Employment and Support Allowance (Transitional Provisions, Housing Benefit and Council Tax Benefit) (Existing Awards) Regulations 2010

Lord Freud Excerpts

Tuesday 20th July 2010 Lords Chamber

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

My Lords, I thank the noble Baroness, Lady Thomas of Winchester, for initiating this debate and other noble Lords for their contributions. I am particularly pleased to welcome the noble Lord, Lord Knight of Weymouth, to the opposition Front Bench. I will do my best to respond to as many questions as possible, but I am under a time constraint and to answer them all would take most of the night. That pun was not deliberate.

No one denies that there is a fundamental problem with the way in which incapacity benefits have being managed. We want to improve the quality of life for the worst off in our society. That does not mean leaving people languishing on benefits which provide financial support but no way back into work. There are now 2.2 million people claiming the old-style incapacity benefits and many of these have had no contact with the department for many years. It is time to change this. We have announced plans for radical reforms of the welfare-to-work system and the implementation of the work programme. The work programme will provide the support that will help people to return to work and will be an integrated package of support, providing personalised help for people who find themselves out of work, based on their needs rather than the benefit they claim. The detail around the work programme will come out in the months to come and will answer many of the questions that the noble Lord, Lord Knight, has posed.

We will build on the strengths of the personalised support delivered through JSA so that all jobseekers with a health condition or disability, including customers converted from incapacity benefits, can access the appropriate support to help overcome their specific challenges. I make it absolutely clear that the point of introducing the work programme is to provide a service to people who are being transferred. My main concern about the previous arrangements was that there was no such national provision for those people who needed that extra support.

These regulations enable the department to reassess all those on the old-style incapacity benefits, using the work capability assessment, so that we can look at what they can do, not what they cannot do. This is a positive move and a fundamental change in the way we perceive the abilities of those who have barriers to work because of a disability or health problem. The regulations provide for the conversion of existing awards of incapacity benefit, income support on disability grounds and severe disablement allowance to employment and support allowance, and are designed to facilitate as smooth a move from incapacity benefits to employment and support allowance as possible.

Where a customer is converted to ESA, the regulations provide not only for the protection of their incapacity benefit, income support or severe disablement allowance but any housing benefit or council tax benefit which may also be in payment at the same time. I hope the House will agree that this is a generous transitional protection which will enable people on the old-style benefits to move over time to the same rate of benefit as new ESA customers. The regulations also make consequential amendments to housing benefit and council tax benefit provisions.

Before I get into the detail, I congratulate my noble friend Lord Kirkwood on his intelligence network. He has once again managed to discover that we need to highlight the fact that we have become aware of a technical legal issue relating specifically to commencement of some of the powers under which the regulations were made by the previous Administration. We will therefore be taking steps to correct the position before the Recess. However, this will not result in any changes to the wording of the regulations as laid.

Now let me turn to the concerns that have been expressed by this House and by others. The first is the capacity of Jobcentre Plus. The reassessment of 1.5 million incapacity benefit claimants will be a challenge for the department and particularly Jobcentre Plus, but is one that we are equipped to deliver. It is also one that is essential, if we are to give these claimants the help they need, and have been too long denied, to improve their chances of moving back into work.

Jobcentre Plus is well equipped to deliver incapacity benefit reassessment to the proposed timeframe. The business case has established the level of staffing required for all three arms of the business to deal with the impact of all aspects of reassessment. The business processes will predominantly be based on customer contact via the telephone, but allowance has been made to deal with the contacts expected in Jobcentre Plus offices.

Implementation planning in terms of Jobcentre Plus staff is progressing at local level to ensure that resources are in place in the run-up to the start of reassessment. Resource recruitment, capacity planning and provision for healthcare professionals continues to progress in line with delivery plans, and is on target. IT provision to support reassessment remains on target. When Jobcentre Plus is at full capacity, it will be dealing with 10,000 cases per week or 700 cases per processing site. To mitigate capacity issues, sites purposely have been selected where it is known that the required capacity can be built to undertake this work. As part of monitoring the reassessment process, Jobcentre Plus will be able to control the flow of cases and if required move cases around the network to ensure that cases are processed in good time.

My noble friend Lady Thomas talked about extending the introduction of reassessment in the context of freezing the programme. The early introduction of the reassessment programme in Burnley and Aberdeen clearly is good practice. It has been suggested that it is being conducted too close to the start of national implementation to be of any real use, but this is not the case. This is not a pilot in the normal sense, but a phased introduction, and will enable us to gain early feedback on claimant and staff experience in relation to the new processes. Valuable information will also be gathered to undertake early validation of estimates, such as the proportion found fit for work. We do not think however that we should extend this trial, as this would delay the reassessment process which is so urgently needed.

There has been criticism, which we have heard today, of the work capability assessment. In March this year, a DWP-led review of the work capability assessment found that generally it is accurately identifying individuals for the right support. That said, the review also made a number of recommendations for improving the assessment, and we announced on 29 June our intention to implement these recommendations. Among them were the mental health issues which the noble Lord, Lord Knight, referred to. We will now begin to revise the work capability assessment accordingly. Implementing the recommendations of the review will ensure that the work capability assessment is fairer, more consistent and transparent. In line with our statutory obligations, we have also commissioned an independent review of the work capability assessment which will be led by the highly respected occupational physician Professor Malcolm Harrington.

The noble Lords, Lord Knight and Lord German, both asked why we do not have a list of conditions exempt from the assessment. We want everyone to have the opportunity to engage in work and the support needed to enable them to do so. It is important that we assess someone’s capability for work not on the nature of their health conditions or disabilities but on how severely those conditions impact on each individual’s ability to function. Having a list of exempt conditions was entirely the wrong approach. It led to people being written off and parked on benefit.

The primary aim of the employment and support allowance is to enable as many people as possible to engage in work by offering them the right support, and to ensure that benefits are paid to the right people until they are able to engage in work. This applies just as much to people with severe conditions who may still be capable of work, given the right support. We know that being out of work is harmful to health and that being in work is generally good for health. We want as many people as possible to engage in work. It is important that individuals who are keen to work, despite the severity of their condition, have the opportunity to work and are not automatically parked on benefit. As I said, we want everyone to have the opportunity to engage in work and to have the support needed to enable them to do so. We recognise that there will always be some people for whom that is not possible because of their severe level of disability. That is why a support group was developed for people with limited capability for work-related activity, who should not be required to engage in that activity as a condition of getting benefit—and who will not be so required.

My noble friend Lord German and the noble Lord, Lord Knight, raised the matter of appeals. Joint work is under way across the DWP and the Tribunals Service to mitigate the impact of increasing workloads by focusing on four key areas: streamlining processes within both DWP and the Tribunals Service, including an end-to-end review of the appeals process; reducing the number of appeals by looking at the messaging we use to manage customer expectations and in particular the language in the disallowance letter; increasing capacity in the Tribunals Service through increasing administrative, judicial and medical resources; and strengthening the working relationship between DWP and the Tribunals Service. We believe that this will lead to an improved appeals service for our customers in due course.

My noble friend Lady Thomas raised the communications strategy issue. We will be developing additional sources of information for the reassessment process, focusing on how we will support our vulnerable customers in consultation with customer representative groups and advisory bodies. Details of these measures will be in place for the trials in October this year. We are also committed to engaging with customer representative groups so that they can support their customers through the migration journey. We have already consulted with national stakeholders over the development of key products for our customers. We also recognise the importance of working with local groups to support our customers through this process and are proactively engaging with third-party organisations in the trial locations.

Taxation has been raised by the Merits Committee and the Social Security Advisory Committee as a point of particular concern; it was raised again today, particularly by my noble friends Lady Thomas and Lord German. Currently, people who have been on IB and severe disablement allowance are exempt from liability for income tax. This provision was introduced in 1995 and has continued ever since. It means that, unlike all other IB claims and new contributory ESA claims, this diminishing number of claimants have never had to pay tax on their benefit if their income reaches the level at which tax becomes payable. We recognise that individuals in this position, especially if they also receive tax credits, could experience a significant reduction in their overall income, even if their benefit income is maintained by the regulations that we are debating today. On the other hand, they have received transitional protection for more than 15 years, which does not apply to more recent claimants, who have to pay tax on the same amount of income.

--- Later in debate ---

[Baroness Thomas of Winchester]

My Lords, I am grateful to all noble Lords who have spoken in this debate. I think that it has been valuable and I particularly welcome my noble friend Lord German to the DWP brief. He knows that the Chamber is not as full as it is on some matters it deals with, but all the better for that.

I was grateful to the noble Lord, Lord Knight, for explaining that we are in an Alice-through-the-looking-glass situation: my noble friend was the architect of his Government’s plans and now everything is reversed. This debate has brought out some of the real problems. We understand that the medical reports are not disease-specific, as it were; they look at what the person can do rather than what he cannot do.

However, the other side of the coin is the fact that there are an enormous number of appeals and a lot of them are successful, so something is going wrong. I was glad to hear him mention Professor Harrington's review—I remember that I have read it before. Presumably, if he suggests changes to the work capability assessment, that will be factored into my noble friend’s plans for legislation later in the year. Will it be dealt with then?

[Lord Freud]

I am pleased to clarify. Clearly, we will have Professor Harrington’s report later in the year. Timing depends on the exact nature of any recommendations that he may make. Obviously, we would like as many of those recommendations to be included as we can.

[Baroness Thomas of Winchester]

I was interested when the Minister said that the programme would be a challenge for Jobcentre Plus offices. That is probably the understatement of the year. I was a bit worried when he said that they will move cases around the network. I hope that that will not be done quite as it sounds—it sounds a rather curious thing to do—and that there will be a lot of telephone recruitment. I hope that it will all work.

I end by saying that my noble friend Lord German had the right phrase when he said, “It ain't what you do, it's the way that you do it”. That should be applied to the regulations. I am most grateful to all noble Lords who have spoken in this debate; I look forward to the Minister’s reply by letter, if he has not been able to answer some of the questions.

Disabled People: UN Convention

Lord Freud Excerpts

Monday 5th July 2010 Lords Chamber

[Baroness Greengross]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I declare an interest as a member of the Equality and Human Rights Commission.

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

My Lords, this Government are committed to the Convention on the Rights of Persons with Disabilities and to using it as a driver to achieve equality for disabled people. The Office for Disability Issues is co-ordinating implementation, monitoring and reporting across government and the devolved Administrations to ensure that they are aware of the need to take the convention into account in developing policies, and that they involve disabled people and their organisations in doing so.

[Baroness Greengross]

In thanking the Minister for his reply, I recognise the huge resource challenge we all face and I welcome the Government’s commitment to ensure that fairness is at the heart of any financial decisions that will be made. In light of the recent announcements around welfare reform, including incapacity benefit and disability living allowance, and the possibility of a delay in implementing the Equality Act, can the Minister assure the House that every step is being taken to make sure that spending cuts do not impede the implementation of the UN convention and that full equality impact assessments are carried out so that the impact on disabled people is actively and appropriately considered?

[Lord Freud]

My Lords, I am grateful to the noble Baroness for her informed questions, which I know come from her interest in and passion for equality issues. I can assure her that we will treat this convention with great seriousness and will push ahead to make sure that it does not slow down. Next July, we are due to report on progress in this area. We will be pushing to make sure that we do so to time. I can also assure her that in our welfare reforms we will look precisely at making sure that those who need support the most continue to receive it.

[Baroness Campbell of Surbiton]

My Lords, one-third of disabled people live below the official poverty line, which does not measure the additional costs of disability. Under the UN disability convention, the Government must promote the right of disabled people to an adequate standard of living and social protection. Will the Government’s review of the disability living allowance and, more importantly the recent closure of the independent living fund to new recipients, breach that obligation?

[Lord Freud]

My Lords, when we look at our obligations under the convention, we are clearly looking at a journey towards complete equality for disabled people. It would be naive to claim that within one bound we shall produce total equality. This has been a long journey, which started many years ago. We are committed to press on and make sure that as we move ahead we produce greater equality and improve the lot of disabled people steadily as the years progress.

[Lord Ashley of Stoke]

The Minister’s assurances are welcome, but how do the Government explain the reservations that they have made? It is not so much the question of individual reservations, but the cumulative effect of all four of them. It gives the impression that the British Government are not interested and certainly are only lukewarm towards the issues covered by the four reservations to the convention. How does the Minister square that?

[Lord Freud]

My Lords, we have four reservations on this convention, and there are two ways of looking at that. A large number of countries have signed—145 of them, and 87 have ratified. We have taken this convention with great seriousness and looked through the implications of applying it, rather than looking at it as a purely aspirational matter. Of those four reservations, we are working extremely hard to ensure that we can remove two.

[Lord Addington]

My Lords, when we are dealing with disability matters we tend to pass a lot of legislation, then have to go back and pass legislation again on the same subject. Have the Government decided whether we have the legislative framework to enact the United Nations convention? If we do not, when will it be in place? May we know as soon as possible?

[Lord Freud]

The United Nations convention is not a matter of law in this country or in Europe. It is a convention that holds us to account on our performance, and on which we report back to the UN. We will do that in July.

[Lord Knight of Weymouth]

My Lords, Article 28 of the convention promotes the right to an adequate standard of living. Elsewhere, the convention requires that all activities must include the participation of persons with disabilities. How have persons with disabilities been involved in the decisions in the Budget that show, in table 2.1 of the Red Book, that £360 million in 2013 and then over £1 billion in 2014 will be cut from the disability living allowance?

[Lord Freud]

My Lords, this is the first time that I have had a chance to welcome the noble Lord to these Benches. As he points out, part of the convention says “nothing about us without us”, and we take that seriously. We will go through the normal Budget processes in terms of ensuring that equality and human rights issues are dealt with.

[Lord Low of Dalston]

My Lords, the Minister will be aware that the European Parliament is currently considering a draft regulation on the rights of passengers on bus and coach transport. Will he assure me that the British Government will support the inclusion in this regulation of stronger rights for disabled people in line with Article 9 of the UN convention, particularly with regard to the provision of assistance and accessible information?

[Lord Freud]

As I said, my Lords, we are determined to implement this convention. We have four reservations, but transport is not one of them. We will be implementing it in as proportionate a way as we can.

State Pension Credit Pilot Scheme Regulations 2010

Lord Freud Excerpts

Monday 5th July 2010 Lords Chamber

Moved By

[Lord Freud]

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

Relevant Documents: 11th Report from the Joint Committee on Statutory Instruments, Session 2009-10; 16th Report from the Merits Committee, Session 2009-10.

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

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

Britain used to have a pensions system to be proud of but, due to years of neglect and inaction, we are left with fewer people saving into a pension every year, and the value of the state pension has been eroded, leaving millions of people in poverty. We are taking action to address that and will deliver on our responsibility to reinvigorate the pension landscape. But too many of today’s pensioners are already paying the price exacted by allowing the value of the basic state pension to be eroded over time.

We will halt that decline by ensuring that the basic state pension rises in line with whichever is the greatest of earnings, prices or 2.5 per cent. But for those who are already paying the price—those who have been let down by the pensions system—it is absolutely critical that they get the help that is available from pension credit.

Pension credit means that no pensioner needs to live on less than £132.60 a week—or £202.40 for couples. Those with severe disabilities, caring responsibilities and/or qualifying housing costs may be entitled to more. But, like other social security benefits, pension credit has to be claimed, and we know that significant numbers of pensioners are not getting the help that they are entitled to.

Latest figures show that some 2.7 million pensioner households, which equates to 3.3 million individuals, are in receipt of pension credit. However, it is estimated that more than 1 million pensioners could be entitled to the benefit who are not claiming it. Research shows that this is due to a range of factors. Predominantly, these include pensioners incorrectly thinking that they are not entitled to any help. Others are reluctant to go through what they see as a demeaning means test whereby they are required to open up their bank books to the state to verify the details of their personal finances. This is in many ways unsurprising. Due to what my honourable friend the Minister for Pensions has called “the curse of incrementalism”, the system of support for older people in this country has under successive Governments become one of Byzantine complexity. Although pension credit can be claimed with one simple telephone call, it cannot surprise us that many older people are bewildered by the system and that many still do not claim what is rightly theirs.

It is quite clear that we have to explore new approaches, but we have also to be sure that taxpayers’ money is properly targeted. For some time, lobby groups such as Age UK have argued that we have all the information that we need to do away with the need for pensioners to make claims at all, and to make automatic payments.

Data that we already hold about people’s financial circumstances have been used to help target take-up activity. However, this information is not specifically collected to decide entitlement to income-related benefits. The indications are that the department is not yet in a position to estimate entitlement with sufficient accuracy to offer a fully automated pension credit payment system now. Indeed, I think it has been generally accepted that the study that we are now planning to conduct is not intended to see whether a system of automatic payments can be rolled out in the near future. The previous Minister of State for Pensions acknowledged this when she said, in reply to a Question, that the previous Government had,

“no current plans to introduce wholesale automatic payments of pension credit”.—[Official Report, Commons, 21/7/09; col. 1316W.]

I am not interested in what we cannot do, but rather in what we may be able to do by using more effectively the information that is already available to us. We need to start from somewhere, and this study will help us to understand what might be possible in the short to medium term. It will help us to explore what opportunities there are to use data more innovatively to drive take-up in the longer term, while ensuring that, in this difficult economic climate, taxpayers’ money continues to be properly targeted on those in the greatest need.

We therefore propose to take forward a modest research study later this year in which awards of benefit will be made for a limited period of 12 weeks to a random sample of some 2,000 pensioners resident in Great Britain based on the information that we already hold and without the need for a claim. The study is being designed with a view to meeting the following objectives: to provide information about how a system that makes more use of personal information that the Government already hold to pay people pension credit might be received by potential recipients; to evaluate ways of using the data available to us to improve take-up under the present pension credit regime; and to deliver evidence about how, in the long term, a reshaping of the benefit or acquisition of better data might enable us to radically streamline the process for awarding pension credit. On the study's conclusion, there will follow an extensive and detailed evaluation of the pilot to see how it has delivered against those objectives.

The regulations make provision for the study. In particular, they set out the provisions for identifying potential participants, calculating the amount of any benefit payable and the manner of subsequent payments. We have spotted that the reference to the regulations coming into force should be in accordance with Regulation 1(2) and not “2(2)” as drafted. That typographical error was noticed after the regulations were laid. While it makes no difference to the content or the effect of the regulations, I assure noble Lords that we will of course amend the reference prior to publication.

The development of these draft regulations has involved the ongoing input of a number of external stakeholders such as Age UK, to name but one. However, I express my gratitude to all those who have been involved in getting these regulations into the shape we see before us today. I commend them to the House.

--- Later in debate ---

[Lord McKenzie of Luton]

Indeed, among the advocates of that I include the noble Lord and possibly even the Pensions Minister, although we shall see what will flow from that.

We note that the limited consultation that the DWP undertook before the election showed general support for the pilot, although, as ever, with some reservations. Clear communications are, as the DWP’s response to the consultation acknowledges, of paramount importance. We are likely to be dealing with many people who are vulnerable and who could be distressed at seeing ad hoc credits appearing on their bank statements.

A condition of eligibility of receiving benefit under the pilot is that a person must receive retirement pension that is paid by way of direct credit transfer to a bank or other account, a point that the noble Lord, Lord Kirkwood, probed. I am not sure whether the Minister has information to hand—if not, perhaps he could write—but we would be interested to know what percentage of people in receipt of retirement pension are now paid other than by these means. Are there data covering the extent to which such people are underrepresented or overrepresented in the entitled non-recipient category? We ought to know that.

The noble Lord, Lord Kirkwood, also touched on a question that arose about the design of the pilot, which involves the payment of just three four-weekly amounts. Is that sufficient to provide the information to satisfy the objectives of the pilot? Given the set-up costs of the pilot, it would be a pity if the opportunity were missed to provide a secure evidence base. On what basis is the Minister satisfied that the three-month period is sufficient to meet the objectives for which the pilot is designed?

The pilot is to cover both the guarantee credit and the savings credit, so the spread of amounts of payments could be quite wide. Is the Minister also satisfied that the proposal to select 2,000 at random from the entitled non-recipient population will pick up a sufficient range of circumstances to enable a comprehensive evaluation of the differing reasons for lack of take-up?

Of course, the pilot has to be seen in the context of other campaigns that are under way to improve the take-up of benefit. Perhaps the Minister could give us an update on these. Specifically, could he tell us about the outreach programmes and the current volumes of face-to-face visits that are being undertaken? What progress is being made on the programme that allows one phone call to access three benefits—pension credit, council tax benefit and housing benefit? Will this continue alongside the pension credit pilot payment?

The noble Lord will recall our deliberations towards the end of the Welfare Reform Bill on the renaming of benefits and the campaign by the Royal British Legion to improve the take-up of council tax benefit by designating it as council tax rebate. If memory serves, we had common cause on this; the noble Lord indicated that it had the support of his party, particularly the now Prime Minister. Will the Minister tell us what progress has been made on this and the current timetable to bring it to completion?

The relationship between pension credit and housing and council tax benefit is important. I understand, for example, that no capital limit is applied to the latter two if a person is in receipt of the guaranteed credit. Both elements of pension credit can be the passport to social fund payments, both discretionary and regulated. Do the amounts paid under the pilot not count for these passporting purposes? If this is the position, is there a risk that, by claiming housing benefit separately during the course of the pilot and/or refraining from claiming pension credit until the end of the pilot period, an individual might miss out, albeit for a short period?

We welcome the pilot. As I have said, it is another means of improving the take-up of pension credit. It is encouraging to see it move forward, notwithstanding the more disagreeable rhetoric that typically emanates from this coalition Government around the welfare system, focusing on fraud and error and itself creating a climate that will deter some people from claiming their just entitlement. This is all against the backdrop of draconian cuts to be visited on government departments and local authorities, with knock-on effects for the voluntary and third sectors—collectively, the support system for helping the most vulnerable to obtain their rights. It is to be hoped that the benefits of this pilot will not be swept away in the deluge of cuts, which would impair the functioning of those whose efforts are directed at helping the poorest and most disadvantaged.

[Lord Freud]

My Lords, this has been an interesting debate. Several points have been raised, which I will endeavour to respond to. I start with the question of my noble friend Lord Kirkwood on means-testing and the signal that it gives out. Whatever system we end up adopting—whether we go for a higher basic pension, as he suggested he supported, or stay with means-testing—there will always be the need for some sort of safety net, given that it is a contributory system. That does not send a message that the Government want more means-testing at the heart of their vision. Nevertheless, it remains the case that we want to ensure that pensioners get what they are entitled to.

The noble Lord asked this pointed question: if there are no plans to roll the system out nationally, what is the point of spending a goodly sum, £1 million, in the present climate? When you look at the scale of the problem, with 1 million pensioners not getting the help that they are entitled to, despite the efforts of PDCS and third sector organisations, we need to think innovatively. Clearly, we are not in a position to roll out a fully automated system today, and we need to build up the evidence base to establish what kind of information we need to get people more of the help that they deserve. The cost of the study was queried by my noble friend Lord Kirkwood. The current revised estimate of the cost of the whole study is £800,000.

Will we have the necessary information to evaluate at the end of the study? There are several elements to the evaluation. We will be asking a sample of the customers to participate in a face-to-face interview and using research contractors who know how to encourage participation. The interviews will be carried out in the place most convenient to the participants—probably in their own homes. Then we will track the take-up of the pension credit of people who have participated in the pilot. Those data are gathered automatically as part of the administrative system. Finally, we will gather the claims data from those who claim pension credit as part of the pilot. Again, that will be done via our own systems.

Homing in on the point on which I touched just now on national rollout, there are no plans for a national rollout. This is a study to help build the evidence base to see what we may be able to do in this area in the future. The complexity and the staff training required are not as daunting as my noble friend Lord Kirkwood suggested. The study will be run by a centralised team rather than small groups across the country. The definitions of income and capital are very much based on the definitions used in standard pension credit. If there are any changes, these will be introduced to make them simpler. We do not have any concerns about our ability to train staff to administer these payments effectively.

My noble friend mentioned the Daily Mail in connection with possible stories about lots of money whizzing off to the Costa Brava. The pension credit is not an exportable social security benefit. Therefore, I assure him that we will select people to take part only if they are resident in Great Britain.

The noble Lord, Lord McKenzie, asked about process. Pensioners can claim housing benefit and council tax benefit alongside pension credit in a single phone call without the need for a signed claim form. Their calls to the 0800 claims number from a BT landline or from the six largest mobile phone networks are free. The noble Lord asked whether 2,000 was sufficient as a sample size. We are confident that 2,000 participants will deliver a sufficient range of circumstances to build a meaningful evidence base. He asked about recovery of money in different ways in terms of the interplay with other claims. I make it absolutely clear that under no circumstances will anyone receiving a payment under these regulations be asked to repay a penny. We will make sure that participants in the study are made fully aware of that fact.

Both the noble Lord and my noble friend asked about the 12-week length of the pilot. It was important to balance two factors; namely, to make the pilot long enough to collect enough meaningful information and to protect public funds which are in short supply. The determination is that 12 weeks is a reasonable compromise between those two objectives.

The noble Lord, Lord McKenzie, asked about passporting and the exclusion of housing benefit and council tax benefit, as it is called at the moment. If we had added in those two benefits, it would have added a significant level of complexity and cost to the pilot. From the outset it was never the intention that the interaction between pension credit and housing benefit and council tax benefit should be factored into this study. Clearly, we expect to learn more about issues such as people’s attitudes to receiving automatic payments of benefit, which may have wider application to other benefits such as housing and council tax benefits.

[Lord McKenzie of Luton]

Perhaps we can just be clear on this fairly narrow point. If somebody in receipt of payments under the pilot refrains during that period from making a claim for pension credit, is there a risk that they could be disadvantaged? If they have a claim for pension credit, I think it will open up some passporting opportunities. I was probing whether that passporting will exist in the interim if a payment is made under the pilot which is not the result of an actual claim to pension credit at that stage.

[Lord Freud]

I thank the noble Lord for that question. I will go back and double check this, but my understanding is that this pilot is entirely separate from any other activity. If an application which took in the passporting opportunities was made in the normal way during this pilot, there would not be a countervailing claim on the money paid by the pilot.

I have just received some support, for which I am more than grateful, confirming my understanding—it is therefore more than my understanding. The position is that there is no risk of disadvantage. If someone claims pension credit, they will get the full claim plus any passporting money, in addition to the pilot funds.

I turn to the question raised by my noble friend and the noble Lord on how many pensioners are paid directly into a bank account. More than 90 per cent of pensioners receive their pensions through direct payments into either a bank account or post office account. I refer to the standard pension to which they would be entitled. We are talking about a small group who do not receive their payments in that way.

I shall write to the noble Lord on his question about the number and content of visits to customers to encourage their take-up. I do not have that information to hand.

Let me draw my remarks to a close. The research study, through these draft regulations, will allow us to explore what potential exists to use data more effectively to improve the take-up of pension credit, to make more automatic awards of pension credit in the future when better data are available, or to simplify the benefit rules. Importantly, it would also help to throw light on whether people are happy about personal data being used in this way. I therefore commend these regulations to noble Lords.

Motion agreed.

House adjourned at 8.43 pm.

Social Security (Claims and Payments) Amendment (No. 2) Regulations 2010

Lord Freud Excerpts

Monday 21st June 2010 Lords Chamber

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

My Lords, I thank my noble friend for tabling the Motion and for giving me the opportunity to explain how this voluntary debt recovery trial will be evaluated. I take the point about the numbers in the House for this debate—this is an exclusive group—but I can claim to be a member, albeit a new one, of the DWP regret club from earlier this year. I need, however, to apologise, albeit on behalf of the previous Administration, for the fact that the Merits Committee was not provided with sufficient information when the regulations came before it.

I should say by way of background that the amendment to the Social Security (Claims and Payments) Regulations 2010 will enable voluntary deductions to be taken from a person’s social security benefit to repay certain HMRC liabilities of under £1,000. The types of debt included are those arising from overpayments of tax credits and those arising from personal tax liability.

The transition from work to benefit can be difficult. Before the previous Government introduced tax credits, it was possible for overpayments of in-work benefit, then known as family credit, to be recovered from other social security benefits. Once tax credits were introduced, this option ceased, even though many customers found it an easy and convenient repayment method. The regulations reinstate this option for those who wish to use it. As well as providing a convenient method of repayment for individuals, this will help those unfortunate enough to have a debt with both the Department for Work and Pensions and the HMRC. Under current processes, both departments could seek repayment independently and both expect repayment. Under the trial process, the departments will work together and ensure that customers have only to repay one debt at a time.

Participation in the trial is purely voluntary. There is therefore no question of excessive compulsory deductions being taken from a customer’s benefit. The option to use this form of repayment and the rate at which any deduction is made will be agreed with the customer before any repayment commences.

This brings me on to the issues raised by the Merits Committee and by my noble friend in this Motion. It is suggested that the trial has been based on inadequate design which will be unable to produce reliable evidence for evaluation. The real issue is perhaps rather that the Explanatory Memorandum failed adequately to explain the design of the trial and specifically the evaluation protocols. This is regrettable and I fully accept that the Merits Committee should always be given sufficient information in order fully to assess the validity of regulations coming before it. In fact, even before this Motion was tabled, the department had written to the Merits Committee, giving a much fuller account of the proposed evaluation methodology than was provided originally.

It may be helpful at this point if I give some details of how DWP and HMRC will work together to run and evaluate the trial. We intend to approach tax credit customers and self-assessment customers who are in receipt of a relevant social security benefit and have new debts to HMRC. My noble friend criticised the structure of the trial as being a case of garbage in and garbage out. I think that the issue is that it is rather more narrowly focused than a wider trial might be.

The aim is to assess whether voluntary deduction of debts owed to HMRC from DWP benefits is attractive to debtors and a cost-effective means of recovery. Outcomes of the trial will be compared to outcomes achieved through existing HMRC debt recovery methods. The trial will provide evidence to inform any future decisions on use of deductions from benefits. If the trial evaluation shows that this is a cost-effective recovery method for government and that it is attractive to customers, it will be retained post trial. However, if that proves not to be the case or there proves to be no interest from customers, it will not be continued beyond the period of the trial.

The objectives of the trial are, first, to test proof of concept. By that, I mean to ensure that the deductions process is operationally effective, that customer information is safeguarded, that customer records are updated and that additional cash recoveries are accounted correctly. The second objective is to assess levels of customer take-up and the factors which motivate customers to participate in the trial or to pay directly to HMRC.  The third is to assess cost-effectiveness; that is, the additional recoveries achieved net of departments’ costs.

There will be three groups for evaluation purposes. The first group will consist of those customers who volunteer to take part in the trial. The evaluation will look at how much was recovered, the spread of weekly deduction rates and how long a person is in receipt of a relevant benefit from which deductions can be made. The DWP and HMRC will both analyse their costs in running the trial to permit an overall cost to Government to be calculated. In addition, the performance of new joined-up operational processes between HMRC and the DWP will be assessed. As part of the evaluation, HMRC will seek feedback from its customers on the effectiveness of the trial and their overall customer experience.

--- Later in debate ---

[Noble Lords]

Ha!

[Lord Freud]

I will not rise to that.

My noble friend Lord Kirkwood asked when the trial was due to start. It will start next month, and the first letters will go out then. We do not intend to cancel this trial; we will go ahead with it, although we will extend it only if it is successful.

The noble Lord, Lord McKenzie, asked whether other methods of repayment would be available. Clearly, if the customer signs up for the trial, no other method will be used. If the customer does not sign up, the repayment methods could be lump sum or instalments by direct debit or standing order. He also asked whether the new Government stand by the decision to deduct at three times the 5 per cent rate. Yes, we stand by that, but it is the maximum rate and participants can choose a lower rate. Finally, he probed the question of other ways of applying sanctions. This is, of course, not a sanction—it is a repayment of a debt—although I can tell him that we are exploring non-financial sanctions.

I commend the principle of the trial as a convenient alternative repayment method for those who wish to use it and as an example of joint working. The design of the trial is adequate, but I accept the criticisms of the Merits Committee and of my noble friend Lord Lucas. We need to get this right in the future. We need to make sure that all our regulatory changes meet the standard expected by the Merits Committee and that we provide all the necessary supporting information in good time.

[Lord Lucas]

My Lords, I am extremely grateful to my noble friend for that comprehensive and helpful reply. I shall not trade blows with him on matters to do with welfare, as I am merely an extremely junior acolyte at his feet. This has been a fascinating debate for me and I shall feel tempted, now that we have a Minister in this House who is so much at the forefront of welfare reform, to sit on the Benches and, at least, to listen. However, I am quite happy to trade blows with his statisticians.

The Minister has made me understand one thing that I did not understand before. The trial is clearly voluntary, but is he saying that the rollout will also be voluntary, even if the trial is a success? That certainly would remove a lot of my worries. However, the effort being expended to create a control group and to look at what is happening in the second, probably larger group of those who will not take part in the trial rather suggests to me that there was an intention—noble Lords opposite may know whether this is the case—that this should be a compulsory way of reclaiming HMRC debts.

If you want to understand how to operate this effectively with people who volunteer, you do a randomised control trial just with those people. You go on until you have a couple of thousand volunteers and you assign them randomly—half you monitor under the current system and half you monitor under the new system. You then have a conventional and statistically robust way of comparing behaviour. It might be fun and informative, and it might have a peripheral virtue to try to understand why the people who have not volunteered have not done so and to try to find out how to encourage them to do so in future, but you certainly would not bother with this functionless control group that sits as an appendage at the bottom.

As I say, there is a simple and statistically robust way of dealing with this if the trial is for a voluntary system, which would not have all the characteristics of the trial that has been put in front of us. If the Minister is prepared to set up a meeting with his statisticians, I should enjoy it very much, because I do not think that they have come up to the mark on this occasion if, as I say, this is a trial for a voluntary system. If I am wrong and this was designed as a trial for a compulsory system, I come back to my old criticism that it does not function as that. You do not get enough information on the likely behaviour of the people who have declined to take part in the trial to be able to predict how they would react if they were compelled to take part.

However, I cannot be churlish when I have received such a good reply from my noble friend, particularly if he sets me up with a tea date with his statisticians—and how could any statistician refuse tea in the Lords? Whatever the circumstances, I happily beg leave to withdraw the Motion.

Chronically Sick and Disabled Persons Act 1970: 40th Anniversary

Lord Freud Excerpts

Thursday 17th June 2010 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Corbett, for leading this important debate and all noble Lords who have made valuable contributions today. I consider it a great honour to have the responsibility of closing for the Government among such knowledgeable, committed and powerful champions of disability equality. I very much welcome the opportunity that this debate provides to discuss the new Government’s approach to equality for disabled people. I also pay tribute, as so many others have done today, to the noble Lord, Lord Morris, and to his remarkable determination in bringing his Act—the Alf Morris Act—into being. We have been privileged today to hear a moving, first-hand account of his battle with complacent authority. His unceasing efforts, and the efforts of those who worked with him, brought into being the first legislation, not just in the UK but across the whole world, to recognise the rights of disabled people.

As other noble Lords have highlighted, we have made significant progress since the Act was introduced 40 years ago. We now have a strong disability rights framework, which was most recently extended by the Equality Act 2010 and the UN Convention on the Rights of Persons with Disabilities. This Government are committed to using the UN convention as a driver to achieve equality for disabled people. We are looking at how we can best implement the Equality Act 2010 and we will be making announcements about its implementation in due course.

The Chronically Sick and Disabled Persons Act was also a catalyst to making Parliament more accessible and resulted in many changes, including, as the noble Baroness, Lady Masham, told us, the invention of the mobile Bench, which is so welcome today. There is still more to do before Parliament is truly representative of the disabled population, which is why this Government have committed to introducing extra support for disabled people who want to become MPs, councillors or elected officials.

Since the Act was introduced, we have moved on from a time when disabled people were essentially invisible to society and were hidden or forgotten. We have moved through a long period when disabled people, although finally visible, were treated as objects of pity or charity. Today, the disability equality agenda is part of mainstream discussions and receives the recognition that it deserves. It is an agenda on which, no matter of what political persuasion, we are all determined to make progress.

Despite disabled people’s voices now being recognised and heard, disabled people still remain, in many ways, the objects of society’s benefaction rather than the subjects of their own lives. There are still many disabled people whose day-to-day lives are not within their control. Disabled people remain categorised by labels—even the term “disabled” to me separates them out from the rest of society—rather than being recognised as individuals who deserve the same opportunities as anyone else to succeed.

While preparing for this debate, I was thinking about how, ultimately, we are all seeking happiness or quality of life, a fulfilment that many philosophers argue comes from the ability to contribute, to be fully appreciated for those contributions and to be of value. According to this thinking, not only is society missing out on the value that disabled people can contribute, but we are denying disabled people the fundamental right to lead fulfilled lives. We are denying the right to seek the attributes that lead to happiness and self-worth—attributes such as social interaction, employment, pleasure, income, democratic freedom and meaning, to name a few. For me, the challenge is how we can empower disabled people to make that complete transformation from object to subject and how we can support disabled people to be completely in control of their own lives so that they have the opportunity to be fully involved in a society that recognises them as individuals rather than people defined by disability.

The Independent Living Movement is important here in terms of,

“disabled people having the same choice, control and freedom as any other citizen—at home, at work, and as members of the community”.

Those principles—designed by disabled people themselves—are fully signed up to by this Government. I must pay tribute to the noble Baroness, Lady Campbell, and to the noble Lord, Lord Ashley, who have done so much to champion independent living for disabled people.

Building on independent living, the right to control, introduced through the Welfare Reform Act 2009, will provide disabled people with greater choice and control over their own lives. It will empower them to make informed decisions about how they want to receive the support to which they are entitled. We will be testing the right through trailblazers, which will commence later this year.

A key factor in people having independence is having the chance of employment. The importance of work extends far beyond the financial benefits that it can bring. As my forebear, Sigmund Freud, said:

“No other technique for the conduct of life attaches the individual so firmly to reality as laying emphasis on work; for his work at least gives him a secure place in a portion of reality, in the human community”.

Some noble Lords will recall that he practised what he preached and wrote some of his most powerful work while in the 17-year grip of the cancer that killed him.

We know that work is generally good for people’s well-being, as investigated by Waddell and Burton in their 2006 report Is Work Good For Your Health and Well-Being?. Conversely, long-term worklessness can have negative health effects, particularly for people’s mental health. This is true for disabled people, people with health conditions and people in the wider population. We recognise, however, that not enough people are experiencing the benefits of work. Sickness absence remains high, with around 170 million working days lost to illness in 2008. Over 600,000 people flowed on to incapacity benefits last year. While less than half of all working-age disabled people are in work, almost 40 per cent of disabled people who are not in work would like to be.

Right now, we have a welfare state that divides our society into neat segments where the poorest are left to live a life of helplessness, undermining their self-confidence and breeding social exclusion that splinters families and communities. That is why we are starting a radical programme of welfare reform. We will reassess all current claimants of incapacity benefit on their readiness to work. We will also introduce the work programme by summer 2011, which will offer a single integrated package of support, providing personalised help for everyone who finds themselves out of work, regardless of the benefit they claim.

The support offered through the work programme will be based on individual need rather than on the benefits claimed and will radically simplify the complex array of existing employment programmes. It will be designed to meet the needs of a wide range of customer groups, including disabled people, helping to ensure that those with the greatest barriers to work do not get left behind. I hope it will mean that those who have been left behind, referred to by my noble friend Lord Addington, will get a real second chance through this programme.

The noble Lord, Lord Rix, who has contributed so much in this area, powerfully pointed out how difficult it is for people with learning difficulties to get a job. We recognise that there are some groups of disabled people, particularly people with learning difficulties, mental health conditions, and autism, who face additional barriers to employment and will need additional support to move into, or return to, work. We are quite clear that everyone who can work should get the support they need to get a job, and we remain committed to tackling the particular disadvantages that those groups face in employment and across other areas of life. I would like to take this opportunity to remind the right reverend Prelate the Bishop of Ripon and Leeds that I was proud to make my maiden speech in this House in support of the Autism Bill. I can assure him that we are committed to addressing the needs of people with autism and their families.

We also recognise that some disabled people will not be able to make the move into employment. If people genuinely cannot work, we will make sure they get the unconditional support they need. As I mentioned earlier, one of the main challenges is changing the way society perceives disability, and that includes tackling the prejudice and ignorance that leads to bullying and harassment. One of the most shocking aspects of today’s society is that disabled people are still subject to harassment of the worst kind. All disabled people deserve to be free from bullying, to feel safe in their own communities, and to be able to make their full contribution to society in safety and security. This Government take this issue seriously—which is why we have committed to promoting better recording of hate crimes—in order to work towards eliminating that very destructive barrier to participation in society. The Equality and Human Rights Commission launched an inquiry this week into disability-related harassment, which we welcome and fully support.

One of the concerns expressed by a number of noble Lords, including the noble Lords, Lord Corbett and Lord Low, and the right reverend Prelate the Bishop of Ripon and Leeds, was that the financial pressures we currently face will effectively undermine progress in disability equality legislation. I can only emphasise that it is vital that any budget cuts do not disproportionately affect disabled people. We are committed to championing disability equality across government and we have a Minister for Disabled People.

I must admit that as it is early in the Administration my responses to many of the specific questions will be of a similar nature—that we are looking at the issues and will respond as soon as we can. I will give some dates. One of the issues on which noble Lords wanted assurances was the access to work programme. It was referred to by the noble Lord, Lord Corbett, and the noble Baroness, Lady Thornton. We are committed to supporting disabled people to enter and remain in employment, and we are currently undertaking a review on how best to do that. We expect to announce further details shortly.

The noble Lords, Lord Corbett and Lord Low, asked whether we will keep the road map to disability equality. We are committed to achieving equality as soon as practically possible. The road map is a useful guide which we will want to use. The noble Baronesses, Lady Campbell and Lady Thornton, and the noble Lord, Lord Low, raised social care. We acknowledge that urgent reform of the social care system is needed. It is one of the biggest challenges facing this Government. That is why we plan an independent commission to consider how to ensure sustainable and responsible funding. That will go ahead.

The noble Lord, Lord Low, asked about the work programme and the noble Baroness, Lady Thornton, asked about work choice. We are moving ahead on the work programme at great speed, as noble Lords will have seen from the announcement last week. We plan to have that in place in the first half of next year. Clearly, one of the most complex issues in designing that programme is differential payments. I will commit to bringing information on our progress as soon as it is available. We are planning to make an announcement on work choice reasonably soon.

I will effectively ask for a little time on the question from the noble Lord, Lord Ashley, on support for his Bill on independent living for disabled people. An Oral Question is down for that and I shall leave my noble friend Lord Howe to answer that for the Department of Health next week—I have dodged that one. The independent living strategy was raised by the noble Baronesses, Lady Campbell and Lady Thornton. We are looking at how to bring that forward and we are discussing it with interested parties and across government. That is work in progress.

The noble Baroness, Lady Gale, asked about our plans regarding carers’ allowance. We recognise that 6 million carers play an indispensible role in looking after friends or family members who need support. Clearly, cash benefits play an important part in that, although a minority of carers, around 10 per cent, receive them. We have set out our commitment to simplify the benefits system in order to improve work incentives and to encourage responsibility and fairness. I can assure the noble Baroness that we will carefully consider the needs of carers as we develop our thinking on welfare reform.

The noble Baroness, Lady Gale, also raised the work capability assessment in the context of Parkinson’s. It was developed in close consultation with experts and specialist disability groups. It is kept under review and we are confident that it is working well. We are committed to conducting an independent review of that assessment every year for the first five years and we are currently in the process of commissioning it. We expect the first findings to be reported later this year.

On the concern of the right reverend Prelate the Bishop of Ripon and Leeds about the provision in schools for pupils with special educational needs, we are looking forward to the Ofsted review of the issue which is coming forward this summer, and will respond to it then. The noble Lord, Lord Rix, raised the issue of apprenticeships for those with learning disabilities. It is clear that people with learning disabilities should have fairer access to apprenticeships. It is a priority for the National Apprenticeship Service to improve the number of learners from diverse backgrounds taking part, and both categories will be included; that is, those with learning difficulties and learning disabilities.

In closing, I stress that we are committed to equality for disabled people, to empowering them to have the freedom to control and shape their own futures and to live full and fulfilling lives. We recognise that there is still some way to go, and we do not underestimate that, but today’s debate has highlighted how far we have come on the journey to disability equality. It has underlined the commitment to a fairer, better Britain with equal opportunities for disabled people so that they can be full and valued members of society.

Poverty

Lord Freud Excerpts

Tuesday 15th June 2010 Lords Chamber

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

My Lords, I thank noble Lords who made such excellent contributions and, in particular, I thank the noble Lord, Lord Kirkwood, who brought up this important topic for debate in this House. I welcome the opportunity to set out this Administration’s approach to poverty.

The recently published State of the Nation Report sets out in stark terms the challenge that this Government face in combating poverty. It shows that the UK is a country where worklessness and welfare dependency are much too prevalent. A higher proportion of children live in households where no one works than in any other EU country. In total, more than one in four adults of working age are out of work. That fact underpins the concern expressed by my noble friend Lord Sheikh. Furthermore, around 1.4 million people have been on out-of-work benefit for nine or more of the past 10 years and at least 12 million working-age households receive financial support from the Government each week. This costs no less than £85 billion a year.

I bring noble Lords’ attention to the National Equality Panel’s report that was published in January and found that in England the median total household wealth in the most deprived tenth of areas is £34,000, while in the least deprived tenth of areas it is £481,000. Those statistics emphasise the concern that the right reverend Prelate the Bishop of Blackburn expressed about inequality.

However, poverty is not merely about inequality of income or assets. The previous Government spent £28.5 billion on tax credits in 2009-10, yet child poverty has fallen woefully short of the target of halving it since 1997. It therefore seems that simply increasing incomes will not improve the position that this country finds itself in. I can assure the noble Lord, Lord Kirkwood, that we are maintaining the timetable on the child poverty commission, and that it will be set up, as planned, over the summer. It is equally significant that the health gap between those from high and low socio-economic backgrounds is wider now than in the 1970s and that the gap in educational attainment between children from wealthy and deprived backgrounds remains high.

Neglecting the interconnectedness of the causes that drive poverty is a recipe for failure. It is with this in mind that I welcome the Prime Minister’s announcement of an independent review of poverty in the UK to be led by Frank Field. The review will look at how we measure poverty and how the home environment can influence educational achievement. Crucially, it will also stimulate debate on the nature and extent of poverty in the UK and make recommendations on how we reduce poverty and enhance life chances for the least advantaged. Without wishing to second-guess the outcome of that review, I am glad today to play some part in that broader debate.

I want to outline four of the most important causes of poverty and give a flavour of the measures that this Government will take to combat them. At the same time I will address the concerns that were so well expressed by the noble Lord, Lord Northbourne, about a purely income-driven approach.

First, we know that a stable home life can make a huge difference to the health and well-being of our children, which is why this Government will, among other things, bring forward reforms to the current tax credit system, removing the material penalty for claimants who live together. I can assure the right reverend Prelate the Bishop of Blackburn and the noble Baroness, Lady Howe, of the coalition Government’s plans to take Sure Start back to its original purpose of early intervention, to increase its focus on the neediest families and to better involve organisations with a track record of supporting families.

I should also like to take this opportunity to refer to the early involvement issues raised by the noble Baroness, Lady Howe. At this important point of reform, we should take the opportunity to ask fundamental questions about the care system we want for children. We know how important the early years of a child’s life are to their cognitive and social development. We should be committed to meeting the challenge of giving the best possible start in life particularly to those vulnerable children who come into care.

Secondly, it is clear that addiction to drugs and alcohol is one of the most damaging causes of poverty. Estimates suggest that almost 80 per cent of problem drug users are on benefits, often for many years and with no realistic prospect of either recovering or finding employment under the current system. My department will bring forward proposals for a refreshed substance misuse strategy that will move away from focusing solely on heroin and crack cocaine and include all drugs and alcohol. These proposals will more effectively support addicts to sustain a drug-free recovery and employment.

Thirdly, a lack of education and skills traps many people in poverty. Improvements in skills can help to reduce child poverty and crime, and improve health and job satisfaction and the ability to perform non-work-related tasks such as managing household finances.

Fourthly, the Government’s work strategy needs to be aligned with the job outcomes we want. Let me assure the noble Lord, Lord Kirkwood, on the way in which we are accelerating the work programme, which has been welcomed by the industry. The work programme will offer stronger incentives for providers to work with the harder to help. They will be paid out of the benefit payments that will be saved as a result of placing people in sustainable work. It implies that those providers will look for a holistic approach to tackling the problems of those people and they will bring much higher resources to solving some of those problems.

The concern expressed by the noble Lord, Lord Adebowale, who I am pleased to see in his place, is one of the things that I hope we will see addressed in our approach, which will start to address the complex needs of many people who need support in getting back into the workplace.

Disabled people are at a substantially higher risk of poverty than non-disabled people. Nearly one in four families with a disabled member live in poverty, compared with less than one in six families where no one is disabled. We want to make sure that work is the best route out of poverty for disabled people and non-disabled people alike. Our plans will help more disabled people to find sustainable jobs and thus regain their independence.

We must also ensure that people can enjoy dignity and security in their old age. The legacy we have inherited includes 1.8 million pensioners living in poverty today. As a first step, we will restore the earnings link with a basic state pension from April 2011 with a triple guarantee. In other words, pensions will be raised in line with earnings or prices, or by 2.5 per cent, whichever is the higher. In the long term, this legacy can be remedied only by cultivating a savings culture in which people have access to a good workplace pension scheme backed by employer contributions.

Let me turn to the many questions that have been asked. There were at least 30 of them, so while I will not be able to handle them all, I shall do my best. The noble Lord, Lord Kirkwood, urged me to provide information on the shape of the Budget and where the financial cuts, if any, might fall. I regret to have to tell him that I cannot pre-empt the Statement next week and urge him and the lobbies to which he referred to be a little more patient.

On Frank Field’s review and his approach to child poverty and the recommendations he will make, all I can say is that he is due to report in December. We await his recommendations with great interest and will take them very seriously indeed.

The noble Lord, Lord Kirkwood, also pressed me on benefit reforms. This is another area where I would not wish to pre-empt later Statements. We are looking closely at ways to unlock what has been called the “unemployment trap” or the “poverty trap” in order to try to put in place a more coherent system so that we can have what my noble friend Lord Sheikh referred to: incentives to work. We will also look to make the system much more flexible, as the noble Baroness, Lady Howe, urged us to do. She referred particularly to micro-jobs, those stepping-stone jobs that are so difficult for people to take on under the current system. We want to make that much easier.

I turn to another leading question from the noble Lord, Lord Kirkwood. He asked whether any cuts next week, if there are any, will affect the most disadvantaged and whether we will look at fraud and error costs. We are committed to helping the most disadvantaged and I hope that some of the measures that I have just discussed, such as the pensions triple guarantee, have reassured him that we take this issue seriously.

I have to draw my remarks to a conclusion. As I have said, I will write to noble Lords in response to as many of the other questions that have been put to me as possible.

Pensions: Automatic Enrolment

Lord Freud Excerpts

Thursday 10th June 2010 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Kirkwood, for raising this debate and providing the House with an opportunity to discuss this important issue. I also congratulate those taking part and join the noble Baroness, Lady Greengross, in her congratulations to those people on such an extraordinarily high quality of debate, which I personally found extremely valuable as we shape the immediate period ahead.

During the past decade, we have seen a big decline in the level of pension saving in the UK. Overall saving in the private sector workplace in terms of pension provision has fallen, from 46 per cent of employees in 1997 to 37 per cent in 2009. That means that 2.6 million more people are not saving in a workplace pension. In the same period, the availability of defined benefit schemes in the private sector has also declined, as the noble Baroness, Lady Hollis, pointed out, and membership fell by 1 million between 2005 and 2009.

For those in defined contribution schemes, there has been a decade of lost growth in the primary market—the equity market. The average real rate of return between 1999 and 2009 was minus 1.2 per cent per annum, and just last month the typical pension fund performance for balanced managed funds was down 3 per cent.

While those trends have been happening, life expectancy in the UK has reached its highest level on record and will increase further to the point where in 2050 there will be just three working people for each pensioner. The reality is that, if people want to enjoy a decent standard of living in retirement, we all as individuals and as a nation need to be much better prepared. But that, of course, is not the only problem we face. Whatever we do now needs to be seen in the context of the worst recession since the Second World War, and the need to reduce the unprecedented fiscal deficit. As a nation, we simply cannot afford to continue without a step change in our savings culture.

This coalition wants to see the principles of fairness, responsibility and social justice apply to both our welfare and pension agendas. The Government want to encourage individuals to take more personal responsibility for themselves by saving more and saving longer towards a retirement income that will meet their expectations. Already, we are in a position today where 45 per cent of pensioner households are entitled to pension credit, and 50 per cent to council tax benefit. It is not sustainable for the state to continue to meet the challenges of undersaving all on its own.

The state pension needs to provide a fair and solid foundation for people to save for their retirement, so this Government will restore the earnings link with the basic state pension from April next year with a “triple guarantee” so that it will rise by the higher of earnings, prices or 2.5 per cent. However, at the same time, we need to restore confidence in public finances, so we will hold a review to set the date at which the state pension age starts to rise to 66 years.

We also want a more flexible approach to retirement. People need to be able to retire when it is right for them, so we intend to phase out the default retirement age and will be consulting with employers and others on how to do this. However, if we are to have a pension system which is fair and sustainable into the future, we also need to reverse the significant decline in private pension saving that we have witnessed in the past decade. That is why we continue to support automatic enrolment.

We want to encourage employers to provide high quality pensions for their employees, but additionally we want to explore options that will stimulate greater personal saving. We are therefore considering additional ways of reducing the costs of running pension schemes, making pensions more affordable for employers to run, and investigating ways of making saving more attractive to individuals. Changes such as our commitment to abolish compulsory annuitisation at 75—as the noble Lord, Lord Fowler, suggested—will provide greater flexibility for pension savers in planning for their future.

The big prize here is to help people when they are working to save more and save for longer, and to make it easier for them to do so—to take responsibility for their future. We need to encourage and enable participation in pension saving so that it is no longer the preserve of the financially savvy or those who happen to work for particular employers. Quite simply, we need to get people back into the savings habit and ensure that they have access to a good workplace pension scheme.

The Pensions Commission’s solution to this dilemma was automatic enrolment into a pension scheme, with mandatory contributions by employers. We on the Government Benches have long been firm supporters of automatic enrolment. We believe that it will be highly effective at tackling the failures in our pensions system by increasing participation in pension saving.

At this point, I pay tribute to the work of one of the earliest behavioural economists, Dr George Loewenstein, who happens to be my cousin. He created the concept of asymmetric paternalism which was so influential in getting these automatic enrolment features in a range of public provision. The evidence shows that it works, leading to increased participation. Your Lordships have only to look at the United States, where automatic enrolment increased membership of its 401(k) schemes among new employees from around 20 to 40 per cent to nearer 90 per cent. Another example is New Zealand, where the introduction of automatic enrolment is estimated to have doubled pension savings in the KiwiSaver product over a three-year period.

As we made clear in our coalition programme, we remain committed to automatic enrolment, but we need to find the right way to make it work. A lot has changed since the Pensions Commission published its recommendations back in 2005. Given the current economic climate, it is essential that we ensure that automatic enrolment is introduced in a way that strikes the right balance between cost and benefits, and ensures maximum value for money for individuals, for employers and for the public purse.

Our review of these reforms will cover the scope of existing plans for automatic enrolment and NEST. Noble Lords would agree that it is vital that the Government take ownership of this initiative so that we have cross-party agreement on this, which, as my noble friend Lord Kirkwood pointed out, is so essential.

We will reach our conclusions quickly and take a hard look over the summer at the plans that we have inherited. If necessary, we will make changes to ensure that the reforms deliver for individuals, employers and the taxpayer.

Let me deal with the many fascinating points raised in debate; I will aim to get through as many as possible.

[Baroness Hollis of Heigham]

I was fascinated by the noble Lord’s point about the review. Which areas in particular are the Government concerned about, and will therefore be discussed in the review? I do not mean what will the conclusions be, but what will the territory be?

[Lord Freud]

I thank the noble Baroness. That is exactly what I was about to get straight on to. I will deal with her particular issues in that context. Before I get into what the review will cover, I start with the speech of the noble Lord, Lord Kirkwood, particularly what he said about employer attitudes and his concerns after meeting the people from AXA and reading their research. Evidence emerging from our research—a large survey of employer attitudes—suggests that 56 per cent of employers believe that these reforms are a good idea. Seventy-seven per cent believe that when they are already contributing 3 per cent or more. There is no doubt that the cost to employers of automatic enrolment is significant. The cost to employers—the smallest employers in particular—concerns me and is something that I want to look at closely in the review.

We are committed to getting the details right. That is why we are carrying out the review—to ensure that the proposals work properly. Several participants in this debate have asked about the details of the review, including the noble Lord, Lord Kirkwood, my noble friend Lady Noakes and the noble Lord, Lord McKenzie. We are finalising the details of the terms of reference, including who will conduct the review, its process, its reporting and so on. We hope to make an announcement encompassing those issues soon. To offer some reassurance, we are concerned about the impact on employers, particularly small employers. We also want to look at the position of older workers. We will review the contract for the NEST administration services, but with an open mind; if it fits with what is needed we will run with it. We aim to reach our conclusions quickly. Again, the detail is yet to be determined, but I expect we will know where we are with this before the House returns after the summer.

The noble Lord, Lord Kirkwood, asked about the NEST charging structure and whether we would keep it. He will infer, from my last answer, that that is a level of detail that we have not yet got to. The first question to ask is: does the scope of auto-enrolment work for both individuals and employers? Scope is key here. Secondly, given that, is NEST, as it is currently configured, the right intervention?

The noble Lord, Lord Kirkwood, asked about the certification process and whether that meshed with the BIS drive to reduce red tape. We are committed to recognising and maintaining existing high-quality pension provision. That means developing a process for employers with good money purchase schemes to show that their scheme meets the minimum requirements for auto-enrolment. This is called the certification process. In the coming months, DWP officials will work with the pensions industry and directly with employers to develop effective processes to support automatic enrolment. This includes straightforward ways for employers to assure themselves that their pension schemes qualify under the law.

The noble Lord, Lord Kirkwood, queried the four-year implementation period. We are fully committed to taking forward the automatic enrolment provisions under the Pensions Act 2008. However, the effects over the medium and long term will be huge. That is why we want to take stock of where things are; that is what the review is about and I do not want to prejudge it.

The noble Lord, Lord Kirkwood, concentrated my mind on wider savings incentives. It is critically important that people have confidence in saving towards their retirement if we are to deliver the step change in savings behaviour that we want. The department’s analysis is that more than 99 per cent of people can expect to be better off in retirement if they have saved than if they have not saved. However, we need to take seriously the possibility of someone facing a loss. The problem is that the people who fall into this category are not like leopards with spots that one can see beforehand; that situation emerges later, so it is a difficult problem. It is important that we allow people to take personal responsibility. However, the noble Lord, Lord Fowler, made the point that people are woefully ignorant in this area. I think that the noble Lord, Lord Kirkwood, said that he used the term “ignorant” in the best way in that regard. There is ignorance in this area, which means that it is very hard for people to take personal responsibility. Clearly, this is a vital area which we will address in our review.

The noble Lord, Lord Kirkwood, mentioned the costs of the Personal Accounts Delivery Authority and the impact of any expenditure cuts. The reduction of the deficit is a number one priority for the Government. Therefore, we will need to look right through the cost base to ensure that the costs are justified and that savings can be made where possible. I reassure my noble friend Lady Noakes that we will take a hard look at those costs and that we will not spend money unnecessarily.

It is vital that individuals have information about opting out. The noble Lord, Lord Kirkwood, is concerned about that. That will be critical to the success of the reforms. We are working closely with the Pensions Regulator to ensure that there is coherent and consistent information.

The noble Lord, Lord Fowler, and the noble Baroness, Lady Hollis, talked about the state of our state provision. The noble Baroness, Lady Hollis, again drew to our attention, as she did in her excellent speech last week, her booklet, A New State Pension. I was touched to think of her running on to the age of 95, and I hope that she does. However, it is slightly invidious to say that, statistically, only three noble Baronesses who were then present in the Chamber would do so, as I count seven who are now present, so it is a case of pot luck. There are clearly attractions in combining various elements of the state pension to introduce a single decent state pension. However, a large number of issues, not least one of them being cost, need to be considered before we introduce such a scheme.

I am very conscious that I am running out of time—unless noble Lords want to give me three more minutes.

[Baroness Anelay of St Johns]

No.

[Lord Kirkwood of Kirkhope]

Shame.

[Lord Freud]

I saw someone else obtain three minutes the other day, but this is not permissible. I will write to noble Lords on other issues that I have not managed to cover. I have a lot to write to noble Lords about; I apologise.

Our goal is straightforward—

[Baroness Anelay of St Johns]

That is it.

[Lord Freud]

I close by thanking all noble Lords who have taken part in this debate and I will write where I have not responded.

Pensions: Deepwater Horizon

Lord Freud Excerpts

Wednesday 9th June 2010 Lords Chamber

[Lord Harrison]

To ask Her Majesty’s Government what assessment they have made of the impact of the Deepwater Horizon oil spill on British pension savers.

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

My Lords, the Deepwater Horizon spill is an environmental and human tragedy. People saving in a pension scheme may be worried by the recent falls in the BP share price and indeed by market speculation about whether BP will pay a dividend this year. However, most pension schemes will be diversified across a range of investments, which will include not only equities but assets such as gilts, property and cash. Those more heavily weighted towards equities should not be too exposed to a single company.

[Lord Harrison]

Given that some one pound in six of the moneys received by pension funds comes from BP, does the Minister accept that these environmental risks can become severe financial risks? In light of that, would his coalition Government consider strengthening the reporting by pension funds to shareholders of these environmental, social and governance risks to ensure that the pension funds are not embarrassed in the way that they could be as a result of the recent tragedy?

[Lord Freud]

My Lords, the noble Lord, Lord Harrison, is right when he says that BP is a major dividend payer. I think that last year it paid approximately 14 per cent of all dividends in the FTSE 100. This raises the question that the noble Lord has just asked: to what extent are pension funds acting responsibly with regard to their ownership responsibilities to companies? There have been improvements in that over the past decade, but the question that we need to consider is whether they have improved enough.

[Lord Lee of Trafford]

Does the noble Lord agree that the question of BP paying a dividend is a decision for the directors of BP and not for the President of the United States?

[Lord Freud]

My Lords, whether to pay a dividend is a decision for BP, which is due to make that decision on 27 July at the appropriate board meeting. Anyone who reads the press will know that the company is coming under enormous pressure in the US not to pay a dividend. Indeed, the political pressure may be greater than the financial pressure, because BP is financially soundly based at this juncture.

[Lord Soley]

Are the Government talking to BP about this, bearing in mind the very real pressures on the company in the United States that could put it under even more pressure? Is not BP in need of help and support from the British Government? Is it being given that?

[Lord Freud]

My Lords, I understand that the Government are in touch with both the US Administration and BP senior management on a regular basis. Clearly, BP is a private company and one would not want to make public any discussions in that area, whether they were or were not happening.

[Lord Richard]

My Lords, do the Government feel that BP is being fairly or unfairly treated by the Americans?

[Lord Freud]

My Lords, that is a deeply political question. Clearly, the emotions raised in the US by this tragedy are enormous. There will be repercussions in the US and in the world as a whole with regard to attitudes towards oil companies. The best that I can say is that we will be watching this space for months to come.

[Lord King of Bridgwater]

My Lords—

--- Later in debate ---

[Lord King of Bridgwater]

My Lords, do not the directors have a duty to the board and the shareholders to meet their correct obligations in full on the serious issues that have arisen in the United States? That must be fully recognised. Having done that, and having made proper assessment of what those are, they also have to recognise the duty to their shareholders in terms of whether to pay a dividend.

[Lord Freud]

My Lords, I thank my noble friend for that question. Clearly, the BP board has to make some complicated decisions, which are a mix of the financial and the political. Market estimates of the cost that the company will have to pay are in the region of £15 billion to £20 billion, although that is purely market speculation and I make no comment about what the Government expect them to be. The company will have to decide in that context whether it is appropriate to pay a dividend.

[Lord Harrison]

I am grateful to the noble Lord for his reply to my first question—

Synthetic Biology

Lord Freud Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government whether they intend to review the regulation of synthetic biology in view of the recent creation of a synthetic organism.

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

My Lords, the Government are confident that the majority of synthetic biology, including the recent work published in Science, is covered by existing regulations that govern work with genetically modified organisms in the UK. In the future, there is a possibility that some synthetic biology involving the creation of artificial cells could fall outside the scope of the current regulations. An amendment to the regulations is being considered to ensure that artificial cells will also be covered.

[Lord Haskel]

I congratulate the Minister on his appointment. This is his first time at the Dispatch Box answering a Question and I wish him every success. Although the Minister’s particular responsibility is welfare reform, his department deals with health and safety. As he is answering this Question, should we conclude that the Government think that synthetic biology is a risky and dangerous topic or does the Minister agree with me that there are a lot of possible benefits?

[Lord Freud]

My Lords, I thank the noble Lord for that slightly back-handed compliment. I confess that synthetic biology is not perhaps the central part of my expertise. However, I am pretty confident that the rules and regulations governing this area, which is very important for the future, are robustly under control.

[Lord Walton of Detchant]

My Lords, the achievement by Dr Craig Venter, who has synthesised a chromosome and inserted it into a cell that is subsequently capable of replication, is clearly an important scientific development. It is so important that the implications of this discovery for the future are very substantial. Bearing in mind the regulations already in existence—to which the Minister referred—would it not be wise even at this stage to invite the Medical Research Council, the Royal Society and the Academy of Medical Sciences to comment on the implications of this discovery for human and animal biology?

[Lord Freud]

My Lords, a process will start in September to look at the regulatory controls around this area. During that period, there will be a full consultation leading to changes to the regulations in order to reinforce protections, particularly around artificial cells. If all goes to plan, these should be ready by next April.

[Lord Patel]

My Lords, does the Minister agree that this is not an artificial cell in the true sense because a cytoplasm of the cell came from an organism itself? That aside, systematic biology offers great potential for developments of all kinds. First, what is at stake here is to make sure that this technology is not patented. If it is, it will give a monopoly to a lot of other systematic biology technologies. Secondly, President Obama has already set up a bioethics advisory committee to advise him on the implications of this research. Does the Minister agree that it would be a good idea to do this in our country? Thirdly, if noble Lords attend or take part in next week’s debate on genomic medicine, they might learn even more.

[Lord Freud]

My Lords, I look forward to attending that debate. As the noble Lord has pointed out, the experiment by Professor Craig Venter consisted essentially of taking the DNA from one bacterium, mycoplasma mycoides, modifying it and then putting it inside another bacterium, mycoplasma capricolum. Technically, that is not the creation of an artificial cell, but that is prospectively the next invention that could come along. That is why we need to make sure that the regulations will cover it.

I can inform the noble Lord that Craig Venter’s experiment is being patented, although observations in the scientific press indicate that that does not represent a risk of him subsequently seizing control of the whole of synthetic biology.

[Lord Mawhinney]

My Lords, I also congratulate the noble Lord on his visit to the Dispatch Box for the first time as a Minister. As a former parliamentary member of the Medical Research Council, whatever the technicalities here, can I encourage the Minister to think carefully about the proposal that the Government should consult distinguished medical, academic and, perhaps, spiritual people about the potential development of this technology at this stage rather than, as has been the case too often in the past, leaving such consultations until it is too late?

[Lord Freud]

My Lords, I thank the noble Lord for his kind words. This is an important development and the UK takes a leading role in the area. We have several research establishments right at the forefront of this development, but I would take back from him the question of whether we should look at this brave new world—if you like—earlier rather than later. At the moment these are very early days in the development of this science.

[Lord Alderdice]

My Lords, in welcoming the Minister to his position, as I do, the noble Lord, Lord Haskel, expressed some surprise that his area of responsibility was relevant. However, it may be of interest to note that the United States Congress responded immediately to this development and that it was the Energy and Commerce Committee which undertook the hearing because genome synthesis is likely to be helpful in the creation of new forms of biofuel energy. Given that, would the Minister find it helpful if your Lordships’ House were to respond in the same way by bringing together not only medical and academic research, but also the ethical and scientific wisdom that is available in this House? Indeed, I wonder if one of the committees of the House would be prepared to undertake an investigation of the kind that has been referred to. Does he think, on behalf of Her Majesty’s Government, that that would be a helpful intervention by this House?

[Lord Freud]

My Lords, formally, BIS is the relevant authority in terms of supporting this new industry, not the DWP, which is in control of the safety aspects. However, that is an interesting proposal and we shall think about it.