Employment and Support Allowance Regulations 2013

Lord Freud Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Lord Freud]

That the draft regulations laid before the House on 10 December 2012 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee.

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

My Lords, I can confirm that in my view the statutory instrument is compatible with the European Convention on Human Rights.

As with the JSA regulations we have just considered, these provisions are designed to work alongside the introduction of universal credit by removing all the existing income-related provisions from ESA. From April 2013, the income-related elements of ESA will gradually be phased out for any cases where universal credit has been rolled out. These regulations will introduce new conditionality and sanctions regimes into ESA benefits to align them with universal credit. The ESA sanctions regime is, following reforms made last year, already significantly aligned with the UC sanctions model. However, beyond these changes, people will find that the effect of the existing employment and support allowance regime is unaltered.

Noble Lords may find it helpful if I provide more detail on how these changes will be applied. ESA is a benefit with which all noble Lords will be familiar and is payable to people on the basis that they have a disability or health condition that affects their ability to work. As with the changes that we are making to JSA, these regulations provide new claimant responsibilities and sanctions for claimants who fail to comply with the conditionality regime.

The requirements placed on ESA claimants are also based on the universal credit model. For example, where appropriate, ESA claimants can be required to prepare for work and attend work-focused interviews. These requirements are broadly equivalent to those placed on claimants in the universal credit work preparation and work-focused interview-only conditionality groups. Therefore, ESA claimants will not be required to look, or be available, for work. I should also stress that ESA claimants can be subject only to the lowest levels of sanctions. These sanctions have an open-ended element that stops building when the claimant complies, so the quicker the claimant engages the shorter the sanction will be.

The two levels of sanctions broadly work in the same way as the equivalent sanctions for universal credit claimants in the work-preparation and work-focused interview requirement groups. The high and medium-level sanctions in JSA and universal credit, which are for longer, fixed periods, do not apply to ESA claimants. Our aim is not to impose sanctions. We want claimants to comply with the reasonable requirements that will prepare them for work. Therefore our focus is on ensuring that the requirements expected of claimants are reasonable and clearly communicated to them. Only if claimants fail to meet a suitable requirement without a good reason will a sanction be imposed.

As with the JSA provisions, these regulations were subject to statutory formal consideration by the Social Security Advisory Committee. The committee decided that formal referral was not necessary, but raised a number of points, which were all considered, and changes were made where appropriate. For example, the committee questioned Regulation 46 of the ESA regulations, which originally provided that the purposes of a work-focused interview included the five things in the list. The committee questioned whether this meant that the interview had other purposes that were not included in the list. We decided that the list should be exhaustive, and therefore amended the wording of the regulation to remove the word “include”.

As the sanctions and conditionality rules for both benefits were being brought broadly into line with universal credit, both sets of regulations were included as part of the Social Security Advisory Committee’s wider UC consultation exercise. We firmly agree with the committee that the key to an effective sanctions regime is clear communication with claimants, delivered by well trained advisers. In line with assurances sought during the passage of the Act, stakeholders were keen to ensure that the sanctions regime incorporates sufficient safeguards for vulnerable claimants.

Noble Lords will know that I share concerns that the sanctions regime incorporates robust safeguards. I would like to assure noble Lords that a number of protections will be in place, for example visiting or calling claimants with a mental health condition or learning disability before a sanction is considered.

In closing, I reiterate to noble Lords that beyond the changes I have outlined, the rules for the new style ESA will be very similar to the existing rules for the contributory element of ESA. I would also like to thank the Secondary Legislation Scrutiny Committee for its earlier consideration and analysis of these regulations. I seek noble Lords’ approval of the regulations here today, and I commend them to the House.

[Baroness Turner of Camden]

My Lords, very briefly, I wish to raise with the Minister the issue of appeals and appeals mechanisms. Where I live, I am often approached by people for advice, particularly by those on DLA. Of course, DLA will be transformed into the personal independence payment under the new system. At present, when people come to me to complain that they do not have the amount of DLA they thought they ought to have, I always advise them to appeal. I tell them what they ought to do, and I advise them to consult the local authorities and to proceed accordingly. The notable thing about appeals against DLA assessments is that 40% of them are successful. That raises a number of questions in my mind about the people who carry out the assessments.

What will happen under the new system? Will a private firm do the assessments, as happens with DLA, and how will the Government ensure that the private firm doing the assessment is capable of doing the job effectively? I have doubts about the way in which the present system operates when so many people are dissatisfied and so many people are successful at appeal. That is very unsatisfactory. From the point of view of those concerned, it makes them feel that the system works not for them but for the Government on behalf of people who want to diminish the amount of money that is spent in support of people who are on benefits.

As regards legal aid, after April that will not be available for anyone who is concerned to contest an appeal. There may be people who are very aggrieved because they are not getting the benefit assessment that they ought to have, even under the new system, but what course will they have to follow, and how can they follow it? Are the Government satisfied that the people doing the assessments are capable of doing them?

[Lord McKenzie of Luton]

My Lords, I thank the noble Lord for introducing these regulations, which run parallel with those relating to JSA, which we have just considered. Before going further with my script, I would like to say that I do not think the Minister dealt with the point I raised earlier about flexibilities being included in the claimant commitment document. Perhaps he might pick up that issue when he responds to this debate.

As we have heard, these regulations relate to contributory ESA, which means that they are generally limited to 12 months, except for people in the support group. Can the Minister confirm that these regulations correctly reflect that position and that days in the support group do not count towards the 365-day maximum, or the days in the assessment period, followed by a period in the support group? Can he further confirm that they reflect the entitlement for someone in the support group to reconnect the contributory entitlement as provided for by Section 52 of the Welfare Reform Act 2012? It would also be helpful if the Minister could put into context the provisions in the regulations relating to youth, given the provisions of Section 53 of the 2012 Act, which preclude further claims under the youth condition.

As for JSA, the Explanatory Memorandum states that any allowance will be paid either alone or together with universal credit, a point probed by my noble friend Lady Donaghy in the earlier debate. How will this work, and who is to decide whether it is paid separately or with universal credit? Currently, universal credit is payable fortnightly in arrears, and the allowance is to be treated as unearned income for the purposes of universal credit. Presumably it is not impacted by the actual payment date. Can the Minister tell us whether ESA is to be sanctioned and whether it is the gross or net amount that is to be taken into account as unearned income? What about hardship payments and repayable hardship payments? How will they work?

The Explanatory Notes make it clear that, with the exception of the conditionality and sanctions regime, the rules will be very similar to the existing rules. I think the Minister repeated that. For the purposes of the record, can he be a little more precise about the lack of similarity?

As regards claimant obligations, the Explanatory Notes at paragraph 7.63 record that the UC model requires more of the claimant than ESA does. In particular, the paragraph suggests that claimants may be required to look for and be available for work that they are capable of doing, which is a more onerous test. Perhaps I can go back to that paragraph. I do not think it accords with what the Minister said in introducing these regulations. It states:

“The requirements placed on Employment and Support Allowance claimants are also based on the Universal Credit model, though there are again some significant differences. For example, claimants can be required to prepare for work and attend work-focused interviews, but are not required to look for work or be available for work whereas in Universal Credit, within limits, claimants may be required to look for or be available for work that they are capable of. The requirements to prepare for work and attend interviews are broadly equivalent to those requirements placed on claimants in the Universal Credit work preparation and work-focused interview only groups”.

I read that to suggest that if the universal credit rules are to apply, claimants may be required to look for, and be available for, work that they are capable of. If that is not the case, it is fine, but if that is correct, one has to ask how these more onerous requirements are to be derived, or are they to be derived from the same WCA process? Will revised guidance be given to Atos and decision-makers?

Similarly, in relation to sanctions, where there is an entitlement to both benefits—contributory ESA and universal credit—the latter will apply. Given that the universal credit requirement on the claimant may be higher than the ESA requirement, what will ensure that there will not be movement up the sanctions scale?

[Lord Freud]

The Employment and Support Allowance Regulations remove the means-tested provisions, because in future universal credit will replace the incremented employment and support allowance. With the exception of the conditionality and sanctions regime, the rules for the new employment and support allowance will be very similar to the existing rules for the contributory element of ESA under the 2008 regulations.

I will pick up some of the questions. The first was from the noble Baroness, Lady Turner, who asked about appeals. As she said, about 37% of appeals overturn the original decision. However, in the context of the total number of decisions made, the tribunal overturned around 15% of around 741,000 fit-for-work decisions. Therefore, the original decision on benefits stood in 85% of cases. Clearly, we will have a further chance to debate this issue later this evening.

All the remaining questions were asked by the noble Lord, Lord McKenzie. He asked about flexibilities for lone parents. Claimants will meet their personal adviser and discuss their circumstances, which will include the hours that the claimant is able to work, taking into account their caring responsibilities. Clearly, the claimant commitment is a living document that will change with people’s circumstances.

There will be separate payments of JSA, ESA and UC. The contributory benefits will not be paid with the same frequency as universal credit, although the monthly amount will be equivalised, and the monthly amount of the contributory benefit will be taken into account as offsetting unearned income. In other words, it will knock out the equivalent amount of UC.

I confirm that days in the support group—the WRAG—will not count towards the 365-day limit. The way in which sanctions will operate if a claimant receives both universal credit and a contributory element is that the relevant sanction will apply to their universal credit award and not to their JSA or ESA award unless they close their UC claim.

The hardship provisions have been removed from both the JSA and the support allowance because it will now be for contribution-based claimants, who will have other income and savings to live on. The noble Lord is correct that there will be no new claims for youth conditions.

I make it absolutely clear that the requirements are for work preparation such as attending a training course, preparing a CV or taking part in the Work Programme. They do not relate specifically to searching for work. Perhaps I may say that there is a bit of clumsy drafting in that paragraph, which states that UC has other elements that are not in the ESA. I know exactly the issue that the noble Lord seized on because I was puzzled by it myself when I read it. However, I can reassure him on that point.

As with the JSA, we are now moving the ESA and UC regimes closer together after the start last year. I commend the regulations to the House.

Motion agreed.

Social Security (Personal Independence Payment) Regulations 2013

Lord Freud Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Lord Freud]

That the draft regulations laid before the House on 13 December 2012 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 23rd Report from the Secondary Legislation Scrutiny Committee.

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

My Lords, this instrument was laid in draft before the House on 13 December 2012, and I confirm to the House that I consider it to be compatible with the European Convention on Human Rights.

This Government are clear that they are committed to continuing to support disabled people to play a full role in society. The reform of DLA and the introduction of the personal independence payment are central to this. We recognise that DLA plays an important role, but it is simply not working in its current form. In the past 10 years, the number of people claiming DLA rose by more than a third, from around 2.4 million to 3.2 million. That level of growth is not sustainable.

We could have reduced expenditure by simply cutting money across the board. Instead we chose the principled but more difficult option of modernising the benefit and focusing support where it is needed most—on those who face the greatest barriers to independent life. I accept that this reform will mean that we spend less money on PIP than we would have spent on DLA, and that fewer people will receive the benefit—300,000 fewer by October 2015 and 600,000 fewer in steady state. We have not hidden from this. However, this has to be put in context. The UK remains a world leader in protecting the rights of disabled people. We currently spend almost £50 billion a year on support and services for disabled people. We will still be spending more on DLA and PIP in 2015-16 than we did in 2009-10 or 2010-11.

Importantly, this reform has also allowed us to ensure that the money we are spending is used effectively and fairly, and will go to the people who need it most. More people will receive the highest rates of the benefit than at present, both in terms of the proportion and the actual number of people receiving the benefit. The proportion of individuals who receive the top rates of both DLA components is 16%. Under PIP this will rise to 23% and will be worth £134.40 a week, based on April’s rates. More individuals will receive the enhanced rate of the daily living component in PIP than receive the highest-rate care component in DLA.

The Government’s reforms present an opportunity to start afresh and make the benefit fit for the 21st century while keeping the best elements of DLA that disabled people value. Throughout the development of PIP we undertook extensive stakeholder engagement to ensure that disabled people and their organisations were able to feed in their views and concerns. We listened, and in many cases acted on what we were told. Our commitment to consultation was recognised by the Secondary Legislation Scrutiny Committee. We are continuing this engagement as we move into the delivery phase of PIP.

A key area where we listened to and acted on people’s views was the timetable for reassessment of the DLA caseload. We announced in December that this would take place more gradually, allowing more time to make sure that we get the implementation of PIP right. The peak period of reassessments will now not start until October 2015. This will also allow time for the first independent review of PIP to be carried out and any required changes to be implemented before reassessment of the bulk of the DLA caseload starts, from October 2015.

--- Later in debate ---

[Lord Hardie]

In rising to speak in support of the amendment moved by the noble Lord, Lord McKenzie of Luton, I have to declare an interest as honorary president of Capability Scotland. Capability Scotland is a charity which provides services, education and accommodation for people with disabilities, both mental and physical, of varying degrees of complexity and severity. It provides services at more than 25 locations in Scotland for 1,000 people who are afflicted in one way or another. It is in that capacity that I became aware of these regulations and of the concerns of people who use the services of Capability Scotland. Those concerns have already been alluded to by the noble Lords, Lord McKenzie of Luton and Lord Alton of Liverpool, the noble Baroness, Lady Grey-Thompson, and other noble Lords in eloquent speeches highlighting the difficulties surrounding these regulations. I cannot improve upon the points they made. I simply look forward to the Minister’s response to the detailed questions posed by noble Lords who were seeking the justification for the reduction of the distance from 50 metres to 20 metres.

A Question on the personal independence payment was asked in the House on 24 January. In reply to an intervention by the noble Baroness, Lady Grey-Thompson, about the 20-metre point, the Minister referred, at col. 1181 of the Official Report, to the various groups mentioned by the noble Lord, Lord McKenzie. I was surprised to see them mentioned because the implication I took from it, wrongly, was that they had suggested that the distance of 20 metres was appropriate.

The other thing I noted from the Minister’s reply was that there is no effective change in the number of people receiving higher rate mobility allowance because of this change. I challenge that statement. I am sure that the Minister did not intentionally mislead the House in making it, but I shall cite an example from Capability Scotland’s experience. A 41-year-old lady who suffers from cerebral palsy is in employment in the National Health Service and currently receives higher rate DLA at £54.05 per week. She uses that to cover the cost of her Motability vehicle, which is essential for her to get from home to work. She can walk with a frame a distance slightly in excess of 20 metres, but she cannot walk 50 metres, and that is why she gets her current benefit. If this regulation passes with the 20-metre limit, she will receive the basic mobility award, not the enhanced mobility award. The effect of that is that she will get £21 a week, losing £33.05 a week, or £132.20 a month. She will not have enough money to replace her car or to take taxis to work, and she will be unable to remain in employment. How is that compatible with the Government’s policy of encouraging people back to work and encouraging people with disabilities into work? This lady has done that, and yet because of this regulation, she will lose that independence.

I do not share the optimism of the noble Baroness, Lady Thomas of Winchester, about the flexibility of the regulations. Regulation 6 sets out the structure and one then has to look at the schedule for the assessment. When one does so, one has the various activities: “Planning and following journeys”, and then “Moving around”. There is then the detail of what is required of “Moving around”. If you:

“Can stand and then move more than 200 metres, either aided or unaided”,

you get no points. If you:

“Can stand and then move more than 50 metres but no more than 200 metres, either aided or unaided”,

you get four points, and so on. These points are maximums. It would not be possible for an assessor to give any more than the points in the table. Therefore, in the case that I have cited, the lady in question will qualify for 10 points. She needs 12, but unless she can get points from “Planning and following journeys”, she will never get 12 points. She is perfectly capable of planning and managing her journeys. I am confident that she is not the only person in this category. Lots of people will lose out because of this change. They deserve an answer to the question: why has this change been introduced? Why has it been reduced to 20 metres? Who suggested it? What is the scientific basis for it? What consultation was there? Did any disability organisation go along with 20 metres? I think not, but I look forward to the Minister’s response.

Another concern I have is that the regulations do not make provision for people who need occasional supervision to prevent them being a danger to themselves. I again cite as an example someone who gets support from the organisation of which I am proud to be honorary president. A 36 year-old man has had schizophrenia for nine years. He receives a low-rate care component of DLA because he has been assessed as requiring occasional supervision to prevent him being a danger to himself. He uses his payment of £20.55 a week for his sister-in-law’s bus fares to and from his home on a daily basis. Seven days a week, she travels by bus there and back to check on him. To give him some structure in his life, she checks that he is up in the morning, and that everything is all right. She knows instinctively if he is not well, and then alerts the mental health team. Take that allowance away, and she will not be able to visit as regularly as she does and the tell-tale signs of his increasing illness will be missed. He may then be a danger to himself and to others.

I am very concerned about these regulations. I hope that the Minister will give me some reassurance about the two matters that I have raised.

[Lord Freud]

Once again, I thank noble Lords very much for their thoughtful and moving contributions to this debate. Clearly, as PIP is being introduced as a new benefit, it is right that it is subject to a very high level of scrutiny. I shall try to address as many questions as I can. The noble Lord, Lord McKenzie, asked about case loads and the steady state, which we estimate will be around 2018. Our current estimate is that the percentage getting the top rate of both elements will rise from 16% in DLA to 23% in PIP. As I have said, the actual number goes up as well, although not by a lot, from 354,000 to 357,000. But the number of people who will get the top rate of the daily living component will go up to 674,000 compared to the 539,000 who currently receive DLA.

My noble friend Lady Thomas wanted me to clarify the meaning of “repeatedly”. Currently, it means as often as the activity being assessed is reasonably required to be completed, which makes the point that it will not be on a daily basis necessarily but will depend on the type of activity that we are talking about. The noble Baroness, Lady Grey-Thompson, referred to what might happen to the 20-metre mobility criterion in the future. Clearly, I am absolutely conscious of the strength of feeling around that criterion and I assure the House that we will keep it under very close review both within and outside the independent review process. In the mean time, we have no plans to make any further changes to this criterion.

My noble friend Lady Browning was concerned, as am I, about groups with autistic spectrum disorder. We have worked to ensure that the PIP assessment will take full and fair account of the complex needs that people with autism face. The noble Lord, Lord Touhig, was concerned about the 30-day time period. We believe that that is sufficient time for providers to conclude the process, including gathering evidence where it is needed. Clearly, this is another area that deserves close monitoring.

My noble friend Lady Thomas was interested in how the Government would monitor Atos and Capita. We have set strict recruitment and training criteria for both providers. We will approve only practitioners who reach high standards. We will have random, independently assured quality checks, which we will undertake on a regular basis. Those assessors will be well versed in our case studies and guidance as part of their training.

As regards the carers’ case load and the steady state figure, the noble Baroness, Lady Lister, was concerned that we were using an interim figure for 2015, going to the steady state in 2018. The figure is a reduction of 9,000 claims out of the total number of claims in payment to carers, which is running at around 600,000. I make that 1.5%. The noble Baroness used a rather larger percentage that I did not recognise. Her figures may be on a different basis but we can talk about that privately.

The noble Lord, Lord McKenzie, was concerned about whether there was the right number of people to conduct these assessments. To one extent, by pushing out the timetable, we have taken away some of the potential overlap with the WCA reassessment bulge, but we are not using any of the same health professionals to carry out the PIP assessments, because PIP is being delivered through sub-contractors.

--- Later in debate ---

[Lord Alton of Liverpool]

Before the Minister sits down, would he be kind enough to answer the question that my noble friend Lady Grey-Thompson and I put to him about the numbers of people who will be affected by these regulations? Before asking the House to agree them, it is surely not unreasonable for us again to put the question to him, not for the first time, of whether he disputes the figure of more than 40%—perhaps as many as 200 people in every parliamentary constituency in this country—standing to have their vehicles repatriated or sequestrated. Does the noble Lord agree with those figures? If he disputes them, what figure would he give the House?

[Lord Freud]

My Lords, we know how many people will get the higher mobility component, a figure that will clearly be fewer under PIP than under DLA. I have provided those figures but, just for the record, the figure of roughly 1 million people on the DLA component in a steady state will reduce to roughly 600,000. That is the decline. What we do not have, and therefore find it difficult to comment on, is a read-across from how many people are on the full mobility allowance to those who have a Motability contract, because that is a private matter. Motability runs its operation separately from us; it is a charitable operation. It is therefore impossible for us or anyone to calculate a read-across of the percentage of people on Motability contracts who will be affected.

[Baroness Hollis of Heigham]

My Lords, perhaps I may pursue the Minister on that point about statistics. When we were discussing this elsewhere, he agreed that actually 200,000 people who currently get the lower rate because of problems of supervision, psychological issues associated with outside movement and so on would now get the enhanced rate. Therefore, the number of those who are losing the allowance on the grounds of physical disability only is not 400,000 but 600,000.

[Lord Freud]

Yes, my Lords, there is some churn. By the time we reach 2018, we will be out beyond the major review process that we will have. The figures are therefore quite tentative for that stage. I am providing them to your Lordships but they are indicative. Clearly, there will be some churn, but the point is that we are trying to direct PIP at the people who really need it.

In closing, it is simply not possible for me to confirm, deny or reach any figures in answer to the noble Lord’s question on how many cars will go.

Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Decisions and Appeals) Regulations 2013

Lord Freud Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Lord Freud]

That the draft regulations laid before the House on 10 December 2012 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee.

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

My Lords, these regulations were laid before the House on 13 December. I confirm to the House that these provisions are compatible with the European Convention on Human Rights.

The decisions and appeals regulations deal with provisions that set out the framework for decision-making in universal credit, personal independence payment and contributory employment support allowance and jobseeker’s allowance. The existing decisions and appeals regulations are tried and tested and are considered still fit for purpose, even in the “new world” of welfare reform. For UC and PIP to work as we intend, both technically and in terms of protecting claimants’ rights and welfare, the benefits require a strong underpinning both at the initial decision-making stage and where decisions are disputed. The regulations we are considering provide just that.

I will focus on those issues that I believe will be of most interest to noble Lords because they are both new and of significance. The first relates to mandatory reconsideration, provided for in Section 102 of the Welfare Reform Act 2012. Currently, a claimant can ask for a decision to be reconsidered by a decision-maker, and this process may result in a revised decision. In practice, however, many people do not do so and instead make an appeal from the outset. This is more costly for the taxpayer, is time-consuming, stressful for claimants and their families, and, for a significant number of appellants—some 40% of all appellants are successful—unnecessary. I say this because this success is on the back of new evidence presented at the tribunal.

We need a process that enables this evidence to be seen or heard by the decision-maker at the earliest opportunity. It is accepted that this will not mean that all decisions will be changed and appeals will be unnecessary, but we should at least have a process that allows this to happen. Mandatory reconsideration does just that. It will mean that applying for a revision will become a necessary step in the process, before claimants decide if they still wish to appeal.

Importantly, another DWP decision-maker will review the original decision, requesting extra information or evidence as required via a telephone discussion. If appropriate, they will then correct the decision. When this happens, there will be no need for an appeal—an outcome that will be better for the individual and better for the department. Claimants will of course be able to appeal to the tribunal if they still disagree with the decision, which will be set out in a letter detailing the outcome of the reconsideration and the reasons for it. We hope that because of the robust nature of the reconsideration and the improved communication that our reforms will result in, some claimants will decide that they do not need to pursue an appeal.

We ran a formal 12-week consultation on the proposals between February and May 2012, and published the Government’s response in September 2012. We received 154 responses, which included a range of suggestions on how we could continue to improve decision-making across all benefits. A number of respondents suggested that there should be a time limit on the reconsideration process. As set out in the Government’s response, we are not making any statutory provision for this. Some cases are more complex and require additional time—particularly, for example, where extra medical evidence needs to be sought. However, we recognise the concern here and are considering the scope for internal targets. It is a balancing act that we must get right. We will monitor developments closely and make adjustments accordingly.

I will mention another change linked to the mandatory reconsideration initiative. It will see all appeals being made directly to HMCTS and not, as now, to this department. The change brings the DWP in line with the appeals process for other departments. It is a positive move as it will allow HMCTS to book hearing dates much more quickly than is possible currently.

I turn now to the payment of benefit pending reconsideration and appeal. Noble Lords should be aware that there is no change to the current policy. Under existing provisions, if someone is refused benefit and requests a revision of that decision, benefit will not be paid pending the consideration of that request. It will be the same for mandatory reconsideration. Again, there is no change in relation to appeals. Under existing provisions, if someone appeals a benefit—save for ESA, which I will come to—no benefit is paid pending the appeal being heard. This must be right. It would be perverse to pay benefit in circumstances where the Secretary of State had established that there was no entitlement to it. As a principle, this will not be changed by the welfare reforms.

I turn now to ESA. At the moment, if someone appeals a refusal of ESA, it can continue to be paid pending the appeal being heard; this is not changing. What is changing is that there can be no appeal until there has been a mandatory reconsideration. So there will be a gap in payment. In that period—and I repeat that applications will be dealt with quickly so that this is kept to a minimum—the claimant could claim jobseeker’s allowance or universal credit. Alternative sources of funds are available. Of course, he or she may choose to wait for the outcome of the application and then, if necessary, appeal and be paid ESA at that point.

Another important policy change in these regulations relates to the payment of universal credit being made on a monthly basis. Reflecting this monthly payment, the effective date rule for change of circumstances will follow a whole-month approach—that is, that a change will be effective from the start of the monthly assessment period in which it occurs. Claimants will be expected to report any changes immediately. This will be made clear in their claimant commitment and in the decision notifications that they receive. Any change that is advantageous to the claimant must be reported within the assessment period in which the change occurred. Where the change is reported late—for instance, if the change occurred at the end of an assessment period or if there were special circumstances that caused the delay—our guidance and regulations on special circumstances will allow the decision-maker discretion to treat the late report as being in time. However, if the change of circumstances is reported late and does not meet the guidelines for accepting a late application, the change will only be applied from the beginning of the assessment period in which it was reported. This policy will ensure that the reporting of changes of circumstances is done in good time, that there is no incentive to delay reporting, and that the monthly universal credit award accurately reflects the claimant’s needs for the month ahead.

One area that I know will interest noble Lords is the issuing to claimants of decision notices, which have been developed taking on board claimant insight and stakeholder feedback. The decision notice will clearly set out a claimant’s monthly award and break down how the award has been calculated. In the long run and in the majority of cases, we intend that claimants should be notified of decisions relating to their universal credit award through the online channel.

I turn now to the guidance being drafted to support these and other regulations. I know that noble Lords have concerns about this and it was raised by the Secondary Legislation Scrutiny Committee. Noble Lords will be pleased to learn that the guidance has been placed in the Library—indeed, I am sure that many will have read the guidance. In relation to these regulations, guidance on revising decisions at any time and on the handling of late notification of a change of circumstances is available.

Finally, it should be noted that these regulations were referred to the Social Security Advisory Committee, which decided not to refer them for formal consultation but did invite comments informally. The comments received related to the time limit for mandatory reconsideration and the whole-month approach, both of which I have already covered. I commend the regulations to the House and ask noble Lords for their approval. I beg to move.

[Lord Bach]

My Lords, I thank the Minister for moving these regulations. This is clearly an important day for the future of our social security system, and the House has heard why so many of us believe this to be a day of shame for our country and its reputation as a civilised and just place to live and work.

I rise, on this particular regulation, certainly as no expert in the provision of the regulations that have gone before but as someone who has an interest, as I hope we all have, in ensuring that everyone has equal rights before the law—in other words, some real access to justice. In the Explanatory Memorandum to the regulations, paragraph 7.1 states:

“The Department for Work and Pensions … is introducing a new set of Decisions and Appeals Regulations to ensure that the decision-making and appeals framework which currently applies to all social security benefits applies to the new benefits introduced by the 2012 Act”.

No doubt the intent behind the regulations—it is a virtuous intent, at least in theory—is that for those wishing to challenge or appeal a decision there is a procedure to go through, as there always has been.

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[Lord McKenzie of Luton]

My Lords, I again thank the Minister for introducing the regulations. I wish him well in dealing with those incisive inquiries from my noble friend Lady Lister about the monthly assessment, the monthly payment and supported housing. She gave us a very powerful analysis.

We acknowledge that an updated framework for decisions and appeals that encompasses universal credit, PIP, JSA and ESA is needed. As the Minister will doubtless anticipate, there are two key matters that we will pursue, mirroring those discussed in the other place: mandatory reconsideration and the payment of benefits in the interim. Noble Lords will recall the debates that we had in Committee and on Report on the Welfare Reform Bill on what has ended up as Section 102 of the Act, and a degree of scepticism about why it was necessary to have two powers when a power was already available to decision-makers to revise a decision prior to the determination of appeal. However, we are where are, with two time limits within the system. If a claimant disagrees with a decision, they have one month to ask for a reconsideration. When the result of that is known, they will have one month from the date of the new decision to appeal.

As the Minister has identified, there is no statutory time within which decision-makers are obligated to complete a reconsideration. This is important because it reflects on how long a claimant’s interim benefit position will endure. We therefore register our concerns about the strictness of the time limits imposed on claimants in the current climate.

My noble friend Lord Bach gave a tour de force speech about the current situation, in which legal aid is being denied and advice agencies are being stretched and hit with redundancies and closures. We received last Friday the Universal Credit Local Support Services Framework, with not enough time to peruse it in any detail for today. Perhaps the Minister will tell us whether its envisaged remit will include advice on a decision or a reconsideration. Will the local support services be available to advise and assist on that? Of course, this pressure on advice surgeries is compounded by the raft of changes that we have discussed today and will doubtless continue to discuss, and which are about to enter the system shortly. Can the Minister say something about any discretion that might be available in respect of the time limits imposed by the provision?

It is understood that benefit entitlement pending a reconsideration will be on hold. I think that is what the Minister said: that if someone is seeking a benefit for the first time, they will be left without benefit if and until the claim is settled positively. For those claiming ESA and going through a reconsideration process, this would appear to herald the change. Is it not the case that an ESA claimant will currently be paid at the assessment rate equivalent to the JSA rate pending a reconsideration and appeal? Will the Minister confirm that this will not be the case in the future? The remedy in the short term, as has been suggested, appears to be a claim for JSA in due course where contributory ESA is involved, presumably a claim for universal credit. This appears to be what the Minister still advises. How does that deal with the point that this may require an individual to sign up to a claimant commitment and undertake work for which they are not suited?

Can the Minister please confirm the position for someone in receipt of ESA who, on a reassessment under the WCA, is assessed as being fit for work or subject to all work-related requirements? If someone who is currently on ESA and at risk of being downgraded to universal credit or JSA is subjected to the reconsideration appeal process, what benefit is paid before that appeal is concluded?

These questions touch on the timeliness of the reconsideration process. It is accepted that if a reconsideration and appeal process is successful, any due award will be backdated to the original claim, but that does not help the claimant in the interim. My honourable friend Anne McGuire MP made the point in another place that where high levels of appeals are successful, such as on ESA and DLA, a protracted reconsideration and appeals process will disadvantage claimants, driving them into debt and into the arms of the food banks.

We note that the Government have declined to place time limits on the reconsideration process—the Minister confirmed that tonight—but it seems from their response to the public consultation on mandatory consideration that they will consider making proposals for an interim performance indicator. Perhaps, therefore, I can take the opportunity to repeat some questions posed by my honourable friend Anne McGuire that remain unanswered. What do the Government envisage as the standard length of time for a revision prior to appeal? Will customers be told how long they should expect to wait? What action can be taken if projected timescales are exceeded, and will the department monitor and publish statistics on waiting times for appeal?

My honourable friend also took us back to earlier deliberations in Grand Committee, when the noble Lord, Lord De Mauley, was at the Dispatch Box. In response to an inquiry, he said:

“Alongside implementation of this power, we intend to make further improvements to the reconsideration process, which will include suitable arrangements for monitoring and, where appropriate, improving the speed of the process”.—[Official Report, 23 November 2011; col. GC 456.]

Perhaps we can be told what progress has been made on that.

Finally, I ask a question about the routine publication of appeals data—again going back to our debates on the Welfare Reform Act. At one stage, I think it was envisaged that there would be a cessation of the routine publication of those data. Perhaps the Minister can confirm that that is not the case.

We do not oppose the regulations, but we need to monitor them closely to see that their implementation does not create unfairness.

[Lord Freud]

Again, I thank noble Lords for some very good contributions. This is not the easiest or most digestible set of regulations. They very much replicate the existing decisions and appeals provisions but, just as the welfare reform agenda has provided an opportunity to reduce the complex range of income-related benefits, with the introduction of UC, it has also provided an opportunity to rationalise the rules governing the administration of these new benefits. This consolidated set of regulations does that by ensuring that the rules underpinning decisions and appeal rights are clearer and more accessible, benefiting both claimants and, indeed, the department.

On the detail of mandatory reconsideration, I reassure the noble Lord, Lord McKenzie, in particular, that we will closely monitor the impact on claimants, the quality of decision-making and appeal rates during the early stages of implementation. It is a key change that will improve claimants’ experience of the appeals process if we get it right. We will also monitor appeal volumes more broadly, particularly with the introduction of the new benefits, UC and PIP. We will review and amend the advice for decision-makers guidance as necessary, and if we find that the regulations are at fault there is an option to amend them.

On the point raised by the noble Lord, Lord McKenzie, regarding the time limit, the key issue is that we will be able to handle some cases with extreme speed while others may take more time, particularly where we need to ask for more evidence. I will commit to keeping noble Lords updated on that matter. On reconsiderations, we envisage that the first point of call will be to our staff, but some people may choose to go to an independent advice centre, although we had not been envisaging this as part of the role of the local support service.

[Baroness Hollis of Heigham]

If the Minister will allow me, could he reconsider that last point? I had wondered whether to intervene following my noble friend’s contribution on legal advice. It would be extremely valuable if the local support services, which are there helping people to move from paper forms to online forms for a brand-new benefit structure, et cetera, were able to give claimants the sort of legal or welfare advice steer that they would have got elsewhere in the past. For example, I remember vividly cases in which parents were trying to claim DLA for children under the age of two, which is of course simply not possible. That sort of advice and guidance could very well be served by the local support services and would pay dividends in cash, as well as in buy-in to the whole UC procedure, if the Minister could ensure it.

[Lord Freud]

My Lords, the best I can do is to have a think about it. The issue is the balance of what we are trying to get the local support service, which is a partnership approach, to do. I want to get the balance of that right, and I will take that away and think about it. Clearly, at some basic level there will be that kind of support; it is the extent to which it becomes a more formalised process. However, as I said, I will have a think about that point.

The point about ESA is that there is a long-standing provision for it to continue during an appeal. That will continue, so there is no change there. The only difference from the current arrangements is in this rather short period of reconsideration, during which ESA will not be payable. Once the appeal starts, ESA will go into payment, as it does currently. I hope that I have just nailed that point and that the noble Lord, Lord McKenzie, is not looking puzzled deliberately but understands it.

[Lord McKenzie of Luton]

I think I understood what the Minister said, but if during the process somebody has applied for or been in receipt of ESA and there is a challenge, it will have to go through a mandatory reconsideration process first and then out on to an appeal. Once you get to the appeal, you will get ESA at the assessment rate—I would guess until it is settled; is that right?—which is equivalent to JSA. Is that not a change from the current position, under which you in effect go straight to an appeal, however long or short that reconsideration period is?

[Lord Freud]

Under the current position, there is a voluntary process whereby people can go for reconsideration and the ESA is not payable until the decision is taken to go formally to an appeal. The difference is that we are moving from a voluntary process that some people do to a mandatory process that all people will have to do, and there is a gap. That is where concern has been expressed, and my response to that concern is that we need to keep it under control and look at how long that timing really is. I take that specific point, but on a more general point my understanding is that there was a bit of concern from the noble Lord that there was actually a change in payment from appeal. As I say, that is not happening.

--- Later in debate ---

[Baroness Hollis of Heigham]

But the payment is in arrears for the previous month.

[Lord Freud]

Yes, the payment reflects what happened in the previous month, but it gives you what you need for the month that you are going to be spending that money in. I will take this debate outside over a cup of—sorry, over a glass of something; I think vodka is appropriate. I will argue this right the way through, because I think it is the most benign way to ensure that people have the appropriate amount of money for each month.

On the point about the advice sector, we are looking at working closely with the advice sector to look at how the existing infrastructure can be used to support claimants with complex needs, and we are looking at new services that we need to develop to ensure that claimants have access to the right support. I have already talked about the multimillion pound support package from the Cabinet Office and the Big Lottery Fund.

I hope that I can offer some reassurance to the noble Baroness, Lady Lister, on the question of supported exempt accommodation. I pulled this area out from the universal credit because I could see that people often came through these accommodations quite rapidly, and it just was not the appropriate way of doing this. We have left that for the time being but with a view to ensuring that there is a sustainable financial regime for this kind of accommodation.

I have to confess to the noble Baroness that I have heard concerns only recently that some of the kinds of accommodation that we would want to support are not within our definition of support-exempt accommodation. I will look at that when we look at the whole thing, and we will consult on it. It is an important issue that we have right up front.

I do not have numbers on payment exceptions. We do not want to set targets for this, but a useful figure to bear in mind in the private-rented sector is that currently about 25% of private-rental claimants have their landlord paid direct. We are trying to get as many people as possible to pay their own landlords.

[Baroness Lister of Burtersett]

I would not expect a target, but there must a working assumption. I am not thinking necessarily about direct payments but about those who are going to find it difficult to deal with monthly payments, which is one of my main concerns. Perhaps the Minister can write to me, because the Government must have some view about whether this is a very small group, a larger group or whatever.

[Lord Freud]

We are not defining this by saying that they are vulnerable people; we are asking how many touch points of support people have. The four groups that have a large number of touch points are people who are homeless or who have mental health problems, addiction problems or learning difficulties. They are the groups about whom I have particular concern about making sure there is support for them. The noble Baroness will have her own figures on how big those groups are. We are working to get them refined. I will be able to provide more information on this as we work our way through. We are doing an enormous amount of work in this area, as noble Lords can see from the piloting we are doing and from how we have built up this network with the local support services. This is an area of great activity.

The noble Lord, Lord Bach, made an impassioned speech. Clearly, legal aid will still be available for appeals to the upper tier on a point of law. In our view, the first tier does not require legal representation because it is not adversarial. We are hoping that one of the things that mandatory reconsideration will do is mean that many applicants do not need to proceed to appeal. We are actively working on getting the right advice services locally.

These reforms are necessary and will not lose sight of the overarching policy drivers, but clearly we will go on listening and learning. I hope that noble Lords leave this debate thinking that the department’s decision-making and appeals structure is robust, fit for purpose and ready for the introduction of UC and PIP.

Motion agreed.

Social Security (Payments on Account of Benefit) Regulations 2013

Lord Freud Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Lord Freud]

That the draft regulations laid before the House on 10 December 2012 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee.

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

My Lords, I can confirm that, in my view, the statutory instrument is compatible with the European Convention on Human Rights.

These regulations support the powers introduced by Section 101(1) of the Welfare Reform Act 2012 to make payments on account of benefit. Two new types of payment on account are introduced by these regulations. First, short-term advances of benefit for universal credit and legacy benefit claimants will replace interim payments and social fund crisis loan alignment payments from 1 April 2013 for legacy benefits and 29 April for universal credit. Secondly, budgeting advances will replace Social Fund budgeting loans for eligible universal credit claimants from 29 April 2013. Short-term advances will provide an advance of benefit against a new claim or a change of circumstances which significantly increases the amount of the benefit award. Budgeting advances will help finance intermittent or unforeseen expenses, such as essential household items or expenses related to maternity or obtaining or retaining employment. These are advances of a claimant’s benefit. They are not additional money provided through a budget-capped scheme as is the case with the existing Social Fund.

I turn to some of the reasons for these changes. The existing Social Fund has been part of the benefit system since 1988. The fund was designed to help people meet exceptional costs that were difficult to budget for out of mainstream benefits. However, it has not kept pace with wider welfare reform which has led to complex administration. Parts of the scheme are poorly targeted and open to misuse. In future, claimants will have access to financial support through advances of benefit and local provision.

Social Fund reform, of which the introduction of short-term and budgeting advances are a key part, was partly in response to various comments and criticisms of the current Social Fund, including from the National Audit Office, the Public Accounts Committee, the Commons Work and Pensions Select Committee, the Social Fund commissioner, and customer representative and other stakeholder groups. As noble Lords know, crisis loans and community care grants are being abolished from April 2013 as part of the reform of the Social Fund. I know that there has been some interest in the progress being made by local authorities and the devolved Administrations in putting their new arrangements in place.

We know from the detailed work being carried out at a local level by Jobcentre Plus that English local authorities are at various stages of readiness. At this point in time we are not aware of any that will not be providing some form of local welfare provision from 1 April. The Scottish and Welsh Governments are both delivering their own national models from 1 April.

Returning to advances of benefit, our core aim remains to provide essential support targeted at people on the lowest incomes, whether in low-paid work or out of work, to manage the demands on their budgets that cannot be addressed through their regular benefit payments. Financial capability plays an important role in helping people to enter the world of work and in enabling self-sufficiency in budgeting and financial management. The Government want people to be able to manage their affairs in a manner that best reflects the demands of modern life, whether in or out of work.

Universal credit will provide a range of financial support to help people achieve financial independence and rely less on government to manage their money. Improving financial responsibility will allow households increased access to affordable credit, will reduce reliance on borrowing from government and will encourage households to take advantage of cheaper tariffs for essential costs such as utility bills.

We recognise that some claimants will need support at the start of their claim when they are waiting for their first payment of benefit, or during their claim when they have a one-off expense for which they have been unable to budget. The new system of advances of benefit will be much simpler to understand and to administer. We will ensure that those in financial need have access to support when they need it.

I want to draw a couple of aspects of the regulations to the attention of the House. For short-term advances, claimants have to be in financial need in order to receive an advance. Regulation 7 defines this as a serious risk of damage to the health or safety of the claimant or a member of their family. This is a high bar to pass but rightly so considering that these advances are paid using public funds. However, it is not a new test within the benefits system. This has been the test in Social Fund crisis loans for the past 25 years or so, so it is one that our staff are used to operating.

Claimants cannot receive a second budgeting advance if they have an existing one which has not yet been fully recovered. This means that they can have only one budgeting advance at a time. This is set out in Regulation 14. I know that this is one element of the new arrangements that has caused some concern.

--- Later in debate ---

[Baroness Sherlock]

My Lords, I thank the Minister for introducing these regulations and explaining how they would work; and my noble friend Lady Lister for her characteristically incisive questions. For this one moment only, I am glad that I am standing here and not sitting in the Minister’s seat. As has been explained, these regulations come in two parts. I will first look briefly at the payments on account. The Minister has explained the circumstances in which these will operate and my noble friend Lady Lister has already tried to tease out the reason why the Government have gone for this strict test of being available only to those in financial need. It is even slightly stricter than that. They will be available only for those in financial need as a result of having applied for a benefit, but not yet received a payment, when it seems likely that they will do; or when an award of benefit has been made, but the date on which it would be paid has not yet been reached.

That last one is likely to be of particular interest to millions of people who will find themselves being moved from weekly or fortnightly to monthly payments. Recent research commissioned by DWP, Work and the Welfare System: a survey of benefits and tax credits recipients, by Tu and Ginnis in 2012, found that 42% of potential universal credit claimants said they would find it harder to budget with monthly payments; 80% of these said that they were likely to run out of money before the end of the month. As I understand it, they will not all be entitled to budgeting advances, only those who find themselves in this stiff test of financial need, as a result of the circumstances I have described.

I would be grateful if the Minister would explain what he understands as being a “serious risk”. Would running out of food or cooking facilities constitute that, as my noble friend Lady Lister mentioned? Food banks already see significant numbers of people turning up because their benefit payments have been delayed. I suggest that this is likely to become much more significant in future with the move to monthly payments. Even if the test is the same as now, will the Minister concede that there may be a different set of needs resulting from a change in the circumstances because all these people are moving into monthly payments? Has he considered that aspect of it?

Regulations 11 to 15 cover budgeting advances. My noble friend Lady Lister has gone through the reduction in the maximum amount available, so I do not need to revisit that but I will be interested to hear the Minister’s answer. I would be interested, though, in the following information, if the Minister can provide it. His department has inquired about what has been happening with regard to the replacement for the Social Fund in different parts of the country. How many of those schemes will offer cash to claimants? What has his department found out about that? That will be important since they will replace a system whereby claimants can access cash at the moment. What research has the department done to establish the alternatives to which claimants are likely to turn? Since many claimants will not be able to access mainstream credit, it must be feared that they will turn at best to expensive legal credit, home credit or retailer financing, or at worst to illegal loan sharks.

I would be grateful if the Minister could explain again why he thinks it is important that claimants should be able to have only one loan at a time, even when it is a very small loan. A family may have borrowed £150 to buy a bed for a child but then a disaster strikes: for example, their washing machine breaks down, there is a flood or the bicycle which the mum is going to use to get to a job interview is stolen. They then need a significantly larger loan. What is the rationale for their not being allowed to take out more than one loan even if the total of the loans is well below the ceiling?

Will the Minister address the interaction between the new low ceiling, the fact that the adviser will be required to establish that the claimant can afford to repay the loan and the fact that the maximum period over which it can be borrowed has been reduced from two years to one year? Therefore, somebody taking out the maximum loan will have to contend with a tighter borrowing period and will have to prove that he or she can afford to repay it. Is there not a danger that that will make it even harder to get the loan in the first place?

These regulations may seem minor and technical but we will see millions of people face changes in their payment patterns because the decisions the Government have taken—in the face of widespread dismay and advice to the contrary—to move to a single payment, including amounts for rent, children as well as work, and to pay it monthly in arrears, are likely to be the cause of significant difficulty for a great many claimants. The least they deserve is a generous, open, accessible system of payments on account to ease the regulations’ passage.

[Lord Freud]

My Lords, again, lots of punchy points have been made. I think that the noble Baroness, Lady Lister, is under a misunderstanding—this rarely happens—as regards the serious risk test. This is applied only to short-term advances. It does not apply to the budgeting advances. I reassure her that not having access to heating would clearly be considered a risk to health. The budgeting advances are exactly the same as for the current budgeting loans in terms of the maximum. The current budgeting loan is lower than the available maximums because that counts for the whole of the Social Fund debt—the £1,500 figure—which includes budgeting loans and crisis loans. Because the Social Fund will no longer exist and we are sending elements of it to the regions and the devolved areas, we are not comparing like with like. The actual maximums as regards the like-for-like components have not changed.

As regards mental health issues, the test is whether the claimant or a member of their family would face a serious risk to health or safety. Clearly, savings are a factor, as are other sources of income, but health, including mental health issues, will be considered.

The context here is to widen the source of funding for families, which is why we are looking to deliver a further £38 million investment into the credit union movement, thereby aiming to make sure that it becomes a viable industry that is able to support families. I am looking forward to making more announcements about that in the not-to-distant future.

--- Later in debate ---

[Baroness Hollis of Heigham]

I am now completely baffled by the approach that the department is taking. On the one hand, the money-lending teams, which are obviously doing well, are seeking to exterminate illegal loan sharks and so on, but they exist because there is a demand for cheap credit, otherwise they would not be in business at all. We obviously respect what the Minister is trying to do with credit unions, which are an appropriate alternative—if, of course, you have first saved—but given that he has now agreed that the maximum figure for single people is £348, £464 for couples and £812 for families with children, why not use those figures as the maximum cap that people can borrow against for their payments on account, rather than be confined to one loan? Thereby, if you have taken out £70 or £120, you cannot take any more until you have paid that back. If you are going to have those caps, regard them as the caps against which money can be borrowed on several occasions and you will therefore teach people how to manage credit as well as income. I suggest that that would be much more appropriate, given the Minister’s other objectives, which we entirely share.

[Lord Freud]

This is a fascinating area because, following the growth of the micro-loan industry particularly in Bangladesh, where it started—it has spread all around the world—the lessons on helping people to learn how to budget are very much along the lines of giving someone a loan which they pay back before they get the next loan. There is therefore a real learning process. In our approach, we are picking up this global phenomenon, whereby we will provide credit—in practice, free credit behind which there is a discipline—which has to be repaid before the next loan is available. It is very much the same thinking as that which we see globally.

[Baroness Lister of Burtersett]

If people know they can get only that amount, they will borrow more than they need at that point, knowing that that is it, whereas, as both of my noble friends are suggesting, you could have £100 here and £100 there, as you need it. I suggest that it would be good to look at this again.

[Baroness Hollis of Heigham]

I would artificially inflate my bid, knowing what you are doing to me. That would be a very foolish way to encourage me to learn how to manage credit.

[Lord Freud]

I can see that I am in the presence of experts—in an observatory context—on how people manipulate any system at all. I shall take away your thoughts, as always, about the fact that some gamesmanship may be going on.

It is getting very late so I shall wrap up. When you look at local authority provision, there are clearly opportunities. It is for each local authority to consider its own local circumstances. We are in the process of getting information about the details of those schemes, which will perhaps provide goods or services and some will provide cash. Then we shall be able to report back at the appropriate time when we have some more information.

I hope I have dealt with the questions. Clearly there will be teething problems, as there is with anything new, but we will monitor this very closely as part of our evaluation programme, and that will cover the introduction of universal credit. In addition, the intention is to review specifically universal credit advances and budgeting advances in 2017. Short-term advances for those on legacy benefits will also be monitored and evaluated. I commend the regulations to the House.

Motion agreed.

Social Security (Loss of Benefit) (Amendment) Regulations 2013

Lord Freud Excerpts

Wednesday 13th February 2013 Lords Chamber

Moved by

[Lord Freud]

That the draft regulations laid before the House on 8 January be approved.

Relevant document: 15th Report from the Joint Committee on Statutory Instruments.

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

My Lords, I can confirm that, in my view, this statutory instrument is compatible with the European Convention on Human Rights.

These regulations support the changes introduced by the Welfare Reform Act 2012 which allow for the toughening and strengthening of loss of benefit penalties for those who commit benefit fraud. These regulations also deal with how these penalties will apply in universal credit. The reason why we are bringing forward these regulations is straightforward. From the research that we have carried out, 41% of claimants think that benefit fraud is easy to get away with, while one-third think that the penalties are not that bad. We need to change the perception that it is okay to steal from the state. It is stealing from taxpayers; it is stealing from fellow citizens; and it is stealing from other benefit claimants.

We accept that the vast majority of people are honest in their dealings with the department. But for those who are not, we need to try to change their behaviour so that they think twice before doing it again. The consequences of their actions must therefore include losing their benefit for a period of time. The more serious or repeated fraudsters should face the harshest treatment. Such behaviour should not be tolerated when you consider that £1.2 billion is lost each year as a result of fraud against the benefit system. It is clear that we have a need to address this undesirable behaviour. This measure is therefore just one of the many we announced in the wider fraud and error strategy. Introducing these changes will help reinforce the message to fraudsters that their actions will not be tolerated and that it is never clever to defraud the benefits system. It will act as a forceful deterrent and encourage a positive change in future behaviour. The regulations before us—the details of which I will now explain—support that aim.

We debated earlier the details of the regulations which cover universal credit sanctions and hardship provisions. I will not dwell on those provisions because they are largely replicated in these regulations. I am sure that noble Lords will recognise that there is a similar need to provide for the appropriate reduction in payments of universal credit during a period of fraudulent loss of benefit. The regulations mean that universal credit claimants, subject to a loss of benefit for a fraud offence, will be paid a reduced rate of universal credit for the penalty period rather than having their universal credit completely withdrawn. This follows the current approach that modifies the effect of the loss-of-benefit penalties imposed on those who are receiving means-tested benefits.

We have set out how we will penalise and treat universal credit claimants who have acted fraudulently while ensuring protection for those claimants who are pregnant, not subject to work-related requirements, or who are responsible for a young child. Those offenders subject to the highest rate of reduction will have their payment reduced by an amount equivalent to the universal credit standard allowance. Where they are in a couple, the reduction will be equivalent to an amount of half of the standard allowance applicable for a couple. In all other cases, it will be reduced by an amount equivalent to 40% of the standard allowance, or 20% of a couple’s claim. This will help ensure that payments for housing costs, for example, are protected.

The regulations also provide for hardship payments of universal credit to be made in appropriate cases. They prescribe the amounts of such payments and the requirements for information that must be fulfilled before they are paid. They also provide for the repayment of hardship payments in certain circumstances. This is in line with existing provisions for other benefits, which we discussed earlier. No one will escape facing a penalty, but safeguards are in place to take into account a person’s conditionality group when the penalty is imposed.

We have also made changes to the loss-of-benefit penalty to be applied to income-related employment and support allowance claimants. In future, such payments may be reduced by 100%. However, this tougher approach will not apply to all employment and support allowance claimants. For example, those who are pregnant, seriously ill, or who are not subject to work-related requirements will retain their payments, but at a reduced amount, depending on their circumstances. Hardship payments will also be available in appropriate cases. These provisions will ensure a similar and consistent approach for universal credit and employment and support allowance claimants in relation to the reductions and hardship arrangements of those benefits that are to be applied where there is either a loss-of-benefit penalty or a conditionality sanction.

The 2012 Act also introduced a provision for a new, immediate three-year loss-of-benefit penalty to apply where a person is convicted of a “relevant offence”—in general, an offence of serious, organised or identity benefit fraud. I think that noble Lords will agree that those who deliberately defraud the taxpayer of benefit payments should face the toughest loss-of-benefit penalties. If someone commits a “relevant offence”, this warrants the application of an immediate three-year loss of benefit.

One relevant offence is specified in the 2012 Act: the common-law offence of conspiracy. That captures the seriousness of the type of offence we intend to be subject to this penalty. However, other offences may be committed in connection with benefit fraud that do not involve serious, organised or identity fraud. We want only benefit offences involving serious, organised or identity fraud to be subject to the three-year loss-of-benefit penalty.

The 2012 Act allows for regulations to set out the other offences that may also be considered “relevant” and therefore justify an immediate three-year loss-of-benefit penalty. The way this will work is that the offences listed in the regulations will be considered “relevant” only when they meet other criteria set out in the 2012 Act. This is because the listed offences are used to prosecute a range of offending.

The three-year loss of benefit penalty will apply in relation to the offences listed in the regulations only where there has been an overpayment of £50,000 or more, where the person receives a prison sentence, including suspended sentences, of one year or more, or where the benefit fraud has occurred over a period of at least two years. These offences are often premeditated, such as where they involve the manufacture of false claims through the creation of false identity or identities, or by the engagement of two or more people to commit benefit fraud on a large scale. We make no apology for getting tough here. There are also some minor technical changes to the existing provisions to specify the appropriate start date of the loss of benefit disqualification period to fit periodicity payment arrangements for some benefits and to update references to certain legislation.

In conclusion, we need to penalise wrongdoing, continue to tackle fraud in the benefit system and seriously deter repeated or serious benefit fraud. These regulations were referred to the independent Social Security Advisory Committee on 7 November 2012, which cleared them without any formal referral. Local authorities have also been kept abreast of the changes. These changes create a necessary, stronger penalties regime. I therefore commend the regulations to the House.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his introduction to these regulations. As has been stated, they are narrowly focused and address particularly the issues of fraud. We share with the Government a strong intolerance of those who, through fraud, deliberately set out to cheat the benefit system. However, the three-year sanction—loss of benefit for three years—driven by non-compliance with conditionality requirements is a serious matter and demands careful scrutiny.

It is understood that these regulations are focused just on situations regarding fraud. The wider issue of sanctions and hardship provisions will be the subject of continuing debate. When we challenged the higher-level sanctions applicable to universal credit, we were told that they should apply only to a handful of individuals. Perhaps the Minister can give us some indication of the likely numbers of individuals expected to be subject to the three-year loss of benefit penalty provided for in these regulations.

The debate on these regulations in the other place covered a number of issues, which I do not propose to range over again in detail this evening. We are better informed about the offence of uttering. We know that these provisions will apply also, as does the sanctions regime, to those in receipt of universal credit who are in work. As the Explanatory Note makes clear, these regulations deal with a new three-year loss of benefit on a first offence following a benefit fraud conviction. The conviction must relate to a serious case of organised or identity-related fraud. The Minister has set out the criteria for that loss of benefit to apply.

We understand why, for universal credit, the measure of any sanction will be related to the standard component and that amounts, for example, for children and housing will continue to be paid, together with any hardship payment. The concern is that when these situations arise, the whole household, including children, will suffer, not only the individual who has committed the fraud. Amounts allocated for children and housing, for example, could be used in whole or in part for daily living expenses, with the increased risk of rent arrears and homelessness. It seems to us that there is an argument that, where there are joint claimants, there should be a presumption that in these circumstances payment should automatically flow to the main carer.

The Minister has touched on the availability of hardship payments and we have already spent some time on those this evening. I do not now propose to raise any further questions on them.

As we are probably at the end of our proceedings, I ought just to take the opportunity to thank the Minister for his display of stamina at the Dispatch Box today and for his determination to do whatever he can to answer the whole array of questions that have been directed at him, which he has done probably with minimal follow-up required in correspondence, so we thank him for that. There are obviously many issues around universal credit, which will run and run, and I am sure that we will revisit them on many occasions over the upcoming months and possibly years. But I think that we should conclude by thanking him for what he has done today.

[Lord Freud]

My Lords, I am particularly grateful that this has been quite a short debate. I appreciate the words of the noble Lord, Lord McKenzie. I do think that the debates we have on these matters are of an extraordinarily high quality. One of the reasons for that is that my department makes an effort to get information out to noble Lords so that these quite complicated matters can be understood and we do not waste a lot of time on points that are just misunderstood. However, I am deeply impressed by the number of people who have expended so much intellectual energy on gaining an understanding of what is in effect a rebuild of our social affairs. I appreciate that very much. As I say, I have taken a lot of ideas from noble Lords and I hope to be able to go on doing so. I therefore thank all noble Lords who have taken part in these debates.

I have one bit of information and one idea to steal from the noble Lord. We think that with the immediate three-year penalty for serious fraud, we estimate that there will be something in the order of 400 cases a year by 2020. The idea I want to take from the noble Lord is one that I do not think we have at the moment. It concerns the redirection of the payment away from the fraudster. That is actually a smart idea in these cases, and perhaps we shall claim it.

[Baroness Hollis of Heigham]

My Lords, this issue arose on the very first debate of the day. Will the noble Lord apply it where all sanctions occur, thus ensuring that there is an assumption that there will be a switch of payment to the main carer?

[Lord Freud]

The noble Baroness always takes a finger and seizes the rest of the arm. I have said that I will look at the idea.

It is clear that we do not have an effective deterrent at the moment. The view from the survey shows that people do not think that there is much to worry about from being caught out. We hope that the new regime will actually make people stop and think before committing a fraud. That is its intention, and I welcome the cross-party support for that. I therefore commend these regulations to the House.

Motion agreed.

Welfare: Personal Independence Payment

Lord Freud Excerpts

Thursday 24th January 2013 Lords Chamber

[Lord Alton of Liverpool]

To ask Her Majesty’s Government what assessment they have made of the effect of the proposed introduction of the Personal Independence Payment on the mobility of sick and disabled people; and of the omission of the words “reliably, safely, repeatedly and in a timely manner” from the text of the Regulations setting out the qualifying criteria for the payment.

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

My Lords, the mobility component of the personal independence payment is designed to support those disabled people who face the greatest barriers to mobility. The principle that individuals must be able to complete activities safely, reliably, repeatedly and in a timely manner is integral to the assessment. We do not believe that this needs to be dealt with in regulations. However, we are looking urgently at whether it is possible to do this in a way that will achieve the outcomes that noble Lords and the Government want.

[Lord Alton of Liverpool]

My Lords, I thank the Minister for that reply. Does he accept that, with one-third of disabled people living in poverty and an estimated 42% fewer being eligible for mobility support—many fearing that they will become prisoners in their own homes—his admission that under the new regime some disabled people will have their specially adapted vehicles taken away from them or offered to them to buy has caused widespread disbelief and considerable distress? Will he say how many repatriations will be involved and at least ensure that those four words he has referred to—“reliably”, “safely”, “repeatedly” and “timely”—remain in the regulations, as almost every single disability rights organisation in the country have urged him and the Government to do?

[Lord Freud]

My Lords, I recognise the strength of feeling around retaining those words, and we are very actively looking at how to put them into the regulations in a way that works legally. I am planning to update Peers next week, on 31 January, on exactly where we have got to. We are looking to incorporate them in regulations and have a device for doing it in that way.

[Baroness Thomas of Winchester]

My Lords, I am encouraged by my noble friend’s words. I am not an expert in anything much at all in this House but I am an expert in not being able to walk very well. I have form in this area because I have been through the DWP tribunal system, so this is one area that I know something about. Does my noble friend accept that if these words are not made statutory in some way or another, the number of appeals will rocket so much, and there will be such a period of uncertainty in so many ways for so many people, that it is not worth not putting in these words?

[Lord Freud]

My noble friend is, as always, much too modest about all her other capabilities. We are looking at this very actively and have clocked that there is great concern. It is not—and was not—our intention for people to be concerned about this particular area, and I hope that I will have a definitive approach to present to Peers in a week’s time, in plenty of time for the debate on the regulations, which will happen on 13 February.

[Lord Touhig]

My Lords, the Minister is on record as saying that not every PIP claimant will require a face-to-face assessment. In the case of autism, will the Government ensure that evidence is collected from professionals who know an autistic person well, before a decision is taken on whether a face-to-face assessment is needed? When one is considered necessary, can he confirm that the assessors will be fully trained to understand the communication difficulties associated with autism?

[Lord Freud]

My Lords, autism is, as the noble Lord points out, a really difficult area for people. It is difficult to understand and see sometimes, but we have a comprehensive training set-up for ATOS and Capita, which will be conducting the assessment. Clearly, each of those people will need to be approved by the DWP. Autism is among a group of quite difficult things to assess, and I personally take his point about its importance. The Government take his point and we will make sure that, when we give the approvals for that, it is one of the issues that is dealt with absolutely properly.

[Baroness Grey-Thompson]

My Lords, I am very disappointed that this issue did not come to the Floor of the House for proper debate. At the very least, the change to 20 metres should have been clearly stated in the consultation documents. The lack of consultation with disabled people and all supporting evidence from experts in disability access as to what distance enables practical mobility and participation mean that there is a real risk that this issue will be open to judicial review. Is the Minister willing to take that risk?

[Lord Freud]

My Lords, the change was made because there was great concern among disability organisations about the previous draft. The concern was that only people in wheelchairs would qualify for the higher rate—that was picked up by Parkinson’s UK, the Multiple Sclerosis Society, the Disability Benefits Consortium and the National AIDS Trust, among others. That is why the change was made. I admit that I would have preferred there to have been more consultation on the 20 metres, but there is no effective change in the number of people receiving higher-rate mobility allowance because of this change. I hope that noble Lords will accept my assurances on this. That change has made it clearer and simpler to operate this measure; it has not changed the numbers affected. Before we start reassessing people in 2015, we will have had a full independent review which will have gone through this issue, among others, by the end of 2014.

[Baroness Uddin]

My Lords—

[Lord Sterling of Plaistow]

My Lords, I declare my interest as chairman of Motability, which I co-founded in 1977 with the late Lord Goodman. Today, we have more than 620,000 vehicles on the road, which is probably the largest fleet of its type in the world. I fully support the principle that the welfare state should help those most in need, and government are actively implementing that principle, but we must appreciate that uncertainty about the effect of these changes will cause considerable worry and stress for many disabled people and their families. As my noble friend the Minister is more than aware, and as has been spoken about today, there is concern among disabled people at the recent change from 50 metres to 20 metres as the distance specified in the regulations for higher-rate mobility allowance. As the timetable for PIP implementation has been extended, will the Minister consider providing further information on, and rationale for, this change—through seminars, for example—thereby maintaining the trust and confidence in PIP being developed?

[Lord Freud]

My Lords, I have to accept that there was inadequate discussion of the changes and that there is inadequate understanding of them—just the concerns that I am hearing today underline that. I shall pick up the suggestion of my noble friend about further communication with the relevant parties and look at how best to do that.

Taxation: Families

Lord Freud Excerpts

Thursday 17th January 2013 Lords Chamber

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

My Lords, this has been an interesting and important debate, and I am grateful to all those who have contributed. The noble Baroness, Lady Sherlock, referred to the quality of the debate; there was something interesting in all the speeches, which is not always the case. I therefore thank the noble Baroness, Lady Hollis, for securing the debate.

I shall set some context for the debate before I try to deal with as many of the points raised as possible. The arguments for our programme of tax and welfare reform are well rehearsed. We have heard much discussion in the media, in Parliament and elsewhere on the welfare and tax policies that the Government have planned. However, I think that it is worth me touching on the rationale for our programme of reform.

We have already made significant progress in tackling the fiscal challenge that we faced when we came into office. We inherited the largest deficit in more than 60 years and, since then, welfare spending has risen from 11% of GDP in 2007-08 to more than 13% today, including pensions and working-age payments. In a constrained fiscal climate, this puts real pressure on key public services and is unsustainable. The deficit has now been reduced by a quarter, and we have created more than 1.2 million private sector jobs. Even if we play around with the small anomaly of those who are on skills training, there has been a huge increase in private sector jobs.

The noble Baroness, Lady Hollis, raised a question about cumulative impacts, and I was fascinated by her sums on this. However, I need to point out that this Government publish impacts of benefit and tax changes alongside each Budget and Autumn Statement. That is something that previous Governments did not do.

[Baroness Hollis of Heigham]

Is the Minister acknowledging that the Government have not published a cumulative analysis of the cuts, benefits and tax changes since 2010? If he is so doing, which I think is what he has said, it is still done slice by slice. Can we hope that he will do so—will he give a commitment to do so in future?

[Lord Freud]

My Lords, it is bluntly impossible to do a total cumulative assessment. I have looked at doing it, and you do not know what to put in and what to leave out. No one has done it in the past; it is not possible. Doing it year by year, as we do, is the best we can do—and it gives a fair view of what happens in a particular year.

I shall continue. While we are taking action to reduce the deficit, we have continued to support families by cutting tax for more than 24 million working people, lifting 2 million of the lowest-paid workers out of income tax altogether. Further freezes in council tax this year will help families with the cost of living by keeping the cost of council tax bills down. Here I pick up the point made by the noble Baroness, Lady Pitkeathley, about localising council tax support. That is being done because it is at the local level where the need for particular support is best understood, and we have announced additional funding of £100 million to support that process. More widely, we are investing heavily in low-income families by supporting the most disadvantaged through every stage of their education.

On the question raised by my noble friend Lady Jenkin, the right reverend Prelate the Bishop of Exeter, and my noble friend Lord Bates, the Government remain committed to recognising marriage in the tax and benefits system. That is as far as I can go today. On the point raised by the right reverend Prelate on child benefit, it will be completely removed only from families that include someone earning over £60,000, and 90% of families will continue to receive child benefit.

It is clear that decisive action is needed to control the damaged and hugely expensive welfare system that we inherited. Labour increased spending on benefits and tax credits by £75 billion and, in real terms, expenditure on all working-age benefits increased from £59 billion in 1997-98 to almost £95 billion in 2010-11, in today’s money. These increases are simply unsustainable. In tax credits, spending increased by £23 billion in real terms between the same two dates, which meant that nine out of 10 families with children became eligible for tax credits—a point made by my noble friend Lady Jenkin. In some cases, families could receive more than £70,000 in earnings and still be entitled. It is clear that, given this level of generosity, we could not protect child benefit and tax credits from the need to make welfare savings.

The Government have not shied away from acknowledging that tough decisions are needed, and we are committed to ensuring that savings measures are taken in the fairest possible way. That is why the 10% richest households will contribute most as a result of the tax and benefit changes that we are making. My noble friend Lord German inquired about that. Overall, as a result of recent changes, we may have reduced the marginal rate from 50% to 45%, but everyone in this House will be familiar with the impact of the Laffer curve. What really counts is how much total tax is taken from the richest; a quarter of all income tax is paid by the top 1% of earners, and the top 5% pay about £50,000. In practice, our changes mean that, overall, the richest will pay £1,000 a year each more in tax, not less, as has been claimed.

It is reasonable to expect the richest to pay their fair share, and it was equally important that we took action to ensure that people on benefits did not receive support that far outweighed the income received by many families who do not rely on benefits to get by. We have, for example, done away with the frighteningly high rates of housing benefit in the private rented sector, and from April this year we are applying an overall benefit cap so that households on out-of-work benefits no longer receive more in welfare payments than the average weekly wage for working households.

The year 2013 is pivotal for welfare reform. The introduction of universal credit and the personal independence payment in April will kick off the most fundamental reforms of working-age benefits for generations. I am pleased to tell my noble friend Lord German that we aim, still on time, to start universal credit on 29 April as a pilot, moving to a national basis in October. The universal credit system creates a seamless system of support to make work pay. People will be able to keep more of their income as they move into work, and it delivers a smoother and more transparent scheme that does away with the administrative difficulties created by switching between benefits and tax credits.

The noble Baroness, Lady Donaghy, made a particular point on universal credit and the self-employed. She made a point about the carry-forward, and I can tell her that I am aiming to introduce something for that to work efficiently; that will be in time for when the people who need it will be using it, so I hope that I can reassure her on that important point.

In the Autumn Statement, the Chancellor announced measures to tackle the rise in spending on benefits and tax credits by increasing the majority of working-age benefits by 1% for the next three years. The savings in that Statement amount to £2.8 billion in 2015-16. We are aiming here to strike the right balance between the support we provide and the need to tackle the spiralling cost of the welfare bill. Picking up the point made by the noble Lord, Lord Alton, on disabled people, we are protecting those elements of ESA support, the disability elements of tax credits and the main disability benefits—DLA, carer’s allowance, attendance allowance and incapacity benefit. While I am discussing the points made by the noble Lord, Lord Alton, about disability—picking up his query on PIP—I suspect we will have a chance to talk about that more next week. There is not a difference: the 50 metre to 20 metre change does not create any substantial difference in entitlement. I will be able to go into that in some more detail.

Although the Government are committed to supporting working families, it would be unrealistic to exclude that group entirely from our savings measures. Although some families will be affected by the tax credit and child benefit changes, we need to put this into context: working households will gain by an average of £125 in 2013-14. Households will, on average, gain—no matter where they sit in the income distribution.

A lot has been made of the suggestion that 81% of the £1 billion or so raised by the tax and benefit changes will come from women. However, the analysis underpinning the 81% figure misrepresents the true impact of welfare reforms on women. It assumes that because the payment of child benefit is to women, its restriction hits women; but the reality is that in many cases it goes into households. The real figure, if you do that analysis, moves from the 80% or so figure to the 60% or so figure. The Government continue to support women and their families through their tax; 80% of households with children will see their tax credits increase. The across-the-board freeze in council tax bills will help families with the cost of living.

Picking up the point made by the noble Baroness, Lady Pitkeathley, on PIP for carers, I remind her that we are committed to linking carers to receipt of either rate of the daily living component of PIP. That is the underlying reason why the impact assessment published in May 2012 showed that broadly the same number would be entitled to the carer’s allowance. Of course, continuing on her theme, where a carer lives in the same household as someone who is disabled, the benefit cap will not apply anyway, because that is one of the exclusions.

On childcare, we are spending an additional £200 million on universal credit and the focus of that is on families who work fewer than 16 hours a week. This investment will mean that 100,000 more families will be helped as they move into work. The Childcare Commission has been considering the cost of childcare in England and we expect its report to be published soon, so there will be further developments on that.

Turning to child poverty, by the relative income measure, the previous Government may have made some progress in moving children from out-of-work households out of poverty, but the effect on children from in-work families was considerably less. As my noble friend Lord Bates pointed out, work is the best route out of poverty. However, only 13% of the reduction in child poverty between 1998 and 2010, came from this fundamental route of families moving into work. That is where universal credit is so important: our estimates are that up to 300,000 more people will enter work as a result of the introduction of universal credit through improved financial incentives alone; 75% of the gainers from universal credit are in the bottom 40% of the income distribution.

Universal credit will make it easier for people to understand the level of benefit to which they are entitled—compared to the current complex system of benefits and tax credits—and significantly improve the take-up of unclaimed entitlements. That is a powerful tool in tackling poverty, because in 2009 it was estimated that 400,000 of the people living in relative income poverty were doing so because their families were not receiving all the benefits to which they were entitled.

I need to point out the importance of our White Paper on pensions, published earlier this week. The reforms will give a boost to the people who lost out on the additional state pension in the past, such as low earners and self-employed people. About 750,000 women who reach state pension age in the first 10 years after the single-tier pension is introduced will receive an average of £9 a week more in state pension because of the single-tier valuation. In response to the noble Baroness, Lady Hollis, this Government are committed to protecting pensioners—much though she may resent it. We have legislated to restore the link to earnings for the basic state pension, and are committed to the triple lock.

On the point raised by the noble Baroness, Lady Sherlock, about relative beneficiaries, the people in the middle have been squeezed quite savagely in recent years overall. I refer her to the interesting article in the Financial Times suggesting that those brackets were back at the levels of 2002-03, whereas the bottom 30% had increased their income in real terms by 3% or 4%.

Our fundamental welfare reforms will transform the welfare system by 2017. The replacement of many of the current suite of income-related benefits and tax credits with our flagship reform—universal credit—will provide a streamlined and transparent scheme that will mean that 3 million families will be better off, on average, by about £168 a month. In April this year, the largest ever increase to personal allowances will benefit 24 million people and lift 1.1 million people out of income tax altogether. Our tax measures, coupled with a modern benefit system, will demonstrate that supporting families remains an absolute priority for this Government.

Welfare Benefits: Women

Lord Freud Excerpts

Thursday 10th January 2013 Lords Chamber

[Baroness Royall of Blaisdon]

To ask Her Majesty’s Government what assessment they have made of the differential impact on women of changes to welfare benefits.

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

My Lords, the Government are supporting women and families, for example by changing childcare support through universal credit and by lifting 2 million of the lowest-paid workers, six out of 10 of whom are women, out of income tax altogether.

[Baroness Royall of Blaisdon]

My Lords, I am grateful for that Answer. The noble Lord says that the Government are supporting women and their families; however the House of Commons Library analysis suggests that 81% of the £1.065 billion raised from the new direct tax credit and benefit changes will come from women. When the Government decided to make these changes, were they really aware of the specific impact on women? If they were not aware of this, it is a disgrace. If they were aware of this, it is an even greater disgrace.

[Lord Freud]

My Lords, the impact on women of the uprating changes, in a Bill that will come to this House shortly, is greater; 33% of women are affected, against only 29% of men. The redistribution under universal credit switches slightly and, in proportion, households with women do slightly better in numbers than households with men—40% of households with women are gainers, compared with 39% of households with men.

[Lord Forsyth of Drumlean]

My Lords, can my noble friend explain how it can be fair that, because of the changes in child benefit, in households with three children where only one partner is working and has a student loan, if their salary goes up from £50,000 to £60,000, they will face an effective marginal tax of 75%? In contrast, households with incomes of £100,000, where both partners are working, will face a marginal tax of 45%. How is that consistent with a fairer tax system?

[Lord Freud]

My Lords, the reason for the reduction in child benefit for those on higher incomes is so that it could be implemented in this way. As my noble friend will know, it has been adjusted to provide a taper at £50,000 to £60,000 to smooth that transition.

[Baroness Hollis of Heigham]

My Lords, the noble Lord’s right honourable friends in the other place, the Chancellor of the Exchequer and the Secretary of State for Work and Pensions, are waging war on so-called shirkers, in part by cutting their benefits. However, as my noble friend has said, two-thirds of those benefit cuts are falling on women. If you take into account changes in pensions, pay and taxes, more than 80% of the cuts are falling on women who are bringing up children, caring for the elderly and holding down a part-time job at minimum wage. Does the Minister agree with his right honourable friends that apparently the face of a shirker is now that of a mother, a carer and a woman?

[Lord Freud]

My Lords, as regards the reduction, or potentially below-inflation increase, in benefits, a lot is happening in the economy in relative terms. Today’s article in the Financial Times is one of the best analyses of that that I have seen. I am sure that others have seen that article, which shows how squeezed people are in the middle and upper-middle tiers of income distribution. They have fallen right back to the level of earnings in 2002-03, while real incomes in the bottom 30% were 3% to 4% higher than they were. That is the context in which we are looking at the adjustments to the benefit levels.

[Lord Winston]

My Lords, is the Minister aware that the average woman of child-bearing age loses about two eggs per hour, unlike the Minister who is making 50,000 sperm per hour? The consequence is that women’s fertility falls rapidly. Does he want to see equality of women in the workplace by trying to support them rather better during their child-bearing years?

[Lord Freud]

My Lords, I will not go into the detailed figures that the noble Lord mentioned. There is very substantial support for women of child-bearing age as, over the past decade, statutory maternity pay and maternity allowance have moved up from being payable for 18 weeks to being payable for 39 weeks. That is the context in which that support should be looked at.

Credit Unions

Lord Freud Excerpts

Thursday 13th December 2012 Lords Chamber

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

My Lords, I must start by thanking the noble Lord, Lord Kennedy of Southwark, for securing what has been a really important debate and for his excellent work in supporting the sector, given his position as the vice-chair of the All-Party Parliamentary Group on Credit Unions. We have had a lot of very thoughtful contributions today, which I know he will have been pleased to hear. Before I touch on some of those, I must also particularly thank the noble Lord, Lord Griffiths, not only for his contribution today but also for his work on the steering committee responsible for the production of our feasibility study, alongside Deanna Oppenheimer, the chair of that team, and Paul Ruddle.

Credit unions play an important part in their local communities by helping low-income consumers, and they can support our aims to tackle problem debt and increase financial inclusion. Today has been an opportunity to reflect on the advances that credit unions have made and what needs to be done in order to provide a wider, more innovative range of financial services to many more consumers. There are 400 credit unions in Great Britain, with £776 million saved in them and more than £602 million currently out on loan. We have 25 credit unions offering current accounts, and some offering mortgages and insurance products. As a number of noble Lords have pointed out, membership of the movement has grown to just over 1 million—and that includes 123,000-odd junior savers. But as the noble Lord, Lord Kennedy, pointed out, that is still only 2% of the adult GB population, compared with credit union coverage of 75% in Ireland and 44% in the USA, so there is room for expansion, to say the least.

We have an estimated 7 million people impacted by what is called the poverty premium, which means that they pay much more for credit and goods than other people. Very often their options are limited to home credit, rent-to-buy shops, payday lenders and illegal loan sharks, which leads all too easily to over-indebtedness. A typical home-collected credit loan charges 272% APR, on a £400 loan over 52 weeks. This works out as a total repayment of £728, whereas a similar loan from a credit union would cost £457, a saving of about £270.

For many years, credit unions have been working in partnership with national and local government, commercial organisations and the voluntary sector to improve the financial health of individuals and families. Many MPs and Lords, as we have heard today, have taken—and continue to take—an active role in supporting their local credit unions.

One of the most interesting common themes running through many of today’s speeches from the noble Lord, Lord Kennedy, my noble friends Lord Griffiths, Lord Stoneham of Droxford and Lord Cormack, and the right reverend Prelate the Bishop of Durham, was the role of banks in supporting the credit union movement. I ought to make the point that banks are in fact supportive. Many see a role for themselves and, indeed, Deanna Oppenheimer supported our feasibility study out of her role on the retail side of Barclays. We should not just ignore their support, but it is clearly an interesting suggestion from noble Lords about whether one should look to the banks for further and deeper levels of support, both in terms of funding but also, and possibly even more importantly for an industry that needs to grow and mature, in the form of the expertise that can be found in the banking sector.

The DWP provided funds of £113 million to more than 150 credit unions between 2006 and 2012. This money was used to support low-income consumers to access necessary and affordable loans, offering a real alternative to the higher cost lenders. On top of that investment, we implemented the legislative reform order in January 2012, which allowed credit unions to reach out to new groups, provide services to community groups, businesses and social enterprises, and offer interest on savings. That helps the credit unions to grow, but clearly much more needs to be done. That is why, following the publication of the feasibility study findings in May, we looked at how credit unions could provide financial services for up to 1 million more consumers on lower incomes—in other words, doubling their footprint—in a way that would allow the movement to modernise, expand and, most importantly, become sustainable and financially viable. My noble friend Lord Griffiths made the important point that we need this industry to become viable. Those proposals reflected a mood for change that is evident throughout the sector and is shared by many interested stakeholders. The study told us that a new approach is required and that reducing costs, modernising, expanding and reorganising must all be part of the equation for the sector to become viable.

In June we announced that we would proceed with the project and make up to £38 million available over the next three years to credit unions that embrace change and modernisation. More than 60% of consumers contacted by the feasibility study wanted the type of local, trusted service that credit unions provide. We have asked for bids against the funding and are currently in the evaluation phase of the project. I will make a further announcement on this in February next year. I hope that that is soon enough. Some noble Lords have criticised the Government for moving too slowly on this. I hope that that date is soon enough to show that we are pushing ahead with this. However, I emphasise that the project will go ahead only if it is subject to tight project management discipline to maximise the chance of success and minimise the risk of financial failure.

Alongside those proposals, the study also proposed that the Government consider an increase to the credit union APR cap, which is currently set at 2% per calendar month, as that would allow credit unions to make small loans to more low-income people at a competitive rate. The study contained compelling evidence which indicated that the average unit price to deliver a loan was £108 and that making a £400 loan over 12 months would earn only £57 in interest—barely half the amount that it cost. While on the surface it does not seem fair to increase interest rates on loans, particularly for people on low incomes, we must move to a position where credit unions can cover their costs on these smaller loans, or get near to doing so, as these smaller loans are costly in terms of administration and staff time. The 3% charge on a £400 credit union loan would increase from £57 to £82. That is a much lower rate than that payable through the other options facing people who want this kind of loan. The increase will result in people paying about 50p per week extra for that typical average loan in return for access to a service that the feasibility study tells us they need and want. However, I remind noble Lords that this is a permissive change. Credit unions will continue to be free to charge lower rates. Clearly, they will want to do that on larger loans where you do not need to cover the administrative costs or you spread them more effectively.

The Economic Secretary to the Treasury, Sajid Javid, has announced that HMT plans to start the rate cap consultation next week, leading to any regulatory change by HMT and BIS being introduced in summer next year. This would allow credit unions to prepare and implement the change from April 2014. The consultation is seeking views on increasing the cap to 3%. Removing the cap entirely would have significant consequences for the movement. The cap is important because it exempts credit unions from consumer credit regulation on the basis that they are not-for-profit, ethical, lending institutions that can be trusted to treat borrowers fairly. Removing this exemption would place a costly burden on credit unions and consumers alike. If the proposal to increase the APR cap to 3% is accepted, the Government will look to ensure that the Consumer Credit Act exemption also remains in place. We are encouraging people to submit their views to the consultation.

I earlier suggested that credit unions must provide a wider, more innovative range of financial services. We hear daily about the growth in payday lenders. Clearly, for some people payday lenders provide a solution which works and is convenient, but they must not be seen as a solution to financial difficulty or a form of credit that is suitable for long-term borrowing. The APR is a very blunt instrument because of the administrative cost involved. If, for example, I was generous enough to lend the noble Lord, Lord Kennedy, £50 and wanted it back next Thursday and suggested that he pay £5 for that service and give me back £55, which seems utterly reasonable to me, the APR rate on that would be 14,300%. Actually, because it is a leap year this year, it would be 14,500%. I give that figure to illustrate that you have to be very careful when using an APR which is designed for longer-term loans, where it tries to cover the administrative costs. It becomes ludicrous when you are covering very short-term loans for small amounts of money.

Despite that comparison, the Government have recently tabled an amendment to the Financial Services Bill because clearly we need to take action to protect vulnerable consumers from the worst practices of lenders. That amendment gives the Financial Conduct Authority a specific power to cap the total cost of credit if it considers that it is consistent with its objectives to do so. These powers will come into effect once the FCA takes over regulation of consumer credit in April 2014.

To pick up the point made by the noble Lord, Lord Elystan-Morgan, the current regulator, the Office of Fair Trading, uses the provisions of the Consumer Credit Act and other legislation to regulate the activities of lenders, including payday lenders. When that responsibility moves to the FCA, it will have additional powers and a range of tools to tackle consumer detriment.

Our plans for universal credit will help low-income households to develop greater responsibility for managing their household budgets and support their transition into work. There is a role for credit unions here and, indeed, a number of them are already working with their local housing associations to develop an account that helps with budgeting and ensures that rent is paid, to pick up the point made by my noble friend Lord Stoneham.

We know that most people on low incomes manage their money well, but around 1.3 million working-age adults still do not use a mainstream bank account. The combination of monthly payments, access to a mainstream bank account and the right level of support will make it easier for households to take advantage of, for instance, cheaper tariffs for essential costs such as utility bills. Increased financial responsibility will also allow households to improve their access to affordable credit.

On the point raised by the noble Lord, Lord Kennedy, on jam-jar accounts, we recognise that accounts with in-built budgeting facilities could support some claimants to manage their money and we are currently working with a range of financial providers, including credit unions, to explore the feasibility of offering these accounts to UC claimants. We expect to announce our detailed approach in that area in the new year. We also recognise that people will need some additional help and support from services provided at a local level and we are working with local authorities, housing associations, credit unions, Money Advice Trust, Citizens Advice and other groups as we work out our strategy.

On the point raised by the noble Baroness, Lady Armstrong, universal credit support will still be available to claimants through budgeting advances, which will help meet unexpected expenses such as household equipment or furniture purchases.

While the support of government is important, it is essential that credit unions attract the appropriate mix of savers and borrowers and working and non-working customers from a range of income levels to become sustainable. It is in that context that I welcome the All Party Parliamentary Group initiative with London Mutual Credit Union to recruit more members from Parliament into credit unions. I support that initiative and look forward to the project launch, which I understand will be in February next year. This picks up the point made by the noble Baroness, Lady McDonagh, about joining such institutions.

The point made by the noble Lord, Lord Collins, about a nationwide marketing campaign is a good one. I do not have a response today, but I will go and mull on that point because next year could be appropriate timing to look at something like that.

I know that in my own department officials are working to promote the benefits of becoming a member of a credit union and encouraging staff to join or to volunteer to help. In the end, the credit union movement and credit unions themselves must step up and show they have the ambition to change and to serve many more people. It will require real leadership from the sector and a real will to modernise. I am sure that, together, we can develop a sector that is sustainable, innovative, and continues to be central to the communities it serves.

Personal Independence Payment

Lord Freud Excerpts

Thursday 13th December 2012 Lords Chamber

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

My Lords, I will now repeat a Statement made earlier in the other place.

“The Government are committed to enabling disabled people to fulfil their potential and play a full role in society. Crucial to that is the reform of disability living allowance, a lifeline for many but which is simply not working in its current form.

In the past 10 years, the number of people claiming rose by more than a third, from around 2.4 million to 3.2 million and expenditure is now far in excess of initial estimated costs. This year the Department for Work and Pensions expects to spend more than £13 billion on DLA. As a percentage of GDP, we spend a fifth more than the EU average on disability benefits and we expect to spend more in real terms in 2015-16 than we did in 2009-10. Today we are publishing the Government’s consultation responses on the draft assessment criteria and on the detailed design of PIP. Alongside that, I will be laying in draft before Parliament the main PIP regulations, setting out the PIP entitlement conditions, assessment criteria and payment rates. We will also publish in draft what the transitional arrangements might look like. The main scheme regulations are subject to the affirmative procedure and I look forward to debating them in full early next year.

Personal independence payment will be easier to understand and administer, financially sustainable and more objective. Throughout the whole development, we have consulted widely with disabled people and we have used their views to inform policy design and implementation plans. As a result of hearing those views, we have made several key changes to the final assessment criteria. I would like to thank the individuals and organisations who contributed.

Starting with the rates, I am pleased to confirm that the rates for PIP will be set at the same rates as DLA. The daily living enhanced rate of PIP will be the same as the higher-rate care component of DLA, and the standard rate of the daily living component will be set at the middle-rate DLA care component. The mobility rates of PIP will be the same as the DLA rates. Furthermore, following the Autumn Statement, these disability benefits will be protected within our uprating measures. PIP, like DLA and carer’s allowance, will continue to be uprated by inflation.

The most important thing I want to announce today is that we have listened and acted on the huge amount of consultation we have had with disabled people and disability groups. We have made specific key changes as a result of our engagement. These are outlined in full in our consultation responses and include broadening our approach to aids and appliances, assessing ability to read and taking account of specialist orientation aids that help mobility; mirroring the linking rules for DLA, which will help to ensure continuity for people with fluctuating conditions; and new plans for contacting young people when they reach the age of 16, or their appointees, to help a smooth transition to PIP. All the changes we have made address the genuine concerns of disabled people and the organisations representing them. Overall, their effect is to make PIP more transparent, objective and fair.

We also listened carefully to concerns about the speed of reassessment. To that end, we will now undertake a significantly slower reassessment timetable to ensure we get this right. It will be phased in, starting with new claims only, in a controlled start area in the north-west and parts of the north-east of England from April 2013. We will then take new claims nationally from June 2013. From October 2013, we will start reassessing people whose DLA award is due to end, people who report a change in condition and young people who reach the age of 16. But now the peak period of reassessments will not start until October 2015. That means we can learn from the early introduction of PIP, testing our process and making sure the assessment is working correctly before we embark on higher volumes. We will then consider the findings of our first independent review, planned for 2014, and act on them. Importantly, unless people report a change in their condition, those with a lifetime or indefinite DLA award will not be reassessed until October 2015 at the earliest.

We can now publish caseload assumptions about the impact of PIP. Those figures clearly show that PIP will deliver its key objective of focusing support on those with the greatest needs. By October 2015, we estimate that we will have reassessed 560,000 claimants. Of those, 160,000 will get a reduced award and 170,000 will get no award. However, 230,000 will get the same support or more support. Under the new criteria, almost a quarter of PIP recipients will get both of the highest rates, worth £134.40 each week, compared with only 16% on DLA.

By reforming the system and ensuring that it is fit for the 21st century, we can use the money we spend on disabled people more efficiently and effectively to help those most in need”.

--- Later in debate ---

[Lord Freud]

My Lords, I thank the noble Lord, Lord McKenzie, for his speech and his—as ever—very thoughtful questions. I will do my best to deal with as many as I can.

I should preface this by saying that we are going to embark on a major exercise and I am determined that it will not be only when we debate the regulations that we will get the information across. There will also be some sessions for noble Lords where we will be able to go through issues with officials and start to look at the detail so that there is a real level of information for all those who are interested. I have made that commitment generally in respect of all the welfare changes we are making, because I acknowledge that there are a lot of them. They require a level of understanding and focus that cannot always be dealt with purely in this Chamber so we have to expand that process.

Picking up the point about the speed of reassessment, that was an issue that I was able to talk about last January, I think it was, when we were very focused on the right speed of introduction. As we introduce a number of very significant changes, we are determined to deliver them safely and steadily, looking carefully at their impacts. That is our approach as we get into the detailed implementation, as it is our approach here and on a lot of the other changes that we are making.

On the question of capacity in relation to Atos, we conducted an open competition in which we measured the capacity of the organisations to deliver on what is the reality on the ground—that was an objective assessment. It is a different process from the WCA, in particular in the delivery, where the bids were looking at delivering a more localised service using health partners.

We are maintaining the existing arrangements for passporting in relation to DWP benefits and we want to ensure that external passports such as concessionary travel and the blue badge scheme are maintained. Those arrangements in particular will be a matter for the other departments which manage the passported services.

It is very difficult to summarise some of the detail about the types of people who are covered by DLA but are not in PIP because we are moving from a non-objective test to an objective test where we can start to measure properly, coherently and systematically the people who really need the support. This test will make sure that the money we have for people who are disabled goes to those who need it most. The figures I have show that, up to 2015-16, we shall be spending more in real terms each year than in the 2009-10 base year.

There has been appropriate consultation across government in introducing PIP. The noble Lord, Lord McKenzie, will have seen the approach to the impact assessments in the Autumn Statement, which goes through segment by segment trying to look at all the impacts on a decile basis. I suspect that he will not be entirely satisfied with that but there is a lot of information in that particular piece of analysis. As the noble Lord will know, like DLA, PIP is payable to those who are both in and out of work. One of the unfortunate myths surrounding DLA among too many communities is that it is an out-of-work benefit, which it is not. It is reflective of need, and people get it either way. We will be signposting people to other available support such as Access to Work which, as noble Lords may remember, has been called “the DWP’s greatest secret”.

I hope I have covered most of the noble Lord’s key questions. However, to the extent that I have not, I will not offer to write on this occasion because I know that we will have ample opportunity to dig into some of these issues over the next couple of months.

[Baroness Turner of Camden]

My Lords, the noble Lord will no doubt remember that I have raised the issue of Remploy on a number of occasions in the past. My current information is that most of the people who were made redundant as the result of the closure of the Remploy factories remain unemployed now. So getting rid of them has not increased opportunities for them to become independent—quite the contrary. I am sure the Minister knows that the unions involved are still protesting about it and still believe that the closure of the Remploy factories has certainly not helped the disabled people who once worked there and had the opportunity to make some sort of living. There are also, of course, the people who supervised their work—looking after disabled people is a specialist kind of supervision which requires a bit more training perhaps than ordinary supervision—and they also have been made redundant.

I am glad to note that the Government are continuing with their consultation and paying some attention to the way in which the transition from DLA to PIP will take place. That is very important because I have received a number of letters from disabled people expressing a great deal of concern about the transition. Although it is very nice to talk about independence and so on, one of the first things one loses when one becomes at all disabled is a feeling of independence. I speak from some knowledge because I am partially, although not very, disabled myself. Things that you used to do for yourself you have to rely on other people to do for you. It is all very well if you can afford to pay someone else to assist you but that is not the case for very many people. I am fortunate enough in that I can pay for others to assist me, but if I were not able to and relied on DLA, I would be very concerned about whether my independence would continue to be looked after if I had to rely on a different kind of benefit. So it is going to be very important to look at the transition because, as far as I can see, people who are disabled are very worried about moving from one benefit to another.

I ask the Minister: is there an appropriate system of appeal? If people are assessed in a way that they feel is not correct and does not maintain their independence, it is very important that there is a system of appeal. My understanding is that, in the current situation where there are appeals, roughly 40% have been successful. This indicates that the people doing the assessing have not been very skilled in their assessment. It is, therefore, necessary to have an appeal system.

[Lord Freud]

On the noble Baroness’s key question, clearly there will be an appeals system, as there is for the WCA. The reason behind the 40% success rate for those who go to appeal—and that figure is roughly right—is usually that there is new information, either oral or written, which was not originally available. On that basis, I do not think it is fair to say that the original WCA and Atos were at fault. Clearly that is not an appropriate charge if one is looking at a different set of information. The real question is whether all the relevant information can be made available at an early stage. We are looking to make sure that there is not additional information which would mean a claimant going to appeal, as that is expensive. The question is whether we can ascertain that earlier in order to truncate the process.

[Baroness Thomas of Winchester]

My Lords, I am very grateful to the noble Lord and his department for listening so extensively to arguments about the needs of disabled people. I am particularly pleased to find that there is a broadening of the definition of people who need to use aids and appliances. At one stage, it looked as though people who used aids and appliances would be thought to be okay and that they would not need any extra resources. Perhaps I may ask a question following on from the one posed by the noble Baroness, Lady Turner, rather than continuing with the Minister’s theme. It concerns the treatment of medical reports. I am rather shocked to find that only a very small proportion of medical reports seem to be read, particularly at the first stage. Will the medical report of every claimant be sought and read by assessors; or will it still be the case that only a proportion of them are read; or will it be left to a decision-maker in the DWP to read them? I am particularly pleased that these regulations are not set in stone yet. Am I right in saying that they are still in draft?

[Lord Freud]

My Lords, on my noble friend’s question about the medical reports, my understanding is that all information which is relevant is brought to the assessments, and that indeed people—supporters or family—can be brought forward to make the case and provide evidence. Again, I am not sure about the extent to which the fine detail of this issue is yet locked down. We are going through the details, and indeed on Monday we can start to discuss some of the fine points. The regulations have been laid in draft to be looked at by the various committees—the Secondary Legislation Scrutiny Committee and so on—and I think that that is the stage of the process that we are at. The noble Baroness is looking puzzled. If I am wrong on that, I shall make sure that that is corrected.

[Lord Sutherland of Houndwood]

My Lords, I welcome the Statement. There are a number of good things in it. However, I should like to ask for reassurance on a specific point. Can the Minister reassure us, either now or certainly at the stage at which regulations are introduced, about the extent to which these changes and their impact will be monitored—for example, in relation to the employability of disabled people, in relation to whether there is a rise in demand for additional residential or homecare support, and in relation to whether there is consistency of assessment between the two different assessing bodies? There are a number of points here on which many of us would be much reassured if monitoring arrangements were in place. No Government can get all of this right. We will be bombarded with statistics from around the whole country, and it would be useful to know that central and independent monitoring was taking place.

[Lord Freud]

My Lords, we are planning to have a real look at this in the autumn of 2014, once the system is up and running. I am sure that we have not yet fine-tuned the exact nature of what we will be testing for, but consistency of application will clearly be one thing. We generally watch that quite closely but that is likely to be one of the issues, and the impacts will be another area which it is likely that that 2014 process will cover.

[The Lord Bishop of Exeter]

My Lords, I go back to the question of objective testing. I speak as the father of a 33 year-old Down’s syndrome daughter, who is in supported accommodation and in receipt of DLA. She has recently had her benefits cut to the point where they barely cover her housing and food costs. Were it not for the financial support that she receives from us, her parents, she would not be able to access the integrated drama group, visit the gym or go swimming—the very things that give quality to her life. To what extent would the criteria for assessing PIP cover not just the hard needs that enable a person to survive but the soft needs that enable them to thrive? What assurance will we have that there will be real consistency across the country, rather than the huge variations between local authorities that exist at present?

[Lord Freud]

My Lords, clearly what we are talking about today is a centralised national process. There are social care provisions on the ground which local authorities are responsible for. PIP will be far more consistent and, indeed, objective than the current DLA, where the criteria for deciding who is entitled to DLA have become increasingly fuzzy. That is one of the problems associated with DLA. The money is designed to deal with the extra costs of being disabled, and those costs are incurred whether someone is in work or out of work—they are extra costs that need to be borne. However, the point of it being made as a payment, as opposed to a provision, is so that people can decide where best to apply those funds. As the right reverend Prelate said, some people will decide on the softer things, which for certain people are just as important as the harder requirements, but it is up to them to decide how to spend that money.

[Baroness Hollis of Heigham]

My Lords, I wish to make two brief comments. First, I have a question, which I am sure the noble Lord will be able to answer. Of the 170,000 people who are going to lose DLA when it moves to PIP, how many are on the current lower-level rate? Secondly, perhaps I may challenge the Minister to be wary of the assumption that DLA should be an objective test. It was never intended to be as such in 1992, when we introduced it, primarily because two people with the same objective disability may have very different competences in coping with that disability. It will depend on their resilience, their family support, their educational ability and their financial resources. Because DLA was person-centred and not a box-ticking exercise against some objective at their assessment, it was able to respond to that difference in competence, as well as to the depth of the disability. I very much hope that the Minister will not be led by a false myth into thinking that this can be reduced to an objective account of external health or mental health which is standardised across the country. It cannot be and, in my view, it should not be.

I support my noble friend very strongly in urging the department to come up with a layered assessment of how all of those benefit changes are interacting. I share briefly with the House a letter I received from a disabled middle-aged lady in an eastern region city who lives in a two-bedroom bungalow. She has rented a nearby garage so that she can charge up her mobility scooter. She is now faced with a housing benefit cut and losing one of her bedrooms of her bungalow, but as she says, there is no one-bedroom bungalow for her to go to. She has had a wet room installed under the disability facilities grant, so if she moves out within five years she would have to repay the grant. If she moves she has to repay the grant; if she stays she has a housing benefit cut. On top of that, she will almost certainly be forced to pay 20% for the first time on council tax, even though she is on benefit, and on top of that, some of her DLA support may also be questioned under PIP. What advice will the noble Lord give me to give to that lady?

[Lord Freud]

Yes, if I can deal with those in order. We do not have a breakdown of where people have moved from.

[Baroness Hollis of Heigham]

My Lords—

--- Later in debate ---

[Lord Freud]

I am told that we do not have that information. Clearly, we will be able to go through the figures, to the extent that we have them, when we meet on Monday. When I said that PIP was objective, I was not trying to imply that it was using the medical model. It is objective in the sense that it is looked at through specific competences. As the noble Baroness pointed out, people can respond very differently to different levels of disability. Taking the example raised by the noble Baroness, a substantial amount had been spent on adaptations—she referred to the wet room. We have a specific exemption for people with very heavily adapted homes for that reason. It would not make sense to sell, so it would not make sense to move. Clearly, I cannot comment on a particular case but one needs to look closely before one assumes the worst.

In making the different changes to our welfare system, we have set in train a thorough level of monitoring and assessment as we gradually bring these systems in. One of the reasons for our strategy of gradualism and monitoring is to understand what is happening on the ground and make appropriate changes if we find that we have to do so.

[Baroness Uddin]

I hesitate to rise because I missed part of the noble Lord’s Statement. I apologise for that but I have been spurred on by the right reverend Prelate and my noble friend Lady Hollis.

I refer to the way in which the noble Lord has approached this whole matter and the fact that the Statement was supposed to clarify the personal independence payment. I declare an interest as a mother of a child who is 33 and has autism, and I have some experience of speaking to other people. I say with respect that ordinarily and normally the Minister provides a great deal of clarity on such matters. However, today he has been less clear. If he is not able to put forward the case with clarity, how can he reassure the House and people with disabilities and their carers who are in a great deal of confusion, disarray and distress, as clearly laid out by a number of noble Lords this afternoon?

[Lord Freud]

My Lords, I made a very full Statement, which I hope was comprehensive. We have focused a lot on people with mental health and learning difficulties. Indeed, we divided communication activity in the new assessment criteria, so there is a new activity focused on reading and understanding signs, symbols and words. That reflects the importance we place on the non-physical side which is one of the areas on which PIP is far more satisfactory than DLA

[Baroness Sherlock]

I shall pick up where my noble friend Lady Hollis stopped. Will the Minister help us to understand the implication of the fact that some people will be better off and some worse off? We cannot understand whether those who will be worse off are those, for example, who are getting the severe disability premium at the moment on one benefit. It is hard to understand. We may simply be redistributing the large amounts of money currently given to people with very high needs by giving smaller amounts of money to those who have lower needs. A number of noble Lords were at a briefing this morning where a range of charities were raising questions with us. Has the Minister been able to reflect, for example, on what happens to those who currently receive severe disability premium—those on mid or high rate DLA who live alone and do not have a carer in receipt of carer’s allowance?

[Lord Freud]

We may have to pick that up and take it later as we are out of time. Within PIP there is a greater concentration towards the people with highest needs. I gave out percentages: I think it was 23% of people on both top rates, which is more than under DLA.