Welfare Reform Bill

Lord Freud Excerpts

Wednesday 14th December 2011 Lords Chamber

[Lord McKenzie of Luton]

My Lords, we should be grateful to the noble Baronesses, Lady Meacher and Lady Grey-Thompson, for introducing this important issue on which we have all received representations. Quite a lot of numbers have been bandied around with particular reference to benefits, and I will be interested in the Minister’s response. As I understand it, in the current system the severe disability premium is paid to people, whether in or out of work, who receive at least middle-rate care, live on their own and do not have a carer. It is payable only as a means-tested benefit so it supports those with a severe disability who have a low income and face many extra costs as a result of living alone.

Alongside that is the disability element of the working tax credit, so under the present system someone who is entitled to DLA or has recently been receiving a long-term sickness benefit would be entitled to the disability element of working tax credit if they worked for at least 16 hours a week. That is where we start from. As we have heard, though, the proposed support for adults in the universal credit depends upon the gateway of the WCA. This is what will drive the new arrangements. The briefing that we have had says that only those with a level of impairment sufficient to be found not fit for work will receive any extra help. I am not totally clear whether in that context “not fit for work” means someone who would only be going to the support group or someone who was going to the WRAG as well. I think the Minister is shaking his head, or rather he is nodding to say that only those in the support group would receive that.

That creates the difficulties that have been spoken about. The changes would mean that someone who could self-propel a wheelchair 50 metres or was registered blind but could undertake a journey unaccompanied could be found fit for work or, presumably, for work-related activity. Of course no one would want to claim that such individuals could not be encouraged to work if they wanted to, but that does not mean that they do not face considerable disadvantage and cost compared with someone with no impairment. So if they are out of work but found fit for work they face the same conditionality as everyone else, but if they are in work, because the gateway for extra support within the universal credit is the WCA, someone who is found fit for work will receive no extra support in work. The juxtaposition of the present and the future is concerning.

I am sure that the Minister will have seen the briefing that we have had. It says that the following are some of the ways in which different groups will be affected. Those who are terminally ill or who develop a severe level of impairment and live on their own could be disadvantaged to a significant degree—by something like £50 a week. Someone who is entitled to a middle rate of the care component but found fit for work—for example, someone who is severely visually impaired—will in many cases be found fit for work. However, if they are living on their own and doing some work, they are likely to have considerable extra costs that are not met by the DLA or by PIP when it comes along. Currently, most would be entitled to at least the middle rate of the DLA care component and therefore the SDP.

Under the current system, a severely visually impaired person in the work-related activity group and living on their own earning £100 a week will be left with a disposable income of £188 a week plus their DLA, after housing costs are paid. Under the universal credit, the same person will be left with a disposable income of less than £100 a week plus whatever PIP is payable after housing costs. There are plenty of other examples and we have heard some of them today from the noble Baronesses. These sorts of disparities are quite disturbing. The Minister might say that these are quite specific and narrow examples of the full spectrum of people who are affected by this, but a serious issue has been raised here and we need to understand fully how people are being protected in comparison with the current system under the new world of the universal credit.

[Lord Freud]

My Lords, this amendment seeks to put an additional element into the amount of universal credit that is payable for those who are severely disabled and who have no one receiving either carer’s allowance or a carer’s premium for looking after them. In essence it seeks to recreate the current severe disability premium within universal credit. As such it would involve a significant increase in cost compared with the Government’s plans. That increase stands at £400 million, unless there were other readjustments. However, let us just take it at face value. At face value, it is unaffordable.

On Monday the House approved the Government’s plans to simplify the disability-related additions. Instead of the seven different components within the current system of benefits and tax credits for adults, and two further rates in child tax credits for disabled children, universal credit will just have two rates for both adults and children. By restructuring the rates in this way, we are not looking to make any savings. We are redistributing around £800 million of current spend without returning any savings at all to the Exchequer. The full amount will be reinvested by increasing the higher rate for more severely disabled people. In our policy briefing note we made it clear that there would be some phasing. I know that I owe the noble Lord, Lord McKenzie, a letter on that matter.

Once resources became fully available, we expected to be able to provide a higher rate, at around £77 a week. This is significantly higher than the current £32.35 payable as the support component within ESA: £44.65, to give the noble Baroness, Lady Meacher, the exact figure she was seeking. It will provide a much more meaningful amount to severely disabled people than the current patchwork of premiums, which gives some people more than others and makes it difficult for people to understand and obtain their full entitlement. I should make it clear that one of the features of the universal credit as a whole is that we are expecting a substantial amount of the gains to the poorer people to come from much better take-up. The simplicity of a system with automatic provision of everything that people are entitled to will mean that more people in this category are likely to be recipients and get what they deserve.

[Baroness Meacher]

It would be helpful if the Minister could explain whether there is any provision in the new system for child carers, where the mother might not be in the support group. You have to be very disabled, as I understand it, to be in the support group. Yet a mother might need her child to do an awful lot in the home: shopping and cooking and all the rest of it. Is there any provision for her?

[Lord Freud]

My Lords, I will come to that. What we are dealing with here is rather interesting, as we move from one system to the universal credit. We are dealing with the current system as it exists on paper, we are dealing with where we want to go in the universal credit, and then we are dealing with something in the middle, which is how things actually work on the ground. This is one of the areas in which things are working on the ground as they are not really meant to. It is simply not the role of the severe disability premium to provide money for young carers. Clearly young carers could be affected if they are providing support for a disabled parent who receives the severe disability premium. Under the current system, the youngster gets it because there is no adult in the house looking after them and they are not allowed to receive the carer’s premium. It is one of those things that has unintentionally fallen through the cracks. It was simply not intended as a support for young carers; it was designed to support severely disabled people who live alone.

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[Lord McKenzie of Luton]

My Lords, I speak initially to Amendment 26. The amendment takes us into the as-yet uncharted waters of in-work conditionality—waters into which my noble friend Lady Drake has at least dipped her toe.

The Bill introduces for the first time the requirement on claimants who already have a job to take action to secure more paid or better paid work. We understand the need, within a system that has no clear distinction between in-work and out-of-work benefits, to have some mechanism to ensure that people do not simply reduce their hours of work to take advantage of the more generous support for lower-hours jobs that universal credit provides, but there are a host of unanswered questions about how in-work conditionality will work. The amendment is intended to ensure that Parliament has an opportunity to review the arrangements once they have come into force.

We debated these questions at some length in Committee, and the Minister's response was basically, “We are thinking about this”, with some indication that he would not be in a huge hurry to introduce this element of the Bill. The most fundamental of those questions is: what exactly is taken to be work in the context of universal credit? When will the state judge that someone is doing enough to be free of the requirement to report on their activity to the jobcentre? Although we have some indication that single people with no caring responsibility or health issues will be expected to work for 35 hours a week, and couples in the same situation for 70 hours, we have no idea what flexibility will be given to those whose circumstances mean that that is not reasonable.

For example, what will happen if one partner of a couple decides to reduce their hours—perhaps to look after children? The way that the incentives are structured within universal credit may encourage many second earners to do just that. Will they then face a jobcentre penalty for not engaging in sufficient work?

It is also unclear exactly how the in-work conditionality provisions will impact on the employment relationship. How will it impact on the likelihood of employers offering somebody a part-time job if they know that the jobcentre will be encouraging them to leave their job for one with longer hours? We know that, despite today's employment figures, some unemployment was avoided at the start of the recession due to employers reducing people's working hours rather than making redundancies. Would they have been penalised for reducing hours in that way under the Bill? The in-work conditionality proposals will bring many more people into the orbit of Jobcentre Plus at a time when the agency is being asked to make challenging efficiency savings. Can the Minister outline what estimate he has made of the additional resource that will be needed to deliver conditionality for in-work claimants and whether he expects to be able to secure that?

In Committee we discussed the position of the work programme providers under these provisions. The Minister assured us that the fact that work programme providers must get somebody into work for 16 hours and keep them there for two years was not in conflict with the aim of this part of the Bill to ensure that somebody leaves a 16-hour job and goes into one that either pays more or has more hours of work each week. A review of this provision after a year will enable us to see whether the Minister’s confidence is justified.

Finally, we have had no equality impact assessment on this proposal. A review would enable us to assess its impact on different groups. As the proposal intends to assess whether somebody is fulfilling their in-work conditionality requirements by looking at how much they are earning rather than how many hours they are working, for those who earn more these requirements will obviously be easier to meet. I hardly need remind noble Lords of the substantial pay penalties faced by women, by people with disabilities and by certain ethnic groups. We will need to look carefully at whether people within these groups are significantly disadvantaged by these proposals.

This amendment in effect accepts the assurances that the Minister gave us in Committee that these matters are under consideration and simply asks him to report back to Parliament on how the proposals are operating in practice. I am sure that he will want to accept it, if only in order to be able to demonstrate that, as we all hope, this policy is achieving its intended aim of supporting people to move on in work.

I move on briefly to the contributions of my two colleagues. As well as talking about the very important issue of the focus on children being the driver of these provisions, the noble Baroness, Lady Drake, referred again to kinship carers. The amendment that she spoke to seeks to add kinship carers, carefully defined, and limited to the first year in which they are caring for a child, to the existing list of exemptions. When we debated this issue in Committee, my noble friend Lady Hayter said that she was able to rip up her speech given the willingness of the Minister to recognise this issue, suggesting that he was looking to address it. My noble friend, who has provided me with the text this evening, says that she is perfectly happy to rip up another one if the Minister can let us know the results of his deliberations and what these have been.

I will not repeat the powerful case made by my noble friend Lady Drake. As she emphasised, kinship carers can play a vitally important role, offering children in extremely vulnerable situations some family continuity and, in doing so, saving the state the considerable costs of taking a child into care—some £40,000 a year in independent foster care. The Who Cares? Trust has highlighted the difficult experiences of many children cared for by their parents, estimating that one-quarter will have lived with abuse, neglect and violence and one in four will have been deserted by their parents, often after drug and alcohol abuse. Sixteen per cent go to their grandparents after family breakdown, one in 10 after a parent’s illness—often mental illness—and one in 10 after the death of a parent.

Although the existing conditionality arrangements provide some protection to those caring for young children, with no conditionality until the child is one, and then work-focused interviews until the child is five, many of the children who move to live with kinship carers will be older than five, as older children—indeed, those over 12 years old—make up a higher proportion of those in kinship care than in the wider population. Despite not being babies, for obvious reasons they need pretty much full-time attention and care. They will be new family members when they arrive, yet, not being adopted, will have no equivalent recognition. They also usually arrive after some sort of trauma and are therefore likely to take time to settle down. The amendment my noble friend spoke to simply seeks to provide for those who take on the care of a related child a year in which they will not be asked to look for work. This will give those considering taking on this huge task some certainty about their income and security during this first year and a chance to focus on their care for the child. A year’s exemption from looking for work would give them time to manage the upheaval in their lives before starting to juggle work and care.

Our concern, expressed by my noble friend, is that, without this amendment, the Bill risks undermining families’ capacity to care for children and increases the likelihood of those arrangements breaking down. Unlike with formal adoption, there is no adjustment period for family carers, despite the needs of the children. Furthermore, carers often have to give up work as a condition of a placement. We are aware that, as my noble friend said, the Minister is sympathetic to this case and we look forward to hearing his response.

Finally, I should like to refer briefly to the contribution of my noble friend Lady Turner of Camden in relation to Amendment 23. As she explained, this amendment seeks to ensure that evidence from a health professional will be accepted as good reason for failing to attend a work-focused interview—a requirement that will, under the Bill, be placed primarily on lone parents with children aged between one and three. We hope that this will be a simple amendment to accept, as my noble friend has explained. In Committee, the Minister told us:

“We will not sanction claimants with limited capability for work, or those who have learning difficulties or mental health conditions, without first making every effort to contact them, their carer or healthcare professional to ensure that they have fully understood the requirement placed on them and had no good reason for failing to meet it”.—[Official Report, 1/11/11; col. GC 417.]

We hope that the Minister will be able to extend this to include those who provide their adviser with evidence that they have a health-related reason for failing to comply with the work-related requirement.

This amendment also enables us briefly to revisit the question that arose in Committee about the relationship between Jobcentre Plus advisers, Atos assessors and the healthcare professionals who deal with a claimant. It also enables us to ask the Minister again to clarify exactly what information is available to Jobcentre Plus and work programme advisers, who have to decide on the type of requirements to which the claimant should be subject. Will they have access to information about a claimant’s health and capability for work that has been uncovered during the assessment phase for employment and support allowance?

We want this whole scheme to work to help those who can be helped but not to waste advisers’ time, nor to bring the system into disrepute by demanding inappropriate behaviours of claimants where evidence of their health needs exists within the system. Therefore, we hope that the Government will feel able to accept my noble friend’s amendment.

[Lord Freud]

My Lords, this group of amendments contains a number of measures that align with our intentions, so we are apparently in agreement. Indeed, many are in line with current practice and we intend to carry them forward into universal credit. I shall take each of them in turn.

With regard to Amendment 23, we recognise that there may be medical reasons that prevent a claimant attending a work-focused interview. We do not need expressly to legislate for this to be recognised. If a claimant gives advance notice that he will be unable to make an appointment and has good reason for this, the interview can be rearranged. If a claimant fails to attend an interview, he will have a reasonable period of time to explain why. As part of that explanation, the claimant will be able to provide any relevant information, including any medical evidence. If the claimant has a good reason, then obviously no sanction will be imposed. This is essentially what happens already and it will continue.

I turn to Amendment 23A in the name of the noble Baroness, Lady Drake. I appreciate the sentiment behind the amendment and agree that it is important to balance the requirements placed on claimants with any childcare responsibilities they may have. Therefore, legislation will provide clear safeguards, ensuring that no claimant who is responsible for a child under five can be made to look for or take a job, and no claimant with a child under 13 will be required to look for a job that does not fit with their child’s school hours, including a reasonable allowance for travel time.

Advisers will have flexibility to tailor the requirements placed on claimants—including allowing limitations to the work that claimants must search and be available for—to take account of their circumstances and the needs of any children for whom they are responsible. Where the child is over 13, advisers will continue to have discretion to permit the claimant to limit their availability if the child’s needs make it necessary. We do not intend to make blanket rules for this age group in legislation, as the children’s maturity and need for parental supervision will vary widely. Therefore, although we agree with the spirit behind the amendment, we do not think it necessary.

On Amendment 25, we are now making provisions in the jobseeker’s allowance on domestic violence. The regulations giving effect to this policy will be subject to affirmative debate early next year as parliamentary time allows. The changes will take effect soon afterwards. The draft jobseeker’s regulations will provide that where a claimant has left the abuser because of violence or the threat of domestic violence, they will be treated as complying. This will be automatic whenever the claimant provides evidence of violence or the threat of violence and may be extended through existing domestic emergency provisions to up to 17 weeks, or to 24 weeks for claimants with childcare responsibilities. The amendment would allow an exemption from work-related requirements only while the threat continues. Our proposal recognises that claimants may need unconditional support for a period after the actual threat has receded.

[Baroness Lister of Burtersett]

We are very pleased to hear that. Can the noble Lord tell us what definition of domestic violence the Government have in mind? They are consulting at present on the question of domestic violence and I wonder what the implications are for this provision.

[Lord Freud]

I am going to have to write with a precise definition of domestic violence and the threat of domestic violence.

Turning to Amendment 26, we are all too well aware that in-work conditionality is a difficult and contentious area. In this debate and in Committee noble Lords raised a number of concerns and questions. I think that I have been open enough to admit that I do not have all of the answers to those questions right now, but I hope that I can provide some real reassurance by describing our planned approach. We are going to take some time to get this right, because it is a new area. I said in Committee that there may be a role for piloting and I can now be much clearer on that.

We have decided that when universal credit is launched we will not be imposing conditionality on claimants with income or earnings which would, broadly speaking, have taken them over the cut-off point for the current out-of-work benefits. So we are effectively continuing with the current system. Rather than a review, our approach will be to pilot the application of conditionality on claimants whose income is above this level. We will want to gather views on the sort of approaches that could be tested and I commit to publishing the details of these pilots. We will then reflect on the results of that process before adopting any national approach.

Finally, turning to Amendment 24A, I have listened very carefully to the feelings of noble Lords on this and again let me say that we are of one mind on this matter. Work is already under way, as I said in Committee, around how kinship carers should be treated for conditionality purposes. I agree that kinship carers who need a period of adjustment should be given time to return to a stable footing before being expected to meet work-related requirements and juggle conditionality with new caring responsibilities. Advisers will have discretion to lift temporarily the requirements on individual claimants where a child’s needs are such that the claimant must be able to provide full-time care. I repeat what I said in Committee. I recognise the potential for value and clarity in a legislative exemption from conditionality and we are carefully considering options for further provisions. The Bill provides scope for flexibility in this area and we have powers to make regulations as necessary. These things take time, but I can assure noble Lords that work is progressing. I am on this case. We are currently talking to the Department for Education—

[Baroness Drake]

I shall not miss any opportunity on this because I know that this important community will hang on the Minister’s every word—and I say that in the warmest sense. The Minister said that advisers would have the discretion to lift the conditionality and, at the same time, he repeated the reference to the value and clarity of legislation. If I may push him, is he saying that guidance and discretion around guidance are not of themselves sufficient to address this community?

[Lord Freud]

I think what I am saying is that you can take away the discretionary elements of support for this community, and that is already in the bag. I would like to add more to that, and that is what I mean when I say that there is value in legislative exemption. Then I move on to say that I am working on it. I am seeing some noble Lords who are familiar with government having a good giggle because they know exactly what is happening and they giggle with reality.

The way I have to express this—again, some noble Lords will recognise this better than others—is that doing more for this group may come at a cost, and we are operating in difficult financial times. I repeat that I have a real interest in this area, and when I am able to give firm answers, I will do so. This is a matter with which we will deal in regulations rather than in primary legislation. On that basis I urge the noble Baroness not to press her amendment.

[Baroness Turner of Camden]

My Lords, I thank the Minister for his response to my amendment on the requirement to attend work-focused interviews and for his promises. As for domestic violence, I did not get around to speaking to my amendment mainly because it was grouped with a number of other amendments and was not called. However, I am very obliged to the Minister for what he said about domestic violence. I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

My Lords, like the noble Baroness, Lady Morgan, I think the fact that this amendment is necessary comes as a surprise. When we started discussions of the Bill, it seemed that the issue of whether recipients of debilitating cancer treatment in the form of oral chemotherapy should be automatically exempted from requirements to look for work was being dealt with in a sensible manner by discussions between the cancer charities, cancer specialists and the Government. It is extremely disappointing to find that these discussions appear to have broken down. Disappointing for us, but extremely worrying for the many cancer patients anxious about what support they will be able to claim and how they will qualify for it when their main focus is living through and coping with some pretty debilitating—as we have heard—albeit wonderful, lifesaving treatments. The Government’s response to the second Harrington review states that its new proposals to ask everyone experiencing cancer treatment to go through the work capability assessment process,

“would increase the number of individuals being treated for cancer going into the Support Group”.

It also states that:

“They would also reduce the number of face-to-face assessments for people being treated for cancer as most assessments could be done on a paper basis, based on evidence presented by a GP or treating healthcare professional”.

While we welcome the acceptance of medical evidence, this proposal still puts cancer patients undergoing treatment through the uncertainty and stress of not knowing whether they will qualify for essential financial support or whether they will be expected to prepare for work while undergoing their treatment. With the proposals to time limit employment and support allowance for those in the work-related activity group, these assessments take on an added importance, since for many people they will determine when the clock starts ticking to the point when they will lose this contributory support altogether.

We do not think that anybody should be written off because they have cancer. We certainly do not think that no one with cancer will ever be able to work again. A brief glance behind me in your Lordships’ House is great testimony. This is not, however, what automatic entry into the support group means. We know that those in the support group can volunteer for access to the work programme and the support there to help them get back into employment. We imagine that the vast majority of those who have overcome their cancer will want to do just that. But for the Government to suggest that those receiving chemotherapy need to be tested to see whether they are really ill enough to avoid a conditionality regime, which we will remind the House was intended to put pressure on people to return to work, suggests that the Government somehow view all cancer patients as potentially taking advantage of the state. We are sure that that is not the Minister’s view and therefore hope that he will be able to accept the amendment.

[Lord Freud]

My Lords, this is obviously a very sensitive issue, and I want to start by saying that we are determined that the benefit system should support in a sensitive, fair and appropriate way people who are diagnosed with cancer and coping with it. I shall try to go through the argumentation here in as simple a way as I can.

First, we know that cancer and cancer treatment affects individuals very differently. That was one thing that the Macmillan evidence demonstrated. It shows that some people can continue working straight through their treatment, are capable of doing so and want to do so. On that evidence, we believe that automatically putting everyone undergoing certain cancer treatments into the support group is not the right way forward. Clearly, there is the example that the noble Baroness raised, the one in the Sunday Times, of Jenni Murray, who had a bad reaction, and one can only sympathise with that. Everyone in this Chamber will have friends or relatives who have gone through this experience and had a bad reaction. It is always painful. We are all thinking exactly the same thing; we are all thinking of someone we know who has gone through hell on this process. But when you talk to the experts, you get examples of someone—let us take a man—who has had testicular cancer and has recovered well from curative surgery and is now being treated with radiotherapy without any significant side effects. On this ruling, he would be automatically placed in the support group. That is a kind of counter-example, which half of us should be so lucky to have.

[Baroness Morgan of Drefelin]

When we look at the Macmillan recommendations, we can see that they take into account that people respond in a range of ways. In the recommendations that the charity made to the Harrington review, they came up with a lot of detail, and I could read it all out. No—I will not read it all out, but I could.

The point that I want to make is that a consensus process was gone through at the request of a government review. We could all pick out little bits of that wide range of opinion that we do not want to promote, but that was not what the charity did. It published it all, which now allows the Government to pick bits out that suit the argument. But the overall conclusion by the experts and the consensus statement was that, for the majority of cancer patients going through specific cancer treatments—and it is not all chemotherapy; we are not talking about long-term oral chemotherapy here—it is more likely than not that they would experience debilitating effects.

[Lord Freud]

Let me go through the argument and I will pause just before I sit down to let the noble Baroness come back on the process. We asked Professor Harrington and Macmillan to review the current descriptors to provide evidence as to whether they could be improved, and we are committed to acting on the evidence that they put forward. The evidence provided by Macmillan showed clearly that there is no longer a basis for differentiating between certain types of cancer treatment in the way that current regulations do. The evidence showed that all types of chemotherapy, including oral chemotherapy and certain radiotherapy, can be debilitating but it also showed that there can be considerable individual variation in the impact of the treatment on each person, and that work can be very important for some individuals with cancer.

I think that there were 16 medical professionals—the oncologists—who were consulted in depth in this evidence. I shall quote just one as an example, who said,

“I am somewhat against the concept of including all chemotherapy”,

in the support group,

“as it will clearly be inappropriate for some patients, risks stigmatising these patients in the workplace and may delay useful reintroduction to the workplace”.

A number of the experts consulted by Macmillan, and indeed Macmillan itself, volunteered evidence of the importance of work to an individual’s rehabilitation and emotional well-being. Indeed, in a recent publication, Macmillan said:

“Many people who are working when they are diagnosed with cancer would prefer to remain in work, or return to their job, during or after treatment”.

From this evidence, it is clear that while many people will not be able to work, some can and do. For them, it is an important part of coping with their diagnosis and treatment.

We want the work capability assessment to effectively reflect this new evidence based on what Macmillan, supported by Professor Harrington, has found. How it would work is that each individual would be assessed on a paper basis. The evidence required might be a note from the claimant’s GP or consultant, and where a claimant is unable to provide information an Atos healthcare professional will contact their GP or consultant to gather the information and ensure that they are not unnecessarily sent on a face-to-face assessment.

We have had a request to look at this evidence more widely, so we are in the process of asking Macmillan whether we can make this document more widely available. At the moment, Macmillan is seeking permission to do that. I hope that that actual evidence becomes more widely available for consideration. We believe that our proposals meet the spirit and intent of Macmillan’s assessment. If that were to be the case and we were to go ahead with those proposals—if your Lordships will bear with me, I will describe the process before we were to go ahead—there would be an increase in the number of people in the support group. About 10 per cent would move from the WRAG group to the support group, while there would be a reduction in the number of face-to-face assessments that individuals suffering from cancer would undergo.

Let me provide another example of how this will better support people by citing a woman who is being treated via oral chemotherapy and who is profoundly fatigued due to the treatment. Her GP confirms her diagnosis and symptoms. Currently, she may be invited for a face-to-face assessment; under the new proposals, she could be placed in the support group on a paper basis.

We are disappointed that Macmillan seems to be unable to support these proposals, which we have based on the evidence that it spent so much energy in collecting, and because we had hoped to introduce the proposals in April 2012. However, since we do not seem to have Macmillan’s support at this particular moment, we will now seek a wider range of views through an informal consultation. As part of this we will seek the views of individuals affected by cancer, their families and carers, healthcare practitioners and cancer specialists, as well as representative groups and other lobby groups. We want to ensure that the benefits system treats individuals with cancer in the most sensitive way.

I recognise the points raised today. We want to get the balance right, which is why, as a result of the evidence presented by Macmillan, we will launch the consultation on these proposals this Friday. It will be informal; it will last 12 weeks, ending on 9 March, and it will follow the advice in the government Code of Practice on Consultation. We will be looking, as I said, for a wide range of evidence, and will consider all the issues, including automatic entitlement, as well as looking at previous experience of cancer assessment in the benefit system.

I hope that that will reassure noble Lords that there will be a proper process which will aim to come out with an answer which gets the general support of this particular community, and I hope that many of them would be a temporary part of that community. The noble Baroness is getting to her feet; I will hover.

[Baroness Morgan of Drefelin]

I think that the Companion says that the Minister is able to respond on Report, so it is very nice of him to hover, but he can have a rest.

Obviously the automatic entitlement is set out in regulations; I think the powers are in the 2007 Act. It would be really helpful to understand what this paper basis will look like. Will it be possible for us to see what those regulations might look like? I cannot remember whether they are affirmative or not. I guess they probably are, but if they are not, then maybe they should be.

[Lord Freud]

Rather than go into detail now I would like to wait for the proper consultation. The document is coming out in two days; it will lay out the issues, the proposals and the background, and there will be a full opportunity for us to gather all those views and pull them together. With that reassurance that there is a real process going on to get agreement and to take everyone’s views, I hope that the noble Baroness feels that she can withdraw her amendment.

[Baroness Morgan of Drefelin]

My Lords, it is very late and I have only a couple of thousand words to get through. More seriously, the Minister has given me quite a lot to think about. Obviously, as this is only the first time that we have had a proper discussion about this, I will have to look at Hansard very carefully, and think about whether I need to come back to it. However, I appreciate the time that the House has given to this issue at this late hour, and I beg leave to withdraw the amendment.

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[Baroness Turner of Camden]

My Lords, I would like to speak very briefly to Amendment 36, which is in this group. This relates, again, to sanctions, and is an attempt to amend Clause 46, talking about high-level sanctions, which says that it is a failure sanctionable under this section if a claimant,

“through misconduct loses employment as an employed earner”.

Not all allegations of misconduct are accurate; sometimes the employee may claim that he is being discriminated against, or perhaps that he has blown the whistle on some unsafe practice and has not been guilty of misconduct. He therefore attempts to institute proceedings to try to demonstrate that the dismissal is unfair.

In such circumstances it seems that it is in line with employment rights if the employee is not sanctioned under this provision, because he has disputed whether or not his dismissal was fair, and has instituted appropriate proceedings. It is quite a simple amendment, designed to protect people’s employment rights, and I hope that the Minister will be prepared to look favourably upon it.

[Lord Freud]

My Lords, I will also try to be as brief as possible. We had a very good discussion on this area in Committee, and I can make clarifications which have been informed by some of that discussion. One of those clarifications is that we will limit the sanction amount to three years, so we will not have it compounding above that level.

The second relates to the parable of the prodigal son. From the argument of the noble Lord, Lord McKenzie, there has got to be a way back into the system. We are trying to change behaviour: where someone has come back and got a job for six months at his job goal level, we will take away his sanctions at that point. I thank noble Lords for the very informed debate that we had.

[Baroness Hollis of Heigham]

Did the noble Lord say that if the person got a job, after six months in the job the sanctions would be removed?

[Lord Freud]

Yes.

[Baroness Hollis of Heigham]

I do not think that is good enough. That means that coming back in and searching for the job—in other words, conforming to the sanctioning conditions—is not enough. He also has to be successful, which will depend on the lottery of what jobs are available, and so on. I would have thought that providing he is conforming to the work conditionality regime in searching for a job, that ought to be enough. You should not be able to punish him just because he lives in Merthyr Tydfil and the jobs are not there, whereas in central London they may be.

[Lord Freud]

My Lords, we thought about this matter very deeply and thought that it was very hard to genuinely measure compliance if there was not a hard result. We decided that the hard result was taking a job and holding that job for six months, and then we would take away the sanctions. That is where we are. It is a lot better than where we were.

[Baroness Hollis of Heigham]

But if that means that he was previously on JSA and HB as part of his universal credit, and he has now gone into low-paid work, so is getting a wage, then presumably if the sanctions still apply he would fail to get the housing element going into his universal credit, and he would not have enough to live on.

[Lord Freud]

No, my Lords, the sanction regime does not work like that. It takes away the equivalent amount of the JSA, so you keep getting your housing credit, but have this amount taken off, which will be a proportion of the total universal credit.

[Baroness Lister of Burtersett]

I am sorry to interrupt the Minister, but is he saying that the department is unable to measure compliance with work-seeking requirements? If that is the case, surely the whole basis of the sanction regime falls apart?

[Lord Freud]

I think I can safely say that we are not saying that. We are just saying that we want real proof of a change. The prodigal son must do more than turn up and warm his hands on the fire as the fatted calf is slaughtered. I am saying that he has to take a job and hold it for a minimum of six months.

[Baroness Hollis of Heigham]

Could the noble Lord perhaps move from the Old Testament to the New Testament?

[Lord Freud]

I thought it was the New Testament. It is definitely a New Testament matter. I am shocked that the noble Baroness—

[Baroness Hollis of Heigham]

I was a Methodist.

[Lord Freud]

I am utterly shocked. Let me keep going; the hour is late and I am forgetting what I am talking about very quickly.

Turning to Amendment 28, we will impose reasonable requirements, taking into account the claimant’s particular circumstances, including any health condition or disability. Universal credit claimants with a health condition or disability that limits their capability for work will not be required to look for work. There are specific safeguards in this area. Decision-makers must consider any relevant matter raised by the claimant when considering whether there is good reason for a failure.

[Baroness Meacher]

That was the issue in Committee. Does it have to be raised by the claimant?

[Lord Freud]

When I say “by the claimant”, it can be done on behalf of the claimant by someone else. There is a clear duty on decision-makers to watch out for vulnerable people. The request I am making of the noble Baroness is this: if we begin to introduce specific legislative provisions around such matters of detail, we will end up with a whole mound—

[Baroness Meacher]

I thank the Minister for giving way. What I am looking for is an assurance that, in regulations, the Minister will guarantee that officials will ensure for themselves that this person could perfectly reasonably comply with conditions. That is all I am looking for—an assurance.

[Lord Freud]

Can I leave it like this, without giving a hard commitment right now, on my feet? When we get to the regulations on this, I will look very hard at exactly what the protection is. I cannot offer any more now but I am sure we will debate this in the months to come. My main point here is that overall duties, rather than lots of specific ones, are the way to go.

Let me turn now to Amendment 36, which proposes an exemption from the sanction for losing employment due to misconduct where the claimant disputes that the dismissal is fair and has instituted proceedings—in other words, is taking a case to an employment tribunal. First, I assure noble Lords that the decision-making process around sanctions for misconduct is rigorous and rounded. We are proposing nothing in this Bill that changes the current process. Decision-makers will take all relevant matters into account when determining whether a sanction should apply, including evidence about whether claimants have left employment through misconduct or been unfairly dismissed. If a tribunal finds that there has been no misconduct by the claimant, this will be very compelling evidence. Where a decision-maker decides that there has been no misconduct, a sanction will not be applied.

However, we do not consider that there can be a blanket rule which says that, where a claimant has instituted proceedings for unfair dismissal, sanctions cannot be applied in that case. One of the reasons for this is that we want to avoid creating a perverse incentive for claimants to make claims to employment tribunals, which would put a burden straight on to employers for no fundamental reason. Decision-makers must have the flexibility to look at each case on its facts and to assess the strength of the evidence. I trust noble Lords will agree that this flexible, case-by-case approach is the right one.

The final amendment, which the noble Lord touched on right at the beginning, and which seemed like a game of tiddlywinks between us, is on targets. He knows what I am going to say—his side likes targets, we do not like targets—so I will say it, as it just keeps the night going. We will continue to collect this information to support our work. We need to know how many sanctions are being imposed, but collecting information is not the same as using it to target. It helps us to assess the consistency of approach in this area and to monitor and evaluate the impact of those sanctions, so that is what we are collecting.

On the basis of that rather rapid, somewhat biblical, summary I would ask noble Lords to withdraw or not move these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply. I thought we were going to have a quicker canter through these issues, and we may wish to return to at least one of them at Third Reading. In relation to the mitigation issue, I am obviously grateful for the Minister’s consideration of that and recognition that there is an issue to address. However, like my noble friend, I am a bit dismayed that the route to dealing with it is the six months—

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, my noble friend Lady Donaghy has made a very strong case, and I look forward to the Minister's response. What she said warmed the cockles of my heart. She referred to generally accepted accounting principles—the true and fair view—and it took me back to another life, but she raises a real issue: rather than having artificial rules for assessing what people are deemed to earn, is it not better to try to capture the actual profits and to target resources on those who seek to abuse the position? That seems a very straightforward matter.

My noble friend raises once more, as she did in Committee, the matter of bogus self-employment. We all know that that is a continuing issue. I have always believed that it rests particularly with HMRC, together with BIS and other departments of government, to make progress on that. It is primarily HMRC that could begin to make a real difference. She wrote reports for the Government, as did the Minister, on the construction sector, and health and safety in particular. There is bogus self-employment in that sector, so she is an expert on that matter. We support the thrust of her amendment.

[Lord Freud]

My Lords, when we discussed a similar amendment to this in Grand Committee, I explained that we intend to retain the existing practice in the benefit system whereby claimants can be treated as having income or capital in cases of deliberate deprivation. However, we believe that different issues arise in relation to self-employment. We think that it is right in principle to apply a minimum income floor to claimants who choose to be self-employed but whose earnings do not make them financially self-sufficient. I confirmed in Committee that the floor will not be based on the hours claimants work. We assume that claimants’ earnings are at a level that we would expect from claimants with similar circumstances in employed work.

Claimants will not be forced to take reduced benefit payments by accepting the minimum income floor. Self-employed claimants will have the choice in universal credit. Some will choose to continue solely with their existing activity with the expectation of increasing their earnings. They will accept the minimum income floor. Those who do not will need to satisfy conditionality requirements. The conditionality regime will aim to guide the claimant towards the most appropriate form of gainful work. For some claimants, this would combine their self-employed activity with part-time employed work. In other situations, the regime may very well encourage the self-employed to keep going in their self-employed efforts. We will need to build a quite sophisticated regime to manage this.

This approach differs from tax credits, which allow claimants to receive maximum support so long as they declare that they are working a minimum number of hours. However, in 2009-10, for example, around 60,000 of the households claiming tax credits that received some or all of their earnings from self-employment declared earnings of under £2,500 a year—less than £50 a week. While this is legitimate under current rules, we believe that some intervention to guide claimants towards increasing their income is justified in return for state support.

[Baroness Hollis of Heigham]

Can the Minister explain what he expects here? The old enterprise allowance scheme, which was very effective, used to give people a top-up of £40 a week to start a business, and as far as I recall this ran for up to two years to give people a chance to establish a small business. How long will someone be allowed to have low earnings while they try to build up a business, and how quickly will guidance from young people in Jobcentre Plus, who frankly have never tried to start a business, steer them back into sanction and conditionality?

[Lord Freud]

I do not automatically think that we will use the example of young people in Jobcentre Plus to deal with some of the more complicated issues here. We acknowledge that the real issue is that we need to create an environment that encourages entrepreneurship. We need to balance the exact rules about the interrelationship between the new enterprise allowance and the time that we will allow. I do not have the exact figures yet, as we are still currently elaborating them. We are looking through all the details of employment earnings. Clearly, the HMRC is expert in this area and we are working closely with it to develop our proposals. I must say to the noble Lord who said that it was a straightforward matter that on that basis he can come and help us to do it.

We are aiming to get the reporting requirements aligned as closely as possible with the tax system. However, in our view, it is reasonable for claimants to provide clear information on their income in return for state support. We are looking at a number of rules within the current benefit and tax credit systems to see what the most appropriate approach is for universal credit. We will then prepare regulations that will set out clearly the way in which earnings from self-employment will be assessed. This House will have the opportunity to debate those regulations in due course, and I think that that will be a fascinating discussion.

In today’s debate we should focus on principles. We clearly need to avoid requirements that will add unnecessary burdens, especially for people who are starting out in business—the people whom we really want to encourage. However, we cannot have a situation where people can be treated as being in full-time work for conditionality purposes, but because they declare no earnings they receive as much benefit as though they were not working at all. That is taking it to the absolute extreme. I hope that this explains why the Government cannot support Amendment 32 and that the noble Baroness will feel able to withdraw it. I know that we will be discussing this area again.

[Baroness Donaghy]

I thank the Minister for that response, and I look forward to seeing the regulations. However, I still have a concern and refer again to my example of a farmer who cannot move his livestock and is therefore getting no income. He is having to work harder than ever but will not be able to get a part-time job.

[Lord Freud]

My Lords, I forgot to say something. There are two areas where we need to get really smart. One is the start-up period and the other is when a business hits a problem. The questions there are how long the process should be and what one allows. That is another area that we are actively looking at.

[Baroness Donaghy]

I am reassured by that. I certainly agree with the Minister that this is a very complex area and, as I said in moving the amendment, it involves a very varied set of problems. I look forward to seeing the regulations and beg leave to withdraw the amendment.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, the noble Baroness has brought an important point to our attention. I have only two questions for the Minister. Can he explain the extent to which the current rules are going to be translated and taken up in universal credit? The position at the moment is that the compensation recovery scheme does not apply to criminal injuries compensation. Can the Minister say whether that would continue under universal credit?

[Lord Freud]

My Lords, Amendments 32A and 34A seek to use primary legislation to exclude criminal injuries compensation from the capital test for universal credit. The existing benefit system does not have a specific disregard for criminal injuries compensation. However, such payments will usually fall under the rules governing personal injury payments where they relate to physical or psychological injuries suffered by the claimant. As indicated in the illustrative draft regulations on capital and income, shared with noble Lords in September, we intend to replicate these personal injury payment provisions in the universal credit regulations. I hope that that answers the question of the noble Lord, Lord McKenzie.

Personal injury payments are disregarded in the current benefit system for a period of 52 weeks from the date that they are paid. Even after that period, remaining capital will continue to be disregarded if it is placed in a trust, as the noble Baroness, Lady Hollins, indicated. This rule allows us to distinguish the personal injuries payment from other savings. If the payment is not separated by placing it into a trust, it becomes increasingly difficult to identify the source of the capital as time goes by. Ultimately, any capital test must consider the balance in a claimant’s account, and over time it becomes impossible to say whether it is from one source or another unless it is held in a different form. That is the reason for the way that this is structured.

The current arrangements are long-standing, and we are not aware of significant practical problems with their use. In any case, the details of capital disregards are a matter we will address in the universal credit regulations. If there are particular problems, we will have a further opportunity to consider them when drafting regulations, and I will bear in mind the points the noble Baroness has made.

In answer to the question asked by the noble Lord, Lord McKenzie, I agree that the compensation recovery scheme does not apply to criminal injuries compensation.

I hope I have made clear why the Government cannot support Amendments 32A and 34A. I hope the noble Baroness will withdraw her amendment.

[Baroness Hollins]

Given the lateness of the hour, I will withdraw my amendment. I will study very carefully what the Minister said to make sure that I understand it. I think what he is basically saying is that it should be possible to protect that capital for 52 weeks, and I understand the point, but it is a little bit more complicated than that. I beg leave to withdraw the amendment.

Disability Benefits

Lord Freud Excerpts

Monday 12th December 2011 Lords Chamber

[Baroness Sharples]

To ask Her Majesty’s Government what checks are carried out on those claiming benefits on the grounds of disability.

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

My Lords, as with all benefits, a series of measures is in place to ensure that disability benefits are paid only to those who are entitled. These vary for each benefit. Last month, Professor Harrington confirmed that there has been positive progress in improving the work capability assessment, which determines entitlement to employment and support allowance. The department continues to develop the assessment for personal independence payment in consultation with stakeholders and relevant experts.

[Baroness Sharples]

Now that Crimestoppers is involved, can we expect to see more claims dealt with quickly—which are false claims? Will the public be encouraged to approach Crimestoppers? I gather that their calls will be entirely anonymous.

[Lord Freud]

Yes, my Lords. I very much welcome the fact that we have made an arrangement with Crimestoppers. We already have the national benefit fraud hotline; but the good thing about Crimestoppers is that it is a very trusted brand, which carries anonymity to those who call it. That will be particularly useful when we look at organised fraud, an area about which I am particularly concerned.

[Lord Wigley]

My Lords, does the Minister accept that the campaign organised by parts of the tabloid press insinuating that disabled people drawing benefits are cheats and scroungers, is totally unacceptable; that the vast majority of disabled people dependent on benefits are absolutely straight and honest; that the level of fraud is relatively low; and that this campaign should stop?

[Lord Freud]

Well, my Lords, clearly we are very concerned by any misrepresentation in the tabloid press, which likes to simplify matters a great deal. We have a real issue in making sure that we have a very clear, coherent and consistent categorisation of who should receive these benefits, because one of the main policy thrusts of this Government is to make sure that the people who really need the money are the ones who get it.

[Lord Low of Dalston]

My Lords, is the Minister aware that the Benefit Integrity Project, introduced by the previous Government to weed out the misuse of disability benefits, found more people on DLA whose needs had risen than fallen, contributing to a rise in expenditure on benefits? Does he expect the introduction of personal independence payments to lead to a similar increase in expenditure, as well as a rise in the cost of administration?

[Lord Freud]

My Lords, there has been relatively little research on DLA and how accurately it is targeted. The last comprehensive survey was in 2005, and it was found that more than 11 per cent of cases were no longer applicable. That does not mean that fraud was involved; it just means that matters had moved on so that it was no longer applicable. We also found a reasonable proportion—much less—of people who should have had higher payments. It is a subjective, inconsistent benefit, which relies too much on self-assessment. We need to get a grip of it.

[The Lord Bishop of Oxford]

My Lords, is the Minister aware that many of us are very concerned that the measure envisaged might have a deleterious effect on the very group that the Government are most concerned to help—that is, those who would come into the support group eligible for universal benefit, but who are actually living alone and without carers?

[Lord Freud]

Yes, my Lords. One of the things we are aiming to do with the employment and support allowance, and the support elements there, is to make sure that we have consistent and simple definitions of who should obtain benefits. At the moment, we have a multiplicity of benefits, and we are aiming to simplify things so as clearly to direct our support to those who need it most.

[Lord Beecham]

My Lords, do the Government intend to implement Professor Harrington’s recommendation to subject cancer patients undergoing chemotherapy to work capacity assessments?

--- Later in debate ---

[Lord Freud]

My Lords, this is a very interesting issue. We have been reading closely Macmillan’s evidence to us, and what is set out is not what Macmillan is actually asking for. Many of the oncologists whose evidence was taken say that it is important for many patients to stay in work. One stated that it may be inappropriate for some patients and that it risks stigmatising chemo patients, but that some people on long-term maintenance treatments may have little or no upset and be quite able to work. We are taking that evidence and looking closely at how we apply it. We will have more people with cancer in the support group because many undergoing oral chemotherapy need to be in it. However, we are not taking a blanket view and we do not want to stigmatise cancer patients.

[Lord Addington]

My Lords, will my noble friend give an assurance that when the initial assessment is made, someone with real expertise in the disability or group of disabilities advises on whether the benefit should be paid?

[Lord Freud]

My Lords, yes, one of the things we are keen to ensure is that there are people with expertise on whom those making the assessments can rely. Professor Harrington addressed that in his first review. For that reason, we had mental health champions in particular in each of the offices undertaking this work.

[Baroness Farrington of Ribbleton]

My Lords, many Members of your Lordships’ House will be aware from personal and family experience that the experience of undergoing chemotherapy of any kind, quite apart from oral chemotherapy, is most unpredictable in each individual case. Within a period of 48 hours, someone who had been coping admirably can suddenly find that they are unable to work. How on earth can the Government respond immediately to those circumstances and how can they stop the media, to which the Minister referred earlier, castigating everyone on chemotherapy as though they are workshy?

[Lord Freud]

My Lords, let me make it absolutely clear that the presumption for people on chemotherapy, whether it is in oral or other forms, is that they will be in the support group. However, we will check this because some people, as the evidence in the Macmillan report demonstrated, get through their chemotherapy with few ill effects, so it is right for them to continue in the workplace. They will want to do that, but the risk is that if there is a blanket move away from the workplace, we basically write off those people’s opportunity to work, and that is wrong.

[Lord Roberts of Llandudno]

My Lords, perhaps I may declare an interest. My wife underwent chemotherapy treatment for some time and she could not have worked at all. How much consultation is there with the patients themselves as they undergo chemotherapy as opposed to with their doctors, in order to find out exactly what their response to this is?

[Lord Freud]

My Lords, when people are in a position where they cannot work and the presumption is that they will be in the support group, we will take the evidence for that from the people who are treating them because it is easily available. It is only in those cases where people are able to work that we will look to place them in the other category so that we do not have a blanket position. This is what the evidence from Macmillan has shown us. We are now going to consult more widely with other cancer organisations so as to be sure that we get this particular, very difficult policy right.

Welfare Reform Bill

Lord Freud Excerpts

Monday 12th December 2011 Lords Chamber

[Noble Lords]

No!

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

My Lords, as I understand it, Amendment 1 has not been moved, but Amendment 2 has. I think that the noble Baroness, Lady Meacher, will speak to Amendment 1, but I do not think that she is in a position to move it. That is my understanding.

[Lord McKenzie of Luton]

My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.

--- Later in debate ---

[Lord Freud]

My Lords, these amendments intend to provide for universal credit to be paid twice a month or, in Amendment 1, for a claimant to be able to choose to be paid more frequently than monthly. As with existing benefits, we will specify payment frequency in regulations made under existing powers in the Social Security Administration Act 1992. I am, though, grateful for the opportunity to set out why we intend for universal credit to be paid monthly.

We want universal credit to prepare people for work and to encourage them to move away from costly weekly and fortnightly budgeting. The present system does not allow people to take responsibility for their finances as the majority of people in work do, day in, day out. That is wrong. It means that the transition to work is more difficult than it needs to be as people have to adjust to monthly budgeting and managing their own rent payments, often with no support. We want to make the first steps into work easier by helping claimants to switch to monthly budgeting while claiming universal credit. Essentially, we are looking for a more empowering system.

The figures have already been raised in the debate. Some 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year are currently paid monthly. It is then right that we help families to deal with the reality of working life, whether they are in or out of work, by paying benefits in a way that mimics payment of a salary.

The noble Lord, Lord McKenzie, asked the straight question: what is so important about monthly payments? He went on to talk about the exploitation of poor people. That is what this is about. Save the Children has estimated that low-income families can face an annual poverty premium of £253 on their gas and electricity alone. Organisations including Consumer Focus, Church Action on Poverty and Family Action recognise the importance that access to the right banking products and sound advice can make in helping families to make the best use of their income. The simple point is that if you are managing on small gobbets of money weekly, it is very tough to match your budgeting process to utility bills or some of the larger or medium-scale capital items. That is why larger amounts paid monthly help people with this poverty premium.

However, I recognise that many people on low incomes are used to budgeting on a weekly or fortnightly basis and are concerned about moving to monthly payments. We absolutely need to support some families to budget effectively. That is why I am keen to develop effective budgeting support for families in this position. In some cases that is just a question of signposting to existing information and advice, in other cases it may require much more intensive, face-to-face support; but we need to take an innovative approach to these budgeting products if we are to stop the exploitation of the poor continuing, as the noble Lord, Lord McKenzie, said.

The universal credit and how we flow money to poorer people in our community is the main opportunity that we have to make a real difference for people in this area. We are working with the banking sector, credit unions, supermarket financial services and the Post Office to explore the opportunity to create cost-effective budgeting accounts. I am looking at accounts that my noble friend Lord Kirkwood will not be able to arrest at his whim, because there are some protections in the way in which we devise those accounts. In the next 18 months there will be an absolute focus of intense work to get this right. One example is the housing demonstration project next year, which will help us to understand the demand for budgeting support and the best ways to deliver it. I am not saying that it will all be easy; it is not. However, it is essential that we develop 21st century solutions to these issues and not think back decades and get in the mindset where we did not have these new ways of approaching things.

A simple system of payment on account will be made available to support claimants. Budgeting advances will provide an efficient means for eligible claimants to have access to interest-free credit, providing an alternative for those on the lowest incomes to high-cost, and even illegal, lenders. I must say that I was admiring a Wonga.com advertisement on the side of a bus this morning. In our system of budgeting advances, in the last year already over a million claimants received budgeting loans worth almost half a billion pounds. In the department we have a revolving fund of £1.1 billon, which will continue to be under our control for these purposes.

Clearly there is an issue, which we are addressing, about helping people move from fortnightly to monthly payments. We need to help with that migration period by stretching payment periods and providing the missing funding, if you like, as they move up, and I am looking at a system of doing that over three months. Many noble Lords have made the point that there are people with exceptional circumstances for whom a monthly payment is simply not appropriate. My noble friend Lord Kirkwood talked about the 15 per cent; my noble friend Lord Newton talked about those who will not cope. Clearly there is a group in this category. Where there is a risk of harm to the claimant or the household, we will of course want to make sure that safeguards for these people are in place. Nevertheless, we cannot set up a system to get the bulk of people in control of their finances and then take that control away from them when they can manage it. We need to look at it that way round, not devise a system which protects the 15 per cent of people that my noble friend estimated would be affected. We must not have the tail wagging the dog. We must include support but we must not have a system which stops people going into the workplace when they can. We have begun working with local authorities, housing associations and the relevant third sector organisations to develop guidance around who might qualify for more frequent payments or the direct payment of a proportion of an award to a third party, such as a landlord. Again, the housing demonstration projects will allow us to test the criteria for exceptions.

I appreciate noble Lords’ concerns about protecting claimants who have not previously been required to budget monthly. However, I truly believe that this is a fundamental part of what we are trying to achieve with universal credit. It is an opportunity to change the dynamic to design a system that is right for the majority but takes account of exceptional circumstances by ensuring that we have the means to make payments more frequently.

I wish to pick up a couple of questions. We can make universal credit payable more frequently. I say in answer to the point made by my noble friend Lord Hamilton that there is a small cost to doing it fortnightly rather than monthly but it is very small; it is about a penny. As regards the fallback position, the regulation-making powers which are used to determine the frequency of payment are not in this Bill but in the Social Security Administration Act 1992. The legislation on ESA and JSA, for instance, says that they are payable weekly. However, as we know, they are paid fortnightly. We have complete flexibility to pay as often as we think is appropriate.

[Baroness Meacher]

The noble Lord said that payments can be made more frequently. Will he assure the House that payments will be made more frequently, and that that facility will be available?

[Lord Freud]

I assure the House that where people cannot handle monthly budgeting, we will have arrangements to help them. However, I ask noble Lords not to tie my hands on this. This can make a major difference to poor people by creating banking and budgeting products that will help their lives. Tying our hands on this, particularly mine, will not help. Therefore, I ask noble Lords not to vote against this.

[Lord McKenzie of Luton]

We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?

[Lord Freud]

My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account—some would argue that that is what it is as regards budgeting advances, for instance—or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.

Welfare Reform Bill

Lord Freud Excerpts

Monday 12th December 2011 Lords Chamber

[Lord Freud]

My Lords, I appreciate absolutely the intention behind the amendment, which is to protect the amounts currently paid to support disabled children. I also take the opportunity to thank the noble Baroness, Lady Wilkins, for her letter, which covers this matter. I will also address some of the points that she raises in this amendment.

This is not easy. We have a fixed financial envelope as we face these difficult times and we have to target resources, so we have some real choices to make. Our approach is to focus our support on the most severely disabled people, ensuring that we have the best support possible for those with the greatest need. I make it absolutely clear that we are not looking to make any savings in the changes. We are making a series of changes to make a coherent system; we are not taking money out of the system. We firmly believe that aligning the extra amounts payable for disabled children with those of disabled adults is the right and fair thing to do. We are aiming to focus our support for disabled people on their need, not on their age.

We know that the movement between support for disabled children and adulthood can be very difficult. The report, Improving the Life Chances of Disabled People, shows that the drop in income from childhood to adulthood can cause financial difficulties for young disabled adults. We want to smooth the transition from childhood to adulthood by removing that artificial divide. This is clearly also essential if we are to protect work incentives in adulthood.

To pick up the point raised the noble Baroness, Lady Grey-Thompson—that amounts for children and adults are meant for different things—support for families with disabled children is not limited to the disability addition. Families with disabled children also receive a disregard. The purpose of the disregard is to make work pay for the household. If the parent of a disabled child is working, they will qualify for a disregard at the appropriate rate for a couple or a lone parent. Our latest assumptions about earnings disregards mean that families with children will always have a disregard at least as high as the disability disregard.

I can take noble Lords through some of the figures. Large figures have been cited for the number of disabled children affected, which have not taken into account the overall effect of universal credit. When you consider what happens to a family with a disabled child where someone in the family is in work, the total return for that family goes up from £383 to £416. That is the effect of all the elements of universal credit coming together. That is for the disabled child, not the severely disabled child, who clearly gets more.

The noble Lord, Lord McKenzie, made a point about the number of children in working families receiving the disabled child element of child tax credit, which is 157,000, which is substantially more than the ones who are not working. The equivalent figure is 131,000. I share with other noble Lords a concern to get this right. When you look at the figures of what is happening under universal credit, a large number of the children about whom we are worried, when you look at the whole package, will benefit. For the minority who see a decline, there will be behavioural changes as they move into the other category, where they can—I accept that they cannot always.

To pick up a question from my noble friend Lady Thomas about what happens in universal credit to children on the middle rate of DLA care, they will get the lower of the two rates of current child tax credit. We are carrying forward the rule that the highest rate goes to those on the highest rate of DLA care.

As I have continuously reiterated through our debates, we are overhauling the entire support, so it is important not to fixate on one aspect of universal credit but to consider the entire package for families. That is why we need to look at that rather than to concentrate on individual components.

[Lord Wigley]

The Minister has acknowledged that whereas some will benefit from other sources of money and that that will counteract the loss of disability benefits, there will be a category who, unless something else is done, will lose out financially. Does he have any proposals to provide a safety net for those people?

[Lord Freud]

Yes I do, and I will come back to that if I may, because a whole series of questions was raised about transitional protection, which I need to deal with comprehensively.

Our impact assessments made clear that, overall, families are more likely to be better off on universal credit. In addition, departmental modelling estimates are that the impact of the reform of disability payments on the number of disabled children living in relative poverty will be negligible. We must remember that support for families with disabled children is provided by the universal credit package as a whole.

On the absolute figures of support, under universal credit, an out-of-work family with a disabled child will receive just over £8,000 a year in benefits for their child once universal credit has been introduced. That compares to just over £4,000 for an out-of-work family with a non-disabled child and about £1,000 for a family who receive only child benefit. The figure for a child on the severely disabled level is £12,000. That is the order.

Let me now turn to the really important point raised by many noble Lords about taking money away from families who have learnt how to build their lives around it. That is exactly why we have introduced transitional protection. My noble friend Lord Boswell has referred to an assurance on no losses for years one and two. The way transitional protection works is that where circumstances remain the same, people’s payment level is protected on a cash basis. That means that families currently receiving child tax credit will not see a cash reduction at all as a result of the move to universal credit, and we will provide cash protection for as long as the universal credit award is less than the previous benefit entitlement. I hope that represents a level of ring-fencing that the noble Baroness, Lady Turner, will recognise.

[Baroness Hollis of Heigham]

Perhaps I may ask the noble Lord about cash protection. Does that mean it will or will not be inflated each year by CPI?

[Lord Freud]

No, clearly there is an erosion factor. Cash protection does not also inflate it. But the point about the universal credit is that it is structured to provide adequate support for families overall, and on top of that where there are differences we have a reasonably long period of transitional protection.

We simply cannot maintain the existing rates for disabled children if we are going to increase the rates for severely disabled adults. I know it is hard to absorb lots of figures at once, but let me just try and capture it. What we are looking at is fundamentally paying a severely disabled child or adult £77 once the universal credit is introduced. That is a big leap for severely disabled adults today who are on £32.35. That is where we are trying to move to, and that is where we are trying to put our resource.

[Lord McKenzie of Luton]

Can the noble Lord say by when he expects to have moved to that figure of £77 for adults?

[Lord Freud]

As we move people on to the universal credit and take people off the other systems we will be gradually putting people on to that amount. But I am better off writing to the noble Lord on that particular matter of timing because it is quite a complicated equation. Basically, we are looking to maintain an overall fixed level of spend in this area, and as we pull down one element we can move up the other elements—that is essentially what is happening, so there is a periodicity there.

We are trying to get money to the most severely disabled in our community. There is a real decision here: maintaining the existing rates for children without doing that—without finding this money—would cost an extra £200 million a year. I simply do not have that money. If this amendment is passed, it will not be possible to increase the addition for the most severely disabled people to £77. So there is a decision to be made here: do you agree with the way we want to rebalance the system—

[Lord McKenzie of Luton]

I am sorry to interrupt the noble Lord again, but is it not right that that equation only follows if you look at those two together? You do not have to operate within that envelope; there are other envelopes, as my noble friend Lady Sherlock mentioned in her contribution.

[Lord Freud]

That is the envelope in which we are operating. If I could find £200 million more to add to that envelope then I could do it, but we are not in that position. As noble Lords know, we have put a lot of money into the universal credit. The overall gross figure going into people’s pockets—the poorest people in the country—every year once we get universal credit in is £4 billion a year. Of that £2 billion is net extra; £2 billion is through a more efficient system. That is the money we have found; that is the overall envelope that we are operating in. I do not have any more money, and there are some very difficult choices.

The question is this: does the noble Baroness want to maintain the rates for moderately disabled children at the expense of raising the limits for severely disabled people? That is really the juggle that we have to do. As I have said, this is not easy; these are difficult judgments. It has been very difficult to get to this position, and that is the decision that we think is best for people who we really want to help. We want to focus our support on the most severely disabled people regardless of their age; to simplify and to align the extra payments for disabled people; and to smooth the transition into adulthood. That is fundamentally the reason why I ask the noble Baroness to withdraw her amendment.

[Baroness Grey-Thompson]

My Lords, I thank the Minister for his response and I thank all noble Lords who have contributed to the debate on this vital amendment. The restructuring of support for disabled adults and children is taking money from disabled children who need it. The Government say that it is not a money-saving measure and that its main aim is to simplify the system and to give more to adults with the severest levels of impairment. However, the simplification is superficial and fails to give more to those with the greatest needs. I think that we should remember the words of the noble Baroness, Lady Campbell of Surbiton, who quoted Dame Philippa on the need to move away from categorising people based on severity of impairment.

Additionally, this measure is going to cause significant hardship to families with disabled children, who are already disproportionately likely to be living in poverty. It will make the situation much worse for those who are likely to have higher costs—those in the very group of adults whom this measure is meant to help. I believe that the Government’s proposals will undermine their own prevention agenda. There is no reason why an adapted form of the current levels of financial support could not be introduced into universal credit, with extra help being given to the support group when new moneys allow. It would not cost anything and would mean that families with disabled children were not among the biggest losers under the new system.

We have often heard it said that the devil is in the detail, and I agree, but I believe that the Minister is also making grand assumptions about the ability of parents of disabled children to work. We have heard much about the transition but this is about the new children who will be coming into the system. I believe that the measures that the Government are proposing will push more children into residential care.

I thank the Minister for asking me whom I would be most likely to support. That is not a question that I would like to answer on my own, and I therefore wish to test the opinion of the House.

--- Later in debate ---

[Lord McKenzie of Luton]

Very good. Of course, this issue is having to be considered, as has been said, against the backdrop of the overall funding for council tax benefit being reduced by 10 per cent but with commitments to protect awards of council tax support for pensioners and possibly for other vulnerable groups. This means, as has been said, that support for working age claimants is to be squeezed dramatically.

The consultation on this proposition, the Localism Bill, closed two months ago, and perhaps we can know when the Government’s response to this will be forthcoming. Quite apart from the administrative consequences of the proposed localism of the benefit, there is, as my noble friend pointed out, a fundamental difference compared with what happens currently. Under present arrangements, council tax benefit is demand led. Whatever the calculation shows is due is made available to the claimant, by offset against the council tax bill, with full reimbursement from the DWP. It is, as my noble friend explained, the AME—annually managed expenditure—bit of government spending.

This will in effect change under a localised system. If claims under a localised system exceed the budgetary amount locally, authorities will have much more limited resources from which to meet the increased demand. They might dip into reserves, if they have any, or they might make the system less generous in a subsequent period. They might switch expenditure from other local authority spend, but given the savage cuts to local authority budgets that have been made recently, there does not seem to be much room for manoeuvre to do that.

It is suggested that local authorities might approach a localised system on some consortium basis, and therefore that other local authorities will help out. I suggest that the prospects for this are not strong. One consequence of these constraints will be that local authorities will inevitably budget on a prudent basis, building in contingencies that will further diminish the resources available to claimants of a localised system. That indeed is what the risk assessment will dictate.

The main reason advanced by the Minister, Grant Shapps MP, in evidence to the CLG Committee for the localisation of council tax benefit was that for local authorities,

“the big advantage is that they will have a stake for the first time in what people who live in those homes are doing; in other words, an incentive to help get the person back into work”.

This is a rather strange view: that it takes possible savings from a benefit pot for local authorities to have an incentive to help people back to work. It is a view that ignores, or is ignorant of, the proactive and imaginative work that many local authorities do to help local residents into work. However, in any event, the driver for having clear incentives to support work is supposed to be the universal credit itself. If there is any incentive in the system, there is a risk that local take-up campaigns will diminish, as any wider take-up will come from the resources of the council.

We have yet to know how much central direction there will be for a localised system. If the Government run true to form, there will be quite a lot. This was certainly the outcome of the Localism Bill, which espoused localism and gave additional powers to local authorities but came with lots of strings attached, as the noble Lord, Lord Newton, will recall, despite some of those strings being removed in your Lordships’ House. There will clearly have to be central direction if the position of pensioners is to be protected, and some form of direction to deal with tapers and work incentives.

We understand, to follow the line of questioning by the noble Lord, Lord German, that the Minister will say that he cannot support a change to the universal credit to include a council tax benefit now. However, there is nothing to stop it being included in the future, as the Bill now stands. If this is the Government’s position, will the Minister confirm that he considers that regulations under Clause 11 will be the route to effect this?

The noble Lord, Lord German, also raised some fascinating questions about how this works for Wales and Scotland. Can the Minister say whether the proposition that he will advance tonight will be, “Don’t worry about it now—you can get it all back in due course.”? What changes would have to be made to the systems that are currently being built to put this into effect? Including council tax support as part of universal credit is of course not without its challenges, particularly the payment issue, so perhaps we can hear whether there has been any thinking around that matter.

However, we support my noble friend’s strong contention that the sensible, practical and principled way to deal with council tax benefit is to include it as part of universal credit. We believe that the Minister, a very logical person, must have come to the same conclusion. If a strong vote today will help his cause, we are more than prepared to play our part.

[Lord Freud]

Beware Greeks. My Lords, noble Lords will be aware from previous debates that we are proposing to abolish council tax benefit before the introduction of universal credit and replace it with local schemes of support. Localising support for council tax is part of a wider policy of decentralisation, which will give councils increased financial autonomy and a greater stake in the economic future of their local area. Localisation also reintroduces the link between council tax levels and the costs of providing support, thus reinforcing local financial accountability.

This reform will give local authorities a significant degree of control over how a 10 per cent reduction in expenditure on the current council tax benefit bill is achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. This saving is an important contribution to the Government’s vital programme of deficit reduction. We need to ensure that localisation supports the improved work incentives that universal credit will bring. However, the Government believe that the key principles required to incentivise work can be delivered through local schemes with the help of technical guidance provided by central government. Local authorities will have a greater stake in getting people back into work than ever before.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, perhaps the noble Lord would reiterate a point. I thought I heard him say that a Bill for the localisation of council tax benefits or whatever it is called will be introduced in this Session. Does he have any more precise detail?

[Lord Freud]

I am afraid that I do not have any more precise detail but, although I do not think that in the consideration of the Welfare Reform Bill I can say soon, I can probably say that it will be between January and May or June, or something like that. I have no more precise information.

[Baroness Hollis of Heigham]

My Lords, I thank everyone who has taken part in this brief expedited debate. I beg your Lordships on the government Benches to hear the words of the noble Lord, Lord Newton, in their ears; namely, that 400 schemes are inane, insane, unwanted and unwelcome, and that council tax benefit should be brought back to where it belongs in social security in order to make universal credit work. The Minister tried to suggest—I would say manfully—that it is too late to change. I do not believe that. That is why we have this House of Lords and this Report stage. Universal credit will not come online until two years’ time in 2013. If your Lordships today support what I believe is the real view of everyone in this Chamber—that council tax benefit should be part of social security—they will support this amendment today. I should like to test the opinion of the House.

Welfare Reform Bill

Lord Freud Excerpts

Monday 12th December 2011 Lords Chamber

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

My Lords, we take the position of carers very seriously and, as the noble Baroness, Lady Hayter, pointed out, today I was very pleased to write a letter, as I had promised, about how the passporting arrangements from PIP would go in and how all of PIP passports into carer’s allowance. I have to apologise—I promised that letter three days before the first day of Report and I think that I am three days late. I hope my apology will be accepted. There was informal information going out, and so it was not too much of a surprise.

The noble Baroness, Lady Lister, asked me whether I was confused. This is an important point, because I sat and worked very hard on this element of carer’s allowance. Two things are happening here. The caring community—the carers—are very keen to have an allowance which is not means-tested, and which recognises their effort and work. I understand that. It is not a question of means-testing it. However, there is a cliff off which the whole allowance falls away, when the carers earn a certain amount. Clearly, that undermines considerably their incentive to work. Therefore, as we were refining the structure for carers, we looked to create, essentially, an additional element in universal credit on top of carer’s allowance, which in practice does not involve a cliff fall in the same way. It is probably easier for me to send a letter on this. I need to clarify this, particularly if the carers’ organisations are confused, as the noble Baroness has said. However, the structure is designed to get rid of these awkward “drop offs” and to be smoother. In fact, noble Lords will be shocked to know that I found a bit of money to put into the system to allow that. If I am not getting credit for that—and I need it—I shall try to earn it by writing a letter spelling out how that has worked.

[Lord Knight of Weymouth]

I am terribly grateful to the Minister. Could he tell us where he found the money?

[Lord Freud]

Finding money is a black art. I need say no more. If I were to reveal any more, it would just rebound negatively on me in every direction. Anyway, that is what has happened. I shall try to spell that out in a letter to the noble Baroness, Lady Bakewell. It is vital that the earnings disregards in universal credit are simpler than those in the current system, in order to achieve the core aim of making the system clear both to claimants and to administrators.

The earnings disregards in universal credit for carers who are in a couple, lone parents or themselves disabled will be more generous than the disregards in the current benefit system, thus enhancing work incentives for the great majority. As we discussed in Grand Committee, I have sent examples to the noble Baroness, Lady Hollis, and more widely, which clearly demonstrate the substantial gains at most earnings levels. I am deeply impressed by the example cited by the noble Baroness, Lady Bakewell, which got to within 3p of the worst possible point. There is a narrow band of between two and five hours where the absolute maximum you could lose is £4.25 a week. I think that the example used by the noble Baroness was £4.22, so she nearly hit it on the nose. I do not know how she managed to miss it by 3p. But the structure means that as you move up, there are some substantial gains. If you move off the small area of two to five hours, there are some big gains. At eight hours of work a week, a single carer would be over £5 a week better off under universal credit, and at 12 hours they would be nearly £15 better off. That is real money, worth £780 over a year.

It may be that the effect of the system is to drive people off the four-hour rate to the six-hour rate. I do not accept that the number of people in that narrow bracket is 50,000. It simply is not that figure and I do not think there is any reliable estimate of what the number is.

[Baroness Hayter of Kentish Town]

If the noble Lord has no idea of how many people are involved, but thinks that the number is less than 50,000, surely he cannot know how much it would cost, and therefore this may be another small amount of money. If the number is small, it cannot cost much to give these people an extra £4 a week.

[Lord Freud]

This is not directly a money matter; it is about the structure and the simplicity of the system. When you are changing from an inchoate system, which is what we have now, there are patches where people are a little less well off than they would have been, and that is why we have transitional protection. As you move to a simple, clean structure, there are problems in doing that, and that is what we are trying to address. By definition, it is not possible to overhaul and simplify a system and keep all the existing rules. Existing claimants will not lose because of the transitional protection, so those who have built their lives around a four-hour week will not lose by this, although within the structure there will be a drive to encourage people to do a little more.

I hope that noble Lords understand what we are trying to do here. I know that there is general support for universal credit, but we must maintain something that is tangibly more simple. With that explanation of why the Government cannot support this amendment, I would urge the noble Baroness to withdraw it.

[Baroness Bakewell]

My Lords, I thank the Minister for his response. I have only one or two points to make. The noble Lord challenged the figure of 50,000. It came from Carers UK, which is perhaps our most authoritative body when it comes to delivering data like this. I acknowledge completely that the system needs simplifying and that we want simplicity in the system, but you can have simplicity at different levels. You can have simplicity operating at the rock bottom of the ladder of pay or at a more generous level of pay. One relevant issue about this four-hour working borderline with this tiny slither of people—it is quite a large slither—is that we are an aging population. More and more carers are themselves old. A lot of people in their 60s care for people in their 80s. People in their 60s looking after someone disabled are quite likely to be eligible for something like four hours work a week. That may be all that they can manage themselves. Often you have those who are already ailing or slightly disabled looking after 90 year-old relations. This issue about hours and the flexibility really calls on the Government to examine and deal with that little niche. To that extent, I am disappointed but I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I propose to speak briefly in support of Amendments 7 and 11 as my noble friend is a renowned expert on pensions and it is never possible to add much, if anything, of substance to what she has said. My noble friend has made an important point about the breaking of the consensus on encouraging saving. On the one hand she instanced the huge sums that will be garnered by the changes to the state pension age and, at the other end of the spectrum, the deferral of automatic enrolment and this measure, which changes the basis on which pension contributions are treated in universal credit compared with working tax credits.

I wish to probe again a point in respect of the 50 per cent only deduction, which I do not think that the Minister dealt with significantly in Committee. Universal credit will obviously be based on real-time information—the information which will flow from employer returns to HMRC, and the data flowing back. That data will be based on 100 per cent deductions of occupational pension schemes, so if universal credit is going to rely on a 50 per cent deduction only, there is going to have to be some other process or loop which is not naturally there in the data flows at the moment. I think the Minister instanced that this was something that was being commissioned. I can imagine the work involved in seeing how that might be derived. I hope that he will take the opportunity tonight to be a little clearer on that. Quite apart from the principle of the measure which my noble friend has raised, I raise the actual practicalities of implementing it. When we looked at recasting the child maintenance system, which we shall come on to on a subsequent Report day, what was determined and debated in your Lordships' Chamber was that it would be based on gross income data provided by HMRC but net of 100 per cent of employee occupational pension contributions, as that was the natural flow of data. I would be grateful if the Minister could deal with the practicalities of that point.

Amendment 11 seeks to ensure that measures can be put in place to address one of the significant couple penalties introduced by the Welfare Reform Bill—a penalty that means that a couple, where one person is over and one under pension age, could lose as much as £100 a week compared to the current system. This sits alongside the couple penalty introduced by the limiting of contributory employment and support allowance and that introduced by the benefit cap in a series of changes that, perhaps unintentionally, mean that couples may see themselves as better off financially, as my noble friend has said, living apart.

The policy change being introduced means that whereas at present couples where one member has reached pension age are eligible for pension credit, following the coming into effect of the Bill, if one member of the couple is below pension age, they will be forced to claim universal credit until both of them qualify for a pension. We have been given no specific figures on the impact of this policy although we know that there are currently 93,000 couples where one person is over and one under pension age. Not all of these will be affected as those who are already receiving pension credit will be able to remain on that benefit. However, as the revised impact assessment points out, those who are affected are likely to be hit hard, stating that the heaviest notional losers for couples without children,

“are in cases where one member is of working-age and one is currently eligible for Pension Credit”.

Perhaps the Minister can tell us how many people he estimates that this change will affect and how much they stand to lose. Bringing pensioners within the orbit of universal credit will also mean, as my noble friend has said, subjecting them to many of the new and harsher rules that accompany the new benefit. The Minister has not yet told us how he expects pensioners to be affected by the new capital limits that will be introduced for universal credit, and also for pension credit when housing benefit is abolished. As Age UK points out, nearly 150,000 people claiming pension credit have more than £16,000 in savings. In the future those with a low income but over £16,000 of savings who have a younger partner will not only be excluded from pension credit, they will not be entitled to universal credit due to their savings.

The Government have argued that the purpose of the policy change is to ensure that working-age claimants are subject to working-age conditionality and asked to look for work. However, many of the working-age claimants who fall into this group and have an older partner may in fact be subject to no work-related requirements—a matter we discussed in Committee—whether because they are caring for someone or have a disability themselves. These couples too will see a £100 a week hit on their income as well as potentially losing other support linked to pension credits, such as the winter fuel payments.

The Government have said that this is not a savings measure so there should be some flexibility within the system to ensure that couples in this situation have their income protected. This policy has not been consulted on and we have not received sufficient information fully to assess who it will affect and how. Therefore, the amendment proposed by my noble friend would give the Government the flexibility to look again at the options in this area and to ensure that couples in this situation do not lose out.

[Lord Freud]

My Lords, Amendment 7 would take a power to disregard the full amount of any pension contributions from the assessment of both single and joint claimants’ income. As I made clear at Committee, this is a matter for regulations and we do not need any additional regulation-making powers. Our stated policy since the Universal Credit White Paper has been a 50 per cent disregard of pension contributions, in line with the current approach in the benefit system, as opposed to the tax credit system. We are taking the middle path between supporting pension saving for people on low incomes and fairness to the taxpayer. It is important to remember that many taxpayers who do not claim benefits do not have occupational or private pensions. A full disregard of all pension contributions would cost an additional £200 million a year.

Noble Lords have characterised our approach as worsening the position when compared with tax credits, where there is a full disregard of pension contributions. However, this oversimplifies the comparison between universal credit, based on net income after tax, and tax credits, based on gross taxable income. Frankly, we are not comparing like with like. We also need to take account of the new employer contribution duties to be introduced from next year. We previously said that when taking account of employer contributions, the cost to an individual for each pound of pension would be 34 pence. Since Committee, we have looked again at these figures and I should like to take this opportunity to correct that one, which we have now calculated out at 38 pence. I apologise for that mistake, which I hope is not too substantial directionally.

If one considers putting £1 today into a pension, the cost in the tax credit system is 39 pence. One can see that that represents 61 pence pure universal credit. However, if one combines that universal credit calculation with the employer pension duties, the figure reduces to the 38 pence that I talked of. The middle way, when considered in combination with what else is happening, is actually not quite as mean or extreme as the noble Baroness, whose expertise I acknowledge and have suffered from in the past, might imply. If you are outside the system entirely, it costs you 80 pence for every £1 of savings. That provides a balance on why we have come to that figure.

Picking up the question from the noble Lord, Lord McKenzie, on the RTI feed, I can inform him that payroll data do identify pension contributions from salary. They have to do that because the pension contributions will be subject to national insurance. That is the feed element we will use to make this calculation, and we are currently working out the detail. Taking all these factors into account, we believe that a 50 per cent disregard is an appropriate balance between encouraging saving and a fair deal for the taxpayer.

Amendment 11 would amend the regulation-making power in Clause 9 relating to the standard allowance. This would allow us to provide an exception for couples with one member above state pension age by excluding the standard allowance from the calculation of their universal credit award. As I explained in Grand Committee, the Government have taken the view that couples with one member above and one under the qualifying age for state pension credit should claim universal credit. Following that debate, I sent the noble Baroness, Lady Hollis, and other noble Lords some worked examples showing the entitlement of different couples on the two benefits. They showed that there will be a range of outcomes depending on individual circumstances. We calculated that more than 90,000 couples with one partner under pension credit age are on pension credit—that was in answer to the noble Lord, Lord McKenzie. However, transitional protection will apply, and all those couples currently on pension credit will stay on it while circumstances remain the same.

We are not convinced that it is necessary to have special rules or different amounts of standard allowance where one partner is above pension age. Universal credit also includes additional amounts for those people who have limited capability for work or regular and substantial caring responsibilities for a severely disabled person. It remains the Government’s view that people of working age who are able to work should prepare for or look for work in return for receiving support from the state. The earnings rules and disregards in universal credit provide a clear incentive to do so. I therefore urge the noble Baroness, Lady Drake, to withdraw her amendment.

[Baroness Drake]

My Lords, I thank the Minister for that reply. I do not think that I am supposed to say that any more—I think the new rules say that I can dispense with that—but I will remain courteous and thank the Minister. Or is that only in Questions? I am trying to keep up.

I will deal with each of his points. First, I did not know that there was a middle path. That is a whole new concept to me. I thought the issue was that in-work benefits would support the incentive to pay for, say, low-to-moderate-income people by disregarding pension contributions. As to the concept of a middle path, I do not know what the merit of that middle path is other than the opportunity to save some public expenditure. I have never seen it publicly debated that it makes a big or meaningful contribution to the pension settlement.

I accept that we may not strictly be comparing like with like, because I am trying to lift from a set of rules under one benefits system to the one that will apply under universal credit, but I do not think that I heard the Minister say that the £200 million saving from this change had varied. As I understand it, the Government are still expecting to save £200 million. However the cloth is cut. That means that, for a particular group of low-to-moderate-income people, £200 million will be taken out of their incentive to save. At the same time, there will be a staggering increase in public expenditure reduction of £59 billion from accelerating the state pension age. I do not want to debate the acceleration of the state pension age—I am sure that there will be opportunities to do that.

[Lord Freud]

If I could just clarify this for the noble Baroness, £200 million is the extra cost of doing this, not the money taken out.

[Baroness Drake]

I am sorry. I thought that the Minister said that they would save £200 million from this change.

[Lord Freud]

No, no, my Lords, I said that the cost of this amendment would be an extra £200 million.

[Baroness Drake]

I will have to go back and check on the figures. None the less, there will be a saving from this which has the effect of reducing the incentive to save for this group of people. As they will not be able to access the benefit of auto-enrolment until later, the contribution from their employer will come online more slowly, and therefore their ability and incentive to save will be reduced.

The Minister said that he sent a series of worked examples to my noble friend Lady Hollis that produced a range of outcomes. That is my whole point—some people can lose quite significantly under these new rules. It is not clear as to what the rules would be in all circumstances. Although there are transitional protections, that simply means that there will be a cliff-edge impact on another group of older couples when these rules come in. This will continue to add to the couple penalty and to the differing treatment of older couples depending on when precisely their qualifying age falls or on the age of their partner. That is why the amendment sought to give the Government flexibility as to how to address the problem of people suffering a significant drop in income. It did not of itself say that in all circumstances a partner should not be subject to work conditionality. However, I beg leave to withdraw my amendment.

--- Later in debate ---

[Lord McKenzie of Luton]

This amendment raises the question of the amount of capital that will be taken into account when calculating universal credit. The Government's proposals at present are that those with savings of above £16,000 will not be able to claim universal credit and that capital above £6,000 will attract a tariff income of £1 for every £250 above the £6,000 floor.

Our amendment seeks to enable differential treatment of capital for those in and out of work, reflecting the current arrangements, under which the universal credit rules replicate current benefit arrangements. Tax credits claimed by those who are in work have no limits on capital nor assume any tariff income, but obviously take account of the actual or taxable investment income. The Minister has talked about universal credit encouraging a culture change in how people manage their money. We fear that the current proposals will discourage low-income people in work from accumulating savings and building assets.

This is not just our view about the capital rules, but that of one of the main architects of universal credit, the Centre for Social Justice. As Deven Ghelani, a senior researcher at the centre said when giving evidence to the House of Commons Bill Committee:

“It is fundamentally a disincentive to save. I think that the savings limit for people who are not working and are on benefits has been £16,000 for I am not sure how many years, but certainly rather a lot”.

It is nice to know that the centre has such precision.

“The limit has not been uprated for at least a decade I would say, and possibly a lot longer. By extending that to people who are working, people who get close to that threshold might suddenly realise that it does not pay to save and that there are perhaps other things that they should be doing with the money, whereas saving is in itself a protection against dependency”.—[Official Report, Commons, Welfare Reform Bill Committee; 22/3/11, col. 19.]

The proposals will act as a barrier for those on modest incomes who are trying to save, whether for a house, for their children's tuition fees for university or against the possibility that they may lose their job and need a cushion of income to fall back on. The Government propose to encourage more tenants to buy their council accommodation. Under these proposals, tenants who wish to save to take up the offer will first be penalised for those savings and then, if they are able to build up their savings sufficiently, barred from accessing universal credit at all. That does not seem to be in line with the Government’s message that, under universal credit, work will always pay.

The department’s briefing assessment of the changes suggests that there will be between 100,000 and 200,000 people who will lose eligibility to universal credit altogether because of the new capital cut-off rules, and that between 200,000 and 300,000 people will have reduced eligibility due to the rules on tariff income. The briefing note states:

“People with substantial savings or other capital clearly have sufficient income to meet their needs”.

It is right that they should draw on these resources before looking to the taxpayer for support, particularly as many taxpayers themselves have savings well below these limits, but the vast majority of low-income workers who are claiming universal credit will also be taxpayers, and their taxes will be used to support other incentives to save in the tax system, including, as we discussed in Committee, the considerable tax relief on pension contributions.

The current proposals punish those on low incomes who are working and trying to build assets for the future. The amendment proposes a modest change to enable differential treatment of capital for those in and out of work. When we debated the issues in Committee, the Minister told us that these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. By accepting the amendments, he could signal that he recognises the importance of enabling those who move into paid work to begin to build up their assets and avoid sending the wrong message that those on low incomes should not expect to be able to save. I beg to move.

[Lord Freud]

My Lords, Amendment 8 would require different tariff incomes to be set against the capital of people in and out of work. I understand the noble Lord’s desire to continue to treat the capital of people in work differently in order to encourage low-income workers to save. I remind the noble Lord and the House that I was able to provide somewhat more precision than the IFS on the last time the figure of £6,000 or £16,000 was raised. To be absolutely honest, I forget the date that I provided in Committee, but it is now on the record in Hansard. The date was 2006. I am pleased to keep just marginally ahead of the IFS every now and then.

This amendment is at odds with our shared ambition for a simpler system. It is also, as it stands, unaffordable. We estimate that it would cost around an additional £70 million a year to remove tariff income for everyone in work with capital up to £16,000. We estimate that it would cost an additional £30 million a year to set tariff income at £1 for every £500, instead of the current £1 for every £250, for everyone in work with capital up to £16,000. That gives you a context of cost. This is a cost matter, as I made clear in Committee. There are quite a lot of nice-to-dos in the universal credit; I would like to do many of them myself, I assure you, but we have got to focus on where we can put the scarce resource and where it is absolutely needed. The debate around that is based on the fact that we estimate that around 80 per cent of those claimants who will have a higher benefit entitlement under universal credit will be in the bottom two income quintiles. Now is not the time to do anything other than to retain the existing threshold of £6,000.

The shocking reality is that if you go to the median household with a working-age adult in it the figure of savings in that household is £300. That is across all working ages in the FRS. That is a shocking figure, but it just shows you where the debate is against the reality of what is happening in this community group. I am using median not average here, because I think it is a better figure.

That is the issue. We have limited resources; we need to focus them on those least able to support themselves. I hope that explains why we are where we are with these particular figures for tariff income and capital and why we cannot support this amendment, and I ask the noble Lord to withdraw it.

[Lord McKenzie of Luton]

My Lords, I am grateful to the Minister for his response. I should just say that it was not the IFS which gave that evidence; it was the Centre for Social Justice, which I thought was an organisation quite close to the noble Lord’s heart.

--- Later in debate ---

[Lord Freud]

I should have known I would never be ahead of the IFS; I apologise to it.

[Lord McKenzie of Luton]

I understand the Minister’s response. It really reiterated what he said in Committee: this is an issue of affordability, not necessarily one of principle. On that basis I do not see why he could not accept the amendment—it would signal the Government’s intent on this—but given the hour I beg leave to withdraw the amendment.

Welfare Reform Bill

Lord Freud Excerpts

Monday 5th December 2011 Lords Chamber

Moved By

[Lord Freud]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 30, Schedule 1, Clause 31, Schedule 2, Clauses 32 and 33, Schedule 3, Clause 34, Schedule 4, Clause 35, Schedule 5, Clause 36, Schedule 6, Clauses 37 to 48, Schedule 7, Clauses 49 to 69, Schedule 8, Clauses 70 to 89, Schedule 9, Clauses 90 and 91, Schedule 10, Clauses 92 to 100, Schedule 11, Clause 101, Schedule 12, Clauses 102 to 140, Schedule 13, Clause 141, Schedule 14, Clauses 142 to 145.

Motion agreed.

Young People: NEET

Lord Freud Excerpts

Tuesday 29th November 2011 Lords Chamber

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

My Lords, we have a coherent strategy to reduce the number of 16 to 24 year-olds not in education, employment or training. This includes measures to increase the participation age and a new youth contract worth nearly £1 billion. The contract will provide more intensive support for all 18 to 24-year-olds, and builds on support that is already available through Jobcentre Plus and the work programme.

[Baroness Jones of Whitchurch]

I thank the Minister for that reply, but with a record 1.16 million young people not in education, employment or training, do the Government now acknowledge the folly of scrapping the future jobs fund, axing the educational maintenance allowance and trebling tuition fees at a time when the economy, through their own policies, was already slowing down? Despite the measures being announced today, is it not the truth that a generation of young people has been badly let down by a Government that is so out of touch that it did nothing for 18 months while youth unemployment continued to rise?

[Lord Freud]

I should like to pick up one aspect of that question, which is the nostalgia displayed for the future jobs fund. When you look at the results of the future jobs fund, you find that, two months after the period ended for a major cohort early on, about half of the people who took part were back on benefit. If you look at what happened under work experience, two months after the first cohort went through, roughly half of the people were off benefit—the same. The difference was that the future jobs fund cost £6,500 whereas the work experience cost £325—20 times cheaper. That is the difference of our activity in looking after youth. We are just as effective, but we are doing it cost-effectively.

[Baroness Brinton]

My Lords, I welcome the Government's expansion of apprenticeships, but it is wrong to assume that this on its own will lower unemployment. Currently, most apprenticeships go to young people already in jobs. Only if a job with an apprenticeship is offered to a young person currently on jobseeker’s allowance will unemployment fall. What steps are being taken to develop closer work between DWP and BIS to ensure that apprenticeships indeed go to unemployed young people?

[Lord Freud]

We are very concerned to have apprenticeships going to the people who need them most. Last week, we announced incentives for employers effectively to take an extra 20,000 people off JSA by giving incentives of £1,500 to do that. We are having a massive increase in apprenticeships. The starts have gone up to about 440,000 this year, which is up 50 per cent on the previous year.

[Lord Touhig]

My Lords, for many young people in this country, the only experience they have of full-time employment is looking for a job in the first place. When the Government's new unemployment scheme for young people is up and running, how many weeks will it take to place an unemployed youngster in work?

--- Later in debate ---

[Lord Freud]

We have a very elaborate structure to help youngsters back into the workplace. The most important element of that is the work programme, which is our new structural programme to help everyone back into work. Youngsters go into that after either nine months or, if they are regarded as particularly vulnerable, three months. That programme is designed to offer them individual support.

[Lord Roberts of Llandudno]

My Lords, does the Minister agree that the situation we are in with young people out of work is far too serious for traditional remedies and that we need some way to acknowledge the structural unemployment? In the past seven years, youth unemployment has been at double the rate of the rest of the unemployment figure. Is it not possible that we need new ways—I mentioned yesterday a Minister solely responsible for youth unemployment, or even a cross-party grouping which could tackle this in a serious way?

[Lord Freud]

My Lords, we are tackling this in a serious way. It is a very complicated issue, but the trick is to understand what has to be done to help youngsters. Only four things help youngsters: educational qualifications, apprenticeships, a job or work experience. We are trying to boost those elements massively in our youth contract.

[Baroness Symons of Vernham Dean]

My Lords, the Minister will have heard it said this morning that applications from young people to be students at university next year have fallen by 16 per cent. He has just mentioned the importance of qualifications for young people. Can he tell us why he thinks those applications have fallen by 16 per cent?

[Lord Freud]

My Lords, one effect of increased fees at universities is that youngsters realise the relative attraction of apprenticeships.

[Noble Lords]

Oh!

[Lord Freud]

There has been a substantial increase in the number of apprenticeships with, as I said, 442,000 starting in 2010-11. We are putting a lot of money towards supporting them, and this is something that other advanced economies such as Germany have concentrated on. I, for one, welcome the rebalancing of our education and support systems in this country.

[Lord Boswell of Aynho]

My Lords, given that I used to employ people, I think that I would feel more comfortable, as I hope the Minister would, about employing a person with a decent apprenticeship which has captured their imagination and given them educational attainments than somebody with a questionable degree from a less good and less vocationally related university, which may well be an inappropriate direction for their talents.

[Lord Freud]

My Lords, we have a real problem in our education system which we are aiming to correct. One of the most shocking things in the report on vocational qualifications from Professor Wolf was the number of youngsters whom we are failing with regard to vocational qualifications—350,000 16 to 18 year-olds a year. If we can get that sorted out and get those young people into good apprenticeships, we will have done a lot to solve the problem that we are all worried about.

Unemployment: Young People

Lord Freud Excerpts

Monday 28th November 2011 Lords Chamber

[Lord Roberts of Llandudno]

To ask Her Majesty’s Government whether they will appoint a Minister to deal specifically with youth unemployment.

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

My Lords, the Government have no intention of doing this. We already have a Minister for Employment who has a clear strategy and robust policies to support young people into work.

[Lord Roberts of Llandudno]

My Lords, I am sure we are grateful for the youth compact that was announced a few days ago and, wherever we sit in the House, wish it well in denting somewhat the 1 million young people who are looking for jobs. However, would it not be better to have one person with an overall view to look at the short-term and long-term problems of youth unemployment, and to co-ordinate the various departments and strands of policy that are affected by them?

[Lord Freud]

My Lords, youth unemployment, specifically, falls within the context of overall unemployment or employment. In practice, it is more important to have integrated support for people to get back into the employment market than across government for youth. In that area, we have the Social Justice Cabinet Committee, which looks at supporting society right across the piece, including youth.

[Baroness Armstrong of Hill Top]

My Lords, is the Minister aware how much the Government are failing many young people in the north-east? We have the highest rate of unemployment and of youth unemployment in the country. That part of the country is struggling to keep going. Given that the Government scrapped the Future Jobs Fund and the regional development agency, which was much engaged in these things, will the Minister give his personal commitment to look at what is going wrong in the north-east and to come up with specific answer for that region and those young people?

[Lord Freud]

My Lords, without just saying yes, I will give that commitment, I want to point out that despite a growing economy some real structural problems have existed in different regions over decades, and certainly over the past decade. There are no easy solutions, but I will follow up the request personally and look at some of these regional issues. We are spending a great deal of time worrying about this.

[Lord Northbourne]

Will the Minister indicate what proportion of the 1 million or so unemployed young people have families where neither the father nor the mother is in employment?

[Lord Freud]

My Lords, I have actually forgotten that particular number, though I did know it. I will commit to writing with the precise number, which has fallen out of my head. I am sorry.

[The Lord Bishop of Liverpool]

My Lords, the Bishops very much welcome the development of apprenticeship schemes. However, is the Minister aware that small businesses very often lose out on the major apprenticeship schemes? Is he aware of the Apprenticeship Training Agency in Liverpool that brings together the Chambers of Commerce, the city council and the colleges in providing apprenticeships for small and medium-sized enterprises? If so, would he like to replicate that model elsewhere?

[Lord Freud]

My Lords, the point about the involvement of small and medium-sized enterprises is a very good one. Last week, we announced a subsidy to enable small and medium-sized enterprises to take on an extra 20,000 apprenticeships with an incentive of £1,500 a time. One of the issues with SMEs is that they need to have comfort that they can go on employing an apprentice for a long time. That is the key issue to get SMEs back into this particular support.

[Lord Cormack]

My Lords, as there is a real danger of a generation growing up without hope, would my noble friend discuss with his ministerial colleagues the desirability of having some form of national social service which all young people can undertake when they leave school?

[Lord Freud]

My Lords, we are, as a priority, looking at how to help youngsters back into the workplace. That is what our youth contract, which was announced on Friday, is about. It is about trying to do the important things, which are work experience, apprenticeships and getting people work through a subsidy to employers.

[Lord Walton of Detchant]

My Lords—

--- Later in debate ---

[Lord Davies of Coity]

My Lords, more than 50 years ago, when I was serving my apprenticeship, the industrial training boards had a levy and grant system that ensured that all small and medium-sized businesses produced apprentices or paid the levy if those businesses poached skilled men from the big companies. Why should we not reintroduce that system?

[Lord Freud]

My Lords, we clearly need to rebuild the apprentice structure in this country—or at least build it, as was never particularly strong compared with countries such as Germany. We are very actively looking at how best to do that.

[Lord Walton of Detchant]

My Lords, to follow up the question of the noble Baroness, Lady Armstrong, is the Minister aware that the newspapers in the north-east reported over the weekend that properties to a value of £130 million owned by One North East, the regional development agency that is being abolished, are being sold and that the money derived from those sales will revert to the Treasury? Would not this money be better spent on doing something about youth unemployment in the north-east?

[Lord Freud]

My Lords, we have just announced putting in an extra £1 billion boost to youth unemployment and that money has to be found from somewhere. The Autumn Statement may be examined with great interest as regards how the money has been shuffled to get that support for youngsters, within an overall spending envelope that it is vital to maintain in order for us to keep low interest rates in this country.

[Baroness Farrington of Ribbleton]

My Lords, will the Minister go back to his Government and look at the question of education maintenance allowances? In the 1980s, under a Conservative Government and amid high youth unemployment, Lancashire County Council was one of the first areas to bring in education maintenance allowances. In high youth unemployment areas such as Skelmersdale, the staying-on rate for further education and training increased by more than 30 per cent. We in Lancashire were complimented by a predecessor Secretary of State, Sir Keith Joseph, who allowed us to create more tertiary colleges to do this. Why are the Government ignoring tried and tested policy?

[Lord Freud]

My Lords, there was about 90 per cent dead weight in EMA, and we replaced it with a bursary system on which we are spending £180 million. That started this September.

Welfare Reform Bill

Lord Freud Excerpts

Monday 28th November 2011 Grand Committee

Moved by

[Lord Freud]

104: Clause 111, page 78, line 12, at end insert—
“(2) In section 190 of that Act (parliamentary control of orders and regulations), in subsection (1), before paragraph (za) insert—
“(zza) an order under section 115A(3B);”.”

--- Later in debate ---

[Lord Freud]

My Lords, Amendments 104A and 104B, tabled in my name, are similar in intention to an earlier suggested amendment to Clause 102. These two amendments will ensure that where a claimant’s benefit is paid to a third party, usually a landlord, recovery of any civil penalty, along with recovery of the associated benefit overpayment, may be made by making appropriate deductions from that benefit payment. Currently, there is a slight difference in the wording used by this clause and Clause 102 when specifying that amounts are recoverable. This was unintentional.

Amendments 104A and 104B remove that difference and ensure a consistent read across. This will mean that, in the limited circumstances in which the third party benefit payment is the only one from which we can make a recovery, we can ensure that whenever a civil penalty is imposed, that penalty and the benefit overpayment may both still be recovered by deduction from that benefit.

In every civil penalty case there will always be an overpayment of benefit and we intend that the civil penalty will be added to the overpayment and recovered in the same way. Being unable to recover the civil penalty in the same way as the overpayment would mean that some claimants could evade the consequences of their negligence or failures to provide accurate and timely information and unnecessarily limit the methods of recovery available for civil penalties.

We want to make it clear that the civil penalty is always recoverable from the person at fault, even if in practice the claimant’s benefit is being paid to a third party. The process for recovery of the civil penalty needs to fit appropriately with debt recovery processes. Aligning the wording in new Sections 115C and 115D with that used in Clause 102 helps us to do that.

Amendments 104AA and 104ZA seek to prohibit the setting of targets for the civil penalty and limit our ability to impose a civil penalty to cases in which there has been a failure to provide information. The noble Baroness, Lady Drake, and my noble friend Lord Skelmersdale asked about negligence. We consider that the requirement of negligence in new Section 115C already implies that there is no reasonable excuse for the failure to take care of their award or claim. However, new Section 115C(1)(b) ensures that if reasonable steps to recover the error have been taken, the penalty will not apply. I certainly understand the possible ramifications if targets were attached to a penalty such as this. It is for exactly those types of reasons that we are not attaching penalties.

Perhaps I may update the noble Baroness, Lady Drake, on the figures in the impact assessment and the number of penalties. Last week, on 22 November, a revised impact assessment was issued that reflects updated estimates relating to the new civil penalty. We are assuming that the changes based on assumed overpayments of above £65, rather than the overpayment of £15, which was part of the earlier working assumption, has led to a substantial revision, and the number of penalties that we will consider moves down to 400,000 a year. We expect to make only half of those, 200,000, which is a substantial decrease on the figures mentioned by the noble Baroness.

[Baroness Hollis of Heigham]

I warn the Minister that that is one of the biggest elephant traps he is setting himself in the entire Bill.

[Lord Freud]

My Lords, I have to make clear that we are taking powers to do this. We do not have to use them.

[Noble Lords]

Oh!

[Lord Freud]

Let me make this absolutely clear. There were concerns that we would have a kind of speed camera situation here. This is about behaviours and making sure that people pay real attention when they are filling in their forms. The actual figures—

[The Countess of Mar]

The noble Lord referred to new Section 115C(1)(b), which states:

“the person fails to take reasonable steps to correct the error”.

Is this after the person has been told that there is an error, or must he find out that he has made an error in order to correct it?

[Lord Freud]

“Negligence” and “reasonable steps” are legally bound words. There is a huge case law about what they imply. One needs not to be negligent when filling in an application and to take reasonable steps to correct mistakes. If you do not know that you have made a mistake, you cannot expect to be able to correct it. That would not be a reasonable step. However, there is a legal framework around these words. I go back to the point I was trying to make about the incentives on the system as opposed to on the individual. On the penalty rates that I gave noble Lords, we expect that the amount collected in a year, for example 2014-15, will be roughly £9 million and the cost of delivering that system of civil penalties the same figure, £9 million, so there is no incentive in the structure to have unnecessary civil penalties. That is not the point. The point is to—

[Lord McKenzie of Luton]

Will the noble Lord help me? Do the penalties accrue to the department or to the consolidated fund?

[Lord Freud]

That is as I would expect from the noble Lord. It is such a wicked question that I am baffled as to the answer. I think everyone is baffled. It is a magnificent question. It has bowled me out on my middle stump. I will have to find out the answer. I will not even hypothesise about where the different funds go. The right analogy for this is when you go to the dentist, having made an appointment, and you fail to attend. The dentist will charge you an amount in many cases in order to discourage that behaviour. When you are giving out a free good, it is very easy for the recipient to abuse it. You counterbalance that by making that somewhat expensive. When you go beyond a free good and you are giving out a positive good, that is even more the case.

[Baroness Hollis of Heigham]

My Lords, the point is that, on any reasonable analogy, the simpler it is for the individual to make an appropriate response such as telling the dentist they cannot come, the more reasonable it is to have a penalty if they fail to do so. The more complicated quantum of knowledge that they are expected to have about their entitlement, and therefore the easier it is to make a mistake or to have a misunderstanding, the more unreasonable it is to have a penalty. Would the noble Lord care to share with us an analogy in civil life as complex as knowledge of this Bill is for the complainant or applicant, rather than the dentist analogy?

[Lord Freud]

My Lords, I hope that it will be as simple as the dentist analogy. The whole point of introducing universal credit is that we get something as simple as saying yes or no with regard to your situation. The existing position is much more complicated than that. As some noble Lords will have seen when I did a presentation on the universal credit, we are trying to boil it down to simplicity. Where it is complicated, that is prima facie evidence that there is no negligence. The noble Baroness’s suggestion that we might take time to check out how the system is bedding in is not a bad one.

[Baroness Hollis of Heigham]

Oh!

[Lord Freud]

Let us not bargain. It is not a bad suggestion. One of the things we want to do—

[Baroness Meacher]

The Minister said that if something is complex, you will not have negligence. Does he accept that what is complicated for one person might be not complicated for another? Certainly what is perfectly straightforward for somebody of average intelligence, for example, might be incredibly complex and difficult to follow for somebody with an IQ well below average. Is there any intention to check that sort of thing out? I know there is a later amendment on this, but it is relevant to this discussion.

[Lord Freud]

It is very relevant. One of the things that we are going to be monitoring as we look at the system is clusters of mistakes because, by definition, the system is not working properly where we are in that position. We will need to work this system in carefully. The noble Baroness, Lady Hollis, who is right on a lot of things, gives a warning, which is right. We cannot use this in an arbitrary way. We must have something, just as the NHS, HMRC and the train companies—I suppose everyone has boilingly paid the extra train ticket surcharge when they were on the wrong train—have systems to encourage people to comply with particular rules. It is particularly necessary where you have a system that is not even a free good. You are giving money out, so you have a positive incentive to shade a few inaccuracies without being fraudulent. We just want to keep people straight.

[Baroness Hollis of Heigham]

I thought it was very revealing when the Minister said the answers are yes/no. Most of these questions are binary—yes/no—but all the difficult ones, the ones people are going to appeal on, are not yes/no; they are shades of grey. When is a lone parent no longer a lone parent? Does a boyfriend stay one night, two nights or three nights? Does he contribute £20 for his weekend food or £50? Is he on the tenancy agreement? In that case, there is no question. That is a shade. It is a judgment call, not a negligence call. It is the same with the student son. It probably would not occur to parents in social housing that their son, who is at the local university and doing bar work at night, could be in the non-dependent adult deduction range. Why should they think so? It is a line, but they do not know where those lines are drawn.

The Minister is right that if somebody deliberately says, “I am not working and I want JSA”, but is actually earning £200 or £300 on the side in the building trade, that is a yes/no, but most of the issues that go to appeal—most of the difficult issues—are shades of grey, and many of us around this table would not be able to advise somebody. I really do not see how the client could possibly judge whether it was appropriate to tell the department or not.

[Lord Freud]

I do not think that we disagree on this. It would not be reasonable where there is clearly a lot of grey in the assessment, and I do not think a court in the land would allow us to say that someone was being negligent. That is not what negligence means. Negligence means not caring at all and just slamming down the wrong information or having information that you did not bother to put down. That is negligence. Getting something wrong on shades or “It didn’t occur to me” are not negligence and would not be construed as negligence in any court in the land. A lot of this is concern about things that the language does not support.

[Lord Touhig]

In my experience over years in the other place of dealing with cases in which people had been overpaid and the department sought to reclaim money, the department always took the line that the claimant was at fault and had been negligent. If we do not get away from that, we are storing up a huge problem. The line of the department has been that it is the fault of the claimant who has deliberately got this wrong, is in the wrong and therefore must repay some benefit they have had.

[Lord Freud]

I do not think that that is what is happening with overpayments, which are a separate category from these civil penalties. On overpayments, the department has taken the view that if people have received money they were not entitled to, that money should come back to the department, and there is no fault or blame attached in that requirement, so it is quite different from the civil penalty.

--- Later in debate ---

[Baroness Lister of Burtersett]

Is that also the case with any other penalty, not just the civil penalty? Is it a benefits sanction?

[Lord Freud]

We absolutely will not do that. The noble Baroness drew a comparison with current levels of JSA usage. The online facility that we offer claimants is so markedly inferior that people would not want to use it. We need to make sure that people will want to use the online provision, and we are taking a lot of active steps to look at how to encourage and help people to use it. Indeed, this is one of the discussions that I am currently having with the various groups and charities that are trying to get the most disadvantaged in society online, because that is one way in which they become a full part of the economic life of the country, and indeed of the whole life of the country. They and I see that this could be an immensely powerful force for getting that inclusion. As I said, we will work very hard to encourage people to use it. One does not encourage people to do something that could be life-transforming for them through some of the things which the noble Baroness suggests I might be doing.

The aim of the civil penalty is to reinforce the importance to claimants of providing accurate information that we require in order to administer their claims and awards in advising us when they have a change of circumstance. It is a different issue when someone does something knowingly. That is fraudulent, and we will target that behaviour by looking at tougher punishments than the one for missing a dental appointment—I had better not talk about my teeth. We want claimants to take more responsibility for overpayments and to encourage a positive change in claimants’ future behaviour so that they take proper care of their benefit claims and awards.

The noble Baroness, Lady Drake, made an important point about mental health. We will take that into account. Indeed, that is why we require the claimant to have acted negligently and to have no reasonable excuse. The department must satisfy itself that the claimant has failed to take appropriate care. Each case will be considered individually by the decision-maker, and the penalty will not be imposed if a claimant’s state of health or mental health is considered relevant to the error that has been made.

Amendment 147ZA would mean that a civil penalty could be imposed only on those who failed to notify us of changes of circumstances and the failure resulted in an overpayment, while a claimant who incurred an overpayment by virtue of their negligence and who failed to take reasonable steps to correct the error would evade a penalty. We already help claimants in Jobcentre Plus and, as I have said, we will reinforce that. We believe that everyone should take responsibility for the accuracy of the information they provide in order to receive a benefit, whether that be at the start of their claim or during the life of their claim when there has been a change of circumstances.

As for the question asked by the noble Baroness, Lady Drake, on legal aid, information on benefits and the conditions of entitlement for them is readily available to the general public. If claimants remain uncertain of which benefit is most applicable to them or have a question about their benefit entitlement, they can and should seek further advice from the department. New Sections 115C and 115D will therefore act together to remind claimants that it is just as important that they correctly report their circumstances at the start of the claim as well as report changes that occur within the life of a claim.

I will aim to answer the remaining three questions, having been bowled out on the fourth. On the ability of local authorities to impose fines, we consulted local authorities on the detail of the initiatives in the strategy and on our plans to implement them. Local authorities have provided input to the various projects that we have set up to implement the strategy. We have local authority staff collocated with the DWP and working on the strategy. That includes the sanctions and penalties project, which is doing the work on civil penalties. We will support local authorities in their work to implement the new penalty, which will include providing clear instruction and guidance on how to operate the new scheme. On the £50—

[Baroness Hollis of Heigham]

Perhaps that would not work. For example, in two side-by-side authorities, a family with two siblings lives with one sibling in each borough. One local authority may decide to exempt in such cases. They have to make 10 per cent cuts and are required to exempt pensioners, which would make 30 per cent cuts. One local authority decides to exempt disabled people all together, so they would have nil. The other does not and the matter is worked out on income. In that situation, how will two disabled siblings who live in two side-by-side boroughs work that out? How will the local authority work out what they should declare, what they should not and what the appropriate penalty could be? It is a complete minefield.

[Lord Freud]

Clearly, there are always difficult and special cases. I suspect that an old lady would not be eliminated entirely. The answer is that there is support for people with particularly tricky circumstances. We will work with local authorities that will be collocated in many cases, especially with the single fraud operation being set up. The shades of grey, which will start to rule out negligence, will be very evident in most of those cases.

In justification of the £50, that sum was chosen because we believe that this is a sufficient amount that will act as a punishment and make claimants more personally responsible for the overpayments they incur and encourage a positive change in their future behaviour. We have also set a significantly lower amount than the harsher punishments available for fraud offences, which reflects the fact that it is directed at the failure to take proper care of a benefit award and is not about fraudulent behaviour. Under the appeal process, the claimant will be able to appeal against the overpayments decisions, the civil penalty or both.

For those reasons, I urge noble Lords to reject Amendments 104AA and 104ZA.

[Baroness Drake]

I thank the Minister. Perhaps I may address some of the points that he raised because I still feel deeply concerned. I probably have slightly more concerns now than I did previously. I do not say that provocatively and I will try to say why. First, it should be made clear that this is a civil penalty that does not deal with fraud issues. There are separate clauses for that. The stated purpose of this civil penalty is to improve people’s behaviour in the accuracy of their form-filling. The concept of introducing the civil penalty worries me, particularly for a community of people with a greater concentration of the vulnerable and lower levels of numeracy and literacy, and when we are taking this means of a civil penalty to address behaviours, some of which are systemic and cannot be dealt with simply by handing out civil penalties here, there and everywhere—notwithstanding that the Minister said that that is not the intention.

The Minister said that Clause 113 goes on to say that there will be no penalty if you take reasonable steps to correct the error, but the point is that someone cannot take reasonable steps to correct an error if he does not know that he has made it. That is the problem. Someone could face the civil penalty before having the chance to put it right because he does not know that he has done something wrong. A concentration of people will be increasingly in the category of not knowing that they have made the error when filling out the form.

The Minister also said that I should not be worried about how the powers will be deployed, but he gave me one of the reasons why I am concerned. Quite rightly, and I do not disagree with him, he said that a civil penalty always comes at the same time as recovering an overpayment. If you issue a civil penalty, you have confirmed that there is an error, so it must follow that there is the recovery of an overpayment. If ever an incentive were articulated, that is it. You do not have to exercise discretion on overpayments; the awarding of a simple penalty puts you straight into going for that overpayment. No other considerations come into play. You make the easier decision to award a civil penalty because you do not then have to make the more complex decision about how to apply a discretion to an overpayment.

[Lord Freud]

My Lords, let me make this absolutely clear. It is the other way round. You can charge a civil penalty only when there has been an overpayment and you would not necessarily charge a civil penalty when there was an overpayment unless you associated that overpayment with negligence.

[Baroness Drake]

That is my point. If civil penalties and overpayments are inextricably linked, you would not award a civil penalty unless there had been an overpayment. You can almost produce an incentive to put something into the category of an error attracting a civil penalty because it makes it easier to justify chasing the overpayment.

[Lord Freud]

My Lords, I must make this absolutely clear—it is my third go at this. An overpayment happens when someone is paid something they should not have been paid. A civil penalty will be charged only when there is both negligence and an overpayment. I forget the logical post hoc, or whatever. We need to get it round the right way.

[The Countess of Mar]

Let me get this absolutely clear. The department finds that there has been an error. Does it then tell the claimant that there has been an error, who says, “Oh dear, I’ll put it right”, and that is it, or does the department say straightaway that it is negligence? Is there a step in the middle when it goes to the claimant?

[Lord Freud]

My Lords, in practice it will depend very much on the circumstances. Clearly, if one had a blanket rule it would be possible every time an error was uncovered to say, “Oh, just a mistake, I’ll put it right”, or, “It was negligence”. There will have to be occasions when it is pretty clear that there was genuine negligence. That will be testable and appealable on a set of definitions around what is negligent.

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[Baroness Hollis of Heigham]

I think that the power exists for tax credits but not for other benefits. At a briefing session, I asked one of the Minister’s officials— I shall not land that person in it—how often it had been used. Their answer was that they were not absolutely sure. I asked whether it was 20 or 2,000 times. Nearer 20, came the reply—in which case, I wonder where that figure of 200,000 would come from and whether it suggests that a lack of clarity is expected in the forms rather than negligence on the part of the people filling them in.

[Lord Freud]

Let me quickly pick up three issues. First, when I talked about clusters, I meant that, where there are clusters and mistakes, something is clearly going wrong with the way in which we are presenting universal credit. In those circumstances, we would look very hard at fixing that problem and we would not be able to accuse anyone of negligence.

Secondly, I shall look very closely at the run-in to operating the universal credit system. I agree with the noble Baroness, Lady Hollis, on lots of things. She is absolutely right that we cannot have a system that demonstrates problems in its run-in phase.

Thirdly, on targets, I need to write to noble Lords. I would not mind forbidding the DWP from ever using those targets in that way—and I could offer it as a deal any day—but a future Government might not want to be so constrained.

[Baroness Lister of Burtersett]

I thank the Minister for his clarification about clusters. How many £50 fines would there need to be before there was a cluster? If it was then accepted in the department that the problem lay in universal credit or in the way in which the form was designed, would the department then consider paying back any £50 fine?

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[Lord Freud]

No, I meant a cluster of mistakes. When we begin to see a cluster of mistakes around a particular set of questions, it clearly means that we have not got it right and need to do something about it. But we will know very fast.

[Baroness Lister of Burtersett]

I accept and quite understand that, but the point is that, before the department realises that there is a cluster, a number of people might have been fined.

[Lord Freud]

My Lords, I buy the point about the delicacy of the run-in. I have a tool with which to monitor it very carefully. However, we must have a system that tells people that they must take care with their application. This is an application on which tens or hundreds of thousands of pounds are riding. It is no good people just putting in slapdash figures and not caring; this is really important information and it must be put down carefully. That is what we are trying to ensure with this relatively modest civil penalty.

[Lord McKenzie of Luton]

My Lords, I am very happy for the Minister to write to us on this rather than to spend more time today, because we need to make progress. This is about the practicalities. He has already indicated that the system could cost £9 million a year to operate. If a local authority seeks to collect both an overpayment and a penalty, the overpayment presumably reverts to the local authority. We do not know whether the penalty reverts to the Consolidated Fund or the DWP, but I presume that it is not to the local authority. The Minister will see that, in those circumstances, which may be quite common, one needs rules about how what is collected in respect of the two components is allocated between them. That presumably creates some administrative costs as well.

[Lord Freud]

I will need to write.

[Baroness Drake]

On the clusters point, clusters will presumably arise by type of error or a particular demographic of those filling in the form erroneously. I come back to my point that that issue should be dealt with not by civil penalties but by taking a more focused look at how one deals with those types of problem. I welcome the Minister saying that he is absolutely for the forbidding of targets. As to whether a future Government would be so constrained, no doubt noble Lords can argue with a future Government if they want them to be so constrained. We are trying to constrain this Government, so I certainly welcome any offers to constrain the way in which this civil penalty is used, although my preference is for it not to be there. I worry about the concept of a civil penalty and its deployment in the community of people whom we are discussing.

Finally, the Minister said that information is readily available, but you need to be able to understand it. No doubt he would say that if you do not understand it you should seek further advice from the department. However, I come back to the issues around the numeracy and literacy skills of this community of claimants. My point is that a new system of civil penalties is coming in. This partly goes to the point that my noble friend Lady Hollis made about trying to run a system of civil penalties when a new system is coming in. There will be less opportunity to find the people who this community of people normally approaches for support and help in filling out their forms because legal aid support through the advice system will not be there. We know that the local authority service will be run down, given the way in which benefits will be dealt with. We know that Jobcentre Plus venues are closing, and the jury is out as to how efficient a call centre system can be—certainly in the first few years—in supporting some of the vulnerable claimants who could be caught by erroneously filling out their forms. I beg leave to withdraw my amendment.

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Moved by

[Lord Freud]

104A: Clause 113, page 79, line 8, leave out subsection (4) and insert—
“(4) A penalty imposed under subsection (2) is recoverable by the appropriate authority from the person on whom it is imposed.”

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Moved by

[Lord Freud]

104B: Clause 113, page 80, line 5, leave out subsection (4) and insert—
“(4) A penalty imposed under subsection (1) or (2) is recoverable by the appropriate authority from the person on whom it is imposed.”

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Moved by

[Lord Freud]

105: Clause 113, page 80, line 16, at end insert—
“(2) In section 190 of that Act (parliamentary control of orders and regulations), in subsection (1), before paragraph (za) insert—
“(zzb) regulations under section 115C(2) or 115D(1) or (2);”.”

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, as has been said by my noble friend Lady Sherlock, the noble Lord, Lord Ramsbotham, has made a powerful case in principle. Like the noble and learned Lord, Lord Mackay, I am not quite sure that the formulation set down here is quite right, as it lumps together sanctions, penalties and recovery of overpayments, and there might be arguments for unpicking those. It would be helpful, in any event, if, following this debate, we could have in writing a note as to what information decision-makers would routinely have in front of them when they make the decision with regard to each of those various categories. That would help us as we move to Report.

We debated issues around the claimant commitment earlier, as has been said. My noble friend Lady Lister made the important point again about that being more about co-production rather than something that is delivered and given to the claimant. That is an important point. As my noble friend Lady Sherlock said, we are dealing with people whose resources are, almost by definition, incredibly stretched. In many cases they are on the edge. If we are going to further reduce the means that they have, then we ought to be very clear that we do that in the knowledge of all of the circumstances and the impact on their well-being.

[Lord Freud]

My Lords, I agree that it is right and proper that a decision-maker gives full consideration to all the relevant facts provided by a claimant when deciding whether to impose a sanction or penalty. It is also important that claimants have appeal rights when sanctions and penalties are imposed. I believe that the amendments are unnecessary because we have adequate protections in place, but I am very happy to meet the noble Lord on this matter. Let us go through it, because it is important that we get it right.

The essential difference between us—although, as the noble Lord, Lord McKenzie pointed out, we need to tease out three different things here—is that the noble Lord, Lord Ramsbotham, is looking for a specific process, whereas we are aiming, in the legal framework as it stands, at a general process of cover. The noble Lord will be aware that, if you have a whole load of specific things, you have a problem when you get the special case that is not covered, whereas if you have a general protection you are covered. I think there is a fruitful discussion to be had around that, and I would welcome a discussion to see that we have the right protections because, again, I do not think there is a huge difference between us here. We want to have the right protections for a vulnerable group. We do not want arbitrary behaviour; we want common sense. It is just a question of looking through. I will circulate the note on this matter to the noble Lord, Lord McKenzie, as well.

We are training decision-makers on a number of areas: retaining impartiality; identifying what constitutes evidence and where the burden of proof lies; on the concept of the balance of probabilities; and on an understanding of social security law. It is vital that we do this.

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[Baroness Hollis of Heigham]

I trust this information is reliable, but in today’s press there were quite a lot of stories about how long appeals are taking and that the department—or, rather, following Leggatt, the tribunals system—is having to appoint a further 85 judges to sit on appeals tribunals because of the backlog, which is up to 12 months. Can I have an assurance—I am sure that this must be the case—that, while waiting for an appeal, no interest is ticking up on sanctions, penalties, overpayments or anything like that?

Secondly, checking with the law on tax credit as opposed to what may be the case on UC, I think that nearly all the difficulties with tax credits were not at the initial point of claim but were changes of circumstance and nearly all of them were associated with childcare changes. Half of all lone parents had more than a dozen changes of circumstances in a year, the system never caught up with itself and the computer nearly toppled. How is this going to work in this situation? People’s childcare circumstances inevitably change over half-term, a Baker day, Easter and Whitsun. By the time you keep reporting them or not reporting them—or feeling that you do not need to report them because there has been no reply to the previous report—you could be in a complete mess. I do not see how the Minister is going to manage this.

[Lord Freud]

The answer to the first question is that interest is not ticking.

On the second question, I share the noble Baroness’s concern about how the present childcare system works on reporting, which is why we are producing an entirely new system with a monthly report and a monthly payment system. Basically, how the system will work is that you put in the receipt for what you have paid, and then that payment is repaid on a monthly basis. The problem presented by a change of circumstances will go. Roughly 15 per cent of problems are caused at the initial stage of the original application. It does not seem sensible to privilege one set of mistakes against another when it is a reasonably substantial proportion.

I am very happy to meet the noble Lord, Lord Ramsbotham, to go through these issues in some detail, because I share his and other noble Lords’ concern that we get this right.

[Lord McKenzie of Luton]

My Lords, if the noble Lord, Lord Ramsbotham, agrees, might we join in with those discussions or reflections?

[Lord Freud]

I would be utterly delighted to invite noble Lords, but not too many. Perhaps the noble Lord, Lord Ramsbotham, will give permission for the Official Opposition team to join him. If he does, I would be delighted to see you all.

[Lord Kirkwood of Kirkhope]

If there are invitations floating around, could I add my name to the list? Two things worry me that we have not touched on. I support the amendment. I do not think that any of us really understands the full consequences of localism as it is finally rolled out. In terms of the public purse as generally described, if we do not have sensible means inquiries within the DWP provisions, we may just be handing on costs, charges and families in distress to our local government colleagues. That does not take us very far.

Another obvious point is that the legal aid changes that are coming are very worrying. If we look at some of the wider context in any such meeting, that would be extremely valuable, too.

[Lord Brooke of Sutton Mandeville]

My Lords, I reassure my noble friend the Minister that I am not asking to come to this meeting, but, as somebody who has sat through long hours in Grand Committee, I would diffidently make the suggestion that both matters might be treated at the same meeting.

[Lord Freud]

Yes, my Lords. I think, actually, I withdraw my offer of a meeting, because, given the level of interest, it is probably not appropriate. We should rather have a little seminar where the noble Lord, Lord Ramsbotham, is the leader, but I must welcome anyone who wants to attend that, because it does not make much sense to be too exclusive. Does that suit? Let us sit down and see whether there are any cracks in this, as some noble Lords are concerned about.

[Baroness Hollis of Heigham]

Sorry, if somebody puts the same information into their applications for universal credit and for localised council tax and the information is negligent or erroneous, though not fraudulent in both cases, are they exposed to two penalties?

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[Lord Freud]

No.

[Baroness Hollis of Heigham]

Then who will get the money? Will it be the local authority or the department?

[Lord Freud]

When I have worked out the various recipients to the main fund and written, I will let the noble Baroness have a copy of the letter that I send to the noble Lord, Lord McKenzie.

[Baroness Hollis of Heigham]

Thank you.

[Lord Freud]

I ask the noble Lord to withdraw his amendment.

[Lord Ramsbotham]

My Lords, I was not quite certain what we were going to end up with after all that. I was very grateful to the noble Lord, Lord McKenzie, for pre-empting me in suggesting that others should come to that meeting, not just those who put their names to the amendment but also those who have spoken, because I suspect that there is quite a lot to be done. I think that it might be sensible also to include some of the groups that approached me in the formulation of the amendment to hear from them on the ground as they have a great deal to contribute. I found it encouraging that the Minister agreed that this was an issue that really has to be tackled so we all start from a common ground.

As always, I am grateful for the wisdom of the noble and learned Lord, Lord Mackay. I absolutely accept what he says and indeed, I have looked at this process in Grand Committee as being a way of refining what we were saying. It was getting something done that needs refining, which I saw as the purpose of the Grand Committee. I entirely take the Minister’s idea that we take this on with a seminar. It is too important an issue not to be explored in detail. The noble Lord, Lord Kirkwood, has introduced the issue of localism, and so on, so there are other issues, as well as the Legal Aid, Sentencing and Punishment of Offenders Bill on the impact on legal aid and access to justice, which should all be taken into account. On that basis, and in thanking everyone who has taken part, I beg leave to withdraw the amendment.

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Moved by

[Lord Freud]

107B: After Clause 124, insert the following new Clause—
“Unlawful disclosure of information supplied to DPP
(1) A person to whom information is supplied under section (Information-sharing between Secretary of State and DPP), or an employee or former employee of such a person, may not disclose the information if it relates to a particular person.
(2) Subsection (1) does not apply to—
(a) a disclosure of a summary or collection of information so framed as not to enable information relating to any particular person to be ascertained from it; (b) a disclosure made for the purposes of a function of the Director of Public Prosecutions, where the disclosure does not contravene any restriction imposed by the Director;(c) a disclosure made to the Secretary of State, or a person providing services to the Secretary of State, for the purposes of the exercise of functions relating to social security matters (within the meaning of section (Information-sharing between Secretary of State and DPP));(d) a disclosure made for the purposes of a criminal investigation or criminal proceedings (whether or not in the United Kingdom);(e) a disclosure made for the purposes of—(i) the exercise of any functions of the prosecutor under Parts 2, 3 and 4 of the Proceeds of Crime Act 2002;(ii) the exercise of any functions of the Serious Organised Crime Agency under that Act;(iii) the exercise of any functions of the Director of the Serious Fraud Office, the Director of Public Prosecutions for Northern Ireland or the Scottish Ministers under, or in relation to, Part 5 or 8 of that Act;(iv) investigations or proceedings outside the United Kingdom which have led or may lead to the making of an external order within the meaning of section 447 of that Act;(f) a disclosure made to a person exercising public functions of law enforcement for the purposes of the exercise of those functions in civil proceedings;(g) a disclosure which in the opinion of the Director of Public Prosecutions is desirable for the purpose of safeguarding national security;(h) a disclosure made in pursuance of an order of a court;(i) a disclosure made with the consent of each person to whom the information relates.(3) Subsection (1) does not apply in relation to information relating to schemes and arrangements under section 2 of the Employment and Training Act 1973.
(4) Subsection (1) is subject to any other Act or to an instrument made under an Act.
(5) A person who contravenes subsection (1) commits an offence.
(6) It is a defence for a person charged with an offence under this section of disclosing information to prove that he or she reasonably believed—
(a) that the disclosure was lawful, or(b) that the information had already and lawfully been made available to the public.(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both, or(b) on summary conviction, to imprisonment for a term not exceeding twelve months or a fine not exceeding the statutory maximum or both.(8) A prosecution for an offence under this section may be instituted only with the consent of the Director of Public Prosecutions.
(9) In relation to an offence under this section committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (increase in maximum term that may be imposed on summary conviction of offence triable either way), the reference in subsection (7)(b) to twelve months shall have effect as if it were a reference to six months.”

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Moved by

[Lord Freud]

108: Clause 126, page 96, line 20, leave out second “prescribed” and insert “relevant social security”

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[Lord McKenzie of Luton]

My Lords, we have a good deal of sympathy for the amendment of the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Thomas. My understanding is that draft regulations—or proposals for regulations—have to be submitted to the SSAC except in certain circumstances. One of them, which has been mentioned, is that regulations made within six months of the enactment of primary powers do not have to be submitted.

This amendment seeks to say that the six-month clock should start when the Bill becomes an Act, not when the particular provisions are drawn down. That could widen the scope of what the SSAC should review. I support that. It is sometimes uncomfortable as a Minister being on the receiving end of a report from the SSAC, but in a sense that is part of the process that we need to engage in. Clearly there would be issues of capacity if this change were to happen overnight, particularly given the Bill that we are now considering. It seems that Bills of this nature will inevitably be framework Bills. Our Bills were. There is always tension between working on the basis of draft SIs, trusting to luck or assurances as to what eventually comes through, and having a degree of certainty.

It is not our official position but it seems to me that one way round this would be for Parliament to be able to amend SIs. It would take us away from some of the debates that we have about trying to get stuff into primary legislation, but that is probably a debate for another day. We should take seriously the prospect of the SSAC looking at SIs more widely and not being pre-empted by the six-month rule. There is clearly an issue not only about the capacity of the SSAC but about its expertise. It is very important that that is maintained.

[Lord Freud]

My Lords, I am not alone, I know, in acknowledging the vast knowledge of my noble friend Lord Kirkwood in this area. He was, of course, chair of both the Social Security Advisory Committee and the Work and Pensions Committee in the House of Commons—I think I can say that now, if I am not pre-empting. His involvement in this important subject stretches much further than that. I welcome the probe and hope that I will be able to persuade him that the amendment is unnecessary.

The SSAC provides a valuable function and goes about its work very effectively. From my perspective and that of my ministerial colleagues, the relationship between the department and the committee is productive. We enjoy a similar relationship to the one that the noble Lord, Lord McKenzie, had. More specifically, the SSAC is currently working on a major study of passport of benefits in the light of the impact of these reforms. As my noble friend acknowledged, this is really the most significant ad hoc study by the committee that Ministers have commissioned for many years. It is a wish to look at situations in the widest possible way.

The committee’s current remit does not include the scrutiny of draft regulations made under powers recently enacted by Parliament. As my noble friend pointed out, this is for a period of six months, beginning from the commencement of the relevant enabling power. The amendment would therefore set the clock ticking from Royal Assent in all cases rather than from the commencement of the relevant enabling power. It follows that if an enabling power was commenced at a point more than six months after Royal Assent, regulations under that power would automatically be referred to the committee. I believe that that would be unnecessary. Informal arrangements are already in place in this area. As I explained when we debated Clause 1, we will continue to talk to the SSAC as we move to the implementation stage of this Bill and use the arrangements that are currently in place and that allow us to provide it with information on new powers and regulations made within six months of the commencement of those powers.

Noble Lords are aware that when the Government implement major welfare reforms, the relevant primary powers are sometimes commenced at different times, reflecting the staggered implementation process that can apply in such circumstances. Under the amendment, some of the regulations brought forward in this scenario—those brought forward within six months of Royal Assent—would not be subject to the committee’s scrutiny, but others brought forward subsequently would be, even though Parliament would have approved the primary powers applicable to the reform as a whole. That inconsistency would be undesirable and we do not believe that adding to the committee’s former role in this way would be warranted. Implementing the reforms in this Bill is an enormous undertaking.

A huge number of officials in the department are working on it, and others are working on changes to a very challenging timetable. It follows that the weight of draft regulations following the reforms would place an unreasonable burden on the SSAC if the Secretary of State were required to refer all regulations to the committee made six months after Royal Assent. That point was touched on by the noble Lord, Lord McKenzie, and I need to confirm that this is an overwhelming process, particularly right now.

I have emphasised that we already have effective informal processes in place in this area. I also believe that the application of the affirmative procedure to, for example, the first core set of universal credit regulations is another safeguard, making it less necessary to consult the SSAC on a formalised basis in respect of those regulations in particular.

[Baroness Hollis of Heigham]

I think we would all accept that there is a difference between this Bill and, for example, a pensions Bill and its draft regulations, on which the Minister, his officials and his staff need to consult what I would call the professional organisations. These are quasi-technical and may be associated with the process; they have their own exchange and interchange of information and of what they flag up, and so on. In other words, there is a professional body of interested but skilled parties who can negotiate with a department on an equal base, and, as a result, draft regulations may be improved before they subsequently become full regulations.

The trouble with welfare reform and a Bill such as this is that, apart from the charitable organisations and lobby groups that have a wealth of expertise, for the most part there are not the bodies that the noble Lord and his staff would expect to negotiate with in the same way as he would expect to negotiate with business organisations or the NAPF about pension structures. Therefore, the very fact that there might be 200 regulations coming our way means that Members too find that they have no input from professional bodies that are equivalent to those pension bodies but that deal with welfare, in order to help shape our thoughts and give us an extra resource of experience.

This is not necessarily appropriate for Bills for which there are bodies that can serve that function, but for framework Bills and where bundles of regulation are likely to cluster in a particular field—housing here, or the benefit cap there—it would be very helpful for all of us seeking to scrutinise those regulations in due course to have had the input of the SSAC before we commence, because otherwise there is nothing between us, the draft regulations and the framework Bill, and we will not get the appropriate input that we need.

[Lord Freud]

My Lords, what we are designing here is a massive undertaking. I know that I set a considerable challenge for the SSAC in the passporting arrangement alone. The noble Baroness and my noble friend ask whether adequate information flows are coming through to Parliament as we consider the regulations. We are in regular contact with the stakeholders on a wide range of issues. We have published a series of detailed policy notes. We are trying to have a very open process.

[Baroness Hollis of Heigham]

My issue is that there are no stakeholders as there are in other types of legislation. My argument hinges on that fact. In pensions legislation, and even in some of the disability legislation that is very specialist, such as the Disability Discrimination Act, which is a more legal framework, there are specialist organisations that can negotiate. We have no such organisations with this Bill. We have charities, but they are client-group representatives rather than bodies of equal professional standards, in the way that the Department of Education has teachers, the Department of Health has doctors and so on. The DWP has no equivalent.

[Lord Freud]

I accept the point. In practice, we face lobbyists and stakeholders, although one could argue that the pensions industry is also facing lobbyists, albeit slightly better resourced ones who are more interested. The core issue is what the SSAC can do with this Bill in its scale and size. The SSAC is a relatively small organisation. It has a secretariat of three or four, internal to the DWP. It has 13 or 14 members. When you look at the literally thousands of people who are creating this, it is very hard to imagine an ability to take this in its entirety, with all those regulations for the SSAC to deal with.

The SSAC has two functions. It deals with a regulatory rolling process, which is outside the major revolution that we are talking about. I hope that it will apply itself to particular issues on which we would really value its help. The first example is passporting. It was very much my own view that this would be a good way in which to start this process.

I think that noble Lords in this Committee underplay their own prowess in this area.

[Noble Lords]

Oh!

[Lord Freud]

It never failed in the past. They also underplay their ability to gather the views of stakeholders that have been coming and do come to them directly. I suggest that a major expansion of the powers of the SSAC, which this would represent in practice, is not appropriate. Any regulations for universal credit that rely on existing legislation relating to claims, awards, payments and joint claimants will still be subject to SSAC examination. I ask the noble Lord to withdraw his amendment.

[Lord Kirkwood of Kirkhope]

I do not know whether I am more frightened now than I was previously. I accept that there is a capacity issue, but I am looking for the comfort that I have heard in the past that significant matters will reach our desks as legislators faster. None of us can keep up with the flow of things. If you are just a guerrilla opposition Member, which I used to be, the default position was to table negative prayers against everything.

The Minister has to be careful that we do not get back to that safety default position where you could just give the Minister of the day a bit of a kicking at the Dispatch Box and go home. Sometimes you might hit lucky on something that the Government did not want you to know about, but that is not where we want to be. I absolutely accept that the Minister in particular has been transparent to a fault. You can see straight through him on things that are coming down the track. It is impossible to read it all, but I worry that he will struggle if these regulations come in in wodges and packages immediately after Royal Assent. I do not want people like me to be put into the position where I think, “Well, safety first. Let us just pray against it anyway”. That would not be sensible.

I would like the SSAC to say, “Of this batch, if you want to concentrate on anything, this is what you should concentrate on”. That would be massively reassuring to me. I would go home at the weekend thinking that I was earning whatever it is that we get to come here. Obviously, I will withdraw this amendment, but I hope that the Minister will reflect on that point. This is a probing amendment. I understand capacity issues and the importance of him using his expertise within the Government to get to a better place. I will read the record and try not to worry more than I did before I tabled the amendment. I beg leave to withdraw the amendment.

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Moved by

[Lord Freud]

114: After Clause 133, insert the following new Clause—
“Recovery of child support maintenance by deduction from benefit
In section 43 of the Child Support Act 1991 (as substituted by the Child Support, Pensions and Social Security Act 2000), for subsections (1) and (2) there is substituted—“(1) The power of the Secretary of State to make regulations under section 5 of the Social Security Administration Act 1992 by virtue of subsection (1)(p) of that section may be exercised with a view to securing the making of payments in respect of child support maintenance by a non-resident parent.
(2) The reference in subsection (1) to the making of payments in respect of child support maintenance includes the recovery of—
(a) arrears of child support maintenance, and(b) fees payable under section 6 of the Child Maintenance and Other Payments Act 2008.””

--- Later in debate ---

[Baroness Hayter of Kentish Town]

I am going to apologise because I think that I now stand between the Committee and what I gather is the custom that the Minister buys drinks for the whole Committee at the end.

Despite the late hour, this is a really important issue that needs raising, but I fear that because of the hour we may need to return to it later. The Child Poverty Act 2010, which established the Child Poverty Commission, was passed with cross-party support, and we believe that there is now similar support for the proposal to expand its remit to deal with social mobility, a move which the Opposition certainly welcome. However, we have serious concerns about what will happen to child poverty in the coming years. It has been mentioned several times in the Committee. The Institute for Fiscal Studies has predicted that the number of children in poverty, which had fallen to its lowest level for 25 years by the end of the previous Labour Government, will now under this Government rise to its highest rate since 1999-2000 by 2020, by which time one in four children will be poor, measured in relative terms.

I am going to raise the main points. The main point is the duty. The potential rise in child poverty over the coming years makes the work of this commission essential. The debate about its function—whether it is simply going to help count numbers or whether it is going to give advice about the impact of the numbers—is crucial. If we look at the role of the commission, one of the most important things has been the proposal that it should have a duty to advise Ministers, but this is now to be taken out. It will therefore have no duty to advise Ministers on the preparation of their strategy. It has meant that this is only the responsibility of government.

Surely the commission should not just look at technical issues around the measurement of poverty and social mobility, but should also look at advising on the results of that measurement—to advise the Government on its role. If it was only measuring it, the commission itself would neither attract a high level of membership nor would it be able to do its role properly. We therefore ask why should there not be a requirement that it advise Ministers on the policy itself? Also, how can it be that this commission could be put together without a requirement that people so appointed should be expert in its field? The final question is that it should have to have the ability to get its own research otherwise it would be dependent simply on research from the Government, which it is meant to be scrutinising. I beg to move.

[Lord Freud]

My Lords, I will speak first to Amendments 114B, 114C and 114D, which would require the Government to consult the commission on the development of child poverty strategy, and for the commission to provide advice to the Government on eradicating child poverty.

We believe that unelected public bodies should be established only in cases where there is a clear need for their role to be carried out by an arm's-length body rather than within government. The new commission, with its remit to objectively assess government progress towards improving social mobility and reducing child poverty, is just such a case. A commission established to provide advice is clearly not. There are already a variety of consultation mechanisms by which the Government can obtain independent advice on child poverty and social mobility policy. Indeed, the consultation on the current child poverty strategy received 280 responses. Moreover, it is a fundamental principle of this Government that Ministers are accountable for the policies and strategies they put forward. These amendments put this principle at risk. They offer a degree of scope for Ministers to shrug off responsibility for any lack of success of their strategy.

Amendment 114E requires that the Government publish a response to each of the commission’s reports. By giving the commission the power to publish annual reports, we are actively ensuring that progress on social mobility and child poverty remains a priority for government. The legislation requires that the commission reports be laid before Parliament, providing the opportunity for parliamentary debate.

Amendment 114F reintroduces the requirement from the original Child Poverty Act that the commission should have a particular balance of child poverty expertise. This requirement has been removed because it is clear that the new commission will require a different balance of expertise. It will monitor progress towards both reducing child poverty and improving social mobility, meeting the child poverty targets and implementing the child poverty strategy. I can assure you that Ministers are fully committed to creating a commission with the right combination of expertise. To ensure that this is the case, the recruitment process for all members of the commission, including the chair and the deputy chair, will be carried out in accordance with the code of practice of the Commissioner for Public Appointments.

Finally, Amendment 114G would give the commission the right to request Ministers to commission research on its behalf. It would also require Ministers to provide a reason if they decide not to meet the commission’s request. We do not believe that this provision is necessary. This is because the commission’s new role means that there will be no need for the commission to be able to access new research as it will not be responsible for developing new policy or strategy. Instead, the commission will produce annual progress reports, and we would expect the vast majority of the evidence needed to fulfil this role to already be available either in the public domain or from the Government. If the Government need more and need to access new research to fulfil their duties, the new legislation already enables Ministers to provide the commission with such resources,

“as the Minister may determine are required by the commission in the exercise of its functions”.

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Moved by

[Lord Freud]

115: Schedule 14, page 173, leave out lines 5 to 10

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Moved by

[Lord Freud]

118ZA: Clause 139, page 104, line 5, at end insert—
“( ) section (Calculation of working tax credit) (calculation of working tax credit);”

--- Later in debate ---

Moved by

[Lord Freud]

118B: Clause 140, page 104, line 16, at end insert—
“( ) section (Calculation of working tax credit) (calculation of working tax credit);”

Welfare Reform Bill

Lord Freud Excerpts

Wednesday 23rd November 2011 Grand Committee

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

My Lords, these amendments seek to provide exemptions on the face of the Bill from the application of the benefit cap for a wide range of different groups. I would like to start by repeating what I said on Monday. We have always been clear that we will look at ways of easing the transition for families and providing assistance in hard cases. We are very aware of concerns about the impact of the cap in specific scenarios. We have always said that we will take account of the sort of issues raised in this debate when preparing the regulations next year. The clause has been drafted to give us powers to set a cap that achieves its purpose in the fairest way possible.

Let me take this early opportunity to assure the noble Baroness, Lady Lister, that I have considered the requirements of the Human Rights Act and the European Convention on Human Rights in respect of this policy. I am content that the way in which we will implement these clauses will meet those requirements.

Let me also clarify early on the point about behavioural change and the logic of applying the cap to people with reduced conditionality—a question raised by the noble Lord, Lord McKenzie. Our policy aim is to achieve a range of positive effects through changing attitudes and expectations. Clearly, we intend in particular to improve work incentives and reinforce the expectation that people of working age should work. However, it is perfectly reasonable to encourage and help people towards employment even if they are not currently expected to work.

I said on Monday that our original estimate was that only about 10 per cent of the households that might be capped would be subject to full conditionality, through the JSA regime. However, it is wrong to say that the remainder will have no work-related requirements. A significant proportion will be people subject to work-focused interviews or work preparation and who will be building towards work. I said on Monday that I would provide the Committee with a breakdown of the caseload of households which might be capped. I also said that we are in the process of updating our figures. These indicate that a higher proportion, about a third, will be subject to full conditionality. I will provide the full set of figures as soon as they become available.

The key point is that if we are to tackle the negative effects of the current system then it makes no sense to exempt people from the cap simply because they are not currently subject to full work-related conditionality. That would not change attitudes and would be very likely to further entrench the problems of worklessness and dependency that we are trying to address. We have therefore been very careful in providing exemptions and deliberately kept the list short.

We have always said that we will exempt households that are entitled to working tax credit and that there will be an exemption for working households on universal credit. I have already explained that I am not yet in a position to provide details of this, but I can assure the noble Baroness, Lady Lister, that we are very conscious of the issue of cliff edges and the need to consider the impact of thresholds on households whose earnings fall.

We have always said that we will exempt war widows and widowers and that we will exempt households with someone in receipt of DLA or constant attendance allowance completely from the effects of the cap. I can confirm that this exemption will also extend to those in receipt of attendance allowance and PIP when it is introduced.

I am aware of representations already made that recipients of industrial injuries disablement benefit should be exempt from the cap in the same way as recipients of DLA. However, I do not think that these groups are in exactly the same position. DLA is paid to people to help with the extra costs arising from their disability. Other than through constant attendance allowance, industrial injuries disablement benefits do not reflect whether the recipient’s disability or illness necessarily brings extra financial costs.

We will be exempting people who are in receipt of constant attendance allowance because it serves the same purpose as DLA, but that does not apply to other industrial injuries payments.

I welcome the remarks of the noble Baroness, Lady Hollins, on the important issue of carers. The DLA exemption will mean that the cap does not affect a carer in a case where, as she said, the person being cared for is a partner or dependent child. Households where a member receives carer’s allowance but no members receive DLA or PIP will however not be exempt. In cases where the recipient of DLA is not deemed to be in the same household as the recipient of carer’s allowance both will be looked at separately and for benefit cap purposes their individual entitlements will be assessed independently. We have also said that we will look at ways to ease the transition for families and provide assistance in hard cases.

On the passport, as I said, I will seek to set out our intention for the passporting arrangements for PIP to carer’s allowance before the start of Report stage. I hope that that is adequate assurance for the noble Baroness, Lady Hollis.

[Baroness Hollis of Heigham]

No, my Lords. The Minister made that clear at the last sitting, but unless we know the actual numbers, as opposed to the structure, we will not know how many carers currently enjoying carer’s allowance, if I may use that word, will lose it and, as a result, become subject to full in-work conditionality—a clause in the Bill that we have to deal with before we get to carer’s benefits.

[Lord Freud]

By the time that I am able to set out these arrangements Committee Members will have a tight band in which to make a judgment. Although it will not be precise I hope that there will be a reasonable degree of precision to enable Members to reach key judgments.

As I confirmed on Monday, support for childcare—

[Baroness Lister of Burtersett]

The Minister seems to be moving off PIP. When we discussed PIP earlier I asked a question and the Minister said that it would be appropriate to discuss it as part of the benefit cap. I do not think that he has addressed the question. How many people does he estimate will be affected by the cap as a result of the PIP waiting period going up from three months to six months, and will he consider backdating entitlement for those who then become eligible for PIP?

[Lord Freud]

Yes, my Lords; that is an excellent question in this sense. I have made clear that we are looking at transitional arrangements, and I will look at precisely this issue of the timing with PIP in the light of those transitional arrangements as people move through. Clearly I have already committed to looking at the three months and the six months, so I have something of a three-handed chess operation to get through, but I hope to come back with the pieces in the right place—or, rather, although the pieces might be in position, they might not be in the right place as far as the noble Baroness is concerned. It will at least be a clear understanding of the position. I absolutely bear in mind the point that she has made.

The noble Baroness’s other question was on school meals. I am happy to commit that, however we restructure the provision of the passported benefit of school meals, it will remain outside the cap in the same way as childcare.

With regard to the kinship care amendment, we have already discussed and recognised in Committee the valuable role that kinship carers fulfil. I made a personal commitment, supported by the Secretary of State, to look at a range of issues affecting this group. I have already had a number of meetings with organisations that support kinship carers to help me better understand their priorities. These carers are able to receive support for the children in their care through the benefit system as, unlike approved foster carers, they have access to child benefit and child tax credit on the same basis as parents. Any payments they receive from the local authority will be disregarded. This parity of treatment with parents will be continued with the introduction of universal credit.

[Baroness Hollis of Heigham]

That is very helpful and clear, but the point being made by the noble Baroness, Lady Hollins, and others was that kinship carers very often take on children additional to those already in their family. Therefore, we are much more likely to see fairly large households with possibly five or six children and, as a result, those families could immediately be up against the benefit cap. How would the noble Lord suggest that is going to be addressed?

[Lord Freud]

My Lords, I accept the importance of this issue. There are a lot of angles to it, but I fully accept its importance and the argument that discouraging kinship carers could actually have a perverse effect, certainly in terms of cost.

The noble Baroness, Lady Sherlock, raised the issue of children at risk. We as a Government take our responsibilities to vulnerable children and vulnerable parents very seriously. It is clear that such families are likely to have multiple problems that may not be solved by benefit payments alone. The noble Baroness is concerned that the benefit cap will force such households to be constantly on the move, which will make it harder for local authorities and support services to keep track of them. We recognise that a more co-ordinated cross-government response is needed, and so last December the Prime Minister announced a new national campaign to try to turn around the lives of the most troubled families in England—there are around 120,000 of them—by the end of this Parliament. Local areas are being encouraged to develop a new approach to supporting these families. It involves redesigning services so that each of the most troubled families is supported by a single key worker who helps them turn their lives around and engage successfully with education and employment. I can assure noble Lords that my officials will work closely with other departments to support the Prime Minister’s plan for these vulnerable families and ensure that those who may be subject to the cap will be given all the help and information available.

[Baroness Sherlock]

My Lords, I thank the Minister for that important information about the 120,000 or so problem families—I think that is the term being used. The three categories in Amendment 99B, which was tabled in my name and that of the noble Earl, Lord Listowel, were children who were subject to a child protection plan, a child in need assessment or a common assessment framework team. Does he believe that those three categories are covered by the 120,000 problem families definition? I confess that this is not my specialist area, but the reason I ask is that I understand that those families, at whom that policy is targeted, are people who are presumed to be taking significant funds from a large range of public agencies. It is quite possible for a child to have a potential vulnerability that a social service department is looking at without the family necessarily being in that position. The questions I was raising were about vulnerable children, not necessarily the children the Minister is describing, but I may have misunderstood. Perhaps he can help me.

[Lord Freud]

My Lords, I am not quite sure, off the top of my head, how the mapping of these vulnerable families is worked. The sign just made to me by the noble Baroness, which normally is a sign for “Can I have the bill please?”, we can convert to mean, “Can I have a letter?” and I will be pleased to do that.

[Baroness Sherlock]

I would settle for a few million but a letter will do nicely.

[Lord Freud]

On the child benefit cap, Amendment 99ZB would require us to exclude child benefit when calculating a household’s total entitlement to welfare benefits for the purposes of applying the benefit cap. Amendment 99AD would go further and require that we exclude all-child related benefits. Both would result in household’s being able to receive benefits at a level above that which we have announced for the benefit cap. We believe that ultimately there has to be a limit to the overall amount of financial support that households in receipt of out-of-work benefits can expect to receive in welfare payments. Like other welfare benefits, benefits for children provided by the state are funded by taxpayers and should be taken into account along with other state benefits when applying the cap.

[Baroness Lister of Burtersett]

My Lords, perhaps the Minister will say more about that. I do not know about other noble Lords but I am afraid that I do not find that enough. I understand the broader argument about the limits and, as the Minister knows, I disagree. There has been talk about a level playing field. Will he explain to the Committee how the Government justify the fact that child benefit is being taken into account on one side of the equation and not on the other when we know that all those families on median earnings are getting child benefit? That is what I do not understand. In the previous session, I think it was my noble friend Lady Hollis who referred to comparing apples and pears. We are not comparing like with like.

[Lord Freud]

My Lords, I acknowledge that we are not comparing like with like. We are looking at a sensible level at which to put the maximum benefit payment. The level that we are looking at is the equivalent of a household earning £35,000. I think that one can overelaborate the logic, which I will not attempt to do here.

Amendment 99AA, in the name of the noble Lord, Lord Best, would introduce a grace period. I accept that there will be occasions when changes occur that are beyond a household’s control. We have said that we are looking at what transitional arrangements might be appropriate. The arguments that I was laying around the PIP are equally applicable here.

[Lord Boswell of Aynho]

Perhaps my noble friend will assist me. I have been worried a couple of times in this debate, both the other day and today. I would be grateful if he could clarify what seems to me to be a certain ambiguity in the use of the word “transition”—of course, not necessarily from his lips. This can mean one of two things: it can mean either a running-in arrangement to make it softer and more acceptable, and better understood before the policy is introduced, as it were, in macro; or it can mean the micro issue about how one deals with the individual case which is to be handled in a humane way. Does he agree that those are both important but distinctive characteristics? As we develop this argument perhaps into the next stage of the Bill, can we make sure that we keep them both in mind and address them separately?

[Lord Freud]

Yes, my Lords. Empson wrote a book called Seven Types of Ambiguity and my noble friend has cited two of them. I can clear up this particular dual ambiguity: the word “transition” here applies both to the running-in of the system and to the timing of how it will affect particular people when the system is fully run in.

[Baroness Hollis of Heigham]

Some of the Minister’s common phrases are “soon” and “very soon” and we are beginning to decode them. Another one is about the possibility of discretionary housing allowance being extended to plug all possible gaps in the system, and we have had some discussion on that. It would be very helpful if he could circulate a paper to us on all the areas where he has assured us that there are going to be transitional arrangements so that we can see what they will look like.

--- Later in debate ---

[Lord Freud]

My Lords, I do not think that I am in a position to do that. I think that I will have to leave it to Hansard to pick up where I have applied the phrase “transitional arrangement”.

[Baroness Hollis of Heigham]

Forgive me, the question was not how many times the noble Lord has used the phrase but what it means in practice. Is there a three-year run-in? What are we talking about here?

[Lord Freud]

All I am able to say at this moment is that there will be transitional arrangements and help for hard cases.

[Lord McKenzie of Luton]

The noble Lord again raises the issue of help in hard cases. Can he give us some indication of what he counts as hard cases, and of which, within the potential group of people who will be hit by the cap, he would say were soft cases?

[Lord Freud]

My Lords, I am being enticed by the velvet tones of the noble Lord. I am afraid that as we build the regulations to tackle the issue of hard cases, I can only say that we are looking at transitional arrangements. I am sorry but I cannot go any further at this stage.

[Lord McKenzie of Luton]

I think that we understand that. However, does the Minister recognise the dilemma with which the Committee is faced? We have a broad framework which the Minister says gives the opportunity of reducing the cap, but we have none of the detail which is absolutely crucial to understanding how it will work and who it will impact. Without providing that he is facing the Committee with an impossible dilemma. Perhaps the noble Lord, Lord Kirkwood, is right and these clauses are irredeemable.

[Baroness Hollis of Heigham]

My Lords, it also means that the noble Lord will face a lot of amendments on Report, which he would not need to face, calling for breathing spaces or a transitional period of one year for people who suddenly lose their jobs or are suddenly exposed, at 27 or 28, to living in a single room, and so on. If he were able to give some clarity about what he proposes, he could wipe out possibly a dozen amendments.

[Lord Freud]

My Lords, I have been set a challenge and a reward. It would be lovely to collect on that, but I cannot make any further assurances.

I shall continue to speak to the amendment in the name of the noble Lord, Lord Best. Apart from the transitional arrangements that I have talked about, the underlying position is to ensure that people understand that they have to take responsibility for the decisions that they make in their lives in the light of what they can afford, and they cannot always look forward to the state stepping in to make good any financial shortfall.

I shall continue on to the more technical areas raised by the noble Lord, Lord Best, on temporary accommodation and supported and sheltered housing. The amendments provide an exemption for households to which local authorities owe a duty because they are homeless, or threatened with homelessness, and for those living in supported or sheltered accommodation. As I said on Monday, discretionary housing payments will not be included as part of the cap, but in wider terms it is too early to say how we shall treat those cases for housing cost purposes in 2013 and beyond. We are exploring options for the treatment of housing benefit for people living in temporary accommodation within universal credit and the overall benefit cap.

Noble Lords may be aware that we recently consulted on high-level proposals to change the method by which help with rent is calculated for those who live in certain supported housing in the social and voluntary sector. As the noble Baroness, Lady Hollis, indicated, there is a series of issues here. We are working very closely with local authorities, housing associations and other government departments, including the devolved Administrations, on these very issues. Our considerations will, obviously, include possible interactions with the benefit cap.

Finally, Amendment 99C, in the name of the right reverend Prelate the Bishop of Ripon and Leeds, would place a requirement on the face of the Bill for exemptions for a range of groups. These include groups that we will provide exemptions for through regulations, and others that we have already discussed during the course of our debates today. The amendment also includes an exemption for lone parents with a child under five. I have made it clear that the cap is intended to act as an incentive to work. I acknowledge that we currently do not require lone parents with children under seven to work, although we are seeking to reduce this to five, but that does not mean that we do not want to encourage them to find employment Indeed that is the very reason why we provide extra support through work-focused interviews.

Each of these amendments would undermine the fundamental principles underpinning the cap—that ultimately there has to be a limit to the amount of benefit that a household can receive and that work should always pay. I have listened carefully to the measured and detailed arguments put forward today and will take them into account when deciding on the final design of the cap. In the mean time, I urge the noble Lords and the right reverend Prelate not to press their amendments.

[Lord McKenzie of Luton]

If I may say so, several questions remain unanswered by the Minister. First, if it were established that the cost and consequences of the cap outweighed the benefits savings, would he still support and seek to introduce the cap?

[Lord Freud]

My Lords, we have done an estimate of the cost and benefits savings of the cap and we have looked clearly at the wider ramifications. The question is theoretical in practice. Clearly the message that we are trying to get over is a behavioural one much more than a cost-based one.

[Lord McKenzie of Luton]

If that is the case, and the Minister has made that point on several occasions, what does the benefit cap provide that is not catered for within the new world of universal credit? I thought that universal credit was all about merging in and out of work benefits, simplicity, making sure that work always pays and changing people's attitudes to work. That is all that the universal credit is about. How does the cap sit with that and what does it produce in terms of policy outcomes in addition to what the universal credit produces?

[Lord Freud]

My Lords, the main difference is the simple message behind the cap: in the end, there is a limit to how much the state is prepared to support someone. That is a clear and simple message that can be readily understood in a way that, however simple universal credit is, that message would not be.

[Lord McKenzie of Luton]

One accepts that it is a simple message, but I am trying to understand the policy outcomes that the Government expect to achieve from that, which are different and in addition to the policy outcomes that they expect from universal credit.

[Lord Freud]

My Lords, what we are looking at now is a three-tier persuasion towards behavioural change. We have a conditionality regime; we have a universal credit that removes the concern of many welfare recipients that if they go to work they will be worse off; and we have a specific limit on how much benefit people can actually earn. That acts as a very precise work incentive, which is a long-term work incentive.

[Lord Oakeshott of Seagrove Bay]

Perhaps I could help the Minister. Surely the answer is that when the universal credit comes in fully it will deal with exactly the point that the noble Lord, Lord McKenzie, is making. That is why it is such a good idea, but it will take a long time and cost a lot of money so this is an interim arrangement. Is that not the position?

[Lord Freud]

I welcome my noble friend’s support because he has expressed the argument much better than I possibly could.

[Lord McKenzie of Luton]

Is the Minister telling us that this is just an interim, transitional arrangement? I thought it was a permanent proposition.

[Lord Freud]

I return to the principle. As I understand it, this is a principle with which the Opposition agree: that there should be a limit on the amount of benefit a household can obtain. We have set that limit at the equivalent of £35,000 of earnings before tax and national insurance.

[Baroness Lister of Burtersett]

I do not know whether the noble Lord, Lord Kirkwood—of wherever he is of—would comment, if he were here, but he spelt out a very powerful argument of principle about entitlement. I have not heard the noble Lord address that argument and, in his absence, I would be very grateful if he could do so.

[Baroness Hollis of Heigham]

Basically, the noble Lord is constructing universal credit based on meeting several different objectives and many of us support this very strongly. However, he then artificially reduces the amount that some people will get under the very structure he has set out to meet the objectives he has outlined. It is that inconsistency of a deliberate cut to an entitlement, constructed by himself through universal credit, that we find unacceptable—so far it has not been explained to us—particularly when some of the consequences may cost us more.

[Lord Freud]

My Lords, the best piece of information I can provide the Committee on that question is that it is the noble Lord, Lord Kirkwood of Kirkhope. I think I am reduced to going back to the basic principle that there should be a limit and we have set that limit at the equivalent of £35,000. We are going round in circles slightly.

[Lord Best]

I thank the Minister for helpful and hopeful words about the transitional arrangements—the 26-week period of grace that was the subject of my amendment. On my other amendments relating to excluding sheltered and supported housing and temporary accommodation, I think the Minister was saying that that was still a work in progress, so my hopes are not dashed on that.

The overarching point that I have repeated a little here is that it is fair enough to have a limit, if the Government, for political or wider reasons, believe it to be necessary, but the limit affects people in very random ways. If you live in a nice three-bedroomed council house in Wales—as I described it earlier—costing £85 a week, you will have £415 left to spend on other things. If you live in a crummy flat in the East End of London at a rent of £325 a week, you will have an awful lot less to spend out of your £500 on all the other things you need. The cap hits people in a rather random way, which is why I have been arguing that we should take housing out of the equation and look at the other factors where the fairness principle might have greater applicability.

The underlying question I would leave with the Minister is: how are we going to manage the movement of people from a high-rent area of the country—they may be in privately rented property or have a number of children—to the cheaper areas of the country? We are looking at something like 200,000 people and 50,000 households. The Minister has suggested that some people will deploy savings, but savings will run out quite quickly if they are being dipped into at an average rate of £93, and for some people up to £150, per week. Such people do not have large amounts of savings and their savings will run out quite quickly. We know it is rather improbable that landlords will drop rents dramatically to cover these and other benefit caps.

In most cases we do not expect people to be going out to work—90 per cent of them are not required to go out to work—so although some might be coerced or incentivised to go out to work, the great majority of the 50,000 will still be in homes where they will not be able to stay because the gap between what they will receive to pay their rent and the rent itself is too wide. They will have to leave. Are we making contingency plans for this movement of a couple of hundred thousand people from the more expensive parts of the south-east and south-west to the inexpensive parts of the country? The move will be expensive.

I pick up on the point made by the noble Lord, Lord McKenzie, about the cost of this cap. If people stay put and wait until they are evicted, an eviction will cost the housing association or social landlord something like £9,000. It is not just the legal costs but the fact that when the people move out you have to redecorate the house and you have a period of vacancy. All those things add up. We reckon that an eviction costs about £9,000, but if people go voluntarily and we can move in at the right time and do things in a more sensible way, the cost is about £2,500. However, on average you are looking at the landlord paying several thousand pounds when people move out.

There is also the question of providing education. When people arrive in new areas, their children will need to attend new schools. Social services departments will have to be notified if children are under the care of social workers. All these things will cost an awful lot of money, let alone just the simple transportation of people’s belongings, the cost of their rail fares and the costs involved in searching for a new home. All this is incredibly expensive. If we are to move 200,000 people because we feel, for whatever reason, that it is not fair for them to continue to occupy homes in expensive areas, are we putting in place the contingency plans that the local authorities in particular will need to get their heads around?

[Lord Freud]

My Lords, I thank the noble Lord, Lord Best, for that area of inquiry. We are looking to get early support for families in a number of ways well before the cap comes in. We are looking at a process whereby families on benefit face the same choices that low-income working families face. We are looking to achieve significant behavioural change through this measure. I assure the noble Lord that we are working hard with local authorities and other departments as well as with the devolved Administrations on the implementation of this measure.

[Lord Wigley]

I find it fairly disturbing that the Minister accepts that 200,000 people will be moving to places where low rents are charged—the noble Lord, Lord Best, referred to that—such as Wales. Is this a land clearance from central London to rural Wales?

[Lord Freud]

I wish to make it clear that I absolutely do not accept that figure. I have said that we are introducing a lot of measures in advance to make sure that that figure does not arise.

[The Lord Bishop of Ripon and Leeds]

My Lords, will the Minister develop a little further the argument as regards Amendment 99C, which concerns the lone parent with a child under the age of five? It seems to me that there needs to be more discussion about the whole question of whether people in those circumstances —this would apply to kinship carers as well—are being encouraged to seek work or to move back into work. It is often argued that they should not be working and that the important thing is that they look after their child under the age of five, or, if they are kinship carers, that they give up work in order to take on that responsibility, which may have suddenly arisen. It seems to me that we ought, therefore, to take much more seriously the possibility that they ought to be exempted because we do not, as a society or a Government, want them to be working.

[Lord Freud]

My Lords, I hope I made clear my sympathy on the kinship carer point. I am looking at it in the round. On the lone parent point, I am afraid I am reduced to the underlying principle that there is a level of pay for people, which we have set at the equivalent of earnings of £35,000. Do not forget that, by definition, half the households in the country receive less than that amount because it is the median amount, and that is why we have fixed on that figure.

[Lord Northbourne]

I wonder whether the Minister can give some sort of comfort to those of us who feel, as the right reverend Prelate does, that raising children under five is a business very often for the mother or the father and that they are providing a much more important service to society and to the world, as well as to their child and themselves, if they concentrate on doing that instead of trying to do two things at once in order to keep up with the regulations in this proposed Bill?

[Lord Freud]

My Lords, I think I am reduced to making the mainstream point that the amount that such families can look to is the equivalent of what up to half the households in the country earn, which is £35,000.

[Lord McKenzie of Luton]

My Lords, the noble Lord, Lord Best, spelled out the challenges that some 200,000 people could face. The Minister may dispute the precise numbers, but he said that we are looking at a lot of measures to make sure that it is not 200,000 people. Can the Minister explain what types of measures are involved? What sort of measures are going to alleviate the challenges that the noble Lord, Lord Best, spelled out?

[Lord Freud]

Clearly one of the most important areas of support that we can supply is helping people find work. One of the areas of support here is clearly Jobcentre Plus, and we are exploring that area pretty actively.

[Lord McKenzie of Luton]

Are we seriously saying that, whether it is 90 per cent or two-thirds of the people affected by this who, under all the other rules and constructs that the Government have brought forward, are not required to get in to work, they are going to use this as a lever to force them in to work? Is that what they are saying?

[Lord Freud]

That is one of the areas of support. If we have about one-third of families who are subject to full conditionality and others subject to partial conditionality, by which we mean moving towards work over a period, a very substantial proportion of the group can be helped into the workplace.

[Baroness Lister of Burtersett]

Is the Minister really saying that it would be supporting, say, a lone mother who has a baby to, in effect, require her to take a job as the only way she can avoid the benefit cap or to move to an area where she does not know people and has not got the support network she needs for her baby? I cannot believe that that is what the Minister is saying.

[Lord Freud]

There is a combination there. Those are the choices that half of the low income working families need to take, although they are not even low income families—this is pretty high income. I am not specifying any more, but we will look at hard cases. I do not want to be “loaves and fishes” about hard cases either, which I know the noble Baroness would want to accuse me of, but those are the two areas relevant to that case study.

[Lord Wigley]

We seem to be getting into a bigger hole on this. If the idea is that 200,000 people, or whatever the lower figure is—I accept that the Minister has a figure and we would be very glad to know what it is—will move to areas of low rent in order to get work there, does the Minister not realise that the reason the rents are low there is that people do not have work?

[Lord Freud]

My Lords, we are going round in circles. Noble Lords seem not to like this, although my understanding is that, as a principle, the Opposition approve of the benefit cap. There is a general level of support for it. I want to lay out the ground that working people with earnings of less than £35,000 already face these kinds of choices with regard to housing. Noble Lords seem to be arguing that people who are not working should be in a better position than those in work by protecting them from having to make this kind of choice. Bluntly, it was that kind of approach that has created or has been partially the cause of the high level of dependency that we have in this country.

I have, bluntly, said all that I can in this area. We can go round and round, but I am not in a position to offer very much more in the way of elaboration.

[Baroness Hollis of Heigham]

I just want to pick up on my noble friend Lady Lister's point. We know that most lone parents come out of a relationship: very often out of a marriage. These are not people who are regarded by others on the estate as shirkers who need to be driven—that sort of mentality. We could have a situation where, before they separated, the total household earned income was perhaps over £30,000 and there was some housing benefit because it was a three-bedroom property in an inner city area at a fairly high cost. He then leaves and she is left with three small children under the age of five in their existing home, which is rented. As a result, they are facing the benefit cap. How on earth do we think that any of these proposals under universal credit or the benefit cap could or should alter that behaviour, the judgments that they have to make and the possibilities open to them? All it can do is turf them out and send them up to Middlesbrough, as far as I can see.

[Lord McKenzie of Luton]

My Lords, I suspect that we have taken this as far as we can today, but I am sure that we will return to it on Report—perhaps we should already be thinking of booking an extra couple of days for that. I have a technical question for the Minister. As I understand it, before we get to universal credit, the variety of benefits that people have will be looked at. That will go into the calculation on one side. We will compare that with the earnings comparator and the difference will be withdrawn by way of reduction of housing benefit. Is that right? So that will be administered by local authorities.

What if people are in receipt of mortgage interest support or the housing benefit element is not necessarily sufficient to cover the shortfall? What happens with all the local authorities that have outsourced their housing benefit and council tax arrangements? There are a lot of them. Have they been engaged? Presumably, there are extracontractual costs because they will be required to do things in excess of current entitlements.

On universal credit, is it likely that the withdrawal will be in respect of only the housing component of the credit or will the broader range of support that is in universal credit be subject to the clawback?

[Lord Freud]

No; we have made it clear that it would apply to housing benefit and not to other benefits. The cap will not have full coverage until universal credit comes in.

[Baroness Drake]

I did not get the chance to mention this when other issues were being discussed. The Minister gave a blunt message on what had caused benefit dependency. But the Bill is also setting the welfare system for people who have no record of benefit dependency. They are hard-working people who from time to time experience difficulty. We know that the Government are considering greater flexibility in the labour market. The newspapers have rumours about making group redundancies easier. Large-scale redundancies are much easier because it cuts the amount of consultation and makes it easier to dismiss people. I should like to push the Minister on the point that, notwithstanding the Government’s position on a cap, the transition to that cap needs to be considered so that the principle of the cap is not broken when hard-working people who do not have a record of benefit dependency are trying to engage in the labour market.

[Lord Freud]

I fully accept that point, as I have already indicated. I shall bear that point very much in mind as we go through the next stages.

[Baroness Donaghy]

My Lords, I deliberately did not intervene on the industrial injuries benefit interval because I did not want to interrupt the flow of the debate. The Minister will not be surprised that I was disappointed by his response to my amendment. This is about signals. I was very moved by the contribution by the noble Baroness, Lady Meacher, on the distinction that people make between hard-working people and so-called scroungers. My amendment concerns working people—of course, not all are still working—who were injured in the course of their working lives. I do not think it is adequate just to say that it is different from disability living allowance.

To pick up a point made by my noble friend, Lady Drake, if the Government are trying to get over messages, they must be seen to support those who have spent their lives working, and even those who have been injured in the course of that work. I ask him whether he would be prepared to reconsider. I am not talking about the amounts of money, as we all know that in this area they are very small, but there is an important point of principle here and this is an opportunity for the Government to reinforce their message.

[Lord Freud]

My Lords, I will not make any promises on this but I will have another look at it. That is the weakest of possible promises. In fact, I am trying to say that it is not a promise at all. The signal I am giving is that I will have another look at it, but that is no guarantee of anything happening.

[The Lord Bishop of Ripon and Leeds]

My Lords, I am very grateful to all those who have taken part in this long and detailed debate on this group of amendments. I am grateful to the Minister for the way in which he has engaged with the discussions. I take a certain amount of hope from some of the things that he has said about taking account of the arguments, which we have shared, and about some specifics, such as references to attendance allowance, to childcare costs, repeatedly, and to free school meals, that there will be exemptions which we can see in those areas. I am also encouraged by the beginnings of a discussion on the issue of carers, in particular kinship carers. I very much hope that that can be taken further in our debates. I am rather less encouraged by the comments on housing benefit, but I hope that there can be ways in which, at least in terms of transitional arrangements, we can move forward on those as well.

The area in which I am least encouraged relates to the amendment on child benefit. We still have not got a real answer to the question of why child benefit counts on one side of the scales and not on the other, a point that the noble Baroness, Lady Lister, has made several times in this debate. We can only use the figure £35,000 on the basis that we are not comparing like with like, otherwise it does not make sense as a figure to be used. That seems to me to be regrettable and I hope that the Minister will be prepared to have another look at this and to discuss just what the place of child benefit—perhaps the key benefit—is within the whole of our society, over many years, in terms of the cap. Having said that, I beg leave to withdraw the amendment.

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Moved by

[Lord Freud]

100: Clause 94, page 63, line 31, at end insert—
“( ) A statutory instrument containing the first regulations under section 93 may not be made unless a draft of the instrument has been laid before, and approved by resolution of, each House of Parliament.”

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Moved by

[Lord Freud]

102: Clause 94, page 63, line 32, after “containing” insert “other”

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He then made reference to budgeting support, which confused me because this has nothing to do with that. It is about individual control over the benefit for which a person has paid contributions. I wonder whether a decision has been taken on this matter yet. If it has not, can the Minister assure me that the points I have made on numerous occasions—that is what it feels like now—will be taken into account when the decision is made?

[Lord Freud]

My Lords, Clause 97 provides that in the case of a benefit awarded jointly, such as universal credit, it can be paid to whichever person in a household they themselves nominate, or for all or part of it to be paid to either person regardless of their nomination.

Amendment 102A seeks to ensure that the child and childcare elements of universal credit are paid to the responsible carer within a household. Amendment 102ZA also seeks to ensure that the child and childcare elements of universal credit are paid to the responsible carer and that the housing element is paid to the partner responsible for housing costs.

Under universal credit, couples living in the same household will make a joint claim for the benefit payment. It is not correct to think of, as has been said, a man claiming for the household. In couples, both will be claimants, which is an important change under universal credit. We have outlined our intention to make universal credit a single payment to a household. This decision will ensure that the household can see clearly the effect of their decisions about work on total household income and ensure that claimants can take responsibility for budgeting. Households budget and organise their finances in different ways, so we want to enable couples to decide between them where their payment should go. It is not for the Government to dictate how a family arranges its finances.

We recognise, however, that there may be cases which require alternative arrangements and the Government intend to retain powers to split payments to couples as a safeguard. We are still considering the circumstances in which we would split payments and further details will be included in regulations. Examples of when the power is used could include where there is proven abuse of the money by one partner or where children are deemed to be at risk.

On the point made by the noble Baronesses, Lady Hayter and Lady Howe, on domestic violence, where there is abuse or children at risk we will have the power to split payments and we are talking to stakeholders about how this should work in practice. Let me try to be clear: when it becomes apparent that one partner is not managing money properly, we have the ability to switch the money entirely to the other partner, which is the appropriate safeguard.

The Government will also have the power to pay the housing element of universal credit direct to the landlord in exceptional cases. We are currently considering with stakeholders the specific circumstances in which this power could be exercised and again will set out further detail in regulations.

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[Lord Freud]

However, in circumstances where a universal credit award is split, neither party will receive specific elements such as housing or childcare. They will each receive a proportion of the total award and decide for themselves how best to use the money. This adheres to one of the key principles of universal credit, which is that claimants must be responsible for their own budgeting.

In answer to the specific question from the noble Baroness, Lady Lister, contributory benefits will continue to be individualised entitlements, but we are looking at options for payment of benefit in cases where a household has entitlement to both contributory benefits and universal credit. It may be simpler to make a single payment of universal credit in that situation, but that is just one possible option and we have the power to cover different approaches.

We are, however, committed to ensuring that people can access support to manage their payment and help them budget effectively. This is likely to include access to nationally available advice and guidance, locally delivered targeted support and improved access to budgeting products.

Budgeting products, I know, mystify the noble Baroness. It is easy to think about universal credit and such areas in slightly Victorian terms. When we look at what universal credit is and the support mechanisms that are under it and wrap it up, we see that there are a huge number of options. I am actively looking at those and interested in encouraging access to what are popularly known as jam jar accounts. Those accounts allow partners to allocate part of their payment for specific purposes, particularly the ones that need to go to utility bills and rent. Such accounts incorporate direct debits and such things. There is a lot of work to be done in this area and I hope to be able to share that with noble Lords as we develop it.

We are talking to a lot of people about this. As well as to the banks and the financial services industry, we are talking to local authorities, housing associations and the voluntary sector about how to deliver this. I may have some more information about how this will start to work. I hope that it will break us out of what could be a 20-year debate into the opportunities offered by modern technology. I hope that I will be able to keep noble Lords updated.

[Baroness Lister of Burtersett]

Will the Minister be able to update us before we get to this on Report? I am sure that we will want to return to this on Report.

[Lord Freud]

I would like to. I have people working on this and we are beginning to think quite differently about how these issues can be addressed—what is universal credit, what is a banking product and where is the join. We must not forget that, at a simple level, a universal credit is a payment stream with budgeting advances. It does not take a lot of imagination to see how it could join up with a more formal banking product and we have to work out where the line is drawn.

Turning to Amendment 102B, I appreciate that the intention behind it is to demonstrate that the taper can be applied to individual elements within the overall universal credit award so that payment of—

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[Lord Freud]

My Lords, I was just tidying up on Amendment 102B. We are not looking to put the taper on individual elements, and I have described why we do not want to go down that route because it is quite different from what universal credit is. With these explanations, I urge the noble Lord to withdraw the amendment.

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[Baroness Lister of Burtersett]

To save the Minister jumping up and down, I asked him a specific question about monitoring the impact on the distribution of income within households which I would be grateful if he would answer. I do not think he answered it, although the reply has been so fragmented because of the Divisions that we may have missed it.

[Lord Freud]

On the first question, I think we should look at this rather differently. It is one payment to the household. On whether we can look at how the household can do different things with that payment, I am very happy to look at all the budgeting supporting mechanisms. I am actively looking at them, and I hope I will get some more information on that.

To be honest, I have not got on the top of my head the detail on the monitoring. We will be looking at it very closely when that comes in and will be devising a structure to do that. As noble Lords know, we are planning to have a very substantial research exercise around universal credit, mainly because it is an almost unique research laboratory opportunity in that we can capture in one place all the different behaviours. I am looking very closely at how we can get world-class research behind many aspects of the universal credit.

[Baroness Sherlock]

This is the last time I shall intervene, I promise—and that is a strong promise rather than a weak one, I can assure the Minister. I understood him to be saying that the state does not want to intervene more than it has to in the financial affairs of families, and I can see that and agree with it, but if putting different amounts of money into different subsets of a bank account is going to encourage people to budget, somebody is still going to have to go through the process of working out which elements of the total award relate to different elements—children, rent et cetera—and deal with the complicated bit of that, which is understanding how tapers apply. When the Minister thinks about this again, will he consider whether the assessment can be for a household but when you get the answer, you simply split the amount and give it in two different directions? Is that not much easier than the Minister getting embroiled with the FSA or the FCA and complicated financial services market products?

[Lord Freud]

I am thinking about this area. I do not think I am thinking in quite the same way as the noble Baroness, but I am looking at it and hope I will be able to have a vigorous conversation with her on where that comes in at a later stage.

[Baroness Hayter of Kentish Town]

I thank the Minister for his responses, although I may not like their content. I also thank the noble Baronesses, Lady Howe, Lady Lister and Lady Sherlock, for their support on these issues, which are very real. My guess is that there will come a time when the Government will have to revisit this when they see the results.

The words of the noble Baroness, Lady Howe, ought to be resonating around. She spoke about vulnerable women and inequalities within households. She said:

“These are women fighting for their children”.

We are talking about people without great access to income needing to feed their children. Very often, it will be a mother living with a man who is not the father of those children. This is great—I am a stepmum and well used to these relationships. But we have to understand that we are very often talking about not the idealised couple but the couple struggling to get their relationship together. Not to enable the woman as a right to have access to that, I find a little strange.

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[Lord McKenzie of Luton]

My Lords, I imagine that this will be extremely brief. This is a genuinely probing amendment on a point of detail. Clause 98 covers payments on account and under the Bill there are three different legs under which those payments can be made. The first mirrors the existing provision of SSAA 1992. The second provides for payment to be made where a claimant is in need. Examples of how it might be applied apparently include where benefit has been claimed but the first pay day has not yet been reached. Regulations will provide the detail of the test of need. New Section 5(1)(r)(iii) enables the Secretary of State to make a payment on account where, again, subject to criteria set out in regulations, it can reasonably be expected to be recovered. I think such payments will replace the existing social fund budgeting loans. However, part of what this clause does is to repeal Section 22 of the Welfare Reform Act 2009, a provision which is not yet commenced.

The thrust of the question really springs from a sentence in the Explanatory Notes which says in respect of that provision that, had it been commenced,

“it would have extended the range of situations in which a payment on account could be made beyond the existing section 5(1)(r) … It would have extended making payments on account to situations similar to those that will be covered by new section 5(1)(r)(ii)”.

My question is: is there anything that Section 22 of the Welfare Reform Act 2009 would have permitted in terms of payments on account which are not now facilitated by those three legs in Clause 98? I beg to move.

[Lord Freud]

In the interests of time, I can give an assurance that there is nothing extra to worry about.

[Lord McKenzie of Luton]

Nothing extra to worry about is good enough to worry about with this Bill. I am grateful for that. Perhaps it can be dealt with in correspondence. It was a genuine inquiry about whether that swapping of the provisions precluded something which would have been allowed. I accept the noble Lord’s assurance on that. I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

My Lords, as I have often said, my education on these issues has grown thanks to the Minister, but I am afraid that today he was trumped by the noble Lord, Lord Ramsbotham, from whom I learned that one may use the word “baloney” in your Lordships’ Committee. Given his reputation, I am slightly hesitant about speaking on this, but I will add a few comments. I must say that the last time that the noble Lord, Lord Brooke, told us his story about Degsy in Liverpool, we got significant movement from the Minister, so I hope that his charm will work equally well today.

The amendment seeks to ensure that people who are coming out of custody get swift access to the benefits to which they are entitled. The Prison Reform Trust report, Time is Money, stated that eight out of 10 former prisoners claim benefits. Obviously, delays in accessing them can lead to enormous financial hardship and stress. It can also increase the risk of reoffending. We also know—although I am sure not as well as the noble Lord, Lord Ramsbotham—how many people in prison have multiple needs.

The transitions of entering or leaving prison, or becoming homeless, often lead to both personal and financial crisis. We think of coming out of prison as very positive, but it can be traumatic for people with multiple needs. With no financial contingencies, these people usually rely on a benefit system that they experience as complicated, slow and unhelpful. In extremis, some return to crime, as that was their proven source of income. The report found many problems experienced by people who were just out of prison, such as: delays of up to four weeks before the first payments, with little or no explanation; problems with claims that had been started before they had gone to prison, and which had to be resolved before any new claims could be made; problems of claims being delayed because they had no fixed address; disputes over prison admission and release dates, where timings can be crucial; and problems caused by not closing down a claim on entry to prison, resulting in a fraud investigation and the suspension of the new claim. Many of the people we are talking about have multiple needs. About one-third of people in prison do not have a bank account, which makes the payment of a deposit for housing or to cover early expenses even harder to organise on release.

As the noble Lord said, help beforehand with immediate access to benefits is key if the person is not to feel the need to return to using other people's money simply to survive. It emphasises the point that has been made about the need for help and advice while in prison. This will be particularly the case over the next few years, when the whole benefit system will have changed; the one that they knew on going into prison will be quite different from the UC world when they come out. We also know that in one survey that about half the prisoners had debts that awaited clearance on release, and one in three owed money for housing. That gets them started on a real problem of owing money on existing housing. It also touches on an earlier amendment about splitting a joint universal credit if they return to a partner with children and then want to take over responsibility for the housing amount. There could be some difficult readjustment or re-entry. When publishing a book about returning from the war in 1945—I remind noble Lords on that side of the table that we had a really good election result that year—it was interesting that it was difficult for stable, loving marriages when a man came home from the war and wanted to take over financial responsibility. So these things affect whole swathes of people. It is a stressful time, and getting benefits lined up early is really important.

The Centre for Social Justice, which is often mentioned in this Committee, has also highlighted the problems faced by people leaving custody. Its report, Locked Up Potential, recognised that delays in processing benefits meant that many people who are discharged have no source of income when it is most urgently needed. I am sure that the Minister is very familiar with its recommendations, which are that:

“To bridge the finance gap, with the objective of reducing the resulting crime which it can fuel, we recommend that all prison employment and benefits advisors be required by the Department of Work and Pensions … and the MOJ to initiate core benefit applications at least three weeks prior to a prisoner’s nominated release date”.

It would be helpful if the Minister could let us know what discussions the DWP has had with the MoJ about responding to the recommendations in that report and ensuring that those leaving prison are not left with gaps and delays in getting the financial support that may be essential to them in starting a new life outside custody.

We know that the coalition Government have decided not to continue with the progress to work scheme, which provided support to ex-offenders. That support will be provided through the work programme, although as we have heard there will be some difficulties there. It would be useful to know what decisions have been made about access to work programmes for ex-offenders and whether they will be fast-tracked to receive this support. If not, what alternative arrangements are being put in place to ensure that they receive the tailored employment support that they might need? While I hope that the Minister will respond to discussions for talk, I also hope that it will not just be talking the talk but walking the walk and that we will get some progress.

[Lord Freud]

My Lords, I have listened with interest to the noble Lord’s remarks and acknowledge his expertise on penal policy. I can also say that I am utterly delighted to meet the noble Lord. I can say now that I do not accept his amendments and I hope that what I describe of what we are actually doing will leave him joyful, both after what I describe here and after our meeting, which will happen as soon as we can. I believe that the route that we are going down will prove more beneficial in the long run than what he has suggested in this amendment, which is more expensive and resource-intensive, in terms of in-prison assessments.

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[Baroness Hollis of Heigham]

Regarding the payment on account, I do not know whether it is exactly the way to go forward, but I think it is the only way you can make this work. However, on the assumption that most people coming out of prison may well be under the age of 35, will the Minister confirm that he expects the payment to include at least the HB single room rent, as well as the jobseeker’s allowance? At £67, the jobseeker’s allowance will not go very far in paying rent. Therefore, the payment on account benefit of UC would include a putative amount for both elements—both what we know is called JSA and what we currently call housing allowance.

[Lord Freud]

My Lords, there are two things here: budgeting advances and a process of how we move people on to the system that we are looking at. I cannot set that out in detail, but we will be doing so in regulations as we elaborate that system.

[Lord Ramsbotham]

My Lords, I thank the Minister for that reply and I also thank those who have contributed to the debate. I have to admit that I am encouraged. However, there is a “but”, and my “buts” are always about the maintenance of momentum. The noble Lord mentioned those on the work programme, but what about those who are not and what about those who are falling between the cracks? When we meet, I should like to explore the question of all the people whom one finds in prison, such as the one that the noble Lord, Lord Brooke, quoted, who fall through the cracks and do not get picked up.

I take issue with the business of leaving things until late. The Prison Service is notoriously bad at leaving things until they are late, and it is the same with housing and debt management. The sooner you can start work on it, the better. It will not be expensive because it can be done by the people in prison, provided that they are brought into the process. It should not be left.

I am very grateful for the Minister’s offer of a meeting. I look forward to it because there is obviously more to discuss, and indeed I shall have one or two examples of that in my Amendment 107, which we shall come to later. That amendment is connected with what happens to people when they come out of prison. In the mean time, in the spirit of the Minister’s reply, and with my thanks for its comprehensive nature, I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

My Lords, as has been set out my noble friends and other noble Baronesses, the amendments relate to how and in what circumstances the state will seek to recover overpayment of universal credit from claimants. As many here, although not me, will remember, the issue of overpayments caused a considerable headache for the previous Government when tax credits were introduced, so it is vital that the present Government get this part of the Bill right. I am sure that anyone with those memories will support this.

In this Bill we have the added complication that, in addition to overpayments being recoverable from the claimant, they will also be recoverable, as the noble Baroness, Lady Hollins, has mentioned, from landlords in certain situations. I am not talking about dodgy landlords but those who are blissfully unaware that the rent they were receiving was not from their tenant but was due to some sort of overpayment, whether by accident or design on the part of the tenant claimant or by error on the part of the DWP. We know that at present there are some cases of overpaid housing benefit that can be recovered from a landlord. Could the Minister tell the Committee whether this clause widens the set of circumstances in which benefits can be recovered? Also, what type of benefit could be recovered from landlords, rather than from claimants? What consultation has taken place on this proposal with the NLA or any other representative of landlords?

I have certainly heard anecdotal remarks from both actual and potential landlords. By the way, I am not someone who thinks that lots of anecdotes add up to evidence. However, I have heard that the idea that landlords might be asked to make good some overpayment made to a tenant when they have no way of recouping it from the tenant is a further disincentive to entering or remaining in this market. I remind the Minister that this comes just at a time when access to private rented accommodation, especially the one-bedroom type quite favoured by small landlords, is so needed due to the housing shortage; to take in the swathe of refugees from the social housing sector as his policy on underoccupation kicks in; and as families may be forced to leave high-rent London for far distant places, as we heard earlier today. We need to encourage landlords to make properties available, not threaten them that they may be left paying for overpayment of a tenant’s claims.

Amendment 103ZZA seeks to ensure that the recovery of any overpayment leaves the claimant with the correct entitlement based on their circumstances, as my noble friend Lady Lister spelt out. Again, this draws on the experience of tax credits, where in some cases claimants were asked to pay back overpayments on the one hand while applying for additional entitlement because of a change in circumstances on the other. The amendment would make sure that the end result is that the claimant receives the payment to which he or she is entitled.

Amendments 103ZZB, 103ZZC, 103ZZD and 103ZZE seek to replace references to earnings with those to income, and then to ensure that the recovery of overpaid benefits cannot leave a claimant without sufficient income on which to live. As has been said, within the current system protections of this type are in place, setting limits on the amount by which the DWP, local authority or HMRC can reduce benefit payments to recover an overpayment. Could the Minister let us know what limits the department intends to place on the recovery of universal credit, and whether they will meet the aim of ensuring that claimants retain a minimum amount on which to live?

Amendment 103ZA ensures that benefits overpaid as a result of official error cannot be recovered when the claimant could not reasonably be expected to know that he or she was being overpaid. In explaining new Section 115C in Clause 113, the DWP says that negligence constitutes not exercising the care which the circumstances demand; that is, being careless. It gives the example of not checking statements made in a claim. However, this amendment is quite different. It is not about lack of care; it is about lack of knowledge. The claimant cannot be expected to know that the amount they were receiving was in fact an overpayment.

Each of us, perhaps even some very rich people in this Room, would know whether £1 million came into our bank accounts as opposed to the £1,000 that we were expecting. However, I have to confess that when the DWP pays my pension I have no idea whether the amount is correct. It is difficult to determine that, partly because I do not get a monthly statement—the equivalent of a pay slip—from the DWP and partly because it is four-weekly and every now and again there is a month when I receive two payments. If that happened to fall in January and then perhaps in October and I got a double payment, I am afraid that I would have absolutely no idea whether that was the correct timing for my extra bonus month—it is always very nice—or whether it was an error, and I have precious little way of checking. This amendment is about ensuring that any overpayment which the claimant could not be expected to know was wrong should not be clawed back. I promise noble Lords that it is not intended to protect my own position; it is tabled simply in the interests of fairness.

[Lord Freud]

My Lords, I am delighted to hear such full-hearted support for monthly payments. First, I would like to speak to Amendment 103ZZA in my name. This amendment is technical in nature and seeks to restore the policy intent and simple premise that where a claimant has a debt, the debt should be recoverable from them. In the majority of cases, overpayments of benefit, penalties, payments on account and certain hardship payments will be recoverable from the claimant and will be recovered by deduction from the benefit that is paid to them. As the Bill is drafted, however, the Secretary of State is prevented from recovering such payments where the claimant’s benefit is paid directly to a third party, for example a landlord. This means that recovery from a claimant is limited to deduction from those benefits paid directly to them. This is unintended and so this amendment seeks to ensure that where a claimant’s benefit that is subject to recovery is paid to a third party, recovery may be made from that benefit.

This ensures that the DWP maintains the same powers of recovery as it does presently for recovery by deduction from housing benefit where it is paid directly to a landlord. Although the claimant may have other benefits from which deductions could be made, to do so adds both cost and complexity to the recovery process. In such cases, where no benefit is payable other than that paid to the third party, the DWP would be reliant on negotiating repayment from non-benefit income or potentially using direct earnings attachments to recover from debtors who are in pay-as-you-earn employment.

The situation becomes even more difficult where the debtor will not negotiate repayment, has no benefits paid directly to them and is not in pay-as-you-earn employment. Without the amendment, this would result in a situation where the DWP or local authorities have no effective way to recover the overpayment or penalty. I am sure noble Lords will agree with me that where there is an obligation to repay benefit debt, the fullest possible powers should be available to the relevant authorities to make recovery by the most efficient means.

I shall now address Amendments 103ZZB, 103ZZC, 103ZZD, 103ZZE, 103ZA and 103ZZZA. These opposition amendments seek to achieve a number of objectives, but are primarily concerned with protecting debtors. I am sure that there is no disagreement over the need for safeguards for vulnerable claimants and those in financial difficulty. We recognise, like the noble Baroness, Lady Lister, that protection needs to extend to the calculation of overpayments as well as their recovery. In common with the noble Baroness, we recognise that such a provision has value in ensuring that an overpayment reflects the true loss of public funds and for this very reason, such a provision already exists in secondary legislation relating to the recovery of overpayments of current benefits.

Like the noble Baroness, we believe that similar provisions should apply here, but feel that such a provision sits more happily in secondary legislation. For that reason, I am happy to offer my assurances that it is our intention to make provision for such a calculation in the regulations to be made under Clause 102, new Section 71ZB(4), which allows regulations to provide that recoverable amounts,

“are to be calculated or estimated in a prescribed manner”.

Placing the provision in secondary legislation allows for both flexibility and review.

Concerning the other issues raised within these amendments, I believe that future overpayment recovery from working-age claimants will be more streamlined and efficient than it is presently. Recovery will thus provide both greater returns and better value for money for taxpayers. For example, under the previous Administration, it was believed that there was a right under common law to recover overpayments occurring due to official error, and the DWP thus requested repayment of those overpayments on that basis. I see that noble Lords who may have been responsible for those requests are in agreement. The Supreme Court, however, ruled that there was no such right and that is why we are legislating to bring the law for working-age benefits back in line with the policy of the previous administration—a policy that we support.

Prescribing that an overpayment caused by official error would not be recoverable if the claimant could not reasonably be expected to know that they were being overpaid brings forward a need to make subjective assessment of the debtor’s capacity to understand entitlement before the overpayment is determined. Although I sympathise with the lack of understanding of the noble Baroness, Lady Hayter, about all the incredible overpayments that she gets and the £1 million that goes into her bank account on a regular basis, I have to say that that is not workable in this context. The DWP will not be prescribing those circumstances for the discretionary write-off or non-recovery of an overpayment. Cases will be considered carefully on their individual merits because each case is different.

As mentioned earlier, the code of practice will outline the policy as to whether recovery should be pursued, and lead to considered, consistent decision making. in response to the noble Baroness, Lady Lister, I am happy to confirm that that will be published in the form of a leaflet.

Considering whether an overpayment can, or should be recovered, the DWP will look at a number of factors, not solely whether the claimant received the money in good faith. It will have regard to ensuring that deductions from benefit or earnings—

[Baroness Meacher]

Will the code of practice be available to us before Report so that we know whether we have a reasonable situation?

[Lord Freud]

Yes, I am pleased to confirm that it will be available in draft. I want to avoid the cost of printing up a leaflet.

We will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor to suffer undue hardship. That remains a cornerstone of our overpayment recovery policy. As presently, future benefit recovery will be subject to regulations that provide for a maximum rate of recovery. In many instances, however, this maximum rate of recovery may still prove unaffordable for some claimants. In such cases, the DWP will discuss an alternative repayment rate.

[Baroness Hollis of Heigham]

I realise that the Minister is going fast, but let us be quite clear. In the past, and I stand to be corrected, my understanding is that when there has been official error and overpayment we would request a repayment. If that request was not responded to or met, effectively, that was pretty much the end of the story. In particular, somebody with a history of disability, poor health, financial pressures and so forth, almost invariably would not reply.

We need to hear from the Minister whether he is moving from request to require; whether he is moving the discourse from the first to the second. I thought that the first was reasonable, so that if they could afford it, they should repay, but if it was unreasonable, then they did not. If he is going from request to require, we need another step in the procedures to try to ensure that those from whom he will require the repayment of debt are in a reasonable position to do so. He cannot just change the words. He has to institute another procedure and another step in the equation. I know that the Minister is going fast but perhaps he might reflect on this and write to us so that we can take this up later. That must be the case.

[Lord Freud]

I am going to come on to that point, which is critical. Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits within the scope of Clause 102 will be recoverable upon application, DWP will consider a claimant’s means, income or expenditure if the debtor considers that they are in hardship.

[Baroness Hollis of Heigham]

The point is that under the previous system the recipient determined what would happen. What the Minister is suggesting is that the DWP will determine whether recovery takes place.

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[Lord Freud]

No. I think what I said is that if the debtor considers that they are in hardship, they can say that and then there is a process built on that.

[Baroness Hollis of Heigham]

I am sorry to take up the Committee’s time, but previously if the recipient said that they were not going to do it, that ended it. There was not an assumption that there was space for negotiation. What the Minister seems to be suggesting is that there will be a requirement, and then the claimant has to opt out rather than the old arrangement, which is that if the recipient said that they were not in a position to repay, that ended the matter. It is a question of where the power lies. Under the old system, the power of refusal lay with the claimant. The Minister is suggesting that it will lie with the DWP, and only if the DWP is persuaded will the claimant be allowed to opt out.

[Lord Freud]

Yes, that is the process. It becomes a requirement, and then if the claimant says, “Look, I can’t afford that rate, I’m in hardship”, then it is adjusted. That is a regular process. In practice, only half the people now make repayments at the maximum rate. That is a very well established process which works pretty well, and I do not think we need to put in extra processes.

My noble friend Lord Kirkwood—Kirkwood of Kirkhope, some people were unaware—asked about an independent appeal right. There is just a general appeal right here for overpayments, and I think that covers this as much as anything else.

[Baroness Hayter of Kentish Town]

Is that an appeal that is open to landlords as well?

[Lord Freud]

What we are talking about, and what I was describing, is where a payment would be going directly to a landlord, but it is for the rent. There would be recovery from that, so then the obligation becomes the debtor’s to replace that amount for the landlord, so, no, the landlord does not have a right to appeal because it is not his money. It is just a direct payment device.

As my noble friend recognised with his amendments, claimants may have other debts that are being repaid that will impact their ability to repay their DWP debt. In such an instance, we may agree that recovery should be suspended until a particular financial commitment of the debtor ends. Additionally, because we recognise that hardship need not solely be financial, these considerations will include whether recovery is likely to be a threat to the health and welfare of not only the debtor but their immediate family. Exceptionally, where it is warranted, DWP may decide not to pursue or to stop pursuing recovery. These hardship situations are well established and balance the needs of the debtor and those of the taxpayer. I believe that this approach is more effective than the prescriptive considerations set out in the amendments. This approach ensures that those claimants who are able to meet the repayment obligations do so and recognises that in some instances there is a need to take into account a claimant’s specific personal circumstances. I trust I have assured noble Lords that these amendments are unnecessary as we already have protections in place to ensure that a debtor does not suffer undue hardship when deductions from benefits or earnings are made and that, where appropriate, a claimant’s individual circumstances will be fully considered.

The noble Baroness, Lady Hayter, asked about limits on universal credit recovery. Recovery will be subject to a maximum rate, as it is currently. This will differ depending on whether the payment is wholly universal credit or a combination of universal credit and earnings. We still have well established hardship considerations. If repayment causes difficulty in those circumstances, we will be able to discuss it. I therefore urge noble Lords not to press these amendments.

The noble Lord, Lord McKenzie, has given notice of his intention to oppose the Question that Clause 105 stand part of the Bill. Clause 105 clarifies that the Limitation Act does not apply to the recovery of benefit overpayments and of social fund and tax credit debts by methods other than court action. It ensures that recovery of such debts by deduction from ongoing entitlement can continue beyond the six-year limitation period for bringing court action. DWP has long taken the view that the statute of limitations has no application to the recovery of benefit overpayments or social fund debts by means other than court action, including by deduction from continuing benefit entitlement.

However, in a 2009 case involving recovery of a housing benefit overpayment by a local authority the High Court came to a different view. DWP was not involved in that case, but given that it could be read as applying also to the recovery of other benefit overpayments and of social fund payments, we believe it is necessary to introduce this measure so that we remain able to balance the recovery of public funds against the financial circumstances of the debtor. In many cases, seeking to recover social security or tax credit debt by means of deduction in a period of no more than six years would place an unfair or impossible burden on the debtor and their family.

We are not proposing anything new; Clause 105 merely clarifies a long-standing and well accepted interpretation of the application of the Limitation Act limitation to the recovery of social security and tax credit debt. The provision ensures that all deductions of benefit made more than six years after the debt became due since Section 9 of the Limitation Act came into force were, or will be deemed to be, legitimately made. It is retrospective to cover the legality of recoveries of six years of debt already made under the presumption that that was the legal position.

By contrast, without this clause—Egyptian calligraphy is very complicated—we may be forced to endeavour to recover all overpayments within six years, and this would imply higher recovery rates and potentially hardship for claimants affected. We have made this measure retrospective to cover all recoveries already made, as I have already said. I hope this clarification will convince the noble Lord and the noble Baroness to allow Clause 105 to stand part of the Bill. I beg to move.

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Moved by

[Lord Freud]

103ZZA: Clause 102, page 68, line 29, leave out “to the person”