Social Security: Claimants

Debate between Lord Freud and Baroness Sherlock

Wednesday 30th November 2016 Lords Chamber

[Lord Freud]

I thank the noble Countess for that question. We have been working on this issue with her and her group for some years now, and I am under the impression that we have made a lot of progress on ensuring that the illness is thoroughly recognised.

[Baroness Sherlock (Lab)]

My Lords, the film shows people being sanctioned for a number of reasons which are clearly not serious. For example Katie, a single mum, is moved to Newcastle when she is made homeless and because she is a few minutes late in getting to the jobcentre, because she cannot find it in a new city, her benefits are sanctioned. Can the Minister tell the House that that would not happen in real life? He normally comes here and tells us that sanctions are very rare and a last resort but we discovered from today’s NAO report that over the last five years, 24% of all JSA claimants were sanctioned. Is it any wonder that our food banks are filling up with people using them who are sanctioned for trivial or unjust reasons? Is this not a disgrace?

[Lord Freud]

There were a whole load of statements there that are simply not true. In the example which the noble Baroness uses, there would clearly be a good reason for someone not being able to fathom the transport in a new place. There are an enormous number of protections for people in the sanctioning process, which has about seven or eight steps: there is a check by the work coach; it goes to the decision-maker; there is provision of information back to the person, who can challenge it with the decision-maker; it can go to dispute resolution, mandatory consideration and then the tribunal. This is not the easy process that is implied. Sanctions are treated very seriously. They are an integral part of the system and are treated with all due seriousness.

Benefit Cap (Housing Benefit and Universal Credit) (Amendment) Regulations 2016

Debate between Lord Freud and Baroness Sherlock

Tuesday 8th November 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, this has been an interesting debate, and I am grateful to the noble Lord, Lord Kirkwood, for his introduction to it and to all noble Lords who have contributed.

First, the good news. I am certainly glad to welcome the good bit of the regulations. As one of a number of concessions won by hard work in this House across the Benches, the regulations exempt from the benefit cap people claiming guardian’s allowance, carer’s allowance and the carer’s element of universal credit.

I have a couple of practical questions for the Minister before I move on. I understand that, because the regulations took effect yesterday, anyone in receipt of one of those benefits will be automatically exempted from the cap. That means that any such person who is already capped will have it automatically lifted, and their next payment will reflect that fact. Similarly, anyone whose case is flagged up as otherwise being caught by the new lower cap but who is in receipt of, or entitled to, one of those benefits will automatically be exempt. Can the Minister confirm that that automatic exemption is the case, and that the claimant will not have to do anything to ensure that they are exempted when they should be? Will he also confirm that his department has communicated with those claimants to let them know what is happening, so that they will understand the change in their circumstances?

On to the bad news. I will not rehearse the arguments made eloquently by many noble Lords about the impact on housing and homelessness—points made very well by the noble Lords, Lord Best and Lord Shipley—and on children, a point made by my noble friend Lady Lister and the right reverend Prelate the Bishop of Leeds. His predecessor the Bishop of Ripon and Leeds and I made an attempt right at the beginning to exempt child benefit from the cap. Sadly, we were unsuccessful, but I am glad to see the right reverend Prelate keeping up a fine tradition of speaking up for the children of Leeds; I hope that one day, he will not have to. If his sermons are as commendable, pointed and brief as his speeches here, may people flock to his cathedral in time to come.

As has been pointed out, the cap will change significantly. We heard about the large number of people who have been brought into it, but there is also the size of the losses. Households already capped could lose another £3,000 a year in London, or £6,000 elsewhere. The Government estimate that newly capped households will lose an average of £2,000 a year. The profile will change dramatically. No longer can Ministers pretend that the problem is people living in Mayfair or having 17 children; the problem will now be right across the country, a point made by the noble Lord, Lord Kirkwood. That was never really the issue, but in future, just 22% of affected households will be in London, whereas the figure had been 42%.

For me, the telling point is that in the north-east, where I live, the number of households affected will jump from 600 to 4,000. There are not that many very expensive properties in the north-east—certainly not that benefits pay for. This is now being spread right across the country. Nor can the Minister complain that it is just about large families. Under the new cap, a single mum with two young children sharing a room will be capped if she is living, not in Mayfair, but in 19% of areas in the country, including Basingstoke or Reading. If those two children are in different rooms, we are talking about a third of the areas in England. This is becoming really significant.

What is it about? Is it about saving money? Points were made by a number of noble Lords. I have been through the impact assessment again, and it is now clear that the savings from these regulations will be £540 million in total over five years. Over that period the Government will spend £870 million in discretionary housing payments. Clearly, not all of that will go on the benefit cap. It also has to cover the impact of the bedroom tax, LHA cuts and the general misery caused by the Government’s social security policy. In the current year, more than a quarter of DHP money went on the benefit cap victims, and we know that the number will go up significantly—more than threefold. Can the Minister tell us how much the Government expect to save from these regulations after deducting an appropriate proportion of the costs of discretionary housing payment money?

We have heard that the options for somebody who is capped are to accept the cut, move somewhere cheaper or get a job for at least 16 hours a week. Let me run through those very briefly. These are cash cuts and they come in overnight. If a family faces an annual benefit cut of £6,000 a year, can the Minister say whether that means it is possible that someone’s housing benefit could be cut by £115 a week from one housing benefit payment to the next? If that is the case, how could anyone absorb that kind of cut?

Another option is to move somewhere cheaper. But where can they move to? The cap spreads right across the country, so what will happen? There are no cheaper places to move to, and the only reason for the handful of places that are cheaper is that they are the kind of areas where there are no jobs and there is no transport to get there even if there were jobs. What is the point of sending people to live there?

The third option is to get a job. The Secretary of State for Work and Pensions, Damian Green, has said that the benefit cap is a real success. Based on the fact that the IFS found only 5% of people in the past who had got a job, the Minister may have to work on defining his terms. Let us look at what happens now. The Government think that if they cut it far enough, eventually people will get a job, but let us see who is being affected. I am particularly concerned about the effect on parents with young children. The benefit cap has already particularly affected single parents with very young kids. Most of those capped have a child aged nought to four. DWP statistics show that 11% of households affected by the current cap are single parents with a child under one. I want to look at that a bit more.

Let us imagine a single mother with young twins who are six months old, living in Basingstoke on basic out-of-work benefits. Let us call her Susan. Susan will be hit by this new cap. If she cannot find a cheaper flat—and she will not, because the housing benefit limits have been pushed down so far that she is already at rock bottom—the only way to escape the cap is to work 16 hours a week. The Government have been getting tougher and tougher on conditionality on single parents, but even they do not require parents of babies to work If you have children of that age you would not be required by the DWP to work.

Even if Susan wanted to leave the babies and go out to work, she would have to find a suitable job. She is not eligible for any of the job search programmes because she is not required to work. I understand that government guidelines to local authorities on the implementation of the benefit cap is that someone who is already capped and will be hit again by the lower cap will be entitled to 40 minutes in total with a work coach to help them to find a job. Can the Minister tell me if that is correct? What help will be provided to a single parent being capped for the first time?

Secondly, where will Susan get childcare from to be able to go out to work? A survey just out from the Family and Childcare Trust found a huge problem of insufficient childcare in many local authority areas. Fewer than half of local authorities in Great Britain reported having sufficient childcare for nought to two year-olds. The Minister will probably talk about the Government’s free childcare offer, but let us remember that that is only for three and four year-olds. It is only 15 hours a week which is not enough to enable parents to get the kids to a nursery, get to a job for 16 hours and back again. The much-vaunted extension of that will not come until next April whereas the cap is already in place. Evidence shows that there is not enough childcare provision now, never mind when it is extended.

Parents like Susan, with children under three, have no entitlement to free childcare at all. They could claim help within tax credits or universal credit, but the limit of how much you can get is so small now, as it has not been raised for so long, that it falls way short of actual childcare costs. The Family and Childcare Trust says,

“there are 11 local authorities where the average cost of part-time childcare exceeds”,

the working tax support cap completely,

“leaving the poorest working parents having to pay an average of”,

£81 a week out of their own pocket. Where is Susan going to get that kind of money? Care for babies is especially expensive. Even if she could find somewhere suitable and a suitable job, she may not even be able to afford the deposit on the first month’s nursery fees, which are usually required upfront. Can the Minister at least assure the House that any parent of young children, who has to take a job because they are capped, can claim the full costs of the deposit for childcare from the flexible support fund his department operates? I ask that because Gingerbread has been getting reports that job centres do not want to use this fund, which is meant to remove barriers to work for childcare, even though childcare is a really obvious barrier. Can he reassure us on that point?

However, let us remember that these are parents whom the DWP does not normally require to work. The only reason that that mum is having to go to work—despite the fact she has only two kids, does not live in an expensive area and her only income is basic benefits and tax credits—is because her rent, as the noble Lord, Lord Best, has said, is at a level where she cannot reasonably pay it without help from benefits. There are Susans all over the country.

As the IFS has pointed out:

“It is possible for the benefit cap to quickly affect many more out-of-work families in an area, once its level falls below the sum of the HB cap in that area for the family type in question and the other (nationally-set) benefit entitlements”.

Once it happens, all those families are going to be chasing the handful of cheaper accommodation and none of them will be able to cope. What do the Government think will happen? Where are these families going to live? The point made by the noble Lord, Lord Best, is that this is driven primarily by a housing crisis. Is not the problem that the Government have failed to invest in housing and are therefore simply trying effectively to shift the problem on to the poor, who are the victims of the rent rise which they have not been able to address?

I am sure the Minister does not want to see parents of young children plunged into crisis. He knows that discretionary housing payments cannot be relied upon because they are discretionary and councils have too many demands on them for help. At the very least, will the Minister pledge to look at how his department can protect parents of young children from the impact of the reduction in the cap? I very much back my noble friend Lady Lister who is pressing the Government to address the question of the family test. Perhaps in doing that, the Minister could also guarantee to report back to Parliament on the impact of this change on families with young children. That is the very least we can expect.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, this Government believe that those out of work should not receive more in benefits than many working families are able to earn. We introduced a benefit cap to encourage people to find work and that is exactly what has happened. The new benefit cap levels continue to provide a clear incentive to work, helping to reduce long-term welfare dependency and ensuring fairness for working households.

Since the original benefit cap was introduced in April 2013, 23,500 capped households have found work. Evaluation has found—this is in response to the query of the noble Baroness, Lady Bakewell—that capped households are 41% more likely to go into work than similar uncapped households, and that 38% of those capped said they were doing more to find work. A number of noble Lords have argued that the benefit cap is flawed, but it was a manifesto commitment and was extensively debated in this House and in another House.

One aspect that I would like to point out to noble Lords is that there has been a culture change around the importance of going to work. Whatever particular policy has been driving that is difficult to assess, but the figures are astonishingly dramatic. The number of children in workless households now stands at 1.35 million. That is the lowest ever since these statistics started to be collected in 1996. It compares well with the figure at the height of the boom: it is more than 400,000 lower. It was 1.79 million in 2008. It is much lower—almost 1 million lower than it was in 1997.

So there has been a dramatic change in attitudes. We see it in various statistics, including the number of people in social housing now going back to work, which they never did. So there is a structural change. I do not pin it directly on this policy. But I do say that there seems to have been a real change, and that is one of the aspects of it.

The Motion of the noble Lord, Lord Kirkwood, expresses concern that we have not,

“made additional support available to those individuals affected by the benefit cap to find work”.

Actually, there is quite a lot of evidence that the success that the cap has had in helping people into work is partly a reflection of the strong support offer we have in place in both jobcentres and local authorities, which we continue to improve. We have contacted claimants potentially affected by the cap well in advance, giving them an idea what the impact might be on their household income and offering them support to adjust their circumstances. We have also ensured that jobcentres and local authorities are equipped and funded to provide that support.

--- Later in debate ---

[Baroness Sherlock]

If you introduce this, there will be a change for somebody who is already capped; or they may have previously been told and made a decision not to make an application because they knew of the impact of the cap. I presume the Government have communicated at some point. It was a serious point.

[Lord Freud]

I am sorry. I did not mean not to be serious. My best understanding of this is that where someone has been capped and will no longer be capped then we will inform them of the change. If that is not the case, I will write to the noble Baroness; if it is, I will not. However, I am pretty sure that it is the case.

To pick up on the concern expressed by the noble Lord, Lord Kirkwood, regarding the point made by the Secondary Legislation Scrutiny Committee, the committee wrote to my colleague the Minister for Welfare Delivery to express concern about the equality analysis. I imagine that the noble Lord saw that letter. Ministers fully considered the equality analysis at the same time as the regulations were made but there was simply a delay in publishing it. Perhaps noble Lords can cast their minds back to the peculiar period in our history following the June referendum, when the machinery of government perhaps was not working quite as smooth as it usually—or always—is.

On evaluation and the Ipsos MORI survey that the noble Lord talked about, the numbers came about because it was a longitudinal survey to understand what was happening; a lot of different levels of analysis went on, which looked at different outcomes, some of which were done on a quantitative basis, others on a qualitative basis; that was a qualitative one. We are committed to go on evaluating it and now we are developing the plans to understand behaviours and attitudes. The quarterly benefit cap statistics will continue to be produced, and the May 2017 release will be the first to show the impact of the lower levels.

I hope I have reassured the House that the Government have put in place measures that provide significant additional support to claimants affected by this policy to help them adjust, and wherever possible to move into work.

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Tuesday 19th July 2016 Lords Chamber

[Lord Freud]

We do publicise them. In UC, we probably do not publicise the advances available enough, and I am looking at making that information more available on screen and automatic, rather than through a conversation—so that is a good point.

[Baroness Sherlock (Lab)]

You certainly do not publish them very well. In 2010-11, more than 1 million people applied for crisis loans. In the year to September 2015, that was down to 140,000 people applying for the equivalent advances.

Did the Minister see the research out today by the IFS which showed what the House has been telling him for a long time: two-thirds of the poor are now in households where somebody is in work? If those people are paid weekly, they are already poor. If they lose their job and apply for universal credit, they have to wait six weeks before they get a penny. As my noble friend said, they get nothing for the first week. Can the Minister not see that that is setting them up to fail?

[Lord Freud]

As I said, I am looking at this area. It is not as simple as some of the figures might make you think. I, too, read the IFS research with great interest. Inequality among children has fallen very steeply since the mid-1990s, most of it post the recession. Whenever the IFS says anything nice, I really appreciate it. It said that the important reason was a remarkable fall in the share of children in workless households. Indeed, we have half a million fewer since 2010.

Universal Credit: Rent Arrears

Debate between Lord Freud and Baroness Sherlock

Wednesday 13th July 2016 Lords Chamber

[Lord Freud]

I congratulate the noble Baroness on her timing with that question. I will not answer it. I am not in a position, however, to commission major research on mental health today.

[Baroness Sherlock (Lab)]

My Lords, exactly a year ago today this House voted for a Motion in my name, urging the Government to delay the enactment of the Universal Credit (Waiting Days) (Amendment) Regulations until UC was rolled out. The Government ignored that, enacted the regulations and, as a result, 79% of people are now in arrears, because when you make a claim for UC, you wait six weeks to get any money and now the first week is missed completely, without any payment at all. On that day, the Minister refused to make a statement but he said that,

“I will come back to the House at the appropriate time”.—[Official Report, 13/7/15; col. 438.]

A year down the road, does he feel that that time has now arrived, and what is he going to do about it?

[Lord Freud]

I have said to the House that I am looking at this, and I hope that later this year we will have some data. I urge the House not to expect too much certainty on this. This is quite a complicated situation—there is a lot happening under this—and I am hopeful that I will be able to explain some of this to noble Lords to their satisfaction.

Poverty

Debate between Lord Freud and Baroness Sherlock

Wednesday 29th June 2016 Lords Chamber

[Lord Freud]

That is one of the topics that I and the Schools Minister are talking about. We now have, as a potential option for future use, far more specific measures of real levels of poverty in universal credit which we can use to record poverty, rather than the much cruder measures that we used in the legacy system.

[Baroness Sherlock (Lab)]

My Lords, if the Minister wants to measure poverty he could perhaps look at the official figures that came out this week. They show that while average household incomes are finally back to their pre-crash levels, child poverty has actually gone up by 200,000. It is the first rise for a decade, the largest single rise in one year since 1996, and even more of those poor kids are in working families. Ministers were warned by people around this House that this would be a consequence of government policy but the Minister kept telling us that we were crying wolf. I have rarely been sorrier to be wrong. But now that the warning signs are clear, what will the Government do about it? We have not yet had the effect of the cut in universal credit help or benefits for large families. Will he please urge his new Secretary of State, if he genuinely wants a one-nation country, to go back and reverse that catastrophic decision to cut help for working families on universal credit?

[Lord Freud]

Regrettably, the cry of wolf is wrong in this case. As the noble Baroness knows perfectly well, these statistics are fairly odd on a year-by-year basis. We have had quite a substantial rise in the median income, so the relative figure has gone down—although, I am told, it is genuinely not statistically significant. At the same time, there has been a decline in the number of children living in absolute poverty, with 100,000 fewer. These figures can be pretty odd, and this is another good example of it.

Poverty Programmes: Audit

Debate between Lord Freud and Baroness Sherlock

Wednesday 4th May 2016 Lords Chamber

[Lord Freud]

I am really pleased to confirm that universal credit is now a national programme right across the country. We have real evidence that it achieves its aims: 13% are more likely to be in work at the nine-month point than if they were on JSA. It is already a good benefit by international comparisons. Many more of those in work are looking to do more hours, and many more are looking to increase their earnings than would be the case if they were on JSA.

[Baroness Sherlock (Lab)]

My Lords, I wonder whether the Minister has read the report just out by the Resolution Foundation, which is chaired by the noble Lord, Lord Willetts. Universal credit was meant to tackle working poverty by making work pay. However, the report found that more than 1 million working families will lose all in-work support, and that that will not be made up by tax cuts, living wage rates or childcare. The report said that the cuts,

“risk leaving UC as little more than a vehicle for rationalising benefit administration and cutting costs to the exchequer. Any ambition for supporting and rewarding work and progression looks very hard to achieve”.

It is now rolled out around the country. It has cost billions, and wasted billions. Was it worth it?

[Lord Freud]

I am absolutely confident that the core architecture of universal credit is doing what it is designed to do, which is to encourage people to move towards greater independence. I simply do not agree with many of the conclusions of the Resolution Foundation.

Employment: Job Creation

Debate between Lord Freud and Baroness Sherlock

Thursday 17th March 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I welcome the rise in employment but I want to ask about the disability employment gap. I was pretty shocked on reading the Red Book to discover that the single biggest revenue raiser was the new decision by the Government to save £4.4 billion over five years by taking personal independence payments away from hundreds of thousands of people who need aids to get dressed or manage incontinence. That is on top of previous PIP cuts, lost Motability cars and ESA cuts. How will that help disabled people into work?

[Lord Freud]

There is a huge misapprehension about the cost of PIP, which has been going up rather than down. These are not cuts: on the present trajectory the figure is moving up to £12 billion, and when we discussed it during the passage of the Welfare Reform and Work Bill there was an expectation that in the key 2019-20 year it would be £9 billion. We are reducing a rapid growth and adjusting how to get PIP because clearly we are getting much higher figures than originally expected through the use of those aids and appliance measurements.

Housing: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Wednesday 2nd March 2016 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what steps they are taking to protect disabled people and victims of domestic violence from the effects of the under-occupancy charge.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

We have already taken steps to protect disabled people and victims of domestic violence by providing local authorities with £560 million in discretionary housing payment funding since 2011. A further £870 million of discretionary housing payment will be provided over the next five years, which will allow local authorities to make long-term or indefinite awards so that people in difficult situations such as these are protected.

[Baroness Sherlock (Lab)]

I thank the Minister for that Answer. The Government are spending a quarter of a million pounds appealing two bedroom-tax cases in the Supreme Court this week: one from a rape victim who had had a panic room installed by the police and the other from a family caring for their severely disabled grandson. I intuit that the Minister will not want to comment on the cases specifically, but he mentioned discretionary housing payments, which are always the Government’s defence when the bedroom tax comes up. But the Government’s own evaluation found that a third of people hit by the bedroom tax did not even know that the payments existed. Can the Minister tell the House what he is doing to improve the situation for disabled people and rape victims and how people will know about the discretionary housing payments?

[Lord Freud]

To start with, roughly 40% of people knew about the discretionary housing payments—that figure has now increased to 66%, I think. So there is information out there. I thank the noble Baroness for making the point that the Supreme Court is looking at this area right at this moment—today; I am necessarily more circumscribed than normal in some of what I can say on this area in the next few minutes.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 29th February 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I welcome this change of heart from the Government, and I thank the Minister for bringing forward his amendment. It is good to know that we can guarantee that in future robust data will continue to be published about the incomes of poor children so that we can see what is happening to child poverty in Britain. I congratulate the right reverend Prelate the Bishop of Durham on his leadership on this issue and, like all other noble Lords, I thank the Child Poverty Action Group and the End Child Poverty coalition for their work. I thank noble Lords who have supported us on this issue through their words and their votes as the Bill has moved through this House.

I regret that we could not persuade the Minister to carry on reporting on child poverty, but I reassure anyone listening outside this House that we will continue to use these data as they are published to hold the Government to account for the consequences of their policies, particularly should those policies contrive to increase the number of poor children in Britain. I fear that I share the view of the right reverend Prelate the Bishop of Durham that it is most likely that that will take place.

I was not going to get into the area of poverty measurement but I have been tempted. I say to the right reverend Prelate the Bishop of Portsmouth that while I have given up sugar for Lent I am not going to give up politics as well, so I hope that he will bear with me for just one moment. Since the Minister took the opportunity of saying why the Government do not want to be in the business of counting the incomes of poor children, I should say that no one has ever felt that it was just about money—but it is not not about money. I am still proud that the last Labour Government lifted 1 million children out of poverty. The Minister may not think that income transfers make that much difference but they really do to the families involved. Labour tried very hard not to focus on tipping people over some imaginary poverty line. Instead it invested child tax credits for all families; it put in place the New Deal to help parents into work; it created tax credits so they could afford to take their jobs; it gave them childcare so that women could afford to go out to work; and it created Sure Start to ensure that the children developed. Therefore I fully support his agenda to look at poverty across the piece. The right reverend Prelate the Bishop of Durham did a nice job of explaining the different kinds of poverty and wealth. However, in the end, if you cannot afford to feed your kids, money matters. I apologise to the right reverend Prelate but now I am back on track.

The particularly important thing about these data coming out is that there is very strong evidence of the scarring effects of living for a period of time on low income in childhood and what that does to children’s life chances. Therefore I hope that as the Government publish the data, because the data will then be available to them they will also influence policy-making. However, given all of that, the House of Lords has done itself proud; I am grateful to have been part of a process during the passage of the Bill where the House of Lords has been able to scrutinise the evidence and the Minister has been willing to listen. I thank all noble Lords and I thank him. I am grateful for this concession, which is important, and we are pleased to support the Motion.

[Lord Freud]

My Lords, I thank noble Lords for their contributions and thank the right reverend Prelate the Bishop of Durham, who led in this area. I will make just one or two short points. In response to the noble Lord, Lord Kirkwood, I remind him that the forecasts of what happens to this measure of relative income are notoriously difficult to get right. I have been in this House on several occasions when there have been dire warnings that child poverty is about to go up over the next two years, but when you get to the figures two years later, it has not happened. I therefore hate having to defend myself against things that do not happen—it is bad enough having to defend myself against things that happen.

We have had a very useful debate on this area in this House. The point is that the debate succeeded in unpicking the concerns that noble Lords had, which is why we were able to find common ground. We are not in agreement in this area in our approach but we have found common ground here, and I hope both sides will be able to live with this amendment. However, I want to give some reassurance. One of the reasons we have brought forward this amendment is because we wanted to reassure the House and other people around the country that we take this whole issue seriously—that we have an agenda and we want to do something about this. We did not want to leave this issue with the impression that we were not taking it seriously. I can agree with the noble Baroness, Lady Sherlock, that I am convinced, as she is, that the publication of the HBAI will not go by without comment by someone on each occasion.

I will pick up on the point made by the right reverend Prelate the Bishop of Portsmouth, although I need to give him a two-handed answer. As I said when we went through this, we have separate arrangements—a specific set of payments—for bereavement. However, on domestic violence, which we dealt with specifically when we discussed it earlier, the right reverend Prelate has made reasoned arguments; I repeat my acknowledgement that this will remain an area of interest, at least for them, and anticipate the natural corollary of that. With those few words, I urge noble Lords to agree to the Motion.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Tuesday 9th February 2016 Lords Chamber

[Lord Freud]

I hear what the noble Lord, Lord Low, has asked for—a meeting on this matter. Of course I would be pleased to meet him, and other colleagues, to discuss this as it wends its way back to the Commons, and perhaps back to us, depending on what happens.

May I take this opportunity to place on formal record my thanks to noble Lords throughout the House? They have discharged their duties to look at the Bill really conscientiously, and have worked hard on some difficult and sensitive issues. They have brought out some unintended consequences, and they have described them and expressed their case in calm, clear language, which means that we can take the points and aim to address them. Indeed, both today and on Report we have tackled some of them.

The Bill has been insulted by one or two noble Lords. I have to reflect back that it has raised some profound issues around what the benefit and welfare system does and how it works. Pinpointing where it affects the most vulnerable and how we can ameliorate that and sort it out has been really valuable.

I thank the Bill team, a handful of whom are in the Box now. They have been formidable in supporting me all the way through the progress of the Bill. I know that they have also been assiduous in briefing noble Lords, because we set up the system, which I have used with previous Bills, whereby there is a briefing ahead of Committee stage, so that when we debate these issues we do not waste time but are able to deal with the issues. The Bill team have done a really good job, and I believe noble Lords think so, too. I am sure I express the view of the whole House in thanking them for all their support.

[Baroness Sherlock]

May I, on behalf of the Opposition, thank the Minister for giving us access to his officials? I thank the Bill team and some very impressive policy people who have been briefing Peers from all over the House. We appreciate his generosity in giving us access to them, and their expertise and willingness to explain to us patiently—sometimes, if necessary, more than once —precisely how the Bill works. We are grateful for that. They have also been helpful in working with the wonderful Muna Abbas, from our Whips team, who has done a brilliant job in supporting us from this side.

We have not been persuaded by the Minister that this is anything other than a bad Bill—but now, as a result of what this House has done, it is less bad than it was. I pay tribute to Peers throughout the House, who have shown the House of Lords doing what it does best—being a revising Chamber which, even when it does not like legislation, focuses its attention on improving it and sending it back to the other place much better than it was. Long may we do so.

Housing Benefit (Abolition of the Family Premium and Date of Claim Amendment) Regulations 2015

Debate between Lord Freud and Baroness Sherlock

Wednesday 3rd February 2016 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords—

[Baroness Sherlock (Lab)]

My Lords, I welcome the Minister’s enthusiasm to respond to the challenges put to him, but I regret that I am going to add to them, if he can bear with us for a little bit longer. I, too, thank the noble Lord, Lord Kirkwood, for giving us the opportunity to debate these regulations and for having gone into some detail about the process questions. I very much share his concerns. We have concerns of substance on these Benches, but the process should be of concern to all Members of the House, irrespective of the view that they may take on these regulations. I hope that the Minister gives some satisfactory answers on that.

As we have heard, these regulations do two things: they remove the family premium from claims to housing benefit from April 2016 and the backdating of housing benefit, to which I shall come in a moment. Existing claimants will also be affected if their circumstances change, such as if they move or if a child reaches the age of 18. When it is lost, it will be lost almost exclusively to working families, because households where someone is claiming an out-of-work benefit will automatically receive the maximum possible housing benefit payment. The Social Security Advisory Committee report cited an example from the Peabody Trust of a single parent in part-time work, caring for her disabled adult son. Should she need to make a new claim for housing benefit following the removal of the family premium, she would lose around £572 a year, compared to what she would get currently—a lot of money for someone in those circumstances.

My noble friend Lord McKenzie asked a very good question about the admin costs. It is hard to believe that simplification is the reason; one could always simplify benefits by abolishing them. We really have to have better arguments than that.

The DWP claims that withdrawing the family premium in HB will “promote better work incentives”, but, as the SSAC points out, some HB claimants will permanently lose the premium if they temporarily increase their hours and therefore could be deterred from doing so. Equally, some will be deterred from moving address to secure or look for work if it means a drop in HB, or could be discouraged from taking short-term work over Christmas, for example, if it means a drop in housing benefit. Will the Minister comment on that?

The SSAC was also very critical of the Government’s refusal to adopt linking rules. It gives the very serious example of domestic violence victims who need to be rehoused and points out that if somebody moves outside a local authority area, they lose the entitlement. The SSAC points out that some local authorities and social landlords have a deliberate policy of moving domestic violence victims to a different local authority area to minimise the risk that they would run into their assailant and to protect them. It states:

“Those organisations now face a fairly stark choice in terms of whether to keep the existing policy in the knowledge that the victim is likely to be financially worse off, or to rehome them within the existing local authority area where they may be at greater risk”.

The Government’s only response to this is to say:

“Since 2010 our policy has been to move away from building new linking into our reforms to Housing Benefit”.

That is not a reason. That is basically saying “The reason for our policy is that it is our policy”. I hope the Minister can give us the reason behind the policy rather than telling us that it is the policy. The Government go on to say that they do not think linking rules are the most appropriate way of supporting vulnerable cases, but they do not explain why. The only alternative they can offer is our old friend the discretionary housing payment, which has already been offered as an answer to almost every problem created by welfare change since 2010, from the fallout of the welfare Bill to the benefit cap.

The SSAC also points out that universal credit will allow linking and continuity of claim where there is a temporary increase in income or relocation to another local authority area, but they will not be available under these HB proposals which it says will have a negative impact on work incentives and will raise issues around income stability and security.

I now come to the backdating change which other noble Lords have commented on. A number of NGOs and charities have said that limiting backdating to one month will have a significant impact on vulnerable renters, a point made very clearly by the noble Lord, Lord Low, and my noble friend Lord McKenzie. As we have heard, the SSAC recommended that the Government should not proceed with the reduction from six months to one month. It is interesting that the committee expressed disappointment at the lack of proper consultation with local authorities, landlords and voluntary and charitable bodies which will be impacted by these changes. I hope the Minister can explain why that consultation was not done.

The SSAC’s view is that the position faced by HB legacy claimants, especially the more vulnerable, is substantially different and more challenging than the position following migration to universal credit. It pointed out that in the absence of a robust impact assessment the case for simple alignment was not there.

The response from the Government to the SSAC report was so slight as to be almost rude. Their only argument is to say that the policy intention is to align the housing benefit treatment with that in universal credit. Where is the rush? As the noble Lord, Lord Kirkwood, pointed out, it is not as though the entire population is about to land on universal credit. I know that back in November 2010 the DWP believed that everybody would be on it by 2017, but we now know that it is going to be at least 2020, possibly 2021, and maybe some way beyond that. We are years away from everyone needing housing support getting it entirely through universal credit. There could yet be millions of people who could come on to housing benefit, get it, move into work, come off it, come back on to it and still not be on universal credit, so there is a significant issue. I hope the Government will tell us their real reasons. It cannot just be that they want to be in exactly the same position on universal credit and on legacy benefits; otherwise they presumably would not have allowed the situation to develop where two people in identical circumstances, one on tax credits and the other on universal credit, could find themselves with a difference of £3,000 a year in entitlement. Will the Government tell us what the real reasons are?

To summarise I would like the Minister to answer some questions. I will be interested in his response to the process points made by the noble Lord, Lord Kirkwood. He referred to the Minister’s letter of 11 January to the noble Lord, Lord Trefgarne, saying that he had instigated a review of the way the DWP produces explanatory memoranda. Will he tell the House when that review is likely to report? Will its findings be published? If they are not going to be published, how will the House get reassurance that his department will be able to do this job better in the future than it has in the past? Will he tell us why the Government did not consult properly before issuing this instrument? Will he explain the reasons for opposing a linking rule in the family premium? In particular, will he tell us why he has rejected the SSAC recommendation of three months if the Government are not willing to go all the way to six months? I look forward to the Minister’s answers.

[Lord Freud]

My Lords, I ask noble Lords to forgive me for not keeping up with the exact floating role of the noble Lord, Lord McKenzie, as he moves forward and back on the Benches. I thank all noble Lords for their contributions which, as one would expect, covered a number of issues.

I start with the family premium, which will align housing benefit with universal credit, which does not have this process. As noble Lords will be well aware, it applies to new cases only. It will therefore not affect people in receipt of family premium on 30 April this year. They will continue to receive the family premium until they are no longer responsible for any children or young people under 20 or make a new claim for housing benefit. To avoid people dying at the stake for the sake of these premiums, I remind noble Lords of their very complicated history which started in 1988. With the reform of tax credits, they were removed from income support but not from housing benefit. I know there is a lot of historical nostalgia for bits of the benefit system, but this one reminds me more of an appendix than of anything else: it had a purpose at one time, but it is pretty odd to remember what it was and it can cause you problems, as I am discovering.

On the linking rules, where claimants are in receipt of housing benefit and subsequently move house into a different local authority, they are required to make a new claim for housing benefit. That has always been the case and the policy does not seek to change it. If the claimants were in receipt of the family premium before their move and they move after 30 April, they will no longer receive the family premium in their new housing benefit claim from their new local authority. That responds to the question from the noble Baroness, Lady Sherlock. I know that the noble Baroness likes to stretch out the period for which this will last, but universal credit will be coming in for new cases reasonably soon. It is simply not feasible to introduce linking rules for these cases because that really would introduce a level of complexity and cost.

I regret that I cannot answer the precise question from the noble Lord, Lord McKenzie, on the administration costs saved. When you go through the sums of how you reach that family premium amount and then do the taper with it, and you have to do that differently through every local authority, I have to believe that it genuinely saves some money. However, I cannot put any amount on that.

On the point about work incentives made by the noble Baroness, Lady Sherlock, the loss of family premium would be one factor among many others, including the financial gain and development prospects that would come from entering work. It is important to mention the likely behavioural change that could result from this policy, as the potential reduction in benefit may make claimants more likely to find work or increase their hours. Indeed, you see evidence of that in some of our welfare reforms already.

I turn to the issue of backdating, which noble Lords touched on. This change introduces equality for working-age claimants by aligning housing benefit rules with those in universal credit. Under current rules, as noble Lords have pointed out, the working-age housing benefit claimants may have their claim treated as made from a date up to six months before they actually make the claim. The backdating period will apply from the date of claim and is not dependent on the time that it takes to process claims. Our rationale is that the one month provides a reasonable period to seek assistance or to get claimant affairs in order for those who can demonstrate good reason as to why they did not claim more promptly. While claimants still receive legacy benefits before migration to UC, there is sense in preparing them for the transition to UC by, so far as practicable, equalising how they are treated. The other factor that is useful when we look at this is that our administrative data show that more than two-thirds of backdating claims for housing benefit are awarded for one month or less.

The noble Lords, Lord Kirkwood and Lord Low, asked why we rejected the three-month recommendation —although, interestingly, the numbers between the one-month figure and the three-month figure are actually not very great. We are aiming to change behaviours. If people want to claim benefits, one month allows sufficient time for them to register a claim in the first instance. It does not matter if it is a more complicated process, because the processing and getting the detail does not change the date of entitlement, which is established on the initial claim.

To respond to the noble Lord, Lord McKenzie, who as usual has excruciating detail at his fingertips, I confirm—and I am impressed that he has looked at this—that where a claim for housing benefit is linked to a claim for one of the legacy income-related benefits that applies the three-month backdating rule, entitlement to housing benefit will be linked back for the full three months if it is made within one month of the award for legacy benefit. So he got that spot on.

On the point from the noble Lords, Lord Kirkwood and Lord Low, we do not anticipate pressures on the homelessness front. I am slightly influenced by the fact that every time we make such a change we are warned about that but so far it has not come through.

Under-occupancy Charge

Debate between Lord Freud and Baroness Sherlock

Thursday 28th January 2016 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for repeating that Answer from the other place. The Court of Appeal ruled against the Government on two bedroom tax cases: one from a victim of rape who had had a panic room installed by the police, and the other from the Rutherford family, who care for their severely disabled grandson. In both cases, the court ruled that the bedroom tax was illegal and discriminatory. However, any relief for the families was short-lived because, astonishingly, Ministers have decided to appeal to the Supreme Court. References to the fact that families may receive the temporary discretionary housing payments from a pot being stretched in ever more directions are nothing but a fig leaf.

I would like to ask the Minister a couple of questions. First, can he confirm that 280 victims of domestic abuse have had a panic room installed under the sanctuary scheme and are affected by the bedroom tax? On the same point, is it true that exempting domestic abuse victims would cost the Government only £200,000 a year? Can he tell the House whether, in the wake of this judgment, the Government will consider withdrawing their appeal and instead taking the right decision of exempting severely disabled children and their families and victims of domestic abuse from the bedroom tax, in which the people of Britain have now completely lost confidence?

[Lord Freud]

I do not have the figures to which the noble Baroness referred, so I will have to check the figures we have and write to her on that.

Effectively, with this appeal we are joining these two cases to a number of others for the Supreme Court to look at the whole thing in one context. It is, essentially, about whether the discretionary housing payment system is appropriate for handling these particular hard cases, which the High Court has, in practice, accepted as the right way to ameliorate those cases, up to now.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 27th January 2016 Lords Chamber

[Lord Freud]

My Lords, Amendment 46E would apply the affirmative procedure to the support for mortgage interest loan regulations as recommended by the Delegated Powers and Regulatory Reform Committee. The committee opined that these are novel provisions which are likely to have a significant impact on a large number of people. This is true, but the part which is novel is the change in this support from a benefit to a loan. In all other aspects the level of support offered and the way the system will be administered will simply replicate the existing system. The committee made its recommendation before your Lordships debated these measures in detail. I have been quite clear about how the new loan system will be implemented and that the regulations we will bring forward will replicate the existing SMI system. Using the affirmative procedure for these regulations would therefore not be a good use of parliamentary time.

I will come to the government amendments, which may actually be the real palliative here because we will have SSAC reports in this area. If they come up with something there is space within the negative procedure to bring issues before the House. The committee did not have that information about what we were planning with SSAC. I should also point out that the current SMI regulations are subject to the negative procedure.

Amendment 46F would prevent the Government from changing the benefit into a loan for those on state pension credit. It would allow regulations to be made to create a system of grants for pensioners’ mortgage interest. This would mean that pensioners would receive help with their mortgage interest as a grant rather than a loan and that that would be the case indefinitely. In this context that would be unsustainable and clearly unfair on the taxpayer. It is not right that taxpayers, many of whom of course cannot afford to buy their own home, are subsidising the acquisition of what in many cases is a very substantial asset. Pensioners will have access to the same level of support for mortgage interest payments as the current system provides and the Government will not recover the loan until the property is sold. With pension credit claimants, it is most likely that this will be on their death and therefore will impact not on them but on the beneficiaries of their will. My noble friend made the point that they may not be that pleased, but the balance is between them and the taxpayer.

I shall pick up on some of the specific points. Pension credit claimants will have access to passported benefits such as funeral payments. We would normally provide advice through a telephone conversation and the advice will focus on the circumstances of the individual concerned with regard to their options, asking whether they have alternatives available such as downsizing or help from relatives or their heirs. I think that the noble Baroness should take my last word on the issue of who would do this as I wrote in my letter. To the extent that that contradicts what I said earlier, it should be the latter. Our view is that whatever theoretical potential conflict there might be, we will make sure as we set out the arrangements that there is no conflict in the way it is done. I think that that is what I expressed in my letter, although perhaps not using that language.

Let me reassure noble Lords that the Government will seek to recover the debt only up to the level of available equity when the property is sold. Any outstanding debt will be written off. The amendment would also provide powers to introduce regulations to introduce a waiting period for pensioners before they can receive help. There is currently no waiting period for help with mortgage interest for pensioner claimants and it is not the Government’s intention to introduce one. With those explanations, I urge noble Lords not to press the amendments.

Amendments 47 to 49 and 83 provide that loans for mortgage interest regulations made under the Welfare Reform and Work Bill are submitted to SSAC, the independent statutory body that provides impartial advice on social security and related matters for consideration. With the introduction of the new loans-based scheme, help with mortgage interest will no longer be a part of benefit entitlement. However, we recognise the important role that SSAC plays in the scrutiny of regulations and have accepted the recommendation of the DPRRC to provide that regulations relating to loans for mortgage interest fall within the remit of SSAC. I have just realised that I slightly misspoke when I implied that the committee might not have both those bits of information. Perhaps I may also withdraw that point.

The amendments also ensure that certain decision-making rules in the Social Security Act 1998 apply to decisions about SMI loans in the same way as they apply to decisions about benefits. In particular, this will ensure that an appeal may be brought against a decision relating to a mortgage interest loan in the same way as an appeal may be brought against a decision relating to a benefit. This means that applicants will have the same appeal rights as under the existing provision for support with mortgage interest, ensuring fairness for applicants of the new loan provision. They will allow the department to supply information about SMI loans within the broader welfare system to persons who are concerned with the provision of welfare services. For example, it will allow the Secretary of State to share information with those providing free school meals and health benefits such as free prescriptions, so that recipients of SMI loans can access these “passported” benefits. I think that that picks up on the point made by the noble Baroness about concerns with the passporting issues.

The final amendment is a minor and technical change to the Long Title. The purpose of SMI loans is to prevent repossessions. All types of mortgages and loans are eligible for support under the new loan system. This change ensures that the Long Title accurately reflects the contents of the Bill by including a reference to “other liabilities”.

[Baroness Sherlock]

My Lords, I thank the Minister for that response. I hope that he will take away again the point about the DPRRC. I certainly welcome the move to refer the regulations to SSAC but, welcome though SSAC is and much as I respect its expertise, it is not Parliament. Parliament should have the opportunity to debate this. He mentioned that the DPRRC recognises that regulations for loans for the grant scheme were negative. I am working from memory but I think that the committee pointed out that, had the draft regulations been available, it would have recommended negative in the ordinary run of things because the original regulations had been negative. In fact, the draft regulations were not available, which is why it recommended the affirmative procedure. Will he go away and think about that?

The fact that the Minister said that the service normally will be by telephone gives me a glimmer of hope that the department might be willing to consider a face-to-face service for vulnerable consumers. I hope he will consider that. I will not take on the point made by the noble Lord, Lord Young, although I disagree with him. Given the lateness of the hour and the fact that we went around this issue fairly effectively in Committee, I will set that to one side. I thank the Minister for his other comments. I hope that when he looks at the record he will check the presumptions that I have made as to the operation of the scheme. Should any of those prove to be wrong and not to have been corrected by him, I hope that he will write to me. On that basis, I beg leave to withdraw the amendment.

Housing Benefit: Social Housing Units

Debate between Lord Freud and Baroness Sherlock

Monday 25th January 2016 Lords Chamber

[Lord Freud]

My Lords, we are looking to double the housing budget to more than £20 billion over the next five years. We are committed to 400,000 new affordable housing starts worth £8 billion—£1.6 billion of that is going to the rented sector. This is from a Government that are really trying to get housing back after the last Labour Government in 2010 left housing starts at the lowest level ever since the 1920s.

[Baroness Sherlock (Lab)]

My Lords, let us put a couple of facts on the table. The Government said they are going to spend £20 billion on housebuilding this Parliament, of which only £1.6 billion will go on affordable housing. Under the welfare reform Bill that the Minister is dealing with at the moment, the OBR has said that 14,000 fewer social housing units will be built as a direct result of the plan to force housing associations to cut rents. How does that help bring the housing benefit bill down?

[Lord Freud]

I just repeat what I said: we are spending £20 billion to have 400,000 new starts. That is more than this country has seen. Where there might be a policy that may have a pressure, we will look at that but, overall, we are determined to get the houses built in this country.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 25th January 2016 Lords Chamber

[Baroness Sherlock]

My Lords, the amendment would exclude guardian’s allowance from the cap. I shall briefly set out the regulations on exactly who gets guardian’s allowance, because I think it is worth doing. You can get it only if you are caring for somebody else’s child, you are entitled to child benefit for the child and both of the child’s parents are dead, or one of the child’s parents is dead and at that time the whereabouts of the other parent is unknown and you have made all reasonable efforts to find them, or one of the child’s parents is dead and the other is in prison with a minimum sentence of two years remaining to serve, following the death of the other parent. People do not get this allowance lightly. It is not paid to foster parents or prospective adopters. My noble friend Lady Hollis, with a precision and a lyricism that I could not begin to match, set out the effects of taking this away from a group of people who are reaching out to some of the most vulnerable children in our country. I hope that that has persuaded the Minister how important this is. But given those effects, and given how few these people are in number, and given how vulnerable the children are, I would like the Minister to explain why they do not fit into the category that he described under the last amendment, when he said that the Government wanted to incentivise work but also to protect the most vulnerable. Why do they not count as the most vulnerable?

In Committee on 21 December I asked the Minister what behavioural incentives the Government were seeking by including guardian’s allowance in the cap. He said:

“Recipients of maternity allowance and guardian’s allowance will be affected by the benefit cap only if they are in receipt of a significant amount of other welfare payments”.—[Official Report, 21/12/15; col. 2378.]

That is not a justification. Either it is right to include guardian’s allowance in the cap or it is not; it cannot be right because you get other benefits as well. So if the Government believe that it is right, can the Minister please tell the House what behavioural response the Government are looking for from people who receive guardian’s allowance as a result of the cap? If he cannot provide one, will he accept that the fact that they will be affected by the cap only if other benefits are also received is not a good argument for guardian’s allowance itself to be counted towards the cap? That argument could be made for any benefit. I look forward to the Minister’s explanation.

[Lord Freud]

Amendment 26 seeks to remove guardian’s allowance from the list of those that are included within the benefit cap, so that it is disregarded when calculating the total amount of benefits a household can receive before the cap is applied. Guardian’s allowance is paid to those who are responsible for a child or young person and either both parents or in some circumstance one parent have died. The Government recognise the crucial and valuable role that recipients play in helping children to recover from the loss of their parents, but I do not agree that it should be excluded from the benefit cap. That is about the principle that there is a clear limit to the amount of benefits that an out-of-work family can receive.

In the interests of time, I shall not repeat my previous arguments, but will provide the best information that we have, which is that the noble Baroness, Lady Hollis, is right to say that this affects very few people. On our sums, the inclusion of the guardian’s allowance within the cap affects fewer than 50 claimants—those are the figures that I have. Rather than a blanket exclusion of this benefit, it is better that targeted support is offered to those who need it. That is where the discretionary housing payments of £870 million come into play. On that basis, I ask the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Baroness Sherlock]

My Lords, this amendment, in the name of my noble friend Lady Hollis, would exempt from the cap women who are at least 29 weeks pregnant or responsible for a child under nine months of age. I thank my noble friend for making it clear to the House just what a perilous situation these women will find themselves in if things proceed as planned.

Some very strong arguments were made to me by Gingerbread as to why this particular group ought to be excluded. It suggests, first, that the group will find it most difficult to move into work to escape the cap and therefore will simply be pushed deeper into poverty. Of course, that is the last thing that it wants for a woman who is pregnant or has a very young child. Secondly, it points out that the Government want families on benefits to make the same choices as those who are in work. Parents in work have pregnancy and maternity rights, including an expectation that they will have some time away from work both when they are in the later stages of pregnancy and in the first months of their child’s life, so this exemption would mirror the rights of working families.

As my noble friend Lady Hollis pointed out, pregnant women and those with very young children are not listed as a priority group for discretionary housing payments, despite the complex challenges that they face as they move into work, and therefore they cannot have that to fall back on as other vulnerable groups might. I would be very interested to hear the Minister’s response to these challenges.

In Committee, I tabled an amendment that would have excluded maternity allowance from the cap. I did so to probe the Government’s reasoning and particularly to try to find out what behavioural responses the Government were expecting of pregnant women. However, as I explained earlier, I could not get an answer from the Minister. The only thing that I got on maternity allowance was the same as for the guardian’s allowance: the response was that people would not be affected unless the household was also getting other benefits. As I have said, that is not an answer.

This amendment from my noble friend seeks to protect a very narrow group of people at a very vulnerable time. The Government’s usual response is that if someone wants to escape the cap, they should either get a job or move house. Can the Minister explain to the House what he thinks the chances are of a woman who is 29 weeks pregnant getting a job? How strong does he think her chances will be out there in the job market if she has not worked previously? Secondly, if that is not a practical thing for her to try to do, maybe he thinks she should move house. I do not know whether he has ever had to help a very heavily pregnant woman move house, but would he really suggest to her that moving house when she is very heavily pregnant or has a brand new baby is either desirable or practical, unless of course she is forced into it in the circumstances described by my noble friend because she ends up being evicted for rent arrears?

I just want to get the Minister to address the practicalities of this situation. This is a very narrow group of people. What do the Government expect them to do if they find themselves hit by the cap? Will he please tell the House?

[Lord Freud]

My Lords, as I have already set out, those with a sustained work history benefit from a nine-month grace period before the cap is applied to them. Therefore, those households that have been in employment for at least 50 out of 52 weeks will be exempt from the cap. This gives time for households, including those with a new child, to adapt to their new circumstances before the cap is applied to them.

Households in receipt of working tax credits or which meet the UC earnings threshold will be entirely exempt from the cap. Although some single mothers will not be immediately able to move into work, for those households consisting of couples, the partner need work only 24 hours a week for the household to qualify for the exemption. Around 45% of households that include a maternity allowance claimant who will be affected by the new cap levels are households consisting of a couple, meaning that a partner can help to exempt a household from the cap through work. Households that include a claimant in receipt of maternity allowance may also be entitled to working tax credits and so be exempt from the cap.

Although I am grateful to the noble Baroness for speaking on this issue and for the research that she has put into it, I am not sure that the amendment would do what is intended. It would not create a disregard or exemption from the cap for the specified group; it would, however, appear to make the group subject to a different prescribed list of benefits to be defined by the Government in regulations. That would of course go against the approach that the Bill adopts of providing certainty about the capped benefits by including them in the Bill. I therefore ask the noble Baroness to withdraw the amendment.

--- Later in debate ---

[Lord Freud]

The Delegated Powers and Regulatory Reform Committee recommended in its report of 23 November a number of amendments to the benefit cap clauses in the Bill. Amendments 29 and 30 are technical and consequential amendments as a result of the committee’s recommendations. Amendment 28 is a tidying amendment and not as a result of the committee’s recommendations.

Before I do that, I would like to explain that, although the committee recommended that Clause 7 should be amended so that new Section 96, which it inserts into the Welfare Reform Act 2012, should reference single persons, couples and lone parents, and provide for the meaning of those terms to be specified in regulations, the Government do not consider this to be necessary. Redrafting the provision in the way suggested would overly complicate the legislation. The Government have been very clear in debates and briefings that the higher tier of the cap levels will apply to lone parents and couples, and that the lower-tier levels will apply to single people without children. I am happy to formally put on record again here today that this is the policy.

Turning to the amendments that are being taken forward, the committee recommended that the affirmative procedure should apply to any regulations amending the level of the benefit cap, using the power introduced in new Section 96A of the 2012 Welfare Reform Act to be inserted by Clause 8. As currently drafted, the affirmative procedure is applied only if the level of the cap is lowered. The amendments to Clause 8 mean that any change to the levels of the cap will be subject to parliamentary debate in line with the committee’s recommendation. This is a considerable level of extra parliamentary scrutiny for these future decisions. I am sure that these amendments to Clause 8 will reassure noble Lords’ concerns that for any future review of the cap this House and the other place will have the opportunity to have the decision explained and debated, and to agree it.

The committee also highlighted that currently regulations pertaining to the benefit cap are not required to be referred to SSAC. It has recommended that an amendment be made to provide that regulations pertaining to the cap must be referred to SSAC. After careful consideration, the Government accept this recommendation in principle and will table an amendment at Third Reading to reflect this. However, the Government do not accept that regulations relating solely to the level of the cap should be referred to SSAC, as that is a matter for Parliament.

A consequential amendment to Clause 7 has been identified. It has arisen as a result of the removal of Section 97(3) of the Welfare Reform Act 2012. Section 97(3) provided that the first set of regulations made under Section 96 were affirmative. As the first set of regulations has been made, the removal of the word “other” from Section 97(4) is purely consequential on that. I beg to move.

[Baroness Sherlock]

My Lords, I thank the Minister for that explanation. We welcome the move to affirmative regulations and are happy to accept his assurance that the other amendments are technical and consequential. I look forward to his returning at Third Reading with details of the amendments relating to SSAC. I would like to ask him to come to Third Reading armed with some specific information. If the Government are not minded to make reference to SSAC in relation to the level of the cap, and given that all the benefits affected by the cap are now in the Bill, will the Minister come back and detail for us precisely what those regulations might refer to that are still available to be sent to SSAC? Will he come back at that point and give a better explanation, of appropriate length—I am not blaming him for not doing it now—as to why the Government do not think that the level of the cap should be referred to SSAC, given that that is probably the single biggest determinant of the impact on those affected by it?

Social Housing Sector

Debate between Lord Freud and Baroness Sherlock

Thursday 14th January 2016 Lords Chamber

[Lord Freud]

We are talking to the relevant supported housing associations—it is a variegated sector. There are a couple of issues that are concerning them at the moment, and this is one of them. We are looking, as we develop a dialogue, to get a policy that works for this sector as soon as we possibly can.

[Baroness Sherlock (Lab)]

My Lords, the other issue that is probably concerning the sector is that the Welfare Reform and Work Bill is forcing all housing associations to cut their rents by 12% over this Parliament—money that will almost all go directly to the Treasury. It is a double whammy. I spoke this morning to the head of Depaul UK, a small charity that houses 700 young homeless people in the north-east and around the country, dealing with kids who have come out of prison or have escaped abuse and exploitation. It has already absorbed cuts of 30%. If this policy goes through, the support workers who teach the young people how to live, cook, pay the rent and go to work and get them ready for independent living simply cannot be paid for. If this goes ahead, Depaul will pull out of hostel provision altogether. Is that what the Government want?

[Lord Freud]

As my noble friend Lady Williams made clear on Monday night, this area is under active consideration within the timetable of the Bill.

--- Later in debate ---

[Lord Freud]

This is a variegated sector, which is exactly what we are discovering now. Supported accommodation or specified accommodation, using the other definition, effectively looks at the services that are provided to support people. I suspect that some of them will supply aids of some kind, but the real thing is the actual service elements that are provided for people.

[Baroness Sherlock]

My Lords, perhaps the noble Lord could ask his noble friend Lord Strathclyde to do the review. That might speed it up.

[Lord Freud]

I constantly consult my noble friend Lord Strathclyde about absolutely everything.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 21st December 2015 Lords Chamber

[Lord Freud]

It was a small report on, I think, 14 children, and we aim to look at things on a much safer basis. I ask the noble Baroness to withdraw her amendment.

[Baroness Sherlock]

My Lords, I thank all noble Lords who have contributed to this extensive debate. There are three more groups to come on the same subject, so we are going to do it very good justice. Given the extent of the debate, I will not try to respond to all the many points that were made. I am grateful to all those who have contributed, particularly in trying to highlight the impact of this lower benefit cap on a number of different groups: on single parents, as the noble Baroness, Lady Manzoor, said; on disabled people, as the noble Baroness, Lady Meacher, said; on carers, as the right reverend Prelate the Bishop of Durham and my noble friend Lady Pitkeathley pointed out; and on children.

I decline to rise to the noble Lord, Lord Blencathra, and engage in political debates about who said what and when, but I confirm that it is the policy of the Labour Front Bench in both this House and another place that we oppose the reduction in the benefit cap to the new levels. I was hoping to respond to the noble Lord, Lord Lansley, but, sadly, he is not in his place. Perhaps when he comes to read this debate he will start to reflect that it is important for us as a House to understand what the Government are trying to do here. They have always offered two arguments for this measure: one is that it is related to work incentives; the second is that it is fair.

On work incentives, the noble Lord may not be aware that significant work incentives are already built into the system. In fact, the CPAG did a report on this very recently showing how much better off families with children already are if they work. The point is that this is comparing individual wages and household income. Someone may earn a certain amount in wages but how much the household needs depends on where they live, how many children there are, whether they have a disability and whether they are carers. As my noble friend Lord Beecham said, this is primarily driven by high housing costs in the private sector. Most people do not get anything like these amounts of money in benefits. Where they do, it is almost always because they have very high rents. That is not their fault; it is the fault of the state, which has failed to get a grip on the housing market, have enough supply and make sure that people can afford to rent in places where there are jobs without driving themselves into this situation. I urge the Government to consider that very carefully.

The point about the comparator really matters. Whether or not the Government are going to set it at 50% or something else, there needs to be a way of understanding at what point the Government would do this. I can create brilliant work incentives tomorrow: I will abolish all benefits. That would be a fantastic work incentive but it would not be reasonable. The point of a social security system is to support people who cannot work—to enable them to meet their needs and feed their children—and then, where appropriate, to support them in work. We have to get an appropriate balance between, on the one hand, the needs of families, and particularly of children and vulnerable people, and the ability of the state to afford it; and, on the other hand, work incentives.

It is not unreasonable for this House to want to understand how the Government reach that judgment. Once you take away any external benchmark, it can simply become an annual whim. That is not appropriate, but it is completely appropriate for this House not to get into the micropolitics but to say, “We want to understand the impact on individual families, and we press the Government to make clear their thinking so that each year we can judge what is a fair amount of money to give to families”, as the noble Lord, Lord Kirkwood, pointed out.

In this country we have a very long tradition of Parliament looking carefully at what families need to survive and building up components of a social security system to address the different sets of needs. The benefit cap overrides all that, so it matters very much how it is constructed and it matters very much that the Government are transparent and accountable in the way that they go about creating it.

I shall not go into the other areas as we have a number of different debates coming up, but on the question of work incentives I point out that 85% of those who are capped at the moment are not in categories required to work, as we will come on to look at in two of the next three groups. Given all that has gone before and given all that we have yet to come, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Freud]

I will try one last time. If noble Lords are dissatisfied, that is the reality.

We currently have a benefit cap in operation at a single rate of £26,000, and we are taking that down. That has mainly affected London. We are now spreading it out to affect just short of 100,000 people—90,000-odd on the impact assessment, although it is interesting that, in 2012, a smaller number were involved in practice than in our original impact assessment, so let us just see.

Our experience of running that benefit cap and the reaction to it were such that the Government decided that we could safely reduce the level and put it into two tiers, so that its impact is spread through the country more evenly. We have taken it down by 12.5%. It is the experience of running it live that has led the Government to think that we could move it to these levels and get the incentive effects that we are looking for to operate. I do not have any more information to provide for the noble Baroness—much though I know that she would like more. I apologise to the extent that she is disappointed.

[Baroness Sherlock]

My Lords, I thank the Minister for trying, if not succeeding, to answer the questions. He must appreciate that we had some very good discussions during the passage of the Welfare Reform Act, which brought in the cap in the first place. One reason that they were good was because a lot of evidence was around. He was asked some searching questions from Peers from all Benches, he engaged with the argument, we had some good debates and I would like to think that the system that we now have in universal credit is better than it would have been had it not been for them. In fact, I think he was kind enough to say so at the time.

One reason why I have always enjoyed participating in debates in this House in this area is precisely because we have been able not just to trade in political slogans but get into detail and understand how we might improve current policy—which is the whole purpose of this Chamber as a revising Chamber.

[Lord Freud]

I say only that I remember with some fondness—not entire fondness, because 17 Sittings in Committee is too much for anyone—that we had some very valuable dialogues then. One of the most important was about universal credit and led directly to the creation of universal support, which is becoming a valuable tool that we are developing. I remember equally vividly that the benefit cap area was one where at least equivalent frustration was expressed by noble Lords about what I was saying. I remember that very distinctly. There were some very punchy discussions. I will say no more than that, but it was not an area where we had the most sweetness and light on that Bill.

[Baroness Sherlock]

I thank the Minister for reminding me of that joyous period; I think of it often.

The Minister mentioned that a lone parent could avoid the cap by going into work for 16 hours on working tax credit. He did not pick up the point that I made on the previous amendment, which was that, on universal credit, he always said that lone parents would be expected to work only if they could find a suitable job where they could get childcare. He has not responded to the fact that a lone parent with a baby would have to go to work. The offer of childcare for three and four year-olds does not apply to babies. The offer of childcare for disadvantaged two year-olds does not apply all year round. There is a real issue. Someone might find that the only response was to take jobs which either might not be available or for which they could not find suitable childcare.

I am sorry to say that I did not find the Minister’s response on maternity allowance persuasive at all. I think this is one of these oddities, and I think the Government just got it wrong and should have just put their hands up. These are generally probing amendments, but I think that that is just genuinely bizarre. The impact assessment says that, if people do the right thing and move into work, they will not be capped. How is it possible for a woman who is about to give birth to do the right thing and move into work? That just does not work. However, I fully accept that I am not getting any more than I have.

Finally, during Committee, my noble friend Lady Lister has given two or three examples of Written Questions that she has asked, the Answers to which have been, frankly, unsatisfactory. They have mostly referred her to another document or website in which the answer was not found—as she has established with the help of the Library. That is a very bad trend in which legitimate questions are being asked for information which would help to inform deliberations in Committee on a Bill, but the department, via its Minister, is not providing them. We will keep a close watch on this and, if it comes up again, we will raise it again on the Floor of this House.

In the mean time, I beg leave to withdraw the amendment.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 21st December 2015 Lords Chamber

[Baroness Sherlock]

Before the Minister replies, I have a few other questions; perhaps he can answer them together. I thank the right reverend Prelate for clarifying that. Indeed, I wanted to be sure that the advice was independent of the debt recovery under the provisions. I apologise if I missed any of the Minister’s answers—I tried to tick them off as I went along, and he did pretty well, so I thank him for that.

First, can the Minister clarify that anyone in receipt of a qualifying benefit will be entitled to a loan whether they have or could be expected in the future to have any equity, or certainly enough equity to cover the loan? Secondly, if somebody loses SMI and as a result loses pension credit, will they lose access to passported benefits as well?

On the question of advice, the Minister described what subjects the advice would cover but I was not quite sure of the level of personalisation. I would put money on the fact that the pensioner will say, “These are my circumstances—should I apply for this?”. Will the adviser be able to say, “I advise you to do it—yes, you should”, or “I advise that you shouldn’t”, or will the advice be much more general, like the kind of money advice we are talking about in pension schemes? Did the Minister say that it was free to the claimant? I am sorry, I may have missed that. Finally, there was the question on redress for customers in the case of bad advice.

While the Minister is reflecting on those, I will respond to a couple of points made in the debate. I thank all noble Lords who contributed. I welcome the noble Lord, Lord Young, to the debate, and thank him for what I choose to regard as the implied compliment that I had some good arguments earlier in the evening, even if I did not do so well just now. In response to the points he made, I find persuasive the research done for two different government departments that the move to 13 weeks had been effective in holding down arrears and repossessions. That was government-commissioned research. I may be wrong about that but it seemed to be one of the most compelling arguments for not going back to 39 weeks. But presumably the Minister will say that they will monitor and evaluate it, and I will be interested to hear what they say.

Both the noble Lord, Lord Young, and the Minister said that in the case of pensioners the beneficiaries are essentially not the claimants themselves but those who will benefit from their estate, but of course it is often the case that that is not strictly true. I live in Durham, and in County Durham plenty of people have houses which are, frankly, worth not very much at all by London standards, so they have very little equity in them. If this kind of debt prevents them accessing all that equity, it may mean that they will not have equity available to them which they might need to get at for care costs or other non-NHS covered support costs of different kinds. So it does potentially have an impact on the pension in their lifetime, not just on those to whom they bequeath the house.

Finally, I should have reiterated something right at the start. The Minister was kind enough to give his officials the freedom to brief us on the session, and I had a particularly helpful conversation on this area. I know it might not seem like it, since I have rewarded them by coming back with lots of questions, but in fact it has been very helpful and has meant that in this debate I have tried to focus more on how this will work than adopting a more combative style. So I appreciate that and I look forward to the answer to those questions.

[Lord Freud]

I do my best. On the independence of people providing the advice, it will be independent of those providing the loan.

[Baroness Sherlock]

And the recovery?

[Lord Freud]

Yes, I think that it is likely to be independent of the recovery. Yes—it is now. On the point about passported benefits, we are working to ensure that individuals who are no longer entitled to an income-related benefit as a result of the introduction of the SMI loans will have access to passported benefits. We are scoping out what the advice will look like and what we expect it to cost. Until we start the contracting process, I cannot prejudge whether SMI advice will be free. So that is outstanding.

I think that I have answered most of the points. If not, I will hit the typewriter—the Kremlin uses only typewriters because computers can be hacked. On the point about the number of weeks, I think that the noble Baroness will find that the level of forbearance with 39 weeks was very high and that very limited numbers of houses were repossessed by the mortgage providers, so I think that that will provide her with some reassurance.

--- Later in debate ---

[Baroness Sherlock]

My Lords, Amendments 104BB in the names of the two noble Earls, Lord Listowel and Lord Cathcart, and the noble Baroness, Lady Meacher, would address the question of direct payment. Direct payment was the subject of considerable discussion during the passage of what became the Welfare Reform Act 2012, together with deliberations on the frequency of payments and split payments, not to mention jam-jar accounts.

My noble friend Lady Hollis asked about the research mentioned by the noble Earl, Lord Cathcart, from the National Federation of ALMOs and ARCH. It did indeed show that 89% of universal credit claimants were in arrears and that 34% of them were eight weeks in arrears, so they were in receipt of an APA. That is a significant proportion, so there clearly is an issue that they have picked up on about the extent of arrears—hence the question of direct payments.

We know that the Government’s starting point is that in the overwhelming majority of cases they want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. But they have set down criteria for considering alternative payment arrangements in limited circumstances for the payment of the housing element of universal credit, invariably the first in order of priority. The guidance states that when arrears reach one month’s rent the DWP will review the situation, following notification by the claimant or the landlord, and when they hit two months or eight weeks, either the landlord or the claimant can request an APA. There is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror the choices in managing money that they say those in work have to make.

However, if an APA is in prospect, this would normally start with personal budget support followed by a managed payment to the landlord. The guidance sets out the tier 1 and tier 2 factors which will be considered for an APA. But having theoretical opportunities to have direct payments is one thing; what matters is how the rules are being applied in practice, so perhaps the Minister can help us here. We know that through to 3 December 2015, there have been 287,310 universal credit awards. Will the Minister tell us how many of them had a housing element included and how many have had an alternative payment arrangement? How many requests for direct payment to a landlord have been made by either landlord or claimant and, of those, how many were approved and how many rejected? I accept that the Minister may need to write to me on these points, but it would help us understand the scale of the problem and whether the research that has been identified is in fact representative of the situation for universal credit claimants more broadly.

Amendment 104BA in the name of the noble Earl, Lord Cathcart, seeks arrangements whereby payment of arrears in respect of a former property can be made by direct payment of a current universal credit claim. This has obvious difficulties because maintaining the current home should be the priority. There must be a risk that adopting that suggestion could lead to a round of evictions for rent arrears as arrears build up in a current tenancy in order to satisfy the arrears on a previous tenancy. There could be further complications because a universal credit award may not cover identical households for the current tenancy and the previous tenancy, so it is not clear how it might be apportioned.

Amendment 104B in the name of the noble Earl, Lord Cathcart, and the noble Lord, Lord Best, seeks a power for the Secretary of State or somebody else to supply information relating to any relevant social security benefit to a landlord, depending on the written authority of the tenant. Noble Lords will be aware of regulations enabling the limited supply of social security information to social landlords, which is governed by the Data Protection Act. I understand the potential benefit to landlords of this, but it raises issues of a different magnitude given the sheer number of private landlords, let alone the capacity issue, so I will be interested to know how the Minister thinks that that might be approached.

There may be an issue here with regard to arrears and universal credit, and if the Minister is not minded to accept this amendment, he needs to come back to the House to suggest how the Government are going to go about dealing with this. I look forward to hearing his reply.

[Lord Freud]

These amendments relate to a number of housing issues, and I will deal with them in the order in which they are listed.

Amendment 104B would enable the Secretary of State to pass information relating to a claimant’s social security benefits to their landlord as long as the claimant had given written consent. As the noble Earl and the noble Lord have stated, knowing that a tenant has claimed a social security benefit will allow a landlord to take early action to ensure that the tenant does not get into rent arrears and jeopardise their tenancy.

As the noble Baroness, Lady Sherlock, said, the Secretary of State already has power to supply some limited information to a social-sector landlord when one of its tenants claims universal credit. This information is shared for the specific purpose of enabling the landlord to determine whether that tenant needs advice, assistance or support in relation to their financial affairs.

The Government recognise that the need for this support might arise because, under universal credit, claimants are now responsible, in many cases for the first time, for handling a monthly budget. Claimants must also use their benefit to pay rent directly to their landlords, something that social tenants were not typically required to do under the housing benefit regime.

However, we do not recognise the need for the same level of support in relation to claimants living in the private rented sector. This is because such claimants will typically already have been responsible for paying their own rent under the housing benefit regime, so will struggle less with the changes introduced by universal credit. In any case, if these claimants require support in relation to managing their finances, it is unlikely to come from their private landlords. We therefore see no need to put additional information-sharing provisions in place.

Employment: Job Creation

Debate between Lord Freud and Baroness Sherlock

Wednesday 16th December 2015 Lords Chamber

[Lord Freud]

In the past five years, 57% of new jobs went to UK nationals compared with 50% under the previous Government. One of the most dramatic figures I want to boast about is what has happened to youth employment. I have quoted again and again in this House the figure about workless youngsters not in education: it is now a million below what it was in 1997. It went right up under the previous Labour Government and is now at a low of 14.2%.

[Baroness Sherlock (Lab)]

My Lords, the employment rate for disabled people is now under 48%, leaving a disability gap of 30 percentage points. The Government have committed to halving that gap, which I welcome, but in the Committee on the welfare reform Bill this week there was support from every Bench of this House to require the Government in their new statutory reporting on employment specifically to report on progress on closing the disability employment gap. The Minister resisted that. Will he think again or, if not, will he tell the House why the Government are so resistant to that?

[Lord Freud]

This Government are going to produce a White Paper in the new year on how to support people who are disabled and pull them back into their rightful place at the economic heart of this country.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 14th December 2015 Lords Chamber

[Baroness Sherlock]

My Lords, I seek clarification on an issue that was raised with me by a charity called Together for Short Lives, which represents parents and children with life-limiting and life-threatening conditions. The amendment is brief but the issue is this: I understand that children under three are not eligible for the higher-rate mobility component of DLA. I believe that the rationale is that children under three are generally not independently mobile, although anyone who has babysat a toddler might disagree. The assumption is that under-threes will have to be carried in arms, lifted into prams and buggies and from them into cars and car seats anyway, whether or not they have a disability.

For most children and their parents that is true, but Together for Short Lives points out that there are small numbers of children who need help and should have access to the mobility component of DLA. That is because there is a small group of children who depend on ventilators for survival, who may have one or more shunts and IV lines for feeding or drug administration, or other technologies that are life-sustaining. The children are in effect constantly attached to life-sustaining equipment that is often bulky or heavy. The child has to be placed in a wheelchair or medical buggy capable of carrying the equipment, monitors and so on, so that the lines and tubes can be securely attached to the child. Parents therefore need specially adapted or broad-based vehicles capable of carrying these small children, linked together with their decidedly not small equipment, securely. The children cannot easily be lifted in and out of cars like most children of their age.

I want to put to the Minister the case for why this small group of children needs the mobility allowance. Some of the children always have to be placed in a medical buggy or wheelchair when not in bed because they need postural support. These are heavy items. In addition to the life-sustaining equipment attached to them, most of these children require a variety of equipment to go with them wherever they are. This could include a spare ventilator and battery, monitors, oxygen supply, a mask, emergency tracheotomy kits and feeding kits. That is on top of the usual paraphernalia that all parents of children under three find that they need to carry with them at all times. The children cannot travel on public transport, because buses will not take oxygen bottles, and there is the inevitable risk of infection.

As well as being susceptible to infection, the children are often prone to medical crises, such as fitting, and their parents need to be able to get them to hospital immediately for life-saving treatment 24/7. If they do not have a car, the children may not be assessed as safe to live at home and will need to remain in hospital or a hospice. As well as being heart-breaking for families and their children, that could, of course, cost rather more than the higher-rate mobility allowance of £57.45 per week.

What would this all cost? As a result of the Welfare Reform Act 2012, disability living allowance has been replaced by PIP for people aged over 16, but DLA is still given to under-16s. This amendment seeks to open up access to the higher-rate mobility component of DLA for under-threes who require life-sustaining equipment as described above. I am told that there are nearly 49,000 children with life-limiting and life-threatening conditions, but only a very small proportion are under-threes who require life-sustaining equipment.

To establish how many might need this component of DLA, Together for Short Lives submitted a freedom of information request to the Department for Transport in 2014 to ask how many parents of children under three had asked for a blue badge because their child was dependent on heavy medical equipment or needed to be near a vehicle in case they need emergency medical treatment. It found that 1,530 children had blue badges. The wording of this amendment is aligned to the criteria for blue badges. If those figures are correct, the cost of giving all 1,530 children access to the higher-rate mobility component of DLA of £57.45 a week would be about £4.5 million. That is a small sum for DWP but would transform the lives of families with a child with a threatening or life-limiting condition.

What I have described feels to me like an anomaly—I cannot believe that the department intended this to happen. I hope that the Minister will give it a very careful response. I am sure that there cannot be anybody listening to this debate here or outside whose hearts would not go out to the children and families in these circumstances. I hope that the Minister agrees that I have made the case that babies and children under three who depend on big and heavy life-sustaining equipment to stay alive and/or have need for immediate access to transport for medical reasons should be regarded as having an additional mobility need and become eligible for the mobility element of DLA. I beg to move.

[Lord Freud]

I thank the noble Baroness for tabling the amendment and for providing that degree of clarity over its purpose. I must express my own empathy regarding the intention of what this amendment aims to achieve. There can be no doubt about the harrowing position of families with very young, severely disabled children. However, I find myself in the unusual situation of needing to reflect a position set out by the noble Lord, Lord McKenzie, some six years ago when he was the government Minister for Work and Pensions.

On that occasion, what was to become the Welfare Reform Act 2009 was being debated in Grand Committee. Noble Peers may recall that that Act introduced, by way of amendment in the other place, a new provision which now gives access to the higher rate mobility component of DLA to severely visually impaired people. In Committee a further amendment, in much the same terms or at least intended as the amendment we are discussing today, was introduced by the noble Baroness, Lady Thomas, who is not in her place today. On that occasion the noble Lord, Lord McKenzie, was sympathetic to the situation set out by the noble Baroness, Lady Thomas, but ultimately resisted the motion. He said that,

“in this difficult financial climate, we need to consider carefully the potential cost of any such change … This amendment would, of course, result in additional costs”.

He estimated costs at that time to be around £15 million a year and went on to say:

“This would obviously be a significant increase in what is, unfortunately, a difficult economic situation, and is simply not affordable in the current context”.—[Official Report, 25/6/09; col. GC 538.]

I have never been sadder to have to agree with the noble Lord and to resist an amendment.

On the techie side, the amendment confers entitlement to neither the higher or lower rate of the mobility component. That is because the distinction between the two rates has been lost. There would also be some unintended consequences of the amendment—most notably that it would remove entitlement from the 16,500 children and adults who currently receive the higher-rate mobility component as a consequence of a severe visual impairment. However, I think that that is just a matter of drafting and I would not want to dwell on that issue—we could always sort it out.

The primary reason for there being a lower age limit for entitlement is that, while many children can walk by the age of three, not all will do so, regardless of disability, and few will be able to walk for any considerable distance. Age three therefore provides a reasonable boundary line between what may be considered developmental delay and walking difficulties arising from a disability or long-term health condition.

I think we can all agree that the majority of very young children, whether disabled or not, will need a considerable degree of support and help from parents and carers. Most parents will also be reliant on a range of bulky and possibly heavy items, such as prams or buggies, and items of equipment for feeding and changing. Nevertheless, I recognise that some young children with particular conditions may be heavily reliant on additional therapeutic equipment, some of which can be bulky and heavy. However, such technologies are improving all the time and in some instances equipment is becoming lighter, smaller or in other ways more transportable.

Despite the mobility component being unavailable to children solely on the basis of a need for such equipment, there already exists a range of provisions, financial and in kind, which can help support such children and their parents. For example, the care component of DLA places no restriction on how it can be used, and any entitlement to DLA can bring with it access to the disability premiums in the income-related benefits or tax credits. Parents may also be able to receive a blue badge for free parking if their child is reliant on heavy equipment or needs to be near a vehicle for treatment.

That, in turn, leads me to question the provision in the amendment which focuses on children who need to be near a vehicle for treatment or where a vehicle is used to transport them for such treatment. I question this for two reasons. The first is on the basis that the provision could help only those parents who already have use of a motor vehicle or who would gain access to one through the higher-rate mobility component of DLA. As I said earlier, the amendment is not clear in its intent regarding the rate at which children under three should become entitled, meaning that, by effect, it is also not clear whether such children would be given access to the Motability scheme and, in turn, a motor vehicle. Hence, the amendment as currently drafted would exclude families without access to a vehicle.

Secondly, I question this provision on a more practical basis. If a child requires emergency transportation along with bulky medical equipment, it is doubtful whether transportation by the parents would be a reasonable and practical expectation. Our emergency services, which are much better equipped in terms of medical training and suitable vehicles, are in place for exactly this kind of situation.

Finally, I must turn to the financial implications of the amendment, which are estimated to be still in the order of £15 million. Clearly, this amendment goes further than that debated previously and, in the time available, we have been unable to determine how many children could potentially be entitled on the basis of access to a nearby vehicle. However, patently that would add to what is already a significant extra cost burden and would further damage our capacity to stay within the welfare cap.

I am sympathetic to the broad intentions behind the amendment but, particularly now, the Government cannot accept it on the basis of the unfunded cost implications. Therefore, regrettably, I have to agree with the noble Lord, Lord McKenzie, and I urge the noble Baroness to withdraw the amendment.

[Baroness Sherlock]

My Lords, before I withdraw the amendment, which I will do, can the Minister tell me how many children his costings are based on?

[Lord Freud]

I thought that I knew the answer to that, but I am a bit uncertain. I hope that inspiration is striking.

Sorry, it is not 1,600; 18,500 children under the age of three are in receipt of DLA and 5,500 children impacted.

[Baroness Sherlock]

I am grateful to the Minister for that. I am grateful also for his thoughtful reply. When he reads Hansard, and given all that he tells us of his view of the current economic situation and how it compares to when my noble friend Lord McKenzie was in office, he might like to reflect on whether his own assessment may be different from that. However, I can see that the two men are obviously of one mind. I ask the Minister to think very hard. My noble friend Lord McKenzie has put his name to this amendment and is very much supportive of it.

I wonder whether the Minister might also be willing for his department to meet somebody from Together for Short Lives, perhaps with me. I think that they would like to be able to understand the basis of the arguments that he was making, not so much in terms of the money but in terms of other things.

[Lord Freud]

I would appreciate meeting them with the noble Baroness. I really regret what I have had to say.

[Baroness Sherlock]

I thank the Minister for that. On that basis, I beg leave to withdraw the amendment.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 7th December 2015 Lords Chamber

[Lord Freud]

Of course, one of the most interesting things about the way tax credit has moved is that people who might have gone into the benefits system may well have gone into the self-employed tax credit system, but the figures I have just provided are the best comparison and include the self-employed on tax credits. They show an enormous increase in the overall figure. Because this is clearly a complex set of figures, I am very happy to write formally to the noble Baroness setting out the true figures on this important matter.

[Baroness Sherlock]

My Lords, I wonder whether the Minister can help me. When I asked what assessment the Government had made about the impact on the likelihood of couples to adopt sibling groups, and whether costs would increase elsewhere, he kindly referred me to the impact assessment. I spent quite a bit of time this weekend reading the impact assessment, being a slightly sad person, and I cannot actually find the section which refers to adoption at all, to sibling groups in particular, or, indeed, to costs elsewhere in any government department. If he can point me to the page or paragraph number, it would be very helpful.

While I am on my feet, the Minister may have forgotten to answer the question raised by the noble Baroness, Lady Howarth of Breckland, who asked specifically about the impact on couples who had not made a choice. The Government mention in the impact assessment that one of their objectives is to ensure that families make the same choice about the number of children they have as might other families who are not in receipt of tax credits—of which more later; watch this space. I think the point the noble Baroness was making is that the kind of choice you get at midnight, when the knock on the door comes, as described by the noble Baroness, Lady Drake, is not quite the same as the choice other families make. Has any distinction been made?

[Lord Freud]

It is actually extraordinarily hard to draw up a system. Those choices are different for different groups. What we are trying to do in this measure is make the choices the same whether you are reliant on the state support system—tax credits—or whether you are reliant on your own resources. That is the parity we are looking for here. That, I am afraid, is the best I can do in terms of the government response.

[Baroness Sherlock]

Has the Minister responded to the question about the impact assessment? I am sorry, which page is it on?

[Lord Freud]

Again, all I can say is that the impact assessment looks at all the impacts. The costs and savings derived are based on the full gamut of impacts.

--- Later in debate ---

[Baroness Sherlock]

Just to clarify, I was talking in this case about the exemption for multiple births, although it applies to all of them. Will the exemptions apply to all means-tested benefits—for a family not getting universal credit, for example?

[Lord Freud]

I am trying to think of another example because, as the noble Baroness knows, we are trying to incorporate all means-tested benefits. The main one is housing benefit and the other one that the noble Baroness may be thinking of is support for council tax where we have not made any provision because each council has its own policies. I cannot think of any other means-tested benefit to which, once universal credit is in and working, that would apply. I think that I have dealt as best I can with all the points raised and, for the reasons set out, I urge noble Lords not to press their amendments.

--- Later in debate ---

[Lord Freud]

Taking the noble Earl’s points in order, we need to have good strategies for care leavers. Clearly, the statistics are disturbing, and they have been for decades. I am not utterly convinced that exemptions in this particular area are the best way of supporting care leavers. There are other things that we can do that are way ahead of this. However, we do now flag care leavers in the benefit system so we know who they are and we can look at what they are doing, certainly with JSA, and I hope that we will be putting that into UC, although I am not absolutely up to date on where we are with that system.

On the noble Earl’s point about popularity, it is important that the benefits system does not become unpopular because that will undermine its legitimacy. It could be argued that one thing that we are doing now is creating a benefits system that has legitimacy and acceptance because it is perceived to be fair and to drive the right outcomes, which is not something that people feel about the legacy benefits system. That is a subtle point and closely related to what we are doing here.

The figures that I have seen, which I am afraid I cannot recall off the top of my head, show that very rich families and very poor families tend to be larger than those in the middle—thereby hangs a tale that goes to my noble friend’s point about who can afford to have large families. But I will have to write to the noble Earl with the exact figures.

[Baroness Sherlock]

When the Minister does that, will he look at the study circulated to most noble Lords which specifically used ONS statistical data to assess the population? One of the things it concluded was that:

“These data show that socio-economic class, perhaps contrary to popular belief, does not affect family size”.

In the higher managerial and professional classes, 6.8% of families had three or more children compared with 6.4% at the very bottom. I can share the reference with the Minister but the data are not as he suggested. Maybe we can compare notes and come back at Report, but as I understand it—and I pay tribute to the noble Earl’s passion for caring for the very poor—one of the reasons that these things are popular is a presumption that poor people have lots of children, which is not true. Even if they did, if they were not working the benefit cap would cut them off once they had two children, if they were renting anywhere—even modest—in Plymouth.

[Lord Freud]

We can cut through debating this by getting the facts, which I shall get to noble Lords.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 7th December 2015 Lords Chamber

[Baroness Sherlock]

My Lords, before the Minister answers that, can I just say that I have found his responses today a little surprising. Many noble Lords have experience of being in Committee with him and having careful, detailed and well-informed debates. We are used to the Minister regularly getting up and telling us how much things cost and I find it almost impossible to believe that his department does not know how much these elements will cost. They have been proposed a long time. The department has had every opportunity and there are very good statisticians and modellers in the DWP. I can conclude only one of two things—either they know and have not told him or he knows and is saving it up for Report to launch it at us from the Box when we try and press a vote. Which is it?

[Lord Freud]

I would never launch something at noble Lords on Report in that way. Let me go and think about how I might present some useful figures in a reasonably timely way. That is not a promise to produce anything more than I have but I will look and see whether I can be more helpful, given that I clearly have not been now.

--- Later in debate ---

[Lord Freud]

I will just deal with that. In universal credit we are producing something very clearly tapered, without the trap at the 16-hour point, which is in the current legacy welfare system. Therefore we have a pathway. One of the things we are doing, particularly for lone parents, is that once you are freed from that tyranny of the 16-hour rule, it is interesting how firms in the north-west, where that is already happening, are able to work with those people and start moving them up the earnings progression—not just as regards the number of hours but earnings progression—and we are beginning to see signs of a transformation. That is behind some of these changes—we want to make people independent of the state as much as we can.

[Baroness Sherlock]

My Lords, I have debated a lot of subjects with the Minister over the last few years, and I am not sure I have ever been as disappointed in a Dispatch Box performance as I have been today. I know that the Minister knows these issues very well, and that he normally comes back. When noble Lords take a lot of care to mount arguments, take apart his arguments and engage, as many have done today, he normally does us all the courtesy of taking them on and responding to them carefully. He simply has not been doing that today.

I asked him only two questions and he did not answer either of them. I deconstructed the argument, and all he did was repeat it. He did not even engage with it. This is only a suspicion, and I am sure I am wrong, but it may just be that the Minister does not have any more enthusiasm for these provisions than I do. However, I am sure that that cannot be the case, and we will find that he comes back from supper enthused with zeal to take on and defend these proposals—which, frankly, has been sadly lacking so far.

I will say a couple of things. One is to reassure the noble Lord, Lord Kirkwood. He mentioned worrying about constitutional implications. He need not worry, of course, as he will well know, being much longer-serving than I am. Since this is primary legislation there is absolutely no reason why we should not send matters back to the House of Commons. The Companion makes this very clear at paragraph 8.181, where it says that,

“with regard to Commons financial privilege, the Lords may properly make amendments to Commons bills (other than supply bills) which, when they come to be considered by the Commons, are deemed by them to infringe their financial privileges. It also follows that the Lords need not anticipate what view the Commons may take of any Lords amendments with respect to”,

that. I hope that as a result he will sleep more easily tonight and will feel able to pursue this at a later stage.

I will make just one final point. I agree with the point made by many noble Lords that this two-child policy is qualitatively different from all the other measures. What we have traditionally done in support is to recognise in social security that children are a public and a private good and therefore that the costs of raising them should properly be shared between the taxpayer and the family. Traditionally, in the case of child benefit, we have said that we should all contribute something to the raising of all children; that where there are particular needs—for example, for disabled children—we should all contribute more; and that where people’s needs are greater, we should contribute more through means-tested benefits. This is a very dangerous day indeed if we move away from that and I hope very much that we will return to it at a later stage in the Bill. But I beg leave to withdraw my opposition.

Welfare Reform and Work Bill

Debate between Lord Freud and Baroness Sherlock

Monday 7th December 2015 Lords Chamber

[Baroness Sherlock]

My Lords, I congratulate the noble Lord on being able to cost one of tonight’s amendments. I find his defence genuinely impossible to understand. I think he actually said that there is no stronger justification for exempting existing children than children who have yet to be born. I simply cannot understand how he can say that with a straight face because he has spent much of this evening telling us that this was all about choice and that parents who are on tax credits should make the same choices before having additional children as parents who are not. These are parents who already have children. These children already exist. They are not making a choice at all. The only reason they are making a claim for tax credits, or universal credit in this case, is because something has happened which means they have then had to fall back on the support of the welfare state. I do not understand how that is a justification and I invite him to think about it and maybe come back before I sit down and give me a choice.

The Government need to think very carefully. They keep giving justifications about choice until they do not hold, in which case they suddenly go, “Oh, look over there. Look at fairness”. This is either about choice or it is not. It cannot be about choice and when that breaks down a different defence is pulled out. It surely has to be one or the other. If it is about choice, how can it apply to people who have not made a choice? If it is not about choice, will the Minister please stop telling us that it is. Can I tempt the Minister to explain to me again why there is not a stronger justification for existing children than new claimants because I think I may have misheard? Is that what he meant?

[Lord Freud]

No, that is exactly what I meant.

[Baroness Sherlock]

At least my hearing is better than my understanding. I find that a profoundly disappointing response, even by the standards of tonight. But given that we are in Committee, I beg leave to withdraw this amendment.

--- Later in debate ---

[Lord Freud]

As I said, the documentation that we have published is the documentation that we need to publish to comply with our public sector equality duties. We have done that, even though the noble Baroness may feel that it is inadequate.

[Baroness Sherlock]

I do not presume to know any more than others about this subject—no one knows more than my noble friend Lady Lister. But on a number of occasions this evening, Peers from different Benches have asked the Minister very specific questions and he has simply got up and said, “What we have published, we have published”. The question he was asked just now was: “The Government must have conducted this test, because they are required to do it, so why won’t they publish it?”. “We have published what we have published” is not an answer. I am getting increasingly anxious about the quality of the responses this evening.

Take the example of dynamic benefits. Could the Minister explain that to me again? If he does not think that static analysis is good then he needs to find another way of analysing it. He simply cannot come to this House and say, “I cannot tell you the impacts of this because it is all dynamic”, because otherwise we will never be able to assess anything that the Government are going to do before they do it. That cannot be reasonable, surely.

[Lord Freud]

This amendment is asking us to do an analysis over the next six months. In practice, that is what will be happening on a dynamic basis, because we have introduced as part of universal credit a test-and-learn approach in which we are able to assess what happens to families and learn the lessons in order to roll out universal credit. That is a pretty public process and we publish what we learn. So, in practice, we have a process that incorporates the dynamic effect of these changes in its overall impact, rather than taking individual bits and pieces of the policy. That is the best answer that I can give to the question. On that basis, I urge the right reverend Prelate to withdraw this amendment.

Families: Work Incentives

Debate between Lord Freud and Baroness Sherlock

Tuesday 27th October 2015 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what progress is being made on work incentives for families with children.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

Universal credit improves incentives to enter into and progress in work. Early results show that current UC claimants do more to look for work, enter work quicker and earn more than current JSA claimants. Childcare costs are a key issue for working families, which is why we are increasing support and provision.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister. I appear to be inadvertently topical, for which I apologise.

As well as the tax credit cuts of recent celebrity, the Government have announced that they are reducing the work allowances in universal credit. The Work and Pensions Select Committee in the Commons heard yesterday that when the minimum wage is fully rolled out in 2020 a single parent, who is now able to work 22 hours a week before losing universal credit, because of these changes will be able to work only 10 hours a week before losing universal credit.

Increasingly, commentators are worried that the Government’s vision that universal credit would make work pay is getting eroded by a series of changes, so I shall ask the Minister’s for reassurance on two points. First, can he assure the House that when universal credit comes in fully the gains to work will be as strong as the Government promised us when the Welfare Reform Bill went through? Secondly, would he consider running a briefing session—perhaps after the CSR—to unpick some of the detail about how work incentives work in practice with all the changes that are going on? I am aware of the complexity with which many noble Lords have wrestled in recent debates, and that might be a useful way forward.

[Lord Freud]

Universal credit is a wide-ranging transformation of the welfare system, so it is difficult to pick isolated elements. It is now rolling out rapidly. At the same time, we are building a support network incorporating, among other things, universal support delivered locally. One of the key factors is that it delivers a gross value to this society of £7 billion every year. One reason it does that is that it directs its support far more efficiently at the people who need it most. The other thing it does is to make sure that it is always worth working and it is always worth working more. Finally, I try to keep the House up to date with universal credit developments because it is a really important transformation. I commit again to do that. I would like to find a way to do that in the Chamber, as I did a couple of months ago.

Benefits: Sanctions

Debate between Lord Freud and Baroness Sherlock

Thursday 10th September 2015 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what plans they have to review the operation of sanctions on benefits.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

We have made a number of improvements to the sanctions systems and are implementing further changes following recommendations made by the Oakley review. We are now focusing on embedding those changes and improvements. We will keep the operation of the sanctions system under review to ensure that it continues to function effectively and fairly.

[Baroness Sherlock (Lab)]

I wonder if the Minister has read the leaflet that his department published for disabled people, which featured Zac and Sarah. Sarah had been sanctioned for failing to produce a CV, but it ended happily. Sarah said:

“My benefit is back to normal now and I’m really pleased with how my CV looks. It’s going to help me when I’m ready to go back to work”.

An FOI request established that Sarah does not exist. The picture was a model and DWP invented the quotes. Real people’s experience of sanctions is very different. Food banks repeatedly see desperate people sanctioned for trivial or, frankly, mystifying reasons, and the scale of sanctions is now such that a fifth—no, almost a quarter—of all JSA claimants were sanctioned in the last five years. Will the Minister please now do what the DWP Select Committee asked: respond to its report and conduct a major review of sanctions before the whole system is discredited?

[Lord Freud]

Let me clarify this. The sanctions level runs at around 5% on a monthly basis. That level is the running rate of sanctions and other figures are simply wrong. On the first point that the noble Baroness made, we do use illustrative examples where they are real, and we make it clear where they are not. In this case, it was wrong—and we have said it was wrong—to have made illustrative examples look as if they were real.

Child Poverty

Debate between Lord Freud and Baroness Sherlock

Wednesday 8th July 2015 Lords Chamber

[Lord Freud]

The number of children in workless households has been coming down rapidly. It has come down by 390,000 and is now at a record low. We are looking to encourage more families back into the workplace through the financial incentives around universal credit, the new national living wage—clearly, a very direct incentive—and free childcare, and we are working to boost the number of apprenticeships from 2 million under the last Government to 3 million under this one.

[Baroness Sherlock (Lab)]

My Lords, the devil for today clearly is in the detail. It is working parents who depend most on tax credits to make work pay and lift their children out of poverty but, while a single parent with two children who is working 16 hours a week will gain £400 from the new national minimum wage, which is very welcome, sadly she will lose more than twice as much in cuts to tax credits. How can this be right? How can the Minister tell the House that working families are better off when it is those very elements of tax credits and universal credit which make work pay that have been cut today? How can that be the security for families of which the Chancellor boasts?

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Tuesday 7th July 2015 Lords Chamber

[Lord Freud]

My Lords, it is a bad day to answer that question. The real point is that as we move from the combination of the benefit and tax credit systems into one universal credit system, the incentives will be restructured to encourage people to work their way down the taper.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the Minister for wanting to update us—in fact, he sent me a lovely letter last week telling me how well universal credit was going—but the point made by the noble Lord, Lord Kirkwood, was that we were expecting 1 million people to be on it by last year. In fact, in two years’ time there should be 7 million people on it. So if the Minister wants to update us, given that there are currently just 65,000 people getting universal credit, will he not follow the advice of the National Audit Office and tackle the secrecy surrounding the programme? In particular, will he agree to publish the full business case for universal credit and a proper plan with milestones, so that we can judge it and reassure people how their money has been spent and when universal credit will be rolled out? He will know that his good friend the Prime Minister has said that sunlight is the best disinfectant. Is it not time to throw open the windows of DWP and let some light in?

[Lord Freud]

We have completed the strategic outline business case and will be doing the outline business case this summer. We have actually put out quite a lot of figures, in particular on the amount that this programme is costing, which is down from the original £2.4 billion to £1.8 billion. The letter which I sent to the noble Baroness and various others, and which is available in the Library, tries to deal with the main changes going on in this programme. It reflects my determination that this House will be kept informed of developments as they come up. I have made a commitment to do that and I will do that.

Housing: Under-occupancy Charge

Debate between Lord Freud and Baroness Sherlock

Tuesday 16th June 2015 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, the Minister does not have to take the word of my very well-qualified noble friend Lady Hollis; perhaps he should talk to the Tory MP Nigel Mills. He highlighted the plight of tenants who wanted to downsize but could not, so were hit with higher rents—the very point he is making. He went on to say:

“It … wasn’t desperately fair on them or desperately good politically”.

He also said that the bedroom tax caused,

“a lot of grief for what wasn’t the hugest amount of money”.

Or he could talk to Daniel Kawczynski MP, who called for a “root and branch” review; or David Cameron’s former speechwriter, Clare Foges, who said of the bedroom tax:

“It is not working as has been hoped and will remain a fly in the one-nation ointment”.

She urged the Prime Minister to move on from it. We keep hearing evidence. Is it not time that the Government admitted that we all make mistakes and that this one is a very bad mistake, a very expensive mistake and a very cruel mistake? Please will they put it right?

[Lord Freud]

There are signs of people both downsizing and going into work on a policy that was designed to save the state £0.5 billion a year and is doing so. One of the side-effects that is not properly appreciated is the extraordinary change in the numbers in social housing who are out of work. They have now reached the lowest levels that we have ever recorded.

Personal Independence Payment

Debate between Lord Freud and Baroness Sherlock

Wednesday 10th June 2015 Lords Chamber

[Lord Freud]

We will continue to support the disabled and the vulnerable in months to come.

[Baroness Sherlock (Lab)]

My Lords, maybe I can follow that up a little more. The noble Baroness, Lady Campbell of Surbiton, specifically asked for an assurance of the Prime Minister’s guarantee that he would continue to support disabled people and that their benefits would be protected. Let me give the Minister the opportunity to give that. The Government want to make £12 billion of welfare cuts. Will he say today that none of those will fall on disabled people?

[Lord Freud]

I repeat what I said: we will continue to support disabled people and the vulnerable through that process.

Personal Independence Payments

Debate between Lord Freud and Baroness Sherlock

Tuesday 10th March 2015 Lords Chamber

[Lord Freud]

We have been working very closely with the providers to make sure that there is an identity of approach in training, right the way through the two different providers and DWP.

[Baroness Sherlock (Lab)]

My Lords, the Government have taken to using a variety of unpublished statistics in relation to PIP. When my noble friend Lord Dubs asked a Question on this very subject on 15 January, the Minister answering said that the backlog was down to 107,000—but was then obliged to write and say that that was not the case at all. So can the Minister tell me something very specific? The latest published figures cover only new applications for personal independence payments, not reassessments of the kind mentioned by the right reverend Prelate the Bishop of Leicester. People suspect that those on disability living allowance are having much slower assessments in order to enable the Government to fast-track new claims. Can the Minister reassure the House that that is not true and also tell us what the waiting times are for DLA?

[Lord Freud]

The two processes, for PIP and for DLA—or rather, for the WCA, which I imagine is what the noble Baroness meant—are separate, and separate contractors operate them. Indeed, Maximus has come in to run the WCA process. As for the figures, statistics will be released next week, on 18 March, giving the PIP clearance times and the waiting outstanding times. That statistical release has been preannounced, in accordance with the normal protocols.

Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015

Debate between Lord Freud and Baroness Sherlock

Thursday 22nd January 2015 Grand Committee

[Baroness Sherlock]

The Minister has done very well. I do not like all the answers, but he has done very well at trying to address many of the points. I will just pick up a couple of them.

First, can he tell us who will deliver the support? Will it be Jobcentre Plus staff or others, and what are the resource implications for the public sector? On the business case, if the £15 million and the light-touch control group are in the original business case, what about the rest of it? I may have misunderstood his comments on that, but where is that to be found?

As for tracking outcomes, obviously RTI works for those who are paying tax and national insurance, but for this to work properly the Government would also need to track people who were not to be found on the system and to find out why not. I am sure the Minister would rebut this, but there is a growing concern—he will have seen both recent media reports and the work of the Work and Pensions Committee—that the ways in which sanctions are being imposed at the moment are completely arbitrary. The only success measure for Jobcentre Plus staff is how many people are driven off the benefit rolls rather than into work. No one bothers to find out the numbers, but the suggestion is that only about one-fifth of people leaving benefits go into work—nobody knows what happens to the rest.

This was a real issue, as I am sure the Minister is aware, in one well known phase of welfare reform in the United States. Researchers tracked people longitudinally and found that a lot of them had simply ended up dropping out of the system completely. At this stage I am not making a value judgment about that, but for this to be properly effective the Government would need to follow those people through and find out what had happened to them to understand what the consequences of that were.

The Minister mentioned skills and the kind of support that is available. If one of the barriers to someone’s progression that is identified is a lack of skills, will the pilots be able to provide skills, or resources to enable people to get skills, which might enable them to earn more and break free of the threshold that would be constrained by this? I also asked whether the same income threshold would be applied for entry to or exit from all the pilots. Is that one of the things that is going to be flexed in any way? Is it the same for all of them?

On the question of ethics, the Minister said at the start that these regulations comprise strictly defined limits. In a manner of speaking they do, but only in the sense that I am strictly defined by the law of gravity, which still gives me quite a lot of latitude in how I go about behaving. The Minister also said that he will give us no information on numbers. Presumably, that could theoretically mean that the entire universal credit population could be put into this without any need for further recourse to Parliament. Is that right? In other words, when does this stop being a pilot? I am trying to establish whether the regulations were really designed to be able to pilot something. The scale of this is such that I am beginning to wonder whether Parliament would really see this as being a pilot. Although I am very glad that the Minister is going back to the SSAC, there is no obvious way to scrutinise this here. Will he give some more thought to that?

Finally, I want to clarify something relating to the sanctions. If the Minister is saying that the requirements will be no worse for people in work than for those out of work, my response would be that I would hope not, otherwise the incentive for getting a job would seem to be rather small. However, that presumably means that somebody could lose all their universal credit for three years for a failure to comply with a brand new requirement exercised by his staff—something that has never been done before. Is the Minister confident about that? I realise he has said that nobody will be sanctioned without good cause, but we both know that there are plenty of examples of people who have been simply because there is a significant amount of error in the way that the guidance has been applied. Cases are constantly being brought forward, and he will be aware of that. How will he check up on that? How will he quality-test the nature of that?

I am aware that I have asked a lot of quite specific questions. I would be grateful if the Minister, with his normal customary kindness, would allow his officials to go through the record and write to me on anything that has not been picked up.

[Lord Freud]

I will certainly go through the record but I am doing my best to answer everything. There is a technical question about income in and out. At the top end, a single person stops being in this trial when he or she hits 35 times the minimum wage—I think, from memory, that it is £116-something. I may be corrected, but that is the top end. The bottom end for a single person is, effectively, £76, and for a couple it is £116, we think.

Essentially, we are trialling this group because people would have come off the out-of-work benefits system at 16 hours times the minimum wage up to where they would get out of conditionality entirely because they would have satisfied 35 hours times the minimum wage. We do that for singles and couples. My figures are being hastily checked but that is the principle behind the answer.

[Baroness Sherlock]

Is that for all pilots? It is not a variable?

[Lord Freud]

Yes. Let me make absolutely sure that I have got the figures right. It is £76 for the individual. However, it is not £116 but £126 for the couple. The figure for an individual at the top end which gets you out of conditionality is £230. So it is within that range of earnings. Clearly quite a lot of people may be doing fewer hours if they are earning rather more.

[Baroness Sherlock]

I am grateful to the Minister and I thank him for establishing those ranges. However, what I am trying to get at is whether exactly the same ranges will be applied in all the different pilots, or are the Government testing whether the ceilings should be set at different levels?

[Lord Freud]

We are going to stay in that range because that is the group for which in-work conditionality would apply. There is no point in testing other ranges. However, we will have information, which I think is the underlying point of the noble Baroness’s question, on how different segments of earnings within that range respond to the different types of regime.

[Baroness Sherlock]

The Minister is being incredibly helpful. I apologise for my having to work this out on the hoof, but I think the Minister is saying that only people whose earnings are within that range will be subject to a pilot. I am trying to establish whether people who are at different points in that range may be subject to different trials. I will say that again. Will people on the same income within that range be subject to different pressures or levels of support requirements?

[Lord Freud]

The answer to that is no. We will put people in within that range. We will then have a process of personalising and tailoring the claimant commitment, which may contain an element of what their earnings are or could be. So I can answer no and yes. It will not be done at a mechanical level but may be done at an individual level.

[Baroness Sherlock]

I am very grateful to the Minister—I had not understood that at all. In that case, we are saying that each of these 15,000 people might have a different target of earnings that would allow them to exit from the conditionality and the programme. That raises some very significant ethical questions and I would strongly ask the Minister to consider giving more thought to this. I am very slowly doing a PhD. Before I am allowed to do anything involving other people—human subjects—I have to go to an ethics committee which puts me through my paces quite carefully. The consequences here are not just differential levels of support but that, potentially, two people in almost identical circumstances might do the same things, but one would lose three years’ worth of universal credit while the other loses nothing. That is a radical step for the Government to take. Has the Minister really thought through the ethics of that?

[Lord Freud]

This is how one delivers personalised support. The claimant commitment is in the system. Elements of the claimant commitment have a mandatory aspect but with others it is just an agreement. In reality, in the trials we will set the claimant commitment rather carefully. It is an agreed document between the work coach and claimant. Elements of that claimant commitment may be mandatory but quite a lot of it will not be. The likelihood is that as we run the trials we will look extraordinarily closely at making sure that we do not have any unsatisfactory sanctioning behaviour. We will test for that. This is a trial.

Although 15,000 people sounds a lot, when universal credit is fully rolled out, we will be dealing with 20 million people—8 million-odd households, comprising 12 million-odd adults and then a number of children. We are talking about a very small number so that we can micromanage it in terms of that kind of concern. The noble Baroness, rightly, is focused on us getting that right, and we are utterly conscious of that particular issue. The numbers will allow us to make sure that there are not those kind of arbitrary differences, as she described them, particularly when the sanctioning regime can move quite rapidly.

Skills is clearly one area where we could do a lot more development as we find the programme beginning to work. In this first trial, we plan to signpost the National Careers Service and colleges. There will be money available to support that through the adviser discretionary fund.

On RTI, the figures are that around 94% of people in formal employment are captured in the PAYE process. Some self-reporting may be required but we will get the bulk of them. Clearly, we will look at other things than just the RTI, but the RTI should give us a good feel for this. We will look at whether there are some anomalies going on where people fall off the system. That is one of the most important things that we will find out from the trial.

The light-touch regime in the business case is funded. Clearly, we will only introduce a less light-touch regime if it offers value for money. That will be part of a negotiation, if we discover it is worth doing. We will not spend hundreds of millions of pounds on a regime that somebody made up in a darkened room when it has no effect. That is why we are doing these trials. Who will deliver these trials? To start with, it will be Jobcentre Plus, as I have described. That is the first iteration; we could go on to other iterations. I described, I hope, the light-touch regime, which involves two work coach conversations. One happens when someone enters work and the other occurs eight weeks later. That is what the control is based on.

I think that I have dealt with the question of sanctions. The noble Baroness will be quick to correct me if I am wrong, but I think that I have covered everything. However, on her point about the numbers, by March, we will have moved to one in three jobcentres. I am sure that she will be the first to acknowledge that, and she will have seen the escalation: 54,000 have already applied for universal credit and the figure is moving up rapidly. That is when we will start pulling out the people on universal credit who are in work to test them.

This is about the commitment by this Government to deliver a universal credit that genuinely supports working-age people when they are out of work and then in work. It gets rid of the distinction which, in my view, has been invidious in our support system. If we are going to do that, we have to understand how best we can support the in-work claimants and get them to get their earnings up. The regulations before us today combine oversight and flexibility in the optimum way.

During the passage of the Bill I was very clear that, in driving through this approach, we would do it through a regulatory structure, so that we could have these debates, keep an eye on it and get that balance. It is a very delicate balance but we will build an evidence base on how we can improve people’s careers and improve earnings among the low-earning. If we get this right and learn how to do it properly, this piece of research will be a key element in improving the economic performance and productivity of the country. That and the fact that people’s lives will be better when they earn more are the two fundamental reasons that I commend these regulations to the Committee.

Employment

Debate between Lord Freud and Baroness Sherlock

Wednesday 21st January 2015 Lords Chamber

[Lord Freud]

My Lords, one of the myths about the improvement in employment is that it is concentrated in the south, particularly in London. The reality is that the bulk of the improvement—75% to 80% of it—has taken place outside London. The youth figures are extremely encouraging, because youth JSA figures are now running at some of the lowest levels we have seen for many years.

[Baroness Sherlock (Lab)]

On youth unemployment, maybe the Minister could look again at the figures. I welcome any rise in employment, but there are 763,000 young people out of work. Last summer, when the Government scrapped their youth contract wage incentive, youth unemployment started going up straight away and it has now risen for three months in a row. Will the Minister tell the House what he plans to do about it? Maybe it is time for him to look at Labour’s compulsory jobs guarantee for young people.

[Lord Freud]

My Lords, the trouble with Labour plans in this area is that they are extraordinarily expensive. The Future Jobs Fund, on which some of them are based, cost 20 times what Work Experience costs—and that produces just as good results. We cannot afford to have these artificial job creation schemes: we want real jobs in the real economy, and I am pleased to say that we now have the highest level of private sector employment that we have ever had.

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Wednesday 10th December 2014 Lords Chamber

[Lord Freud]

One of the things that we need to do with universal credit is to make sure that everyone can take part in it. We are creating a system to do that through universal support, where we go into partnership with local authorities to help people, concentrating particularly on financial and digital inclusion. We then pull in all the other third sector companies, such as landlords, Citizens Advice and credit unions, to make sure that support is holistic.

[Baroness Sherlock (Lab)]

I do not doubt the Government’s intentions or the Minister’s commitment, but this has to be delivered to work. To go back to the original Question, the OBR said at the time of the Autumn Statement that, despite having already been delayed repeatedly and reset last year, it was assuming an extra six-month delay on top of the Government’s current plans because of what it called “optimism bias” in the DWP. Just right now, as the Public Accounts Committee is hearing from the Treasury, it was confirmed by the chair that the Treasury has not signed off the DWP’s business case for universal credit. What can the Minister say to the House? Universal credit is running almost four years late. It is costing money to taxpayers and vulnerable clients. It risks, frankly, making a laughing stock of the department. What can the Minister tell us to reassure us and how can we believe him?

[Lord Freud]

I re-emphasise that the Treasury has signed off the strategic outline business case. This plan is being done in a way that makes sure that we do it safely and securely—not the big bang method. As I said, it is being done more cheaply than originally envisaged. It is vital that we do not do the kind of thing that happened with tax credit when it was opened on one day and was a total shambles for millions of people.

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Monday 24th November 2014 Lords Chamber

[Lord Freud]

The working allowances in universal credit are much greater than under the legacy system, so there is a freeze that will have a small effect. Nevertheless, the poverty impacts are to take 300,000 children out of poverty.

[Baroness Sherlock (Lab)]

My Lords, I would like to return to the question of arrears raised by my noble friend Lady Hollis. Not only are people paid universal credit once a month in arrears but that is compounded by the debts they are getting into by having to pay back some of their council tax and crucially by the bedroom tax. Has the Minister read the report of the fact that Iain Duncan Smith went to court to defend his department’s right to levy the bedroom tax on a council home whose spare room was in fact a panic room which a charity had paid to secure to protect a woman who had suffered rape, assault, stalking and death threats from her violent ex-partner? As the newspapers reported clearly, she could lose £11.65 a week or move to a home with no secure space. How can the Minister justify this?

[Lord Freud]

We have a system with the spare room subsidy where there is support at a local level through discretionary housing payment, and this is exactly the kind of case where you would expect to see that payment made.

Introduction: Baroness Smith of Newnham

Debate between Lord Freud and Baroness Sherlock

Tuesday 21st October 2014 Lords Chamber

[Lord Freud]

Matthew Oakley was very concerned about the communications aspects of talking to claimants about sanctions. We have taken that point very seriously. Indeed, we have accepted his recommendations on that and are going further; we are reviewing and improving all our claimant communications on sanctions across every benefit, and we aim to ensure that people understand that they have received a sanction and why they have received it. We have introduced a claimant communications unit that tries to get the language right—because, as many noble Lords know, some of the language that the DWP put out in the past was clunky at best.

[Baroness Sherlock (Lab)]

My Lords, I wonder whether the Minister has taken the opportunity to read the evidence that was given to Matthew Oakley when he did this report. I accept that sanctions are a necessary part of the system, but it is quite clear that many people have been sanctioned who have done literally nothing wrong. Look at the evidence from the CAB of the man sanctioned twice for missing appointments with his Work Programme provider; in fact, he had been to all the appointments with a company to which it had subcontracted him, but he was sanctioned. Then there was the man who was sanctioned after being told to be in two different places at once and the woman who was sanctioned for being in hospital having treatment for cervical cancer, despite having given advance notice of her hospital appointment to the system before she went in. I could go on. There is a very real risk of claimants starting to believe that the Government are more concerned with cutting their benefits than getting them into work. Will the Government sort this?

[Lord Freud]

My Lords, it is clearly utterly important that the sanctions regime is fair to people. We have put in layer on layer of protections and safety nets in the machine. People have, to start with, five days to respond to the letter saying that we are looking at a sanction. Then it goes to a decision-maker and then, if claimants do not like that, to a mandatory reconsideration, which is an extra layer. Then you can go into the tribunal process, and we have hardship. We are putting many measures in to make sure that we run this system as fairly as we possibly can.

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Wednesday 30th July 2014 Lords Chamber

[Lord Freud]

One of the things that we are doing as we roll this out is to watch key factors very closely. That is the point of going at this pace, so that we can see small numbers to start with and see what is happening. I will watch this very closely. I talked to the Women’s Aid groups intensively on a number of things of great concern to them and to me, and I will keep watching this one very closely.

[Baroness Sherlock (Lab)]

My Lords, although I welcome the Minister’s commitment to transparency, I was reading this week about the DWP’s battle to stop the publication of the risk register and other documentation relating to universal credit. The Information Commissioner said that the other papers should come out, and a tribunal added the risk register, but the department has appealed. One journalist has pointed out that the judge said that he could see,

“no support for the argument”,

and that the department had not, “provided any persuasive evidence”. The department now wants to appeal again. I have two questions for the Minister. First, what exactly are the Government trying to keep from us? Secondly, how much public money have they spent in the attempt?

[Lord Freud]

This is a government policy; it was equally a matter for the previous Government as it is for this one not to publish particular information about the business case, risk registers and so on. It is something that we are maintaining not just for this programme but generally. I will say, however, that there has been an enormous amount of information put out on this programme, more than for any of our other programmes. There have been reports from the SSAC, from the NAO, from the PAC; it was in the MPA; and it was in our annual report. We are talking to the Select Committee and going through the contents and information within those business plans without breaking the norms of what Governments do in terms of providing a specific document.

Youth Employment

Debate between Lord Freud and Baroness Sherlock

Wednesday 30th July 2014 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what action they are taking to reduce levels of youth unemployment following the recent closure of the youth employment contract incentive scheme.

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

Tackling youth unemployment remains a priority for this Government, and our successful Youth Contract will continue. The wage incentive will end as planned next March, just three and a half weeks earlier than anticipated. The youth claimant count has fallen by 134,000—the largest annual fall since 1997—taking it to its lowest level since 2008.

[Baroness Sherlock (Lab)]

My Lords, I have asked repeatedly about the Youth Contract wage incentive scheme in this House, and the Minister has repeatedly assured us that all is well. On 20 March, in relation to youth unemployment, he talked about,

“just about the most comprehensive response that has ever been seen”.—[Official Report, 20/3/14; col. 280.]

On 5 February, of the Youth Contract, he said: “Our approach is working”. On 7 April, he said:

“Our approach continues to work”.—[Official Report, 7/4/14; col. 1129.]

On 17 June, we were back to “the most comprehensive response”, et cetera. Now we learn that the wage incentive scheme is being scrapped. Can the Minister tell the House, first, how many of the target 160,000 wage incentive payments have been made? The last note that I saw had a figure of 10,000. Secondly, when did he realise the scheme was not going to reach its target and why did he not tell the House sooner?

[Lord Freud]

My Lords, I am keen to reaffirm that the Youth Contract is both comprehensive and working. One element, the wage incentive, has now helped more than 65,000 youngsters into jobs. The other elements of the programme are performing powerfully: 148,000 youngsters have started work experience on the programme, and 46,000 have gone into sector-based work academies.

Housing: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Tuesday 22nd July 2014 Lords Chamber

[Lord Freud]

My Lords, the private sector had the LHA introduced, as my noble friend pointed out, by the previous Government. We had to take steps to constrain the spending on that. We have taken £2 billion out of that benefit for savings. The results of that also came out last week. The final report was dramatically less in its impact than the predictions that we had. Instead of landlords pulling out of the market, they have increased their supply by 7%. There has been very little evidence of displacement; a very marginal probability of moving home; and again we have had homelessness acceptances coming down. We are on the same trajectory with the spare room changes as with the LHA changes.

[Baroness Sherlock (Lab)]

I am starting to wonder whether the Minister and I have read the same report—

--- Later in debate ---

[Lord Freud]

My Lords, I have told the House on previous occasions that the difference here is that there is very little changeover or moving within this particular group, so there is no way in which one could introduce this kind of policy on that kind of basis. It therefore has to apply to stock. I remind noble Lords that the impact assessment for this measure envisaged moving or downsizing on the part of about 50,000 people. Nineteen thousand people have moved during the first eight months, which is on the trajectory of our expectations.

[Baroness Sherlock]

My Lords, the Minister has read the report. The House will be aware that he has previously reassured us not to worry about the hundreds of thousands of people affected because of all the things that they can do. This report shows that every one of those has failed: they are not taking in lodgers; they cannot move; they cannot find additional hours; and they cannot downsize because there are no properties out there. This week, Chambers put “bedroom tax” into its dictionary. Is it not time for the Government to accept that they have got it wrong and make that term archaic for ever?

[Lord Freud]

The report was an early look at the policy. As the research says, it provides a baseline. There is evidence of people looking for work—18% of those affected are looking to earn more in work and 50% of the unemployed are doing so. As I told the House last week, the number of people in workless households in social housing is dropping dramatically. People are moving, as I just said. Nineteen thousand people have moved in the early months of the policy, which is in line with our expectation of 50,000. It is clearly stated in the report that, over two years, one might expect to see 20%.

Poverty and Social Exclusion

Debate between Lord Freud and Baroness Sherlock

Thursday 17th July 2014 Lords Chamber

[Lord Freud]

It is clearly vital, as my noble friend says, to close the gap. There are lots of interesting statistics, particularly about what is happening in the London schools that are outperforming—although we do not know exactly how that has happened, and it is vital that we find out. It is the London Challenge, and there are quite a lot of analyses of exactly why that has come about.

[Baroness Sherlock (Lab)]

My Lords, the long-awaited interim report on the bedroom tax emerged this week. It slipped out at the height of the reshuffle without so much as a ministerial Statement, and it confirms what we knew—that only 4.5% of claimants have downsized, arrears have gone up, half of claimants have cut back on essentials such as food, and a quarter have gone into debt to avoid losing their home. I ask the Minister two questions. First, what assessment have the Government made of the effect of the bedroom tax on child poverty levels? Secondly, given the rather extensive briefing in today’s media that the Liberal Democrats are doing a U-turn on the bedroom tax, is it still government policy?

[Lord Freud]

Maybe I am not the best person to comment on Liberal Democrat manifesto planning. I can, however, assure the House that the removal of the spare room subsidy remains government policy—and I remind the House that this was coalition policy, which was decided in 2010 at the highest levels of government.

Benefit Cap

Debate between Lord Freud and Baroness Sherlock

Wednesday 2nd July 2014 Lords Chamber

[Lord Freud]

One of the things that we are doing is reforming the whole of the welfare system in order to find out the barriers to going to work that people have and helping to address them. In the particular case of the introduction of the benefit cap, we had an enormous initiative to work with those individuals through Jobcentre Plus. We wrote to them, talked to them and provided intensive employment support. We worked with local authorities to help them with budgeting, housing and childcare. In this particular case we worked hard, and that seems to be an effective set of interventions.

[Baroness Sherlock (Lab)]

My Lords, how much has been spent on discretionary housing payments to those affected by the benefit cap and what impact has that had on the planned savings from the policy? So, for 2013-14, how much was spent on discretionary payments, to what extent has that reduced the savings for central government and what impact has it had on local government?

[Lord Freud]

The department pays out a lump sum of discretionary housing payments that local authorities apply to the various policies that they are tackling. There is a specific amount, £110 million, that goes to this particular policy although actually, when you look at the analysis of how local authorities attribute the spend, it is rather less than the amount attributed to the benefit cap. The total AME savings set against that are £225 million. As I said, the importance of this policy is that it sends out a message about the direction of travel, which is that the way to get people out of poverty so that they have proper support is to get them into work.

Housing: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Tuesday 24th June 2014 Lords Chamber

[Lord Freud]

My Lords, for obvious reasons, I have not seen the report. It will be published but I am not aware of that kind of detail at this stage. Clearly once the report is out we can look at the issues that remain uncovered. There will be a full report, which will be published next year in 2015.

[Baroness Sherlock (Lab)]

My Lords, the Minister has often complained about councils underspending the discretionary funds that mitigate the effect of the bedroom tax. Did he see the report in Inside Housing last week which stated that £7 million of the extra £20 million allocated by the Government last July remains unallocated to councils by the Government? An FoI request showed that 27 councils did not get the money they asked for mostly because the department decided that this would allow them to buy out the effects of the bedroom tax. So people asked for money, were turned down because it would have the effect that was wanted, and then it is claimed that the underspend shows that they did not need any more money in the first place. How can the Minister explain that to the thousands of people affected by the bedroom tax?

[Lord Freud]

My Lords, some of my more sharp-eyed colleagues here will have seen the information we put out on the discretionary housing payments for last year. That showed that there was a £13 million underspend by 240 councils and that of the £20 million bidding fund, £7 million was not spent. The £20 million was not applied for in its entirety. However, we allocated that money on the basis of parity of requirement. There was an extensive process to make sure that we gave the appropriate amounts of money to those councils.

Personal Independence Payment

Debate between Lord Freud and Baroness Sherlock

Tuesday 24th June 2014 Lords Chamber

[Lord Freud]

My Lords, the Government remain committed to maintaining support for disabled people. We spend roughly £50 billion a year, every year, and that is held in real terms. That is a fifth higher than the EU average. The overall spend on incapacity benefits has remained roughly flat in real terms over the life of this Government, and indeed the benefits about which we are talking—PIP, DLA—have actually been going up in real terms over the past four years.

[Baroness Sherlock (Lab)]

My Lords, the Minister’s assurances would be rather more encouraging were it not for the fact that, as well as this shambles of the WCA and the 42-year backlog, employment and support allowance has been delayed and proved not to be succeeding; the Work Programme has a 94% failure rate; the bedroom tax is not meeting its objectives; and at current speeds, universal credit will take 1,052 years to roll out. Is the Minister proud of these achievements?

[Lord Freud]

My Lords, we are transforming the welfare system in this country. We are doing it across the piece. It is all very well for the Opposition to complain about the speed at which we do these programmes. These programmes are difficult to do. They were shied away from by the previous Government. I think that Peers all round the House will be pleased to see these transformational changes go in and transform the way in which this country operates at a fundamental level. There is a level of cynicism about what is always a difficulty: getting difficult, complicated programmes through exactly to timetable. People who know how difficult projects are know that process, but this is critical work for our country.

Housing: Discretionary Housing Payment

Debate between Lord Freud and Baroness Sherlock

Wednesday 9th April 2014 Lords Chamber

[Lord Freud]

My Lords, my noble friend draws attention to the point that we have introduced a cap on the amount of housing benefit to stop the very large amounts that were paid on local housing allowance.

[Baroness Sherlock (Lab)]

My Lords, 500,000 people are affected by the bedroom tax, most of them disabled. If the Minister wants some figures, two-thirds of tenants hit by the bedroom tax are currently in arrears and, of those, 40% have been issued with a notice seeking possession. This is a serious crisis, and I think that the Minister should acquaint himself with all the figures, including those on evictions.

The House knows that a Labour Government would abolish the bedroom tax. The Minister told the House on 12 December that,

“the interim review is due to be published in the spring of 2014. I will be most pleased to discuss the findings of that review with Members of the House, who I suspect will be keen to have that dialogue”.—[Official Report, 12/12/13; col. 907.]

I am very keen to have the dialogue. When does it start?

[Lord Freud]

The noble Baroness need not persuade me about the savings—she needs to persuade the OBR, which has scored down in the Budget £490 million. The noble Baroness talked about the fact that a Labour Government would abolish the spare room subsidy. We will produce an interim report later this year, as I said, and we will bring forward next year the full report on what has been happening with the bedroom tax, as you would call it.

Housing Benefit (Transitional Provisions) (Amendment) Regulations 2014

Debate between Lord Freud and Baroness Sherlock

Thursday 3rd April 2014 Lords Chamber

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

My Lords, I will not test the patience of the House by going over ground that we have covered many times in recent weeks and months. On the general nature of the policy, one issue that is worth my dealing with is the recent BBC estimate that 6% of those affected by the spare room subsidy, or 30,000 people, moved during the first 11 months of its operation. Noble Lords opposite may see this as a sign of failure, but we do not. It is an example of the behavioural response that this policy is successfully driving. We have seen further evidence of this again today in the announcement by Housing Partners Ltd that in the past year it has increased by a quarter the number of successful mutual exchanges for social tenants. Its experience also shows that there is a steady supply of smaller one and two-bedroom properties available, which is at odds with some of the claims made today from the Benches opposite.

There are another couple of points on our general position that I have not dealt with before. One, raised by the noble Baroness, Lady Sherlock, and amplified by the noble Lords, Lord Taylor and Lord Low, was about money-saving, so let me be precise on that. We know, and have stated in our impact assessment, that some people could downsize, some could move into the private rented sector and others could get discretionary housing payments. However, savings remain estimated at £500 million per annum and this did not change in the Budget, so the party opposite will not be able to argue—unless it can persuade the OBR—that this policy should be got rid of on the basis of cost because that is not what the OBR has calculated.

On the point about kinship carers, they will be treated as foster parents where they do not have a child placed with them or the child is not treated as occupying their home. However, where a carer is responsible for a child and the child is therefore treated as a member of the claimant’s household, they will be treated the same as other claimants under the size criteria.

I shall restrict my remaining comments to the Motion and the amendment to the regulations, explaining first what these regulations do. The instrument amends paragraph 4 of Schedule 3 to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006. These provide transitional protection for certain housing benefit claimants. The amendment removes the transitional protection from social sector tenants. This means that their housing benefit will be determined using Regulation 13 of the Housing Benefit Regulations 2006, which sets out the maximum rent in the social sector.

This transitional protection was provided for private sector tenants when local reference rent rules were introduced in 1996. These restricted the amount of housing benefit that could be awarded through private landlords charging high rents. Currently, fewer than 40,000 private sector claimants, mostly pensioners, are still covered by this protection. In answer to my noble friend Lord German’s question, it was never required by, or intended for, people living in social housing. Transitional support has already been provided for those affected by the removal of the spare room subsidy through discretionary housing payments. Unlike the loophole provision, this is available to those who claimed benefit after 1996.

Let me go through some of the specific issues raised about the loophole. My noble friend Lord German asked about numbers. The cost of the loophole will be so small that it will not impact on our forecast of housing benefit expenditure of £23.9 billion for the year. The claims that our estimates of the size are wrong are based on FoI figures that are at best speculative and at worst misleading. The claimants have 13 months to make their claims.

Regarding who will be expected to meet the costs—a question raised by the noble Baroness, Lady Nye, and my noble friend Lord German—these will be met by the DWP through the normal subsidy arrangements. At the moment, we have £2 million of additional administrative funding to distribute.

My noble friend asked whether those covered by the loophole who received discretionary housing payments would have to repay it. The answer is no; the award was made when there was a need and reimbursing the housing benefit would not change that.

Let me pick up the point on inheritance, which we dealt with at some length during that recent Urgent Question from the noble Baroness, Lady Sherlock. When a claimant dies, anyone living in a household who both takes over the tenancy and is awarded housing benefit within four weeks of the death can inherit the loophole protection. That was a process we already allowed for when we were looking at our costs. As my noble friend inquired, we are working on a major review of this for next year as well as an interim review, and I think I will stick with my “later this year” rather than “soon” at this point.

Turning now to what the Motion itself says, the noble Baroness’s Motion makes a series of unsubstantiated assertions. First, it states that the regulations cannot be amended without the precise number affected by the loophole being known. That simply is not true. It is not about numbers; it is a matter of principle. Parliament never intended that this transitional protection should apply to this group of claimants or to this policy. The regulations have been amended to restore that original policy intention.

Secondly, there is an accusation in the Motion of government confusion and mishandling. There is no confusion. As soon as the loophole was identified, we were clear that we would close it and that is exactly what we have done. Guidance was issued to local authorities. Arrangements were put in place to ensure that central Government met the costs of the loophole—both the benefit costs and the additional administrative costs.

The final claim in the Motion from the noble Baroness is that there is a disproportionate impact from the regulations on the most vulnerable. It is the loophole as it stood that was arbitrary and unfair. This transitional protection was never intended for this policy. As a result, it has protected a random group of claimants without a meaningful test or reason.

The removal of the spare room subsidy has now been operating for a year and it is working. The latest data show that the numbers facing a reduction in their housing benefit dropped by around 50,000 between May and November last year. Discretionary housing payments are funded and working: only £13 million of the £20 million reserve funding that we set aside has been allocated to local authorities. Revised DHP guidance was published yesterday, promoting longer-term awards where appropriate. The Court of Appeal has confirmed that the Government are meeting their human rights obligations and public sector equality duty. This year, we are saving about £490 million a year from the housing benefit bill.

In conclusion, the policy is working. The loophole has been closed. Arrangements are in place to support local authorities and those affected by the loophole. Finally, claimants have up to 13 months to make a claim that the loophole applied to them. For these reasons, this Motion should be withdrawn.

[Baroness Sherlock]

My Lords, I am in the unusual position of saying that I am not sure whether I agree with a single word that the Minister has just said. It was in fact the second most disappointing speech of the day.

The Minister has put forward three broad arguments. First, that it does not matter how many people are affected. But it matters to me, it matters to them and it matters to the local authorities, which have to deal with the mess that the Government have created.

Secondly, there is the question of savings. I noticed that the Minister failed to answer my question on what the net savings would be. Clearly, these savings are vanishing before us like a will o’ the wisp. The Minister also failed to explain how the savings remain the same, despite the Government having had to increase the money allocated for discretionary housing payments from £20 million to £190 million. The Government seem determined to ignore the costs and problems created for councils and other housing providers. If there is any doubt about that, let us remember that the National Audit Office said that the Government’s costings do not take account of,

“the full scale of potential impacts”,

and do not include the additional costs faced by local authorities. We have heard so much about those costs today from my noble friend Lord Beecham and the noble Lord, Lord Taylor.

There is then the question of overcrowding. As my noble friend Lady Hollis pointed out, this argument is frankly specious. There are not enough smaller homes to move into, a point underscored by my noble friend Lord Beecham, and where they are they are in the wrong places. They are not in the places where people are being asked to move. People have not moved because there is nowhere to move to. During the passage of the Welfare Reform Act, the noble Lord, Lord Best, and my noble friend Lady Hollis put an amendment to this House which said that the bedroom tax should not apply if someone could not be offered somewhere else to move to. The noble Lord, Lord Taylor, had the courage to vote for that amendment at the time and I commend him for his consistency. Other noble Lords did not and the government Benches voted it down. Let us not therefore pretend that what the Government are really worried about is overcrowded houses. They had every opportunity to correct that and they failed it.

We have heard so many powerful speeches today about the misery and desperation caused by this policy. If the noble Lord, Lord Freud, really believes that this policy is a success, I would hate to see what his failures look like. If he feels that he is getting the right behavioural effects, what are they? Are they in the family described by the noble Lord, Lord Touhig, who are not eating? Are they the families who are going without or giving up bedrooms needed by carers or disabled people? No: the handful of people who have moved are doing so out of desperation, not because they were responding to a behavioural stimulus.

I found the speech from the noble Lord, Lord German, very disappointing. I was delighted to read the reports of Tim Farron saying that the Liberal Democrats were going to withdraw their support for the bedroom tax.

Housing: Inherited Social Housing Tenancies

Debate between Lord Freud and Baroness Sherlock

Monday 24th March 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for that Answer—I think. Obviously, this House has not discussed the regulations concerned, although a regret Motion is coming up. I want to ask the Minister two questions, the first on numbers. He has told the House previously that the number of people affected by this loophole in the bedroom tax is small—the DWP says 3,000 to 5,000—but figures obtained under FOI by Labour show that, with more than a third of councils still to reply, already well over 23,000 people are likely to be affected. The new guidance, to which I think the Minister referred, may increase the number still further. Can he therefore tell the House precisely how many people will be affected by the loophole?

Secondly, I want to put to the noble Lord the following statement:

“I worry about what Labour chooses to call the bedroom tax, because so often what is a spare room is in fact a vital part of looking after an elderly person. It enables their relatives to come, it enables carers to be there … I think we introduced that rather without thinking it through very well, and I think that’s costing us”.

It is costing all of us, in discretionary housing payments, in rent arrears and in human misery. Surely the Minister agrees.

[Lord Freud]

My Lords, as I have said in this House previously, the numbers involved with this particular loophole are small. This particular inheritance issue does not change our estimates. A figure of around 5,000 has been attributed to the DWP in defining “small”.

On the FOI figures, it is worth making the point that local authorities are now getting to grips with the actual numbers. The Birmingham figures were quoted quite extensively. It was reported that Birmingham alone had 2,100 cases, the significance being that they make up a large proportion of the figure that we have been looking at. More recently, Birmingham put out a clarification, saying:

“We haven’t finished identifying them at Birmingham so can’t give you an exact number, but the number of possible cases has dropped substantially below the 2100 that was reported in the papers.”

So we can see that some of the FOI responses to which the noble Baroness referred—if that was an example—may be clarified.

We have a process for supporting local authorities and people to make the adjustments through discretionary housing payments, which we have increased in recent years from £20 million to £180 million in the current year—indeed, the signs are that that figure will be underspent. The number of people being affected is coming down reasonably rapidly; it is now below half a million.

Employment: Universal Jobmatch

Debate between Lord Freud and Baroness Sherlock

Wednesday 19th March 2014 Lords Chamber

[Lord Freud]

My Lords, we take security very seriously. One of the reasons that there is a difference between the standard Monster site and that run by the state is exactly to make sure that there is security in our site. We work closely with Monster on that. People have to be careful with their information on the site, as for anywhere else on the internet. We make sure that there is proper support for people and instruction on how to keep their information safe.

[Baroness Sherlock (Lab)]

My Lords, when I asked a Question on this subject last week, the Minister was very reassuring. He told the House that:

“Universal Jobmatch has revolutionised the service of Jobcentre Plus. It is a transformative service”.—[Official Report, 11/3/14; col. 1673.]

He added that, of 500,000 employers, only 179 had been looked at for breach of conditions. However, this week the Daily Mail reported that, at the beginning of March, 125,000 jobs—a fifth of the total—were taken off the site. The Guardian reported that, in fact, the department was going to scrap the site in 18 months because there were so many problems.

I invite the Minister to reconsider the answer he gave to me then. Did he know then that the Universal Jobmatch website had so many problems? If so, why was he so reassuring? If he did not know, why did he not know?

[Lord Freud]

My Lords, I am pleased to say that I do know and can reconfirm what I said last week; I can actually amplify it. We are currently investigating about 17 sites for potentially being in breach of our terms and conditions. That does not mean that they are fraudulent; it just means that they may have mistakes in them, they may be duplicates, they may be from job boards, or there may not be a contract with the end user. That is what we mean by being not in compliance with our terms and conditions.

Universal Jobmatch is a very successful system. We are working closely with Monster and the contract runs to 2016. To the extent that there may be some misunderstanding and misrepresentation, the phrase “extend a contract” has a precise meaning: that you run a contract to a certain point, and do not go on extending but renew. We have a policy to work closely with Monster right up to 2016.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2014

Debate between Lord Freud and Baroness Sherlock

Monday 17th March 2014 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for his explanation of these regulations, and I thank all noble Lords for their contributions. Like the noble Lord, Lord Wigley, I recognise that there is no statutory obligation to uprate these amounts, and therefore I, too, welcome the Government’s decision to uprate the pneumoconiosis and mesothelioma lump sum payments under the 1979 and 2008 schemes.

A number of the questions that I wanted to raise have been asked, but I want to return to one point, which was raised by the noble Lord, Lord Alton, and my noble friend Lord McKenzie, about the difference between payments made to applicants in life and those made to dependants under both schemes. The noble Lord, Lord Alton, explained the three points of difference between the two. As he reminded us, in 2010 my noble friend Lord McKenzie reduced the differential in lump sum payments between in-life claimants and claims from dependants, but there has been no further narrowing of the gap between the two. When regulations equivalent to those here today were before the Grand Committee on 7 March last year—with a very similar cast, I notice from Hansard—representations on this very point were made by the noble Lord, Lord Wigley, and the noble Lord, Lord Avebury, who is not in his place. In his reply on that occasion, the noble Earl, Lord Howe, to whom it fell to respond, said:

“Ministers have to balance competing priorities, and because of the current financial situation, it is our duty to ensure that all available resources are well targeted. As around 85% of payments made under these schemes are paid to those who are suffering from the disease, I believe that they are currently rightly targeted on the sufferer to help them and their families to cope while living with the stress that illness inevitably brings”.—[Official Report, 7/3/13; col. GC 314.]

I remind the Committee of the point that the Minister made in his opening remarks, which is, in fact, that people live for a very short time knowing that they have the disease. If people on average live only nine to 12 months after diagnosis, I wonder whether the Minister still feels that that argument for focusing resources holds water.

When the regulations were debated in another place on 7 March last year, the then Minister, Mr Mark Hoban, acknowledged the discrepancy and said:

“It is something that we need to keep under review, and if the resources are available, we will see whether we can introduce measures to do that. The point about the difference between payments made to a sufferer and to their dependants is well made”.—[Official Report, Commons, Delegated Legislation Committee, 7/3/13; col. 9.]

I have three questions for the Minister. First, will he tell the Grand Committee whether the Government have indeed kept this issue under review and, if so, what conclusions they have drawn? Secondly, will he tell the Committee what percentage of payments is currently made to dependants rather than sufferers? Finally, what estimate has the department made of the cost of narrowing further or, indeed, eliminating the differential between the two? I look forward to the Minister’s reply.

[Lord Freud]

My Lords, as ever, noble Lords have asked a set of sizzling questions, which I shall do my best to address, although they are getting so technical now, because we have gone round this subject so many times, that I think that I shall end up writing quite a bit of it out, if noble Lords will excuse me for doing so.

On the question from the noble Lord, Lord Wigley, on the breakdown of the figures for the latest year, 2012-13, there is a total of 3,180 cases due to the 1979 Act. That represents the bulk of the expenditure, at £43.6 million. The 2008 scheme figures are 500 cases and £9.6 million of expenditure. I think that we have the breakdown figures that the noble Lord requested from 2002-03 onwards, but not to hand; I shall need to write with them. I did not anticipate that particular run of figures. I think that that will tie up with the recovery figures for the noble Lord, Lord McKenzie, and how they relate to the 2008 figures. I think that I will tie that up—I shall aim to do some tables.

On the split between sufferers and dependants, again, I shall use the latest year. Under the 1979 Act, of the total the bulk were the sufferers—2,900 out of the total—and 280 were the dependants. With the 2008 scheme, 450 were sufferers and 50 were dependants. That testifies to the speed with which the money gets out, given the sad mortality expectation that we were discussing. I am in no position today to move much further on making any progress in closing that gap between dependants and sufferers, but it is something that we keep under review. Clearly, we have been looking very closely at this whole area over the past year, and we will keep it under review. That is the best that I can do, speaking today.

I hope that I have covered everything, except for the HSE questions, with the awareness-raising scheme. I will write on the actual cost of what it would be to close that differential on the figures that I have just provided, which will give a baseline on what we are keeping under review. I shall also need to write on the detail of the HSE awareness-raising campaign. I feel somewhat embarrassed that I have resorted quite so much to the written word. If there is anything else at all, I shall include that in the letter. These are two important schemes. I commend the uprating of the payment scales and ask approval to implement them.

Diffuse Mesothelioma Payment Scheme Regulations 2014

Debate between Lord Freud and Baroness Sherlock

Monday 17th March 2014 Grand Committee

[Lord Freud]

Noble Lords could go on about this, but I cannot.

On the other point made by the noble Lord, Lord James, about the crossover between the schemes supporting the Royal British Legion, I am not aware of the issue he raises, but I shall look into it for him.

On the point made by the noble Lord, Lord McKenzie, on the oversight committee, we are not legislating for that, but we have discussed the matter with the AVSG, the TUC, insurers, personal injury lawyers and accident insurance lawyers. We are agreeing with those groups how the committee could operate. We intend that it will look at various aspects of the running of the scheme, particularly in the early period. We envisage it considering complaints against the scheme, redacted claims and decisions. It will then send a report to the Secretary of State, who will include the issues raised by the committee in his published annual report. It will be quite transparent.

On the point made by the noble Lord, Lord McKenzie, about HMRC, we continue to work with other departments to seek a resolution to this issue. Regrettably, that is still ongoing work. We have encouraged the ABI to continue to engage with the MoJ as they look to improve the process for mesothelioma cases in regard to the portal.

In response to the question asked by the noble Baroness, Lady Sherlock, the reason we can increase the payments to 80% is because the scheme administrators have now been selected and the costs have been finalised. Those costs fall well below projected costs, and this allows us to increase the payments while keeping the levy the same.

In the November impact assessment the net benefit to lawyers was expected to be £2.69 million over 10 years. That has reduced to £1.6 million. The reason for this difference is that the original scheme administration costs used in all previous versions of the impact assessment assumed that some legal administration costs would benefit lawyers working on the scheme. These costs were estimated to be £23 million from successful cases, £1.7 million from unsuccessful cases and £1.2 million from ad hoc legal administration costs. Due to further understanding of the way in which the scheme will be administered, it is now recognised that these legal administration costs are not necessary, meaning that overall it is expected that lawyers will benefit by less. I can confirm that applicants will still receive the difference between the £7,000 and the legal costs, if there is a positive difference.

[Baroness Sherlock]

Before the noble Lord leaves that point, can he confirm that the figure that was previously £24.2 million has now either disappeared or is in single figures and that there will be no other loss or additional costs for the applicant as a result of those costs being taken out of the scheme altogether?

[Lord Freud]

Yes, I can confirm that. In the tendering process resulting in the appointment of Gallagher Bassett, the company was required to demonstrate that it had sufficient resources to process the expected volume of claims. We have reviewed its tender to ensure that it is accurate and realistic and have satisfied ourselves that it can deliver as part of our due diligence. The administrators will be employees of the scheme administrator. If the person with mesothelioma dies before an application can be made, their dependant can make the application. If the person dies after making an application but before a payment is made, the payment is made to their personal representative.

--- Later in debate ---

[Baroness Sherlock]

I thank the Minister for clarifying that point. I was talking about people who have died who do not have dependants. It seems that the Minister was saying that the personal representative can receive a payment even in the circumstances that I have described: when people were diagnosed on or after 25 July 2012 but had not made an application because the process was not available to them.

[Lord Freud]

They cannot make one in that period.

[Baroness Sherlock]

Can the Minister please explain why? These are people who the scheme is explicitly designed to cover. They simply had the misfortune to die before the Government had been able to put the scheme in place and give them an application form to fill in. Why should they be excluded?

[Lord Freud]

I think it is because they do not have dependants. However, I will write to justify what that difference is and why we have designed the scheme in that way. Our estimate is that the 80% payment will be within the 3%, but that is clearly based on our figures. As to the final question on the setup and running costs of the scheme, I cannot go into too much detail for reasons of commercial confidentiality. I will write carefully and provide as much information as I safely can.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 12th March 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I am pleased to support Amendment 1 which is tabled in the name of my noble friend Lord McKenzie of Luton. My noble friend has been like a terrier chasing the Minister on the subject of passported benefits and payments. The Minister may have thought he had shaken him off as he left the Moses Room at the end of the Committee stage, but I am sure he knew better. Indeed, it is to the Minister’s credit that he was content to return to this subject at Third Reading, knowing that he would face the onslaught of yet more gentle but expert and determined questioning from my noble friend Lord McKenzie.

I express my appreciation to the Minister for allowing his officials to brief us and to his officials for giving us for the first time a detailed list of all the benefits that are being passported from pension credit. However, that left some clear question marks about the future strategy for passported benefits. If the Minister is in a position to tell us where the Government’s forward plans are taking them, not just on these two, but on any of the other benefits that are not clearly passported from pension credit, I think the House would appreciate that.

My noble friend has set out the case characteristically clearly, and I need add little to it, but the House and the country will want to hear the Minister answer the questions asked by the noble Lord, Lord German. We want to be satisfied that people will not lose out and that there is an alternative plan for arrangements to replace the passporting of cold weather payments and access to the warm home discount scheme.

The point made by my noble friend Lord McKenzie about the role of rising energy prices in the cost of living crisis is visible to all noble Lords at the moment. This is a particular issue in relation to these two benefits in parts of the country that obviously suffer from lower temperatures. I should perhaps declare an interest as a resident of Durham where, despite the fact that we have a world heritage site and much to commend us, with lower rainfall on average, even I have to confess that our temperatures are on average perhaps a whisker below those on the tropical Riviera of Cornwall. On the other hand, this will not affect me until I reach state pension age and that is receding ahead of me at some rate, so perhaps no declaration of interest is needed.

The Government have indicated that they propose to introduce the new single-tier pension above the current level of the guarantee credit in pension credit. But it is clear that that could come in at just a shade above. If Ministers want to carry on asserting that reducing means-testing is an important part of these pension reforms, then they have to have a strategy on passporting—otherwise they will end up with the kind of cliff-edges which anyone who worries about means-testing will know can really be a trap for the unwary.

Maybe the Government have had the opportunity since Report stage to think through how this will be taken forward and can give the House the kind of assurances that have been sought by both noble Lords who have spoken. If they have not, which I will understand, I very much hope that the Minister can accept the amendment. Parliament has a right to know what will happen to these payments, and by the time we get regulations it will be too late. I look forward to the Minister’s reply.

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

My Lords, I am glad to have the opportunity to discuss the amendment, which the noble Lord, Lord McKenzie, was understandably unable to move on Report. I hope that I will be able to offer him some reassurance about the current arrangements and the further work that we are planning.

As noble Lords will be aware, pension credit acts as a passport to a number of other benefits, most of which are linked to an individual being in receipt of the guarantee credit element. That element will continue to be available for the poorest, whether they reach state pension age before or after the introduction of the single-tier pension, and will continue to act as a passport to cold weather payments.

I also remind noble Lords that the single-tier pension itself promotes savings, removing the need for savings credit. The full single tier will be set above the level of the basic means test, removing the current problem whereby the state pension has not kept pace with the means test and therefore the need for a complex reward system. Together with other reforms to the pension system over time, the poorest pensioners are also the most likely to have higher incomes than they would have done if the current system had been rolled forward.

While I understand concerns about knock-on effects for vulnerable pensioners, there is actually relatively little in the pensioner welfare system that depends entirely on receipt of pension credit. For example, housing benefit and council tax reductions can already be claimed on low-income grounds, regardless of receipt of pension credit, and this will continue. Other benefits such as free television licences and travel concessions can be claimed on the grounds of age. The only significant benefits that are truly passported from pension credit are cold weather payments and the warm home discount scheme.

Cold weather payments, as noble Lords are of course aware, provide help with the additional costs of heating during periods of severe weather. The scheme runs from 1 November to 31 March each winter. A payment of £25 is made to someone when the average temperature has been recorded as, or is forecast to be, zero degrees or below over seven consecutive days at the weather station linked to their postcode. In some winters there are relatively few triggers, in some years there are many triggers; in fact, there have been very few indeed this year.

Cold weather payments are made to people who receive certain income-related benefits and satisfy the eligibility conditions set out in the Social Fund Cold Weather Payments (General) Regulations 1988. All those who receive pension credit are eligible, whether they receive the guarantee credit or the savings credit element, or both.

The noble Lord, Lord McKenzie, asked about universal credit. Those eligible for cold weather payments are those who are not employed or self-employed and they or their partner receive either a limited capability for work element or a limited capability for work element with a work-related activity element, or who receive a disabled child element within their assessment, or who have a child under the age of five years in the family. Universal credit recipients who are employed or self-employed will be eligible for cold weather payments only if they have a disabled child in the family.

Our predicted expenditure on cold weather payments is based on the average number of payments over the past 10 years. On that basis, while we cannot predict the actual impacts, we might expect around £2 million to have been spent in 2020 on cold weather payments for people who would have received pension credit under the current system, but who would not under the single -tier system. That is based on our calculation of 20,000 single-tier pensioners being raised above the standard minimum guarantee, and 60,000 who would have been entitled to a savings credit under the pre-single tier system.

That expenditure is of course by no means certain, which is why we have not assumed any savings from cold weather payments as a result of the Bill. However, we are not complacent about that issue and that group of people. That is why we are already considering ways in which it might be possible to identify, for cold weather payment purposes, single-tier pensioners whose income will be above but close to the level of the standard minimum guarantee.

In response to the question from my noble friend Lord German, I can reassure the House that it is not our intention to reduce eligibility.

The noble Lord, Lord McKenzie, also asked about the warm home discount scheme. That is a rebate on electricity bills for pensioners aged 75 or over who receive the guarantee credit in pension credit, and for pensioners under 75 who receive the guarantee credit without a savings credit. From 2014-15 it will be extended to all pensioners receiving the guarantee credit. Rebates may also be available for a broader group including those in receipt of the savings credit as well as certain other groups below pension age, but those broader group rebates are subject to a cash limit and to the policies of individual suppliers, as agreed with Ofgem. We have committed to extending the warm home discount scheme into 2015-16, but we have not made plans for 2016-17 and beyond.

On the question asked by the noble Lord about discussions with electricity suppliers, that will be part of the consultation in the spring on extending support for the core group. Access to cold weather payments and the future of the warm home discount scheme are part of a broader set of issues around targeting spending to combat fuel poverty among older people. As I said, we will consult later in the spring on a new fuel poverty strategy, which will include the question of reducing fuel costs for those pensioners in the second income quintile, which is where savings credit recipients are clustered.

For single-tier cohorts, it will not be possible to identify exactly which household might have been entitled to a savings credit without retaining the savings credit assessment itself. We are assessing the cost and capacity issues of doing that, as well as the trade-off for intrusion into pensioner households. However, the department’s initial assessment is that there are likely to be better and more cost-effective ways of reducing fuel costs for that group, especially by using recently developed datasets that allow us to identify poorly insulated homes and the characteristics of the households living there, with a view to making infrastructural as well as cash interventions.

I can reassure noble Lords that cold weather payments and the warm home discount scheme are an important part of our fuel poverty strategy, and major components of our work to improve the well-being of older people. However, that is a separate issue from promoting savings through pension reform, and we are not wedded to particular ways of meshing the two together.

On the question put by the noble Baroness, Lady Sherlock, on our passporting strategy, we will continue to use a mixture of age, low-income and passporting from means-tested benefits to target different benefits and services to different groups. I understand the concerns raised by the noble Lord, Lord McKenzie, and I hope that I have been able to provide him with reassurances.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I remind the House of my registered interest as a non-executive director of the Financial Ombudsman Service.

I thank the Minister for explaining his amendments and all noble Lords who have contributed to this debate for their insights. On Report the Government were understandably worried by the alliance building up between the noble Lord, Lord Lawson, and my noble friend Lord Browne, who regrets that he is unable to be here as a result of the date of Third Reading being moved. In order to head off a possible defeat, the Minister made a speech offering strong reassurances. It is against those reassurances that the House should judge the amendments that the Government have brought forward today. Let us remind ourselves what those reassurances were.

The Government were keen to assure the House that whatever their amendment said, their intention was that all costs would be covered by their proposals. On 26 February, the noble Lord, Lord Freud, told the House:

“We are looking for transparency on all charges. We are looking to ensure that that is published”.

He reinforced that point today. I think that I heard him say that there will be full transparency on all costs and charges.

My noble friend Lord Browne then intervened on Report to seek clarification on how transparency would be handled in relation to transaction costs, since it seemed that the Government were proposing to exempt areas where there were existing FCA rules in relation to transparency. The existing FCA rules on transparency exempt transaction costs, he noted, so how would the transaction costs in such cases be dealt with? The Minister replied:

“I am putting it on the record that we will aim to capture all costs, including all transaction costs”.

A little later, he went on to say:

“It is not to do with the EU”.—[Official Report, 26/2/14; cols. 967-68.]

What could be clearer? However, the current government amendments give the Secretary of State the responsibility for regulating disclosure of charges only for occupational schemes, leaving it to the FCA to do so for money purchase schemes.

Therefore, the first and most obvious question to the Minister, touched on by my noble friend Lady Drake, is: why is the Secretary of State divesting himself of the power to set the requirements for securing transparency of transaction costs in relation to money purchase personal pension schemes by giving the responsibility for the requirements on disclosure of information to the FCA?

Secondly, Amendment 3 has the effect of explicitly excluding defined benefit schemes from the regulations on the publication of costs and charges, and the Minister gave some indication of the Government’s thinking on that. However, I was very pleased that the noble Lord, Lord Lawson, raised the questions that he did, supported by my noble friend Lady Drake, because this is indeed not a victimless area. Not only are there costs to the companies that are the employers but there are potential risks to the sustainability of the pension schemes if employers find themselves carrying unreasonable and unnecessary levels of cost. It must be remembered that there are employers who may be well equipped to understand and challenge the nature of the charging structure but there are many others who are not, and they deserve protection as well. Perhaps the Government could explain some more about that. In particular, can the Minister tell the House what the timescale will be for this consultation and, if the Government decide to bring forward regulations, when the House may expect to hear more about that?

My noble friend Lady Drake then raised a series of important questions regarding what this dual regulatory regime will mean in practice, given that the FCA currently does not require transaction costs to be published for DC pensions. Amendment 4 makes it clear that the FCA must consult the Treasury and the Secretary of State before making rules about the disclosure of costs. The supplementary memorandum from the DWP to the Delegated Powers and Regulatory Reform Committee on the Bill reminds us that Section 138(1) of the Financial Services and Markets Act 2000, known as FiSMA, requires the FCA also to consult the Prudential Regulation Authority before making rules and then to publish those rules in draft, to seek representations and not to make rules without having regard to those representations.

Therefore, the Minister is left with the crucial question from my noble friend Lady Drake as to the extent to which the PRA’s concern for the sustainability of financial services companies may constrain the Government’s apparent desire for the FCA to make rules to ensure disclosure of all transaction costs, as again promised by the Minister today. What happens if the Secretary of State believes that the decisions that the FCA takes in this respect are not properly aligned with his or her own decisions on transparency in relation to occupational schemes? As my noble friend asked: what happens then?

Finally, there is the interesting question of the role of the EU. The Minister has said clearly that this is not a matter for the EU but my noble friend has sought clarification. I certainly understand that the publication of transaction costs with respect to retail products is covered by EU rules but that the publication of transaction costs with respect to workplace pensions is not, and I look forward to the Minister confirming that. However, one hears that EU rules may or may not lead to increased transparency of all transaction costs some time after 2016. I should like to test the Minister. Does he think that it would be acceptable if the FCA decided not to do anything about transaction costs but simply to await the decision of the EU? One assumes not, as not only would that not seem to chime with the Government’s general rhetoric about ceding powers to Europe but it is hard to see that the Minister’s words to the House on Report would imply that level of uncertainty, since he made it clear that it was nothing to do with the EU.

In the end, it is up to this House to decide whether it believes that the government amendments brought forward today have the ability to honour the cheque that they wrote to the noble Lord, Lord Lawson, on Report. The Opposition are not, as yet, persuaded. However, it is for the Minister to tell the House how precisely he can guarantee to deliver on the assurance that the Government will capture all costs and charges and, crucially, by what date that will happen.

Finally, and even more importantly, there remains the unresolved issue of a cap on charges. In his extremely impressive speech when we debated these matters on Report, the noble Lord, Lord Turner, put the matter succinctly when he said:

“I do not think that transparency is an alternative to a charge cap”.—[Official Report, 26/2/14; col. 966.]

Nor do I. If the Government really have the interests of consumers at heart, they will take much stronger action right now.

[Lord Freud]

My Lords, let me start by dealing with the question raised by the noble Baronesses, Lady Drake and Lady Sherlock, on the way in which the regulation works between two groups. The Pensions Regulator and the FCA work closely together to ensure that the regulatory frameworks for trust-based pensions under the regulator and contract-based pensions under the FCA are aligned and provide for a robust system of governance and fair treatment for members. The Government are not looking to change the current regulatory structure, as was confirmed in the DWP’s Triennial Review of Pensions Bodies, which was published in December 2013. Structuring the duties in this way is necessary to reflect the dual regulation structure and the fact that the FCA is an independent body in statute. Without this approach, there would be no duty on the FCA to make these rules.

In addition to their existing duties to consult, the amendments mean that both the Secretary of State and the FCA will be under statutory duties to consult one another in making regulations and rules, enabling us as far as possible to ensure consistency of approach with the rules following the regulations. There is absolute commitment from the Government and from the FCA to aim for consistency. The FCA would not propose to deviate from government regulations. The aim of a separate duty is not to provide room for inconsistency—far from it; it is about giving the FCA the flexibility that it needs to use its powers and expertise to respond as an independent regulator.

The noble Baroness, Lady Drake, raised a question on hybrid schemes. The regulations will be able to extend the disclosure rules to the DC element of hybrid schemes. The duty is in addition to the existing power in Section 113 of the Pension Schemes Act 1993.

The noble Baroness also raised a question on the relative position of the PRA—the prudential regulator—and the FCA. The FCA, as per its rules, will be consulting on the development of disclosure and requirements and will work closely with both Her Majesty’s Treasury and the PRA. Treasury Ministers are committed to strong disclosure of member-borne costs and believe that the FCA is best placed to make those rules.

On the question of the SORP code, raised by the noble Baroness, Lady Drake, the Government recognise industry initiatives to improve transparency of pension costs and charges, but as the OFT noted, such measures are voluntary and can be piecemeal. That is why the Government believe that transparency measures should be compulsory and standardised.

--- Later in debate ---

[Lord Freud]

My Lords, I have not carried out a detailed analysis of the SORP code. I can assure the noble Baroness that, under the regulations and rules that we will now develop, we will capture all costs. To the extent that those are not in the SORP code, that would be a wider requirement.

On what will happen if the FCA rules are not found to be adequate, the Secretary of State retains the power in Section 113 of the Pension Schemes Act 1993 to make regulations about both occupational and personal pension schemes disclosure.

On the timescale issue raised by the noble Baroness, Lady Sherlock, assuming that this Bill receives Royal Assent, I believe that regulations will be brought forward later this year. The Government will consult on these regulations before they are laid. The Government’s proposals on charges, transparency and governance will be published soon. I have not changed the position on that after our rather enjoyable debate on the matter on Report.

[Baroness Sherlock]

Is the Minister saying that the Government propose to consult on whether DB schemes should be included and then publish a single set of regulations, or will they go ahead on the basis he has outlined and subsequently consult on DB?

[Lord Freud]

The DB element will be part of the consultation. Depending on that consultation, we will have to decide how to treat that particular aspect.

On the questions around the EU, clearly right now we are free to write these regulations and rules and there are no EU rules to hinder that. However, that might change in the future. One of the attractions of pulling the FCA into this process is that it has technical expertise in this area and is the body negotiating in Europe on relevant EU legislation. It is therefore best placed to work with DWP on determining how costs and charges can be defined, captured, measured and disclosed. By using its own rule-making power, the FCA may be able to respond quicker than the parliamentary process to changes in the market or from the EU.

I think I have dealt with all the issues.

--- Later in debate ---

[Lord Freud]

My Lords, on Report I regrettably said that we had completed the legislation required to cover the change to the Pension Protection Fund compensation cap. Clearly, that was tempting fate because we have noticed that the wording in a particular place is not as clear as it could be, and this amendment addresses that. We made an amendment on Report to the PPF compensation cap measures setting out how the length of pensionable service should be determined for an individual who was a member of connected schemes; that is, for someone who was a member of a multi-employer scheme and who had worked for two or more of the companies attached to that scheme. That amendment allowed for the discrete periods of pensionable service to be added together. Crucially, if the person had worked for two employers at the same time—that is, the periods of employment overlapped—the amendment sought to prevent the overlapping period from being counted twice. Unfortunately, the wording of the amendment could be read as meaning that the period of overlap should not be counted at all. This would clearly not be right. This amendment therefore clarifies the wording to ensure it cannot be read in that manner. As a result, overlapping periods of employment will be counted correctly—in other words, once.

This is the final amendment to which I will speak and so before I sit down, I would like to take a moment to thank all those who have worked so hard on this Bill. Many colleagues across the House have contributed their time and substantial expertise to understanding and improving these landmark reforms. In particular, I am delighted that the Bill now contains measures that will help improve the retirement income of the spouses of service personnel. Preparing a Bill and supporting its passage through both Houses is a significant undertaking. This Bill contains a wide range of measures relating to state pensions, private pensions and bereavement benefits, and so has involved a large number of different policy teams. I estimate that close to 200 policy officials, analysts and lawyers have been involved. Many of them have been directly involved in attending briefing meetings or providing materials that have contributed to the excellent level of debate we have seen.

It has been especially gratifying to hear so many noble Lords mention the assistance of DWP officials in their speeches both in this Chamber and during Committee stage. It is a fitting tribute that their work is recognised in this way. I am grateful to them and to the excellent draftsmen in the Office of the Parliamentary Counsel who have worked so hard on this Bill. The Bill team deserves a special mention and so I would like to take this opportunity to thank Rez Mossavat, Jo Foakes, Megan Rooney, Helen Kelly and the Bill manager, Michael Cordy, for all their work and support. With that, I beg to move.

[Baroness Sherlock]

My Lords, I congratulate the Minister on having spotted the error before Royal Assent and the Opposition have no problem with the amendment.

I, too, would like to take this opportunity to say a few words of thanks to my colleagues for all their wisdom and support. I thank especially my noble friend Lord Browne of Ladyton for doing so much work on this Bill and for being such a constant source of support. I would also very much like to thank the Minister for the way he has handled the Bill—for his openness and his willingness to engage with appeals from all parties and to share the information and knowledge of his department. I thank the noble Lord, Lord Bates, for adopting a similar style and for his engagement. I thank the officials, too, for their helpfulness and their willingness to answer so many questions—in my case, often very stupid ones, which they have answered with graciousness and lots of information. We have all very much appreciated that.

The Bill has benefited from scrutiny in this House and leaves this place a better Bill than when it arrived, as is so often the case. It is the first Bill I have taken all the way through from the Front Bench and I have learnt a great deal from noble Lords on all sides. I have been grateful for the kindness and indulgence of the House as I have learnt on the job—a sort of apprenticeship, as one might have it. As the Minister said, the Bill has now benefited not only from the one victory that the House scored on mini-jobs—we hope very much that the other end will see the wisdom of that but, if not, we stand by our beds awaiting its return should that prove necessary—but from concessions around things such as service wives, auto-enrolment and categories of employer, and in other ways as we have gone through it. I pass my thanks to all noble Lords who have contributed at any point in the process. We all share a common objective of getting people in Britain saving for their retirement and I hope this Bill will help contribute to that objective.

Employment: Universal Jobmatch

Debate between Lord Freud and Baroness Sherlock

Tuesday 11th March 2014 Lords Chamber

[Baroness Sherlock]

To ask Her Majesty’s Government what steps they are taking to ensure that all vacancies advertised on Universal Jobmatch are genuine.

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

The vast majority of employers post genuine jobs, and we do not hesitate to take action against those who do not follow our rules. We regularly monitor Universal Jobmatch to ensure that accounts comply, including that vacancies are genuine. If there is any cause for doubt, we will remove the vacancies until we have investigated. We continuously improve the service and are working with the provider to enhance our validation of employer accounts and vacancies.

[Baroness Sherlock (Lab)]

I thank the Minister for that very reassuring Answer. How does he then explain the fact that the media are reporting that a third of a million jobs on that website are ghost jobs? The Government were warned. The site has been found to be vulnerable to hackers. In the National Online Recruitment Awards, it won the wooden spoon for being a,

“mongrel of a recruitment website”,

that,

“commits almost every online recruitment crime, and then some”.

Channel 4 investigated last month. It found that one in 50 jobs had been placed by one man in Coventry. He could not prove that they existed, but it turned out that he made money every time he passed on a CV to a real agency. Channel 4 found out that, of the 600,000 jobs there, 118,000 were from one door-to-door catalogue company. This is a disgrace. You could not make it up. Will the Minister tell the House two things: first, when did the Government first know that there were problems with ghost jobs on this site; secondly, can he assure the House that no jobseeker has been sanctioned for refusing to apply for a ghost job or a job which they feared was there just to harvest their personal details?

[Lord Freud]

My Lords, Universal Jobmatch has revolutionised the service of Jobcentre Plus. It is a transformative service. We have many people registered on it on a paperless basis. Half a million employers are on that service. As I said, we monitor it the whole time. We are now looking at 179 employers who may be in breach of our conditions and will suspend them if they prove in breach. I can assure noble Lords that no jobseeker will be sanctioned for not applying for a job that does not exist.

Welfare: Cost of Family Breakdown

Debate between Lord Freud and Baroness Sherlock

Tuesday 4th March 2014 Lords Chamber

[Lord Freud]

We are running two immediate programmes. The first is to provide help and support for separated families, running in SR10 at £14 million, £10 million of which is spent on an innovation fund that tests various interventions, involving 17 different voluntary and private groups. The other aspect is the relationship support interventions, on which we are spending £30 million. There are three main areas—something called Let’s Stick Together, marriage preparation and couples counselling.

[Baroness Sherlock (Lab)]

I would like to return to the answer that the Minister gave my noble friend Lady Lister. If the Minister does not know why people go to food banks, I commend to him the “Panorama” programme shown on television last night about food banks. Among other people, they interviewed a mother who described the fact that her benefits had been wrongly sanctioned for three months and that they had so little to eat that her milk dried up while breastfeeding.

I have two questions for the Minister. First what is the current success rate of appeals against sanctions on benefits? Secondly, what does he make of the pictures shown in the “Panorama” programme last night of the jobcentre that put up charts to show its staff how much money could be saved to the department by sanctioning people for a range of times?

[Lord Freud]

I must emphasise to noble Lords that we absolutely do not have targets for sanctioning. We have looked into this matter, and we do not have them—we do not run them. When there are exceptions, we stop it. That is not the purpose of sanctions; the purpose of sanctions is to run a system in which we provide some £85 billion to people who need it. It is our safety net to make sure that we give that properly and that people comply with the conditions required to receive that money.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 26th February 2014 Lords Chamber

[Lord Freud]

I can confirm my noble friend’s question—or I can give the answer to confirm it.

At this point in time, when we are just starting out with automatic enrolment and successfully getting people saving for the first time, we need to make it as easy as possible for them to build their pension. We need to use inertia in the right way. That means moving a small pension pot to the current live pot where the individual can see it growing, rather than sending it off to a scheme with which the individual has no engagement and in which they have no interest.

Now is not the time to break the link between the individual and his or her employer. Automatic enrolment is going well, with 3 million individuals newly saving and less than 10% opting out. It is reinforcing the workplace pension as a key element of the benefit package that employers offer their staff after decades of decline in occupational pensions.

I have heard the argument that these amendments are designed to give the Government another option, which appears on the surface to be a generous approach. Providing the Government with greater flexibility is one thing, but listening to the debate today, I suspect that few on the Opposition Benches want the Government to have the flexibility to chose anything but the aggregator model.

In practice, the amendments will leave us in limbo and bring back uncertainty at a time when industry is beginning to get behind, and position itself to deliver, pot follows member. As my honourable friend in the other place announced on Monday, officials are currently exploring the feasibility of using HMRC’s PAYE data and system to help us to deliver a secure, efficient and straightforward pot-matching element to implement the process.

In response to the assertion of the noble Baroness, Lady Sherlock, that pot follows member would be hard to set up, we have recently had some very positive workshops with industry representatives and HMRC. The model is already inspiring some exciting and innovative approaches to transferring money with an employee as they move jobs. The cost of the transfer was specifically mentioned by the noble Baroness, Lady Drake. It will be the same for an aggregator as for pot follows member. Altus has challenged the claim that pension transfers are too hard and too expensive by stating that transfers for ISAs and funds cost £1 or less, and that this can be replicated for pension transfers.

After two years of discussion and debate on this issue, even if we cannot agree with the Opposition on the right delivery model, I hope that we can agree that we need to take a positive step forward. On the “pause to reflect” point made by the noble Lord, Lord Hutton, I do not believe that we are rushing into this measure. We first consulted more than two years ago and followed up with two policy papers. We also held extensive discussions with industry and consumer groups within that period. I urge the noble Lords to withdraw their amendment to allow us to work together, and work with industry, to make automatic transfers a reality.

[Baroness Sherlock]

My Lords, I thank all noble Lords who have contributed to what has been another classic House of Lords debate. I particularly thank my co-signatories to this amendment, my noble friends Lord Hutton and Lady Drake. The Minister referred at the outset to a pantheon of pensions expertise, and indeed it has been. The noble Lord, Lord Bates, joked in Grand Committee that the Pensions Commission was almost quorate since two of its three members were gathered there. I say to the Minister, as I said then to the noble Lord, Lord Bates, that if I were sitting where he was and this pantheon was sitting opposite me and telling me that I was wrong, I would be pausing, just as my noble friend Lord Hutton suggested.

A number of arguments have been made today. The Minister says that the Government have been discussing this for two years but this House has not. When we discussed it in Grand Committee, I do not recall hearing a single supportive speech for pot follows member. I am glad that the researchers of the noble Lord, Lord Stoneham, moved him from his position then to the position that he articulated so clearly today, but I do not think that anyone in this House has heard those arguments made until today. I am glad that we have heard them, and very glad that the Minister has been doing work with the industry to get it ready to deliver what will be this Act. However, it is still a Bill; it is not an Act and this House has every right to make its own decisions. Whatever decisions Parliament makes, I have no doubt that at that point the Minister and his colleagues will go out there to deliver.

What arguments have we heard today against our enabling amendment? First, we have heard that it is not clear what the choice is. Well, that is the point: the amendment says to the Government, “Go back and think again. We will work with you if necessary, but think again”. It is said that there will be a delay. Yes, there will be a delay, but the wrong thing would be to rush ahead and make a decision because you want it now, if the consequences would be very serious because it is the wrong decision. This is too serious to rush into. A lot of criticisms have been made so far. For example, the Minister says that the way in which this amendment is constructed would leave the choice of the aggregator with the outgoing employer. If the Minister looks again at Amendment 23J, he will find in fact that it says that regulations may do one of two things. There is a big “or” between the two; it is either push or pull. Everything about these amendments is constructed to say that we recognise there are choices to be made but think that the Government have not given enough thought to what should be the right way forward for consumers.

We have heard nothing to counter the arguments made across the Benches here. What about all those who leave employment? What about the self-employed, who make up the fastest-growing sector: where do their pension pots go? What happens to the pension pot of the seasonal cricketer mentioned by the noble Lord, Lord Turnbull? I am sorry, but I live in Durham and our cricketers are mostly in the England teams, so I cannot advise him there. However, I can tell him that that person would really struggle under pot follows member. What about all those people in mini-jobs who will find themselves in a position of not having a single employer? Much has been said about the relationship between employer and employee, but the truth is that every model of pension scheme struggles with employee engagement. As the noble Lord, Lord Flight, pointed out, the whole point of this is that it addresses only the position of those who make no active choice themselves, yet those are the people to whom the state owes the greatest responsibility. These are the people whose funds we are moving, without their explicit consent, from one employer to another.

Much has been made of the fact that we want all the schemes to be of the best quality, but let’s get real—the OFT has already said that the market is not working. The noble Lord, Lord Turner, has described the challenges they found: people are learning when they come to retire that between 25% and 40% of their pension pot has gone in charges. If the Government really are committed to tackling charges I would invite the Minister to intervene again and to give a proper answer to his noble friend, the noble Lord, Lord German, about when the Government will cap pension charges. If he will not tell us now, I have a very simple solution for him—he can vote for our amendment in the next group and cap the charges tomorrow.

--- Later in debate ---

[Lord Freud]

I really do need to take up the invitation. I think that we have made it clear that we will deal with this within this Parliament, which I think means by a date some time in May. I think that that is fairly clear.

[Baroness Sherlock]

It is interesting, my Lords. What has happened—without wishing to pre-empt the next debate—is that the Opposition pushed the Government to do this but the Government said that it was not necessary. The Minister then went out to consultation and suddenly seemed to get cold feet, and he put it on hold for a year. There is a very small window but I am delighted to hear it. But the Minister can vote for our amendment and need not wait. The Government are again being invited to do it, and my noble friend Lord Hutton has very powerfully made the case for why they should.

I have been careful to try not to put my personal preference in the proposals, but I would be happy to join the Minister in a proper cross-party, consensual discussion about the way forward. The Labour Party introduced auto-enrolment and I pay tribute to the Government for taking it forward. We all share a common objective: to get as many people as possible saving for retirement. They can do so only if they have trust and confidence in the pensions market and in the schemes they are investing in. If they do not have that confidence they will not save and we will all be the poorer. The best way to do it is to ensure that there are schemes in which people can have confidence. I believe this is the right way forward and I wish to test the opinion of the House.

--- Later in debate ---

[Baroness Sherlock]

My Lords, Amendment 41A in my name and that of my noble friend Lord Browne calls for the Secretary of State to review and report to Parliament on the impact of the Bill on specific groups. I recognise that the department undertakes research, but this amendment picks up on something slightly different: the impact on specific groups about which concern has been expressed during the passage of the Bill through Parliament, or where provision is in effect a work in progress.

This is a major Bill that will have a significant impact on the majority of our citizens—indeed, on pretty much all of those who have yet to reach state pension age. If the Bill proves to be even half as good as the 1948 Act, it may be in place for a long time. The amendment calls for reviews of provisions made in the Bill to check that we have got it right and to enable us to make any necessary adjustments for those who are unfairly disadvantaged, or where provisions seem not to be working as we might have hoped.

Paragraph (a) of the proposed new clause calls for a review of existing and future beneficiaries of the state pension scheme. When there are winners and losers we should review that to make sure that we have got the balance right. We should also include within the review an assessment of whether transitional arrangements are adequate and working.

Paragraph (b) relates to the operation of private pension schemes. Given the debates this evening, I hardly need detain the House further by sharing our views on whether the private pensions system is working well; I think that we all know that there are challenges. Some of the changes that are needed, such as to the annuity market, may well need primary legislation, but many will not. The review will take the opportunity to look at whether the various changes, legislative or not, which the Government have made and promised, are working effectively.

Paragraph (c) relates to the concerns expressed by many women born between 6 April 1951 and April 1953. I am sure that all noble Lords have had many communications from women in that category who are affected. In Grand Committee, the Minister was pressed by various noble Lords, including my noble friend Lady Hollis and the noble Lord, Lord Paddick, to be clear as to whether or not this cohort of women would be better or worse off under the new system. The assumption of the Government is that they will be better off, but I never got a satisfactory response to the question I posed in Committee as to why the Government think that women born between 1951 and 1953 are better off under existing arrangements, and yet also claim that women will mostly be better off under the new pension arrangements. I still do not quite understand how both can be right. The amendment asks the Government to report to Parliament on the actual impact of these provisions, rather than simply relying on analysis of what the impact is likely to be.

Paragraph (d) focuses on the need for a review of the knowledge of young people of the system. Young people currently face a challenging work environment with high youth unemployment, the potential for high debts if they go to university and astonishingly high rents. We may safely conclude that, for most of them, concern about living in poverty in their dotage is not chief among their concerns, so a call to start contributing to an auto-enrolled pension may not ring loud. Yet that is of course the very best time to address those concerns.

Better financial education is needed, coupled with information about the importance of providing in future for their retirement. We owe it to young people to encourage them to consider making pension provision as soon as they are able to do so. This amendment seeks to keep track of the Government’s strategy to ensure that our young people are armed with a greater understanding of the need to proactively engage with pension decisions.

This is a far-reaching Bill and we should therefore make sure that we have got it right. Paragraph (e) of the proposed new clause recognises that the Select Committee, and indeed the Government, may identify other matters that should be reviewed and reported to Parliament.

The principle underpinning the Bill is that people should have a state pension that is simple to understand and that they should take responsibility for saving for their old age through work-based pensions. We also need to have it acknowledged today that the state owes a duty of care to the large numbers coming under auto-enrolment. In light of the broad consensus that industry must improve its standards and reduce its charges, its progress towards that should be monitored by Parliament. The amendment sets out a method of parliamentary scrutiny to ensure that we have got it right and that the Pensions Bill will last us, as the Minister aspires, for decades to come. As there will be an election before enactment—and, of course, a change of Government, one hopes—the amendment is prudent. I recommend it to the House. I beg to move.

[Lord Freud]

My Lords, I do not think that anyone in the House can be under any misapprehension but that the Government value extremely highly the role of evidence, analysis, consultation and evaluation in policy-making. Our approach to designing this once-in-a-generation package of pension reforms has been heavily informed by a robust and wide-ranging evidence base. However, looking at the text of the amendment and its timing, I must make clear that the provisions on the new state pension, and many of the other provisions in the Bill, will simply not have been commenced by spring next year—the time used in this amendment. Therefore, all that would come out of such an amendment would be a rehash of the information that has already been provided to Parliament: there would be nothing to add. We have no particular objection to this amendment in terms of sentiment, but its timing is just not appropriate.

I will not spend a lot of time going through all the issues, which we have gone through in huge detail over the past weeks and months. However, I will touch on how we will monitor the impacts in the future and what the plans are. It is clearly imperative, as the noble Baroness said, that a set of reforms of this nature is accompanied by a strategic approach to monitoring at sensible intervals. I am not saying anything that noble Lords will disagree with when I state that pensions is a very long-term policy area, and that the impact of many measures will not be felt fully for decades.

As a society we are asking people to do more to think ahead and plan for their retirement. As a Government it is our duty to do the same in looking at the retirement outcomes of the population as a whole. Our retirement outcomes framework, published in September 2013, provides an overview of projected future retirement incomes, looking at the impacts of government pension reforms as a whole and across state and private systems.

--- Later in debate ---

[Lord Freud]

I am happy to make sure that we itemise those in a way that will help noble Lords keep an eye on what they need to monitor as we go along.

We will update the modelling as evidence becomes available on the impact on work and saving of automatic enrolment, the single-tier state pension, and state pension age changes. As noble Lords will know, the department conducts a six-monthly tracking study of attitudes and behaviours in relation to pensions, later life and automatic enrolment. A similar exercise will start after Royal Assent, to monitor awareness and understanding of the reforms.

We are committed to the principle of post-legislative scrutiny, but such scrutiny must have scope to provide insights beyond the impact assessment and consultation practices to which we are already committed. I know that the noble Baroness accepts the point on timing, but the timing of this amendment would not add materially to the powers of the Work and Pensions Select Committee. Indeed, there is an awkwardness about the timing, because it straddles the next election. However, we look forward to continuing to develop pensions strategy with that committee’s input.

I know that the noble Lord does not appreciate my asking for the other side to withdraw this amendment and not press it to a vote, but that is the position I am in. Maybe there is more warmth to my request than there has been this evening.

[Baroness Sherlock]

My Lords, that would not be hard. I thank the Minister for that response, and I thank my noble friend Lady Hollis for pressing him for more detail on how this will be monitored in future.

I am very grateful to the Minister for setting out the Government’s commitment to post-legislative scrutiny and for setting out his commitment to making sure that the impacts of the Bill are analysed carefully, and with the use of evidence. I will press him to do two things. The first is to give particular attention to the two groups mentioned by my noble friend Lady Hollis. The women born from 1951 to 1953 feel very strongly that they have missed out on something important with this. If the Government turn out to be right, and they are better off under the current system, it is important not just that the Government find that out but that they share that knowledge as widely as possible. If that is the case, those women will be reassured—and, if not, they have a right to know anyway. Can the Minister also look at the position of those who would have been affected by, for example, the removal of derived rights, and whether the transitional protections are working well for them?

Secondly, as well as all the work that has been done to an appropriate timescale, will the Minister give some thought to how that might best be shared with the House? The proceedings have been very good as the Bill has moved through Parliament. A lot of issues have been raised—in this House in particular—and a lot of expertise has been brought to bear on this, and we have all learnt a lot from the process. Having done that, rather than have the results of it disappear into the department, marvellous as it is, it would be helpful if they could come back out so that we can all learn from that, both for the Bill and for future legislation. However, I will take his assent to those marvellous suggestions as read, and on the basis of that—and because he asked so nicely—I beg leave to withdraw this amendment.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Monday 24th February 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I am not surprised, having sat through Committee, that this has been such a powerful debate. We have had some very important, moving and well informed speeches at all stages of the Bill touching on these subjects. I am very grateful to the noble Baroness, Lady Finlay, and to the noble Earl, Lord Listowel, for sharing their expertise in these areas, as well as to the noble Lord, Lord Rix, for being willing to share with us the experience of bereavement and its ongoing impact on one’s life at any age.

My noble friend Lady Hollis laid out the case very strongly at the outset. I am delighted that the Minister is interested in reviewing the impact on families with a distressed child and how that relates to conditionality in the future. It is an excellent commitment and I look forward to seeing the results of it. It is up to my noble friend Lady Hollis to make a judgment on this but I do not think that that in any way precludes the need for this amendment, which is about a very specific category of person—people who are bereaved and who may find themselves going on to claim universal credit but who would normally be expected to go out to work because they had children of school age. Both of those things are important.

I still have with me the very powerful speech made by the right reverend Prelate the Bishop of Derby at Second Reading, in which he laid out his experience of pastoral care for the bereaved, something reprised very effectively today by the right reverend Prelate the Bishop of Wakefield. I do not need to say very much more about why this matters. Many Members of this House have had experience of bereavement in one way or another and there can be few more important issues than how a country supports its citizens when the worst of all possible things happens to them.

The Government’s case throughout this debate has been that these bereavement reforms are not really about money. From 2016 to 2020, they estimate the changes will cost an extra £110 million, because they will protect payments under the current system, but that thereafter, in total, there will be small savings. The argument is that these are reforms not cuts. The Government have said throughout that they want to simplify the system and put resources where, in their view, they are most needed: as a short-term intervention to allow a bereaved spouse or civil partner to deal with the immediate costs of the death of a partner. If support is needed in the longer term, that is what universal credit is for.

Amendments 18 to 20, in the name of the noble Baroness, Lady Finlay, address the question of how long bereavement support should be paid for. In Committee, the noble Baroness laid out some very moving circumstances in which families could find themselves, clearly drawing on her own clinical experience. I know that the Minister expressed sympathy with what she said, and it may be that his review of distress will address that. I would be interested to see what he has to say when he comes to speak.

Amendments 2 and 21, in the name of my noble friend Lady Hollis, quite specifically seek to relax the work conditionality requirement for those in receipt of bereavement support payment. This is particularly important for widowed parents. There is a difference between those who do not want to work and those who would like to work, or go back to work, but who have been forced to recognise that the reality of the state that their children are in is such that they have to choose—of course they will choose their children and not work, unless they have literally no choice. Some parents will need a longer period, both to adjust to their own grief and shock and to deal with the grief and shock faced by their children.

It has already been pointed out that the regulations for universal credit mean that kinship carers are exempt from work conditionality for a year from the time that they assume the care of the child. This was agreed by the Minister—under the persuasive pressure of my noble friend Lady Drake and others—in recognition of the fact that adults need time to adjust to being, effectively, a single parent. Why should the same principle not apply to bereavement? I would be very interested if the Minister could answer one question about his review: does he intend to change the regulations to allow bereaved parents specifically to be exempt from conditionality? In Committee, he said that he was reviewing this and that he wanted to change the guidance given to decision-makers in jobcentres. But that is a very different question altogether. I can see why that might be the way forward for distress in general—after all, distress comes in very different forms and some judgment would have to be made about when the family was distressed. The awful thing about bereavement is that it is horribly clear: one is either bereaved or one is not, and I therefore do not think there is a need for the kind of flexibility that might be needed in other circumstances.

I also worry because I have heard many cases, as I am sure other noble Lords have, where young jobcentre officials, with the best of intentions, ended up making bad decisions because they did not properly understand what it was like to be a single parent trying to juggle more than one child and a part-time job. That person could of course simply say, “I am sorry but despite whatever you say, I am not going back to work because I have to prioritise my children”. If that happens, their benefits get sanctioned. They can appeal, but do we really want them to have to go through that six months after losing their husband, wife or civil partner? When 58% of appeals against sanctions on jobseeker’s allowance are successful, how much are we willing to bet the farm on the effectiveness of decisions by individuals in jobcentres? In my case, it would be not very much.

At Second Reading the noble Lord, Lord German, used words such as “harsh” and “cruel” to describe the decision to force widowed parents back to work after six months. I believe that he was right. He cited the research, which he touched on again today, showing that outcomes for children very much depend on the effectiveness of the remaining parent in coping. That is partly about their availability to children. All that this amendment from my noble friend Lady Hollis does is to ask that those widowed parents who need to claim universal credit alongside bereavement support payment to make ends meet should not be required to go back to work for 12 months. After all, the Government have decided to focus their support on that first 12 months, so surely they should be willing simply to stretch this for the same period.

I have heard it said that a year is too long: since employers do not offer bereavement leave for a year, why should the state? It is because employers cannot do that that so many parents end up giving up their jobs when they lose their spouse or civil partner. The combination of burdens is simply too much to cope with. Universal credit is meant to be the safety net for those very parents, and it must be here. This amendment specifically recognises that the Government are planning to recycle all the resources spent on bereavement to be able to create this new system. All it does is to give them the power to recycle that money in whatever way they want, such that that reform should include this small change—that for 12 months after losing one’s husband, wife or civil partner a parent should not be forced back to work.

We should be clear that a decent society will not put bereaved children in the position of having lost one parent only to find that the other is not able to give them the level of care that they need at this crucial time. Many people in this House will know that losing a parent in childhood is a life-changing event: one never gets over it. We cannot protect children from that horror but when it happens, please let us at least say that we will support the remaining parent as best we can. It is clear that this House does not think that the Government have got this part of the Bill right. Amendments 2 and 19 give them the means and the incentive to go away and get this right. I urge the Minister to accept them.

[Lord Freud]

My Lords, losing a spouse is one of the most tragic circumstances that a person will have to endure and, as such, it has been recognised since the outset of the welfare system that the bereaved need some financial assistance. Bereavement benefits form a crucial part of state support but limited reforms over the years have led to a complex system, which has not kept pace with changes in the benefit system or wider changes in society. This legislation will address this. With a simple payment structure focusing support on the period immediately after the bereavement and a single contribution condition, the new bereavement support payment will be far more easily understood and claimed. It will mean that more people will benefit, particularly younger widows.

A claim to the new bereavement support payment is made by the surviving spouse or civil partner. The noble Baroness, Lady Finlay, raised those extremely tragic cases where not only is there one bereavement but the surviving spouse dies shortly afterwards. She is of course right that there can be no expectation that a claim is made by the surviving spouse in such circumstances. I take this opportunity to make it absolutely clear that, as with the current benefits, there will be arrangements in place for claims to be made posthumously. Every year, the Department for Work and Pensions receives around 10 posthumous claims to bereavement benefits made on behalf of a bereaved spouse who has subsequently died. There are regulations to ensure that appropriate payment can be made in respect of these claims.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Monday 24th February 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, my noble friend Lady Hollis has raised some significant questions and I look forward to hearing the Minister’s answers. This amendment follows an ultimately rather unsatisfactory discussion we had in Committee during which my noble friends Lord McKenzie and Lady Hollis, along with the noble Baroness, Lady Greengross, and others tried valiantly to get the Minister to explain exactly when somebody would receive a communication from DWP to warn them that the state pension they would get in future would not be the same as what they might have expected. I went back and reread the record. I think the answer we got was that they would get a statement if or when they asked for it and then normally only digitally. The Minister kindly arranged for officials to explain their communications strategy to Peers, and I am genuinely grateful for that. However I think it is fair to say that the exercise did not entirely allay our fears or perhaps fill out all the gaps in our knowledge. I hope the Minister is looking forward to finding a consultancy fee for my noble friend Lady Hollis for her contribution to what will doubtless be the next mailshot from the department.

In Committee I raised comments that had been made during the Select Committee inquiry and elsewhere from quite a wide variety of bodies about this subject. It is worth highlighting a couple. Citizens Advice has been stressing that considerable complexity inevitably remains in the system because of the transitional provisions. It says that,

“a sustained communications programme could improve outcomes, manage expectations, minimise misinformation, promote action on NI contributions, and support personal saving for retirement”.

That last point is one made by my noble friend Lady Turner. The Association of British Insurers had also stressed that adequate communication was essential because it was important that people did not feel unclear about how much they would receive, and it should be clear that they would need to save. That is a crucial drive behind all of these reforms and the Labour reforms that preceded them. People need to understand what they are going to get to make sure they save enough for their retirement.

The Select Committee certainly found that there was a lot of confusion out there. Many people thought that from now everybody would get £144 a week instead of the current state pension. Many people thought that all means-testing would disappear and that if they would have got more than £144 now that they would lose that in future. The committee stressed how important it was that people have full information about their future entitlement.

I reiterate three simple questions which I raised in Committee; they did not get answered at the time but I think the Minister has had an opportunity since then to reflect on them. First, how and when do the Government propose to contact people to tell them of the changes to their entitlement? Secondly, at what point will the Government contact people who have previously requested and received a pension statement to warn them that it may no longer be accurate? Finally, in setting up a communications campaign on this new scheme, what outcomes are the Government seeking and how will they measure them? I look forward to the Minister’s reply.

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

My Lords, the single-tier pension reforms are designed to simplify the current state pension system, to make it easier for people to understand what they will get from the state in retirement. More so than for other reforms, therefore, communication is critical to success, so I certainly share the interest that noble Lords have shown in this issue. Effective communication requires both the right message and the right channel for delivering that message. This forms the basis for our communication strategy to support these reforms, a summary of which I circulated to noble Lords this morning and which will be placed in the Library.

We will deliver a phased approach to our communications, building from Royal Assent towards the implementation of the reforms and beyond. This will allow us to provide accurate and up-to-date information as quickly as possible before we issue more tailored communications through a range of channels to reach all our audience groups.

State pension statements will remain a key communication with future pensioners and will be an important vehicle for helping individuals understand how they are affected by the reforms. The introduction of these reforms gives us the opportunity to radically transform the way we currently provide this statement service. Our ultimate vision is to provide an online system that is integrated with HMRC’s national insurance data, enabling people to access this information at a time to suit them and in a way that allows them to model the impact of gaining further qualifying years.

In Committee I said that we would provide statements that reflect the single-tier rules once we have the new IT in place and individuals’ NI contribution records are complete up to and including the 2015-16 tax year. Prior to April 2016 our plan was to continue to provide statements based on the current rules accompanied by additional information on the single-tier changes to those affected by the reforms. However, we believe there is trade-off in terms of providing information we have available based on current system amounts while trying to minimise the distribution of information that is potentially misleading or simply begs further questions. Noble Lords may wish to note that we are therefore currently reviewing the information we can provide to customers prior to April 2016 to ensure that it is as accurate and helpful as possible. We will make a decision on this by the end of March when we will make our plans more widely known through discussions with our stakeholders and within our broader communication materials.

The noble Baroness, Lady Sherlock, asked when we might contact previous recipients who will be affected by the changes. We will consider this to be part of the process. It is important to note that our data retention rules mean that our statement IT systems hold only a limited number of historic requests going back a maximum of 18 months, and therefore we cannot contact all previous statement recipients. The statements make it clear that the estimates they provide are based on the current rules and may change if individual circumstances alter or the law changes.

--- Later in debate ---

[Baroness Sherlock]

My Lords, although we gave this a fairly good airing in Committee, I confess that I do not yet feel that I properly understand the nature of the Government’s objections to the taking of lump sums. My noble friend Lady Hollis explained her case for this, and there is no doubt that we have a crisis of savings in this country. Too many people do not have a safety net for a rainy day, and British households generally do not have enough money in savings. That amount has been falling in recent years—unsurprisingly, given the pressures on the cost of living. The case made by my noble friend about why people might need access to a lump sum deserves an answer from the Minister. She described when and why the option was introduced and what people might use it for.

However, having gone carefully over the record and the correspondence since, I did not get answers to some of the questions which I put to the Minister in Committee. Those answers would help me because I would like to understand two things. First, are the Government confident that they have worked through who will be affected by this, what the impact will be and what the alternatives are? Secondly, can they explain clearly why they are doing it? On the first point—and I did ask this—we know that 75% of those who are deferring are women, but do we know why?

My noble friend suggested in Committee that those people are waiting until their partner retires to claim their pensions. Have the Government been able to confirm whether that is why they are deferring, or are they deferring because they are still working and have not saved enough to feel able to retire? What do we know about the wealth of those who are deferring their pensions? These questions matter because they would go to the points made by my noble friend Lady Hollis about whether people without savings are going to end up accessing other forms of credit, which we would not want them to do as they may be problematic.

Most of all, I would like to understand what the Government’s objection is. We have had a few arguments made: the argument of simplicity was made and has been pretty well dispatched, so I will not revisit it. Another argument raised was that significant numbers of people deferring and claiming a lump sum are living overseas. However, we know from the data given to us that more than three-quarters of those people are living in the UK, so that is probably not the issue. Is it the administrative burden? Perhaps the Minister could tell us whether it is that or simply the cost.

If it is the cost, I understand that. If the Government’s argument is that the costs are significant, the House, I am sure, will listen carefully. However, it would be helpful at this point if the Minister could simply come out and say whether he would like to do this but cannot afford it or whether the Government think for some reason that it is a bad idea, in which case my noble friend Lady Hollis has laid down a strong challenge which the Minister really should answer.

[Lord Freud]

My Lords, in designing the single-tier reforms our overriding aim has been to deliver a flat-rate pension above the basic level of the means test without increasing spending, and to do so in a way that recognises people’s contributions under the current system. This is not easy to do and it involves difficult trade-offs. Some elements of the transition necessarily generate costs in the early years, particularly the “better of” calculation, which means that people with low amounts of additional state pension, such as carers, receive a boost. There is also the fact that those with high amounts of additional state pension, which take them over the full amount of the single-tier pension, are able to keep the surplus as a protected payment. Nevertheless, we have been able to stay within 1% of projected expenditure until 2040, which is fair to current pensioners and to future taxpayers.

In answer to the blunt question of the noble Baroness, Lady Sherlock, removal of the lump sum option for those who defer their state pension has played a key role in flattening expenditure. The early-year savings that this delivers have been ploughed back into the single-tier design. We are, however, still keen to preserve some flexibility for single-tier pensioners who, by choice or accident, claim after they reach state pension age, so people will still be able to build up an increase to their state pension that is paid on top of their single-tier entitlement for the rest of their lives. As discussed in Grand Committee, there remains the option of backdating a claim for a single-tier pension. By backdating their claim to a state pension, someone who has delayed claiming for whatever reason—either unintentionally or as part of a planned retirement—will be able to get up to 12 months’ arrears when they make their claim for a pension. This would provide someone who has qualified for the maximum weekly amount of £144 with arrears of almost £7,500 at 2012-13 prices.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Monday 24th February 2014 Lords Chamber

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

My Lords, I am aware that the noble Lord, Lord McKenzie, cannot be present today for personal reasons. Given the circumstances, I should be happy to have further discussions with him about his Amendment 7.

[Baroness Sherlock (Lab)]

My Lords, I know that my noble friend would wish to bring back his amendment at Third Reading. Would that be okay with the Minister?

[Lord Freud]

Yes, that would be all right.

--- Later in debate ---

[Baroness Sherlock]

My Lords, in speaking to Amendment 16, I shall also speak to Amendment 17 in my name and that of my noble friend Lord Browne. We on these Benches agree with the principle of raising the state pension age to reflect longevity. We accept the need for periodic reviews of the state pension age. Where we differ from the Government is on how best to do that.

Fixing the state pension age is never easy. There is always an issue of fairness at stake. Having a careful, evidence-based review before taking any future decisions on changes to the state pension age is a crucial element of ensuring fairness between generations. However, sometimes fairness requires a consideration of difference, particularly differences in longevity and health. The Government are setting considerable store by actuarial information on average life expectancy. However, while average life expectancy tells us something—mostly quite a lot about medical advances and their ability to keep us alive for longer—it does not tell us very much about our health in retirement or differential mortality rates.

We heard a great deal of evidence in Committee to inform our debate, and I certainly will not rehearse it all here, noble Lords will be relieved to hear. However, maybe the headlines are worth briefly restating. People are living longer, but the proportion of years in full health is not keeping track at the same rate. We have significant inequalities in health within the UK, and significant variations in mortality as a result. There are clear socioeconomic differences. There is a class divide, as managerial and professional classes live longer than manual workers by 3.8 years for women and 3.1 years for men. There is a clear geographical divide.

There is then the effect of this differential life expectancy on state retirement incomes, with the irony that those living the shortest lives post-retirement—the poorest and least skilled workers—will receive less in state pension than their better-off counterparts, but they may well have contributed for longer as a result of having spent less time in education.

If we want people to save for retirement, they need to trust the Government, to trust Parliament and to believe that their pensions are safe in our hands. The public need to know that they will not be at the mercy of political expediency, and that they will be protected from any adjustments that need to be made by ensuring that they are not made too quickly. Rather than simply being a matter for the Secretary of State, as the Bill proposes, we need a genuinely independent panel which has the kind of cross-party and independent representation that will reassure the public and give confidence to parliamentarians from across the spectrum. Our amendment proposes simply that the review body should include representatives of the opposition parties and of the Cross Benches of this House to ensure that Parliament as a whole is at the heart of this process. It would also include representatives of trade unions, who are themselves the representatives of those who are spending their ever-longer working lives saving for retirement. This broader representation will give people confidence that a wide range of views will be heard. I urge the Minister to accept it.

[Lord Freud]

My Lords, as your Lordships know, the purpose of the review of state pension age is to inform the Government. The reports from the Government Actuary and the independently led review, which will feed into the review, should collect and analyse the latest data, and give the Government of the day the information they need to make what will always be a difficult and contentious decision.

We are all keen that the Secretary of State receives a report that is impartial. Because we are requiring that all reports compiled as part of the review are published and all future changes to state pension age continue to go through primary legislation, any proposal based on a report that is not impartial, credible and comprehensive will quickly fall apart when scrutinised by stakeholders and both Houses of Parliament.

Turning first to the substance of the amendment tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, if one thing is apparent it is that there is no clear consensus on who should sit on the review, what they should look at, or how they should collect the necessary evidence. We have been clear in Grand Committee and in the other place that this Government’s vision of the review is one similar to the independent review of public service pensions. That review was run by the noble Lord, Lord Hutton, a member of the opposition Benches and an expert in his field. It was transparent, comprehensive, independent and established a consensus.

Noble Lords will also be aware that the Pensions Commission, set up by the previous Government, had three commissioners from the areas of business, trade unionism and academia: not a single politician or Cross-Bencher. That commission gained support through comprehensive and open debate about the issues and trade-offs, rather than being based on the inherent characteristics of the commissioners’ backgrounds.

In short, the amendment tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, would preclude these two successful models. It would result in a body of at least six individuals from stakeholder groups, the other place and this House. It would not necessarily have the expertise to review the relevant data and would effectively create a mini parliamentary process before the parliamentary process proper. We do not think that is the right way to run a review designed to inform the Government. In the Bill as currently drafted there is nothing to prevent a future Government running the review in whatever way they think best. That is a key point underpinning our approach to the review—getting future Governments to take active ownership of and responsibility for all aspects of the review, instead of just going through the motions.

Turning to the factors to be considered as part of any review, I must note that in response to the recommendation made by the noble Baronesses, Lady Turner and Lady Sherlock, we do not have the data regarding the relationship between specific occupations or types of work and life expectancy and healthy life expectancy. Beginning to collect such data would be both burdensome and, I imagine, for some professions simply impossible. More generally, we do not think it is necessary to specify any factors to be considered in legislation. We have already consulted stakeholders on what factors they think are important, and stated the factors we expect to be considered in the White Paper. The Opposition are worried that by not specifying the factors in legislation, future reviews simply will not consider important variables. However, what kind of support would such a review generate?

We want to encourage all interested parties to feed in their thoughts and contributions to better involve them. Specifying factors in the Bill could send out the message that we have already thought of everything important, and that future Governments do not need to consider additional factors as they are not set out in primary legislation. Such an approach could lead to a tick-box mentality, with Governments simply going through the motions instead of taking a proper, considered approach to each review. My point is illustrated by the fact that another factor has been added to the Opposition’s amendment since its predecessor was tabled only a month or so ago. Other noble Lords have also previously suggested additional factors, including life expectancy of the lowest income decile, prevalence of smoking and quality of diet. This demonstrates that the determination of relevant factors should take place after a thorough and extensive consideration and on an iterative basis for each review.

I turn now to the review’s remit. We believe that the Government should maintain control of this to keep it focused on the task at hand. There is nothing in the Bill to prevent the Secretary of State of the day updating the remit of the review, and we—or, more importantly, stakeholders—would fully expect him or her to do just this if new and compelling factors were identified during the course of the review.

The amendment of the noble Baroness, Lady Sherlock, also requires evidence to be gathered in public sessions. Although there is nothing in the Bill to prevent some evidence being taken orally—rather as Select Committees do—noble Lords will be aware that the nature of the analysis around state pension age, such as the myriad tables, charts and graphs, does not lend itself well to public sessions. Underpinning our approach is the idea that each Government will fully own and be responsible for the review. Setting out membership and factors to be considered restricts rather than increases that responsibility. It would instead limit the scope of reviews and reduce engagement by stakeholders. I therefore urge the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Baroness Sherlock]

My Lords, in Committee the Minister came under sustained pressure on this matter from my noble friends Lady Hollis and Lord McKenzie, among others, and I am sure that he did not expect to emerge unscathed from Report. Many noble Lords pressed the Minister in Committee to try to understand what the consequences of this increase in means-testing would be. In particular, they were concerned about what would happen to those older pensioners who inadvertently, or perhaps negligently, fail to report changes of circumstances.

The Minister could not assuage our fears in Committee but wrote to us subsequently. That was helpful as it made clear what would happen. The letter he sent to us, dated 20 January, noted that claimants of any age who commit benefit fraud can be prosecuted. However, it also says:

“DWP may offer an Administrative Penalty as an alternative to prosecution. That penalty is 50% of the overpayment with a minimum value penalty of £350 and a maximum of £2000”.

When a claimant makes an error resulting in an overpayment, the letter explains that,

“a DWP decision maker will consider the full circumstances of the individual case … taking into account the reasons that led to the error”.

The letter then referred us to the guidance for decision-makers. I read this guidance so that noble Lords would not have to, and that is an hour of my life that I will not get back, so anyone who feels that he would like to buy me a drink at any point to say thank you is most welcome to do so. However, having done so, I then discovered the following. Incidentally, CPen means civil penalty and DM means decision-maker. The guidance states:

“Before imposing the CPen, the DM must establish that the claimant

1. has acted negligently and

2. has failed to take any reasonable steps to correct the error that led to the overpayment”.

I accept that the word “negligently” implies something serious. However, on the “Meaning of ‘negligently’”, the guidance continues:

“DMs should note that negligently should be taken to mean acting carelessly, not paying sufficient attention to the task in hand, or disregarding the importance of what is required to be done in relation to the claim or an award”.

In other words, that is a pretty low bar.

A number of noble Lords expressed concerns—as has been done very clearly by my noble friend just now—about what happens to pensioners who might struggle to keep the paperwork together or report every relevant change. The letter from the Minister said that robust safeguards are in place to ensure that matters such as mental capacity are considered. However, the guidance also makes clear that misrepresentation can involve simply leaving a section blank, perhaps because someone cannot figure out how to fill it in at that point and forgets to go back and do so later. The guidance also states at paragraphs 09206-7 that a claimant cannot avoid responsibility for misrepresentation just on the grounds that they claim they did not know what they were doing. It states:

“Non-responsibility is limited to those who are blind, illiterate or do not fully understand a particular form they have signed. Poor education, illness or inborn incapacity alone is not sufficient to show non-responsibility. People are expected to take reasonable steps to understand what they sign”.

This is exactly the sort of reason why so many pensioners dread means-testing and do not claim benefits to which they are entitled. If the Minister does not want to accept this amendment tonight, I plead with him to do one thing. Will he please take this guidance away urgently and have it revised before this legislation ever is introduced, so that pensioners are not expected to follow these kinds of rules?

[Lord Freud]

My Lords, assessed income periods were introduced by the noble Baroness, Lady Hollis, during the passage of the State Pension Credit Act 2002. At that time it was assumed that income and capital for those above pensionable age remained relatively stable and it therefore made good sense to relax reporting requirements, both for the individual and the department in terms of running costs. This was still the case in 2007 when the Government of the day introduced indefinite assessed income periods for those aged 80 or over.

The noble Baroness said just now that income and capital do not fluctuate by much. We have now tested those assumptions, analysed around 100,000 cases and come to the conclusion that there is actually a greater degree of volatility in people’s financial circumstances than she and the department had anticipated at the relevant times. In some cases, assessed income periods have allowed people to continue to receive pension credit following a change in their circumstances when they would not have been entitled to it had they made a new claim at that point. The evidence means that we have had to think again about the viability of the policy and have concluded that AIPs should be abolished. Ultimately, if we were to allow AIPs to continue, the taxpayer would be providing support to people who no longer need it. It would mean retaining a system in which we can only apply changes to retirement provision that would increase an award but cannot take account of windfalls that would otherwise see a reduction in or loss of benefit.

Let me be clear, we are not changing entitlement rules. We are changing the reporting system so that people’s benefit entitlement reflects their circumstances at the time. To that end, we are looking to simplify the reporting requirements so that we are able to support those who need it most and best target our benefit expenditure. I am of course mindful that by changing reporting requirements some people may find it more difficult to adjust, particularly those of the most advanced years who may have the greatest difficulty in contacting us. This is why existing indefinite assessed income periods in place prior to 2016 will continue.

For those new recipients, or those on fixed-term AIPs, we will have the opportunity to explain clearly what does and does not need to be reported at the point of claim or when their existing claim is reviewed. I stress that pension credit is already designed in such a way as to minimise reporting requirements. For example, changes to capital only need to be reported if their total amount exceeds £10,000. Currently, only 12% of people on pension credit have capital above that level. People would need to report new income streams, but we will continue to take into account annual increases in pensions automatically, based on what people tell us. We will also encourage people to tell us if their capital falls below £10,000 or if any income stops, to ensure that we capture beneficial changes.

Employment: Young People

Debate between Lord Freud and Baroness Sherlock

Wednesday 5th February 2014 Lords Chamber

[Lord Freud]

My Lords, I could not agree more with my noble friend. There are only four things one can do to help youngsters into the workforce: directly get them a job; training and education; apprenticeships; or work experience, which is a stepping stone. That is what Alison Wolf told us, and that is what the Government are aiming to do.

[Baroness Sherlock (Lab)]

My Lords, I think the Minister said that the Government inherited high long-term youth unemployment from the Opposition. However, the ONS publication Labour Market Statistics shows that long-term unemployment for 18-24 year-olds is 232,000. The same data set shows that in the period spanning the last election it was only 188,000. Labour has made it very clear that we would guarantee a job for every young person out of work for more than a year and make them take it. What will the Government do?

[Lord Freud]

My Lords, the figures the noble Baroness quoted are very distorted by the training allowances, which got people off the long-term measure. I will not go into a long song and dance about it, but those figures were the result of a very distorted comparison. I have quoted the real figures—the ones that matter—to this House on a regular basis. When you look at youngsters who are both workless and outside full-time education, that figure rose through the longest boom we have seen in our history because of structural inability to get those youngsters into the workforce. There was neither adequate education nor routes into the workforce. We are turning those figures round—and they are the real figures.

Child Support Fees Regulations 2014

Debate between Lord Freud and Baroness Sherlock

Tuesday 4th February 2014 Grand Committee

[Baroness Sherlock]

I thank the Minister for going through all those questions—I am very grateful. I still have a couple which perhaps he missed out.

The Minister has explained to us that the Government believe that there will be more children in receipt of maintenance and more effective arrangements. However, he did not pick up on the amount of money that will change hands. For example, it would be perfectly possible for someone who was currently getting the full statutory amount through the statutory system to have in future a family-based arrangement in which they agree to take half of that amount to keep each other happy. Will the Government also be monitoring, and set a target for, the amount of child maintenance that is changing hands, and will they monitor in particular whether the amounts for individual families go down? In other words, one could see a change in the mean—by, for example, people who are currently nil-assessed joining the system—but that might disguise a fall in other cases. How well would that be monitored?

I think that I asked a question about the media campaign that Steve Webb had promised in early 2014. Does the Minister have any information on that?

There is a piece of nuance for which I apologise from this side as a pedant. On the question of domestic violence, the Minister said that he is confident that a non-geographic option will be available. Could he reassure the Committee that where domestic violence is alleged or admitted, a parent with care will not be required to accept direct pay unless and until such a scheme is available to them?

Lastly, I want to be sure that I understood his question about enforcement and HMRC. I think that he is saying that it will become more difficult for a parent with care to raise the question of where they believe earnings have been underdeclared. HMRC may deal with the general question of whether enough tax has been paid but at the moment, as I understand it, and I would be grateful if he would tell me whether or not I am right, a parent with care can go to the CSA with evidence showing that the non-resident parent has higher income than has been declared to the CSA—for example, if the lifestyle in terms of a house, a car or money spent would not appear to tally with the relatively small amount of income declared—and it can investigate and address that. Is he saying that that will not happen unless HMRC decides in general terms to conduct a tax investigation?

[Lord Freud]

On the question of the amount of maintenance, our estimate at this stage is that more children will get maintenance. That is what I have said. How much that maintenance is in money terms is less clear at this stage. It is one of the things that we will find out. I need to remind noble Lords that assistance may take many forms to children—more shared care—so the question is not just about money. It is about the level of support. That is an area that we will be looking at closely.

On bank accounts, the parent with care will be able to dictate to which account the non-resident parent must pay. If that fails to happen, it will result in a return to the collection service, which I think in practice deals with the noble Baroness’s question.

At the moment, the CSA gets a complaint from the parent with care. The place where it goes to check is HMRC. That main checking area becomes irrelevant when there is a direct feed. Where she is suspicious—it is a suspicion—of, effectively, tax fraud, that is what we are talking about.

[Baroness Sherlock]

So the CSA does no investigating of its own? I am sorry; I must have misunderstood that point.

[Lord Freud]

No. Currently the CSA checks with HMRC. As now, it will be able to provide information to support its suspicions that all might not be well. This is a difficult issue more generally.

On the question about the campaign, we are planning a media campaign using social media and paid-for channels such as radio. We are still finalising those details. The intention is to raise awareness of case closure and to promote parental responsibility. We will get more details of that out in coming months.

With all the issues dealt with—perhaps not to everyone’s absolute satisfaction—I will commit to continuing to provide transparency in the delivery of this programme of reforms. We published a strategy for the publication of information about the 2012 scheme on 18 July last year. We plan to release official statistics once we are assured of the appropriate quality of the data; we expect this to be after April 2014, as I said. Ahead of this, we have used the management information that is available to release limited relevant data on a one-off experimental basis, published on 25 November last year. As I mentioned earlier, we will review the effects of the fees and regulations, and lay a report before Parliament following 30 months of operation. I commend the regulations to the Grand Committee.

Housing: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Tuesday 28th January 2014 Lords Chamber

[Lord Freud]

My Lords, less than half the overcrowding takes place in London. More than 30% of properties are actually one-bedroom and 108,000 have come up. We are adapting to the transition by using the discretionary housing payment system. The recent data on discretionary housing payments show that that is exactly how local authorities are using that money.

[Baroness Sherlock (Lab)]

My Lords, the Minister mentioned discretionary housing payments. The LGA survey says that 81% of authorities said that the number of applications for DHPs had increased greatly between April and November 2013 and that the social sector size criteria topped the list of reasons for this. The LGA has made the point that there are some areas where there is simply not enough accommodation, and therefore the amounts of money the Government have made available are not enough. The tenants are suffering and the local authorities are picking up the tab. Will the Government commit to reviewing this policy and giving local authorities and tenants the help they need?

[Lord Freud]

My Lords, we have a high level of discretionary housing payments, running at £180 million. More importantly, £20 million of that is to be bid for. I have currently had 67 bids and we are paying out. I am not sure whether local authorities will actually be using up all the discretionary housing payment at their disposal. As noble Lords know, a review is going on. I will be able to publicise the interim findings in the spring and the final version will appear next year.

Employment: New Jobs

Debate between Lord Freud and Baroness Sherlock

Monday 27th January 2014 Lords Chamber

[Lord Freud]

I am pleased to say that the regional position is pretty balanced. During this quarter, employment rose in virtually every UK region, with one exception. The north of England and the Midlands are doing particularly well. If one looks at the balance between the north and the south, since the election there have been 360,000 extra private sector jobs in the north—to take those four regions together—and 420,000 in London and the south-east.

[Baroness Sherlock (Lab)]

If that information is right, can the Minister explain the report from the Centre for Cities, which shows that four out of five private sector jobs are now created in London? For example, private sector employment grew by 2.8% in London year on year, but it fell in Sunderland and in Bradford it fell by more than 5%. Do the Government have a strategy for jobs north of, say, Witney?

[Lord Freud]

I hope that I made it very clear to noble Lords that this is a very widely spread recovery, that the north is doing very well and that the noble Baroness is misrepresenting the actual figures.

Housing: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Monday 20th January 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, the Minister has failed to address the core point made by my noble friend Lady Hollis and the noble Lord, Lord Best: why are the Government penalising people already in social housing, who took out their contracts when the current system was in place and before the bedroom tax came in? Why could they not protect people, as this House asked them to do during the passage of the Welfare Reform Act? If all else fails, will he join us in our costed commitment to abolish the bedroom tax?

[Lord Freud]

My Lords, the costings of the Labour Party in this area are fairly extreme because it seems to have used the same money many times over. This is a savings measure introduced in the emergency Budget, which applies to the existing case load and gives 33 months’ notice. The comparison is with the LHA changes introduced at the same time, for which there was less notice: 21 to 33 months. We have put in as support the discretionary housing payment system, as opposed to transitional protection.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 15th January 2014 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, all noble Lords who have spoken have laid down a significant challenge to the Minister on this part of the Bill. I do not propose to add a great deal, but there are a few questions that I would like to clarify. First, in his opening remarks, I think the Minister said that one of the problems being addressed was that there were significant levels of incorrect awards of pension credit because various assets and income were not being taken into account if they happened after an AIP was set. Does he mean incorrect? Presumably, he does not mean incorrect if they were in line with the rules. If someone is not required to declare it then they do not affect the award, but maybe I misunderstood that point.

Secondly, there is a question about the additional changes of circumstances. I am struggling a little to understand what the department does and does not know about this. The impact assessment states:

“We have limited evidence for the additional number of changes of circumstance that are likely to be reported each year as a result of the change in policy”,

but the impact assessment provides an estimate of £17 million a year as the cost of processing additional changes of circumstances and reviews. What assumptions is that figure based on in terms of the number of changes of circumstances?

Picking up a point made by my noble friend Lord McKenzie, what estimate has the department made of the likely increase in fraud and error as a result of the abolition of AIPs? Will the Minister remind the Committee what sanctions will be imposed on pensioners who fail to report a change in retirement income or capital that is relevant to their award? I would also be interested to hear what kind of support will be given. Will he also take the opportunity to remind the Committee how pensioners will be informed of this, how they will be reminded and what discretion can be exercised in choosing whether to sanction them, and of course what appeal mechanisms are there. That would be very helpful.

There is then the crucial question of the likely effect on the level of pension credit awards to those who have, or would have had, an AIP. The impact assessment was encouraging at first because it states:

“Analysis suggests that many customers are not currently reporting changes which would lead to an increase in their entitlement so they may actually benefit from the simplification of the policy”.

Can the Minister explain the use of the word “simplification”? At the moment, if I have an AIP and an income only from pension and capital, I do not have to tell the DWP about any changes in income, but in future I will. How is that simpler?

On the question of level, the briefing said that despite the fact that many customers may be better off, most people will not be better off as the Minister and my noble friend Lord McKenzie have pointed out. It is obvious that they could not be if £80 million a year is to be saved. Also, my understanding is that not only will there be twice as many losers as gainers, if I have read this correctly the average gainer will gain £6.70 a week but the average loser will lose £13.10 a week, which is twice as much. Will the Minister clarify whether that is right and if so what average means in this context? Is it a mean or median figure?

On the impact by age band of abolishing AIPs, the briefing from the department says that it is not possible to break down savings by age band, but that the younger cohort of recipients who are more likely to be affected by the change in policy are less likely to have capital above £10,000 or other pension income. Will the Minister help me understand that distinction? Assuming that they are spared, these younger pensioners will go on to be over-75s, who would have been entitled to an indefinite AIP. Is the assumption that that cohort, when they reach 75, will still be less likely to have savings over £10,000 or other pension income and thus less likely to face a change in pension credit entitlement? In other words, is the distinction one of age or cohort?

Just out of interest, did the department make any assessment of the effect and cost of, for example, maintaining indefinite AIPs for pensioners above 80 or 85 or any other age level? There is then the question raised by my noble friend Lady Hollis on equity release. I have no intention of standing between my two noble friends on the question of how they should be treated, being a woman with an ambition to live to at least 75 myself. But this is a serious question, to which the Minister responded at Second Reading simply by saying that,

“equity release may not necessarily result in a reduction in eligibility for means-tested benefits and will depend on overall income and capital”.—[Official Report, 3/12/13; col. 193.]

Of course, that is obviously true; for some people it may, and for some it may not. The briefing on the subject that came from the department had a note attached to it that may have come from the Department of Health, entitled, Reforms to Care and Support: Financial Product Review. That said, on equity release:

“Some people do use this to fund the cost of domiciliary or home care. No data is collected on the number of people who take out equity release to pay for care but it is currently very limited”.

At the risk of being a pedant, if no data are collected, how do the Government know that the number is very limited? I wonder if they are perhaps relying on the Age Concern survey referenced in the DWP briefing note, Abolition of Assessed Income Periods—Equity Release? I think probably not, however, because it suggests that the sample size was too small to be used for extrapolation. So I am sure that is not the source of it. But they must be able to make an estimate to be able to declare that the number is very limited, so can the Minister tell the Committee how many people the department estimates take out equity release to pay for care?

The importance of this question is to understand its implications. Even if the Minister takes the view that he does not regard this as being anything other than administrative easement, as explained by my noble friend Lord McKenzie, the Committee needs to understand whether there will be consequences for the treatment of income that may be needed to pay for care and, if so, how those costs will otherwise be addressed. I look forward to the Minister’s reply.

[Lord Freud]

My Lords, I shall deal with the equity release issue first. Assessed income periods were never intended to enable people to shield their income and capital from interaction with the means-tested system. Pension credit is a safety net benefit providing support for daily living needs for the poorest and, as such, should be a last resort.

--- Later in debate ---

[Lord Freud]

My Lords, my experience of cat skinning is that it takes quite a long time, so I am not sure that I can promise the aforesaid cat in its dematerialised form in the right time.

[Baroness Sherlock]

Is the Minister able to help us find out how big the cat is?

[Lord Freud]

I am being taken way off my brief.

[Baroness Sherlock]

I am sorry, but I am pressing the Minister on the comment about the assessment of how many people use AIPs for equity release. The phrase I think he used at the beginning of his remarks was that this may be a minority of claimants, which is about as vague as it is possible to get in terms of a formulation. Can he shed any light on this?

[Lord Freud]

No, my Lords. We do not have any precision on this, and that is one of the reasons that we want to look at it in the context of social care. Clearly, one will need to build a better evidence base rather than me extrapolating from a very thin one. The cat is small; it is possibly a kitten.

On the question from the noble Baroness, Lady Hollis, about potentially retaining AIPs until the age of 75, while the noble Lord, Lord McKenzie, talked about the age of 80, we do not have a breakdown of age from the sample of AIP reviews that we have taken, but we have no evidence to suggest that older pensioners have more stable incomes than younger ones. Retaining AIPs for older pensioners would prevent us driving many of the inaccuracies out of the system and would lead to a two-tier system, whereas we want to see a single, understandable regime for everyone. Older pensioners are more likely to have indefinite AIPs already in place in April 2016 because they are being retained, so they should not experience any significant changes to their reporting requirements.

On the more detailed question about numbers raised by the noble Lord, Lord McKenzie, on the breakdown between guarantee credit and savings credit, I do not have it to hand behind me right now, but I am happy to offer a letter providing that. I can confirm to him that someone who applies for pension credit can make a claim for housing benefit, but people will be encouraged to seek council tax support. As the noble Lord is fully aware, that scheme was localised in April of the current financial year.

--- Later in debate ---

[Lord Freud]

As the noble Baroness is fully aware, the dividing line is actually much more spread given the complicated transitional arrangements between one system and another. There is not the sharpness of a dividing line—I know the noble Baroness is fully aware of that because we have debated it in great detail. I am conscious that we are pressed for time.

[Baroness Sherlock]

There are three questions that the Minister did not answer. I am happy for him to write to me: I wanted to get them on the record so that they could be picked up before Report. I asked about the estimate of £17 million in the impact assessment for the cost of processing additional changes of circumstance. What assumptions was that figure based on in terms of the numbers of additional reviews or changes of circumstance?

I asked what estimate, if any, the department had made of the likely increase in fraud and error as a result of AIPs going. Also, the departmental briefing says that the younger cohort of recipients who are more likely to be affected by the change in policy are less likely to have capital above £10,000 or other pension income. Is it that cohort or because they are young and therefore when they become old that will no longer apply?

[Lord Freud]

My Lords, I will arrange to write to the noble Baroness. I think I can deal with the second point straightaway. We simply do not know whether it is an age or a cohort effect, so I cannot be clearer about that.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Monday 13th January 2014 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, as this is the first discussion of Part 2 of the Bill, it may be worth setting out a couple of principles from these Benches at the outset. First, we agree with the principle of raising the state pension age to reflect longevity, as people are living longer than when the current arrangements were put in place, largely in post-war reforms. As I indicated at Second Reading, we also accept the need for periodic reviews of the state pension age, but we differ from the Government on how best to do that—we will return to that issue in the discussion of our later amendment.

Fixing the state pension age is never easy, and an issue of fairness is always at stake. There needs to be a balance between the interests of the generations on the funding of retirement incomes in a pay-as-you-go system, where today’s taxpayers fund today’s pensions. As we will discuss in later groups, our view is that having a careful, evidence-based review before taking any future decisions on changes to the state pension age is a crucial element of ensuring fairness between generations.

However the arguments made by my noble friend Lady Turner require careful attention from all of us. Sometimes fairness also requires at least a consideration of difference, and my noble friend has highlighted some crucial differences, particularly in relation to longevity and health. We all know that life expectancy is increasing, but that fact conceals as much as it reveals. Mortality rates vary widely, as do morbidity rates. There is a huge amount of socio-demographic data available to inform our debate—and I am sure we will hear a great deal of it in the groups to come—from the Wanless and Marmot reviews to government figures and other outside research. There are also some very interesting data from the TUC. I will say more on this later, but I do not want to pre-empt what I think could be a very substantial discussion coming up shortly.

There are no easy solutions to these problems. The biggest challenge to the Government is to address the question of differential mortality and morbidity rates through urgent attention to public health, but we also need time to reflect on how best to deal with these questions in relation to the state pension age. It is our view that the best way to do that is to ensure that the mechanism for reviewing the state pension age includes a review panel which has on it representatives of a wide range of interests in society, including employer and employee representatives and representatives of different parties and, indeed, our own Cross Benches. I shall move an amendment later today to that effect, but in the mean time, I hope very much that the Minister will take the concerns of my noble friend seriously. I look forward to his reply.

[Lord Freud]

My Lords, the purpose of Clause 25 is to bring forward by just over eight years the point at which the state pension age completes its rise to 67. The latest evidence shows that we are living longer and, on average, healthier lives than ever before. To illustrate this point: a man in the UK reaching the age of 65 30 years ago—in 1983—could expect to spend 14.5 years in retirement. Today, a man reaching that same age can expect to spend about 21.5 years in retirement.

The noble Baroness, Lady Turner, raised the key issue of differential life expectancy. I do not propose to go into that in great detail at this point because we will have the opportunity to address that full-on in the next amendment; so, if she will forgive me, I shall concentrate my remarks on raising the age to 67.

The Pensions Act 2007 was informed by the Office for National Statistics’ 2004-based life expectancy projections. Those projections suggested that a man aged 67 in 2028 would survive for a further 19.9 years. However, on our latest understanding, this same man is projected to survive for a further 21.5 years, fully 1.6 years longer than we thought when setting the original timetable in the 2007 Act.

We continue to believe that it is only fair that those enjoying the benefits of longer life expectancy pay a share of the associated costs. Bringing forward the increase in pensionable age to 66 through provisions in the Pensions Act 2011 ensured the short-term sustainability of the UK’s state pension system. Now, the measures contained in this clause to accelerate the increase to the age of 67, combined with the regular review mechanism as set out in Clause 26, will help ensure the fairness and affordability of the system into the medium and long term. The savings projected to result from this proposal are significant—some £73 billion in net savings between 2026 and 2036—but not only are there net spending reductions, but this measure is projected to increase employment rates and boost GDP by around £100 billion over the same period.

Bringing forward the rise to 67 by some eight years will affect around 8 million men and women born between 6 April 1960 and 5 April 1969: people who are now aged between about 44 and 53. As with previous increases in state pension age, the transition to the higher age will be phased in gradually: men and women born between 6 April 1960 and 5 March 1961 will have a state pension age of between 66 and 67, and those born between 6 March 1961 and 5 April 1969 will have a state pension age of 67. Those born after 5 April 1969 will not be affected by this change because they already have a state pension age of 67 or 68, or somewhere in between the two, as legislated for in the Pensions Act 2007. The proposals in this clause mean that the maximum increase that any individual will experience in their state pension age, in relation to the Pensions Act 2007, is one year. By starting the transition to age 67 in 2026, no one who was affected by the Pensions Act 2011 will have their state pension age changed again by the measures in this Bill. To help people prepare for the change, we announced these proposals back in November 2011, giving the first cohorts affected more than 14 years’ notice.

Finally, noble Lords will be aware that an ageing society is not a phenomenon unique to the UK. That is why other countries in Europe and beyond are moving to adjust the age at which retirement benefits become available. Indeed, even by moving to a state pension age of 67 in 2028, we will still be behind many other countries—Ireland will get there in 2021, the Netherlands and Australia in 2023, and Denmark and the US in 2027. In bringing forward the rise to a state pension age of 67 we are ensuring that the system as a whole remains fair between the generations and sustainable and that we are doing so in a way that is on a par with elsewhere in the developed world. I beg to move that Clause 25 stands part of the Bill.

--- Later in debate ---

[Baroness Sherlock]

My Lords, in addition to a gender divide, we have heard that there is a class divide and a geographical divide. To add to the examples from Glasgow, Liverpool and Norfolk, I offer Dorset, which I am reliably informed is the place to live—statistically, you are expected to live longest in the UK. Women in east Dorset can expect to live nine years longer than women in Corby—the area with the shortest life expectancy for women. Men living in east Dorset can expect to live 7.1 years longer than men in Manchester—the area with the shortest life expectancy for men. Then there is the effect of this differential life expectancy on state retirement incomes. Those living shortest post retirement, primarily the poorest and least skilled workers, will obviously receive less in state pension than their better-off counterparts in Dorset. Women in Corby will get £67,000 less and men in Manchester will get £53,000 less. And, of course, those manual workers may well have contributed for longer than those who spent longer in education.

Where does all this take us? It does not take us to any straightforward policy solutions. As I am sure is the case with other noble Lords, many representations have been made to me on ways in which the Government should tackle this—that perhaps they should not raise the state pension age until we have tackled inequalities in health; or that a variable retirement age should be brought in, taking account of life expectancy, work pattern or contribution history; or that there should be flexible retirement proposals or the idea of paying actuarially adjusted pensions early for those retiring in their 60s but before the state pension age. It is quite likely that none of these will commend themselves to the Minister. Given the look on his face, I expect that I am right in that. However, I am sure the Minister will accept that what we have heard today is an analysis that suggests that a significant set of public policy issues needs to be addressed. They are not all pension issues—a point that my noble friend Lady Drake made powerfully—but are effectively spillovers from decisions around the state pension age, which will then impact on public policy-making in a range of other areas.

If the Minister does not feel able to respond positively to any of those concrete suggestions on how to deal with this issue, I encourage him at the very least to go along with the idea of spelling out in the Bill the need to take account of all these factors, because that would then at least put the review process for setting the state pension age in the position of having to tackle all these complicated issues and making some recommendations to government on which we could all, I hope, place some store.

[Lord Freud]

My Lords, the purpose of Clause 26 is to ensure that every Government consider state pension age in light of the latest life expectancy projections and other relevant data. The legislation sets out that a review must be informed by a report from the Government Actuary on the proportion of adult life spent in retirement and corresponding implications for state pension age.

On the point about pensions as a percentage of GDP raised by the noble Baroness, Lady Hollis, the single-tier impact assessment shows that even with an SPA of 67 in 2028 and an SPA of 68 in 2046, the proportion of pensioner benefit expenditure could rise from under 7% of GDP in 2016 to 9% of GDP by the 2060s. I am addressing her point about the baby boom.

It is true that life expectancy is different between socio-economic groups, and even in the latest figures it slightly widened. However, it is increasing for all groups. Such inequalities have always existed and, as the Minister noted in Committee in the other place, adjusting the pension age is not the right way to address these inequalities. We need to address these issues elsewhere through tackling the factors that lead to these differences in life expectancy. To illustrate the rate of increase, the period of life expectancy at age 65 for males in the lowest occupational class between 2002 and 2006 was 15.3 years. You have to go back only to 1999 for the average period of life expectancy of males from all occupations to be the same figure.

I will not go into detail on one of the amendments regarding adult age because we have not discussed it very much, but I will pick up the point raised by the noble Baroness, Lady Hollis, and the noble Lord, Lord Whitty, on the timing of when people enter the labour market.

The single-tier pension’s key features are simplicity—giving people the clarity and confidence to save—and a value set above the minimum income guarantee standard. Allowing early access would mean that we would have actuarially to reduce the pension, and this would severely undermine both these key features of the new system, complicating outcomes and meaning that, if people’s actuarially reduced state pension was below the minimum guarantee, we would retain an extensive and complex system of means-testing. International organisations have repeatedly advised countries to withdraw incentives to early retirement. Indeed, in recent years, a number of countries have put in place measures to discourage it, including Denmark, Finland and Germany.

The changes to state pension age are primarily about fiscal sustainability and fairness between the generations, such as taxpayers and pensioners, at any given time. It is therefore right that the Government Actuary’s Department focuses on total life expectancy from state pension age and not on healthy life expectancy. Indeed, the Pensions Commission advocated that pension age should rise proportionately in line with life expectancy, thereby maintaining the proportion of adult life spent in retirement. Just last week, the noble Lord, Lord Turner, reasserted this principle. This is what the GAD element of the review is for.

We also think it is crucial that future Governments have access to wider evidence before laying any proposals to change state pension age before Parliament. We have been clear in the White Paper and in the other place that we believe the reviews of state pension age should consider healthy life expectancy but also differences between socioeconomic groups and the wider economic effects of increasing state pension age.

On my original point about flexibility, we do not want to be too prescriptive in setting out factors that must be looked at by each review. We want to foster a more long-term view which would allow each Government to specify factors relevant to the circumstances at the time of commissioning the review. There is the danger that, by setting out a list of things for each review to consider, future Governments will simply have a tick-box approach to the reviews. As my noble friend Lord Stonham said—

[Baroness Sherlock]

It is Stoneham.

--- Later in debate ---

[Baroness Sherlock]

My Lords, as I said, there has been a succession of changes to pension policy and legislation. One key example is that under the previous Labour Government the number of years of contributions required to get a full basic state pension fell significantly, only for there to be a change of Government and for the number now being proposed to shoot back up again. The Chancellor did not help by giving the appearance of using the Autumn Statement to make an ad hoc announcement about the raising of state pension age. Once the dust settled, that turned out to be nothing more than what was already in the Pensions Bill and was therefore not necessary. However, that ran the risk of reinforcing the impression that pensions policy is made on the hoof, and we need to tackle that.

If we are serious about getting Britain saving for retirement, we need a proper, cross-party consensus on the way forward for settling the state pension age. Rather than simply being a matter for the Secretary of State, as the Bill proposes, we need a proper external panel which has the kind of cross-party and independent representation which will reassure the public and give confidence to parliamentarians from across the spectrum. We need a review mechanism that is clearly understood, a review body that is clear in purpose and function and ways of working, and clear parliamentary scrutiny of its finding—the kinds of things that will come from the report.

I know that the Minister will want to be reassuring about the Government’s intentions. In another place, the Pensions Minister said, in the face of pressure from the Opposition, that he had always envisaged a model such as the Hutton review, where the review is chaired by someone who people respect and who has credibility across the spectrum. That point was underlined by the Minister at Second Reading. I am happy to accept that the current Pensions Minister means that. However, even if that proposal were satisfactory, he will not always be Pensions Minister. I mean no disrespect when I say that I hope very much that in 18 months he will not be Pensions Minister any more. I can recommend my right honourable friend Mr Gregg McClymont, should anyone be looking for an alternative. However, Mr Webb, even when he is Pensions Minister, cannot bind the hands of his successors, even in this Parliament, never mind a future one. That is why this matter needs fixing in legislation.

Our amendment proposes simply that the review body should include representatives of the opposition parties and of the Cross-Bench Members of this House to ensure that Parliament as a whole is at the heart of this process. It would also include representatives of trade unions as those who represent those who are spending their ever-longer working lives saving for retirement. This broader representation on the review panel will give people confidence that a wide range of views will be heard. This amendment does not seek to shape the remit beyond that of having a range of competent and representative people sitting on the review panel. I urge the Minister to accept it.

[Lord Freud]

My Lords, I start by acknowledging the expertise and experience of the noble Baroness, Lady Drake, as a member of the Pensions Commission, on which she was able to rest when she moved this debate.

The purpose of the review is to inform the Secretary of State. Its job would be to collect and analyse the latest data, compiling a report to give the Government of the day the information they need to make a decision. Of course, we are all keen that the Secretary of State receives a report that is both impartial and credible. We appreciate the attraction of a panel to ensure that a wide range of views are reflected in the compilation of the report. However, we have been clear that we do not think that prescribing a committee is the right way to go. We do not want to restrict future Governments by prescribing exactly what the review looks at and who is doing the looking. There is greater merit in allowing Governments to choose whether to appoint a single reviewer—as with the review of public service pensions by the noble Lord, Lord Hutton—or a larger commission, such as the Pensions Commission. Indeed, the latter, set up by the previous Government, was made up of three individuals, two from the worlds of academia and business, neither of which, incidentally, was mentioned in the amendment.

Both of those cases show that a legislative underpin is not required to set up a review that can win cross-party and wider public support and that there is no consensus on where is the best place to find the right people. We do not think that the proposal by the noble Baroness, Lady Drake, to set up a permanent commission—an NDPB or a standing commission, as she put it—is appropriate. That kind of structure is simply not necessary for a review that will come together and publish a report on a single issue, wide-ranging though it may be.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 18th December 2013 Grand Committee

[Lord Freud]

Despite the guarantee credit not changing a lot, there is roughly a halving of the overall reliance on means-tested benefits, so there is a move, but I acknowledge that it is not by any means a complete elimination of the use of means-tested benefits.

[Baroness Sherlock]

I think the Minister may be offering a rather dramatic understatement. It is not an elimination; it is a change of 1%. As we established in the Committee on Monday, most of the reduction in means-testing is related to the abolition of the savings credit, which is removing access to something for people. If my noble friend is right, he has hit on something quite extraordinary, which is that despite the Government saying that the STP will be pitched at a level above the means-tested level for the pension credit, it is in fact, according to his modelling, pitched at a level that will not lift anyone but the 1% who get it out of means-testing. Surely the whole argument collapses at that point.

[Lord Freud]

My Lords, the guarantee credit does go down in absolute terms. It is already a small percentage of the total. When one gets into arguments about data it gets very confusing, so I will set this issue out very clearly. As I understand it, the issue is about the number of people on means-testing as we look forward into the single tier over the decades. The subsidiary question behind that is what it does to the incentive to save. I will address those two questions with some proper data in a letter rather than trying to do so off the top of my head when I am not absolutely confident about providing exactly the right information.

The start rate of the full single-tier pension should not be viewed in isolation but in combination with the private pension income that some 6 million to 9 million people will gain from having been automatically enrolled in a workplace pension. An inflated start would be unaffordable and unsustainable, and I ask the noble Baroness to withdraw her amendment.

[Baroness Sherlock]

I am very grateful to the Minister for his offer to write to all Members of the Committee. Will he prioritise that letter and write it before the Committee next sits, rather than waiting until we come back at a later stage of the Bill?

[Lord Freud]

Yes; I am trying to get letters out at great speed. I am expecting to sign letters relating to the questions from Monday later today in order to get them to Members of the Committee as quickly as possible, so that is a three-day turnaround. I will aim to do something rapidly for today as well.

--- Later in debate ---

[Lord Freud]

My Lords, as I said even before the noble Baroness intervened, even though the numbers today are relatively small, I am not decrying that particular issue. I was referring to the 50,000 figure—the current estimate of those affected. Let me get on with my argument and not worry about that at the moment.

The drive to universal credit is to allow greater flexibility in the labour market, so zero-hour contracts work with universal credit. There may be elements of zero-hour contracts that are of concern, particularly if the balance of power between the employee and the employer is unfair, but universal credit works with that flexibility of the labour market.

[Baroness Sherlock]

I understand the argument the Minister is making, but let us suppose that the woman described by my noble friend is in a relationship with a civil partner or a husband. What is the most the husband could earn before she would effectively be excluded from universal credit? As they do not have children, if her earnings are low but his are at a reasonable level, she would no longer be able to benefit from his pension. So you cannot assume that she would be caught up in universal credit because her earnings are low.

[Lord Freud]

I accept that. This is for low-paid households. That is what universal credit is. There will be some people in higher paid households who will have to take a view on how to make their arrangements through voluntary NICs or whatever. I accept that point.

--- Later in debate ---

[Baroness Hollis of Heigham]

Why does the Minister think that the courts would not support us in having transitional arrangements for those who are ordinarily resident? I am not a lawyer, but, in my somewhat limited experience of judicial reviews, there have been a number of challenges. The two criteria I lay down are: was Parliament’s intention was clear—Roe v Wade—and would it be a position that a reasonable person would think was not unreasonable. The addition of ordinarily resident would seem to fit the criteria for transitional arrangements. If the Minister could help us on why that is not the case, I would be interested.

[Baroness Sherlock]

My question is slightly different, but perhaps the Minister could answer them both at once. Are the costings net of any additional expenditure on pension credit?

[Lord Freud]

Yes, it is a net figure. On the legal position, clearly the noble Baroness will remember that we are in the European Union and there are definitions of which kind of payments are transportable, so to speak, and which ones can be restricted. That is where our legal issue comes from. Therefore, rather than go into huge detail on that—

--- Later in debate ---

[Baroness Sherlock]

My Lords, I shall speak briefly on this amendment. I was exceedingly brief last time, but since the Minister did not feel any compulsion to do likewise, I shall take my time this time round. The amendment again raises a particular question about transitional protection. I will not revisit the substantive debate that we have just had, but I want to highlight a couple of points. To do that, I want to use a case study given to us by DWP officials.

In this case, we have a couple who have been named Jack and Jill—a slight lack of imagination, but better than the DEL and AMI beloved of Treasury case studies. Jill reaches state pension age in 2020 and her husband Jack reaches state pension age in 2018. Conveniently, they have average life expectancy, so Jack survives until 2040 and Jill until 2044. In this case, Jill had 15 qualifying years of contributions.

Under the current system, Jill would get a married woman’s pension of £64. Under the new system she would get £62. But the real crunch comes when Jack sadly dies. At that point, Jill would receive £113 a week under the current system. Under the new system she would receive only £62 in single-tier pension. That is a huge difference and a real worry to the real Jills of this world, and even more so to those who outlive their husbands by more than two years. The Minister may say that Jill can claim pension credit, but the DWP did not tell me how much Jill has in the bank, so it may be that her savings would preclude that. Even if they do not, I have reason to believe that Jack always thought that his contributions would be enough to ensure that Jill got a pension without having to turn to means-tested benefits. I would be grateful if the Minister could comment on Jack and Jill.

There is some transitional protection in place and I want to be sure that I have understood it properly. If I understand the rules correctly, if the dependant—in other words the person seeking to benefit from the derived entitlement—reaches state pension age before 6 April 2016, he or she would be entitled to derived and inherited state pension as under the current system, but only based on the other person’s national insurance contributions as paid up to 4 April 2016. If he reaches state pension age before April 2016 but she does not then she gets no derived or inherited entitlement. In either case, it is possible for the surviving partner to receive 50% of the additional state pension accrued after 2002 and before April 2016, and between 50% and 100% of the additional state pension accrued under SERPS before 2002, depending on when the contributor reached or would have reached state pension age. I would be grateful if the Minister could confirm whether that is correct.

If it is, perhaps the Minister could answer a different question. He spent a lot of time in his response to the last amendment stressing the simplicity of this case in order to respond to a concern that I had made at Second Reading. I am flattered that he read it so carefully. However, does the Minister think that Jack and Jill’s case or the description that I have just outlined passes that simplicity test? If I am right, will the Government then tell the Committee two other things? First, what consultation have the Government done with the real Jacks and Jills of this world and, secondly and more crucially, what steps are the Government taking to identify and warn those couples who are in this situation and may still be married, widowhood not yet having broken in, what the impact of these changes will be so that they can start to make provision as soon as possible?

[Lord Freud]

My Lords, I have already set out the Government’s position on the issue of the ability of one individual to derive a pension based on another’s national insurance record. As the noble Baroness, Lady Sherlock, pointed out somewhat bitterly, I did that at some length, so I will try to be as brief as she was in dealing with this. I appreciate that the noble Baroness, Lady Hollis, wishes to discuss the three interrelated issues separately, so I want to address her specific concerns here.

It is the ability for individuals to receive a survivor’s state pension, often called a widow’s pension, to which we have now turned. Let me outline the different groups that this amendment concerns. These are, first, those who would otherwise have gained a married woman’s pension and, secondly, those who would not have been entitled to the married woman’s pension because they have more than the equivalent of a 60% basic state pension in their own right but less than 100%, so would otherwise have received a widow’s pension. There will also be some who, regardless of whether they derive any basic state pension, may have expected to inherit some additional state pension.

We are putting in place transitional arrangements for that last group for inherited additional state pension. This will mean that where a survivor is in a marriage or civil partnership with someone in the current system they will inherit additional state pension, as now. For those where both parties are in the single tier, the survivor will be able to inherit 50% of the protected payment, where one exists. This is what Clause 7 and Schedule 3 achieve.

Limiting inherited additional state pension and the ability to derive a widow’s pension will, however, mean that some people receive less. In terms of how much those losses are, we estimate that the figure will be about £8 per week in 2025. That is the median figure and is made up mostly of people receiving less by way of inherited additional state pension. This loss is also due to the fact that people cannot carry on building up additional state pension after 2016, limiting the potentially inheritable amount.

However, around three-quarters of people reaching state pension age in the first 10 years of single tier who would have inherited some additional state pension under the current system will receive more single-tier state pension over their lifetime than they would have in the current scheme. This is because the gain from current system inheritance at the point of bereavement—and, potentially, very late in retirement—will be more than offset by the gains in state pension as a result of the single-tier valuation and uprating arrangements.

I think that this particular point feeds through into the issue of fairness. We are giving less to some people but we are using those savings to fund higher entitlements at state pension age for many people. Many people will benefit when they are younger—and by that I mean at the point of state pension age as opposed to widowhood—and are more likely to spend the money than would be the case towards the end of their lives.

On the simplicity test, I have to acknowledge the point from the noble Baroness, Lady Sherlock, that there are elements of complexity in the transition. However, that is because of the current system, not because of the single-tier system.

On the related issue of communications, the core objective of our strategy on communications is to raise awareness of the changes, particularly among those significantly affected by the reforms or those reaching state pension age shortly after the reforms are introduced. As I said on Monday, I will be producing our communications package in the new year.

The noble Baroness, Lady Sherlock, mentioned two examples. I think that it would be best to take up the Jack and Jill example with officials later, but her second example seemed to be correct, and I have confirmation of that. I think that she interpreted correctly the different groups—that is, who is in single tier and who is out.

[Baroness Sherlock]

My Lords, when I used the example of Jack and Jill, I was not asking whether it was correct. Unless the officials have made a mistake—in which case I am sure they will let me know—I presume it to be so. I was simply using it to demonstrate how much somebody would lose under the system.

[Lord Freud]

I am sorry, I was not referring to the Jack and Jill question; I was referring to the second example, where the noble Baroness asked me whether she had interpreted it correctly. I have the pleasure of telling her that, as always, she is absolutely correct, except of course where she disagrees with me.

I will not go into the arguments on simplicity and clarity or fairness, because the same arguments apply. In the light of my response, I hope that the noble Baroness will withdraw her amendment.

--- Later in debate ---

[Baroness Sherlock]

My Lords, I thank my noble friend Lord McKenzie for giving us the opportunity to touch on this issue and for setting out the challenges in his characteristically clear and well informed style. I shall be very interested to hear what the Minister has to say in response.

I would be grateful if the Minister would answer the following questions. First, will he clarify whether all the routes to gaining national insurance credits which are currently available will continue to be available in the new system on the same terms? Secondly, if not, or if there is any doubt about that, have the Government consulted on changes or will they commit to a public consultation before making any changes? I include within that any changes that are implied or necessitated by the switch to the new pension system or the universal credit system.

My noble friend raised an issue concerning the Government’s strategy. In particular, I am concerned about the categories of people who have actively to make claims for credits and will not get them automatically, even under universal credit. I think he cited all the ones that I have been able to identify, plus child benefit, which I had not noted. Will the Minister tell us whether the Government’s strategy will include elements targeted at those categories of person? Within that, will they consider how they engage with direct routes, rather than just generalised campaigns? My noble friend Lord Browne mentioned that the Armed Forces look for ways to make sure that members of the forces community can take up those credits. Will the Government consider other routes to that—for example, through adoption services or the ways in which the Government already communicate with those in receipt of maternity, paternity, adoption or sick pay? Is the department in discussions with other government departments about the way to take this forward?

My noble friend Lord McKenzie also mentioned take-up. It would be helpful if the Government could report on take-up now and under the new system and tell us how they will monitor that and report to Parliament on it. Finally, will the Minister tell the Committee whether the Government have considered ways in which people might actively be supported in claiming credits for past years, which might now become important, where they would not have been previously?

[Lord Freud]

I thank the noble Lord, Lord McKenzie, for this amendment. I hope that I shall be able to offer some reassurances about the current arrangements and those within the context of the work that we are planning. The existing arrangements provide for national insurance credits to cover a wide variety of contingencies and activities, as he acknowledged. They are generally available to people who are unable to work and pay contributions. This could be because they are unemployed, incapacitated or caring for others, but credits are also available to cover a range of other circumstances—for example, jury service or if an individual is employed but is in receipt of working tax credit.

Credits protect a person’s national insurance record and their future entitlement to benefits. Under the current system, all classes of credits protect the basic state pension, and in certain circumstances an earnings factor credit can be awarded to protect state second pension entitlement, mainly for caring responsibilities and long-term incapacity. I can confirm that the crediting arrangements will be brought forward to the new system and that people will still be able to get credits to protect their single-tier pension position.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply and my noble friend Lady Sherlock for her questions. On the latter point, I am not sure that the Minister specifically dealt with whether there would be individual strategies focused on those types of people whom we particularly need to reach, such as carers. On the issue that was just raised about not accessing the benefits through other benefits, the point about contributory ESA and contributory JSA, as I understand it, is that you cannot achieve them only by credits; there has to be a payment arrangement as well to qualify. If the credit is changed, that makes it potentially more difficult than it is at the moment. The Minister mentioned the earnings factor credits but, as I understand it, those disappear because S2P obviously disappears as well in the new regime.

I am comforted by the fact that deficiency notices, perhaps in their new form, are to be reactivated once we get to the stage where the April 2016 data are available, which is helpful. I suppose that, broadly, one accepts that there is going to be a big communications strategy. I see that my noble friend Lady Sherlock is poised to ask a question, so I will give her that opportunity.

[Baroness Sherlock]

Before my noble friend withdraws his amendment, the reason I asked the Minister generally at the beginning about whether all the currently available routes to gaining NI credits would continue on the same terms was precisely to try to draw out the kind of things that my noble friend has been highlighting. If the Minister finds anything else which could possibly fall under that category when he goes back and consults more with his officials, perhaps he might write to us.

[Lord Freud]

My Lords, I will be pleased to do that.

Benefits: Sanctions

Debate between Lord Freud and Baroness Sherlock

Monday 16th December 2013 Lords Chamber

[Lord Freud]

As I just said, we are having one review, undertaken by Matthew Oakley. My colleague the Minister for Employment is also looking at this area very closely, and I am expecting the details of the review that she is overseeing to be published reasonably soon.

[Baroness Sherlock (Lab)]

My Lords, the Minister said that sanctions had not increased significantly. Perhaps he would look at a Written Answer given in another place to Mr Timms on 4 July, which suggested that the amount of money withheld from JSA in sanctions in 2009-10 was £11 million. Only halfway through 2012-13, it was £60 million. If it carried on at that rate, that would constitute a tenfold increase. Anyone who has ever been to a food bank will have heard horror stories about people being sanctioned for trivial or disgraceful reasons. Can the Minister please get a grip on this?

[Lord Freud]

My Lords, the relative figures are that since 2010 the volume of sanctions has run at between 3% and 5.5% whereas between 2005 and 2010 the rate was running between 2% and 4%. One of the most encouraging elements of the new regime is that the proportion of people on high-level sanctions has fallen quite steeply and is now down by 40% from 10,000 per calendar month to 6,000 per calendar month.

Pensions Bill

Debate between Lord Freud and Baroness Sherlock

Monday 16th December 2013 Grand Committee

[Baroness Sherlock]

My Lords, I wonder if I could just follow up on a couple of points. I thank the Minister for that response and I understand that, certainly at a £10 billion a year price tag, this would be a challenging reform to adopt. Could I ask him—I may have missed it and I apologise if I did—to respond to my questions about pension credit and passported benefits? If the Government are not going to able to bring existing pensioners into the new system can he give us a categorical assurance that pension credit will last throughout, and if so that the passported benefits on the back of that will come?

[Lord Freud]

My Lords, we are not changing the existing system for people who are on that system. Therefore that system, with the way that pension credit is set up, will not change for those people.

[Baroness Sherlock]

Forgive me, but may I therefore invite the Minister to put it this way: the Government have no plans to end savings credit, change its current value or change access to benefits currently passported on it?

[Lord Freud]

My Lords, I am happy so to confirm. As I say, for existing pensioners we have no plans to make any changes to the way that pension credit works. I have got a little bit more information. The cost of £10 billion is to get everyone on to single tier, and that is the cost to get all current pensioners to the illustrative £144 per week. I can confirm that cost is £10 billion per annum. This is a figure taken at 2016 and clearly that would reduce over time. The other issue that we discussed as we went through this was the 75% of people who see a change of less than £5 a week: this is not an average and most people will see only a small change compared to the current system.

--- Later in debate ---

[Baroness Sherlock]

On that point, have the Government therefore costed what might happen if they simply included this group in the system and not allowed them to choose?

[Lord Freud]

I will have to write with that estimate. There is every way of doing these estimates that one can imagine. That brings me to the amendment tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, which is to review how many women in this cohort are projected to derive a pension based on their spouse’s record. We have published a paper on derived entitlement, which covers the projected outcomes for people as a result of removing these provisions. As one may expect, individuals reaching pension age in the few years before April 2016 will have similar national insurance records to those reaching pension age in the few years after April 2016. As such, we can assume that the proportion of women in the cohort under question retiring under the current system who benefit from derived entitlement is broadly similar to the proportion of women reaching pension age just after 2016 who may be disadvantaged.

[Lord Freud]

My Lords, it is now in Hansard. We will spend some time on derived entitlement in later clauses, rather than going through that issue now. We will, I know, spend an awful lot of time on derived entitlement thanks to a certain set of amendments from the noble Baroness, so I have no fear at all that I will not be utterly explicit on this matter before the end of this Committee.

At Second Reading, the noble Baroness, Lady Sherlock, recognised that a line had to be drawn somewhere, but she asked the House to think carefully about whether it is right that twins of different genders should find themselves in different positions. Equally, one could ask whether it would be fair for people who reach state pension age on the same day—for example, the 65 year-old man and the 61 year-old woman—to be in different positions. The noble Baroness, Lady Sherlock, is absolutely right that a line has to be drawn. We have been clear and consistent that only people reaching pension age after the new system is implemented may receive a single-tier pension.

The noble Baroness asked whether these women would lose out. It is not a question of this particular cohort losing out; they simply will not receive a single-tier pension, just like everyone else reaching pension age before 2016. The Government have not changed these women’s state pension age and so there has not been a change in the pension that these women were expecting. Regarding the leading question on discrimination raised by the noble Baroness, I can confirm that any difference in treatment is as a result of the legislation providing for the change in pension age, which is not in this Bill, and we are satisfied that there is no breach of Article 14 of the ECHR on grounds of sex. This is justifiable in helping to pursue legitimate aims and achieving them in a timely way to achieve an equality of state pension outcomes between men and women generally.

[Baroness Sherlock]

I am trying to address these questions as I go, otherwise I will forget them. Does that legal advice also cover domestic law?

[Lord Freud]

That legal advice covers the full gamut of the legal position. On pension sharing, the average number of share orders is currently running to around 100 a year, so there is in practice a negligible impact on the gains and losses. We have written to all the cohorts affected by equalisation—

[Lord Freud]

I can confirm what the noble Baroness says: I am talking about the additional pension, not the state pension.

To summarise: the women in this group are getting the pension that they expected when they expected it. We have produced analysis on this group of women as well as on the impact of changes to derived entitlement. We need a clear start for the changes and, in line with the 2010 reforms, believe that that should be based on reaching state pension age. I urge the noble Baroness to withdraw her amendment.

[Baroness Sherlock]

Before my noble friend responds, I think that the Minister has ticked off all my questions and said that in fact these were incidental in terms of differences between the 1951-53 group and the 1953-60 group. Given that, I wonder if he could come back to the question that I posed: how is it, then, that those who retire in the first 10 years after implementation are apparently mostly going to be better off, whereas those in this group immediately before that will actually be worse off if they move on to the new system?

[Lord Freud]

It will be easier if I push that analysis of the figures into the letter-writing process rather than trying to summarise it off the top of my head, because it is quite complicated.

--- Later in debate ---

[Baroness Sherlock]

My Lords, I shall say very little. I am so keen to hear the answer to that last question that I shall race through my contribution even more so than normal.

My noble friend Lady Hollis has done the Committee a service by opening up the question of the level at which the single-tier pension will be set at introduction. Both she and my noble friend Lady Drake have drawn attention to the rather dusty view taken by different bodies of the Government’s refusal to do this.

The Work and Pensions Select Committee was very clear about the fundamental importance of the principle that the STP should be set above the level of pension credit. That is primarily about means-testing, and I was grateful to my noble friend Lady Hollis for making the point that, contrary to what one would think from some of the headline messages, the percentage-point reduction in means-testing is really very small, being somewhere between 2% and 3%. That is not very surprising. One of the notes that we were given explaining means-testing and single tier confirmed what I think a number of us had expected, which is that, while there is a small reduction in the number of pensioner households claiming guarantee credit—pension credit—a considerable part of the reduction in means-testing on pension credit relates to those who would have received savings credit. It has always been very easy to reduce the number of people involved in means-testing: just make benefits less generous or take them away faster. You simply reduce the level at which you can get them. Taking a benefit away from people may reduce means-testing; it is not in itself an achievement. More interesting is what the combined effect is.

The Government’s response to the Select Committee was to confirm that it was indeed a principle of the STP that it should be set above the standard minimum guarantee and would be thus set, and that Parliament would be able to debate it as the regulations would be affirmative. However, as my noble friend Lady Drake said, the Delegated Powers Committee pointed out that this is the first time that this is being set not in primary legislation but simply in regulations which cannot be amended. I confess that this is not an area of expertise—along with many things that I talk about—but I presume that the reason for this is that, when Parliament is debating the introduction of a new system, it is impossible to understand the implications for anybody involved unless one knows the level at which it will be introduced.

I spent the entire weekend, apart from a brief outing to the marvellous Durham Johnston Christmas concert, going through all the details trying to understand the impact on different people of all these changes. They are all predicated on the assumption that this will be set at £144. If that assumption proves to be untrue, or indeed if the triple lock proves not to be the case, then I have no idea what the impact will be or who the winners and losers will be, and all our debates today and in the many joyous weeks that we have to look forward to will be rather academic. Can the Minister be tempted to give us some level of clarity, at least about what the minimum level might be, in order that we can understand better the assumptions that the Government are making? I raised this question at Second Reading and, I have to say, got a rather dusty reply. The Minister said simply:

“We will need to decide that closer to implementation when the level of the pension credit standard minimum guarantee for 2016-17 is known. I am afraid that I cannot reveal all tonight”.—[Official Report, 3/12/13; col. 192.]

So I confess that it is not with a hopeful heart that I await the Minister’s response, but I await with fascination his response to my noble friend Lady Drake.

[Lord Freud]

I shall start with the question from the noble Baroness, Lady Hollis, referring to the previous amendment regarding men coming off guarantee credit. I commit to write to her with the data on the numbers coming off.

The central principle that these reforms represent is that the full amount of the single-tier pension will be above the basic level of the means-tested support for a single person. This provides a clear foundation for both private saving and automatic enrolment, and it builds on the broad cross-party consensus that has characterised the debate that there has been on pension reform: people need to save more, and to do that they need to know what they are going to get. The reforms are therefore not so much about spending more or less money on future pensioners but about restructuring the system to provide clarity and confidence to help people today to plan for their retirement.

In the White Paper, published in January 2013, we used an illustrative start rate of £144, which was above the minimum guarantee and forecast to stay within the projected spending on the current system. Every extra pound added to the start rate increases annual costs by £500 million in the 2030s. A start rate of 2% above the standard minimum guarantee would incur significant additional costs.

On the question from the noble Baroness, Lady Drake, on the narrowing of the gap between the standard minimum guarantee and the start rate of the single tier, the Green Paper said explicitly that the precise value of that start rate would need to be set at a level that met the affordability principle. The start rate that we will fix will need to be set closer to implementation, when the Government will be able to factor in both the 2016-17 level of the standard minimum guarantee and the latest economic and forecasting data.

The Committee will note that the regulations to set the start rate will be subject to affirmative resolution and will therefore be debated in this House. The noble Baronesses, Lady Drake and Lady Sherlock, asked why this is being done by affirmative resolution as opposed to in the Bill, as is the existing position. The different approach was flagged up by the DPRRC, although, interestingly, it did not recommend that we changed our legislative approach. That approach is consistent with recent legislation, such as establishing both the ESA and universal credit, and it is driven by not currently knowing what rate to use, given the enormous costs involved of getting that rate out even by a small amount from what it should be, relative to the means-tested level.

On contracting out, there is not a clear distinction between the people who are contracted in and contracted out. We estimate that even by the 2030s about 80% of people will have been contracted out at some point. The analysis we have done in the IA, as the noble Baroness, Lady Drake, pointed out, is based on the net state pension outcome, not the gross.

The stated intention of the Government is that the start rate should be above the standard minimum guarantee, and it is the Government’s intention that it should remain above the standard minimum guarantee into the future. That is why the Bill sets out that the single-tier pension will be uprated by at least earnings growth. There is flexibility in the legislation for discretionary above-earnings uprating, depending on the fiscal circumstances at the time.

I point out to noble Lords that where a couple both receive the full amount of single-tier pension, as a household they will receive almost a third more under the new system than the couples’ rate of the standard minimum guarantee. To promise a single-tier start rate at 2% above the basic level of means-tested support would mean that we could not guarantee that the reforms would be cost-neutral. With these reforms, we aim not to increase the amount spent on pensions but to provide clarity to support private saving.

On the question from the noble Baroness, Lady Sherlock, on the decrease in the numbers of those who are means-tested being driven by the end of savings credit, clearly the answer is yes, in part. However, that money is being used to provide the flatter state pension that is central to these reforms and it allows us to provide the single tier in a cost-neutral package, while simplifying the system. Although there is no Baroness Castle to barrack us from in front or behind, or wherever she did it, it clearly makes sense to go to a system that is less—or as little—reliant on means-testing as possible. This is the way to do that and I urge the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Lord Freud]

I will certainly be pleased to write on the thinking behind why it is net. As I say, I am not in a position to commit to anything on the gross figures at this stage, but I will set out the latest position in that area in that letter.

[Baroness Sherlock]

It would be very helpful if the Minister could write and confirm that it was net. It would also be helpful if he confirmed that the gross figures were not available to him and explain why not. It would be helpful if he could simply clarify why they are not available or why he does not have them.

Disabled People: Mobility Benefits

Debate between Lord Freud and Baroness Sherlock

Monday 2nd December 2013 Lords Chamber

[Lord Freud]

My Lords, we have had a very thorough consultation on this. I cannot bring to mind right now the exact level of consultation with the transport department. I will need to write to the noble Baroness with that information.

[Baroness Sherlock (Lab)]

My Lords, I wonder whether the Minister realises just how worried disabled people are. The whole transition to PIP has been in chaos. The Atos work capability assessment is a disaster, the bedroom tax is hitting them, disabled kids have had their benefits cut, and 100,000 people have signed a petition demanding a cumulative impact assessment of the Government’s changes. Is the Minister proud of the Government’s record?

[Lord Freud]

My Lords, we are handling an extraordinarily difficult economic and financial position. As noble Lords are of course aware, we have had a decline in GDP of 7.2% from its peak in 2008-09. That is more or less the same level as what happened in the 1930s. Handling that decline has been enormously difficult and one of the most interesting things about the way we have handled it generally is that, unlike every other developed country, we have spread the inevitable difficulties across the whole economy, rather than, as elsewhere, the poor being hit far worse than the rich. That has not happened in the adjustment that we have made in this country.

Scotland: Underoccupancy Charge

Debate between Lord Freud and Baroness Sherlock

Thursday 24th October 2013 Lords Chamber

[Lord Freud]

My Lords, my noble friend is right that the private rented sector basis is the local housing allowance, which is paid on the shape of the family who occupies. It is paid on the basis of how many rooms are required. Until now, there has been an imbalance between the provision in the social rented sector and the private rented sector, which this policy corrects.

[Baroness Sherlock (Lab)]

My Lords, the evidence is mounting. On top of evidence from the University of York and the University of Cambridge, in the past week alone the Archbishop of Wales has slammed the effect on Wales and now we have concerns from the Scottish Government. Perhaps most telling of all is a report I read this week in the Spectator by Isabel Hardman in which she suggested that Ministers were now referring to the spare-room subsidy as “Lord Freud’s idea” in an attempt to distance themselves from it? Would the Minister like to take this opportunity to rebut that outrageous slur?

[Lord Freud]

My Lords, a good idea has many fathers. Clearly, everyone in this Government is responsible for the bedroom tax and I am one of them.

Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Tuesday 15th October 2013 Grand Committee

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

My Lords, the regulations are regarded as being compatible with rights under the European Convention on Human Rights.

We updated the regulations last year with the introduction of the jobseeker’s allowance domestic violence easement, which recognised the challenge that the victims of domestic violence face when making the decision to flee a perpetrator. The easement made provision for jobseeker’s allowance claimants who are victims of actual or threatened domestic violence by a partner, former partner or family member to be exempt from jobseeking conditions for an initial four-week period, which may be extended to a total of 13 weeks where evidence is provided. The period allows those affected by domestic violence the time to focus on important priorities, such as organising new accommodation or arranging alternative schooling for dependent children, without also having to focus on meeting their jobseeking conditions.

Since 31 March 2013, the Government have implemented the revised definition of domestic violence. The Home Office carried out an extensive consultation with stakeholders to establish a definition that captured the full spectrum of what form domestic violence can take. Reflecting the advice of former victims and those professionals who work to support them, the definition goes well beyond physical abuse to incorporate sexual, emotional, psychological and financial abuse. The new definition specifically introduces controlling and coercive behaviour, as well as recognising that those aged 16 and 17 may be victims.

We are seeking to update the definition of domestic violence in the jobseeker’s allowance regulations so that it corresponds with the new cross-government definition. Through our existing regulations, we already give as much weight to a single incident of domestic violence as we do to multiple incidents, and we already include 16 and 17 year-olds under Regulation 14A. However, domestic violence was previously limited to specific types of abuse. We need to ensure that we incorporate the new definition in full.

I hope that the Grand Committee will accept that the change of definition is a positive and important step. For the first time, the definition recognises that victims may be subject to different types of domestic violence and abuse. It makes it clear that domestic violence can be many things, and is certainly broader than physical violence alone. By working to a single cross-government definition, we will enable victims and those who support them to be absolutely clear about what constitutes abuse and what support is available.

We know that the first incident reported to the police or other agencies is rarely the first incident to occur; often, people have been subject to abuse on multiple occasions before they seek help. Promotion of this definition should assist victims in coming forward and seeking help.

We know from the Office for National Statistics that 31% of women and 18% of men interviewed in 2011-12 had experienced domestic abuse by a partner or family member since they were aged 16. These figures are equivalent to 5 million female victims and 2.9 million male victims. This is a substantial issue for our society.

The Crime Survey for England and Wales has estimated that around 1.1 million adults experienced coercive control in 2010-11. That is why it is important to extend the definition of domestic violence to include such behaviour. It has been widely understood for some time that it is a core part of domestic violence. As such, this move does not represent a fundamental change in the definition but a recognition that coercive control is a complex pattern of overlapping and repeated abuse perpetrated within a context of power and control that it is important to highlight.

The introduction of the jobseeker’s allowance domestic violence easement and the destitute domestic violence concession last year was welcomed by external stakeholders and front-line staff. It is the first time that the Department for Work and Pensions has specifically supported the needs of domestic violence victims and their families within the welfare regime. The policies have been designed to give victims the additional support they need to get their lives back together and to put them on a secure footing after leaving a partner.

Having introduced the policy, the department took the decision to research how its implementation had worked in practice, in order to understand how well the policies have been operating and to ensure that we continually improve our service. Work is under way to implement the recommendations from the research that was published in June this year. It includes improving the understanding of the easement and concession among front-line staff through refreshed guidance. Messages will be directed towards these staff, including benefit centre staff, and will focus not only on policies but on supporting vulnerable customers sensitively.

The work also includes the use of management information, and its distribution to different levels of the organisation to give an insight into the use of the policies by location, and work with local partnership managers to promote the benefits of dialogue with local domestic violence stakeholders. We will continue to maintain strong relationships with stakeholders at national level to ensure that those issues are dealt with, that best practice is identified and shared, and that the latest evidence and analysis is used by the policy team to determine future activity.

It is of paramount importance to me that advisers are given the learning and support that they need to help them identify and help vulnerable claimants, not just through the financial support that Jobcentre Plus can offer but by signposting to the many local organisations that support victims at such a critical point in their life.

I hope that noble Lords will agree that these changes are worth while and that applying a common cross-government definition of domestic violence and abuse will make it easier for all to understand. I believe that it is a significant improvement to the help that we offer to victims of domestic violence. On that basis, I hope that the Grand Committee will support these changes.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for that very comprehensive explanation of these regulations. We on these Benches welcome the Government’s changes, not least because it is another stage in a process which began with a government amendment to the Welfare Reform Bill in this House in 2008-09.

I agree with the Minister that it is of the highest importance that victims of domestic violence are given the space and support necessary to rebuild their lives at the time that they move away from a situation of abuse. I think that the regulations have the potential to form an important part of that support. However, perhaps the Minister can reassure the Committee on a few points. First, simply in terms of the definition—which seems to be helpfully broader than the one that it succeeds—can the Minister confirm for the record that no one who is covered by the current regulations would be excluded by the extended definition?

The Minister referred to the cross-government definition of domestic violence that is now being used. It clearly makes sense to have a definition in these regulations which is coherent with that but, looking at the cross-government definition, unless I am mistaken, there seems to be a difference between the two. The new cross-government definition of domestic violence and abuse refers to:

“Any incident or pattern of incidents of controlling, coercive or threatening behaviour, violence or abuse”.

I do not think that threatening behaviour is covered in these regulations but I may have made a mistake and perhaps the Minister can point out to me where it is. If there is a difference between what is in the regulations and what is in the cross-government definition, can the Minister explain to the Committee why that is the case?

Next, can the Minister tell us whether the Government are about to bring forward changes to the universal credit regulations? Otherwise, of course, we would be in the deeply unhappy position of having a difference between the regulations affecting those claiming jobseeker’s allowance and the very many people who I am sure will be claiming universal credit any month now. Perhaps he could reassure us as to what is happening with that. Do the Government propose to bring forward amending regulations and, if so, when? How many people will be claiming universal credit at the point at which they will be changed?

I looked at the research that has been done on both the easement and the DDV, which the Minister referred to, and very helpful it was too. The Minister referred to some action that has been taken to follow up the recommendations of that DWP research from June this year. The Committee may wish to note that I counted 15 recommendations specific to the DWP; I have chosen to pass over for the moment the recommendations for further research that are also contained in the report. Can the Minister tell the Committee which of those 15 recommendations to the department have already been implemented in full? If he does not have that information to hand, will he write to me to confirm that? It would seem important that those recommendations are implemented very soon, and the department has had since June to do that.

This matters because the research showed that, despite the fact that we have high levels of domestic violence reporting in this country, the take-up of both the easement and the other policy are actually quite low. The government report said:

“We know from official statistics that DV rates overall are high, affecting one in three women, and that it is particularly prevalent among unemployed women. Yet the Jobcentre Plus offices visited with the highest numbers of JSA DV Easement cases were reporting fewer than 20 cases overall during the course of a year”.

If I read this correctly, only 338 cases of the four-week easement and 115 cases of the full 38-week easement were taken up as part of the JSA domestic violence easement. That seems incredibly low given the levels of reported domestic violence, and the report points out that those domestic violence reported rates are higher among unemployed women. Is the Minister comfortable that the policy has been properly understood and implemented by his officials? If not, how soon does he expect to feel confidence in that situation?

I have one further question. When these regulations were debated in the other place, the question was raised as to whether the position of 16 and 17 year-olds was the same as that of those aged 18 and over. Can the Minister clarify that for the record?

Subject to the answers to those few questions, we on these Benches are pleased to welcome this definition and look forward to hearing what the Minister has to say.

[Lord Freud]

I thank the noble Baroness for that. I know she has a concern in this area. Clearly, domestic violence is a dreadful form of abuse. We as a Government are committed to providing better support for victims. This is the first time that the definition recognises that the victims may be subject to a wide range of domestic violence and abuse.

On her specific question about whether the move from the old to the new has left any form of abuse stranded and not covered, I am happy to confirm that there is no situation covered in the old form which is not covered in the new form. The attraction of having a single definition is that it makes it much clearer to everyone—supporters and victims alike—what constitutes the abuse and that they can go to all government agencies for help with particular types of abuse.

Running through the questions in no particular order, on the 16 and 17 year-old question, our regulations are set out in such a way that they refer to all claimants. Clearly there are 16 and 17 year-olds who are claimants and therefore we do not have to specifically talk about 16 and 17 year-olds because they are automatically covered.

The other point raised about the structure of the regulations concerned why the definition is not replicated exactly. This is just about wording; the practical effect is the same. It needed to be worded in a way which, in drafting terms, was consistent with the powers in paragraph 8B of Schedule 1 to the Jobseekers Act 1995, which talked about domestic violence which is inflicted or threatened. The conduct we are defining must therefore be capable of being inflicted or threatened. In that light, the reference to “threats” and the “threat” of coercive behaviour, and “threatening behaviour”, are in practice surplus to requirements: one does not threaten to threaten. That is the trouble when one has other legislation into which one needs to fit things. That is all it is.

Housing: Under-Occupancy Charge

Debate between Lord Freud and Baroness Sherlock

Wednesday 9th October 2013 Lords Chamber

[Lord Freud]

My Lords, I have not, of course, made any specific recommendations to people. Let me just go through the point. We are monitoring this change very closely. It is in its early stages as people start to adjust. We have put in a lot of discretionary housing payments; the total is £180 million this year. The early returns—and I stress they are early returns—show that local authorities are either managing those well or are underspending at this particular time.

[Baroness Sherlock (Lab)]

My Lords, does the Minister accept that last week the courts ruled that a woman with multiple sclerosis was entitled to have a bedroom separate from her husband because otherwise her human rights were breached? The courts have now ruled that disabled children and disabled adults can have their own rooms. These savings are vanishing before our eyes, and there are no rooms for people to move into because there are no smaller properties. Do the Government accept that the National Housing Federation has described this policy on its six-month anniversary as being a “cruel failure”? Is that not right, and will the Government not change their mind now?

[Lord Freud]

First, I congratulate the noble Baroness on moving to her new position. I look forward to many constructive exchanges with her, although perhaps not this one. We are currently moving to ensure that disabled children who need spare rooms will have them, and regulations on that are going through consultation. In the case of disabled adults where there was a judicial review, the judges decided that the policy was appropriate and did not breach any equalities duty.

Social Security, Child Support, Vaccine Damage and Other Payments (Decisions and Appeals) (Amendment) Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Monday 8th July 2013 Grand Committee

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

My Lords, I am pleased to introduce this instrument, which was laid before the House on 13 June 2013. I am satisfied that it is compatible with the European Convention on Human Rights.

The regulations provide for the introduction of the mandatory reconsideration process for vaccine damage payments, child support maintenance payments, mesothelioma lump sum payments and all social security benefits, save for universal credit and personal independence payment, which have been subject to mandatory reconsideration since April this year.

Currently, a claimant can ask for a decision to be reconsidered by a decision-maker, which may result in a revised decision. In practice, however, many people do not do so and instead make an appeal from the outset. This is more costly for the taxpayer, time-consuming, stressful for claimants and their families, and for a significant number of appellants unnecessary. I say this because the reason that the vast majority of decisions are overturned on appeal is because of new evidence presented at the tribunal.

I hope that noble Lords will agree that we need a process that enables this evidence to be seen or heard by the decision-maker at the earliest opportunity. It is accepted that this does not mean that all decisions will be changed and that appeals will be unnecessary, but we believe we should have a process that at least promotes this possibility. Mandatory reconsideration does just that.

Mandatory reconsideration will mean that applying for a revision will become a necessary step in the decision-making process before claimants decide whether they wish to appeal. Importantly, the intention is that another DWP decision-maker will review the original decision, requesting extra information or evidence as required via a telephone discussion, and, if appropriate, correct the decision. When this happens, there is no need for an appeal—an outcome that is better for the individual and better for the department.

I assure noble Lords that claimants will of course be able to appeal to Her Majesty’s Courts and Tribunals Service if they still disagree with the decision. The means of doing this will be set out in a letter detailing the outcome of the reconsideration and the reasons for it. We would hope that because of the robust nature of the reconsideration and the improved communication, this new process will result either in decisions being changed or, where this does not happen, claimants deciding that they do not need to pursue an appeal.

We undertook a formal consultation before we introduced mandatory reconsideration for universal credit and personal independence payment. A number of respondents suggested that there should be a time limit on the reconsideration process and there have been further representations about this. While we understand the concerns, we are not making any statutory provision for it. Some cases are more complex and require additional time—particularly, for example, cases where extra medical evidence may need to be sought. Others will be completed in days. It will be a case of considering each case on its merits.

However, we are considering the scope for internal performance targets. While these will reflect the requirement to deal with applications quickly, it will not be at the expense of quality. The process will fail if clearance times become the driver. We will be back with unnecessary appeals and all that that entails. It is a balancing act which we must get right. We will monitor developments closely and adjust accordingly. We may in due course learn from the experience of UC and PIP but at this time we have had so few requests for mandatory reconsideration that we have not as yet learnt anything which will inform our future handling of these applications. We will of course continue to monitor the situation ahead of October.

I turn now to the payment of benefit pending reconsideration and appeal. This has caused a lot of concern, particularly in relation to employment and support allowance. First, I want to make the point that there is no change from the current policy. If someone is refused benefit under the existing provisions and they request a revision of that decision, benefit will not be paid pending the consideration of that request. It will be the same for mandatory reconsideration. Secondly, there is no change in relation to appeals. If someone appeals a decision under the existing provisions, no benefit is paid pending the appeal being heard—save for ESA, which I will come to. This must be right. It would be perverse to pay benefit in circumstances where the Secretary of State has established that there is no entitlement to benefit.

I turn now to ESA. At the moment, if someone appeals a refusal of ESA, it can continue to be paid pending the appeal being heard. This is not changing. What is changing is that there can be no appeal until there has been a mandatory reconsideration. There could therefore be a gap in payment. However, during that period—and I repeat my message that applications will be dealt with quickly so that this is kept to a minimum—the claimant could claim jobseeker’s allowance or universal credit. In other words, alternative sources of funds are available. The claimant may choose to wait for the outcome of his application and, if necessary, appeal and be paid ESA at that point. It is accepted that the move from stopping ESA to claiming and being paid jobseeker’s allowance will not happen overnight, but provided that the claimant does not delay in making his claim, the wait for his first payment of jobseeker’s allowance should be short.

Finally, another change to mention linked to the introduction of mandatory reconsideration is that all appeals will be made directly to HMCTS and not as now to this department. This change brings the DWP in line with other departments’ appeals processes. This is a positive move as it will allow HMCTS to book hearing dates more quickly than is possible currently. The department believes that the regulations will result in a clearer, escalating dispute process that will deliver a fair and efficient system for people who dispute a decision. I commend this statutory instrument to the Committee.

[Baroness Sherlock]

My Lords, I thank the Minister for his explanation of these regulations, which will extend the provision of mandatory reconsideration to a range of benefits and payments administered by the DWP. I also thank the Minister for clarifying which benefits the regulations will apply to—I understood him to say that they would apply to all benefits administered by the DWP with the exception of universal credit and PIP. When he comes to respond, can the Minister clarify the way in which these regulations will apply specifically to JSA and ESA? I had thought that they were in some part addressed by earlier regulations. It is possible that only the direct lodgement elements of JSA and ESA are affected by these regulations, the commencement having been done by the previous set. Perhaps the Minister could clarify that when he comes to respond.

Social Security (Disability Living Allowance, Attendance Allowance and Carer’s Allowance) (Amendment) Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Monday 24th June 2013 Lords Chamber

[Baroness Sherlock]

My Lords, I should begin by acknowledging all the work done by the noble Lord, Lord Alton, in bringing to the attention of the House, not just today but repeatedly, the concerns of people who are in receipt of mobility payments and who are worried about the effect of these changes and the way they are being implemented.

This debate this evening has made very clear just how important Motability cars and other mobility schemes are to so many disabled people. I was very moved by the account just given by the noble Baroness, Lady Masham, who explained so well the consequences for so many people; of how important it has been to have access to these cars and the fears that would accompany their departure.

The scheme, as Motability itself puts it, gives disabled people,

“the freedom to get to work or college, meet up with friends, enjoy a day trip out with their families, attend a medical appointment, or go shopping; to enjoy the independence that so many of us take for granted.”.

Yes, quite so. One of the things that we have struggled to get to tonight is the game of numbers—a point made by the noble Lord, Lord Alton, the noble Baroness, Lady Thomas, my noble friend Lady Hollis and others. It has proved very difficult to get a clear picture of just how many people will be affected by these changes since the Government have so far been unable to give us precise figures for those who might lose their cars or adapted vehicles. My noble friend Lady Hollis offered up 180,000. In the absence of anything from the Government, I suggest we all adopt that figure tonight. If the Minister will not accept that, please could he give us his own figure?

In past debates, the Minister has contended that because the decision to lease a vehicle is an individual one and the contract between the individual and Motability is a private one, it is not a matter for the Government. In response to that, first, the noble and learned Lord, Lord Hardie, made the very interesting point that if direct payments are made, the Government must know that information. Even if they do not, irrespective of the fact that a number of people will choose no longer to lease a vehicle, a number will automatically lose theirs simply by virtue of the fact that they will no longer be entitled to the enhanced rate when they transfer to PIP. The Government surely must have at least an estimate of what those numbers will be. Could they please share those numbers with us? Could the Minister tell us his best estimate tonight?

Secondly, if the Government intend to press ahead in the way they have announced, those affected will clearly need to make plans about how to manage the effects of the changes. What are the Government doing to publicise the changes and inform people who will be affected? The noble Lord, Lord Alton, and my noble friend Lady Hollis asked what transitional arrangements would be put in place for people losing their cars. The Government have told the House previously that they were in discussions with Motability but could not then give further detail. The noble Lord, Lord Freud, has said previously that he had sympathy with the concerns of the noble Lord, Lord Alton, and he was keen to find a way of supporting people during the transitional period. In the debate on 13 February, the noble Lord, Lord Freud, said in response to my noble friend Lord McKenzie of Luton:

“We are actively exploring what extra support we can give to disabled people to ensure that they can still get to work. We are looking at whether we can use access to work as that particular vehicle. We want to ensure that mobility support remains in place during any transition between the Motability scheme and access to work”.—[Official Report, 13/2/13; col. 740.]

What is the position on Access to Work, an issue also raised by my noble friend Lady Wilkins? Will it be possible to use Access to Work for this? What will happen with transitions? Will the sums of money available be enough to deal with the kinds of things described by my noble friend? Where have the Minister’s conversations got to? Also, where have his discussions with Motability reached? Will he provide more information as to what transitional measures might be put in place? In particular, what opportunities will be given to claimants to either buy or continue to lease adapted vehicles, and at what price? Will he clarify the position of in-patients in hospitals? That point was raised by the noble and learned Lord, Lord Hardie, the noble Baroness, Lady Thomas, and others.

This would also be a good time for the Minister to give the House some more information about the new consultation on PIP criteria and how that will link in with the inception of this new scheme—a point made by many noble Lords, understandably. It might help if the House understood more of the Government’s thinking on questions such as the 20/50 rule and the issues on which other campaigners have been pushing the Government to consult. How will this affect people in receipt of the higher rate of DLA who use Motability cars? What advice would he give them at this stage, looking ahead and trying to plan?

There is then the question of geography, raised by the noble Lord, Lord Wigley, and that of people in rural areas, raised by my noble friend Lady Hollis and the noble Baroness, Lady Masham. Have the Government done any assessment of the variable impact around the country? Can we even have a sense of impact by region, or the difference between urban and rural impact? I am sure that the Government would not have made a change on this scale without having considered that. Will the Minister share that with us?

Finally, at the risk of running slightly wide of the Motion, has the Minister given any thought to the context in which these changes are taking place? We know that support for disabled people wanting to move into work has been in trouble. The Work Programme is struggling generally and is clearly failing to help disabled people into work. The latest report from the Employment Related Services Association suggests that the numbers of people on ESA getting a job start as a result of referral to the Work Programme are terribly low: just 6% of referrals in the ESA flow payment group had a job start, 5% of those in the ESA volunteers group, and just 2% of referrals in the ESA ex-IB group. Given that, will the Minister take this opportunity to give the House some reassurance that the Government are concentrating in a cohesive and integrated way on the kind of support needed to help disabled people into work and to support them when they are there?

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

My Lords, I have some difficulty in framing this answer because the debate was very wide but the regulations we are discussing are actually extremely narrow. What we are actually discussing is bringing the treatment of patients in hospital into line between those who receive Motability and those who stop receiving it after a certain period. There was an exemption for the Motability element and we are just bringing the two into line. I acknowledge that there has been a very wide debate on the whole area but we are talking about something that is actually much narrower. I hope noble Lords will understand as I try to juggle the two. I will try to deal with some of the wider issues but I will deal with the actual issue first.

I will set a little bit of context by saying that even in these hard economic times this Government continue to spend around £50 billion a year on disabled people and services to enable those who face the greatest barriers to participate fully in society. That figure compares well internationally. We spend almost double the OECD average as a percentage of GDP—2.4% against the OECD average of 1.3%. Only two out of the 34 OECD countries spend more. Through the reforms of DLA and the introduction of PIP, we will make sure that the billions we spend provide more targeted support to those who need it most. Three million people will continue to get DLA or PIP and half a million will actually get more under the new system.

While I am on figures, to answer the question from the noble Lord, Lord Alton, about the money flow to Motability, £1.6 billion went through to it in terms of transfer of benefit. My noble friend Lady Thomas asked what happens to the transfer. Clearly we recognise that some people will lose out but we have sought to ensure that those who lose out are those whose disabilities have the least impact on their participation in society. On our sampling of this, many people—more than half a million—will be winners under PIP.

The UK has a proud history in furthering the rights of disabled people and we want to ensure that all people are treated fairly. The provisions under debate, which also apply to claimants of PIP, are a case in hand. They ensure that everyone receiving the mobility component of DLA or PIP in the future will be subject to the same payment rules, whether or not they have a Motability vehicle. The history of this was that when the mobility component of DLA stopped being paid to hospital in-patients in 1996, transitional provisions were built in, including a measure which allowed for payments to continue in order to cover the costs of the lease on a Motability vehicle. These arrangements represented a reasonable adjustment at the time for those in-patients who were committed to a mobility contract when the rules changed. However, noble Lords must understand that any lease held by someone in 1996 will have now long expired and these arrangements are past their sell-by date for the users affected at the time.

In response to the question from the noble and learned Lord, Lord Hardie, about consultation, we clearly signalled our intention to implement this change in our consultation on the detailed design of our reforms to DLA. In that consultation we made clear that this change was not intended to penalise Motability users but to introduce fairness between how we treat those who chose to take out a lease with Motability—some 600,000 people—and the vast, or substantial, majority who do not, which is 1.1 million people.

Unemployment: Young People

Debate between Lord Freud and Baroness Sherlock

Thursday 20th June 2013 Lords Chamber

[Lord Freud]

My Lords, one of the recommendations of the Wolf report, which, as noble Lord’s will remember, I am very enthusiastic about, is to underpin the importance of apprenticeships and vocational training. In the latest year for which I have a record, 2011-12, we had more than half a million apprenticeships—520,000. That is up 86% on the two years before. Clearly this is one of the most important ways in which to get youth back into the workforce in a sustainable way, and it is something that we are pursuing aggressively.

[Baroness Sherlock]

My Lords, the Minister might not realise that one consequence of our very, very slow growth is that 1 million young people are out of work. In the north-east, where I live, a quarter of young people are out of work. We now need something really radical. May I make a suggestion? Labour’s job guarantee would mean that any young person out of work for a year would be guaranteed a job and would have to take it. Will he match that?

[Lord Freud]

My Lords, we have a huge number of programmes in our youth contract to encourage people into work. One thing I need to emphasise is that we have a long-term problem of disengaged youth, which we had right through the longest boom we have ever had. The real measure here is people not in education or work. In 2001, that figure stood at just shy of 1 million and it rose through the boom period. Since the election, we have pulled it down by 60,000. The figure currently is 1.3 million. It is a real problem that cannot be brought down with short-term programmes; it is brought down by fundamentally restructuring how youngsters are supported—through vocational education as a key underpinning to get these kids into meaningful long-term work.

Child Support and Claims and Payments (Miscellaneous Amendments and Change to the Minimum Amount of Liability) Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Wednesday 12th June 2013 Grand Committee

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

My Lords, this instrument was laid in draft before the House on 20 May 2013, and I confirm to the House that I consider it as being compatible with the European Convention on Human Rights.

The minimum amount of liability, more commonly known as the flat rate, is applied to non-resident parents whose gross weekly income is more than the flat rate itself and less than £100 per week. It also applies to all non-resident parents who are in receipt of certain prescribed benefits. The flat rate was set at £5 in 2003 and has not been uprated since. The Child Maintenance and Other Payments Act 2008 made provision for increasing the flat rate of child support for cases dealt with under the rules of any scheme established under the terms of the Act. The change has yet to be brought into force.

The increase provided for in the 2008 Act was from £5 to £7. However, because the 2012 scheme launched as a relatively small-scale pathfinder when it began on 10 December 2012, technical changes were applied to the 2012 scheme calculation regulations to ensure that the flat rate remained at £5. The flat rate for the 2012 scheme will remain at £5 for the duration of the pathfinder and will increase only once the 2003 scheme closes to new applicants. This is to ensure that all new cases will be subject to the same flat rate, regardless of whether they are directed to the 2012 scheme pathfinder or the 2003 scheme.

It is intended that the increase to the flat rate made by the 2008 Act will be brought into force later in the year, when the 2012 child maintenance scheme is opened to all applicants. This instrument makes certain consequential amendments as a result of that increase. The policy intention behind the increase is primarily that the value of the flat rate should be restored to its 2003 real value. This will reinforce the principle that parents have an obligation to support their children where they have the means to do so.

At £7, the increased flat rate will represent broadly the same value as the £5 flat rate when it began. For example, when the flat rate was introduced in 2003, £5 represented 9% of the benefit of a single person over 25 years of age on jobseeker’s allowance. The annual uprating of benefits has meant that the same £5 represents just 7% of the benefit of a single person over 25 years of age on jobseeker’s allowance. A flat rate of £7 represents 10% of the benefit of a single person over 25 years of age on jobseeker’s allowance, restoring the value of the 2003 flat rate.

The proposed flat-rate increase will also amend the percentages applied to the reduced rate of child support maintenance payable if the non-resident parent has an income of less than £200 but more than £100. This will mean that the maintenance liability of parents on the reduced rate will increase in order that the reduced rate continues to smooth increases in liabilities between the flat rate and the basic rate, which is used for those parents earning £200 or more. The Government are also committed to a wider review of the child maintenance calculation formula, with a particular focus on work incentives, once we have delivered the current raft of reforms.

The regulations before us also make miscellaneous amendments in relation to variations, which are those rules that allow for a deviation from the usual child maintenance calculation rules in certain limited circumstances. A variation could increase or decrease a child maintenance liability. For example, if a parent receives unearned income from property, savings and investments or casual earnings, this could increase their liability. On the other hand, if they incur special expenses, such as the cost of travelling to see a child, or boarding school fees, this could reduce their liability. I should make it clear that the changes contained in these regulations affect only those variations that increase liability.

The 2012 scheme is designed to work with historic income information obtained annually from HM Revenue and Customs. The changes proposed will allow that, where the information cannot be obtained electronically from HMRC, we will be able to determine unearned income by reference to information supplied by the parent in relation to the most recent tax year. This change will make for a more efficient means of obtaining reliable unearned income information and therefore allow for a more accurate calculation of maintenance liability.

In addition, the amendments will clarify that where a variation would decrease a non-resident parent’s income for child maintenance purposes to the point that their liability would fall to below the flat rate, even if the variation is agreed, the amount of maintenance that the parent will be liable for will none the less remain at the flat rate. This is in order to strike a balance between reducing liability to take account of special expenses and ensuring that children continue to benefit from some financial support. It puts children first. This will also ensure consistency between a non-resident parent who has their maintenance reduced to the level of the flat rate through a variation and a non-resident parent on the flat rate. A non-resident parent in the latter situation cannot apply for a special expenses variation.

As has always been the practice throughout the development of the 2012 scheme regulations, we have undertaken extensive stakeholder engagement. The proposed increase to the flat rate was subject to a formal consultation in 2011, and stakeholders made it clear that they believe that an increase in the flat rate to £7 is warranted. We have met stakeholder groups since that consultation, and on careful reflection we are persuaded by their arguments and have decided that the flat rate should increase to £7. We will closely monitor the regulations, along with other child maintenance policy changes, to ensure that all the activities in the new 2012 scheme are delivering the intended outcomes.

I hope that that short opening speech reassures the Committee that the changes we have proposed are sensible ones that have been developed with the aim of delivering an efficient statutory child maintenance system. These changes will ensure an appropriate increase in the amount of maintenance flowing to children. They will also make for a more efficient and accurate variations regime. I commend the instrument to the Committee.

[Baroness Sherlock]

My Lords, I thank the Minister for his introduction of these regulations. We could hardly oppose provisions enabling the increase in the flat-rate maintenance amount from £5 to £7, as they flow from the 2008 Act, which was the legislation of the previous Government. The Government were right to listen to stakeholders and to draw back from their original intent of increasing that to £10. As the Minister has indicated, the £7 figure will keep the amount at about 10% of the basic over-25s JSA rate, and the increase should therefore mean more money for children.

I understand from both the documentation and the Minister’s introduction that the regulations are not intended to come into force until the introduction of the 2012 scheme, so the utilisation of gross income in the calculation is used “for all purposes”. Perhaps the Minister could clarify that; otherwise I will have to read the record to see when exactly this is going to come into force. Is it intended to refer to the time when the 2012 scheme is open to all new applicants or the time when the 2012 scheme will have replaced the 1993 and 2003 schemes? If the latter, could he clarify now when the Government expect that to take place?

We have also heard that the regulations cover other “consequential” matters. As the Minister indicated, one of these is the revised rate calculation that applies where the non-resident parent has income of between £100 and £200. The rates in the regulations are lower than those provided for in the 2012 regulations, and perhaps the Minister could explain why. I imagine that it relates to the effect of raising the flat rate but it would be helpful if he could confirm that, as well as setting out the impact on the levels of child maintenance liability for non-resident parents earning between £100 and £200. I would be grateful if he could give some indication of the range of changes—what is the smallest and largest amount by which the future liability will differ from the past? That would give us an indication of whether they are indeed large or small in their impact. I would also be grateful if the Minister could confirm what would happen to someone earning precisely £200. Is there any danger of a cliff-edge when someone moves from below £200, where the reduced rate applies, to £200 where the standard rate will apply?

Mesothelioma Bill [HL]

Debate between Lord Freud and Baroness Sherlock

Monday 10th June 2013 Grand Committee

[Baroness Sherlock]

My Lords, I thank the noble Lord for taking the trouble to look into that and for the gracious way in which he has acknowledged his error. Of course I am happy to forgive him for this and for any similar offences. However, can he reflect for a moment on the consequences of the change? Although I confess to a tendency to pedantry, on that occasion I do not think I was simply being pedantic. I was trying to draw a distinction between whether the matter was a liability for which the insurance company would wish to reserve or a running cost for which it would have to plan, because I understood that the Minister had used the fact that an insurance company would not be permitted to reserve before a certain date as an argument for why the scheme could not start before 25 July. Had that been the case, I would imagine that no such restraint would exist in the case of planning for a payment. An insurance company can plan for a future level of running costs based on its own judgment, not on any auditing limitations. Will the Minister respond to that?

[Lord Freud]

In the interests of time, the best thing I can do today is to accept the fantastic offer of future forgiveness for anything I may say, and in return I promise to reflect on the consequences of the change.

Let me move on to all the other points that have been made. I promised to write to the noble Baroness, Lady Golding, about the Prison Service’s work, to the noble Lord, Lord Browne, on Clause 2, and to the noble Lord, Lord McKenzie, on three counts. A letter is now being sent to Peers and a copy has been placed in the Library. Judging from some side conversations that I have overheard, I am sure there will be further discussion on one or two of those matters. Having dealt with those issues, let me turn to the subject under discussion as set out in Amendment 16.

I understand noble Lords’ wish to ensure that if we are to express payment amounts in relation to civil damages, the data we hold on average civil damages in mesothelioma cases should be current. However, I must reject the proposal to require a yearly review on the grounds that it would not be fruitful due to the volume of mesothelioma cases. Reviewing civil cases on a yearly basis would be too frequent to show any trends or changes in the awards. Indeed, the data that we hold on the initial trawl for the period 2007 to 2012 show this. In this case, it takes a bit longer for meaningful trends to appear.

It should also be said that gathering the data is pretty costly, and in the interests of value for money we need to make sure that they are gathered at intervals that allow us to identify change. One year is too short a period for this, so a review of the data every five years is more appropriate. If we were to accept the amendment, costs would be incurred from gathering data on an annual basis, and further costs would be involved through the requirement for these reviews to be carried out by an independent body. As part of the monitoring planned, civil compensation amounts in mesothelioma cases will be reviewed, but there is no need for a separate body or for annual reports. Furthermore, I can give my assurance that this area will not go ignored.

I also offer the reassurance that we shall not just assign a fixed tariff to this and then ignore it. Far from it. Along with the monitoring of data from civil cases that I have just mentioned, I can confirm for the noble Lord, Lord McKenzie, that we intend to uprate the tariff on an annual basis in line with the consumer prices index. The noble Lord went on to put a vast number of specific questions to me, and we shall touch on quite a few of them later. However, perhaps I may pick up the point about legal fees, although we will deal with them in due course. A figure of £7,000 was mentioned, and more recently £2,000 was mentioned. In practice, it will probably come in at something in between, but we will deal with fees in the fullness of time.

A set of questions was based on what will happen if we collect more or less than we expected. The DWP will underwrite any under levy after the first four years through smoothing. Any over levy will be paid to the Consolidated Fund, as required by HMT.

Clearly, we will be setting a figure initially, then reviewing it. That is our best guess of the right kind of figure that we will be using. We moved the 76% figure to 70% on the basis of what the likely amount was that would minimise the risk of those costs being passed to British industry. This became clearer during the process of negotiation. Rather than go into the specifics about the 2.61% being consistent with the 2.24%, I will add that to a letter.

I hope with the commitments that I have made on how we are planning to set this levy, I reassure both the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, on this matter, and I urge them not to press their amendment.

Mesothelioma Bill [HL]

Debate between Lord Freud and Baroness Sherlock

Wednesday 5th June 2013 Grand Committee

[Baroness Sherlock]

The Minister is again speaking of reserving for the liabilities. I am grateful to the noble Lord, Lord James, both for sharing his considerable expertise and experience and for helping me to understand that I clearly phrased my previous question poorly. I was trying to ask the Minister whether, when he refers to insurance companies reserving for the liabilities, he makes any distinction between the fact that an insurance company would in the ordinary run of things reserve against a future liability that would crystallise if and when somebody whose employer had been insured by that insurer were to develop mesothelioma, and the fact that what an insurance company will have now is arguably not a liability but a requirement to pay something that is more like a tax. Here, I declare an interest as a member of the board of the Financial Ombudsman Service. Is this situation not more like some aspects of the levy applied by the FCA on relevant financial services companies, which requires them to contribute, for example, to the cost of the Financial Services Compensation Scheme? In other words, it is an annual cost that is fixed by the body imposing the levy and not a liability that arises directly from activities of the company. Therefore, does the question of reserving not apply at all?

[Lord Freud]

What happens is that insurers have to provide that they have sufficient funds to meet their liabilities. The levy is a hypothecated tax that they have to pay so that their ability to meet their liabilities is monitored by the Financial Conduct Authority, the FCA—or the FSA, to those of us using old money. The insurer could not pre-empt the outcome of the consultation. That was something that they could not do and did not do, as I understand it.

--- Later in debate ---

[Baroness Sherlock]

I would like to offer the Minister a way of reassuring us on this because we may be talking at cross-purposes.

Obviously, if an insurance company finds that its annual costs of doing business by staying in the market and providing active employer’s liability insurance are going to be higher, it will need to make sure in its usual planning that it has the resources available to enable it to pay the annual costs of doing business to stay in that market. That is not the same thing as saying it must reserve formally against liabilities that it has. That, as I understand it, is the Minister’s main argument as to why they could not have begun this process earlier. If it were about reserving for liabilities, there are clear regulatory requirements and negotiations with auditors that would constrain the point at which the insurance company could start doing this.

However, if we are simply looking at a higher annual cost—and I am not suggesting that that is not a relevant or material consideration to the company—of remaining in the market which is unrelated to the nature of the specific policies that were written, there is presumably no reason why the insurance company could not have planned for that by reading carefully, as I am sure it did, the document published by my noble friend Lord McKenzie. This showed clearly that the Government wished to intervene in this area and the options on which they were consulting, all of which would clearly have required the industry to pay out. It was clear that that was coming down the track.

A way for the Minister to solve this would be to answer my other question. Could he provide—either now or by the next sitting—some evidence of an insurance company that has reserved since the announcement was made in 2012? There must be companies that have a 2012 financial-year end date. If the Minister is right, insurance companies will presumably have reserved. Perhaps he could share that with us.

[Lord Freud]

I will double-check, my Lords, but my understanding is that a reserve from an insurance company is not specified out. There would be a general sum overall and we would not be able to extract those elements. I have made clear that we are not talking about a general level of doing business but about a specific reserve created because of this particular liability. That is what we are talking about.

--- Later in debate ---

[Lord Freud]

I have done quite a lot of work on this, as I have said, and talked to the department. I am saying that this would have to be a Department of Health levy, but the Department of Health is not minded to legislate in this way on this matter because that is not how the structure of research provision in this country works. That is the position. I can get further clarification on this ready for Report.

[Baroness Sherlock]

The question of whether the Department of Health wishes to do this is a separate matter but, on whether the DWP can do this in its Bill, is the Minister saying that it cannot do it because it is not government policy that the DWP should create a levy that would be to the benefit of something that belongs to DoH, or is he saying that it is illegal for it to do so?

[Lord Freud]

I am not sure of the definition of illegality, but our powers are such that we cannot raise money for things that are not within our vote. Whether or not that makes it illegal, I am not sure. However, that is the position and we are held to it.

Jobseekers (Back to Work Schemes) Bill

Debate between Lord Freud and Baroness Sherlock

Monday 25th March 2013 Lords Chamber

[Baroness Sherlock]

My Lords, in responding to this amendment, I should like to pay tribute to my noble friend Lord Bach, who has fought tirelessly on this subject for many months.

As we have heard, it is currently possible for a claimant who meets the eligibility criteria to get free legal advice and assistance to cover preparatory work for a hearing. Legal aid may also be available for higher tribunals and courts appeals on a point of law. However, from 1 April, all welfare benefits will be out of scope for legal aid. The context for this Bill makes this all the more complicated because, as we heard from the Minister, the law on sanctions has changed, so claimants may struggle to work out what applies to their case. Further, since there may often be significant delays between alleged breach and appeal, claimants may also struggle to work out what good cause or recompliance mean so long after the event, subjects to which we will return on a later amendment. This brings me to my questions for the Minister. First, will he clarify the position? If a claimant would have been entitled to legal aid to help prepare his case had he appealed within a month of a decision to sanction him, will he still be entitled to legal aid on the same basis should he appeal after 1 April? If the answer is yes, how will this happen? Who will provide the advice and who will pay for it? If the answer is no, given that the Courts and Tribunal Service is likely to be inundated with cases once the deferred decisions pile is unleashed, what assessment have the Government done of the likely delays and the consequent additional cost to the Courts and Tribunal Service of having so many unadvised appellants arriving at once?

If the Government are unable to give satisfactory answers to all these questions, I suggest that the Minister should accept this very mild amendment. If he does not, and my noble friend Lord Bach chooses to press it to a vote, we on these Benches will give him full support. The very least that the Government should do is provide a considered view—impossible beforehand, given the timetable—of the effect on access to legal advice and support of a group which Parliament never intended to be affected by the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act. We are pleased to support this amendment.

[Lord Freud]

My Lords, before I deal with this amendment, I ask the Committee to indulge me as I answer a couple of questions on the last round from the noble Lord, Lord McKenzie of Luton, which may be relevant.

On the question of what sanctions mean for national insurance, if the failure to participate was after 22 October 2012, national insurance is not credited but if it was before 22 October 2012 then it is. On going into work, no sanctions will be applied to people who no longer receive jobseeker’s allowance. That might save some writing.

--- Later in debate ---

[Lord Freud]

My Lords, this amendment, which would require the Secretary of State to issue guidance on the way in which claimants can mitigate any penalty imposed under the ESE or MWA regulations after the Act comes into force, is unnecessary, as this information is provided to claimants as a matter of standard practice. When a claimant is issued with a benefit sanction, they are as a matter of course sent a letter explaining the decision made and what effect it will have. The letter clearly tells claimants that if they want to appeal the decision, they should fill in leaflet GL24, If you think our Decision is Wrong, and that claimants can,

“get this leaflet from your Jobcentre or Social Security Office”.

Attached to the sanctions letter are two leaflets: leaflet 1NF1, on appealing against a decision and leaflet JSA9, the hardship leaflet). I have both of these leaflets with me today.

The leaflet on appealing against a decision explains in plain English who the claimant should contact if they want to know more about the decision or, if they think the decision was wrong, how to appeal it and what support they may get in formulating that appeal. The hardship leaflet explains what financial support is available, the eligibility criteria and how to apply for hardship, and provides the form they must fill in to claim hardship. The whole process is done as a matter of course and, indeed, is on the record and available for anyone to see how those leaflets work.

I turn to the point raised by the noble Baroness, Lady Sherlock, on recompliance. If a claimant has been issued with a 26-week sanction but has complied in the intervening period, they will be served with a four-week sanction. Recompliance is not particular to any scheme and can include participation in any other scheme. Of course, the sanctions regime has changed, so if the failure to participate was before 22 October last year, the old regime, which includes the re-engagement, applies. However, if the failure to participate is after 22 October, the current sanctions regime, which has no engagement and which builds up, will apply. That goes on the time of the failure to participate.

The noble Baroness was concerned about the time between the failure and the sanction being imposed on the stockpiled cases. I am sorry that I have not yet found a better word than stockpiled but it is for cases not people. As I said on an earlier amendment, the process of finding that information takes place immediately on the failure. They receive a letter and need to provide good cause at that point. Clearly, where there is a problem and there needs to be amplification, and there is a problem of information or evidence, the decision-maker will have to take that into account in the normal way, given that there is a gap and it is a justifiable lacuna.

As a matter of course, the cases that we have stockpiled will get issued with a sanction and receive the standard letter, and those accompanying leaflets that I outlined. This amendment is therefore superfluous and I ask the noble Baroness to withdraw it.

[Baroness Sherlock]

I thank the Minister for that reply and, in particular, for clarifying that it will be the sanctions regime that was applicable at the time of the alleged breach that would prevail. I will just ask him to clarify one point more specifically. I was glad to hear him say that any subsequent direction can count as recompliance and that it did not have to be something specific to the particular scheme or course originally. It can count, but will it?

[Lord Freud]

If it fits the norms within which that re-compliance operates, then it will. I am not sure whether there is huge distinction, in this case, between the may and the will.

[Baroness Sherlock]

I am not trying to be pedantic, although I confess that it is a hobby. The reason it matters in this case is that normally, if I were sanctioned for not participating in a course, the obvious way to comply is to start going to the course. As the course has long since finished, there are all kinds of unrelated things that may have happened in between then and now, which would not be the obvious way for me to re-comply with a direction on something that has long since ceased. Therefore, the fact that these things could count does not necessarily mean that they will. The reason that I wanted guidance was precisely to make clear to jobcentre staff that in these circumstances they should interpret any form of compliance as being enough. I encourage the noble Lord to say that on the record.

[Lord Freud]

What I will say on the record is that we will ensure that guidance to jobcentre staff will make this absolutely clear.

[Baroness Sherlock]

What will that be?

[Lord Freud]

My Lords, we will make sure that the particular options here are laid out for jobcentre staff so that we do this consistently. I can add that recompliance will count if it is a scheme under the ESE regulations.

[Baroness Sherlock]

That was worth waiting for. I thank the Minister for that. I still think that this amendment is worth while. Although the Minister regards it as superfluous, the information that goes out to claimants actually relates specifically and only to complaints and hardships. The other obvious way to mitigate the effect of a sanction is recompliance and in fact none of that information does relate to recompliance. However, in the light of what he has just said, and given the lateness of the hour, I beg leave to withdraw the amendment.

Jobseekers (Back to Work Schemes) Bill

Debate between Lord Freud and Baroness Sherlock

Thursday 21st March 2013 Lords Chamber

[Baroness Sherlock]

My Lords, what a sorry state of affairs we find ourselves in. I almost feel sorry for the Minister, or I would if this shambles were not entirely of the Government’s own making. This debate has made clear the depressing, and I suppose rather shocking, extent of the Government’s failings. It seems as though crucial regulations underpinning the conditionality regime of the Government’s flagship, if utterly useless, Work Programme, as well as various other schemes, have been ruled unlawful by the Court of Appeal, and the Government now want to rectify the problem that they have created by forcing this Bill through Parliament at breakneck speed.

My noble friend Lord McKenzie made the point that the Constitution Committee has said clearly that it disagrees with the Government’s assessment, and we have now heard that, as it were, from the horse’s mouth in an extraordinarily powerful speech from the noble Lord, Lord Pannick. This is only the fourth time that I have spoken from the Dispatch Box in your Lordships’ House, but I suspect that if I were spared to do so another 400 times I would never begin to match the power of a speech like that, and I congratulate him. I am glad that it is the Minister, not me, who has to respond to it. The point that the noble Lord made, which I think is very interesting, is that the Government, having decided that the matter could take four weeks to consider from the time when they got the new regulations laid and enforced in this House, suddenly decided that there was a panic. I would like the Minister to return to this in his response.

In response to my noble friend Lord Foulkes, I think the Minister implied that the Government spent those four weeks considering all the various options before deciding on this deeply attractive one out of the collection. Will he explain why the Government did not consider the options before the decision? Presumably there were always two possible outcomes from the judgment, yes or no, so it would have been possible for them to spend time in advance of the ruling considering what they might do if they lost the case. Why did they have to wait for four weeks to consider the options and then come to Parliament to tell us that, having waited for four weeks, we had to rush through this in days? I will be interested to hear what the Minister has to say.

The shambles is even more annoying because the Government were warned. The Minister seemed to imply that the Social Security Advisory Committee did not tell them that the regulations were illegal, but perhaps he could help me. I understood that the committee drew attention to the overly wide scope of the regulation that was being used. Was that not one of the points on which the Court of Appeal found against the Government? If not, perhaps he could correct me, and I invite him to do so now if he wishes.

[Lord Freud]

The point that was being made by the SSAC about the width was that it meant that it was not necessary to come back to Parliament for specific approvals on particular schemes. It was not that this was likely to be against the law. The point was about parliamentary oversight.

[Baroness Sherlock]

I thank the Minister for explaining that, but of course it was on precisely the fact that parliamentary oversight and scrutiny of the nature of these regulations is important that I understand the Court of Appeal found against the Government. At the very least, this was a pretty heavy hint from the Social Security Advisory Committee, one that the Government managed to ignore completely.

Then there is the issue of retrospection, to which I barely need to turn after the speech from the noble Lord, Lord Pannick. As my noble friend Lord Bach noted, the worst aspect of this debacle is the combination of retrospection and fast-tracking. That is a particularly toxic mix, but it is what we are faced with. I look forward to hearing the Minister’s explanation of how the circumstances here make it necessary to bring forward this particular form of retrospection with this astonishingly foreshortened timetable, a point made by the noble Lord, Lord German. If the Minister’s response on that point is not compelling, I look forward to seeing the noble Lord join us in the Division Lobby should my noble friend Lord McKenzie decide to press his deplore Motion to a vote.

Like my noble friend Lord McKenzie, I am grateful to my noble friends Lady Royall of Blaisdon and Lord Bassam for trying to get us a few extra days to consider this matter. At least we now have the weekend to read the papers in more detail. I am also grateful that my right honourable friends Liam Byrne and Stephen Timms in the other place managed to get the Bill changed so that it would at least guarantee appeal rights for those affected by the sanctions process and ensure an independent review of that process.

It now falls to us in this House to do two things. The first is to register that this state of affairs is not right. The amendment in the name of my noble friend Lord McKenzie of Luton simply puts on record what we on these Benches think about the mess that the Government have got themselves into and the way they propose to get themselves out of it. I very much hope that the House will support it. We will then get down to the work that this House does best: doing our best, in the limited time that we have, to scrutinise the Government’s plans to ensure that there are no more disasters lurking in the undergrowth of this fast-tracked Bill.

There is a whole series of issues to which we will have to come back in Committee on Monday. For example, we know that appeal rights are to be safeguarded, but how can those appeals be robust when there is such a long time lag between the alleged breaches and the sanction being applied? As various noble Lords have said, how will the Government ensure fair treatment of a complainant who may have said that they had perfectly good cause not to comply with the requirement of a programme but who will struggle to evidence that months after the event? There is also the question of hardship. What kind of hardship regime will apply? The hardship regime is in the process of changing. How will the Government ensure that appropriate help is given to those who would suffer hardship as a result of sanctions?

Then there is the $64,000 question posed by my noble friend Lord Bach: will the Minister guarantee that anyone wishing to challenge decisions will have the same right to access to legal advice or aid as they would have done at the time the alleged breach took place, under regulations that have been found to be lawful?

There is so much more that I would like to ask, but we will have to wait until the dog end of Monday’s sitting, to which the remaining stages of the Bill have been confined. The message from today is clear: this is a shambles. I am beginning to wonder whether the Government’s entire approach to getting people into work is not itself a shambles. The evidence is clear. The Government are failing the unemployed of this country. They are failing to create jobs. They are failing to help them get back into jobs. Their flagship Work Programme—

Universal Credit Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Wednesday 13th February 2013 Lords Chamber

[Lord Freud]

I will be pleased to write.

[Baroness Sherlock]

My Lords, I thank the Minister for trying to answer our questions. Of course he could not answer them all in the time because there were so many. I have never been through a two-and-a-quarter-hour debate over one set of regulations with so many powerful speeches from every set of Benches in this House. I understand it is complicated, but we are running out of time. This is not simply a rough sketch of the architecture; these regulations describe what will happen to real claimants when the system starts operating in April. I understand that the Government are doing something that will revolutionise payments to all working-age claimants. We support that principle, but we cannot experiment on the lives of ordinary men and women in this country and on their children. The Minister has been unable to answer, despite his best efforts, concerns from all around the House about the impact on disabled people, childcare, free school meals, vulnerable people, of forcing people to claim online and so much more. We have to let these regulations go through because that is the nature of our House, but we do not have to allow them to go through without making a very clear signal to the Government that they need to get these things right. To that end, I wish to test the opinion of the House. I urge all noble Lords to come with me.

Social Security (Payments on Account of Benefit) Regulations 2013

Debate between Lord Freud and Baroness Sherlock

Wednesday 13th February 2013 Lords Chamber

[Baroness Sherlock]

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

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

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

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

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

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

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

[Lord Freud]

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

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

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

Personal Independence Payment

Debate between Lord Freud and Baroness Sherlock

Thursday 13th December 2012 Lords Chamber

[Lord Freud]

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

[Baroness Sherlock]

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

[Lord Freud]

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

Universal Credit

Debate between Lord Freud and Baroness Sherlock

Tuesday 6th November 2012 Lords Chamber

[Lord Freud]

My Lords, we did a survey on our complete claimant base and found, somewhat to our surprise, that 78% of them were already online, and, indeed, that 41% of them used online banking. Our target when we start next year is to have 50% of people going online, with others going to our other channels which support the online process. We plan to have a support and exceptions process to help the people who need support in getting their universal credit.

[Baroness Sherlock]

My Lords, is the Minister aware of the recent report of the Joseph Rowntree Foundation which showed that it will be very difficult for people to claim online because only 20% of people now do so and only 40% are ready and able? What will the Government do if people do not feel able to claim online? How far and for how long are the Government willing to extend paper applications to those who struggle?

[Lord Freud]

My Lords, I should make clear that we are not entertaining paper applications. We are looking at either face-to-face or telephone support groups. We have looked at pushing JSA online and the figures have gone up from 16% in September last year to 39% this September. We are moving people very rapidly to the online route.

Child Support Maintenance Calculation Regulations 2012

Debate between Lord Freud and Baroness Sherlock

Monday 15th October 2012 Grand Committee

[Lord Freud]

We are still on that timetable, absolutely. But we will be flexible as a department. The one piece of advice that the Public Accounts Committee has given to us as a Government, and to the last Government, is to feel our way into these things, to be flexible, pathfind the way and build from there. So we are taking that advice. We cannot have it both ways. This means that there is not a date on which we must press the button, and if we do not press the button on that day we are late, it is a delay and a fiasco. I believe it is wrong of us as politicians to play with computer systems in that way. It is not the right way to do it. We must go in steadily and introduce these systems in a smart, incremental way. That is the lesson that we have learnt from some superhumungous tragedies. When it comes to computer systems, the Government get a lot of the stick for bad computer system introduction. This is because Government computer systems are publically known. The private sector has just as many snafus with computers as the public sector, it is just that they do not make them public.

This ties in neatly to the point about four schemes in parallel, from the noble Baroness, Lady Sherlock. We already have three systems running in parallel, and this new system will be more automated and more efficient than those. By using the pathfinder approach that I have described, the new system will be working well before we introduce it full tilt. If the new system is working and sustainable with the kind of volumes that I described, then we will be able to manage the four systems that we will have under our hand at any one time.

[Baroness Sherlock]

I am grateful to the Minister. As I understand it, one of the arguments for the new system was that, as it would be more efficient, there would be fewer staff needed to run it and it would be cheaper et cetera. I know that that may all be up for grabs, but is the Minister confident that the kind of cuts in resource that CMEC had before its transition will leave enough staff to be able to run this? I understand the point he makes about agile development and wanting to take time to run the system in before shedding its predecessor systems. However there is a danger, as seen both here and with housing benefit. As each new system has come in, everybody has been assured that the new system will be the thing that will render all previous systems unnecessary, but all that has happened is an accretion of systems. I just want to be confident that he feels that he has the resource to manage all these systems for as long as it takes, because otherwise people stuck on the earlier systems could suffer and find their situation getting worse, not better.

[Lord Freud]

Yes, my Lords. The approach is to bring in a new system, which is efficient and automated, at a level that does not consume a lot of resource to start with. You are running your existing systems with the resource that they require. As you ramp up the new system, it starts to establish itself, because you are doing it on a careful pathfinder basis that maintains that automation and efficiency. Then you can start, in practice, reducing the load on the other three systems. That is how you get the gains by doing it, and that is why it is so important to ramp up the new system so that it does not throw a huge amount of clerical work back into the system to compound the clerical overload. We are still running 100,000 cases clerically in one way or another. It may appear a bit smoother to the outside world now, but every £100 transferred is costing the state £35, and that is not something that any Government can tolerate. That is the process: get something efficient; roll it out when you know that it works; build it up; and then start to work down your existing portfolio. That is the process.

The noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, asked about assets and lifestyles. The reality is that that provision was very difficult to use, as everyone involved knows. It was not a successful mechanism for the parent with care to use. Capturing actual income is far more meaningful for parents and far more administratively achievable, which is why we switched over to that approach.

The minimum flat rate of £5 has not increased since 2003 and will remain until the new scheme is fully open to all new applicants. I fully accept the point made by the noble Baroness, Lady Sherlock, about whether it is compatible with UC. At some stage in the future, it may be possible to look at tapers and matching it up, but it is too soon to do that. I accept the general point, but I do not think we are there yet.

The noble Lord, Lord McKenzie, asked about ignoring unearned income in the calculation. We are making the main calculation on taxable employment income, trading income or pension income because HMRC holds that information for the vast majority of taxpayers. Taxpayers who are not liable for self-assessment are not required to declare income of less than £10,000 per year from savings and investments. It would be unfair to take account of unearned income details sourced from HMRC and not pursue parents who had that income but were not required to declare it. Asking non-resident parents to supply that information would be to repeat the delays of the current schemes where non-resident parents are often unco-operative. A parent with care can apply for a variation to take account of unearned income. It is the same with shared care. The noble Lord was right that where it was agreed that there was shared care and the disagreement was about how much it was, the one-seventh assumption would come in. Where there was no agreement that there was sharing, it would have to be done by way of variation.

On taking account of pension schemes, the new scheme will, as now, allow contributions to an occupational pension scheme to be deducted from income, with the resulting figure used to calculate child maintenance. There is no limit on the amount of contributions that can be deducted. That is not a change in the existing system.

[Lord Freud]

May I offer to write on that issue? We are layers down. Rather than dealing with that impromptu I will aim to write, as I will on how the prompts might work for the non-resident parent on their pensions. Again, that is getting to a level of technicality that I do not have at my fingertips. On tax credits, ignoring that loses 100,000 families about £6 a week in maintenance. Both noble Lords made that point. Again, that is an attempt to get rid of a level of complexity and drive through simplicity. We have set the percentages and thresholds to ensure that changes in liability are minimised except where, as a flat rate, we deliberately intended to raise them. We expect more than half of non-resident parents to pay more than under the current scheme.

[Baroness Sherlock]

Does the Minister accept that those who will pay more and the lone parents with care who are getting less may not be the same pairs of people? Obviously one cannot assume that the poorest parents with care are necessarily partnered to the poorest non-resident parents, but actually research shows that broadly speaking it is not uncommon for partnerships to be among people of very similar socioeconomic backgrounds and demographics. Is the Minister conscious that, even if overall many non-resident parents are paying more, the poorest parents with care may end up getting less as a result of the fact that the poorer among the non-resident parents are having this income ignored?

[Lord Freud]

I am not sure I have a precise breakdown within the socioeconomic groups to do that analysis. I will look later to see if I can send the noble Baroness some information on that. I am not sure off the top of my head that I know how that balances out but I will see what I have and include it to the extent that I do.

--- Later in debate ---

[Baroness Sherlock]

I am very grateful for that. Also, if that is not the case, I would settle for an alternative justification of the decision.

[Lord Freud]

I will either produce information or a justification.

On the war pension point made by the noble Lord, Lord McKenzie, a war disablement pension is considered a prescribed benefit, in which case the flat rate of maintenance will apply. A parent with care can apply for a variation to take account of any additional income received by the non-resident parent.

On the 12-month rule and the position with the Scottish minutes of agreement, we are in discussion with the Ministry of Justice and colleagues in the Scottish Government to ensure that the statutory maintenance system and the family justice system both north and south of the border work together as effectively as possible in the interests of parents and children. We are hoping to meet family lawyers’ representatives in England and Wales and Scotland to discuss this soon. However, I should say that at this point we are yet to be convinced that there is a compelling case for legislative change.

In reply to the question from the noble Baroness, Lady Sherlock, on the level of information and evidence required from a parent with care to make an application for variation, the link with HMRC means that the department has immediate access to a non-resident parent’s income information, which removes the requirement for the parent with care to supply substantial evidence of the non-resident parent’s financial circumstances. That means that fewer applications will be rejected at the preliminary stage and makes it easier for the parent with care to apply for variations. I believe that I have dealt with all the questions.

[Lord McKenzie of Luton]

Perhaps I may briefly revert to the issue of shared care when it is equal shared care. Obviously if both parties agree that there is equal shared care, they would not be in the system anyway because no maintenance would flow from it. Clearly it is potentially in the interest of the non-resident parent to claim equal shared care because then there would be no maintenance liability. What will the process be for determination of that and whether any form of appeal is attached to it?

[Baroness Sherlock]

One of the questions I asked was in relation to preparing parents in the current system for moving across to the new system, in particular transitional protection. I apologise if I missed the Minister’s answer.

[Lord Freud]

On transitional protection, the basic approach is that these rules have been very difficult to operate and our intention is to have very simple rules that are capable of being applied to the majority of parents. While there may be winners and losers, we expect there to be relatively few large losers. Many of them are likely in any case to go into a family-based arrangement, which may be a better option. That is the reason for not planning transitional protection. We will be providing an expanded service of information and advice to customers before the launch of the new system, to be called “Help and support for separated families”.

The way it will work is that if there is equal shared care and there are no payments either way, both parents have to agree that. If there is no agreement, we will go to the one-seventh proportion; that is, one night of shared care. We will accept verbal information about shared care, but both parents must agree. If they do not do so, we then move into the more formal process.

I am down to a very few issues on which I can now write to noble Lords, otherwise we will be here all night. There will be plenty of opportunities to debate these issues since further debates on the child maintenance system are coming up, and I know that many of us are looking forward to those. However, these regulations are narrow in scope and focus on simplifying the statutory child support scheme, improving the service to clients, reducing the costs to the taxpayer and increasing the flow of maintenance payments to children. I am heartened by the fact that there is support in principle, albeit that I will provide some more detail. On that basis, I commend this instrument to the Committee.

Credit Unions

Debate between Lord Freud and Baroness Sherlock

Thursday 19th July 2012 Lords Chamber

[Lord Freud]

My Lords, the whole point of this exercise is to expedite the growth of the movement. There are currently 1 million members of credit unions. The target that we have set is to double that within five to seven years and to make credit unions self-sustaining, which they currently are not.

[Baroness Sherlock]

My Lords, I am very glad that the Minister has given us that target of 2 million people but, in the light of the figures given by my noble friend Lord Kennedy, if 7 million people are using high-cost credit at the moment, with the extortionate interest rates of doorstep lending, is 2 million too unambitious a target? Should the Government not be shooting for a far higher figure?

[Lord Freud]

My Lords, we have to build an industry that is self-sustaining. That is the vital priority. It is no good piling money into an industry that cannot effectively absorb it. It is vital that we get this right, and this expansion project is the right way to go.

Public Bodies (Child Maintenance and Enforcement Commission: Abolition and Transfer of Functions) Order 2012

Debate between Lord Freud and Baroness Sherlock

Thursday 12th July 2012 Grand Committee

[Baroness Sherlock]

I would accept a letter from the Minister.

[Lord Freud]

Actually, I would like to turn that around on the noble Baroness; I will accept a letter from her on the lessons from history, and I will pass it on and make sure that they are applied. I look forward to receiving that.

On my noble friend Lord Kirkwood’s question about how we will achieve the savings, we are talking about securing ministerial accountability—this is not about driving savings. The amount of savings from this measure is pretty modest: direct savings are probably running at about £500,000 a year, and that is due to changes to IT systems and one-off costs. We would hope to see longer-term savings from integrating services more deeply into the department. I think, and this point was raised by my noble friend Lord German, that there are some real opportunities here to get holistic support. The longer that I have been in this job, the more I have realised that bringing support together for people and families in trouble is the way to go. There is an opportunity for us to pull the services together in this context as well as in other contexts.

I am tempted to offer to write to the noble Lord, Lord McKenzie. I always feel that it is a triumph if I can get out without offering him a letter because I can answer all his very clever questions. I think that I am down to the one on adverse tax consequences. Although it is always difficult to prove a negative, I cannot imagine how there can be adverse tax consequences because we do something in the middle of the year, when they are both effectively Crown bodies. If that is a wrong tentative statement, I will commit to write, but I hope that I will have avoided any need to put pen to paper for him on this occasion; that would be one of my personal targets. This is about making sure that Ministers are fully accountable to Parliament.

Child Poverty

Debate between Lord Freud and Baroness Sherlock

Tuesday 26th June 2012 Lords Chamber

[Lord Freud]

Yes, my Lords, this is an important point. We have a different approach from many of our continental peers. Looking at the figures, we do not seem to be doing well enough in some of these areas. When there are people who need real support, we need to look more closely at the education of the workforce.

[Baroness Sherlock]

If the UK is second in transferring money to help children, I personally am rather proud of that. If the Minister does not want to focus on income transfers, will he take this opportunity to reassure the House that when his universal credit comes in he will carry on supplying free school meals to children?

[Lord Freud]

Let me make clear why I do not think it is good enough. We are second as regards the number of income transfers—that comes out in the UNICEF report—but we are 22nd out of 35 countries as regards relative child poverty. That shows that we are just not getting value for our money. I can say that we are making arrangements to ensure that school meals continue in basically the same way, although longer term I am looking to try to incorporate that in the universal credit even more tightly and to make some improvements.

Employment: Work Programme

Debate between Lord Freud and Baroness Sherlock

Wednesday 29th February 2012 Lords Chamber

[Lord Freud]

My Lords, we monitor very closely what is happening within each of the prime provider contracts, and we have introduced—I think for the first time by any Government, in this country certainly—a process where the prime providers look after their supply chains, which we call the Merlin Standard. That is the main protection for subcontractors to make sure they are treated appropriately.

[Baroness Sherlock]

My Lords, when travelling the country with the Riots Communities and Victims Panel, a frequent complaint was that the Work Programme did not have any subregional targets. For example, if you had a couple of wards with very bad unemployment, which could potentially be a reason for future disturbances, a contractor could actually meet all its targets by cherry picking people from other areas who were easier to move into work, and leaving that area untouched. Can the Minister tell the House what the Government are doing about that?

[Lord Freud]

My Lords, the way that we are trying to reduce the cherry picking, which has been natural in all of the programmes that have been introduced, is to try to fine-tune the financing so that providers are incentivised to help the hardest to help. That is why providers can earn up to £14,000 to help the very hardest to help. If we see problems developing, in that we have not priced accurately, we will need to look at pricing structures, because that is the way to solve the problem.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 23rd November 2011 Grand Committee

[Lord Freud]

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

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

[Baroness Sherlock]

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

[Lord Freud]

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

[Baroness Sherlock]

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

[Lord Freud]

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

--- Later in debate ---

[Lord Freud]

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

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

[Baroness Sherlock]

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

[Lord Freud]

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

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Monday 21st November 2011 Grand Committee

[Lord Freud]

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

[Baroness Sherlock]

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

--- Later in debate ---

[Lord Freud]

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

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

[Baroness Sherlock]

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

[Lord Freud]

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

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

--- Later in debate ---

[Lord Freud]

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

[Baroness Sherlock]

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

[Lord Freud]

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

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Thursday 10th November 2011 Grand Committee

[Baroness Sherlock]

My Lords, perhaps I may pick up on the second part of the question asked by the noble Earl, Lord Listowel. Would someone be required to work during the school holidays? I shall let the officials think about that while I pose a couple of other questions. I was pleased to hear the noble Lord say that the Government appreciate that there are two objectives here: the care of children and the importance of work. He has explained the figures and the research the Government have done into the impact of work. Can he share with us their research into the impact on children of parents working at the point at which they have to make the transition into school?

[Lord Freud]

My Lords, I cannot bring to mind a particular piece of research on that question, but I suspect that the noble Baroness, Lady Lister, probably went into this in great detail when she was working on her piece of research for the CSJ. If I can find something which pinpoints that particular question, I will certainly give the noble Baroness the reference. But the general point I sought to make is that a range of research in this area shows the great benefits for families of working, and if I can give a particular answer to her question, I will.

[Lord Freud]

Let us not debate research none of us can remember. I will have a look at this and if I can provide anything more solid, I will do so. On the point about school holidays, under the regulations, if a lone parent had to leave a job because no appropriate childcare was available in the holidays, that would be taken into account for good reason. Technically it is good cause, but it would become good reason.

[Baroness Sherlock]

My Lords, I am so sorry, but in that case I need to clarify this. As I understood it, the question posed by the noble Earl was not whether someone would be sanctioned for being unable to get suitable childcare, but whether they would be allowed only to choose to take a job that enabled them to stay at home with their children during the holidays. The summer holidays last a long time and children might never see their lone parent during working hours. I think the point that the noble Earl was trying to clarify is this: if I am a lone parent and the only job I can find is one that requires me to work during the school holidays and I do not take it, is that good reason?

[Lord Freud]

I think it would be good reason. As I have just said, if someone cannot find appropriate childcare in the holidays—

[Baroness Sherlock]

My Lords, I am so sorry, but I must be expressing myself badly. I am assuming that childcare is available during the holidays, but if for reasons due to my own strange peccadilloes I want to spend the holidays with my child and the only job available is one that would require me to work all year round—during school hours in term time is fair enough, but also during school hours in the holidays—in those circumstances would I as a lone parent have to take that job, even if it meant that my child would have to spend the whole of the school holidays in childcare? Would the noble Lord clarify that point?

[Lord Freud]

Yes, my Lords, the picture the noble Baroness draws is correct. If a job is available and there is appropriate childcare, the lone parent would be obliged to take that job.

[Baroness Sherlock]

I thank the noble Lord for that clarification, if not for the answer, which I am very disappointed with. I accept that the noble Lord does not have research on the question of transition available to him at the moment. I just want to lodge a concern that the point of transition for children either moving into school at all or moving from junior to secondary school is difficult, and there is research out there to support that. The research looks at the impact in later life if those transition points are not well handled. I would be grateful, before we get to Report, if the noble Lord would give some thought to whether he could give us some comfort that the Government would want to give a clear policy steer that they would expect their advisers to look kindly on lone parents who, for good reason, want to support their children during the key transition point into school. I have one final question. If a five year-old were not in school—I will not go into it; there may be reasons why a five year-old may not yet have started school—would that lone parent still be required to go out to work?

--- Later in debate ---

[Lord Freud]

Let me just try to pin down the point on transitions and whether people should be in work. There is little evidence relating to the effects of maternal employment on children's cognitive and behavioural outcomes in the UK, but what there is suggests that there are few negative effects of maternal employment once the child is aged over 18 months. If I can find some more research, I shall get it to noble Lord post-haste.

[Baroness Sherlock]

I will not trade research, but I think it would be helpful to come back to this on Report. I just want to put down a marker that some of the research around the impact of maternal work centres around two things. The two outstanding issues are, first, the quality of substitute care and how you control that in evaluating the impact on child development; and, secondly, the degree to which the mother wishes to work, which has always been a significant issue. There has been some work suggesting that if the mother wants to work, the effect on the mother can be positive, and that that is communicated to the child and, if that is not the situation, the opposite is communicated. Until now our regime has not required lone parents or partners to go out to work against their wishes in those circumstances. Obviously it is a little harder to do. Perhaps in his research the noble Lord might look at what might be the nearest parallel to that. Perhaps we should have a coffee and discuss research at a later date.

[Lord Freud]

The point that the noble Baroness, Lady Sherlock, makes is an incredibly complicated and central one because people’s way of thinking about themselves is shaped by many things, not least by the expectations that others and the state have on them. We are trying to develop a really complicated socio-psychological set of impacts with the system. There is not an easy answer. We are trying to make people want to work because that is the expectation and that is the norm. That is what we are trying to achieve with our reforms.

[Baroness Sherlock]

My Lords, I understand that. The fact is that the noble Lord is not trying to make people want to work but telling them that they have to work. The evidence may be complicated. For me, the point of the objective is simple. I do not think that the state should be substituting its judgment for that of a parent of a young child as to when it is better to go out to work. That should be left to the parent.

--- Later in debate ---

[Lord Freud]

If the noble Lord looks at page 11 of the government response document, it shows that the tripling was clearly driven by a phone-based service. As I said, we are getting that more under control. The 10-year average spend is £30 million, and clearly we are aiming to get back down to more sensible levels through this method, as I said.

[Baroness Sherlock]

The Minister obviously has access to in-year figures, which we do not. If he were to project forward from the most recent figures that he has, what would he expect the spend to be?

[Lord Freud]

At the end of this year, we are expecting it to come down to £60 million.

[Baroness Sherlock]

That is twice what you are projecting handing over.

[Lord Freud]

It is on a downward—

[Baroness Sherlock]

Just checking, thank you.

[Lord Freud]

There is a downward trajectory, and the measures that we are putting into effect do not reflect that full amount. The full amount is £60 million, but the underlying figure is coming down by more than that if you annualise the latest set of figures.

[Baroness Sherlock]

I am very grateful to the Minister. I just wanted to be sure that I had understood, for the record, that he is proposing to halve the amount being spent on crisis loans for general expenditure as a result of this change. I thank him very much for that clarity.

[Lord Freud]

I will make it absolutely clear that this is not a halving on an annualised basis when one considers the decline in trend. I would like that on the record as well.

I will take the question raised by the noble Baroness, Lady Lister, on the risk of high-cost lenders, or loan sharks as she referred to them. We recognise the danger that illegal and high-cost lenders pose to vulnerable people, who can become very dangerously indebted if they are driven to use such services. We are committed to continuing to provide an interest-free lending facility for those who are least likely to be able to access mainstream credit. We call the process “budgeting advances”. That is a national provision of payment on account that will replace Social Fund budgeting loans. The budgeting advance will be paid to those vulnerable people least likely to access mainstream lending, to help ensure that they are not driven to use illegal lenders. That process, when we put it into the universal credit, will have a much different feel to the paper-driven process that we have today. The two systems of budgeting advances will run in parallel while we introduce the universal credit.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Thursday 3rd November 2011 Grand Committee

[Lord Freud]

My Lords, let me try to pick up some of those points. Picking up the point of the noble Baroness, Lady Hollis, I hope that she is hearing that I am sympathetic to this point. I hope that noble Lords have heard that this is about money. We do not have this money. We have a very sharp choice to make, about whether to reduce workless households or to look after second earners with a disregard. We have taken this decision, and we have also taken a decision, when we do find some more money, to do something about childcare, which is another issue that I know greatly concerns noble Lords.

There are two clear issues when we look to improve this system, as we see dynamic effects coming through which are provable. We had a debate the other day on why we need to test things. Two of the obvious things to test will be second earner disregards and taper. Those are the first two things that everyone in this Room, I think, would like to know about as we get the system under way. Therefore, to the extent to which I am being asked “Will we look at it?”, yes, we will be looking at this. I am not going to make any assurances, because we should find the answers, but that is exactly the kind of question we want to have answered.

I shall take up the points of the noble Baroness, Lady Sherlock, on MDRs. You can freight all kinds of things on to MDRs if you want to, with different costs, and I am sure that you can create a position where the overall costs come up to high MDRs. The simple point that I would like to make is that with the universal credit itself, the MDRs come down.

On whether we will force people to take a job which leaves the household poorer, we made the point when we discussed this that we take these things into account when we set up the obligations of claimants.

[Baroness Sherlock]

My Lords, I am grateful to the Minister. I hear very clearly his sympathy for this issue. If it is simply a question of money and therefore timing, one of the things he could do, to put everyone’s minds at ease, is to say, “Until we can afford it, we will not force a household to be worse off by forcing them into work or sanctioning them”. He could then review the situation when he found the money down the back of the sofa next time.

[Lord Freud]

I will not give that kind of assurance to noble Lords. This is clearly—

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Tuesday 1st November 2011 Grand Committee

[Lord Freud]

My Lords, the press reports were about the level of deductions to pay fines and whether the current limit was right for people who had committed a crime and been fined. Although this is breaking news, this is not an area I am confident we will consider in this particular Bill because it is about fines. It is not a matter today that we will need to consider.

[Baroness Sherlock]

My Lords, I want to ask the Minister two questions. The first is related to the questions asked by my noble friend Lady Lister and the noble Lord, Lord Boswell. I remind the Committee that I am a member of the Communities and Victims Panel looking at the impact of the riots, although my question is not specifically about the riots.

On the question of fines, what account can be taken of any fines the claimant may be committed to paying when making a decision to sanction the benefit. For example, it may be the intention to only sanction or remove the standard element but if the household is already committed to paying fines, inevitably that is going to be taken out of elements that are intended for children or housing, so the effect will be to eat into those. Could the Minister explain how that will be taken into account?

The second question returns to what I think I heard him saying in response to my noble friend Lord McKenzie in relation to the final amendment in this group. I believe that he said there would be no targets or benchmarks for sanctions. Could he reassure the Committee a little further? Are there any targets, performance indicators, measures or benchmarks that would have the effect of incentivising an increase in the number of sanctions? I would be happy to repeat that if it would be helpful.

[Lord Freud]

Go on.

[Baroness Sherlock]

I am not sure I can, frankly, but maybe Hansard can. I talk too quickly even for myself sometimes.

The Minister was kind enough to say in response to my noble friend that there were no targets that were designed to incentivise an increase in the number of sanctions. Are there any targets, performance indicators, measures or benchmarks—he will know the language better—that would have the effect of creating an incentive to increase the number of sanctions? The Minister probably knows what I am getting at; one does not have to be directly incentivised to sanction people. If, for example, there were pressure on the department to reduce either the number of people claiming certain benefits or the cost of the programme element of the budget and therefore the cost of those benefits, one way to achieve that might be sanctions. I am not suggesting that they would do so but inevitably, once there are measures, someone responds. There might be other ways of doing that. Could he answer that for us?

--- Later in debate ---

[Lord Freud]

Clearly, I am interested in behaviour change. However, I would hope that before we get into these regions we will have had the behaviour change. There will have to have been a very bad failure in circumstances where we impose a three-year sanction.

[Baroness Sherlock]

Perhaps I may try to understand this. I apologise if I have not grasped it until now. Let us assume that someone has refused to co-operate and perhaps has a drug problem that has not been identified until this point. Something happens, possibly even as a result of the shock of the sanction, and they get themselves into a position where they are enabled finally to begin the process of engaging and searching. At that point, will the adviser simply stop the sanction and put them back into compliance? Even at its simplest, if somebody has no income they cannot look for a job, unless it is next door.

[Lord Freud]

My Lords, we are moving now into the area of ill health. That is where decision-makers come in and look very hard at what is happening. This is aimed at the person who has not got a mental health problem or a chronic illness. We are looking at someone who simply refuses to become part of the regime.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Wednesday 26th October 2011 Grand Committee

[Baroness Sherlock]

Perhaps I may ask one question. The noble Lord will be aware of this issue. We have heard about it from many claimants and I am sure that other noble Lords have had similar experiences to mine. At least one organisation that works with lone parents has complained to me about cases where lone parents have been sanctioned for failing to take jobs. They were confident of the veracity of the accounts they had been given, and it was clear that the claimant could not possibly have made it to the job and taken their children to childcare. There did not seem to be any malice involved, but the adviser did not understand what was involved in trying to get two or more children to different kinds of childcare in very tight timescales, in a context where being a few minutes late can mean either that you are fined by a nursery or that your child’s place is given to somebody else. How will the Minister protect claimants in that situation? Will he make sure that the guidance is sufficiently clear?

I am concerned because, as I understand it from our briefings, decisions like that can be challenged and referred to another adviser, but the only independent recourse a claimant has if the decision goes against them is to refuse to take the job, be sanctioned and then go to a tribunal to challenge it. This is not efficient. I quite see that it is not the Minister’s intention, but how can he reassure us and those claimants that they will not be in that position?

[Lord Freud]

My Lords, I start by expressing a degree of envy at the ability of the noble Lord, Lord McKenzie, to commandeer a ministerial car in the past. In these straitened times I am reduced to a bicycle. However, in case noble Lords are anxious, I can confirm that the Ortleib pannier manages to contain a ministerial Box—and I have two panniers.

Turning to the amendments, as noble Lords know, we recently announced that jobseekers will be expected to look for suitable work within a 90-minute commute from their home. This is the default position in jobseeker’s allowance at the moment. The intention is to ensure that claimants search in a sufficiently wide geographic area while keeping the requirements reasonable. The old position was that JSA claimants could restrict travel time to 60 minutes, but only for the first 13 weeks and only if they had a reasonable prospect of work. Otherwise, the 90 minutes of travel time did apply. Therefore, this is not a huge change, although I understand the challenge that the noble Baroness, Lady Sherlock, has given me when she said that the existing system could operate a little better. I accept that challenge. Our briefing note on the work search and availability requirements for universal credit explained that this would continue to be the normal position for claimants. However, we also explained that limitations will be applied to the work that a claimant has to look for to take into account any relevant circumstances, particularly childcare. For example, we are clear that a claimant who is the lead carer for a child under 13 need only look for work that will fit around school hours. This would include any necessary travel time.

A claimant with young children may be asked to take a job 90 minutes away, but only if the job had working hours that allowed the claimant to get the children to and from school and still get to work on time. Similarly, if a commute of any time up to 90 minutes is too far given caring responsibilities or health issues—for instance, the need to stay close to a child with ill health—we would be able to take that into account. Picking up the point made by the noble Lord, Lord McKenzie, about the widening of the job goal, that is not intended to refer to a geographic or time widening, but refers to the type of work and remuneration. The travel time remains at 90 minutes.

--- Later in debate ---

[Baroness Sherlock]

Perhaps I may clarify something. I may have misheard the noble Lord and I apologise for delaying the Committee. Did he say in his response that there might be circumstances in which somebody would not be better off, but that they should take a job anyway? I see that he did. I will quote from the right honourable Iain Duncan Smith, the Secretary of State for Work and Pensions. In his introduction to the Green Paper he referred to people of working age and stated:

“We will help them to find work and make sure work pays when they do. They in return will be expected to seek work and take work when it is available”.

Was that not the contract he laid before the British people? What the Minister said appears to contradict it.

[Lord Freud]

I will pick up on that last point from the noble Baroness, Lady Sherlock. There may be special circumstances. There are no blanket absolutes about taking a job.

--- Later in debate ---

[Baroness Hollis of Heigham]

It is very interesting that the noble Lord should say that, because it was exactly the advice I had from civil servants at the time. None the less, it did not stop us introducing NI credits for grandparents who did more than 20 hours’ care a week for their daughter, releasing her to work. If you can do it for national insurance and pensions, you can certainly do it for childcare, and it would be much easier to do it with conditionality.

[Baroness Sherlock]

My Lords, perhaps I could suggest to the Minister that Jobcentre Plus could encourage the grandparent to train as a childminder. The daughter could then claim help through universal credit to pay the grandparent for childcare. You could simply cycle the money round that way—it might be a better way to do it.

[Lord Freud]

My Lords, I am really grateful to the noble Baroness, Lady Sherlock, for her imaginative way of manipulating the system. I am sure that it is something we should look at very closely. No, come on; I will look at this. This is very difficult so I am not promising anything, but I will look at it.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Monday 24th October 2011 Grand Committee

[Baroness Sherlock]

I want to intervene briefly to ask the Minister a couple of specific questions. There is very little to add to the speech made by my noble friend Lord Knight of Weymouth. The Minister should hope that this does not go badly because he may find that speech being quoted back at him. He has been warned, and very eloquently too.

I have huge sympathy for the Minister. As I have said before in this Committee, I was involved as a special adviser during the development of tax credits, and I watched Ministers seek and receive all assurances that it would be reasonable for a Minister in those circumstances to have. I would not for one moment suggest that the officials with whom they worked, all of whom I was hugely respectful of, did anything other than give the best assurances they could. However, until a system is up and running one never really knows how it will respond to the realities of the information within it, so we all know this is a risk.

I want to ask the Minister about what kind of assurances he has been seeking and receiving and, in particular, whether he has been getting any independent assurance on the development and management of this project. As I understand it, the DWP’s development of its system is going to be dependent on the revenue’s system. Has the Minister received any assurance from the Treasury that has enabled him to progress, given the interdependence of those two things? Has he received assurances from the Treasury or from HMRC, in particular, about the nature of their systems so that he can make plans on the back of them? Secondly, what assurance has he about whether his plans are robust enough? If he will not tell us what it is, what is the nature of the assurance that was sought and from whom was it sought? I am aware that by and large large-scale government projects of this nature often seek some kind of independent assurance, perhaps from an independent auditor, whether internally or externally procured. Can the Minister assure us that the department has been through that process and can he reassure us on the basis of the reassurance that he has been given?

Thirdly, I am interested in how plan B will work. I am very sorry to say that I cannot make the briefing on 3 November. That is a genuine disappointment on my part. I am in the anorak category as well. I am afraid I am engaged with a communities and victims panel looking at the impact of the riots, and that takes me elsewhere on that day. Can the Minister explain very briefly how plan B will work? For example, is it the intention that businesses will report real-time information manually monthly or that individuals will report? Is the assumption that the DWP part of the game, where it matches up the different packets of real-time information from different employers in relation to individuals or households, will be done automatically as it is now? How will that work? Is it the intention that the new child maintenance system will be dependent on the same HMRC real-time information system? If so, is there any priority about which of these projects gets first dibs on the HMRC data, should it come under pressure?

If the Minister can answer only one question, I am really interested in the assurance question, so he will save me getting up again. Finally, if there is reporting under plan B, has he been able to get advice on what additional pressure that will put on the system? I am conscious that automated systems often put on much less pressure than processing individually and manually entered data, whether from businesses or elsewhere. Is that something that has been factored in?

[Lord Freud]

My Lords, before I respond to the amendment, I want to deal with the issues about what universal credit does and some of its impacts because the noble Lord, Lord Knight, implied that it has a perverse impact on poverty when exactly the opposite is the case. The IFS noted that it is progressive and pointed out that the bottom two quintiles gain £11 and £10 per week respectively and that 80 per cent of the gainers are from those bottom two quintiles. In fact, its estimate is that child poverty will reduce by rather more than our estimate. Our estimate is 350,000 when the system is in; its estimate was 450,000.

I do not want to go over the economic stuff, otherwise we will stay here all day. I want to deal with this issue. I can assure noble Lords that as part of the work to build the universal credit system we are undertaking a level of testing fully commensurate with a programme of this scale. Prior to the main go-live date in October 2013, there will be significant levels of testing specifically focused on ensuring that the various components work effectively together, including realistic business testing. For this project, we are adopting the Agile method of development, which creates and tests working IT components at an early stage. We are actually testing them now, and I shall show them to Members who can attend on 3 November. Instead of building very big sections of the IT system slowly, we are building small pieces more quickly. We are confident that this approach will provide a stable and fully proven system that will allow us to successfully deliver universal credit. I assure my noble friend Lord Boswell that the system will be sized to cater for the worst case volumes and will be robustly tested for performance at peak times. But I do not believe that it is necessary to introduce the additional step of a formal report, with the additional cost to the taxpayer and inherent time delays this would entail.

--- Later in debate ---

[Baroness Sherlock]

I thank the Minister for that. At the outset, obviously that kind of assurance will give confidence in the nature of the planning. Is he receiving independent assurance, as the programme goes on? The fact that he is, very unusually, a member of the programme board as a Minister, is certainly a sign of his own commitment to the project. It makes independent assurance even more important, because part of the point of independent assurance is to give an outside view in case those who are too close to the project may not see pitfalls as they develop.

[Lord Freud]

Yes, I am absolutely aware of that. The Major Projects Authority is looking at the process, and coming up in November or December is the next major independent look through the whole project. It is genuinely independent and quite a tough set of governance.

[Lord Freud]

The responsibility for those reviews is with the Cabinet Office. It is slightly hazy—I think that is the best word. They seem to get out, but I am not sure of the exact process. I take the point of that question and I will explore and report back to the Committee exactly how that information will be published. It may well be that we would look at extracts. Leave it with me. I take the point and will come back and say exactly how that information will be treated.

I want to clarify for the noble Lord, Lord Knight, his questions on costs because there are a lot of different figures flying around. One of the confusing things is that the figure of £2 billion has genuinely attached itself to two or three different parts of the project so it is easy to get confused. If you see £2 billion you think it is that £2 billion. The first £2 billion is all the costs associated with the implementation and operation of universal credit across the SR10 years, which is not just purely an IT investment. Some £1.5 billion of that is investment in systems, people, estates and other resources to allow the creation of the model. On top of that, there is another £0.5 billion for transitional and future running costs following the launch in October 2013. That £2 billion is a separate £2 billion to the net extra AME costs when it is all in operation compared with the current system. I apologise for the various £2 billions. There are some more running around but let us not get into those.

[Baroness Sherlock]

I am sorry, but I would like the Minister’s help in understanding which £2 billion the Public Accounts Committee was talking about in its report. It said,

“Approximately £628 million of the £2 billion set aside for Universal Credit is capital expenditure and a further £400 million is to cover the increased benefits … So less than half of the funds … will be available for staff costs”.

Is that the £2 billion that he was just talking about?

[Lord Freud]

Yes, that is the £2 billion of the implementation. The £628 million was within the £1.5 billion figure that I was talking about. I apologise for the confusion. There are a lot of figures. There are too many £2 billions. This is the oddest topic to joke about that I have ever come across, but there we are.

The noble Lord raised an issue about the complexity of universal credit in comparison with the ESA. This is a large project. There is no doubt about that. It breaks down to three different projects from the one that the noble Lord, Lord Knight, was talking about. The first is the universal credit administration platform. That is a DWP responsibility. That incorporates large elements that have already been developed, such as the payment accounting system. The next thing is the universal credit real-time earnings calculation and the payment and accounting system. That is basically the front end of the system and the rules engine behind it. Then there is the feed, which is the HMRC RTI system. You are looking almost at two components there: the supply of the information, which is being piloted—those pilots are getting going—and the data cleansing because, as the noble Lord rightly pointed out, getting the data through in a way that is readable and matchable is the key. Currently, the HMRC is working really hard on getting that right. It has got up to a data cleanse of 98.3 per cent and its aim is to push that higher and higher.

On data security, we will use our secure file transfer system, which is already in place between DWP and HMRC and is currently used for national insurance systems as well. We have recently had an independent assessment, which is an extra piece of independent scrutiny, undertaken by IBM on that technology plan. I should add on data sharing, as there was a question from my noble friend Lord German on data standards, that we are using the relevant information—the ISO standard. In fact, it is not a question of having it to be used for universal credit; we are already doing so and it is in place today.

We have a robust governance process with the Major Projects Authority. There is a commitment from me to keep noble Lords well informed on this matter, and I can make that commitment from a stronger position than most Lords Ministers because I am responsible for it. I make that commitment informally and I make it formally. The development can also be monitored by Select Committees in another place—the Work and Pensions Select Committee or the Public Accounts Committee—and they indeed look at it. All the structures are in place to ensure that the introduction of universal credit is properly scrutinised and on that basis I ask the noble Lord not to press this amendment.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Tuesday 18th October 2011 Grand Committee

[Baroness Sherlock]

May I press the Minister on one more point? I understood that his argument in response to the amendments up to Amendment 83 was that he could not accept such a broad exclusion because it would encompass people who would otherwise have paid the shortfall. That is probably the dead weight argument. I was in the Treasury. Dead weight is much loved as an argument by the Treasury and despised by pretty much everyone outside it. You can see that it makes perfect sense, if you are in the Treasury, to think, “You are already paying this, why on earth would I want to do it?”. If you are on the other end of the telescope, it looks rather different.

Does the Minister accept that the fact that a claimant may stay put and pay the difference does not necessarily mean that they can afford to pay it? That point was made by the noble Lord, Lord Kirkwood, and the noble Earl, Lord Listowel. Someone who can see no alternative suitable accommodation may stay put, pay the difference—or at least accept that they must pay the difference and get into debt, with all the consequences that has for the family. Does the Minister accept that point and, if so, how will he address it?

[Lord Freud]

My Lords, it was interesting that there was a range of responses to our survey. Different people will do different things depending on the circumstances. That is the point. That is the problem with all the broadly defined exemptions that we have discussed today, which we have explored in great detail in the department: none of them works to define eloquently and adequately the people whom we want to protect. We need other ways to do that. I know that people like to attack the Treasury on every conceivable opportunity—

[Baroness Sherlock]

The Treasury employed me for many years; I would do no such thing.

[Lord Freud]

It did not sound like that.

Some people will choose to pay £11 and £12 extra for an extra bedroom perfectly rationally and other people will make other responses; a wide range of response is likely. A lot of people would regard it as a bargain to spend that amount on an extra bedroom. As noble Lords will be aware, spending to get that extra accommodation in the outside world—whether through a mortgage or through renting—would cost a lot more.

[Baroness Sherlock]

Forgive me, in the interests of levity, I was not being clear enough. The people I am concerned about are not those who could afford it but declined to stay, or those who are staying put and are happy to pay the money. The Minister mentioned statistics earlier about the number of people who would move, downsize or stay put and pay the difference. I am concerned about the rump who remain, which I think is sizeable—perhaps he will remind us of the percentage. I tease him about dead weight only because that argument works only if the Government are willing to accept that the price is borne by those who are not capable of making the difference. I am trying to tease out exactly how big is that price, who is paying it and what price the Minister would regard as acceptable for people who are forced into debt in order to make it work for everyone else.

[Lord Freud]

My Lords, I said earlier that we are working on the detailed implementation of this. It would be premature to make judgments on that. We need to develop strategies to ensure that those problems do not arise.

Welfare Reform Bill

Debate between Lord Freud and Baroness Sherlock

Monday 10th October 2011 Grand Committee

[Baroness Sherlock]

My Lords, I would like to add one final word. Could the Minister reflect for us briefly on one of the wider consequences of this move? When tax credits were set up, they were, as he will know, designed to replicate work in many ways and to replicate the tax system, so it is not the case that having savings is not taken into account at all. Under tax credits, genuine income from savings is taken into account, and that is the way it should be, but under this new system it is not just the very richest who are affected. Once people reach £6,000 worth of savings, they will face, as my noble friend Lady Drake described, a heavily punitive rate of effective taxation on that. I wonder what the effect of that is on the marginal deduction rates as they move into work.

I ask the noble Lord to do two things. One is to comment on how he has factored that into the effective incentives to move into work in a whole variety of situations. Secondly, could he say whether he is not worried at all that it might push people back into an approach of dependency on the state as opposed to their trying to share that responsibility between themselves and the state, which the tax credits system encourages them to do?

[Lord Freud]

My Lords, Amendments 22B and 22F would exclude from the calculation of capital any savings placed into an individual savings account or other prescribed accounts of a claimant who is in work, or who has been in work in the past 12 months, up to a maximum limit to be set no lower than £50,000. It begs a really very simple question: should the taxpayer support someone who has savings of £50,000? That is the question that is being asked here, and I think it is a question about amounts. The figures we are using were taken over from the existing benefits system, and they were raised a little over five years ago in April 2006. Those figures were doubled from £8,000 at the top to £16,000, and the starting rate from £3,000 to £6,000, so those figures do move around. I accept that determining what the right figure is here is not an exact science. Indeed, one of the things I am keen to have is a responsive system that starts to get research and understand judgments such as what the right figure is here.

I understand exactly the motivation of the two amendments, which is to encourage low-income workers to save. The argument comes down to how much we and the taxpayer can afford. I gave some figures when we debated the previous group of amendments. I will remind noble Lords that if we had an upper capital limit of £50,000, it would cost £90 million a year, which we simply do not have. Under our proposals, only when a claimant, or joint claimants, has £16,000 or more will the entitlement to universal credit cease; and only 13 per cent of households have this much in savings. That is why the figure is not as arbitrary as some noble Lords indicated.

I was asked a series of questions. I will have to add to my letter to the noble Earl, Lord Listowel, to get right the position of children leaving care. Clearly, a child's income and capital are wholly disregarded in the system. The noble Lord, Lord McKenzie, asked about the treatment of ISA interest. Universal credit will replicate the capital rules for means-tested benefits by using a tariff income. It is not possible to read across from the tax credit system. As noble Lords know, tariff income is not—and is not meant to be—the equivalent of the actual income that you might earn on that amount of capital. The figure includes an estimate of how much you should be prepared to run down your capital while you look for support from the state.

--- Later in debate ---

[Baroness Sherlock]

I would like to make one brief point about the sums of money that are increasingly needed to save for a house. It was reported in the Guardian on 17 September this year that the average deposit has gone up tenfold in the last 20 years, from £6,793 in 1990 to over £65,000 now. The same article went on to quote a banker from First Direct, which I presume must know these things, who said:

“The average deposit … has actually risen more than twice as fast as house prices and almost four times as fast as income”.

Could the Minister therefore think for a moment about whether the inflation in the savings limit properly takes account of the specific house-related inflation, and within that the specific deposit-related inflation, that we are seeing?

[Lord Freud]

My Lords, Amendments 22C and 22D would exclude from the calculation of capital prescribed amounts saved for a deposit on the purchase of accommodation for personal use where the claimant is in work or has been in work in the previous 12 months. I can of course see the benefits of encouraging low-earning families to become homeowners, but at present these amendments would be difficult if not impossible to implement efficiently in practice. As the noble Baroness, Lady Drake, pre-empted my argumentation, I will not go into this in depth, but I must say that one would need both the provision of a savings vehicle, which would in effect be exclusively for the purchase of a house, as well as adequate numbers of people wanting to save in this particular way, for that market to work. I do not think there is any necessary block on creating a vehicle like that at some stage in the future, and it would be up to a Government to look at that in the future. Right now, given our constraints, I do not think we are in a position to do it. As noble Lords have heard and as the noble Baroness suggested, these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. I remind noble Lords that we have obtained an envelope of £4 billion per annum to give to people in receipt of universal credit. I am not netting it off against other changes, but that is what the universal credit does. Finding extra money for this, that and the other cannot be done just by a wave of the hand. It will be tough to get extra money for desirable things.

It is essential that we get the architecture of a structure that we can use to help and motivate people. If we cannot afford particular things or it would be desirable to develop particular processes, that is fine and we can do it, but right now we do not have those resources. For that core reason, I hope noble Lords will appreciate why we do not support these amendments, and I ask the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Lord Freud]

My Lords, Amendment 29 specifies that deductions from the claimant’s maximum amount of universal credit should include an amount in respect of prescribed types of unearned income calculated in the same way as the deductions made in respect of earnings. As drafted, Clause 8 allows for a reduction in respect of unearned income to be calculated “in the prescribed manner”. The Bill therefore already allows for the manner of such reductions to be specified in regulations. This could include, where appropriate, the same calculation as for earnings.

As we set out in the White Paper, claimants will have their universal credit withdrawn according to a single taper rate after appropriate disregards. The latest assumptions on the earnings disregard have been set out in a new policy briefing note which was published today. Further analysis is provided in an updated version of the impact assessment for universal credit, which was published not very soon, but this afternoon.

With regard to income other than earnings, we have today released a new policy briefing note which confirms that statutory sick pay and statutory maternity, paternity and adoption pay will be treated as earnings. We do not intend to treat either ESA—or ESA equivalent—or maternity allowance as earnings. They are not treated as earnings in the current system; they are benefits and are treated as such. Nor do we propose to alter the current treatment of maternity allowance in the benefits system, where it is taken into account in full. This is because maternity allowance is one of a number of benefits which exist to replace income for people who are out of work. It therefore addresses the same need as universal credit for mothers who cannot work because they are giving birth to their children. We do not believe it is right for the Government to pay twice to meet the same need.

The income briefing note also explains our wider approach. In general, where a claimant has income at their disposal to meet their living costs, such as spousal maintenance or payouts from an occupational pension, these payments will be taken fully into account. However, we need to make exceptions to this general rule while ensuring that the system is kept as simple as possible. We will therefore disregard certain income types in full where they are paid due to additional costs or expenses that a claimant has. This would apply to additional payments due to being disabled, such as DLA or various local authority payments, or for looking after children, including child benefit and fostering allowances. We will also disregard in full certain payments which would be disproportionately costly to take into account. These will include the value of payments in kind or charitable payments.

I turn now to the proposed subsections in Amendment 30 which would require the Secretary of State to carry out and publish a review of the impact of a taper rate on universal credit claimants and their work incentives one year after the Act comes into force. As the revised impact assessment sets out, we expect the single taper together with the earnings disregards to improve work incentives significantly. With regard to the participation tax rate, the number of households who lose between 70 per cent and all their earnings through taxation and benefit withdrawal on moving into 10 hours of work will fall by 1.2 million under universal credit. Under the current system, around half a million individuals in low-paid work would lose more than 80 per cent of an increase in their earnings because of higher tax or withdrawn benefits. Virtually no households would lose 80 per cent under universal credit. On reasonable assumptions, the combined impact of take-up and entitlements will lift around 900,000 individuals out of poverty, including more than 350,000 children and 550,000 working-age adults.

These are significant outcomes and we will be monitoring and evaluating universal credit to confirm that they are achieved. However, this is an ongoing process and we expect that it will take longer than a year to develop a sufficient body of evidence on which to draw firm conclusions. As a result, we do not think it appropriate—

[Baroness Sherlock]

I thank the Minister. I am trying to look through the revised impact assessment, as I am sure will other noble Lords. I hope he has had the opportunity to read it before I have; I would be very disappointed if he had not. I wonder, therefore, if he would give us the benefit of that experience. Regarding the figure he has just cited of 200,000 children being lifted out of poverty by entitlement alone—and I see he has had to resort to modelling take-up which he has always previously refused to do on the grounds that it was not necessary—could he remind us what the previous estimate was of the number of children being lifted out of poverty?

[Lord Freud]

Yes, I can help noble Lords. There is a small decline for adults in this impact assessment compared with the last one. It is down from 600,000 to 550,000. However, the figure for children is unchanged at 350,000.

[Baroness Sherlock]

Is it unchanged?

[Lord Freud]

Yes, for children lifted out of poverty, the figure 350,000 is unchanged. I am sorry; I can only tell noble Lords what is in the document, which I confirm that I did read over the weekend. Let me nail down the reason why I do not want a formal annual review process. I do not think that that is the right way to go when we have something as sophisticated as the universal credit, given the impact of the different delivery mechanisms, taper rates, disregards and conditionality. I will be talking to the Committee quite soon about how we could assess the system most effectively. I accept assessment and regular assessment, and I am looking for support from this Committee in that process.

[Baroness Sherlock]

I thank the Minister. I wanted to phrase my question more precisely because I think I may have confused him. The improvised impact assessment says on page 18 that changes in modelled entitlements will lift approximately 200,000 children out of poverty. The figure of 350,000 children that he quoted included take-up modelling. My understanding is that previously he has given us figures that did not include take-up modelling. I am trying to contrast the current steady state figure without any assumed change in take-up compared to the previous steady state figure.

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[Lord Freud]

I can absolutely confirm that the figures included take-up and are the same figures, so there is no change there.

[Baroness Sherlock]

I am so sorry. What was the previous figure, not including take-up modelling?

[Lord Freud]

They are exactly the same—200,000 and 400,000 adults. Those figures have not changed. Let me come back to the issue raised by the noble Baroness, Lady Hayter, on the target rate of the taper. I do not think it is right to have a target rate of what the optimum figure is, and I will not talk about the iron triangle today. I will spare the Committee. A lot of factors are involved in what the optimum rate will be. We do not know, so it would be foolish to set a target, whether it is 55 or 65 per cent. If noble Lords want my opinion, I think 65 per cent is too high and a future Government—when they have some money—would be smart to lower it. But by then I would hope that we would know exactly what the optimum figures were. When we know that, a smart Government would move to it. It would be wrong to set a target when we do not know what the optimum figure is. I agree that we need to be very sophisticated in our understanding of how people behave and the impacts of universal credit. I take on board the spirit of this amendment in the sense that we do need to assess it. I do not think this is the right way and I hope to be able to discuss with this Committee better ways of assessing it. I am hoping for some real enthusiasm behind those ways as well.

I hope that these answers have helped to clarify our intentions in these areas. They are really important areas, and I urge noble Lords not to press their amendments.

Social Mobility and Child Poverty Commission

Debate between Lord Freud and Baroness Sherlock

Thursday 23rd June 2011 Lords Chamber

[Lord Freud]

My Lords, the job of the commission will be to hold the Government to account for their strategy. It is the job of the Government to set the strategy and we will look at all the areas in which we need to improve performance.

[Baroness Sherlock]

My Lords, I am sure that noble Lords who saw the recent BBC documentary “Poor Kids” will have been moved by the brutal reality of child poverty in Britain that was portrayed. Will the Minister assure the House that the Government will commit themselves to tackling poverty at the very bottom and not just social mobility? Is he aware of the concerns expressed by charities that the Government’s approach to the commission may undermine its independence and will he meet the End Child Poverty group to discuss this?

[Lord Freud]

My Lords, one of the things that we are doing to expand the measures of accountability is to look precisely at severe poverty, which is a combination of very low incomes and material deprivation. That is an area on which we want to focus. One of the problems with targets is that they encourage Governments to tuck people just above an arbitrary line, which we do not want to do. I am sorry, but I have forgotten the second part of the noble Baroness’s question.

[Baroness Sherlock]

Will the Minister meet the End Child Poverty group to discuss its concerns that the Government may be weakening the commission’s independence?

[Lord Freud]

We are not weakening the commission’s independence in any way; we are strengthening it by requiring the commission to hold the Government to account. The fact that we are not insisting that the commission sets the strategy for the Government means that the Government now have that responsibility and the commission can then hold them to account. I shall of course meet the group at any stage; I am sure that it is in my diary anyway.

Child Poverty

Debate between Lord Freud and Baroness Sherlock

Tuesday 17th May 2011 Lords Chamber

[Baroness Sherlock]

My Lords, returning to the matter of targets, even if the Government are correct, as the Minister said, and 350,000 children are lifted out of poverty by the welfare reforms, the IFS has said that that will be wiped out by the numbers falling into poverty before reforms even take place. I am sure that everyone in the House wants to build on the achievements in raising children out of poverty. Would targets not be the best way to do that?

[Lord Freud]

My Lords, it is important to look at what the figures have shown us. Last year we put an enormous amount of money into tax credits and the benefits system. The amount increased by 6.7 per cent and is the sole reason that we had income growth in this country in that year. It is not sustainable to do this by income transfers. Our aim is to try to transform the lives of people, and that must mean a renewed emphasis on getting people back into work, making them independent and leading their own lives. That is our strategy and that is how we have reformulated our poverty policy.

Housing Benefit

Debate between Lord Freud and Baroness Sherlock

Monday 6th December 2010 Lords Chamber

[Lord Freud]

My Lords, I thank my noble friend for that question, which gets to the heart of the issue. There are three reasons why we think there will be an adjustment in the marketplace. First, we as taxpayers represent 40 per cent of the private rental market. Secondly, there have been some surveys of landlord attitudes; roughly half say that they are prepared to reduce rates. Obviously, they are sending a message back to the main buyer. Thirdly, last week we put in place a mechanism to help that adjustment process. We are prepared to pay direct rents to landlords where they are prepared to show flexibility in helping people to stay in their homes.

[Baroness Sherlock]

Will the Minister comment on the concern expressed by charities that families may be forced to move repeatedly? In particular, can he comment on the fact that all the evidence shows that families at risk who move repeatedly can be put out of the reach of the social services? What steps will the Government take to protect vulnerable families in that situation?

[Lord Freud]

My Lords, one of the points that was raised by SSAC, the advisory committee, was that by having two sets of changes in April and October we were potentially making people make two sets of adjustments. That is why we fine-tuned our arrangements, as we announced last week, so that they come into effect in April, but there is a nine-month period for people to make an adjustment. We have also put in £50 million to help local authorities deal with the transition—some of which will be difficult—to make sure that it goes as smoothly as possible.