Welfare Reform Bill

Lord Freud Excerpts

Monday 21st November 2011 Grand Committee

[Lord McKenzie of Luton]

My Lords, we have a degree of sympathy with the amendment moved by my noble friend Lord Touhig and spoken to by the noble Countess, Lady Mar, and the noble Lord, Lord Wigley. As I understand it, it goes with the grain of what the Government are seeking to do. When we debated similar issues last week, I thought the term “exceptional circumstances” was somewhat broader than a strict reading of it might lead one to conclude. Therefore, I ask the Minister to expand on that when dealing with this amendment and to say whether he accepts the proposition that there will be those with long-term degenerative conditions that are unlikely to improve.

The noble Lord, Lord Skelmersdale, makes the reasonable point that we never know if there might be medical scientific breakthroughs, but, as my noble friend said, these matters could always be revisited. It seems to be important to try to give some comfort to people whose condition is sadly not going to improve. What is the purpose of bringing them in simply to pile stress on to their lives and use resources that could be deployed elsewhere?

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

My Lords, we think it is right that an individual’s benefit entitlement is based on the degree to which he or she is participating in society. This level of participation can vary as health conditions or impairments improve or deteriorate, their impact changes or individuals adapt to their circumstances. We want the benefit accurately to reflect relevant changes in circumstances to ensure that people receive the right level of support. The 2004-05 national benefit review found that about £630 million a year of DLA is overpaid as a result of unreported changes in circumstances. This cannot be right. However, it is equally about ensuring that, when people’s circumstances deteriorate, the benefit keeps track with them.

The same study estimated that around £190 million of DLA is underpaid each year—vital money that is not reaching the people for whom it was intended. There is no one-size-fits-all answer; our approach will involve a combination of awards that, in some cases, will be fixed for a short time and in others will be longer term, depending on the individual, the impact of their disability and the extent to which they are able to live independently. In many circumstances, this can change for better or indeed for worse during someone’s lifetime, and this will be different for different people. We think that an active management regime that involves planned reviews is the most appropriate way of responding to this.

However, it is important—and on this I feel we agree—that we do not undertake inappropriate or unnecessary assessments and interventions where there is unlikely to be a change in award. Key to this is ensuring that decisions on award duration and interventions are evidence based. Here I refer back to comments I made during the debate on the noble Lord’s previous amendments. In PIP assessment, we want to get the best mix of evidence from a variety of sources. This will be partly about what the claimants tell us about themselves, partly what can be gathered at face-to-face consultations and partly what we can obtain from relevant people who support them. Moreover, as I said, we want individuals to tell us who is best placed to advise us on these matters.

Therefore, I think we are fundamentally in the same place as the noble Lords and the noble Baroness. The one key difference is that we do not think that an individual’s type of health condition or impairment matters—for example, whether or not it is a lifelong condition; what matters is the likely impact of the condition going forwards and whether it is likely to affect benefit entitlement. Conditions and impairments—even ones that are usually degenerative—can affect people in very different ways. That is why we want decisions on award durations to be based on individual circumstances following consideration of all the evidence of the case.

[Lord Wigley]

The Minister said a moment ago that he was looking for the maximum degree of flexibility and not to have reviews where they were patently not necessary. Am I right in recalling that in the earlier debates he indicated that the first tier of any review might be with the professionals without impinging on the beneficiary so as not to cause unnecessary worry and that, if the professional—the GP or whoever—advised that there was no change, there would be no need at all for the beneficiary to be aware of this?

[Lord Freud]

Yes, my Lords. That is what I said and it has not changed. Noble Lords might be reassured by the fact that, even where awards are fixed term and periodic reassessment is required, this does not have to be burdensome. As I have just said, in some cases the assessments will involve scrutiny of paper evidence only and will not require a face-to-face consultation. This will especially be the case where there is considerable supporting evidence on which to base decisions. Conditions or impairments which are life-long and/or degenerative are particularly likely to have such supporting evidence.

We will provide guidance on the duration of an award, including when an ongoing award would be appropriate and with what frequency that award would be reviewed. We are committed to developing the duration assessment in consultation with disabled people and their representatives to ensure that we get it right. We recognise how important this is to ensure that the process of deciding award durations remains both fair and transparent.

I should also like to tackle a misconception that seems to have built up in relation to this issue—that is, that there will be a requirement for everyone to be reviewed on a yearly basis. This is simply not true. While some people will receive one-year awards where their circumstances warrant it, the vast majority of awards are likely to be longer than this, with some being much longer and some indefinite.

I hope that I have reassured noble Lords that we are in the same place as them on this issue. We want award durations to be based on individuals’ circumstances and the likelihood of change; we do not want unnecessary reviews or assessments; and we want decisions on these issues to be based on the best evidence, including that from the professionals involved in supporting claimants. On that basis, I urge the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

Can the Minister clarify one point? He said that some awards might be long- term and some short-term. Can he give us an inkling as to the department’s thinking about that spectrum and what long-term awards may mean?

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[Lord Freud]

My Lords, it would be premature for me to go into much more detail here. Clearly, we are aiming to build up the award duration in consultation, and I would not want to pre-empt that consultative process.

[Lord Touhig]

My Lords, I thank all noble Lords for their contributions to this very short but useful and important debate. The noble Lord, Lord Wigley, pointed out that we have sought to be flexible in these amendments. I am sorry that the noble Lord, Lord Skelmersdale, thinks that we are being somewhat restrictive. However, that is not the intention; we are trying to be flexible, recognising that there will be circumstances where it will not be appropriate for a lifetime award to be made.

The noble Countess, Lady Mar, made an important point in speaking about someone with experience of an illness that will not improve. Putting someone through all the problems and distress of a review will not be helpful at all. We all hope to God that many of these problems can be solved as time goes on. My noble friend Lord McAvoy made the point that, if what we are asking for were in the Bill and there were some considerable improvement in one area or another, we would obviously need to change the law if that were appropriate. Therefore, I think that we need to be flexible on that.

The Minister made the important point that £630 million had been overpaid in DLA. However, from my experience of sitting on the Public Accounts Committee in the other place, I would say that one really has to look into how that happened. Very often, it was due to failure by the department and not because someone’s condition had changed. The National Audit Office reports point this out. Indeed, on one occasion I had a case where a constituent had to complete a form and there was a box to be ticked against the question, “Have you received income support in the past year?”. She ticked it and underneath wrote, “But it ceased on X date”. However, because the form was scanned in, the department’s system could not read the words underneath, so it continued to overpay her and then demanded the money back. I fear that the problem of overpayment is often caused not by the person making the claim but by the system, in any event.

I thank the noble Lord for his clarity on a number of points and for the encouragement that he gave. I feel that can we make progress, as the way that we are working in this Committee and in this House helps us to improve the quality of legislation because of the backgrounds, knowledge and expertise that so many noble Lords have on a whole range of matters. I believe that by collaborating, we will protect those who are perhaps the most vulnerable—certainly, those who concern those of us who tabled this amendment—so that they will not have to go through all the trauma and difficulties associated with constant review of their benefit once it is awarded, if their condition is such that it will not improve. Having said that, I thank the Minister for his comments and I am sure that we will enter into more dialogue about this in future. I beg leave to withdraw the amendment.

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[Lord Rix]

My Lords, the purpose of this amendment and Amendment 88 would be to introduce a biennial independent review of the personal independence payment for the first six years after it comes into force. The amendments also aim to require the report within two years of PIP being implemented, not the three years as proposed in the Bill. As your Lordships will be aware, the Bill already provides for a single independent review of the PIP assessment, with a report that must be presented to Parliament. While this is welcome, given the impact of the new assessment on many disabled people—particularly those with a learning disability—I believe that more than one review would be necessary.

Indeed, the precedent for having more than one review has already been established. The work capability assessment is subject to an annual independent review for the first five years of its operation, as laid out in the Welfare Reform Act 2007. The experience of the work capability assessment has shown the benefits of an ongoing independent review, although I acknowledge that the yearly requirement has meant insufficient time for the introduction of one review’s proposals before the next commences. Hence, I am calling for the PIP review to take place on a biennial basis only. During discussion on this matter in the Commons, it was noted by the Government that the proposed one-off report is just one way of “close working and testing” the implementation of the new measure. However, I am concerned that this does not necessarily guarantee a fully fit-for-purpose assessment.

The independent review of the WCA has shown a process that is not working as it should be. If a similar scenario is revealed for the PIP assessment, the Government should act swiftly to ensure that disabled people are appropriately supported and not denied the assistance they need to live more independently. I believe a biennial review would help to make this happen. Indeed, on a more positive note, if PIP is to be as successful as the Government claim it is going to be, Ministers would then have a valuable opportunity to showcase this in Parliament and more widely across the country, which—in these rather hard-pressed times for the Government on this Bill—must surely be a welcome boost both to the Government and to Ministers. I beg to move.

[Lord Freud]

My Lords, perhaps I may be permitted to make an early intervention here in order to offer to take this matter away and return on Report. The Government fully agree with noble Lords on the need for robust independent evaluation of how the assessment works in practice and of the value that Professor Harrington has added through his reviews of the work capability assessment. While we had not intended legislating for multiple reviews of PIP, we are not averse to them. Given the strength of opinion that I know exists on this issue, I will take it away to see what I can do before Report. Although I cannot promise here and now that I can agree to exactly the formulation in these amendments, I will do all that I can to satisfy noble Lords on this matter.

I hope that this statement also deals with my noble friend Lord German’s concern, which I believe may lie behind his Amendments 98ZA and 98ZB. Given this assurance, I urge noble Lords to withdraw their amendments.

[Lord Wigley]

My Lords, as my fire has been taken away from me by the Minister, perhaps I may at least be allowed to say thank you. In consideration of this matter—and obviously consideration can come to a positive outcome, but not necessarily—the one initial fact that I would ask the Minister to take on board is that other circumstances can change in parallel with this—the general economy and other legislation—which may make it beneficial for reviews to take place more frequently. However, I will not press an open door.

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Moved by

[Lord Freud]

89: Schedule 9, page 133, line 10, leave out from beginning to end of line 28 on page 134

[Lord Freud]

My Lords, the amendments in this group serve two purposes: to remove a number of consequential amendments relating to tax provisions for claimants of personal independence payment, and to align the benefit with common provisions on appealing against payability decisions when someone is imprisoned or detained in legal custody. I do not wish to dwell on the latter provision, as it is merely intended to extend common rules to personal independence payment, but I should like to offer some reassurances around the amendments that we are proposing against tax provisions.

First, let me say that these amendments do not reflect any change in the Government’s plans for either welfare or taxation. The amendments are purely a procedural matter. They will remove the tax amendments from the Welfare Reform Bill so that suitable tax amendments can be made by a future Finance Bill or by Treasury order if appropriate. It may be helpful if I give an example of one of the tax-related provisions. Currently, Schedule 7A to the Finance Act 1994 makes provision for the letting of a vehicle to be exempt from insurance premium tax. This provision applies where the contract is made on qualifying terms, one of which is that the disabled person leasing the vehicle receives the DLA mobility component at either rate.

I should like to reassure noble Lords that, although we are removing these provisions from the Bill, the Government have committed to maintain the current passporting arrangements wherever possible. These amendments will not make anyone worse off. They do not reflect any change in the Government’s plans for either welfare or taxation; they are purely procedural. The provisions will remove the tax amendments from the Welfare Reform Bill, so that suitable tax amendments can be made in future finance legislation. This will enable the tax position, including potential knock-on consequences for other parts of tax legislation, to be considered in the round.

The Government have been very clear that personal independence payment, like DLA, will be a tax-free benefit. In recognition of that absolute commitment, we have therefore decided to retain provision within this Bill to provide absolute certainty that these payments will be free of tax. I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of these amendments, which I think I understand and accept. I wondered at first when I saw them whether we had done something to upset Treasury Ministers, and they no longer wanted to come before us. To be clear, we have provisions in here relating to tax which we are simply moving out of the Bill because they are going to go back in a Finance Act. If they remained in the Bill in their current form, would that in any way invalidate them? There might be a procedural issue that has gone awry in this case, but I am still a little unclear as to why it is necessary in the event, given that those provisions are there, they could not remain.

More importantly, I am anxious that if these provisions come out of this Bill, there is certainty that they will end up in a Finance Bill. Can the Minister give us any assurance as to which Bill that is likely to be and what processes, given the oversight that we dealt with a couple of Committee sittings ago, there are in place to make sure that these are followed through and put into effect?

[Lord Freud]

When you look at these detailed measures, which is something that I do not encourage anyone to do who wants to retain their sang-froid, you can see that they are closely associated with taxation and trust funds. It is much more coherent for them to be dealt with in a Finance Bill or another finance Act rather than one dealing with welfare reform. That is simply the reason, because it means that if you restructure a piece of tax trust law, you can do the whole thing in one, rather than having to go to different Acts. That is the reason.

Amendment 89 agreed.

Moved by

[Lord Freud]

90: Schedule 9, page 137, line 35, leave out from beginning to end of line 9 on page 140

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[Lord McKenzie of Luton]

My Lords, these are useful probing amendments to understand fully what is happening or proposed in respect of this group of young people. I imagine that the Minister will say that, as the Bill stands, there are already powers to make regulations as proposed for 16 to 24 year-olds, but it is an opportunity to get something on the record. We certainly support the thrust of this and the needs for regulations that are affirmative—not just the first set. I think that we will hear from the noble Lord, Lord German, on that in a moment.

The age 16 already has ramifications in the DLA system. Below that age, young people cannot qualify for the lower-rate care component via the cooking test, and there are additional tests for the lower-rate mobility test. So there is already a potentially stressful transition under DLA that could be compounded with the transition to PIP. The figures that have been mentioned are that over the next three years 173,000 disabled children will turn 16. If they have to seek or apply for PIP immediately, that is a big challenge. There was a hint in the other place when this was debated that that would not necessarily be the case and that, in the scheduling of young people in this age group, they would go directly on to PIP. Perhaps we can have the Minister’s reassurance or an update on that point.

The briefing note that we got from the DWP sets out the work undertaken to date, seeking to base the assessment on the education health and care plan that is being developed across government, which we would support. But I am not quite sure how it fits together on timing, particularly over the next couple of years, with PIP being relatively close by and due to be with us shortly. Can the Minister confirm to us the process of assessment for young adults and say what the likely migration process is? What happens to 16 year-olds who are on DLA at the point when PIP is introduced?

[Lord Freud]

My Lords, I am grateful to the noble Lord, Lord Patel, for tabling these amendments and to the noble Baroness, Lady Sherlock, for moving them in his absence. The amendments allow me to set out the Government’s position on how we will deliver PIP effectively for young disabled people in a way that is sensitive to their needs. Noble Lords may be aware that the Government published a briefing document that specifically considered the position of young people. The briefing document set out some of the main insights that we have learned from them and their representatives, which are informing our design work.

Let me be clear from the outset. I know that there are particular issues and sensitivities when dealing with disabled young adults at what can be a particularly challenging period of their life. That is why we have been working closely with people aged 16 to 24 and their representative organisations in order to understand how we can ensure that the benefit is administered in a way that best meets their needs. Two main considerations that young people have raised with us are: whether 16 is too young an age to begin the process of moving from DLA to PIP; and making sure that the transition arrangements for moving on to the new benefit are easy to understand and transparent—the role of advocates and information needs, for example, being particularly important.

Under current arrangements for DLA, the child-related rules fall away at the age of 16 and the entitlement conditions to the care component are extended. The age of 16 therefore forms a natural touch-point to re-examine entitlement and take young people through to entitlement and receipt of DLA in their own right, where that is appropriate. Paying young people directly gives them direct control over how the benefit can enable them to live independent lives. It is our firm belief that the principle of giving individuals control over how they can tackle the barriers to their independence should be brought forward into PIP.

In developing our proposals for PIP, we know that there are particular issues that we need to address concerning its delivery to young adults. For example, young disabled people can expect to go through a number of assessments as they move from childhood to adulthood, and many of them will require varying degrees of support to negotiate those assessments. That is why we will ensure that all young people who claim, or transition on to, PIP will have the appropriate support to allow them fully to express their needs. This could be, for example, by allowing a parent, advocate or friend to accompany them to their face-to-face consultation.

We are fully involving young disabled people and their representatives as we design and build the delivery mechanisms. For example, we are working with user-led organisations through the PIP implementation development group, which is made up of a wide range of organisations including those that represent young people. We have also begun work with focus groups and have conducted one-to-one interviews directly with young people, appointees and their representatives to inform both the way in which PIP will be delivered and the transition arrangements for those moving from DLA to PIP.

As I mentioned, the transition from childhood to adulthood brings with it numerous assessments at different ages. We are therefore also working across government, in particular with the Department of Education, to see what more we may be able to join up and share information with the proposed single assessment process for education, health and social care. This means, for example, that if an individual is still in education or training, exploring whether we may be able to use evidence from special educational needs assessments or information from the school or college to inform the determination of a PIP claim. But we need to look carefully at this so that we get the right balance between not overassessing someone and having an approach that is too general to identify a person’s specific needs. My officials are therefore working closely with officials in the Department of Education so that we get this right.

To ensure transparency, credibility and a smooth transition from DLA to PIP, we know that we will need to build in processes, with appropriate information and engagement, that let young people and their families know what to expect and understand what they have to do. Our intention is to ensure continuity of payment, with no gap between DLA ending and PIP starting when an individual makes a claim and subject to their meeting the eligibility conditions. We are continuing to consider how the detailed rules should work and, as with all the changes that we are making, we will continue to involve disabled people and their representatives in the design.

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[Lord McKenzie of Luton]

Could the Minister clarify a point? I apologise if I have missed this. In the case of someone who at the moment is under 16 and on DLA, if they reach the age of 16 before PIP is introduced, will they undergo the normal reassessment to adult DLA? If they reach 16 after PIP has been introduced, will they automatically go through the PIP process, or could they potentially stay on the DLA adult process for a period, whatever that may be?

[Lord Freud]

My Lords, we have not done a detailed migration strategy. When people are effectively on adult DLA, even though they have transitioned from child DLA, we will have to work out the exact timings for when to take them. We do not have those precise details yet.

[Lord McKenzie of Luton]

I am grateful for that. The Minister will see that the issue that that highlights is the one that was probed: if people reaching 16 are going to go straight on to PIP, given what is going to happen with the number of young people achieving the age of 16 over the next couple of years, they are in large measure going to be first through the gate for PIP. That was the concern.

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[Lord Freud]

Clearly, if they go through their birthday when PIP is in position, we will have the arrangements that I was describing. If they have already gone through the gateway because PIP was not yet in position, we will have to decide on the precise migration strategy regarding whether they get priority or at what stage we would take them. That is something we need to determine a little later.

[Baroness Sherlock]

My Lords, I thank the Minister for giving such a comprehensive account of the Government’s approach to this group of young people. I also thank him for his offer to write to the noble Lord, Lord Patel, and to me. I hope that, if he does, he will pick up the point made at the very end by my noble friend Lord McKenzie and try to address what happens to those young people who may be first through the gate and how the system can deal with them. In the light of that, I beg leave to withdraw the amendment.

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Moved by

[Lord Freud]

97: Clause 91, page 61, line 32, leave out “either or both” and insert “any”

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There are many ways in which the cap can be made to fit. In the search for a balance of fairness to both working families and children in non-working families, the cap level can be constructed to meet these dual ambitions much better. The Secretary of State for Communities and Local Government has already told us that the cap as constructed would produce no savings to the taxpayer. I am sure that many of your Lordships see the merit in this balance of fairness. This stage of the Bill gives the Government time to consider all these issues. Changes are needed, and I would want to see them. The Government have said that they want to balance their budget, but not on the backs of the poor. Well, neither should it be on the backs of children. These children should not have to pay because of the actions of their parents. I know that the Government are listening. I would like to know when we can hear the result of their deliberations, because there must be a way of making the cap fit.

[Lord Freud]

My Lords, these amendments seek to increase the amount of welfare benefits that households which are out of work will be able to receive to above the level that we have said we will be introducing for the new benefit cap. Before I speak to the specific points that they raise, I need to make it clear that the coalition Government believe that there has to be a limit on the overall levels of benefit that it is appropriate for the state to provide to those who are not working. Indeed, I understand from the comment of Liam Byrne MP in yesterday’s Observer that this is also the position of the Opposition. Perhaps the noble Lord, Lord McKenzie, will be happy to confirm that.

A welfare system that provides payment at unrestricted rates ultimately serves nobody—not those paying taxes to fund it and often not those it traps in welfare dependency by providing little or no incentive to move off benefit and into employment. It is important that the benefits system is fair and is seen to be fair. We do not believe that it is appropriate that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households.

We believe that the cap for lone-parent and couple households should be around £500 a week, which is the level of median household earnings. This is the equivalent of a net salary of £26,000 per year, or a gross figure of £35,000 per year. There will be a cap of around £350 per week for single-adult households. Therefore, even within the limits of the cap, households will still be able to receive significant amounts of financial assistance from state welfare payments—an amount equal to the median national wage without going out to work. To make that explicit, it is the equivalent of what more than half the households in the country are earning.

The right reverend Prelate’s Amendment 99ZA and several of his other amendments seek to differentiate and improve the position of families with children in the way that the cap is calculated and applied. I acknowledge that, because of in-work benefits, there will be some working households that earn at the level of the average weekly wage whose total income will exceed the level that we are setting for the cap. However, we believe that work should always pay more than out-of-work benefits. That is one of the driving principles of the Bill and at the heart of our welfare reform.

When we introduce the cap, we intend to use a method that looks at median earnings after tax and national insurance for all working families, which will strike the right balance between providing support for families, promoting fairness between those out of work on benefits and those in work and, crucially, ensuring that there are clear financial incentives to work because work is the best route out of poverty. The benefit cap provides a clear, simple message that there has to be a maximum level of financial support that claimants can expect the state to provide. The aim of this policy is to achieve positive effects through changed attitudes to welfare, responsible life choices and strong work incentives. People must be encouraged to take responsibility for their decisions in light of what they can afford. I accept that a case can be made for making the estimate in a variety of ways. However, I should make it clear that the clause would provide us with flexibility, should it be necessary in future to adapt how we estimate average earnings if it is felt that we are no longer achieving the correct balance.

I will address Amendments 99ABAA, 99AC and 99ACA together, as they are all concerned with housing-related benefits. Each of these amendments would undermine the fundamental principles underpinning the cap—that, ultimately, there must be a limit to the amount of benefit that a household can receive and that work should pay. It is not right that some families on benefits have been able to live in homes that most working families could not afford. With the introduction of the cap, people receiving benefit will have to make the same choices about their housing that people who do not get benefit make.

The noble Lord, Lord Best, raised a point about whether the cap will force families to move. It will not necessarily mean that people need to move but they will have to make the same choices about affordability as those in work. While some may well choose to move, there are a number of ways in which they might be able to meet any such shortfall, such as moving into employment, trying to negotiate a reduction in their rent—I accept the noble Lord’s point that in some cases that may not be possible—and meeting it from other income or capital. The Government are looking at ways of easing the transition for families and providing assistance in hard cases. We recognise that there are households for which it would be inappropriate to restrict the amount of benefit that they can receive. We have announced the groups that we intend to exempt and will discuss these groups further as we move on to the next debate.

The noble Lord, Lord McKenzie, asked about childcare—specifically whether those working a small number of hours will be eligible for support for childcare costs through the universal credit. I confirm that support for childcare through the universal credit will not be affected by the cap.

[Lord McKenzie of Luton]

Could the noble Lord clarify whether he is saying that it will not be included in the total of benefits that is judged against the cap, or whether it cannot be withdrawn from that component of the benefit?

[Lord Freud]

It is the former. It may be helpful if I explain now that we feel that the best way to support these households is to exempt them completely from the impacts of the cap, rather than attempt, as these amendments do, to alter its design to accommodate their particular circumstances. For the groups to whom the cap applies, this measure creates a very strong incentive to work. The most effective way of smoothing transition will be to engage closely with those families likely to be affected by the cap in the year before it is implemented. We are having initial discussions with local authorities and will provide them with guidance on the implications of the caps so that they can take account of this when working with affected households, especially those affected by the LHA cap.

On the council tax benefit question, I confirm that we are looking at the implications of localised support for council tax, including the implications of decisions taken by the devolved Administrations.

[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 McKenzie of Luton]

Will discretionary housing payments be included as benefits for these purposes?

[Lord Freud]

They will not be included. Moving on, with regard to the couple penalty, we should not assume any automatic link between the benefit cap and family breakdown. One of the key drivers of family breakdown is long-term unemployment, which puts considerable pressure on vulnerable families. One of the most supportive things that we can do for these families is ensure that work always pays and that the transition to work is as smooth as possible.

The benefit cap is intended to support our new universal credit, which will improve the incentive to work and the level of support for many low-income families, especially couples with children in rented accommodation. At the same time, we will also look to offer additional support through Jobcentre Plus. This would include working with local providers to support claimants with budgeting and the management of their housing costs, and encouraging families affected to engage with more employment support, particularly the work programme. We have always made clear that we would look at ways of easing the transition for families and providing assistance in hard cases.

Picking up the remarks of my noble friend Lord German, where he read from a putative letter—

[Noble Lords]

Putative?

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[Lord Freud]

Putative is a good word. The figures to which he was referring came from internal modelling from the Department for Communities and Local Government which had not been externally validated. That analysis was out of date, having been produced in January and before we announced that we were looking at transitional arrangements for dealing with particularly hard cases. It is not possible to predict robustly the effects of this policy on homelessness as we cannot anticipate the resulting behaviours of tenants or their landlords. We will think carefully about all these matters, but the clause is drafted so that we have all the powers we need to ensure, through regulations, that the cap achieves its purpose in the fairest way possible.

Picking up the question of the noble Lord, Lord McKenzie, on the devolved Administrations, under Clause 93(9) we will be able to reduce only payments that are the responsibility of the United Kingdom Parliament. No payments that are within the legislative competence of the Scottish Parliament, the National Assembly for Wales or the Welsh Ministers will be reduced by the cap.

[Lord McKenzie of Luton]

I understand that; I have read the clause. I was trying to understand what might be included in the items that cannot be capped in Wales and Scotland.

[Lord Freud]

Such payments could, however, be taken into account when determining whether the cap itself should apply and whether the non-devolved payment should be reduced. Presently, we expect the cap to apply to housing benefit and ultimately to universal credit, which are the responsibility of the UK Parliament.

The next, or rather the last, question put by the noble Lord, Lord McKenzie, was on whether the Government accept that there would be an increased burden on local authorities as a result of this measure. The impact assessment recognised that there could be a cost to local authorities in connection with temporary accommodation. That is why we intend to work closely with local authorities on the implementation of the cap.

[Baroness Sherlock]

Could I just press the Minister for a moment on that? Have the Government looked into what other costs there might be for local authorities? For example, what if families with children were forced to move only to boroughs such as Haringey or Redbridge? Has the Minister looked into the matter and, if so, could he tell the Committee what would happen about the availability of school places or of other forms of support or social services, in those boroughs? Could he share the information with us?

[Lord Freud]

My Lords, the principle, as noble Lords will know, is that the grants to particular local authorities reflect the number of people living in those authorities. Therefore, there is an automatic adjustment process. I accept there are some timing issues if there are sudden movements, but the DWP is talking very closely to DCLG about these practical implementation matters.

I come to an end with this question. As I understand it, certainly the parties in the Committee—I am not sure whether that covers all the Back-Benchers—are all signed up to the principle of the cap. We believe that the cap is the right approach. In the light of these comments, I hope that the right reverend Prelate and the other noble Lords will withdraw their amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister as ever for his detailed response but there are still a few questions left unanswered. I can confirm that he correctly sets out the position of the Labour Party in respect of the cap, but we want to see something that is evidence-based, properly analysed and fair to people. This is our great concern with what is on the table at the moment. The Minister did not deal with the analysis of the 50,000 households to be affected by this and the extent to which they are in a group which is subject to full work conditionality. If a big thrust of this is to look at work incentives but it then applies only to a minority of those people, where does that leave the policy?

[Lord Freud]

I think that we have a scattering of figures in this area. It is a minority, which I think is around 10 per cent. If the noble Lord is after a detailed response, I ought to offer to write on that matter if it would be satisfactory to him.

[Lord McKenzie of Luton]

That would certainly be satisfactory but even if that 10 per cent estimate is roughly right, it means that 90 per cent of the people who will be affected by this cap are under no obligation, under the Government's policies, to have full work conditionality. How does that square with the big thrust of this being about work incentives? I should also like to follow up on another point which the Minister did not touch upon: the profile of those, again within that 50,000, who would be tenants and paying rent of one sort or another. Is it the case that a significant proportion of that 50,000 are tenants of social landlords, RSLs or councils?

[Baroness Lister of Burtersett]

While the noble Lord is conferring, can he perhaps explain to the Committee what behavioural effects the Government are trying to achieve in the case of those who are not required to seek work?

[Lord Freud]

On the figures, one reason why I am slightly betwixt and between is that we are looking at that impact assessment, which is now somewhat dated, with a view to updating it and providing fresher figures when we can. That work is in progress and we are getting some more detail. All that I can do is to offer to provide some of that extra detail as soon as we get it. I am not completely sure yet of its timetable but there is ongoing work there, which is why I am slightly hazy about exactly what some of these figures will end up being, for which I apologise.

[Baroness Sherlock]

Before we leave this point, my noble friend Lady Lister just asked what is for me the crucial question: what behavioural impact does the Minister want this to have? He told the Committee earlier that if people did not want to be forced to move house, they could do one of three things: they could negotiate their rent down, but he acknowledged to the noble Lord, Lord Best, that that might not be possible; they could move into work, but he has just told the noble Lord, Lord McKenzie, that 90 per cent of them are not required to work; or they could use savings. We know from discussions earlier in Committee that most people in this situation have almost no savings. What is he trying to achieve?

[Lord Freud]

My Lords, I am going to revert to principle here. The principle of our policy sets out that the equivalent of £35,000 of earned income is a reasonable maximum amount of benefits for the state to pay someone who is living on them. Clearly, we are aware of concerns about the impact of a cap in some specific circumstances, and the clause is drafted as it is in order to give us the power to set the cap so that it achieves the purpose in the fairest possible way.

[Lord McKenzie of Luton]

I am sorry to press the Minister but, for us, the percentage of people affected by the cap who might be tenants of social landlords is a hugely important issue. I accept that the information has been updated but perhaps he can at least confirm the original estimate. Does he not understand that it is impossible for those people to get lower-cost housing? Generally you cannot get housing that costs less than social housing, so what are those people meant to do?

[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?

--- Later in debate ---

[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.

[The Lord Bishop of Ripon and Leeds]

I have two points. First, do I understand that now, in contrast to the research done some months ago, a far lower proportion of those affected by the cap are in social housing? If so, where have they gone—the people who were in social housing a few months ago but who no longer are?

Going back to the original amendment that we are, in a way, discussing, my second, unconnected, question is that I have still not quite understood why it is inappropriate, when looking at the cap, to look at families with children separately from couples. We have the distinction between singles and couples. Surely, in any discussion of how a cap should operate, children are fundamental and families with children are fundamentally different from those who do not have children. Should that not somewhere come into the way in which the cap, and therefore this clause, are established?

[Lord Northbourne]

I support that view.

[Lord Freud]

As to the first question asked by the right reverend Prelate on where all the people in social housing have gone, the situation is, to be honest, probably nothing more than a result of greater depth of analysis. I do not think that there is any real movement there but, as we have homed in and obtained more information, that is our understanding.

On his second question, the interesting reality is that childless couples have higher earnings than couples with kids. Perversely, therefore, having a differentiation based on what actually happens would have the opposite effect to the one that I imagine the right reverend Prelate wants. That is the point. It is not a useful approach because it would do exactly the opposite.

[Lord McKenzie of Luton]

My Lords, is that right? It might be right if you are looking at earnings, but if you are looking at income, which was part of the proposition, it might not be the case.

[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.

[Lord McKenzie of Luton]

I am sorry to come back to this but there are still some unanswered questions. I do not think the noble Lord dealt with the definition of “in-work” and when the cap will apply. Is the threshold set at 16 hours, as it is for working tax credit at the moment? How will that change from April? I think for couples there is a joint requirement for 24 hours a week, rather than 16. How will that all work?

[Lord Freud]

That is a matter that we will look at very closely. We want to encourage work and one of the main aspects of universal credit is to encourage smaller amounts of work. We will look at that issue very precisely.

[Lord McKenzie of Luton]

In which case, I have one final question. In relation to homelessness, I asked whether we might have a detailed note setting out all the obligations of local authorities when people present as homeless or when they are evicted.

[Lord Freud]

I will be happy to do that.

[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.

--- Later in debate ---

[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.

[The Lord Bishop of Ripon and Leeds]

Perhaps I may just thank everyone for all the contributions that have been made. I also thank the Minister for his engagement with the collection of questions that have been asked of him over the past half-hour or so. I retain considerable disappointment in terms of moving forward in this area. There is clearly considerable disquiet among your Lordships over how this is developing. We have not yet pursued far enough issues such as the couple penalty, which the noble Baroness, Lady Tyler, spoke about. We have been exploring homelessness but have not got all that far. It might grow as a result of the cap. The noble Lord, Lord German, and others made points about children. I do not detect any likelihood that the amendment will be accepted unanimously by this Committee but it is with considerable reluctance that I withdraw it. I know that a number of these debates will need to go on behind the scenes if we are not to have the debate all over again on Report. I beg leave to withdraw the amendment.