Welfare Benefits Up-rating Bill

Lord Kirkwood of Kirkhope Excerpts

Tuesday 5th March 2013 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, I will make just a short intervention on this amendment so ably moved by the noble Baroness, Lady Lister. I entirely concur with her view and analysis. I want to add, however, the fact that I am now very frightened about what is happening in the short term. There is a complacent view held among policymakers generally that the Work Programme and universal credit are all that need be done. I support both, and will not cast any aspersions on any Governments or make any party political points, but both these important reforms will take at least 10 years to go into steady state and be of assistance to our most hard-pressed, low-income households in the United Kingdom.

If I am right about that, and about the prognosis for the United Kingdom’s level of economy over that period, we face a really difficult period of activity where we cannot rely safely on the Work Programme and universal credit to provide the social protection that this country needs and expects. We need to do something in the short term that seeks to understand what is going on. More than anything else, this is a plea for really rigorous and urgent monitoring of everything going on: every bit of evidence from every constituent part of the United Kingdom. We need to watch carefully what is happening. The noble Baroness is quite right: malnutrition of children will result over the next five to 10 years if we are not extremely careful.

Now, this is no one’s fault. I understand perfectly well the need to get austerity and deficit reduction properly balanced in the nation’s future policy at a financial and fiscal level. But nobody could have foreseen the difficulties or longevity of the recession, or the lack of growth that this country will have to deal with in the short term of five to 10 years. That does not seem like a long time and I do not take anything away from the long-term need to get universal credit and the Work Programme put together and rolled out, but nobody is paying enough attention to what is going on in the short term.

If you refer to the sensible policy professionals who look at this, the Joseph Rowntree Foundation is first among them and there is the work by Loughborough University, Professor Jonathan Bradshaw, and all these experts. We have better professionals in the United Kingdom than any other European country. I say that because I have worked with most of them for the best part of 25 years. The noble Baroness is one of them— she nodded at that point. This is a serious point: we have internationally recognised experts on this yet we are deaf to what they say to us. A growing body of opinion says that something different and more than what has been put in the policy framework to date needs to be done to be sure that we do not face levels of financial adversity with which the public will not be comfortable.

I know that there is a view that people are against welfare spend and we have had discussions over the Welfare Reform Act and this Bill about the language used nationally in the public discourse on this important area of public policy. It is important because £200,000 million a year is spent and it is still creating problems. We need to face up to that. We need to have a much more adult discussion about what is going on.

Certainly, concepts such as the minimum income standards need to be part of that discussion. We need to look at the cumulative effect of everything that has happened since 2010 that has made the circumstances dramatically worse. People know that I am a professional, paid-up pessimist—I accept that—but we have to be very careful about how we assess the evidence.

I want to make a couple of quick suggestions about how we might deal with that in conjunction with looking at the principles in the long and short term and how we perform the monitoring and evaluation. What is happening in the devolved legislatures of the United Kingdom is very important. There are positive responses in Wales, and in Scotland, which I know best, where the need is recognised. We must first promote the need to do things differently. That may mean financing food banks—that is not something that I want, but if the alternative is malnutrition in children, we cannot ignore that. It is easier in smaller countries which have shorter lines of communication and a smaller scale. They can move more flexibly and faster. Working with the legislatures in Cardiff and Edinburgh, I think that there are some quick wins that central Government could help to promote. I hope that we will do that and keep the channels of communication between London and the constituent legislatures throughout the rest of the United Kingdom open and dialogue promoted urgently.

As the second part of that, working with local authorities will be so important. The evidence coming back from housing authorities, particularly in local authorities, presents variable geometry—we are getting different messages from different parts of the country. There is a spatial dimension to some of these issues which we should not ignore. In the past, we have always safely relied on a centralised, unified United Kingdom social security process as the right thing to do. I have less confidence about that working in the next five to 10 years. We need to look much more carefully at how housing and labour markets are aligned in some regions of our United Kingdom and be sensitive to changes happening in those fields.

I think that we need a short-term anti-poverty strategy. The principles covered by the amendment of the noble Baroness are important and must be kept in mind for the longer term, but all my instincts tell me that the next three, five or seven years will be difficult in a way that nobody has previously been able to get a grip on. If we do not respond to that by looking at some of the ideas contained in the amendment, we will pay a heavy price in terms of child poverty, in particular. We have an important amendment coming up next on that subject, and I hope that we will think carefully about that as well.

In strongly supporting the concept behind the amendment, I would like the Committee to consider not just the longer and medium term but some of the emergency state provisions that we as a country will be forced to face over the next five to 10 years.

[Baroness Sherlock]

My Lords, this has been an interesting brief debate, introduced by my noble friend Lady Lister with her now characteristic blend of expertise and passion. I am sure that we are all grateful to her for opening up the question so well. The quotes that she shared with the Committee about children arriving hungry at school and mothers missing meals and going without themselves to protect their children from the effects of poverty were, on one level, not a surprise to any of us, but they are still shocking. They should be profoundly shocking.

I found the point made by the right reverend Prelate very interesting and I understand why he would like those assurances from both sides of the Committee. My noble friend Lord McKenzie of Luton made Labour’s position clear at the beginning of our first day in Committee. It is this: if we were in government right now, we would be uprating benefits in line with inflation. However, we cannot make a commitment at this stage for the next Parliament. My view is that that is not a good idea anyway. We are fundamentally opposed to the whole principle in the Bill of fixing the levels of uprating for a period. We have perfectly good mechanisms for uprating benefits annually in line with inflation in the light of prevailing economic circumstances. To be honest, I would not want to be tempted into anything other than maintaining that position, but I fully understand why the right reverend Prelate is pressing the concerns that he is pressing.

I also found the comments made by the noble Lord, Lord Kirkwood of Kirkhope, very interesting. He drew in the spatial dimensions of poverty and the wide-ranging regional issues. That is something that we may come back to. I particularly agreed with his point about the need to monitor what is going on. The next amendment that I shall move encourages the Government to look specifically at the impact on child poverty. I also support the noble Lord’s point about the need for a cumulative assessment of all the changes between 2010 and now—a point made very strongly by my noble friend Lady Hollis at earlier stages of debate.

Since the Bill cannot help but drive down standards of living for families, what assessment have the Government made of the likely impact on the well-being of the poorest adults and children of what is effectively a real-terms cut in benefits and tax credits, not just over the year ahead, but over the three years covered by the first uprating and the two years of this Bill? It would be very helpful to the Committee to understand what assessment the Government have made. At a time when three new food banks are opening every week and even families in work are finding it a struggle to make ends meet, the state needs to take particular care to demonstrate that resources are gathered and distributed in a way that is fair to everyone. In the light of that, I shall be very interested to hear what the Minister has to say.

--- Later in debate ---

[Baroness Sherlock]

My Lords, Amendment 12 is in my name and that of my noble friend Lord McKenzie of Luton. This amendment would require the Secretary of State to publish and lay before Parliament a report assessing the impact of the order on the number of children living in the four measures of child poverty set out in the Child Poverty Act; namely, relative low income, combined low income and material deprivation, absolute low income, and persistent poverty. The aim is very simple. It is to force the Government to face up to the consequences of their actions and to come clean about the impact of these measures on child poverty.

I am sure that the Minister is closely familiar with the coalition agreement. I know that I read it regularly, so I expect no less of him. My favourite bit is paragraph 14, the first bullet point of which reads:

“We will maintain the goal of ending child poverty in the UK by 2020”.

That is rather lovely and has a beauty in its simplicity. I will repeat it:

“We will maintain the goal of ending child poverty in the UK by 2020”.

In keeping with that commitment, the Government have previously published the effect on child poverty of Budgets, spending reviews and Autumn Statements. But in the last Autumn Statement we did not get the kind of detail that we were expecting. Why could that be? We got a hint in a Written Answer in another place from the honourable Esther McVey when she said:

“We estimate that the uprating measures in 2013-14, 2014-15 and 2015-16 will result in around an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI”.—[Official Report, 15/1/13; col. 716W.]

It probably is important to look at the backdrop to this. Since the goal of ending child poverty by 2020 was first announced in 1999, the UK has made real progress. Some 1.1 million children were taken out of relative child poverty between 1998-99 and 2010-11, and 2.1 million children were taken out of absolute child poverty between 1998-99 and 2010-11. But now we are going into reverse. The rise in child poverty likely to be caused by these measures is on top of a net rise in child poverty of 400,000 by 2015 and 800,000 by 2020, resulting from the Government’s current fiscal policies, as seen in the IFS analysis of 2011.

If that is right—the Institute for Fiscal Studies has a pretty good record on these things—that means a rise in child poverty of at least 1 million children under the relative low-income measure is now likely by 2020. However, the relative low-income measure is just one of the four poverty measures in the Child Poverty Act. I should like to ask the Government why Ministers have not given any figures on the number of children who will be pushed into absolute poverty by the Bill, despite the fact that the Government have the same capacity to produce an estimate on that measure as on the relative low-income measure. I look forward to hearing the answer because, as the Minister will realise, the Government have a statutory duty to reduce absolute child poverty under the Child Poverty Act. Therefore, they presumably must be able to measure it to know if they have fulfilled that statutory duty.

Similarly, the Government have given no assessment of the likely impact of the Bill on material deprivation, despite again having a statutory duty to reduce material deprivation under the Child Poverty Act. Even if Ministers did not feel able to produce a numerical estimate, I cannot see any reason why they could not produce a narrative assessment, a point made repeatedly by the Child Poverty Action Group. Finally, and at the risk of being repetitive, we have seen no assessment, not even a narrative one, of the impact of the Bill on persistent poverty, despite the fact that yet again the Government have a statutory duty to reduce persistent child poverty under the Child Poverty Act.

This really is a disgrace after all the careful progress that has been made. The reason the previous Government took child poverty so seriously was that it had risen so dramatically under the previous Conservative Government. The researcher, Jonathan Bradshaw, who has already been mentioned today, found that child poverty increased nearly threefold in the 1980s alone and that the well-being of British children compared unfavourably with that of children in most developed nations. That was the reason the Labour Government acted. It was also the reason why, by the time of the last election, there was apparently cross-party support for that goal of tackling child poverty in Britain. We are now in the position of having to ask what it means for the Government to say that they will maintain the goal of ending child poverty in the UK by 2020.

This is perhaps a philosophical point, but what does it mean to have a goal if one takes no steps towards it? I may say that I have a goal of being a concert pianist, but if I do not take lessons to learn to play the piano and I never practise, no matter how many times I say it, the odds of my becoming a concert pianist must be seen to be slim. In that case, on what basis can Ministers say they are committed to eradicating child poverty in the UK if they keep bringing forward Bills that drive it ever higher? It may be time for them to come forward and say that they do not in fact have any intention of eradicating child poverty and perhaps never did.

The amendment really is for the Government’s own good. If they are committed to the goal of ending child poverty by 2020, they need to understand the impact of their policies on child poverty. Otherwise, they cannot possibly achieve that. If they are not committed to that goal, the nation has a right to know that and still to understand what the impact of these measures would be. That is all the amendment does. It requires the Secretary of State to tell Parliament and the nation what the effect would be of these measures before he implements them. What could be more reasonable than that? I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I hope to make an even shorter contribution to this important debate. I agree that the amendment relating to child poverty is apposite and important. I want to confine myself to seeking further clarification from the Minister, if she has the information to hand. It would be to the Committee’s advantage if we knew more about what we can expect from the Social Mobility and Child Poverty Commission, because it relates directly to the substance of this amendment.

I was pleased that there was a recent change to the membership of the commission and that our very own noble Baroness, Lady Shephard of Northwold, has joined it. I am pleased about that because she is an experienced hand and I trust her judgment. I look forward to seeing the fruits of her work within that commission. It is important to us all. However, I was disappointed to learn recently that the first annual report of the Social Mobility and Child Poverty Commission is not now to be with us before 26 September this year. We were expecting it in May. I make that observation because it is a sign of drift, potentially. If I am wrong about that, I hope that I will be put right.

I was very uneasy about adding social mobility to child poverty. The original terms of reference of the 2010 Bill as put forward by the noble Lord, Lord McKenzie, were the correct ones. The Deputy Prime Minister, of whom I am a great fan, as I am sure people understand, was wrong. Social mobility is a different subject altogether. It is much longer term and in the short term, we are dealing with a situation that is more of an emergency than the aspiration of social mobility, which of course we all accept. We really need to understand what contribution to child poverty this commission will make. If the Front Bench can tell us anything about that in the course of this amendment, that would be very useful.

My second point is that of course we know that there is a consultation on child poverty measurement. I am taxing my memory here, but I think we were expecting the end of the consultation to be earlier this year—some time in February. If that is the case and my memory is correct, I hope we can be told that the Government’s contribution to the further development of child poverty measurement will be vouchsafed to us sometime soon. It will certainly be important to get hold of this around the time of the Budget, if we can. Some of the Office for Budget Responsibility’s assessments of future policy in terms of the Budget should be seen against the background of the Government’s view about how they will treat child poverty measurement in the future.

I am slightly nervous about some of the things that I have been hearing are being factored into the measurement of child poverty in the future. It may be that I am misreading signals but I hope that we do not lose focus on the fact that, at the end of the day, child poverty can be addressed only with money. Regarding any attempt to dress that up and expand the measurements too widely, while I am in favour of having all the data and metrics that we can access, for the reasons I explained on the last amendment we are facing an emergency situation the extent of which I did not anticipate.

The difficulties are mounting up, as we heard earlier. The decisions to be taken by the Government in the near future on measuring the data on child poverty are very important. If the Minister can help us to understand when we might expect information of that kind, it would help the Committee’s consideration of this Bill not just today but over the rest of its proceedings.

[Baroness Lister of Burtersett]

My Lords, I am pleased to support my noble friends on this important amendment, which has been moved so ably. The Government have still not explained why they did not include the impact on child poverty in the impact assessment for the Bill, as they promised. A Written Answer in the Commons as late as 30 January wrongly stated that the impact assessment sets out the estimated child and adult poverty effects, but it does not. As it is, the shameful figures had to be dragged out of the Government by a Written Question, as my noble friend said. Nor have the Government explained to the Committee how the anticipated increase in the number of children living in poverty thereby revealed is compatible with their obligations under the Child Poverty Act 2010, to which my noble friend referred. I asked this question during Second Reading, but answer came there none.

Instead, the Minister deflected the question with the Government’s usual line that the child poverty measurement indicators are somehow not fit for purpose —picking up on the point made by the noble Lord, Lord Kirkwood. That was followed by a brief discussion about the importance of education, debt and paid work in tackling poverty, but nothing was said about how by enacting this legislation and knowingly adding 200,000 children to the poverty rolls, the Government are fulfilling their obligations under the Act. Those obligations are in addition to the increase in child poverty estimated by the Institute for Fiscal Studies, to which my noble friend referred. I would be grateful if today the Minister could answer the question I asked at Second Reading. What does this mean for the Government’s statutory obligations under the Act? Whatever the Government think about the measures of poverty enshrined in the Act, unless they plan to amend it—perhaps the Minister could tell us if they do—they must face up to their legal obligations as set out in it. What countervailing measures will they take against the increase of 200,000 children living in poverty?

I agree with the Minister that education, debt and work are important factors in any anti-poverty strategy, but it is unclear how reducing real incomes will help with any of them. How, for instance, will making life harder for low-income families enhance the educational chances of their children? Hungry children do not make good learners. Anxious and stressed parents are less able to support their children’s education. Adequate incomes are important to educational chances. Paul Gregg has estimated that around 50% of educational inequalities or attainment gaps between the rich and the poor in the UK stem from differences in income. Similarly, as the Minister said, debt is a major problem for poor families, but I fail to see how reducing their weekly income will reduce that problem. All the children’s charities are predicting an increase in debt as a consequence of this Bill, and a Bill that depresses the incomes of low-income workers is hardly conducive to promoting work as the best route out of poverty. I made the point earlier about what Alan Marsh said: people who are demoralised do not make very effective jobseekers.

As the Government consistently attempt to deflect questions about the impact of the Bill on child poverty by dismissing the measures in the Child Poverty Act 2010 as inadequate I should like to say a few words, if the Committee will indulge me, about their recent consultation on those measures. Noble Lords might have read a letter recently in the Guardian from eight fellows of the British Academy, myself included. The letter argued that the Government’s proposals to measure child poverty in a new way,

“are confused and would meet neither the government’s objectives nor international standards”.

While accepting that,

“it is helpful to track what is happening to the factors that lead to poverty and the barriers to children’s life chances”,

the letter advises that,

“it does not make sense to combine all of these into a single measure. To do so would open up the government to the accusation that it aims to dilute the importance of income in monitoring the extent of ‘poverty’ at precisely the time that its policies will be reducing the real incomes of poor families”.

Guaranteed Minimum Pensions Increase Order 2013

Lord Kirkwood of Kirkhope Excerpts

Thursday 28th February 2013 Grand Committee

Other Lordships here today may be in receipt of the basic state pension. I received a letter a month ago from the DWP informing me of my new basic state pension rate from April this year, which somewhat indicates that the Government are ahead of the order before us. I wonder whether we could be a little more honest about this, in that we have published, updated and reflected the new rates in consultation with people who are going to be recipients. I would hope that we can be clear on that matter. In other terms, with a somewhat heavy heart, because it is never easy to hold back on expenditure for people who are in need of these benefits, I am happy to support the orders before us.

[Lord Kirkwood of Kirkhope]

My Lords, I am pleased to follow my noble friend and concur with everything that he said. I have been doing uprating statements since 1984, I think, and I am here this afternoon really because I did not want to miss one. I have the boxed set, so I would feel that I was in the wrong place if I was not here. However, and this is me in my moaning mood, in the old days when men were men and women were women these debates were really big parliamentary occasions. These are huge sums of public money that we are considering this afternoon. This is no reflection on the Government at all, because while it is a question for the whole House I do not think that if we held this debate on the Floor of the Chamber there would be many more people here. I cannot help but say that it is a shame that we do not have more concern or attention from other colleagues albeit on what I accept is a ritual.

This is a very important annual debate, but this year it is different. My noble friend explained some of the differences, and I want to explore them a little more deeply, because, both qualitatively and quantitatively, these orders are different from any I have seen before. I make it clear that the Government are absolutely entitled, under the rules of the game as I understand them, to make these reductions against an economic background that we can all see. I am obviously not going to move against these orders, particularly in the context of the uprating Bill, which is in front of the House, but we are in exceptional circumstances. There is therefore a case for the Government to say, “For the next 12 months, Britain is a poorer nation and we all have to make a contribution towards getting back on to a steady state”. My point is that I am not confident that we will get back to a steady state for a number of years. I am not an economist and I do not know, but I really believe that the paradigm has changed and that we will all be forced to face up to the circumstances. That may be supporting the Government’s case more than I am accustomed to do, as the Minister might say.

The point I want to make on the back of that is that if we are in different circumstances if I can use the analogy of discretionary housing payments and if the Government are saying that the housing benefit changes are so profound that there have to be mitigating short-term, time-limited emergency procedures to take the sting out of them for low-income families, we may be forced to think about an equivalent emergency package for low-income households if year after year we find that we do not get back to trend levels of growth. I think that in future uprating debates we are going to be forced to look very carefully not only at adjusting the levels down but in addition at ways of getting behind people who are really at the end of the financial road. They have no scope.

The Government have recognised the plight of pensioners, and the rationale for that is understandable. My noble friend mentioned it: they have limited ways of increasing their earnings. The Government’s suggestion is that working-age households always have the option of work, but I wonder how realistic that is. If we are seeing food banks develop to the extent to which I fear they may develop in future in local communities, I think as legislators we will have to reflect that rather than just assuming that we are in a steady state and that the Government can take those savings out year after year. We might all need to think about how we tackle this. Part of that might be exceptional measures for low-income households.

The evidence comes at me every day from every source. This morning, I picked up a very interesting piece of evidence from the Money Advice Trust, which is a very important institution that I watch because I am interested in the development of payday loans. There are problems about some of the administration and regulation of payday loans. The statement from the Money Advice Trust demonstrates the changes that are happening underneath us and that are affected by this uprating statement. It reports that:

“its National Debtline service took over 20,000 calls for help with payday loans in 2012 … The figure represents a 94 per cent year on year increase, and an increase of 4,200 per cent since the onset of the financial crisis in 2007”.

I know a little about payday loans. Working families take advantage of them. I am not against payday loans. Short-term unsecured credit has a role to play. I do not think it is regulated properly, but that is a different argument. These are working-age families. In my estimation, these levels of increase are not going to get any less any time soon. I recognise that something has to be done with the deficit reduction, but we may need to have a grown-up discussion about this across the parties and across Parliament to make sure that we are not ignoring what is happening in a lot of our challenged communities, particularly in the old social-rented council estates of my native Glasgow, for example, where I know that some these changes that we are introducing on top of everything else that is happening will produce levels of financial challenge for particular groups. Lone-parent families are one group that I particularly care about, and I know that colleagues know even more about that than I do.

I am concurring with this order on the basis that we need to think about other ways of providing some sort of emergency relief—hopefully only short-term—as well as what we are doing in these orders. If we do not start thinking about that now, we will suddenly find that we will be hit by levels of malnutrition and child poverty that will be found completely unacceptable by the population at large. We have to avoid that at all costs.

Finally, I apologise for this because I should have checked before I came, but I do not know what the Government Actuary has to say about the National Insurance Fund, which is appearing in not the means-tested but the contributory dimensions of these orders. Presumably, no Treasury grant is being requested, although I would be surprised if that was the case. Can we have a statement from the Minister to the effect that the department and ministerial team are comfortable with the Government Actuary’s view of the orders as they stand? That is important for the Grand Committee in its consideration of these important orders this afternoon.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for her introduction to these two orders. We do not have much to raise on the first order. The GMP is a promised income for those who contracted out before 1997, so the order is a routine process, which we support.

I have just one question. The Explanatory Note refers to there being no new costs on the private or public sector as a result of these orders, but an uprating cost clearly has to be borne by someone: the pensions providers. Is that not the case?

We have covered much of the ground on the Social Security Benefits Up-rating Order, as the noble Lords, Lord German and Lord Kirkwood, have said. I do not mind having a rerun of this, although much has already been said and we still have more Committee proceedings to go, let alone Report, so I shall resist the wholesale revisiting of our debates, although if provoked I might withdraw that assurance.

The noble Lord, Lord Kirkwood, as ever, made an incredibly valuable contribution on where all this is heading. We all know that the deficit has to be dealt with, although we might argue with how that is being done. But we have not seen as part of an impact assessment—and it is something I would ask about—the impact of this uprating order on child poverty. What assessment, if any, have the Government made of this uprating order’s impact on things such as personal debt and poverty more generally? What do they think about the food banks, which are growing up in our country at the moment? One opened in Lewisham, but unfortunately it was on the day of the universal credit regulation, so I could not go. It is just one of just hundreds that are growing up in a country that we know could by any standards be classified as rich.

We have heard about the basic state pension and the much lauded triple lock—the highest of earnings, prices or 2.5%, in this case. We have no difficulty with the basic state pension having been a higher share of average earnings for some time, although is that not largely because average earnings are so depressed because of the state of the economy? My right honourable friend Stephen Timms in the other place dug away at the triple lock, saying that it is certainly a success in terms of rhetoric but that its practical implications have been much more limited. He knew of one that was not operated because RPI gave a better result, and in year 2 inflation was used. It was only in year 3 that the 2.5% kicked in, in excess of inflation. On the old basis of uprating by RPI in those latter two years, the award would have been higher. Perhaps the Minister can confirm that 1.5 million pensioner households are missing out compared with what would have been the position had the standard minimum guarantee been uprated by earnings and the savings credit threshold frozen.

Welfare Benefits Up-rating Bill

Lord Kirkwood of Kirkhope Excerpts

Monday 25th February 2013 Lords Chamber

In conclusion, the Bill as it currently stands seriously fails to protect working families, and will cast children into poverty. It simply does not go far enough to promote work, so that work always pays, particularly for the lowest earning working families. My amendments go some way to mitigate these deficiencies, and I beg to move.

[Lord Kirkwood of Kirkhope]

I am happy to support these amendments and have added my name to most of them. The House owes a debt of gratitude to the right reverend Prelate the Bishop of Leicester for raising these points. I particularly support his concerns about lone parents. Over the whole systematic process of change, my concerns are getting greater and greater about the compounding effect of all these changes that we see in the social protection available in the United Kingdom. Lone parents, who are mainly women, are struggling already, and we need to watch their situation with great concern in future.

My heart absolutely sank when I saw that this Bill was being applied to universal credit, because universal credit should be the future; it is the architecture around which we as a country should and must have serious consideration about provision for low-income households. We need to have a discussion with people such as my noble friend Lord Forsyth of Drumlean as well, between now and the next election. I hope that there will be a grown-up discussion about how the United Kingdom, as a poorer country, accommodates some of these new pressures, and I am willing to engage in that to the best of my ability. However, what is wrong about applying these two years of locked-down 1% increases is that they risk prejudicing the whole new future, as I see it, of how we cope.

In my experience, the administrative cuts in the health service prejudiced the view of a lot of people towards some of the NHS reforms. My real fear is that people will not know that the cuts are being introduced by the uprating Bill and will think, in the early years of universal credit, when they are transitioned across into the new system, that they are being sold a pup. That will potentially damage the public’s understanding of what universal credit is about and that is a real shame. I understand perfectly well all the arguments that the noble Lord, Lord Forsyth, makes, and we have to put up with them in the best way we can, but we should have isolated universal credit for the reasons that I have explained.

Further, I do not think that we know how universal credit will work out when it is in steady state, and it will take a long time to get there. I come back to the costs that will be saved by applying this uprating Bill to universal credit because I am a bit confused about exactly what the Government think they are going to save. Therefore, I make my first complaint—it is another moan—with conviction. The noble Lord, Lord Freud, bless him, has worked very hard to try to get universal credit to stand up. I read a worrying story in the Financial Times, which said that the self-employed have not yet been told that there is a real-time HMRC system heading in their direction. Not many of them know about it. That is more than slightly worrying—it is very worrying, because the computer system is essential to that measure working sensibly. However, we must try to do the best we can to make it work in future.

Secondly—again, the right reverend Prelate was right to give this priority—one of the best elements of universal credit is the way it deals with what used to be known in the old language as income disregard. Some of us have fought for years to do something constructive about income disregard. It is a very intractable problem and universal credit has given us an opportunity to get hold of that and provide incentives to get into work. Universal credit does that, but the first thing that the Government do after bringing in this new progressive reform is to cap it at 1%. How that is supposed to meld with everything else that has been done in connection with the Work Programme makes no sense to me. It will save relatively small amounts of money in terms of the big picture savings that the Government are trying to lock in, but for the life of me it seems a counterproductive, silly cut to introduce and it compounds my first point in that it makes the universal credit system look worse than it is.

The right reverend Prelate the Bishop of Leicester made eloquent and important points about child poverty targets. I concur with everything that he said, so I do not need to elaborate on that. My final point is about costs because I am struggling to understand the savings that have been alluded to. I do not expect the Minister to be able to do this off the top of her head but it would be helpful to me if, before Report, I could be told what the universal credit cost savings are in this measure because I cannot make any sense of the impact assessment. I agree with the noble Baroness, Lady Hollis, that it is—

[Baroness Hollis of Heigham]

Perfunctory.

[Lord Kirkwood of Kirkhope]

Indeed. I am looking at the Treasury Autumn Statement 2012, Table 2.1, which has a category headed, “Exchequer savings resulting from 1% uprating of benefits and tax credits”. This is over the three years, not just the two years in the Bill. The table also has a category headed, “Universal Credit: finalise disregards and increase by 1% for two years from 2014-15”. The figure given suggests that the saving for 2015-16 will be £640 million. However, my honourable friend Steve Webb, in a Written Answer to Stephen Timms on 13 February, identified universal credit additional savings as £20 million in 2014-15, £100 million in 2015-16 and £150 million in 2016-17. I am not sure how these figures relate to one another. I may be misreading the statistics and the tables may be drawn up using different bases, but between now and Report I would like to understand how these figures are worked out.

As the noble Baroness, Lady Hollis, said, the assumptions about how many people will be translated on to universal credit are best guesses, to put it mildly. I think the roll-out programme will take much longer, for the reasons that I explained earlier, and the story in the Financial Times compounds my anxieties in this regard. I think the figures that the right reverend Prelate gave of 10% of claimants being on universal credit by 2014-15 and 30% by 2015-16 are ambitious, to put it mildly, so can we have some greater clarity?

This is an important Bill. I understand the significance of the situation in which the Government find themselves. If I did not believe that before this weekend, all the financial circumstances of the past few days have confirmed the difficulty of the situation. However, before Report, we must try to get a better fix, in particular on the savings related to the universal credit inclusion in the Bill, because it is unclear to me. It is important and, from where I am sitting at the moment, I do not think that the savings are worth the candle. I would be much happier leaving universal credit out of the Bill. Let it be the future and let us all work on it, try to protect it and build on it in the best way we can. The Bill is a retrograde step as it affects universal credit, and I support these amendments for that reason.

[Baroness Howe of Idlicote]

My Lords, I want to say a very brief word about two groups—children and families. Before I do so, I congratulate the right reverend Prelate the Bishop of Leicester on his excellent briefing on these very important areas. I agree with a great deal of what the noble Lord, Lord Kirkwood, said.

We know that the Government are not on target to meet the Child Poverty Act commitment to eradicate child poverty by 2020. The right reverend Prelate referred to that. We are told by the Institute for Fiscal Studies that there can be almost no chance of eradicating child poverty, as defined in the Child Poverty Act, by 2020. It predicted that there would be an additional 500,000 children living in absolute poverty by 2015. However, that leaves out a further 200,000 children who will be pushed into relative income poverty. How on earth will this Bill help the Government to meet their commitments under the Child Poverty Act?

I am even more concerned about the disproportionate impact that all this is having on women. The Bill disproportionately affects women, including through the cap on child benefit payments and statutory maternity pay. Furthermore, those in low-paid work, who are more likely to be women, will lose the most. It is estimated that 300,000 nurses and midwives, 150,000 primary and nursery school teachers and 1.14 million admin workers and secretaries will be affected by the cap. Some 98% of child benefit payments are paid to women. Child benefit has already been frozen for three years, meaning that over five years there will be a total of a 2% increase; for the same period, CPI will have risen by 16%. Of different family types, lone parents, who are mostly women, as we know, will lose the most: £261 a year by 2015.

--- Later in debate ---

Moved by

[Lord Kirkwood of Kirkhope]

6: Clause 1, page 2, line 2, at end insert—
“( ) Subsection (1) does not apply in relation to a tax year if, on the review in that tax year under section 150(1) of the Social Security Administration Act 1992, the Secretary of State determines that the general level of prices, measured by the Consumer Price Index, for Great Britain has increased by 3% or more over the period under review.”

[Lord Kirkwood of Kirkhope]

My Lords, it is a pleasure to move Amendment 6, standing in my name and that of my good friend, the noble Baroness, Lady Lister of Burtersett. This is a probing amendment. It is something about which I feel very strongly. It is a modest proposal that does not seek to disrupt the certainty of which my noble friend made so much earlier in the course of these important debates. The amendment simply disapplies the 1% uprating in Clauses 1 and 2 in the event of inflation reaching 3% in 2014-15. In those circumstances, we would revert to the default position of the annual uprating mechanisms that we all know and love. We would achieve the savings without exposing clients on benefits in future to the risks of inflation above and beyond the government estimates on which the savings will be made.

It is important to remember that the Bill deals with two years of annual uprating. However, we must factor in to the totality of the situation we face the already accepted £505 million that the Autumn Statement estimated that the 1% uprating would yield in this current year. I am sure that we are all looking forward to the uprating statement later in the week. In addition, the saving from the 1% uprating of local housing allowance is being dealt with through separate legislation. Both these reductions have already been made for the current year, 2013-14. We must not forget the reductions this year, in addition to those of the two years for which the Bill provides.

What will the Government do if the OBR estimates are too low? We know that the Budget Statement is a few weeks away. No doubt the Office for Budget Responsibility will discharge its duty to make available to the Chancellor, and subsequently to the rest of us, its best evidence and estimates about the inflationary risks that we face. However, we all understand that the Bill is based on the CPI and inflation forecast of the OBR, which at the moment stands at 2.6% in September this year, to be followed by 2.2% in September 2014. Those are the estimates on which the savings of £1.2 billion in 2014-15 and £1.9 billion in 2015-16 are posited.

--- Later in debate ---

[Lord Newby]

My Lords, economists say all kinds of things. For every economist who says one thing, I guarantee that I can find you an economist who says the other thing. There will be a new inflation forecast from the OBR at the time of the Budget. It would be completely inappropriate for me to speculate on what that might say and I am certainly not going to do so today.

As I said at Second Reading—and I repeat—we will continue to monitor closely the rate of inflation and its impact on the cost of living for families and the wider economy, as we always do. Again, as I said at Second Reading, the Government have taken action in response to the changes in the cost of living, including cancelling the January fuel price rise, providing further funding for local authorities to freeze council tax and, of course, for virtually everybody in work, implementing the largest ever increase in the personal allowance in April 2013.

The Government believe that what really matters to families is the impact of our policies as a whole and this will continue to be a key consideration for our policies in the future. However, that does not mean that we believe that we should add conditions to the Bill, and I am certainly not going to agree to that this evening. People have seen very significant restraint in their pay across the private and public sectors without the comfort of a safeguard against increases in inflation. Noble Lords have said a lot about certainty today. The truth is that no one has certainty, whether they are in or out of work, about their future real income. As noble Lords know, many people in the public and private sectors have not been getting pay increases linked to inflation and have been falling behind in real terms. This is exemplified by the difficult decision we took to freeze public sector pay at a time when inflation was rising to 5.2%. It is also borne out by the fact that, according to the latest figures, over the past year average earnings have risen by only 1.3%—not very different from the increase that is being proposed in the Bill. This means that on the best available forecasts—those produced by the OBR in November last year—even with the effects of this Bill, by the end of the financial year 2015-16, out-of-work benefits will still have risen faster since the start of the financial crisis than if they had been linked to average earnings, which many noble Lords are concerned about.

It is vital that we set out clear and credible plans to reduce welfare spending, tackle the deficit and secure the economic recovery. Adding conditions to the vital savings delivered by this Bill would remove that certainty.

[Lord Kirkwood of Kirkhope]

My Lords, I am very grateful to my noble friend. These are very difficult issues. I do not think that his response takes us any further forward from the Government’s position at Second Reading. I hope that he will do me the favour of reflecting carefully on what he has heard today. I am grateful to my noble friend Lady Lister for her wise counsel and support, as always.

I am seriously interested in this issue. I think it is a modest proposal. I will go away and think carefully about what my noble friend has said today but we may have to return to this at later stages of the Bill. On that basis, I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Universal Credit Regulations 2013

Lord Kirkwood of Kirkhope Excerpts

Wednesday 13th February 2013 Lords Chamber

[Lord Kirkwood of Kirkhope]

I am grateful to my noble friend for that advice which I will try to take into account. As always it is a pleasure to follow the noble Baroness, Lady Lister. Her speeches repay careful study and I am sure that colleagues will do that. I yield to no one in the pleasure I get from reading social security regulations. Nothing makes my weekend more than a wet towel around my head and a glass of malt whisky in my hand, but I will make my first plea to the Minister a simple one: can we have August off this year? The consultative process has consulted me all out, so I am just going to make some general remarks about what I think we need to watch out for carefully in these regulations.

I am absolutely supportive of the general political direction of these reforms, but they are very ambitious, so we have to be careful about how we implement them. The noble Baroness, Lady Hollis, was also correct to say that whether we like it or not, the financial austerity we are experiencing may prejudice the outcome of what I think is an essential and necessary architectural change. We have to be careful that we do not spoil the public’s understanding of what is trying to be achieved here in the short term. I know the Minister is alive to that but we need to continue to be alive to it.

These regulations put us in a position of having fewer unknown unknowns, but there are still quite a lot of known unknowns. The question that I really want to ask more than anything else this evening is a process one, about how we can be sure that we use the expertise in this House and, indeed, some of its self-confessed non-expertise. The latter is just as effective, as the noble Baroness, Lady Lister, said, and the speech of the noble Lord, Lord Eden, was very refreshing and welcome in that regard. We in this House need to be sure that we have an ongoing and positive relationship that allows us to encourage the Government to continue to be flexible in the roll-out of this programme. It will take 10 years to get to a steady state in universal credit and for it to be really bedded in so that people are comfortable about it. We must hasten slowly to get the introduction of this policy correct.

I am very pleased that the Social Security Advisory Committee is so engaged. I remember getting quite a long look down a ministerial nose when I suggested that this might happen. However, to be fair to the Minister, he does listen and changed his mind. The SSAC report gives me more comfort than I would otherwise have had, so I thank him for that, as I do for some of the other flexibilities he has introduced. He has to persuade his ministerial colleagues, some of them in other departments, that some flexibility needs to be retained. Unless we do that, we will prejudice the implementation of this very important new area of public policy.

It is quite difficult to get the balance right with the next thing I want to say to the Minister. I believe what he says to me and understand that the Government’s position is that the digital implementation—the agile computing process that has been deployed in this case, which is new, innovative and gives us better functionality, in theory—is all on track and that everything is under control. I have to say to him that that is not the signal that I am getting from sources close to the development of the project who are not Ministers. It is so important to make sure that we get the computer-based system—not just the digital application process but the underlying framework of ICT provision—to work. I believe it can be done but am very nervous about the timetable—a point that I think was made by the Delegated Legislation Committee—because I bear the scars of the Child Support Agency and many other horrors. There have been one or two successes but the experience has not been great. I hear the assurances that I am getting officially, but would just like to make sure that if things start to become unstitched, or the timing slips, that adult ways will be found to deal with that. If things start to go wrong, we need to know about it. There is nothing worse than Ministers covering up. I am not suggesting for a moment that that is being done, but if things go wrong, my plea is that the Minister comes and looks me in the eye and says, “Look, there’s a glitch here, we’re going to lose six months”, or whatever it is. I would much rather have that than find suddenly that the whole project is in jeopardy because of the computers going wrong. I hope that he will take that message to heart.

I will just make a point in passing about pathfinders. There is a spatial dimension to the pathfinders as we roll this out. Coming from, and having formerly represented, a rural area, I know that the differences between the communities that this programme will serve are very important. In the evaluation of the pathfinders, I hope that my noble friend will pay very careful attention to the different types of communities that we are seeking to serve.

I want to make a very quick point in passing. The noble Baronesses, Lady Lister and Lady Sherlock, both made a point about guidance suddenly becoming a substitute for regulation. I say this in a considered way, but I was horrified by what Mr Mark Hoban said on Monday when the First Delegated Legislation Committee was discussing these regulations. He said:

“We think that it is more appropriate to rely on the discretion and judgment of our advisers to make the right decision for families. We will monitor that situation quite carefully and there will be training in place”.—[Official Report, Commons, First Delegated Legislation Committee, 11/2/13; col. 23.]

That is dismissing the qualitative difference between the essential protection that regulations provide and slipping into guidance. If this is to be part of the new system, I think he will come up against serious objection in this place if not in the House of Commons—to be fair, Mr Stephen Timms made the point powerfully. That is something that I will certainly share with other colleagues in watching like a hawk.

My final point is about the importance of the exceptions service and the evaluation framework. We have just seen some encouraging signs that the exceptions service will be deployed properly. It will need money but if it is done in the way that I understand it will be done, I would be satisfied with that. However, there is always a risk that it falls down in the deployment because it does not have the capacity to meet the demand. Frankly, it is very hard to assess the level of the demand that it will be expected to meet, certainly in the early months and years of this rollout.

I am very encouraged by the members of the expert group that is looking at the evaluation framework. I have been looking at the evaluation framework very carefully. This brings me back to where I came in: the way in which we monitor and evaluate this implementation will be absolutely crucial. My plea is for honesty and a continuing relationship with this House because I am long enough in the tooth to know that things get much better consideration here than anywhere else. If we do that, we have a much better chance of getting this system in place in time and in a way that benefits the kind of people we are trying to serve.

[The Lord Bishop of Worcester]

My Lords, I welcome the introduction of universal credit. I think it is a very important step forward. Like other noble Lords, I am grateful to the Minister for all the work that he and his colleagues have put into the regulations before us today.

However, I am concerned about the inadvertent hardship that might be caused to some of the most vulnerable in our society. The report of the inquiry led by the noble Baroness, Lady Grey-Thompson, Holes in the Safety Net: The Impact of Universal Credit on Disabled People and Their Families, has already been referred to by the noble Baroness, Lady Sherlock. It clearly sets out the concerns of disability charities and the millions of people they represent. I want briefly to highlight one of the issues about which I feel concern: the impact on families with disabled children.

As I understand it, the regulations laid before us today propose to reduce the level of financial support to most disabled children from £57 a week under the current system to just £28 a week, or £124 a month—a reduction of nearly £30 a week. According to the Government’s own estimates, 100,000 disabled children will be affected. Only the most severely disabled children who are on high-rate care components of the disability living allowance or registered blind will be unaffected.

Many parents of disabled children already struggle to find the money to cover the extra costs of having a disabled child, such as specialist adaptations to their home, access to disability-friendly services and higher travel and childcare expenses. Already, 28% of households with a disabled child are living in poverty, and this rises to around 50% if the additional costs associated with being disabled are taken into account.

For those affected by this further reduction in their income, the impact could be very serious. Two-thirds of them say that they will have to cut back on spending on food and more than half say that they will get into debt, yet on Monday we heard in the debate on the Welfare Benefits Up-rating Bill that the lower disability addition of universal credit, as well as being cut in half, will be now uprated by just 1% a year in 2014 and 2015, well below the expected rate of inflation. That is why one of my colleagues on these Benches will support an amendment to remove the child disability elements of universal credit from the 1% cap.

I highlight to your Lordships the serious concerns raised in the report on these and other areas produced by the inquiry headed by the noble Baroness, Lady Grey-Thompson. I urge the Minister to review and monitor the impact of universal credit on disabled people, and in particular on families with disabled children so that this policy can better meet its aims of supporting those in greatest need constructively.

Jobseeker’s Allowance Regulations 2013

Lord Kirkwood of Kirkhope Excerpts

Wednesday 13th February 2013 Lords Chamber

[Baroness Lister of Burtersett]

My Lords, I want to make a very brief point. However, it is a positive point, after having been rather critical of the Universal Credit Regulations.

During our discussions on the Bill, I raised on a number of occasions my concern that there had been a suggestion that the payment of contributory benefits might be wrapped up with universal credit. That would mean that it would all go into one bank account even though contributory JSA is an individual entitlement. Therefore, I am delighted that that will not happen. I simply seek an assurance from the Minister that no step will be taken to make that happen without first debating it in both Houses of Parliament. It is an important issue and it could mean the loss of individual entitlement, particularly for many women who have now come within the contributory benefit system.

[Lord Kirkwood of Kirkhope]

It is still a pleasure to follow the noble Baroness because she made a point that I was going to make. I want to make two remarks on which I would like the Minister to reflect. The first is about the contributory system—the national insurance system. In the middle of last year, I remember listening with great attention to a lecture given by a valued friend, Malcolm Wicks, who sadly died recently. He was a great defender of the national contributory system. He gave a lecture on how he melded the concept of citizenship with the national insurance principle. He said that this involved a lifetime longitudinal commitment both ways between the state and the individual, with people paying in and people taking out, and that people understood that. He was an exponent of that all his life and I certainly miss his good counsel and wisdom. I share his view. We cannot allow these regulations to pass without remarking that this is another notch down in the diminishing of the national insurance principle. I regret that. I understand why the Government are doing it because otherwise the misalignment would be confusing. If you are introducing universal credit, I understand the rationale and it makes perfect sense. However, universal credit does not have the advantage that the national insurance contributory principle had of giving a longer-term relationship between the state and the individual. I want to put that on the record in passing.

Secondly, conditionality for people who are paying national insurance contributions suggests to me that people should perhaps pay less because they now have to submit themselves to sanctions. I have a strong view on sanctions and earlier today the noble Baroness, Lady Hollis, reflected some of that. I take the Paul Gregg view that sanctions are positive only if you can get the full commitment of the individual who might be potentially taking on a jobseeker’s commitment that will lead to sanctions, and if they feel that they are in charge of the process. That is not the case with the system of conditionality as it is currently cast, although with a bit of flexibility it might be amended in that direction to put people in a position where they feel they are more in control of what is going on. They are then much more likely to understand the rationale of a sanction being applied to them. That is work in progress. I hope it will be part of the careful evaluation that the Minister explained to us earlier this afternoon the Government will undertake.

My points really comprise two moans about national insurance that I am getting off my chest. I do not expect the Government to do anything about it. However, these regulations change things in a way that is significant for the future of the national insurance system. Indeed, perhaps in the long term, once universal credit gets into a steady state, the Government of the day—whoever they may be—may want to ask themselves whether it is sensible to continue to have a residual diminishing national insurance contributory principle set of benefits running alongside universal credit. I am agnostic about that but I certainly think that it needs to be recognised in this important debate.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for introducing these regulations. I am fully supportive of the probing that my noble friend Lady Donaghy has done, particularly around the construction sector, on which she is very knowledgeable. I agree with the noble Lord, Lord Kirkwood, that, given the increasing demise of the contributory principle, it is important to consider how we re-establish that in this context, if we can. Of course, there has been an accelerated demise in various benefits. We shall talk about contributory ESA in a moment, but that is now payable for just one year and JSA is generally payable for just six months.

The Minister explained that these regulations refer just to contributory JSA and not to earnings-related JSA. I believe that he referred to my next point in introducing the regulations but, to be clear, I understand that as regards the entitlement under these arrangements, the national insurance contribution rules remain exactly the same as they are at the moment. In respect of national insurance credits, under current circumstances these can be obtained when the claimant satisfies the qualifying conditions for JSA, when he or she is not in work and earning. Will the Minister remind us what the credit and entitlement will be under universal credit when JSA is no longer with us? The Explanatory Memorandum recites that the rules for contributory entitlement are, except for the conditionality and sanctions regimes on which the Minister touched, “largely” unchanged. Will he particularise a little any other significant changes outside those two areas? As regards the alignment of the conditionality and sanctions regimes, we obviously see the merit of this and these regulations give us an opportunity to explore further how that actually works across the three benefits, including ESA.

Like others, I am grateful to Gingerbread, which briefed us on this matter, particularly as regards its focus on lone parent flexibilities, which was touched on extensively in our earlier debate. I will not go over that again except to say that I think the Minister said in response to the debate that 10 out of the 12 lone parent flexibilities are being carried forward, albeit in guidance rather than in regulations. I apologise if he covered this point earlier, but will he remind us which two are not being carried forward? We are aware that he has been pressed on flexibilities and that these should be set out clearly in the claimant commitment so that both the adviser and the single parent claimant can share the same understanding of what the regulations and guidance say about balancing work conditionality with caring responsibilities. It is understood that the noble Lord’s colleague in another place was sympathetic to this. Perhaps the Minister can say whether he agrees. It seems an ideal way of ensuring that all concerned are clear on the matter and it would help to focus the minds of advisers who may not always be up to date with the range of flexibilities available.

Small Pension Funds

Lord Kirkwood of Kirkhope Excerpts

Tuesday 27th November 2012 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, it is a great pleasure to follow the noble Lord, Lord Lipsey, and very reassuring to all of us to know that we have an expert in our midst in terms of giving us pension advice. If he would be kind enough to set up a surgery on Wednesday morning in the Bishops’ Bar I am sure that there will be a queue, and I will be at the front of it. It is typical of him that he spends some of his time devoting his expertise to this very important subject.

It is a very important subject and the timing of the debate is perfect. The noble Baroness, Lady Greengross, has championed this subject and, indeed, the International Longevity Centre-UK has done an amazing amount of extremely good work. That work is very professional, well thought-through and very constructive. It and she deserve some serious attention in the debate, not just this evening but in the future. I think she is right that the retail distribution review—it will be put in place next year and I do not think that any of us has any fundamental objection to it—represents an improvement but will have unintended consequences. I confess that I am only just beginning to appreciate the extent of the unintended consequences. Some of the figures that we have heard from all sides in all the valuable, interesting and positive contributions to this debate have demonstrated how deep and wide the problem could be if it were allowed to continue to 2050. Some of the figures are worrying.

The noble Baroness, Lady Hollis, in her inimitable and passionate way, argued her case, and particularly the case for women and stranded pots. This is not the first time that I have heard her make that speech but it is always worth listening to her every time she makes it. It is absolutely correct and I would encourage her to go on making it. In fact I have lifted bits of her speeches and used them in other places. I confess that that is a weakness that I have with some of the contributions she makes.

The need is urgent. There is a lot of passion and urgency but I do not think that there is much politics in this. I believe that the industry gets this problem. I have talked to people in industry and a lot of them are coming up with some sensible workarounds for some of the worst effects of this advice gap, which is the core of the debate. It is the centre that needs to be sorted. The noble Baroness, Lady Hollis, is right to say that there are a couple of pieces of pensions legislation in gestation so there might be another opportunity for us to get together once the RDR is implemented to try and get some purchase on making the improvements that are necessary.

I echo the surprise of the noble Lord, Lord Lipsey, that we did not get some briefing from the FSA. I do not think that he missed it in his earlier remarks—it will have got the point. I endorse that; the point he makes is absolutely correct. However, there is a wider problem, alluded to by the noble Baroness, Lady Greengross, which I want to reinforce. I think that there has been a bit of dereliction in duty in terms of the way in which those three main policy departments are co-ordinating their work. She is right to say that the FSA, the Treasury and the DWP, from the respective positions, should have been across this problem with some positive responses before now. I would very much like to know—although I will not ask the question because it might embarrass the Minister, who is completely blameless: she has an alibi; she was not around at the time—whether there have been any ministerial meetings on the subject across those three departments. I think that I know the answer. I do not think there have even been official meetings across the three departments. That is no longer good enough. We now need to require an assurance from the new Minister—we wish her well as she works her way into the department—that she will go back to the department and make sure that she attends a meeting talking about this subject intelligently across these three departments. Nothing less will do. If she does that, she will find ready support from the industry.

Many things are happening. There is a lot of concern out there that the ineffable complications and complexities of our pension rules and regulations are getting in the way. I cannot for the life of me understand why you get stranded pots at the end of your saving life and £2,000 here and £2,000 there. These are in DC invested schemes—the money is there—and I cannot understand why people cannot put it together collectively. I cannot see who would lose from that. It is true that the industry has the idea that it will lose business but I am unconvinced by that argument. We need to be more straightforward about this. My noble friend Lord Patten is right: the austerity that we are in means that we are constrained in what we can do, but that should not stop us introducing innovative approaches to sort out some of these matters.

Of course, I support what my noble friend Lord Stoneham said about what the Government are doing. Steve Webb has had a huge workload—successfully discharged, as far as we can see—on the NESTA front and therefore he has not been looking for things to do. I genuinely support the long-term vision he has because it is the correct one. He may say, “Well, we have been looking at issues such as pots following the member automatically when they transfer jobs”—which I think is a correct thing to do—but I would like to see the colour of that in some of the upcoming legislation before I can be certain that that was secured. Knocking small pots into fat pots—or whatever the parliamentary language is for explaining that—seems entirely possible with a little lateral thinking and a little support from the industry, which, as I say, is there.

I hope that when my noble friend replies she will at least undertake to take back some of the important, positive ideas that have been discussed this evening and see if she can press them across the DWP, the FSA and the Treasury.

My noble friend would do me a service if she would look again at the Money Advice Service, because my noble friend Lord Stoneham is right about the need for education. I am worried about the Money Advice Service. Since April it has had responsibility for debt counselling across the United Kingdom. It has a budget of £78 million. That sounds like a lot of money but when the universal credit comes into being over the next five years or so I think that it will be swamped. It may be that that should be the priority, but that is not the point that I am making. The point I am making is that if the FSA levy produces £78 million—if I have got the figure correct—it will need to be monitored quite carefully. The Money Advice Service is now in a crucially important position to help people with OMO questions and decumulation issues as they approach retirement; it is an essential co-part of its work. I do not think that it is properly resourced at the moment for the future demands that will be placed on it. I would be grateful if the Minister could go back and ask cogent questions about whether the service believes that it has the resources to discharge the important responsibilities which Parliament has put on it, and provide us with some reassurance at a future point in the debate.

This is a very important debate and I hope that the Minister goes back charged up with a new enthusiasm to get the co-ordination across the departments that is so necessary to achieve positive outcomes in this area.

Child Support Management of Payments and Arrears (Amendment) Regulations 2012

Lord Kirkwood of Kirkhope Excerpts

Tuesday 20th November 2012 Grand Committee

[Lord Kirkwood of Kirkhope]

My Lords, it is a pleasure to follow the noble Lord, Lord McKenzie, on this important set of regulations. I should say at the outset that, like him, I have no objections to the technical provisions therein contained. I recognise the genuine progress that the Child Maintenance and Enforcement Commission in the current set-up, which will eventually morph into the Child Maintenance Service, has made in some areas over recent years.

That does not deny that a huge amount of work is now going to unfold, starting from next year with the closing down of all existing CSA cases. The department has the job of getting to grips with the mountains of child maintenance debt that have accumulated over the past 19 years. It is reassuring to hear the Minister say that we will soon be able to see the child maintenance arrears strategy. It was supposed to be published by the end of this calendar year, so I hope that we will still see it within that timeframe. Although the regulations are important, they are relatively small scale compared to the longer-term problems that we may face.

Like the noble Lord, Lord McKenzie, I have a list of elucidatory questions to ask. I do not think that it will be possible for the Minister sensibly to answer them all in the time available this evening, so I am perfectly happy to take some written guidance if that is found to be convenient to the Committee and the Minister. Although the regulations are important, they merely tidy up some peripheral areas. However, the context behind the whole policy or subject area is complicated and concerning and it bears some examination before we approve the regulations.

I start with the position taken by the Comptroller and Auditor-General on the last client fund accounts published by the Child Maintenance and Enforcement Commission. I accept that they are historic; the last audited figures we have are for 2008-09 and 2009-10. These suggest that at 31 March 2010 the commission regarded that total maintenance arrears amounted to £3.7 billion, and I believe that that figure will have increased by now. At that stage the commission took the view that only 28% of it was potentially collectable. That is just about £1 billion, and of that only about £0.5 billion, 13% of the total reported arrears, was likely to be collected. That is the size of the mountain we are setting out to climb next year, and we know that it is against a background of inaccurate maintenance assessments, processing errors, overstatements and understatements in the reported accounts, the arrears being available only at financial statement level, not at the individual case level, and arrears collection targets consistently missed year after year, year in, year out. On the basis of the information presented in the last audited client fund accounts, the Auditor-General concluded that,

“the scale, age and collectability of the outstanding maintenance balances which have accumulated since the inception of the statutory child maintenance schemes, mean that the Commission continues to face a significant challenge to collect a large proportion of these arrears”.

That continues to be the case. The regulations we are discussing are a constructive step forward, but only a small step.

The Public Accounts Committee, responding to the opinion of the Comptroller and Auditor-General, took the view that the department had to do more to communicate positively and constructively with the parents involved, particularly the parents with care. In the Government’s response to the PAC’s conclusions, they said they would make a determined attempt to collect the £2.7 billion deemed, according to the C&AG’s report, not to be collectable. They would do that by undertaking a trial with a small number of clients to try and improve communication with parents with care to keep them au fait with what is happening in their individual cases. I understand that this trial has started. It would be of great benefit to us all to learn more about it. I think it started in June. I would like to know how many cases it has covered and whether there has been any evaluation of its success in terms of improving communication.

The work has significance for the future prospects of collection in the longer term and I would certainly like an assurance that when it is completed it will be published in full so we can see exactly what difference it can make by notifying parents of what action is planned to recover the sums owing to them. It should also tell customers of any debt it believes is too costly to pursue rather than leaving parents in limbo, which has been the case in the past. The DWP and new Child Maintenance Service understand that we need to work harder to make sure that the unvarnished truth is made available at every opportunity to the parents with care. If we had some assurances about that and the pilot scheme works well, then I hope we will seize the opportunity to make improvements in that direction.

I have a couple of other questions and, again, a written response is perfectly acceptable because some of these things get quite complicated. I want to ask about the validation of cases. When the CSA closes down a case, the DWP always separately undertakes a validation of the debt before it is transferred. I understand that only validated CSA arrears will be transferred into the new IT system; that is, those amounts that have been properly validated. In passing, I hear that the computer system being used at the moment is incapable of fully dealing with part payments. That may be a temporary situation, but if it is true, there is a long history, which I remember as well as anybody, of glitches in IT systems costing the system dear and contributing to accumulating arrears. If the new IT system is fully capable of taking part payments, particularly if they are used extensively in the future, that would be good.

However, we have a validation system which will almost inevitably mean that the number of individual cases will be reduced. I would like a reassurance that if and when that happens, there will be a full exchange with the parents with care as to what has happened, what the write-off has been, and a full explanation of the validation process and how it will affect their casework. These draft regulations provide for an arrears write-off, as the Minister has said, where a parent with care no longer wants the arrears. As part of the case closure process, will parents with care be asked whether they still want the arrears and, if so, at what stage? I would like to understand better the validation process as applied to these regulations, how it will be handled and how this work will unfold during the case closure process.

I turn briefly to the deprioritisation of older cases. It is stated Government policy, and the new Child Maintenance Service has made it explicitly clear in a way that has caused a great deal of concern, that the existing arrears in older cases—cases that are out of payment because the children are beyond the age of minority or have gone on to university—will not get the same priority to be chased down as those of parents with care for children who are of the age group which is currently eligible to accrue payments from non-resident parents. I have real concerns about this. This issue obviously goes wider than these regulations. I shall lay down a marker that when the Child Maintenance Service arrears strategy is published in full later in the year or whenever it comes, I hope that serious consideration will be given to what steps will taken. If older cases are not prioritised, what will happen to them? They cannot just be left because that is an abrogation of responsibility by the department and the Child Maintenance Service. It is effectively giving a green light to non-resident parents who have successfully evaded their responsibilities so far. That needs further and better consideration.

Penultimately, I raise the question of compensation. There will be some cases in these regulations where there will be a prima facie case where maladministration within the CSA or CMEC in the past has demonstrably led to arrears being greater than they normally would have been. I do not know exactly what the policy is at the moment but in the intimation of any such set of circumstances where the arrears are judged to be no longer collectable and there is a bona fide case to be made that the Child Support Agency contributed to that, compensation should be offered. We should be clear about what those compensation details are for the cases that they affect. They will not only affect these regulations, but the whole childcare arrears strategy in the longer term.

Finally, under the new statutory child maintenance schemes, cases will be admitted to the new child maintenance collection service only once a direct payment arrangement has actually broken down. That means that all the new cases that are assumed will come with arrears. The future strategy that is yet to be published needs to take a clear hold of that and deal with it, otherwise, we will end up in five or 10 years’ time dealing with new cases with uncollected arrears. If that was allowed to happen, we would not have learnt the lessons of the past. That would be very disappointing and regrettable. What I am really asking for—as did, I think, the noble Lord, Lord McKenzie—is an early clarification of some of the wider policy intentions of the Child Maintenance Service in relation to outstanding arrears.

We will monitor these regulations carefully. The questions the noble Lord, Lord McKenzie, and I have raised deserve some response, but I am content to rest on what has been suggested and watch the future policy roll out. The Government can be sure that we will be watching very carefully to see whether these regulations are implemented properly and effectively so that child maintenance flows to the children that it seeks to serve.

--- Later in debate ---

[Baroness Stowell of Beeston]

I am grateful to the noble Lord—he is demonstrating his experience in this area. That is one fewer letter for us to have to commission and I am sure that my friends behind me will be grateful for that. The noble Lord asked if there is scope for the non-resident parent to disagree between allocations to the Secretary of State and the parent with care. We will give the parent with care’s debt the priority and both clients will be informed of this. The non-resident parent can specify which parent with care, as I explained in my opening remarks, but the department will decide the priority hierarchy after that. Obviously, we will give the parent with care priority over the Secretary of State.

The noble Lord asked what was defective about the enforcement powers that might lead us to this arrangement for part-payment. The enforcement powers are not defective, but there are circumstances in which there is no suitable action to take; for example, where a non-resident parent is self-employed and has no assets. In this example, there is often no way of collecting the debt in full—I think that might address one of the points of the noble Lord, Lord Kirkwood, as well.

The noble Lord, Lord McKenzie, asked about the lump sum of part-payments and clarified why instalments have to be regulated for at a later date. This is one of those technical answers. If we regulated to allow for that now but could not facilitate it in practice I am advised that we could face legal challenge. We can therefore only introduce the legal power once we know that we can deliver it in practice. So we would if we could, but we cannot.

[Lord Kirkwood of Kirkhope]

That is a first.

[Baroness Stowell of Beeston]

I shall ignore the remarks of the noble Lord from a sedentary position and keep moving on.

The noble Lord, Lord McKenzie, also asked how the department will stop non-resident parents using the part-payment powers to play the system—“Where are the risks?”. The noble Lord may not have used that phrase, but I think he was asking where the risks were in this. If a non-resident parent enters into a part-payment agreement and subsequently defaults, the legislation provides that the commission may cancel the agreement and pursue the non-resident parent for the total amount of the arrears that they owe. Both parents would be notified of this before entering into a part-payment agreement with the commission. A non-resident parent will therefore have an incentive to remain compliant with their part-payment agreement.

The noble Lord, Lord Kirkwood, talked about older cases and asked whether arrears in these cases will get the same priority as more recent ones. The strategy to which we have already referred, and which is due for publication soon, will set out what we plan to do to stem the growth of arrears and manage arrears in all types of cases. It is an issue that we recognise and it will be addressed. He also asked about any arrears that have built up on the existing schemes once a case has been closed. This subject will be brought before the House for debate next year—I look forward to debating it at that time and I will ensure that I am fully equipped to answer the noble Lord then. Arrears of maintenance accrued under existing schemes will continue to be owed to the parent with care unless that parent requests that it not be collected.

I have covered the points raised by the noble Lord, Lord Kirkwood, and I believe that I have done the same for the noble Lord, Lord McKenzie. I will conclude by restating my thanks to the noble Lords for their support for these regulations.

Housing Benefit (Amendment) Regulations 2012

Lord Kirkwood of Kirkhope Excerpts

Monday 15th October 2012 Grand Committee

We accept provisions relating to the local housing allowance to be largely consequential on the earlier order that made the change to uprate by CPI. We then expressed our concerns about that and continue to do so. These regulations are focused on the narrower issue of the annual uprating, but inevitably are at the start of a process in which there is a divergence between levels of support and actual rents payable. The reality is that implementation of these regulations will create tremendous hardships for thousands of our fellow citizens, and the Government know it. It is a callous piece of public policy.

[Lord Kirkwood of Kirkhope]

My Lords, perhaps I may make a brief intervention at this stage. It is right not to dredge back over the painful territory of the policy intent, because we discussed it at great length in another context earlier in the year. We should use our time this afternoon to look at some of the detailed implementation questions that arise from the policy. Actually, we should be thinking about getting a housing policy for the United Kingdom that is worthy of the name when trying to sort some of this out.

People have been asking me some of the practical questions about this and I just do not know the answers. I am nervous that we are getting towards a single implementation date, 1 April 2013, when there will remain a great deal of uncertainty on the back of the substantial change. If people get substantial change and are not prepared for it, they are even more badly affected by it. We must avoid that at all stages, if we can.

Has the department any confidence in working with local authorities and local housing associations? I was interested to hear the Minister talk about the work done in Liverpool and the Midlands on the home swap direct scheme. That is entirely healthy and welcome. However, if we had taken this at a slower pace and worked with local authorities and local housing associations across the length and breadth of the United Kingdom, a lot of that would have been in place before 1 April. I have no confidence, even if everyone works hard—and I am sure that they are working hard—that we will get proper home swap direct-type arrangements in place across the United Kingdom.

Are there sufficient co-ordination mechanisms in place between the DWP and the other constituent nations of the United Kingdom—Scotland, Wales and Northern Ireland? Presumably, they are making their own arrangements in their own ways. Is the department confident that there is a proper exchange of information and swap of best practice, and that the circumstances north of the border, and in Wales and Northern Ireland, will be as fit for purpose as they can be, come 1 April next year? That is a very important question.

Discretionary housing payment distribution is an important element of that. I understand the Minister to have just said that decisions will be taken later about how it is to be rolled out. However, I say to him that only last week someone in a local authority tenancy came to me. He is in a two-bedroom property, had some adaptations made to the premises and signed a letter of undertaking to the local authority to say that he would stay in that property for a one-year or two-year period. Therefore, he is locked into that tenancy and cannot move. He was prepared in principle to consider moving but he is now caught both ways.

That is just one example of, I am sure, many detailed questions that are arising which would have been better addressed if we had had a more measured transitional phase in the policy’s implementation. Following our important debates on the Bill earlier in the year—it is now an Act—does the department have any further research on the availability of single and two-bedroom properties? Is the map any clearer as regards where the accessibility lies so that people can make a decision about whether there are appropriate smaller properties into which to downsize? It would be reassuring to know that some work had been done and that people were being helped to understand where to start looking for some of these properties.

I concur with what the noble Lord, Lord McKenzie, said about the disability issue. When looking at the impact assessment and the briefing that we received last week, I missed the significance of that. I am not a disability expert; a lot of people know a lot more than I do about this technical and politically very important problem. I was taken aback by the extent to which the client group will be affected by this policy change. I did not know that. I wish that I had known it during the passage of the Bill.

[Baroness Hollis of Heigham]

The figure is two-thirds.

[Lord Kirkwood of Kirkhope]

Yes, it is two-thirds. I would not have guessed that. That is new and it is deeply concerning. I hope that the Minister will help us to understand what is being done about that.

During the passage of the Bill, the noble Baroness, Lady Hollis, kept referring to rurality. Another point that was driven home to me over the summer, coming from south-east Scotland, is that people are panicking about where they should begin to look for appropriately sized accommodation if they are to avoid the penalties that these policy changes introduce. There are no real alternatives in many cases, which is a problem.

A lot of us are relying heavily on the review. I was reassured that the Minister committed himself to conduct a proper review working with the noble Lord, Lord Best. I think that he made that commitment on his own initiative. Therefore, we are entitled to be confident about the review. However, if the review shows that the policy intent has not been delivered in some of these important areas, which I am sure are causing concern to other Members of the Committee as well as to the noble Lord, Lord McKenzie, and me, I would like him to reassure me that action will follow as a result of the review, so that this is not an academic piece of work that says, “On the one hand or on the other hand”, but will say, “Actually, we did not think that would happen. The culture has not changed in the way that we expected it would and therefore we are going to do something different and perhaps even change the policy”.

Of course, housing benefit needs to be constrained; it is a very big number and it is getting bigger. However, I think that we are grabbing at this policy. Irrespective of whether you think that the policy is right or wrong, the process is being carried out far too fast. Doing it all on one day—1 April next year—is a very unsafe thing to do in my view. I hope that we get this right and that the review will lead to some amelioration of some of the problems that are bound to come out of the woodwork when these policy changes are implemented.

--- Later in debate ---

[Lord Freud]

I have pleasure in giving a commitment that I will tell noble Lords exactly how we plan to do it when we know. I think I have covered all the issues that were raised—

[Lord Kirkwood of Kirkhope]

I apologise for interrupting the Minister’s progress. Is there a communications strategy that will roll out with the policy? Obviously, this will have to be delivered by housing associations and local authorities. Is the noble Lord confident that proper notice will be given to those who are affected so that a letter will not arrive in the letter box a fortnight before the policy crystallises?

[Lord Freud]

We are holding a big exercise with local authorities and housing associations and, indeed, the institute is doing a lot of work on this. All the materials are currently going to the relevant bodies and it is up to them to deliver it. They have DWP-branded material in the form of leaflets and so on, so the information is available and ready to go out. Clearly, a lot of effort is going into working out who will be affected and making sure that they get support. There are model letters and leaflets that make up a full toolkit.

I hope I have dealt with the issues. Again, I know full well that noble Lords do not like this policy. That view has been expressed in the Chamber twice and I remember that absolutely, as I suppose noble Lords do, too. There is history here. Our votes were overturned by the Commons, this came back and noble Lords tried again. In the end, after one iteration of it was stopped, I said that I would take following that up in terms of research very seriously, and I set that in train. I hope noble Lords will accept that, unpalatable as these measures are, we have found the best balanced way of reducing the housing bill, which is simply enormous now. No one has said to me, “There is another, easy half a billion to find in the housing bill this way”. This is the fairest way of doing it. It requires a response from local authorities, housing associations and tenants but one that, in the majority of cases, those groups will be able to make. There will be hard cases. Let us hope that we have put enough resource into looking after various hard cases. With that, I hope that on balance noble Lords can support these regulations—with reluctance. I commend them to the Committee.

Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) (No. 3) Regulations 2012

Lord Kirkwood of Kirkhope Excerpts

Monday 15th October 2012 Grand Committee

[Lord McKenzie of Luton]

My Lords, I thank the Minister for introducing this order. I doubt whether it will take us quite as long as the business we have just dealt with. Like the Minister, I am happy to celebrate the start of auto-enrolment, which is a very important development in the pension landscape. In that context, we accept and support the need for this change to the regulations. I am sorry that my noble friend Lady Drake is not able to be with us today. She is not well, but she lumbered me with some questions.

What happens if as a result of current considerations of CPI and RPI, the construction of CPI is amended to include housing costs, which could cause it to be higher, and the formula for calculating RPI, using geometric rather than the current arithmetic mean, could cause it to be lower? Is the Minister confident that revaluation by RPI is likely to be more generous in most years?

On my noble friend’s behalf I want to ask about the schemes that apply discretionary revaluation increases. Does this mean that under their statutory funding objective to secure sufficient and appropriate assets to cover their technical provisions, those provisions must include revaluation at a rate no less than the minimum set out in regulations? Further, what happens when such a scheme is in deficit? Must its schedule of contributions and recovery plan be based on assumptions that include the minimum revaluation rate?

My noble friend has asked a further series of questions. For those schemes which apply discretionary revaluation increases, who under this SI can continue to do so and remain qualifying schemes provided that the revaluation is funded for and included in the statement of funding principles? Will the provision for revaluation be required to be at least that necessary to meet the minimum rate for the revaluation requirement of CPI or 2.5%, whichever is the lower? Further, in the event of an employer ceasing to participate in a scheme that applies discretionary revaluation increases, will any Section 75 debt be calculated on the assumption that the minimum rate for revaluation will apply? Finally, will those schemes which revalue by reference to the increase in average earnings continue to be required to meet the minimum rate for the revaluation requirement of CPI or 2.5%, whichever is the lower?

If the noble Lord would prefer to write on any or all of these questions, that may help us all. Having said that, we are happy to support these regulations.

[Lord Kirkwood of Kirkhope]

My Lords, I want to add my support for these regulations. I have myself had one of the four or five questions from the noble Baroness, Lady Drake. It concerns the consultation that the Office for National Statistics is engaged in at the moment in terms of RPI versus CPI. That needs to be thought about quite carefully because it could have a dramatic impact on some of the scheme rules we are talking about and which these regulations cover. I want to put in a request that the department ensures that the ONS is careful about this issue and that people are made aware of the consultation it is currently engaged in.

There is one point I do not understand. I imagine that an average salary scheme must be a defined benefit scheme and therefore it will have a statement of funding principles and trustees. Given that, I do not understand why the easier fix for this was not to change the scheme rules in order to make them compliant. I cannot believe that trustees would want to do anything other than that. They may have a contest for the sponsor of the scheme in terms of getting the resources, but I cannot see how that would be a problem. My question is this: although I am in favour of them, why are these regulations necessary? Why can the trustees of the scheme not deal with it by making a small amendment to the funding rules in the statement of principles for their own individual salary schemes?

If it is easier to give answers to these rather more simple questions by letter, I am quite happy to receive one as well.

[Lord Freud]

My Lords, I think I will end up writing a letter, but I ought to try to answer the questions in general terms, thus saving a little effort in terms of letter writing. The first point made by the noble Lord, Lord McKenzie, concerned the potential changes to CPI and RPI. About a year ago we had the most glorious debate on this matter, for which I enjoyed researching probably more than any other topic. I think I am pretty comfortable in saying that the authorities are looking at these two measures and that there are likely to be some changes. RPI has had a very bad press lately, as some noble Lords who are aficionados will have noticed. If and when that change happens, we will have to take a decision, but it is pretty premature to take two hypotheticals and jump to a conclusion ahead of time. We will engage closely with the ONS to ensure that the potential impact on pension re-evaluation is fully considered.

On relying on trustees, my noble friend is absolutely right that there will be trustees here. This is just a technical change. The way it was drafted would have excluded these particular schemes, so that is the way that that has been addressed. This is moving into where schemes go into deficit and the question from the noble Lord, Lord McKenzie. They will be required to find funds for the minimum revaluation rate. Section 75 debt will continue to be calculated on the basis that the minimum revaluation rate will apply. The sums go on, even though the scheme has a problem which needs to catch up.

On the schemes that revalue benefits by reference to earnings, we are committed to considering further how that kind of revaluation could be allowed for. Historically, earnings have gone up faster than inflation so it is a lower risk, although that has not necessarily happened in recent years. On the question of whether the provision for discretionary revaluation would be required to be at least that necessary to meet the minimum rate—CPI, RPI or whatever is lower—the answer is yes. Regulation 36(3)(a) stipulates that a scheme with benefits to be revalued on the exercise of the discretionary power can be a qualifying scheme if,

“the funding of the scheme takes account of the exercise of the discretionary power and does so on the assumption that accrued benefits would be revalued at or above the minimum rate”.

That figure is CPI or RPI, whichever is the lower.

I may have answered all the questions without the need for a letter. That would be one of the miracles of our time. I will make sure and, to the extent that we have not absolutely locked this down, I will send a letter over because it is a very technical area.

Child Support Maintenance Calculation Regulations 2012

Lord Kirkwood of Kirkhope Excerpts

Monday 15th October 2012 Grand Committee

Obviously to the advantage of PWCs is the increase in maintenance where NRPs are on low incomes or benefits, although doubling the liability of the poorest is a bit steep. As is clear from the impact assessment, the new calculation rules will lead to considerable changes to current outcomes for a variety of reasons. The regulations are likely to change the amounts due for hundreds of thousands of existing parents. What advice and information is to be made available to help parents make appropriate decisions under these new regulations? However, I conclude by reiterating that we are supportive of their thrust.

[Lord Kirkwood of Kirkhope]

My Lords, perhaps I may make a brief intervention in this important debate. I am opposed to charging, and I hope that we will be able to get rid of it. I understand that there are deficit reduction problems, but an important state-run service should be available to single parents who are struggling to raise children, sometimes with little or no help from non-resident parents. That is what we should be aiming for in the long run and as a matter of principle.

The current plans underestimate the extent to which winners and losers will become a big issue when the plans are eventually rolled out in full. The extent of this change has not properly been taken into account, and there will be big swings in both money in and money out of the hands of non-resident parents and parents with care.

However, I want to concentrate on the National Audit Office’s concerns expressed in February 2012 after it started to look at whether implementation of phase one and phase two of the plans may or may not be delayed. I remind colleagues that at that stage the commission planned to introduce the new scheme in two phases. In phase one, the commission would be able to enter applications to the new scheme from new clients from October 2012. That was the plan in February, and we are now into October. Phase two was to be started six months later, with an indicative start date of July 2013. That would involve the launch of the whole statutory gateway service, introduce charges and transfer the caseload.

I read the NAO report with great interest, and I read page 37 with particular interest. It was headed,

“Figure 17 … Commission risks repeating past mistakes”.

Some of us have been following this saga since 1991. The NAO rightly said that if this policy is to have any chance of success, the new maintenance system needs to be properly worked through and, importantly, it needs a new IT system that works. I understand, although I may be corrected if I am wrong, that the new IT system commissioned from Tata Consultancy Services—TCS—is a mixture of agile computing, which is an iterative way of developing programmes, and more conventional ways of delivering government IT systems.

The February NAO report is concerning as, among other things, it says at page 38:

“The Commission reported to the audit committee in October 2011 on the high risk that the change programme may not deliver phase two functionality within agreed timescales, to realise the benefits outlined in the business case”.

Therefore, there was an early risk. People understood that this was a challenge and that the system might not be delivered on time. The next paragraph of the report—paragraph 3.27—expresses the worry that:

“The Commission has not built any contingency into delivering the new scheme”.

This worrying NAO report was produced in February. The NAO was right to mention both those points about the functionality of the computer and the lack of contingency plans.

The next iteration of the development of the IT issue and the possibility of delay in the IT system occurred when the Permanent Secretary and the then chief executive of the Child Maintenance and Enforcement Commission, Mr Shanahan, appeared before the Public Accounts Committee. At that stage, the Permanent Secretary and the CEO of CMEC were bullish about the fact that the NAO report was out of date. They said that phase one on its own merits had,

“a delivery confidence assessment of amber/green”,

from the Office of Government Commerce, and that that office’s review described the whole project, including phase one and phase two, as,

“having substantial risks, which the programme is taking sensible steps to manage, meaning that the delivery confidence overall is amber”.

Therefore, the NAO report, which adverted to real concerns, was batted back by the Permanent Secretary and Mr Shanahan when they made those remarks in March 2012.

The last annual report of the Child Maintenance and Enforcement Commission, which was produced just before it was taken back into the department in July 2012, revealed that,

“over the last 6 months of the financial year, slippage occurred around testing”.

It went on to refer to,

“a number of required actions to improve delivery confidence”.

We were also told that a pathfinder would be used to introduce the new scheme. Therefore, phase one was no longer where it was supposed to be; it is now a pathfinder. The annual report goes on to say:

“This, and improved testing velocity, mean that the Executive Team has strong confidence in a successful October introduction”.

However, I do not know what “testing velocity” means. That report was issued in July 2012. The Minister tells us today that the pathfinder seems to have changed. Before I continue with that point, I should say that my good friend, Professor Steve Webb, said on 11 September that the pathfinder group would be extremely small and would consist of parents with main care who had four or more children, where at least four of the children had the same non-resident parent. That is hundreds or it might be thousands—these are new applicants—so this pathfinder for phase one is nearly invisible as far as I can see. It has not started yet. If that was not bad enough, my good friend, Professor Webb, when answering questions about this in the other place on 11 September, said that,

“we are now in the final stage of testing, with new system staff training to start in a few weeks”.

That was the position on 11 September. We have been here before. We deserve some assurances about the implementation schedule for all this.

Obviously, the delay is of great concern to the NAO because the business case means that savings of £117 million need to be made between now and 2014-15. In this delay in implementation, the full phase one/phase two configuration costs the taxpayer £3 million a month. These are big sums of money.

--- Later in debate ---

[Lord Freud]

My Lords, the debate has strayed somewhat from these regulations, most substantially into the readiness of IT. I shall try to deal with that issue full on, because it is a fair question.

The concern is that the new system is late and will not work, and the normal things that people get concerned about with IT were raised. There is clearly a balance here to be struck as regards making sure that you deliver what you are intending to deliver in terms of savings and product, and making sure that it works. You fine-tune that as you get closer and closer and you know more. Regarding the timing, as my noble friend said, we were planning to start in October. It will be a few weeks after that when we will really go in on phase one, but in the scheme of things, it is a few weeks late but will come in safely because we are currently testing to make sure that when we start the system is working. The general point I was asked was: will we go ahead before we are confident that the system works? I can give an absolute assurance, and repeat what the Permanent Secretary said, that we will not go ahead until we are confident that the system will deliver for both the client base and the taxpayer.

The first phase will go ahead in a matter of weeks. As regards the numbers that my noble friend was interested in, we will begin incrementally. In the first phase, we will start off with literally 100 or 200 cases a month for the first, say, four months. We then move up rapidly in the next couple of months to 3,000 or 4,000 cases a month. After six months, when we take over all the new intakes, we will be dealing with 10,000 cases a month. That is the planned progression. Again, as regards the question of the noble Baroness, Lady Sherlock, on when we will press the button, I should make it absolutely clear that we will not do so unless we are confident that this works. Everyone here knows the history, and we are as conscious of that as anyone.

I take the question of personal assurance very seriously. For a lot of the computer systems that we are introducing, and universal credit in particular, I will give personal assurance. This system is not actually part of my personal portfolio. Although I am dealing with it for the House, the reality is that I am not sitting on this particular computer system with quite the same ferocity—

[Lord Kirkwood of Kirkhope]

My Lord, that is what worries me. Is it still the case that the target date for the introduction of phase two is July 2013, with a few weeks’ slippage?

[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.