Welfare Reform Bill

Baroness Hollis of Heigham Excerpts

Tuesday 8th November 2011 Grand Committee

[Lord German]

I can answer that question by simply stating that the work capability assessment, if done accurately enough, should place people in the most appropriate group. Of course, one of the questions in the work capability assessment is, “What are you capable of?”; “capability” is in the title. If you are capable, with an illness, to do some work, and if you know that that will diminish over time, logic tells me that you need to think again about the way that that group of people is affected by such a proposal.

In a sense, what it means is that a clear definition between support on one side and being work ready on the other is not necessarily the only appropriate distinction you can make. It is part of the issue about having clear cut-offs and clear decisions of this sort. You need to be flexible for the people who need it most and whose circumstances will have changed.

[Baroness Hollis of Heigham]

I shall be brief because we have had some very full and powerful speeches from people who are intimately involved and who have specialist knowledge in this field. Like others, as I am sure my noble friends will go on to say, I would prefer not to see this clause in the Bill at all. I very much support the whole range of amendments that have been tabled.

However, I want to add my particular support to Amendment 75A. This is something that many of us referred to at Second Reading. It is the amendment that, leaving aside the issue of the disabled person, most protects the position of the other partner in the relationship, and it is therefore consistent with universal credit. In my view, it is the amendment that, if the Minister seeks to retain consistency with universal credit, he will do his best to support. Basically, we are again running the sort of arguments that we were having over second incomes and disregards, where the question was, “What is the return to work?”, and the Minister told us that he could not afford to run a disregard, even though the costs of childcare might eat up the earnings.

Here, we have the same problem in an even more aggravated form because here, above all, we need if we possibly can to keep the working partner attached to the labour market. We know that if somebody needs to care for more than about 20 hours a week, they probably cannot combine that with anything other than a part-time job. The ingenuity of the Lib Dem amendment is that it allows for something like 24 hours a week at minimum wage or thereabouts, which is pretty much at the tipping point where somebody leaves a full-time labour market and can manage only part-time work in order to make a generous and graceful contribution to caring responsibilities.

If the Minister cannot accept the push of this amendment—I will not say “understand” because I know that he understands it perfectly well—he will be saying to a woman in this position, who may be the working partner: “We are going to make it so unattractive for you to stay in the labour market and work that you, who may very well be tired because of your caring responsibilities, may have financial pressures and may yourself have minor complaints, will want to come out”. It would be infinitely better for her poverty, her health, her connections to the labour market, her sense of self-esteem and her social gregariousness to have a wider life that we should do our absolute damnedest to support her in the labour market—even if on only a part-time basis—and ensure that she kept that money. That is not a huge sum but it would lift her, as a parent, out of poverty and keep her in the labour market. If her partner’s condition deteriorated, we might be very glad that she had that earnings capacity behind her. If he died, we should be very glad that she had remained attached to the labour market and could, after a period of grieving, re-enter it. If he got well, and we would expect to attach conditionality to her, we would be very glad that she had remained attached to the labour market. On all possible outcomes of their partnership, it is in our public interest—the Government’s included—that we keep her attached to the labour market.

I feel very strongly that we have real problems with couples’ earnings. We have seen that before in amendments moved by my noble friend Lady Lister. Here, it seems even more damaging if we go down the parsimonious route of trying to peel off every pound that the woman earns against the partner’s benefit income. I hope very much not only that the Minister will take this away and think about it but, if he is unable to move, that the Lib Dems, who have come up with a decent and ingenious amendment addressing a very real problem—though it is not sufficient to deal with all the problems that disabled people face on the ESA, which need other amendments—will not retreat from the courage of their convictions and will pursue this through.

[Baroness Gibson of Market Rasen]

My Lords, perhaps I may explain why I am briefly entering the Bill at this stage. I did not speak at Second Reading and was not planning to speak in the debates but I have chosen to speak today because I received a letter from an old school friend. He went to school with me when I attended Caistor Grammar School in Lincolnshire many years ago. This friend knows a lot about disability because he is himself disabled. In mid-life, he went into hospital to have what was expected to be a very straightforward operation but unfortunately came out having lost his sight. When Derek wrote to me, I took his letter very seriously and I wish to speak briefly on his behalf today.

My friend is very worried indeed about Clause 51, particularly about the one-year time-limit on contributory ESA, which we have heard a lot about this afternoon, and the replacement of the working-age disability living allowance. With regard to the limit on contributory ESA, he points out that it takes no account of the often very complex issues that disabled people need to address in preparing for and finding work. I understand that the Government have estimated that 94 per cent of those on ESA and in the work-related activity group would take over a year to find work. That would mean that by 2015-16 700,000 people would be affected and 280,000 could have lost their entire benefit payment. The new criteria focus on a much narrower range of support than DLA and appear to fail to recognise the barriers that prevent blind and partially sighted people being able to participate fully in society.

The Disability Benefits Consortium, which is a national coalition of more than 50 disability and welfare charities and other organisations committed to working towards a fair benefits system, also wishes to see Clause 51 removed from the Bill to ensure that disabled people continue to receive the critical financial support that they so deserve. The Disability Benefits Consortium included in its briefing a moving statement from a woman who has Parkinson’s disease. She says:

“I’ve worked all my life and paid for decades into the system on the understanding that there’ll be support if I need it. To be told that all of this support could have an arbitrary time limit is both unfair and stressful”.

I agree. Clause 51 is very flawed and this would be a better Bill if it were removed.

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[Lord Freud]

My Lords, clearly, the detailed mechanics of that is something that we will need to work out and set out in regulation. I am not absolutely convinced that we have it locked down—we might, but I simply do not know. But clearly we will make that clear.

I shall come on to the question asked by the noble Lord, Lord McKenzie. The run-ons in practice are rather complicated. I shall come on and deal with that in a little while.

For the most vulnerable, we will provide the support when it is needed for as long as needed. When people can work, they should be expected to; a lifetime on benefits is no longer an option.

Amendments 72 and 76 are technical amendments that seek to restore the original policy intent for Clauses 51 and 52. The current wording of those clauses meant that days in the assessment phase before the determination that the claimant should be placed in the support group must count towards the calculation of the 365-day limit. This would not of course affect a claimant who remains in the support group throughout their ESA award, but it would affect those claimants who moved to the work-related activity group from the support group, at which point they would be entitled only to the balance of the 365 days after deducting the day spent in the assessment phase. This was never our intention and I urge noble Lords to accept this amendment.

I shall now address Amendments 71M, 72A, 73, 74, 75 and 75A. Amendment 71M would increase the time limit for claimants receiving contributory ESA in the work-related activity group from 365 days to a prescribed minimum of 730 days. We disagree that two years is the right approach. The noble Lord, Lord McKenzie suggested that this was a modest change. It would, in fact, cost a total of £1.6 billion by 2016-17.

[Baroness Hollis of Heigham]

Is that per year, not a roll-up?

[Lord Freud]

No, that is the total up to 2016-17—a roll-up.

[Baroness Hollis of Heigham]

It would be more helpful and reasonable if we had annual figures, not roll-up figures.

[Lord Freud]

I will be supplying annual figures later on. I wanted a single figure.

[Lord Freud]

It is a single figure. We believe that our one-year time limit is not arbitrary; rather, it strikes the right balance between restricting access to contributory benefits and allowing those with longer-term illnesses to adjust to their health condition and surrounding circumstances. In recognition of that, it is double the length of time allowed for contributory JSA and is one of a number of difficult decisions that the Government have had to make in view of the current fiscal climate.

Given that I was asked about the single figure, perhaps I may take the opportunity to read out the per annum figures. Next year, the change would cost £270 million; in the following year, 2013-14, it would be £420 million; the figure would be the same the following year; in 2015-16, we think that the cost would be £360 million; and it would be £140 million in 2016-17.

[Baroness Hollis of Heigham]

Do those interesting figures mean that by 2020 the figure could be expected to be below, say, £50 million?

[Lord Freud]

My Lords, I am not sure what the extrapolation would be. Those are the figures we have. If I have a longer run at it, I will make the figures available when, or if, I have them. I am sorry, but we do not have any figures stretching out beyond that point.

[Baroness Hollis of Heigham]

The Minister accepts that point that it looks as though there is a reverse bell curve here. It would be interesting to know, perhaps at Report, some information as to how that would pan out.

[Lord Freud]

My Lords, one can clearly see the process here, as you move through the bulge, of stopping as you take on the transfer from IB to ESA. You can see that the effect of moving from one year to two years is a reduction as you go through that group—the bell curve, as the noble Baroness described it.

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[Baroness Hollis of Heigham]

I think that the noble Lord will also note from comparative research that their replacement earnings benefit, whether you call it JSA, IS or whatever, is a much higher proportion of earnings than is the case in the UK.

[Lord Freud]

My Lords, as noble Lords know, direct comparisons of systems are terribly difficult to make.

[Baroness Hollis of Heigham]

That is the point that we are making, I think.

[Lord Freud]

Although we have what seems to be a rather modest level of primary benefit, whether it is JSA or ESA, we pile up a lot of other “elements”, we might call them, in terms of housing benefit to get substantial figures. Therefore, making a comparison internationally is not straightforward at all. I am not making a straightforward comparison of amounts; I am making a straightforward comparison of the timing issue. I am saying that the 52-week limit falls into line with much international practice in countries whose systems we generally admire. I am arguing that, to that extent, the accusation that this is arbitrary simply does not stand. We are conforming with norms which are followed very broadly internationally.

[Baroness Hollis of Heigham]

That may well be right and I would not disagree with the noble Lord’s point about time and the comparison that he made there. However, the point is that that time limit, although it may or may not be regarded as arbitrary, is not threatening if the drop-down from that limit to the alternative income, which is income-related, is not particularly significant. That is the point that some of us were seeking to make.

[Lord Freud]

My Lords, in practice, other countries in northern Europe, as noble Lords will know, have a very much more contribution-based system, and the support for people who fall outside that system or are immigrants who never got into it is much lower than with our support systems, which are pretty good for people who are not in the economic system. Therefore, I am not sure that I accept that point at all.

[Baroness Hollis of Heigham]

I am sorry to intervene again but this is Committee stage. The point there is precisely the aim behind this set of amendments. Most of the European countries that I have studied—and I have looked at the Bradshaw research and so on—have a much higher commitment to the contributory principle. Therefore, this covers people for much longer at a much higher level with a sense of entitlement. This issue goes back to the very powerful arguments put forward by my noble friend Lady Lister. With a strong commitment to a contributory principle, even if you have a relatively short time limit for sickness benefit, because of the resulting contributory benefits to remaining unemployed, the drop-downs are therefore not threatening. That is surely the point that some of us have been seeking to make.

[Lord Freud]

My Lords, I think that we could debate this issue for a long time. The point that I am simply trying to make is that the arbitrary nature which this time limit has been accused of looks much less arbitrary when it seems to be the time norm chosen by a whole range of countries. Other countries such as Canada, Germany, Poland and Australia also feel that it is right that there should be some limit to the state’s support for those who have an illness.

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[Lord Freud]

No, let me make that clear. I will take the points one by one.

Professor Harrington is looking very closely at cancer treatments and is working very closely with Macmillan in particular, to which I must pay testimony; it has provided a lot of extraordinarily valuable background data that we have been grateful for and are using. So there is a process going on.

The point I was making about the timescales is that clearly there is a time when not absolutely all but the bulk of all cancer sufferers going through treatment will be on the support, which is unlimited. They will have gone through that process, then they start the WRAG process, which is time-limited, after that. So it is not “one year for your illness”, if you like; it is one year on these particular benefits.

The noble Lord made a most effective speech at Second Reading, which I remember vividly. I am sure everyone else does as well. He was making the point about how tough it is getting through the experience of cancer—and we are worrying about that in detail. But I also want to give reassurance on the example the noble Lord used, when you get to a year and you are still having a tough time. That is probably not likely to happen in practice very much because of the different phases.

[Baroness Hollis of Heigham]

What the Minister is saying, which is a welcome elaboration of policy, is that new entrants into the system who have the sorts of conditions that the noble Lord, Lord Patel, and others described, may very well be reassured by the fact that they have up to two years or longer on non-means-tested benefits. Does that not therefore put into even sharper concern the situation of the retrospective nature for people already on those benefits raised by the noble Baroness, Lady Meacher? Does it not suggest that by comparison the situation is that much the harsher?

[Lord Freud]

I will come back to that issue and argue strongly that there is no retrospection. I will make that argument in a coherent way. No, the people who will have been on support will be in a position where there will be no difference between the existing group and the new group. There will not be that difference. As the noble Lord, who has infinitely more experience than I have, said, with cancer there is a differential experience, and some people literally sail through the process—the really lucky ones. Maybe that is slightly over the top, but they get through the process in a reasonable time, pretty fast, while others find it very tough indeed. If we put everyone in the same category by definition a type of illness, we get back to the problems that we have with treating people who need help to work and everything else—we are excluding them from that. Of course, once you set a precedent in that area, it rolls on and on. That is why we are going about this using the WCA as the route to putting people in different categories.

I was also asked about support to work. Support to find work will be widely available for all ESA claimants from the outset of their claim, irrespective of their health condition. Following the work capability assessment for most ESA claimants placed in the work-related activity group, that support will be mandatory either through Jobcentre Plus or through the work programme once their prognosis is down to a particular number of months.

The vast majority of ESA claimants who want the more intensive support offered by the work programme will be able to access it as soon as the outcome of the WCA is known. That includes contributory ESA claimants who can remain on the programme after their benefit has come to an end—to meet the point raised by the noble Baroness, Lady Lister. That ensures that they receive all the support they need to help them to return to work. Clearly, that was a conscious decision in the design of the work programme because it is clearly not supported by any sort of delaying switch. This is a straight investment in helping those individuals back into work.

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[Lord Freud]

My Lords, people in the WRAG who have gone through their time-limited period do not then have a right to go into the support group on a contributory basis. Clearly, they have a right to go into it on an income-related basis, but not on a contributory basis.

[Baroness Hollis of Heigham]

I am now completely baffled. I thought the argument was that if somebody had not exhausted their time on the contributory basis and had, for whatever reason, been able to get back into work, which then collapsed or folded, they would be able to get back into the support group using some of the contributions that were still available. The noble Lord ran against this the argument that this might be five years away and was therefore unrealistic in terms of connection. The point that I was going to press was that, in that case, the Minister was saying that one of the easements that we currently have is the 12-weeks’ linking rule. I was going to come back and suggest that in these circumstances it would be sensible to have something more like a 12-month linking rule so that there was a realistic time in which, if either the job or the person’s health folded again, they could come back and use up their unused period of contributory benefit.

[Lord Freud]

My Lords, clearly, they can use up time that they have not used. Therefore, if you are nine months down in the period of the contributory WRAG but go to work and come back, and are due to go into the support group, you can do so. However, if you have used up your contributory element of WRAG, there are, as I was trying to describe, some quite complicated effects. In practice, there may be up to a two-year period to do that. We have an easement, allowing a claimant to satisfy the first contribution condition for ESA if they have paid contributions in any tax year at a certain rate and have received a contributory ESA award in the last complete tax year, before the current benefit year in which they are claiming again.

It is quite a complicated situation. In practice, the easement for many people will work for about two years in those circumstances but no longer. It will not, as Amendment 71P is looking to do, make it unlimited. There may be different costs to having an easement of five or 10 years but we have not had a chance to look at the costs of this amendment. So I cannot accept that we make this amendment and urge that it is not pressed.

I am completely lost in my brief.

[Baroness Hollis of Heigham]

Perhaps we should have a tea break. The votes were so demanding that we have not had time for one.

[Lord Freud]

Moving swiftly on—Amendments 72A and 73 exclude from time-limiting any days contributory ESA claimants in the WRAG have received ESA for before this clause comes into effect. We expect that around 100,000 people will have been in receipt of contributory ESA in the WRAG for more than 12 months by April 2012, plus an additional 100,000 who will reach 12 months’ duration in the WRAG during the rest of 2012-13.

On the issue raised by my noble friend Lady Thomas on retrospection, a benefit claimant has no right to receive ESA indefinitely if the conditions of entitlement change or their circumstances change and they no longer meet the conditions of entitlement. Through the amendments made by the Bill, we are changing the conditions of entitlement for the future so that entitlement will not end until Clauses 51 and 52 is commenced. This will not affect any entitlement that has already arisen. I assure noble Lords that we are not seeking to recover past ESA payments that claimants have received correctly, but merely defining their future entitlement to ESA on the basis of whether at the time the clause is commenced they have had ESA already and if so for how long, and whether they are in the WRAG. We took the decision to issue 115,000 notification letters to all claimants potentially affected by this change to ensure that they were given sufficient notice. This generated around 4,200 inquiries from claimants in response.

We wish to strike a balance between fairness of treatment for all those affected and complexity. We do not think that it is reasonable that people in the WRAG who have already received contributory ESA before Clause 51 comes into force should continue to do so for an additional year after the clause is commenced. This would be unfair to new claimants; we want as many people as possible to receive benefit for the same period of time. Given the very difficult financial position that we inherited from the previous Administration, this is another difficult decision that we have had to make to ensure that the economic well-being of our country is protected.

[Baroness Meacher]

Can I just raise a question? The Minister talks about the unfairness about those in the future and those in the past, but that issue exists anyway. People who started claiming 18 months or two years ago, or whatever, clearly had a different length of contributory ESA to those people who claimed any time from 1 April last year in the Government’s terms. What I was suggesting was that the conditions are changing as of 1 April next year, and it is retrospective to suggest that the conditions change from 12 months previously. That is what is retrospective. Of course, you will always have unfairnesses between the past and the future when you change laws. It is not logical to suggest that there is some sort of inequity between past and future and, therefore, there is no retrospection. I think that the Minister has to accept that there is retrospection here.

[Baroness Hollis of Heigham]

My Lords, perhaps I may add to the Minister’s woes. He will no doubt be aware that previous Administrations faced this difficulty when we moved from IVB—invalidity benefit—to incapacity benefit. What happened was that people on invalidity benefit remained on that benefit and only new entrants went onto incapacity benefit. That is one path. I can quite see that allowing long-term claimants to have two or three different paths is technically complicated and administratively undesirable, but it is what is most supportive and decent to the individuals concerned. Their expectations are not suddenly changed part-way through their later years.

The second path that the noble Lord could adopt would be to say that from now on, at a certain date, this will be a common rule for all new and existing applicants. That would be the middle path. What would clearly be wrong would be to say that this will apply only to new applicants and that we will knock off existing claimants who have come up to the time barrier. I have never known that in social security before—ever.

[Lord Freud]

My Lords, the accepted convention on retrospection is that it applies from the announcement of a measure. When the price of petrol goes up in the Budget, it goes up that night or the next night and then the Finance Bill becomes an Act four or five months later. That is the convention—you go from the date of announcement. We announced this move from October 2010.

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[Lord Freud]

My Lords, one of the clear preparations is to understand whether you are now entitled instead to income-related ESA on the WRAG, or to take steps to get into a job, or whatever it is. There are a number of things, but preparation would cover all of them. However, the documents written in October 2010 were saying that this change was coming in April 2012, effectively giving 17 or 18 months’ notice that this change would apply. That is what was intended by the document.

We have taken steps to give people whose awards will end, either when the clause comes into force or shortly after, time to assess their circumstances and adjust to the change. We have written to all existing contributory ESA claimants who could be affected to make them aware of this change. It is important to remember that claimants in the support group and those claiming income-related ESA will not be affected. The noble Baroness, Lady Hayter, raised the issue of the impact on the lowest deciles. The analysis in the impact assessment shows that although many people affected are in the lowest deciles, they will tend to be fully or partially compensated by income-related ESA and those who will not be eligible for income-related benefits are typically in the middle or higher deciles.

The government amendments I have already outlined ensure that days in the assessment phase for a claimant subsequently placed in the support group are excluded from the 365-day total. Amendment 74 would go further than this; it would mean the 365-day limit for all contributory ESA claimants, including those placed in the WRAG, begins only from day 92 of the claim. This would therefore give an extra 13 weeks of contributory ESA to WRAG members, increasing their overall award to 15 months. Another effect of the amendment would be that, if claimants have repeated short-term claims and as a result they are not medically assessed via the WCA, these claims might never individually go beyond the 13-week assessment phase. If so, the 365-day time limit might never apply to their contributory ESA award. This amendment could therefore create a perverse incentive for claimants to terminate the award before the end of the assessment phase; they may also try to delay attending the WCA. We do not believe that such behaviour should be encouraged.

Amendment 75 would allow claimants receiving contributory ESA who move in and out of the support group, to start a fresh 365-day period each time they move from the support group back to the WRAG. For those claimants moving between the two groups regularly, it is likely to mean they would be able to remain on contributory ESA indefinitely. This amendment would lead to inconsistent periods on benefit for claimants. For some, time spent in the WRAG would count towards the 365-day limit while for others it would not. This is unfair. We believe that everyone should be treated the same, irrespective of when they are placed in the WRAG. I understand the noble Lords’ concern about fluctuating conditions, which may have prompted this amendment. We recognise the importance of the role the WCA plays for people with fluctuating medical conditions, as I have discussed.

To pick up one more point on the cancer issue, I want to make it absolutely clear that the present position is that anyone who is diagnosed as terminally ill and who is expected to die within six months will automatically be placed on the support group.

[Baroness Hollis of Heigham]

I am sorry, but could someone be diagnosed as terminally ill as a result of the biopsy and be given a life expectancy of 11 to 12 months, which may be accurate almost to the week, yet not be deemed under this condition to be terminally ill?

[Lord Freud]

That is correct. That is the current position but the reality is that the treatment provision is likely to catch most of those people.

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[Lord Freud]

My Lords, I know that this is a very emotive matter and I have said that we are looking very closely at the recommendations from Professor Harrington. I have picked up the concerns on this matter, and I think that that is as far as I can go today.

Amendment 75A would introduce an additional income disregard for partners when calculating an award of income-related ESA. Based on the current annual personal allowance for income tax of £7,475, this disregard would amount to a gross weekly amount of £143.75. Currently, when calculating an award of income-related ESA, we provide disregards on partner’s earnings of £20 per week and a disregard of between £10 and £20 for other specified income. This contrasts with universal credit, where a disabled person would have a minimum earnings disregard of £40 per week.

The practical effect of this amendment would be that the DWP would be forced to amend existing DWP regulations to remove existing disregards and make new regulations to disregard a minimum of what, under current tax allowances, would be £143.75 per week of a claimant’s partner’s gross income when calculating entitlement to income-related ESA. If we did not amend the existing disregards, the excess would then be subject to an additional £10 to £20 disregard where appropriate. In total, this would potentially increase expenditure on the ESA by up to £500 million per year.

We do not think that this approach would be reasonable. Introducing a significant new disregard for ESA claimants would be unfair to others receiving other income-related benefits, such as claimants whose partners claim income-based jobseeker’s allowance, where the earnings disregard is currently set at £10 per week, and ESA claimants who have no partner.

At this point, perhaps I may introduce the question of what happens to payments of contributory benefits—

[Baroness Hollis of Heigham]

Returning to the previous point on Amendment 75A, will the Minister confirm, for clarity, that the figure of £500 million per year was related to the cost of this amendment only, not to changing other disregards? I was not clear about that from what he said.

[Lord Freud]

Yes, it applies to this amendment only.

[Baroness Hollis of Heigham]

Therefore, having this exclusion for this group would cost £500 million a year with no knock-on consequences for other disregards for people on JSA or whichever benefit the Minister cited. I just wish to be clear on this.

[Lord Freud]

We have done a relatively simple sum on this and this is the change. We have not rebuilt the whole system to make it consistent.

[Baroness Hollis of Heigham]

Is it therefore also net of the actual disregard that people will get, which will be £20 plus possibly some other amount?

[Lord Freud]

We have put it on top of that £10 disregard.

[Baroness Hollis of Heigham]

In that case, before the Minister goes on to a different point, why does he think that the situation of someone whose partner is on JSA, but with no history of disability or whatever in the family, is identical to the situation of a partner who is managing to care for a person for possibly 20 hours a week or more—that is why they are on those benefits anyway—and is, on top of that, hanging on by her fingertips in the world of work? Incidentally, we have now established that this will, first, not make it pay for her and, secondly, will almost certainly encourage her to leave the labour market. Why does the Minister think that there is any equitable comparison whatsoever between that and JSA? I am all in favour of establishing simple parameters so that people know where they stand, but I should have thought that the noble Lord would accept that someone who is disabled and has a partner, or possibly a wife, caring for them for 20 hours a week and in a part-time job is none the less in a very different situation from a young couple in their 20s who are on combined JSA.

[Lord Freud]

My Lords, at that kind of annual cost this really is an expensive amendment. Whereas one can clearly look at elements and disregards in the system later when there is some money—I have made this point before—this is a lot of money.

[Baroness Hollis of Heigham]

Can the Minister then tell us what the total saving on the ESA is going to be overall so that we can see what percentage this represents?

[Lord Freud]

Yes. I am speaking slightly from memory but the running rate is about £1.7 billion a year. I am sorry—I have tripped myself up on that.

[Baroness Hollis of Heigham]

It cannot possibly be. You cannot have £500 million a year and £1.7 billion in total. That does not work, but I would be happy for the noble Lord to refer to it later.

[Lord Freud]

I will refer to it in a minute. Let me gather my forces. I come to the point made by the noble Baroness, Lady Lister, on ESA contribution and universal credit. We are looking to simplify the payment arrangements for cases where there is entitlement to both universal credit and contributory benefits. Customer insight research suggested that claimants would prefer a single payment of universal credit rather than two separate payments, but no final decisions have been made. The key point is that contributory ESA and JSA will continue as individual entitlements. In other words, as now, they will not be affected in any way by the circumstances of the partner.

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[Lord Freud]

My Lords, we have had this discussion before. I come back to the point that one of the most interesting opportunities in the universal credit is the budgeting support. When I talk about budgeting support there is an element there of how you run your household finances, which we are just beginning to explore. There is huge potential in that and I am just beginning to think about what that could imply and what it means, so we will come back to this in the months to come because it has enormous promise in the areas that the noble Baroness is worried about.

Let me go through the AME savings, which were raised by the noble Baroness, Lady Hollis. Running each year from 2012, they are: £420 million; £780 million; £1,090 million; £1,330 million; and £1,380 million. The £500 million—

[Baroness Hollis of Heigham]

What are those the savings on?

[Lord Freud]

They are the AME savings from Clause 51. The £500 million cost that we are talking about of this amendment is calculated on the basis of applying the disregard to all ESA claimants, not just those affected by time-limiting. We would have to apply it to everyone.

[Baroness Hollis of Heigham]

Is the Minister saying that the £500 million cost of Amendment 75A exceeds the total amount of savings on all these changes in 2012?

[Lord Freud]

Yes. This is the ESA income-related claimants. I think that has a £500 million average cost per year spread over that period, but it is a per year cost. No, I am sorry; it is a steady-state £500 million, so it should be looked at against the £1.3 billion or £1.4 billion figures as a proportion.

[Baroness Hollis of Heigham]

These figures seem deeply implausible to me, but we will work on them. Thank you.

[Lord Freud]

Additionally, the amendment would likely weaken the financial incentive for a benefit claimant’s partner to take up full-time work. It would increase the number of people who qualify for income- related ESA and therefore give them automatic entitlement to housing benefit and/or council tax benefit at a cost of approximately £50 million per year.

In addition, if Amendment 75A were accepted and we did not mirror that larger disregard in the housing benefit and council tax regulations, it would mean disparate treatment between those claimants passported automatically on to housing benefit or council tax benefit because they are entitled to income-related ESA, and those who claim housing benefit or council tax benefit on low-income grounds. That would be unfair. We estimate that it would cost approximately £50 million per year to mirror this amendment in the housing benefit regulations. That is in addition to the £50 million previously mentioned.

If the amendments tabled by noble Lords were accepted, either singularly or collectively, it would significantly reduce the expected benefit savings of these measures. If Clause 51 did not stand part of the Bill, the entire savings projected by this measure would be lost. That amounts to around £5 billion in total by 2016-17, and we went through the individual years.

[Baroness Hollis of Heigham]

I am sorry; the Minister said £5 billion went through the individual years. My figures add up to £3.5 billion.

[Lord Freud]

Well, I make it nearly £5 billion to 2016-17.

[Baroness Hollis of Heigham]

That is £420 million, £780 million, £1,090 million and £1,380 million.

[Lord Freud]

You missed out £1,330 million. I have £420 million, £780 million, £1,090 million, £1,330 million and £1,380 million. That is nearly £5 billion.

Accepting Amendment 71M would reduce the total savings by around a third by 2016-17, which is £1.6 billion. Accepting Amendments 72A or 73 would reduce savings by around £420 million, which represents the entire savings forecast projected for 2012-13. Amendment 74 would reduce savings by around £430 million in total by 2016-17.

--- Later in debate ---

[Lord McKenzie of Luton]

I can support my noble friend: as I understand it, people get the basic JSA rate in the assessment period.

[Baroness Hollis of Heigham]

You might as well be on JSA and be done with it.

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[Lord Freud]

Sorry, I withdraw that.

[Baroness Hollis of Heigham]

Is the Minister saying that after 13 weeks you get paid a higher rate even if you have not been assessed because the assessment is taking longer than your 13 weeks? It might take 20 weeks or 25 weeks. Is that what he is saying; that it is okay for part of the period to get the higher rates but the lower rate period counts in the run-up to that? Is that what he is saying?

[Lord Freud]

Yes.

[Baroness Hollis of Heigham]

Forgive me, but that seems to be a very confused position.

[Lord Freud]

Whether it is confused or not, the position is that, when you are claiming the ESA rate, the first 13 weeks you are in the assessment phase you are on the lower rate. Then you go on to the standard WRAG rate from week 14.

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[Baroness Hollis of Heigham]

My noble friend’s point is entirely valid. You are nominally, on paper, entitled to 12 months of the WRAG money, but in practice it is actually 12 months minus 13 weeks—three months—because for that period you are on a benefit that for all purposes might just as well be JSA, because it is at a lower rate and therefore should not realistically count.

[Baroness Lister of Burtersett]

What is the principal reason for that? How does the Minister justify it?

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his very extensive reply dealing with a whole host of interruptions. That must certainly be a record for this Committee.

[Baroness Hollis of Heigham]

I wonder if my noble friend will allow me to ask him a question? Does he not agree that this shows the undesirability of having one vast grouping all day, which means that we are constantly interrupting the Minister because he is about to move on to something else and we cannot have a discussion on different topics? It would have been perfectly simple to have turned it into something like four groups on the different issues. We could have had a coherent discussion on each of those and then gone on to a wider discussion at the end. This way, we have been to-ing and fro-ing trying to get information. No wonder the Minister has sometimes had to shuffle his papers. It is because of the way that this has been grouped. It is madness.

[Noble Lords]

Hear, hear.

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[The Deputy Chairman of Committees (The Countess of Mar)]

My Lords, if I could offer some guidance, the groupings are informal and noble Lords are perfectly at liberty to decouple amendments if they are not happy.

[Baroness Hollis of Heigham]

The noble Baroness the Deputy Chairman of Committees is absolutely right, but you do have to lead on the amendment group to have that right.

[Lord McKenzie of Luton]

To satisfy both my noble friends, there is a balance to be struck between making decent progress on the Bill and having coherent discussions. I hope that we have achieved both, or will achieve both, today.

I come back to the Minister’s response, but will comment on what other noble Lords have said. The overall tenor of our very powerful debate this afternoon is clearly to the effect that people are extremely unhappy with these provisions. Comments have ranged from suggesting that we should not have them at all, with Clause 51 not standing part, to a series of detailed amendments. Noble Lords have made a range of extremely pertinent points. The noble Baroness, Lady Meacher, talked about job prospects and asked where the fairness was in this. My noble friend Lady Lister talked about the value of the contributory principle and making sure that it does not get lost, as well as the quality impact assessment and the challenges of denying people an independent source of income.

The noble Baroness, Lady Thomas, talked about the changing of the rules. We do not have an answer yet as to why the Government changed their mind on that, and the Minister may wish to respond further in due course. The noble Baroness, Lady Morgan, raised a range of concerns focused on how the WCA works, and how people access the support group, particularly those who are terminally ill. The noble Lord, Lord Wigley, was one of those noble Lords concerned about whether Clause 51 should exist at all, while the noble Lord, Lord German, talked about the WCA getting it right. I absolutely agree, and we have common cause on that, but we should get it right irrespective of these provisions as it serves a purpose around conditionality and support that should be available to people.

As for what is arbitrary and what is not, I warm to the Minister’s definition—it is what others do, so it is not arbitrary. On that basis, we might almost apply to join the euro, but I do not think that the Minister would suggest that.

Our amendment fundamentally looked at these things being dealt with by way of orders, so you could build an evidence base as to what was appropriate. Yes, we had a two-year minimum, which one would accept was not based on the most robust of evidence. My noble friend Lady Hollis warmed to the thrust of the amendment, as it was one way to ameliorate some of the impacts of the provisions, although it does not deal with them entirely. For example, it does not deal with the independent source of income, which my noble friend Lady Lister was concerned about.

My noble friend Lady Gibson was also concerned about the very existence of Clause 51, and there were some very moving examples from my noble friend Lady Hayter. The noble Lord, Lord Patel, led the charge on the challenge that the assessment period should not be included, that Clause 51 should not be there at all and that there should not be a start to this before the legislation comes into force. There was an interesting reference to Lib Dem conference resolutions, which we might keep in our sights.

However, we should thank the Minister for a very full series of exchanges on a lot of detailed points. Fundamentally, this comes back to costs, which he always quotes at us. I agree that we shall have to study Hansard and get into the figures. He could not resist the jibe about the deficit, although I wish he had because I could have resisted pointing out that we have had an international financial crisis that has affected all major economies.

[Baroness Hollis of Heigham]

Driven by bankers in their former lives.

[Lord McKenzie of Luton]

Driven by bankers—thankfully not accountants. With great respect, I normally find the Minister convincing but he was not convincing on the assessment period, and at the end of the day acknowledged that he had concerns about that. As to the definition of whether the proposal is backdated or not, starting this process up to 12 months before the legislation comes into effect is a very unusual way to proceed.

Part of the reason why we are going down this path is that the Minister said right at the start of his response that we should expect people to avail themselves of the help and support available. He also said that a lifetime on benefits is no longer an option. I would not disagree one iota with that, but no one is arguing for a lifetime on benefits—certainly not for those who can move closer to the labour market and into work. That is not a matter between us, but the noble Lord did not deal with the point about the WCA, around which there is a lot of discussion. We all want it to work as it should do, but is there not, when people are allocated to the WRAG or the support group—certainly the WRAG—a prognosis that goes with them that says how long they are likely to be in that group and, therefore, when they are likely to be fit to join what is currently the JSA group? That is the hope and that is how it works. The Minister has said that in the past and told us that that prognosis is tested before someone is moved off benefit. We therefore have a process by which an individual judgment is made about how long people will be assumed to be in the WRAG, and then ultimately, when that time is up, whether they should remain in the WRAG, go into the support group or join JSA. We have an individualised process, do we not? Why can that not be used?

This is where we fundamentally differ from the Government: if the object is to ensure that people can stay in the WRAG for as long as they need to and have the benefit of the contributory ESA system for as long as is necessary, is that not a fair way of proceeding? On the other hand—I think that this is probably the Government’s position because we need to save money—is the Minister saying, “We do not care how long you need to stay in the WRAG; after a period your contributory benefit will be chopped”? It seems that the position is not related in the Government’s mind to how long people should need support in the WRAG.

--- Later in debate ---

[Lord Patel]

My Lords, I support the amendment moved by the noble Baroness, Lady Lister, but I would also remove Clause 52 from standing part of the Bill. Many charities including CLIC Sargent, a charity which supports children with cancer, and other disability charities are also against this clause. The charities, such as that leading charity for young people with cancer, have serious concerns because of the negative impact that proposals in the Bill will have on young cancer patients and other disabled young people. I believe the Government must undertake a proper assessment of the financial support available to those young people with long-term health conditions and/or disabilities before making these changes, as well as considering the cumulative impact of their programme of welfare reform on this age group.

I emphasise that my proposals do not seek to secure higher rates of benefit for those aged 16-24 but simply to ensure a more level playing field in relation to access to benefits and financial support. For example, I believe it is wrong that students with a long-term illness must already be in receipt of DLA to be eligible for income-related ESA. These proposals are supported by other charities too, particularly young disabled peoples’ charities.

As far as cancer is concerned, every day 10 families are told that their child has cancer. A study in 2007 found that 83 per cent of families incur significant extra costs associated with their child’s cancer treatment, with 68 per cent of families experiencing worrying financial difficulties. New research, published last December, found that on average young people with cancer spent £277 each month over and above their normal expenses, as a result of their illness. Half of those young cancer patients surveyed had to borrow money as a result of their illness. More than one in five had borrowed over £1,000, with almost one in 10 borrowing over £2,000. The top two expenses were travel and clothing.

My proposal would retain the youth provisions for contributions-based employment and support allowance and would ensure that young people with long-term health conditions and/or disabilities are not disadvantaged under the proposed new arrangements for ESA. The reason for these proposals is clear; under the youth provision, a person under the age of 20 who is not in full-time education and who has had a “limited capability for work” for 196 consecutive days can gain entitlement to contributory ESA despite not having reached the contributions threshold. ESA youth claimants are disabled people who are aged 16-19 inclusive or who satisfy the age exception rule, which revolves around rules for education or training, if aged between 20 and 25; they have at least 28 weeks of continuous medical evidence to support a claim for ESA; they are not in full-time education; they have been resident and present in Great Britain for 26 out of 52 weeks prior to the claim; and they do not meet the normal national insurance contribution requirements.

The youth rules were introduced for incapacity benefit in April 2001 as a result of provisions in the Welfare Reform and Pensions Act 1999, which were intended to,

“refocus benefit on people disabled early in life who have never had the opportunity to work and gain entitlement to incapacity benefits through the payment of contributions”.—[Official Report, Commons, 6/11/00; col. 96W.]

The rules were carried over into ESA following the Welfare Reform Act 2007, again to ensure that young people who might not have had the opportunity to build up a sufficient contribution record would not be excluded from the non-means-tested allowance.

The Government intend to abolish the youth condition as part of the Welfare Reform Bill, as well as time-limiting its receipt to 12 months for existing claimants. The justification for this change, as set out in the impact assessment, is that it will simplify the benefits system and ensure consistency of treatment for those claiming ESA. This assessment completely fails to recognise that young people with long-term health conditions and/or disabilities are already in a place of disadvantage in comparison with older adults, hence the introduction of the youth condition in the first place, and that this change will entrench this disadvantage. This will mean that young people, including those unable to work because of cancer, for instance, will be extremely unlikely to be able to access the contributory element of ESA and will have recourse only to the means-tested income-related element to be subsumed into universal credit. Young people who are ineligible for the income-related component, which will include those with a partner who works more than 24 hours a week and some full-time students, could therefore lose up to just under £100 a week. This will have a devastating impact on those who are unable to work and are struggling with the significant additional costs of a cancer diagnosis.

The eligibility of young people for benefits is extremely dependent on their circumstances, particularly in relation to their education status. There are serious concerns, for example, about how students are treated under the system. Full-time students are able to claim income-related ESA only if they are already in receipt of DLA. I can give noble Lords a case study. This is another example of how the eligibility rules currently disadvantage young people. I am also concerned about the knock-on effect of many young cancer patients who are students becoming ineligible for DLA as a result of the introduction of PIP, removing their eligibility for ESA. It is critical that the Government ensure that the eligibility of students with long-term health conditions and/or disabilities for ESA is not dependent on their receipt of DLA.

I shall give noble Lords an example of a student. A young woman of 20, who was a full-time university student, was diagnosed with an aggressive sarcoma and came home to have treatment. Her mother is a single parent on income support with a younger child. The mother’s former partner died of cancer during the young woman’s treatment, meaning that the mother no longer received child maintenance for a younger child. The young woman was refused DLA initially and, as a result, was ineligible for ESA. In addition, this meant that the mother was not eligible for carer’s allowance, nor did the patient have access to a student loan, as she had taken a year out from university to have treatment. The family of three was therefore living on the mother’s income support alone and was in huge financial trouble, completely unable to pay the bills and under a lot of stress. The social worker, supported by CLIC Sargent, applied for a reconsideration and the patient was awarded DLA, which meant that she could get ESA, her mum got carer’s allowance and they got some housing and council tax benefit. Without the DLA and other benefits, this family would simply not have been able to cope financially.

A further 10 per cent of people will lose almost £100 a week by virtue of not qualifying for income-related ESA. Over a year, this amounts to £5,000. Only 20 per cent, or just under 3,000 claimants, will get exactly the same amount of income-related ESA that they would have got under the youth provisions. Based on government estimates, this loss of income may affect as many as 10,000 people by 2015-16. It is wrong that this saving should be levied from such a small group of vulnerable young people. Indeed, the department’s own impact assessment notes:

“The abolition of the ESA ‘Youth’ provisions is more likely to have an impact on disabled people because ESA is directly targeted at people with health conditions that limit their ability to work. There is a risk that the affected group will be more likely to need more support because of their condition than all ESA customers”.

My amendment is linked to my subsequent amendments in that they all seek to create a more level playing field for those young people with long-term health conditions and disabilities who require support through the benefits system.

[Baroness Hollis of Heigham]

I wanted to say only that I support the very moving amendments of my noble friend Lady Lister and the noble Lord, Lord Patel. When we introduced the 1999 Act, which I remember vividly, and replaced invalidity benefit with incapacity benefit, we considered and decided against the proposals that are now being introduced. This was primarily on the grounds of decency, but behind that lay another argument. The group that we were most concerned about at that time was not so much the cancer patients to whom the noble Lord, Lord Patel, referred, but those people with severe learning difficulties who would never find their way fully into the labour market and, as a result, could never build up contributions or savings. They might at some point receive a modest legacy or something that would help them but we did not want contributory IB to be dependent on that lottery. Therefore, we did not go down that road. Given the very small sums of money involved, in the interests of decency and given that such young people cannot build up the financial resources—and often the practical resilience, with the help of partners and so on—to allow them to cope, I very much hope that the Minister will think strongly about reconsidering the approach taken in Clause 52.

[The Earl of Listowel]

My Lords, briefly, I join in the request for the Minister to think very carefully about these matters. I have been moved by the speeches on this amendment. Reference was made to children leaving care, which certainly resonated with me. We know that disabled children are greatly overrepresented among children in care. We know that the transition from care is very difficult for many children without disabilities, so those with disabilities may be doubly disadvantaged as they make that transition into adulthood. Furthermore, we also know that for children with disabilities, in the general run, the turnover of social workers and many disturbances mean that the transition to adulthood and adult services is often very problematic. There are many good reasons why this amendment should be given careful consideration. I look forward to what I hope will be a sympathetic response from the Minister.

--- Later in debate ---

[Baroness Lister of Burtersett]

My Lords, perhaps it is the lateness of the hour but I did not think that the Minister read his brief with his customary gusto. I hope that that reflected his embarrassment at trying to justify what I called a mean-minded measure. I did not know that the previous Government had considered this, and I am very glad that they decided not to take it further, as my noble friend said, on the basis of decency. We are talking about decency here and this is an indecent clause. The amendment is purely a fall-back amendment. It would be much preferable if the Minister simply said, “We will continue with the status quo”. Therefore, the amendment would not be necessary. It is a minimalist amendment and, if it creates new problems, they could of course be considered. However, if the clause were to be withdrawn, we would not have to worry about the amendment.

I take the point about why the Minister cannot give us an assurance now about passported benefits, but I suggest that that should not therefore be used as a justification for this measure, given that we do not know who will be receiving passported benefits under universal credit. The Minister said that no other age group has this kind of concession. Of course there is no other age group because any other age group would normally be in paid work and be able to get their contributions. The whole point is that this group cannot be in paid work to get their contributions. I have to say that I am disappointed by the Minister’s response and I hope that perhaps he will reflect on what has been said and think again about this. He then came back and said that there would be a cumulative saving of £10 million. I mean, really—£10 million is absolute peanuts in public spending terms.

[Baroness Hollis of Heigham]

It is a margin of error.

[Baroness Lister of Burtersett]

A margin of error—I thank my noble friend. We are told that this is not about saving money. Therefore, it is totally inappropriate to say what the cumulative savings will be if it is not about saving money. With a heavy heart, I beg leave to withdraw the amendment.