Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(12 years, 11 months ago)
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Lord McKenzie of Luton
My Lords, I will be brief on Amendments 27, 30, 31 and 29, which deal with sanctions. However, given the hour, there is just one particular point I wish to pursue.
We have already had the assurances of the noble Lord and his colleagues that there will be no target set in respect of sanctions. That is clearly on the record in Committee. We might like one more go at it, but we need not spend any more time on that. In the other place we made the argument for reducing the maximum sanction from three years to one. Given where we are, I do not see merit in going over those arguments again; we will just have to differ on that.
The point that I wish to pursue is the opportunity for people to mitigate that longer-term sanction. My noble friend Lady Hollis touched upon this briefly in Committee. If someone is sanctioned for three years, your leverage to encourage them closer towards the labour market is very limited. Three years is a long period of time; people change and perhaps understand the consequences of what they have done. It seemed a reasonable proposition that they should have an opportunity of mitigating and reducing that three-year period. That is the point that we wanted to pursue in this amendment. I beg to move.
Baroness Hollis of Heigham
My Lords, I strongly support my noble friend on his last point. The whole point of sanctions is not just to punish but to change behaviour. If someone does so and therefore, having learnt their lesson, is willing to comply, they should get rewarded for that, so to speak, otherwise there is no incentive for them to change their behaviour. I hope that the Minister will hear my noble friend’s wise words, otherwise the sanctions regime will not work or stick—and, I suspect, will end up being judicially reviewable.
Baroness Meacher
My Lords, I shall speak extremely briefly to Amendment 28, which is in this group, but I would not wish the House to take the brevity of my remarks as an assessment of the importance that I attach to it. The amendment concerns thousands of people up and down the country with mental health problems, mental impairments and learning difficulties and would affect whether they are fairly treated or denied benefits unfairly because of misunderstandings and a failure to understand why those people have failed to comply with the conditionality requirements and then have their benefits removed or cut.
I emphasise that it is not sufficient, as I believe the Minister said in Committee, that if a matter is drawn to the attention of the officials, they will take that matter into account. Many of these people will not be aware that they need to make that clear; they will not even necessarily have the capacity to make it clear that their disability, handicap or learning difficulty prevented them satisfying the conditionality requirements. They may indeed be lying in bed, not opening their post, not answering the phone, not responding to requests to come for an interview and so on.
The Minister is very familiar with these issues, but I was concerned in Committee that he seemed simply to suggest that a person can point out that they have a problem. I would be interested to know whether he can assure the House that specific actions will be taken by officials to ensure that they have considered and checked whether a person has a mental health problem or a learning difficulty, and whether that has in fact affected their capacity to respond.
The other issue in the amendment has to do with reasonable adjustments. Of course there are people who cannot get to the office and attend an interview or assessment, such as people suffering with agoraphobia. Many others are also sufficiently unwell in a mental health way that they simply will not be able to perform as others might. Reasonable adjustments have to be made for those claimants if they are going to be fairly assessed and not sanctioned unreasonably. I will be very interested to know what the Minister has to say in response to these issues.
Lord Freud
My Lords, I will also try to be as brief as possible. We had a very good discussion on this area in Committee, and I can make clarifications which have been informed by some of that discussion. One of those clarifications is that we will limit the sanction amount to three years, so we will not have it compounding above that level.
The second relates to the parable of the prodigal son. From the argument of the noble Lord, Lord McKenzie, there has got to be a way back into the system. We are trying to change behaviour: where someone has come back and got a job for six months at his job goal level, we will take away his sanctions at that point. I thank noble Lords for the very informed debate that we had.
Baroness Hollis of Heigham
Did the noble Lord say that if the person got a job, after six months in the job the sanctions would be removed?
Baroness Hollis of Heigham
I do not think that is good enough. That means that coming back in and searching for the job—in other words, conforming to the sanctioning conditions—is not enough. He also has to be successful, which will depend on the lottery of what jobs are available, and so on. I would have thought that providing he is conforming to the work conditionality regime in searching for a job, that ought to be enough. You should not be able to punish him just because he lives in Merthyr Tydfil and the jobs are not there, whereas in central London they may be.
Lord Freud
My Lords, we thought about this matter very deeply and thought that it was very hard to genuinely measure compliance if there was not a hard result. We decided that the hard result was taking a job and holding that job for six months, and then we would take away the sanctions. That is where we are. It is a lot better than where we were.
Baroness Hollis of Heigham
But if that means that he was previously on JSA and HB as part of his universal credit, and he has now gone into low-paid work, so is getting a wage, then presumably if the sanctions still apply he would fail to get the housing element going into his universal credit, and he would not have enough to live on.
Lord Freud
No, my Lords, the sanction regime does not work like that. It takes away the equivalent amount of the JSA, so you keep getting your housing credit, but have this amount taken off, which will be a proportion of the total universal credit.
Lord Freud
I think I can safely say that we are not saying that. We are just saying that we want real proof of a change. The prodigal son must do more than turn up and warm his hands on the fire as the fatted calf is slaughtered. I am saying that he has to take a job and hold it for a minimum of six months.
Baroness Hollis of Heigham
Could the noble Lord perhaps move from the Old Testament to the New Testament?
Lord Freud
I thought it was the New Testament. It is definitely a New Testament matter. I am shocked that the noble Baroness—
Lord Freud
I am utterly shocked. Let me keep going; the hour is late and I am forgetting what I am talking about very quickly.
Turning to Amendment 28, we will impose reasonable requirements, taking into account the claimant’s particular circumstances, including any health condition or disability. Universal credit claimants with a health condition or disability that limits their capability for work will not be required to look for work. There are specific safeguards in this area. Decision-makers must consider any relevant matter raised by the claimant when considering whether there is good reason for a failure.
Lord Freud
My Lords, when we discussed a similar amendment to this in Grand Committee, I explained that we intend to retain the existing practice in the benefit system whereby claimants can be treated as having income or capital in cases of deliberate deprivation. However, we believe that different issues arise in relation to self-employment. We think that it is right in principle to apply a minimum income floor to claimants who choose to be self-employed but whose earnings do not make them financially self-sufficient. I confirmed in Committee that the floor will not be based on the hours claimants work. We assume that claimants’ earnings are at a level that we would expect from claimants with similar circumstances in employed work.
Claimants will not be forced to take reduced benefit payments by accepting the minimum income floor. Self-employed claimants will have the choice in universal credit. Some will choose to continue solely with their existing activity with the expectation of increasing their earnings. They will accept the minimum income floor. Those who do not will need to satisfy conditionality requirements. The conditionality regime will aim to guide the claimant towards the most appropriate form of gainful work. For some claimants, this would combine their self-employed activity with part-time employed work. In other situations, the regime may very well encourage the self-employed to keep going in their self-employed efforts. We will need to build a quite sophisticated regime to manage this.
This approach differs from tax credits, which allow claimants to receive maximum support so long as they declare that they are working a minimum number of hours. However, in 2009-10, for example, around 60,000 of the households claiming tax credits that received some or all of their earnings from self-employment declared earnings of under £2,500 a year—less than £50 a week. While this is legitimate under current rules, we believe that some intervention to guide claimants towards increasing their income is justified in return for state support.
Baroness Hollis of Heigham
Can the Minister explain what he expects here? The old enterprise allowance scheme, which was very effective, used to give people a top-up of £40 a week to start a business, and as far as I recall this ran for up to two years to give people a chance to establish a small business. How long will someone be allowed to have low earnings while they try to build up a business, and how quickly will guidance from young people in Jobcentre Plus, who frankly have never tried to start a business, steer them back into sanction and conditionality?
Lord Freud
I do not automatically think that we will use the example of young people in Jobcentre Plus to deal with some of the more complicated issues here. We acknowledge that the real issue is that we need to create an environment that encourages entrepreneurship. We need to balance the exact rules about the interrelationship between the new enterprise allowance and the time that we will allow. I do not have the exact figures yet, as we are still currently elaborating them. We are looking through all the details of employment earnings. Clearly, the HMRC is expert in this area and we are working closely with it to develop our proposals. I must say to the noble Lord who said that it was a straightforward matter that on that basis he can come and help us to do it.
We are aiming to get the reporting requirements aligned as closely as possible with the tax system. However, in our view, it is reasonable for claimants to provide clear information on their income in return for state support. We are looking at a number of rules within the current benefit and tax credit systems to see what the most appropriate approach is for universal credit. We will then prepare regulations that will set out clearly the way in which earnings from self-employment will be assessed. This House will have the opportunity to debate those regulations in due course, and I think that that will be a fascinating discussion.
In today’s debate we should focus on principles. We clearly need to avoid requirements that will add unnecessary burdens, especially for people who are starting out in business—the people whom we really want to encourage. However, we cannot have a situation where people can be treated as being in full-time work for conditionality purposes, but because they declare no earnings they receive as much benefit as though they were not working at all. That is taking it to the absolute extreme. I hope that this explains why the Government cannot support Amendment 32 and that the noble Baroness will feel able to withdraw it. I know that we will be discussing this area again.
Baroness Hollins
My Lords, in speaking to the two amendments in this group, I want to mention a personal interest in the issue that I shall be talking about, as some years ago a member of my family was affected by it.
As noble Lords know, the capital of a claimant is taken into account when assessing the level of benefit to be received. If the amount of capital is greater than a prescribed amount—I think it is currently £16,000—then the person’s benefits are adjusted accordingly. There are several exceptions to what is counted as capital and these include any funds held in trust. This is clearly outlined in the 2009 Housing Benefit/Council Tax Benefit Guidance Manual, which states that certain types of capital should be disregarded in full, including the value of any funds held in trust and the value of the right to receive any payment under that trust following payments made to the claimant as a result of a personal injury, such as vaccine damage payments or criminal injury compensation. The value of these funds is not taken into account when calculating the capital of the claimant. Therefore, any payment made into the trust as a result of a personal injury, such as criminal injuries compensation, will not count when the claimant’s benefits are considered.
These amendments seek to apply the principle that claimants who have received criminal injuries compensation should not lose benefits, regardless of the form in which it is received or kept. A year later, the 2010 Housing Benefit/Council Tax Benefit Guidance Manual states that officials should treat lump sum compensation payments as capital. Examples given include lump payments, such as those made by the Criminal Injuries Compensation Authority. However, the manual then reminds officials to disregard the value of any compensation payment for personal injury which is held in trust. I believe that criminal injury compensation payments should not be considered as capital at all when assessing the levels of benefit, regardless of whether this is a £1,000 payment for 12 weeks of blurred vision or the maximum of £500,000 which is paid out for injuries leading to indefinite loss of earnings. Recipients of larger sums are likely to put this into a trust, but recipients of smaller sums are not. They may intend to use it for a holiday—some recompense for the injury that they suffered. One of the purposes of criminal injury compensation is to give recipients the opportunity to improve their quality of life after their trauma.
These amendments would benefit some victims of crime, particularly people with mental health problems or learning difficulties. Not only are they more likely to be in receipt of benefits, they are also more susceptible to being victims of crime. The benefits that they receive are provided to cover essential costs, and any payments made as criminal injuries compensation are made in recognition of pain and suffering that the victim has gone through and perhaps for the purpose of making up any lost earnings.
The idea that the benefits that the person is receiving and the criminal injuries compensation provide for two distinct purposes is very important. It is for this reason that allowing one to influence the level of the other would be unfair. The Minister may consider that Clause 5 would have been a better place for these amendments. I hope that he will accept these amendments or undertake to bring them back at Third Reading in a more appropriate form. I hope he will reassure me that these simple amendments would be acceptable. I beg to move.
Baroness Hollis of Heigham
My Lords, I strongly support the amendment. I had the privilege many years ago of being responsible for vaccine damage payments within the department and always tried to make a distinction between payments that were in lieu of earnings, which tended to be of the incapacity benefit sort, and payments which were a lump sum. Sometimes there was a structured payment of capital over a period of time as compensation for suffering and injury as opposed to an earnings replacement. We always excluded that second element from coming within the debiting of benefit. That distinction has been well drawn by the noble Baroness, Lady Hollins.
I hope that the Minister can respect the ethics as well as the long history of making a distinction between getting an income replacement benefit—ESA, for example—and getting an element of compensation for damages, for suffering, for pain and so on. In my understanding that has always been protected and has not been debited against your rent. Otherwise it is not worth anything to you at all. That was never the intention of the law. I hope that the Minister can support the proposals of the noble Baroness, Lady Hollins.
Lord McKenzie of Luton
My Lords, the noble Baroness has brought an important point to our attention. I have only two questions for the Minister. Can he explain the extent to which the current rules are going to be translated and taken up in universal credit? The position at the moment is that the compensation recovery scheme does not apply to criminal injuries compensation. Can the Minister say whether that would continue under universal credit?
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(12 years, 11 months ago)
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Lord McKenzie of Luton
My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.
Baroness Hollis of Heigham
I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend’s request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.
Lord Wigley
My Lords, I was under the impression that when the noble Baroness, Lady Lister, got to her feet to speak, she said that she would move the first amendment and speak to the second. As she has her name on the first amendment, I would not have thought that there was an issue.
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Baroness Hollis of Heigham Excerpts(12 years, 11 months ago)
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Lord Freud
Yes I do, and I will come back to that if I may, because a whole series of questions was raised about transitional protection, which I need to deal with comprehensively.
Our impact assessments made clear that, overall, families are more likely to be better off on universal credit. In addition, departmental modelling estimates are that the impact of the reform of disability payments on the number of disabled children living in relative poverty will be negligible. We must remember that support for families with disabled children is provided by the universal credit package as a whole.
On the absolute figures of support, under universal credit, an out-of-work family with a disabled child will receive just over £8,000 a year in benefits for their child once universal credit has been introduced. That compares to just over £4,000 for an out-of-work family with a non-disabled child and about £1,000 for a family who receive only child benefit. The figure for a child on the severely disabled level is £12,000. That is the order.
Let me now turn to the really important point raised by many noble Lords about taking money away from families who have learnt how to build their lives around it. That is exactly why we have introduced transitional protection. My noble friend Lord Boswell has referred to an assurance on no losses for years one and two. The way transitional protection works is that where circumstances remain the same, people’s payment level is protected on a cash basis. That means that families currently receiving child tax credit will not see a cash reduction at all as a result of the move to universal credit, and we will provide cash protection for as long as the universal credit award is less than the previous benefit entitlement. I hope that represents a level of ring-fencing that the noble Baroness, Lady Turner, will recognise.
Baroness Hollis of Heigham
Perhaps I may ask the noble Lord about cash protection. Does that mean it will or will not be inflated each year by CPI?
Lord Freud
No, clearly there is an erosion factor. Cash protection does not also inflate it. But the point about the universal credit is that it is structured to provide adequate support for families overall, and on top of that where there are differences we have a reasonably long period of transitional protection.
We simply cannot maintain the existing rates for disabled children if we are going to increase the rates for severely disabled adults. I know it is hard to absorb lots of figures at once, but let me just try and capture it. What we are looking at is fundamentally paying a severely disabled child or adult £77 once the universal credit is introduced. That is a big leap for severely disabled adults today who are on £32.35. That is where we are trying to move to, and that is where we are trying to put our resource.
Baroness Hollis of Heigham
My Lords, I am moving this amendment precisely because I strongly support universal credit. If the House agrees with me in supporting universal credit, I suggest in all decorum that it should also support this amendment.
At the moment, council tax benefit is a social security benefit—a national benefit—which responds to local need. The DWP reimburses local authority spend. If, for example, a factory closes, the need for council tax benefit in that community may increase, and that need is met because the benefit is national and needs-led. Sensibly, therefore, it should be part of universal credit, along with JSA, housing benefit, ESA and so on, because the need for council tax benefit runs alongside those other benefits and should be related to family need, as universal credit will be. Instead, the DWP’s need to include CTB within universal credit appears to have been trumped by the demand of the DCLG and other departments that it form part of a completely separate agenda—the localism agenda. These agendas—universal credit versus localism—clash, and so far the wrong decision has been made.
What is DCLG proposing? In future DCLG will award a fixed-rate grant to local authorities from which it will have to construct its own council rebate scheme. What is wrong with that, your Lordships may think? Quite a lot, and there are three reasons in particular. First, instead of one national scheme that is common across the country, understood by everyone—claimants, local authorities, staff and advice centres—there will be 400 different schemes. There will be a separate and different scheme for every local authority in the country. Norfolk, for example, will have seven schemes that are all different.
Think of the staff resources involved, when we are trying to save money, in constructing and running such schemes, especially when local authorities already outsource much of their work. Think of the complexity of giving advice to people who come into, say, the Norwich Citizens Advice office from all over Norfolk, trying to understand UC and then having to add on seven different taper arrangements according to which district council they come from within Norfolk. All of the admirable simplicity of UC goes out the window. Think of the possibility of underpayment, overpayment, error or even fraud because there is no standard scheme. Given that there will not be enough money to go round, why would any local authority encourage take-up? They will not.
We in this House are rightly building these problems out of universal credit, and the Minister is to be congratulated on that. But we will be building them back in again if this amendment is not accepted. DCLG has balkanised council tax benefit in the name of localism. It recognises this, and now DCLG urges local authorities to do the opposite of what it was calling for—to share common schemes—in which case, why balkanise it in the first place? It will be financed by a fixed grant and will not be needs-led in future. If a factory closes and local need increases, the grant will not go up. Presumably everybody gets less. Or, it will have to be topped up by the council tax that is already suffering 30 per cent cuts in services and a freeze. Think, my Lords, for a moment if that applied to jobseeker’s allowance, and that what you have if you are unemployed in your district depends not on your needs, or on any national standard, but on the needs of everyone else in your district. Your payment would go up and down according to local employment or unemployment figures in your district.
DCLG in its consultation paper recognises this risk, so it suggests—hopefully, idealistically—that local authorities should voluntarily help each other and bail each other out. Oh yeah? Why balkanise, as DCLG requires, if local authorities are too small to bear the risk, as DCLG recgonises? Worse, that fixed grant will be cut by the DCLG by 10 per cent, perhaps more in future. There will be a 10 per cent reduction in council tax benefit per head, but pensioners are to be protected, so the cuts that fall on others will be 20 per cent. However the council, under pressure from local charities, could decide to protect, say, disabled people—I could understand why they would—and give them the full CTB. The more vulnerable families you protect in devising your own local scheme, the more that families in low-paid work—the last man standing, so to speak—carry the cuts.
The Association of North-East Councils has calculated that once vulnerable families are protected, other working-age claimants will face cuts of up to 50 per cent in their council tax benefit. Then work will not pay and universal credit will be a waste of time. Severe cuts in other words are being smuggled in under the drapery of localism but are they essential? At the same time DCLG is spending £250 million on reinstating weekly bin collection or £800 million to freeze council tax, so that my council tax bills are protected while those with much lower incomes on council tax benefit will face cuts of 50 per cent.
Finally, what you will get in CTB will, of course, be determined by your income. Families facing the means test of universal credit will now find that they also face a second means test—that of CTB. How on earth will the value of moving into work be calculated, which is what universal credit is all about, when people face two means tests, two tapers—one with national rules and one with 400 separate local rules—that are layered on top of each other? As the noble Lord, Lord German, rightly said in Committee,
“if you believe in a universal credit, and you have a postcode lottery for what that amount of money might mean to you, how on earth are you going to be able to judge whether or not work is beneficial for you?”.—[Official Report, 6/10/11; col. GC 381.]
Exactly so; I could not have put it better.
UC was designed to bring all working-age benefits together into one so that every one of us would know what we would get and why work paid. Under the localism agenda, council tax benefit—a social security benefit—is being plucked out of UC, thereby destabilising it and balkanising the system. Forgive me, but this is administrative madness. All of this is being proposed in the name of localism but do local authorities want it? City authorities, like the one I used to lead in Norwich, hate it, as they will see some of their poorest citizens unable to pay their council tax and facing arrears and debts. Equally, some small rural districts are now wondering where they will get the staff resources to devise and run their own in-house schemes. East Devon district council’s cabinet has said that the scheme means: “costs, costs, costs”. A councillor said:
“This should be strangled at birth. It is a disgrace . . . We haven’t got the resources and we haven’t got the time”.
Nearly 6 million people receiving council tax benefit will in future not know what they will get because they will have no entitlement—just a handout from the local authority whose generosity or meanness will vary from district to district, from factory opening to factory closure, and from year to year. We took social security away from local authorities when we finally abolished the Poor Law after the Second World War. Now one of the worst effects of the Poor Law—the postcode lottery—is being reinstated for council tax benefit under the name of localism. That is wrong. To add extra means-testing on top of universal credit’s means-testing is insane. It will undermine universal credit without a shadow of a doubt. I and almost every other Member of your Lordships’ House want to see it working, so what then is the point of this Bill? Worse, this guise of localism will make poor people poorer, and local authorities, in whose name this is being done, will be powerless to help them. Council tax benefit needs to be brought back within UC. I beg to move.
Lord Newton of Braintree
My Lords, I shall be brief because I know that the House wants to get on. I am a supporter of the universal credit, so I am opposed to anything that is inimical to its success, and the exclusion of council tax benefit is exactly that; it is totally inconsistent with the Government’s proposals.
It is an open secret, although I do not expect the Minister to confirm this from the Front Bench, that the DWP does not want council tax benefit to be excluded, that there has been a battle with the DCLG and that for the moment, although heaven knows why, the localism agenda has prevailed. When anyone asks about 400 different social security systems, we are told that it will not be allowed to happen—so the localism agenda, we are told, will not be allowed to be localism because the local systems will be made to come into line in some sensible way. That is daft, but it is what we are confronted with.
I have two or three points to make. This is said to be cash limited, and indeed a cut. What is going to happen in an area where there is a big factory closure and the money has already been spread out? Does everyone already on council tax benefit have to take a cut in order to finance those who have just come on to it? In areas where, say, a big Tesco opens and 400 new jobs are created, does everyone get a bonus because a lot of people have been taken off council tax benefit? It is mad.
My first constituency boundaries straddled a parish boundary; number 36 Havengore was in Braintree and number 34 was in Chelmsford, but the houses were semi-detached. Can we really have totally different benefit systems for the people living in those two houses? Again, this is mad. Do the local councils want it? The answer is no, it is a nightmare for them. We should stop it, and if this amendment is pressed to a vote, for the first time today I shall not be able to vote for the Government.
Lord Freud
I am afraid that I do not have any more precise detail but, although I do not think that in the consideration of the Welfare Reform Bill I can say soon, I can probably say that it will be between January and May or June, or something like that. I have no more precise information.
Baroness Hollis of Heigham
My Lords, I thank everyone who has taken part in this brief expedited debate. I beg your Lordships on the government Benches to hear the words of the noble Lord, Lord Newton, in their ears; namely, that 400 schemes are inane, insane, unwanted and unwelcome, and that council tax benefit should be brought back to where it belongs in social security in order to make universal credit work. The Minister tried to suggest—I would say manfully—that it is too late to change. I do not believe that. That is why we have this House of Lords and this Report stage. Universal credit will not come online until two years’ time in 2013. If your Lordships today support what I believe is the real view of everyone in this Chamber—that council tax benefit should be part of social security—they will support this amendment today. I should like to test the opinion of the House.
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Baroness Hollis of Heigham Excerpts(12 years, 12 months ago)
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Lord Skelmersdale
My Lords, I am glad that the noble Baroness, Lady Drake, has called attention to Clause 113, because it is easy enough for some people not to understand the form that they are filling in, even sometimes in the presence of a member of the Minister’s department in the jobcentre. My real problem with this clause is that it talks about negligence. If you fill in a form in a slapdash manner, that is negligent. I would far prefer something like “knowingly”: in other words, designing to commit some sort of fraud. That would be a much happier arrangement.
Baroness Hollis of Heigham
I support my noble friend’s amendment. Following on from what the noble Lord, Lord Skelmersdale, said, I would say that the test of fraud is normally—I think I saw a former Lord Chancellor who would know much better than I—associated with intent and ignorance of the law and is not a defence, but I think in this case it is because we are dealing with the interlocking of very vulnerable people and a new and very different system for people to understand.
There are three or four matters on which if I were asked now whether people needed to declare things, I could not guide them, and I like to think I have some nodding acquaintance with this Bill. For example, a lone parent has a boyfriend who works away. He stays with her overnight one or twice over the weekend. As a result, is she no longer a lone parent? Clearly it will not depend on their sleeping arrangements but on what contribution he makes to their financial arrangements. On a weekend basis, would that be sufficiently substantial to make her no longer a lone parent but part of a couple and therefore falsely declaring if she claims to be a lone parent? I am not clear what would happen in that situation under the Bill. Perfectly reasonably she might regard the fact that as she is getting universal credit she is not a lone parent and he is somebody who comes in as a boyfriend but not a partner.
With housing benefit, you could have a family with a student son who is living at home, going to the local university and working part-time. Should he be declared for housing benefit as a potential contributor to the rent so that non-dependent adult deductions come into play? I do not know. I think it would be quite difficult for that couple to assess.
Let me give another example that we discussed at considerable length and about which the Minister was rightly sympathetic—kinship carers. Conventionally, kinship carers are entitled to claim for child credit and so on if they have the equivalent of the child benefit book, which normally takes about eight weeks to come across. In future, given that child benefit will not necessarily be a separate benefit entitlement, if there is a rotating relationship in which the child goes back to its birth parents for a few weeks and then, because the father or the mother may be an addict of some degree, goes back to the grandparents, at what point and for how long a period of continuous care are the kinship carers entitled to claim the child elements in universal credit? I do not know.
In those three cases—and I could elaborate another six on disability benefits that are becoming clear to us—I would not be able to advise somebody on what they should declare on their forms as being relevant for the consideration of UC. It would be natural for them in those quite complicated situations not to declare things that appear to work against them. They would not be doing it with an intent to deceive. They may think it is a perfectly proper statement of their position as they see it, yet under this clause they could be caught for negligence and fined. That is completely unreasonable.
The one piece of advice I would give the Minister is that whatever he does, whether he claims that this is needed as a reserve power or not, he should not touch it for at least three years until after the Bill has come into practical effect because of the bedding-down issues that it will have. The Minister has to make only one mistake, such as his department suing somebody for penalties for negligence when the department was wrong—and there will inevitably be departmental error; there always is when you introduce new systems—and the whole of the good will behind this Bill will disappear overnight.
Baroness Lister of Burtersett
My Lords, my noble friend gives some very good examples of how easy it might be to make mistakes, particularly when the universal credit is quite low. I remind noble Lords that on 24 October the noble Lord, Lord Boswell, told us how easy it is to make mistakes. When he applied for his retirement pension, he got it wrong. Was he being negligent? No. It was an example of how easy it is to fill in a form wrongly. It is not necessarily negligence.
Apart from that little reminder of how any noble Lord could easily make a mistake, I also wanted to pick up a point made by my noble friend Lady Drake about the expectation that 80 per cent of claimants will be claiming online. Recently a piece of research, Increasing Digital Channel Use Amongst Digitally Excluded Jobcentre Plus Claimants, found that one group of those claimants were what the authors call the “uninterested”. The researchers said that this group will,
“require persuasion or compulsion before they will use digital services, possibly with the threat of a benefit sanction for non-use”.
I would be very grateful if the Minister could assure the Committee that there is absolutely no intention to sanction people for not using online procedures. Some people have a mental block against using computers and we do not want yet another sanction in the system. I know that it was researchers who said this, and not the department, but if he could give us that assurance now, that would be very helpful.
Lord Freud
My Lords, Amendments 104A and 104B, tabled in my name, are similar in intention to an earlier suggested amendment to Clause 102. These two amendments will ensure that where a claimant’s benefit is paid to a third party, usually a landlord, recovery of any civil penalty, along with recovery of the associated benefit overpayment, may be made by making appropriate deductions from that benefit payment. Currently, there is a slight difference in the wording used by this clause and Clause 102 when specifying that amounts are recoverable. This was unintentional.
Amendments 104A and 104B remove that difference and ensure a consistent read across. This will mean that, in the limited circumstances in which the third party benefit payment is the only one from which we can make a recovery, we can ensure that whenever a civil penalty is imposed, that penalty and the benefit overpayment may both still be recovered by deduction from that benefit.
In every civil penalty case there will always be an overpayment of benefit and we intend that the civil penalty will be added to the overpayment and recovered in the same way. Being unable to recover the civil penalty in the same way as the overpayment would mean that some claimants could evade the consequences of their negligence or failures to provide accurate and timely information and unnecessarily limit the methods of recovery available for civil penalties.
We want to make it clear that the civil penalty is always recoverable from the person at fault, even if in practice the claimant’s benefit is being paid to a third party. The process for recovery of the civil penalty needs to fit appropriately with debt recovery processes. Aligning the wording in new Sections 115C and 115D with that used in Clause 102 helps us to do that.
Amendments 104AA and 104ZA seek to prohibit the setting of targets for the civil penalty and limit our ability to impose a civil penalty to cases in which there has been a failure to provide information. The noble Baroness, Lady Drake, and my noble friend Lord Skelmersdale asked about negligence. We consider that the requirement of negligence in new Section 115C already implies that there is no reasonable excuse for the failure to take care of their award or claim. However, new Section 115C(1)(b) ensures that if reasonable steps to recover the error have been taken, the penalty will not apply. I certainly understand the possible ramifications if targets were attached to a penalty such as this. It is for exactly those types of reasons that we are not attaching penalties.
Perhaps I may update the noble Baroness, Lady Drake, on the figures in the impact assessment and the number of penalties. Last week, on 22 November, a revised impact assessment was issued that reflects updated estimates relating to the new civil penalty. We are assuming that the changes based on assumed overpayments of above £65, rather than the overpayment of £15, which was part of the earlier working assumption, has led to a substantial revision, and the number of penalties that we will consider moves down to 400,000 a year. We expect to make only half of those, 200,000, which is a substantial decrease on the figures mentioned by the noble Baroness.
Baroness Hollis of Heigham
I warn the Minister that that is one of the biggest elephant traps he is setting himself in the entire Bill.
Lord Freud
My Lords, I have to make clear that we are taking powers to do this. We do not have to use them.
Lord Freud
That is as I would expect from the noble Lord. It is such a wicked question that I am baffled as to the answer. I think everyone is baffled. It is a magnificent question. It has bowled me out on my middle stump. I will have to find out the answer. I will not even hypothesise about where the different funds go. The right analogy for this is when you go to the dentist, having made an appointment, and you fail to attend. The dentist will charge you an amount in many cases in order to discourage that behaviour. When you are giving out a free good, it is very easy for the recipient to abuse it. You counterbalance that by making that somewhat expensive. When you go beyond a free good and you are giving out a positive good, that is even more the case.
Baroness Hollis of Heigham
My Lords, the point is that, on any reasonable analogy, the simpler it is for the individual to make an appropriate response such as telling the dentist they cannot come, the more reasonable it is to have a penalty if they fail to do so. The more complicated quantum of knowledge that they are expected to have about their entitlement, and therefore the easier it is to make a mistake or to have a misunderstanding, the more unreasonable it is to have a penalty. Would the noble Lord care to share with us an analogy in civil life as complex as knowledge of this Bill is for the complainant or applicant, rather than the dentist analogy?
Lord Freud
My Lords, I hope that it will be as simple as the dentist analogy. The whole point of introducing universal credit is that we get something as simple as saying yes or no with regard to your situation. The existing position is much more complicated than that. As some noble Lords will have seen when I did a presentation on the universal credit, we are trying to boil it down to simplicity. Where it is complicated, that is prima facie evidence that there is no negligence. The noble Baroness’s suggestion that we might take time to check out how the system is bedding in is not a bad one.
Lord Freud
Let us not bargain. It is not a bad suggestion. One of the things we want to do—
Lord Freud
It is very relevant. One of the things that we are going to be monitoring as we look at the system is clusters of mistakes because, by definition, the system is not working properly where we are in that position. We will need to work this system in carefully. The noble Baroness, Lady Hollis, who is right on a lot of things, gives a warning, which is right. We cannot use this in an arbitrary way. We must have something, just as the NHS, HMRC and the train companies—I suppose everyone has boilingly paid the extra train ticket surcharge when they were on the wrong train—have systems to encourage people to comply with particular rules. It is particularly necessary where you have a system that is not even a free good. You are giving money out, so you have a positive incentive to shade a few inaccuracies without being fraudulent. We just want to keep people straight.
Baroness Hollis of Heigham
I thought it was very revealing when the Minister said the answers are yes/no. Most of these questions are binary—yes/no—but all the difficult ones, the ones people are going to appeal on, are not yes/no; they are shades of grey. When is a lone parent no longer a lone parent? Does a boyfriend stay one night, two nights or three nights? Does he contribute £20 for his weekend food or £50? Is he on the tenancy agreement? In that case, there is no question. That is a shade. It is a judgment call, not a negligence call. It is the same with the student son. It probably would not occur to parents in social housing that their son, who is at the local university and doing bar work at night, could be in the non-dependent adult deduction range. Why should they think so? It is a line, but they do not know where those lines are drawn.
The Minister is right that if somebody deliberately says, “I am not working and I want JSA”, but is actually earning £200 or £300 on the side in the building trade, that is a yes/no, but most of the issues that go to appeal—most of the difficult issues—are shades of grey, and many of us around this table would not be able to advise somebody. I really do not see how the client could possibly judge whether it was appropriate to tell the department or not.
Lord Freud
I do not think that we disagree on this. It would not be reasonable where there is clearly a lot of grey in the assessment, and I do not think a court in the land would allow us to say that someone was being negligent. That is not what negligence means. Negligence means not caring at all and just slamming down the wrong information or having information that you did not bother to put down. That is negligence. Getting something wrong on shades or “It didn’t occur to me” are not negligence and would not be construed as negligence in any court in the land. A lot of this is concern about things that the language does not support.
Lord Freud
We absolutely will not do that. The noble Baroness drew a comparison with current levels of JSA usage. The online facility that we offer claimants is so markedly inferior that people would not want to use it. We need to make sure that people will want to use the online provision, and we are taking a lot of active steps to look at how to encourage and help people to use it. Indeed, this is one of the discussions that I am currently having with the various groups and charities that are trying to get the most disadvantaged in society online, because that is one way in which they become a full part of the economic life of the country, and indeed of the whole life of the country. They and I see that this could be an immensely powerful force for getting that inclusion. As I said, we will work very hard to encourage people to use it. One does not encourage people to do something that could be life-transforming for them through some of the things which the noble Baroness suggests I might be doing.
The aim of the civil penalty is to reinforce the importance to claimants of providing accurate information that we require in order to administer their claims and awards in advising us when they have a change of circumstance. It is a different issue when someone does something knowingly. That is fraudulent, and we will target that behaviour by looking at tougher punishments than the one for missing a dental appointment—I had better not talk about my teeth. We want claimants to take more responsibility for overpayments and to encourage a positive change in claimants’ future behaviour so that they take proper care of their benefit claims and awards.
The noble Baroness, Lady Drake, made an important point about mental health. We will take that into account. Indeed, that is why we require the claimant to have acted negligently and to have no reasonable excuse. The department must satisfy itself that the claimant has failed to take appropriate care. Each case will be considered individually by the decision-maker, and the penalty will not be imposed if a claimant’s state of health or mental health is considered relevant to the error that has been made.
Amendment 147ZA would mean that a civil penalty could be imposed only on those who failed to notify us of changes of circumstances and the failure resulted in an overpayment, while a claimant who incurred an overpayment by virtue of their negligence and who failed to take reasonable steps to correct the error would evade a penalty. We already help claimants in Jobcentre Plus and, as I have said, we will reinforce that. We believe that everyone should take responsibility for the accuracy of the information they provide in order to receive a benefit, whether that be at the start of their claim or during the life of their claim when there has been a change of circumstances.
As for the question asked by the noble Baroness, Lady Drake, on legal aid, information on benefits and the conditions of entitlement for them is readily available to the general public. If claimants remain uncertain of which benefit is most applicable to them or have a question about their benefit entitlement, they can and should seek further advice from the department. New Sections 115C and 115D will therefore act together to remind claimants that it is just as important that they correctly report their circumstances at the start of the claim as well as report changes that occur within the life of a claim.
I will aim to answer the remaining three questions, having been bowled out on the fourth. On the ability of local authorities to impose fines, we consulted local authorities on the detail of the initiatives in the strategy and on our plans to implement them. Local authorities have provided input to the various projects that we have set up to implement the strategy. We have local authority staff collocated with the DWP and working on the strategy. That includes the sanctions and penalties project, which is doing the work on civil penalties. We will support local authorities in their work to implement the new penalty, which will include providing clear instruction and guidance on how to operate the new scheme. On the £50—
Baroness Hollis of Heigham
Perhaps that would not work. For example, in two side-by-side authorities, a family with two siblings lives with one sibling in each borough. One local authority may decide to exempt in such cases. They have to make 10 per cent cuts and are required to exempt pensioners, which would make 30 per cent cuts. One local authority decides to exempt disabled people all together, so they would have nil. The other does not and the matter is worked out on income. In that situation, how will two disabled siblings who live in two side-by-side boroughs work that out? How will the local authority work out what they should declare, what they should not and what the appropriate penalty could be? It is a complete minefield.
Lord Freud
Clearly, there are always difficult and special cases. I suspect that an old lady would not be eliminated entirely. The answer is that there is support for people with particularly tricky circumstances. We will work with local authorities that will be collocated in many cases, especially with the single fraud operation being set up. The shades of grey, which will start to rule out negligence, will be very evident in most of those cases.
In justification of the £50, that sum was chosen because we believe that this is a sufficient amount that will act as a punishment and make claimants more personally responsible for the overpayments they incur and encourage a positive change in their future behaviour. We have also set a significantly lower amount than the harsher punishments available for fraud offences, which reflects the fact that it is directed at the failure to take proper care of a benefit award and is not about fraudulent behaviour. Under the appeal process, the claimant will be able to appeal against the overpayments decisions, the civil penalty or both.
For those reasons, I urge noble Lords to reject Amendments 104AA and 104ZA.
Lord Touhig
Could my noble friend say—perhaps in response to the Minister’s answer to the noble Countess, Lady Mar, when he said that it would depend upon the circumstances, and following on the point just made by my noble friend—whether she thinks it would be helpful if the Minister, before Report, could provide us with the number of cases in which the department has accepted that an overpayment has been its fault and has not pursued it, and the number of occasions on which it has found that it has been the client’s fault and pursued that?
Baroness Hollis of Heigham
I think that the power exists for tax credits but not for other benefits. At a briefing session, I asked one of the Minister’s officials— I shall not land that person in it—how often it had been used. Their answer was that they were not absolutely sure. I asked whether it was 20 or 2,000 times. Nearer 20, came the reply—in which case, I wonder where that figure of 200,000 would come from and whether it suggests that a lack of clarity is expected in the forms rather than negligence on the part of the people filling them in.
Lord Freud
Let me quickly pick up three issues. First, when I talked about clusters, I meant that, where there are clusters and mistakes, something is clearly going wrong with the way in which we are presenting universal credit. In those circumstances, we would look very hard at fixing that problem and we would not be able to accuse anyone of negligence.
Secondly, I shall look very closely at the run-in to operating the universal credit system. I agree with the noble Baroness, Lady Hollis, on lots of things. She is absolutely right that we cannot have a system that demonstrates problems in its run-in phase.
Thirdly, on targets, I need to write to noble Lords. I would not mind forbidding the DWP from ever using those targets in that way—and I could offer it as a deal any day—but a future Government might not want to be so constrained.
Baroness Hollis of Heigham
I trust this information is reliable, but in today’s press there were quite a lot of stories about how long appeals are taking and that the department—or, rather, following Leggatt, the tribunals system—is having to appoint a further 85 judges to sit on appeals tribunals because of the backlog, which is up to 12 months. Can I have an assurance—I am sure that this must be the case—that, while waiting for an appeal, no interest is ticking up on sanctions, penalties, overpayments or anything like that?
Secondly, checking with the law on tax credit as opposed to what may be the case on UC, I think that nearly all the difficulties with tax credits were not at the initial point of claim but were changes of circumstance and nearly all of them were associated with childcare changes. Half of all lone parents had more than a dozen changes of circumstances in a year, the system never caught up with itself and the computer nearly toppled. How is this going to work in this situation? People’s childcare circumstances inevitably change over half-term, a Baker day, Easter and Whitsun. By the time you keep reporting them or not reporting them—or feeling that you do not need to report them because there has been no reply to the previous report—you could be in a complete mess. I do not see how the Minister is going to manage this.
Lord Freud
The answer to the first question is that interest is not ticking.
On the second question, I share the noble Baroness’s concern about how the present childcare system works on reporting, which is why we are producing an entirely new system with a monthly report and a monthly payment system. Basically, how the system will work is that you put in the receipt for what you have paid, and then that payment is repaid on a monthly basis. The problem presented by a change of circumstances will go. Roughly 15 per cent of problems are caused at the initial stage of the original application. It does not seem sensible to privilege one set of mistakes against another when it is a reasonably substantial proportion.
I am very happy to meet the noble Lord, Lord Ramsbotham, to go through these issues in some detail, because I share his and other noble Lords’ concern that we get this right.
Lord Freud
Yes, my Lords. I think, actually, I withdraw my offer of a meeting, because, given the level of interest, it is probably not appropriate. We should rather have a little seminar where the noble Lord, Lord Ramsbotham, is the leader, but I must welcome anyone who wants to attend that, because it does not make much sense to be too exclusive. Does that suit? Let us sit down and see whether there are any cracks in this, as some noble Lords are concerned about.
Baroness Hollis of Heigham
Sorry, if somebody puts the same information into their applications for universal credit and for localised council tax and the information is negligent or erroneous, though not fraudulent in both cases, are they exposed to two penalties?
Baroness Hollis of Heigham
Then who will get the money? Will it be the local authority or the department?
Lord Freud
When I have worked out the various recipients to the main fund and written, I will let the noble Baroness have a copy of the letter that I send to the noble Lord, Lord McKenzie.
Lord De Mauley
I am grateful to the noble Baroness for her questions. In order to hasten things, may I write to her with answers to those questions?
Baroness Hollis of Heigham
Is it not the case that local authorities and the department very sensibly share information on the ATLAS project and therefore that this would follow from that?
Lord De Mauley
I am grateful to the noble Baroness. I think I will include that in the written answer.
Lord Freud
My Lords, I am not alone, I know, in acknowledging the vast knowledge of my noble friend Lord Kirkwood in this area. He was, of course, chair of both the Social Security Advisory Committee and the Work and Pensions Committee in the House of Commons—I think I can say that now, if I am not pre-empting. His involvement in this important subject stretches much further than that. I welcome the probe and hope that I will be able to persuade him that the amendment is unnecessary.
The SSAC provides a valuable function and goes about its work very effectively. From my perspective and that of my ministerial colleagues, the relationship between the department and the committee is productive. We enjoy a similar relationship to the one that the noble Lord, Lord McKenzie, had. More specifically, the SSAC is currently working on a major study of passport of benefits in the light of the impact of these reforms. As my noble friend acknowledged, this is really the most significant ad hoc study by the committee that Ministers have commissioned for many years. It is a wish to look at situations in the widest possible way.
The committee’s current remit does not include the scrutiny of draft regulations made under powers recently enacted by Parliament. As my noble friend pointed out, this is for a period of six months, beginning from the commencement of the relevant enabling power. The amendment would therefore set the clock ticking from Royal Assent in all cases rather than from the commencement of the relevant enabling power. It follows that if an enabling power was commenced at a point more than six months after Royal Assent, regulations under that power would automatically be referred to the committee. I believe that that would be unnecessary. Informal arrangements are already in place in this area. As I explained when we debated Clause 1, we will continue to talk to the SSAC as we move to the implementation stage of this Bill and use the arrangements that are currently in place and that allow us to provide it with information on new powers and regulations made within six months of the commencement of those powers.
Noble Lords are aware that when the Government implement major welfare reforms, the relevant primary powers are sometimes commenced at different times, reflecting the staggered implementation process that can apply in such circumstances. Under the amendment, some of the regulations brought forward in this scenario—those brought forward within six months of Royal Assent—would not be subject to the committee’s scrutiny, but others brought forward subsequently would be, even though Parliament would have approved the primary powers applicable to the reform as a whole. That inconsistency would be undesirable and we do not believe that adding to the committee’s former role in this way would be warranted. Implementing the reforms in this Bill is an enormous undertaking.
A huge number of officials in the department are working on it, and others are working on changes to a very challenging timetable. It follows that the weight of draft regulations following the reforms would place an unreasonable burden on the SSAC if the Secretary of State were required to refer all regulations to the committee made six months after Royal Assent. That point was touched on by the noble Lord, Lord McKenzie, and I need to confirm that this is an overwhelming process, particularly right now.
I have emphasised that we already have effective informal processes in place in this area. I also believe that the application of the affirmative procedure to, for example, the first core set of universal credit regulations is another safeguard, making it less necessary to consult the SSAC on a formalised basis in respect of those regulations in particular.
Baroness Hollis of Heigham
I think we would all accept that there is a difference between this Bill and, for example, a pensions Bill and its draft regulations, on which the Minister, his officials and his staff need to consult what I would call the professional organisations. These are quasi-technical and may be associated with the process; they have their own exchange and interchange of information and of what they flag up, and so on. In other words, there is a professional body of interested but skilled parties who can negotiate with a department on an equal base, and, as a result, draft regulations may be improved before they subsequently become full regulations.
The trouble with welfare reform and a Bill such as this is that, apart from the charitable organisations and lobby groups that have a wealth of expertise, for the most part there are not the bodies that the noble Lord and his staff would expect to negotiate with in the same way as he would expect to negotiate with business organisations or the NAPF about pension structures. Therefore, the very fact that there might be 200 regulations coming our way means that Members too find that they have no input from professional bodies that are equivalent to those pension bodies but that deal with welfare, in order to help shape our thoughts and give us an extra resource of experience.
This is not necessarily appropriate for Bills for which there are bodies that can serve that function, but for framework Bills and where bundles of regulation are likely to cluster in a particular field—housing here, or the benefit cap there—it would be very helpful for all of us seeking to scrutinise those regulations in due course to have had the input of the SSAC before we commence, because otherwise there is nothing between us, the draft regulations and the framework Bill, and we will not get the appropriate input that we need.
Lord Freud
My Lords, what we are designing here is a massive undertaking. I know that I set a considerable challenge for the SSAC in the passporting arrangement alone. The noble Baroness and my noble friend ask whether adequate information flows are coming through to Parliament as we consider the regulations. We are in regular contact with the stakeholders on a wide range of issues. We have published a series of detailed policy notes. We are trying to have a very open process.
Baroness Hollis of Heigham
My issue is that there are no stakeholders as there are in other types of legislation. My argument hinges on that fact. In pensions legislation, and even in some of the disability legislation that is very specialist, such as the Disability Discrimination Act, which is a more legal framework, there are specialist organisations that can negotiate. We have no such organisations with this Bill. We have charities, but they are client-group representatives rather than bodies of equal professional standards, in the way that the Department of Education has teachers, the Department of Health has doctors and so on. The DWP has no equivalent.
Lord Freud
I accept the point. In practice, we face lobbyists and stakeholders, although one could argue that the pensions industry is also facing lobbyists, albeit slightly better resourced ones who are more interested. The core issue is what the SSAC can do with this Bill in its scale and size. The SSAC is a relatively small organisation. It has a secretariat of three or four, internal to the DWP. It has 13 or 14 members. When you look at the literally thousands of people who are creating this, it is very hard to imagine an ability to take this in its entirety, with all those regulations for the SSAC to deal with.
The SSAC has two functions. It deals with a regulatory rolling process, which is outside the major revolution that we are talking about. I hope that it will apply itself to particular issues on which we would really value its help. The first example is passporting. It was very much my own view that this would be a good way in which to start this process.
I think that noble Lords in this Committee underplay their own prowess in this area.
Baroness Hollis of Heigham
My Lords, the speeches that we have heard so far have been extremely powerful and I very much supported the amendment moved by the noble Lord, Lord Kirkwood. I shall refer to Amendment 113B in the name of my noble friend Lady Sherlock, as well as Amendment 113DA in the name of the noble and learned Lord, Lord Mackay. I feel strongly that structures should follow the objectives and not that we should adapt the objectives to be the outcome of whatever structures we think we can best achieve, which is what is going on, I fear, in Amendment 113B. Amendment 113DA is simply wrong and I am frankly amazed that the DWP has come forward with this proposition. It is morally offensive and I do not know from where it has come.
Like others we have the CSA engraved on our hearts. The 1992 legislation was a catastrophe primarily because it insisted on overturning existing court objectives and becoming retrospective, which means that the new system never caught up even though it was entirely well intentioned. I remember defending our intentions on the 2000 legislation in front of the committee chaired at the time by the noble Lord, Lord Kirkwood. We found it difficult to persuade the Treasury to budge beyond a £10 hand-back to women, so we could never get women to co-operate in setting the CSA on their old partners, as there was little in it for them.
The moves established by my noble friend in 2008 to allow women to keep all their maintenance was a triumph, but the problem with voluntarism, which also accompanied it, meant that it became a charter for bullies who did not want to pay, as indicated by my noble friend Lady Lister. We know that the people who pay are the men who need to pay most, not the men who need to pay least. They are the men who have been married, divorced, are older, earn more, have a profound attachment to their children and expect and want to pay. They are honourable and decent men and they are the ones who pay most. They pay and behave admirably. We also know, however, the ones who do not pay. They are the young, feckless men who have never actually lived with the child, who is perhaps the result of an overnight relationship, if we can dignify it with that term—a casual sexual act. They think that they were trapped.
There are the chaotic self-employed who never get their accounts right and never find the money to pay for their children. A group that surprised me are the men in uniform who are often very bitter, judgmental and followers of the language of fault—“She had an affair so it is her fault and I don’t pay”—with little regard for the children. Finally, there is the group mentioned by my noble friend Lady Lister—the men who have remarried, with second families whose new partner is often very hostile to any payment. These men change their address, their job, their name, and even their country to avoid paying.
Add to those problems a flaky computer and the problems of HMT, which is not only unwilling for women to keep their money but refuses to share key information so that NRPs can be tracked through their current records. We were not allowed to deduct even a £5 benefit payment at source. It would have been obvious for HMT computers to talk to DWP computers, but that was not possible either. It is no wonder that there has been a struggle ever since.
I fear that increasingly—with these measures, I am convinced of it—the concept of child support has taken a wrong turning in this country. Unless we accept the amendments moved so ably by the noble Lord, Lord Kirkwood, and my noble friend Lady Sherlock, that wrong turning will become a highway down which the failure to pay child maintenance will rapidly escalate. I strongly believe that statutory payment should be not the last resort but the first. That is how we establish the appropriate level of money that should be paid; you establish a speedy pattern of payment. We know from Australia and all the international research that unless you establish payment early and ensure that it is paid regularly for at least a year, it dies within 18 months or two years. Establish payment early and get it paid regularly and there is a hope that you will get amicable contact arrangements. Then the whole thing becomes a virtuous circle.
Having voluntary payment in which the father can bully his way out of payment, as he too often has done, means that it never gets established. If instead we had statutory payment to begin with and then after six months or a year following regular, reliable payments the reward was voluntary negotiations, that would be wonderful. That would combine the best of all worlds. You would establish the pattern of payment, and then, if the father co-operates in that activity, you could allow that couple to make their own future arrangements. That way the child does not suffer. This way, I fear that the rights of the child to income and support from the father—it is the father in all but 3 per cent of cases—are going to get lost in what I have to say is the department pursuing cost cutting rather than ensuring adequate support for children.
We know that regularly paid maintenance is not only good for children in the signal that it sends from fathers about being committed to their children’s lives, but that it can be the payment above all—all the Alan Marsh research shows this—that lifts a lone parent with a couple of children from below the poverty line to above it. It can be transforming. It is like privatised, old fashioned family credit if it is paid and paid regularly. It will be so paid only if it is established early, and that means through a statutory system in which good behaviour allows you to go on to the voluntary path. I very much fear that in going down the path not just of voluntarism but of trying to get rid of CMEC, which at least was trying very hard to ensure that money was paid to children, we will lose the real benefits that are available to children through the poverty objectives and we will be overcome by the structural problems of seeking to reduce costs. That is highly unfortunate.
Baroness Howe of Idlicote
My Lords, I apologise for not being here the whole time. I had to chair quite an important meeting on stalking, but that is another matter. I had not realised until just now that the amendment tabled by the noble and learned Lord, Lord Mackay of Clashfern, to which I have put my name, is in this group.
Baroness Hollis of Heigham
Could I therefore ask the Minister a question to which his noble friend responded on a previous amendment? If he is making a power to impose charges, would he at the very least agree that it would be unwise—as well as indecent, as some of us might think—to introduce them for at least two years or so, until the new system has settled down?
Lord De Mauley
My Lords, I take the general point that they should not come in immediately. We are in fact proposing to introduce the new service and run it for six months before we introduce charges.
The behaviour that my noble friend’s specific amendment would take into account on the part of the applicant is consistent with one objective of the application charge—pursuing alternatives to the statutory service before applying to it—so in that sense it is consistent with our thinking. I would argue, though, that there would be difficulties in collecting hard evidence to show that a parent with care had taken reasonable steps without an inappropriate degree of intrusiveness. However, the amendment does focus our attention on the fundamental issue of access to the statutory service for those who need it.
Lord Kirkwood of Kirkhope
Perhaps my noble friend will expand on one detail. The amendment seeks an expeditious response within a seven-day period whereas the Government seem to be working to a four-week response time. Is there any way in which I can persuade the Minister to think about at least setting some targets? A month is a long time in a challenged household. It is a gap that we have identified and it will exist. These things will happen. I might be being too ambitious with seven days but my noble friend is being very complacent if he is sticking to 28 days.
Baroness Hollis of Heigham
I shall be brief. I have a question that we should have asked on the previous group of amendments. What moneys do the Government expect to collect as a result of the £100 fee?
Lord De Mauley
My Lords, in answer to my noble friend’s question, given the admonishment of my noble friend Lord Freud in an earlier debate I can hardly utter the word “target”. I do not know where he got the figure of 28 days from—it is not familiar to me—but I will answer his question in more detail in writing.
Will the noble Baroness repeat her question?
Baroness Hollis of Heigham
I was going through the impact analysis statement on the changes in CMEC and I cannot find the figures anywhere. We should have asked this on the previous group—it is our fault—but can the Minister tell us how much the Government expect to garner by way of the £100 charge?
Lord De Mauley
Given what I said in the debate on charging, I would prefer to write to the noble Baroness about that in due course.
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Wigley
My Lords, I was truncated once again shortly before we finished on Monday. I wanted to add just a few words to the powerful speeches that were made on this amendment—none more powerful than that of the noble Lord, Lord Kirkwood, who apologises for being unable to be here because he is chairing another committee. The points that he made on entitlement to benefit were central. If one is going to get into a situation where capping prevents people getting what Parliament has passed as being their entitlement, there is something that is fundamentally wrong. I suspect that the Minister will have heard the points that have been made. A colleague whom I shall not name suggested that I give the Government hell; I am not going to do that because I am sure that the Government are in listening mode and will take on board the points that have been made. They are central to arguments about social security and I hope that the Minister will respond in those terms.
Baroness Hollis of Heigham
My Lords, we are talking still about benefit caps. We left the debate on Monday, I think, accepting that families hit the cap, as the noble Lord, Lord Best, explained so straightforwardly for us, through the interplay of both high rents and large families, a problem particularly in London and the south-east, with 70 per cent of those affected in social housing. Amendments tabled during our previous day’s debate sought, first, a more appropriate comparator by excluding child benefit in particular from benefit cap calculations—this was an argument by my noble friend Lady Lister—so that we could compare like with like and not apples with oranges. A second group of amendments suggested, wisely, a transitional period of grace before the cap was imposed. This is a theme to which I think we will all want to return, because we need a period of grace for quite a lot of the measures being introduced in order for them to settle down before the whole weight of penalties comes into play. We ran a similar amendment on housing benefit earlier. A third group of amendments sought to exclude subgroups from the caps—for example, those in supported housing, carers and kinship carers.
I want to focus on two aspects of all the debates that we have had so far, plus on the issue of carers, which was raised so effectively by the noble Baroness, Lady Hollins, and issues of housing benefit raised by the noble Lord, Lord Best. I support the thrust of all the amendments. There was one golden rule of public finance that I learnt from my time in the department: amendments abating or removing cuts always cost more than the cuts originally saved, even if the situation is not restored to the pre-existing status quo. That may be the case here again.
I wish to raise some wider questions on Amendment 99A tabled by the noble Baroness, Lady Hollins. She argued powerfully that just as PIP will remain outside of UC and the cap, so, equally, should carer’s benefit not be included in the cap, because they mirror each other, as they do in real life. The financial pressures, the fatigue and exhaustion, the using-up of savings and the social isolation apply just as much to many carers as they do to so many disabled people. We know that the Minister is sympathetic to carers, as is the whole House. So far, however, we do not yet know how many carers face a reduced earnings disregard. We do not know how many carers will lose carers allowance, because of the possible uneven mapping of the existing DLA passported benefit to the new PIP. We also do not know whether CA will come within the cap.
Given that the Bill is going through Committee stage here I feel that we are entitled to require the Minister to give us this information before we start Report stage and that we should not have to wait until we get to the clauses specifically about carers. If a single carer—it could be no carers, or it could be 100,000 carers—loses their entitlement to a passported benefit they will come into the framework of in-work conditionality which we have to deal with before we get to the carers clauses, at which point the Minister tells us he will be able to give us the information we want. We cannot do it that way round. It is not fair to the carers and it is not fair to Committee Members, who have been trying to do our best to get from the Minister—I am sure that he wants to be helpful on this—this information on the situation in which carers will find themselves. We must know everything about this situation before Report; otherwise some of us will be demanding that we go back into Committee, in the middle of Report stage, in order to take on board information that should have been available to inform earlier debates. It is not a proposal I would wish to argue. It is annoying for everybody concerned, but I feel quite strongly that it is not reasonable to ask us to proceed in this way.
The second area is housing benefit. Again, I strongly support the amendments moved so powerfully by the noble Lord, Lord Best. However, perhaps I may widen the point to remind the Minister of where we are so far and what we so far know, and then to ask him what advice he would give to a housing association such as mine—I declare an interest as chair of Broadland Housing Association. First, there is under-occupying. So far we have learnt that many of our poorest tenants would be required to move to smaller accommodation—except that we do not have it; it does not exist and it will not be built in the next few years. So the tenants will stay put and be fined on average about £20 a week. They have no savings, so they will run up arrears. However, we will be asked to avoid evicting them on grounds of decency as well as cost savings. Although such tenants would not be intentionally homeless through arrears generated by benefit cuts—as the Minister has helpfully agreed on the record—we would in any event have to rehouse them, probably in the house next door, if we evicted them. We will get substantial arrears from—although not pensioners—perhaps one-fifth of our tenants. I do not know.
We will perhaps also be faced, as we found from the discussion last week, with some tenants who are up against the housing benefit or UC cap. They too will face arrears, and again we will be expected as social landlords to avoid evicting them for what is not their fault. Again, arrears for us will mount.
We may also face cuts in housing benefit for those with supported housing in its various forms, although obviously this is a much smaller group. Again their arrears may mount, and again those will pass to the housing association.
Finally—an issue which we have not yet debated—we will certainly face substantial arrears in the move to direct payments to tenants rather than to the landlord.
Each of these four changes in housing benefit from DWP will plunge social housing landlords into mounting arrears. What is my housing association to do? We cannot raise rents to compensate for those arrears because we are at our fixed-target rent and DCLG does not allow us to go above it. We cannot get extra revenues from HCA or DCLG—indeed, they have cut our capital revenues by some 60 per cent. Housing associations could well find their accounts qualified, at which point the banks may threaten to reprice their capital loans because of infringement of a covenant, at which point our building programme falls.
I suppose that we could cut staff but the Tenant Services Authority within the HCA requires us to improve services. A 95 per cent satisfaction rate on any of the criteria it produces is required, which means that there must be staff on the ground, and quite rightly so. The driving-up of standards equals staff, which means that you cannot cut in that field either.
Put those four cuts together and they could send many housing associations into the red. Any one or two of these proposed benefit changes would be difficult to manage, but to face all four would be unbelievably difficult. I warn the Minister that he could be jeopardising the financial stability of a swathe of housing associations across the country. How then will the Prime Minister’s newly voiced concern for affordable housing be met? Given that 95 per cent of all housing stock that will exist in 10 years’ time has already been built, we cannot adjust the stock to meet what I believe is very wrong-headed, and in some places downright indecent, changes to HB. Some of us feel very strongly about this and it would seriously jeopardise our support for UC. DWP’s cuts in housing benefit will be offloaded to housing associations as arrears.
Goodness knows that local authorities are strapped for cash with 30 per cent cuts, but at least they have other financial resources. Housing associations do not. I repeat to the Minister that his savings will be our debt. DWP and DCLG have to get their act together. As I suggested at Second Reading, not entirely jocularly, if we could persuade DCLG to give up its batty scheme of localising council tax benefit with all the savings that accompany it and trade it for protecting the housing benefit, which would finance the homes we need and keep people in the homes that they want, UC would be welcomed widely across the country. I warn the Minister to take this issue very seriously. It will be very difficult for those in the field of social housing to cope when his cuts become our arrears with no capacity to meet them.
Baroness Meacher
I support Amendment 99A, which would exempt from the benefit cap, as others have mentioned, claimants with entitlement to carer’s allowance or additional allowances within universal credit for claimants with regular and substantial caring responsibilities. I am sure that this amendment was moved extremely ably by my noble friend Lady Hollins.
Perhaps I may make a couple of comments about the cap more generally. As Cross-Benchers, we do not normally refer to any political activities that we might have undertaken even in the distant past. Over a quarter of a century, however, I have spent rather a lot of time knocking on doors. One incredibly powerful recollection that I have is that the perception of the so-called scrounger was always the biggest single issue on the doorstep, even bigger than immigration. We cannot get away from the fact that low-income earners bitterly resent neighbours who they regard as being on benefits and, apparently, seeming to do rather better than they themselves. It is important that low-income earners feel that they are benefiting from going to work, which was the objective of the tax credit system. I strongly support the principle of that, albeit that there were a few problems with complexity.
As for the political motivation behind the benefits cap, I understand that people must have that incentive to work and that those in work should not resent those who are out of work. I have concerns, however, which I believe others have expressed, about the cap as a mechanism for achieving that sense of fairness. My understanding is that the design of the universal benefit should achieve this objective if only, as others have said, the council tax benefit were incorporated within it—at least except for a small number of very large families and some people living in very high cost areas.
I suggest to the Minister that the Government give some thought to finding a formulation in the legislation to achieve their fairness objective as between claimants and low-paid earners without resort to the notion of the cap. I know that the Secretary of State is extremely committed to this cap because it is a beautifully simple little message about being tough on claimants, if one is really honest about it. However, the Secretary of State should think carefully about whether this is acceptable within the traditions of democracy in this country. The aim, of course, would be to avoid relinquishing parliamentary scrutiny of the Executive. That is important because the levels and structure of benefits should not be open to change by the Executive without reference to Parliament. I understand that that is possible with the Bill as drafted. I know that the Minister will correct me if I am wrong but that is my understanding.
As regards this amendment, if the Government are determined to have the benefit—and I still hope that they are not—one group of claimants who clearly should be exempt are carers. About 200,000 children in the UK are being raised by grandparents, older siblings or other family members and friends. These carers step in to bring up a child or children as a result of very difficult family circumstances which often involve drug or alcohol misuse, abuse or neglect, death or serious illness, domestic violence or imprisonment. These carers are saving the taxpayer very large sums. These households are often large, simply because they have children of their own and then bring in others, perhaps five or more; so they will be disproportionately affected by the cap. I am sure that others have already mentioned this issue but I hope that the Minister will address it directly.
The idea of imposing a cap or some form of benefit control on large families is presumably to discourage parents from having more children than they can readily cope with, but that argument does not apply at all to carers who take on other people’s children. I do not know what the Minister feels about that point. Is that actually the main incentive behind the cap in relation to these households? Have I misunderstood? I would welcome his clarification. I know that he will want to support carers and hope that he is in a position to hold out some hope of concession on this issue. I hope that, at the very least, he will take this matter away for consideration.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these amendments seek to provide exemptions on the face of the Bill from the application of the benefit cap for a wide range of different groups. I would like to start by repeating what I said on Monday. We have always been clear that we will look at ways of easing the transition for families and providing assistance in hard cases. We are very aware of concerns about the impact of the cap in specific scenarios. We have always said that we will take account of the sort of issues raised in this debate when preparing the regulations next year. The clause has been drafted to give us powers to set a cap that achieves its purpose in the fairest way possible.
Let me take this early opportunity to assure the noble Baroness, Lady Lister, that I have considered the requirements of the Human Rights Act and the European Convention on Human Rights in respect of this policy. I am content that the way in which we will implement these clauses will meet those requirements.
Let me also clarify early on the point about behavioural change and the logic of applying the cap to people with reduced conditionality—a question raised by the noble Lord, Lord McKenzie. Our policy aim is to achieve a range of positive effects through changing attitudes and expectations. Clearly, we intend in particular to improve work incentives and reinforce the expectation that people of working age should work. However, it is perfectly reasonable to encourage and help people towards employment even if they are not currently expected to work.
I said on Monday that our original estimate was that only about 10 per cent of the households that might be capped would be subject to full conditionality, through the JSA regime. However, it is wrong to say that the remainder will have no work-related requirements. A significant proportion will be people subject to work-focused interviews or work preparation and who will be building towards work. I said on Monday that I would provide the Committee with a breakdown of the caseload of households which might be capped. I also said that we are in the process of updating our figures. These indicate that a higher proportion, about a third, will be subject to full conditionality. I will provide the full set of figures as soon as they become available.
The key point is that if we are to tackle the negative effects of the current system then it makes no sense to exempt people from the cap simply because they are not currently subject to full work-related conditionality. That would not change attitudes and would be very likely to further entrench the problems of worklessness and dependency that we are trying to address. We have therefore been very careful in providing exemptions and deliberately kept the list short.
We have always said that we will exempt households that are entitled to working tax credit and that there will be an exemption for working households on universal credit. I have already explained that I am not yet in a position to provide details of this, but I can assure the noble Baroness, Lady Lister, that we are very conscious of the issue of cliff edges and the need to consider the impact of thresholds on households whose earnings fall.
We have always said that we will exempt war widows and widowers and that we will exempt households with someone in receipt of DLA or constant attendance allowance completely from the effects of the cap. I can confirm that this exemption will also extend to those in receipt of attendance allowance and PIP when it is introduced.
I am aware of representations already made that recipients of industrial injuries disablement benefit should be exempt from the cap in the same way as recipients of DLA. However, I do not think that these groups are in exactly the same position. DLA is paid to people to help with the extra costs arising from their disability. Other than through constant attendance allowance, industrial injuries disablement benefits do not reflect whether the recipient’s disability or illness necessarily brings extra financial costs.
We will be exempting people who are in receipt of constant attendance allowance because it serves the same purpose as DLA, but that does not apply to other industrial injuries payments.
I welcome the remarks of the noble Baroness, Lady Hollins, on the important issue of carers. The DLA exemption will mean that the cap does not affect a carer in a case where, as she said, the person being cared for is a partner or dependent child. Households where a member receives carer’s allowance but no members receive DLA or PIP will however not be exempt. In cases where the recipient of DLA is not deemed to be in the same household as the recipient of carer’s allowance both will be looked at separately and for benefit cap purposes their individual entitlements will be assessed independently. We have also said that we will look at ways to ease the transition for families and provide assistance in hard cases.
On the passport, as I said, I will seek to set out our intention for the passporting arrangements for PIP to carer’s allowance before the start of Report stage. I hope that that is adequate assurance for the noble Baroness, Lady Hollis.
Baroness Hollis of Heigham
No, my Lords. The Minister made that clear at the last sitting, but unless we know the actual numbers, as opposed to the structure, we will not know how many carers currently enjoying carer’s allowance, if I may use that word, will lose it and, as a result, become subject to full in-work conditionality—a clause in the Bill that we have to deal with before we get to carer’s benefits.
Lord Freud
By the time that I am able to set out these arrangements Committee Members will have a tight band in which to make a judgment. Although it will not be precise I hope that there will be a reasonable degree of precision to enable Members to reach key judgments.
As I confirmed on Monday, support for childcare—
Lord Freud
Yes, my Lords; that is an excellent question in this sense. I have made clear that we are looking at transitional arrangements, and I will look at precisely this issue of the timing with PIP in the light of those transitional arrangements as people move through. Clearly I have already committed to looking at the three months and the six months, so I have something of a three-handed chess operation to get through, but I hope to come back with the pieces in the right place—or, rather, although the pieces might be in position, they might not be in the right place as far as the noble Baroness is concerned. It will at least be a clear understanding of the position. I absolutely bear in mind the point that she has made.
The noble Baroness’s other question was on school meals. I am happy to commit that, however we restructure the provision of the passported benefit of school meals, it will remain outside the cap in the same way as childcare.
With regard to the kinship care amendment, we have already discussed and recognised in Committee the valuable role that kinship carers fulfil. I made a personal commitment, supported by the Secretary of State, to look at a range of issues affecting this group. I have already had a number of meetings with organisations that support kinship carers to help me better understand their priorities. These carers are able to receive support for the children in their care through the benefit system as, unlike approved foster carers, they have access to child benefit and child tax credit on the same basis as parents. Any payments they receive from the local authority will be disregarded. This parity of treatment with parents will be continued with the introduction of universal credit.
Baroness Hollis of Heigham
That is very helpful and clear, but the point being made by the noble Baroness, Lady Hollins, and others was that kinship carers very often take on children additional to those already in their family. Therefore, we are much more likely to see fairly large households with possibly five or six children and, as a result, those families could immediately be up against the benefit cap. How would the noble Lord suggest that is going to be addressed?
Lord Freud
My Lords, I accept the importance of this issue. There are a lot of angles to it, but I fully accept its importance and the argument that discouraging kinship carers could actually have a perverse effect, certainly in terms of cost.
The noble Baroness, Lady Sherlock, raised the issue of children at risk. We as a Government take our responsibilities to vulnerable children and vulnerable parents very seriously. It is clear that such families are likely to have multiple problems that may not be solved by benefit payments alone. The noble Baroness is concerned that the benefit cap will force such households to be constantly on the move, which will make it harder for local authorities and support services to keep track of them. We recognise that a more co-ordinated cross-government response is needed, and so last December the Prime Minister announced a new national campaign to try to turn around the lives of the most troubled families in England—there are around 120,000 of them—by the end of this Parliament. Local areas are being encouraged to develop a new approach to supporting these families. It involves redesigning services so that each of the most troubled families is supported by a single key worker who helps them turn their lives around and engage successfully with education and employment. I can assure noble Lords that my officials will work closely with other departments to support the Prime Minister’s plan for these vulnerable families and ensure that those who may be subject to the cap will be given all the help and information available.
Lord Freud
Yes, my Lords. Empson wrote a book called Seven Types of Ambiguity and my noble friend has cited two of them. I can clear up this particular dual ambiguity: the word “transition” here applies both to the running-in of the system and to the timing of how it will affect particular people when the system is fully run in.
Baroness Hollis of Heigham
Some of the Minister’s common phrases are “soon” and “very soon” and we are beginning to decode them. Another one is about the possibility of discretionary housing allowance being extended to plug all possible gaps in the system, and we have had some discussion on that. It would be very helpful if he could circulate a paper to us on all the areas where he has assured us that there are going to be transitional arrangements so that we can see what they will look like.
Lord Freud
My Lords, I do not think that I am in a position to do that. I think that I will have to leave it to Hansard to pick up where I have applied the phrase “transitional arrangement”.
Baroness Hollis of Heigham
Forgive me, the question was not how many times the noble Lord has used the phrase but what it means in practice. Is there a three-year run-in? What are we talking about here?
Lord Freud
All I am able to say at this moment is that there will be transitional arrangements and help for hard cases.
Lord McKenzie of Luton
I think that we understand that. However, does the Minister recognise the dilemma with which the Committee is faced? We have a broad framework which the Minister says gives the opportunity of reducing the cap, but we have none of the detail which is absolutely crucial to understanding how it will work and who it will impact. Without providing that he is facing the Committee with an impossible dilemma. Perhaps the noble Lord, Lord Kirkwood, is right and these clauses are irredeemable.
Baroness Hollis of Heigham
My Lords, it also means that the noble Lord will face a lot of amendments on Report, which he would not need to face, calling for breathing spaces or a transitional period of one year for people who suddenly lose their jobs or are suddenly exposed, at 27 or 28, to living in a single room, and so on. If he were able to give some clarity about what he proposes, he could wipe out possibly a dozen amendments.
Lord Freud
My Lords, I have been set a challenge and a reward. It would be lovely to collect on that, but I cannot make any further assurances.
I shall continue to speak to the amendment in the name of the noble Lord, Lord Best. Apart from the transitional arrangements that I have talked about, the underlying position is to ensure that people understand that they have to take responsibility for the decisions that they make in their lives in the light of what they can afford, and they cannot always look forward to the state stepping in to make good any financial shortfall.
I shall continue on to the more technical areas raised by the noble Lord, Lord Best, on temporary accommodation and supported and sheltered housing. The amendments provide an exemption for households to which local authorities owe a duty because they are homeless, or threatened with homelessness, and for those living in supported or sheltered accommodation. As I said on Monday, discretionary housing payments will not be included as part of the cap, but in wider terms it is too early to say how we shall treat those cases for housing cost purposes in 2013 and beyond. We are exploring options for the treatment of housing benefit for people living in temporary accommodation within universal credit and the overall benefit cap.
Noble Lords may be aware that we recently consulted on high-level proposals to change the method by which help with rent is calculated for those who live in certain supported housing in the social and voluntary sector. As the noble Baroness, Lady Hollis, indicated, there is a series of issues here. We are working very closely with local authorities, housing associations and other government departments, including the devolved Administrations, on these very issues. Our considerations will, obviously, include possible interactions with the benefit cap.
Finally, Amendment 99C, in the name of the right reverend Prelate the Bishop of Ripon and Leeds, would place a requirement on the face of the Bill for exemptions for a range of groups. These include groups that we will provide exemptions for through regulations, and others that we have already discussed during the course of our debates today. The amendment also includes an exemption for lone parents with a child under five. I have made it clear that the cap is intended to act as an incentive to work. I acknowledge that we currently do not require lone parents with children under seven to work, although we are seeking to reduce this to five, but that does not mean that we do not want to encourage them to find employment Indeed that is the very reason why we provide extra support through work-focused interviews.
Each of these amendments would undermine the fundamental principles underpinning the cap—that ultimately there has to be a limit to the amount of benefit that a household can receive and that work should always pay. I have listened carefully to the measured and detailed arguments put forward today and will take them into account when deciding on the final design of the cap. In the mean time, I urge the noble Lords and the right reverend Prelate not to press their amendments.
Baroness Lister of Burtersett
I do not know whether the noble Lord, Lord Kirkwood—of wherever he is of—would comment, if he were here, but he spelt out a very powerful argument of principle about entitlement. I have not heard the noble Lord address that argument and, in his absence, I would be very grateful if he could do so.
Baroness Hollis of Heigham
Basically, the noble Lord is constructing universal credit based on meeting several different objectives and many of us support this very strongly. However, he then artificially reduces the amount that some people will get under the very structure he has set out to meet the objectives he has outlined. It is that inconsistency of a deliberate cut to an entitlement, constructed by himself through universal credit, that we find unacceptable—so far it has not been explained to us—particularly when some of the consequences may cost us more.
Lord Freud
My Lords, the best piece of information I can provide the Committee on that question is that it is the noble Lord, Lord Kirkwood of Kirkhope. I think I am reduced to going back to the basic principle that there should be a limit and we have set that limit at the equivalent of £35,000. We are going round in circles slightly.
Lord Freud
My Lords, we are going round in circles. Noble Lords seem not to like this, although my understanding is that, as a principle, the Opposition approve of the benefit cap. There is a general level of support for it. I want to lay out the ground that working people with earnings of less than £35,000 already face these kinds of choices with regard to housing. Noble Lords seem to be arguing that people who are not working should be in a better position than those in work by protecting them from having to make this kind of choice. Bluntly, it was that kind of approach that has created or has been partially the cause of the high level of dependency that we have in this country.
I have, bluntly, said all that I can in this area. We can go round and round, but I am not in a position to offer very much more in the way of elaboration.
Baroness Hollis of Heigham
I just want to pick up on my noble friend Lady Lister's point. We know that most lone parents come out of a relationship: very often out of a marriage. These are not people who are regarded by others on the estate as shirkers who need to be driven—that sort of mentality. We could have a situation where, before they separated, the total household earned income was perhaps over £30,000 and there was some housing benefit because it was a three-bedroom property in an inner city area at a fairly high cost. He then leaves and she is left with three small children under the age of five in their existing home, which is rented. As a result, they are facing the benefit cap. How on earth do we think that any of these proposals under universal credit or the benefit cap could or should alter that behaviour, the judgments that they have to make and the possibilities open to them? All it can do is turf them out and send them up to Middlesbrough, as far as I can see.
Lord McKenzie of Luton
My Lords, I suspect that we have taken this as far as we can today, but I am sure that we will return to it on Report—perhaps we should already be thinking of booking an extra couple of days for that. I have a technical question for the Minister. As I understand it, before we get to universal credit, the variety of benefits that people have will be looked at. That will go into the calculation on one side. We will compare that with the earnings comparator and the difference will be withdrawn by way of reduction of housing benefit. Is that right? So that will be administered by local authorities.
What if people are in receipt of mortgage interest support or the housing benefit element is not necessarily sufficient to cover the shortfall? What happens with all the local authorities that have outsourced their housing benefit and council tax arrangements? There are a lot of them. Have they been engaged? Presumably, there are extracontractual costs because they will be required to do things in excess of current entitlements.
On universal credit, is it likely that the withdrawal will be in respect of only the housing component of the credit or will the broader range of support that is in universal credit be subject to the clawback?
Baroness Hollis of Heigham
My Lords, the noble Lord, Lord Ramsbotham, has made a very powerful case, particularly for those serving short sentences. One can be reasonably confident that the benefit entitlement with which they enter prison will remain the same when they leave it. Could the Minister help me by fleshing out his thoughts a little further on a situation in which you cannot know in the same way, under universal credit, whether someone leaving prison is going into the household of a former partner with children or whether that household has broken up while he has been in prison? What question marks will there be? It was much easier to arrange when we were dealing with a single benefit, such as jobseeker’s allowance, which was not particularly related to the network of other benefits that a household might receive. It would clearly work for those serving short sentences or for somebody who was single throughout their sentence and expected to come out single. Could the Minister help us on how he would handle a situation in which a person was going back into a household with children, where there might be rent to be paid from his universal credit entitlement? He might go back expecting that payment to be made to him. Perhaps the Minister could help us on that.
Lord Ramsbotham
Thank you very much. I am glad that the noble Baroness raised that point. It reinforces something that many of us have been saying for a long time: the prison system of this country is not organised to help itself. The trouble is that prisoners are scattered all over the country by an incoherent national population management structure, as opposed to—as recommended by the noble and learned Lord, Lord Woolf, after the Strangeways riots in 1990—prisons being grouped into what he called community clusters or regional clusters so that nobody ever left their region. Therefore, all the resources of the region could be applied to the rehabilitation of their own offenders. It will be very difficult for the Ministry of Justice to resolve the questions that noble Lords have asked under the present distributed system. If prisons were regionalised and the prison authorities properly hooked into all the authorities in the region, it would be much easier to liaise with the regional authorities responsible for finding out that sort of detail. That should of course be part of the whole rehabilitation process anyway. The questions that the noble Baroness, Lady Hollis, posed are absolutely ones that should be referred to the Ministry of Justice. We should ask, “How will you ensure that these are answered, because they must be?”.
Baroness Hollis of Heigham
Regarding the payment on account, I do not know whether it is exactly the way to go forward, but I think it is the only way you can make this work. However, on the assumption that most people coming out of prison may well be under the age of 35, will the Minister confirm that he expects the payment to include at least the HB single room rent, as well as the jobseeker’s allowance? At £67, the jobseeker’s allowance will not go very far in paying rent. Therefore, the payment on account benefit of UC would include a putative amount for both elements—both what we know is called JSA and what we currently call housing allowance.
Lord Freud
My Lords, there are two things here: budgeting advances and a process of how we move people on to the system that we are looking at. I cannot set that out in detail, but we will be doing so in regulations as we elaborate that system.
Lord De Mauley
I do not have an answer for the noble Lord. He is right to raise this issue. Perhaps I may include that in the correspondence.
Baroness Hollis of Heigham
The Minister is being very helpful on this but I want to go back to the point made by my noble friend. This stemmed originally from what the noble Lord, Lord Freud, corrected, which was a misapprehension in the press some time back that people would lose ESA et cetera while they appealed. This was presented as an issue of moral hazard: why would anyone ever not appeal if they knew that through the process of appeal they would get a benefit even if subsequently this was not confirmed?
The other side of that moral hazard issue is: how many people, and under what circumstances and what benefits, could lose their income even though ultimately it might be reinstated by an appeals tribunal and backdated? During the process, which could very well take six weeks, what do they live on? The noble Lord may be able to respond now but, if not, perhaps he can write to us about in what circumstances, with what benefits and with what clients there could be a situation in which someone could lose their benefit, even though they were appealing and might subsequently be reinstated? During that process they could be living basically on the kindness of strangers.
Lord De Mauley
I understand what the noble Baroness wants and I am grateful to her for allowing me to write.
Lord Freud
Yes, I am pleased to confirm that it will be available in draft. I want to avoid the cost of printing up a leaflet.
We will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor to suffer undue hardship. That remains a cornerstone of our overpayment recovery policy. As presently, future benefit recovery will be subject to regulations that provide for a maximum rate of recovery. In many instances, however, this maximum rate of recovery may still prove unaffordable for some claimants. In such cases, the DWP will discuss an alternative repayment rate.
Baroness Hollis of Heigham
I realise that the Minister is going fast, but let us be quite clear. In the past, and I stand to be corrected, my understanding is that when there has been official error and overpayment we would request a repayment. If that request was not responded to or met, effectively, that was pretty much the end of the story. In particular, somebody with a history of disability, poor health, financial pressures and so forth, almost invariably would not reply.
We need to hear from the Minister whether he is moving from request to require; whether he is moving the discourse from the first to the second. I thought that the first was reasonable, so that if they could afford it, they should repay, but if it was unreasonable, then they did not. If he is going from request to require, we need another step in the procedures to try to ensure that those from whom he will require the repayment of debt are in a reasonable position to do so. He cannot just change the words. He has to institute another procedure and another step in the equation. I know that the Minister is going fast but perhaps he might reflect on this and write to us so that we can take this up later. That must be the case.
Lord Freud
I am going to come on to that point, which is critical. Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits within the scope of Clause 102 will be recoverable upon application, DWP will consider a claimant’s means, income or expenditure if the debtor considers that they are in hardship.
Baroness Hollis of Heigham
The point is that under the previous system the recipient determined what would happen. What the Minister is suggesting is that the DWP will determine whether recovery takes place.
Lord Freud
No. I think what I said is that if the debtor considers that they are in hardship, they can say that and then there is a process built on that.
Baroness Hollis of Heigham
I am sorry to take up the Committee’s time, but previously if the recipient said that they were not going to do it, that ended it. There was not an assumption that there was space for negotiation. What the Minister seems to be suggesting is that there will be a requirement, and then the claimant has to opt out rather than the old arrangement, which is that if the recipient said that they were not in a position to repay, that ended the matter. It is a question of where the power lies. Under the old system, the power of refusal lay with the claimant. The Minister is suggesting that it will lie with the DWP, and only if the DWP is persuaded will the claimant be allowed to opt out.
Lord Freud
Yes, that is the process. It becomes a requirement, and then if the claimant says, “Look, I can’t afford that rate, I’m in hardship”, then it is adjusted. That is a regular process. In practice, only half the people now make repayments at the maximum rate. That is a very well established process which works pretty well, and I do not think we need to put in extra processes.
My noble friend Lord Kirkwood—Kirkwood of Kirkhope, some people were unaware—asked about an independent appeal right. There is just a general appeal right here for overpayments, and I think that covers this as much as anything else.
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
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Baroness Hollis of Heigham
My Lords, I support the noble Lord, Lord Best, in his amendment. There are some very difficult inconsistencies in the Government’s policy on housing benefit, about which we should be concerned. The noble Lord talked about the fact that there is, apparently, almost a standard housing and rent element in the benefit assumptions, even though we know that rent varies from area to area and region to region.
I particularly want to pick up the point that he made about the discrepancies between the private rented sector and the social rented sector. Some of us—certainly the noble Lord, Lord Best, and I—argued very strongly against a benefit cap based on underoccupancy in an earlier round of amendments. It was clear from the impact analysis that one of the responses that the Government felt was appropriate for people who were in so-called overly large local authority accommodation—with no possibility of an internal move because the stock does not exist—was to tell them that they should move into the private rented sector. However, the impact analysis also recognised that that sector would also have increased rents, and therefore the assumption of savings that would follow from that move would not be available to the Government.
The Government are saying that if you manage to avoid your housing benefit cut by virtue of these very harsh rules on underoccupancy by going into the private rented sector, you will then come up against an alternative cut—the benefit cap. You are between a rock and a hard place: you can stay put and have your cut because of the underoccupancy rules, or you can move to accommodation in the private rented sector which apparently fits, but because of the number of children you have, you will be up against the benefit cap and again you face a cut. Which strategy does the Minister suggest people should follow in that situation? It would be helpful to know because a lot of our poorest families will be faced with just such dilemmas.
Lord McKenzie of Luton
My Lords, we are indebted to the right reverend Prelate the Bishop of Ripon and Leeds for leading the charge on this. Indeed, faith communities generally have been a voice for people who might otherwise not have been heard. The need for so many amendments around this proposal in the Bill highlights the extent to which it is a badly conceived policy. Whether or not you believe there should be an overall cap on benefit entitlement, what we know about the approach taken to applying such a cap in the Bill shows it to be unfair, inconsistent and to ignore the needs of many of the most vulnerable.
This first group of amendments relates to how the benefit cap is to be calculated and shows the extent to which there are major inconsistencies in the Government’s approach. The second group relates to the fact that the Government appear to have ignored the needs of many of the most vulnerable people when thinking about who is to be excluded from the benefit cap.
The Government have argued that applying the benefit cap is fair. The Secretary of State for Work and Pensions, Iain Duncan Smith, has stated:
“The benefit cap will restore fairness to the taxpayer and fairness to those who do the right thing on benefits”.
Of course, we are learning with this Government that fairness has many different meanings to different people, but it would be hard for anyone to justify the idea that the current policy will be fair to children, who, as we have heard, the Children’s Society has shown are nine times as likely to lose out from the cap as adults. Out of the 50,000 households that will be affected by the cap, the Children’s Society estimates that 210,000 will be hit, compared to 70,000 adults. Perhaps the Minister will tell us whether he thinks this policy is indeed fair to children.
The Bill impacts so heavily on children in part because of the way that the Government have stated that they will calculate the level of the cap. At present it is proposed to set the benefit cap at two different levels. The first, for single people without children, will be introduced at around £350. For couples, it will be introduced whether they have children or not, and for single parents with children the cap will be introduced based on net average earnings for a working household with or without children, which the Government estimate to be around £500 per week at the point of introduction.
We should note that that proposal creates a substantial couple penalty, which the noble Baroness, Lady Tyler, spoke about. Research by Family Action showed that for two lone-parent households that decided to move in together this penalty could be as much as £9,000 a year. Does the Minister believe that financial penalties of this type form a disincentive for families to move in together? If so, what assessments has his department made of the likely impacts of applying the cap in this way on the rates of lone parenthood and cohabitation?
We note that while the universal credit has a higher personal amount for couples than for single people with children, the benefit cap has not followed the same principle. Not only is the current calculation unfair towards couple families, it is also unfair in its comparison between those in and out of work. Both working and non-working families were able to receive child benefit and housing benefit. As the level of the cap is based on earning levels rather than income, however, these will, as the right reverend Prelate said, be excluded from consideration of the amount of money that working families have to live on but included in the calculation for those out of work. Amendments in the next group seek to exclude child benefit and those in this group to exclude housing benefit from being included in the calculation of total income for out-of-work families. Perhaps now the Minister could explain exactly the basis on which this method for calculating average family earnings was chosen.
In-work benefits, including working tax credit and, subsequently, universal credit, will also be excluded from the calculation of the level of the cap, but not from the calculation of the amount of income that out-of-work families are expected to live on. Here we come to another lack of clarity about the Government’s approach, as it is once again not clear what the definition of work is expected to be for the benefit cap when universal credit is established. Before universal credit is established, the cap will initially be applied to housing benefit, and the note with the draft regulations that we received states that a claimant in receipt of housing benefit will be considered to be in work if they are entitled to working tax credit. It has been announced that when working tax credit is abolished, there will be a corresponding exemption for people on universal credit who are considered to be in work. The precise criteria for this exception are still being considered.
Again, the thinking behind the benefit cap appears to be out of kilter with what is behind the universal credit. Indeed, the Government have just spent a large amount of money on ensuring that households working under 16 hours will still be able to claim support with childcare costs under universal credit. Yet in benefit-cap terms, it seems that working less than 16 hours is not really considered as work, and it is possible that this childcare support will be removed by the restriction on the total amount of benefit that a family can receive. Large families may be caught in a trap whereby any move into work brings with it additional childcare costs, which are then reduced by the cap to the extent that working is no longer worth while. Does the Minister believe that a family in which someone is working for less than 16 hours a week is a “working family”?
Amendments 99ABAA and 99ACA in our names seek to understand why housing benefit and council tax benefit have been included in the benefit cap. At present, the proposals seem both unfair and unworkable. The differences in rent around the country, as we heard from the noble Lord, Lord Best, mean that families in different areas will be affected very differently by the cap, with the most severe impact on families in London. As the Government’s own impact assessment states about the possible impacts of the cap, it is likely to affect where different family types will be able to live, housing benefit may no longer cover housing costs, and some households may go into rent arrears. This is a direct consequence, they acknowledge, of government policy. Some households will be pushed into rent arrears, which will require expense and effort by landlords and the courts to evict and seek to recoup rent arrears. Some households are likely to present as homeless and may, as a result, need to move into more expensive temporary accommodation at a cost to the local authority. These costs are likely to fall most heavily on local authorities in London. Shelter, Crisis, Homeless Link and the National Housing Federation state that although the cap has been characterised as a cap on large families, high rents in London mean that families with just two children will be subject to the cap in all inner London and many parts of outer London, including Newham, Haringey and Hounslow, because of higher housing costs in those areas. London Councils points out that rent levels vary widely across the country. London has the highest average private sector rents in the country, at £220 per week, which is more than 35 per cent higher when compared to £164 nationally. It is estimated that more than 50 per cent of couples with more than three children in London are unlikely to be able to afford their rent.
The benefit cap will come on top of the already imposed cap on the local housing allowance, as we have heard, while Shelter, Crisis, Homeless Link and the National Housing Federation state:
“Unless housing benefit is removed from the calculation of the cap there is a risk that low income households will be displaced from large areas of the south-east, on a scale far wider than that feared in response to”
the local housing allowance caps. For families already hit by those caps, the organisations state,
“there is a risk that they could be hit again and forced to move twice within less than a year”,
as the noble Lord, Lord Best, said. What estimates has the Minister made of the additional cost to local authorities in London and the increased costs that they are likely to face as a result of the household benefit cap?
In the post-Bill world, these same local authorities will also be delivering council tax benefit. For the Government to be able to take council tax benefit or its replacement into account for the purposes of the cap, they will therefore need local authorities to tell them who is in receipt of the benefit and how much they are receiving. What arrangements does the Minister expect to be in place to ensure that the benefit cap correctly takes into account the amount of support with council tax?
The variation in local authority support for council tax also means that how families are affected by the benefit cap will vary by local authority. Those local authorities faced with additional costs in temporary accommodation as a result of the cap may be tempted to recoup their costs by limiting the amount of support that they give with council tax—knowing that, in effect, the DWP will pick up the bill by paying out more universal credit before the benefit cap is imposed. Perhaps the Minister can tell us what estimates have been made of the potential for savings from the benefit cap to vary, depending on the level of council tax support put in place by differing local authorities.
The Minister may say in his response that according to the impact assessment the benefit cap is expected to hit just 50,000 households—roughly 1 per cent of the out-of-work benefit caseload. Yet the impact on these families will be extreme, with an expected average loss of £93 a week. He may also tell us that he has no money and no way of recouping the expected savings from this policy of £225 million in 2013-14, and £270 million in 2014-15. However, it is clear that the costs of this policy, not only in terms of family well-being but for local authorities, will be high. The amendments proposed today seek to rescue this policy and to ensure that it can retain some aspects of the fairness that the Government say that they are aiming for. I hope that the Minister feels able to accept the amendments.
Perhaps I may conclude with a few questions. The impact assessment, as has been discussed, sets out the consequences of the benefit cap—that it will force people into rent arrears and cause them to be evicted—but it has not been able to put a cost on that. Do central Government accept that this is an increased burden on local authorities which, under the Government’s policy, should be met on one basis or another, and has any further work being undertaken to quantify this? What about the costs falling on the devolved Administrations? As to those Administrations, which benefits, if any, are included under Clause 93(9) that could be capped in England but not in Wales or Scotland? Perhaps the Minister could let us have a detailed note, not today but by correspondence, on the local authority obligations to individuals and families made homeless by these provisions and the types of rules that local authorities have to take into account, particularly in relation to local connections.
Can the Minister also say something about the number of people who will be affected by this cap and who live in social housing? I think that a figure of something like 70 per cent was discussed in the other place, but that may not be up to date. The point is that social housing is, generally, of lower cost than pretty much any other housing around. If people in social housing are being forced into rent arrears and eviction, the only consequence will be that they will face being rehoused in higher-cost accommodation.
Baroness Hollis of Heigham
Does the noble Lord not agree that, with the new affordable rents—which are going to be 80 per cent of market rents—we could end up with social housing being higher than the benefit available to somebody on the 30th or 20th percentile in the private rented sector?
Lord McKenzie of Luton
Would the noble Lord approve of a lifestyle change that forced someone out of a council house, whatever the level of rent, into much more expensive private sector accommodation because they had been made homeless? Is that a lifestyle change that the noble Lord would approve of?
Baroness Hollis of Heigham
Perhaps I may add to my noble friend’s comments. Would the noble Lord care to compare apples with apples rather than apples with oranges—in other words, not compare the situation of a single man earning the average of £25,000 with the situation of a family who would also be entitled, for example, to child tax credits? If the noble Lord is going to make comparisons, he must in all integrity compare like with like.
Lord Skelmersdale
If there is a family where the sole income comes from either the man or the woman, then the situation is as I have described it. If, however, someone is working full time and someone is working part time, then the situation is clearly different, which is what I suspect the noble Baroness means.
Baroness Hollis of Heigham
The noble Lord is incorrect. He is failing to recognise that a man in work with a family at that income level will be entitled to tax credits that go into his net income. He is failing to take into account the additional benefits that come from the state over and beyond wages for someone in full-time work. He must compare like with like in all integrity.
Lord Skelmersdale
In that case, it would be useful for my noble friend Lord Freud to tell us how many families with an income of £25,900 a year are on benefit of any sort. I cannot imagine that he will be able to do so off the cuff but—
Baroness Hollis of Heigham
If the Minister is staying on this point then I will sit down, but before he goes on to another point, could he please clarify further? Say that there are two households in band D in two different local authorities for which the council tax charge in one borough is £20 a week and in the other is £30 a week. In the first borough, the localised benefits system effectively allows a rebate of £15 out of the £20, but in the other borough facing £30 a week there is a localised council tax benefit of only half that sum, which is also £15. When it comes to calculating the universal credit, what elements of that mess will the Minister take into account? Will he look at the putative council tax that should be paid and the benefit or the net sum paid? What counts as income? What counts as cost? How will this be done when everyone will have a different calculation to be made locally?
Lord Freud
The noble Baroness is, as always, way ahead of the curve. As I hope I explained, there are several things that have to happen before we come to deciding some of those issues, and we need to know the shape of any replacement for council tax or the impact of localising council tax, which as yet we do not. I am left with my previous observation that we will take that information into account when we have it, but we have all the powers to do that so there is no issue here regarding our not being able to do it.
Baroness Hollis of Heigham
I understand the dilemma that the Minister faces and that it is not a dilemma of his making, so I have great sympathy with him. Will he expect income to be the council tax benefit, or the council tax benefit minus whatever element the individual may be expected to pay? In other words, are we dealing with gross or net? It could vary by £15 or £20 a week between two different households with similar income in adjacent boroughs, and that will make a lot of difference to their actual outgoings.
Lord Freud
Regrettably, yes, it may or it may not. That will depend on how we reach our design by taking in the implications of localised support. I cannot design a system on the spot when we do not know several of the components, but we have the powers here to take that into account and we are planning to do so.
Lord Freud
The best I can say is that according to the current published impact assessment roughly 70 per cent of those affected are in social housing. However, the direction of travel of those figures in the new assessment is downwards, although I do not know by how much.
Baroness Hollis of Heigham
I am not sure that I have an answer that I fully understand. The noble Lord, Lord Best, raised the question of affordable housing, which, as we know, is to be set at 80 per cent of market rents. The market rent for a three or four-bedroomed family house not in central London but in some of the outer suburbs might well be £1,200 a month or £300 a week. Social housing with an affordable rent would therefore have to be 80 per cent of that £300, which is £240 a week. Let us assume that a family consists of a husband and wife with two or three children. He is in work and is paying an affordable rent, then his job collapses and he goes on to UC. He then finds that £240 a week has to come out of his benefit and he is up against the cap. Precisely what is he going to do? Obviously he is going to search for work but what does he do in the meanwhile? This is an affordable rent, being 80 per cent of a market rent, yet this is social housing, so there is nowhere else for him to go. What does he do? As my noble friend said, the probability is that he has very modest savings, otherwise he would not be in that sector in the first place, and he has children in school. It may well be that he cannot reasonably expect to get a job within the next six months, however frantically he tries, and he is then up against a benefit cap while in social housing with children. What does he do?
Lord Freud
My Lords, I have made it clear how we ease the transition for families, and that is one of the things that we are looking at.
Baroness Hollis of Heigham
Can the Minister at least help the Committee by indicating the shape—I shall not try to hold him to the precise details—of that transitional arrangement? Will it be over three years, or alternatively will extra resources be available through the discretionary housing allowance via the DCLG in order to allow local authorities to smooth that transitional arrangement? Would there be exceptions for particular payments, such as higher housing rent, because we are talking about social housing and affordable rents? Alternatively, would the Minister suggest to the DCLG that that rent could go from being affordable to the average social rent, even though that would then inhibit the ability to carry on with new building? I can think of three or four ways of doing it but what does the noble Lord have in mind?
Lord Freud
Regrettably, I am not in a position to be drawn. All I can say is that we are looking at how we can ease the position for families and how we can provide assistance for hard cases. I know that the noble Baroness has already created four different scenarios and ways of doing it, for which we are grateful, but that is all I can say at this point.
Baroness Hollis of Heigham
But it is a problem of the Government’s own creation. This is the difficulty—there is no evidence that this will have any longer-term savings cost.
Lord Freud
I should like to engage in a detailed debate on this, but all I can tell noble Lords at this stage is that we are looking at how we ease the transition for families, and we are looking at providing assistance in hard cases.
Lord Freud
I very elegantly have a wonderful piece of paper to hand. On the median, it works for total income—all gross and net household income—and it works for the mean. I can give noble Lords all the figures but it would bore them.
Baroness Hollis of Heigham
If the Minister could circulate those figures to all Members of the Committee, it would be very useful.
Lord Freud
I am sure that noble Lords probably have them at their fingertips anyway. They are meant to be accessible figures, but if noble Lords would like some help and for me to use up another Scandinavian forest, I will circulate them. I will put them in an e-mail instead. That would be cheaper.
Baroness Hollis of Heigham
Will the Minister ensure that his colleagues in the DCLG do not give guidance to local authorities that anyone unable to pay their rent by virtue of these changes is therefore deemed intentionally homeless? That is absolutely key.
Lord Freud
As I said, we are working very closely with the DCLG on the implementation of the benefit cap. We will work through those issues in detail.
Baroness Hollis of Heigham
When may we know the answer to that point? Conventionally, under homelessness legislation, anyone who loses their home by virtue of a failure to pay their rent is regarded as intentionally homeless. If they have children, they may get some help on grounds of vulnerability and the local authority may temporarily rehouse them. However, in future the local authority has only to give them guidance into the private rented sector, where they will be stuck. It is not a casual question. Unless we redefine the homelessness legislation from 1972 onwards, these families will be crucified.
Lord Freud
It is for local authorities to make decisions on individual homelessness applications, as they do now. Under homelessness legislation, if the only reason for the person’s homelessness is a reduction in benefit that is outside their control, they should not be considered intentionally homeless by their local authority.
Lord Kirkwood of Kirkhope
My Lords, I think that Clauses 93 and 94, and I speak only for myself, are incapable of satisfactory amendment. They constitute a direct and dangerous attack on entitlement and the concept of entitlement. They subvert the scrutiny of Parliament and they will cost more than they save. Apart from that, they are absolutely fine. I understand colleagues’ attempts to try to mitigate some of the damage. The speeches have been powerful; I have supported some of them and agree with all of them. If the Minister decided to take on all the suggestions that he has had today on exemption, it would be so complex that it would add some £270 million to add some agile computing to get the exemptions properly carried out—and I would like to think that simplicity is an overriding principle in developing new policy.
The thing that really causes me sleepless nights is looking at the clauses themselves. I have just three points. I spent some time—not quite in my bath, as I do not take social security Bills to my bath with me—looking at three aspects in particular. The Minister might help me with this. Clause 93(1) starts with the wording:
“Regulations may provide for a benefit cap to be applied”.
I think that that is a first. I do not think that there is any other social security legislation that aggregates entitlement and then depresses the total amount by regulation. If I am wrong, I would really like to hear about whether any other legislation does that—and I have been looking at this area of policy since 1986.
We need to be careful that the step we are taking is not taken lightly, because subsection (2) contains some language that is also worrying if you follow the thread all the way through the rest of the clause. It says inter alia that,
“where a single person’s or couple’s total entitlement to welfare benefits in respect of the reference period exceeds the relevant amount, their entitlement to welfare benefits ... is reduced by an amount up to or equalling the excess”
We find out about the relevant amount from subsection (5), which tells us that it is going to be contained in regulations. It also tells us at subsection (6) that the relevant amount will be,
“determined by reference to estimated average earnings”,
and we have had some important discussions about exactly what that does and does not mean. Then we have subsection (8), which is wonderful. It says:
“The Secretary of State may estimate such earnings in such manner as the Secretary of State thinks fit”.
That is quite novel as well. Is there another social security regulation where the Secretary of State can exercise that level of discretion on top of the attack on entitlement contained in subsection (1)?
Lord Kirkwood of Kirkhope
It may be putative, for all I know, but the conjunction of subsections (1) and (8) worries me greatly. There may well be other precedents, but perhaps people who know better than I do will leave me alone so that I can finish my speech quickly.
I move on to my third point. Clause 93(4) talks about regulations, and that subsection is also worrying. Paragraph (b) states that regulations may,
“make provision as to the welfare benefit or benefits from which a reduction is to be made”.
There is absolutely no qualification there. It refers not just to workless benefits but to welfare benefit or benefits. The Minister slightly gave the game away earlier by saying that we have all the power we need in Clause 93, and he is absolutely right about that. There is nothing that he cannot do by regulation. My point is: what is the House of Lords for if not to say that Clause 93 is a step too far?
I will vote not only against Clauses 93 and 94 but against the regulations that flow from those clauses, because that is the only way that we can protect entitlement. From where I am sitting, the concept of entitlement is sacrosanct in the benefits system. I am up for a discussion about reducing the social security budget total by £270 million. We can do that—we can have the debates; we know the process; we can choose the benefit and we can look at the effects. We do a lot of work in creating these entitlements and I should like to think that we do so carefully, line by line, particularly in the House of Lords. We all know that that certainly does not happen any more in the House of Commons, so this is the last place where on occasion we can protect people’s entitlement.
We should remember that we are talking about the lowest two deciles of the household income group in this country. They are the most vulnerable people in our communities throughout the length and breadth of the land. We need to be safe in the knowledge that we are doing what is right, benefit by benefit, but I think that Clauses 93 and 94 take away that security of knowledge. If we pass these clauses, everything can be capped by regulation. By convention, we do not vote against regulations in the House of Lords, and there are very good reasons and precedents for that. However, this is a game that any Government can play. My noble friend is a sensible and good man, as we established earlier in the Committee. We might make sensible decisions about some of these things but they will be enshrined in law. Another Government will use this power and it will subvert the role of Parliament. That is my objection. I understand and agree with a plea for exemptions left, right and centre, but I feel in my heart that if we pass this legislation we will be crossing a bridge that will lead to consequences which are not easily foreseen.
Speaking for myself, I will not vote for these clauses. I think that on Report the House should not just concentrate on some of the important, powerful speeches made in attempts to win exemptions but give some consideration to the parliamentary ramifications of Clauses 93 and 94. If that does not happen, we will be surrendering a power that we will never win back.
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Low of Dalston
My Lords, I have put my name to Amendment 86ZB in this group. These amendments, which would dispense with a face-to-face assessment where there is appropriate written evidence, have considerable overlap with Amendment 86ZZZV in the name of the noble Baroness, Lady Campbell, in the next group. So, if I may, I will say what I have to say on the matter now and spare the Committee the repetition when it comes up later especially since, with apologies to the Committee, I have to leave for the airport at 3.15 and may not be around when we come to the later discussion.
Lord Low of Dalston
I particularly support the idea of a trial period before incurring huge public expenditure in reassessing 2 million disabled people, many of whom really do not need it, for example, if their circumstances are unlikely to change. Where there is written evidence of severe impairments, it is simply common sense to accept that evidence and avoid putting people through costly and potentially distressing face-to-face interviews. Setting out criteria that would signal eligibility for PIP without an interview is an administratively simple way to indentify those who have severe impairments that have already been assessed through written evidence as giving rise to a higher level care or mobility need.
The Government have said that they do not think it is right that we should judge people purely on the type of health condition or impairment they have, making blanket decisions about benefit entitlement. One can understand their desire to personalise the assessment process when the impact of an impairment may not be clear. However, it is obvious that in some cases the impact is clear from written evidence and beyond dispute in terms of its implications for the rate of PIP that should be awarded. For some groups of people it is perfectly clear from the severity of their impairment that they should be eligible for enhanced rates of PIP without further assessment. For example, if someone is deafblind, a face-to-face interview to establish that they have mobility needs of the highest level is barmy. If someone has no sight at all or no legs, no further assessment is needed to confirm that they have a high level of mobility need. In cases such as these, a face-to-face interview is simply a waste of money. In addition to avoiding unnecessary stress for severely disabled people, this amendment would save money for the taxpayer. It feels pretty much like a no-brainer to me.
Baroness Hollis of Heigham
My Lords, can I make one proposal to the Minister? He may not feel able to accept this amendment—although given the strength of feeling in Committee I hope very much he takes it back and reflects on whether he can move more than he has been able to do today, otherwise I am sure it will come up on Report. Can he at least consider, as a fall-back position, that for a year new applicants who have been refused and existing applicants who are currently on DLA who will lose entitlement under the proposed new PIP would have a further personal review stage put into the system? This would involve not just the decision-maker but the disability organisations so they can work through the material themselves to see whether they would uphold the decision.
The Minister and the department will need additional knowledge-building within the decision-making process. The best way to do that in that first year may be to look at the cases that are being refused or declined and reconsider them before the applicant is notified. This would ensure that errors have not been made and that the decision-maker understands fully—in the light of real expertise coming from the relevant associations and organisations—where that may take him or her. I would suggest a further stage of at least 12 months of a review process within the department in which rejections are analysed a second time around with the help of representatives from disability organisations which are experienced in these matters so that we build up expertise.
Lord Freud
My Lords, I am very happy to reflect on that rather interesting point. I will go back and think about that very hard.
Baroness Hollis of Heigham
How many points do you need altogether if one produces 10 and the other produces 12?
Lord Freud
My Lords, this is a matter to be revealed at a somewhat later date. I am pleased to have provided a timetable of when this matter will become clear. However, the direction of travel is clear: the maximum number of points on that one is 15.
I almost want to call the noble Baroness, Lady Campbell, my noble friend, but I am not allowed to do so. I invite the noble Baroness to join me; I have to find an appropriate enticement so that I can call her my noble friend. However, I must disagree with her concerns. I suggest that she is likely to score very highly in the assessment by way of the very aids and appliances that she has highlighted. As I said, electric wheelchairs are right at the top of that measure at 15 points. We will produce case studies by the time PIP is debated on Report which clearly illustrate how individuals who successfully use aids and appliances will continue to receive PIP in a similar way as they do with DLA.
I turn to the noble Baroness’s second amendment. We are committed to personal independence payment, like disability living allowance, being an extra-costs benefit for disabled people, to spend on whatever they see fit. Our experience of DLA tells us that in some cases the money will go towards the cost and upkeep of specific purchases or activities, such as aids or appliances, or that it may simply become part of the disabled person’s budget paying for things as and when they come up, such as the need for shopping deliveries or taxis. The clear intent is that the mobility component should be used to help improve the disabled person’s ability to get around but we have no wish to prescribe how they should spend the money.
Given that the purpose of the benefit is to contribute to disability-related costs such as aids and appliances, and that there are other support means available, we do not think we should be paying for aids and appliances in addition to this. Given these comments and the reassurances that I hope I have given on how aids and appliances will be treated in the assessment, I urge the noble Baroness to withdraw her amendments.
Lord Freud
My Lords, I thank noble Lords for tabling these amendments and welcome the opportunity to respond on this important feature of personal independence payment. The required period condition has given rise to a great deal of considered and reasoned debate today. The debate has also been informed by the not inconsiderable assistance of briefing provided by the likes of Macmillan Cancer Support and the Disability Benefits Consortium, as well as many others over the past few months.
The amendments seek primarily to shorten the qualifying period before the personal independence payment can be paid. They also increase the onward period over which someone must be expected to satisfy the conditions of entitlement and modify how someone can satisfy the required period condition. Taken together, I was pleased to see that Amendments 86A to D preserve the overall required period condition of 12 months. I therefore welcome the fact that these amendments explicitly accept the principle that personal independence payment should be paid only to people whose needs arise from long-term conditions. This is a fundamental aim of personal independence payment and ties our definition of long-term disability in with that used in the Equality Act.
Under disability living allowance, people currently have to satisfy a three-month qualifying period and a six-month prospective test. These rules were put in place when the old attendance allowance and mobility allowance were merged to form DLA in 1992. However, for personal independence payment we are designing a new benefit; one fit for the 21st century, so it is only right that we looked at what it is the most appropriate length of the qualifying period and prospective test.
I know how much these changes to the qualifying period have worried certain groups of disabled people and their representatives, most particularly those representing people who have been diagnosed with cancer or who have experienced sudden-onset conditions. Noble Lords may be interested to learn that the changes found support in our consultation, in particular the link with the Equality Act definition.
Perhaps it may help to reassure noble Lords further if I set out that the required period condition is not a money-saving measure, nor is it meant to deny disabled people support where the impact of their condition is long-term. This is about having a mechanism which can identify, assess and pay a valuable cash benefit to individuals who have a long-term health condition or impairment which results in burdensome financial costs, regardless of income. Personal independence payment is not designed to assist individuals dealing with short-term needs.
Where there are immediate and ongoing costs which can cause financial difficulties, or have an effect on someone’s ability to participate fully so that their levels of independence may begin to suffer, there is a range of means-tested and non-means-tested support to help people through some of the shorter-term burdens, both financial and practical. I acknowledge that this help may not be available to all, but all provision has to be dictated by balancing need and an individual’s capacity to meet it from their own resources.
Baroness Hollis of Heigham
Can the noble Lord give us examples of that? Like others, I have nursed people through cancer—three people, including my late husband—and what we need is what does not exist, which is an upfront grant to cover costs until the condition has stabilised. During those six months, in his situation, I was all right, as I could throw money at it, but I noticed that in the waiting rooms for chemo and radio, then back to chemo and then to radio, a constant theme for the people there—some were feisty, some were broken, some were defeated and some were coping—was the huge financial pressures, particularly on those who did not have an adequate income or adequate family support to allow them to cope. If the Minister cannot move in this direction, he has to come up with something that will do the same job.
Lord Freud
My Lords, among the elements available in the shorter term are healthcare, travel costs, free prescriptions or aids and appliances provided by the NHS or the local authority. Following the request by the noble Lord, Lord McKenzie, it may be easier for me to write with a list of particular supports.
Lord Freud
I have slight jitters about that level of transparency, apparently.
Lord Freud
No, no, no. The Treasury is not a disability organisation, let me assure you. Those who know the Treasury well will be absolutely confident in that description.
As I said, it is not a cost matter. It is a matter where people’s sensitivities have been very clearly expressed. We will go away to look at that very, very closely. Some of the observations in this room today will help us in that consideration.
I do not know if there are any other points I really need to make. I just reassure or assure the noble Baroness, Lady Howe, that the required-period condition will not be a snapshot in time. The legislation makes that quite clear by talking about the likelihood of the assessment being met on any particular day. It means that if someone is likely to meet the conditions for the majority of the time, they can safely be taken as being more likely than not to meet them than if we were just randomly to pick a day.
The other issue I need just to touch on, which is often misunderstood, is that during people’s stay in hospital, when the cost of their disability-related needs are being met, individuals will already be fulfilling the required-period condition for personal independence payment. The noble Baroness, Lady Campbell, was concerned that filling in your DLA or PIP assessment form was not the first thing on your mind.
That means that when someone is able to leave hospital, perhaps with a care plan in place and further rehabilitation scheduled, they may well have satisfied some or even all of the qualifying period. That currently exists for DLA and is often misunderstood, with people thinking that they become entitled only after they have filled in and submitted the form. The qualifying date starts on the day that the needs arise—the day you have the accident that has caused a particular problem, for instance—not from when the claim form is submitted. I acknowledge that some conditions that arise gradually and it is very difficult to pinpoint the precise day.
With those observations and commitments to reflect, I ask the noble Baroness to withdraw the amendment.
Lord Freud
My Lords, we have made a number of commitments in relation to people aged 65 and over. Noble Lords may be aware that alongside the Government’s response to the consultation on DLA reform, we also published a policy briefing in May that set out our policy objectives and proposals. We intend to make regulations for personal independence payment that will allow people who have reached the upper age limit to continue to receive personal independence payment. Our priority is to support those individuals with established, long-term health conditions or impairments that would put them at a financial disadvantage over a long period. We fully understand that receiving this benefit is important for those aged 65 and over, particularly for those in receipt of the mobility component. We also know about their concern that the loss of entitlement could affect their independence.
The intention behind this amendment is to ensure ongoing support throughout later life for individuals whose abilities are limited earlier in life, recognising that they may have had less opportunity to earn and save for later life. I can assure noble Lords that this is also our intention and that it can be achieved without amendment to the Bill, but instead through regulations. As it currently stands, the amendment would potentially widen the scope of the personal independence payment and undermine our intention of creating a more affordable and sustainable benefit.
Turning to the current rules, broadly speaking, current DLA provisions have a one-year linking rule. This allows individuals over 65 to renew an award within one year of their previous award without losing DLA entitlement. Similarly, we intend to allow a linking period for PIP. This will support those individuals who reach the upper age limit and have a break in their claim through temporary improvement, provided the individual makes a claim within a defined period and continues to fulfil the eligibility criteria for PIP. As with DLA, there will be restrictions on new and existing claims for those over the age of 65. As I have said, our priority is to target support, through PIP, on disabled individuals with established, long-term health conditions or impairments, who may incur extra costs throughout their early lives and would have had less opportunity to save for retirement. Those individuals who develop care needs later in life, as part of the natural ageing process, will continue to be able to claim attendance allowance provided they meet the eligibility criteria.
Under Clause 81 we already have a power to make secondary legislation and to provide for exceptions. By setting out these provisions in regulations we can ensure that the legislation can be adapted in response to any future changes in the social care system which might affect pensioners. The Personal Independence Payment Implementation Development Group will strive to ensure that policy design and delivery in respect of people aged 65 and over is informed by disabled people and their representatives.
On the question raised by the noble Lord, Lord McKenzie, on what happens to DLA recipients over the age of 65 whose fixed term expires, we have made it clear that they will not be within the scope of PIP for the time being. That means that existing recipients of DLA aged 64 or over at April 2013 would be invited to reclaim DLA towards the end of an existing fixed-term award. At this stage we have made no decisions on the rates of PIP or how these will compare with other benefits.
Baroness Hollis of Heigham
In that case, how does the Minister establish any smooth movement on to attendance allowance, given that attendance allowance is not coming within UC?
Lord Freud
Clearly, that will be one of the issues we will need to take into account when we sit down to establish these rates. Given these reassurances on our approach, I urge the noble Baroness to withdraw this amendment.
Lord Freud
My Lords, perhaps I might again interpose slightly out of order in the interests of clarity. I am grateful to the noble Baroness, Lady Hollins, for tabling the amendment and for making some valid points. I revert to my opening comments today on the timing of the information. We aim to get more information on the passporting arrangements from PIP to carers’ allowance prior to the start of the Report stage, which I hope will satisfy the request. I should add that we are sympathetic to the position of carers—which I hope is recognisable code—and the Government recognise the important role that people with caring responsibilities have in our society. We are continuing to listen very carefully to the contributions that we receive.
I cannot at this stage add anything further. I therefore urge the noble Baroness to withdraw her amendment, which clearly we will be able to consider in more detail in a little while.
Baroness Hollis of Heigham
My Lords, I apologise to the Minister for being fractionally late and therefore missing his statement. Had I been here, I would no doubt have been pushing him on the questions I now want to raise.
Although we welcome and very much appreciate that the passporting arrangements will be with us before the start of Report, we also need to know the statistics, the numbers. In other words, to what extent will the existing case load of people on middle and higher-rate DLA go through into PIP? Will some of those on the lower rate now come into PIP? If carers are passported, as the Minister gave us hope to believe, from both rates of PIP, will that mean there will be more carers in future because some lower-rate carers will be joining them, or will some disabled people on what is currently the middle rate of DLA, which entitles their carer to receive carers’ allowance, fall out of PIP altogether?
Until we know the mapping of the numbers we cannot understand the implications of the very helpful information the Minister is going to make available. The crude fact is that any carer who is now on CA who finds that the person they are caring for will fall out of middle-rate DLA—therefore they may fall out of even a relatively supportive interpretation of the new PIP arrangements with both tiers entitling you on to it—will then find themselves suddenly excluded from having carers’ allowance. Because they are caring for someone for 35 hours a week, that will vanish. As a result they will be exposed to full, in-work conditionality even though the care needs of that person—35 hours a week—will not disappear.
We need to know those numbers and they are issues that we are going to have to reflect on in Committee before we get to the relevant clauses associated with DLA and ESA. Will the noble Lord kindly say whether he will be able not just to tell us before Report, as I hope, that both the upper and lower rate of PIP will entitle you to carers’ allowance but how those two populations rub on to the two existing populations? Will there be losers as well as possibly gainers among carers with all the possible implications they will be exposed to? The Minister may be able to tell us what happens to disabled people and the numbers coming into the PIP framework.
Baroness Howe of Idlicote
My Lords, I hope the Committee will forgive me for coming in at this stage. Earlier today, Carers UK asked me to ask a supplementary on this which is not dissimilar from what we have just heard. There are more than 560 carers receiving carers’ allowance and so on and they may well transfer over into PIP. The Minister has made it clear that decisions are going to be made and will be looked at in detail, but these are the questions Carers UK wanted me to ask. First, what assessments are being made on the impact of carers of the two options available—establishing eligibility through both rates or just through the enhanced rate of the daily living component? Secondly, if the Minister is unable to announce a decision—which he obviously is—on which rate will lead to eligibility for carers’ allowance, will he publish the assessments of the impact on both options so that the Committee can discuss their implications?
Lord Freud
My Lords, as always, the questioning is pinpoint in its precision to rip open any veils that I may be draping over myself. I speak in the spirit of Salome. As I said, before Report begins, I will provide more information about the passporting arrangements from PIP to carers’ allowance. I cannot say more than that today or in practice, as noble Lords are aware, I would end up making the announcement, which I am not in a position to do. Threshold information for PIP will be available prior to the specific Report discussion on that part of the Bill.
Baroness Hollis of Heigham
Does the Minister accept the point that my noble friend made very fully, that we cannot do it that way around? It is back to front. We have to know what the thresholds are for PIP to know which and how many carers will be passported on, on either assumption, whether it is one band or both bands. The Minister has been very sympathetic on this, but unless we have that information, the information on carers will tell us only the mechanism, not the effect. We have to know the effect.
Lord Freud
My Lords, I feel slightly as though I have trapped myself, and I will explain exactly why. I spent a lot of time on the carers’ allowance. I was very worried about the cliff edge at £100 earnings, and so I reinserted a carers’ element into the universal credit, very deliberately, to get rid of that and to have a smoothed effect. I have spent some money—or we the taxpayers have spent some money; it is not out of my own pocket—and I find myself slightly hoist on my own petard by the noble Baroness, Lady Hollis, by making a subtle connection between the universal credit and the carers’ allowance. This was not there originally, when it was a carers’ allowance.
I see that there is a connection—I have created it, but it is fairly narrow—to get that taper to work. It does not undermine the way in which we think about carers and the way in which we look at the universal credit. As I say, I will be able to explain the principles of how the allowance will work right at the start. We will see the actual numbers later when we start to look at the real carers’ allowance. I think noble Lords should be more tolerant of me than they are being.
Baroness Hollis of Heigham
I should be very tolerant of the Minister if he had answered the question. However, my question was not about tapers and the interplay of carers’ allowance; that is a genuine set of questions, but not the one I was trying to explore. I was saying that because carers’ allowance is a passported benefit, we have to discuss, and have to know, how many people will be entitled to the original benefit, from which carers are passported, to calculate how many carers will or will not continue to qualify for carers’ allowance. If they do not qualify for it absolutely, then they come into the in-work conditionality issues that some of us are worried they may be exposed to. For once I think the Minister has not understood where I was coming from on this, which was not about tapers and the interplay; that is a separate bundle of issues that we will no doubt seek to tease out.
Let us assume that both levels of PIP, standard and enhanced, entitle you to a carers’ allowance. That would be very good news. However, we need to know how many disabled people are entitled to the standard rate of PIP, and whether it is just the people currently on the middle rate, or some of the people currently on the lower rate as well, or fewer people than who are on the middle rate now, who will be entitled to that lower rate. Only then can we work out how many carers will be affected, numerically. We cannot discuss, therefore, the extent and the value of a passported benefit until we know the original client group on whom that passport is dependent.
Lord Freud
My Lords, as I have tried to explain, we will introduce PIP from the bottom up. We will try to find the people who need the money and there will be winners and losers in that process. In particular, the PIP process is far more understanding of mental health issues. I do not think looking at absolute numbers undermines the principles of how you create the universal credit. It does not undermine our considerations of the principles of the universal credit but we need to understand the impact of PIP and the carers’ allowance in relation to it. We shall have that information in time and debate it in great depth. I am committing to providing those figures at the right time. It is not a trivial but a hard commitment. The timing has been produced under pressure from the Committee and I hope that it is accepted in the spirit with which it has been obtained.
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the purpose of the government amendments in this group is to correct an omission in secondary legislation which was made to implement changes to the working tax credit withdrawal rate announced as part of the June 2010 Budget. I apologise for the fact that these amendments are required.
Any award of working tax credit or child tax credit is reduced or withdrawn by a prescribed rate for every pound of income that a claimant has above a specified threshold. One of the changes announced in my right honourable friend the Chancellor’s June 2010 Budget in relation to tax credits was to amend the withdrawal rate for both child tax credit and working tax credit. The intention for the tax year 2011-12 was that the withdrawal rate would be set at 41 per cent, so that for every pound of income above the threshold, the amount of tax credits payable would be reduced by 41p. HMRC accordingly amended the tax credits IT system and since 6 April 2011 has implemented the increase in the withdrawal rates for both working tax credits and child tax credits and thus has applied a withdrawal rate of 41 per cent in relation to both tax credits for 2011-12 awards. Although the secondary legislation was amended correctly for the child tax credit withdrawal rate, unfortunately the working tax credit withdrawal rate was not. This new clause will correct the technical omission and will ensure that the withdrawal rate for working tax credit from 6 April 2011 is 41 per cent and not 39 per cent.
Let me be very clear for the record. HMRC is paying claimants the right amount of money as announced in the June 2010 Budget. It is applying the 41 per withdrawal rate and has been since 6 April 2011. In practical terms, the implementation of this correction will not impact tax credit claimants as it simply aligns the legislation with the announced and currently effective practice. I beg to move.
Baroness Hollis of Heigham
Does that mean that as a result we have been paying people less than they were entitled to by law and are retrospectively correcting that?
Lord Sassoon
My Lords, claimants are being paid what they expected to be paid based on the announcement made by my right honourable friend the Chancellor in the June 2010 Budget. If the legislation goes uncorrected, HMRC will be paying at a rate that is not covered by the law, so it is necessary to amend the legislation to bring into alignment the law and what claimants expected to receive and are receiving.
Baroness Hollis of Heigham
So I think the answer to my question is yes. In other words, between April and December, HMRC has been withdrawing money at a taper that was not legitimised by legislation?
Lord Sassoon
My Lords, there are a lot of things where HMRC starts in practice, and the law, whether primary or secondary legislation, comes afterwards. If the law does not come in, adjustments will subsequently have to be made. The result of doing this now is that there will be no adjustments and people will have been paid what it was intended they be paid.
Baroness Hollis of Heigham
My Lords, I will not say that the noble Lord is wriggling—I am looking for a more courteous word—but it is something like that. He keeps saying, “If we didn’t do this, it would get worse”. That is quite right. However, will he not confirm that between April and December he has withdrawn money at a rate not approved, legitimised, permitted or allowed by legislation?
Lord Sassoon
As the law stands, HMRC is giving people less money than the law says that it should.
Lord Wigley
My Lords, will the Minister confirm that people who had an entitlement under the law as it stood will be paid fully in accordance with the law as it stood, and that there is no question of a clawback coming through retrospective legislation?
Baroness Hollis of Heigham
It is worse than that. Money has been taken from people. The thrust of the noble Lord’s argument suggests that it should be repaid until it has been appropriately legitimised.
Lord Sassoon
It is certainly the case that if the law were not brought into line with what the Chancellor intended, at some point HMRC would have to make adjustments to the incorrect clawbacks that were calculated. We can discuss this for as long as we want. The fact is that there was a clear policy announcement. It should have gone through in the original statutory instrument—I think it was 2011/1035—and a claimant can at any stage ask for an appeal and ask to have their payments recalculated. However, clearly it would be pointless to do so if they expect that the amendment we are now debating will be agreed and will get the position back to where it ought to have been all along.
Lord Sassoon
The technical position is that what is paid during the year is only an interim award. Of course, HMRC seeks to pay all entitlements on a correct basis. However, the final calculation is done at the end of the tax year. Therefore, at the moment HMRC is quite properly paying what it believes will be the position once we get the legislation lined up with the original policy intention.
Baroness Hollis of Heigham
My Lords, if the tax system changes half way through the year, we do not say that it is retrospectively applied to the previous six months and rely on an end-of-year adjustment, which is what the noble Lord seems to be doing. He has illegally underpaid people for something like nine months. The fact that tax credits are done at the end of the year and as an adjustment is neither here nor there. For that period he has illegally underpaid and he cannot retrospectively go back and claim money from them which he was not entitled to do.
Lord Sassoon
My Lords, as I understand it that is not the position. The position for all taxpayers and claimants has to be finally calculated at the end of the year—and in many circumstances it can be done only then—because all sorts of circumstances may have changed. The issue is to get the legislation right in respect of this tax year. HMRC has calculated everything to date on the basis that there will be no further adjustments required at the end of the tax year once we get the legislation back into alignment with what was originally intended.
I appreciate the intention of noble Lords opposite to make hay out of this. It was a technical error in a statutory instrument that should not have happened. The amendment we are considering today is not to change anything midway through the year but to change the law with effect from 6 April 2011. There is going to be no unfairness and everything will be in line with exactly what my right honourable friend the Chancellor announced in the first place.
Lord Sassoon
My Lords, I always speak for the whole Government, of course. The first point is to re-emphasise that we are talking about an adjustment that will apply, as was always intended, from the beginning of this tax year—6 April 2011—so the issues of what happens to people whose circumstances change during the middle of the year are not relevant. The policy was announced as taking effect for the tax year 2011-12, which is precisely what the amendments are intended to achieve.
There is nothing magic about the amount of money and the juxtaposition. I know that June 2010 seems a while ago now but this was the emergency Budget in which we needed to do a number of things, not least set out a very clear plan to deal with the inherited deficit.
Lord Boswell of Aynho
My Lords, will my noble friend reflect, in conjunction with our noble friend his colleague, that in a sense—I have enjoyed watching the passing scene on this matter—he has been rescued by the fact that the concept of income tax is a tax from year to year and has a defined period in which adjustments can be made? But I understand that under the universal credit, the payment period will be somewhat different and the ability to use that kind of argument, if there were a miscalculation of the taper rate in the future, would not be available? That is perhaps the moral that Ministers and officials will need to take into account in avoiding any slip-ups in the future.
Baroness Hollis of Heigham
My Lords, in the wording in proposed new subsection (2), all that comes close is in the regulations referring to capital being deemed to be income and income being deemed to be capital. Here we have something that has to be treated as being done is though it would have been done had it not been for the fact that it was not done. As a basis of legislation in future, I wonder whether the Minister would welcome such an approach from the Opposition.
Lord Skelmersdale
My Lords, the members of the opposition party have been waxing lyrical in this particular case. With all the experience of his advisers behind him, can my noble friend say whether such an accident—and an accident it most certainly is—ever occurred during the course of the last Labour Government?
Lord Freud
My Lords, as the noble Lord knows, we have published the criteria and weightings but have not yet gone into any further definition of how the system might work in terms of thresholds. I will aim to bring some more definition around that by Report.
Baroness Hollis of Heigham
Could the noble Lord bring back not just definitions but examples? He talked about a “dynamic” version. I do not understand that, except that “dynamic” is a sexy word. Perhaps he could describe how the situation of somebody who is currently on middle-rate DLA would change under PIP.
Baroness Hollis of Heigham
My Lords, I support my noble friend in her request. In order to have a sound evidence base, we are going to need stats about how the existing clients of DLA—if I can put it that way—will map on to the future ones proposed for PIP and the implications for carers. It is not a discrete thing: it has interactions with ESA; it has interactions with in-work conditionality; and it has interactions with other things, like housing benefit, extra rooms and the rest of it. It has tentacles right through the whole of the Bill.
I will make a serious proposal to the Minister. I will personally not be happy to go into a Report stage of this Bill unless we have had, at least three days before the first day of Report, all the information that we need on the proposed changes to DLA and the linking effect to carer’s allowance, because it interacts with so many other aspects of the Bill. I hope the Minister will agree that that is an acceptable position to hold.
Lord Newton of Braintree
My Lords, before the Minister replies, which I assume he is about to do, I will just chip in again. I do not have the up-to-date knowledge that the noble Baroness, Lady Hollis, has from her more recent experience as a social security Minister, but I did once again prick up my ears at the reference to carers. There is obviously a link between disability living allowance with its three rates and the payment of carer’s allowance. This is not something that I have focused on, but I would much appreciate a word from the Minister about what the effects of that might be. That would be on top of the 652,000, as I understand it, and could mean that some households suffer what in conventional jargon would be called a double-whammy. We need to know something about that.
Baroness Hollis of Heigham
I would add to the noble Lord’s very helpful intervention that if someone who is currently getting carer’s allowance finds themselves disqualified in future, they will come within the whole remit of in-work conditionality and all the other issues that affect this Bill. It is not just a one-off enclosed issue; it has tentacles or effects or implications right across the Bill.
Lord Newton of Braintree
I can understand that; that is where the noble Baroness is more up to date than I am. The Minister must be the most up to date of all.
Lord Freud
My Lords, I apologise that the information about the second draft criteria was not available earlier and I apologise for ruining a lot of weekends. What is the reason? We had a large volume of feedback to our informal consultation and we have made a significant amount of changes. It took some time—rather longer than we hoped—to work through it all. It is crucial that we get this right. One of the reasons—as noble Lords have pointed out already—is that there is a lot of sensitivity around this. If we put things out that are not right, we will create concerns where we should not. Misleading impressions here are very dangerous.
As I said, we aim to have the thresholds available for the Report stage of our consideration of this—not before the whole of the Report stage, but in good time for when we reach these matters at Report.
Baroness Hollis of Heigham
My Lords—if the noble Lord will allow me to intervene again—I am sorry, but that really will not do. Too much depends on how you align the two rates of disability allowance; the passporting of carer’s allowance will depend on it; and, in turn whole issues such as couple conditionality, in-work payments and the like will depend on that. We cannot deal with earlier sections of the Bill if we do not know what the implications of this are. It will not do to leave this until Report. We have to have it before we start the Report stage.
Lord Freud
My Lords, I regret to say that I am not in a position to say that we will have the implications for carers ready for Report as well as the threshold information, which is another roll-on. We will be discussing the carer’s element in a later amendment, so I shall deal with that more fully then. I am looking at the timings of the information that I have. There is a large amount of co-production going on in the development of PIP, where we are talking to disabled people and disabled groups. That is what is taking the time to get to where we need to get to.
Lord Freud
Perhaps I could undertake to do that ahead of Wednesday’s sitting and go through what we are expecting to have when.
Baroness Hollis of Heigham
If the Minister were able to say, for example, that carer’s allowance will be attached to both rates, whatever they may turn out to be in terms of eligibility, some of our concerns would be removed. If he cannot say even that, I think half of Chapter 1, nearly all of Chapter 2 and quite a fair amount of Chapter 3 are affected by the passporting decision for carers.
Lord Freud
My Lords, I will give a full report on Wednesday, but I have already indicated where I am pretty sure we are. We are looking at passporting in a much wider way. We are having the SSAC report in January with its recommendations. There will undoubtedly be a lot of work around that. It would indeed be foolish to look at one aspect of passporting without taking the whole of passporting together. As noble Lords know, this is a framework Bill. There will be plenty of time to consider all these elements as we go through the regulations when we will be doing things in the fullest possible way. I imagine noble Lords in this Room will be taking a very full interest in all these aspects. Let me leave it that I will come back with the timetable at our next sitting.
These amendments seek to broaden the scope of PIP—I do not know whether my noble friend’s formulation of the personal disability costs payment has found favour, but I will stick with PIP, like the noble Baroness, Lady Hayter, for the purposes of this—by introducing an additional tier to the daily living component. When we consulted on the overall framework to personal independence payment, we stated our intention to move to a structure that has two components paid at two rates. We decided on this structure for three key reasons: to simplify the overall structure by reducing possible award outcomes from 11 to eight; to make it easier to understand and administer; and to ensure that it reflects the range of individual needs and provides appropriate levels of support.
We also made it clear that the overall design of personal independence payment is intended to ensure that the benefit is fairer, more transparent and focused on the individuals who are least able to live independently. It also provides an affordable and sustainable platform of provision for the future.
In responding to our consultations, most organisations said that they supported the move to broader definitions for both components as they were a better reflection of the real experience of disabled people’s daily lives. Our view, therefore, is that a daily living component paid at one of two rates will enable us to better reflect the impact of impairment on an individual’s ability to participate. I appreciate the concerns of the noble Baroness that people will receive lower levels or no support under our reforms and that her amendments are intended to prevent that. However, that fails to deal with one of our fundamental aims, which is to give more consideration to whom we prioritise for support.
The Government have been clear here. We intend to protect those who are most in need and will prioritise support for individuals whose impairment has most impact on their ability to participate. That aim, and the way in which we intend to deliver it through the new assessment criteria, may necessarily result in shifts in provision. Some people will receive more support under our proposals; some the same; and some less. This is not an exercise in simply making arbitrary cuts to existing provision; it is about refocusing benefit provision so that it reflects disability impairments and barriers to participation in the 21st century.
Lord Freud
My Lords, let me start with the numbers. Large numbers are being thrown around about what is meant to be a 20 per cent cut. In practice, it is a cut from a projection because the benefit was rising very steeply, so measures were taken to get it under control. The whole caseload in 2009-10 was running at £3.1 million and now £3.2 million. In 2015-16 our projection is for it to run at more or less £3.1 million—£3.059 million. In terms of money, this is cash money. We are looking at a figure of £11.5 billion rising to £13.7 billion in 2015-16—and that is cash, not real. That was the projection we inherited and it is from that that we are cutting £1.3 billion. So from £13.6 billion we will take £1.3 billion, which will leave £12.3 billion.
Baroness Hollis of Heigham
I am very interested in this point and it is exactly what I want to press the Minister on. Earlier he said that this was irrespective of—net of, if you like—demographic changes. Is he still saying that that is true for these figures? Certainly, all my assumptions based on his impact analysis and all the rest of it, and from what most of us know about this, are that people are getting their DLA and carrying it through into older age, and there is increased eligibility for attendance allowance by virtue of people living longer. So what one really wants to know is where he thinks the extra cost is coming from and whether, rather like pension costs, it reflects what is happening demographically and does not show any “looseness” in the financial gateways to the benefit.
Lord Freud
My Lords, as I said earlier, the history of this is that only 30 per cent of the gain that we have seen in recent years has been due to demographics. The rest has been the result of a drive in demand. I do not think that there was any assumption of a huge change in expectation in the projection. I am sure that once she has gone through Hansard, the noble Baroness will work it out.
I shall take the question on transitional protection put by my noble friend Lord Newton that I failed to answer. He had to ask it again, and I apologise for that. We do not have any plans to introduce such protection for people who currently receive DLA and may not be entitled to PIP. While I accept that they may have been entitled to it for some time, it would be strange to continue to pay a benefit to people who no longer met the entitlement criteria. So there is no difference between this and the similar 2004-05 exercise where 12 per cent of people were found no longer to be entitled.
I turn now to the question raised by the noble Baroness, Lady Hollins, on the difficulty of working out what the assessments we published on Friday mean. That was an exercise in showing the weightings and how the criteria might work to prioritise relative need. We know that there are strong views on these relative weightings. That is why we have published them: so that we can now discuss and fine-tune them to the extent that we need to. As I said, we will be able to move on this when we come to these clauses on Report, having done the exercise and worked out what it means in terms of entitlement thresholds.
Baroness Wilkins
I thank the noble Lord for that explanation. As the noble Baroness, Lady Campbell, said, it is the Government's stated aim that the new system should be underpinned by the social model. Ministers have insisted that the assessment process should recognise the disabling barriers that stand in the way of full and equal citizenship for people who need support to go about their daily lives. The Minister for Disabled People recently stated:
“Our vision is clear: we want to remove barriers to create opportunities for disabled people to be able to fulfil their potential and be fully participating members of society”.
I welcome the amended draft regulations that were published by the Government on Friday. They take into account some of the criticisms of the earlier draft. However, as the noble Baroness, Lady Campbell, said, this is only a start. There is still concern about whether the Government will be able to identify the needs of a broad range of people, including those who need to make greater use of utilities or who incur additional transport costs. The amendments will assist the Government's recognition of the need for the assessment process to recognise the impact of disabling barriers. They will reassure disabled people and their organisations that they have been listened to, and they will provide the clear principle on which the Government say they want the new assessment to be based.
DLA and its replacement, PIP—DCLP as we will now call it—were created in recognition of the fact that it is highly costly to live as a disabled person in today's society. It is not just impairment or illness that create costs but the environmental, economic and attitudinal barriers that often accompany such experiences. The Counting the Cost report by Scope and Demos clearly demonstrated that factors such as the suitability of housing, the accessibility of local transport links and whether an individual has already received other forms of support from friends and family will all contribute to their extra costs. Therefore, it is imperative that these factors are considered when designing the assessment for PIP or DCLP. Otherwise, as the noble Baroness, Lady Campbell, eloquently outlined, many disabled people across the country will fail to receive the most appropriate levels of support, and the new assessment process will not be fit for the Government's stated purpose.
Baroness Hollis of Heigham
My Lords, I was rather surprised to see that the amendment was felt to be needed. I had thought that the past 30 years would have made such an amendment redundant. Some time back, for just a few months and for reasons that I am ashamed to admit, I was in a wheelchair. Looking back, it is hard to say whether the difficulties I had were due to social or medical factors. What I am sure about is that an impairment easily becomes a disability if the environment is not supportive of that individual. That seems to make the difference.
What puzzled me until the noble Lord, Lord Addington, mentioned it was that we had not referred to the DDA. The whole point of the DDA was to set the medical impairment in a context which, through social, practical, emotional and moral reasons, did not serve to bar the person from full involvement in their lives. What we asked with the DDA was that employers and providers of goods and services should be required to make “reasonable” adjustments. This seemed a perfectly intelligent balance between the costs for small businesses and the rights of individuals not to face artificially induced and constructed barriers to their full social inclusion.
I remember going around the city and looking at our historic buildings, which we had been told by various people could not be made accessible for disabled people. On the contrary, the brilliant architect John Goldsmith, who was then over at the old DoE and was himself disabled, showed how we could ensure full access to buildings from museums to 18th century chapels for disabled people in wheelchairs and the like. In the process, mothers with buggies, pensioners loaded down with bags and a whole swathe of the community found that they had added access on the back of what we were doing nominally for disabled people. We opened up some of the most beautiful buildings of the City to perhaps a third of its population who had found barriers in their way. Without needing to get into a debate about social and medical because I cannot follow down those paths, I say to the Minister that I just do not see how you can separate the one from the other, because they interlock whether they be transport, housing, public access to buildings or whatever. Unless you have both sides of that equation, an impairment will continue to remain a disability—unnecessarily so—for far too many people.
Baroness Grey-Thompson
My Lords, I rise very briefly to support this amendment as my name is on it. Others have explained very clearly the need for these amendments. More specifically, I rise to support the noble Lord, Lord Wigley. The social model was a lifeline to me. My parents brought me up to believe that having an impairment was not my fault. I became a wheelchair user at the age of seven—some 35 years ago. I was brought up in the social model before there was even a name for it, but I also grew up in a world where there were loads of people who almost delighted in giving me the long list of things that I never could, or even should, do, such as go to the cinema, stay in a mainstream school, go to university, go to a sports club, or even, more recently, get married and have a baby. The social model outlines very clearly how disabled people can play their part in society. We should not take this for granted because it would be too easy to forget what the social model is.
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Earl of Listowel
My Lords, before the Minister replies, can I say that I am very disappointed to hear that lone parents with a child of six or seven who cannot find a job except one that occupies them during the school holidays as well, will be obliged to take a job under the new arrangement. That was not my understanding from my reading on this and it seems very disappointing that that is the situation. I would appreciate if the Minister would double check to be very clear on this particular matter. If he has done so, and he is clear on it, then in that case I suppose I will have to read Hansard again.
The other matter is about transitions in school. A point that is always emphasised to me is that the transitions into primary school and from primary into secondary school are key to the success of a child’s education. We need to ensure that we do not do anything to make those transitions more difficult. If there is research there that we can identify, maybe the Minister might be able to help with that, or perhaps he could undertake to look very carefully at this particular area. It would be helpful if he could see whether there is any adverse impact caused by the changes in terms of the transitions of children into primary school.
Baroness Hollis of Heigham
My Lords, could I also ask a question, which is to turn the comments and questions made by the noble Baroness, Lady Sherlock, around the other way? If a lone parent has found a job as a dinner lady, precisely because her hours fit those of her young children, and she is therefore not being paid and not working over the holiday periods, is she at all exposed to the issue of work conditionality?
The second issue is on transition. Again, speaking from personal experience—and we all brought our children through school—many children sail through and love that first year of school. However, many children who suddenly go into what they regard as “big school” can find it very stressful. They revert to bed-wetting, have disturbed nights, are fearful, actually hide under the table when the school bus comes, and so on. In those situations, the lone parent needs to be on hand and available to go into the school if necessary, to collect the child from the school, during that first year of settling down. Most of us can talk from personal experience in that respect. The noble Lord would be very wise to listen to the point about transition—whether it is for one year, or ideally for two years, before the full conditionality comes in.
Lord Freud
My Lords, on the first question on whether the child happens not to be in school on their fifth birthday, there will be a small number of lone parents that we are aware of whose youngest child is aged five but who has not yet started school. We are therefore going to expand the existing flexibilities within jobseeker’s allowance to support these lone parents through the short period of time until their child enters school or reaches compulsory school age, whichever comes sooner.
On the question raised by the noble Baroness, Lady Hollis, about the dinner lady—people who are employed through the school year—where the dinner lady is presumably on a contract through the process then clearly she has a job and would escape conditionality in holiday periods because she would be working in a long-term job. As one gets to short term fillings-in I expect that it becomes a bit more detailed and dependent on particular circumstances. The broad position, however, would be that they would be within the job for that period.
Baroness Hollis of Heigham
Thank you, I am very grateful for that. If I understand the Minister rightly, that means that through the period of the school holidays, for example, the dinner lady will go up the ladder—or down, whichever way you want to put it—to increase the amount of universal credit during that period, to compensate her for lack of income, and it would then be readjusted when she goes back to being a dinner lady in the school term.
Lord Freud
Yes, the noble Baroness is way ahead of us, as usual, as we structure how we do the universal credit. We are currently looking at that very closely in terms of how we do it. We have not settled this, but my view is to look at it in fairly cash-in-the-month terms, as she is implying. That is where I would come from as we started to devise it. However, I cannot give a commitment or go further than say how we would do that. I am not keen to elaborate averaging-out processes because I think that gets overcomplicated.
Baroness Sherlock
My Lords, I understand that. The fact is that the noble Lord is not trying to make people want to work but telling them that they have to work. The evidence may be complicated. For me, the point of the objective is simple. I do not think that the state should be substituting its judgment for that of a parent of a young child as to when it is better to go out to work. That should be left to the parent.
Baroness Hollis of Heigham
Perhaps I could reinforce a point. We know from all the research, going beyond Jane Millar right back to the American research, that a lone parent who goes out to work and retains that work, if it is sustainable, benefits from the lift out of poverty. I entirely accept that that is important for the family as well as for role models. However, that is possible if and only if she has childcare that she trusts. Very often that childcare is from a family member, who is often a grandparent. The grandparent can address the problems of the child in the transition period and so on. Yet time and again we are doing nothing to recognise the role that grandparents may play and instead we are going to impose in-work conditionality on them, taking them out of the caring function that they would voluntarily and willingly embrace for everyone’s benefit. We will expect two generations to work and for the child to be somewhere out there.
Lord McKenzie of Luton
My Lords, I thought that this started off as a relatively straightforward debate, but I am delighted that it has expanded into a huge philosophical debate which is very important. I thank all noble Lords who have spoken at least in support of the opposition to the clause. I think that some would go quite a bit further but there are important issues around childcare, the time spent with children, the propensity of the mother to want to work and the quality of substitute childcare. In one way or another, each of those has been touched on by noble Lords. I think that it was the noble Baroness, Lady Lister, who expressed the view that she was not totally signed up to the concept of lone parents in work when their children are as young as five, and I acknowledge that.
Baroness Hollis of Heigham
My Lords, there has always been a tension within social security, as David Donnison spelled out many years ago when we had what was then called supplementary benefit, between standard, national, no-postcode-lottery funding and payments, and the need for discretion. The Social Fund as it has become has that element of discretion and flexibility, which is why it would be madness to go to a call centre and think that you can do the thing that most requires discretion by telephone. I entirely sympathise with the Government’s wish to move away from that procedure.
My noble friend Lady Lister and the noble Lord, Lord Kirkwood, have eloquently explained the need for the Social Fund. I do not want to rehearse that, although if I had my way I would treble the money going into it because of its value to people. Indeed, the people who need it are not there because of financial mismanagement, let alone scrounging. They are there for the most part because of absolute, desperate, grinding poverty, having come out of care, prison or a refuge. They are the ones we seek to help.
Instead, I want to talk about something more mundane: the process proposed for the handling of Social Fund moneys, particularly community care grants, in future. Where that money is going to a local authority that is a single-tier unitary authority, I have no reason to think that it will not be able to get its act together because housing, social services and advice services are integrated on one level. However, it will be catastrophic for the shire counties where there are two-tier structures. I shall explain.
I come from Norfolk, a county which is about 60 miles by about 40 miles. When I was a county councillor representing Norwich I was closing schools that I had never visited and putting yellow lines on roads I did not drive on, and we called it “local government”. I have to say that the Jobcentre in my district had more local knowledge than most county councillors had outside their immediate patch. Under this proposal the money will go to a county council that has no local experience or knowledge. I do not in any way mean to criticise social workers who are doing a heroic job, but the council has none of the local knowledge at councillor or policy-shaping level that is required.
A second problem is that in a county council like Norfolk, there are a number of rural districts within which there may be small pockets of acute rural deprivation—even though they may contain thatched cottages covered with roses—but there is also the deprivation of Great Yarmouth, King’s Lynn, Thetford and some of the poorest estates in the eastern region, in Norwich. If the county council decides to go on a format allocation, it may send money to rural districts that do not need it as their pockets of rural deprivation have been resolved because those people have voted with their feet—I know this to be the case—and have come into the nearest urban city area. I have known good social workers give them the bus fare to do so, and quite right too; I would do the same in their situation. So the first problem with sending the money over to the county council is that they do not have local knowledge, but the second problem is that there is a huge variety of circumstance in an area as large as Norfolk, and I have no confidence that that will be recognised in the use of that money by the county council.
The third issue is what we call ring-fencing. If I were a county councillor with this money and I was seriously worried, as most county councillors are in good faith and decency, about child abuse protection, I would regard this as a fund to plunder. I would regard other priorities as being of more urgent need. I am therefore not in any sense confident that that money will be spent where it should be.
For several reasons, I want to see instead, and I hope that this will happen, the money in two-tier authorities going to the local district council. First, the local district council should have much more intimate knowledge of its locality and local needs. If localism means anything, it does not mean distributing down to a county council, half of whose councillors have never visited the village or the area where the deprivation is concentrated. You might just as well have the money coming from London or indeed from Scotland. It has to go down to the local district council.
Secondly, over and beyond local knowledge, if we cannot have ring-fencing—I hope we do, but I will come back to that—then at least it should be integrated with the fact that it is those same lower-tier authorities, the housing authorities, that are going to be responsible for the discretionary housing allowance and for the development of this absurd structure of individualised council tax benefits. Okay, it is an absurd and foolish system but it looks as though we may be stuck with it for a while until better sense prevails and we can reintegrate council tax benefit into universal credit. This means, though, that district councils on the ground have to have the staff, the resources, the local knowledge and the detailed experience of those same client groups for discretionary housing awards and for council tax benefit. They should ally to that the grants and some of the loans of the Social Fund because often they are dealing with the same client group, and often for the same purpose.
We have heard that a high proportion of community grants are spent in securing rent access to the private rented sector. It means that discretionary housing allowance—two funds, in future on two tiers—will be doing the same thing for a local community. This is absurd. If we cannot have a ring-fenced fund, then at least the money should go to a district council which can see the best way of meeting the needs of young people coming out of care or of ex-offenders. It may be that more money should go into discretionary housing and less should go elsewhere, but you can meet the service in different ways. However, I agree with the noble Lord, Lord Kirkwood, that you then need to make sure that there is an effective reporting and monitoring regime so that local authorities at the district level are accountable for how they have spent the money. There is more than one way to meet a need, and that is why I am not always supportive of ring-fencing. Local authorities can often meet a need in a better and more effective way—you only have to see the difference between residential care and domiciliary services to realise that there is not just one way—but they have to have retrospective, so to speak, supervision and control by virtue of inspection and monitoring.
I am hoping that the Minister will respond positively to this and say that when dealing with two-tier authorities, the shire counties, where the document says that the money is going to the upper tier, he will give a commitment, as far as he can, that there will be a letter of guidance requiring county councils to distribute and allocate funds based on previous expenditure levels in the district council. Otherwise some rural districts may pocket the money to keep their council tax down while the urban areas that receive people from the rural districts who have voted with their feet will have an even heavier burden to bear on reduced funding. In addition, meeting need should be recognised as a part of a district council’s repertoire. If there is to be an assumption that a local connection should be required, I accept the need for special care, particularly for battered women. Actually, in practice that is the least of our problems because in my experience nearly all local authorities have a very decent arrangement of trading homes so that women coming out of a violent relationship can move on from a hostel to a half-way house and then into a permanent home in a different authority. That works pretty well on the ground, but there are many other groups that, if they can, rural authorities will encourage into urban areas so that their responsibilities are negated. I hope that in that case the money will follow the client. If it does, I have no problem with that at all.
When the Minister deals with the big policy issues raised by my noble friend and by the noble Lord, Lord Kirkwood, I ask him also to comment on the process point and at least give some of us some comfort that this will simply not be exploited, manipulated and abused in good faith by upper-tier authorities to do things that, because of their lack of local knowledge, they regard as more important than this and, as a result, strengthen the capacity of lower-tier authorities which are going to be dealing with discretionary housing allowance and council tax benefit. They will have an additional resource in order to meet the local need that they are best placed to address.
The Earl of Listowel
My Lords, I rise briefly to support the call by the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, to introduce ring-fencing or at least to allow ring-fencing for some time while we go through this huge transition with the introduction of this Bill. I do so for a number of reasons. Listening to the debate I am again reminded of the speech made by the right honourable Iain Duncan Smith at the Conservative Party Conference this year. He highlighted the great amount of debt that this country carries and, in particular, the debt of unsecured loans that people have taken upon themselves. Will the Minister say whether he is concerned that individuals who currently benefit from the Social Fund might turn to loan sharks or take out unsecured loans and expose themselves and their families to risk and threat because there is nowhere else where they can get the support they need?
I have been meeting chief executives, and indeed I recently met a deputy chief executive of a metropolitan authority. After spending the evening with him, what really struck me was the immense burden that he carried. He had to make choices with limited resources. I asked him whether he found himself having to cut back in the areas of child protection and child and family social workers. He said that he and his colleagues were definitely not taking money out of those pots. Then, on meeting a group of chief executives and directors of children’s services in the Palace of Westminster to discuss children’s centres, again we heard that the money was definitely not being taken out of children’s centres and they were really trying to support those as far as possible.
My point is that there are so many calls on the limited resources of chief executives and directors of children’s services in local authorities. The risk is that this money, as the noble Baroness, Lady Hollis, has said, will be diverted into other very important provision, but that those families who need this ultimate safety net will lose out under the new arrangements. I look for an assurance from the Minister that this will not be the case. I should say that Barnardo’s, which has so much experience in this area has raised these concerns with me. One should also pay tribute to the Conservative Administration that set this up in the first place and the noble Lord, Lord Newton of Braintree, because from what I have heard, it has made a very positive impact on the lives of some of our most vulnerable citizens and families.
The issue of accountability, of how this money is spent, has been aired and needs to be addressed. Should there be minimum standards that local authorities have to meet before they are allowed to use this money as they see fit? I look forward to the Minister’s response.
Lord Freud
I will make it absolutely clear that this is not a halving on an annualised basis when one considers the decline in trend. I would like that on the record as well.
I will take the question raised by the noble Baroness, Lady Lister, on the risk of high-cost lenders, or loan sharks as she referred to them. We recognise the danger that illegal and high-cost lenders pose to vulnerable people, who can become very dangerously indebted if they are driven to use such services. We are committed to continuing to provide an interest-free lending facility for those who are least likely to be able to access mainstream credit. We call the process “budgeting advances”. That is a national provision of payment on account that will replace Social Fund budgeting loans. The budgeting advance will be paid to those vulnerable people least likely to access mainstream lending, to help ensure that they are not driven to use illegal lenders. That process, when we put it into the universal credit, will have a much different feel to the paper-driven process that we have today. The two systems of budgeting advances will run in parallel while we introduce the universal credit.
Baroness Hollis of Heigham
I note the Minister’s figures—which startled me—about what he thinks will happen to the crisis loan for general living expenses. Given that those are loans, does he expect there to be any virement? In other words, will the budgeting loans, the alignment process and the rise to 1,500 and so on meet some of the suppressed demand that will, in future, exist for crisis loans?
Lord Freud
My Lords, I am not sure that I got the point of the question. Would the noble Baroness repeat it?
Baroness Hollis of Heigham
Yes, by all means. Crisis loans are for general living expenses. There is therefore a close connection between them and general budgeting loans, which also deal with those expenses—unlike community care grants, which are in a different category altogether, and which can be completely ring-fenced. Do the Government expect any virement between the two funding headings? The depressed figure that was responded to by my noble friend Lady Sherlock, which appears to suggest that about £60 million was coming down to £30 million, would none the less be offset by an appropriate increase in the budgeting loans that he is talking about as payment on account.
Lord Freud
My Lords, the straightforward answer is that currently we are not seeing that alignment, based on the measures that we are taking.
Lord Freud
I will have to fall back on offering to write on that particular matter. I do not know exactly how we finance local disasters. In practice, the Social Fund has not been much used in that area. However, I will have to write on how funding for local disasters works.
Baroness Hollis of Heigham
Perhaps I may give the noble Lord an example. It may not be as extensive as flooding, but a not untypical example is a gas explosion in a high-rise block of flats that results in 80 or 100 families having to be rehoused and needing financial support to buy furniture and this, that and the other. Is it expected that that will come from this provision or will there be additional allocations?
Lord Freud
The obligations of the local authorities are centred on housing provision. There are a number of duties around what local authorities have to do to rehouse people according to their homelessness obligations. That is where some of the crises would be dealt with. Local authorities could look to provide the support using some of the Social Fund money that they have available. In practice it will be a more efficient use of money because we will have a one-stop shop for that kind of problem in the housing area.
Lord Freud
As I say, that is not a major use of the fund. Clearly, the local authority with its housing obligations is very well placed to manage that on a holistic basis. In the case of that example, there would be a better and more efficient use of funding than we have today.
The amendments in this group seek to place constraints on the changes to the discretionary Social Fund that would undermine the much-needed reforms and prevent the needs of vulnerable people being addressed in an effective way. In line with our commitment to localism, and to allow local authorities to make the best decisions for their respective areas based on their more detailed knowledge of local concerns and requirements, we do not propose to ring-fence the funding given to local authorities in England and in the devolved Administrations of Scotland and Wales. Local authorities have entered very positively into discussions with us and have come forward with interesting and innovative ideas on how support can be delivered. For example, one large rural authority is considering using some funding to pay the delivery fees charged by an existing provider to deliver free goods to the vulnerable people they need to reach.
The noble Baroness, Lady Hollis, asked whether the funding would go to the upper or lower tier. The funding will be allocated to upper-tier local authorities in order to provide the greatest possible flexibility to local areas. From our discussions with local authorities, we know that a range of delivery models is being considered. Some of these models will result in funding being devolved to lower-tier services such as housing. Decisions about the ultimate funding route for each area will be determined by a range of local factors, including the location and the nature of existing services and how these align with areas of deprivation and need, and the level of funding that will be devolved. In less deprived areas it may not be necessary or practical to operate a number of services.
Baroness Hollis of Heigham
I simply do not understand that answer. It will go to upper-tier authorities: then what?
Lord Freud
As I was trying to explain, the upper-tier authorities will then design their services in different ways. Some will decide that the most efficient thing to do is to give it to a group of lower-tier authorities; some will do it themselves; some will devolve it to the housing operations within lower tiers. What I am trying to say is that there will be various responses.
Baroness Hollis of Heigham
So it would be entirely up to the county council as to how they distribute this money, if they distribute it at all, and whether they actually use it for the services that are proposed.
Lord Freud
My Lords, on the argument between the upper and lower tiers, yes. I will come back to the issue around ring-fencing, where there has been some pretty powerful argumentation. That is what Amendment 86ZZZB seeks to ring-fence. At one level, that will restrict such innovative thinking. Ring-fencing could also prevent pooling of funding streams and ultimately limit the ability of each local authority to devise schemes that best address the specific needs in their respective areas.
We have had some excellent contributions. I think the best one—no, that was invidious—very enjoyable one was from my noble friend Lord Brooke with his reminiscences of Degsy Hatton. It is quite clear that we need to make sure, if we are putting money out for vulnerable people, that it goes to vulnerable people and is not diverted elsewhere. We are localising this funding for sound reasons, because the closer to the ground you can get with this funding the better it is likely to be spent. Local authorities clearly already have duties to provide assistance to vulnerable people.
There is clearly a great weight of feeling in this Committee, very well expressed—brilliantly expressed in many cases—and I will take those thoughts away, reflect on them and come back with an answer about where those reflections have gone. Reflection can be a fairly external matter. However, we will be setting out the purpose of the funding in a settlement letter from the Secretary of State for Work and Pensions. Clearly, at one level at least, that provides sufficient clarity on the purpose of the funding for local authorities. Picking up the point made by the noble Baroness, Lady Lister, on cash for emergencies, that cash is meant for emergencies. Of course, with local disasters, there comes a point when they are overwhelmed but I shall reply in writing on that.
Amendment 86ZZZD would require local authorities to provide victims of domestic violence with financial support. Local authorities, along with other specialist support services, often already provide more tailored support than the current community care grant scheme offers. Where an individual requires household items, it may be better to offer furnished accommodation in such circumstances. Local authorities will have the appropriate support services on the ground and be in the best position to assess what type and level of support is required. On top of this, they already have a duty to provide support and accommodation to anyone made homeless as a result of domestic violence, and this complements a wide range of assistance which is also available at local level.
Baroness Hollis of Heigham
My Lords, that is a district council function, not a county council one. When half the local authorities in England are split between two tiers, it really is not going to work like that.
Lord Freud
My Lords, I know that the noble Baroness is very concerned about this issue and it may be that there is a breakdown in some particular circumstances. But there is a duty on authorities to meet these duties. In my reflections, I will look at this because it may be connected with how we might find a solution to the more general concerns.
Lord Freud
I would be highly delighted to provide that list of duties. The new national provision of payments on account will be monitored by the department to ensure that it is working effectively and efficiently. We are confident that the combination of this national provision and the new local provision will be a better way of providing support to those who need it most.
Amendment 86ZZZEB seeks to standardise the delivery by local authorities of the new provision and appeals, and introduce an independent tier of review for local authority decisions. This would defeat the purpose of our proposed reforms by, in effect, requiring local authorities to administer a national scheme. It is not clear whether this is intended to cover only English local authorities or to extend the responsibility to local authorities in Scotland and Wales. The whole reason for devolving assistance to the local level in England is to enable decisions to be made at the most appropriate level to effectively identify and target those in greatest need. It will be the responsibility of local authorities in England to decide on appropriate arrangements for internal review. As already discussed, local authorities are answerable for the services they provide and have a range of duties towards vulnerable people that they are required to meet, which I will list.
Lord Freud
Picking up on the powerful point made by my noble friend Lord Kirkwood on the Independent Review Service, that service review’s decision is made on whether to award discretionary Social Fund payment. These decisions must have been subject to an internal Jobcentre Plus review before being passed to the Independent Review Service. The reforms to the discretionary Social Fund will mean that the Independent Review Service’s workload will diminish and eventually come to an end. It would not be appropriate or feasible to have a national review scheme to deal with the diversity of new provision delivered by local authorities and the Welsh and Scottish Governments. Local authorities will set up their own internal review mechanisms if they think it appropriate to do so. In addition, the Local Government Ombudsman is fair and impartial, and is available to people dissatisfied with decisions made by their local authority.
Amendment 86ZZZF would delay the introduction of new systems until universal credit is fully rolled out and has achieved prescribed performance targets. This would delay the benefits of a more localised approach to the discretionary support. Performance standards are already in place for the current benefit regime, for which the Secretary of State is accountable, and this will continue to be the case for universal credit. The business plan for 2011-15 confirms that the department will continue to publish a range of indicators on the performance of delivery businesses, including claims processing, customer and employer satisfaction and labour market services. With these measures already in place, we do not see the need for regulations to set out the performance targets or standards for universal credit which the amendment would require.
On the question raised by my noble friend Lord Kirkwood on cuts-driven reform, the White Paper on universal credit gave the commitment that this was not a cost-cutting measure and that costs would be funded. The initial funding allocation is fixed for the rest of the spending review period and future allocations will take account of changes in need.
Baroness Hollis of Heigham
Will the noble Lord also circulate to us in a letter what the future funding allocations will be by subheading, including that held centrally and that going out to local authorities over the rest of the spending review period?
Lord Freud
My Lords, I hesitate to commit to that. If it is available at a reasonable price, I will do it but I will not if it is not.
Baroness Hollis of Heigham
I am sorry but the noble Lord has just given a commitment that this is not a fixed money measure and that funding will continue at a certain level until the end of the CSR, so he must know what those figures are.
Lord Freud
Yes, my Lords, the figure is £178 million per year, which I think is in the documentation, until the end of the spending review.
Baroness Hollis of Heigham
But we also need to see the breakdown within those headings.
Lord Freud
Could the noble Baroness make it clear what breakdown she means? I think she meant by area.
Lord McKenzie of Luton
I think there are two issues. First, what is the total pot for the rest of the spending review? I think the noble Lord has confirmed that that is £178 million—fixed or to be uprated by inflation?
Welfare Reform Bill
Baroness Hollis of Heigham Excerpts(13 years ago)
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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.
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
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.
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.
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.
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.
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.
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.
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.
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?
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.
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—
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.
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.
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
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
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.
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.
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.
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.
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.
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 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.