Welfare Reform Bill

Lord Kirkwood of Kirkhope Excerpts

Tuesday 4th October 2011 Grand Committee

Moved by

[Lord Kirkwood of Kirkhope]

1: Clause 1, page 1, line 7, leave out “universal credit” and insert “working age entitlement”

[Lord Kirkwood of Kirkhope]

My Lords, I preface my remarks in the slightly Foulkesian vein of exhibiting some displeasure, not about the logistics of the Committee Room—I understand that there are arguments about that—but because I certainly did not find it easy to prepare amendments, talk to colleagues and pressure groups and get here today to start what is one of the most significant pieces of social security legislation that I have ever come across in this way. Starting at the fag-end of an afternoon is not the best way of making progress. There are colleagues, also, at the Conservative Party conference on bona fide political business that denies them access to the first two sessions on the Bill, and I do not think that that is correct. There are also pressure groups at the party conference at Manchester who would like to be here but cannot because they have commitments, and I have found this very difficult.

I was dealing with very helpful duty Clerks trying to table amendments from afar; admittedly, we were all afar because we were on Recess last week, so tabling amendments by Friday was very difficult. I say to my noble friend the Deputy Chief Whip that the usual channels—the blame is not all pointed at the Government and I am not expecting him to respond to this—need to give some consideration to how Members approach their work, particularly with a recess coming before the start of this Bill. For my money, it would have been much more convenient to start this proceeding on Thursday at the least, if not the week after, which was when it was originally booked to start. We need a little consideration for those of us who are technically engaged in this important legislation. I hope that that will be borne in mind. It is completely out of order so I will say it quickly, but this is a consequence of far too much legislation. The usual channels should get themselves together and get this sorted out, otherwise we will all struggle to devote the appropriate level of time and depth of analysis to what we are being invited to look at.

I shall explain what I hope will be for the convenience of the Committee. I have spoken at length to the Government Whips Office from afar, some of the conversations being more successful than others. I got some pretty tart replies in the early stages but at last I got some sense out of them. This is what I propose to do. Colleagues will notice that I have tabled a big group of amendments. Group 3 consists of a whole range of amendments. That was during a phase when I thought: “Golly, if everybody else is having the trouble that I am having, there will be no amendments to Clause 1”. Dilatory tactics are an honourable parliamentary tradition, so in 10 minutes I amended Clause 1 in every way I could. That is what the group beginning with Amendment 3 is all about.

However, having calmed down and talked to the Government Whips Office, I had it suggested to me that we begin with a broad-ranging debate on clause stand part. To some, that might appear to be putting the cart before the horse, but in this situation I am convinced that if we have a general discussion—we have some important amendments about the inclusion of council tax which I hope we come to on Thursday—then we can spend what is left of the day inviting colleagues to look at clause stand part and Amendment 1.

That would give us the broadest attempt at understanding some of the Second Reading-ish areas, or areas not contained at all in the first 30 clauses. Universal credit, the first clause, opens the gate to Chapters 1 and 2. The first 30 clauses are all about universal credit. The consolation that I can offer colleagues, to whom I apologise, and who have done a lot of research and homework on the group beginning with Amendment 3, is that they are all perfectly admissible by definition in a clause stand part debate because they are all amendments to Clause 1. So it is not for me to encourage anybody to do anything, but I wanted to make clear that I did not want to sell people short and feel they had been short-changed. That is what I think is best for the Committee, and I hope that colleagues find it acceptable.

I want to mention two things about what I hope to get out of this Committee stage. Amendments need to be made to the Bill, as I said at Second Reading. This Bill is not perfect. I am particularly concerned about the level of Treasury claw-back in the benefits section. It is absolutely true to say that universal credit will produce new income for low-income households, particularly those going into many jobs and the like. We all understand that, but there will be a reduction of existing levels of benefit, particularly in areas like housing and the universal household cap, which will really, really hurt the households that it affects.

My mission in this Committee is to robustly press the Government on the 10-ish or 12-ish issues where that particular concern applies. I understand that this is a long and technical Bill, and I want to make a point about regulations in a moment, but for me, politically, I say this to pressure groups and others outside this place who have been informing and advising us so well: they should concentrate their fire. We need priorities, and we can get changes if we are clear and if this Committee sends a signal to the department. That signal might also get noticed by the Treasury, and it would be a perfect circle if we could make that join and get some improvements by Report in a way that would make people like me more comfortable and think of supporting the changes.

I mentioned regulations. Obviously regulations are at the cutting edge of the implementation of the Bill. In passing I want to pay tribute to the Minister of State and the Bill team for making themselves endlessly available and offering us all kilograms of paper, some of which are informative, some of which are just heavy. Whatever you might think about their other approaches to the Bill, the accessibility of the Minister and the Bill team has been exemplary. I hope that that will continue.

Maybe the Minister could say something about how he proposes—subject to the availability of the information—to make draft regulations available. Obviously, some of the areas under discussion cannot be dealt with. For example, passported benefits are currently under consultation by the Social Security Advisory Committee. That is perfectly sensible but the committee will not report until later. I am not asking for every draft regulation before we can make sense and see the universal credit come into focus, but I am still struggling with what is quite a fundamental change in the way that we do these kinds of things.

What’s in a name? It just occurred to me that “universal credit” does not mean anything very much. It is certainly not universal to any social security advocate or specialist, because “universal” is something that is not means-tested and no one can say that universal credit will not be means-tested. “Universal” is not the right word—and it is not a credit. Credits were all stolen by the former Prime Minister when he was Chancellor. He took them away from the department and created tax credits. It was a successful policy—until it all fell into very difficult administrative difficulties—but the department did not have any say over it. Credits went to the Treasury. Universal credit is coming back to the department, which I am in favour of, but there will be confusion about what a benefit is and what a credit is. I notice that some of the titles in the Bill mention working-age benefits in Part 2.

So, the name is very important because it sends a signal about what the benefit is for. I am not seriously suggesting at this stage that we change the name, because I am sure that thousands of pounds have been paid to consultants to craft the artwork around universal credit. But this is a working-age entitlement, which is what I understand it to be, what it should be and what I hope that it is. We are stuck now with “universal credit”, which I think came from dynamic benefits and the Council for Social Justice report that informed a lot of the philosophy behind universal credits. We need to think carefully and clearly. There was a big attempt when tax credits came in to differentiate working tax credits, which were for work, and child tax credits, which were for family support. That did not work. Thinking more clearly about the name in the future would be helpful.

I want to make a couple of other quick points under the clause stand part debate. The one thing that does not appear in the first 30 clauses is the word “employer”. For this new administrative system to work, employers have to engage and to contract employment with employees. We are concentrating here on the supply side, all the time trying to get employees into a better situation. I am in favour of that and I understand it, but—I am a board member of the Wise Group in Glasgow, so I know this—you cannot do that successfully unless you are working really hard, extensively and sustainably with employers. If you do not encourage them to take on people who, prima facie, are not ideal employees, they will run a mile. You have to get a close relationship with employers. I know that the Government have done some work at a high level with some of the big employment confederations and on a regional basis, where they were getting people to sign up. That is very welcome, but we need to think about small-scale employment as well. I was going to refer to the omission, although it is not really an omission because it would not really fit the legislation. I just make the point that the elephant in the room for the first 30 clauses is going to be employers, and we must not forget that.

--- Later in debate ---

[Lord Newton of Braintree]

On this occasion I will accept not just realism but good will.

[Lord Kirkwood of Kirkhope]

I am grateful to all colleagues who have taken part in this debate. I hope it has fulfilled its purpose of scoping out exactly where the Committee is going. I understand that colleagues want to finish at 7.30 pm. I cannot but welcome my mentor, the noble Lord, Lord Newton, who was Secretary of State for Health and Social Security under Margaret Thatcher and succeeded in spite of all these things. It is a particular delight. I should like the Minister of State to pay particular attention to what the noble Lord says because he knows what he is talking about. I know this because I have followed his career for many years.

We obviously need a code for this. An Enigma machine might be purchased so that we can understand what “soon” really means, and issues of that kind. That will help the Committee. I certainly want to sign up for the demonstration of Yasmin and Liam when it comes. Apart from anything else, I have a drink riding on this. If this system works, I owe the Minister of State at least a double whisky or whatever his poison is. I want to be deeply involved in all these processes related to IT.

I have two other very quick points. It is true to say, and reassuring to hear, that SSAC has that role, and that the Minister clearly understands its importance in this process. He will know that it has never had the same formal process of review over tax credits that it had over the benefits system. We need to be careful about that. If the Government are not careful and start hiding behind that technicality, it may be more difficult for SSAC to look at the successor benefits to tax credits and working tax credit, which would be a shame. I would not mind some reassurance on that.

Just for amusement, I discovered that the word “regulations” appears 380 times in the Bill.

[Lord Freud]

My noble friend asked for some reassurance in the area of tax credits. Under the universal credit, it will effectively become part of the responsibility of the DWP and therefore become overviewable and reviewable by SSAC. Whereas I might have been a little coy in giving some other assurances today, I can be absolutely uncoy about this one.

[Lord Kirkwood of Kirkhope]

There is no need for code for “coy”. In the last minute available to me, the one thing I want to say is that if we are getting this level of co-operation from the Bill team, I am willing to do more work. We do not normally do it this way. With new, technical social security Bills, the default position is to table amendments to clarify and bring the thing into focus. Speaking for myself—I speak for nobody else—I am willing to do more of that work with the Bill team if they are available. As the noble Lord, Lord McKenzie, said, we often share rhetoric but we should, as a Committee, try to drill into the dozen issues that are the real hot spots. I think that is what the pressure groups are hoping for with this Bill. I am certainly up for that. That is a much better way to proceed than splattering amendments, as I did with Clause 1 and for which I apologise; I will not do that again. We will take the length of time that we need to take, but if we get the hot spots ironed out sensibly it will be to the benefit of not just the Committee but the whole House and the implementation of this policy, which it is so important that we get right.

Again, I am grateful to colleagues who have taken part and to the Minister for being so generous in responding. We are now a minute late. I now withdraw the amendment.

Amendment 1 withdrawn.

Welfare Reform Bill

Lord Kirkwood of Kirkhope Excerpts

Tuesday 13th September 2011 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, it is a pleasure to follow the noble Baroness, Lady Turner of Camden; her experience is always of great value to the House. I also congratulate the noble Lord, Lord Feldman, on his powerful maiden speech, which will repay careful study.

I arrived at this debate with a 15-minute speech as is allowed under the Companion but, as the noble Lord, Lord McNally, announced that we only have seven minutes I have cut the first eight minutes of my speech. Unfortunately, that was the half of the speech that was a paean of praise to the Minister of State, so I am left with seven minutes which will look really quite critical. That is not my fault; it is the business managers wot did it.

This has been a very good debate. It is a shame that we are only getting seven-minute contributions, because it is a very complicated Bill. I acknowledge, as others have, the energy and enthusiasm of the Minister of State. He really has put an enormous amount of his own personal time and energy into this, and so have the Bill team. I concur with others who say that we have all been able to get access to some of the complications and technicalities because of the efforts that they have made in making information available, and I hope that will continue.

I hope that we will take this Bill into Grand Committee. In Grand Committee we would have a much better chance of looking at the relative benefits between gross and net tapers—some of us spend time thinking about these things—and we could have a much better quality of consideration, particularly of the technical aspects of this Bill. However, we need time: there is no equivalent of seven-minute speeches in Committee. We have got to do this seriously, so I look to the Minister of State for support when he is confronted by the business managers to get the time that we need. If he does not give us the time, I promise him we will just take the time, so it is better to continue with his idea of co-operation, which he has been absolutely splendid in fostering so far. However, if he starts to close down debate, particularly in Committee, I for one will not take kindly to that.

I agree with the noble Baroness, Lady Hollis, when she said that she detected the fingerprints of the Treasury all over this; we have both been in this business for a long while. I agree that the structure and the architecture of the Bill are perfectly defensible—I will say a word about that in a minute—but it is at risk of being prejudiced because of the degree to which these cuts have come on the back of it. I perfectly well understand that the Treasury needed cuts because the universal credit proposed in the Bill needs funding to pump-prime it. It has not got as much money as dynamic benefits. The dynamic benefits report of 18 months ago was very compelling: it is a very robust argument about what can be achieved if you invest in the system and have tapers that really make a difference and make work pay. It is marginal as to whether this Bill will actually achieve its objective the way it is currently cast. It is open to other Governments of course, and as my noble friend Lord German was saying we have some expectation that once we get through this period of austerity, which you cannot ignore, then we might get into a better position where we can make the Bill even better than it is at the moment. The Treasury’s influence is malign, and while I myself am in favour of supporting the architecture I will do everything I can within the Committee structure to mitigate some of these cuts.

I have a word in passing about the pressure group community, which has been very good at supplying information to us in a very useful way. I counsel them to think about mitigating this Bill. Understandably, some of them are taking very high-flown positions, as if there was no economic difficulty and this was all dead easy. That is what they are there to do, and I do not criticise them. I have read all their briefings, but I have not been able to respond to them all because they have been coming at me like stuff out of a cement mixer for the last two or three weeks. I am sure that is not unusual and that all my colleagues are in the same boat. However, I counsel them to spend some time thinking about how they might help the Committee mitigate some of the worst features of the Bill in how it bears down on benefit expenditure.

This point has not been mentioned before: while it is of course a simplification to collapse benefits into the universal credit—I support that—because of its technical difficulty the benefit system will not be simple after it. I implore the Minister to make sure that he takes full advantage of the capacity of the Social Security Advisory Committee when it comes to the regulation-making stage of this Bill, because it has great knowledge in length and in depth. It has a wealth of experience, is objective and does excellent work. I have some amendments in mind for the Committee where we might think about how to integrate the work of that social security committee even better into our considerations of the Bill, because it is not just the Committee stage that we are dealing with. We will be having regulations and affirmative debates for many months and years, and the SSAC has a track record which we ignore at our peril.

I counsel the coalition Government about overclaiming. I do not really mean the Minister of State, but there are people talking about a revolution. However, integrating working-age benefits between those in work and without it is dead obvious. It is said that this is all a great revolution but people such as Professor Roy Sainsbury at York have been talking about it for years. There are a number of different ways of doing it, so there is actually nothing new about any of this. Universal credit plus the work programme is very important but let us just keep the heid, as my granny used to say in Glasgow, and not get too carried away with it.

I want to talk briefly about how we capture the volumes of money that are being spent in the welfare system. It is sensible to invest in social protection. The well-being of our population is something that I am prepared to spend money on but we talk about it in the abstract—in billions of pounds. If it is looked at in terms of the public sector percentage spend or indeed as a share of national wealth, I do not think that the spending is out of control. It has certainly ticked up in a way that Governments cannot ignore and therefore I support some bearing down on the current levels. However, when we talk about it we should be talking about the percentage of public spend. The number of pound notes in every 100 that we spend on welfare should be looked at more carefully because that gives us a much better idea of what these systems are costing. The public know nothing about the relative costs of the different benefits, so public opinion is not a helpful guide on that matter.

The IT situation concerns me; I have said that to the Minister of State privately. I have been involved in some of the past reforms and they have all fallen over when they go up in scale. The pilots always work and the professionals who design these things are always very clever and convincing. However, when it goes United Kingdom-wide—when you scale it up from a few hundred thousand cases being put through a computer to 60 million—it falls over. Doing this over the next two years is impossible. That is my view and I hope I am wrong. I have said that to the Minister in spades and his enthusiasm is still undimmed. I am lost in admiration for his confidence in what he is doing but I think it is wrong. If it all works by 2017, I will buy him a drink and apologise—and from a Scotsman, a drink is actually quite something.

I want to finish with a single thought. The noble Baroness, Lady Sherlock, my noble friend Lady Tyler and others made impassioned pleas about the benefit cap, which is a step too far for me. I give the Minister fair warning that I cannot support the benefit cap as it is currently cast and I hope that he will look at it very carefully. There are lots of reasons: for example, 70 per cent of those people are in social housing and 206,000 children will be the people who will carry the can for it. However, for me it is actually a question of principle. We have a system of entitlements in our social security system and, if you have the entitlements, you get the benefit. Here is an arbitrary system coming in and overlaying that by saying, “Well, you may well be entitled to it but we think it's too much”. Parliament should not let that pass without some comment because it cuts straight across everything that we have known in the social security system since I started coming to Parliament, when I was thinking about the supplementary benefit system, which shows your Lordships how long ago that was. That cap is not fair and is an idea which I struggle with. I understand the need for deficit reduction but I cannot follow the Minister in the direction of a household benefit cap as it is currently cast. I want there to be no doubt about that but I am happy to continue the discussion and look forward to the debates in Committee.

This is an important Bill. We have to be careful how we implement it. We are looking at an economy that is performing poorly, with inflation and people's household domestic costs rising. The social rental sector is getting worse, not better. Yet there is one situation for households in this country that would be worse than dependency, and that is hopelessness. If we are not careful, some of the low-income households in our country will be subjected to hopelessness as a result of some of the measures in this Bill.

Jobseeker’s Allowance (Mandatory Work Activity Scheme) Regulations 2011

Lord Kirkwood of Kirkhope Excerpts

Tuesday 10th May 2011 Lords Chamber

[Baroness Lister of Burtersett]

My Lords, being new to the House, I am no connoisseur of Merits Committee reports, but on reading its 27th Report over Easter, it struck me as being damning in its conclusion that the lack of information attached to the regulations was unacceptable. The noble Baroness, Lady Thomas of Winchester has confirmed that view.

I am rather more familiar with the reports of the Social Security Advisory Committee, having read many of them over the years. Its report on these regulations, to which the Merits Committee refers, is at the more critical end of the spectrum of SSAC statements. Its key recommendation was that mandatory work activity should not proceed. Nevertheless, it is proceeding on the basis of regulations deemed inadequate by the Merits Committee for their lack of clarity of purpose. As the committee underlines, these are important regulations, the effects of which could have serious implications for the livelihood of thousands of unemployed people. As we have heard, where sanctions are imposed, JSA will be withdrawn for 13 or 26 weeks and, if further primary legislation is passed, we could be talking about loss of benefits for 156 weeks for a third so-called offence from April 2012.

The evidence suggests that it is often the most vulnerable who are subjected to sanctions. Both the Merits Committee and SSAC comment on the ambiguities surrounding the scheme's purpose. The department denies any punitive intent, emphasising how the scheme is supposed to help customers develop behaviours and attitudes required to get and keep work, yet it is adamant that sanctions must be applied to those who do not comply. I do not find the department's response to SSAC’s concerns very convincing. The velvet glove and warm words about support surrounding the iron fist of sanctions look rather threadbare.

I am reinforced in that view by my reading of a recent systematic review of international evidence on the impact of benefit sanctions published by the Joseph Rowntree Foundation. The review questions the efficacy of sanctions in changing claimants’ motivation or attitude towards work. It suggests that although sanctions may have a short-term effect in shortening unemployment spells, the longer-term effects can be counterproductive in jobs and earnings progression. It is worth citing the report's conclusion:

“this report brings into focus the gulf between the rhetoric of welfare reform and the evidence of the effects of sanctions … policy-makers continue to justify the extension of sanctions (and sanction-backed conditionality) on moral philosophy grounds while taking an ambivalent attitude to the evidence … with evidence being marginalised by discussion of principles and what can be expected of claimants in return for benefits”.

I fear that, in a moral crusade against the supposed welfare dependency, Ministers read the evidence through a distorting lens. As the TUC warned in its submission to SSAC, these regulations seem to move employment policy further away from an evidence-based approach. The SSAC report comments:

“The evidence on the efficacy of ‘workfare’ schemes is, at best, mixed”,

as the noble Countess has already pointed out.

Personally, I was unhappy about the previous Government's work-for-your-benefit proposal, but at least, as the Merits Committee notes and my noble friend pointed out, it was to be a pilot scheme with a clear evaluation plan aimed at examining whether mandatory work activity had demonstrable benefits. These regulations introduce mandatory work activity nationwide without any such evidence.

That makes all the more important the monitoring of placements to ensure that, among other things, participants are treated properly and are not used to replace waged workers. I am pleased that the department has accepted SSAC’s recommendation on that point, and I would welcome more information from the Minister about the placement monitoring system. However, as the Child Poverty Action Group points out—I declare an interest as its honorary president— there are no guarantees of minimum standards that can be expected from employers. I regret that the department has rejected SSAC’s recommendation that detailed guidance should be given to employers about placements.

My other main concern, which was also picked up by the Merits Committee and SSAC and was commented on by the noble Countess, is the question of discretion. The Merits Committee questioned how the scheme can be delivered with any degree of consistency given the degree of flexibility and discretion built into it. In its 28th report, drawing attention to oral evidence provided by the Minister for Employment, the committee observed that,

“The targeting of the Mandatory Work Activity Scheme is to be left almost entirely to the discretion of Jobcentre Advisers, and the Minister is sanguine that there will be local variation and a lack of consistency in the way that the Advisers apply their judgment”.

That is just one example of how discretion is being extended in the social security system, and I find it worrying.

Flexibility sounds very positive, but its flip side is a lack of clear rights and the danger of arbitrary and inconsistent decision-making and lack of transparency. Moreover, the JRF review suggests that the administration of sanctions is not rational or equitable and can lead to bias, including racial bias. Important decisions with implications for a claimant's livelihood will be taken on the basis of what SSAC refers to as the

“views and opinions of the personal adviser”—

views and opinions about attitudes and motivations that will require considerable skill to interpret correctly. I would be grateful if the Minister would tell us about the kind of training that advisers will receive to make these decisions, and whether all advisers will have received this training by later this month when the scheme is introduced.

Will the Minister also clarify the department's response to SSAC's recommendation that,

“detailed information is provided to potential participants about the criteria for selection”?

In its response to SSAC’s report, the department says that it accepts the recommendation, but in explaining how it accepts it the department does not state explicitly that potential participants will be told the criteria for selection. I would be grateful if the Minister would confirm whether they will be told.

Another extension of discretion lies in the refusal to prescribe in regulations factors to be taken into account when deciding whether someone has good cause for failing to take part in the scheme when required to do so. This point was made by the noble Baroness, Lady Thomas of Winchester. The department's response to SSAC, namely that doing so risks limiting the circumstances in which good cause could be applied, again is unconvincing. Clear good-cause provisions in the regulations would provide a safeguard for claimants, without necessarily limiting the circumstances to those listed.

In conclusion, the Merits Committee complains about the vague and insubstantial basis on which we are expected to assess whether the regulations will achieve their objective. On the basis of research evidence, I fear that the regulations will do more harm than good. I support my noble friend's prayer that they be annulled, and the Motion of Regret tabled by the noble Countess.

[Lord Kirkwood of Kirkhope]

My Lords, the House owes a debt to the noble Countess, Lady Mar, for raising these regulations this evening. As always, it also owes a debt to the Merits Committee and the Social Security Advisory Committee for their excellent work. The debate highlights very important points, many of which have already been made.

The first thing that I will say relates to the initial observations about procedures made by the noble Lord, Lord Knight. I would support him in pursuing the clarity that we need to enable the House to demonstrate and exhibit displeasure to the department without necessarily seeking to completely torpedo and annul regulations. The Motion in front of us in the name of the noble Countess, Lady Mar, is well judged. It is not always a Minister's fault—indeed, I completely absolve my noble friend from some of the worst excesses of this order. However, we should have the ability to make it clear that if there is insufficient detail, and if we do not feel that it is safe to endorse proposals that are brought to the House by the department via Ministers, we should have a method of expressing that in a grown-up way, and we should be able also to test opinion in the Division Lobbies. I encourage the noble Lord to pursue that line of thought.

Secondly, my noble friend must have bigger fish to fry. I have spies everywhere and they tell me that this is an £8 million scheme. That does not mean that it is not important—there are important principles here—but he has much more important things to worry about, such as universal credit and the work programme, which are both crucial. I also understand that we have managed to get such a keen price out of the contractors that we have been able to double the number of places for the mandatory work activity scheme and are now thinking about 19,000. That raises questions about the quality of the schemes that will be provided. I have a calculator, and I can divide 19,000 into £8 million and see that it works out at something like £430 per four-week placement. These figures need to be confirmed; otherwise, we will all be confused. The point I am making is that, if we have four-week schemes that are costing £430 to provide, one wonders about the disproportionate sanctions referred to by colleagues earlier in this debate of £1,800 or thereabouts, being equivalent to 26 weeks’ benefit at £67.50. There is a disproportionality about some of this, as well as the question of whether the quality can be delivered on a four-week scheme for £430. We need to keep this in context, but there are some really important questions that worry me about these regulations that are creating potential precedents. These deserve attention.

First, if I understand it right, contributory JSA benefit claimants are covered by these regulations. Contributory benefit claimants are different from means-tested JSA benefit claimants. They have been paying national insurance contributions to enable them to be entitled to this benefit, at least in the first year, before they go into the work programme, as I understand this scheme as it is going to be rolled out. They are going to be tapped on the shoulder by some Jobcentre Plus personal adviser and be told that they are going to be subject to the mandatory work activity scheme. People who make contributions through the national insurance system should be in a different place from those on a means-tested JSA regime. I would like the Minister to comment on whether that is correct.

I also worry greatly about the way we are potentially interfering with the well-established legal definition of “actively seeking work”. The way I read this—and again, I would like to be corrected if I am wrong—being able to do just enough to satisfy JSA legal entitlement requirements is not going to be enough anymore under this scheme, because if you are only undertaking activity that is just enough to satisfy your personal adviser, you can still be mandated to be put on this mandatory work activity scheme. So I think we are stretching some of the well-established concepts. What people really clearly understand about “actively seeking work” has been built up over years in case law. We interfere with that at our peril, and I hope the department is thinking carefully about that.

I also concur with the comments made about adviser discretion, which is unappealable, to nominate candidates for this scheme. Obviously, the decision about a sanction is appealable and that is understood, but the noble Baroness, Lady Lister, was right to draw attention to giving discretion to advisers, as other colleagues have done in terms of local flexibility to contractors.

Part 6 of these regulations causes me some concern because I do not know that I have ever seen anything like this, but I may be wrong. Part 6 talks about “contracting out certain functions in relation to the scheme”. If we are starting to contract out certain functions of the scheme—I understand that does not include sanctions—that is new territory as far as I am concerned. We have to be very careful about what Jobcentre Plus staff and personal advisers can do, as well as some of the providers of these schemes.

Employment and Support Allowance (Limited Capability for Work and Limited Capability for Work-Related Activity) (Amendment) Regulations 2011

Lord Kirkwood of Kirkhope Excerpts

Wednesday 16th March 2011 Lords Chamber

Moved By

[Lord Kirkwood of Kirkhope]

That a Humble Address be presented to Her Majesty praying that the regulations, laid before the House on 10 February, be annulled. (SI 2011/228)

Relevant document: 23rd Report from the Merits Committee.

[Lord Kirkwood of Kirkhope]

My Lords, this is an important debate. I start by declaring my own interest as a director of the Wise Group in Glasgow. I have no pecuniary interest but the purpose that I am afforded by being a director of the Wise Group is that, four times a year, I get to go on a wet Friday to Glasgow after a six-hour train journey. Nevertheless, it is very fulfilling and important work. The group does an excellent job for the communities that it serves in Glasgow and I am pleased to be associated with it. That explains my interest in this important subject.

The background to this debate is, quite simply, that after considerable consultation the disability organisations—most of which colleagues will know well, as we have been working with them for many years—have concluded through the Disability Benefits Consortium that these regulations imperfectly achieve their policy objective. That is a clear steer that the disability community would like the House to consider annulling these regulations and we owe them nothing less than to do that.

I start by acknowledging the work of the Minister, who has brought drive and commitment to this policy area since he wrote his original report those few years ago. I am absolutely at one with him in trying to discourage inactivity and encourage sustaining work. I think we both understand that Carol Black’s work changed the game of active labour markets and I stand four-square with him in trying to make sure that we can develop and deliver schemes that enable people to get out of inactivity and into work. That work has to be productive and sustainable, but if they can do that then the well-being of the client group that we are seeking to serve will improve.

I am founding the evidence for this evening’s debate on the excellent work that has been done, as I say every time we talk about the subject, both by the Social Security Advisory Committee and by the Merits Committee, which looked at this in very great detail in its 23rd report. These are complicated regulations but if any colleagues are looking for a quick summary of exactly where this subject’s importance lies and of its importance to the individuals concerned, they should look at appendix 1 of that report and the evidence that was laid out there compellingly. The Social Security Advisory Committee report that was produced, which was done with formal reference to these regulations, also repays careful study and is worth reading.

I start with a concern that is new to me and disturbing if true. I would like to hear the Minister’s view on it. The SSAC says, in its conclusions at paragraph 19:

“The Committee is concerned that there is a disagreement of substance between the Department and the external stakeholders who participated in the review as to whether the”,

work capability assessment,

“in its present form could be said to be working satisfactorily”.

If that is true and the stakeholder community is talking past the department and neither party tries to get back into some sort of meaningful communication, it is in no one’s interests. I do not know what happened in the past but that is the first time I have ever seen an SSAC report saying anything so stark. I do not know whether it is true but I would like an assurance that the Minister will redouble any of the efforts which I know he has been making to ensure that that gap is expeditiously closed. It would be inimical to the interests of the client group that we are trying to help if the pressure group community does not have confidence in its channels of communication with the department. I hope that he can give us that reassurance.

The other evidence which is the core of the debate is the Social Security Advisory Committee’s view at paragraph 4.3. I will quote another sentence which encapsulates a whole load of evidence that I do not have time to go into. Perhaps other colleagues might pursue that, particularly on mental health, learning disability and fluctuating conditions. After a very big consultation—I think it had 400 responses—the committee noted that the department is undertaking an ongoing programme of review but concluded, among other things:

“There appears to be a widespread perception that, overall, rather than simplifying, streamlining and refining the test, these amendments”,

in these regulations,

“will make it harder in practice for claimants to demonstrate that they are incapable of work or that they have limited capacity for work or work-related activity”.

That is the core of my concern, which the department now has to address. As I say, I am absolutely indebted to the Social Security Advisory Committee and the Merits Committee, as we all are. Indeed, Richard Tilt, the chairman of the former committee, is an extremely wise man and his experience will, I hope, be available to us for some time to come.

Briefly stated, this is one of the biggest changes that I have ever seen in social security since I started studying this policy area when I was elected to another place in 1983. Why? Because in April we will open the door to a national reassessment of 2.6 million people. We have a model which arguably does not work for employment and support allowance claimants yet. It is a work in progress, but I am absolutely persuaded that Parliament is trying its best to get on top of it. However if in April we are really considering taking on an extra 10,000 or 11,000 new cases each week—it might be each month, but whichever—it is a very big increase and raises questions about capacity. We have to consider the capacity of the Atos Healthcare medical professionals who do these functional capability assessments for work capability assessments, and it raises questions about capacity for jobseeker’s allowance as well.

There is a huge difference between a customer making an application de novo for employment and support allowance and somebody in Glasgow who has been unemployed for 10 years, who has been on incapacity benefit, and who gets a letter asking him to call at the Atos Healthcare professional centre to have his benefit assessed. He will know that if he does not get the continuing levels of support that he currently enjoys he could be £30 per week worse off at a stroke.

I go back to where I came in. I am absolutely in favour of ensuring that everybody who can contribute to the world of work should do so. There is no doubt in anybody’s mind that there are people who need a wake-up call, to use the expression of my American friends. Indeed, there are people who swing the lead, do not play the game and act in bad faith. I know all these things. However, to take 2.6 million over three years and put them through a process where the model has not been absolutely rigorously road-tested to everybody’s satisfaction is not safe. That is the case that the disability organisations have been making to me.

If that is not hard enough we have the deficit reduction programme, which I also support. We cannot ignore the fact that this country is now poorer than it was a while ago. There are also regional and spatial dimensions because labour markets vary. The labour market in Reading is very different from that in downtown Glasgow, which must be borne in mind. On top of that, the work programme, which again I support, is still in gestation. We do not know the detail of how the work programme will serve the client group that we are seeking to help. I think that the identified concerns about the functional capability assessment—it is not a medical assessment—are well founded. If anybody has any doubt that there are problems around it, I point out that the successful appeal rate against decisions on the current scheme is high, suggesting that attention must be paid to these provisions, particularly for mental health and fluctuating condition clients.

There are advantages in the regulations. I certainly welcome the chemotherapy and residential drug changes. They are not to be diminished in any way because they will help substantially the group that they are designed to serve. The biggest complaint comes from the disability stakeholder pressure group community. Professor Harrington has published his phase 1 report, which is truly an excellent piece of work. It offers a series of recommendations which really deal in a much more real-world way with the kind of problems that people face. The complaint is that we are not waiting for the totality of the Harrington work to be put in place. He is already starting on the second annual independent assessment, where he will look at the descriptors for fluctuating circumstances and the like. The results of that will be available probably in late 2011. We should not be opening the gate to the national reassessment of incapacity benefit claimants until we see what Professor Harrington can come up with. That is what the disability organisations say and it is a prima facie valid claim.

Colleagues will know this because we spent a lot of time on the Welfare Reform Act 2007, when the previous Government sensibly required a five-year annual set of reviews. Some of the complaints that the disability groups make is that this will be a piecemeal change, which is the legislators’ fault. We rightly felt that it was not safe to do it without getting independent reviews. The previous Government were right to do that and this Government were right to get Professor Harrington on the case. He brings hope to the whole situation—he certainly does to me.

--- Later in debate ---

[Lord Freud]

My Lords, I am pleased to answer that question. I am rather surprised by the actions of the groups. I have seen a lot of correspondence and a lot of internal work. There was very full engagement by both sides, and a lot of correspondence about fine-tuning the regulations. At the end of the process there seemed to be real agreement. Therefore I am genuinely surprised that, after the passage of some months, the consensus seems to have been significantly eroded. Income elements may have come to the fore, whereas the technical analysis that was the subject of the interplay between the department and the groups was perhaps easier to get to grips with.

I will go back to describing the system. The wider system that we inherited, after the measures that the internal reviews described, contained flaws that we as a new Government have looked to put right as quickly as possible. In June we launched the first of the five annual independent reviews of the work capability assessment—the first of the reviews that this House legislated for. It was carried out by Professor Malcolm Harrington, a highly respected occupational physician. He reported last November. He did not consider that the work capability assessment was broken but felt that it was not working as well as it should and made a series of recommendations to improve its fairness and effectiveness. We have fully endorsed his review, as the noble Baroness, Lady Thomas, pointed out, and we have committed to implementing his recommendations as quickly as possible.

The first key element of those recommendations—I am borrowing, again, from the description of the noble Baroness, Lady Thomas—is that we empower Jobcentre Plus decision-makers to make the right decision. They will have clear responsibility for the decisions they make and will be given the support that they need to ensure that those decisions are independent and considered. I hope that that is one of the reassurances for which the noble Lord, Lord Kirkwood, was looking.

The second recommendation is to ensure that individuals are treated with compassion by clearly explaining everything to them, helping them to fully understand the process they will go through and ensuring that they know that they can provide additional evidence, including medical evidence, for consideration at any time. I hope that that is the second of the reassurances for which the noble Lord, Lord Kirkwood, was looking.

The third major change is to improve the transparency of the Atos assessment by ensuring the audio recording of assessments in the Atos pilot. The other element involving the Atos process is that we will account for the particular difficulties in assessing mental health conditions by ensuring that Atos employs “mental health champions” at every centre.

Nearly all these changes will be in place for the start of the reassessment, with the remainder completed in time for the summer. We have also appointed Professor Harrington to conduct the second independent review. He will now examine the assessment in more detail, particularly focusing on mental health descriptors and fluctuating conditions.

I shall now respond to the questions of the noble Baroness, Lady Finlay, on fluctuating conditions. The fact that conditions fluctuate is now embedded in the descriptors. We just want to make sure in this next piece of work that we get that absolutely right. We look forward to Professor Harrington’s recommendations following the second review in due course.

The regulations before us today are part of this improvement process. They come from the internal review undertaken and fully supported by the previous Government. That review suggested a number of changes to clarify and improve the technical descriptors; noble Lords have made these points so I will go through them quickly. The changes include placing individuals awaiting or between courses of chemotherapy in the support group; expanding the support group to cover people with certain communication problems and severe disability due to mental health conditions; greater provision for individuals who are in residential rehabilitation due to drug or alcohol misuse; ensuring the descriptors take account of someone’s adaptation to a condition or disability; and simplifying the language of the descriptors to ensure fair, consistent and transparent applications. These changes will improve the work capability assessment. They will increase the number of people with severe disabilities who are provided with unconditional support in the support group. They will ensure that we do not deny employment support to individuals who, with our help, can get back to work.

The internal review consulted a range of experts and groups and, as I described just now, tried to reach consensus. Significant concerns were expressed by the groups around the descriptors. I will not go into those because I am short of time, but I can respond to the noble Countess, Lady Mar, on fluctuating conditions. It must be possible for all the descriptors to be completed reliably, repeatedly and safely, otherwise the individual is considered unable to complete the activity.

The Department for Work and Pensions has undertaken rigorous testing of these changes to understand their effects. The department modelled the impact of the changes on data from almost 60,000 assessments, and a panel of experts was brought together to examine the changes in significant detail. Where any issues were identified during this process, further refinements were made to the descriptors. From this analysis we expect the changes to increase the number of new claimants who are put in the support group, specifically, those who are awaiting or are between courses of chemotherapy, and some whose limited capability relates to certain mental functions and communication difficulties.

I have run out of time, but I hope that the House will indulge me for two more minutes as this is really important. We are committed to the principle of continuous review and refinement of the work capability assessment. As part of that principle, we have reviewed in detail the working of the work capability assessment and consulted in depth with specialist disability groups to improve the assessment. The addendum to the original report shows how far such concerns were taken on board in these regulations. We are committed to taking Professor Harrington’s review to improve the sensitivity of the process. Of the 17 recommendations that he made, we will have 15 in place in time for April and the other two in a couple of months. I hope that that is a final reassurance for the noble Lord, Lord Kirkwood, and the noble Countess, Lady Mar.

The changes that we are making in the regulations will improve the work capability assessment. They will expand the support group to cover people with severe disability due to mental health conditions and communication problems. They will ensure that the descriptors take account of someone’s adaptation to a condition or disability and accepting these regulations means that we can make these important improvements now. We remain committed to the principle of continuous improvement to the work capability assessment. I trust that the noble Lord, Lord Kirkwood, will feel able to withdraw his Prayer to Annul these important regulations.

[Lord Kirkwood of Kirkhope]

My Lords, I am grateful to the Minister. It has been a long but excellent debate. I thank all noble Lords who have participated. I shall certainly look carefully at the record tomorrow to ensure that we learn the lessons that have been laid in front of the House during the debate. I am pretty sure that the Minister will do the same—that he will take the opportunity of reflecting very carefully on what he has heard and the tone in which some of these powerful speeches have been made.

Knowing the Minister as I do, I know that he will also take away from the debate the fact that he may have some work to do to reconnect the department properly with the disability community and the pressures groups that represent it. I hope he will take that commitment on personally and not leave it to his senior officials, very highly regarded as they may be. I hope that he will personally invest time to make that connection good, otherwise it will fall foul of broken communications in future if it is not put right.

Reflecting on the debate, I think the Minister has got an amber light; he did not get a red light, but he still can in future if he does not complete the commitments he made—speaking for myself, I am willing to accept them—but he has not got a green light. I hope I am reflecting the tone of our excellent debate in seeking the leave of the House to withdraw this Prayer.

Motion withdrawn.

Social Security Benefits Up-rating Order 2011

Lord Kirkwood of Kirkhope Excerpts

Monday 14th March 2011 Lords Chamber

[Lord German]

I was very grateful that the Government did not put the override in place, because of course it should be up to occupational pension schemes to make up their own minds according to their rules. Clearly, if RPI were written into the contract that already existed, that would apply and the schemes would be able to stay with that. Most pension schemes will be able to make that choice, and I hope that there will be a debate among pension fund members about the way in which that might be put into place. It is also very important that pensioners with accrued benefits under RPI should have those benefits maintained and that, if the choice is made to change, CPI should occur only after the CPI regulation hits the deck.

Going slightly beyond this issue, I want look at the packages in the round and I also want to ask the Minister some questions. I am pleased that there was no override, and I wonder whether the Minister can confirm what I have just said regarding accruals for occupational pension schemes. Will the switch to CPI see the pressure on occupational pension funds reduced? I know that some figures have been produced regarding the reduction in pressure on some occupational pension funds. I should be grateful if the Minister could update us on the current thinking on that matter and on the current analysis of who is going to move and in which direction.

My final question relates to the much bigger world of the reforms proposed by the noble Lord, Lord Hutton. What are the Government’s thoughts about the direction of travel of the matters that we are discussing today, and how will that impact on the public sector pension funds? Will the Government be responding to the noble Lord, Lord Hutton, and in what timescale? People will want to understand the Government’s direction of travel, both on the basic pension and on public service pensions, which I imagine are a cause of concern to many people at present.

[Lord Kirkwood of Kirkhope]

My Lords, I should like to make a few comments at the end of what is always a very important annual occasion. There have been occasions in the past when colleagues in the House have not considered it appropriate to look at social security benefit uprating orders, but these orders are extremely important for the people whom they affect and it is right that we should spend time looking carefully at the provisions. I am not surprised that more colleagues do not participate in these debates, as they are extremely complicated, particularly this year when we are contemplating wholesale changes in the benefit system. It is particularly difficult to foresee the impact that some of these announced changes will bring in future.

It would be helpful to receive some reassurance from my noble friend on the Front Bench on a couple of points. I agree with the comments that have been made about the pension provision. That is one area where substantial progress has been made, for which I am very grateful.

I want to pick up an important point made by the noble Baroness, Lady Lister, who is probably the only person in this Chamber who has been doing uprating orders for longer than I have—she advised me about them when I was elected to the other place in 1983, which was not yesterday. She has a huge amount of experience and knowledge and she will be a great asset to this House in considering these issues in the future. She raised the point about freezing child benefit until 2014. Of course, that is against the background of deficit reduction. I defer to no one on the necessity to attack the important financial circumstances that we all face, but how will that affect the child poverty strategy? In the legislation that we passed in the dying days of the previous Parliament, the Child Poverty Act 2010, we set out the requirement for a child poverty strategy. I anticipate that that will be unleashed on us quite soon. These changes will have a dramatic impact on the staging posts of 2015 and 2020 in the child poverty strategy.

Deficit reduction notwithstanding, I hope that the Government do not make these changes in a way that makes it impossible to get to a more comfortable place on child poverty by 2020. If that were the case, I would be very concerned. I think that redistribution is still necessary. The noble Baroness was absolutely right to say that this benefit was a tax allowance in the days before it was converted. It is extremely important that we keep the pressure up. People like me are uncomfortable about freezing child benefit. If the Government continue to freeze it, I shall be more than uncomfortable; I shall be very upset. A word of comfort about the fact that there is a child poverty strategy in gestation and about to be unleashed on us would send me home a happier bunny this evening.

We shall return to the CPI/RPI debate, and at great length. For me, there is some conflicting evidence. My noble friend dealt with the substitution effect. I think that he is right about substitution and I concede that he is right about geometry and not arithmetic. However, I do not necessarily concede that, therefore, CPI is an appropriate measure. I think that the IFS is on his side when it comes to substitution but, on whether this is an inflation experience that is adequate and appropriate for the client group, it is on a different side of the argument. The press release that I have in front of me, dated August 2010, suggests that it believes that,

“only 23 per cent of benefit claimants are unaffected by increases in mortgage interest payments and council tax”.

Therefore, the rest will be caught by the reduction. We cannot ignore that. I want to think about that more carefully and I shall study, with care, what my noble friend says about it, if not tonight then at another stage. I think that the jury is out. I think that he has won the argument about substitution but I do not think that that necessarily means that it is a safe measure in perpetuity. You only have to ask the Library not just about the short-term effects but also about the long-term effects to see that reductions in domestic household incomes are stark. Over a 20-year and a 30-year period, they are unconscionable. I hope that we in the coalition Government are not lashed to the mast on some of these things. If the CPI in the middle-to-longer term—five to 10 years—starts to pinch in a way that I think it may, I hope that we will be big enough to look again at whether it is an appropriate measure.

--- Later in debate ---

[Lord Lea of Crondall]

Perhaps I may say how interesting I find the noble Lord’s analysis of the difference between the RPI and the CPI. Some 30 years ago, I was a member of the RPI advisory committee when it had a great row with the Treasury about mortgage interest payments. The philosophical argument was that you cannot have the cost of money as a factor in the national income. I respect that that was always the Treasury position. It might be slightly provocative to say this, but perhaps an organisation such as the Office for National Statistics or the new Office for Budget Responsibility could objectively set out the pros and cons for the different purposes. Whether one is dealing with national accounts or the cost of bus fares, one has to disaggregate the RPI. This issue arises all the time. Therefore, it would be useful if the Cabinet Office or somewhere else could produce a paper on the strengths and weaknesses for different purposes of the RPI and the CPI, including European standardised statistics and all the rest of it.

[Lord Kirkwood of Kirkhope]

I certainly think that that is a good idea and I would support it.

[Lord Freud]

My Lords, this has been an interesting debate, as one would hope and expect. I thank noble Lords for their valued contributions. I should probably declare an interest in that I am due a winter fuel payment this year, although I did not get it. The DWP says that it paid everyone and I find that I am the only person who did not get their winter fuel payment.

The uprating order and the GMP increase order both legislate for increases to benefits and pensions to be paid from April, thus protecting their value at a difficult time. My overview of what the noble Lord, Lord McKenzie, said is that the party opposite was perfectly happy with the CPI in the short term and would agree with the UK Office for National Statistics on the issue if the CPI was to include housing costs in the slightly longer term. On that basis, I suspect that there is rather less between us than might appear at first instance. We are very interested in the changes that will potentially be made to the CPI if housing costs are incorporated, which is being looked at. However, as the noble Lord, Lord Lea, hinted, it is likely that that would be done not by including the changes in mortgage interest rates but by the actual changes in house values.

A lot of points were raised in the debate and I will do my best to answer as many as I can. An important point about substitution was raised by the noble Lord, Lord McKenzie, the noble Baroness, Lady Lister, and my noble friend Lord German, who pointed out that people will buy everything at the bottom, which is what one expects them to do—that was the sentiment. However, that is not what happens with this index, which it is important to emphasise. If in a given range of the cheapest items—or best value goods, whatever they are called—and one of them goes up but the rest stay the same, people will substitute the one that has increased in price with the ones that remained stable. The relative movement in those goods, rather than their absolute value at any one time, is what counts. It is really important to understand that when looking at how the substitution effect actually works.

We could probably all bore each other by quoting lots of different experts—and I think we have, so I will not bother doing so—but the noble Lord, Lord McKenzie, made the point that we abandoned the policy of the CPI when it came to it. I repeat what I said in my opening remarks: we announced the RPI for the basic state pension for the year at the same time as we announced the move to the CPI, so there has been no reversal or change. That was what the policy was.

On the point raised by the noble Lord, Lord McKenzie, on the triple guarantee, in the current environment the earnings factor does not make much immediate difference, but over time it will make a substantial difference and pensioners will benefit from it. As I said in my opening remarks, the 1.5 per cent increase from the previous year was not reversed. Picking up on some of the noble Lord’s other points, I think that he knows almost better than I do that, when it comes to mortgage interest for people of working age, benefit recipients and working people on low incomes can also get support for mortgage interest payments.

The noble Lord asked what assessment had been made of the changes that we have introduced to non-dependent deductions. The equality impact assessment on those changes has been published on the DWP website. A question was also asked about indexation rights for public service pensions. Those have been index-linked on the same RPI basis up to this point, and in future the indexation will be made on the new basis, which is CPI.

The noble Lord, Lord McKenzie, and the noble Baroness, Lady Lister, also homed in on the effect on poorer households, which is the big question here. We now have 5.8 million adults of working age living in relative poverty. As I have argued, the idea is that using the CPI will ensure that typical changes remain in line with real experience. Where we need to go in this area—a much more important point—is in the structure of the benefits system so that we strike the right balance between the welfare system as a safety net and one that sends out a clear message that work is valuable and that, if you can work, you should work.

We are modelling the big impact that will be made by introducing the universal credit. We estimate that 350,000 fewer children and 600,000 fewer adults will be expected to live in poverty—on the normal definition of 60 per cent of median household income. Some two-thirds of that effect will be because of better take-up. My noble friend Lord Kirkwood asked whether we would chase underpayments as hard as overpayments, but that is exactly how that effect will happen in practice. A lot of the effect will come from take-up by people who simply do not take up what they are entitled to.

Housing Benefit (Amendment) Regulations 2010

Lord Kirkwood of Kirkhope Excerpts

Monday 24th January 2011 Lords Chamber

[Baroness Wilkins]

As heralded by the noble Baroness, Lady Thomas, I will concentrate on the situation regarding disabled people. In recent years, disabled people have been given hope that we will achieve equality by 2025, but with these regulations we see yet again that the Government are imposing cuts that will disproportionately affect disabled people. That might not be the intention but it is the effect.

Disabled people are the group most likely to be dependent on benefits, so the most likely to be affected by these cuts. Only half of disabled people of working age are in work compared with 80 per cent of non-disabled people, and the poverty rate among disabled people is double that of the rest of the population. As we have heard, the likelihood is that significant numbers of people will be forced to move. Being one of the poorest groups, disabled people are more likely to face this threat than others. The Minister has repeatedly implied that this is no problem as people are constantly on the move. What understanding does the Minister have of what that means for disabled people?

First, for physically impaired people there is the major issue of finding accessible accommodation. The paucity of housing stock which meets disabled people’s needs is a disgrace and far too little is being done about it. Not only that, the actual process of moving will be difficult for many who are physically disabled or who have mental illness. Secondly, disabled people are likely to be more reliant on informal support from neighbours, friends and family. These networks are built slowly and cannot be turned on and off like a tap. However, if disabled people are forced to move, the dislocation will inevitably mean increased isolation and result in more reliance on the statutory agencies and charities. Related to that is the fact that existing relationships with health and social services will be broken so there will be additional costs of re-assessment and re-establishing the support to be borne by the statutory services. What assessment has been made of what it will cost the state in forcing disabled people to move as a result of these regulations?

The Minister may say that the increase in discretionary housing payments will meet our concerns but the increase is nowhere near sufficient to support all those who need it. Disabled people will be only one of the vulnerable groups in need of this funding as Leonard Cheshire Disability has pointed out. On the brighter side, I welcome the Government’s move to allow an extra bedroom for those who need an overnight carer. Cuts elsewhere will mean that this is not as beneficial as it sounds. RADAR has been contacted by Ann—not her real name—who was given housing benefit and the second bedroom rate for a live-in carer. As a result, her mother bought a two-bedroom property with a mortgage for Ann and her live-in carer to rent. So far, so good, but Ann has had problems getting somebody to live in. As a result, the council reduced the second-bedroom rate to a first-bedroom rate on the ground that it was not the main residence of the live-in carer. Now Ann cannot pay her mother the rent that she owes, and so her mother cannot pay the mortgage. This has left both of them in extreme financial hardship and her mother now has to look after Ann at night as well.

The severe cuts being imposed on local authorities have resulted in some appalling decisions, with local authorities trying to cut overnight carers and forcing people to use incontinence pads instead. Such was the case last year when the former ballerina Elaine McDonald, who was not incontinent but just needed help getting to the loo, took the royal borough of Kensington and Chelsea to court when it imposed this cut. She lost the case. Does this mean that there will be an inevitable domino effect with cuts by social services resulting in the loss of the extra bedroom allowance? Will the Minister give the House an assurance that this will not be the case and that if a person is assessed as needing overnight care, they will receive the extra bedroom allowance?

I regret that the noble Lord, Lord Knight, will not press his Motions but I urge all noble Lords to support the Motion in the name of the noble Lord, Lord Best. Will the Minister agree to commission primary research to monitor and evaluate the impact on disabled people in particular within the year, given that disabled people are likely to be disproportionately affected by these cuts?

[Lord Kirkwood of Kirkhope]

My Lords, it is always a pleasure to follow the noble Baroness, Lady Wilkins. Her personal experience and powerful testimony are always of benefit to the House. We are very pleased to listen to what she had to say. However, I do not agree with the last point she made because, politically, it is absolutely apposite that the noble Lord, Lord Knight, took the decision that he did to leave a Division for now. That was the right thing to do and the debate benefited from it. It certainly makes it easier for people like me, who agree with a lot of the analysis and share a lot of the concern, to keep the pressure on the Minister for Welfare Reform. I am also grateful to the noble Lord, Lord Best, who admirably set the scene. Given the expert that he is, we would expect nothing else.

The politics of this are not hard to discern. Those of us who have been around long enough to remember the introduction of housing benefit in 1988 can see the Treasury’s fingerprints all over these cuts which have been on Treasury shelves since the income support system was changed in the welfare reform Act of 1986. Given the speed with which certainly the initial tranche of changes were introduced, some of which are reflected in the statutory instruments we are discussing, they could have been given no other thought than the Treasury insisting that DWP Ministers had to find changes.

As I keep saying, the noble Lord, Lord Freud, is a national treasure given that he is the architect of the universal credit, the principle of which I absolutely support. However, he had to pay a price for that. I well understand the concessions that have to be made between departments. Therefore, I do not blame my noble friend for what we are facing. However, the noble Lord, Lord Knight, was right to refer to the £15 excess. That was very welcome because if there is a feeling across the House that constructive measures can and should be taken to limit some of the damage referred to in many eloquent speeches this evening, that strengthens my noble friend’s hand in making representations to the department. In any case, this game does not finish this evening; it will be a long journey. Iterations of these cuts will be introduced over a period of years. Therefore, we have a little time to look at what is going on. We are not, to quote a phrase, lashed to the mast; at least, I would not like to think that we are.

If the Motion moved by the noble Lord, Lord Best, is accepted, and as long as the Minister for Welfare Reform is prepared to say that it is not just restricted to the regulations, which are only the start of a long journey which will make considerable changes, some of which will get considerably more acute come 2013, the House will have done a valuable piece of work. The Minister must also understand that he has to respond with a sense of responsibility, from an adult point of view, by being very firm about his assurances about what will be reviewed and reported, and how, when and why. We need to know what we are being asked to support.

The point was made eloquently by the noble Baroness, Lady Hollis, but I have always felt that housing policy driven by housing benefit is completely crackers. It has all got out of kilter. We all need to step back to consider some of the excellent work done by John Hills in his excellent report, Ends and Means, and the Kate Barker recommendations of 2004—all a bit long in the tooth now, but the direction of travel necessary in the long term is all there. That work can be built on in future.

The private rented sector is not a place for long-term, low-income households’ housing needs to be met. It is a device that should be for another segment of our society altogether. We have let it get out of control in a way that is difficult to justify. Like colleagues, I find it difficult to be sure that the savings set out in these plans will be realised as they are expected to be without unintended consequences. It is not just the June 2010 Budget proposals or the spending review proposals—as, again, the noble Baroness, Lady Hollis, said, it is the universal credit changes, which are profound.

The House can be reassured that it will get a chance to come back to some of these issues. I give an undertaking to the noble Lord, Lord Knight, that if we do not get a proper review or if we get a proper review but a red traffic light on the basis of the red, amber and green system of risk assessment on some of these issues, I will happily consider joining him in the Lobby if the Government do not measure up to the requirements, which are felt on all sides to be necessary, before we can go home this evening satisfied that we have done our job properly.

I conclude by mentioning four—well, four and a half—things that I want in the review. The first has been discussed earlier. I want to know exactly what proportion of the market the Government expect to be accessible to people who are on local housing allowance. I do not believe that the proportion of 30 per cent will hold. Once it is indexed to CPI, there is no real expectation that across the country LHA clients will be able to access 30 per cent of the market. That is my view in London and other areas.

The Government need to explain what proportion of the private rented sector they eventually expect the changes to make available to the client group. I think that the market will fragment. I think that the pressure coming into the private rented sector is likely to segment into a binary system where people who are unable to get on to the first rung of the owner-occupation ladder will be in a much more advantageous place. There are many more of them. The evidence that went into the DWP Select Committee report indicates that there is enough pressure there to keep rents rising and that demand will increase. There is a real risk that the sector will split. That will be made worse after 2013.

Welfare Reform

Lord Kirkwood of Kirkhope Excerpts

Monday 11th October 2010 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, perhaps I may return to the important question raised by the noble Lord, Lord Skelmersdale. Does the Minister accept that there is real concern about whether the work capability assessment is fit for purpose? In the pilots established in Aberdeen and Burnley, will Professor Harrington be able to look at the medical versus the biopsychosocial dimensions of the tests? Some of us believe that the tests are far too medical. My experience working with the Wise Group suggests that people have not medical problems but biopsychosocial problems, which do not admit of an easy medical solution. Will Professor Harrington be able to look at that and give advice to the Government on improving the tests?

[Lord Freud]

I thank the noble Lord, Lord Kirkwood, for concentrating on the important issue of what good health and ill health are, which is extraordinarily difficult to pin down. I am sure that he believes as I do that the well-springs of health are around basic social skills and a sense of meaning and community. When we put people on inactive benefits, we are taking away from them the well-springs of health. It is vital that we help people back into work, which is such an important contributor to their psychosocial well-being. We will watch the WCA very closely to make sure that it does its job, so that we can have the opportunity to get people back to work.

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

Lord Kirkwood of Kirkhope Excerpts

Tuesday 20th July 2010 Lords Chamber

I assure my noble friend that I am in favour of the migration of people currently on the passive benefit of incapacity benefit to the more active benefit of ESA. However, it is important to get the migration right and to listen to the concerns of those who are dealing day to day with some of the most vulnerable people, who will be even more vulnerable if the WCA is not more flexible and if there is not more support and help in the system. We all want the same thing—namely, that as many people as possible should be able to do at least some paid work, with those most in need of help and support being able to access it—but how the Government go about this major step in the right direction is as important as the policy itself. I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I am delighted to follow my noble friend. I declare an interest: as my colleagues may know, I am a non-executive, non-remunerated director of the Wise Group in Glasgow.

My noble friend Lady Thomas has an eagle eye for finding statutory instruments and Orders in Council which are of serious significance. Her experience in both the Merits Committee and now in the Delegated Powers Committee serves the House well and we are in her debt. These are important regulations. My spies, of whom there are many, tell me that, technically, they are legally ambiguous. If I did not know the noble Lords, Lord McKenzie and Lord Knight, as well as I do, I would think that this was a deliberate Labour spoiling tactic to leave a gremlin in the system to subvert the confidence of the incoming coalition Government. However, that is a quite unqualified and undignified accusation and I make it only in passing.

There are some technical ambiguities in the regulations. This serves to demonstrate how important it is to simplify some of these systems. If the professionals dealing with these regulations cannot make up their minds whether or not they are clear, I do not know who can.

I wish to make one or two brief points about the significance of the long-term implications of these regulations. I am an unqualified supporter of Professor Paul Gregg’s personalised conditionality concept. During the course of the Welfare Reform Bill last year, colleagues will have heard me expound this theory. Professor Gregg rightly captures the deal we will be offering people in future. Yes, there will be conditionality and people will have to be responsible for their actions, but the deal has another side to it: there will be a tailored, sensitive conditionality over which they will have a voice and which they will be able to help mould and shape for their own personal circumstances. That is the offer. The offer has two sides to it, both of which are important.

These orders should not to be considered in the context of the panic caused by the deficit-reduction problems that we face right now, because I hope that this system will sustain the support that we give to people in these circumstances not just for the three years of the next comprehensive spending period but for five, 10 or 15 years. If it works and can be made to work well and sensitively, it will serve us in the long term. Therefore, the regulations should not necessarily be shaded or influenced too much by the financial circumstances that immediately face us, although they are significant.

We need to be realistic about how many people we can expect to help in the short term. If we manage to get upwards of 1 million people back into remunerative work where they have some prospects of job retention and progression, it would be a marvellous success. If expectations are too high, particularly if they are driven by the perception of cuts and not of progressive policy changes, we will be in some trouble. We need to be realistic about what we can achieve. We shall get a better policy outcome in delivery if we do that.

We should work with the willing. Jobcentre Plus staff at the front line know this. I agree with my noble friend: everybody in Jobcentre Plus offices that I visit is in the front line. The only people in the back are the managers; perhaps we can get rid of some of them in order to support the front-line staff. The only people who are backstage are the big cheeses; it is the front-line people whom we are trying to support. We need to work with the willing. It is clear from my work in the Wise Group that there are people who are anxious and positively engaged in trying to get back to work. If you can have success with some of them early on, the word spreads and you get positive feedback. People then say, “Well, if it’s worked for my next-door neighbour, then I hope it can work for me”.

There is a spatial dimension to this problem. That is nothing new. Anybody who has studied these policies in the past understands that labour market conditions in Reading are different from those in Merthyr Tydfil or downtown Liverpool. When the policy is rolled out from October, and subsequently when it is rolled out nationally from February, that needs to be borne in mind. For the reasons that I gave earlier, conditionality must be sensitively applied in favour of the client as often as possible.

I am therefore confident that there can be a coherent policy. The direction of travel is absolutely right. Both Front Benches have made as much progress as they reasonably can. It is a very difficult area, and it is made more difficult by the financial circumstances, but it is the right thing to do. However, we need a coherent, long-term policy. We should think about a single working-age benefit. It is hard to get from where we are now to there; it will take time; but we should do nothing that gets in the way of that and makes it more difficult.

My noble friend spoke about providers. I think that some providers believe that the quality of the medical personnel who do the medical examinations which inform this process could be better. The decision-makers who take forward that work—it is crucial work for the individuals that it affects—need to have some responsibility for making sure that the quality of the medical reports is consistently good. If it is not, there needs to be something in the system that gives them the ability to say to Atos or their line managers, “I’m really not comfortable with the medical evidence that I am getting that informs my decisions”. That is an important piece of the business model that needs in the implementation to be carefully considered. I know that my noble friend is aware of it and I am confident that he is on the case. I hope that he will do everything that he can to make sure that those decision-makers get the best information so that they can make the best decisions possible.

The explanations given to people on incapacity benefit when they are first contacted, and subsequently when the policy is rolled out after February, need to be clear. I hope that the quality of the offer that is being made—I hope that it is an offer because as I said it is personalised and conditional—will be explained to them. The responsibilities that they have are different. Some of them fall foul of those responsibilities because they do not know what they are. In the past, that has been because some of the letters and communication strategies that have been used have been opaque. If you are confronting this situation for the first time and are in a vulnerable household, the last thing you need is ambiguity about what you are facing. We need to be crystal clear about what we now require—because “require” is the only verb that can be used in this new situation.

Also, from a provider point of view, there is a lot of concern about people who leave the system. There are people who should not have been in the system in the first place, but an estimated 30 per cent will exit the system. American experience suggests that a lot of those people become destitute, and that is not in anyone’s interests. In America you can move to the next-door state and start again. You cannot do that in the United Kingdom so we need some follow-through to make sure that people are not being dumped. The object of this policy is not to dump people: it is to apply it to people who are properly eligible. If my noble friend could give me some assurances about that I would be grateful.

This is not just about people getting people into sustainable jobs. I am pleased that we are talking about what I would consider to be sustainable jobs and not just jobs for 13 weeks, which was never sustainable under the old system. We are making progress in that direction, but we need to talk about job retention and advancement as well. We must not lose sight of that. We need to be able to say to people that, even if they are getting ready for work and nearer the labour market, this is all about giving them work experience from which they can benefit. Therefore, as my American colleagues all say, they start with any job, move to a better job and then on to a career. They are being offered an ABC system. That is part of the offer. If we can do that, and it is possible with the proper back-up, support and implementation of the policy, then this is a win-win situation for everyone.

I am certain that my noble friend on the Front Bench is having all sorts of frayed conversations with the Treasury. I would like to strengthen his arm—his hand, rather, because strengthening your arm is to do with drinking. To strengthen the hand is a Quaker concept which I understand is more beneficial to everybody. I hope that he will hold out. If this policy is to work, there will be a degree of invest to save across the broader policy front. If he does not win support from his colleagues in that direction, even if the policy is absolutely 100 per cent, with the best will in the world, he may still fail because we cannot do this if there is absolutely no money to give people the opportunity to train themselves off benefit and into work, which is the idea behind the policy.

[Lord German]

My Lords, I also rise to support my noble friends in welcoming the intention and general thrust of these regulations and changes. Supporting incapacity benefit claimants into work and making sure that people are on the right benefit with the right level of support is obviously the correct thing to do. There is no doubt either about the significance of these regulations. About 1.5 million people in our country will be affected and some of them are the most vulnerable in our society. The issues that I want to comment on, therefore, are not about the principle but about the process of migration—“it ain’t what you do, it’s the way that you do it”.

There are two outcomes that I am sure my noble friend the Minister will wish to avoid—the unexpected and the unintended. The unexpected might be failure somewhere in the process of change—perhaps a blockage in the appeals process or a group of vulnerable people who are marginalised by the whole process. Since it is unexpected, all you can do is ensure that the system is as robust as possible and that everything is in place before it migrates and is therefore able to withstand the shocks. The unintended consequences, however, can be guarded against more easily. For that we look to the reports of the Merits Committee and the Social Security Advisory Committee. They have produced a clear, evidence-based set of reports, which should help to steer the Government through the maze that is the migration process.

As I know from the dates given on the SSAC report and the Government response, it appears that the response is from the previous Government. I therefore offer a brief analogy to my noble friend the Minister, based on my experience. I took over a ministerial portfolio in Wales; one month beforehand, the previous Minister from another party in a coalition had thrown the switch on a new computerised payment system for farmers. The system was intended to surpass anything else in the past; it was all-singing and all-dancing, and introduced a new payment structure. Needless to say, it went terribly wrong in year one but was corrected and became an exemplar system in year two. I shouldered a large part of the anguish of the claimants while my predecessor escaped without a scratch. I hope that our noble friend will benefit in coming out of this without a scratch.

State Pension Credit Pilot Scheme Regulations 2010

Lord Kirkwood of Kirkhope Excerpts

Monday 5th July 2010 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, I am grateful to my noble friend for introducing the regulations. It comes as no surprise to those of us who served on the Committee for the proceedings of the Welfare Reform Act 2009. Section 27 presaged the Motion tabled by my noble friend Lord Freud this evening. To that extent, it is business as usual.

These are interesting regulations, for a number of reasons. I would like to use the context of this evening’s debate to raise one or two issues. It is a tactical provision and an important piece of legislation for a number of reasons that I will come to the moment in terms of how it widens the extent of well understood and well honed social security tenets of legislation.

It is tactical because it seeks to underpin the concept of means-testing. In so far as that gets more money into pensioner households which are eligible and which are not claiming, that is welcome. But at the outset of this Government, if we are looking in the long term and thinking strategically, is more efficient means-testing what we are really trying to be about? That is an important strategic question.

It is early days for the new coalition Government to come to a final conclusion about that, but we are beginning to run out of time on a wider horizon. If you look at the proposals that were contained in the Turner commission some years back, the understanding that the noble Lord, Lord Turner, had when he made his recommendations was that there would have been more discernible movement by now in the direction of a universal basic state pension, which produced a threshold of earnings, such as 30 per cent of average earnings. It would be a base; a first-tier provision on which other things could be built. We are not getting there fast enough.

This is a limited project both in terms of time because it will run for a 12-month period, and in terms of scope, because we are devoting only £1 million of the DWP departmental expenditure limit—although that is £1 million not available for other things in very trying circumstances over the next comprehensive spending review.

We have got to think carefully about the signal that this is sending. We have to ask whether it is credible, even if this pilot is swimmingly successful, that the 70 per cent of pensioner households which do not currently get the entitlement which they are due suddenly become, as if by magic, able to get this automatic payment after a deemed application. Where does that take us? All it does is encourage people to think more about means-testing. If that is the long-term goal, I would be much happier if we were to think more carefully and strategically about developing the basic state pension in a sustainable way.

The State of the Nation report, which was helpfully produced by the department just after the election, talks at page 38 about the disincentives to save that can be created by means-testing. It refers specifically to pensioner credit in that regard. Although this is a very limited project—it pays benefit automatically for 12 weeks to families and the Pensions Policy Institute certainly suggests that as things stand 30 per cent to 40 per cent of pensioners will be eligible for pension credit and means-testing in the future—we have to bear in mind that this may be a project that ends up being of little value if the strategic decision is to go in the other direction and to head down a unified first-tier pension provision which gives a sustainable income for pensioner households.

It is an important signal in that you could raise expectations in the minds of pensioner households that this would be the way forward and that they would be sent money through the post. I do not think that we can do that. Looking at the financial framework that we are facing for the next three years, I do not think it is realistic that the department could find the money out of the annual managed expenditure of the departmental settlement—whatever it is—on 20 October. If this pilot is successful and a way to automatically send pension credit to pensioner households is found, it could cost £5 billion. I will put it no higher than this, but I doubt that there is £5 billion in the annual managed expenditure of the budget over the next comprehensive spending round to pay for that. We need to be very careful about how we evaluate this, how we sell it and how it fits into the long-term strategy of the coalition Government.

As I said earlier, deeming applications to have been made is a substantial revision of social security law, as is the automatic payment. The idea that people can be sent money in the post without having made an application in the first place is a radical departure from everything that we know and it needs to be treated with very great care.

I hope that my noble friend will look very carefully at the use of pilots. Perfectly understandably, he is still finding his way around the department. I do not say this critically because most of the pilots had a merit in their own right when looked at individually, but over the distance they became completely incoherent. It was impossible for observers to track the evaluation and what happened to them. I suspect that many of them bit the dust quietly. The whole notion of “pilotitis” was getting out of hand in the previous Administration. I am just warning my noble friend that the department might encourage him to do that. He has to be very stern and very sure that if he introduces pilots he really means them. He must take the value out of them and make sure that they are not just a waste of time for everyone involved.

Staff resources will be involved because it is complex. I am absolutely sure that my noble friend is right. Trying to stitch together the bits and pieces of data that are available legitimately and lawfully to the department in order to establish who will get these automatic payments will not be easy. If anyone is unsure about that, they should look at parts 4 and 5 of these regulations which have completely separate definitions for income and earnings that have to be laid on top of an already complicated situation. People will have to do staff training to carry out these pilots, which will be random across the whole of the United Kingdom. Only 2,000 people will be involved, but that does not mean that a whole lot more people in the staff complement will not need to know about these things. There may well be a single helpline telephone number, which I would welcome. People will need to know how to deal with folk who ring up and say, “I have just been sent a lot of money by the department in the post. What is all this about?”. I know that a lot of care is being taken over getting the letters of explanation correct and I welcome that, but there are staff resources involved in this and it will involve complexity of some kind.

On the operational questions, a lot of the problems have been ironed out in the extensive consultations that have been conducted. I welcome that. I recognise too that the stakeholders who have been asked are a lot more welcoming to the order than I am sounding today. However, there are still some questions in my mind. For example: why is this money being paid for only 12 weeks, monthly in arrears? Did someone guess that, or is there a reason for having 12 weeks of payments and then they stop?

A second question that is obvious but to which I think I know the answer is that if an underlying entitlement is detected from this automatic payment, presumably people are entitled to pursue that genuine entitlement. Once week 13 comes along and the money stops coming, they can go to the Jobcentre or phone the Pension Service and get a proper claim. I assume that that is axiomatic and will not be a bar to long-term entitlement, if entitlement is indeed found.

I have a slight objection to the pilot excluding people who do not have access to direct credit. The people with bank accounts are the people who are organised; the people who we are trying to help most are the folk who do not have bank accounts and are still using alternative means. Now, there are not many of them, and statisticians may say, “If you take too many of them into the pilot, that may skew the pilot”, but some of them should be in the pilot to draw statistical conclusions from, because there are still significant numbers of people in that category across the United Kingdom.

Why we are excluding religious orders is an interesting question. “What have we got against monks and nuns?” I ask myself. I have no way of understanding that, except maybe that they live in a residential setting.

May I have an assurance, just for Daily Mail purposes, that this money will not be sent to people in Spain? I think that regulation 10 means that people in Spain will not be sent cheques automatically, having been deemed eligible for pension credit, because that would be in nobody’s interests.

I hear myself sounding quite niggardly about this, but there are some important issues here that I hope the Government are thinking through. My question to my noble friend is this: “Is it really credible to say that this pilot is determined to achieve an algorithm that will produce automatic payments of pension credit in future to the 30 per cent of pensioner households that are not currently collecting it because they do not know that they are entitled to it and that we have the money to pay for this in the short to middle term?”. That is an important question that the Government need to think about carefully before they implement these pilots.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of the order before us. I will not rise much to his opening salvo about the state pension, except perhaps to remind him gently that it was a Conservative Government who broke the link with earnings, and it was the previous Labour Government who, on coming into office, had to address the abject situation that many pensioners found themselves in, hence pension credit. That is how the previous Government lifted hundreds of thousands of pensioners out of relative poverty. Perhaps, though, that is for another debate.

It goes without saying that we support the pension credit pilot, which, as the noble Lord, Lord Kirkwood, acknowledged, has as its basis the provisions of Section 27 of the Welfare Reform Act 2009. Maximising the take-up of income-related benefits is an effective way of tackling pensioner poverty. We know that, despite considerable take-up activity, a significant number of people who are entitled to pension credit are still not claiming it.

The noble Lord, Lord Kirkwood, said that the regulations are, in his view, basically tactical in enshrining means-testing as part of the system. I remind him that the package on which the pensions system is based stems from the Turner commission: improvements to the basic state pension, relinking it to earnings, and improvements to S2P, particularly the flat rating. The other component is, of course, auto-enrolment, on which we await the results of the review that is under way. My noble friend Lady Hollis, who is not with us today, has strong views about wrapping pension credit, S2P and the basic state pension into one pot.

[Lord Kirkwood of Kirkhope]

I have said that, too.

[Lord McKenzie of Luton]

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

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

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

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

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

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

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

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

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

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

Lord Kirkwood of Kirkhope Excerpts

Monday 21st June 2010 Lords Chamber

[Lord Goodlad]

My Lords, I have very little to add to what has been said by my noble friend Lord Lucas. The Merits Committee reported to the House on this matter in April and again following a meeting last week. He has deployed all the considerations that we had in mind with his usual thoroughness. The noble Baroness, Lady Thomas, added to that. We will hear what the noble Lord on the Opposition Front Bench has to say. Whether to proceed with the trial is clearly a matter that will have to be considered in the light of, among other things, what is said tonight. A very large number of people, including the poorest people in our society, are involved in all this, and we look forward to hearing what the Minister has to say, but it is an extremely important matter.

[Lord Kirkwood of Kirkhope]

My Lords, I am pleased to be able to follow colleagues in this technical but important debate. I start by congratulating the noble Lord, Lord Lucas, on joining the Motion-to-regret club. The bad news for him is that the chairman is my noble friend Lady Thomas, I am the secretary, and he will now have to be the treasurer because there are only three of us who have been through this process. He is a very welcome addition to the clan. It is a very distinguished group, as my noble friend said.

I will take a slightly wider look at the background to the order. I am very worried that it will become a default option for Her Majesty's Revenue and Customs, which would be a very bad thing. The first thing that we should bear in mind is that we are talking about recovering overpayments that have been made by the Treasury. A number of questions flow from that if it is true, which I believe it is. Why on earth is the department rolling out pilots of this kind at a time of real stress and difficulty, with administrative cuts and all sorts of pressure on DWP staff? I make no complaint about that because I think we are all prepared for it, but these are some of the most difficult financial circumstances that low-income households have ever faced. This is a once-in-100-years event—I have certainly seen nothing like it in the 30 years that I have been in public life—and we should not start spraying letters around to people who are in debt only to the extent that the Treasury has miscalculated the amount of tax credits that they are due. We have to bear in mind the fact that this is not just debt but an overpayment; it is a function of error at the hands of Treasury officials. We have to be very careful about the context in which we are sending these letters and raising these proposals, even though this is supposed to be a voluntary scheme.

Incidentally, I do not expect the department to have these figures available in the Minister’s brief this evening, but I would be very interested to know how many customers on benefit are affected by self-assessment error. There cannot be a big number of them across the country. Self-assessment is used mainly by people who are outside PAYE and who are self-employed and the like, so the question of self-assessment by people on benefit puzzles me, given the constrained nature of the benefits to which this order applies. How many people across the country in the system are in that position?

I know that the noble Lord, Lord Freud, cares about this and is enthusiastic about reform. The complexity of the system is part of the reason why these overpayments are made in the first place, and rolling out pilots to mitigate the damage that is done by complexity and error is the wrong way around. We should concentrate, and I believe that he will concentrate, on getting the system right first time and on not creating the overpayments in the tax credit system that create these debts. We need a root and branch review, and I hope that he will not lose his enthusiasm for that. Knowing him, I think that that is unlikely. I would strengthen his hand to get this done. It will not happen quickly, but I hope that he will use his undoubted expertise in financial systems to help to bring that about.

Secondly, third-party deductions are a very important part of the social security benefit system. They were contrived in 1988 and were an anti-poverty measure to protect levels of benefits. The Social Security Advisory Committee’s report on this shows—at paragraph 4.4, table 1—that mortgage payments, rent arrears and fuel charges were the essential things for which deductions could be made. People needed a deduction for housing or they were evicted, and they needed a deduction for fuel charges or they became hypothermic. That was why the third-party deduction system was put into place. It has been extended as the SSAC memorandum suggests, most recently for child maintenance purposes in 2006. However, we must be very careful about why and when we use third-party deductions or we get into management objectives and not anti-poverty ones. Third-party deductions should be used absolutely only in circumstances in which they cannot be avoided. Benefit levels are already at poverty levels. Measured against average median household incomes, poverty levels are built into some of the levels of benefit that we have at the moment. We should interfere with third-party deductions only with great care. The SSAC memorandum says—an occasional paper was done on this in 2008—that we should look at all these things and indicates the part that the social fund should play in dealing with anti-poverty.

My noble friend mentioned the hardship rules, which are important. There are some circumstances, which I came across myself not that long ago, where write-offs would have been properly argued and could have been suggested in ways that would help the households. But they are able to be determined only by people who know what they are doing. Citizens Advice and independent financial advisers who specialise in this kind of work and who know what they are doing can make recommendations which otherwise would be left unknown to the households that these things affect.

Thirdly, this cannot be done without safe, independent financial advice. I know that the FSA has tried to roll out a financial capability scheme—it may have been caught by purdah during the general election campaign—but we can be sure that these debts are being recovered safely, even in a so-called voluntary capacity, only if there is independent advice to which people can be referred so that they know that what they are doing is sensible in the totality of their debts.

The excellent recent publication, State of the Nation Report: Poverty, Worklessness and Welfare Dependency in the UK, produced by the Secretary of State, states that 79 million people in the United Kingdom are in serious debt. An independent advisory service would serve not only the purposes of these regulations but would have a wider purpose as well. One could argue that some FSA rules about treating customers fairly would require people repaying debts to HMRC to be given a statement of what their repayments are doing in terms of extinguishing the debt over a period of weeks or months, but I hope not years. There are no statements. In my experience, a lot of people have no idea of how their benefit payments are made up or of what payments are being made to other parts of the system which may also have third party deductions on their benefits.

The treating customers fairly rules of the FSA should be applied if this pilot ever is rolled out across the country because £9.75—the noble Lord, Lord Lucas, effectively made this point—to a household operating on a weekly cash basis, as a lot of benefit families and households are, is a huge amount of money. Many of these households have to work on a cash basis from week to week, robbing Peter to pay Paul and trying to stay out of default. It is a very difficult balancing act for them to manage.

As regards the timing of this, the earlier memorandum and other papers suggested that a roll-out would almost be upon us even now. The response from Steve Webb to the committee at a later stage made it clear that there was some reconsideration of whether the thing would even start. This is an important moment to stop and think about whether the pilot is necessary and, even if it were was successful, whether we are creating a default option which just makes it easier for the Treasury and HMRC to correct errors that they should not have made in the first place.

Finally, the SSAC recommendations, taken together with the timing and the context into which these pilots are being introduced, are inimical to the interests of benefit households in the way that they are currently cast. I for one would recommend to the Minister that he suggests that this pilot is cancelled.