to receive their benefit, carers must be caring for a minimum of 35 hours a week—the equivalent of a full working week. Many care around the clock, with NHS Information Centre figures showing that a fifth of carers are caring for more than 50 hours a week. It would not be possible to say that these individuals are not working hard. Nor could it be said that they are not contributing to society, as they represent so many of the social values that the Government are working to promote in this Bill and beyond—strong families and communities, and taking personal responsibility. Indeed, such carers are not required to seek work and conditionality does not apply to them.
However, there are some inconsistencies in the existing proposals. While the Government have stated that the exemption for DLA protects families affected by disability, this is not the case for all such families. A lot depends on the definition of the word “household”. The DLA exemption protects households that include a DLA claimant, but what is considered to be a household in universal credit includes children under 18 and partners but not adult children or other adult relatives. Therefore, while carers looking after disabled partners and disabled young children would be exempt from the cap, those caring for adult disabled children or elderly parents or disabled siblings would not be exempt. Families caring for disabled children under 18 would therefore be exempt from the cap, but those caring for adult disabled children would be subject to it because the DLA claimant, as an adult, would no longer be considered to live in the same benefits household, even if they were living together.
Let me give an example of a family who would be affected. Imagine a single father with three sons, the eldest of whom is 19, has learning disabilities and a variety of other health conditions. The father has two other children of school age. While his eldest son receives DLA and he himself gets carers’ allowance for supporting him full-time, the father’s benefits, including child benefit and housing benefit, would be capped because his adult son would not be considered to be in the same benefits household as his father, despite living with him. The financial impact of the cap could be significant. With local housing allowance and council tax benefit totalling £305.22, income support £42.95, child tax credit £108.75, child benefit £33.70 and carers’ allowance £55.55, he would be in receipt of £546.17 a week. A cap of the level announced by the Government would result in a loss of £46 a week or £184 a month.
Such a drop in income could force carers such as this father to stop caring and instead turn to social services to provide full-time care for his son because he feels that he has no choice but to look for paid work rather than be a full time carer—a distressing situation for the family and ultimately far more costly to the state. According to Carers UK, to which I am grateful to for providing me with an excellent briefing for today, carers giving up work in order to care lose an average of £11,000 a year.
This kind of situation is neither logical nor fair. The best way to ensure that the carer’s contribution is better recognised and rewarded, and that carers are not penalised for taking on caring responsibilities, would be to give carers exemption from this cap. I ask the Minister: why is carers’ allowance included in the benefit cap when the Government’s intention is to protect those affected by disability? Or is it simply a mistake?
Welfare Reform Bill
Baroness Donaghy Excerpts(13 years ago)
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Baroness Donaghy
Baroness Donaghy
My Lords, the purpose of this amendment is to recognise the particular needs of the self-employed. It would ensure that the power to prescribe a minimum level of income applies only to those self-employed claimants who under-declare their earned income with a view to maximising their entitlement to universal credit.
While it is important to prevent abuse of the system, it is equally important not to discourage the genuine self-employed claimant with a potentially viable business in the early stages of development or one that is in financial difficulty. The White Paper acknowledges that,
“in starting up a business … it can take some time before it becomes profitable”.
It proposes that the minimum income floor should be applied only when a business has become “established”.
There is at present no indication of how that is to be interpreted or what guidelines or regulations will be issued, so I ask the Minister: when will this information become available?
As I said at Second Reading, there are some 4 million self-employed people in the UK, and that number is likely to grow as employment becomes more difficult. It represents an enormously varied group which faces a greater degree of risk than is faced by those in traditional employment. Profits are affected by any number of events such as the loss of a key customer, the sickness of the sole proprietor, a bad debt or accumulation of slow payers, or even by taking on a new employee. The measurement of self-employment income for universal credit purposes should follow generally accepted accountancy principles and aim at a true and fair view of a business’s profit. The welfare system needs to support businesses through such periods, not discourage them by imposing unrealistic levels of deemed income such as the minimum income floor.
My amendment recognises that real abuse should be directly targeted, but that if you impose a minimum income floor for each hour worked, that in itself will open the floodgates for abuse. This view is supported by the National Farmers’ Union, the Tenant Farmers Association and the Federation of Small Businesses, as well as by Community Link, Citizens Advice and the Child Poverty Action Group. There are those with disability or a medical condition that makes it difficult for them to take traditional employment. We have already heard from the noble Baronesses, Lady Grey-Thompson, Lady Thomas of Winchester and Lady Wilkins, about how difficult it is for the disabled to find employment. Being self-employed often allows the disabled to work at their own pace and according to a pattern that suits their circumstances.
I have another question. What steps are the Government taking to minimise the compliance burden on the self-employed? The current system requires only one set of accounts to be prepared, which is accepted for both tax and tax credits. This allows the individual to get on with running their business. If a different measure of self-employed income were to apply for universal credit, the burden would increase because individuals would have to assess profits for tax purposes according to one measure and income for universal credit purposes according to another, quite different, measure.
If income is to be based upon reported hours, the harder a self-employed person works to get their business on its feet, the more they could lose from their universal credit entitlement. Some might spend as much time seeking paid work as actually doing it, such as taxi drivers who may work 50 to 60 hours per week or more. It would be unfortunate if this measure were to deter genuine claimants from taking the risks inherent in self-employment when its purpose is to prevent a minority under-declaring their profits.
Perhaps I may give a real example sent by the Royal Agricultural Benevolent Institution. I hope that it is not one of those examples that the Minister will say is a unique and very special man. He is a single man aged 53 on a rented 160-acre farm, farming arable/field vegetables only. He has had a disastrous winter and lost the whole crop due to bad weather and flooding. Consequently, he has made a loss this year and is very distressed. As this would be calculated by HMRC to be nil earnings, he is currently eligible for a full working tax credit of £51.87 per week. Under the proposed changes in the universal credit, he will no longer be entitled to any help. The circumstances were beyond his control, and without the safety net of the tax credits he will be unable to get back on his feet and carry on farming. What will he do? Is this an example of someone where savings are to be made? Is he to face the humiliation of getting advice from Jobcentre Plus about diversifying or going to work for the farm next door?
There are already regulatory powers to counteract moves by claimants to under-declare their income for tax credit and benefit purposes. Under the income deprivation rules, a person is deemed still to have income of which they have divested themselves in order to maximise their claim to benefit or tax credit. Where the Government perceive this abuse, surely the right course is to enforce existing powers rather than invent new ones that will discourage genuine cases.
This brings me a group of individuals who in practically every sense of the word are employees but who are treated as self-employed because the alternative is no job at all. When I was a member of the Low Pay Commission, a situation where economic circumstances took away choice was called monopsony—which is not a word that is used very often. I have met home workers who were forced to accept self-employed status in order to earn money. If they asked questions, they would be replaced with one of the hundreds of women in the area who were confined to their homes for domestic or cultural reasons and were equally desperate for work.
In the construction industry up to 90 per cent of workers in London are self-employed, and yet they are told when to turn up for work and what to do when they are at work. HMRC is responsible for the construction industry tax scheme, the CIS, where contractors submit monthly returns detailing their subcontractors and certifying that none of them is in fact an employee. However, the questions asked of a contractor to establish whether any of their subcontractors are self-employed are remarkably similar to the criteria used for identifying direct employment. Successive Governments have tried to deal with the issue of bogus self-employment with little measurable success. In my report on the construction industry I wrote that:
“It may be that successive Governments see the various schemes they have adopted as a buttress against the huge informal economy in construction—a compromise so that at least some tax is collected”.
I raise these two examples of bogus self-employment—some home workers and some construction workers—to emphasise that the Government’s proposals could penalise the genuine self-employed and fail to tackle some of the gross abuses that happen now. These abuses could be alleviated by the proper enforcement of our tax laws by HMRC and of our employment laws by the Department for Business, Innovation and Skills in conjunction with the Department for Work and Pensions—with all the resources that that implies. It would also mean a level of interdepartmental co-operation in Whitehall that would make even the Minister with his acknowledged abilities blench in terror.
In conclusion, there is a clear distinction between profits on the one hand and drawings on the other, and welfare policy must reflect that distinction if in-work support is to succeed in promoting work through self-employment. The success of working tax credits in encouraging work, in particular self-employment, rests on a recognition, in alignment with the tax system, of the economic reality of how a business is doing, particularly with regard to investment in business equipment and trading losses. How is the Minister going to treat the self-employed, and does he think that my amendment would help to emphasise the real target rather than those struggling to survive in deeply difficult financial circumstances? I beg to move.
Lord Wigley
My Lords, I give enthusiastic support not only to the amendment but also to the direction in which the noble Baroness is taking the Committee. The need to ensure that disabled people do not feel that they are being debarred by the system from becoming self-employed is very important indeed. Possibly it has been a greater problem in the past and I hope that it will become even less of one with the changes we are getting. However, we need certain assurances if that is to be the case. I believe not only that this is in their own interests, given that self-employment can offer a flexibility which can be very useful, but also that they have a massive contribution to make. Given support, disabled people can also become the employers of other people. Therefore I hope that it will be possible to give the assurances that have been sought in the amendment in order to move things forward on this agenda.
Lord Freud
Yes, the system is absolutely straightforward for a disabled person who goes into employment, where it is unequivocally much safer. There is a difference in self-employment in that, in cases of low earnings, we will look for an element of potential conditionality and a relationship with that person when they do not want to observe the minimum income floor. You have a choice: either have a minimum income floor and then there is not conditionality; or you come below it and there is a conditionality regime. That does not mean there is an instruction saying, “It is out to work. Stop what you are doing”. It absolutely does not mean that. It means that we know what people are doing and, after discussing it with them, can reach an assessment of what they should be doing. In many cases we will be absolutely happy for them to continue that regime. It offers us an opportunity to know what is really happening out there—I suspect in a way that we do not know now.
Baroness Donaghy
I am extremely grateful to the noble Lords who took part in this discussion—the noble Lord, Lord Wigley, and my noble friends Lord McKenzie, Lord McAvoy and Lady Hollis. I have learnt something today. I did not know that my noble friend Lord McAvoy owned a pub. I do not know if that makes him a licensee. I thought that I was the only licensee in the House of Lords. I was one for 16 years. We must obviously now compare notes.
I am also extremely grateful to the Minister. I take assurances from some of the things that he said. He accepted that the self-employed are different and that their situation is complex in relation to this subject. He is determined to produce clear rules—I have written that down: “clear rules”. I do not know if those rules will be as clear as those in Amendment 52B from the noble Baroness, Lady Howe, and my noble friend Lady Lister, which was just debated. Let us hope that they are really clear.
I take assurance from the Minister saying that we cannot use real-time information. I am aware that this is work in progress. I have some worries about the when. In my contribution I asked when this information was going to be available. I am pleased that we will have the opportunity to look at this in terms of the affirmative situation to which he referred. We will have another chance to look at the regulations. He acknowledged that specific rules will try to cope with things like the start dates and what happens when things go badly wrong. Again, I welcome the fact that he has tried to cover the entire patch.
I understand why he baulked at mentioning the issue of bogus self-employment. It is a big subject but I must come back to the comment that some of the real abuses are around the edges of the twilight zone of informal economy, bogus self-employment and people who abuse the system—sometimes all three. The sooner we can get some co-ordination in our systems, the better for everyone. I may come back to haunt the Minister about this whole area on another occasion but in the light of those positions, although still with some question marks, I beg leave to withdraw the amendment.
Welfare Reform Bill
Baroness Donaghy Excerpts(13 years ago)
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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.
Welfare Reform Bill
Baroness Donaghy Excerpts(13 years, 2 months ago)
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Baroness Donaghy
My Lords, I shall concentrate on the potential impact of the Bill on self-employed people, with perhaps a few words on kinship carers, referred to earlier by the noble Baroness, Lady Tyler.
The coalition has acknowledged that the self-employed are a group which “is often difficult to map”. We still have no clear indication of how they will be treated by the universal credit system. The 4 million self-employed people who contribute £21 billion in added value to the UK economy and the Federation of Small Businesses are concerned that self-employed people will be considered to be earning a set wage, calculated at the national minimum wage for reported hours worked. This is not only unrealistic, it is likely to discourage self-employment and is itself open to abuse by underreporting working hours. Small business owners starting up for the first time often do not start earning until much later. Most start-ups fail within the first three years of operation and it is essential that we support those willing, as the Federation of Small Businesses put it,
“to take that plunge into entrepreneurship”.
The coalition Government have previously stated that they encourage a more dynamic private sector. Encouraging more people to go into self-employment will help to guarantee the long-term economic growth of the UK economy and offers opportunities to reverse the current high levels of unemployment. How will the universal credit affect self-employed people and what measures will be taken to ensure that it does not act as a disincentive to set up a business? Under the current system, someone who starts up as self-employed will be entitled to full working tax credit as long as the work that they are doing is seen to be in expectation of payment—the business has to be reasonably viable. The universal credit will deem people to earn the minimum wage even if they have been unable to take a wage out of the business during the starting-up period. That means that people will lose money if they start their own business.
The only incentive here is to give up or slip into the informal economy. How often will the self-employed be expected to fill in tax returns in order to receive the universal credit, as their working hours will be outside the PAYE system? How will the Government minimise any extra work for small businesses? The Government will know that various organisations have raised concerns about the proposals for the self-employed. Citizens Advice has said that,
“this is clearly the difference between being able or not to set up in business”.
It has outlined a telling case study where one woman would be £61 a week worse off under the new system. The National Association of Welfare Rights Advisers and the Low Incomes Tax Reform Group believe that the Government should use a similar model to that already used for working tax credit which, by using a measurement of self-employed profit within the tax system, takes account of loss-making periods and investment in premises, equipment and machinery for business.
I am aware that the coalition has indicated that the rules on the treatment of the self-employed will be set out in regulations and that they are still,
“looking for the best way of doing it”.
I have some appreciation that putting this on the face of the Bill might hinder flexibility. However, when the regulations are eventually produced and if they do not tackle the issues that I have raised—namely, avoiding disincentives to self-employment, reconsidering the proposal of the minimum wage as an income floor and facilitating the collection of information about income which is easily adjustable as circumstances change—an important principle will have been lost: the Welfare Reform Bill was supposed to improve things. The new system will be worse than the current system and self-employment will have additional burdens placed on it by a supposedly red-tape-cutting Government.
We need an indication at least of intentions towards this group of people—an outline of what the regulations might say, an assurance that the definition of income from self-employment in universal credit is aligned with that used in the tax and credits system, and an absolute assurance from the Government that they are on the side of entrepreneurs.
As the noble Baroness, Lady Drake, is committed to the other parliamentary business at this time, I want to say something about kinship carers—a subject that she would have covered in more detail. There are around 200,000 kinship carers in the UK and an estimated 300,000 children who would otherwise be in care being raised by family members. Many such carers will be affected by the conditionality requirements and the cap on benefits. This will unintentionally undermine many kinship carers’ capacity to care for the children by requiring them to look for work, increase the hours that they work or cap the benefits that they can claim. If only 5 per cent of the children in kinship care were to enter the care system, it would cost the taxpayer £500 million every year. It costs £40,000 a year per child to be placed in independent foster care.
Kinship carers should be exempted from conditionality requirements under universal credit for 12 months after the children move in. The increase in the state pension age for women from 60 to 66 will mean that an increasing number of older grandmother carers will be expected to be available for work under the conditionality requirements. These people are taking on responsibility, not avoiding it. The Bill should present an opportunity to support kinship carers not add new barriers. Thank you.
Pensions Bill [HL]
Baroness Donaghy Excerpts(13 years, 9 months ago)
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Baroness Donaghy
My Lords, we are reaching the end of the debate; I am conscious of the time and the ground covered. I will confine myself to one part of the Bill. In doing so, I associate myself with all the remarks made by my noble friend Lady Drake and congratulate her on her contribution.
I want to deal with the proposal to raise the salary level at which someone is automatically enrolled to £7,475 a year, with a future possibility of increasing that threshold. For 30 years, I represented low-paid workers. I was a member of the first Low Pay Commission and, as one of the European social partners, I was part of the team that led to the adoption of the part-time workers directive in the 1990s, so I want to focus on the threshold because of its impact on the low paid. Too often, we spend time here talking about people with careers; I want to talk about people with jobs.
I appreciate that the proposal is a result of a recommendation by the independent review which was published in October last year. The review team also considered whether the smallest employer or the older worker should be excluded, whether any changes to the proposed regulations, such as a three-month waiting period, would help, and whether simplification of the scheme, such as self-certification, would be advisable. My guess is that there was some negotiation within the review group on these areas and the lowest paid and casual workers lost out. I appreciate that the threshold of £15,000 was rejected by the review group, and I am grateful for that, but the proposed threshold of £7,475 this year, possibly rising to £10,000, might exclude those who have a series of jobs, some seasonal, some multi-site jobs with different employers. It might be neat and tidy, as some noble Lords have said, to fix on the income tax threshold, but that threshold is a political decision, not one based on need.
The CIPD, of which I am a fellow, conducted a survey last week indicating that 65 per cent of staff in the private sector are not saving in a company pension. This shows all too graphically the scale of the problem in future and surely argues for fewer exclusions, not more. Anything that is linked to an income tax threshold will mean that an individual’s pension future will be tied to the varying political whims of successive Governments. We need a plan that will last for 40, not four, years. If the threshold increases to £10,000, 1 million to 1.5 million people, mainly women, will be excluded.
When I first started work at the University of London in 1968, I was excluded from the occupational pension scheme, along with all my immediate workmates. In my case, it was because of a two-year eligibility requirement. In other cases, it was because they were part-time and, for the rest, it was because they were not earning sufficient to qualify for entry at that time. I was the lucky one because at least I got in eventually. Those who stayed and retired in the past few years did so on a reduced pension because of the obstacles placed in their way a lifetime ago. I sometimes feel as if this is where I came in.
We should not assume that low-paid people are stupid and do not want to plan for the future or make short-term sacrifices for long-term benefit. The lowest-paid men and women will be excluded from automatic enrolment not just for administrative convenience but because, I still believe, there is not sufficient appreciation in the UK of the impact of low pay on millions of people. When we talk about poverty, it is too often focused on benefits, tax credits and other forms of support. We should also be focusing on lower-paid workers and enabling them to plan for the future. I urge the Minister to reconsider his proposal to raise the threshold for eligibility and to put people on the right road to help themselves to secure their own future.
Health and Safety: Common Sense Common Safety
Baroness Donaghy Excerpts(13 years, 12 months ago)
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Baroness Donaghy
My Lords, I welcome the opportunity to debate this subject. As author of a report for the previous Government last year on the underlying causes of construction fatal accidents, I see that the noble Lord, Lord Young, has tried to cut the Gordian knot in some of the same areas that I tackled: the role of insurance companies, the gold-plating by some paid health and safety consultants, and the need for a common set of qualifications for health and safety consultants. In my contribution, I want to make a distinction between paid consultants and unpaid health and safety representatives, which I think is an important one. I pay tribute to the hundreds of thousands of trade union health and safety representatives who, over the years and with little appreciation, have helped to keep our workplaces safe. In the discussion about proportionality and the need to do something about the jobsworth mentality and the killjoys, let us not forget that important work still needs to be done by unpaid volunteers who keep our thoughtlessness and carelessness in check.
Reading between the lines of the noble Lord’s report, I suspect he faced the same difficulty as me in pinning down insurance companies as to their role and responsibilities. I was conscious that there was insufficient published information on which to base reliable conclusions for my report, except to say that the issues are worthy of further exploration. I refer to discount schemes and safety incentives, and the possible sponsorship by insurance companies of safety advisers. Insurance is a highly competitive industry with specialist insurance covering large construction markets and low-margin premiums for the bottom end. It is a cutthroat business, but that does not absolve insurers from their responsibilities in this area. If the recommendations in the noble Lord’s report succeed in winkling out more co-operation from the insurance industry, he will indeed have performed a valuable service.
The report also touches on the accreditation of paid health and safety consultants and recommends a process to ensure that assessments are proportionate. During the six months I spent drawing up the report on the construction industry, I met 175 representations of organisations with an interest in the industry. It did not take me long to realise that there are well established organisations with long and honourable traditions of health and safety—dare I say entrenched?—which makes any progress slow and difficult. Of course the possession of a common accreditation or a common core of agreed standards, which might be more achievable, does not guarantee proportionality. Indeed, proportionality is unlikely to be achieved when there is money to be made. There are too many seagulls around this particular liner.
I was reassured by the noble Lord’s words in the executive summary that none of the recommendations applies to hazardous occupations,
“where the present system … is nevertheless effective in reducing accidents at work”.
I hope that the Government will keep their foot on the pedal when it comes to the construction industry. Although we claim that we are among the best in the world, it is a matter of shame that, through accidents at work, we kill between 40 and 100 construction workers every year. Last month, in the course of one week alone, seven construction workers died in separate accidents. The underreporting of accidents under the regulations—RIDDOR—is a national scandal, and I hope that the report’s recommendations on this area will improve matters. However, I do not have time to go into the detail of this.
Each death is a family tragedy. I spent time last year with six families who all felt as if the whole system was against them. To make fun of “elf ‘n safety” in their company or to talk about the compensation culture would have been a sick joke. If proportionality is to work, we must take much more seriously the issue of fatalities in the construction sector.
I refer also to occupational health. Far more workers die from the chronic effects of ill health caused by or made worse at work. Some 20 tradesmen—electricians, plumbers and so on—die every week from asbestos-related disease. In addition, 12 construction workers die each week from silica-related lung cancer. That is 32 workers a week, which means that one worker will have died during this debate. I make a plea to the Government to keep the pressure up on prevention.
Some marvellous work is being done by large and small construction companies, as well as by the trade associations, in partnership with the Health and Safety Executive, to prevent fatalities and accidents at work. It is not sufficient for the HSE to revert to being the policeman for health and safety, because it simply does not have the resources to carry out that role effectively. Working with companies and key trade associations to change the culture is the most effective way for the future. Those companies that concentrate on prevention show, by their record, that on the whole this works. Do not let us wait for blood on the concrete before taking action.
Finally, I referred earlier to the attempt by the noble Lord, Lord Young, to cut the Gordian knot. As noble Lords will know, Gordius, king of Phrygia, tied an intricate knot that supposedly could be undone only by the future ruler of Asia. Along came Alexander the Great, who cut it with his sword. If the noble Lord’s report brings some proportionality into health and safety while upholding the Health and Safety at Work etc. Act and thus saving lives, he will truly be an Alexander.