Social Mobility: Public Schools
Baroness Hayter of Kentish Town Excerpts(11 years ago)
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Baroness Hussein-Ece
Does the Minister agree that until we tackle growing inequalities, we cannot hope to tackle social inequality? When you have a situation in which more than 60% of young black men in this country are unemployed, how on earth are we going to achieve social mobility?
Lord Bates
My noble friend raises a very important point, which is that the route back into social mobility comes through the place of work. That is why we are opening up 1.5 million apprenticeships and why bearing down on unemployment—it is a fact that we are now in the 17th month of falling unemployment among the young—is so critical to raising the prospects of the young people, as we so want to do.
Baroness Hayter of Kentish Town
My Lords, I apologise to the noble Baroness, Lady Hussein-Ece.
Even where two similarly qualified graduates attended the same university, what happens afterwards is that the privately schooled graduate is 8% more likely to get a top job than someone from the state schools—even at that stage. What are the Government doing with their own recruitment policies to make sure that that sort of unfairness does not appear within the Civil Service?
Enterprise and Regulatory Reform Bill
Baroness Hayter of Kentish Town Excerpts(11 years, 8 months ago)
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Viscount Younger of Leckie
My Lords, on Report we debated the amendment in the name of the noble Baroness, Lady Hayter, on letting and managing agents. I made it clear then that the Government could not accept her amendment but that we were giving most serious consideration to the issue of redress. The noble Baroness confirmed that it was a redress mechanism that she was seeking in her amendment.
The Government have given serious consideration to these issues. We have considered reports by the Office of Fair Trading, Which?, the Royal Institution of Chartered Surveyors and others, and we have listened carefully to the debate here and indeed in the other place. The Government recognise that the fact that not all agents belong to a redress scheme has been an issue of growing concern. We are satisfied that making this a requirement would provide both the means of addressing complaints when things go wrong and a means to improve service quality across these important parts of the housing sector.
Providing access to redress would deal with many of the failings that people are concerned about in their day to day dealings with letting and managing agents. At the same time, the existing consumer protection and leasehold legislation remains in place and is already available, and is indeed used for the more serious matters.
Having listened to the concerns raised most specifically in this House by the noble Baroness, Lady Hayter, and others, including my noble friend Lady Gardner, the Government have introduced in the other place an amendment in lieu of the amendment tabled by the noble Baroness, Lady Hayter. The government amendment gives powers to require letting and managing agents of privately rented and residential leasehold homes to belong to a redress scheme. It gets to the heart of what the noble Baroness, Lady Hayter, was seeking, but without subjecting letting and managing agents to the additional layers of regulation that are in the Estate Agents Act and on which her amendment was based.
I am pleased to say that, while clearly some would have liked the Government to have gone further than redress, this amendment has been warmly welcomed and was approved without Division in the other place. Indeed, the honourable Member for Streatham, shadow Business Secretary Chuka Umunna, described it as,
“a victory for tenants and landlords””.—[Official Report, Commons, 16/4/13; col. 229.]
The Government’s approach has also been welcomed by key organisations. For example, the National Approved Letting Scheme welcomed it as a common-sense approach to improving the consumer experience of renting and letting and a sensible alternative to the heavy-handed bureaucracy of a formal regulatory regime. Similarly, the National Landlords Association has endorsed the Government’s approach of meeting the challenge of regulating letting agents head on, rather than simply applying the standards of estate agency to a distinct sector with its own significant risks.
If these clauses are enacted, the next steps will be for the Department for Communities and Local Government to consult on the details of the measures and to go through the formal scrutiny processes so that the necessary orders can be brought forward for approval in both Houses. We would expect consultation to be under way by the summer.
In their consultations, the Government will wish to take account of a number of the points that have been raised in the other place, for example on how existing codes of practice will be reflected in the redress schemes. There were also questions in the other place about the residential leasehold sector, generally echoing concerns that have been raised by my noble friend Lady Gardner of Parkes. The Department for Communities and Local Government is taking forward work on these issues, following its recent round table meeting, which my noble friend attended. I know that it will continue to involve my noble friend and a broad range of other interested parties on these matters.
My honourable friend in the other place, the Housing Minister, Mark Prisk, has spoken to the honourable Member for Worthing West about the points that he raised on the Leasehold Advisory Service and has now written to him.
The Government consider that this amendment can make a real improvement to the operation of letting and property management agents, for a very modest and proportionate regulatory burden. I am grateful to bodies such as the Office of Fair Trading and Which? for rightly bringing attention to these issues, and to noble Lords who have worked hard to bring these measures within the current Bill, in particular the noble Baroness, Lady Hayter, and my noble friend Lady Gardner. I also acknowledge my honourable friend in the other place, the Housing Minister Mark Prisk, who has a long-standing interest in this issue and has worked hard to deliver a workable redress mechanism within the current Bill.
I therefore ask that noble Lords do not insist on their amendment and instead agree with the other place on its amendments in lieu. I beg to move.
Baroness Hayter of Kentish Town
My Lords, I welcome and support Motion E. I pay tribute to a number of key players who have brought us to this happy position. First, there is the coalition of those interested in the well-being of tenants and landlords, as the Minister has mentioned, such as Which?, Shelter and RICS, which have given me a lot of help not only in drafting but in the persuasion, if I may say, of this House and then the Government, who perhaps were a little reluctant to start with but have made a very large step forward. The coalition that came together included representatives of tenants and landlords, as has been mentioned, but also the British Property Federation, the Mayor of London and various London councils, as well as the professional organisations to which some of these bodies belong.
The amendments in lieu are not exactly the whole of what the House asked for in passing my original amendment, in that they do not include a role for the OFT in debarring agents who go seriously astray. However, I am confident that with the build-up of intelligence by the various redress schemes, evidence will come to light on which the OFT or Trading Standards will be able to take action.
Furthermore, as happened with estate agents and as has been suggested in the consultation, ombudsmen will develop codes of conduct for letting and managing agents—based, no doubt, on the professional codes that they have in place now—to give member agents guidance as to how an ombudsman will decide a case. That is perhaps a backdoor way to the adoption of a code, but is very welcome for all that.
In due course, I and consumer groups will no doubt be asking for further regulation of letting and management agents if this measure proves insufficient to protect landlords and tenants, and I have a feeling that the noble Baroness, Lady Gardner, is not about to let this wider issue drop.
For the moment, I conclude by thanking our Lords PLP staff, Beth Gardiner-Smith, Sophie Davis and Ian Parker, for their help, and saying a very genuine thank you to both the Ministers who are with us this evening. They took a lot of trouble to listen to our concerns very carefully and—I am sure at some personal risk to themselves—battled with their colleagues at the other end to win through. This House has brought some good home sense to an issue that is of great importance to thousands of our fellow citizens.
Lord Sharkey
My Lords, I want to say two things. First, I congratulate the noble Baroness, Lady Hayter, on her determination and persistence in pursuing the case for a redress system for letting and managing agents, and I thank the Government for agreeing to act.
Secondly, I want to ask the Government about timing. The Minister knows that the amendments are couched in terms of “may” rather than “must”, but I am sure that in this case that means “will”. The question really is: when do the Government expect to be able to bring forward the appropriate orders? As we have all said in discussions on this issue, the matter is urgent; people are suffering now. Can the Minister give some indication at least of the expecting timing of the orders?
If it were not getting on for midnight, I would also ask what on earth Commons Amendment 40A(6) actually means. But it is getting on for midnight, so I will not.
Enterprise and Regulatory Reform Bill
Baroness Hayter of Kentish Town Excerpts(11 years, 10 months ago)
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Baroness Hayter of Kentish Town
My Lords, I thank the Minister for introducing this new provision. We consider that the concept behind the Midata initiative is very worthy. We note that when it was launched, the heading of the BIS press release was:
“New power to boost consumers’ access to data”.
It seemed to be a welcome initiative and we applaud the Government’s role in pushing for voluntary initiatives on giving consumers access to their own purchasing and transactional data.
We also recognise that there is a need to put some of this on a statutory basis so that all providers of goods and services can, in time, be required to provide that access. But the act of putting this on a legal basis forces us to consider, and provide for, the complications that could arise. I am sure that the Minister will be aware of the very strong objection of the British Retail Consortium to this initiative. However, he may also want to note that the consumer organisation, Consumer Focus, while admiring the supposed right, has some serious anxieties about it. We risk the fact that what should be an improved consumer service may actually have issues that have not been dealt with fully on both security and privacy. Some of these arise already, both with the way in which providers keep individual data for their own purpose and in the voluntary schemes of provision to customers that are being introduced without statutory backing.
Once those schemes are required by the Government, then surely the Government and Parliament have a duty to ensure that consumer protection is built into the process. The new service that will be required of providers by law will involve issues of personal data transmission, data storage, multiple combination and multiple access, which means that the process must have built into it security and minimisation of risk to consumers’ privacy and disclosure of identity. Such precautions will also need to be accompanied by systems of identifying liability and responsibility for redress and absolute clarity about how one goes about seeking that redress.
At the moment, data on the purchases and transactions are largely held by the direct provider, although they are also often sold on or combined with other data. Under Midata, consumers will also have access but there will be greater potential for the selling on and combining of data. Hence, liability, clarity on liability and redress systems are essential. If the system works, the Midata providers must be required to adhere to the highest security and data protection standards. Consumers need to know that Midata providers meet those high standards; so there must be easy identification of those who have been designated as trustworthy providers. It is presumably the Government’s contention that this will be done by secondary legislation, but unless the principles are written clearly in primary legislation, it will be difficult to judge whether those systems can work.
Amendment 58D deals with enforcement of the duty to disclose, but it includes no provision for complaint, mediation, arbitration or redress should that obligation be carried out in a way that endangers or threatens to endanger privacy and security of data. We know that the Information Commissioner is designated as enforcer, at least until the Government decide otherwise, but there is no provision for an ombudsman or for ADR coverage for this. On the Information Commissioner, I have great admiration for the difficult job that both he and his predecessor have done but I seek some confirmation that the Minister is confident that that role is appropriate to fall to the Information Commissioner. He does, of course, already have to make difficult judgments between transparency and data protection, but there are particular dimensions here. I am curious to know whether he even wants this job. Perhaps the Government could also give us some assurance about what additional resources will he get in order to carry it out. The Government themselves seem a bit hesitant as to whether the Information Commissioner is the best-placed person, as they have allowed scope for designating some other body. I do not know whether the Government had something else in mind, or whether it was just a fail-safe provision.
Going back to Amendment 58C, there is also the associated issue of what kind of information and what kind of access is covered. There are many ways in which we purchase goods and conduct our financial transactions. Does this cover the web-based data and transaction services—social media, free apps and online platforms that facilitate transactions between parties? Obvious examples are eBay and Amazon—all different, but all using and storing online consumer data. Because of the conglomerate nature of many retail providers across many markets, there is an issue of how this data is shared even within a company and what the legitimate and non-legitimate boundaries are of such sharing.
In the course of the Financial Services Bill, my noble friend Lord Whitty raised the issue of whether consumer data collected by Tesco, and recorded on their Clubcards, from its retail sales could be used by Tesco’s banking arm to establish creditworthiness. Some Chinese walls are already required within banks and financial institutions. The new Financial Services Act, however, does not require that, in the case of a bank owned by a non-financial institution, there must be such Chinese walls—although the Government did write into the Bill, now an Act, a reserve power to make that requirement. Tesco and financial services are simply as a potential example of this. It has not yet happened. More concretely, in America there have been issues with Walmart and its banking arm.
With consumer data now required, or potentially required, under this Midata clause, to be parcelled up neatly on an individual basis rather than aggregated or earmarked for future marketing as is more usually the case, the possibility for data sharing increases significantly. There is also the issue of companies which are major traders in this country but owned overseas, some in the four areas designated as priority by the Government for this legislation.
Could the Minister tell us how far privacy and data protection can be guaranteed beyond UK boundaries? The sectors chosen—energy, mobile phones and financial institutions—are dominated by major companies and feature oligopolistic markets. However, there are small providers, and there will be even more in other sectors to which these provisions will be extended in due course. Provisions which are not onerous for large retailers—banking and telecoms giants, for example—could be very onerous for smaller retailers and even smaller financial institutions. We understand that the legislation has no exclusions for smaller companies. Again, perhaps the Minister could confirm whether that is the case.
We would also like to ask the Government about their choice of sector priorities. The amendment links together information on individuals held by the provider and held on behalf of the consumer. At present these are legally very different. Data, such as that held by Tesco on its Clubcards, are the clear property of the providing company, as is most data on purchases. However, transactional data held with banks on savings or debt are the property of the consumer and subject to strict privacy and disclosure requirements. As we see it, under Midata, the distinction between those two is blurred.
There are also issues about the kind of data disclosable and the format of that disclosure. The intention, as the Minister outlined, is to provide in electronic machine-readable form data requested by the customer. The customer must be able to request all purchasing and transactional data for a period of at least a year in order to be able to draw rational conclusions and make rational decisions on, for example, changing the pattern of purchase or switching suppliers, which has been suggested. That needs to be specified.
Viscount Younger of Leckie
The noble Lord, Lord Whitty, makes an interesting point. I will need to double check and revert to him to clarify his point.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for his reply. I am particularly reassured by the ongoing discussions with consumer groups. Perhaps it was not clear in what he said—I did not quite hear it—but it seemed to me that he said that no extra resources would be made available to the Information Commissioner. If that is not the case, perhaps that could be clarified.
Baroness Hayter of Kentish Town
My Lords, we very much welcome the amendments tabled by the noble Lord, Lord Razzall, and the noble Baroness, particularly their intention to clarify investors’ fiduciary duty. The amendments, as have been suggested, would clarify that institutional investors are not legally obliged to maximise short-term profits at any cost but “may”—that word was emphasised—take into account wider factors, such as the long-term sustainability of returns. This is modelled on Section 172 of the Companies Act 2006, which similarly clarified that company directors may take account of longer-term and wider factors, such as their impact on communities or the environment.
We on this side tabled remarkably similar amendments to the Financial Services Bill last year. We remain of the view that the position of those who hold money or assets on behalf of others, and who take decisions about those assets, should have their real owners’ or beneficiaries’ interests centre stage. The Kay Review of UK Equity Markets of July 2012 acknowledged a problem with misinterpretations of fiduciary duties, based on what he said was,
“a narrow interpretation of the interests of … beneficiaries which focused on maximising financial returns over a short timescale and prevented the consideration of longer term factors which might impact on company performance, including questions of sustainability or … social impact”.
This can lead to unhelpful short-term behaviour by investors and is a barrier to the adoption of the stewardship approach. The Kay report concluded that,
“there is a need to clarify how these duties should be applied in the context of investment, given the widespread concerns about how these standards are interpreted”.
The Bill in front of us is about enterprise and long-term growth. The Government are giving shareholders additional rights, which we welcome, but these must be balanced with duties to the underlying beneficiaries, who may have wider interests than just immediate returns. These amendments propose that there should be no legal barriers to consideration of those beneficiaries’ interests. They do not mandate anything but they clarify the law. The amendments are, we would say, permissive rather than prescriptive, and would ensure that the law does not prevent trustees from taking a broader approach. The provision does not mandate them to do so; in fact, it restores the primacy of trustees’ discretion in deciding how best to serve their beneficiaries, as opposed to assuming that the law restricts them to taking a particular approach.
The amendments make it clear that the duty of fiduciary investors is solely to their beneficiaries, and that the interests of beneficiaries must be the basis for all decisions. They clarify that this need not always mean maximising short-term profits: if trustees believe that their beneficiaries’ interests will be better served by taking into account wider factors, they will be empowered to do so. Indeed, where trustees choose to take account of purely non-financial factors—such as beneficiaries’ ethical views or implications for their quality of life—the amendments specify that this must not be to the detriment of beneficiaries’ long-term financial interests.
Perhaps I may give one example to show why this amendment is so needed. A large pension fund, which I fear does not wish to be named in this debate, received legal advice to the effect that its policy on shareholder engagement and responsible investment might be unlawful. Its policy stated that the fund would seek to exercise voting rights in listed companies in which it held shares, and that it would take into account environmental, social and governance issues with the potential to affect the long-term value for the fund’s beneficiaries. This position is firmly grounded in the financial interests of beneficiaries, and is widely accepted as best practice within the industry. The Government endorsed such an approach by promoting the stewardship code, through its package of enhanced shareholder rights on executive pay, and, in the Commons, where Pensions Minister Steve Webb said that,
“the coalition Government fully support the highest standards of corporate governance and ethical behaviour. We agree that a socially responsible investment strategy is a sound choice for pension schemes”.—[Official Report, Commons, 20/1/12; col. 1044.]
Despite this, the advice from a large and reputable law firm took an extremely narrow view of beneficiaries’ best interests, and suggested that the costs involved in exercising voting rights might render the policy unlawful unless the firm could demonstrate that such stewardship brought monetised benefits to the individual fund. The opinion cast doubt on whether such benefits could be demonstrated. This illustrates why the Government’s approach to responsible capitalism, which has focused on giving shareholders more rights, needs to be complemented by measures to remove any perceived legal barriers to the responsible exercise of these rights.
For long-term, sustainable growth and returns, we want responsible shareholder engagement with listed companies. The Kay review recommended, and the Government agreed, that the Law Commission be asked to review the question of fiduciary duty, with Kay himself indicating that statutory clarification may be necessary to resolve this. We would therefore ask Minister to confirm today that, if the Law Commission thereby recommends such statutory underpinning, the Government will take action.
Viscount Younger of Leckie
My Lords, these amendments would introduce a statutory requirement for institutional investors to act in the best interests of their clients and beneficiaries. They seek to clarify that these investors are not legally obliged to maximise short-term financial returns, but may take into account longer-term considerations, including the social and environmental impact of the companies in which they invest.
I am grateful to my noble friend Lord Razzall, supported in name by my noble friend Lady Brinton, for giving us the opportunity to debate the vital issue of fiduciary standards in the investment industry. As noble Lords may be aware, the duties of investment intermediaries were considered by Professor John Kay in his 2012 independent review of equity markets and long-term decision-making. The noble Baroness, Lady Hayter, mentioned this in her speech. The Government have broadly accepted the recommendations of the Kay report in this area. Specifically, they have made clear their support for the view expressed by Professor Kay, and echoed in Amendment 58F, that institutional investors should not automatically assume that maximising short-term returns is sufficient to serve the interests of their clients or beneficiaries. Instead they should take into account long-term factors relevant to their clients’ interests over the time horizon of the investment. However, the Kay report also found that there was no clear agreement on what the law currently requires of those investing on others’ behalf, and recommended that the matter be referred to the Law Commission.
The Government have therefore asked the Law Commission to undertake a review of the legal obligations arising from fiduciary duties that dictate what considerations are appropriate for trustees and other intermediaries acting in the best interests of their clients and beneficiaries. The Government also support Professor Kay’s view that there should be a common minimum standard of behaviour required of all investment intermediaries. While I therefore have great sympathy with the spirit of my noble friends’ intentions, I do not believe that the approach taken in these amendments would achieve this. The amendments attempt to enshrine aspects of the common-law concept of fiduciary duties in statute, and to apply these to certain institutional investors in all circumstances. This includes applying them to certain FSA-authorised firms without due regard to the FSA’s existing regulatory requirements. This approach would add to confusion and uncertainty about the meaning of the word “fiduciary”, the circumstances in which a fiduciary relationship already arises and the standards already expected of investors in regulation.
The government response to the Kay report is very clear in setting out the principle that all investment intermediaries should act in the best interests of their clients or beneficiaries in line with generally prevailing standards of decent behaviour. In order to embed this principle effectively, the Government have asked the FSA, and its successor organisation, the FCA, to consider to what extent current regulatory rules in this area align with this principle and to determine what action might be desirable. This includes, if necessary, changes to regulatory requirements at EU level.
With these reassurances, I hope that my noble friends will feel able to withdraw their amendment.
Enterprise and Regulatory Reform Bill
Baroness Hayter of Kentish Town Excerpts(12 years ago)
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“Consumer Panel
(1) The CMA must make and maintain effective arrangements for consulting consumers on the extent to which its general policies and practices are consistent with its purposes under section 20.
(2) Arrangements under this section must include the establishment and maintenance of a panel of persons (to be known as “the Consumer Panel”) to represent the interests of consumers.
(3) The CMA must appoint one of the members of the Consumer Panel to be its chair.
(4) The CMA may appoint to the Consumer Panel such consumers, or persons representing the interests of consumers, as it considers appropriate.
(5) The CMA must secure that membership of the Consumer Panel is such as to give a fair degree of representation to those who are using, or are or may be contemplating using, services otherwise than in connection with businesses carried on by them.”
Baroness Hayter of Kentish Town
My Lords, for the purpose of this amendment, perhaps we can accept that we are going to have a CMA, not prejudging what might happen later, because this amendment suggests that if we have one there should be a consumer panel attached to it.
One of the most effective ways of helping to ensure that regulation is always in the hands of consumers, whether they be clients of lawyers, customers of financial services, receivers of radio and TV programmes, or purchasers of food, is to ensure that the regulatory body always, and continuously, hears the voice of consumers. This is particularly important with any regulator seeking to promote competition, as consumers are key to the whole competition remit that we seek for our economy. They understand better than anyone how the market really does or does not work for them. They know about non-price barriers to shopping around; they understand about tie-in deals; and they are the best to judge whether providers, whether of goods or services, are part of a competitive, responsive market.
More than that, consumer panels, made up of people experienced in representing, researching or advocating for consumers, in complaint handling, or in policy development, bring to the regulatory table expertise in hearing the unmet needs of consumers and of measuring their experiences, both satisfactory and unsatisfactory. They are alert to likely future trends; they can assess how policy will impact on actual behaviours, whether of providers or users; and they can make a significant difference to the work plan and priorities of statutory regulators. We have seen this with the Financial Services Authority, where the panel will morph into the same role with the new Financial Conduct Authority, at the Food Standards Agency, and, as I know well from my former role as its chair, in the Legal Services Board’s consumer panel. The Civil Aviation Authority has established one, and the Office of Rail Regulation is looking to create one, having had an informal panel for a couple of years.
It is not merely consumer representatives who want an economy that is consumer and client focused. In his first blog, the new chief executive of the Investment Management Association, Daniel Godfrey, says that one of his two priorities for 2013 is to work in collaboration with regulators and Governments to create a framework which, in his words, protects clients.
There can be no better way to create such a framework than having consumers or their representatives embedded in the regulatory architecture—not simply from the outside, so that they must shout and scream, put out press releases and lobby and harry, in the way that we see and, often, welcome outside consumer bodies doing, but as part of evidence-based and thoughtful development of policy and practice to ensure that the regulator never forgets, in this case, that the whole point of regulation is to promote and protect consumers’ interests. Indeed, the embedded nature of consumer panels means that they can provide input at the earliest stages of policy formulation before the regulator consults—when, in truth, it has often made up its mind—influencing the culture of the organisation from the inside and helping colleagues to get things right the first time round.
A further advantage is the ability to share market-sensitive information and analysis, which regulators are unlikely to want to show even to consumer bodies, which they generally trust, as well as to test thinking. This can be useful in processes such as price controlling, and for the CMA could be particularly relevant in market investigations. A consumer panel provides expert advice on tap, whereas generalist, outside consumer bodies tend to move in and out of policy areas over time.
Consumer panels are also an important counterweight, especially in areas where industry is well placed to influence or lobby, which would certainly be the case for the CMA. Panels are also surprisingly cost-effective, as being embedded results in economies of scale. In the case of my former Legal Services Consumer Panel, its £44,000 a year budget was a mere pin-prick in the £25 billion of consumer spending in legal services.
Consumer panels also play a key role in accountability by scrutinising the regulator’s work in the name of those whose interests it is meant to pursue. It is very easy, once regulatory institutions have been established, to forget or become rather complacent about the underlying rationale for regulating an economic sector. Moreover, given the effective “outsourcing” of statutory consumer functions, as outlined earlier today by my noble friend Lord Whitty, to non-statutory bodies, with no organisation other than the CMA to oversee or lead these outside bodies, it will be essential that the CMA has clear consumer input to this part of its remit, and that would be a natural task for a consumer panel.
Placing a panel on a statutory footing also guarantees its independence. It can represent the interests of consumers without fear or favour, as the CMA could not terminate a consumer panel if it found it a trifle uncomfortable. Of course, any such panel would need some powers, such as the right to make representations to the CMA, alongside reciprocal duties on the CMA to give reasons when disagreeing with such advice. This would aid transparency but would also be vital to the panel’s ability to influence.
Given the need, in terms of concurrency, for the Secretary of State to consult consumer bodies before removing a regulator’s competitive powers, a CMA consumer panel could have a specific role to play here. Similarly, as is argued in other amendments before the Committee today, a CMA panel would be broader than individual purchasers of goods and services. In particular, the panel would need members who were able to consider the interests of micro-enterprises and small businesses, for example, which sometimes experience even greater detriment than domestic consumers.
The CMA, if it exists, will be a key player in ensuring that our economy is competitive and therefore flourishing, and that it serves the consumer interest well. The creation of a consumer panel would concentrate minds on the end user—the beneficiary of all this regulation. I know that when the noble Lord, Lord Currie—who is in his place today—was the head of Ofcom, he welcomed, and I believe valued, the role that the consumer panel played in that regulation. Therefore, I do not think that he would fear the creation of a consumer panel for the CMA. I beg to move.
Viscount Younger of Leckie
My Lords, I thank the noble Baroness, Lady Hayter, for this amendment, which seeks to establish a CMA consumer panel, and I note her very considerable experience in chairing consumer panels over many years.
Close co-operation between the CMA and consumer organisations will be essential to ensure that the CMA is well informed on issues that cause consumer detriment, and that it takes action in the right areas. Competition authorities are well used to taking account of consumer welfare in their activities and this will be the case for the CMA in particular, given its objective to promote competition in the interest of consumers. This is why we have established SIPEP, a new strategic intelligence, prevention and enforcement partnership, which will bring together key consumer bodies, including Citizens Advice and representatives from Scotland and Northern Ireland, to work together to identify those issues that impact on consumers and collectively agree priorities for enforcement, information and education. These will assist in guiding the CMA’s policies and priorities.
In addition to this, the Bill already has extensive provisions on transparency and consultation with consumers and other bodies. The CMA must consult stakeholders, including consumer representative bodies and the general public, on a range of issues that guide its policy. For example, paragraph 12 of Schedule 4 to the Bill provides that as part of its annual plan, the CMA must consult on its main objectives for the year and the relative priorities of each of those objectives. The CMA must also consult on statutory and non-statutory guidance which sets out much of the CMA’s policy and processes. The super-complaint process, in which the OFT is required to provide a fast-track response to certain consumer bodies, will also be retained for the CMA.
Given the consultation requirements, the new approach to enhanced working between the CMA and bodies across the consumer landscape, and the super-complaint process, I hope that the noble Baroness will consider that the arrangements for consulting consumers are already sufficient and will agree to withdraw this amendment.
Baroness Hayter of Kentish Town
I thank the Minister for that response and my noble friend Lord Borrie and the noble Lord, Lord Skelmersdale, for their comments. As usual, my noble friend Lord Borrie goes straight to the point that the name is wrong. Maybe we can negotiate on “consumer forum” or “consumer round table”. However, right as he is on that, wrong are the Government in their response.
Before I turn to the Minister’s comments, perhaps I may say that the comment made by the noble Lord, Lord Skelmersdale, was interesting. It is about whether one person on a board is sufficient to represent all consumers, an issue which the consumer movement has discussed a great deal. It is like being the only woman in a committee and people assuming that you can speak on behalf of all women. When the noble Baroness, Lady Oppenheim-Barnes, was first at meetings—I hope she does not take this badly—she was very often probably the only woman present. Even women of my age are still experiencing that situation now. As the one woman, it was somehow expected that you would speak for all women. It can be the same with consumers. However, as I found on panels, there were BME consumers, rural consumers, old consumers and young consumers, and you need a broad panel, if you like, to reach in, understand and get to a hearing in that way. A middle-class woman such as myself as a consumer rep does not do it, but a much broader-based panel does.
I hope the noble Lord, Lord Skelmersdale, understands that it makes it easier for one consumer representative on a board if there are mechanisms for a much broader consultation.
Lord Skelmersdale
My Lords, if the noble Baroness has finished with her remarks on me, does that mean that she intends to withdraw Amendment 24BA—because, if not, she is speaking against herself?
Baroness Hayter of Kentish Town
I am certainly not. I am suggesting that you need a person on the board with experience—I will come to that—but, on its own, this is not a sufficient condition for making the board work.
Let me now comment on what the Minister has said. If he expects the partnership to carry out the kind of role that consumer panels have carried out, he does not understand what consumer panels have done. A partnership that comes together once a month, once a quarter—I do not know how often it is going to meet; I think it has met only twice so far—simply would not be able to bring the right level of detail to the work of the CMA. Some of the matters the Minister mentioned are exactly those outside functions which will not be carried out by the CMA but by others.
I think I have touched on the problem of consultation. When it goes outside the family to Which? or Citizens Advice, it is put out in a pristine and finished way rather than at an earlier stage. It does not solve the problem.
We will need to think about this matter and possibly come back to it because it is vital to make this new authority work well.
Baroness Oppenheim-Barnes
Before the noble Baroness withdraws her amendment perhaps I may ask her a question arising from the statement made in advance by the Citizens Advice service, which is going to be the home of information, advice, education and advocacy on general consumer matters under the Regulated Industries Unit. This is one of the best pieces of news in the Bill because it will bring together the technical expertise, Consumer Focus and information gathered by the CABs and a unit to represent consumer interests in the regulated sectors—gas services, electrical services, postal services and so on.
This is very important because the regulatory authorities do not always appear to be sympathetic in areas in which they should be. It is not very gratifying or appeasing for consumers when one of the regulated bodies receives a multimillion pound fine for being in breach of their responsibilities because the consumers who have suffered do not receive a single penny of that. All they hear about is this very big sum and they do not know whether it has made any difference to the practices. Also, it has been a very long-standing argument of mine—and I hope that it will be solved by this—that Citizens Advice and Consumer Focus should be able to take up individual matters. That is important because the big regulators will not take up matters such as how the bill is presented. Very often bills are presented in a most confusing and frightening way. EDF sends out bills that look, at first, very frightening to the ordinary eye and certainly to an aged person—particularly when they see £1,000 appearing in big letters on the front, although it is not what they will in fact have to pay. It is an assumption of what they might have to pay if they used a certain amount of electricity, or whatever. This is an important provision and I hope that the noble Baroness will take account of that before she withdraws the amendment.
Baroness Hayter of Kentish Town
I thank the noble Baroness for those comments. The Regulated Industries Unit will be extraordinarily important but, of course, it will cover only post and energy, which is very restrictive. It will not be allowed a role in the sort of areas that the CMA will be dealing with. She raised an interesting question about where the individual goes to. One of the important things about a consumer panel is that it can gather the intelligence, be that from an ombudsman or any other form of individual complaints, and even go into the annual reports of companies to see how they have handled complaints. The panel can then use the intelligence to come to the CMA and perhaps say, “Look, we have done that homework. We know where this market is not working”. My fear is that Citizens Advice, with the best will in the world, will simply be unable to do that. We will have people coming through the door with a lot of debt problems, or who are homeless, or who have just been sacked by their employer, suffered water leaks or whatever. That ability to take intelligence, translate it into policy and feed that into the regulator will be beyond that organisation. That is why we will have to come back to this. However, for the moment, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, the noble Lord has raised some really important issues. Certainly we would like to hear from the Minister why the Government have chosen this particular set-up, which is an argument that we have just been having in relation to the Financial Services Bill. The question remains as to why any panels under this Bill are not hearing cases completely independently of the CMA board.
I am sorry that I went on earlier about my consumer panel experience but I also have to say that I was a member of the determinations panel of the Pensions Regulator. We were completely independent of the Pensions Regulator. We were appointed by it to ensure that we knew something about pensions but that was about it. Other than that, we were completely independent. We did not work there and we did not know the staff, other than bumping into them in the loo and so on, but we were very independent of them. It was therefore more than a Chinese wall—it amounted to a gap of a good few miles.
Similarly, in our discussions on the Financial Services Bill, we have been trying to ensure that the Regulatory Decisions Committee of the FSA is equally independent of and separate from the FSA. That is partly to do with independence but also because it seems that we should look at whether there is a difference between the two roles of serving on the CMA board and doing hearings and taking decisions. The role of serving on the board is really about setting strategy and policy, whereas the work of the panels is often quite different and calls on a slightly different skill set. Therefore, we are interested in knowing why the Government have not made sure that the investigators are separate from the decision-makers and that their roles are not blurred— I think that was the word used earlier by the noble Baroness, Lady Oppenheim-Barnes, in quoting a former chair of the monopolies commission.
I assume that we all want a strong firewall between investigations and decision-making, so perhaps it is better to make them absolutely separate from the start, rather than going through convoluted ways of achieving that end.
Viscount Younger of Leckie
My Lords, these amendments affect the provisions that provide for a partial overlap of the CMA board, which is responsible for the CMA overall and phase 1 decisions in mergers and markets in particular, and the CMA panel, whose members are responsible for phase 2 decisions in mergers and markets and regulatory appeals. The governance and decision-making arrangements in Schedule 4 are designed to establish a single, coherent competition authority while retaining the separation of decision-making between phase 1 and phase 2; in particular, merger and markets cases.
Paragraph 1 of Schedule 4 provides that at least one person be appointed to both the board and the panel. In the Government’s response to the competition reform consultation, we said that we intend to appoint two or three such people to the board and the panel. The membership provisions being debated here are designed to ensure that the board includes members with experience of the phase 2 processes, and so to address any reluctance of the board to have a matter referred to a group of independent panellists whose decisions are, under paragraph 49, to be taken independently of it and over which it will have no direct control. Ensuring that there is a steady flow of appropriate market investigation is one of the key intended benefits of the creation of the CMA, so the provisions will play an important role.
I believe that the provisions in the amendment in the name of the noble Baroness, Lady Hayter, will undermine the separation of decision-making by allowing board members to take phase 2 decisions. I assure her that the Government would also be concerned about the risks resulting from some of the same people involved in a decision to make a referral also being involved in final decisions at phase 2. It is for this reason that paragraph 33 prevents this from happening.
Paragraph 33 works prospectively, so that where the board will be considering whether a matter should be referred to the chair of the CMA for the constitution of a group of panellists who will be responsible for a phase 2 inquiry, the chair must first determine whether a member of the board might be expected to be appointed to a resulting group. In these circumstances, the person so identified must not participate in the board’s consideration of the referral.
Finally, because the Government intend to appoint two or three people who will be board members and panellists, even where one board member is excluded from considering a referral, other panellists—who will not be involved in the group taking on an inquiry if the matter is referred—will still be able to participate in the board discussion. This provision therefore protects independence of decision-making, while also ensuring that the board includes members with responsibilities across the CMA’s range of functions, and is therefore able to act, at a strategic level, as a coherent body. I therefore ask my noble friend to withdraw his amendment.
“(1A) Appointment of a person as chair under sub-paragraph (1)(a) shall be subject to approval by a Select Committee of Parliament.”
Baroness Hayter of Kentish Town
My Lords, the first amendment in the group seeks simply to have the appointment of the chair approved by the relevant Select Committee in accordance with the coalition agreement which said:
“We will strengthen the powers of Select Committees to scrutinise major public appointments”.
That built on the wording of the Conservative manifesto to,
“give Select Committees the right to hold confirmation hearings for major public appointments, including the heads of Quangos”,
and on the Liberal Democrat manifesto which said:
“We will increase Parliamentary scrutiny of Government appointments”.
It is hard to put it any better than that. However, even if the Conservatives, the Liberal Democrats and the coalition had not supported this, it is still a good thing.
Parliamentary oversight of the performance of the CMA is vital. Our economy depends on a vibrant, competitive market and, given the powers and remit of the CMA, it is important that Parliament checks that it is doing its job. So this amendment is part of that trend of transparency.
Amendment 24AB concerns the key appointment in all of this—the chair of the CMA. We are more than content with the “shadow” chair, if I may call the noble Lord, Lord Currie of Marylebone, who is in his place, a mere shadow. The amendment is about any successor of his in due course and the attributes that we would wish to see in any such appointment.
Competition law is not only for economists and lawyers. What economists choose to measure is not a neutral given but depends on what they judge to be important. A recent OFT review of the estate agency industry decided that we needed more of them—that is, more estate agents. Clearly the authors of the review had never walked up and down our high streets. However, that is what they thought rather than that we needed better regulated, more truthful and cheaper estate agents. There was something lacking in an over-economically driven approach which ignored the experience of home buyers. We would therefore look for someone who understood how markets really worked for consumers and had experience of retail or wholesale markets and, even more, who understood the particular needs of vulnerable consumers and how failing markets hit them particularly hard.
Baroness Hayter of Kentish Town
I thank the Minister for that. The words “not necessary in the Bill” must be in the word processor for the team behind him, because whatever we ask, the answer is, “Don’t worry, we are doing it. It is not necessary to have it in the Bill”. I am not sure that this is always the best way of writing legislation. There are some things that are very important to have in the Bill as signals and they are also important for accountability.
It is interesting that the Minister, if I heard him correctly, said that the list of appointments which it has been agreed should go to a Select Committee was last published in August 2009. That was in the glorious days, of course, of a Labour Government, happy that they were. Given all the work that this Government have done in changing quangos and changing appointments, the idea that it has not been updated since then leaves me a bit surprised and perhaps reinforces the fact that, sometimes, having this in the Bill is really important.
We have no grounds even for raising the first appointment, as I made clear. We are delighted with the first appointment; we could not have done it better ourselves. If you would like to put us in government, we will do it ourselves. However, we are talking about the future and making sure that the commitment to consumers and their interests is there.
The final thing I will say is that I thought our wording “in the direct employment” covered the chief executive. If I did not word the amendment correctly, that was what it was meant to be. Whether that should be an undertaking in a side letter or something, that point remains. I am sorry that the Minister, who I believe speaks on behalf of a coalition Government with a commitment not just to continuing but to strengthening the powers of Select Committees in major public appointments, feels that that does not allow him to do so in this case. I beg leave to withdraw the amendment.
“(8) Of the persons appointed to membership of the CMA Board under sub-paragraph (1)(b), at least one must have expertise as a representative of consumers.”
Baroness Hayter of Kentish Town
My Lords, the good news for the Committee is that this is the last it will hear from me for a bit. I will hand over to my noble friend Lord Mitchell, whose great success in the Financial Services Bill will, I hope, make the Minister quake as he receives my noble friend’s amendments.
The first of the two amendments in this group, which I move on behalf of my noble friend Lord Whitty and me, concerns the make up of the CMA board, and ensures that, as has already been mentioned, at least one of its members has expertise in representing the interests of consumers. There is a large pool on which to draw for this. For example, they may be former employees or board members of ombudsman schemes or consumer bodies or panels, or else active in the wider consumer movement. I know from the testimony of the financial industry and not just the consumer movement how well received Mick McAteer’s appointment has been, in his work at both the Financial Reporting Council and now the Financial Services Authority. He was formerly with Which?, has been a consumer advocate with long experience of representing consumers at both UK and EU levels, and has brought realism grounded in consumer experience, expertise and a clear consumer focus to the FSA for the past three years—to widespread acclaim. Earlier, a former chair of the National Consumer Council—not one of the two with us today—proved herself to be so invaluable to the FSA that it promoted her to become its vice-chair. Other examples abound.
Our proposal is modest. It is for just one such person, but having that in the Bill also reinforces the fact that the CMA is all about consumer interests and that consumers’ voices must be heard at the highest level. As I said previously in response to a question by the noble Lord, Lord Skelmersdale, this is not instead of a consumer panel. No one person can represent all consumer interests. What is interesting is that that person can be a channel and focus, albeit that they take the full corporate responsibility for the whole board.
The second amendment in the group, Amendment 24BK, is based on the assumption, which we do not necessarily share, about the proposed panels and the tiers mechanism in the new architecture. We have argued that that might not be for the best. For the moment, accepting that that structure is there, our proposal is again to emphasise the need for consumer and competition experts on CMA panels to avoid the risk of making their deliberations insufficiently consumer focused. That would make sure that the CMA and its decision-making panels represented the interests of consumers throughout their work. I beg to move.
Viscount Younger of Leckie
My Lords, Amendment 24BA adds a requirement to appoint at least one person with consumer representative expertise to the CMA board. A similar amendment was proposed by the Opposition in Committee in another place. We share the concern of noble Lords opposite that the reforms promote consumer interests, as mentioned in an earlier debate today. Consumer interests will be at the heart of the CMA. Given this, the amendment is not necessary. It could also undermine the perceived fairness of the CMA. We agree with the point made in the previous Government’s 2001 White Paper on a world-class competition regime that decisions should be made independently on the basis of sound economic analysis of the effects on competition. Independence of government and between the phases enables better decisions, greater certainty for business and more clarity in the regime.
Baroness Hayter of Kentish Town
I thank the Minister for that. How interesting it is that we can have sector specialists such as lawyers and accountants, and they are not conflicted, but you can talk about someone coming from a consumer background and it is immediately assumed that they will be conflicted. Everyone in this Room is a consumer, and consumer representatives speak on our behalf, whether to individual providers, regulators or anyone else. Just because they have done that and built up that expertise, they may be conflicted, but a sector specialist such as an accountant who no doubt has worked with some of these companies is not—I find that very interesting.
It has been very clear that having people from a consumer background on the Legal Services Board and the FSA is valued by people from the industry. To write that into the requirement seems the least that we can do. I see that most of the words that the Minister read were actually written before I had spoken, so perhaps when he looks again at what we have actually said, he may be able to be a little more responsive should we need to bring this back. For the moment, I beg leave to withdraw the amendment.
“(c) set out the consumer benefit which will be achieved as a result of the objectives and priorities as set out in paragraph (a)”
Baroness Hayter of Kentish Town
My Lords, these amendments speak for themselves, so I hope that I can be brief. They are to remind the CMA, and to be certain that it includes in its reports, that it must set out the consumer benefit to be achieved and then monitor and evaluate it in its objectives and priorities. That will make its accountability for achieving this easier to ensure and will enable Parliament, the public, consumer groups and others to have clear evidence on which to assess progress.
Amendment 24BE means checking that the staff are up to the task set for them and that the resources are properly allocated to meet key objectives. Amendment 24BF is to allow Parliament and others to evaluate the cost of this merger into a single body, not just in money, important though that is, but on whether competition is healthier and that cases are being heard more quickly. We all, I assume, support post-legislative scrutiny. This amendment would produce the evidence on which to base that work. I beg to move.
Viscount Younger of Leckie
I am grateful once again to the noble Baroness, Lady Hayter, for the suggested amendments. Amendment 24BD would impose a requirement on the CMA that its annual plan for a forthcoming financial year should contain the consumer benefit that will be achieved as a result of the CMA’s main objectives for the year, and the prioritisation of those objectives.
Under the OFT spending review settlement, the OFT is currently required to provide an estimate of direct savings to consumers from its activities and to assess the associated benefit cost ratio against the current target of 5:1. In 2011 this figure was exceeded to deliver a benefit to cost ratio of 7:1. For the OFT, such a requirement serves to encourage it to maximise benefits to consumers in deciding what work to take forward. By comparison, however, a requirement for the CMA to assess the impact of its future work would be considerably less precise. As well as difficulties in assessing the future benefits of particular cases, the CMA’s caseload itself is not predictable. This amendment could therefore incentivise the CMA to underestimate and underachieve and could also potentially leave the CMA at risk of judicial review if forecasted consumer benefits were not realised.
Amendment 24BE seeks to provide a statutory requirement for the CMA to report in its annual performance report on the skills of its staff and to estimate the resources needed to perform its functions in the following two financial years. As drafted, the Bill provides a statutory requirement for the CMA to produce an annual plan and performance report in which it must set out its objectives for the coming year and the relative priorities, and how it has delivered against these. In addition, both the OFT and the Competition Commission already publish information relating to their staff, such as the development, diversity and engagement of their staff. We expect the same of the CMA. While it is imperative that the CMA has a skilled workforce to carry out its functions, to report on the skills of its workforce on an annual basis will be unnecessarily burdensome to the CMA, we believe.
Finally, Amendment 24BF proposes that the CMA’s first performance report provides an assessment of the transition costs and the impact of reforms on the speed of referrals. Evaluating whether the policy delivers the objectives is essential to ensuring that the CMA is getting it right, as is an assessment of the transitional costs against benefits. However, such an evaluation must provide an assessment of the costs against benefits over an appropriate time period: to do otherwise would not provide an accurate picture of the impact of the policy. A requirement to assess the costs and benefits to the competition regime within the first financial year of the reforms would be far too soon for a realistic assessment of the transition costs and benefits in either financial or competition terms. The Government’s impact assessment of the proposed reforms to the UK competition regime, which includes the transition to the CMA, commits government to a review of the policy in 2018. That is an appropriate point at which to consider the impact of the transition to the CMA in both financial and competition terms. For this reason, we do not consider that it is right for there to be a statutory requirement for the CMA to include within its first annual performance report an assessment of transition costs in both financial and competition terms.
While I welcome the intention behind these amendments, their practical impact could serve to hinder the efficient and smooth working of the CMA as a high-performance organisation. I therefore request that the noble Baroness withdraw these amendments.
Baroness Hayter of Kentish Town
I thank the Minister for that. I assume from what he just said that the requirement on the OFT to measure the balance of its saving to consumers will continue into the CMA.
Baroness Hayter of Kentish Town
In case Hansard did not record that, the answer was a very welcome “yes”, for which I thank him.
The Minister talked about the requirement for reporting on diversity of staff. Needless to say, we welcome that, but it seems to me that if you set up an organisation to do a job, making sure that it has the appropriate staff is central. Its human resources department will know if it is not got enough IT people, it will know if it is short of various staff. All we are asking is that it should share that knowledge with us. For those who say that this is extra work, I believe that a well run organisation knows about staff turnover, who it is recruiting and who it cannot recruit.
Finally, I welcome the fact that there will be a review in 2018. Of course, it is a bit late by then to do anything about it if the Government have made a mistake in doing this. I suppose that it is better late than never, but I hope that the Ministers at the time will at least be asking those questions, even if it is not a statutory requirement. I beg leave to withdraw the amendment.
“Consumer research16A (1) The CMA must make arrangements for ascertaining information with regards to—
(a) the state of public opinion about the manner in which financial services are provided to consumers;(b) consumer experiences of consumers in relation to the provision of financial services, including—(i) handling of complaints by financial institutions, and(ii) resolution of disputes with financial institutions.(2) The CMA shall consult concurrent regulators where necessary.
(3) The CMA shall publish the conclusions from research carried out under sub-paragraph (1) every two years.
(4) The CMA shall report to the Secretary of State its conclusions and any recommendations arising from research carried out under sub-paragraph (1) every 2 years.
(5) The Secretary of State shall publish a response to any such report within 60 days and lay a copy of that response before Parliament.
(6) This section does not restrict the CMA’s power to make any arrangements that it considers to be incidental or conducive to the carrying out of any of its functions.”
Baroness Hayter of Kentish Town
My Lords, despite the financial sector nominally being competitive—in that there is a choice of banks—we have seen a real lack of satisfaction with banks among consumers.
We do not need to rehearse the mis-selling scandals, with unwitting customers, including small businesses, being sold—as a nice little earner—products that they do not need. We have a reminder of the banks’ record in the newspapers today. Furthermore, we know how hard it has been for people to switch bank accounts— a case made very strongly by the noble Lord, Lord Flight, who is not in his place now, during the discussions on the Financial Services Bill. We know that banks have been unbelievably slow to react to complaints about bank charges—in fact, without the OFT a number of malpractices would still be going on—and that they remain resistant to transparency on fees and charges. Indeed, what I find odd is that no other supplier of a service can simply remove money from one’s bank account without first submitting an invoice or agreeing the amount with the customer.
Banks are slow to deal with complaints, they are resistant to the ombudsman’s activity, and it sometimes feels as though they exist for their staff and their bonuses, rather than to serve the consumer. This smacks of a failing market. Therefore, Amendment 24BH seeks to test that allegation by asking the CMA not to rely on a collection of anecdotes—which does not evidence make—but to undertake some serious consumer research into this market, and to present that, together with any recommendations flowing from it, to the Secretary of State, who should then report back to Parliament.
The other evidence of the lack of a functioning competitive market is the virtual seizing up of finance for small and medium-sized enterprises, and indeed for high-growth businesses, as set out earlier by my noble friend Lord Mitchell. Yet we know that our economic regeneration, and our future, rest on their shoulders. Something is amiss.
This does not feel like a competitive industry when customers cannot get what they want: money for investment. Thus Amendment 24BJ seeks to force the CMA to undertake some serious research on competition in the financial services sector. When we discussed these issues during our debates on the Financial Services Bill, we were told that the CMA would be the lead regulator on competition—the FCA’s role being to promote competition, it seems, rather than deal with its absence—so now we ask the CMA to do just that. I beg to move.
Viscount Younger of Leckie
I thank the noble Baroness, Lady Hayter, for these amendments.
To be effective, the CMA needs to be able to independently determine its own priorities, but its ability to do this would be undermined by the obligation under Amendment 24BH to undertake regular reviews of one particular sector. As we have discussed, the Government are of course determined to improve financial regulation. Markets and market regulation evolve and, by requiring the CMA to carry out studies every two years, this amendment might have the effect of limiting the ability of the CMA to carry out higher-priority work.
The CMA also needs to be able to choose which tool to deploy. During the course of a targeted investigation, Amendment 24BH could require the CMA to produce a general report on the financial sector. In these circumstances, the reporting requirement could waste resources, interfere with an investigation or even act as a disincentive to initiate a separate investigation in the first place.
Finally, while the CMA will be the central competition authority, the FCA will be the lead regulator in the financial services sector, funded by an industry levy. It would be duplicative for the CMA to be required to carry out detailed scrutiny of conduct in the financial services sector at taxpayers’ expense, as required by Amendment 24BH. The OFT and the Competition Commission’s scrutiny powers will be transferred to the CMA by order, under this Bill. New arrangements for co-operation between the CMA and the Financial Conduct Authority will ensure that the two bodies work well together. They will both, of course, have the power to carry out research and publish reports, as envisaged by these amendments. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank the Minister for that. There is one bit of that which I can accept—that it may not be necessary to do this every two years. But there is a major problem in this sector of financial services, and it is time that the Government accepted that. In the Financial Services Bill they are rejigging the architecture, a bit like this, taking the FSA and splitting it in two, sending one bit to Threadneedle Street and letting the other bit stay in Canary Wharf. None of that will seize the problem of the banking industry. I wonder whether the Government are ever going to do it. This was another way to say that this is an industry, and a market, that needs looking at. If it is not going to be done by the FCA, which is not going to have the same powers, surely it should be done by the CMA—if not every two years, even as a one-off now—to see whether we can sort this industry.
This is something that we will certainly need to come back to. The Minister referred to arrangements between the CMA and FCA, but so far the Government have absolutely refused even to accept the obligation to have an MoU between those two. We will come back to that in this Bill. There is something fundamentally wrong in this enormously important sector, which is failing to serve consumers and industry, small companies in particular, and no one seems willing to do anything about it. We will come back to this, maybe without the reference to “two years”. For the moment, I withdraw the amendment.
Lord Deben
My Lords, I refer to my entry in the House of Lords register of interests. This gives me a good opportunity to ask one question of the Minister: has he noticed that this Part of the Bill refers to many things which were in the Financial Services Bill and that both are entirely different from everything else the Government are doing? In every other part of the Government’s actions we are reducing the amount of regulation. Much of the Bill is about that, but when we get on to the financial services arrangements, we are laying more and more emphasis upon more and more regulation and there is no indication, in my view, that it is going to be any better. It is really beginning to bug me that much of what has gone wrong was, of course, the fault of the financial services—I am not for one moment denying that—and certainly the fault of the banks, but I cannot honestly say that the regulator has come out of it with a great deal of praise. Indeed, a number of the things that went wrong can be laid directly at the door of the regulator. So the regulator then comes back and says, “Well, the only way to solve these problems is to have more regulation and more powers, so we can get it more wrong.”
My worry is simply that everywhere else in the Government’s programme, the Government have made the argument that if we have too heavy regulation, we do not have innovation, we do not have new things, we do not have new ideas and new mechanisms to meet the new circumstances of Britain, which after all is in competition with the rest of the world. That is the logic, that is the argument; an argument I buy into. The one area in which that is evidently not true is this one. So now we have had two Bills which interrelate and in this Part of the Bill, which is otherwise an admirable Bill, it has merely gone on doing what the Financial Services Bill had so wrongly done elsewhere. So we have an attitude to regulation which is entirely inconsistent.
We have just had two Bills going through the House of Lords and noble Lords may have noticed that the passage of the Civil Aviation Bill was entirely filled with speeches by Ministers about how wonderful it was that the public was now going to have a great deal more say and more appeal, and the regulators were not going to be able to ride roughshod over customers, businesses and the like. At exactly the same time, we introduced another Bill saying there are going to be no appeals, the public are not going to have a say, businesses are not going to have a say but instead we will have tougher and tougher regulations. I find this incomprehensible and as I have tried on several occasions to raise it in detail it would help me a great deal if the Minister would explain the rather curious mismatch.
Of course, the party opposite has not raised this very much because it wants more regulation in every circumstance: we know that. I raise it at this opportunity because I cannot do it on the amendments of the noble Baroness, Lady Hayter, but I think that in 10 years’ time—probably in five years’ time—people will look back at this period in Parliament and say, “What the blazes were they doing making the British financial industry less able to compete and less able to innovate, when they were doing so much good stuff in the whole of the rest of British industry?”.
Baroness Hayter of Kentish Town
I shall try to resist temptation. As to spectacles, of course it was the consumers who most wanted opticians not to be regulated. It has benefited us all because we have been able to buy much cheaper glasses than we used to.
I would like to ask the Minister, in the complete secrecy of this room, with only a few Hansard writers and television watchers present, that if his Government had not wanted a bonfire of the quangos, would this merger ever have gone ahead? Was it just another number in the bonfire of the quangos or did BIS always want this?
Viscount Eccles
Before the Minister replies, I would like to thank the noble Baroness for her comment. There may well be another, very general, explanation. I have worked in the public sector in a number of different bodies. I once received a letter saying that the Minister understood that I did not wish to be reappointed to this body because I was too busy—it was a Department of Trade and Industry body—but that was not the reason. The reason was that I had attended a meeting and voted against a grant to a company because I thought it was not a sound company. However, the grant was passed and paid out and the business went bust. I was too clever because I had got it right and so I had to be removed.
There are few of us here but this important general explanation will be reported in Hansard. There is a strong wish in departments—this is a general comment—to reduce the independence of public bodies, to centralise their activities and to get them back as close to the Ministry as they can. The Competition Commission has been an independent body for 60-something years, so how did it get into the Public Bodies Act that these two organisations would be merged? It cannot have got in as a result of the Cabinet Office saying, “Have you got any good ideas?” There must have been somewhere in the purlieus of BIS a document saying, “Would it not be a good idea to reform the competition regime?”
I believe that this merger has not ever been given the proper consideration by the Government that it needs to assess the risk in what is proposed, and to offset that risk against the apparently negligible benefits.
Welfare Reform Bill
Baroness Hayter of Kentish Town Excerpts(12 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Hayter of Kentish Town
My Lords, as we have heard, without our amendment, the Bill will deny thousands of disabled people aged under 20 the right to a non-means-tested ESA when they reach working age. These young people are exactly those whom we discussed in the first amendment—disabled since either birth or childhood. When they grow up they will no longer be entitled to a benefit in their own right but instead will have to rely on means-tested benefit, depriving them of an independent income as an adult. As it stands, even those young people unlikely ever to be able to work will never be entitled to non-means-tested benefits as they will never have the chance to build up a national insurance contribution record. That means that those with early-onset conditions will for ever be disadvantaged compared with those who become disabled later in life and have therefore had time to build up enough contributions to receive non-means-tested benefits.
Clause 52 abolishes the right of people under 20 with work-limiting conditions to be treated as if they had met the NI contributions. I wonder whether our colleagues in the Commons really meant to reject our amendment in the knowledge that it affects young people, some with profound disabilities from childhood, and those with the greatest disadvantage in the labour market. The Bill removes their access to an independent income and reduces their chance of achieving independence. As my noble friend Lady Lister said, it was not to save money—at least that was not listed as a policy intent in the Government’s paper. Therefore, it can only be about changing behaviour, but how do these youngsters change their disability? Most of them would love to work but it is the behaviour of others, particularly understanding employers, which will be the biggest determinant of whether they can find work.
As my noble friend Lady Lister said, these changes are, for the country, tiny—£17 million cumulative—but the impact on young disabled people will be huge. On average, 70 per cent will lose about £25 a week, but 10 per cent of those 15,000 youngsters will lose entitlement altogether, because they have either savings or income from another family member. The Minister spoke earlier about inheritance. I do not know people who go around inheriting lots of money; maybe he does. The idea that because some people may inherit, everyone should be denied access to benefit, I find very strange.
The impact assessment also does not look at the effect on other family members. The introduction of a means test will undoubtedly decrease the incentive for anyone living with a young disabled person either to work or to build up savings. Indeed, these young disabled people will actually have a huge negative dowry to bring into any relationship, because the earnings of the person whom they would love to move in with will immediately kick in against the means-tested benefits of these young disabled people.
We do not know—we cannot work it out from the income assessment—exactly which people will be affected. However, the figures for those under 16 claiming DLA show that 41 per cent of them do so in relation to a learning disability. It is reasonable to assume that a large proportion of the people affected will also be in this group. As my noble friend has said, this is not the amendment she wanted to table. While we must accept that the Commons has given its decision on this provision that removes the right from these people, we ask the Government to monitor its impact, if only to assure both Houses that our fears for these young people are not justified.
The Minister has said that he will review all such policies and impacts of the Bill. We hope as we begin the ending, if you like, of this period of the Bill that the Government can say yes to this very small amendment, which only writes in that such a review should take place.
Lord Freud
My Lords, the short answer is that we will monitor it. However, I do not accept the amendment and I will explain exactly why. It does not work in the way that is intended. It is designed for us to have a full formal review. As noble Lords will recognise, we do have reviews and we treat them very seriously. If you look at the example of the Harrington review of the WCA, you see that they can be of immense value in the development of policy.
The way this one would work is that we would have a review one year after the measure came into force. The amendment would require that that report—a big formal report—is laid before the Houses of Parliament within three months, an incredibly rapid timescale as I am sure that the noble Baroness will recognise. We will monitor this and use evidence from a large number of sources on the experiences and outcomes of those affected. We will use DWP administrative datasets to monitor the trends in both the caseloads and in the level and distribution of benefit entitlements.
I want to put into context the huge paraphernalia that this amendment would require in practice. We are looking at the region of 15,000 claims to ESA youth every year. We expect 10 per cent of those not to qualify for ESA—not to be in the system. That is 1,500 people. It is not appropriate to have on the Bill a major Houses of Parliament review when the numbers are so small. The timing is not right. One does not look at a policy like this only once; one needs to keep it under review and look at it over a number of years, not do it in an inflexible way. I am trying to say that I buy the point that we need to watch it, but I do not think this amendment works. We can evaluate detailed specialist research. Broad surveys will be useless. It is too small and we will not pick up anyone if we do it on the FRS. It will be five people if we do it like that. We will have to review it very differently and then use it to inform how we guide our future policy direction and, potentially, operational improvements.
I do not wish to row about benefit tourism. The reason that it came through late, to be blunt, is that my blood was chilled towards the end of last year when I started working through some of this stuff. That is why I missed it in November. I had not really absorbed the implications. I do not think I would call it a panic—
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“(c) the grounds on which such sanctions may be terminated, prior to the period specified in paragraph (b), including the compliance of the claimant to such conditions as may be imposed.”
Baroness Hayter of Kentish Town
My Lords, this amendment seeks clarification on the issue of what the Minister called “the prodigal son” when he referred to it in earlier discussions. I think that takes government paternalism perhaps a little too far. It relates to the situation of a jobseeker who has received a three-year sanction for a failure to comply with the requirements imposed by this legislation and the circumstances in which that sanction may be removed. This is important because in order to change behaviour, which we know is one of the great motivators behind the Bill, there really must be some carrots as well as sticks.
The three-year sanction is the stick, but the carrot has to be that people who start co-operating and fulfilling the work-search conditions should be able to work towards lifting that sanction. Their behaviour may well change because something in their own life has changed—the death of a parent they were looking after; the birth of a child; a marriage or a break-up; dealing with their own substance misuse; or simply, maybe late in life, growing up—or it may change as a result of the three-year sanction. For whatever reason, it must be possible for the sanction to be lifted, and this amendment requires that the grounds on which the sanction could be lifted should, first, be prescribed in regulations and, secondly, should include the claimant’s compliance with the work-search conditions.
On Report, the Minister told us that he had accepted this principle on ending the sanction and we very much welcomed his words on that. He said that it was,
“a lot better than where we were”.—[Official Report, 14/12/11; col. 1387.]
However, he also said that the department had decided that the proof of the prodigal son’s return was to be in work for six months. Of course, it partly depends on the definition of work, to which my noble friend has just alluded—going for just one hour a week is probably not what the Minister had in mind—so regulations will have to deal with that. Whatever the definition is going to be, we think it means that at that point the sanction will be removed. However, without our amendment, we are not absolutely clear that the three-year sanction can be lifted before the three years are up. It appeared so from the Minister’s words at Report but perhaps he could clarify that the Bill allows not just for a lower sanction to be set at the beginning but for the lifting of a sanction before its end. Clause 27(5)(a) allows for the lifting of the other sanctions but the Bill appears to be silent on the lifting of these higher sanctions.
However, assuming that the Bill does allow for such higher-level sanctions to be ended early, we nevertheless do not believe that having to be in work for a full six months is the right hurdle. First, it gives very little incentive for the claimant to engage with the jobcentre and to meet the conditions set, which would help that person to find employment through all that will be offered by Jobcentre Plus or other providers. Secondly, it would mean that the possibility of having the sanction lifted will depend not only on factors within the claimant’s own control, such as looking for work, but on factors well outside his or her control such as local and indeed national economic conditions.
I do not need to remind the House that there are 5.8 unemployed people looking for every job. A claimant who happens to be one of the 4.8 unlucky ones who, despite everything they do to try to find a job, cannot get work—perhaps because they live in Merthyr Tydfil, which I think was the example given on Report—will continue to receive a sanction through no fault of their own. This turns the sanctions regime into a punishment for previous failures rather than a useful tool to encourage engagement with the jobcentre and the work programme providers.
Our amendment leaves the exact formula for compliance open to regulations, as we know the noble Lord will listen to arguments made in the drawing-up of those, and it will give the Minister and his department a chance to think through the best way to ensure that the sanctions regime provides suitable incentives to engage with the system rather than cutting people off altogether. One obvious suggestion might be to lift the sanction after a period of compliance with the work-search conditions, but the detail could be left to the department as it also struggles with the definition of work.
Without our amendment, the Bill risks driving people further from the labour market rather than moving them towards work by engaging with the process and fulfilling the work-search criteria. I hope, therefore, that the Minister will be able to accept the amendment. I beg to move.
Lord Freud
My Lords, under this construct, they will have to do the six months to wipe off the sanctions. Let us not forget that the sanctions that we are talking about do not involve the full amount of support but the equivalent of the JSA—£63-odd. There will be a very strong incentive on that person to take absolutely anything to fill in the rest of the time.
As I said, this is a very interesting area of deterrence and compliance and how we influence behaviour, which is exactly why I wanted to have the powers to pilot all these things. This is our starting point. Noble Lords have influenced us into making the lift at the six-month level, and it is clearly our best view today on what the reasonable balance is. No one can know yet as we have not done the live testing, but we will do it and we will be able to look at this and get the balance absolutely right. It might need to be milder, it might need to be tougher, but noble Lords will appreciate that if we pilot and test and look at these things in the way that I am describing, we will start to get answers on what works and move away from some of the rather more excited commentary and pressures from some of the media in this area. It could be of great interest to noble Lords if we start to move this into a social science area where we know the answer as opposed to an area where everyone has an opinion.
With those thoughts, I urge the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for passing the test on the regulations—obviously I knew; I was just testing him—and finding that out, which I had obviously failed to do.
As I said earlier, we welcome the fact that the Government have undoubtedly accepted that the three-year sanctions need to be lifted in certain circumstances. However, questions remain, some of which could be dealt with in regulations. For example, people need to know what the carrot is and what they have to do to get sanctions lifted. There is still the problem of defining work, particularly for someone who has childcare responsibilities and the job offer simply does not fit in with their responsibilities.
I am sure the Minister did not mean this, but I also worry about the idea of an incentive to take anything that is offered. Would that not allow certain rogue employers to exploit people on benefits because they know that if there are sanctions they can offer pretty thankless and underpaid jobs? Similarly, I also worry about people leaving a job. There is the problem of the strength of an employer, but those worries are by the by. The biggest thing to say about this is that the idea that you have to get a job to come off sanctions, even if you live in an area where there are simply no jobs available, remains a problem. However, I welcome the Minister’s commitment to pilot and test this. If it proved to be a big stumbling block, I assume that he could come back with regulations to allow for that. On that basis, I beg leave to withdraw the amendment.
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Lord Bichard
I support this amendment as someone who used to be responsible for delivering the benefits system. When I was in that position, I remember railing against the complexity of the system and am therefore delighted that we are doing something about that. I also railed against the complexity of some of the bureaucratic communications that were sent out. Since I am now more often on the receiving end of those kinds of communications, I fear that my railing had little impact because they are still excessively complicated and I find it quite difficult to understand some of the letters that I receive.
It is placing a very heavy burden on benefit recipients to expect them to understand fully all the communications that they receive and therefore fully to appreciate sometimes when an overpayment has been made. For those of us who had an overpayment of, say, an occupational pension that we have to repay, irritating though it is, we can probably afford to do that over a period of time. It is a very different issue for a benefit recipient to repay a large sum of money in their circumstances. Therefore, I support the amendment. It is really important to get some clarification of the situation as we move forward.
Baroness Hayter of Kentish Town
My Lords, it seems that the HMRC’s position on tax credits is to say, “If we fail to meet our responsibilities but you meet all yours, we won’t ask you to pay back all of an overpayment caused by our failure”. That is quite a strong statement of their side of the bargain and recognition of an error made by HMRC. Its own code of practice and guidance sets out the limitations of payments where a claimant is experiencing hardship and the circumstances in which an overpayment will be written off.
Given that we will now have a new and unfamiliar system of universal credit, once it is clear both that there has been an official error and that the recipient could not possibly have known about it, if all those overpayments were to be clawed back in those circumstances the officials would have precious little incentive to get the system right, despite the hardship that that could later cost claimants who, through no fault of their own, were overpaid.
In Committee, the noble Lord, Lord Freud, said:
“Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits … will be recoverable … DWP will consider a claimant’s means, income or expenditure if the debtor”—
I do not like that word because it suggests that the claimant in some way invited this—
“considers that they are in hardship”.
However, that means that repayment is essentially means-tested in that the DWP will have the discretion to write off an overpayment based, in the Minister’s words, “on their individual merits”.
The Minister promised the Committee that the DWP,
“will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor”—
a claimant—
“to suffer undue hardship”.—[Official Report, 23/11/11; col. GC 468.]
However, it seems to me that this has two problems. First, it is discretionary and possibly means-tested but without anyone knowing the rules. HMRC’s draft code, which was sent to us in December, as the noble Baroness, Lady Hollins, has said, says only that it might decide in exceptional circumstances not to seek recovery of an overpayment or part of it and that there are no prescribed circumstances for a discretionary write-off, although it hints that it would do so only in cases of immediate significant family hardship or a threat to their health, and emphasises that hardship is taken to be “other than financial hardship”.
Secondly, the code relies on claimants knowing that they can appeal against a required repayment without having been informed about that. The draft leaflet really does not make it very clear, nor does it explain how to appeal. If I have understood it correctly, it says only that you can consider the amount that is being asked for, but not the fact that you have to pay it because of your own circumstances. The Minister said in Committee,
“that if the debtor considers they are in hardship, they can say that and then there is a process built on that”,—[Official Report, 23/11/11; col. GC 469.]
but it is not clear how that would work. If this amendment falls and the system proceeds, will the Minister assure us, first, that anyone asked to repay to cover for official error will be told of their right to appeal; secondly, that they will be given rather more guidance than that given in the draft leaflet as to the circumstances in which any write-off will be allowed; and, thirdly, where the repayment is sought from landlords, which in certain cases it would be, that they will also have the right of appeal against a loss of income over which they will have no control?
The Minister knows that the IT problems caused significant headaches and hardship for many claimants in the early days of tax credits. Getting the position right on overpayments and ensuring that claimants do not feel that they have been unjustly made to pay for the errors of government officials will be essential to building confidence in universal credit. We look forward to the Minister’s response to these and the other queries raised, and emphasise that this amendment is about the consequences of official error, not of claimant mistakes.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, as we have previously discussed, Clause 103 is based on the premise that for those benefits within its scope, most if not all overpayments will be recoverable. I think we are all in agreement that a benefit recipient should not receive any more money than they are due; nor should they receive any less. In keeping with this general principle, we believe that a benefit recipient should not be allowed to keep money that they should not have received and that this should hold true even if they were not aware of the mistake. I do not think that we can accurately compare the issue of tax credit overpayments, raised by the noble Baroness, Lady Hayter, with that of benefit overpayments. That is because awards of tax credit are based on an estimate of what someone will earn, whereas benefit entitlement is based on actual information—and of course it will not have escaped anyone’s notice that the level of tax credit debt has grown significantly.
As we have discussed before, although the provision allows for all overpayments to be recoverable, this does not necessarily mean that overpayments will be recovered in all circumstances. We will endeavour to recover all overpayments where we are able to do so and where it is reasonable to do so without causing undue hardship. This remains a cornerstone of our overpayment recovery policy. The code of practice, a draft version of which has been distributed to noble Lords, will provide guidance about the circumstances in which recovery action will or will not be taken. It is intended that the code of practice will be available to the public in leaflet form and online. This will ensure that the decision-making process is transparent and that the right decisions are made about the recovery of overpayments. Where a claimant wishes to challenge a decision, they may exercise their right of appeal against it.
To pick up on the point made by the noble Baroness, Lady Hollins, on what compels decision-makers to apply the code of practice, the application will form part of the decision-making process, and failure to adhere to it would leave the DWP open to challenge and appeal on the decision itself or, indeed, judicial review for failure to apply good practice. While there may be no legal duty to comply, failure to do so renders the department more open to successful appeal by the claimants. So we have every incentive to adhere to the code of practice.
Lord Ramsbotham
My Lords, Amendment 62A is in many ways complementary to Amendment 62ZC, which we have just debated.
The purpose of the amendment is to try to ensure that the standard of evidence required of officials in local authorities or jobcentres when imposing civil penalties and recovering overpayments should be the same as that required in the courts when imposing fines and enforcing debts. I set out at length my reasoning for the amendment to the Grand Committee and I do not propose to repeat that now.
In Grand Committee I was grateful to the noble and learned Lord, Lord Mackay of Clashfern, who helpfully suggested that, as tabled, the amendment was too prescriptive. The Minister, while agreeing that it was right and proper that decision-makers gave full consideration to all the relevant facts provided by a claimant, who should also have the right of appeal, suggested that adequate protections were already in place. However, he also agreed to meet those who had drafted the amendment to go through the issues in detail. That meeting has taken place, for which all who attended—I hope that I am speaking for the noble Lords, Lord McKenzie of Luton and Lord Kirkwood, as well as myself—were extremely grateful.
Before that meeting I tabled the amendment in its current form. It proposes that, to better ensure the original intention, the guidelines recently published by the Sentencing Guidelines Council, chaired by Lord Justice Leveson, should be followed. At the conclusion of the meeting the Minister said that he wanted to work with those attending the meeting, whom he recognised as being concerned about vulnerable people, to get the guidance right and compliant with the Wednesbury principles on reasonableness.
The Minister also said that he would look again at the current guidance with the reworded amendment and see whether adjustment was appropriate, not least because of the similarity with the decision-making required, on the one hand, of the courts when imposing fines and enforcing debts, and, on the other, by officials in local authorities and jobcentres in raising civil penalties and recovering overpayments. I hope that the consistency resulting from what I propose will encourage the Minister to accept at least the spirit of the amendment. I note with interest what he said about the code of practice. I am sure that that is the way in which the guidance should be got to officials. I would welcome his reassurance that the guidelines about which this amendment speaks have been included in the working of that code of practice. I look forward to his response. I beg to move.
Baroness Hayter of Kentish Town
My Lords, on behalf of my noble friend Lord McKenzie, I also thank the Minister and the noble Lord, Lord Ramsbotham, for that meeting. I know that he found it of considerable interest and use. The noble Lord, Lord Ramsbotham, of course knows rather a lot about penalties, sanctions and their fairness. His amendment seeks to ensure that the appropriate guidelines and procedures are in place when a jobcentre or local authority imposes sanctions, fines or penalties on claimants, and particularly that, when officials impose such penalties, they give clear reasons for doing so.
Clarity about circumstances in which a penalty, sanction or overpayment can be recovered is vital if administrative justice is to be realised but also to enable claimants to have confidence in the system. It obviously also makes the job of officials considerably easier when there is a clear set of steps to follow and a clear description of the circumstances in which they should consider possible hardship to a claimant. It is also essential that the reasons for any sanction or repayment are set out, preferably in writing, so that the claimant, any adviser or a reviewer can understand the grounds on which the decision was taken. We look forward to the Minister giving us assurances that a set of guidelines, safeguards and relevant procedures will be in place so as to meet the aspirations set out in the amendment.
Lord Freud
My Lords, I need to start by thanking the noble Lord, Lord Ramsbotham, for arranging a really useful seminar the other week on a range of issues related to sanctions and penalties. I was equally impressed by the content of that seminar, the iron discipline with which it was conducted and how much ground we managed to cover. We are very keen to draw on the expertise of others as we develop our implementation plans. I look forward to continuing to work with interested groups in this collaborative manner. I gave a commitment in that meeting that we would work collaboratively with the groups involved. I am pleased to repeat formally here that that collaboration will happen.
Turning to the substance of the amendment, I hope I have made clear that we are really on the same page on many of these issues. We absolutely agree that clear guidance should be issued to officials making decisions on behalf of the Secretary of State where discretion is exercised. We do this now and will continue to do it under universal credit. Decision-makers will be required to follow this guidance when applying the law to the facts of the case where they consider a decision about a claim, sanctions for non-compliance with work-related requirements, a civil penalty or the recovery of overpayment. As is currently the case, we will make this guidance publicly available.
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“(3) Any such steps taken under subsection (2A) should be consistent with any advice relating to child poverty provided by the Social Mobility and Child Poverty Commission.”
Baroness Hayter of Kentish Town
My Lords, we form a select few still in the Chamber. I remind noble Lords that the Child Poverty Act 2010, which established the Child Poverty Commission, was passed with cross-party support. We believe that there is now similar support for the proposal to expand its remit to deal with social mobility. We welcome that move. However, our Amendment 62F seeks to ensure that the commission has a duty, an obligation and a right to advise Ministers so that the fruits of its expertise, research, understanding and work are put at the heart of decision-making. This is not to replace the Government’s role in decision-making but to input at the appropriate level into the intelligence available to the Minister, as strategies to tackle child poverty are developed and implemented. Amendment 62CZA seeks to ensure that the child maintenance and enforcement policies similarly do not fly in the face of objective, evidence-based advice. The Child Poverty and Social Mobility Commission may be a very valuable think-tank, academic centre of excellence and great publishing venture but without this duty to advise it will not be guaranteed a voice in Whitehall.
We naturally warmly welcome the Government’s Amendment 62JA, which appears to meet our request in Amendment 62K, and which enables Ministers to provide the commission with any resources, including research, which Ministers think are required for it to carry out its functions. Perhaps the Minister will confirm that this will enable the commission to request research directly where it believes that there are important gaps in the data available to it. Will the Minister also outline what might happen if the commission believes that such research is necessary but the relevant Minister does not? While we are delighted that the Government have seen the need for such research, it would be useful if the Minister could also say when exactly he expects the new commission to be established, as we need its input. These amendments are needed to strengthen the role of the Child Poverty and Social Mobility Commission. Amendment 62F is central, not an add-on, to the work of the commission. It would restore the duty for the commission to give advice to Ministers on the preparation of their strategy. The DWP note states:
“The Government believes that policy development should be the responsibility of Ministers … and should not be delegated to arm’s length bodies. The Commission’s current advisory role inadvertently provides a route for Ministers to avoid accountability if the Strategy proves ineffective by shifting responsibility to the Commission”.
It goes on to state that the commission will henceforth only be able to give advice on technical issues around the measurement of poverty and social mobility.
We welcome the strengthened accountability whereby the annual report of the commission will report on progress towards the target. Far from being incompatible with the commission providing advice on the strategy, part of that advice comprises being able to input into Ministers’ thinking on matters beyond just technical issues around measurement. A serious commission with quality members and staff will be hard to establish if it is denied the existing duty of advising Ministers. What, after all, will be the point of it as opposed to having this work done by a university department? There is no chance that Ministers would simply delegate development of a strategy to an unelected commission. It is clearly Ministers on whom the ultimate duty to eradicate child poverty falls, and who will be answerable in this House and elsewhere for the success of that strategy. Placing on the commission the duty to give advice to the Government would strengthen its role and status, allowing it to provide the independent scrutiny, intellectual challenge and source of expertise that were envisaged in the original Child Poverty Act, which passed with cross-party support. I beg to move.
Baroness Lister of Burtersett
My Lords, I rise briefly to support the amendment of my noble friend Lady Hayter. However, her case was made on the assumption that the commission will have expertise. The original requirement that commissioners must have expertise relevant to the work of the commission has been taken out by this legislation. Apparently, the Government have argued that, because the commission will be a reviewing rather than an advisory body, the expertise requirement is no longer needed in the schedule. However, as End Child Poverty points out, this makes no sense. Reviewing requires just as much expertise as advising.
I should therefore be grateful if the Minister could give a rather better explanation as to why that provision has been taken out, because it is in danger of weakening the commission. I understand that the commissioners will be appointed through the non-departmental public body appointing process. Can the Minister explain how the process will work in this instance? What type of expertise do the Government believe is necessary for the commission, taken as a whole, to have? How will the NDPB appointment process ensure that the commission has such expertise? We are of course talking about expertise on both child poverty and social mobility. It is perhaps also worth considering not just traditional academic forms of expertise but the expertise born of experience.
Baroness Hayter of Kentish Town
I must respond to the Minister’s reiteration of the Government's commitment to reducing child poverty. He will be aware that I shall therefore quote from the IFS study and its prediction that the number of children in poverty, having fallen to its lowest level for 25 years, will, under the coalition Government’s policies, rise to its highest level since 1999-2000 by 2020, at which time one quarter of all children will be poor. We of course look to the Government to prove the IFS wrong by making sure that that prediction does not come true.
I am interested that it is the move to get rid of quangos that has led to the desire to remove the word “advice”. I think that that is wrong. In addition to needing expertise, on which there is some agreement, the commission needs authority to be able to advise ministers. That is not policy-making; it is an input into policy. Describing its advice as being alongside other bodies devalues it, but the Minister has said that he wants this to be a more powerful commission. If that is the objective, clearly, we support it. We like the change of name and remit. I hope that he can hold to that in setting it up. I guess the great bribe to us this evening, having been told that it would be set up when the Bill was through, is for me to sit down as soon as possible and enable the Bill to be enacted so that the commission can be set up.
I hope, however, that even if the word “advice” will not be there, Ministers and future Ministers will take the output of the commission extremely seriously as they develop policy, not simply in the implementation of it. With that, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, does not Davos sound interesting? I gather that the Prime Minister is there as well as the noble Lord, Lord Layard, but that Mick Jagger decided not to turn up. The advantage in one sense of the absence of the noble Lord, Lord Layard, is that we have had the privilege of hearing the amendment moved by the noble Lord, Lord Adebowale, who is second to none in his experience of working with substance abusers and those with mental health problems. It is good to have him here.
The subject of mental health is an important one and has featured a lot in our debates throughout the Bill—in discussions on where and whether conditionality is appropriately applied, in looking at the length of time for which contributory employment and support allowance should be available, and in assessing ways of dealing with the caseload for DLA and how best to introduce and assess the new PIP criteria. In all these we have been dealing with the consequences of the increasing mental problems that have been touched on. We know that the diagnosis of mental health problems has been rising. An NHS study in 2007 found that the prevalence of common psychiatric disorders severe enough to need treatment was between 6 and 9 per cent among people of working age. That means that we are talking about between one in 10 and one in 20 of our fellow citizens.
The consequences of that for the Bill and for the DWP are most obvious in the growth of the number of people eligible for DLA. Since 2002 the rise in the number of claims—which the Minister has frequently cited when making the case for reform of the benefit—has been almost entirely accounted for by those with either learning disabilities or mental health conditions. So, ensuring that employment and mental health treatment services are working closely together would have clear benefits not only—although most importantly—for claimants, but also for the department’s own efforts to reduce the number of people forced out of work through ill health. Equally vital will be an attempt to work with employers to help them better understand and equip themselves to be able to use the talents of those who, whether on an ongoing basis or for short periods, experience poor mental health.
I hope the Minister will outline in his response not only how employment-focused services, in particular for those on ESA, are working with mental health experts and ensuring that claimants receive the right treatment, but also what his department is doing to encourage employers to put the right support in place and to take a positive attitude towards workers with poor mental health. If he follows up on the excellent suggestion of a meeting, it would be particularly appropriate, along the lines set out by my noble friend Lord Winston, to include the Department of Health in it. Perhaps we will be able to encourage a bit of cross-Whitehall working on this issue.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I start by thanking the noble Lord, Lord Layard, who is in a better place, and the noble Lord, Lord Adebowale, who moved the amendment, for all their work on mental health conditions. Last month I had a very good meeting with the noble Lord, Lord Layard, on these matters, so there is an active dialogue. I want to put this into some context. This is an area that I have taken an enormous interest in, and I think that we need to go much further. What we need to realise is that we are right at the beginning of the process of even thinking that for people with these kinds of illnesses, work is a solution and not a problem for them. It is early days in our understanding of what to do and how to do it, but in the years to come we will have a really good opportunity to try to lock some of this stuff down. It can be done from several directions, which I want to describe.
The problem is that, as we know, around a third of those going on to ESA have a primary diagnosis of a mental health condition, although dual diagnosis and co-morbidity is seen in many cases. Indeed, a lot of people have mental health problems because they are long-term unemployed or long-term inactive. They need the right interventions to help them back into work, and mental health services are absolutely vital in that area, along with employment training and support. It must be the role of GPs and health services to diagnose conditions and work out what, if any, specialist health support should be provided to each individual, and to make those referrals to specialist health services. They have the knowledge to make those complex judgments. It is not the role of non-medically qualified individuals in Jobcentre Plus to do that; it is simply not appropriate. They can do some things—they can signpost people to health support such as the IAPT programme; they can provide work support—but they do not have the training or the knowledge formally to refer individuals to specialist health support. Nor do I want to go down the road of mandation into treatment or of out-of-work obligations. That is not the right way to go. I think that noble Lords will immediately understand all the human rights issues around that.
I assure noble Lords that we have a significant number of safeguards in place to ensure that individuals who present with mental health conditions and who may need specialist health support are signposted to such support. If at work capability assessment stage an individual presents with unexpected findings or undiagnosed physical or mental health conditions that cause the healthcare professional concern, and they feel that their GP should be aware of it, that information goes to the GP within 24 hours of the assessment. Again, it reinforces the role of the GP.
I am not talking about passing the buck to the NHS, because we have an important role to play. We need to ensure that the incentives in the system are right so that we stop people falling out of work—mental health conditions come second behind musculoskeletal conditions in the list of reasons. These concerns led me to commission the sickness absence review led by Dame Carol Black and David Frost. That important review has done a lot of the analysis that I wanted, and one of its recommendations was an independent assessment service which offers a kind of second opinion and a much more coherent view on what a person can do in terms of the workplace and their illness. That is about catching people at the right time, and I want to be able to catch people right at the start. The review has made a very serious set of recommendations which, as we work through their implications, could become a valuable motor to our rethinking how we supply help and make the connections between health and work. That is one opportunity that we now have. We are taking our time to get our reaction out because we want to get it right and to sort this issue out in its context.
We are also working with work programme providers to help them support those of their participants who have a mental health condition in gaining employment. We have had a bit of a slow start, as I had to admit in this Chamber yesterday, with the flow of ESA, although there are good signs that it is beginning to pick up. We have established a relationship between the prime providers and the mental health specialists, and I thank the noble Lord, Lord Adebowale, who is one of the key people in working out the mental health interventions that help people on the road to work. He has started working that out precisely and I am looking to him to give me some of the answers. I should probably vote against him rather than him against me because he has the responsibility in that area.
Within Jobcentre Plus we have launched a new support for all advisers to ensure that they are better skilled in helping claimants to improve their health and well-being. Jobcentre Plus employs disability employment advisers who are able to help claimants with the most severe health problems and to refer them to specialist divisions, such as Work Choice. We employ mental health and well-being partnership managers to build practical links between the local mental health services and employment services. Outside of the employment support we provide, the department has been actively engaged with the Department of Health to ensure that employment support is an integral part of the IAPT programme. Similar work is ongoing with the devolved Administrations.
This is a serious amendment on a serious matter. It is a difficult matter and we are not going to sort it out with a little bit of legislation. I commit to continue giving the issue serious consideration and effort. We can make a big improvement to the lives of hundreds of thousands of people and I commit to go on working in this area. I will have any meeting on this matter. My door is always open anyway but on this matter it is wide open. I therefore urge the noble Lord to withdraw his amendment.
“Review into the impact of the calculation of universal credit
The Secretary of State shall conduct a review into the impact of the calculation of universal credit, to conclude one year after the coming into force of this provision, and shall publish a report on the review to both Houses of Parliament, on—(a) claimants’ ability to access childcare, and(b) the impact on work incentives for second earners.”
Baroness Hayter of Kentish Town
My Lords, as has been repeated and endorsed many times, a main aim of universal credit is to make work pay. This amendment seeks to ensure that universal credit makes work pay for women and parents. At present, there are very real fears that, first, the cuts in support for childcare that the Government have introduced and, secondly, the impact on second earners of the way that universal credit has been designed will mean that universal credit leads to fewer women entering or remaining in the workplace. The amendment therefore asks for a review of the impact of universal credit on claimants in these two areas, to enable us to monitor the extent to which such fears are justified.
I trust the Minister will not try and tell us that a review costs £1.4 billion—the figure he quoted on 17 January for a review of the introduction of PIP, admittedly with some trialling, which he told us was happening anyway,. He has of course yet to answer my subsequent query on how this figure was reached, but I urge him not to repeat it today. He also told us on 29 November that the Government were investing £2 billion to cover all the costs of implementing and operating universal credit, which is why the figure of over half that for an independent review of a different aspect of the Bill is a little hard to comprehend.
Nevertheless, we welcome the Government’s support for the principle of reviews. In the case of child maintenance, according to the letter distributed to Peers mid-morning today, the Government’s amendment to review the impact of all their child maintenance reforms 30 months after the introduction of charging to ensure that the reforms have driven the behavioural change anticipated shows a welcome willingness on the part of the Government to test the evidence to see whether they achieved their aims. This amendment seeks no less. It is to enable the Government to set out the evidence for their various changes and assess the impact on the families concerned.
Lord Freud
My Lords, I have to admit that this amendment is not as expensive as the £1.4 billion PIP one, because the noble Baroness is looking to do the research afterwards rather than stopping it all and doing the research first, which would have delayed it. The reason why the PIP amendment was so expensive was the one-year delay, meaning that all those savings would not have accrued.
The intention behind this amendment is to allow discussion of the impact of the universal credit on both the accessibility of childcare and work incentives for potential second earners. Working families will be able to receive support in respect of 70 per cent of monthly childcare costs up to £760 for one child or £1,300 for two or more children. These amounts are equivalent to the current arrangements in tax credits.
We understand that childcare plays a crucial part in parents’ work decisions and are determined to help those moving into the workplace, which is why we found the extra £300 million to help people below the 16-hour limit of tax credits. The childcare market is very varied and does not always effectively meet the needs of working parents. We are introducing flexibility into the system, such as through introducing monthly limits based on actual paid costs, so that it supports the childcare market better. Local authorities in England and Wales have the duty to secure as far as reasonably practicable sufficient childcare for working parents. The Department for Education is currently consulting on whether a local annual report would be a more effective and meaningful way of enabling parents to hold their local authority to account.
Let me move now to the concerns over the work incentives for potential second earners. My views on this are on the record. The costs are high. If couples who were both in work were entitled to an additional disregard of, say, £700 a year, the cost would be £240 million. If the disregard were £1,000, the cost would be £350 million. Those are the sums and we simply do not have them at this stage. Universal credit should mean that most families in which one parent works full-time for 35 hours a week for the minimum wage will not live in poverty.
The amendment asks us to confirm in legislation that we will undertake a formal review of both these areas. However, my real response is that these are just two particular areas. We will monitor the effect of universal credit right across aspect after aspect of its impacts. I have also included powers in the Bill to pilot different policy approaches. We will do that by having affirmative regulations to approve particular pilots. Any substantive changes following a pilot will also require regulations and be subject to the usual SSAC, so there are a lot of protections here.
It will not be a question of doing a review of something such as the second-earner incentive. I want to see a pilot in which we can pinpoint the value of moving it around. That is a far more useful way of finding out such things. What is the effect of the taper? What is the effect of the second-earner disregard? What is the effect of moving them around? We need to know all these things in a much more coherent way than we would from carrying out a review. We will have econometric analysis of a kind that leaves anything that we have seen in the past in the dust. Therefore, this requirement for a review and a report on specific impacts just creates unnecessary bureaucracy. That is not the way I want to do it.
To summarise, I hope it is clear that we are aware of these two issues, which are very important and interesting. I will continue to give them the attention that they deserve, and I therefore urge the noble Baroness to withdraw this amendment.
Baroness Hayter of Kentish Town
Having had the promise of the intention to give these issues the importance that they deserve, I beg leave to withdraw the amendment.
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Baroness Tyler of Enfield
My Lords, I support the amendment that has just been moved so powerfully and comprehensively by the noble Baroness, Lady Drake. Having myself moved a similar amendment in Committee, I do not wish to go over the same ground that she has, save to say that there is a powerful case for providing an exemption from the cap for grandparents, older siblings, aunts, uncles and other family members who are raising vulnerable children because of very difficult family circumstances such as parental death, alcohol or substance misuse, imprisonment, severe illness, disability, abuse or neglect—the list goes on and on. Children living in the care of family and friends are often exceptionally vulnerable and have already suffered huge disadvantages and traumas in life.
As the noble Baroness clearly put across, one consequence of the benefit cap that I am sure is unintended is that fewer family and friends may step forward as carers in these difficult circumstances, and the cost to the state, particularly if more children go into care as a result, would be considerable. To amplify that point, I shall mention a few statistics that the Family Rights Group was good enough to share with me from an internet survey that it has just conducted—the largest survey of family and friends carers in the UK—with 500 respondents. The survey’s findings show that: more than 16 per cent of respondents were raising three or more children, both kinship children and their own; 11 per cent of respondents were in private rented accommodation and 28 per cent in housing association or council rented accommodation; 29 per cent received housing benefit; 31 per cent had given up work permanently when taking on kinship children while 14 per cent had given up work temporarily; and 20 per cent of the children that they were raising had previously been in an unrelated foster care placement. I think this puts some flesh on the bones of this particular issue.
I know that my noble friend the Minister was very sympathetic in Committee to this issue and has written in very sympathetic terms to the charities which are most involved. I very much hope that he has some reassuring words to give us tonight.
Baroness Hayter of Kentish Town
My Lords, rather like the amendment which we discussed earlier on carers, this amendment will, as has been spelt out, protect another unappreciated group: grandparents and other family members or friends who take on the care of children. As the noble Baroness, Lady Tyler, has just told the House, we know that the Minister is sympathetic to this group, which includes many children who have experienced significant traumas before their move to a new caring family.
The Who Cares? Trust estimates that a quarter of these children have lived with abuse, neglect and violence, and a quarter will have been deserted by their parents, often after drug and alcohol abuse. About 60 per cent go to grandparents after family breakdown, one in 10 after a parent’s illness—often mental illness—and one in 10 after the death of a parent. Applying the benefit cap to these families may leave them facing the difficult choices, of which we have already heard, about whether they can simply afford to carry on taking care of the child or children.
As we know, the impact assessment tells us that a family will lose about £93 a week. That is a substantial chunk of income. That may not be very much to Sir, or Mr, Fred Goodwin, but it is a fortune to some of these families. Should any of them decide that they can simply no longer afford to continue looking after the child, that will, as we have heard, create significant costs for the state. With regard to kinship carer allowance, there are estimates that if just 5 per cent of those currently in the care of family or friends were in formal foster care, that alone would add £500 million a year to the cost that the Minister would have to justify to his friends in the Treasury.
The Minister has spoken many warm words about the role played by kinship carers. He has also told us that the benefit cap is primarily intended not as a deficit reduction measure but to change behaviour. Indeed, his right honourable friend the Secretary of State told the BBC that the cap was aimed at making lives better by reducing dependency. We are not talking about dependent claimants here. We are talking about dependent children, who, after some great trauma or difficulty with their own parents, desperately need the kindness, care and homes offered by these grandparents, siblings, aunts or friends. We should be very careful that the Government’s laudable desire to reduce dependency for one group does not have dire effects on the well-being of another.
Given that the cap is not about deficit reduction, so we are not sending the Minister off to arm-wrestle with Her Majesty’s Treasury, we hope that he will try to turn those warm words into concrete protection. It has been suggested earlier this evening that maybe there is a little bit of movement to come. I look forward to hearing from him.
Lord Kirkwood of Kirkhope
My Lords, I shall add a few comments to the speeches of the noble Baronesses, Lady Meacher and Lady Lister. I learnt the importance of this subject a long time ago when I was involved in consistorial legal work in a provincial legal office in south-east Scotland. I was surprised by the importance of financial autonomy to people within quite troubled and tense family contexts, as the noble Baroness, Lady Lister, mentioned. I was then persuaded yet again, academically, by the exemplary work that she has done ever since with Fran Bennett and others to make this case consistently over the years. It is as apt in this benefit reform as it was in the Fowler reforms or at any time since. I guess I could be persuaded that this is a debate that needs to be conducted at regulation level and I am certainly up for continuing an interest through the primary legislation until the regulations are tabled. I will be happy to contribute to those discussions.
There is a real question that I want to be clear in my head about. We had some interesting discussions in Grand Committee and I am certainly sympathetic to the Minister’s search for innovative financial products. I think it is absolutely correct. However, if you separate out the politics from all this, I would like to understand whether it is factually possible for the agile computer system that we are developing with such care in Warrington to deliver the device suggested in Amendment 61C. That is a separate question from whether the Minister is prepared to deliver it. I want to know that we are not blocking off—this is the point that the noble Baroness, Lady Meacher, made—the opportunity to come back to this. If we cannot persuade the coalition in the short term, either tonight or in regulations, that this is the right thing to do, which I believe it is, it would comfort me if the Minister were able to say that the Government do not believe that this is right because there are other ways of dealing with it. I would go to my bed this evening and rest slightly easier if he were able to say that it is still possible and we would not need to buy a new computer system if we wanted to do this in future.
Baroness Hayter of Kentish Town
My Lords, I am looking forward to the Minister’s reply, otherwise we will worry about the sleeping patterns of the noble Lord. These amendments, as has been clearly set out, seek to mitigate the risk of paying the entirety of universal credit to one person and, in particular, to provide protection for women who are more likely to be the main carer in a couple and less likely to have the power in the relationship to determine how money is managed.
The Government’s proposals suggest that universal credit payments would not, other than exceptionally, be split between a couple. Instead, they would be paid, as we have heard, entirely into one bank account. The DWP briefing note states that,
“the Government wishes to place responsibility for household budgeting with the household. It is not Government’s role to dictate how a household spends their money”.
However, these amendments are not about how households spend their money but how they receive it. They are about allowing households to decide to whom the money should be paid. This principle is long established in social security policy. Households receiving child benefit can nominate a main carer and those receiving working tax credit can receive child tax credit in the bank account of the main carer and working tax credit in the bank account of the other partner.
Concerns about the shift in policy from this have been voiced by a wide range of organisations, all of which have presented strong arguments in favour of ensuring that the part of universal credit intended for children is paid to the person who has the main care of them. As has already been spelt out, we know that benefits labelled as intended for children are more likely to be used for that purpose. This amendment would enable the Government to identify the parts of the credit intended to help with the costs of children.
Research for HMRC shows that child tax credit is commonly identified as money for children and more often spent accordingly. Again, as has been said, we know that money within the household is frequently unequally distributed, particularly in low-income families. An Oxfam study of black and minority ethnic women in low-income couples revealed cases where,
“women had so little access to money that their husbands were effectively in control of key aspects of their lives”.
Benefits for children are sometimes the sole source of independent income for vulnerable women.
As the Women’s Budget Group points out,
“putting benefits together is key to the design of UC; paying it into one account is not”.
There can already be exceptions. Sometimes, for example, there will be rent for certain categories of recipients. Support for mortgage interest may be paid to lenders and, as the Women’s Budget Group states,
“a sanctioned claimant could lose their UC, and the remainder … paid to their partner”.
The DWP briefing acknowledges:
“There may, however, be exceptional cases that require alternative arrangements: to ensure safeguards. The Government intends to retain powers to split payments between members of a couple in joint claim cases”.
I think that the noble Lord, Lord Kirkwood, will be able to sleep easy in his bed because it seems clear to me that the technology will exist to enable the Minister, if he so desires, to accept either or both of these amendments; that is, either paying the child elements of universal credit to the main carer or, in line with the Government’s assertion that they wish to enable choice, allowing families to choose to split their payments.
Resistance to these amendments would suggest that administrative simplicity is seen as more important than either ensuring that women have an independent income or encouraging money which is intended for children to reach them. I hope that the Minister will feel able to accept the argument for these changes.
Lord Freud
My Lords, under universal credit, couples will make a joint claim for benefit payment. We have been clear that claimants will receive universal credit as a single payment, which will ensure that claimants can clearly see the effect of their decisions about work on total household income. The House debated this issue extensively in Committee. We also discussed direct monthly payments in another context when the House accepted the principle of a single payment. Couples will be able to choose which bank account the total universal credit award should go into. Once universal credit has been paid into that account, claimants will have the freedom to manage their money how they wish. They will have the opportunity to transfer some of that money into another account, or they may choose to have the universal credit paid into a joint account in the first place.
Giving people these choices to manage their money is in line with evidence that suggests that, in today’s world, the majority of couples pool their resources—
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Lord German
My Lords, to concur with the noble Lord’s last sentence, this is a matter of accountability. I refer to Amendment 50ZA, which applies only to England. Members of the House of Lords will be very familiar with the fact that other parts of the United Kingdom will receive this money, and I would like some confirmation from the Minister on the arrangements that are to be made for Scotland and Wales. If, as I understand it, this money is to be transferred by means of the Barnett formula, the amendment will apply only to England. I wonder how it is possible to seek accountability for money that has been given by this Parliament for the services that are so vital for people within the current arrangements for the Social Fund. This is not an anti-devolution to local government statement, but the lines of accountability here do need to be judged. If we are devolving the power for that accountability to the Welsh and Scottish Governments, we need to state that now, and noble Lords need to understand that this is a further devolution of responsibility. Many noble Lords may accept this, or like it, or find it an attractive proposition, but the Government’s intention in this respect is as yet unclear to me.
Baroness Hayter of Kentish Town
My Lords, I am not sure whether the noble Lord, Lord German, is for or against the amendment, but all the other speakers have clearly supported these amendments. This is quite sensible, because the amendments all set out to ensure that vulnerable people can continue to access support once the Social Fund has been devolved, to whomsoever.
The first amendment in the group implements a recommendation of the Select Committee in another place. It would provide some reassurance about the effectiveness of the new system of helping those in need, and clearer information to local voters about whether their local authority is choosing to spend less than the allocated amount. It does nothing to restrict local discretion in how to implement the Social Fund replacement scheme; it merely places a requirement on the local authority, as has been said, to account for it. I think that all noble Lords who spoke would support that, and I feel sure that this is an aim that the Minister, similarly, will support.
The second amendment in the group, as was spelled out, would ensure that the use of local connection rules cannot prevent, for example, care leavers, the homeless, those fleeing domestic violence—the noble Lord, Lord Blair, spoke about them—and those leaving institutional residential care accessing Social Fund-type support. It is true that it ties the hands of local authorities a little, but only to ensure that groups that might be very much in need of support are not left with nowhere else to turn. As we heard, for many women fleeing domestic violence, community care grants are vital in helping them to set up a new home and perhaps buy a cot, a bed or a cooker. Given that many women need to enter refuges or other homes away from their former partners, they will often be unable to meet local connection rules.
We know that, among people who use the discretionary Social Fund, one in eight is leaving some sort of institutional care; nearly one in 10 is leaving prison; and one in five has at some time experienced homelessness. I work in Camden with people who have alcohol problems. There are a lot of train stations in Camden, so a lot of people arrive on our doorstep. At the time we help them with their drink problem, they will not be in the same area where they have lived and worked for perhaps 30 years.
Although I understand that the noble Baroness, Lady Meacher, will not press her amendment, I urge the Minister to consider it. We know that although universal credit budgeting loans could be available for rent in advance, crisis loans will be abolished before the introduction of universal credit, and it could be some time before the new system is set up and reliable. We know from our experience of many new IT systems that even the best laid plans occasionally go wrong. We have had many assurances from the noble Lord, Lord Freud, about the robust nature of the system being put in place, but it would be prudent to ensure that a national safety net remains while we wait for him—we hope—to be proved right on this occasion. I said “prudent” but it is probably vital that we continue to guarantee national access to community care loans and crisis loans until the universal credit system is set up. Once national systems have been devolved, the accountability that my noble friend spoke of, as well as the local connection rules, will be an essential part of helping these vulnerable groups. We are happy to support all three amendments in this group.
Lord De Mauley
My Lords, when we discussed the Social Fund last week, I hope I was able to offer reassurance in two key areas. First, I informed noble Lords that we would extend the 2014-15 review of a cross-section of local authorities to include information about the way they have used their funding for the new local provision. Perhaps I may return to that in a moment.
I was also able to assure your Lordships that the settlement letter that noble Lords referred to today that will accompany the funding will set out what the funding is to be used for and will describe the outcome that must be achieved—although, for reasons I explained, not the method that should be used to achieve the outcome. After further consideration of the issue, and following questions from noble Lords, I am able to explain what the settlement letter will contain. The letter will set out what the funding is to be used for, the underlying principles, and describe the outcome that must be achieved. It will say that the funding is to concentrate resources on those facing greatest difficulty in managing their income, and to enable a more flexible response to unavoidable need. The letter will make explicit that the funding is to provide a replacement provision for community care grants and general living expenses crisis loans.
The letter will go on to explain that community care grants were awarded for a range of expenses, including household equipment, and were intended to support vulnerable people to return to or remain in the community or to ease exceptional pressure on families. They were also intended to assist with certain travel expenses. It will also explain that crisis loans were made to meet immediate short-term needs in an emergency or as a consequence of a disaster when a person had insufficient resources to prevent a serious risk to the health and safety of themselves or their family. As I said in our discussion of Amendment 50 last week, I assure your Lordships that we are equally committed to ensuring that this funding goes to help the most vulnerable.
Amendment 50ZA would require the Secretary of State to publish information on the amount of money given annually to each local authority. I can assure your Lordships that we already plan to publish this information on the DWP website. On community care grant budgets, noble Lords might like to be aware that work has been done since Committee to make the funding distribution fairer by changing the funding allocation methodology.
It is each local authority’s responsibility to decide what type of support it provides with these funds. We have already been made aware of a variety of innovative ways in which local authorities plan to use this money, such as furniture re-use schemes, working with credit unions, investing in existing projects or joining up with other organisations in the area. For example, the fieldwork undertaken by the department shows that rural local authorities had very different ideas from those of urban authorities, and would embrace the freedom to design and establish local provision that suits the particular challenges they face.
Some benefit recipients cannot even afford the delivery of free goods from support schemes. During the fieldwork, the department was made aware of the fact that a local authority in Yorkshire is considering using some of the new funding to pay the delivery fees charged by an existing provider for the delivery of free goods to benefit recipients and other low income groups. This demonstrates the benefit of tailoring support to the local area. This initiative is particularly useful in a rural area, as it would have been far more expensive for people to arrange their own deliveries than in an urban area. This service would help people on the lowest incomes to receive free household goods that they might otherwise be simply unable to access.
Another example of innovative thinking came from a local authority in the Greater Manchester area, which said that it would use the funding to expand the local credit union, as this already provides household goods to people on low incomes. Expanding the scheme would increase access to affordable credit for those on low incomes and reduce the reliance on high-cost and illegal lenders. Yet another different approach to the new provision is that of a local authority in the south-west, which has been looking at how commissioning services would boost the local economy, providing new skills and routes back into employment and out of poverty.
As I hope is evident from these examples, giving local authorities the responsibility for deciding what the new local provision will look like allows for innovative new schemes that are tailored to the local area.
Baroness Hollins
My Lords, I shall speak briefly in support of this amendment and Amendment 50B. I spoke at length in Committee in support of the requirement for the decision-maker to collect evidence from the claimant’s own health professional, and I do not intend to repeat myself. However, I should like to make a specific point about the requirement in Amendment 50B that,
“persons approved by the Secretary of State to undertake assessments have specific training in all mental, intellectual and cognitive disorders”.
This is because it is necessary to state that specialist skills are required in assessing someone with autism, learning disability or mental illness, and I know that it is intended that such expertise should be provided. However, most medical doctors do not have these skills. Indeed, Professor Steve Field, when writing about the NHS Future Forum in connection with the Health and Social Care Bill, pointed out in his most recent papers that it is of some sadness and regret that most doctors do not have training in these specialties, particularly those relating to learning disability and autism.
The other point I should make is that in psychiatry these are also specialist skills and not all psychiatrists have them. All will be good at assessing mental illness, but not all will have expertise in assessing people with learning disability or autism. That requires additional or different specialist training. I wish just to draw that to the Minister’s attention.
Baroness Hayter of Kentish Town
My Lords, these amendments would improve the assessment process for the new PIP and allay the fears of many people with disabilities that the poor experience of the ESA assessments, where around 40 per cent have been successfully appealed, is not replicated under the new benefits system.
Amendment 50B relates to the training of those undertaking face-to-face assessments to ensure that they have knowledge of mental, intellectual and cognitive disorders, clear guidance about when to access more specialist advice, and a guarantee that such advice will be available. In Committee, we received some encouragement from the Minister who stated:
“Assessors will be required to have a broad training in disability analysis as well as training on specific impairments … we intend to ensure that they have sufficient training in mental, intellectual and cognitive impairments … and will stipulate this in our contracts”.—[Official Report, 16/11/11; col. GC 263.]
Perhaps the Minister could let us know what budget has been set aside for such training.
Amendments 50C and 50D would exempt certain people from a face-to-face assessment where sufficient evidence is available via other means. This would actually save money for the Government. I hope that the Treasury is listening. Implementing face-to-face assessments was to have cost about £675 million. The amendments would reduce the costs by removing from the process claimants for whom a face-to-face assessment is clearly unnecessary. This would help those with lifelong or degenerative conditions, for whom a face-to-face assessment could be stressful. For example, about half those with MS or Parkinson’s are receiving the highest level of DLA. Putting them through an expensive and stressful face-to-face test seems unnecessary.
Again, we received some assurance in Committee. The Minister stated that,
“where there is already sufficient evidence on which to make a decision … we completely agree … a face-to-face consultation should not be required”.
I hope that the flexibility would be there for that. However, he also argued that other than for those with a terminal illness,
“we do not agree that there should be different rules or processes for different groups of people … on the basis of impairment type”.—[Official Report, 16/11/11; col. GC 261.]
Yet, if the Minister is prepared to accept that those with a terminal illness should not be subject to unnecessary assessment, surely the same argument could be applied to those with degenerative conditions where there is no hope of improvement. We look forward to any assurances the Minister can give that unnecessary face-to-face assessments will not be necessary.
If he is not persuaded by me, perhaps he will be persuaded by someone of his own political background—the Mayor of London, Boris Johnson. I have never quoted from one of his speeches before. He writes:
“Evidence from the individuals GP and/or a consultant will provide an accurate assessment of need. It would be difficult for a healthcare professional in a one-off meeting to elicit a comprehensive response about the daily reality for each claimant. Face-to-face meetings … could prove … inappropriate for an individual who may have difficulty with social contacts, such as those with autism, or for those with an intellectual or mental health disability”.
This brings me to the first amendment in this group which would ensure that the assessment process always takes account of evidence from the claimant’s old healthcare professional. It builds on the experience of the work capability assessment for ESA and is to help the Government to avoid history repeating itself. Unfortunately, in this case, it would be as tragedy not farce. The problem with the current proposals is that they put the onus on the claimant to collect the medical evidence and also to have the knowledge that would be helpful to provide this. As we have seen with ESA assessments, it is exactly this that often leads to unnecessary duplication as a case is assessed and then reassessed in the light of the evidence from the GP or professional. The initial failure to consider such evidence has contributed to the very high and expensive success rates.
In Committee the Minister argued that while medical evidence could be of use, he felt that it was not necessary to gather evidence in every case. He said:
“In some cases what the claimant has already told us … will be sufficient. In other cases, information … might be likely to add only limited value”.—[Official Report, 16/11/11; col. GC 261.]
Surely it would be better to err on the side of caution, given the widespread inaccuracy of the ESA assessments and the need to ensure that the personal independence payments do not follow the same route. Medical evidence is bound to assist the decision-maker in far more cases than those in which it proves unnecessary.
This is a modest amendment. It seeks to ensure that the introduction of personal independence payments proceeds smoothly and more importantly to ensure that the right benefit is paid to the right people. I hope the Minister will accept this. Certainly it would have our full support.
Lord Freud
My Lords, I could summarise my speech in about three sentences. I am in agreement with virtually everything said in the Chamber. I hope that after my three sentences I will be able to provide assurances. My only point of real disagreement is that I do not want it to be mandatory—in primary legislation. This is in regard to the point made by my noble friend Lord Kirkwood that it reduces flexibility and we are much better off setting it up in regulations and guides and in the contracts. That is our proposed approach but fundamentally we are absorbing all the valuable points made on this group. I will try now with some speed to go through those assurances. I ask noble Lords to stop me with the precise assurance they want if I am not making the assurance well enough.
Amendment 50A was semi-withdrawn by the noble Lord, Lord Touhig, but I will try to deal with it because it is a building block. People being assessed can bring in someone with them—a relation, a friend or a professional—to help them. That is really important in the group we spent a lot of time on this afternoon relating to autism and Asperger’s. When people are over-bright their relation can make the point about the reality and the over-anxiety of the person being assessed. That would be an active role in the process.
I turn now to Amendment 50B. Clearly, we need to make sure that assessors have all the appropriate training to interpret the evidence that they are provided with. I have to make the point that it is not a medical assessment PIP. It does not ask the assessor to diagnose a condition or to recommend treatment options. It is different. It looks at how the conditions or impairments affect individuals’ everyday lives. That is a different skill set from that involved in treatment. There is not quite the same level of need for specialist skills but it is our intention that assessors will have a broad training in disability analysis as well as training in mental, intellectual and cognitive impairments. That level of training will be stipulated in our contracts with any providers and we will be responsible for signing off the training syllabuses. There will be occasions when assessors need more specialist support in the course of making these assessments. We will ensure that they have access to and support from individuals who have the in-depth knowledge that the noble Baroness, Lady Meacher, mentioned with regard to mental health conditions.