Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 7 months ago)
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Baroness Grey-Thompson
My Lords, I rise to support the amendment of the noble Baroness, Lady Meacher, and to look specifically at the removal of the severe disability premium and the effect that it will have on young carers who are looking after a lone parent who is disabled or two parents who are both disabled.
The severe disability premium is really important in supporting young carers. Children who are still in full-time education cannot claim carer’s allowance, but many play an invaluable role in supporting disabled parents. However, if there is no other adult in the household, and no one claiming carer’s allowance, the family can benefit from the extra financial help offered by the SDP.
The abolition of the SDP will cost families with a young carer up to £55.30 per week, which is £2,876 per year. This cost could be equivalent to 20 per cent of household income after housing costs. The Department for Work and Pensions estimates that around 25,000 lone parents are in receipt of severe disability premium. That is 25,000 families with a disabled adult, in receipt of the mid or high-rate care component of DLA, but with no adult either in the household or receiving carer’s allowance to look after them, and with children in the household.
Many of these children are likely to be doing a substantial amount of caring for the parent, but this measure could force them to have to take on additional caring and household responsibilities because the family just cannot afford to pay for help. This is likely to put additional pressures on their children to make up for this loss of additional care. This is happening at a time when support services for young carers are being cut back, according to a recent survey by Action for Children. The charity surveyed 23 of its young carer projects between May and June this year. Findings reveal that almost half of services questioned reported a rise in the number of children on waiting lists and had seen an increase in the needs of young carers.
The Children’s Society, which works with young carers, gave the following example of the pressure that some of these children face and why they should not be pushed into even tighter financial circumstances. Kelly’s mum, Jenny, became ill about 10 years ago when she was only eight years old. An aggressive illness hospitalised Jenny, and has since entirely paralysed her down one side. After staying with relatives for several months while her mum was in hospital, Kelly was able to move back in to live with her mum from the age of nine. Since then she has cared for her mum non-stop. She makes meals and does the washing and cleaning. She said early on that she could only make simple dinners such as scrambled eggs on toast, but she has learnt quickly, and she has had to. She does not do it alone; she has a rota of professional carers who come to help out day to day, but they cannot do everything, and they do not stay overnight.
About three years ago, the year before Kelly was due to sit her GCSEs, Jenny became extremely ill for a while. Kelly had to get up around four times a night to help her out. Naturally, she was exhausted, dragging herself to bed as soon as she got in from school. Jenny currently receives the severe disability premium, meaning that she and Kelly are just one of 25,000 families with a disabled single parent. They will presumably be covered by transitional protection, unless Jenny’s reassessment for ESA from IB is viewed as a change of circumstances. It would be useful if the Minister would be able to clarify that. However, families who find themselves in a similar position after the measure is brought in are likely to be left £55 a week worse off as a result of losing this premium.
Lord McKenzie of Luton
My Lords, we should be grateful to the noble Baronesses, Lady Meacher and Lady Grey-Thompson, for introducing this important issue on which we have all received representations. Quite a lot of numbers have been bandied around with particular reference to benefits, and I will be interested in the Minister’s response. As I understand it, in the current system the severe disability premium is paid to people, whether in or out of work, who receive at least middle-rate care, live on their own and do not have a carer. It is payable only as a means-tested benefit so it supports those with a severe disability who have a low income and face many extra costs as a result of living alone.
Alongside that is the disability element of the working tax credit, so under the present system someone who is entitled to DLA or has recently been receiving a long-term sickness benefit would be entitled to the disability element of working tax credit if they worked for at least 16 hours a week. That is where we start from. As we have heard, though, the proposed support for adults in the universal credit depends upon the gateway of the WCA. This is what will drive the new arrangements. The briefing that we have had says that only those with a level of impairment sufficient to be found not fit for work will receive any extra help. I am not totally clear whether in that context “not fit for work” means someone who would only be going to the support group or someone who was going to the WRAG as well. I think the Minister is shaking his head, or rather he is nodding to say that only those in the support group would receive that.
That creates the difficulties that have been spoken about. The changes would mean that someone who could self-propel a wheelchair 50 metres or was registered blind but could undertake a journey unaccompanied could be found fit for work or, presumably, for work-related activity. Of course no one would want to claim that such individuals could not be encouraged to work if they wanted to, but that does not mean that they do not face considerable disadvantage and cost compared with someone with no impairment. So if they are out of work but found fit for work they face the same conditionality as everyone else, but if they are in work, because the gateway for extra support within the universal credit is the WCA, someone who is found fit for work will receive no extra support in work. The juxtaposition of the present and the future is concerning.
I am sure that the Minister will have seen the briefing that we have had. It says that the following are some of the ways in which different groups will be affected. Those who are terminally ill or who develop a severe level of impairment and live on their own could be disadvantaged to a significant degree—by something like £50 a week. Someone who is entitled to a middle rate of the care component but found fit for work—for example, someone who is severely visually impaired—will in many cases be found fit for work. However, if they are living on their own and doing some work, they are likely to have considerable extra costs that are not met by the DLA or by PIP when it comes along. Currently, most would be entitled to at least the middle rate of the DLA care component and therefore the SDP.
Under the current system, a severely visually impaired person in the work-related activity group and living on their own earning £100 a week will be left with a disposable income of £188 a week plus their DLA, after housing costs are paid. Under the universal credit, the same person will be left with a disposable income of less than £100 a week plus whatever PIP is payable after housing costs. There are plenty of other examples and we have heard some of them today from the noble Baronesses. These sorts of disparities are quite disturbing. The Minister might say that these are quite specific and narrow examples of the full spectrum of people who are affected by this, but a serious issue has been raised here and we need to understand fully how people are being protected in comparison with the current system under the new world of the universal credit.
Lord Freud
My Lords, this amendment seeks to put an additional element into the amount of universal credit that is payable for those who are severely disabled and who have no one receiving either carer’s allowance or a carer’s premium for looking after them. In essence it seeks to recreate the current severe disability premium within universal credit. As such it would involve a significant increase in cost compared with the Government’s plans. That increase stands at £400 million, unless there were other readjustments. However, let us just take it at face value. At face value, it is unaffordable.
On Monday the House approved the Government’s plans to simplify the disability-related additions. Instead of the seven different components within the current system of benefits and tax credits for adults, and two further rates in child tax credits for disabled children, universal credit will just have two rates for both adults and children. By restructuring the rates in this way, we are not looking to make any savings. We are redistributing around £800 million of current spend without returning any savings at all to the Exchequer. The full amount will be reinvested by increasing the higher rate for more severely disabled people. In our policy briefing note we made it clear that there would be some phasing. I know that I owe the noble Lord, Lord McKenzie, a letter on that matter.
Once resources became fully available, we expected to be able to provide a higher rate, at around £77 a week. This is significantly higher than the current £32.35 payable as the support component within ESA: £44.65, to give the noble Baroness, Lady Meacher, the exact figure she was seeking. It will provide a much more meaningful amount to severely disabled people than the current patchwork of premiums, which gives some people more than others and makes it difficult for people to understand and obtain their full entitlement. I should make it clear that one of the features of the universal credit as a whole is that we are expecting a substantial amount of the gains to the poorer people to come from much better take-up. The simplicity of a system with automatic provision of everything that people are entitled to will mean that more people in this category are likely to be recipients and get what they deserve.
Lord McKenzie of Luton
My Lords, I speak initially to Amendment 26. The amendment takes us into the as-yet uncharted waters of in-work conditionality—waters into which my noble friend Lady Drake has at least dipped her toe.
The Bill introduces for the first time the requirement on claimants who already have a job to take action to secure more paid or better paid work. We understand the need, within a system that has no clear distinction between in-work and out-of-work benefits, to have some mechanism to ensure that people do not simply reduce their hours of work to take advantage of the more generous support for lower-hours jobs that universal credit provides, but there are a host of unanswered questions about how in-work conditionality will work. The amendment is intended to ensure that Parliament has an opportunity to review the arrangements once they have come into force.
We debated these questions at some length in Committee, and the Minister's response was basically, “We are thinking about this”, with some indication that he would not be in a huge hurry to introduce this element of the Bill. The most fundamental of those questions is: what exactly is taken to be work in the context of universal credit? When will the state judge that someone is doing enough to be free of the requirement to report on their activity to the jobcentre? Although we have some indication that single people with no caring responsibility or health issues will be expected to work for 35 hours a week, and couples in the same situation for 70 hours, we have no idea what flexibility will be given to those whose circumstances mean that that is not reasonable.
For example, what will happen if one partner of a couple decides to reduce their hours—perhaps to look after children? The way that the incentives are structured within universal credit may encourage many second earners to do just that. Will they then face a jobcentre penalty for not engaging in sufficient work?
It is also unclear exactly how the in-work conditionality provisions will impact on the employment relationship. How will it impact on the likelihood of employers offering somebody a part-time job if they know that the jobcentre will be encouraging them to leave their job for one with longer hours? We know that, despite today's employment figures, some unemployment was avoided at the start of the recession due to employers reducing people's working hours rather than making redundancies. Would they have been penalised for reducing hours in that way under the Bill? The in-work conditionality proposals will bring many more people into the orbit of Jobcentre Plus at a time when the agency is being asked to make challenging efficiency savings. Can the Minister outline what estimate he has made of the additional resource that will be needed to deliver conditionality for in-work claimants and whether he expects to be able to secure that?
In Committee we discussed the position of the work programme providers under these provisions. The Minister assured us that the fact that work programme providers must get somebody into work for 16 hours and keep them there for two years was not in conflict with the aim of this part of the Bill to ensure that somebody leaves a 16-hour job and goes into one that either pays more or has more hours of work each week. A review of this provision after a year will enable us to see whether the Minister’s confidence is justified.
Finally, we have had no equality impact assessment on this proposal. A review would enable us to assess its impact on different groups. As the proposal intends to assess whether somebody is fulfilling their in-work conditionality requirements by looking at how much they are earning rather than how many hours they are working, for those who earn more these requirements will obviously be easier to meet. I hardly need remind noble Lords of the substantial pay penalties faced by women, by people with disabilities and by certain ethnic groups. We will need to look carefully at whether people within these groups are significantly disadvantaged by these proposals.
This amendment in effect accepts the assurances that the Minister gave us in Committee that these matters are under consideration and simply asks him to report back to Parliament on how the proposals are operating in practice. I am sure that he will want to accept it, if only in order to be able to demonstrate that, as we all hope, this policy is achieving its intended aim of supporting people to move on in work.
I move on briefly to the contributions of my two colleagues. As well as talking about the very important issue of the focus on children being the driver of these provisions, the noble Baroness, Lady Drake, referred again to kinship carers. The amendment that she spoke to seeks to add kinship carers, carefully defined, and limited to the first year in which they are caring for a child, to the existing list of exemptions. When we debated this issue in Committee, my noble friend Lady Hayter said that she was able to rip up her speech given the willingness of the Minister to recognise this issue, suggesting that he was looking to address it. My noble friend, who has provided me with the text this evening, says that she is perfectly happy to rip up another one if the Minister can let us know the results of his deliberations and what these have been.
I will not repeat the powerful case made by my noble friend Lady Drake. As she emphasised, kinship carers can play a vitally important role, offering children in extremely vulnerable situations some family continuity and, in doing so, saving the state the considerable costs of taking a child into care—some £40,000 a year in independent foster care. The Who Cares? Trust has highlighted the difficult experiences of many children cared for by their parents, estimating that one-quarter will have lived with abuse, neglect and violence and one in four will have been deserted by their parents, often after drug and alcohol abuse. Sixteen per cent go to their grandparents after family breakdown, one in 10 after a parent’s illness—often mental illness—and one in 10 after the death of a parent.
Although the existing conditionality arrangements provide some protection to those caring for young children, with no conditionality until the child is one, and then work-focused interviews until the child is five, many of the children who move to live with kinship carers will be older than five, as older children—indeed, those over 12 years old—make up a higher proportion of those in kinship care than in the wider population. Despite not being babies, for obvious reasons they need pretty much full-time attention and care. They will be new family members when they arrive, yet, not being adopted, will have no equivalent recognition. They also usually arrive after some sort of trauma and are therefore likely to take time to settle down. The amendment my noble friend spoke to simply seeks to provide for those who take on the care of a related child a year in which they will not be asked to look for work. This will give those considering taking on this huge task some certainty about their income and security during this first year and a chance to focus on their care for the child. A year’s exemption from looking for work would give them time to manage the upheaval in their lives before starting to juggle work and care.
Our concern, expressed by my noble friend, is that, without this amendment, the Bill risks undermining families’ capacity to care for children and increases the likelihood of those arrangements breaking down. Unlike with formal adoption, there is no adjustment period for family carers, despite the needs of the children. Furthermore, carers often have to give up work as a condition of a placement. We are aware that, as my noble friend said, the Minister is sympathetic to this case and we look forward to hearing his response.
Finally, I should like to refer briefly to the contribution of my noble friend Lady Turner of Camden in relation to Amendment 23. As she explained, this amendment seeks to ensure that evidence from a health professional will be accepted as good reason for failing to attend a work-focused interview—a requirement that will, under the Bill, be placed primarily on lone parents with children aged between one and three. We hope that this will be a simple amendment to accept, as my noble friend has explained. In Committee, the Minister told us:
“We will not sanction claimants with limited capability for work, or those who have learning difficulties or mental health conditions, without first making every effort to contact them, their carer or healthcare professional to ensure that they have fully understood the requirement placed on them and had no good reason for failing to meet it”.—[Official Report, 1/11/11; col. GC 417.]
We hope that the Minister will be able to extend this to include those who provide their adviser with evidence that they have a health-related reason for failing to comply with the work-related requirement.
This amendment also enables us briefly to revisit the question that arose in Committee about the relationship between Jobcentre Plus advisers, Atos assessors and the healthcare professionals who deal with a claimant. It also enables us to ask the Minister again to clarify exactly what information is available to Jobcentre Plus and work programme advisers, who have to decide on the type of requirements to which the claimant should be subject. Will they have access to information about a claimant’s health and capability for work that has been uncovered during the assessment phase for employment and support allowance?
We want this whole scheme to work to help those who can be helped but not to waste advisers’ time, nor to bring the system into disrepute by demanding inappropriate behaviours of claimants where evidence of their health needs exists within the system. Therefore, we hope that the Government will feel able to accept my noble friend’s amendment.
Lord Freud
My Lords, this group of amendments contains a number of measures that align with our intentions, so we are apparently in agreement. Indeed, many are in line with current practice and we intend to carry them forward into universal credit. I shall take each of them in turn.
With regard to Amendment 23, we recognise that there may be medical reasons that prevent a claimant attending a work-focused interview. We do not need expressly to legislate for this to be recognised. If a claimant gives advance notice that he will be unable to make an appointment and has good reason for this, the interview can be rearranged. If a claimant fails to attend an interview, he will have a reasonable period of time to explain why. As part of that explanation, the claimant will be able to provide any relevant information, including any medical evidence. If the claimant has a good reason, then obviously no sanction will be imposed. This is essentially what happens already and it will continue.
I turn to Amendment 23A in the name of the noble Baroness, Lady Drake. I appreciate the sentiment behind the amendment and agree that it is important to balance the requirements placed on claimants with any childcare responsibilities they may have. Therefore, legislation will provide clear safeguards, ensuring that no claimant who is responsible for a child under five can be made to look for or take a job, and no claimant with a child under 13 will be required to look for a job that does not fit with their child’s school hours, including a reasonable allowance for travel time.
Advisers will have flexibility to tailor the requirements placed on claimants—including allowing limitations to the work that claimants must search and be available for—to take account of their circumstances and the needs of any children for whom they are responsible. Where the child is over 13, advisers will continue to have discretion to permit the claimant to limit their availability if the child’s needs make it necessary. We do not intend to make blanket rules for this age group in legislation, as the children’s maturity and need for parental supervision will vary widely. Therefore, although we agree with the spirit behind the amendment, we do not think it necessary.
On Amendment 25, we are now making provisions in the jobseeker’s allowance on domestic violence. The regulations giving effect to this policy will be subject to affirmative debate early next year as parliamentary time allows. The changes will take effect soon afterwards. The draft jobseeker’s regulations will provide that where a claimant has left the abuser because of violence or the threat of domestic violence, they will be treated as complying. This will be automatic whenever the claimant provides evidence of violence or the threat of violence and may be extended through existing domestic emergency provisions to up to 17 weeks, or to 24 weeks for claimants with childcare responsibilities. The amendment would allow an exemption from work-related requirements only while the threat continues. Our proposal recognises that claimants may need unconditional support for a period after the actual threat has receded.
Lord McKenzie of Luton
My Lords, I will be brief on Amendments 27, 30, 31 and 29, which deal with sanctions. However, given the hour, there is just one particular point I wish to pursue.
We have already had the assurances of the noble Lord and his colleagues that there will be no target set in respect of sanctions. That is clearly on the record in Committee. We might like one more go at it, but we need not spend any more time on that. In the other place we made the argument for reducing the maximum sanction from three years to one. Given where we are, I do not see merit in going over those arguments again; we will just have to differ on that.
The point that I wish to pursue is the opportunity for people to mitigate that longer-term sanction. My noble friend Lady Hollis touched upon this briefly in Committee. If someone is sanctioned for three years, your leverage to encourage them closer towards the labour market is very limited. Three years is a long period of time; people change and perhaps understand the consequences of what they have done. It seemed a reasonable proposition that they should have an opportunity of mitigating and reducing that three-year period. That is the point that we wanted to pursue in this amendment. I beg to move.
Baroness Hollis of Heigham
My Lords, I strongly support my noble friend on his last point. The whole point of sanctions is not just to punish but to change behaviour. If someone does so and therefore, having learnt their lesson, is willing to comply, they should get rewarded for that, so to speak, otherwise there is no incentive for them to change their behaviour. I hope that the Minister will hear my noble friend’s wise words, otherwise the sanctions regime will not work or stick—and, I suspect, will end up being judicially reviewable.
Lord Freud
Can I leave it like this, without giving a hard commitment right now, on my feet? When we get to the regulations on this, I will look very hard at exactly what the protection is. I cannot offer any more now but I am sure we will debate this in the months to come. My main point here is that overall duties, rather than lots of specific ones, are the way to go.
Let me turn now to Amendment 36, which proposes an exemption from the sanction for losing employment due to misconduct where the claimant disputes that the dismissal is fair and has instituted proceedings—in other words, is taking a case to an employment tribunal. First, I assure noble Lords that the decision-making process around sanctions for misconduct is rigorous and rounded. We are proposing nothing in this Bill that changes the current process. Decision-makers will take all relevant matters into account when determining whether a sanction should apply, including evidence about whether claimants have left employment through misconduct or been unfairly dismissed. If a tribunal finds that there has been no misconduct by the claimant, this will be very compelling evidence. Where a decision-maker decides that there has been no misconduct, a sanction will not be applied.
However, we do not consider that there can be a blanket rule which says that, where a claimant has instituted proceedings for unfair dismissal, sanctions cannot be applied in that case. One of the reasons for this is that we want to avoid creating a perverse incentive for claimants to make claims to employment tribunals, which would put a burden straight on to employers for no fundamental reason. Decision-makers must have the flexibility to look at each case on its facts and to assess the strength of the evidence. I trust noble Lords will agree that this flexible, case-by-case approach is the right one.
The final amendment, which the noble Lord touched on right at the beginning, and which seemed like a game of tiddlywinks between us, is on targets. He knows what I am going to say—his side likes targets, we do not like targets—so I will say it, as it just keeps the night going. We will continue to collect this information to support our work. We need to know how many sanctions are being imposed, but collecting information is not the same as using it to target. It helps us to assess the consistency of approach in this area and to monitor and evaluate the impact of those sanctions, so that is what we are collecting.
On the basis of that rather rapid, somewhat biblical, summary I would ask noble Lords to withdraw or not move these amendments.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply. I thought we were going to have a quicker canter through these issues, and we may wish to return to at least one of them at Third Reading. In relation to the mitigation issue, I am obviously grateful for the Minister’s consideration of that and recognition that there is an issue to address. However, like my noble friend, I am a bit dismayed that the route to dealing with it is the six months—
Baroness Anelay of St Johns
My Lords, I know that we are in a cordial mood and we have reached a magical moment as far as noble Lords and perhaps the staff, too, are concerned. As Government Chief Whip, I ought gently to remind the noble Lord, who was a Minister himself with distinction, that Third Reading rules are very carefully framed by this House and I know he would not wish to breach them. There are matters which may very properly be brought back at Third Reading. I know that he will consider whether any wish he expresses now to bring back at Third Reading will later be translated into action only within the rules.
Lord McKenzie of Luton
Indeed, my Lords. We aspire to do nothing but stay within the rules. We would not dream of treading outside of them.
It is disappointing, for the reason my noble friend gave, that if the idea is to get somebody to re-engage, it must surely be possible to evaluate prior to them actually getting into work. After they have been in work for six months, it may be that there is frankly not a lot to sanction in any event. It depends on the level of earnings and the impact of universal credit on that. I would urge the Minister to reflect and think again on this point. We have had our exchange on targets and I understand that the data are still going to be collected. I trust they are not going to be posted on office notice boards to act as an indirect incentive. I accept the Minister’s assurance on that.
The noble Baroness, Lady Meacher, made a very important point which has not, I think, been fully addressed. In summary, she is seeking a requirement for the department to be proactive with people before they are sanctioned, not just relying on them to respond, question and challenge.
My noble friend Lady Turner’s amendment raises an interesting point. If the decision maker is going to make an up-front judgment as to whether there has been misconduct by an individual who has left work or whose employment has been terminated, this might pre-empt the role of the tribunal itself, whose job it is to make that assessment.
I am not sure how that sits four-square but, given the hour, I would urge the Minister to reconsider the first item in relation to mitigation. I am sure we will all be happy if we can avoid Third Reading and a possible challenge from the noble Lords’ Chief Whip. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, we were happy to try and continue a bit further to reach the target amendment. My noble friends are nodding in agreement. Perhaps it is not too late.
Baroness Anelay of St Johns
My Lords, I know that it is unusual for the noble Lord to put such a matter. I certainly am content to accept that offer, but I do not wish in any way to make the House feel that it is being overworked. I am looking carefully at the opposition Front Bench and I see the noble Lord, Lord McAvoy, giving his consent. Perhaps I may check with my noble friend the Minister. We are all aware of the other side of the coin of that offer, to which I have no objection whatever. It is a perfectly normal way for an Opposition to behave and I certainly recognise it as such. It is a generous offer met in generous spirit. Perhaps we may continue.
Baroness Donaghy
My Lords, the amendment was in the first grouping on the first day of Report, when we were all bright-eyed and bushy-tailed. I asked for this to be degrouped, and I therefore accept my punishment with good grace.
I asked for the amendment to be degrouped because the issue of self-employed people is extremely important and deserves a slot on its own. The purpose of the amendment is to recognise the particular needs of the self-employed. It will ensure that the power to prescribe a minimum level of income applies only to those self-employed claimants if they under-declare their earned income with a view to maximising their entitlement to universal credit.
While it is important to prevent abuse of the system, it is equally important not to discourage the genuine self-employed claimant with a potentially viable business in the early stages of development or in financial difficulty. There are some 4 million self-employed people in the UK and that number is likely to grow as employment becomes more difficult. They are an enormously varied group who face a greater degree of risk than traditional employees. Profits are affected by any number of events—the loss of a key customer, the sickness of the sole proprietor, a bad debt, the accumulation of slow payers, or even taking on a new employee.
The measurement of self-employed income for universal credit purposes should follow generally accepted accountancy principles and aim at a true and fair view of a business’s profits. The welfare system needs to support business through such periods, not discourage them by imposing unrealistic levels of deemed income such as the minimum income floor. My amendment recognises that real abuse should be directly targeted. If you impose a minimum income floor for each hour worked, that in itself will open the floodgates for abuse. That view is supported by the National Farmers’ Union, the Tenant Farmers’ Association and the Federation of Small Businesses, as well as Community Link, Citizens Advice and the Child Poverty Action Group.
There are those with a disability or medical condition which makes it difficult for them to take traditional employment. Indeed, it is often difficult for the disabled to find employment. Being self-employed allows the disabled to work at their own pace and according to a pattern which suits their circumstances.
What steps are the Government taking to minimise the compliance burden on the self-employed? The current system requires only one set of accounts to be prepared, which is accepted for both tax and tax credits. That allows the individual to get on with running their business. If a different measure of self-employed income were to apply for universal credit, the burden would be increased by having to assess profits for tax purposes according to one measure; and income for universal credit purposes according to another, quite different measure. If income is to be based on reported hours, the harder a self-employed individual works to get their business on its feet, the more they could lose from their universal credit entitlement.
It would be unfortunate if the measure were to put off genuine claimants from taking the risks inherent in self-employment, when its purpose was to deter a minority from underdeclaring their profits. One real example, which I gave in Committee, was of an arable farmer whose crop was completely destroyed. I was going to give another detailed example of livestock farmers who could not move them if they were under BTB restrictions, but in view of the hour, I will not.
There are already regulatory powers to counteract moves by claimants to underdeclare their income for tax credit. For benefit purposes, under the income deprivation rules, a person is deemed still to have income of which they have divested themselves to maximise their claim to benefit or tax credit. Where the Government perceive that abuse, surely the right course is to enforce existing powers rather than to invent new ones which will discourage genuine cases.
This brings me to a group who are in practically every sense of the word employees, but where individuals are treated as self-employed because the alternative is no job at all. They are often referred to as bogus self-employed. The Government's difficulty in drawing up criteria to deal with the genuine self-employed may be alleviated by proper enforcement of the tax laws by HMRC and employment laws by the BIS department, with all the resources that that implies. It also means a greatly increased level of interdepartmental co-operation in Whitehall.
As I said earlier, self-employment entails a greater risk than traditional employment. The self-employed must often choose between taking drawings for themselves or reinvesting in the business to enable it to grow. Welfare policy must reflect those different needs if it is to succeed in promoting work through self-employment. The success of working tax credit in encouraging work and, in particular, self-employment, rests on its recognition, in alignment with the tax system, of the economic reality of how a business is doing—particularly with regard to investment in business equipment and trading losses. Will the Minister indicate what guidelines will be issued and when? I ask him to accept my amendment, which aims at the real target, rather than those struggling to survive in these deeply difficult times. I beg to move.
Lord McKenzie of Luton
My Lords, my noble friend Lady Donaghy has made a very strong case, and I look forward to the Minister's response. What she said warmed the cockles of my heart. She referred to generally accepted accounting principles—the true and fair view—and it took me back to another life, but she raises a real issue: rather than having artificial rules for assessing what people are deemed to earn, is it not better to try to capture the actual profits and to target resources on those who seek to abuse the position? That seems a very straightforward matter.
My noble friend raises once more, as she did in Committee, the matter of bogus self-employment. We all know that that is a continuing issue. I have always believed that it rests particularly with HMRC, together with BIS and other departments of government, to make progress on that. It is primarily HMRC that could begin to make a real difference. She wrote reports for the Government, as did the Minister, on the construction sector, and health and safety in particular. There is bogus self-employment in that sector, so she is an expert on that matter. We support the thrust of her amendment.
Lord Freud
My Lords, when we discussed a similar amendment to this in Grand Committee, I explained that we intend to retain the existing practice in the benefit system whereby claimants can be treated as having income or capital in cases of deliberate deprivation. However, we believe that different issues arise in relation to self-employment. We think that it is right in principle to apply a minimum income floor to claimants who choose to be self-employed but whose earnings do not make them financially self-sufficient. I confirmed in Committee that the floor will not be based on the hours claimants work. We assume that claimants’ earnings are at a level that we would expect from claimants with similar circumstances in employed work.
Claimants will not be forced to take reduced benefit payments by accepting the minimum income floor. Self-employed claimants will have the choice in universal credit. Some will choose to continue solely with their existing activity with the expectation of increasing their earnings. They will accept the minimum income floor. Those who do not will need to satisfy conditionality requirements. The conditionality regime will aim to guide the claimant towards the most appropriate form of gainful work. For some claimants, this would combine their self-employed activity with part-time employed work. In other situations, the regime may very well encourage the self-employed to keep going in their self-employed efforts. We will need to build a quite sophisticated regime to manage this.
This approach differs from tax credits, which allow claimants to receive maximum support so long as they declare that they are working a minimum number of hours. However, in 2009-10, for example, around 60,000 of the households claiming tax credits that received some or all of their earnings from self-employment declared earnings of under £2,500 a year—less than £50 a week. While this is legitimate under current rules, we believe that some intervention to guide claimants towards increasing their income is justified in return for state support.
Baroness Hollis of Heigham
My Lords, I strongly support the amendment. I had the privilege many years ago of being responsible for vaccine damage payments within the department and always tried to make a distinction between payments that were in lieu of earnings, which tended to be of the incapacity benefit sort, and payments which were a lump sum. Sometimes there was a structured payment of capital over a period of time as compensation for suffering and injury as opposed to an earnings replacement. We always excluded that second element from coming within the debiting of benefit. That distinction has been well drawn by the noble Baroness, Lady Hollins.
I hope that the Minister can respect the ethics as well as the long history of making a distinction between getting an income replacement benefit—ESA, for example—and getting an element of compensation for damages, for suffering, for pain and so on. In my understanding that has always been protected and has not been debited against your rent. Otherwise it is not worth anything to you at all. That was never the intention of the law. I hope that the Minister can support the proposals of the noble Baroness, Lady Hollins.
Lord McKenzie of Luton
My Lords, the noble Baroness has brought an important point to our attention. I have only two questions for the Minister. Can he explain the extent to which the current rules are going to be translated and taken up in universal credit? The position at the moment is that the compensation recovery scheme does not apply to criminal injuries compensation. Can the Minister say whether that would continue under universal credit?
Lord Freud
My Lords, Amendments 32A and 34A seek to use primary legislation to exclude criminal injuries compensation from the capital test for universal credit. The existing benefit system does not have a specific disregard for criminal injuries compensation. However, such payments will usually fall under the rules governing personal injury payments where they relate to physical or psychological injuries suffered by the claimant. As indicated in the illustrative draft regulations on capital and income, shared with noble Lords in September, we intend to replicate these personal injury payment provisions in the universal credit regulations. I hope that that answers the question of the noble Lord, Lord McKenzie.
Personal injury payments are disregarded in the current benefit system for a period of 52 weeks from the date that they are paid. Even after that period, remaining capital will continue to be disregarded if it is placed in a trust, as the noble Baroness, Lady Hollins, indicated. This rule allows us to distinguish the personal injuries payment from other savings. If the payment is not separated by placing it into a trust, it becomes increasingly difficult to identify the source of the capital as time goes by. Ultimately, any capital test must consider the balance in a claimant’s account, and over time it becomes impossible to say whether it is from one source or another unless it is held in a different form. That is the reason for the way that this is structured.
The current arrangements are long-standing, and we are not aware of significant practical problems with their use. In any case, the details of capital disregards are a matter we will address in the universal credit regulations. If there are particular problems, we will have a further opportunity to consider them when drafting regulations, and I will bear in mind the points the noble Baroness has made.
In answer to the question asked by the noble Lord, Lord McKenzie, I agree that the compensation recovery scheme does not apply to criminal injuries compensation.
I hope I have made clear why the Government cannot support Amendments 32A and 34A. I hope the noble Baroness will withdraw her amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 7 months ago)
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The Lord Bishop of Leicester
My Lords, it is a privilege to speak in support of the noble Baroness’s amendment. Her evident mastery of the subject has impressed the whole House, as it certainly impressed everyone involved in Committee. I do not have a great deal to add to what she said except that, in reading the transcript of that Committee, it struck me that two things did not emerge clearly enough, particularly given what the Minister said in reply. They were: first, a clear recognition that living on a very low income requires highly sophisticated financial domestic management and highly sophisticated budgeting. That would almost certainly be beyond the rest of us to manage. It seem to me unreasonable to expect people who are living with the burden of that kind of pressure also to develop skills beyond what the average in the community would be in terms of managing their finances.
That relates to my second point. The proposal for a monthly payment seems to have been made to generate a culture change among those who are not perhaps in the habit of regular employment—in other words, to build the capacity of those in receipt of the benefit to behave like the rest of society. However, I put it to the House and to the Minister that perhaps what we need more of is the capacity of government to understand what it is like to live on a very low income. That is where the capacity building needs to happen here.
I very much hope that the Minister, who has consistently shown a readiness to listen and respond, will think again on these amendments. My own experience as a parish priest in east London, and more recently in the parishes of the outer estates of Leicester, has shown me repeatedly and at first hand the extreme pressures under which those on very low incomes live. This is a modest amendment that would signal to those in receipt of these payments that their problems are understood and that the Government are ready to be sympathetic.
Lord McKenzie of Luton
My Lords, perhaps I may clarify precisely what it is that we are debating. I believe that my noble friend Lady Lister moved Amendment 1, somewhat belatedly, on behalf of the noble Baroness, Lady Meacher, and also spoke to Amendment 2, which is in her name.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, as I understand it, Amendment 1 has not been moved, but Amendment 2 has. I think that the noble Baroness, Lady Meacher, will speak to Amendment 1, but I do not think that she is in a position to move it. That is my understanding.
Lord McKenzie of Luton
My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.
Baroness Hollis of Heigham
I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend’s request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.
Lord Newton of Braintree
My Lords, I do not know whether the Minister wants to give guidance on that point or to take it up later. I want to intervene briefly, and slightly apologetically, because, like the noble Lord, Lord Kirkwood, I was a bit late on the scene, but I am conscious that I played some part on this subject in Committee, so I think that it would be wrong to keep my head completely down in this debate.
I differ from my noble friend Lord Kirkwood in one respect; I think that the objective of what the Secretary of State describes as culture change in this field is not unworthy. Apart from that, I agree with pretty well everything that the noble Lord said. However, we need to remember something I learnt in various roles, including in my early years as a junior Social Security Minister when I became, it was be fair to say, friends, more or less, with the noble Baroness, Lady Lister. As I said in another context recently, culture change is not an event; it is a process. It takes time and not everyone will get through it. In an organisation, if you want a culture change and people cannot accommodate it, sooner or later they and the organisation have to part company, and they do something else.
This is the social security system, and people cannot part company with it. There is nowhere else for them to go, and we cannot abandon them. There is therefore real force in some of the concerns that are being expressed. Some people, such as those I tried to help in my former constituency, simply will not be able to manage. What are we going to do about them? As I say, we cannot abandon them. I might say that this will feed into something that is coming up later: whether rent should be paid directly to landlords. In some cases, where they cannot manage they will put the food for the baby first and the rent will not be paid. Then there will be another little problem, and someone will have to sort them out. Let us not pretend that this is easy, even if the objective is worth while.
I am not sure—and here I look with some trepidation at the noble Baroness, Lady Lister—that inserting into the Bill an insistence on ossifying fortnightly payments is right. The Bill already provides for some flexibility. Some benefits—including disability living allowance, I think I am right in saying—are paid monthly. This is not a simple picture. We do, however, need that flexibility where it is clear that failing to pay at more frequent intervals will multiply problems, difficulties and further costs in other parts of the system. The Bill allows for that, and I welcome that, but we need clear indication from the Minister this afternoon that this flexibility will be used.
Lord McKenzie of Luton
My Lords, first, I thank the government French Bench for facilitating the debate on these three amendments, after the hiccup we had at the start, and I thank the noble Lord, Lord Brooke, for his helpful advice. I say to the noble Lord, Lord German, in respect of his comments on Amendment 3, that I take the point. If he wants, perhaps, a more iterative process, I am happy to accept an amendment to our amendment. I am bound to say that we rather learnt about calling for reviews from the Liberal Democrats and Conservatives when we were in government—it has the merit of generally not having much of a price tag attached to it.
We start our deliberations on Report by considering the important aspect of how universal credit would work—that is, how payment would be affected, especially the frequency of the payment. However, let me first put in context our approach to the general issue. As we have clearly stated on the record, we support the concept and broad approach of universal credit, a benefit system that provides in-and-out-of-work support, as a clear system of the income disregards and common tapers has significant potential, not least the prospect of clearer incentives for work.
As has been apparent from our Committee sessions, and the matters that we will discuss on Report, the manner in which it is proposed to be introduced is, we believe, flawed. Some of the shortcomings are resource issues—work incentives for second earners—but some are potential failings in the base architecture: the exclusion of council tax benefit; the treatment of self-employed people; and, also, the payment arrangements. I agree with the noble Lord, Lord Kirkwood, that this is not a peripheral operation or issue—this is central to how the system should work.
We will come on to discuss issues about which member of the couple should receive payment and how landlords are to be treated—as the noble Lord, Lord Newton, has indicated. The amendments we are considering now address the vital matter of frequency of payment. Amendment 3, tabled in my name and that of my noble friend Lady Hayter, calls for,
“a review into the impact of payment arrangements on claimants, to conclude one year after the coming into force of this Act”.
I will acknowledge that it might be more appropriately triggered by the universal credit provisions coming into force. We see this review focusing on the impact on claimants by looking at it from the claimant’s perspective. In Grand Committee on 10 October this year, at col. GC 440, the Minister referred to the research being undertaken, particularly around the frequency of payment. An obligation to undertake an early review of how things are working in practice and a report to Parliament would be entirely consistent with the Government’s evidence-based approach to this issue.
We know that at present JSA is paid fortnightly in arrears, that ESA is normally paid fortnightly in arrears, income support is normally paid fortnightly in arrears, and that tax credits are paid on request either weekly or every four weeks, although I think one would acknowledge that HMRC has an overriding discretion in that respect. Housing benefit is normally payable in arrears at intervals of a week, two weeks, four weeks or one month, but as I understand it, if the rent allowance is greater than £2 a week, the claimant can require it to be paid fortnightly. So in having for universal credit the norm as monthly payments, the Government are clearly not seeking to get the best fit with the current components that are to be displaced. Indeed, I think that the Minister and this debate have acknowledged that. He said on the same occasion in Grand Committee:
“With this system, we are one of the drivers of the way people behave and of social change”.—[Official Report, 10/10/11; col. GC 441.]
I support the comments that have been made by a number of contributors, including by my noble friend Lady Sherlock, about culture change, but culture change to what effect in this respect? We understand and accept the thrust of a system that encourages people into work and helps them to understand the benefits of work by seeing its financial rewards, but what is so important about trying to encourage people to get used to a monthly payment and budgetary arrangement rather than one on a different basis, even if they were in a position to do that? The noble Lord, Lord Freud, also referred in Grand Committee to his search for flexibility. If this is an acknowledgment that monthly does not have to be the rigid approach to payment, we may be closer on this issue than perhaps we thought.
We heard from the noble Baroness, Lady Meacher, my noble friend Lady Lister and other noble Lords about compelling reasons why payments on a monthly basis will create particular difficulties for some families, and not just a small minority of supposedly inadequate budgeters. As for mimicking work, which we have heard as well, while 75 per cent of those in employment are paid monthly, 25 per cent are not and half of those earning £10,000 a year or less are paid less frequently than monthly. We heard in Committee and again today about the growth in the business of payday loans. Recent surveys show that nearly half of the population struggles to make earnings stretch until payday, with 7 per cent considering taking out a high interest short-term loan within the next six months. The issue of how to stop the exploitation of poor people is a debate that I hope we will have on another day.
Amendment 1, eventually moved by the noble Baroness, Lady Meacher, would require regulations to be drawn up giving claimants the opportunity to require payment of their universal credit entitlement more frequently than would otherwise flow from Clause 7. We support this amendment and so, we hope, will the Minister, because it seems to fit foursquare with his acceptance of the need for flexibility. Obviously the regulations would have to set out practical parameters to the choice available to claimants, but this should include a fortnightly option. The Minister will know also that it would not preclude arrangements where a claimant could draw down against a monthly entitlement. It would be consistent with that. Neither would it preclude the Minister from retaining the distinction between the assessment period and frequency of payment, a point made by my noble friend Lady Lister.
It is understood that the Minister may argue that the issue of frequency of payment can be addressed by the development of new banking products and that he would not wish the Bill to preclude that. That is fair enough, but we consider that the thrust of the amendment moved by the noble Baroness, Lady Meacher, would not shut out those types of options provided that there are arrangements with parameters dealt with in regulation for claimants to choose. But we do not know today that these banking products can be delivered in time for the introduction of universal credit, whether they can be comprehensively available and without high cost. Without that certainty, it is right that something is included in the Bill along the lines of Amendment 1.
Perhaps the Minister will take the opportunity to update us on the Government’s thinking in this area, as other noble Lords have requested. In particular, do they support the proposition that there should be flexibility within sensible and practicable parameters of receipt patterns? Should there be a right for claimants to choose within these parameters? Can he confirm that the arrangements being considered are not just about drawing down on a monthly payment already made in arrears?
Amendment 2 is more clear-cut and, I think, more to the liking of the noble Lord, Lord Kirkwood. It sets down a requirement for amounts to be paid fortnightly. It has the merit of being clear and closest to the current patterns of receipt, making it slightly more manageable to exist from payday to payday. We support the amendment as an alternative proposition should Amendment 1 be rejected or fail today.
Lord McKenzie of Luton
We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?
Lord Freud
My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account—some would argue that that is what it is as regards budgeting advances, for instance—or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 7 months ago)
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Baroness Sherlock
My Lords, I will detain the House only very briefly, but I feel I should say a word of support, having put my name to this amendment, put down by the noble Baroness, Lady Grey-Thompson.
I wish to say just three things. First, we have heard that the effect of these cuts is really quite severe. The noble Lord, Lord Wigley, is correct: parents could find themselves losing up to £1,400 a year, even if they have a family with just one disabled child. That is a very significant loss.
Secondly, the case for doing this is weak. The only case that I have heard over money is about alignment with adults. We have heard a very compelling argument from the noble Baroness, Lady Grey-Thompson, as to how that simply is not the case.
Finally, there is the question of money. I understand that the Government have said that the cuts are not intended to save money but to redistribute it, so that the money saved by these cuts will be used to raise the level of support for adults in the support group. This amendment lays down a marker; by saying that the support given to disabled children cannot be reduced below the current level, it makes the Government think again about that particular brand of rough justice. There is no particular reason why, in making these redistributions, disabled children should be asked to pay for money that is being given to other groups of disabled people. This amendment is not seeking an investment of billions of pounds; it is simply laying down a marker and saying that, when decisions are being taken, this group cannot be expected to bear that cost.
Lord McKenzie of Luton
My Lords, we support Amendment 4, so comprehensively moved by the noble Baroness, Lady Grey-Thompson, and spoken to by a number of noble Lords who are very knowledgeable about these issues. It deals with just part of the inequity introduced by the restructuring of support for disabled people: that affecting families with children. We will debate further issues affecting disabled adults and the removal of the severe disability premium in due course.
Like other speakers, I welcome proposals to increase, over time, the levels of benefit for those in the support group, but we do not think that this should be paid for by drastic cuts in support provided for families with disabled children. Leaving aside transitional protection, my figure is that some 200,000 could lose £27 per week. Whether it is 100,000 or 200,000, it is many children indeed.
We have heard about transitional protection, particularly from the noble Lord, Lord Boswell, but transitional protection is of no use to new claimants. It might stop you losing what you have, but it does not help if you are claiming for the first time. As it is a cash protection it will in any case reduce in real terms over time. Transitional protection will also cease on change of circumstances—the noble Baroness, Lady Thomas, pursued this point—and we have yet to receive clarity on quite what this means.
We are told that the restructuring of these benefits is to simplify the system and that aligning the rates of support for adults and children will ease the transition for disabled children into adulthood, but how does the Minister respond to the point that there is not true alignment? There is also the issue that the gateways are different: for adults it is the WCA process; for children, as now, it is via the DLA. Children who are severely visually impaired will receive the higher addition—a move that we welcome—but it is by no means certain that adults who are severely visually impaired will be allocated to the support group under the WCA. Furthermore, as the noble Baroness, Lady Grey-Thompson, pointed out, disability disregards in the universal credit proposals add to the support for adults.
In Committee, we had some knowledgeable contributions from noble Lords about the costs that families with disabled children face. We know that families with disabled children are disproportionately likely to be living in poverty. In Committee, we heard the very personal experiences of the noble Lord, Lord Wigley. We also heard detailed analysis. We have heard further details today from the noble Baronesses, Lady Grey-Thompson and Lady Campbell, and my noble friend Lady Wilkins. I shall list some of the potential extra costs faced by families: heating, which is a big issue; sensory equipment; special toys; special diet; transport; extra and special clothing; and help with siblings, who will not have their parents’ time and attention. To this must be added the lost opportunity for parents—or at least for one of them—to work.
For those in work, costs can be higher because of the increased costs associated with care and transport for disabled children. Those costs do not only or most heavily fall on families with the most disabled children—that point was tellingly made by the noble Baroness, Lady Campbell. As framed, the amendment need not have overall cost implications for the Government, but it would of course cause a rethink of the restructuring, a restructuring that currently redistributes resources away from children and towards adults.
Reversing a benefit loss of £27 a week for some of the neediest families in our country must be a priority. Failure to do so will inevitably increase poverty at a time when the Government are reneging on their commitment to upgrade the child element of the child tax credit by more than inflation—a measure that they proclaimed in their 2010 Budget would ensure that effects on child poverty would be statistically insignificant but that is a cloak that they can no longer hide behind.
If the noble Baroness is minded to test the opinion of the House, we will support her on the amendment.
Lord McKenzie of Luton
Can the noble Lord say by when he expects to have moved to that figure of £77 for adults?
Lord Freud
As we move people on to the universal credit and take people off the other systems we will be gradually putting people on to that amount. But I am better off writing to the noble Lord on that particular matter of timing because it is quite a complicated equation. Basically, we are looking to maintain an overall fixed level of spend in this area, and as we pull down one element we can move up the other elements—that is essentially what is happening, so there is a periodicity there.
We are trying to get money to the most severely disabled in our community. There is a real decision here: maintaining the existing rates for children without doing that—without finding this money—would cost an extra £200 million a year. I simply do not have that money. If this amendment is passed, it will not be possible to increase the addition for the most severely disabled people to £77. So there is a decision to be made here: do you agree with the way we want to rebalance the system—
Lord McKenzie of Luton
I am sorry to interrupt the noble Lord again, but is it not right that that equation only follows if you look at those two together? You do not have to operate within that envelope; there are other envelopes, as my noble friend Lady Sherlock mentioned in her contribution.
Lord German
My Lords, I do not intend to turn my back on what I said in Committee; in fact, I intend to repeat some of it, so I hope that noble Lords will bear with me. If you believe that council tax benefit is a universal benefit and part of the social security system, clearly you need to ensure that it is delivered everywhere within our country and on a uniform basis so that people will know the rules and the benefit they are going to get.
The noble Baroness, Lady Hollis, has talked about England, but I want to talk, as noble Lords know I frequently do, about the other parts of the United Kingdom that will also be affected by this. I start with a big question to the Minister. He wrote to me about this issue when I asked him how it would work in Wales and Scotland. I was told that the money would be given with a 10 per cent saving—that is a crucial sentence because we can reflect on that and on how we can manage the budget within a council tax benefit structure—and that the saving would be given to the devolved Administrations to enable them to bring forward their own arrangements for help with council tax.
The next sentence was about the powers that they would need to bring forward their own arrangements for help with council tax, and it says that these arrangements must fall within existing competence. This is a crucial question; if there is one thing that I know about, it is that the demand for competence is very important. Clearly it is not primary competence because it is not primary legislation that is being transferred, but executive devolution powers must be being given to both the Scottish Parliament and the Welsh Assembly to be able to achieve that. I would like to know which executive powers have been given, because both Scotland and Wales could refuse to have those powers, which would be a perfectly reasonable thing for them to do. If they think that this is not something that they can manage or want to do, they can refuse to take those competences.
Even if Scotland were to accept those powers, and I have made this point in Committee, I wonder what game we would be playing into in Scotland alone. Remember that the basis of the Scotland Bill that is before your Lordships’ House is that social security should not be devolved; it is part of the glue that holds the United Kingdom together. Say that you do not give the social security competence but you obviously give some competence to the Scottish Government. If you give them that money, my guess, and it is purely a guess, is that they will take the money, convert it by putting a bit of Alex Salmond paste on top of it and make it into a Scottish system. They will then use that as an argument to say, “If you think you want a social security system in Scotland but that we can’t cope with it, here we are, doing a better job than they are in England”. There is a danger to the unity of the United Kingdom in this matter, which is why we ought to consider very seriously what the effects of this change will be.
I am told that Clause 11 gives powers to take the competences back. There is no doubt that there is considerable anguish about this matter, but if you believe that it is a universal system, surely it makes sense to use the funding as part of the universal benefit but also to take the hit that has to come with the budget reduction. After all, if the DCLG is going to be able to allocate the money with the budget reduction, that budget reduction could just as easily be done by the DWP. Obviously it would not be a nice, friendly or comfortable process, but as with all levers you have not damaged the social security structure of this country at the same time.
My question to the Minister is this: if you are to retrieve these competences from Wales and Scotland, which competences are you retrieving, and where does Clause 11 give the power to the other place to bring back the powers into the social security structure? The most important feature that we have to decide here in your Lordships’ House is whether it is better placed, with the appropriate cut, inside the universal credit or inside a social security system for our country as a whole, or whether we wish absolutely and once and for all to abolish council tax credit and have what might be called a local support scheme in whatever the local authority can provide with the money that is provided for it if you cannot even call it a benefit.
I worry greatly about this prospect, and I ask my noble friend the Minister to reassure me that we can bring this back and to tell me how we can bring it back and how we get it back from Scotland and Wales.
Lord McKenzie of Luton
My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.
My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.
Lord McKenzie of Luton
Very good. Of course, this issue is having to be considered, as has been said, against the backdrop of the overall funding for council tax benefit being reduced by 10 per cent but with commitments to protect awards of council tax support for pensioners and possibly for other vulnerable groups. This means, as has been said, that support for working age claimants is to be squeezed dramatically.
The consultation on this proposition, the Localism Bill, closed two months ago, and perhaps we can know when the Government’s response to this will be forthcoming. Quite apart from the administrative consequences of the proposed localism of the benefit, there is, as my noble friend pointed out, a fundamental difference compared with what happens currently. Under present arrangements, council tax benefit is demand led. Whatever the calculation shows is due is made available to the claimant, by offset against the council tax bill, with full reimbursement from the DWP. It is, as my noble friend explained, the AME—annually managed expenditure—bit of government spending.
This will in effect change under a localised system. If claims under a localised system exceed the budgetary amount locally, authorities will have much more limited resources from which to meet the increased demand. They might dip into reserves, if they have any, or they might make the system less generous in a subsequent period. They might switch expenditure from other local authority spend, but given the savage cuts to local authority budgets that have been made recently, there does not seem to be much room for manoeuvre to do that.
It is suggested that local authorities might approach a localised system on some consortium basis, and therefore that other local authorities will help out. I suggest that the prospects for this are not strong. One consequence of these constraints will be that local authorities will inevitably budget on a prudent basis, building in contingencies that will further diminish the resources available to claimants of a localised system. That indeed is what the risk assessment will dictate.
The main reason advanced by the Minister, Grant Shapps MP, in evidence to the CLG Committee for the localisation of council tax benefit was that for local authorities,
“the big advantage is that they will have a stake for the first time in what people who live in those homes are doing; in other words, an incentive to help get the person back into work”.
This is a rather strange view: that it takes possible savings from a benefit pot for local authorities to have an incentive to help people back to work. It is a view that ignores, or is ignorant of, the proactive and imaginative work that many local authorities do to help local residents into work. However, in any event, the driver for having clear incentives to support work is supposed to be the universal credit itself. If there is any incentive in the system, there is a risk that local take-up campaigns will diminish, as any wider take-up will come from the resources of the council.
We have yet to know how much central direction there will be for a localised system. If the Government run true to form, there will be quite a lot. This was certainly the outcome of the Localism Bill, which espoused localism and gave additional powers to local authorities but came with lots of strings attached, as the noble Lord, Lord Newton, will recall, despite some of those strings being removed in your Lordships’ House. There will clearly have to be central direction if the position of pensioners is to be protected, and some form of direction to deal with tapers and work incentives.
We understand, to follow the line of questioning by the noble Lord, Lord German, that the Minister will say that he cannot support a change to the universal credit to include a council tax benefit now. However, there is nothing to stop it being included in the future, as the Bill now stands. If this is the Government’s position, will the Minister confirm that he considers that regulations under Clause 11 will be the route to effect this?
The noble Lord, Lord German, also raised some fascinating questions about how this works for Wales and Scotland. Can the Minister say whether the proposition that he will advance tonight will be, “Don’t worry about it now—you can get it all back in due course.”? What changes would have to be made to the systems that are currently being built to put this into effect? Including council tax support as part of universal credit is of course not without its challenges, particularly the payment issue, so perhaps we can hear whether there has been any thinking around that matter.
However, we support my noble friend’s strong contention that the sensible, practical and principled way to deal with council tax benefit is to include it as part of universal credit. We believe that the Minister, a very logical person, must have come to the same conclusion. If a strong vote today will help his cause, we are more than prepared to play our part.
Lord Freud
Beware Greeks. My Lords, noble Lords will be aware from previous debates that we are proposing to abolish council tax benefit before the introduction of universal credit and replace it with local schemes of support. Localising support for council tax is part of a wider policy of decentralisation, which will give councils increased financial autonomy and a greater stake in the economic future of their local area. Localisation also reintroduces the link between council tax levels and the costs of providing support, thus reinforcing local financial accountability.
This reform will give local authorities a significant degree of control over how a 10 per cent reduction in expenditure on the current council tax benefit bill is achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. This saving is an important contribution to the Government’s vital programme of deficit reduction. We need to ensure that localisation supports the improved work incentives that universal credit will bring. However, the Government believe that the key principles required to incentivise work can be delivered through local schemes with the help of technical guidance provided by central government. Local authorities will have a greater stake in getting people back into work than ever before.
Lord McKenzie of Luton
My Lords, perhaps the noble Lord would reiterate a point. I thought I heard him say that a Bill for the localisation of council tax benefits or whatever it is called will be introduced in this Session. Does he have any more precise detail?
Lord Freud
I am afraid that I do not have any more precise detail but, although I do not think that in the consideration of the Welfare Reform Bill I can say soon, I can probably say that it will be between January and May or June, or something like that. I have no more precise information.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 7 months ago)
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Lord McKenzie of Luton
My Lords, I propose to speak briefly in support of Amendments 7 and 11 as my noble friend is a renowned expert on pensions and it is never possible to add much, if anything, of substance to what she has said. My noble friend has made an important point about the breaking of the consensus on encouraging saving. On the one hand she instanced the huge sums that will be garnered by the changes to the state pension age and, at the other end of the spectrum, the deferral of automatic enrolment and this measure, which changes the basis on which pension contributions are treated in universal credit compared with working tax credits.
I wish to probe again a point in respect of the 50 per cent only deduction, which I do not think that the Minister dealt with significantly in Committee. Universal credit will obviously be based on real-time information—the information which will flow from employer returns to HMRC, and the data flowing back. That data will be based on 100 per cent deductions of occupational pension schemes, so if universal credit is going to rely on a 50 per cent deduction only, there is going to have to be some other process or loop which is not naturally there in the data flows at the moment. I think the Minister instanced that this was something that was being commissioned. I can imagine the work involved in seeing how that might be derived. I hope that he will take the opportunity tonight to be a little clearer on that. Quite apart from the principle of the measure which my noble friend has raised, I raise the actual practicalities of implementing it. When we looked at recasting the child maintenance system, which we shall come on to on a subsequent Report day, what was determined and debated in your Lordships' Chamber was that it would be based on gross income data provided by HMRC but net of 100 per cent of employee occupational pension contributions, as that was the natural flow of data. I would be grateful if the Minister could deal with the practicalities of that point.
Amendment 11 seeks to ensure that measures can be put in place to address one of the significant couple penalties introduced by the Welfare Reform Bill—a penalty that means that a couple, where one person is over and one under pension age, could lose as much as £100 a week compared to the current system. This sits alongside the couple penalty introduced by the limiting of contributory employment and support allowance and that introduced by the benefit cap in a series of changes that, perhaps unintentionally, mean that couples may see themselves as better off financially, as my noble friend has said, living apart.
The policy change being introduced means that whereas at present couples where one member has reached pension age are eligible for pension credit, following the coming into effect of the Bill, if one member of the couple is below pension age, they will be forced to claim universal credit until both of them qualify for a pension. We have been given no specific figures on the impact of this policy although we know that there are currently 93,000 couples where one person is over and one under pension age. Not all of these will be affected as those who are already receiving pension credit will be able to remain on that benefit. However, as the revised impact assessment points out, those who are affected are likely to be hit hard, stating that the heaviest notional losers for couples without children,
“are in cases where one member is of working-age and one is currently eligible for Pension Credit”.
Perhaps the Minister can tell us how many people he estimates that this change will affect and how much they stand to lose. Bringing pensioners within the orbit of universal credit will also mean, as my noble friend has said, subjecting them to many of the new and harsher rules that accompany the new benefit. The Minister has not yet told us how he expects pensioners to be affected by the new capital limits that will be introduced for universal credit, and also for pension credit when housing benefit is abolished. As Age UK points out, nearly 150,000 people claiming pension credit have more than £16,000 in savings. In the future those with a low income but over £16,000 of savings who have a younger partner will not only be excluded from pension credit, they will not be entitled to universal credit due to their savings.
The Government have argued that the purpose of the policy change is to ensure that working-age claimants are subject to working-age conditionality and asked to look for work. However, many of the working-age claimants who fall into this group and have an older partner may in fact be subject to no work-related requirements—a matter we discussed in Committee—whether because they are caring for someone or have a disability themselves. These couples too will see a £100 a week hit on their income as well as potentially losing other support linked to pension credits, such as the winter fuel payments.
The Government have said that this is not a savings measure so there should be some flexibility within the system to ensure that couples in this situation have their income protected. This policy has not been consulted on and we have not received sufficient information fully to assess who it will affect and how. Therefore, the amendment proposed by my noble friend would give the Government the flexibility to look again at the options in this area and to ensure that couples in this situation do not lose out.
Lord Freud
My Lords, Amendment 7 would take a power to disregard the full amount of any pension contributions from the assessment of both single and joint claimants’ income. As I made clear at Committee, this is a matter for regulations and we do not need any additional regulation-making powers. Our stated policy since the Universal Credit White Paper has been a 50 per cent disregard of pension contributions, in line with the current approach in the benefit system, as opposed to the tax credit system. We are taking the middle path between supporting pension saving for people on low incomes and fairness to the taxpayer. It is important to remember that many taxpayers who do not claim benefits do not have occupational or private pensions. A full disregard of all pension contributions would cost an additional £200 million a year.
Noble Lords have characterised our approach as worsening the position when compared with tax credits, where there is a full disregard of pension contributions. However, this oversimplifies the comparison between universal credit, based on net income after tax, and tax credits, based on gross taxable income. Frankly, we are not comparing like with like. We also need to take account of the new employer contribution duties to be introduced from next year. We previously said that when taking account of employer contributions, the cost to an individual for each pound of pension would be 34 pence. Since Committee, we have looked again at these figures and I should like to take this opportunity to correct that one, which we have now calculated out at 38 pence. I apologise for that mistake, which I hope is not too substantial directionally.
If one considers putting £1 today into a pension, the cost in the tax credit system is 39 pence. One can see that that represents 61 pence pure universal credit. However, if one combines that universal credit calculation with the employer pension duties, the figure reduces to the 38 pence that I talked of. The middle way, when considered in combination with what else is happening, is actually not quite as mean or extreme as the noble Baroness, whose expertise I acknowledge and have suffered from in the past, might imply. If you are outside the system entirely, it costs you 80 pence for every £1 of savings. That provides a balance on why we have come to that figure.
Picking up the question from the noble Lord, Lord McKenzie, on the RTI feed, I can inform him that payroll data do identify pension contributions from salary. They have to do that because the pension contributions will be subject to national insurance. That is the feed element we will use to make this calculation, and we are currently working out the detail. Taking all these factors into account, we believe that a 50 per cent disregard is an appropriate balance between encouraging saving and a fair deal for the taxpayer.
Amendment 11 would amend the regulation-making power in Clause 9 relating to the standard allowance. This would allow us to provide an exception for couples with one member above state pension age by excluding the standard allowance from the calculation of their universal credit award. As I explained in Grand Committee, the Government have taken the view that couples with one member above and one under the qualifying age for state pension credit should claim universal credit. Following that debate, I sent the noble Baroness, Lady Hollis, and other noble Lords some worked examples showing the entitlement of different couples on the two benefits. They showed that there will be a range of outcomes depending on individual circumstances. We calculated that more than 90,000 couples with one partner under pension credit age are on pension credit—that was in answer to the noble Lord, Lord McKenzie. However, transitional protection will apply, and all those couples currently on pension credit will stay on it while circumstances remain the same.
We are not convinced that it is necessary to have special rules or different amounts of standard allowance where one partner is above pension age. Universal credit also includes additional amounts for those people who have limited capability for work or regular and substantial caring responsibilities for a severely disabled person. It remains the Government’s view that people of working age who are able to work should prepare for or look for work in return for receiving support from the state. The earnings rules and disregards in universal credit provide a clear incentive to do so. I therefore urge the noble Baroness, Lady Drake, to withdraw her amendment.
“(5) Regulations are to specify the amount of tariff income from capital that is to be included as unearned income, including specifying different amounts for in work and out of work claimants.”
Lord McKenzie of Luton
This amendment raises the question of the amount of capital that will be taken into account when calculating universal credit. The Government's proposals at present are that those with savings of above £16,000 will not be able to claim universal credit and that capital above £6,000 will attract a tariff income of £1 for every £250 above the £6,000 floor.
Our amendment seeks to enable differential treatment of capital for those in and out of work, reflecting the current arrangements, under which the universal credit rules replicate current benefit arrangements. Tax credits claimed by those who are in work have no limits on capital nor assume any tariff income, but obviously take account of the actual or taxable investment income. The Minister has talked about universal credit encouraging a culture change in how people manage their money. We fear that the current proposals will discourage low-income people in work from accumulating savings and building assets.
This is not just our view about the capital rules, but that of one of the main architects of universal credit, the Centre for Social Justice. As Deven Ghelani, a senior researcher at the centre said when giving evidence to the House of Commons Bill Committee:
“It is fundamentally a disincentive to save. I think that the savings limit for people who are not working and are on benefits has been £16,000 for I am not sure how many years, but certainly rather a lot”.
It is nice to know that the centre has such precision.
“The limit has not been uprated for at least a decade I would say, and possibly a lot longer. By extending that to people who are working, people who get close to that threshold might suddenly realise that it does not pay to save and that there are perhaps other things that they should be doing with the money, whereas saving is in itself a protection against dependency”.—[Official Report, Commons, Welfare Reform Bill Committee; 22/3/11, col. 19.]
The proposals will act as a barrier for those on modest incomes who are trying to save, whether for a house, for their children's tuition fees for university or against the possibility that they may lose their job and need a cushion of income to fall back on. The Government propose to encourage more tenants to buy their council accommodation. Under these proposals, tenants who wish to save to take up the offer will first be penalised for those savings and then, if they are able to build up their savings sufficiently, barred from accessing universal credit at all. That does not seem to be in line with the Government’s message that, under universal credit, work will always pay.
The department’s briefing assessment of the changes suggests that there will be between 100,000 and 200,000 people who will lose eligibility to universal credit altogether because of the new capital cut-off rules, and that between 200,000 and 300,000 people will have reduced eligibility due to the rules on tariff income. The briefing note states:
“People with substantial savings or other capital clearly have sufficient income to meet their needs”.
It is right that they should draw on these resources before looking to the taxpayer for support, particularly as many taxpayers themselves have savings well below these limits, but the vast majority of low-income workers who are claiming universal credit will also be taxpayers, and their taxes will be used to support other incentives to save in the tax system, including, as we discussed in Committee, the considerable tax relief on pension contributions.
The current proposals punish those on low incomes who are working and trying to build assets for the future. The amendment proposes a modest change to enable differential treatment of capital for those in and out of work. When we debated the issues in Committee, the Minister told us that these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. By accepting the amendments, he could signal that he recognises the importance of enabling those who move into paid work to begin to build up their assets and avoid sending the wrong message that those on low incomes should not expect to be able to save. I beg to move.
Lord Freud
My Lords, Amendment 8 would require different tariff incomes to be set against the capital of people in and out of work. I understand the noble Lord’s desire to continue to treat the capital of people in work differently in order to encourage low-income workers to save. I remind the noble Lord and the House that I was able to provide somewhat more precision than the IFS on the last time the figure of £6,000 or £16,000 was raised. To be absolutely honest, I forget the date that I provided in Committee, but it is now on the record in Hansard. The date was 2006. I am pleased to keep just marginally ahead of the IFS every now and then.
This amendment is at odds with our shared ambition for a simpler system. It is also, as it stands, unaffordable. We estimate that it would cost around an additional £70 million a year to remove tariff income for everyone in work with capital up to £16,000. We estimate that it would cost an additional £30 million a year to set tariff income at £1 for every £500, instead of the current £1 for every £250, for everyone in work with capital up to £16,000. That gives you a context of cost. This is a cost matter, as I made clear in Committee. There are quite a lot of nice-to-dos in the universal credit; I would like to do many of them myself, I assure you, but we have got to focus on where we can put the scarce resource and where it is absolutely needed. The debate around that is based on the fact that we estimate that around 80 per cent of those claimants who will have a higher benefit entitlement under universal credit will be in the bottom two income quintiles. Now is not the time to do anything other than to retain the existing threshold of £6,000.
The shocking reality is that if you go to the median household with a working-age adult in it the figure of savings in that household is £300. That is across all working ages in the FRS. That is a shocking figure, but it just shows you where the debate is against the reality of what is happening in this community group. I am using median not average here, because I think it is a better figure.
That is the issue. We have limited resources; we need to focus them on those least able to support themselves. I hope that explains why we are where we are with these particular figures for tariff income and capital and why we cannot support this amendment, and I ask the noble Lord to withdraw it.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for his response. I should just say that it was not the IFS which gave that evidence; it was the Centre for Social Justice, which I thought was an organisation quite close to the noble Lord’s heart.
Lord Freud
I should have known I would never be ahead of the IFS; I apologise to it.
Lord McKenzie of Luton
I understand the Minister’s response. It really reiterated what he said in Committee: this is an issue of affordability, not necessarily one of principle. On that basis I do not see why he could not accept the amendment—it would signal the Government’s intent on this—but given the hour I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 7 months ago)
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Baroness Turner of Camden
My Lords, I do not want to add much to what has been so well said already in support of the amendment. On the other hand, we have been talking about other Bills while discussing this one, and I note that some of the information that we have from, say, Citizens Advice, indicates that it gets a lot of applications from individuals who have no idea of their entitlement and need assistance with that. If people do not know what they are entitled to, it is easy for them to make mistakes in claiming. That may very well have happened in the cases that have been cited this afternoon.
Moreover, it does not say in the Bill exactly what the prescribed amount of penalty will be, so apparently in addition to giving back the overpayment a penalty would be involved. That would mean that somebody who is already very vulnerable and who has no money could be in difficulty on paying both the penalty and the overpayment. I suggest that the Minister looks at this part of the Bill as it could do with a bit of rewriting in line with what a number of Peers have had to say this afternoon.
Lord McKenzie of Luton
My Lords, my noble friend Lady Drake has opened an important probe on these provisions, and other noble Lords have emphasised some of the practical difficulties that they create. I hope that the Government will reflect on the intent, the wording, the timing and some of the practicalities that these provisions throw up.
I want to add to the questions in a modest way. The “appropriate authority” that can levy the penalties includes those that will administer council tax benefits. We know that in future several hundred authorities will be levying council tax benefits unless we can get some amendments to the Bill. There is a real issue of consistency and the systems themselves possibly being markedly different and administered in a different way. Precisely how is it proposed that consistency in council tax benefit will be achieved? What sort of value to engagement will there be with all those authorities? Indeed, is there capacity within the DWP to undertake that effectively?
I have two more questions. The briefing suggested that the penalty levy would be £50. What was that figure benchmarked against? Can I also have clarification of “due process” and whether rights of appeal are attached to this? It would be helpful to hear from the Minister. Subject to that, and to the many pertinent questions asked by my noble friends, I shall not raise further points. We have not heard the Minister’s amendments yet, so subject to that, those are my questions.
Lord Freud
“Negligence” and “reasonable steps” are legally bound words. There is a huge case law about what they imply. One needs not to be negligent when filling in an application and to take reasonable steps to correct mistakes. If you do not know that you have made a mistake, you cannot expect to be able to correct it. That would not be a reasonable step. However, there is a legal framework around these words. I go back to the point I was trying to make about the incentives on the system as opposed to on the individual. On the penalty rates that I gave noble Lords, we expect that the amount collected in a year, for example 2014-15, will be roughly £9 million and the cost of delivering that system of civil penalties the same figure, £9 million, so there is no incentive in the structure to have unnecessary civil penalties. That is not the point. The point is to—
Lord McKenzie of Luton
Will the noble Lord help me? Do the penalties accrue to the department or to the consolidated fund?
Lord Freud
That is as I would expect from the noble Lord. It is such a wicked question that I am baffled as to the answer. I think everyone is baffled. It is a magnificent question. It has bowled me out on my middle stump. I will have to find out the answer. I will not even hypothesise about where the different funds go. The right analogy for this is when you go to the dentist, having made an appointment, and you fail to attend. The dentist will charge you an amount in many cases in order to discourage that behaviour. When you are giving out a free good, it is very easy for the recipient to abuse it. You counterbalance that by making that somewhat expensive. When you go beyond a free good and you are giving out a positive good, that is even more the case.
Lord Freud
My Lords, I buy the point about the delicacy of the run-in. I have a tool with which to monitor it very carefully. However, we must have a system that tells people that they must take care with their application. This is an application on which tens or hundreds of thousands of pounds are riding. It is no good people just putting in slapdash figures and not caring; this is really important information and it must be put down carefully. That is what we are trying to ensure with this relatively modest civil penalty.
Lord McKenzie of Luton
My Lords, I am very happy for the Minister to write to us on this rather than to spend more time today, because we need to make progress. This is about the practicalities. He has already indicated that the system could cost £9 million a year to operate. If a local authority seeks to collect both an overpayment and a penalty, the overpayment presumably reverts to the local authority. We do not know whether the penalty reverts to the Consolidated Fund or the DWP, but I presume that it is not to the local authority. The Minister will see that, in those circumstances, which may be quite common, one needs rules about how what is collected in respect of the two components is allocated between them. That presumably creates some administrative costs as well.
Baroness Sherlock
My Lords, I would like to add just one point for the Minister to think about in his response. The noble Lord, Lord Ramsbotham, made a very powerful case. If the Minister does not like this way of doing things, could he help the Committee to understand how he can guarantee that his officials will undertake what seem to me to be the eminently reasonable strictures contained within the clause? If this is not the way, then what is?
Amendments moved by the noble Lord, Lord Kirkwood, and others in Committee have drawn the attention of the Committee to the fact that many of the people who will be receiving this benefit are living on the breadline. They are living on incomes which are so tight that what may seem to be relatively small sanctions can tip somebody into misery, as the classics will tell us. Could the Minister therefore consider how we in this Committee and in the House can have the confidence that nobody in that situation will be plunged potentially into despair by having a sanction applied without due consideration being taken of the impact on their physical and mental health, and indeed on the well-being of any children in their family, as described by the noble Lord, Lord Ramsbotham?
Lord McKenzie of Luton
My Lords, as has been said by my noble friend Lady Sherlock, the noble Lord, Lord Ramsbotham, has made a powerful case in principle. Like the noble and learned Lord, Lord Mackay, I am not quite sure that the formulation set down here is quite right, as it lumps together sanctions, penalties and recovery of overpayments, and there might be arguments for unpicking those. It would be helpful, in any event, if, following this debate, we could have in writing a note as to what information decision-makers would routinely have in front of them when they make the decision with regard to each of those various categories. That would help us as we move to Report.
We debated issues around the claimant commitment earlier, as has been said. My noble friend Lady Lister made the important point again about that being more about co-production rather than something that is delivered and given to the claimant. That is an important point. As my noble friend Lady Sherlock said, we are dealing with people whose resources are, almost by definition, incredibly stretched. In many cases they are on the edge. If we are going to further reduce the means that they have, then we ought to be very clear that we do that in the knowledge of all of the circumstances and the impact on their well-being.
Lord Freud
My Lords, I agree that it is right and proper that a decision-maker gives full consideration to all the relevant facts provided by a claimant when deciding whether to impose a sanction or penalty. It is also important that claimants have appeal rights when sanctions and penalties are imposed. I believe that the amendments are unnecessary because we have adequate protections in place, but I am very happy to meet the noble Lord on this matter. Let us go through it, because it is important that we get it right.
The essential difference between us—although, as the noble Lord, Lord McKenzie pointed out, we need to tease out three different things here—is that the noble Lord, Lord Ramsbotham, is looking for a specific process, whereas we are aiming, in the legal framework as it stands, at a general process of cover. The noble Lord will be aware that, if you have a whole load of specific things, you have a problem when you get the special case that is not covered, whereas if you have a general protection you are covered. I think there is a fruitful discussion to be had around that, and I would welcome a discussion to see that we have the right protections because, again, I do not think there is a huge difference between us here. We want to have the right protections for a vulnerable group. We do not want arbitrary behaviour; we want common sense. It is just a question of looking through. I will circulate the note on this matter to the noble Lord, Lord McKenzie, as well.
We are training decision-makers on a number of areas: retaining impartiality; identifying what constitutes evidence and where the burden of proof lies; on the concept of the balance of probabilities; and on an understanding of social security law. It is vital that we do this.
Lord Freud
The answer to the first question is that interest is not ticking.
On the second question, I share the noble Baroness’s concern about how the present childcare system works on reporting, which is why we are producing an entirely new system with a monthly report and a monthly payment system. Basically, how the system will work is that you put in the receipt for what you have paid, and then that payment is repaid on a monthly basis. The problem presented by a change of circumstances will go. Roughly 15 per cent of problems are caused at the initial stage of the original application. It does not seem sensible to privilege one set of mistakes against another when it is a reasonably substantial proportion.
I am very happy to meet the noble Lord, Lord Ramsbotham, to go through these issues in some detail, because I share his and other noble Lords’ concern that we get this right.
Lord McKenzie of Luton
My Lords, if the noble Lord, Lord Ramsbotham, agrees, might we join in with those discussions or reflections?
Lord Freud
I would be utterly delighted to invite noble Lords, but not too many. Perhaps the noble Lord, Lord Ramsbotham, will give permission for the Official Opposition team to join him. If he does, I would be delighted to see you all.
Lord McKenzie of Luton
My Lords, we have a good deal of sympathy for the amendment of the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Thomas. My understanding is that draft regulations—or proposals for regulations—have to be submitted to the SSAC except in certain circumstances. One of them, which has been mentioned, is that regulations made within six months of the enactment of primary powers do not have to be submitted.
This amendment seeks to say that the six-month clock should start when the Bill becomes an Act, not when the particular provisions are drawn down. That could widen the scope of what the SSAC should review. I support that. It is sometimes uncomfortable as a Minister being on the receiving end of a report from the SSAC, but in a sense that is part of the process that we need to engage in. Clearly there would be issues of capacity if this change were to happen overnight, particularly given the Bill that we are now considering. It seems that Bills of this nature will inevitably be framework Bills. Our Bills were. There is always tension between working on the basis of draft SIs, trusting to luck or assurances as to what eventually comes through, and having a degree of certainty.
It is not our official position but it seems to me that one way round this would be for Parliament to be able to amend SIs. It would take us away from some of the debates that we have about trying to get stuff into primary legislation, but that is probably a debate for another day. We should take seriously the prospect of the SSAC looking at SIs more widely and not being pre-empted by the six-month rule. There is clearly an issue not only about the capacity of the SSAC but about its expertise. It is very important that that is maintained.
Lord Freud
My Lords, I am not alone, I know, in acknowledging the vast knowledge of my noble friend Lord Kirkwood in this area. He was, of course, chair of both the Social Security Advisory Committee and the Work and Pensions Committee in the House of Commons—I think I can say that now, if I am not pre-empting. His involvement in this important subject stretches much further than that. I welcome the probe and hope that I will be able to persuade him that the amendment is unnecessary.
The SSAC provides a valuable function and goes about its work very effectively. From my perspective and that of my ministerial colleagues, the relationship between the department and the committee is productive. We enjoy a similar relationship to the one that the noble Lord, Lord McKenzie, had. More specifically, the SSAC is currently working on a major study of passport of benefits in the light of the impact of these reforms. As my noble friend acknowledged, this is really the most significant ad hoc study by the committee that Ministers have commissioned for many years. It is a wish to look at situations in the widest possible way.
The committee’s current remit does not include the scrutiny of draft regulations made under powers recently enacted by Parliament. As my noble friend pointed out, this is for a period of six months, beginning from the commencement of the relevant enabling power. The amendment would therefore set the clock ticking from Royal Assent in all cases rather than from the commencement of the relevant enabling power. It follows that if an enabling power was commenced at a point more than six months after Royal Assent, regulations under that power would automatically be referred to the committee. I believe that that would be unnecessary. Informal arrangements are already in place in this area. As I explained when we debated Clause 1, we will continue to talk to the SSAC as we move to the implementation stage of this Bill and use the arrangements that are currently in place and that allow us to provide it with information on new powers and regulations made within six months of the commencement of those powers.
Noble Lords are aware that when the Government implement major welfare reforms, the relevant primary powers are sometimes commenced at different times, reflecting the staggered implementation process that can apply in such circumstances. Under the amendment, some of the regulations brought forward in this scenario—those brought forward within six months of Royal Assent—would not be subject to the committee’s scrutiny, but others brought forward subsequently would be, even though Parliament would have approved the primary powers applicable to the reform as a whole. That inconsistency would be undesirable and we do not believe that adding to the committee’s former role in this way would be warranted. Implementing the reforms in this Bill is an enormous undertaking.
A huge number of officials in the department are working on it, and others are working on changes to a very challenging timetable. It follows that the weight of draft regulations following the reforms would place an unreasonable burden on the SSAC if the Secretary of State were required to refer all regulations to the committee made six months after Royal Assent. That point was touched on by the noble Lord, Lord McKenzie, and I need to confirm that this is an overwhelming process, particularly right now.
I have emphasised that we already have effective informal processes in place in this area. I also believe that the application of the affirmative procedure to, for example, the first core set of universal credit regulations is another safeguard, making it less necessary to consult the SSAC on a formalised basis in respect of those regulations in particular.
Lord McKenzie of Luton
I thank the noble Lord, Lord Kirkwood, for introducing this group of amendments and acknowledge his long-standing interest and expertise in issues of child maintenance. Like him, I pay tribute to the staff of the CSA and CMEC who, over many years, have stuck with the various iterations of child maintenance that they have had to deal with and sometimes struggle with.
My noble friend Lady Hollis gave us a brief history of child maintenance. It is right that one of the problems and the reason why the first of these amendments in particular—I support them all—is so important is that along the way the CSA has sought to be different things and to achieve different objectives. In 1991, it was substantially focused on the clawback of benefit, so no benefit accrued to children. The 2004 amendments recast that and focused the CSA on child poverty in particular, but, as my noble friend said, it was stymied to a certain extent by not being able to make progress on the disregards. I defend the 2008 changes—noble Lords would not expect me to do otherwise—for a number of reasons. It potentially gets round the problem of those who do not want to pay by the assessment being on the gross income of the non-resident parent, which is obtainable from HMRC. That has not yet been implemented, but it was a key issue in stopping non-resident parents messing up the system, which is what happened to the two previous systems. Voluntary it might have been, but there was an absolute right for either parent to make use of the statutory system with charges, which we are going to come to, that did not deter people on low incomes.
Lord De Mauley
No, my Lords. I shall come to that, if I may, in a moment.
The purpose of the “gateway” clause is to give all parents the opportunity fully to understand their range of choices and the support that is available to overcome barriers to family-based arrangements. It is in no way intended to prevent them accessing the statutory service if that is the best option for them. We simply want that to be a considered choice. Parents can come back to the statutory service at any time if a family- based arrangement does not work out.
The “gateway” will take the form of a telephone conversation with an agent who will simply explain the available maintenance choices to the prospective applicant and signpost them to any associated help they might need. At the end of that conversation, if the parent feels that the statutory service is the best option, they will be transferred to the statutory service to begin the application process. We will develop an analogous approach for parents wishing to apply online.
We are also aware that a variety of support services for separating families already exists in the voluntary and community sector. However, we all know that there is a multitude of complex issues to be addressed during separation and it can be difficult, especially at a time of distress, for parents to find the information and support that they need. The gateway will also help signpost parents to such support so that if, following the conversation with an agent, they decide that they want to try to establish a family-based arrangement, we can help them find the support they need to do so.
Lord McKenzie of Luton
Will the Minister explain the difference between what he has just described and the current options service, other than the related charges that come through? The charges will need to be explained before somebody can make an application but, apart from that, in terms of the support and information that are given, how does the new arrangement differ?
Lord De Mauley
I shall come back to that if I may.
With the right support in place to help parents collaborate better, more children will be able to benefit from effective family-based maintenance arrangements. Outcomes for children across a range of measures are almost always best when parents work together. We want to make it easier for parents to access support by ensuring that it is available in a more co-ordinated way.
We want the people who know families best to shape these plans. That is why we asked a steering group of academics and voluntary sector experts to help us develop proposals for better coordinating support at a local and national level and as to how most appropriately to measure success. I am pleased to be able to say that we will look to act on this advice and to commit increased funding as detailed proposals emerge. This could include, for example, a web portal or a helpline that would provide an entry point to the wide range of services which are already available but parents may not be aware of. The helpline might, for example, offer a “triage” conversation to help parents identify their priority issues and obstacles and then advise on how and where to get support on them. The web portal would provide a framework to help co-ordinate the wide variety of online services already available, ranging from interactive advice and support from experts to forums where parents can talk to others in the same situation to share learning and information. The steering group will also consider how best to co-ordinate face-to-face local services to offer help and support. We will also look to test which interventions are most effective in helping parents overcome any obstacles to collaboration. This will be critical in helping us to decide where best to direct funding.
Amendment 113D would appear to create a period within which the prospect of an application being made to the statutory service against the non-resident parent would act as a stimulus to the NRP to engage in conversation with the commission. The conversation would encourage the NRP to consider taking action towards a family-based arrangement. This is a welcome intention, but one drawback is that it would impose a delay on processing the application where there was no prospect of a family-based arrangement, which in turn would delay the flow of maintenance. The Government’s view is that it is preferable to get parents talking at an earlier stage in the separation process to maximise the chances of them acting collaboratively and to provide them with access to services that will help them overcome any barriers to doing this.
The commission also has the objective of promoting financial responsibility. It should not be only the threat of an application to the statutory service that forces non-resident parents to be mindful of their obligations. The commission will continue to work to produce the cultural change outlined in the Green Paper so that the statutory service is the last resort rather than the default option. This will not happen overnight but this rebalancing of approach away from state intervention to parental collaboration must be the right approach.
Amendment 113F would exempt existing CSA clients from the need to take reasonable steps before applying to the new statutory scheme. It is just as important that these parents consider the possibility of reaching a family-based arrangement as parents entering the child maintenance system for the first time, particularly as they will be treated as if they are making a fresh application. Research tells us that 51 per cent of CSA parents with care feel that they would be likely or very likely to make a family-based arrangement were they to receive the right help and support. In addition, many CSA clients were compelled to apply to the CSA as a condition of applying for benefit.
Therefore, it is surely right to give CSA client parents who feel that they can make an arrangement and who may have been required to use the CSA the scope to consider whether a family-based arrangement could work for them. I challenge the view that the only way to have an effective arrangement is to have the state manage it. That approach has been shown not to work. Our proposals will provide more support for family-based arrangements and more options for reaching effective arrangements.
My noble friend Lord Kirkwood asked about the costs of transition, which will be effected over a three-year period. Estimates of cost will accompany consultation on the regulations covering case closure and charging, which will set out the spending profiles. The policy has not been finalised, so costs have not yet been firmed up.
In the context of Amendment 113D, my noble friend Lady Tyler referred to there being no charge on the NRP, to which I will turn when we deal with the next group. The noble Lord, Lord McKenzie, asked how the gateway is different from options. The conversation is basically the same. The difference is that we would expect applicants to have the options conversation before applying to the statutory service. At present, they go straight to the CSA. Earlier, I mentioned that we want to make the statutory service more effective. He also asked whether there is capacity to cope with case closure and how support will be structured. Yes, there are no concerns about capacity and support will be structured along similar lines as CM options.
The noble Lord, Lord McKenzie, also asked whether the same fee structure would be applied generally and, if not, what it will be. There will be one application charge only. He asked whether there would be an appeals process, if I understood him correctly. I think there is no need for an appeals service because the gateway is simply a phone call. He asked whether, if access is denied, an individual can apply again. Yes, they can. He asked how soon they can get on the statutory scheme. The answer is immediately. He asked whether both parents need to interact with the gateway. No, it requires just one telephone call, which generally is from the parent with care but both parents are free to seek advice.
With that rather lengthy response, I hope that I can persuade the noble Lord not to press his amendment.
Baroness Tyler of Enfield
My Lords, I would like briefly to add a few comments to those that have been made so powerfully around this Committee. We have heard some moving quotes today, but the one I want to give is not from someone who has been part of this process as an end user but from Sir David Henshaw who, back in 2006, came up with the report that is often cited as being the genesis of the idea of charging. We have heard his name referred to on a number of occasions as his policy has been explained. Sir David Henshaw himself recognised the limits to charging when he said:
“I do not want to create a disincentive to use the service for those parents who have no other option for agreeing maintenance”.
We know, because DWP estimates tell us, that about half of all eligible families have no child maintenance arrangements at all. The danger is that even more children in poorer families will go without child maintenance as a result of the proposal to charge the parent with care. This is my final point, which I want to link to the one I made on the previous group of amendments. Not only will the children be worse off—we have heard some graphic and moving accounts of the real hardship that some children could be in—but more will grow up without a role model of a father who contributes, however modestly, to the cost of raising his own children.
Lord McKenzie of Luton
My Lords, like all noble Lords, I am indebted to the noble and learned Lord, Lord Mackay, for tabling the amendment. His being in tandem with the noble Lord, Lord Newton, is an irresistible combination. I do not envy the Minister having to reply.
There have been some powerful and moving contributions. I should start by putting clearly on the record where we are in relation to charging. It has been suggested that what the Government are bringing forward is just based on the previous Government’s proposals, but that is not so. It is absolutely correct to say that charging is permitted under the 2008 legislation, which is supported by the noble and learned Lord, Lord Mackay. But that is enabling legislation like so much of this Bill. It certainly did not envisage proposals such as those advanced by the coalition Government. It should be recognised of course that there were charging arrangements under the original 1991 legislation, but I believe that that was stopped in 1995 because the CSA was not delivering.
Our position on charging is clear. It is reflected in the White Paper entitled, A New System of Child Maintenance, dated December 2006. It cites in part what the noble Baroness, Lady Tyler, has just said and makes reference to Sir David Henshaw. Paragraph 5.48 states:
“We recognise the importance of having a charging regime that does not dissuade vulnerable and low-income parents with care from seeking maintenance in the first place. Therefore, the future charging regime will be based on three clear principles. First, that the charging structure should incentivise non-resident parents to meet their responsibilities. Second, that the clear burden of charging should fall on the non-resident parent and not the parent with care. Third, that cost recovery for C-MEC should never be prioritised above payment of outstanding debt for the parent with care”.
Those provisions were not debated particularly extensively when we considered the Bill in 2008, although there was some discussion. At that time, we made it clear that it was for CMEC to advise and recommend to Ministers the detail of any charging regime but that such advice would be subject to CMEC’s overarching objective of maximising the number of children benefiting from effective maintenance arrangements, a point made by my noble friend Lady Sherlock a short while ago.
Although the clear focus on any charging should be on the non-resident parent, CMEC was not precluded from considering a small application fee to both non-resident parents and parents with care where voluntary arrangements might be more effective for them. We also made it clear that any charging structure should not commence until the service was fit for purpose and that this would not be before the launch of the new scheme then planned for 2010, which I think is now planned for 2012.
The Government have proposed a range of charges, including an upfront application fee of £100, which would be reduced for parents on benefits, and an ongoing collection charge on both non-resident parents and parents with care. The latter would be avoided for each if maintenance direct were used. However, whether maintenance direct is a secure and sustainable method of payment is wholly dependent on the non-resident parent. The Government’s proposals for charging fall foul of our criteria in a number of respects. An upfront fee of £100 is bound to act as a deterrent for lower-income households. It is payable not only in circumstances where a voluntary arrangement might be possible but in circumstances where it is not, for whatever reasons. That seems highly likely to increase the prospect of circumstances where no maintenance arrangements are entered into. Penalising parents with care with a collection charge, which depends on the NRP acting responsibly, is wholly unjust. The proposals allow for a reduction in the case of those on benefits but there is no exemption. Neither is any relief proposed for the collection charge.
That is why we are fully supportive of the amendment in the name of the noble and learned Lord. In short, it states that there will be no fees charged to parents with care where they have taken all reasonable steps to enter into a maintenance arrangement and it is not possible or appropriate to do so. There may be a multiplicity of reasons why it is not possible or appropriate to do so, some of which are particularised in later amendments. My noble friend Lady Sherlock has just spoken to one, as indeed has the noble Lord, Lord Kirkwood. In such circumstances, the only prospect of obtaining arrangements is the statutory system. There should be no charge which precludes this, which is what the noble and learned Lord’s amendment seeks to secure.
Amendment 113E, in the name of the noble Lord, Lord Kirkwood, seeks to introduce a reduction or waiver of fees where the income of a parent falls below prescribed levels. We have already indicated why we consider an exemption to be appropriate, although we acknowledge that the scope of Clause 6 is already wide enough to accomplish this.
Amendment 113EA has been spoken to powerfully by my noble friend and sets down circumstances where voluntary arrangements would clearly be inappropriate. The Government, I am sure, will be sympathetic to this given that they already acknowledge that individuals experiencing domestic violence will by-pass their new gateway.
Government Amendment 114 prompts me to raise questions relating to issues of enforcement. Can the Minister give an update on the various measures contained in the 2008 Act, including the use of deduction-from-earnings orders; regular deductions from accounts; lump-sum deduction orders; orders preventing avoidance; administrative liability orders; disqualification for holding or obtaining travel authorisation; curfew orders; and disqualification from driving? Can he say which of these are in force? If it is about getting sensible arrangements, it is also about making sure that those people who are responsible non-resident parents meet their commitments. We put in place a raft of enforcement measures which should have facilitated that and I would be grateful for an update on their progress.
Lord De Mauley
My Lords, I start by addressing my noble and learned friend’s Amendment 113DA. This would exempt from any charges parents with care who have taken all reasonable steps to make an arrangement outside the statutory scheme. In the debate on the previous group of amendments I said that we are seeking to promote collaboration between parents and to encourage them to consider their child maintenance options instead of taking the statutory service as the default. Research shows that more than half of parents with care in the Child Support Agency say that it is likely that they could make a collaborative arrangement with the right advice and support. We believe that it is generally in people’s best interests to focus on developing family support services for separated parents to enable them to consider their options and access help in overcoming barriers to collaborating where this is possible.
The introduction of charging is fundamental to our reforms to encourage parents to consider their options. Of course, not every parent will be able to make a family-based arrangement and so some parents will need to use the new statutory scheme. We believe that it is reasonable to ask them to make a contribution to the cost of the service they receive. We have spent some time considering the issue of value for money in the context of an application and it is worth pointing out that the average yearly Child Support Agency maintenance award is around £1,800 and an average case can be expected to last nine years. This equates to more than £16,000 of child maintenance. It is also worth pointing out that, unlike the situation until quite recently—the noble Baroness, Lady Hollis, mentioned this in the debate on the last group of amendments and I pay tribute to the previous Government for changing it—the receipt of maintenance does not now result in a reduction in benefits. I can confirm that this will remain the case with universal credit. Every penny of maintenance received is on top of whatever benefits the recipient has qualified for.
Noble Lords will, I hope, be able to see that, in the long-term, making some contribution towards the cost of the application in order to expedite this will be a good deal for parents given the significant on going financial benefit of child maintenance and the support offered if there should be any cessation of payment.
The noble Baroness, Lady Sherlock, asked whether the application charge will be used to discourage people from using the service. No. Our aim is that where relationships break down, both parents continue to take responsibility for the welfare of their children. This includes collaboration on issues of finance and, where appropriate, on going involvement of both parents in their children’s lives. We feel that it is fair for those parents who use the statutory service to reprioritise some of their spending towards the cost of their application and ongoing maintenance collection.
Lord De Mauley
I agree that that is a good question. The Government will accept that making a phone call to the gateway is taking reasonable steps.
I said earlier that I agreed with the last Government that it is acceptable to charge for the statutory system. I am, however, very sympathetic to the concerns that have been raised today and I have listened very carefully to noble Lords’ views. What is critical is the amount that the applicant is charged to access the service. Concerns have been raised about the figure that has been mentioned. The noble Baroness, Lady Lister of Burtersett, in the last debate, and the noble Lord, Lord McKenzie, in this debate, mentioned a figure of £100. Both of them suggested that that figure is too high. I sympathise with this view, so I undertake to the Committee to have discussions with my ministerial colleagues and to make that point very vigorously. I thank noble Lords for their contributions today because they will strengthen my hand in those discussions. I also remind noble Lords that we will also consult in due course on our charging levels and debate the regulations in Parliament.
Amendment 113E explores the idea of relating the waiver or reduction of fees to the level of a parent’s income. In a simple way, this is already built into the proposed application charges, with a different, lower rate for those applicants on benefit. Rather than attempt to build further complexity into the IT system, I would prefer, as I have said, to take another look at the overall level of the application charge.
I understand that the matter of an ongoing collection charge is also a concern. The right reverend Prelate the Bishop of Blackburn referred to this. I will take this opportunity to point out to noble Lords that such a charge will be incurred only if maintenance is actually being received; by definition, therefore, people will have to pay for a service only if it is working. I have explained some of the improvements that we plan to make to the service. I am sure noble Lords will agree that it badly needs improvement.
Furthermore, collection charges can be avoided at any time if maintenance direct is selected. The noble Baroness, Lady Sherlock, asked whether victims of domestic violence will pay collection charges. I will come back to victims of domestic violence in a moment, but in the context of collection charges I must say that I do not think it is unreasonable to levy a charge for a service. What is important is the quality of the service and the level of the charge. I hope that I have gone some way to demonstrating that the service will be an improvement on what it has been.
Turning to victims of domestic violence, I reiterate that, as outlined in the Green Paper, Strengthening Families, Promoting Parental Responsibility: the Future of Child Maintenance, we are committed to exempting victims of domestic violence from the application charge. I reiterate that we will honour this commitment. Victims of domestic violence will not have to pay an application charge and they will be fast tracked through the gateway. We accept that applicants who have been victims of domestic violence cannot be expected to make family-based arrangements and so should be exempt from the application charge. However, we do not think it is unreasonable that they should make a contribution, as I have just said, to the cost of the statutory service once they are in it.
To assist them wherever possible to move into maintenance direct and so avoid collection charges and recognising that applicants in these circumstances will not want to have direct dealings with their ex-partner, we are developing a payment support service so that payment can be made outside the collection service without the parent with care having to divulge any personal details to the non-resident parent.
The noble Baroness, Lady Sherlock, asked about the definition of domestic violence. The commission has been working with the Home Office, which has the lead on domestic violence across government. In 2004, the Home Office replaced the 14 previous definitions of domestic violence used across government with a single cross-government definition. We will, of course, be using that definition.
We are still considering how the parent with care can prove that they have been a victim of domestic violence, but I can assure noble Lords that what is designed will not be onerous or burdensome.
Finally, I turn to Amendment 114. In the current child maintenance schemes, the Government have the ability to collect child maintenance by deducting it directly from the benefits of non-resident parents, which is an effective method. The purpose of this amendment is to enable us to continue to do this upon the introduction of universal credit. The amendment will allow, where necessary, for deductions in respect of child maintenance to be made from a non-resident parent’s universal credit award.
We envisage allowing most non-resident parents in the new statutory scheme the opportunity to pay their child maintenance directly to the parent with care—that is maintenance direct, which most noble Lords are familiar with. This should mean that in most cases use of the collection service and deductions from universal credit will be necessary only if the non-resident parent fails to pay by this method. In the current scheme, the ability to make such deductions is limited to where the non-resident parent is liable for the flat rate of maintenance, which could potentially rule out this option for a significant proportion of universal credit claimants who could be liable to pay more. The amendment will remove that restriction.
The amendment also makes clear the position in relation to charging. In the new child maintenance scheme, it is proposed that ongoing collection charges are payable by non-resident parents on top of the maintenance due where it is necessary for the maintenance to be collected using the collection service. The amendment ensures that any charges payable by non-resident parents can also be deducted directly from their benefit payments or universal credit, where this is appropriate. It also allows arrears to be deducted.
My noble friend Lord Newton asked about the appeals system. I should clarify that when I said there was no appeal with the gateway, it is because no one will be stopped from applying to the statutory service, so there is nothing to appeal against. The parent with care just needs to make a phone call and will be granted access to the statutory service.
The noble Lord, Lord McKenzie, asked for an update on the powers taken in the 2008 Act. The Government remain committed to pursuing arrears and will continue to use all their expanded powers to this end while the Child Support Agency schemes remain open. We frequently use deductions from earnings orders, lump sum deductions and deductions from accounts. Parents who fail to pay now face tougher sanctions, including having money deducted directly from their bank account or having their home seized. Primary powers enable the Government administratively—without application to a court—to disqualify a non-resident parent from holding a driving licence or passport where we are of the opinion that the non-resident parent has wilfully refused or culpably neglected to pay child maintenance. These powers are not yet in force. Prior to any final decision being made to commence them, there would need to be public consultation on the detail of how they would work. If the noble Lord so wishes, I can write to him detailing exactly what powers we currently use and what we still plan to bring forward.
Lord McKenzie of Luton
That would be helpful, but could the Minister also indicate the extent to which those powers are going to be transferred to the Secretary of State?
Lord De Mauley
I shall include that in the letter I will send out. In the light of what I have said, I hope that I can persuade my noble and learned friend not to press his amendment.
Lord McKenzie of Luton
My Lords, I will be brief in saying that we support the thrust of each of these amendments.
Lord De Mauley
My Lords, turning first to my noble friend’s Amendment 113G, the Government are determined to ensure that non-resident parents meet their child maintenance responsibilities. That is why we have already committed to bring cases into the collection service as soon as we have evidence that payment has not been made through maintenance direct. Where a parent with care informs us that payment has not been received and the non-resident parent is unable to provide evidence to the contrary, such as a bank statement showing credits to the parent with care’s account, we will swiftly move the case in to the collection service and act quickly to ensure payment is reinstated.
This could include the use of enforcement tools where necessary, such as deduction from earnings orders, where maintenance is deducted directly from an employed non-resident parent’s earnings, and deduction orders, which enable deductions to be made directly from a non-resident parent’s bank account. Where the parent with care alleges that further payments have been missed during the maintenance direct period and there is no evidence to the contrary, we will ensure that these arrears are also paid when we bring the case into the collection service. It is unacceptable for non-resident parents to neglect their child maintenance responsibilities and build up arrears, which the Government are determined to tackle. To that end we will take a more robust approach to collection and enforcement in the new scheme and will use all avenues available to us to ensure outstanding arrears are paid and new arrears are not allowed to accrue.
We will not give up on cases. Following the introduction of the new scheme, the commission will continue to pursue non-resident parents for any arrears of maintenance that they may owe, which will include arrears from the schemes currently in operation. Where arrears have been accrued prior to the introduction of charging, no charges will be payable by either party in relation to these amounts.
On victims of domestic violence, as raised under Amendment 113H, let me put it on the record that we are committed to ensuring that victims are protected. They will be fast tracked into the statutory scheme; they will not be expected to make a family-based arrangement; and will not be required pay an application charge. Clause 132 provides non-resident parents with the ability to choose to pay their child support maintenance by maintenance direct within the statutory scheme. When designing this provision we considered carefully how to protect victims of domestic violence. Therefore, we will provide a service to enable direct payments between the parties without the need for any direct contact to be made or any personal information to be disclosed. This will be known as the payment support service. We will also provide appropriate support to help clients to use this service effectively where necessary.
We believe that the provision of this service and the support we will provide to clients in using it will ensure that victims of domestic violence are able to use maintenance direct safely, without any risk of harm to the parent with care or the child. As I have explained, as soon as we have evidence that payment has not been received we will bring the case into the collection service and take appropriate action to re-establish payment. With that explanation, I hope that my noble friend will agree not to press his amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 8 months ago)
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Lord McKenzie of Luton
My Lords, before we adjourned on Monday we had very significant contributions from noble Lords, as we have had today. We heard a powerful case from my noble friend Lady Lister against the principle of the cap, and, indeed, a brave speech by the noble Lord, Lord Kirkwood, about why in his view these clauses are irredeemable, a point which was reinforced by the noble Lord, Lord Wigley, a moment ago. Nevertheless, I believe that we must try to amend Clauses 93 and 94, because to leave them unconstrained would leave some of the most vulnerable in our country subject to major injustice.
This second group of amendments seeks to introduce exemptions from the cap, either for particular groups or for specific benefits. Amendment 99ZB, moved by the right reverend Prelate the Bishop of Ripon and Leeds, and Amendment 99AD, to which we have added our names, exclude, in the first case, child benefit, and, in the second case, all elements paid with respect to children, from the calculation of total income from benefits for the purposes of the cap. As we have seen, at present the proposals have a disproportionate impact on children who can, of course, do nothing themselves to change their behaviour to escape from the impact of the cap. Moreover, as discussed, the cap is not only unfair but inconsistent in its treatment of these benefits which are included as income for those out of work but not in calculating the level of the cap. We support these amendments, and if the Minister is not able to do so, we would ask him exactly why these benefits are to be included in the calculation of the in-work but not the out-of-work income.
Amendments 99A and 99AAA, spoken to respectively by the noble Baronesses, Lady Hollins and Lady Tyler, create exemptions for, first, carers, and, secondly, family and friends as carers. They have had support from the noble Baroness, Lady Meacher, and the noble Lord, Lord Northbourne. Like them, we are keen to understand the Government’s thinking on this. The Government’s impact assessment says that the impact on those affected will be that they need to choose between taking up work—of course, the cap does not apply to those entitled to working tax credit—reducing their non-rent expenditure or moving to cheaper accommodation or area. Can the Minister tell us which of those options he expects families who are caring to take up? I believe that he should especially answer the point raised by the noble Baroness, Lady Hollins, about why he considers that carers do not fit the description of working hard and playing their full part in society.
Amendments 99AB and 99D, spoken to by the noble Lord, Lord Best, and to which we have added our names, provide an exemption from the cap for those in supported, sheltered or temporary accommodation. We know that those families may be particularly vulnerable and face real problems if forced to move due to a reduction in their housing benefit. As the noble Lord, Lord Best, said, families in temporary accommodation have not chosen to live in high-rent housing; they have been placed there due to there being no other options available. It seems particularly unfair to penalise them for a situation over which they have had little control. As Shelter, Crisis, Homeless Link and the National Housing Federation have stated, the caps for households in temporary accommodation create the prospect of a spiral of homelessness where households lose their income due to the overall benefit cap, but are unable to access accommodation under the main homelessness duty because they are still subject to benefit restrictions.
Amendment 99AA and 99C create exemptions for those who have recently started claiming benefits because of job losses. At present, the benefit cap will penalise those who have just lost jobs for decisions about their rent level or family size taken while employed. If it achieves its intended effect of forcing families to move to cheaper accommodation, the benefit cap is likely to increase hugely the disruption caused by job loss for such families and reduce the chances of them finding employment rather than giving them the level of security that the benefit system was designed to provide for people who have lost their job.
My noble friend Lady Drake spoke with some force, as did the noble Lord, Lord Best, about the traumatic situation facing people when they lose their jobs and at that very point confront what might be the further traumatic consequences of the benefit cap. As my noble friend declared, a modern welfare system is intended not only to incentivise people to work and to address benefit dependency but to support hard-working families with a clear work ethic in managing a flexible labour market. Perhaps the Minister will say whether he agrees.
We are told that much of the thrust or motivation behind the Bill is to encourage people into work, to keep them there and to ensure that work is rewarded. The group of claimants who would be covered by the amendment tabled by my noble friend Lady Donaghy are exactly the people who do not need any such incentivisation. They have indeed been working, possibly for decades and perhaps in hazardous situations since all have been injured at work. It is part of our contract with employees, which goes back to some of the earliest social legislation of workmen’s compensation Acts, that those hurt in the course of their work should be compensated, ideally by the employer or, failing that, by the state. This benefit is paid to all who qualify regardless of whether they are in work. It therefore cannot ever act as a disincentive to earning as the recipient continues to receive this money regardless of whether they have other earnings. It is compensation for perhaps being less able to work, for finding work more tiring or for not being able to return to one’s original occupation, but it does not diminish the financial advantages of working as it is paid out alongside any earnings. The point made by my noble friend Lady Donaghy was that to save perhaps £1 million we hurt those who have already been hurt at work. Is that fairness? I do not think so.
There remain some fundamental questions to be answered. I hope that the interlude since Monday will have given the Minister the opportunity to marshal his thoughts on some of those. We heard on Monday a reiteration of the Government’s position that households getting out-of-work benefits should not,
“receive a greater income from benefits than the average weekly net wage for working households”.
Can the Minister say whether this policy overrides any cost implications? Should the reductions in benefit expenditure from the cap be less than costs engendered, be it through homelessness, reductions in the number of people being able to care, the extra expense of supporting disrupted vulnerable families or the costs of bureaucracy in administering the system, would the policy still be for the cap to prevail? The Minister stated on Monday:
“The benefit cap provides a clear, simple message that there has to be a maximum level of financial support that claimants can expect the state to provide”.—[Official Report, 21/11/11; col. GC 345.]
Yet, we heard the welcome news that childcare costs were to be excluded. So what is the principle—if any part of this policy could be described as principle—which determines those items of support that can potentially be received in excess of the cap and those which cannot? What is the policy?
Perhaps the starkest example of an unfair element in the proposal is, as outlined by the right reverend Prelate the Bishop of Ripon and Leeds, the treatment of child benefit. This is a non-means-tested benefit paid to all families whether in or out of work and has very high take-up rates. It is included in the total of benefits but not included in the comparative income level. My noble friend Lady Lister called this patently unjust, as it is. Where there is a demonstrable, illogical injustice of this nature which collides with the rhetoric and intent of the cap, on what basis is the argument for justice jettisoned in favour of the cap? Perhaps the Minister will explain that to us.
The Minister is an enthusiast for the universal credit. This is the approach which merges in and out of work support, will be easily understood, will mean that it always pays to be in work rather than out of work and will change the paradigm of people’s attitudes to work. I think that the noble Baroness, Lady Meacher, touched on that point. If all this is right, what remaining role is there for the benefit cap? Before we reach universal credit, the cap is apparently to be administered by local authorities’ deductions from housing benefit. Can the Minister tell us what happens if the housing benefit component is insufficient to cover that, possibly because of support for mortgage interest being included in the calculation rather than a rental housing benefit amount? Will universal credit mean a greater range of support is apparently at risk when it is introduced? Can the Minister tell us about the practicalities of all this when the housing benefit and council tax benefit service has been outsourced by so many councils? My noble friend Lady Hollis raised some very practical issues about the impact of this on housing associations. What will it actually mean?
These are not theoretical questions but questions that will be faced, and faced in the near term. I do not believe that we have yet had the answer to the question posed by several noble Lords on Monday, that if most of the people to be affected by the cap are those for whom there is no full work conditionality, what is the change in behaviour that this policy is designed to achieve? We need to hear from the Minister on these points and on the whole range of other questions that were raised earlier.
Lord Freud
All I am able to say at this moment is that there will be transitional arrangements and help for hard cases.
Lord McKenzie of Luton
The noble Lord again raises the issue of help in hard cases. Can he give us some indication of what he counts as hard cases, and of which, within the potential group of people who will be hit by the cap, he would say were soft cases?
Lord Freud
My Lords, I am being enticed by the velvet tones of the noble Lord. I am afraid that as we build the regulations to tackle the issue of hard cases, I can only say that we are looking at transitional arrangements. I am sorry but I cannot go any further at this stage.
Lord McKenzie of Luton
I think that we understand that. However, does the Minister recognise the dilemma with which the Committee is faced? We have a broad framework which the Minister says gives the opportunity of reducing the cap, but we have none of the detail which is absolutely crucial to understanding how it will work and who it will impact. Without providing that he is facing the Committee with an impossible dilemma. Perhaps the noble Lord, Lord Kirkwood, is right and these clauses are irredeemable.
Baroness Hollis of Heigham
My Lords, it also means that the noble Lord will face a lot of amendments on Report, which he would not need to face, calling for breathing spaces or a transitional period of one year for people who suddenly lose their jobs or are suddenly exposed, at 27 or 28, to living in a single room, and so on. If he were able to give some clarity about what he proposes, he could wipe out possibly a dozen amendments.
Lord Freud
My Lords, I have been set a challenge and a reward. It would be lovely to collect on that, but I cannot make any further assurances.
I shall continue to speak to the amendment in the name of the noble Lord, Lord Best. Apart from the transitional arrangements that I have talked about, the underlying position is to ensure that people understand that they have to take responsibility for the decisions that they make in their lives in the light of what they can afford, and they cannot always look forward to the state stepping in to make good any financial shortfall.
I shall continue on to the more technical areas raised by the noble Lord, Lord Best, on temporary accommodation and supported and sheltered housing. The amendments provide an exemption for households to which local authorities owe a duty because they are homeless, or threatened with homelessness, and for those living in supported or sheltered accommodation. As I said on Monday, discretionary housing payments will not be included as part of the cap, but in wider terms it is too early to say how we shall treat those cases for housing cost purposes in 2013 and beyond. We are exploring options for the treatment of housing benefit for people living in temporary accommodation within universal credit and the overall benefit cap.
Noble Lords may be aware that we recently consulted on high-level proposals to change the method by which help with rent is calculated for those who live in certain supported housing in the social and voluntary sector. As the noble Baroness, Lady Hollis, indicated, there is a series of issues here. We are working very closely with local authorities, housing associations and other government departments, including the devolved Administrations, on these very issues. Our considerations will, obviously, include possible interactions with the benefit cap.
Finally, Amendment 99C, in the name of the right reverend Prelate the Bishop of Ripon and Leeds, would place a requirement on the face of the Bill for exemptions for a range of groups. These include groups that we will provide exemptions for through regulations, and others that we have already discussed during the course of our debates today. The amendment also includes an exemption for lone parents with a child under five. I have made it clear that the cap is intended to act as an incentive to work. I acknowledge that we currently do not require lone parents with children under seven to work, although we are seeking to reduce this to five, but that does not mean that we do not want to encourage them to find employment Indeed that is the very reason why we provide extra support through work-focused interviews.
Each of these amendments would undermine the fundamental principles underpinning the cap—that ultimately there has to be a limit to the amount of benefit that a household can receive and that work should always pay. I have listened carefully to the measured and detailed arguments put forward today and will take them into account when deciding on the final design of the cap. In the mean time, I urge the noble Lords and the right reverend Prelate not to press their amendments.
Lord McKenzie of Luton
If I may say so, several questions remain unanswered by the Minister. First, if it were established that the cost and consequences of the cap outweighed the benefits savings, would he still support and seek to introduce the cap?
Lord Freud
My Lords, we have done an estimate of the cost and benefits savings of the cap and we have looked clearly at the wider ramifications. The question is theoretical in practice. Clearly the message that we are trying to get over is a behavioural one much more than a cost-based one.
Lord McKenzie of Luton
If that is the case, and the Minister has made that point on several occasions, what does the benefit cap provide that is not catered for within the new world of universal credit? I thought that universal credit was all about merging in and out of work benefits, simplicity, making sure that work always pays and changing people's attitudes to work. That is all that the universal credit is about. How does the cap sit with that and what does it produce in terms of policy outcomes in addition to what the universal credit produces?
Lord Freud
My Lords, the main difference is the simple message behind the cap: in the end, there is a limit to how much the state is prepared to support someone. That is a clear and simple message that can be readily understood in a way that, however simple universal credit is, that message would not be.
Lord McKenzie of Luton
One accepts that it is a simple message, but I am trying to understand the policy outcomes that the Government expect to achieve from that, which are different and in addition to the policy outcomes that they expect from universal credit.
Lord Freud
My Lords, what we are looking at now is a three-tier persuasion towards behavioural change. We have a conditionality regime; we have a universal credit that removes the concern of many welfare recipients that if they go to work they will be worse off; and we have a specific limit on how much benefit people can actually earn. That acts as a very precise work incentive, which is a long-term work incentive.
Lord Freud
I welcome my noble friend’s support because he has expressed the argument much better than I possibly could.
Lord McKenzie of Luton
Is the Minister telling us that this is just an interim, transitional arrangement? I thought it was a permanent proposition.
Lord Freud
I return to the principle. As I understand it, this is a principle with which the Opposition agree: that there should be a limit on the amount of benefit a household can obtain. We have set that limit at the equivalent of £35,000 of earnings before tax and national insurance.
Lord Freud
My Lords, I think I am reduced to making the mainstream point that the amount that such families can look to is the equivalent of what up to half the households in the country earn, which is £35,000.
Lord McKenzie of Luton
My Lords, the noble Lord, Lord Best, spelled out the challenges that some 200,000 people could face. The Minister may dispute the precise numbers, but he said that we are looking at a lot of measures to make sure that it is not 200,000 people. Can the Minister explain what types of measures are involved? What sort of measures are going to alleviate the challenges that the noble Lord, Lord Best, spelled out?
Lord Freud
Clearly one of the most important areas of support that we can supply is helping people find work. One of the areas of support here is clearly Jobcentre Plus, and we are exploring that area pretty actively.
Lord McKenzie of Luton
Are we seriously saying that, whether it is 90 per cent or two-thirds of the people affected by this who, under all the other rules and constructs that the Government have brought forward, are not required to get in to work, they are going to use this as a lever to force them in to work? Is that what they are saying?
Lord Freud
That is one of the areas of support. If we have about one-third of families who are subject to full conditionality and others subject to partial conditionality, by which we mean moving towards work over a period, a very substantial proportion of the group can be helped into the workplace.
Baroness Hollis of Heigham
I just want to pick up on my noble friend Lady Lister's point. We know that most lone parents come out of a relationship: very often out of a marriage. These are not people who are regarded by others on the estate as shirkers who need to be driven—that sort of mentality. We could have a situation where, before they separated, the total household earned income was perhaps over £30,000 and there was some housing benefit because it was a three-bedroom property in an inner city area at a fairly high cost. He then leaves and she is left with three small children under the age of five in their existing home, which is rented. As a result, they are facing the benefit cap. How on earth do we think that any of these proposals under universal credit or the benefit cap could or should alter that behaviour, the judgments that they have to make and the possibilities open to them? All it can do is turf them out and send them up to Middlesbrough, as far as I can see.
Lord McKenzie of Luton
My Lords, I suspect that we have taken this as far as we can today, but I am sure that we will return to it on Report—perhaps we should already be thinking of booking an extra couple of days for that. I have a technical question for the Minister. As I understand it, before we get to universal credit, the variety of benefits that people have will be looked at. That will go into the calculation on one side. We will compare that with the earnings comparator and the difference will be withdrawn by way of reduction of housing benefit. Is that right? So that will be administered by local authorities.
What if people are in receipt of mortgage interest support or the housing benefit element is not necessarily sufficient to cover the shortfall? What happens with all the local authorities that have outsourced their housing benefit and council tax arrangements? There are a lot of them. Have they been engaged? Presumably, there are extracontractual costs because they will be required to do things in excess of current entitlements.
On universal credit, is it likely that the withdrawal will be in respect of only the housing component of the credit or will the broader range of support that is in universal credit be subject to the clawback?
Lord Freud
No; we have made it clear that it would apply to housing benefit and not to other benefits. The cap will not have full coverage until universal credit comes in.
Lord McKenzie of Luton
My Lords, I imagine that this will be extremely brief. This is a genuinely probing amendment on a point of detail. Clause 98 covers payments on account and under the Bill there are three different legs under which those payments can be made. The first mirrors the existing provision of SSAA 1992. The second provides for payment to be made where a claimant is in need. Examples of how it might be applied apparently include where benefit has been claimed but the first pay day has not yet been reached. Regulations will provide the detail of the test of need. New Section 5(1)(r)(iii) enables the Secretary of State to make a payment on account where, again, subject to criteria set out in regulations, it can reasonably be expected to be recovered. I think such payments will replace the existing social fund budgeting loans. However, part of what this clause does is to repeal Section 22 of the Welfare Reform Act 2009, a provision which is not yet commenced.
The thrust of the question really springs from a sentence in the Explanatory Notes which says in respect of that provision that, had it been commenced,
“it would have extended the range of situations in which a payment on account could be made beyond the existing section 5(1)(r) … It would have extended making payments on account to situations similar to those that will be covered by new section 5(1)(r)(ii)”.
My question is: is there anything that Section 22 of the Welfare Reform Act 2009 would have permitted in terms of payments on account which are not now facilitated by those three legs in Clause 98? I beg to move.
Lord Freud
In the interests of time, I can give an assurance that there is nothing extra to worry about.
Lord McKenzie of Luton
Nothing extra to worry about is good enough to worry about with this Bill. I am grateful for that. Perhaps it can be dealt with in correspondence. It was a genuine inquiry about whether that swapping of the provisions precluded something which would have been allowed. I accept the noble Lord’s assurance on that. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, the noble Baroness, Lady Meacher, has made a powerful argument about why the current provisions cannot be properly implemented and why they are not sufficient. In welcoming the Minister to his first slot at the Dispatch Box today, I ask him whether it is possible, perhaps not today, although today if he can, for him to set out for us each of the benefits that would be affected by these proposed changes, what the current arrangements for those benefits are in respect of appeal provisions, what happens to payment or otherwise in the interim and the extent to which that would change under these new provisions? That would be important in helping us to understand what might happen in practice.
I may have missed the point when the noble Baroness was speaking on this issue, but is there a time limit for the DWP to respond to a reconsideration request? There are time limits which flow from it, but under these new arrangements, what causes the DWP to have to respond quickly or within a fixed timetable, particularly if for some of the benefits the dispute is about whether a benefit should be in payment at all? It might be an argument about the capital rules for universal credit or about the category that somebody is in. If it is ESA, I think the claimant gets the assessment rate until the matter has been settled. If the noble Lord is able to clarify that, it would particularly help us understand the import of these proposed changes.
Lord De Mauley
My Lords, the noble Baroness, Lady Meacher, has eloquently explained her concerns and those of her noble friend Lady Grey-Thompson, who cannot be with us today, about Clause 99. Let me try to address them.
I assure your Lordships that the time limits for claimants wishing to request a revision, or make an appeal, in relation to most social security benefits are not changing. What is changing is that claimants will need to ask for the decision to be looked at again before they can appeal. I hope that noble Lords will agree that it is in everyone’s interests for disputed decisions to be resolved at the pre-appeal stage wherever possible. Previous figures have indicated that approximately 65 per cent of cases overturned historically were a result of additional evidence being provided that was not available to the decision-maker.
While the claimant will be required to apply for reconsideration within one month of being notified of a decision, the process for making the request is informal. It does not require the claimant to supply a substantial submission and can be done by telephone, face to face or in writing, so claimants should not be subject to additional expense.
The purpose of Clause 99 is to allow DWP to focus on revision rather than responding to appeals, enabling more disputes to be resolved at an earlier stage. Claimants will still be able to ask for a written explanation of the decision and, where they do, the one-month time limit for applying for reconsideration will be extended. In the event that a claimant fails to request a reconsideration on time, the deadline can be extended where there are special circumstances—for example, a hospital admission —which make it impracticable for the claimant to meet the deadline. I assure the noble Baroness that when a request for reconsideration is made beyond the one-month deadline, no formal submission of reasons will be required. They can be supplied by telephone, allowing a decision-maker to consider whether they meet the criteria for an extension of the deadline.
This clause does not change which decisions carry appeal rights; it will simply require claimants to go through the internal reconsideration process first. The purpose of this is to ensure that the decision-making and appeal process is both fair and proportionate.
Although reconsideration is already practised in DWP, there is no legislative requirement for it to be carried out when an appeal is made. Clause 99 will introduce this requirement. Currently, decisions are routinely reconsidered on appeal, so the reconsideration process takes place after the claimant has already decided to appeal to the tribunal.
Under the new arrangements, DWP will use direct contact with the claimant to gather additional evidence relevant to the decision and will provide an explanation of the outcome of the reconsideration. The process will allow a claimant’s decision to appeal to be informed by whether reconsideration had provided them with a clear justification for the original decision, and a clear explanation of it.
Some parts of DWP have already introduced a more robust and independent reconsideration process. However, claimants may often have already made a formal appeal before this process begins. As the noble Baroness has rightly pointed out, under Clause 99, where a decision is overturned upon reconsideration, this will save the taxpayer the cost of an appeal and the claimant the stress of appealing.
The noble Baroness makes the point that, under the current process, no one can get to a tribunal without confirming their intent to carry on. However, if a claimant does not respond to the TAS1, the appeal does not simply stop. The tribunal will still be required to make a decision to strike out the appeal.
Currently, the claimant has 14 days to respond to a TAS1, which is sent along with the DWP response to the appeal and often the reconsideration outcome. Unless the claimant appeals early, which is the issue that we are trying to resolve, this gives the claimant only a short time to consider this information and make an informed decision on whether to proceed with their appeal or to withdraw.
Clause 99 will allow the claimant to make an informed decision about whether to appeal, having passed through a less formal process. There is currently no time limit for the DWP to complete the reconsideration process, nor is one proposed, but it is important to the DWP that each stage of the decision-making and appeals process is carried out within acceptable timescales and does not result in unreasonable delays for claimants. The department is considering carefully how best to monitor and evaluate this in future.
The noble Baroness expressed a concern that claimants will not qualify for payment of ESA pending reconsideration. No appellants should be left without support, since other benefits such as JSA may be available. No decisions have yet been made to change ESA. The main focus of the DWP is to make the correct decision, based on all the available evidence, at the earliest point. Clause 99 will also help claimants distinguish between revision and appeal. The process will be clearly explained via decision letters, leaflets and through direct contact with claimants.
The noble Baroness referred to costs. There will, of course, be costs, particularly relating to IT changes, to implement this clause. The DWP expects to meet these within its spending review settlement. Furthermore, savings are expected to be made in both the DWP and the Ministry of Justice via a reduction in appeals.
I do not think that I have responded in detail—
Lord De Mauley
My Lords, we are not trying to introduce a new stage—reconsideration and appeal have existed before; we are trying to get a better process of reconsideration before we get to appeal so that we can avoid a large number of appeals that occur. We are introducing an element of flexibility and informality so that claimants are not held quite so rigidly to deadlines, information and the form in which it comes. We plan to make the process more streamlined for them as well as for the department. We require Clause 99 to effect that.
Lord McKenzie of Luton
I understand the thrust of the point the noble Lord has just made but I am also trying to understand the position of claimants who ultimately rely on a successful appeal to end up in the right category. If I understood what the Minister said, the reconsideration needs to take place before they can get to an appeal, and there is no timeframe within which the DWP has to go through that reconsideration process before that appeal starts. Other things being equal, that would mean that it could take longer for those who rely on a successful outcome of an appeals process to end up in the right category. The extent to which that matters depends on what people are being paid in the interim. If, under ESA, they are paid the assessment period rate—the JSA rate—until the appeal has run its course, at least they may have some resources. However, if the issue is whether or not the benefit is payable at all, as there may be a dispute about capital, as I said earlier, they would receive nothing for that period. That is part of the worry. However, we understand the point about streamlining and the improvement that the noble Lord is seeking to make.
Lord De Mauley
I am grateful to noble Lords for allowing me the opportunity to clarify that. It is important to the department that each stage of the decision-making and appeals process is carried out within an acceptable timescale and does not result in unreasonable delays for claimants. Alongside implementation of this power, we intend to make further improvements to the reconsideration process, which will include suitable arrangements for monitoring and, where appropriate, improving the speed of the process.
Taking the second point made by the noble Lord, Lord McKenzie, which is allied to that to a great extent because it is a matter of how a claimant affords to live in the mean time, whatever the outcome of the appeal, the tribunal’s decision takes effect from the date of the original decision. So if the tribunal rules in the claimant’s favour and, for example, makes an award of benefit where the original decision was that the claimant did not qualify, all the arrears of benefit will be paid in full from the date that the claim took effect. I do not think that that particularly addresses the noble Lord’s concern.
The noble Lord and the noble Baroness expressed the concern that claimants will not qualify for the payment of ESA pending reconsideration. I have said before and I will say again—I hope that this will address the point made by the noble Lord—no appellants should be left without support since other benefits such as JSA should be available in those cases. He also asked a broader question about benefits more generally and generously offered me the opportunity to write to him or meet him. I would be grateful if we could expand on that in such a forum.
Lord McKenzie of Luton
I am grateful to the noble Lord for that and very happy to deal with that matter through correspondence. However, what does he believe to be a reasonable timeframe within which the reconsideration should routinely take place? What is the target and the plan for the department?
Lord De Mauley
I do not have an answer for the noble Lord. He is right to raise this issue. Perhaps I may include that in the correspondence.
Baroness Healy of Primrose Hill
My Lords, I will also speak to Amendment 103ZA. I will be brief. It may appear overly generous on the part of a cash-strapped Government already making severe cuts in benefits and public services not to demand repayments. However, in the interests of natural and administrative justice it cannot be right to request repayment when every penny is already allocated to get a family through the week—and now to be the month. Benefits are about to be cut and will no longer keep pace with inflation. Housing, energy, food and travel costs are all rising at frightening speed. With the best will in the world, I cannot comprehend how a family which is already struggling can be asked to pay back more than its members are currently being paid either in wages or benefits or both. Many charities and churches have raised the alarm over this element of the Bill. I strongly urge the Government to reconsider such a course. It may seem small in the overall picture of state spending but would be enormous for a family on an already modest income.
Lord McKenzie of Luton
My Lords, my noble friend Lady Hayter is going to do Front-Bench duty on this group of amendments. I want to speak briefly to Clause 105, where a probing amendment has been put down, to make sure that we have understood what is happening in respect of the statute of limitations.
My understanding is that, at the moment, to take action to recover sums which are outstanding, you cannot go back more than six years: they are statute-barred at six years. The issue is what an action is for these purposes. The clause clarifies that, other than proceedings in a court of law, recoveries of sums due are not actions. The consequence, as I understand it, is that they are not statute-barred, so unless you need to take action through court proceedings, as a result of this clause there is no statute of limitations applying to debts arising under the Social Security Act or the provisions that are set down in the clause. That seems to be a departure from the existing position.
Moreover, the clause says that the amendment is regarded as having always formed part of the 1980 Act, so that it is retrospective, and does not just operate from the date this clause comes into existence, except in respect of proceedings. I have a question as to what, for these purposes, the proceedings are which would still remain outside the retrospection of this clause. But more importantly, what assessment has been made of the additional amounts that might be brought in scope for recovery as a result of these changes to the law?
Welfare Reform Bill
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Lord McAvoy
My Lords, I would like to follow the point made by the noble Lord, Lord Skelmersdale, that medical science might come up with a cure, but I am puzzled as to why that is problem. Surely when the facts change, the law would be changed; I do not see any great problem with changing the law.
Lord McKenzie of Luton
My Lords, we have a degree of sympathy with the amendment moved by my noble friend Lord Touhig and spoken to by the noble Countess, Lady Mar, and the noble Lord, Lord Wigley. As I understand it, it goes with the grain of what the Government are seeking to do. When we debated similar issues last week, I thought the term “exceptional circumstances” was somewhat broader than a strict reading of it might lead one to conclude. Therefore, I ask the Minister to expand on that when dealing with this amendment and to say whether he accepts the proposition that there will be those with long-term degenerative conditions that are unlikely to improve.
The noble Lord, Lord Skelmersdale, makes the reasonable point that we never know if there might be medical scientific breakthroughs, but, as my noble friend said, these matters could always be revisited. It seems to be important to try to give some comfort to people whose condition is sadly not going to improve. What is the purpose of bringing them in simply to pile stress on to their lives and use resources that could be deployed elsewhere?
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we think it is right that an individual’s benefit entitlement is based on the degree to which he or she is participating in society. This level of participation can vary as health conditions or impairments improve or deteriorate, their impact changes or individuals adapt to their circumstances. We want the benefit accurately to reflect relevant changes in circumstances to ensure that people receive the right level of support. The 2004-05 national benefit review found that about £630 million a year of DLA is overpaid as a result of unreported changes in circumstances. This cannot be right. However, it is equally about ensuring that, when people’s circumstances deteriorate, the benefit keeps track with them.
The same study estimated that around £190 million of DLA is underpaid each year—vital money that is not reaching the people for whom it was intended. There is no one-size-fits-all answer; our approach will involve a combination of awards that, in some cases, will be fixed for a short time and in others will be longer term, depending on the individual, the impact of their disability and the extent to which they are able to live independently. In many circumstances, this can change for better or indeed for worse during someone’s lifetime, and this will be different for different people. We think that an active management regime that involves planned reviews is the most appropriate way of responding to this.
However, it is important—and on this I feel we agree—that we do not undertake inappropriate or unnecessary assessments and interventions where there is unlikely to be a change in award. Key to this is ensuring that decisions on award duration and interventions are evidence based. Here I refer back to comments I made during the debate on the noble Lord’s previous amendments. In PIP assessment, we want to get the best mix of evidence from a variety of sources. This will be partly about what the claimants tell us about themselves, partly what can be gathered at face-to-face consultations and partly what we can obtain from relevant people who support them. Moreover, as I said, we want individuals to tell us who is best placed to advise us on these matters.
Therefore, I think we are fundamentally in the same place as the noble Lords and the noble Baroness. The one key difference is that we do not think that an individual’s type of health condition or impairment matters—for example, whether or not it is a lifelong condition; what matters is the likely impact of the condition going forwards and whether it is likely to affect benefit entitlement. Conditions and impairments—even ones that are usually degenerative—can affect people in very different ways. That is why we want decisions on award durations to be based on individual circumstances following consideration of all the evidence of the case.
Lord Freud
Yes, my Lords. That is what I said and it has not changed. Noble Lords might be reassured by the fact that, even where awards are fixed term and periodic reassessment is required, this does not have to be burdensome. As I have just said, in some cases the assessments will involve scrutiny of paper evidence only and will not require a face-to-face consultation. This will especially be the case where there is considerable supporting evidence on which to base decisions. Conditions or impairments which are life-long and/or degenerative are particularly likely to have such supporting evidence.
We will provide guidance on the duration of an award, including when an ongoing award would be appropriate and with what frequency that award would be reviewed. We are committed to developing the duration assessment in consultation with disabled people and their representatives to ensure that we get it right. We recognise how important this is to ensure that the process of deciding award durations remains both fair and transparent.
I should also like to tackle a misconception that seems to have built up in relation to this issue—that is, that there will be a requirement for everyone to be reviewed on a yearly basis. This is simply not true. While some people will receive one-year awards where their circumstances warrant it, the vast majority of awards are likely to be longer than this, with some being much longer and some indefinite.
I hope that I have reassured noble Lords that we are in the same place as them on this issue. We want award durations to be based on individuals’ circumstances and the likelihood of change; we do not want unnecessary reviews or assessments; and we want decisions on these issues to be based on the best evidence, including that from the professionals involved in supporting claimants. On that basis, I urge the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
Can the Minister clarify one point? He said that some awards might be long- term and some short-term. Can he give us an inkling as to the department’s thinking about that spectrum and what long-term awards may mean?
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of these amendments, which I think I understand and accept. I wondered at first when I saw them whether we had done something to upset Treasury Ministers, and they no longer wanted to come before us. To be clear, we have provisions in here relating to tax which we are simply moving out of the Bill because they are going to go back in a Finance Act. If they remained in the Bill in their current form, would that in any way invalidate them? There might be a procedural issue that has gone awry in this case, but I am still a little unclear as to why it is necessary in the event, given that those provisions are there, they could not remain.
More importantly, I am anxious that if these provisions come out of this Bill, there is certainty that they will end up in a Finance Bill. Can the Minister give us any assurance as to which Bill that is likely to be and what processes, given the oversight that we dealt with a couple of Committee sittings ago, there are in place to make sure that these are followed through and put into effect?
Lord Freud
When you look at these detailed measures, which is something that I do not encourage anyone to do who wants to retain their sang-froid, you can see that they are closely associated with taxation and trust funds. It is much more coherent for them to be dealt with in a Finance Bill or another finance Act rather than one dealing with welfare reform. That is simply the reason, because it means that if you restructure a piece of tax trust law, you can do the whole thing in one, rather than having to go to different Acts. That is the reason.
Baroness Sherlock
My Lords, I move this amendment on behalf of the noble Lord, Lord Patel, who has been unavoidably detained, as he has an important meeting on other legislation. I shall speak also to Amendment 98A.
In doing so, I am grateful for briefing, particularly from CLIC Sargent, a charity that works with children with cancer. These are probing amendments that are designed to ensure that personal independence payment is able to meet the distinct needs of young people aged 16 to 24 who have a long-term health condition or disability. I understand that the Government have confirmed that the reform of DLA for under-16s will be taken forward separately, but there is still an issue about whether PIP is able to meet the unique needs of young people aged 16 to 24. There is a concern that they will end up being treated the same way as adults, despite being much less likely to have financial independence and having fewer benefits available to them. I understand that DLA is at present the only benefit available to young people with a health condition which is available in all circumstances. Therefore, it is particularly important that PIP is able to meet the unique needs of this group of young people with health conditions or disabilities.
As noble Lords will appreciate, those young people aged 16 to 24 face a range of transitions as they approach adulthood. They may leave education and move on to higher education or employment, perhaps leaving their family and moving into their own home. They may enter into long-term relationships and have children; increasingly, those key transitions happen in the 20s. In particular, I am conscious that elsewhere the Government are moving to raise the age participation rate for children in education. There are also reviews going on of SEN; the disability Green Paper is looking at a co-ordinated system of assessment and support from birth to age 25. But the plans to raise participation age will mean that, for example, most 16 to 18 year-olds will still be in education or training, but PIP will classify them as working-age adults. By way of example, I understand that the best practice NICE guidance treats 16 to 24 year-olds with cancer as being a distinct group with specific social, psychological and educational needs and goes on to explain the best way for services to be shaped for this group. Could the Minister be encouraged to look at that as an approach that might be helpful in transitioning across to examining PIP?
The effect of relying on different age ranges within the benefits system not only complicates transition for long-term health conditions or disabilities but can also see them facing a cliff edge. Can I put some specific questions to the Minister? I have no desire to press this amendment but perhaps he could help the Committee to understand how the Government intend to support this group of people. Has he looked at the possibility of introducing specialist teams or a tailored approach to young people aged 16 to 24 in the benefits system? Would he consider a distinct PIP system for those aged 16 to 24, which would include an age-appropriate system of assessment for that age group? In particular, would he consider whether those already in receipt of DLA could continue to receive it until they turn 18—or maybe even up to 24, if he is feeling particularly generous today? Would he comment on the qualifying period? Could he reassure the Committee that that will not apply for those under 18, and ideally not for those under 24? Could he help the Committee to understand what approach the Government are taking to harmonising the various age limits across the benefit system?
This is a potentially particularly vulnerable group of young people, and it is important that in looking at how PIP will operate we take careful account of the impact on this group. I hope that the Minister is able to reassure the Committee. I beg to move.
Lord McKenzie of Luton
My Lords, these are useful probing amendments to understand fully what is happening or proposed in respect of this group of young people. I imagine that the Minister will say that, as the Bill stands, there are already powers to make regulations as proposed for 16 to 24 year-olds, but it is an opportunity to get something on the record. We certainly support the thrust of this and the needs for regulations that are affirmative—not just the first set. I think that we will hear from the noble Lord, Lord German, on that in a moment.
The age 16 already has ramifications in the DLA system. Below that age, young people cannot qualify for the lower-rate care component via the cooking test, and there are additional tests for the lower-rate mobility test. So there is already a potentially stressful transition under DLA that could be compounded with the transition to PIP. The figures that have been mentioned are that over the next three years 173,000 disabled children will turn 16. If they have to seek or apply for PIP immediately, that is a big challenge. There was a hint in the other place when this was debated that that would not necessarily be the case and that, in the scheduling of young people in this age group, they would go directly on to PIP. Perhaps we can have the Minister’s reassurance or an update on that point.
The briefing note that we got from the DWP sets out the work undertaken to date, seeking to base the assessment on the education health and care plan that is being developed across government, which we would support. But I am not quite sure how it fits together on timing, particularly over the next couple of years, with PIP being relatively close by and due to be with us shortly. Can the Minister confirm to us the process of assessment for young adults and say what the likely migration process is? What happens to 16 year-olds who are on DLA at the point when PIP is introduced?
Lord Freud
My Lords, I am grateful to the noble Lord, Lord Patel, for tabling these amendments and to the noble Baroness, Lady Sherlock, for moving them in his absence. The amendments allow me to set out the Government’s position on how we will deliver PIP effectively for young disabled people in a way that is sensitive to their needs. Noble Lords may be aware that the Government published a briefing document that specifically considered the position of young people. The briefing document set out some of the main insights that we have learned from them and their representatives, which are informing our design work.
Let me be clear from the outset. I know that there are particular issues and sensitivities when dealing with disabled young adults at what can be a particularly challenging period of their life. That is why we have been working closely with people aged 16 to 24 and their representative organisations in order to understand how we can ensure that the benefit is administered in a way that best meets their needs. Two main considerations that young people have raised with us are: whether 16 is too young an age to begin the process of moving from DLA to PIP; and making sure that the transition arrangements for moving on to the new benefit are easy to understand and transparent—the role of advocates and information needs, for example, being particularly important.
Under current arrangements for DLA, the child-related rules fall away at the age of 16 and the entitlement conditions to the care component are extended. The age of 16 therefore forms a natural touch-point to re-examine entitlement and take young people through to entitlement and receipt of DLA in their own right, where that is appropriate. Paying young people directly gives them direct control over how the benefit can enable them to live independent lives. It is our firm belief that the principle of giving individuals control over how they can tackle the barriers to their independence should be brought forward into PIP.
In developing our proposals for PIP, we know that there are particular issues that we need to address concerning its delivery to young adults. For example, young disabled people can expect to go through a number of assessments as they move from childhood to adulthood, and many of them will require varying degrees of support to negotiate those assessments. That is why we will ensure that all young people who claim, or transition on to, PIP will have the appropriate support to allow them fully to express their needs. This could be, for example, by allowing a parent, advocate or friend to accompany them to their face-to-face consultation.
We are fully involving young disabled people and their representatives as we design and build the delivery mechanisms. For example, we are working with user-led organisations through the PIP implementation development group, which is made up of a wide range of organisations including those that represent young people. We have also begun work with focus groups and have conducted one-to-one interviews directly with young people, appointees and their representatives to inform both the way in which PIP will be delivered and the transition arrangements for those moving from DLA to PIP.
As I mentioned, the transition from childhood to adulthood brings with it numerous assessments at different ages. We are therefore also working across government, in particular with the Department of Education, to see what more we may be able to join up and share information with the proposed single assessment process for education, health and social care. This means, for example, that if an individual is still in education or training, exploring whether we may be able to use evidence from special educational needs assessments or information from the school or college to inform the determination of a PIP claim. But we need to look carefully at this so that we get the right balance between not overassessing someone and having an approach that is too general to identify a person’s specific needs. My officials are therefore working closely with officials in the Department of Education so that we get this right.
To ensure transparency, credibility and a smooth transition from DLA to PIP, we know that we will need to build in processes, with appropriate information and engagement, that let young people and their families know what to expect and understand what they have to do. Our intention is to ensure continuity of payment, with no gap between DLA ending and PIP starting when an individual makes a claim and subject to their meeting the eligibility conditions. We are continuing to consider how the detailed rules should work and, as with all the changes that we are making, we will continue to involve disabled people and their representatives in the design.
Lord McKenzie of Luton
Could the Minister clarify a point? I apologise if I have missed this. In the case of someone who at the moment is under 16 and on DLA, if they reach the age of 16 before PIP is introduced, will they undergo the normal reassessment to adult DLA? If they reach 16 after PIP has been introduced, will they automatically go through the PIP process, or could they potentially stay on the DLA adult process for a period, whatever that may be?
Lord Freud
My Lords, we have not done a detailed migration strategy. When people are effectively on adult DLA, even though they have transitioned from child DLA, we will have to work out the exact timings for when to take them. We do not have those precise details yet.
Lord McKenzie of Luton
I am grateful for that. The Minister will see that the issue that that highlights is the one that was probed: if people reaching 16 are going to go straight on to PIP, given what is going to happen with the number of young people achieving the age of 16 over the next couple of years, they are in large measure going to be first through the gate for PIP. That was the concern.
Baroness Tyler of Enfield
My Lords, I should like to explain why I decided to add my name to the excellent amendments that have just been put forward by the right reverend Prelate the Bishop of Ripon and Leeds. I, too, was indebted to the work of the Children’s Society, which did an excellent analysis in this area. I understand the rationale for a benefit cap. I am not trying to say that I am against it; I understand the arguments about promoting fairness between those in work and those receiving benefits, and indeed the need to reduce the cost of the rapidly growing benefits bill as part of the overall deficit reduction strategy. My concern, though, as I looked at the numbers, at who would be affected and at the types of families that would be affected, was the implications for some of the most vulnerable families, particularly families with children. I shall say a few more words about that.
I was very taken by the analysis of the Children’s Society that showed that children would be disproportionately affected by how the benefit cap is currently constructed. While it is estimated that some 50,000 households will have their benefits reduced at the moment by this policy, it has also been estimated that over 200,000 children will be affected and up to 80,000 of those could be made homeless.
The composition of the households that are likely to be affected is interesting. The figures are one-third couples, two-thirds single women—generally single mothers—and about half will also be disabled. Indeed, 60 per cent of the households likely to be affected live in London, where housing is more expensive, particularly people living in private rented accommodation. Various ethnic groups will also be particularly affected, when they have larger families.
The first consequences of the benefit cap, unless it is possible to look at constructing it in a different way—perhaps using one of the approaches suggested in these excellent amendments—will be families having to move very abruptly to cheaper areas. This risks children moving school in the middle of a year, thereby disrupting their education and their social networks. It also risks families splitting up, and I shall come back to that point. It could have adverse consequences on kinship carers—family and friends—which is why in the next grouping I am moving an amendment on that point. I also feel that families who will be able to continue to pay the rent will have less money left for other essentials such as food and clothes, which will therefore contribute to child poverty. For families who are not able to pay the rent, are evicted and become homeless, this will be a parlous situation. Children are a priority group for council housing so this is likely to lead to additional pressure on temporary accommodation costs, adding to the cost pressures on local authority budgets. We have heard quite a bit about this in recent months.
There is then a very real danger, which has had virtually no attention, that children at risk will simply disappear from view. This raises real child protection and safeguarding concerns for me. We all know the very tragic stories of children who have disappeared from view and what happens to them in the very worst circumstances. We must ensure that the benefit cap does not, however inadvertently, have that consequence.
Then there is the reduction in what I call mixed communities, as poorer families are forced to move out of an expensive area. As I said earlier, this is particularly the case in London. Not only will it create very undesirable ghettoisation but there will be pressure on public services in ways that different bits of different boroughs will find difficult to deal with. For example, the concentration of workless households in some areas has significant potential implications for a wide range of local authority services. Boroughs that have an inward migration of households are likely to face severely increased service pressures such as demand for school places, the impact of unemployment, poverty and poor housing conditions, whereas in contrast other boroughs will experience reduced demand for such services but will themselves face challenges and costs in adapting very quickly to these different demands.
The point that I should like to finish on, which I feel particularly passionate about—perhaps because I am chief executive of the country’s largest relationships support organisation Relate, which is a declared interest—is the inherent couple penalty currently built into the benefit cap. This has had very little attention so far, but it will affect couples substantially more than lone parents. Indeed, it has been suggested by experts in the field that the cap will introduce one of the most substantial couple penalties ever seen in the benefits system, so it could have the perverse consequence of breaking up families as well as deterring people from entering new relationships and forming new households. Surely this couple penalty is completely at odds with the Government’s, and indeed the Prime Minister’s, very clear stance on wishing to support strong and stable family relationships. I am sure that this is an unintended consequence and has not been thought through, but we need to look at this.
Finally, the impact would be particularly keen where two lone parents decide to move in together, particularly if they both had children from the previous relationship. Such couples could then find that they would be far worse off by moving in and forming one household rather than living as two separate households. I will not detain the Committee’s time any longer, but I just wanted to explain why I feel that having some in-depth discussion of an alternative way of constructing the benefit cap is so vital.
Lord McKenzie of Luton
My Lords, I think that the noble Lord, Lord Best, wishes to speak.
Lord Best
My Lords, in speaking to Amendment 99AC in this group, I am very grateful to Shelter, Homeless Link and the National Housing Federation, which have formulated a series of amendments here and given invaluable advice to all of us.
It turns out that the new benefit cap is really about two factors: children and housing. As was so clearly demonstrated by the noble Baroness, Lady Tyler, and the right reverend Prelate, because the cap is not adjusted to take account of the number of children in a family, larger families will be hardest hit. The other factor for which no allowance is made in the crude calculation of the benefit cap is housing costs. No account is taken of the fact that families in otherwise identical circumstances have to pay very different amounts for their housing, not out of choice but because of where they live, what type of landlord they have and the size of home that their family requires.
Rents are far higher in some areas than in others. In London and the south-east, rents may be four times the levels in the cheaper areas of the north of England or, say, south Wales. If the accommodation is in the private rented sector, again rents can be several times higher than in the social, council or housing association sector. Of course, accommodation costs will be higher if you have a larger family. Heaven help you if you have, say, three children—let alone four, as in my own family—and you are in the private rented sector and you live in the southern half of England. If you cannot find a job, you are probably going to have to move, most likely to a cheaper area where, unfortunately, employment prospects are likely to be even worse, or you will face homelessness.
The cap is very much about housing, and the way that it is applied relates directly to housing costs. Where a family’s entitlement to benefits exceeds the cap, the cut to their state support is to be achieved, in the first instance, by cutting their housing benefit. The DWP calculates that some 50,000 households will be affected. On average, they will lose £93 per week from the amount that they can contribute towards their rent. This shortfall, which cannot possibly be covered by cutting back on food, clothing, heating and so on, rises to a colossal £150 per week for some 7,500 families. The cap also raises the prospect that some families who will have to move in 2012, because of caps on housing benefit and local housing allowance already announced, will be hit again and uprooted for a second time when this overall cap reaches them in 2013.
Amendment 99AC in my name seeks to address this fundamental flaw in the proposal for a benefit cap by excluding the housing benefit component from it. This would not save all those affected since the largest families will be left with virtually nothing with which to pay their rents if they are not to fall below the poverty line. However, it recognises the extreme consequences, even for those in smaller households, of having to pay today’s market rents in so many areas. Removing the housing benefit element from the cap would greatly moderate its effect upon already very poor households.
The DWP itself points out in its impact assessment that households are very likely to go into rent arrears, which means landlords and the courts incurring the expense and effort of evictions, and local authorities facing the increased cost of handling homelessness. Shelter research shows that out-of-work families with just two children will face a shortfall in what they receive for their rent in the private rented sector in all inner London boroughs and many outer London boroughs, from Hounslow to Haringey to Newham. Those with three children will face this problem in every London borough and in 82 per cent of all local authorities throughout the south-east of England.
I may be pre-empting the Minister’s response but the problem would be solved if private landlords and housing associations charging the highest rents were to cut dramatically the rents of their tenants receiving housing benefit or local housing allowance. However, we should remember that housing benefit and local housing allowance are being cut and capped in several other ways, including through the high rent caps and the restriction to the lowest 30 per cent of rents. Therefore, in total, some pretty hefty rent reductions will be necessary. I fear that there is simply no chance of private landlords, who now have lots of new customers because so few younger households can afford to buy, slashing rents to accommodate the extra cap. Rather, Amendment 99AC seeks to remove much of this problem by taking housing benefits out of the equation.
In the next set of amendments, I will look at some of the ways in which the problem might be mitigated. However, this overarching amendment seeks to remove from the problem of a simple, overarching benefit cap the housing costs that make such a big difference to who is and who is not affected by the new overall cap.
Lord McKenzie of Luton
My Lords, we are indebted to the right reverend Prelate the Bishop of Ripon and Leeds for leading the charge on this. Indeed, faith communities generally have been a voice for people who might otherwise not have been heard. The need for so many amendments around this proposal in the Bill highlights the extent to which it is a badly conceived policy. Whether or not you believe there should be an overall cap on benefit entitlement, what we know about the approach taken to applying such a cap in the Bill shows it to be unfair, inconsistent and to ignore the needs of many of the most vulnerable.
This first group of amendments relates to how the benefit cap is to be calculated and shows the extent to which there are major inconsistencies in the Government’s approach. The second group relates to the fact that the Government appear to have ignored the needs of many of the most vulnerable people when thinking about who is to be excluded from the benefit cap.
The Government have argued that applying the benefit cap is fair. The Secretary of State for Work and Pensions, Iain Duncan Smith, has stated:
“The benefit cap will restore fairness to the taxpayer and fairness to those who do the right thing on benefits”.
Of course, we are learning with this Government that fairness has many different meanings to different people, but it would be hard for anyone to justify the idea that the current policy will be fair to children, who, as we have heard, the Children’s Society has shown are nine times as likely to lose out from the cap as adults. Out of the 50,000 households that will be affected by the cap, the Children’s Society estimates that 210,000 will be hit, compared to 70,000 adults. Perhaps the Minister will tell us whether he thinks this policy is indeed fair to children.
The Bill impacts so heavily on children in part because of the way that the Government have stated that they will calculate the level of the cap. At present it is proposed to set the benefit cap at two different levels. The first, for single people without children, will be introduced at around £350. For couples, it will be introduced whether they have children or not, and for single parents with children the cap will be introduced based on net average earnings for a working household with or without children, which the Government estimate to be around £500 per week at the point of introduction.
We should note that that proposal creates a substantial couple penalty, which the noble Baroness, Lady Tyler, spoke about. Research by Family Action showed that for two lone-parent households that decided to move in together this penalty could be as much as £9,000 a year. Does the Minister believe that financial penalties of this type form a disincentive for families to move in together? If so, what assessments has his department made of the likely impacts of applying the cap in this way on the rates of lone parenthood and cohabitation?
We note that while the universal credit has a higher personal amount for couples than for single people with children, the benefit cap has not followed the same principle. Not only is the current calculation unfair towards couple families, it is also unfair in its comparison between those in and out of work. Both working and non-working families were able to receive child benefit and housing benefit. As the level of the cap is based on earning levels rather than income, however, these will, as the right reverend Prelate said, be excluded from consideration of the amount of money that working families have to live on but included in the calculation for those out of work. Amendments in the next group seek to exclude child benefit and those in this group to exclude housing benefit from being included in the calculation of total income for out-of-work families. Perhaps now the Minister could explain exactly the basis on which this method for calculating average family earnings was chosen.
In-work benefits, including working tax credit and, subsequently, universal credit, will also be excluded from the calculation of the level of the cap, but not from the calculation of the amount of income that out-of-work families are expected to live on. Here we come to another lack of clarity about the Government’s approach, as it is once again not clear what the definition of work is expected to be for the benefit cap when universal credit is established. Before universal credit is established, the cap will initially be applied to housing benefit, and the note with the draft regulations that we received states that a claimant in receipt of housing benefit will be considered to be in work if they are entitled to working tax credit. It has been announced that when working tax credit is abolished, there will be a corresponding exemption for people on universal credit who are considered to be in work. The precise criteria for this exception are still being considered.
Again, the thinking behind the benefit cap appears to be out of kilter with what is behind the universal credit. Indeed, the Government have just spent a large amount of money on ensuring that households working under 16 hours will still be able to claim support with childcare costs under universal credit. Yet in benefit-cap terms, it seems that working less than 16 hours is not really considered as work, and it is possible that this childcare support will be removed by the restriction on the total amount of benefit that a family can receive. Large families may be caught in a trap whereby any move into work brings with it additional childcare costs, which are then reduced by the cap to the extent that working is no longer worth while. Does the Minister believe that a family in which someone is working for less than 16 hours a week is a “working family”?
Amendments 99ABAA and 99ACA in our names seek to understand why housing benefit and council tax benefit have been included in the benefit cap. At present, the proposals seem both unfair and unworkable. The differences in rent around the country, as we heard from the noble Lord, Lord Best, mean that families in different areas will be affected very differently by the cap, with the most severe impact on families in London. As the Government’s own impact assessment states about the possible impacts of the cap, it is likely to affect where different family types will be able to live, housing benefit may no longer cover housing costs, and some households may go into rent arrears. This is a direct consequence, they acknowledge, of government policy. Some households will be pushed into rent arrears, which will require expense and effort by landlords and the courts to evict and seek to recoup rent arrears. Some households are likely to present as homeless and may, as a result, need to move into more expensive temporary accommodation at a cost to the local authority. These costs are likely to fall most heavily on local authorities in London. Shelter, Crisis, Homeless Link and the National Housing Federation state that although the cap has been characterised as a cap on large families, high rents in London mean that families with just two children will be subject to the cap in all inner London and many parts of outer London, including Newham, Haringey and Hounslow, because of higher housing costs in those areas. London Councils points out that rent levels vary widely across the country. London has the highest average private sector rents in the country, at £220 per week, which is more than 35 per cent higher when compared to £164 nationally. It is estimated that more than 50 per cent of couples with more than three children in London are unlikely to be able to afford their rent.
The benefit cap will come on top of the already imposed cap on the local housing allowance, as we have heard, while Shelter, Crisis, Homeless Link and the National Housing Federation state:
“Unless housing benefit is removed from the calculation of the cap there is a risk that low income households will be displaced from large areas of the south-east, on a scale far wider than that feared in response to”
the local housing allowance caps. For families already hit by those caps, the organisations state,
“there is a risk that they could be hit again and forced to move twice within less than a year”,
as the noble Lord, Lord Best, said. What estimates has the Minister made of the additional cost to local authorities in London and the increased costs that they are likely to face as a result of the household benefit cap?
In the post-Bill world, these same local authorities will also be delivering council tax benefit. For the Government to be able to take council tax benefit or its replacement into account for the purposes of the cap, they will therefore need local authorities to tell them who is in receipt of the benefit and how much they are receiving. What arrangements does the Minister expect to be in place to ensure that the benefit cap correctly takes into account the amount of support with council tax?
The variation in local authority support for council tax also means that how families are affected by the benefit cap will vary by local authority. Those local authorities faced with additional costs in temporary accommodation as a result of the cap may be tempted to recoup their costs by limiting the amount of support that they give with council tax—knowing that, in effect, the DWP will pick up the bill by paying out more universal credit before the benefit cap is imposed. Perhaps the Minister can tell us what estimates have been made of the potential for savings from the benefit cap to vary, depending on the level of council tax support put in place by differing local authorities.
The Minister may say in his response that according to the impact assessment the benefit cap is expected to hit just 50,000 households—roughly 1 per cent of the out-of-work benefit caseload. Yet the impact on these families will be extreme, with an expected average loss of £93 a week. He may also tell us that he has no money and no way of recouping the expected savings from this policy of £225 million in 2013-14, and £270 million in 2014-15. However, it is clear that the costs of this policy, not only in terms of family well-being but for local authorities, will be high. The amendments proposed today seek to rescue this policy and to ensure that it can retain some aspects of the fairness that the Government say that they are aiming for. I hope that the Minister feels able to accept the amendments.
Perhaps I may conclude with a few questions. The impact assessment, as has been discussed, sets out the consequences of the benefit cap—that it will force people into rent arrears and cause them to be evicted—but it has not been able to put a cost on that. Do central Government accept that this is an increased burden on local authorities which, under the Government’s policy, should be met on one basis or another, and has any further work being undertaken to quantify this? What about the costs falling on the devolved Administrations? As to those Administrations, which benefits, if any, are included under Clause 93(9) that could be capped in England but not in Wales or Scotland? Perhaps the Minister could let us have a detailed note, not today but by correspondence, on the local authority obligations to individuals and families made homeless by these provisions and the types of rules that local authorities have to take into account, particularly in relation to local connections.
Can the Minister also say something about the number of people who will be affected by this cap and who live in social housing? I think that a figure of something like 70 per cent was discussed in the other place, but that may not be up to date. The point is that social housing is, generally, of lower cost than pretty much any other housing around. If people in social housing are being forced into rent arrears and eviction, the only consequence will be that they will face being rehoused in higher-cost accommodation.
Baroness Hollis of Heigham
Does the noble Lord not agree that, with the new affordable rents—which are going to be 80 per cent of market rents—we could end up with social housing being higher than the benefit available to somebody on the 30th or 20th percentile in the private rented sector?
Lord McKenzie of Luton
Indeed, I very much agree with that. In fact, one of my other questions to the Minister is to ask what assessment has been made of the impact of the capping policy on RSL’s ability to charge rents of up to 80 per cent of market value, which is the key to the housing programme that the Government have promulgated. They have moved away capital spend to revenue spend. Perhaps the Minister could spell out more generally the whole evidence base for this policy that is presented to us.
I also ask the Minister—because part of the rationale is supposedly its impact on work incentive—whether, out of the 50,000 households expected to be affected by the cap, he could split that 50,000 between those who are within income support currently, those who are within the WRAG, those in the support group and those in the full conditionality regime of JSA. Does he agree that the cap will effectively create a cliff edge that undermines a key benefit of the universal credit? Whether it is hours or income, movement to either side of the cut-off point could be dramatic. What modelling has been done to assess the consequences of that?
Finally—for the time being—I ask the noble Lord for his comments on the report from the Centre for Social Justice, which I think is an organisation dear to the Minister’s heart. It says,
“we do share some of the criticisms about how such cuts are being introduced in the welfare system”.
That was a reference to child benefit. The Centre for Social Justice goes on to state:
“But our main contention is with current plans to introduce a full benefit cap on households in one fell swoop. Without the careful phasing in of such a cap … the CSJ is concerned it will bring hardship to as many as 50,000 large families who will have the plug pulled from under them overnight”.
As we discussed, average losses are projected to be £93 a week. The Centre for Social Justice states that, “it is likely to be devastating” and that the Government should think again urgently about their implementation plan. Does the Minister accept that assessment?
Lord Skelmersdale
Can I just finish? I accept that this will involve lifestyle changes. It is inevitable, is it not? Noble Lords have spoken about housing. There is no doubt that idleness—no, idleness is an unfair word—having more time than someone in full-time work costs money. How and with what—
Lord McKenzie of Luton
Would the noble Lord approve of a lifestyle change that forced someone out of a council house, whatever the level of rent, into much more expensive private sector accommodation because they had been made homeless? Is that a lifestyle change that the noble Lord would approve of?
Baroness Hollis of Heigham
Perhaps I may add to my noble friend’s comments. Would the noble Lord care to compare apples with apples rather than apples with oranges—in other words, not compare the situation of a single man earning the average of £25,000 with the situation of a family who would also be entitled, for example, to child tax credits? If the noble Lord is going to make comparisons, he must in all integrity compare like with like.
Lord Freud
My Lords, these amendments seek to increase the amount of welfare benefits that households which are out of work will be able to receive to above the level that we have said we will be introducing for the new benefit cap. Before I speak to the specific points that they raise, I need to make it clear that the coalition Government believe that there has to be a limit on the overall levels of benefit that it is appropriate for the state to provide to those who are not working. Indeed, I understand from the comment of Liam Byrne MP in yesterday’s Observer that this is also the position of the Opposition. Perhaps the noble Lord, Lord McKenzie, will be happy to confirm that.
A welfare system that provides payment at unrestricted rates ultimately serves nobody—not those paying taxes to fund it and often not those it traps in welfare dependency by providing little or no incentive to move off benefit and into employment. It is important that the benefits system is fair and is seen to be fair. We do not believe that it is appropriate that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households.
We believe that the cap for lone-parent and couple households should be around £500 a week, which is the level of median household earnings. This is the equivalent of a net salary of £26,000 per year, or a gross figure of £35,000 per year. There will be a cap of around £350 per week for single-adult households. Therefore, even within the limits of the cap, households will still be able to receive significant amounts of financial assistance from state welfare payments—an amount equal to the median national wage without going out to work. To make that explicit, it is the equivalent of what more than half the households in the country are earning.
The right reverend Prelate’s Amendment 99ZA and several of his other amendments seek to differentiate and improve the position of families with children in the way that the cap is calculated and applied. I acknowledge that, because of in-work benefits, there will be some working households that earn at the level of the average weekly wage whose total income will exceed the level that we are setting for the cap. However, we believe that work should always pay more than out-of-work benefits. That is one of the driving principles of the Bill and at the heart of our welfare reform.
When we introduce the cap, we intend to use a method that looks at median earnings after tax and national insurance for all working families, which will strike the right balance between providing support for families, promoting fairness between those out of work on benefits and those in work and, crucially, ensuring that there are clear financial incentives to work because work is the best route out of poverty. The benefit cap provides a clear, simple message that there has to be a maximum level of financial support that claimants can expect the state to provide. The aim of this policy is to achieve positive effects through changed attitudes to welfare, responsible life choices and strong work incentives. People must be encouraged to take responsibility for their decisions in light of what they can afford. I accept that a case can be made for making the estimate in a variety of ways. However, I should make it clear that the clause would provide us with flexibility, should it be necessary in future to adapt how we estimate average earnings if it is felt that we are no longer achieving the correct balance.
I will address Amendments 99ABAA, 99AC and 99ACA together, as they are all concerned with housing-related benefits. Each of these amendments would undermine the fundamental principles underpinning the cap—that, ultimately, there must be a limit to the amount of benefit that a household can receive and that work should pay. It is not right that some families on benefits have been able to live in homes that most working families could not afford. With the introduction of the cap, people receiving benefit will have to make the same choices about their housing that people who do not get benefit make.
The noble Lord, Lord Best, raised a point about whether the cap will force families to move. It will not necessarily mean that people need to move but they will have to make the same choices about affordability as those in work. While some may well choose to move, there are a number of ways in which they might be able to meet any such shortfall, such as moving into employment, trying to negotiate a reduction in their rent—I accept the noble Lord’s point that in some cases that may not be possible—and meeting it from other income or capital. The Government are looking at ways of easing the transition for families and providing assistance in hard cases. We recognise that there are households for which it would be inappropriate to restrict the amount of benefit that they can receive. We have announced the groups that we intend to exempt and will discuss these groups further as we move on to the next debate.
The noble Lord, Lord McKenzie, asked about childcare—specifically whether those working a small number of hours will be eligible for support for childcare costs through the universal credit. I confirm that support for childcare through the universal credit will not be affected by the cap.
Lord McKenzie of Luton
Could the noble Lord clarify whether he is saying that it will not be included in the total of benefits that is judged against the cap, or whether it cannot be withdrawn from that component of the benefit?
Lord Freud
It is the former. It may be helpful if I explain now that we feel that the best way to support these households is to exempt them completely from the impacts of the cap, rather than attempt, as these amendments do, to alter its design to accommodate their particular circumstances. For the groups to whom the cap applies, this measure creates a very strong incentive to work. The most effective way of smoothing transition will be to engage closely with those families likely to be affected by the cap in the year before it is implemented. We are having initial discussions with local authorities and will provide them with guidance on the implications of the caps so that they can take account of this when working with affected households, especially those affected by the LHA cap.
On the council tax benefit question, I confirm that we are looking at the implications of localised support for council tax, including the implications of decisions taken by the devolved Administrations.
Lord Freud
Regrettably, yes, it may or it may not. That will depend on how we reach our design by taking in the implications of localised support. I cannot design a system on the spot when we do not know several of the components, but we have the powers here to take that into account and we are planning to do so.
Lord McKenzie of Luton
Will discretionary housing payments be included as benefits for these purposes?
Lord Freud
They will not be included. Moving on, with regard to the couple penalty, we should not assume any automatic link between the benefit cap and family breakdown. One of the key drivers of family breakdown is long-term unemployment, which puts considerable pressure on vulnerable families. One of the most supportive things that we can do for these families is ensure that work always pays and that the transition to work is as smooth as possible.
The benefit cap is intended to support our new universal credit, which will improve the incentive to work and the level of support for many low-income families, especially couples with children in rented accommodation. At the same time, we will also look to offer additional support through Jobcentre Plus. This would include working with local providers to support claimants with budgeting and the management of their housing costs, and encouraging families affected to engage with more employment support, particularly the work programme. We have always made clear that we would look at ways of easing the transition for families and providing assistance in hard cases.
Picking up the remarks of my noble friend Lord German, where he read from a putative letter—
Lord Freud
Putative is a good word. The figures to which he was referring came from internal modelling from the Department for Communities and Local Government which had not been externally validated. That analysis was out of date, having been produced in January and before we announced that we were looking at transitional arrangements for dealing with particularly hard cases. It is not possible to predict robustly the effects of this policy on homelessness as we cannot anticipate the resulting behaviours of tenants or their landlords. We will think carefully about all these matters, but the clause is drafted so that we have all the powers we need to ensure, through regulations, that the cap achieves its purpose in the fairest way possible.
Picking up the question of the noble Lord, Lord McKenzie, on the devolved Administrations, under Clause 93(9) we will be able to reduce only payments that are the responsibility of the United Kingdom Parliament. No payments that are within the legislative competence of the Scottish Parliament, the National Assembly for Wales or the Welsh Ministers will be reduced by the cap.
Lord McKenzie of Luton
I understand that; I have read the clause. I was trying to understand what might be included in the items that cannot be capped in Wales and Scotland.
Lord Freud
Such payments could, however, be taken into account when determining whether the cap itself should apply and whether the non-devolved payment should be reduced. Presently, we expect the cap to apply to housing benefit and ultimately to universal credit, which are the responsibility of the UK Parliament.
The next, or rather the last, question put by the noble Lord, Lord McKenzie, was on whether the Government accept that there would be an increased burden on local authorities as a result of this measure. The impact assessment recognised that there could be a cost to local authorities in connection with temporary accommodation. That is why we intend to work closely with local authorities on the implementation of the cap.
Lord Freud
My Lords, the principle, as noble Lords will know, is that the grants to particular local authorities reflect the number of people living in those authorities. Therefore, there is an automatic adjustment process. I accept there are some timing issues if there are sudden movements, but the DWP is talking very closely to DCLG about these practical implementation matters.
I come to an end with this question. As I understand it, certainly the parties in the Committee—I am not sure whether that covers all the Back-Benchers—are all signed up to the principle of the cap. We believe that the cap is the right approach. In the light of these comments, I hope that the right reverend Prelate and the other noble Lords will withdraw their amendments.
Lord McKenzie of Luton
My Lords, I thank the Minister as ever for his detailed response but there are still a few questions left unanswered. I can confirm that he correctly sets out the position of the Labour Party in respect of the cap, but we want to see something that is evidence-based, properly analysed and fair to people. This is our great concern with what is on the table at the moment. The Minister did not deal with the analysis of the 50,000 households to be affected by this and the extent to which they are in a group which is subject to full work conditionality. If a big thrust of this is to look at work incentives but it then applies only to a minority of those people, where does that leave the policy?
Lord Freud
I think that we have a scattering of figures in this area. It is a minority, which I think is around 10 per cent. If the noble Lord is after a detailed response, I ought to offer to write on that matter if it would be satisfactory to him.
Lord McKenzie of Luton
That would certainly be satisfactory but even if that 10 per cent estimate is roughly right, it means that 90 per cent of the people who will be affected by this cap are under no obligation, under the Government's policies, to have full work conditionality. How does that square with the big thrust of this being about work incentives? I should also like to follow up on another point which the Minister did not touch upon: the profile of those, again within that 50,000, who would be tenants and paying rent of one sort or another. Is it the case that a significant proportion of that 50,000 are tenants of social landlords, RSLs or councils?
Baroness Lister of Burtersett
While the noble Lord is conferring, can he perhaps explain to the Committee what behavioural effects the Government are trying to achieve in the case of those who are not required to seek work?
Lord McKenzie of Luton
I am sorry to press the Minister but, for us, the percentage of people affected by the cap who might be tenants of social landlords is a hugely important issue. I accept that the information has been updated but perhaps he can at least confirm the original estimate. Does he not understand that it is impossible for those people to get lower-cost housing? Generally you cannot get housing that costs less than social housing, so what are those people meant to do?
Lord Freud
The best I can say is that according to the current published impact assessment roughly 70 per cent of those affected are in social housing. However, the direction of travel of those figures in the new assessment is downwards, although I do not know by how much.
Lord Freud
As to the first question asked by the right reverend Prelate on where all the people in social housing have gone, the situation is, to be honest, probably nothing more than a result of greater depth of analysis. I do not think that there is any real movement there but, as we have homed in and obtained more information, that is our understanding.
On his second question, the interesting reality is that childless couples have higher earnings than couples with kids. Perversely, therefore, having a differentiation based on what actually happens would have the opposite effect to the one that I imagine the right reverend Prelate wants. That is the point. It is not a useful approach because it would do exactly the opposite.
Lord McKenzie of Luton
My Lords, is that right? It might be right if you are looking at earnings, but if you are looking at income, which was part of the proposition, it might not be the case.
Lord Freud
I very elegantly have a wonderful piece of paper to hand. On the median, it works for total income—all gross and net household income—and it works for the mean. I can give noble Lords all the figures but it would bore them.
Lord Freud
I am sure that noble Lords probably have them at their fingertips anyway. They are meant to be accessible figures, but if noble Lords would like some help and for me to use up another Scandinavian forest, I will circulate them. I will put them in an e-mail instead. That would be cheaper.
Lord McKenzie of Luton
I am sorry to come back to this but there are still some unanswered questions. I do not think the noble Lord dealt with the definition of “in-work” and when the cap will apply. Is the threshold set at 16 hours, as it is for working tax credit at the moment? How will that change from April? I think for couples there is a joint requirement for 24 hours a week, rather than 16. How will that all work?
Lord Freud
That is a matter that we will look at very closely. We want to encourage work and one of the main aspects of universal credit is to encourage smaller amounts of work. We will look at that issue very precisely.
Lord McKenzie of Luton
In which case, I have one final question. In relation to homelessness, I asked whether we might have a detailed note setting out all the obligations of local authorities when people present as homeless or when they are evicted.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, if I may intervene briefly, I promised on Monday to provide some timetabling indicators of provision of information about entitlement thresholds for PIP and passporting arrangements for carers. I am happy to confirm our intention to provide entitlement thresholds for PIP and information on the likely impact of these ahead of the consideration of this part at Report stage.
Noble Lords will wish to be aware that we are looking carefully at the interaction between universal credit and carers’ allowance. In the interests of providing a smooth taper of benefit provision as carers return to work, a carers’ element is included within the universal credit structure, which of course removes the cliff-edge effect. That is why we have done that. In order for noble Lords to have the fullest possible picture of provision for carers as we debate universal credit, I will also aim to provide more information about the passporting arrangements from PIP to carers’ allowance prior to the start of Report stage. Thank you for your indulgence.
Lord McKenzie of Luton
I thank the Minister for that statement. It is very helpful in being able to schedule and make progress on Report.
Lord Wigley
My Lords, as I was saying before I was interrupted a couple of days ago, these amendments touch on a critical consideration—namely, the need to ensure that those making assessments can identify factors that may make it difficult to engage meaningfully, fairly and objectively with the applicants: disabled people, whose condition of course fluctuates, as has been mentioned already, and for whom communication itself is often a challenge.
Nowhere is this more evident than among those whose difficulties arise from the autistic spectrum of disorders. As was pointed out by the noble Lord, Lord Touhig, on Monday, on the autistic spectrum not only are no two people the same, but the same person may exhibit different characteristics over a period of time.
The Minister will, I am sure, have noted from Monday’s debate that many of those who contributed—the noble Lords, Lord German, Lord Addington and Lord Touhig, and the noble Baronesses, Lady Howe and Lady Healy—highlighted the challenge of proper assessment in the context of autism. The noble Baroness, Lady Healy, emphasised the need for assessors to have specific training in autism, and access to expert champions. The noble Baroness, Lady Grey-Thompson, who moved the amendment, warned of the dangers of incorrect decisions where assessors base their conclusions on face-to-face interviews without professional knowledge and without experts’ evidence. Given the extent to which autism factors have run through this debate, may I urge the Minister to address the points raised in that autism context?
In particular, I urge the Minister to ensure that in dealing with problems of face-to-face assessments, safeguards be written into the Bill, so that wherever there is ample expert written evidence available, applicants do not have to go through unnecessary face-to-face assessments. The Bill should stipulate that all assessment will take into account expert reports and evidence as a first tier in that assessment process.
Secondly, there should be a requirement that those undertaking assessment have appropriate training, including in autism. This is something about which Autism Cymru, the organisation in Wales, feels particularly strongly. Also, in every assessment centre there should be available to assessors appropriate experts or champions in mental, intellectual or cognitive disabilities, including autism.
The third point I want to underline—and these have all been raised in different ways by noble Lords who have contributed to this debate—is that the Bill and regulations must specify that parents and carers are categorically allowed to support disabled individuals at every stage in the assessment process. Those without such support should be told of their rights to an independent advocate.
Finally, I turn to the position of lifelong awards in the context of Amendments 86F and 86G, to which I have added my name. The Government have said that they want all awards to be for fixed terms apart from in exceptional circumstances, and that there will be some sort of built-in review process. Surely the Minister must realise and accept that there will be people who are sadly not exceptional, whose condition is a lifelong one and for whom the worry and uncertainty of regular reviews are an unnecessary imposition, the cost of which is a waste of public money. Does not all common sense say that those with a degenerative disease, for example, should not have to face repeated assessments? In this group there are more than 300,000 adults, as I understand it, with autism, whose core condition will not change; there are some 70,000 with MS and 20,000 with Parkinson’s disease, whose condition is incurable. Retesting these people is no more than pandering to the tabloid agenda we heard about in the last sitting.
I urge the Minister to take on board these amendments and to facilitate lifelong awards where appropriate.
The Earl of Listowel
My Lords, I hesitate to speak because I was not present at the previous part of this debate. However, after listening to today’s debate and reading part of Hansard’s previous report, I am prompted to ask a question. It may have been answered already and, if so, I apologise for doing so. In the sensitive processing of asylum immigrant applications in the immigration system, continuity of contact with the case officer—continuity of the relationship between the person being assessed and their case manager—has been found to be helpful. I would be interested to hear from the Minister what possibilities there are for that continuity of relationship in this context.
Lord McKenzie of Luton
My Lord, this is an important group of amendments which addresses aspects of the assessment process. As we have heard, some of the underlining concerns which the amendments seek to address are drawn from experience of the work capability assessment and the difficulties which this has created for disabled people. They all raise points which deserve our support, although I expect the Minister will say that, at least in part, they can be covered in regulations. To the extent that he does so, I hope the noble Lord will take the opportunity to put clearly on the record how each of these matters will be addressed.
The noble Baroness, Lady Grey-Thompson, cited WCA examples to emphasise the importance of evidence from the claimant’s healthcare professionals being part of the assessment process, with the obligation on the DWP to organise this. Notwithstanding that we now have a bio-psycho-social model and that the condition or impairment that an individual has may in some cases be of limited value in assessing an individual’s ability to participate in society, this will not always be the case, and there is a clear risk that without it the assessment could be significantly adrift. A process which does not incur the kind of charges which individuals face, to which the noble Baroness, referred, is important.
The amendment of the noble Lord, Lord German, concerning advocacy is also to be supported. As he acknowledged, the explanatory note to the draft assessment criteria is clear that an individual will be able to bring a friend or advocate to a face-to-face consultation. The implication is that such a person could be there to help with the process and not be just silent company. Indeed, I believe that was confirmed by the Minister in the other place when the matter was raised there. Presumably training for staff will enable assessors to sort out advocates who are trying to lead individuals. Claimants must be entitled to know that there is a right for them to be accompanied.
On Monday, my noble friend Lord Touhig gave a clear example of how this could be important. He raised the example of when someone was asked about a bus journey and gave an answer, which of itself would have been extremely unhelpful and misleading to the assessment process. Having an advocate there to help with that explanation would have been hugely important.
The noble Lord, Lord Addington, is a consistent advocate for those with autism and I have no doubt that his plea that those undertaking assessments should be properly trained in mental, intellectual and cognitive disorders will be supported by the Minister. Can the Minister confirm that this will be the case for decision-makers? Perhaps he can also say what is the planned position in respect of access to specialists, which is another key component of the noble Lord’s amendment.
It is understood that the department has recently begun a tendering exercise for the assessments to be undertaken by a third-party supplier. Will the Minister say what specifically is being sought in respect of access to this type of expertise? Presumably, the specification has been developed at this stage. Therefore, can he also tell us what that specification indicates in respect of the numbers, the likely volume of face-to-face assessments and the numbers of likely exceptions to those face-to-face assessments? Perhaps he can also say something about the overall numbers. When this issue was debated in another place, reference was made to the prospect of some of the assessments being able to be undertaken at home—a more comforting and aware environment for some claimants. Perhaps the Minister can update us on this and also say how it is being dealt with in the specification.
We had a number of detailed and knowledgeable explanations from those concerned with autism, including from my noble friends Lord Touhig and Lady Healy and again, this afternoon, from the noble Lord, Lord Wigley. Their amendments seek relief from face-to-face assessment in certain circumstances where there is sufficient medical and other evidence on which to base a clear judgment. The challenges which face-to-face interviews can present for individuals with an autism spectrum condition were graphically described by my noble friend Lady Healy. She said that it is not just the nervousness or anxiety that is experienced at the approach of a difficult event, but dread and terror. The Minister demonstrated sympathy with this point of view at Second Reading. We hope that these amendments will enable him to say a little more in support of that proposition.
Lord Freud
My Lords, I would like to start by responding to the noble Baroness, Lady Grey-Thompson, on her Amendment 86ZZZUA. Obtaining the right evidence for assessors and decision-makers will be a key part of the assessment process for personal independence payment, enabling us to make the best decisions regarding an individual’s claim. Such evidence might come from a range of sources, but in particular from the healthcare professionals involved in supporting disabled people on a regular basis. This may sometimes be the individual’s GP, but in other cases will not be. Many individuals, particularly those with longer-term conditions, may not have not seen their GP for some time and another professional might be much more relevant. This is why we want individuals to tell us who we should be seeking evidence from, as they will know best.
We will encourage individuals to provide this evidence to support their claim or, if they cannot, to let us know who it would be best for us to approach directly. We do not wish to create a two-tier system, as feared by the noble Baroness. However, I do not necessarily think that we need to gather such evidence in every case. In some cases what the claimant has already told us, or provided alongside their claim, will be sufficient. In other cases, information from a health professional might be likely to add only limited value. We must remember here that what the condition or impairment is, or its severity, is often not critical in the assessment; it is the impact of it that matters. The gathering of additional evidence should be decided on the merits of individual cases.
The noble Baroness referred to learning from the work capability assessment used in employment and support allowance. Although it is important to be clear that ESA and personal independence payment are very different benefits paid for very different reasons, we are seeking to learn from the experience of delivering the work capability assessment. As part of this we are looking closely at the findings of the independent review of the assessment carried out by Professor Malcolm Harrington to see where we can improve the design of the personal independence payment claim and assessment processes. For example, we recognise the need to ensure that these processes are empathetic, that we gather the best possible evidence and that assessors are given the training and support they need.
I turn now to the amendments tabled by the noble Lord, Lord Touhig, and the noble Baroness, Lady Gardner. Evidence will also enable us to make the best decisions about how an individual's claim should be dealt with, including whether a face-to-face consultation is necessary.
We recognise the importance of the assessment process being carried out sensitively and proportionately. We have made it clear that we believe that face-to-face consultations should form part of the claim process for most individuals. Consultation will play a key role in creating a fairer, more objective and transparent assessment, providing individuals with the opportunity to put across their views on how their impairment affects their everyday lives.
However, where there is already sufficient evidence on which to make a decision on entitlement, we completely agree with noble Lords who argue that a face-to-face consultation should not be required. In such cases, entitlement would be considered on the basis of paper evidence only, and we have the flexibility in legislation to allow for that.
In doing so, we are ensuring that we will have a tiered assessment—as recommended by the National Autistic Society, and referred to by the noble Baroness, Lady Healy and the noble Lord, Lord Wigley—a process where we consider evidence provided by the claimant first, then any additional evidence gathered and then carry out a face-to-face consultation only if needed.
However, we do not agree that there should be different rules or processes for different groups of people, and especially not on the basis of impairment type. Exempting individuals from the face-to-face consultation on the basis of their impairment would undermine one of the key principles of the new benefit, which is to treat the individual as an individual. The noble Lord, Lord Touhig, argued the point well when he said that when you have seen one person with autism, you have seen only one person and that no two people with autism are the same.
The only exception to that principle is where individuals are claiming under the terminal illness provisions, whom we will not expect to attend face-to-face consultations. I am sure that all noble Lords will accept the need to make an exception under those circumstances.
Picking up the point made by the noble Lord, Lord Wigley, on the frequency of reassessments, we will take a personalised approach to setting the length of awards, varying the frequency and formats of awards and reviews depending on the individual’s needs and the likelihood of the impact of their health condition or impairment changing. Some people will have short-term awards; others longer; and some will receive ongoing awards. It is also important to state that reviews may not always necessarily involve face-to-face consultation. We recognise that it will be important to ensure that the review process is applied sensitively and appropriately.
Having discussed the need for face-to-face consultation, I feel that this is an appropriate juncture at which to turn our attention to my noble friend Lord German’s amendment regarding the attendance at a face-to-face consultation of a suitable person alongside the claimant. We appreciate that some individuals will be able to participate in a face-to-face consultation only with the additional support of someone whom they know and trust. It has always been our intention that individuals should be advised that they can bring with them another person—be it a relation, friend or professional who supports them—in order to help them or to remove any anxiety that they may feel in undertaking a face-to-face consultation. Indeed, the Minister for Disabled People made that exact point during debate in the Commons. That will apply to all claimants.
I agree with my noble friend that the suitable person should not just be a bystander to proceedings. They should be able to play an active role in supporting the claimant and ensuring that they understand the assessor’s questions and requests in order to help them to answer them on their own. Where the claimant is not able to speak for themselves as they should, with the claimant’s consent, they should be able to engage with, and respond to, the assessor directly to ensure that they are provided with the necessary information—particularly in the context of all of our concerns with the community on the autistic spectrum. I hope that that reassures my noble friend and noble Lords more generally on this critical point.
This important measure does not need legislation. We have already made a clear commitment to it and are building it into our processes, guidance and within the commercial framework with the successful assessment supplier.
Lord McKenzie of Luton
My Lords, a compelling case has been made for a trial period before the system goes live in its fullest extent. When this was debated at the other end there was some debate around the difference between a pilot and testing, and what that meant in government legalese. The proposition seems very clear: we want to see it working in practice before it is more widely available, for all the reasons that have been advanced by noble Lords about confidence, which I link with the issues of co-production, value for money and testing the capacity of providers. If it is to be meaningful, this would have to be done together with whoever will end up being the provider. It could not be done just with DWP staff, with providers coming in later. We acknowledge what is clear from the documentation we have: there has been an enormous amount of testing and engagement to date. However, that is not the same as or a substitute for having the final subject of the trial criteria in place and knowing where the thresholds are.
The amendment says that the trial period should be in respect only of those new claimants. I wonder quite why we are adopting that cut-off point. Is there not also going to be an issue for existing DLA recipients who have to go through the process and how that is handled, with all the communications and sensitivities around that? In particular, I think we know there will be some who are in receipt of DLA at the moment who will go through an assessment process and not be able to end up on PIP. I would be interested in the noble Baroness’s view on why she has pitched it at just new claimants, rather than people currently on DLA who will have to, in a sense, be recycled through the new process.
I want to make a point about capacity as well. We do not know who the new providers will be. Certainly, if they can earn the sums that my noble friend Lady Wilkins referred to, you would think that there should not be a capacity issue—certainly not in terms of numbers. However, I recall an instance a couple of years ago when, for industrial injuries benefit, the condition of miner’s knee was recognised as something that had to be compensated. Trying to pull in capacity to get those assessments done was, frankly, the devil’s own job because the existing providers did not have enough people to help out, certainly not in the timeframe that was wanted. Although, in a sense, the system will not be fully up and running even in that one-year trial period, this seems to be an important opportunity to test that capacity—not only in terms of the numbers but the processes and how people are being dealt with, and the levels of expertise that we expect to be available. This is a real opportunity to try it.
One thing that strikes me—it has been part of the whole debate over this Bill—is how pervasive the problems with the WCA are right across the spectrum. If we knew when that was introduced what we know now, there would have been much more careful testing of it, as is requested and sought by this amendment. Therefore, I do believe it is important to see how it is happening in practice before it is rolled out more widely, whether that is over one year or a different period.
Lord Freud
Let me take each of the noble Baroness’s amendments in turn. On the trialling of the assessment, I am sure that noble Lords are aware that it is possible to test out and evaluate the assessment process without trialling it. There is, indeed, an advantage to testing over trialling, because the former can be done without affecting an individual’s entitlement to benefit.
The noble Baroness will be aware of the testing we undertook throughout the summer with more than 900 disabled volunteers, and the informal consultation that took place alongside it. Both were very effective, and allowed us to review, revise and improve the draft assessment criteria from the draft published in May to the draft with which noble Lords have recently been provided. We are now seeking further views on that.
For our testing, using independent experts has demonstrated that our proposed approach to assessment is both reliable and valid. This testing included individuals on the autistic spectrum. This is not the end of the matter, though, as we believe the development of the benefit processes, including the assessment, should be and will be an iterative process. Therefore, in addition to testing of the assessment, we have created a specific development group to engage with a broad spectrum of disability organisations, to understand their views on a range of issues related to the delivery of the benefit. We have also created a number of customer research panels made up of groups of disabled people who share similar characteristics. We will seek to test our processes in a model office environment, allowing us to see how they work without affecting individuals. These processes will be vital in helping us gather insight first-hand from individuals on whom the process may impact.
Turning to the independent review of the trial referred to in the amendment, I first state that I do appreciate the importance of such reviews, and will talk about that in more detail later. However, undertaking this after only one year of operation would not provide adequate time for the assessment process to bed in. It would not allow enough time for sufficient data to be captured, as it requires people to go through the full claims process in this time, and there are inevitable lags in the production of statistics. Any subsequent analysis would therefore provide an unrealistic impression of how the benefit was operating.
There are, of course, other means by which we seek to evaluate and improve the operation of the new assessment. The assessment and its associated process will remain living tools, and we will continually carry out internal evaluation work to monitor their performance. We will therefore not have to wait for the outcome of the independent review to learn from and take action based on operational and individual experiences.
The second element of the noble Baroness’s amendment is the involvement of disabled people’s organisations in the assessment process. Let me assure the noble Baroness that we have involved disabled people’s organisations in the development of this policy from day one. We are trying to approach this work in a co-produced way, seeking the views of disabled people and their organisations at each stage. I have mentioned in earlier debates that our assessment development group comprises members of Equality 2025 and Radar. Both have provided critical support, direction and challenge throughout the process of developing the assessment criteria.
We also held a 16-week informal consultation on our initial draft of the assessment criteria, which sought the views and opinions of disabled people and their organisations. This process helped us to revise the initial draft assessment criteria and develop the second draft, which has lately been made available. Most of the changes that we have made have been as a direct result of the input of disability organisations. We are now seeking views on the second draft and, importantly, the proposed weightings, before we reach any firm views on the entitlement thresholds. We then intend to carry out a full consultation on the entire assessment criteria, including the weightings and thresholds.
Equally, we are involving disabled people and the organisations that represent them as we design the operational processes for personal independence payment. To achieve this, we have created a dedicated working group specifically for this purpose. The group’s membership has been drawn from a wide number of national and grass-roots, user-led organisations, and it is currently working with us on a range of operational issues. We also see disabled people’s organisations playing a key role in the delivery of the new benefit, helping to inform individuals and guide them through the process. This could include assisting them in making claims, providing evidence to help support their case and/or attending assessments with them to provide support and reassurance. We are undertaking work to strengthen and expand our partnership arrangements with local organisations that represent disabled people and ensure that they have all the relevant information about PIP.
Meanwhile, there is nothing in the legislation to prevent disabled people’s organisations being involved in the delivery of assessments. The key for us is ensuring that, regardless of which organisation or organisations deliver the assessment, they have the capacity to do so, and that individual assessors have the requisite skills and experience. Disability organisations have been free to participate in the procurement exercise for the assessment, which is now under way, either as prime contractors or as partners of such organisations. Whatever the outcome of this exercise, we will ask the assessment provider to work with disability organisations and seek their input, so that we can deliver the best possible service to claimants.
The final element of the noble Baroness’s amendment is intended to ensure that individuals whose condition is unlikely to change over five years should not have to undergo an assessment more often than once every five years. We will discuss this issue in more detail in a later group of amendments. However, we know that disabled people’s lives are varied and that health conditions and impairments affect people in many different ways. As I have said before, we therefore do not feel it would be appropriate to make blanket rules for particular groups of people.
Under personal independence payment, we want individuals’ treatment to be tailored to fit their personal circumstances. This includes our approach to award length and review date, which should also be personalised. Such an approach would be able to take into account the likelihood of the impact of an individual’s health condition or impairment changing. We know that for some people a shorter-term award might be appropriate. For others, a longer-term award might be appropriate, while, for those with the severest disabilities, an ongoing award might be right. We absolutely do not want unnecessary reviews of claims, both to reduce the impact on individuals and to ensure that we do not waste money.
The noble Baroness, Lady Wilkins, raised the question of the overall cost of delivering DLA reform over three years. This was included in the 2010 Budget Red Book at £675 million.
Lord Freud
My Lords, I am very happy to reflect on that rather interesting point. I will go back and think about that very hard.
Lord McKenzie of Luton
I wonder if the Minister just could deal with this point also. In his response he explained—and I think we would accept—that a lot of testing, engagement and assessment is going on. That is what you would expect of the noble Lord. However, what it does not achieve—and I think the amendment is trying to—is a gentle start to the process, so that it does not start fully over a condensed period. A key lesson from the WCA is not so much its background philosophy or some of the assessment processes, although they have been refined by Harrington, but what happened in practice. There was a disconnect between the two to a certain extent. The thrust of this and perhaps the challenge is calling it a trial period. It is really the timeframe in which it is introduced which seems to be particularly important.
Lord Freud
My Lords, I am very sympathetic to the thrust of the noble Lord’s point. Noble Lords will be aware that when we designed the universal credit we did it on a trajectory. It is really important that we get the right trajectory on all these introductions. In that context, rather than having a formal trial which has some very specific implications around that process, I take the point about a trajectory of introduction. Indeed, we are looking very hard at the optimum trajectory of introduction.
Baroness Grey-Thompson
My Lords, I also support the noble Baroness, Lady Thomas of Winchester. When I first looked at this area, I found it quite confusing and some of it not very simple to understand. Some aids and adaptations are taken into account for the assessment. For example, for the mobility component, any aid that the person can use to assist them in walking is taken into account. However, someone who can self-propel a wheelchair will qualify because they are still unable, or virtually unable, to walk.
I declare an interest as a wheelchair user and someone who spends considerable time making sure that I can get the right aids and equipment for me to live as normal a life as possible. As the noble Baroness, Lady Campbell of Surbiton, has said, you try to get as much independence as possible. For me, it is about getting a small chair that means I can fit into every lift in this building, which is a challenge when they are all built into the various chimney stacks; and one that is light enough to push for more than 50 metres, which does not get you very far in your Lordships’ House on the very expensive carpet that we have here. I also need to get it in and out of my car. I spend a lot of time making sure that equipment is right for me but I could easily buy a chair with wheels that are 16 inches in diameter, rather than 11 inches, and that weighs 30 kilos instead of four and a half. That would change my impairment considerably but I want to be as independent as possible. Those aids and adaptations make my life easier but they do not stop the patronising attitude that is out there. They do not stop the barriers.
I also want to encourage disabled people to be as fit and healthy as possible but we could be in a situation where we prevent people exercising and doing physical activity because they are penalised for doing so. Again, in my case, I spend several hundred pounds on the right cushion to sit on to ensure that I do not get a pressure sore. A cushion cover for that cushion is around £120. This costs the National Health Service considerably more than it would if I sat on a piece of old, tatty foam. However, if I sit on a piece of old, tatty foam, I might be in a better position to be considered for DLA in the future. It is the same with adaptable housing, and lifts and ramps. We are getting into a very difficult situation here, where the things that should be making disabled people’s lives easier, to enable them to contribute, will actually encourage them to think about things in a very different way.
It is very important we get this right. We do not want to push disabled people back into their houses, or ghettoise them. We are in a real danger of doing that if we do not find the right balance, and make sure that disabled people have access to the right equipment to enable them to live as independent lives as possible, and to contribute towards society.
Lord McKenzie of Luton
My Lords, it is with a degree of trepidation that I rise to speak, having just heard those contributions. This issue presents a real conundrum. There is an argument that asks, if the social model is to identify the broader challenges to living that confront disabled people, is it unreasonable to take account of provisions and innovations of aids and appliances that society has developed to help people in their daily living? However, it is easy to state that; as the contributions we have just heard made clear, there is a question of what that will mean in practice.
We could recognise that the use of aids and appliances will not always remove the barriers that people face; we have certainly heard that explained. We should also recognise that not everyone will have access to aids and appliances, or indeed adaptations, which could enhance their quality of life. There is a conundrum that is recognised in the November 2011 Explanatory Note. If account is taken only of aids and appliances that people have and—other things being equal—that produces a low award, there is a potential disincentive to acquire those very aids and appliances that will improve people’s lives.
As I understand, what is currently proposed—as the noble Baroness, Lady Thomas, identified, this mirrors the current DLA formulation—is that the assessment will take account of aids and appliances that are normally used and can reasonably be expected to be worn or used. This seems to penalise those who have not yet acquired those aids and appliances. They will have a zero or low award, and not have the money to acquire the facilities. I wonder if it would not be a more reasonable approach, if there is to be some recognition of aids and appliances in the assessment, to take account of what people have initially, with some acknowledgement that, at a reassessment at some stage in the future, you might add those that people might be reasonably expected to use. At least that way, there is a transition.
We know that some aids can be differentiated from others on the basis that in themselves they do not overcome all the issues of mobility. Attaching higher scores for these circumstances—although we do not know what the tariff will be—does not seem unreasonable. The more I have thought about this, and the more contributions I have heard, the more difficult an issue I think it is.
Lord Freud
My Lords, I owe my noble friend Lady Thomas an apology and a clarification. I incorrectly attributed her question about reconsiderations in the previous group to ESA, when of course it applied to PIP. The new provisions on reconsiderations contained in Clause 99 will make a difference, but I suggest that we have a separate debate on that later clause, as it is a wider issue than just in relation to PIP.
Lord Freud
My Lords, this is a matter to be revealed at a somewhat later date. I am pleased to have provided a timetable of when this matter will become clear. However, the direction of travel is clear: the maximum number of points on that one is 15.
I almost want to call the noble Baroness, Lady Campbell, my noble friend, but I am not allowed to do so. I invite the noble Baroness to join me; I have to find an appropriate enticement so that I can call her my noble friend. However, I must disagree with her concerns. I suggest that she is likely to score very highly in the assessment by way of the very aids and appliances that she has highlighted. As I said, electric wheelchairs are right at the top of that measure at 15 points. We will produce case studies by the time PIP is debated on Report which clearly illustrate how individuals who successfully use aids and appliances will continue to receive PIP in a similar way as they do with DLA.
I turn to the noble Baroness’s second amendment. We are committed to personal independence payment, like disability living allowance, being an extra-costs benefit for disabled people, to spend on whatever they see fit. Our experience of DLA tells us that in some cases the money will go towards the cost and upkeep of specific purchases or activities, such as aids or appliances, or that it may simply become part of the disabled person’s budget paying for things as and when they come up, such as the need for shopping deliveries or taxis. The clear intent is that the mobility component should be used to help improve the disabled person’s ability to get around but we have no wish to prescribe how they should spend the money.
Given that the purpose of the benefit is to contribute to disability-related costs such as aids and appliances, and that there are other support means available, we do not think we should be paying for aids and appliances in addition to this. Given these comments and the reassurances that I hope I have given on how aids and appliances will be treated in the assessment, I urge the noble Baroness to withdraw her amendments.
Lord McKenzie of Luton
I do not think that the noble Lord has helped me with my conundrum. Is it not the case that the assessment will take account of aids and appliances that people have as well as aids and appliances that it might be reasonable for them to have? If that is the case, in that latter category is that not a double whammy as, other things being equal, people would get a lower assessment and a lower or zero award, and therefore would not have the wherewithal to acquire some of the aids and appliances which would positively improve their lives?
Lord Freud
This is the Catch-22 that a number of noble Lords have pointed out today and in the past, whereby denying oneself an obvious aid is used as a method or device to maintain a higher level of PIP. Clearly, we want to discourage that because we want people to maximise their opportunities in life. The noble Lord referred to a period in which to obtain an aid. However, that drives straight down the other path of starting to multiply the number of reassessments, which we do not want to do. There is a balance to be struck here but most people are able to get aids and appliances. They may not get the four-and-a-half kilo device of the noble Baroness, Lady Grey-Thompson. That is half the weight of my bike.
Lord McKenzie of Luton
My Lords, we have had a powerful set of contributions on the amendments. I hope that the Minister will have ringing in his ears the important question: if it is not about cost savings, why on earth are the Government seeking to do this? We have heard powerful presentations, especially from my noble friend Lady Morgan, about the costs that confront people. My noble friend Lady Lister has just made an extremely important point about the interrelation of this with the benefit, as well as the other challenges that come with the proposals.
The amendments are intended to deal, first, with the issue of fluctuating conditions; and, secondly, to alter the assessment period for access to personal independence payments. Looking first at fluctuating conditions, the amendments would ensure that those whose physical or mental condition limits their ability for the majority of the time, rather than continuously, would still be eligible. As drafted, the Bill suggests that people with fluctuating conditions would not qualify if they are not consistently ill for the required length of time, regardless of the severity of their condition. That is the case with the current work capability assessment, which, as we know, consistently fails people with fluctuating conditions such as mental health problems or multiple sclerosis.
The new draft criteria published on Friday contain some welcome recognition of the need to ensure that people with fluctuating conditions are not disadvantaged under the PIP assessment, so that where someone needs more than one descriptor within an activity, the time period can be counted cumulatively towards the thresholds of 50 per cent of days needed to satisfy one descriptor. However, what evidence is there to show that the method of taking account of the needs of people with fluctuating conditions will be both accurate and fair while meeting the aim of not disadvantaging those people during the assessment?
The Bill will extend the qualifying period before claimants can receive PIP from the current three months under DLA to six months. People will continue to have to demonstrate that their impairment or health condition will last through a further six months to qualify. That increases the total period for which individuals will have to demonstrate need from nine months to one year. The amendments would retain the one-year period, but split it so that claimants will have a three-month waiting period only but will have to demonstrate that their impairment is likely to last for an additional nine months. We support the amendments.
A wide range of organisations have expressed their concerns about that change. As the Disability Benefits Consortium put it, DLA eligibility is based on individuals experiencing additional costs as a consequence of their impairment or health condition.
“Making people wait longer will place further burdens on those adjusting to sudden onset conditions such as stroke, or people who experience the immediate debilitating effects of treatment such as cancer”—
we have heard strong testimony to that this afternoon—
“as well as penalising those whose impairment or condition has gradually worsened over a period of time and have already had to deal with additional costs prior to passing the threshold for PIP. To require additional costs to exist for six months before offering any financial assistance will push even more disabled people into debt”.
The noble Baroness, Lady Thomas, made that point very strongly.
If applied to disabled children, it will also place increased pressure on families trying to adjust to their child's impairment or health needs. The Government have stated that that change will not bring about any significant savings, but we believe that it will have a significant impact on disabled people. As we have heard, the Equality and Human Rights Commission has also raised concerns in this area, stating that the change from a three to a six-month waiting period may also undermine the Government's stated aim to support disabled people into work and enable them to remain in work. Further, newly disabled people without support for the six months may not be able to continue in their current employment or be able to find suitable alternatives.
Macmillan has highlighted the particular problems of people with cancer, as did my noble friend Lady Morgan. Macmillan states:
“For people with cancer, where treatment and its debilitating effects can begin very quickly after diagnosis, support needs are often immediate. Macmillan believes people with sudden-onset, long-term conditions should be able to claim support as soon as their support needs arise. We are flatly opposed to increasing the qualifying period from three to six months”.
Macmillan also points out that DLA is the only non-means-tested support available to cover the immediate costs of a person’s illness or disability during this period, and says:
“The outcome of delaying payment by yet another three months will be that cancer patients who are struggling to pay their bills or mortgage payments will face more debt and more stress”.
As we have heard, the Government’s policy briefing note for this proposal gives the justification for this change that of aligning the definition of disability with that used in attendance allowance, and with that,
“generally used for the Equality Act 2010”.
The guidance in the Equality Act in fact specifies that someone is to be considered as having a disability if they have an impairment that will last at least 12 months, or for the rest of their life, but this says nothing about how long somebody should have to wait before they are assessed as having this disability.
The policy briefing note also states:
“While we acknowledge that some impairments or conditions may appear long-term at their outset, and that additional costs may arise as a result, this may not always be the case. Where disability-related costs do arise early on, for instance as a result of having to make frequent hospital visits for treatment, additional support mechanisms provide an element of coverage before the qualifying period is satisfied, for example through the NHS travel costs scheme or other social security benefits”.
However, as Macmillan states, these types of support are usually means tested, unlike disability living allowance—or PIP, which is intended to meet the additional costs that arise through a disability for somebody, whatever their income level. Will the Minister please list the types of support that the Government think will be available to people in this situation, and which will be available to those people who have built up savings which exclude them from normal means-tested benefits? Can the Minister say whether any additional cost would be expected from changing from a six-month waiting period and a six-month expected disability to a three-month waiting period and a nine-month expected disability? If this would not be an additional cost, what on earth is the rationale for asking people to wait an additional three months in order to receive vital support?
Lord Freud
My Lords, I thank noble Lords for tabling these amendments and welcome the opportunity to respond on this important feature of personal independence payment. The required period condition has given rise to a great deal of considered and reasoned debate today. The debate has also been informed by the not inconsiderable assistance of briefing provided by the likes of Macmillan Cancer Support and the Disability Benefits Consortium, as well as many others over the past few months.
The amendments seek primarily to shorten the qualifying period before the personal independence payment can be paid. They also increase the onward period over which someone must be expected to satisfy the conditions of entitlement and modify how someone can satisfy the required period condition. Taken together, I was pleased to see that Amendments 86A to D preserve the overall required period condition of 12 months. I therefore welcome the fact that these amendments explicitly accept the principle that personal independence payment should be paid only to people whose needs arise from long-term conditions. This is a fundamental aim of personal independence payment and ties our definition of long-term disability in with that used in the Equality Act.
Under disability living allowance, people currently have to satisfy a three-month qualifying period and a six-month prospective test. These rules were put in place when the old attendance allowance and mobility allowance were merged to form DLA in 1992. However, for personal independence payment we are designing a new benefit; one fit for the 21st century, so it is only right that we looked at what it is the most appropriate length of the qualifying period and prospective test.
I know how much these changes to the qualifying period have worried certain groups of disabled people and their representatives, most particularly those representing people who have been diagnosed with cancer or who have experienced sudden-onset conditions. Noble Lords may be interested to learn that the changes found support in our consultation, in particular the link with the Equality Act definition.
Perhaps it may help to reassure noble Lords further if I set out that the required period condition is not a money-saving measure, nor is it meant to deny disabled people support where the impact of their condition is long-term. This is about having a mechanism which can identify, assess and pay a valuable cash benefit to individuals who have a long-term health condition or impairment which results in burdensome financial costs, regardless of income. Personal independence payment is not designed to assist individuals dealing with short-term needs.
Where there are immediate and ongoing costs which can cause financial difficulties, or have an effect on someone’s ability to participate fully so that their levels of independence may begin to suffer, there is a range of means-tested and non-means-tested support to help people through some of the shorter-term burdens, both financial and practical. I acknowledge that this help may not be available to all, but all provision has to be dictated by balancing need and an individual’s capacity to meet it from their own resources.
Lord McKenzie of Luton
My Lords, I can be brief on this. The noble Baroness has covered pretty much every point that I had in my script. We support this and the proposition that it should be in the Bill.
I take the opportunity to ask a couple of questions. In terms of transition, what is the position of someone aged 65 or over who is in receipt of DLA, which expires because it is time-limited? Will somebody in those circumstances be able to refresh that claim, including a mobility element, or will they have to move on to PIP or attendance allowance? In respect of attendance allowance, is it the intention to align the lower and higher rates of that benefit with the enhanced and standard daily living components of PIP?
Lord Freud
My Lords, we have made a number of commitments in relation to people aged 65 and over. Noble Lords may be aware that alongside the Government’s response to the consultation on DLA reform, we also published a policy briefing in May that set out our policy objectives and proposals. We intend to make regulations for personal independence payment that will allow people who have reached the upper age limit to continue to receive personal independence payment. Our priority is to support those individuals with established, long-term health conditions or impairments that would put them at a financial disadvantage over a long period. We fully understand that receiving this benefit is important for those aged 65 and over, particularly for those in receipt of the mobility component. We also know about their concern that the loss of entitlement could affect their independence.
The intention behind this amendment is to ensure ongoing support throughout later life for individuals whose abilities are limited earlier in life, recognising that they may have had less opportunity to earn and save for later life. I can assure noble Lords that this is also our intention and that it can be achieved without amendment to the Bill, but instead through regulations. As it currently stands, the amendment would potentially widen the scope of the personal independence payment and undermine our intention of creating a more affordable and sustainable benefit.
Turning to the current rules, broadly speaking, current DLA provisions have a one-year linking rule. This allows individuals over 65 to renew an award within one year of their previous award without losing DLA entitlement. Similarly, we intend to allow a linking period for PIP. This will support those individuals who reach the upper age limit and have a break in their claim through temporary improvement, provided the individual makes a claim within a defined period and continues to fulfil the eligibility criteria for PIP. As with DLA, there will be restrictions on new and existing claims for those over the age of 65. As I have said, our priority is to target support, through PIP, on disabled individuals with established, long-term health conditions or impairments, who may incur extra costs throughout their early lives and would have had less opportunity to save for retirement. Those individuals who develop care needs later in life, as part of the natural ageing process, will continue to be able to claim attendance allowance provided they meet the eligibility criteria.
Under Clause 81 we already have a power to make secondary legislation and to provide for exceptions. By setting out these provisions in regulations we can ensure that the legislation can be adapted in response to any future changes in the social care system which might affect pensioners. The Personal Independence Payment Implementation Development Group will strive to ensure that policy design and delivery in respect of people aged 65 and over is informed by disabled people and their representatives.
On the question raised by the noble Lord, Lord McKenzie, on what happens to DLA recipients over the age of 65 whose fixed term expires, we have made it clear that they will not be within the scope of PIP for the time being. That means that existing recipients of DLA aged 64 or over at April 2013 would be invited to reclaim DLA towards the end of an existing fixed-term award. At this stage we have made no decisions on the rates of PIP or how these will compare with other benefits.
Lord McKenzie of Luton
My Lords, I am happy to give way to the Minister, who I think wants to say something.
Lord Freud
If the noble Lord agrees, it might be valuable if I make clear where we stand on this issue. We have already announced that we will not remove the mobility component of DLA from people in residential care from October 2012, as was originally planned. We have also said that we will review the position on the personal independence payment. This is precisely what we have done. We are now considering the findings of the recently published review into provision for the mobility needs of care home residents by the noble Lord, Lord Low, before we announce our final decision.
We have listened to what disabled people and organisations of and for people with disabilities have said. I will ensure that, when we introduce the personal independence payment from April 2013, disabled people are treated fairly regardless of their place of residence. Our final decision will take account of this, of the findings from the Low review and of our own work within the department. I am sorry that I am unable to give noble Lords the final decision today but—I will not use “soon” or “very soon”—I hope to get it to them in the not too distant future. With this reassurance, I urge the noble Lord to withdraw the amendment at the appropriate moment.
Lord McKenzie of Luton
I am grateful to the Minister for that statement; I take a degree of comfort from it. It is a pity that he cannot speak definitively, because that might have truncated some of our discussion. Notwithstanding what he said, I will deliver my script—or bits of it, anyway—because others want to contribute to the debate. Do the Government accept the conclusions of the report by the noble Lord, Lord Low?
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)
My Lords, I am sorry to interrupt but before a debate begins the amendment needs to be proposed.
Lord Freud
My Lords, I am sorry for the delay. I was trying to work out whether we were sympathetic or very sympathetic to the report from the noble Lord, Lord Low; I think it is somewhere between those two.
Lord McKenzie of Luton
This is a rather odd process where we have the answers before the proposition; perhaps we should move to that procedure.
I shall try to truncate what I was going to say because we take encouragement from what the Minister said. I start by asking when we get to hear the announcement. The Minister has given us a very clear indication about that. I hope that it will reflect the clear findings of the review of the noble Lord, Lord Low: that removing the mobility component of disability living allowance from those in residential care would be unfair and irrational.
The justification given for the policy proposal is that there has been an overlap with the support provided by local authorities to help with mobility costs, but the review has shown comprehensively that no such overlap exists. Having received responses from 46 local authorities, with an impressive total of 828 written submissions, the review found that, in general, the support provided by local authorities was aimed at meeting a different category of mobility need from that supported by DLA mobility. It states:
“Local authority funding for mobility focused on the support needed to meet assessed care needs, for example travel to a day service, rather than a personal need like visiting friends and family. There was therefore no overlap between the support provided by DLA mobility and that offered by local authorities”.
The review also found that DLA mobility is key to meeting the personal mobility needs of care, stating that the evidence received by the review overwhelmingly showed that DLA offers personalised support and provides the individual with choice and control over how their mobility needs are met. As the review concludes,
“it is DLA mobility that provides the most appropriate means of meeting personal mobility needs. If the rights of disabled people are to be preserved then it is vital that DLA mobility, and its successor under PIP, are retained for people living in residential care”.
I will not develop that point further, although we should place on record our appreciation to the noble Lord, Lord Low, for all the work that has gone into the review, including the clarity of the conclusion and analysis included in the report.
I shall deal with just one further point. We hear a lot about the Government having no money throughout this Committee stage. We should remind ourselves, especially in view of the encouragement that the Minister has just given us, that savings to the tune of £160 million a year from 2013-14 onwards have been booked in respect of this matter. There was a hint from the debate in the other place that those savings were, if not specifically arising from this proposal, of a general nature and, in so far as they could not be achieved by changes to the mobility payments would otherwise have to be met by DLA claimants. Can the Minister be clear on that? If the Government are persuaded to change their stance on mobility payments, will any budgetary shortfall have to be met from elsewhere within the DLA/PIP projections, or will additional funding be provided elsewhere by the Government to meet the fact that that saving, which was never real, will not arise?
Lord Freud
My Lords, that is a leading question, as I have learnt to appreciate from the noble Lord, Lord McKenzie. Clearly, it is a substantial amount of money and one reason that it is so difficult to come up with the early warmth and sympathy that people want to hear is because this is tough to find. We have been doing a lot of work in this area. As your Lordships saw with the restructuring of the universal credit, we took all of our projections in a unit and it is completely impossible to balance them all off. You could pick anything on the balancing act but there is no specific direct link into DLA overall because, as I said, we are doing PIP on a bottom-up basis, not the top-down basis of a target. We are trying to find the level at which people need genuine support. It is not a link in the budgetary, top-down way implied by what is behind that question: have we just taken it from another bit of the DLA? No, we have not.
Lord McKenzie of Luton
In which case, I am doubly grateful for the Minister’s response. I think that was clear in relation to the budgetary item, although I will read the record to make sure that my understanding is correct. However, I am sure that the tenor of his indications will be warmly and widely welcomed. It would be helpful, particularly for all those people who have been made very fearful by the original proposals, if those conclusions could be announced as soon as possible. In which case, I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sassoon
My Lords, nobody is being misled because the Chancellor of the Exchequer made the position extremely clear in his original Budget Statement. People have had their calculations made on the basis of the Statement by the Chancellor. What we are doing today is part of the process of getting the law into alignment with that to make absolutely sure that people are paid precisely what was announced in the June 2010 Budget.
Lord McKenzie of Luton
My Lords, I was going to start by welcoming the noble Lord, Lord Sassoon, to our Committee deliberations, which I now do a little belatedly. It seems to me that the proposition we are hearing today is that you collect the tax you want and then you align the legislation with it in due course. Does the Minister differentiate in his analysis between those who still have a claim that is continuing and those whose claim might have ceased during the course of the year for one reason or another?
I want to ask one or two further questions. In terms of the increase in the tax credit withdrawal rate, has any assessment been made of the impact of that on work incentives? Can the Minister also say something about the distributional impact of that reduction? It may seem just a small adjustment from 39 per cent to 41 per cent but the Red Book for the period shows that the impact in the first year would be £645 million increasing to more than £700 million throughout the rest of the CSR period. These are not small sums of money we are dealing with here in this rather retrospective manner.
In terms of the impact of those sums, the budget line sits on the same page as an item we are just about to discuss in relation to the disability living allowance. On the same line are the savings the Government are planning to make to a reform of the gateway which is something like double the savings they are making from these changes to the tax credits. Can the Minister perhaps just say something about that juxtaposition and the relative position of the two adjustments?
Lord Skelmersdale
My Lords, the members of the opposition party have been waxing lyrical in this particular case. With all the experience of his advisers behind him, can my noble friend say whether such an accident—and an accident it most certainly is—ever occurred during the course of the last Labour Government?
Lord McKenzie of Luton
Before the Minister responds to that, perhaps I may add to the list of questions. A moment ago he said that these were fair and targeted proposals, but can he expand on that proposition for us? The increase in the taper rate that affects some people runs to the tune of £780 million and the disability living allowance changes to the gateway amount to a withdrawal amounts to £1.4 billion from disabled people. How does he deal with that juxtaposition? How does he evaluate it? What is the basis for saying that those are fair and targeted? The Minister said it is always right to remind us about the inherited deficit. Perhaps I could say that it is always right to remind Members opposite that a financial crisis has hit every economy around the world—certainly all the major economies; when the last Government left office, the economy was growing and unemployment was going down.
Lord Sassoon
Perhaps it is worth saying that in future HM Treasury will be making a prospective provision for subsequent years by making new uprating regulations in time for the tax year 2012-13. So, just to be clear, this subsection will operate from the day it comes into force, but relates to this year; something different will happen next year. We will have the regulations in good time. I do not want to prolong things by discussing accidents that might have happened under the previous Government. I am sure there is a long list of things that went wrong; we know that there are significant things that have gone wrong in the administration of tax over the years. As for the distributional point, the critical thing is that with the entire package of tax decisions we took last year— and again it was repeated in the Budget document this year—we look at the effects of the measures quintile by quintile. The critical test here is that we have made sure that when all the measures and decisions taken by this Government are taken together, those who can afford to pay most pay most. So again—
Lord McKenzie of Luton
Does the Minister reject the IFS analysis that the tax and benefit changes that this Government have introduced will lead to an increase in both absolute poverty and relative poverty—both in children and in adults?
Lord Sassoon
My Lords, I think we are going much further than this individual measure. This measure is part of a much wider construct, which is not the subject of the amendment today. The amendment today is merely to get the position in line with what the IFS, the OBR and all other commentators believe to be the position
Without prolonging the point about the IFS, the IFS absolutely confirms the point I was just making: it is the richest in our society who will be paying the most as a result of the measures that we have taken, both in the budgets and in the spending review.
Lord McKenzie of Luton
I think we have pressed the Minister enough on this. We ought to let him go, but I do wish that he will return for some further deliberations before we finish this Committee stage.
Lord Skelmersdale
I am sure that the eloquent and moving speeches we have heard today will cause my noble friend the Minister to think very hard indeed. I accept the need for a change in the name of the benefit. “Personal independence payment” is wrong for all the reasons that have been advocated. However, there is a problem. This is a totally new benefit for disabled people, but I believe that having “allowance” in its name is a mistake as it is too close to “disability living allowance”.
While listening to the arguments today, I came up with my own preferred formulation—“personal disability costs payment”. It is all of those things, and it is a payment. When my noble friend thinks about these issues—I am sure that he will not give us a plus or minus answer today; at least, I jolly well hope not—I hope that he will consider that suggestion.
Lord McKenzie of Luton
My Lords, the proposition before us today is that we change references to “personal independence payment” and replace them with “disability living costs allowance”. We have heard strong and compelling arguments to support that proposition and I am happy to give support from the opposition Front Bench. I do not propose to offer an alternative formulation, but I understand where the noble Lord, Lord Skelmersdale, was coming from. It seems that the reasons that have been articulated today are overwhelmingly right. They are about clarity; about sending out the right signals; about not conceding issues to the press; about not allowing the word “disability” to be airbrushed out of the system; and about trying to combat some of the fears about the way that the proposals have been brought forward.
The DLA has its origins in 1970 when attendance and mobility allowances were introduced for severely disabled people. It was introduced in 1992 under the guidance of the noble Lord, Lord Newton. I am delighted that he is regaining his self-confidence—I cannot imagine him without it. It was introduced because the then system was not meeting the needs of some groups of disabled people; for example, people with learning disabilities and visual impairments. The noble Lord, Lord Low, described DLA as now having iconic significance.
As the impact assessment produced for this Bill indicates, DLA is a benefit which provides a cash contribution towards the extra costs of needs arising from an impairment or health condition. Because it is not practical to measure each individual’s expenditure and therefore entitlement, entitlement has to be based on proxies for extra costs, care and mobility. These proxies were used at the time because research showed that they were the greatest sources of extra cost. So a decision about whether an award is made is not on the basis of an individual’s cost, but on the severity of their care and mobility needs.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the noble Baroness is seeking to replace the name “personal independence payment” with “disability living costs allowance”. We have also had my noble friend’s suggestion that we replace it with “personal disability costs payment”. I am very grateful for all the contributions on this genuinely important issue. Before dealing with the noble Baroness’s amendment, I should like to take the opportunity to talk about why we are reforming the disability living allowance and the Government’s policy intentions that underpin the personal independence payment. We believe that now is the right time to replace DLA by creating an affordable and sustainable system to support those disabled people who experience the greatest barriers to living full, active and independent lives. DLA has failed to keep pace with the changing approach to disability in society. It lacks consistency in the way it supports disabled people with similar needs, and we know from feedback received from claimants and their representatives that the application process is unduly complex.
Personal independence payment will be different from its predecessor. It will be a more dynamic, objectively assessed and transparent benefit based upon people’s daily living and/or mobility needs. It will consider the impact an individual’s impairment or health condition has on their daily life. It will take account of changes in individual circumstances and in the impact of underlying disabilities. It will reflect the wider changes in society that have taken place since 1992, when DLA was introduced, such as social attitudes, advances in aids and adaptations, and equality legislation. We will prioritise support on those individuals who face the greatest day-to-day challenges and who are therefore likely to experience higher costs.
The changes we are making through the introduction of personal independence payment will ensure that the benefit remains sustainable for the future. Currently, 3.2 million people receive DLA. This is an increase of around 30 per cent in the past eight years and it is important to note that for the DLA caseload overall only around one-third of that 30 per cent growth can be attributed to demographic factors. Personal independence payment will not be linked to an individual’s impairment, but will instead focus on the ability of an individual to carry out a range of activities necessary for everyday life and the extra costs arising because of their impairment. It will be payable to people who are in work as well as to those who are out of work.
I turn to the noble Baroness’s amendment, the name “personal independence payment” is intended to communicate the purpose of a benefit that continues to make a contribution to the extra costs that some disabled people face to help them to lead full, active and independent lives. I can reassure the noble Baroness that we have not yet incurred artwork costs for personal independence payment, nor, I need to confess, did we invest heavily in private sector consultants to come up with options for the change of name. I guess one can be excoriated and congratulated on both those facts.
Before announcing our plans for personal independence payment, we conducted a series of focus group sessions in which we were able to discuss the name of the new benefit. People felt that the word “disability”, although broadly understood and accepted as an umbrella term, was generally seen as relating to physical disability and was a more difficult term for mental health conditions. As noble Lords know, one of the big changes in personal independence payment is the swing in favour of people with mental health conditions. “Living” was felt simply to imply existing or surviving, and ‘allowance’ was deemed to be old-fashioned and paternalistic, as my noble friend Lord Skelmersdale suggested. It was because of these negative connotations that we decided, as part of the reform of DLA, to rename the benefit. Clearly, people will continue to have mixed views on the name “personal independence payment”, but it has found favour in many quarters. Through the DLA reform consultation, we received some positive comments on the new name for the benefit. I will quote one correspondent—if I do not, I suspect that no one else in the Committee will—who stated:
“I love the new name”,
and added that it seemed,
“more dignified than being given an ‘allowance’ for being disabled”.
We have always been clear that we will have greater regard for the social model when reforming DLA. The name “personal independence payment” reflects that intent rather than focusing on medical model terminology.
It is clear that noble Lords have differing views on the name of the benefit. I emphasise that our view is that “personal independence payment” reflects the principles and intention of the benefit. However, having heard the debate today, I am happy to take back noble Lords’ views, which were put very powerfully, to the Minister for Disabled People. I will ask her to consider how we might seek further feedback from disabled people on the proposed name. On that basis, I urge the noble Baroness to withdraw the amendment.
Lord McKenzie of Luton
In responding to the debate, on a couple of occasions the Minister used the formulation “greatest barriers”, which carried the implication that people who face lesser barriers will fall outside the help of the new benefit. Could he be more specific about who is likely to fall into that category?
Lord Freud
My Lords, as the noble Lord knows, we have published the criteria and weightings but have not yet gone into any further definition of how the system might work in terms of thresholds. I will aim to bring some more definition around that by Report.
Lord Freud
My Lords, the proposition is that we need to have this locked down ahead of the rest of the Bill. Regrettably, we are not expecting to have the passporting elements of this ready for the time we consider it. I will go into some detail. The timing issue is that there would be no gain, if that is the real concern, in pulling this information earlier and hurrying the consideration process artificially.
Lord McKenzie of Luton
I think that it would be very helpful if immediately following today’s sitting we have an update on what is and is not going to be ready because there are serious issues about consideration. Rather than prolong the process today, if the Minister would undertake to do that, it would be helpful.
Lord Freud
Perhaps I could undertake to do that ahead of Wednesday’s sitting and go through what we are expecting to have when.
Baroness Grey-Thompson
My Lords, I rise very briefly to support this amendment as my name is on it. Others have explained very clearly the need for these amendments. More specifically, I rise to support the noble Lord, Lord Wigley. The social model was a lifeline to me. My parents brought me up to believe that having an impairment was not my fault. I became a wheelchair user at the age of seven—some 35 years ago. I was brought up in the social model before there was even a name for it, but I also grew up in a world where there were loads of people who almost delighted in giving me the long list of things that I never could, or even should, do, such as go to the cinema, stay in a mainstream school, go to university, go to a sports club, or even, more recently, get married and have a baby. The social model outlines very clearly how disabled people can play their part in society. We should not take this for granted because it would be too easy to forget what the social model is.
Lord McKenzie of Luton
My Lords, these amendments are about encompassing the social model in the Bill. We support them. I have come to this issue somewhat later than some noble Lords here such as the noble Lord, Lord Wigley, my noble friend Lady Wilkins and others. I found the Scope document, which has been referred to, particularly helpful not only because it laid out a route to a different process of assessment, but because it took the assessment and criteria in the DWP’s document and tried to point out in practical terms why they may not have encompassed these wider issues. I say to the Minister, as others have said, that this should not be a difficulty for the Government because they have on the record their commitment to the social model. It is in Hansard for 30 November 2010. I think it was the Minister, Maria Miller. It is clearly on the record and not a matter of dispute.
Indeed, the DLA consultation paper referred to the social model in the following terms:
“The social model of disability says that disability is created by barriers in society. These barriers generally fall into three categories: the environment—including inaccessible buildings and services…people’s attitudes—stereotyping, discrimination and prejudice…organisations—inflexible policies, practices and procedures”.
Of course, the model argues that these barriers can be changed or removed. We accept that dealing with these barriers is not just a matter for a DLA or PIP or whatever it is called, but the consequences of these barriers need to be taken into account in assessing entitlement. I ask the Minister how the approach to PIP is reflected in the social model of disability and how the Government would counter criticisms that their approach is still driven by the medical model which concentrated on the inability to undertake activities due to a physical, mental or cognitive impairment.
Paragraph 4.9 on page 29 of the explanatory notes to the second draft of the assessment criteria says,
“Furthermore, we remain concerned that taking greater account of issues such as housing, access to transport, informal support and utilities would make the assessment more subjective and lead to inconsistent outcomes for individuals. Many of these issues will be dependent on local circumstances and availability of services, meaning that results might differ depending on location across the country”.
Of course we understand the difficulty that taking account of a wider range of factors would involve an expanded and different process. However, any process that involves a points-based approach will have a degree of subjectivity to it.
The Minister will be aware of proposals from Scope, which other noble Lords have mentioned, that recommend the trial of a more extensive process that has co-operation with the claimant at its heart. I will not run through the detail except perhaps to comment on the last bit of the process as it sees it, which is the production of a local support plan to capture the evidence and information brought up over the course of the assessment process in order to help highlight where in the individual’s life the barriers and the needs tend to arise. This could help the claimant to identify particular areas in which PIP might provide valuable support in meeting disability costs, but would not take the form of an outcome-based agreement binding the individual to use their PIP for specific purposes. Do the Government have any plans to test this approach, together with input from disability groups? We acknowledge that a good deal of work, thought and engagement has gone into updating the assessment criteria, and this has also been recognised by the Disability Benefits Consortium, but inevitably questions arise about the rules of engagement going forward, what further consultation will be taking place, and particularly about why the Government are confident that the current proposals will take account of the full range of barriers and costs that disabled people face. I think that that is a particular bone of contention that may have been eased by the current document, but that has certainly not been fully answered. That is why it is important to have these issues in the Bill.
Lord Freud
My Lords, the noble Baroness is seeking to ensure that the assessment for PIP reflects the social model of disability, which would mean that assessors would not just consider the impact of impairment on an individual, but also the social, practical and environmental barriers they face. On the question raised on the support we have, I should say that we have the Assessment Development Group whose role is to advise on the detail of the new criteria we are developing, so the group is necessarily technical in nature. However, the members of the group have a wide range of experience in working with and supporting disabled people, including two representatives of disabled people and disability organisations. Several of the group members are disabled people. The group includes individuals from a range of professions including occupational therapists, psychiatrists, physiotherapists, expert social workers and GPs. We also have representatives from RADAR and Equality 2025. We know it is important to hear wider views, which is why we have been talking to disability organisations throughout the development of the assessment and why we will continue to do so.
The amendment reflects a commonly held view that the assessment we are developing is a medical assessment. I am pleased to have this opportunity to state that that is not the case. The assessment is not fully based on the medical model, with the impairment or health condition that the individual has or its severity determining the entitlement. Indeed, the type of condition or impairment an individual has is of limited relevance as this assessment focuses on the activities essential to daily living and on outcomes. By looking at holistic activities and participation outcomes, this assessment will better reflect the social model of disability than did previous assessments. I do accept that it is not a full social model assessment; it is not intended to be. However, neither is it a medical model. The reality is that it is somewhere in between. It is perhaps more of a bio-psycho-social model. That is not a term that I have coined; it was coined by Professor Gordon Waddle whose work in the field of health and disability we have discussed in this House before. It recognises that there are biological, psychological and social factors to disability, which we have tried to capture in the assessment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton
My Lords, I have given notice that I intend to oppose that this clause stand part of the Bill in order to be able to return briefly, I hope, to a subject that we have touched on before. Because of its significance, I want to clarify certain points.
Specifically, does this clause introduce a change? Is it a widening of the definition of work-related activity? If it is not, one might ask why the provision is in the Bill at all. We see merit in work placements and work experience but we are trying to understand the boundaries between them and work itself. This is important, as it is being made available and could be mandated for those in the WRAG—those found not fit for work. Are those in the WRAG currently involved in work placements and work experience? If so, what safeguards are being introduced? In particular, what guidance is given to providers in the work programme about all this, and what monitoring is undertaken? Is access-to-work funding available for work experience and work placements as for work? If not, how does that help disabled people move closer to the labour market?
I shall tag one further question on to this debate. It has been reported in the press—I know that the noble Lord is reluctant to comment on press reports—that somebody who has been in the work programme for two years and has not been in employment will come off and go into some form of community service arrangement. Are we likely to see any amendments come forward in this Bill that touch on this issue, or will that be dealt with in regulations, or is it pure speculation that we can ignore?
Lord Boswell of Aynho
My Lords, I invite the Minister to comment on the way that I construe the clause, which is that it is facilitative and increases flexibility, which seems to me very welcome. Adding to the list of questions given to him by the noble Lord, Lord McKenzie, could he also say a little about the employment status of people in this situation and, for example, their insurance and other measures of cover? I am more conscious of the situation in relation to children at school. There are sensitivities. It is important that they are got right, but the principle is a good one.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this summer we increased conditionality for ESA claimants in the work-related activity group with the introduction of the work-related activity regulations. For the first time, those who are able to prepare for a return to work will be required to do so, where it is reasonable.
This measure is another aspect of work-related activity, and thus those groups—such as support group claimants, lone parents with children under the age of five and those with caring responsibilities—who are not required to undertake work-related activity will not be required to do work experience or work placements.
Noble Lords asked, in relation to Clause 16, whether this measure extends the definition of work-related activity, which is one of the questions asked by the noble Lord, Lord McKenzie. The Bill seeks to clarify what may be included by way of work-related activity, rather than extend its meaning. Work-related activity is already defined in the Welfare Reform Act 2007 as,
“activity which makes it more likely that the person will obtain or remain in work or be able to do so”,
and Clause 54 makes expressly clear that this may include work experience or a work placement.
However, an adviser will only place a claimant on a work experience placement if he judges that it will help support the claimant back to work, and if it is suitable. If a claimant feels that the requirements placed upon them are unreasonable, they can request that the adviser reconsider whether an activity is appropriate. Claimants are also able to follow a rigorous complaints procedure if they do not think that they are receiving a satisfactory service. I hope that that explains what the formal protections are to the noble Lord, Lord McKenzie.
The focus of work experience and work placements will be on learning new skills and gaining valuable experience to get a flavour of the workplace environment. They will provide claimants who may have a limited work history with the opportunity to increase their confidence and employability. The precise nature of such placements will depend on what is deemed suitable for the individual, bearing in mind their physical and mental capabilities, and ensuring that necessary adjustments are made.
Placements would normally be short term, but there is currently no set duration, and this will normally be agreed between the adviser and the customer. Work experience and placements must be appropriate to the individual’s circumstances and need not be full-time. For instance, if a person’s health condition means that their mobility and pain levels improve over the course of the day, an adviser might find them a placement for two or three hours in the afternoon. This is quite different from the more challenging demands of paid work, which would normally be a longer-term and less flexible commitment with higher expectations placed on the worker.
The requirement to undertake work experience or work placements will be used flexibly by advisers as part of a range of work-related activities. It is not intended that such placements would necessarily replace other aspects of work preparation. It may be one of a number of work-related activities required of an individual which, in combination, best support a claimant to move closer to the labour market.
In response to concerns that work experience may be used to judge whether an individual is in fact capable of work, this is not the case. A claimant cannot be found capable of work unless they are found capable following a work capability assessment. This new measure will therefore not affect anyone’s underlying entitlement to benefit.
On the question raised by the noble Lord, Lord McKenzie, on access to work, the answer is that it is not available to claimants undertaking work-related activity. For claimants participating in sector-based work academies, funding will be available to help with reasonable adjustments during their participation in that provision. For work experience arranged through alternative sources, reasonable adjustments will be made where necessary to ensure that claimants are able to undertake any work experience or work placement in a safe environment which meets the needs of the claimant. Where necessary, Jobcentre Plus could assist employers with reasonable adjustments, using the flexible fund which is available to an adviser.
I shall clarify the issue of job outcomes for work programme providers. Work programme providers will not be paid for work placements and, therefore, there is no incentive for the provider to encourage a claimant to undertake long-term unpaid work experience, which I think is the underlying concern that the noble Lord has in raising this point. Payment arises for work placement providers only if a sustained, paid, full job outcome is achieved. Furthermore, sustainment payments also ensure that it is not profitable for providers to encourage claimants to undertake unreasonable work-related activity with the aim of making them enter the labour market before they are ready, as that is unlikely to lead to a positive long-term job outcome. I hope that I have described a series of formal protections but also an incentive structure that means that this is not going to lead to any abuse or, if it did, that it would be smack against the financial incentives that we have set up.
In response to my noble friend Lord Skelmersdale’s question on substitute Section 11(3)(c) in Clause 56, I can confirm that the definition of “work preparation” will be the same and will include work experience or a work placement in both clauses.
I owe the noble Earl, Lord Listowel, an answer on mentors. I wish to express our interest in mentors. I am absolutely with him on the importance of mentoring, and as he may or may not know, I have developed my own project with CSV, called Grandmentors, where we test how older, retired people can support youngsters making the transition to adulthood, along precisely that thinking. That project, which I think is one of the very few formal projects with research around it, tries to establish the real economic value to the country of mentoring. I have put my own wallet behind it. I look forward to reporting to him when I have some decent findings.
Lord McKenzie of Luton
I am grateful to the Minister for that reply. I am comforted that my concern was not so much about what providers might be up to as about whether work and work experience generally might be almost a way round the WCA for those who are otherwise in the WRAG. I think that the Minister has given us enough comfort on the key distinctions between work experience and work placements, although I note that he said that they do not necessarily need to be full time and that normally paid work would be more onerous. I accept the generality of what he says and that gives me the comfort that I was seeking. I am not sure whether he dealt with the question of employment rights, which is an interesting one, and presumably part of the distinction between work and work placements, but that is satisfactory for my purposes.
Lord McKenzie of Luton
My Lords, I am grateful to Gingerbread for a briefing on this issue. It has asked us to raise this matter, which I believe has considerable merit.
Clause 57 proposes to extend further the numbers of single parents required to seek work. From early 2012, single parents not in paid work and whose youngest child is aged five or over will no longer be entitled to claim income support. Instead, single parents will be required to claim jobseeker’s allowance or another benefit. On JSA, single parents receive the same amount of money each week as they do on income support, but face a substantial increase in conditionality and risk a payment sanction if they fail to demonstrate that they are actively seeking and available for work.
This latest proposal is estimated to affect 100,000 single parents currently receiving income support who have a youngest child aged five or over. It is understood that the Government anticipate this will save something like £50 million in 2012-13 by removing entitlement to income support from this group of single parents. However, I wonder if there is any revision to that sum, given the state of the labour market and the difficulties that are confronted by people seeking work.
We have an opportunity to introduce a delay to the proposed change and instead align it with the planned introduction of universal credit from 2013. This can be achieved by simply removing this clause from the Bill, which is what this amendment seeks to do, and would mean that single parents with a youngest child aged five would continue to receive income support until universal credit is implemented. At this point, single parents, along with responsible carers and couple families, will be subject to work search and work availability requirements, as outlined in Clause 22; that is, “all work-related requirements”.
Noble Lords will be aware that Clause 57 is an extension of the lone parent obligation policy which we brought forward when in government. The LPO restricts entitlement to income support for single parents according to the age of their youngest child. The reforms have sought to move more and more single parents from income support to JSA. Implementation began in November 2008 and first affected parents whose youngest child was aged 12 and over in October 2009; parents with children aged 10 and 11 were also transferred to JSA. In October 2010, single parents with children aged seven, eight and nine switched into JSA. In previous years, single parents have been given clear advance notice of six months in order to prepare for the switch from income support to JSA. However, we have not yet passed this piece of legislation and this will be implemented in April 2012, which is certainly in the near term.
Some 57 per cent of single parents are in paid employment and many more want work as a means of increased income and financial independence. Those are key motivators, along with personal independence, the opportunity for social interaction and to set a good example for their children. Indeed, 42 per cent of single parents say that having almost any job is better than being unemployed and on benefits. Critically, single parents require jobs that allow them to be there for their children when necessary. With only one parent to do the school run, care for children when they are ill and support them with their schoolwork, jobs with flexible working patterns are absolutely vital, as is access to affordable, high-quality childcare. We have discussed that on a number of previous occasions. Flexibility does not just mean part time but can include job share, compressed hours in term time and annualised hours. However, employment opportunities that provide the degree of flexibility that single parents need are few and far between, particularly in difficult economic times.
The particular reasons for delay are as follows. On 7 October this year the Government announced an extension of childcare support to those working under 16 hours to be implemented as part of universal credit from October 2013. Currently, through working tax credits, as we are aware, single parents working 16 hours or more a week can access support of 70 per cent of their childcare costs up to £175 per week for one child and up to £300 per week for two or more children. This provides vital support to working parents on low to middle incomes and makes all the difference as to whether they can make work pay. However, it has always been a challenge for those with caring responsibilities or those who have been out of work for some time to make the leap from no work to 16 or more hours a week. So the further investment to provide childcare support at the same level for those working under 16 hours a week from 2013 onwards is welcome. This support will be of particular benefit to single parents of five and six year-olds who move on to JSA from income support after a period of time looking after their child. That is why it makes no sense to push 100,000 single parents into this position 18 months before the new childcare support is available.
In addition to the logic of delaying the switch from income support to JSA to enable single parents to access the new childcare support that will be available under universal credit, I suggest that there is a broader rationale in aligning this change with the overall implementation of universal credit. The transition from the current benefits and tax credits system to unified universal credit will require a huge administrative change in order to transition all existing claimants on to the new system. When resources are stretched, it would therefore be both needlessly disruptive to single parents and an unnecessary cost to the state to put the same group of claimants through two substantial administrative processes within a relatively short period of time—ending entitlement to income support in early 2012 and then a migration on to universal credit for existing claimants from April 2014.
It is also important to note that the Bill we are considering introduces changes that will affect the job search requirements of lead carers in couples families which will be implemented from 2013 as part of universal credit. From this point on, nominated lead carers in joint couple claims will be required to seek work when the youngest child reaches the age of five and be subject to increased conditionality accordingly. There is therefore no clear rationale for why single parents should be subject to identical changes in advance of nominated lead carers in a joint claim.
According to the Office for National Statistics, in the three months from June to August 2011, unemployment rose to 2.57 million, an increase of 114,000. The fall in the number of people employed was 178,000 and has been particularly driven by the loss of part-time jobs, down by 175,000. Single parents rely heavily on part-time work as this allows them to juggle their caring responsibilities with work. The total number of people claiming JSA is 1.6 million, of which 124,000 are single parents. The total number of single parents claiming JSA increased by 48,000 over the 12 months from August 2010. Unemployment is at a 17-year high and job creation in the private sector has so far failed to plug the rising tide of redundancies and job losses in the public sector. Overall, the picture is bleak, with markedly fewer family-friendly jobs available and increasing numbers of single parents trapped on jobseeker’s allowance, so moving an additional 100,000 single parents from income support to JSA when their youngest child reaches five is a blunt instrument in the current economic climate.
Increased conditionality and tougher sanctions only serve to add unwarranted pressure on single parents when suitable employment opportunities remain sparse, childcare costs continue to rise faster than earnings and single parents are not able to take advantage of new childcare support that will be introduced from 2013. Single parents will struggle to find work that is sustainable and that fits around their caring responsibilities when faced with increased conditionality, limited access to support for childcare costs, limited opportunities to access training and further education, low growth and a stagnant job market. I oppose the clause standing part.
Baroness Lister of Burtersett
I had not planned to speak but I support the opposition to the clause standing part. It seems eminently sensible that we should postpone this provision. I am prompted to speak by a rash of e-mails that I received today from people who clearly feel strongly about it, although I shall read from only one of the e-mails. However, I am ambivalent about the issue of lone parents and paid work. On the one hand I was a member of the Commission on Social Justice which, to a lot of criticism, recommended that lone parents with children aged 12 and over, I think, should become part of the workforce. One of the reasons for that, as my noble friend said, is the importance of paid work to women as a source of independent income and so forth. On the other hand, it also worries me that much new policy underestimates the importance and value of care work and the time and energy it takes. So, as I say, I am ambivalent. However, I think that lowering the age to five is perhaps going too far. It is putting a lot of strain on lone parents in terms of the competing responsibilities that we are placing on them. That is very much reflected in the rash of e-mails that I received today. I shall read out from one. I do not necessarily agree with everything in it but it reflects what people are feeling. This e-mail is in fact not from someone directly affected but from a grandmother who would have been affected had this rule applied earlier. She says:
“I have been informed that you are discussing legislation which will force mothers who are [on] welfare to look for a ‘job’ when the youngest is five years of age. I am a grandmother now but raised three children on welfare following marriage breakdown. It was not a lot of money but I had control of it”—
an issue that I have been raising in other contexts—
“and was able to survive and care for all my children. I did try going out to work but it was almost impossible to cope first of all with having time with them. Keeping tabs on where they were every day of the week was a nightmare. When I lived on welfare they knew they could come home after school bring their friends with them home if they wanted. Much safer for everyone. The proposal that children have to be out of their home from leaving for school in the morning until I get home later in the evening”—
I myself would not put it this strongly—
“is nothing less than child abuse—adults are exhausted after doing such hours”.
I think that we should be conscious of that point on exhaustion. We are asking an awful lot of lone parents. She continues:
“How are children supposed to develop with any feelings of confidence and security if they are constantly shunted around from pillar to post, treated as if they are an encumbrance, rather than being valued by the society”.
I shall not read any more. However, there is a feeling that we are devaluing the work of caring for young children whether it is done by mothers or fathers. This opposition to the clause standing part would allow us to pause and think again about whether this is the right way to go, particularly in the current labour conditions, and whether it would not be better to wait until universal credit is introduced and the childcare changes referred to by my noble friend are made. I hope that the Minister might be willing to pause and reflect on this matter.
Baroness Hollis of Heigham
Perhaps I could reinforce a point. We know from all the research, going beyond Jane Millar right back to the American research, that a lone parent who goes out to work and retains that work, if it is sustainable, benefits from the lift out of poverty. I entirely accept that that is important for the family as well as for role models. However, that is possible if and only if she has childcare that she trusts. Very often that childcare is from a family member, who is often a grandparent. The grandparent can address the problems of the child in the transition period and so on. Yet time and again we are doing nothing to recognise the role that grandparents may play and instead we are going to impose in-work conditionality on them, taking them out of the caring function that they would voluntarily and willingly embrace for everyone’s benefit. We will expect two generations to work and for the child to be somewhere out there.
Lord McKenzie of Luton
My Lords, I thought that this started off as a relatively straightforward debate, but I am delighted that it has expanded into a huge philosophical debate which is very important. I thank all noble Lords who have spoken at least in support of the opposition to the clause. I think that some would go quite a bit further but there are important issues around childcare, the time spent with children, the propensity of the mother to want to work and the quality of substitute childcare. In one way or another, each of those has been touched on by noble Lords. I think that it was the noble Baroness, Lady Lister, who expressed the view that she was not totally signed up to the concept of lone parents in work when their children are as young as five, and I acknowledge that.
Lord McKenzie of Luton
My Lords, this is by way of a serious probe to understand the Government’s plans and their progress on supporting individuals with drug and alcohol dependency. Clause 59 essentially removes the regime set out in the Welfare Reform Act 2009. Those involved in considering that legislation will recall that it ended up in a considerably better place than where it started. The noble Baroness, Lady Meacher, who is not in her place, should be able to claim considerable credit for encouraging the Government of the day to move from where they were to where they ended up.
The thrust of those provisions involves requiring claimants in the JSA regime to take part in a substance-related assessment where there are reasonable grounds for suspecting that they have a drug dependency which affects their prospects of obtaining or remaining in work. The jobseeker’s agreement is suspended if the individual engages in a voluntary rehabilitation plan. Such a rehabilitation plan could involve submitting to treatment, possibly at a specified institution. In the event of somebody failing to engage in such a plan, a mandatory plan could be imposed, but the legislation is very clear that such a plan cannot require a person to submit to medical or surgical treatment. A similar regime is provided for in the legislation for people in the work-related activity group but not, of course, the support group. Perhaps the Minister can remind us what, if any, regulations to introduce these measures were eventually promulgated—none, I suspect.
The information pack provided with this Bill states:
“It is considered that provisions from the Welfare Reform Act 2009 are too narrowly focused, impractical and expensive. In December 2010 the Government published a Drugs Strategy outlining first steps to ensuring the benefit system supports effective engagement with recovery services, which is considered to be more successful than coercion. For these, existing powers can be utilised”.
Perhaps the Minister can set out for us how the first steps are progressing.
On the Government’s drugs strategy, page 23 says:
“The first step is to ensure that the benefit system supports engagement with recovery services. We will offer claimants who are dependent on drugs or alcohol a choice between rigorous enforcement of the normal conditions and sanctions where they are not engaged in structured recovery activity, or appropriately tailored conditionality for those that are. Over the longer term, we will explore building appropriate incentives into the universal credit system to encourage and reward treatment take-up. In practice, this means that those not in treatment will neither be specifically targeted with, nor excused from sanctions by virtue of their dependence, but will be expected to comply with the full requirements of the benefits regime or face the consequences. Where people are taking steps to address their dependence, they will be supported, and the requirements placed upon them will be appropriate to their personal circumstances and will provide them with the necessary time and space to focus on their recovery”.
Clearly, the availability of support services will be key to this approach. Perhaps the Minister can give us an assessment of what is currently provided and available. The provisions that are being removed from existing legislation contain powers to extend the application to alcohol. Perhaps the Minister can say what the Government have in mind for those with an alcohol dependency; what services are available and what assessment has been undertaken.
The 2010 drugs strategy also says:
“We will also look at amending legislation to make it clear that where someone is attending residential rehabilitation and would be eligible for out-of-work benefits, they will be deemed to have a reduced capability for employment and will therefore be automatically entitled to Employment and Support Allowance”.
Is this still the plan and where is the legislation that provides for that? Presumably entitlement would cease after 365 days, maybe earlier if the claimant has a partner with modest income or capital. Whatever the limitations of the 2009 legislation, it provided a range of protections for individuals: a substance-related assessment could only be conducted by an approved person; relief from certain tests if the claimant provided a permissible sample, but not an intimate sample; an absolute bar on having to submit to medical or surgical treatment; protections concerning supply of information; and protection in criminal proceedings in respect of information provided about drug use. How will these issues be addressed in the new arrangements?
I should also be clear that we share a common goal of supporting people to live a drug-free life. An opportunity to get and sustain a job is an integral part of helping to achieve this, but we are entitled to know and have on the record what the Government plan in this regard.
Baroness Hayter of Kentish Town
My Lords, I will add a few more words on the 2010 drugs strategy. I very much welcome its view that the benefits system should support effective engagement with recovery services. It considers that this is more successful than coercion—a view that I strongly hold. As my noble friend said, the strategy covers all drug problems, including the severe misuse of alcohol. About 400,000 benefit claimants—about 8 per cent of all working-age claimants—are dependent on drugs or alcohol. I welcome the strategy of increasing the number of such claimants who engage with treatment and rehabilitation and go on to find employment.
I will ask a little more about the plan, quoted by my noble friend Lord McKenzie, about the choice between vigorous enforcement of the normal conditions and sanctions where claimants are not engaged in structured recovery activity, and appropriate tailored conditionality for those who are. How will that conditionality be decided?
My bigger question is: how can such claimants engage in structured recovery activity when the result of government cuts is that there are ever fewer agencies offering structured day programmes or any other form of treatment? I declare an interest as a trustee of Camden-based CASA. The noble Lord must pass it every day on his way back home. For 27 years CASA has provided in Camden a range of services for alcohol and drug misusers and their families.
Our dual diagnosis service for those with mental health and alcohol misuse problems has been ended. Our families service has been curtailed. Our older persons service has been halved. Our back to employment service has been closed. This month we had to shut our Camden day service centre in Fortess Road, which was well known, and sell the building. Many of our staff were made redundant and our premises were closed. That is the impact of the cuts on local government and other potential funders. My question to the Minister is not about the intention behind this, but about where people will get the services and the help that they need to be able to respond to the strategy. Furthermore, with the Government's withdrawal of 100 per cent of its grant to the National Agency on Alcohol Misuse—Alcohol Concern, as it is known—which I set up at the Government’s behest and with government money in 1984, who will help set up, co-ordinate and make known such services to the claimants who need them?
I would also like the Minister to tell us how those for whom structured recovery activities are appropriate will be identified. Also, how is structured recovery activity to be defined? I have been trying for 27 years to define it for our clients and have failed. I do not mean that as a joke: it is very difficult because it is a highly personalised service. I would be interested to know the Government's definition of structured recovery activity. We also know that the drug co-ordinators who were responsible for building the relationship between Jobcentre Plus and external agencies in the drugs field, such as treatment and probation services, have now been abolished. Who is expected to co-ordinate the work of Jobcentre Plus with the providers of these services in their local community?
The impact assessment for the drugs strategy states that:
“Employment support will be funded on an outcomes basis, using benefit savings freed up when people engaged with recovery services move into employment or full-time education”.
The assessment suggests that this funding provision will be delivered via the work programme. Will the Minister tell us what proportion of work programme providers are offering support with drug and alcohol issues, and how many people have accessed the support? Furthermore, as I hear that St Mungo’s and other voluntary agencies are receiving none of the anticipated referrals from the work programme, can the Minister outline where such services are being provided and where participants are being signposted to?
Lord Freud
My Lords, I like to be able to flesh out these adverbs—no, they are not adverbs. My grammar is slightly frail. The answer is that I cannot be any more specific. If that is news, I am not in a position to provide any more definition.
Clause 59 removes Section 11 and Schedule 3 from the 2009 Act, and also removes the provisions which Schedule 3 inserted into the Jobseekers Act 1995 and the Welfare Reform Act 2007. We know that the vast majority of people with substance dependency issues eventually want to break free of their addiction. The National Treatment Agency reports that, last year, more than 200,000 people in England entered treatment. That represents about two-thirds of all those with dependency issues. In 2010-11, 27,969 adults left treatment in England free of dependency, which is an increase of 150 per cent compared with 2005-06. Waiting times continue to reduce—96 per cent get into treatment within three weeks of referral. In England, we spend more than £400 million on drug treatment and this budget has not been cut. We want to build on that. We believe that the right approach is to offer support and encouragement for those who want to tackle their substance addiction. We are therefore ensuring that our advisers have the confidence to engage in the often difficult conversations with those who they believe have dependency problems, that they understand the issues that addicts face and that they work in partnership with local treatment agencies to improve referral rates. By encouraging closer working between Jobcentre advisers and treatment service providers we will increase the number of people moving into sustained recovery.
If claimants decide to take up the treatment opportunities available to them, we will look to ensure that they have the opportunity to focus on that treatment and make it succeed. This is not being soft on addicts. The choice to tackle addiction is not an easy one, as anyone who has tried will confirm. Claimants who decline the offer of treatment will be expected to comply with their ordinary full labour-market conditions as a requirement for continuing to be entitled to their benefit.
The noble Lord, Lord McKenzie, asked about universal credit. We are clear that the imposition of work-related requirements under universal credit must not conflict with an individual’s treatment regime. We want to maximise every individual’s chances of an early move into work. For those with substance dependency, the first logical step will often to be to confront their addition, and we do not want simultaneously to impose labour market requirements that make it challenging or even impossible to complete treatment. This will be our guiding principle under universal credit and we will make sure that this can be achieved. The structure of universal credit legislation makes this relatively straightforward. We have considerable flexibility in the powers we are taking in the Bill to ensure that we can tailor work-related requirements to fit with the circumstances and capability of an individual. We will be considering how best this can be done as we develop regulations.
The provisions inserted by the Welfare Reform Act 2009 are inappropriate and likely to have unintended adverse consequences for substance or alcohol-dependent claimants, their communities and the public purse. The provisions have not been commenced and do not reflect this Government’s direction of travel in dealing with the very difficult question of drug and alcohol addiction, nor do they take account of the introduction of universal credit, which will replace both the income-related strands of JSA and ESA in due course. Hence we seek to repeal them. I beg to move that Clause 59 stand part of the Bill.
Lord McKenzie of Luton
I am grateful to the Minister. I should say that the purpose of raising this issue was not to mourn the passing of Schedule 3 but to understand where the Government were heading in its place. Perhaps the noble Lord dealt with it by saying that this can be accomplished by regulations, but the strategy says that those who are undertaking residential treatment would be deemed as not having been in the work-related activity group or its equivalent in universal credit. Would he say that the Bill provides the necessary flexibility to achieve that or is something else expected to deal with that?
Perhaps the Minister could also say something about the protections, which was one of the important features of the 2009 Act, that if somebody declares that they have a drug dependency—effectively owning up to something that could be a criminal offence—what safeguards does the noble Lord have in the current arrangements that would provide protections for individuals in those circumstances, assuming that the noble Lord believes that those protections should be there?
Lord Freud
To take the first question, we already have amended the regulations. We did that from 28 March 2011, amending the regulations relating to employment and support allowance. It is clear that those in residential rehabilitation for alcohol or drugs should be automatically treated as having limited capability for work while they are in residential rehabilitation, and this will help them have access to benefit at a time when they are focusing on their treatment.
On the matter of the protections, I am going to have to offer to write to the noble Lord. That is a pretty complicated matter. When we are not doing the things for which the protections were incorporated, it is difficult to understand where we might need some protections. I will have a think about that and write to the noble Lord.
Lord McKenzie of Luton
I am grateful to the Minister for that and I think that this deals satisfactorily with the purpose of the probe.
Lord Skelmersdale
My Lords, many years ago when my noble friend Lord Brooke was my temporary boss in Northern Ireland, never in a million years did I expect that he would ever be described, or indeed would describe himself, as St Sebastian. The reason I mention that is that I knew that when he became Secretary of State, he had moderately recently been a Treasury Minister. My job in Northern Ireland, inter alia, was to look after the Social Fund in the then 32 Northern Ireland social security offices. It quickly became apparent that the calls on the Social Fund in any particular office at any particular time were extremely erratic. I asked my civil servants if London would object if I moved money around the system in order to try to balance it up. Of course the following year I had to do it again because of that erraticism.
It is all very well expecting the Social Fund, which is expatriated to Scotland, Northern Ireland and Wales as a whole, to operate well with ring-fencing, but I find it absolutely impossible to believe that ring-fencing can ever apply when it is expatriated to local authorities in England for the simple reason that one local authority will build up a certain amount while another will be permanently in deficit. That is not going to help the people whom the Social Fund is intended to help in the first place.
Lord McKenzie of Luton
My Lords, we have added our names to Amendments 86ZZZB, 86ZZZC and 86ZZZD and we support the other amendments in this group. We have our own amendment, Amendment 86ZZZEB, and I should say to the noble Lord, Lord German, that I am happy to accept his amendments to my amendment. Perhaps we can go through the Lobby together when the opportunity arises.
The Social Fund, particularly the discretionary component, helps some of the most disadvantaged and marginalised individuals in the country. We have been given a lot of historical perspective on this, but my brief says that the fund has its origins in the exceptional needs payments scheme introduced by the Labour Government in 1948. However, some may go back a bit further. We should recognise that the fund as it operates today is not perfect. Indeed, a number of noble Lords have made that point. When we were in Government, we paved the way for change and consulted on it. The case we made was the one referred to by the noble Lord, Lord German, which was that the system was short-term, passive and complex. Its role was as a sticking plaster to deal with short-term crises and did not address the longer-term challenges which individuals face, particularly those of financial and social exclusion.
That said, we should never lose sight of the importance of a safety net for those who are in desperate need. We have all received powerful testimony from a range of organisations to the difference that a crisis loan or a community care grant can make when individuals with acute needs are faced with very difficult circumstances. It helps the poorest and the most vulnerable people in our society and we know how an early intervention can prevent a slide into even more desperate circumstances.
The case has been made by others, particularly in a very powerful presentation by my noble friend Lady Lister, as to why we should continue to support this. I would like to comment on some of the other contributions. Perhaps I may say to the noble Lord, Lord Brooke, that the great mistake he made was to confront Derek Hatton with a Socialist Worker under his arm. It should have been Militant, and then he might have got a better reception. So far as ring-fencing is concerned, I recall one party conference when a certain Dennis Skinner was speaking from the platform. He addressed the mayor who had come to open the conference and suggested that he should melt down his chain and put it into the housing revenue account, so there are precedents as well.
One of the difficulties I have with the government proposals is in trying to understand precisely their vision of what should result from this process. On page 25 of Local support to replace Community Care Grants and Crisis Loans for living expenses in England, the Government’s response to the call for evidence, they say:
“There is no expectation or desire from central government that the new service will mirror the current Social Fund scheme in whole or in part”.
If that is right, what is the Government’s vision? What are they seeking to achieve? My blood ran cold when I turned to page 27—this was the point made by my noble friend Lady Lister—where it says:
“One of the design issues raised by a large number of respondents is whether provision should be in the form of cash payments or goods and services, including for example food parcels and both new and re-conditioned household items”.
The next paragraph says:
“The need to offer recipients choice or control over the item they received was not generally considered a requirement and by a number of respondents it was thought to be undesirable. There was a strong sense that if there is a genuine need recipients will accept the support that is offered”.
What sort of country are we living in where we have those sorts of rules? It is “take it or leave it”, living off the scraps from the supermarket when they clear the shelves at night.
My noble friend Lady Sherlock pressed on a range of points concerning funding. I shall address Appendix C of the document I just referred to. Bandied around somewhere in the text is a figure of £178 million, but this annexe says it gives us,
“National-level data from the latest available financial year and 2005-6”.
The year then was 2009-10, so it was not as up to date as my noble friend. It says:
“We have indicated our intention and already taken action to manage the current levels of demand and spend for Crisis Loans back towards 2005-06 levels. 2005-06 data should therefore be regarded as more representative of the levels of demand and spend at the point of transition to the new local provision”.
The gross spend on crisis loans in 2009-10 was £67 million, but what was it in 2005-6? It was £20 million. Is that what the Government are about now, trying to scale back from even the 2009-10 figures to just £20 million in allocating moneys to start this process? It is an absolute disgrace if that is the proposition, and this is supposedly not meant to be about saving money.
Notwithstanding that, the information we have had is that the Government are cutting back on some of these arrangements. Crisis loans for items only following a disaster and crisis loans for living expenses have been cut back from 75 per cent to 60 per cent, supposedly aligning with the hardship payment rate under JSA. Crisis loans for living expenses are limited to three in a rolling 12-month period. There is already a process under way to cut back on this spend before we get into the new arrangements. I would like to understand the rationale and the justification for that.
I thoroughly and wholeheartedly support the proposition concerning ring-fencing. What we are talking about is money that goes into local authority budgets, ring-fenced for a specific purpose. The Government have made great play of reducing ring-fencing on local authorities—as we did in Government to a certain extent—but as a technique and as a means of ensuring that the money that goes through to local authorities is spent on that endeavour, it is well tried and tested. There is not a problem in doing it. Indeed, one of the experiences we need to reflect on is what happened to the “Supporting People” programme. That programme was originally ring-fenced. It was then un-ring-fenced, I think with the support of the CLG Select Committee, but at least in those circumstances local authorities were required to continue to report centrally about how that allocation had been dealt with. It was not rigid but at least there was a reporting requirement. I do not know, but perhaps the Minister can tell us, whether any such arrangements are proposed so far as the Social Fund is concerned.
My noble friend Lady Hollis was absolutely right to identify the issues that will arise under two-tier authorities. She suggested that one way of dealing with this would be to have a mandatory allocation to districts, but that raises the whole question of who people will engage with at the local level to get the support they need. Most of their needs will be related to housing, which is at the district level, but some may be related to adult services, which are the functions of a county council. Where people go and what the process will be is entirely unclear.
The noble Earl, Lord Listowel, supported the issues around ring-fencing. He made the point, as did other noble Lords, about the pressure that is on local authorities at this time. They have had dramatic cuts made to their budgets and some of those cuts have been front-end loaded. In some respects, they have had greater responsibilities imposed on them under the Localism Bill. Indeed, what are hard-pressed councils to do when such extraordinary pressures are placed on them? They must try to make decent decisions so as to protect and support their communities. This is another example of the Government, in the guise of localism, pushing down on local authorities and giving them the supposed problem that they are not prepared to face up to and deal with themselves.
My noble friend Lady Turner centred her speech on issues around domestic violence. I wholeheartedly agree with her, and that is why the amendment should be supported.
The greatest difficulty with all this is being able to see what the Government’s vision is. Local authorities are innovative and many of them will work very hard to protect in every way they can the vulnerable citizens in their communities, and indeed those from outside their communities. The noble Lord, Lord Kirkwood, made the point about connections. If local authorities put in place a focus on people with local connections, it will particularly disadvantage those whom the Social Fund is designed to help—the people who are settling back into a community and perhaps do not yet have a fixed abode. They may be rough sleepers or—I think this is the expression—they sofa-surf, which is when they kip down for the night on friends’ sofas here, there and everywhere. Helping those people means that a barrier cannot be put on some localised connection. I would support all the amendments which seek to avoid that.
The noble Lord, Lord Kirkwood, was absolutely right to say that we need consistency of approach and transparency in all this. In part, that is what our amendment seeks to do: it would establish that there should be mechanisms to make sure that we get consistency. As I say, that has to be on an England basis because separate and well funded schemes will operate in Scotland and Wales. That is fine, and we should be happy with that. One of the other challenges here is that these changes are being introduced at a time when there is a whole maelstrom of change going on around localism, welfare reform, our health and social care provisions, and what legal aid support people can receive. In the midst of all that, these changes are being brought forward. They will affect the most vulnerable people in our society, and if we have a duty as Members of Parliament and certainly as members of a Government, above all we should look to protect them. These provisions simply do not do that.
Lord Freud
My Lords, the current discretionary Social Fund is clearly in need of reform, as several noble Lords agreed today. From 2006 to 2011, the number of crisis loan awards tripled. The evidence does not suggest, however, that this increase reflected an underlying increase in genuine need, as it was largely independent of the recession. Analysis of the increased demand showed that it was driven by young single people on jobseeker’s allowance, many of them still living at home, rather than reflecting a more general trend across all benefit client groups. Strong action has already been taken to get spending under control, and demand has already reduced markedly.
Analysis of the current community care grants scheme shows that the remote operation of a highly discretionary scheme may not deliver the best use of a limited resource. The scheme is often poorly targeted due to the lack of integration with the wider social care agenda. Local authorities and the devolved Administrations are better placed to determine and support the needs of local vulnerable people than the current centralised system.
Clause 69 paves the way for reform of the discretionary Social Fund. Community care grants and crisis loans for general living expenses will be replaced by new local provision designed and delivered by local authorities in England and the devolved Administrations in Scotland and Wales. Budgeting loans and crisis loans for alignment to benefit or wages will be replaced by a national system of advances of benefit through the payments-on-account provisions set out in Clause 98. So the majority of the discretionary element of the Social Fund money will still be administered at national level because it is closely aligned to the ongoing benefit system: that is the most efficient way to do it. That discretionary loan fund pot at national level, which revolves, is currently standing, I believe, at £1.2 billion. I compare that with the £178 million going locally which is divided into grants, currently at £141 million, and general living expenses at £36 million. That does not add up to the full £178 million because there is another £1 million of transition funding.
Lord McKenzie of Luton
Will the Minister explain where the figure of £36 million comes from? The 2009-10 figure for crisis loans for general living expenses is £67 million. The Minister is clearly one year on from that, but has the figure halved over that period?
Lord Freud
If the noble Lord looks at page 11 of the government response document, it shows that the tripling was clearly driven by a phone-based service. As I said, we are getting that more under control. The 10-year average spend is £30 million, and clearly we are aiming to get back down to more sensible levels through this method, as I said.
Lord Boswell of Aynho
My Lords, would it not also be reasonable, in cases of very substantial disasters extending perhaps beyond the compass of a single block of flats—although that would be a serious local tragedy—to look at the Bellwin scheme, which as I understand it is designed to deal not with the initial tranche of costs but with the substantial extra costs that local authorities will face if they are confronted by a major natural or physical disaster?
Lord McKenzie of Luton
The noble Lord is absolutely right. That was deployed in relation to the flooding in Cumbria.
Baroness Lister of Burtersett
I raise this to ask not so much about housing but about people's white goods and furniture that may have been destroyed for whatever reason. My understanding is that, at present, they can turn to discretionary crisis loans in such cases.
Lord Freud
Local authorities have a number of duties under which they are bound, and those are the duties to which I am referring. Let me continue.
Lord McKenzie of Luton
Could we ask the Minister to provide us with a list of the duties and the statutory references to them so that we have them on the record? We will then be able to see clearly what is covered and what is not.
Lord McKenzie of Luton
I think there are two issues. First, what is the total pot for the rest of the spending review? I think the noble Lord has confirmed that that is £178 million—fixed or to be uprated by inflation?
Lord McKenzie of Luton
So it is declining in real terms. The second issue is how it is allocated among local authorities. Will it be done as part of the general revenue support grant, so that it gets mixed up with all the other things, or will it be dealt with separately?
Lord Freud
I understand that it is fixed for two years, which takes us to the end of this spending review.
I turn now to a number of questions raised by my noble friend Lord German, who asked about the devolution aspects. The Scottish Government have consulted on the approach that they might take to deliver the new local provision. They considered local as well as Scotland-wide approaches and they now have to decide whether the local approach, in line with the English approach, or the centralised approach is best. If the Scottish Government decide to go down the centralised route, that would be an interesting test case of whether devolving down to the local level, to populations of between 12,000 in the City of London and 1.4 million in Kent, or centralised to cover 5.2 million people across Scotland, is the best way to administer this sort of discretionary support. Clearly, we have taken the view that the closer to the populations served, the better.
If the Scottish Government choose to divert funding from other sources to top up the funding they receive from the UK Government, that is their choice, but they will have to tell the Scottish people from where the money has been diverted. My noble friend asked about legislative consent motions, but those are not necessarily for Social Fund reform. On the accounting officer question, for the national payments on account provisions that will clearly be the DWP Permanent Secretary. I shall come back to him on the devolved moneys.
I hope that I have adequately explained why these amendments are necessary. I shall reflect on the points that have been made so powerfully. Meanwhile, I would urge the noble Baroness to withdraw her amendment.
Lord McKenzie of Luton
My Lords, we gave notice of our intention to oppose the Question that Clause 74 stand part of the Bill, but we have had discussions along the way which, for the time being, we find satisfactory, so we shall not oppose the Question.