Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thought it would be convenient to touch on the timetable. There has been discussion between the usual channels on the best way to take the rest of proceedings. We have agreed, subject to our best endeavours and without overriding anything, that there will be 17 Committee sittings, finishing on 28 November. The main items will be taken as follows. ESA time-limiting will be debated today; the Social Fund issues on 10 November; the PIP on 14 and 16 November; the benefit cap on 21 November; fraud and error on 23 November; and child maintenance and changes to the Child Poverty Commission on the last day, 28 November. I will circulate this timetable to all Peers after today.
Lord McKenzie of Luton
My Lords, I thank the noble Lord, Lord Freud, for running through that timetable. Our Front Bench is signed up to using our best intentions to make sure that we stick to it. It is helpful for those who are not necessarily here for every bit of the Bill to know roughly what the schedule is. My Whip, my noble friend Lord McAvoy, has asked me to stress that these are firm intentions but not a straitjacket.
Baroness Morgan of Drefelin
My Lords, it is incredibly helpful for those of us on the Cross Benches to hear from the Minister what the timetable for the subject matter for debates might be. Can I also point out how difficult it might be for some of us, with the Health and Social Care Bill being in Committee at the same time as the Welfare Reform Bill? I have amendments down for both Bills and it will be difficult. I know that is true for many Peers.
Lord McKenzie of Luton
My Lords, in speaking to Amendment 71M, I shall speak also to Amendment 71P. I shall speak to the other amendments in this group when they have been introduced.
Clause 51 is one of the most controversial and unfair provisions in the Bill. It seeks to limit contributory ESA to 365 days in aggregate in respect of the same reference period. The clause further seeks to have the clock running for this currently so that days of receipt to date count towards the total. Our amendment is modest in that it seeks to remove the reference to 365 days and replaces it with an order-making power for which the prescribed number of days must be at least 730—that is, two years. This formulation provides the route to ensuring that any time-limiting of contributory ESA must be based on a proper analysis and evidence, rather than the arbitrary approach that the Bill adopts.
To justify a time limit for ESA we need to be satisfied that it is reasonable to expect people to return to work within the period, or to be fit for work and transfer to the JSA regime or be subject to work-related requirements in the universal credit regime. This judgment is not without difficulty, given the multiplicity of circumstances that cause individuals to be allocated to the work-related activity group—the WRAG. They include mental health and fluctuating conditions and depend on the level of support that is available to individuals. No one is arguing for a system that enables individuals to stay in the WRAG for ever without making any effort to move closer to the labour market. However, is it not the case that, when placed in the WRAG, there is a prognosis of how long somebody will stay there, and that prognosis is reviewed for its appropriateness before a claimant is moved to the JSA regime or, in the future, to the all work-related requirements of universal credit or, indeed, to the support group?
Therefore, in essence, the system has an individualised assessment of how long somebody may need to remain in receipt of contributory ESA if the national insurance conditions are satisfied. If the Government have confidence in the WCA process, why not rely and build on this approach? Is not the answer that this is really not about fairness or making reasonable judgments about how long people need to remain in the WRAG but all about cost savings and removing entitlements to which individuals may have contributed throughout their working lives?
A lot of figures have been swirling around this matter but we know that government estimates show that by 2015-16 700,000 people will be affected by time-limiting. Forty per cent of these will not qualify for means-tested benefit. Of those who do, can the Minister give us an estimate of those who will receive maximum income-related ESA and possibly the distribution of those who will not? We know that 94 per cent of contributing ESA claimants in the WRAG have a claim, the duration of which is 12 months or more. From the Pathways programme, we know that between 2005-06 and 2008-09 only between 25 and 30 per cent of participants found work within 12 months. There are strong representations, for example, from Macmillan to the effect that for many cancer patients 12 months is not a long enough period before they return to work. It maintains that three-quarters of people with cancer placed in the WRAG still claim the benefit 12 months later.
Of course, the Government’s defence of all this is that income-related ESA will still be available. However, the thresholds for the means-tested benefit is low, and entitlement could be denied if a person’s partner earned as little as £7,500 a year or worked more than 24 hours a week. That is another couple penalty and a significant disincentive to work. The Government’s own assessment is that the average change in income for those who lose out from time-limiting is a loss of £52 a week—a staggering amount—with some losing as much as £94 a week.
We can accept that, as with JSA, an argument can be made for contributory ESA to be subject to a time limit, but the line must be drawn at a point where it is reasonable to expect that people will be able to move on from the support and protection of the work-related activity regime. Three hundred and sixty-five days is clearly far too short a time for this yardstick. Seven hundred and thirty days is, it is accepted, an arbitrary figure to an extent, but the real task is to do the analysis, produce the evidence and do the work so that a proper time limit can be established. This evidence-based approach is what the DWP is usually so good at, and it is to be regretted that it is being abandoned in this situation.
Although not spoken to yet, we wholeheartedly support the proposition that the assessment phase should not feature in the number of days counted for any limitation period. The basic JSA rate is all that is received during this period and claimants do not know whether they will end up in either the WRAG or the support group.
Similarly, we support the amendments that prevent any days arising prior to the introduction of the legislation counting towards any limitation period. Can the Minister tell us how many people will lose contributory ESA at the point that these provisions in the Bill come into effect? Writing to tell people that this restriction is probably on its way—and we will have to see the resolve of the Liberal Democrats on this issue when we have the opportunity to vote—is all very well but helpful advice to the effect that the DWP cannot offer any guidance before the legislation becomes law must have been received with some consternation. Perhaps we can ask what feedback has been received.
I have not spoken to Amendment 71P, which is by way of a probe. The notes provided by the DWP state that people in the support group will not be affected by the proposals. Is this correct? Take the case of someone who starts in the WRAG but because of a deteriorating condition transfers to the support group. Prior to any time limit in legislation taking effect, contributory ESA would have been payable throughout, based on satisfying the first and second contribution conditions at the start of the claim. But if entitlement ceases as a result of the time-limiting rule, will the claimant not have to satisfy the contribution conditions afresh? Satisfying the second contribution condition may not be a problem because of crediting, but the claimant could be out of time to take advantage of the last tax year in which the national insurance contributions were paid, the last time when the individual was actually earning in excess of the LEL.
I have a couple of further questions. When somebody is migrated on to the ESA from contributory incapacity benefit, will the national insurance contribution conditions be treated as satisfied or will they have to be met again? The Minister will recognise that somebody who in later years has been treated as having limited capability for work may well have been credited with sufficient national insurance contributions to satisfy the second condition, but may struggle to satisfy the first condition of paying contributions amounting to 25 times LEL within the previous three complete tax years. When somebody is transferred from contributory incapacity benefit to contributory ESA, is it intended that the 365-day clock starts at that point? What analysis has been undertaken in respect of this in planning transfers to ESA? What is the position of somebody who is no longer in the WRAG because they are considered to be fit for work and currently, therefore, are on JSA? Will they be eligible for contributory JSA, albeit for a maximum of six months? Further, policy briefing note 4 makes it clear that further changes are planned to the employment and support allowance to align the earnings rules and taper with universal credit. With contributory ESA in steady state, accepting for this purpose the 365-day time limit, what analysis has been undertaken of the costs and benefits of this? Is it intended to be cost-neutral?
We have a number of other amendments to consider. I have no doubt that we will hear the refrain from the Minister, “There is no money. These changes are vital for deficit reduction”. But there is always choice. The question is: why make these particular cuts and why is this particular burden to be borne by those who by definition are not currently able to work and, moreover, have paid their dues in the past? I beg to move.
Lord Wigley
My Lords, I must say that I have considerable reservations about this clause in general, and these amendments touch on a number of them. I have concern about the provision for time-limiting the contribution-related ESA to 12 months, as is provided by this clause. It means that ESA claimants with a spouse or partner working 24 hours a week or more will not be eligible for the benefit. I believe that the time-limiting ESA is a serious disincentive to work for the partners and carers of ESA claimants, which leads to a situation in which unemployment is more financially sustainable than work, which must be a considerable worry to us all.
I further believe that the time-limiting of ESA punishes working families where one member is claiming ESA. Does the Minister accept that those with a working partner or with other income or capital, possibly up to as many as 400,000 people, will lose entitlement to the benefit completely if these provisions go forward? I urge the Government to think again on this.
Lord German
My Lords, I shall speak to Amendment 75A in my name. I start by saying that the important thing is to get the work capability assessment right. That was a point made by the noble Lord, Lord McKenzie. It is important that people are accurately placed in one or another of the categories. That means that rapid progress needs to be made with the improvements that have been suggested by and are being adopted from Professor Harrington’s report. It seems that the work capability assessment is a crucial first part in ensuring that the whole system works effectively and properly.
The purpose of this amendment is to protect the most vulnerable and the poorest, and to take a slightly different approach from those suggested so far. I should like to start by looking at the context of two words that many noble Lords have used so far in this discussion—“arbitrary” and “temporary”. There is a difference. The noble Baroness, Lady Meacher, referred to any date being arbitrary. It is indeed an arbitrary decision, and if you have some form of illness that will take you beyond 720 days or whatever, then it is an arbitrary cut-off date one way or the other. That is our principal concern—the provision does not address the issues relating to the people concerned.
I of course recognise that there is an issue to which many noble Lords have referred regarding the cost-saving measure in this proposal. I should like to ask the Minister why the savings now being predicted are between £1.3 billion and £1.4 billion, given that in the comprehensive spending review the Chancellor of the Exchequer said that the savings would be £2 billion a year. This is a question that my noble friend Lady Thomas raised—to try to identify why there was a change of procedure from the announcement made by the Chancellor of the Exchequer, who stated that that there would be no backdating and that the provision would not be retrospective, when this proposal is for some form of retrospection.
When you examine the ways in which you can have a non-arbitrary system that deals with people’s needs, and when you look for a system that in our view deals with the most vulnerable and poorest in our society, there is a variety of ways in which you can do it. Obviously, through medical assessment, you could potentially re-examine people at some stage and say whether their medical condition had improved or was changing, or whether the condition would require that the payment should continue. The problem with reassessment is: when do you reassess and how long does that take? If you understand the meaning that I have already put on the word “arbitrary”, then, whether it is 18, 13, 12, nine or six months, you will see that it really is a question of the individual’s circumstances.
Lord McKenzie of Luton
I am sorry to interrupt the noble Lord, but if the process is that when someone is put into the work-related activity group there is a prognosis as to how long they are likely to remain there—this is the basis on which referrals to the work programme are made, for example—does he accept that that is a natural and clear point for reassessment?
Lord German
It is a point of assessment, but the problem is that people’s medical conditions can alter—they can get worse or better, and there is the issue of fluctuating conditions that noble Lords have also recognised. The point that I am making is that there is a problem with a single point, and you need to have a progression of points if you are going to use medical assessment.
The other approach that has already been referred to in this debate is exemption by groups. Once again, identifying groups of people is very tricky because people can fall into different categories within a particular group. There is also the danger that, if you identify one group, another group might be left out. In this amendment, we are therefore proposing to look at ways in which—while we cannot wreck the Government’s proposals to make savings and reach the overall budget targets that they have set—we can ensure that the most vulnerable are protected from the effects of any time-limiting contributory ESA. This essentially means protecting the poorest and the sickest. The objective, therefore, is to focus the protection of those who are least able to support themselves. I know that that aim is shared by the Government, and we recognise that they are not time-limiting those in the support group, or even those on income-related ESA—to which I shall return in a moment.
However, we are not fully convinced of the thresholds at which income-related ESA apply, or that they are set at a level that will adequately protect low-income claimants—especially those with working partners. It is interesting to note from the impact assessment that 62 per cent of all those who would not be able to claim income-related ESA at the end of 12 months could not do so because of their employment. I want to come back to that issue of income. I know that we are talking here about a form of means-testing but, even so, we are talking about the main reason why people’s payments cannot continue.
We know that the Government are keen to ensure that there are no disincentives to work and that work will always pay. I am also aware that the Conservative Party in the Government wants to strongly support family ties through the tax and benefits regime. As such, it seems odd to us that the narrowness of the ESA means test risks undermining both these objectives, since it can present an incentive for a certain group to give up work. Paragraph 24 of the impact assessment states:
“Those with the most incentive to give up work are partners earning less than £150 a week, as their net income could potentially only be a few pounds less if they gave up work. An indicative analysis shows that 10% of all partners are in this position”.
If that is the case, these are the 10 per cent who are obviously the poorest and the most threatened by the change which is before them. With that 10 per cent of people in mind, this amendment seeks to set in law a floor beneath which the means test cannot apply. We are probing the Government to see whether they think that the test, as currently applied, is adequate to protect the lowest income households.
The amendment is set in terms not of the hours worked, because that is quite difficult to assess, but of the actual paid income. We know that the new universal credit system will enable the DWP to indentify the income of the partner. I am attracted to an income-based level because it is a clearer marker of actual income than hours worked.
Nevertheless, we would like to hear the Minister’s view on alternative methods of measuring income for a means test. We have chosen in this amendment the income tax personal allowance threshold divided by 52, for simply making it a weekly income measure rather than an annual. This is an external marker and thus less arbitrary than plucking a figure from thin air to write into legislation. If you divide the current rate of £7,475, the figure comes to £143.75 a week, which is very close to the £150 figure mentioned in paragraph 24 on page 11 of the Government’s impact assessment. This level therefore almost equates to the £150 figure. The Government’s own assessment notes that this is the level below which there exists a disincentive for people to work. We are trying to address that disincentive.
We—those who tabled this amendment—cannot be committed to a particular bar or level to set. But I am keen—I hope noble Lords will agree—to set in place an architecture for the future. My noble friend the Minister has used many times the argument that the taper can move with time as circumstances permit, but I want a means-test bar from which one can fluctuate as government income increases. We are aware that the Government have expressed the intention to raise the personal allowance threshold and we are very pleased with that. But it seems to us that if the Government think one should keep one’s earnings and not lose them to the taxman below a certain level, the same logic might also be applied to earnings and to one’s partner’s ESA. I welcome the Government’s response to the future impact of this amendment in light of the changes to the tax threshold which are before us in the next few years.
There are two other issues on which I should like to probe the Government. If they were to look at what happens immediately after the 12-month period is up, and if the income-related ESA is not available—because of the bar or the fact it is means-tested, or for any other reason, capital perhaps—will the Minister allow people who would otherwise have been eligible for income-related ESA to have the national insurance contributions credits applied to them? That would allow them to get the passported benefits that came with that purpose and therefore additional benefits would flow. At its minimum level, that would be a level of support that people could look to.
Lord Freud
My Lords, I had just begun to address the question raised by the noble Lord, Lord McKenzie, on national insurance contributions. The person who has transferred to contributory benefit from incapacity benefit will be treated as having met the contribution conditions from the point of migration. Claimants will be entitled for a year to ESA if they are placed in the work-related activity group. National insurance credits will continue to be awarded to people who continue to have limited capacity for work, even if they receive no ESA at all.
Through these changes we are sending out a clear message. To the most vulnerable, we will provide the support when it is needed for as long as it is needed.
Lord McKenzie of Luton
If the Minister has moved on from national insurance, perhaps he might just address this point of circumstances where somebody starts off in the WRAG and at the start of their claim meets the national insurance contributions, because they have been both credited in and paid sufficient in one of those years. That claim is terminated or ceases after 365 days and the person then moves into the support group. Would that be a new claim for the purposes of attachment to the national insurance contributions? If people had to look afresh at that point, they may well have been credited insufficiently, but they would not be able to pay in, because they would not have been in the labour market and would not have had earnings. They would therefore be disconnected from contributory ESA.
Baroness Lister of Burtersett
I shall ask the Minister another question, so that he can get his breath back. I very much welcome what he said about credits. This may reflect my ignorance of the mechanics of it, but could he explain how people get credited, if they cease to be part of the system and have no entitlement to anything?
Lord Freud
The noble Baroness has got that absolutely right. It is both for people who are currently on income-related ESA and those who have been recipients of contributory ESA.
There will clearly be a financial cost to Amendment 71P, but I am afraid that in the short time available I have not been able to produce a robust costing.
Lord McKenzie of Luton
I thought the Minister said in his earlier remarks that, effectively, these things did not need the amendment because they were dealt with by way of easement. Therefore, presumably they are already factored into the cost and no additional cost would arise from this. Is that not what he said?
Lord Freud
No, that is not what I am saying. The noble Lord’s amendment raises the example of someone who has been in the WRAG for a year, falls off it and in five years’ time falls ill. The amendment would allow them to go onto the contributory support element of ESA as of right. That carries a cost for which I do not have the exact figure. We are working on it.
Lord McKenzie of Luton
I am sorry but I thought the noble Lord, in responding earlier, said that there were easements to address this so that you effectively reconnected people because of their national insurance contributions. That was the issue that was being raised. We are dealing here with people who, but for the 365-day time-limiting, would currently have a continual claim to ESA.
Lord Freud
My Lords, I am convinced that I did not say that this particular easement was built in. I was talking about national insurance contributions. Once they are through the time-limited period, individuals cannot then switch back into the support group on a contributory basis.
Lord McKenzie of Luton
Forgive me, but that means that people in the support group are disadvantaged by these provisions, contrary to the Government’s assertion.
Lord Freud
My Lords, people in the WRAG who have gone through their time-limited period do not then have a right to go into the support group on a contributory basis. Clearly, they have a right to go into it on an income-related basis, but not on a contributory basis.
Baroness Lister of Burtersett
Forgive me if I am wrong and I expose the frailness of my knowledge of social security, but I thought that claimants got a lower rate during the assessment phase. Therefore it may be called the same benefit but, in terms of the money people get, it is less. That period is not being included. That is why I am saying that it is a year minus 13 weeks. Yes, they are getting a benefit but at a lower rate.
Lord McKenzie of Luton
I can support my noble friend: as I understand it, people get the basic JSA rate in the assessment period.
Baroness Hollis of Heigham
You might as well be on JSA and be done with it.
Lord McKenzie of Luton
Surely that is not right. Is it backdated to the end of the assessment period?
Lord Freud
I have to admit that I am not particularly happy about the assessment phase of ESA and how it is working. It is becoming a separate benefit in practice. I would like to look at it. It is difficult to have a set of principles around something that one is somewhat unhappy about.
I shall go on with the costs. Amendment 74 would reduce savings by around £430 million in total by 2016-17. Amendment 75A would increase expenditure on ESA by approximately £500 million per year, plus up to £50 million more on other income-related benefits. I cannot accept that we should make these amendments. They would place a very high financial cost on us in the current fiscal climate. I believe our proposed changes are right in principle and fair to the taxpayer. I urge noble Lords not to press these amendments.
Lord McKenzie of Luton
My Lords, I thank the Minister for his very extensive reply dealing with a whole host of interruptions. That must certainly be a record for this Committee.
Baroness Hollis of Heigham
I wonder if my noble friend will allow me to ask him a question? Does he not agree that this shows the undesirability of having one vast grouping all day, which means that we are constantly interrupting the Minister because he is about to move on to something else and we cannot have a discussion on different topics? It would have been perfectly simple to have turned it into something like four groups on the different issues. We could have had a coherent discussion on each of those and then gone on to a wider discussion at the end. This way, we have been to-ing and fro-ing trying to get information. No wonder the Minister has sometimes had to shuffle his papers. It is because of the way that this has been grouped. It is madness.
Baroness Hollis of Heigham
The noble Baroness the Deputy Chairman of Committees is absolutely right, but you do have to lead on the amendment group to have that right.
Lord McKenzie of Luton
To satisfy both my noble friends, there is a balance to be struck between making decent progress on the Bill and having coherent discussions. I hope that we have achieved both, or will achieve both, today.
I come back to the Minister’s response, but will comment on what other noble Lords have said. The overall tenor of our very powerful debate this afternoon is clearly to the effect that people are extremely unhappy with these provisions. Comments have ranged from suggesting that we should not have them at all, with Clause 51 not standing part, to a series of detailed amendments. Noble Lords have made a range of extremely pertinent points. The noble Baroness, Lady Meacher, talked about job prospects and asked where the fairness was in this. My noble friend Lady Lister talked about the value of the contributory principle and making sure that it does not get lost, as well as the quality impact assessment and the challenges of denying people an independent source of income.
The noble Baroness, Lady Thomas, talked about the changing of the rules. We do not have an answer yet as to why the Government changed their mind on that, and the Minister may wish to respond further in due course. The noble Baroness, Lady Morgan, raised a range of concerns focused on how the WCA works, and how people access the support group, particularly those who are terminally ill. The noble Lord, Lord Wigley, was one of those noble Lords concerned about whether Clause 51 should exist at all, while the noble Lord, Lord German, talked about the WCA getting it right. I absolutely agree, and we have common cause on that, but we should get it right irrespective of these provisions as it serves a purpose around conditionality and support that should be available to people.
As for what is arbitrary and what is not, I warm to the Minister’s definition—it is what others do, so it is not arbitrary. On that basis, we might almost apply to join the euro, but I do not think that the Minister would suggest that.
Our amendment fundamentally looked at these things being dealt with by way of orders, so you could build an evidence base as to what was appropriate. Yes, we had a two-year minimum, which one would accept was not based on the most robust of evidence. My noble friend Lady Hollis warmed to the thrust of the amendment, as it was one way to ameliorate some of the impacts of the provisions, although it does not deal with them entirely. For example, it does not deal with the independent source of income, which my noble friend Lady Lister was concerned about.
My noble friend Lady Gibson was also concerned about the very existence of Clause 51, and there were some very moving examples from my noble friend Lady Hayter. The noble Lord, Lord Patel, led the charge on the challenge that the assessment period should not be included, that Clause 51 should not be there at all and that there should not be a start to this before the legislation comes into force. There was an interesting reference to Lib Dem conference resolutions, which we might keep in our sights.
However, we should thank the Minister for a very full series of exchanges on a lot of detailed points. Fundamentally, this comes back to costs, which he always quotes at us. I agree that we shall have to study Hansard and get into the figures. He could not resist the jibe about the deficit, although I wish he had because I could have resisted pointing out that we have had an international financial crisis that has affected all major economies.
Lord McKenzie of Luton
Driven by bankers—thankfully not accountants. With great respect, I normally find the Minister convincing but he was not convincing on the assessment period, and at the end of the day acknowledged that he had concerns about that. As to the definition of whether the proposal is backdated or not, starting this process up to 12 months before the legislation comes into effect is a very unusual way to proceed.
Part of the reason why we are going down this path is that the Minister said right at the start of his response that we should expect people to avail themselves of the help and support available. He also said that a lifetime on benefits is no longer an option. I would not disagree one iota with that, but no one is arguing for a lifetime on benefits—certainly not for those who can move closer to the labour market and into work. That is not a matter between us, but the noble Lord did not deal with the point about the WCA, around which there is a lot of discussion. We all want it to work as it should do, but is there not, when people are allocated to the WRAG or the support group—certainly the WRAG—a prognosis that goes with them that says how long they are likely to be in that group and, therefore, when they are likely to be fit to join what is currently the JSA group? That is the hope and that is how it works. The Minister has said that in the past and told us that that prognosis is tested before someone is moved off benefit. We therefore have a process by which an individual judgment is made about how long people will be assumed to be in the WRAG, and then ultimately, when that time is up, whether they should remain in the WRAG, go into the support group or join JSA. We have an individualised process, do we not? Why can that not be used?
This is where we fundamentally differ from the Government: if the object is to ensure that people can stay in the WRAG for as long as they need to and have the benefit of the contributory ESA system for as long as is necessary, is that not a fair way of proceeding? On the other hand—I think that this is probably the Government’s position because we need to save money—is the Minister saying, “We do not care how long you need to stay in the WRAG; after a period your contributory benefit will be chopped”? It seems that the position is not related in the Government’s mind to how long people should need support in the WRAG.
Lord Freud
If the noble Lord would like me to, I can give him a little information on that. The latest data show that among all those assessed to be in the work-related activity group at their initial WCA, 91 per cent have a prognosis of 12 months or less. However, it is placing an awful lot of weight on such a prognosis to build a system around it. I would personally feel pretty uncomfortable about it. However, the data make the point about the expectation that the curve is rather similar to what you would expect regarding the potential for people to come off—certainly, the WRAG element—on that prognosis.
Lord McKenzie of Luton
Is it not the case that the same prognosis is used for remuneration of providers in the work programme because that determines which remuneration slot they are in?
Lord Freud
The standard position on the work programme is that people whose prognosis goes into the three-month phase then go into work programme, which provides a heavy incentive at that stage to help those people back into the workplace.
Lord McKenzie of Luton
Perhaps I might move on. The noble Lord has stacked up the costs of these various amendments. However, the Government have not reflected on who is bearing those costs. That is a point made by several noble Lords during the debate. It is not just spread equally across the population or pro rata to resources across the population. It is concentrated on a range of people who are in the work-related activity group, who we want to move closer to the labour market but who are currently neither in work nor, according to the analysis, fit for work. That is the fundamental issue that we are trying to get to grips with. I am sure that the amendments that we have discussed in Grand Committee today will all be withdrawn but I have no doubt that we will revisit them in one form or another when we get to Report.
I thought that the noble Lord had reassured me on the decoupling of people in the support group when he first spoke. When we followed that up, I was much less reassured. The claim that this does not affect people in the support group could be difficult to sustain in circumstances where they get disconnected by the national insurance rules. I urge the Minister at least to reflect on that to see whether there should be some change in or expansion of the linking rules. We are dealing here with a situation where, currently, there would be a continual claim whether someone was in the WRAG or the support group. We seek only to establish that if that link in the WRAG is broken because of the 365-day rule, when people end up in the support group they are not disconnected from those earlier national insurance contribution conditions, particularly the first one. We will certainly want to come back to that in detail.
We will not have a meeting of minds on this today but I am sure the Minister will reflect, as he always does, on the data, facts and arguments that have been put to him. It seems very clear today that, overwhelmingly, those arguments have been against what the Government are proposing. Having said that, I beg leave to withdraw the amendment.
The Earl of Listowel
My Lords, briefly, I join in the request for the Minister to think very carefully about these matters. I have been moved by the speeches on this amendment. Reference was made to children leaving care, which certainly resonated with me. We know that disabled children are greatly overrepresented among children in care. We know that the transition from care is very difficult for many children without disabilities, so those with disabilities may be doubly disadvantaged as they make that transition into adulthood. Furthermore, we also know that for children with disabilities, in the general run, the turnover of social workers and many disturbances mean that the transition to adulthood and adult services is often very problematic. There are many good reasons why this amendment should be given careful consideration. I look forward to what I hope will be a sympathetic response from the Minister.
Lord McKenzie of Luton
My Lords, on this occasion I am happy to be at one with my noble friend Lady Lister and the noble Lord, Lord Patel. I am not sure that I am happy to be reminded about being assailed from the left by the noble Lord, Lord Skelmersdale; I try to put those memories far behind me. These are two important amendments and I hope that the Government will consider them seriously and take them on board. As my honourable friend Stephen Timms said in another place, it is,
“very hard to understand the Government’s justification for abolishing ESA for those people”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 645.]
He said that it is a measure that seems “unreasonably punitive”. I agree.
Lord Freud
My Lords, I shall briefly explain what the existing rules are for young people. Special conditions for young people who are exempt from meeting the usual PAYE national insurance conditions are set out in paragraph 4 to Schedule 1 to the Welfare Reform Act 2007. These provide that a person aged 16 to 19, or 20 to 25 in certain prescribed circumstances, who is not in full-time education and has had a limited capability for work for 196 consecutive days, will be entitled to contributory ESA. No other age group can qualify for contributory ESA without having paid or being treated as having paid national insurance contributions. Nor does any other contributory benefit have similar arrangements. The vast majority of claimants who presently receive contributory ESA on the grounds of youth—around 90 per cent—are expected to receive income-related ESA. Those who do not qualify for income-related ESA are likely to have capital in excess of £16,000 or a partner in full-time work who may be entitled to working tax credit. Clause 52 removes these special rules.
Benefits: EU Nationals
Lord McKenzie of Luton Excerpts(12 years, 9 months ago)
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Lord Freud
My Lords, we are going to take a pretty robust line on this matter. We have an opt-out from the Lisbon treaty which we have been using for African nationals where there are third-country agreements, in particular Morocco, Algeria and Tunisia. Again, currently we have legal differences with the Commission on this matter, which is looking for ways to get around our opt-out, but we are determined that we will retain it.
Lord McKenzie of Luton
My Lords, can the Minister tell us what the uprating arrangements are for benefits that are exported? We are aware that by generally switching uprating to CPI, the Government are seeking to reduce the income mostly of poor people by some £10 billion a year in 2015-16. Will the Minister take this opportunity to denounce any suggestion that benefit uprating in the UK for upcoming years will not at least keep pace with CPI?
Lord Freud
My Lords, we have had this discussion during the Committee stage of the Welfare Reform Bill and I have made it absolutely clear that I am not going to comment on that particular question in any way.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 9 months ago)
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Baroness Drake
My Lords, the purpose of this amendment is to allow regulations to specify that pension contributions made by single or either of joint claimants are disregarded in full in calculating their income for the purposes of calculating entitlement to universal credit: in effect, that 100 per cent of contributions made to an Inland Revenue approved pension are deducted from earnings that are brought to account in the calculation. The current tax credit rules disregard the whole of any pension contribution, and housing benefit takes half of that contribution into account.
Briefing note 3, which I read again this morning, states that only 50 per cent of pension contributions will be deducted from income under universal credit. I find this decision to allow only 50 per cent of pension contribution to be deducted—as against the current 100 per cent—quite disturbing when we are on the eve of beginning to auto-enrol millions of people into a workplace pension, many of whom will be modest-income earners and many of whom will be in receipt of universal credit. I find it disturbing for three reasons. First, it will undermine the incentive to save—I will come back to this. Secondly, it will impact those on lower incomes. Thirdly—and this is an argument to which I will return on another occasion—it is another example of a government policy measure, of which there have been several over a short period, which results in little or no asset accumulation strategy for low to moderate income earners.
The arguments for auto-enrolment and the 8 per cent base load of contribution included an analysis of financial incentives to save. It included the fact that this 100 per cent of contributions was allowed in the deduction under working tax credit. That analysis was carried out in three instances: once by the Pensions Commission—we were aware of it and it influenced our thinking—and twice by the DWP in its research report 403 Financial Incentives to Save for Retirement, and its report on the savings incentive work programme. The latter report was a very high-profile event; it was carried out in a rather heated environment around incentives to save and means-tested traps. The DWP was full and transparent in its engagement with all relevant stakeholders, sharing data and analysis. The report was widely accepted at the time. In all of these reports it was clear that the way in which pension contributions were treated under the tax credit system was part of the incentive to save and the payback analysis on every pound saved for low to moderate-income earners.
I cannot do justice to the reports in moving an amendment, but I refer to one or two selected examples. Looking at £1 of saving by a low earner under current benefit and tax credit rules, paragraph 4.5 of the DWP Research Report 403 advises;
“the expected payback for a low earner per £1 contribution net of any offsetting benefit effect is £2.81, compared to £2.52 with no such offset”.
The same paragraph, in brief, goes on to illustrate, admittedly for a very stylised individual, how receipt of working tax credit throughout working life by someone on a lower level of income can increase the return on their savings to 4.1 per cent from 3.2 per cent after all the effects of these offsets. Even if tax credits are received only at certain points and not throughout the whole working life, they still boost the net return on savings. If one were to take the difference between 3.2 per cent and 4.1 per cent and express it in terms of a percentage difference in a rate of return over 30 to 40 years, what would that mean? It would mean a pension pot of the order of 20 per cent or perhaps 25 per cent less than it would otherwise be.
Then we come to those on the lowest incomes who are hit hardest. I come back to a point that I made in a previous amendment about the purpose of the tax credit, which was to make work pay. It made it easier for people to get a real return from being in work and accept responsibility. This is very important to those on lower incomes. Clearly, a very strong incentive to save will be lost by changing the rules on pension credit and, inevitably, it is going to trail through to a gender dimension. I always get very stressed when I look at these things in terms of the gender impact.
Referring back to Appendix D of the DWP report on the savings incentive work programme, again this shows that those on modest incomes in receipt of tax credits and housing benefit effectively pay 52p for an individual contribution of £1, which, with the employer match, means that £2 is contributed to their pension. That clearly enhances the payback from saving for these individuals. I know that there will be instances where some people whose incomes are below the earnings limit at which withdrawal begins will not get that benefit. None the less, for significant numbers of people— and that number will increase in an auto-enrolled world—under the current arrangements the payback would be much higher by allowing the 100 per cent.
I come on to the broader point. It is very easy to look at a piece of policy incrementally and say, “We have to make difficult choices. We can do this and save that”, but I am always really concerned when I see a series of incremental policy decisions. When you look at their cumulative effect, they are quite exponential in their impact and much greater than the people who made the individual incremental decisions thought they would be. This is almost disassembling asset accumulation strategy. Policies focused on improving the benefits system and policies directed at asset-building by lower income groups are not alternatives. I get a feeling that there is a debate that says that they are. Certainly when I participated in the debate that led to the scrapping of the savings gateway, that was the debate that was running at that time.
It is not a matter of either/or; you address the low income policy and income redistribution or you address the asset accumulation strategy, but recognising that addressing inequality and enabling people to take responsibility, stay in control and be empowered, and everything that we aspire to for people to achieve, have and be, requires both sets of policies. Yet we see in this Bill and elsewhere other measures by the Government that have the effect of disassembling asset accumulation strategies. We have the one that I am talking about, where the amount of pension contribution deductions that can be made is now to be halved. We saw the removal of the savings gateway. We are seeing the application of quite aggressive capital rules to the savings of those in work under universal credit. We are seeing the application of aggressive capital rules where one partner has reached pension credit age and the other has not. We have seen the aggressive taking into account of ISAs and assumptions about income flow from ISAs, which were a product that was supposed to be targeted at lower to moderate-income earners. It was a high-advantage, simple, cash savings product.
Therefore, when one stands back, I have a general concern about the impact of a series of measures on the asset accumulation strategy for people on low-to-moderate incomes. I honestly do not know how one expects people to embrace responsibility and long-term saving, and think about preparing for retirement, when one of the significant things that contributed to the payback on your savings, apart from the employer contribution, was the way in which your pension contribution interfaced with the benefits system. It is unfair and it is certainly inefficient as a piece of policy, either as pension policy or in helping people to exercise more control and responsibility.
May I also ask about some operational issues that flow from this? It is not clear how personal pensions that are not paid through the employer will be handled when someone says, “I am not engaged in the auto-enrolment arrangements with the employer but I am paying into a personal pension, so how do I get account taken of that?”. Secondly, it strikes me that this will be quite a complicated procedure. If someone is on universal credit and paying a contribution, only 50 per cent of which is taken into account, you cannot take the gross earnings figure and you cannot take the net earnings figure because the Inland Revenue would have given a more generous allowance for that pension contribution. Therefore, you have to create another figure for the 50 per cent allowance that you are going to give on pension contributions. It just struck me as a rather complicated calculation or procedure, so I should like to understand how that will be done. I also dislike and disagree with the intention to reduce it from 100 per cent to 50 per cent. I beg to move.
Lord McKenzie of Luton
My Lords, I do not want to add anything to the very full argument around the policy that my noble friend has laid out. I just re-emphasise the issues about the practicalities and how they will work. I understand that employer contributions will not be treated as income for universal credit purposes but only 50 per cent of the employee contribution will be deductible. As my noble friend says, the data that come from the system would be net of tax, net of national insurance and net of occupational pension contributions, not the full contribution. Therefore, some adjustment would have to be made to that. How does that sit with the collection through real-time income and the related point that my noble friend made about when those contributions are made directly to personal pensions? Presumably there will need to be some additional reporting requirement. I guess this just emphasises that, in the world of universal credit, all is not as simple as we would wish and sometimes portray.
Lord McKenzie of Luton
Can the Minister help us on one point? I am interested in the practicalities and operation. He said that we could not do all this through the RTI system. I am trying to understand how much of it can be done, given that the RTI system is going to produce either a gross income figure or a net of tax and national insurance figure.
Lord Freud
My Lords, we had a session earlier today trying to go through what the universal credit shows. Without being overprecise, a lot more information is available but effectively you need the net and the gross figures. Clearly, the personal pensions are not captured on that payslip, but the pension contributions through auto-enrolment, for example, would be captured.
Lord McKenzie of Luton
I accept that you might have the net and the gross figures, but do you not now need another figure, which is half the occupational pension payment? That is not readily thrown up in the pay-as-you-earn system or any other system.
Baroness Wilkins
My Lords, I support the amendment which has been so comprehensively introduced by the noble Baroness, Lady Thomas of Winchester. I wish to make one additional point, which is that one of the very dispiriting elements of having a long-term health condition or a disability is the fact that you are so often on the receiving end of help. It can almost get to the point where you are not expected to be able to do things for other people. For example, I very rarely get leafleted in the street by charity workers. If I go to the door to a charity worker, they apologise that they have bothered me. It is as if you are not expected to be able to contribute to society in any way. However, one very obvious way in which we can contribute is by sharing the experience of our condition, making some value out of it and aiding research in this way. That can surely only be beneficial for future generations, for medical professionals and for ourselves and our self-esteem. It seems nonsensical that red tape in the benefits system should stand in the way.
Lord McKenzie of Luton
My Lords, I support the thrust of the noble Baroness’s amendment. I do not think that there was much that I ever did as Minister which was the cause of great rejoicing, but I was grateful for at least one memory. I recall several meetings that we had together, trying to see that we ended up in a situation where amounts paid to service users did not inadvertently affect their benefits. I have been trying to recall all of the detail of that. I am not sure that I can, but I am sure that the Minister will be able to bring us up to date or remind us.
Part of what we were trying to do then was to see if a sensible application of the current rules, by way of clear guidance across Jobcentre Plus, would be a route to tackling it. It was in part, but it did not deal with the whole of the situation. There can be no doubt that engagement of those who actually use our services in shaping how they are organised and delivered can be of enormous public benefit. This particularly applies to the multiplicity of research projects which can underpin innovation and vital developments in services. Service user engagement is to be strongly encouraged. We are thoroughly supportive of this.
As the noble Baroness has said, it seems entirely reasonable, as we reflect on the introduction of universal credit, to see how far a legislative solution will cover the situation, rather than perhaps just relying upon practice and guidance, as happens in part at the moment. However, as we have heard, that does not cover all of the gaps, and there are a range of issues about whether payment just covers actual outgoings, about whether there is an excess or profit, about the frequency of activity and about whether any spreading or averaging rules would apply—we went down that avenue at one stage. There is also the issue of protecting those who decline a payment from the notional income rules. It may be that the disregard regime in universal credit could help or could be made to help. On the basis of the noble Baroness’s figure, that may not be the case.
Turning to the specifics of the amendment, I have an issue about terminology. It refers to expenses,
“wholly, exclusively and necessarily incurred in the performance of the duties of the employment”.
It is an interesting point to distinguish employment and involvement. It is certainly the case in tax legislation, and I think in benefits legislation also, that the phrase “wholly, exclusively and necessarily” precludes taking the costs of travel from home to work out of the arrangements. There has always been a distinction between the cost of undertaking travel as part of your work or involvement and putting yourself in a position to do that, which is travel from home to work. Therefore I am not sure that the formulation is necessarily the right one.
This has been going on for a number of years. Progress has been made, but it clearly has not solved the problem, as we have heard. It would not have a huge price tag, if any, to use this opportunity with universal credit to deal with it absolutely.
Baroness Thomas of Winchester
I am caught between two pieces of advice: one is that we do need legislation and one is that we do not. I am somewhat conflicted, and I would like to get this sorted out before Third Reading. We have been told that for the rules that I read out from the statutory instrument, there was a peg on which to hang it, and that is why they were there. We were told that because there is nothing for NHS research we could not extend it. I shall withdraw the amendment now, but hope that we can resolve this before Third Reading, if not Report.
Lord McKenzie of Luton
Could the noble Lord arrange to send us copies of the earlier advice, because there is some confusion and I am not clear in my mind?
Lord Freud
My Lords, I will have an early meeting with my noble friend on this, and we will take it from there. Subject to that meeting, I will provide that particular advice, otherwise we may go round the houses on this very technical matter. I hope it is one we can resolve pretty fast, with a letter.
Lord McKenzie of Luton
My Lords, this is a probing amendment to seek the best understanding we can about how support for housing will work for someone on pension credit. Because housing benefit is to be abolished, housing support for those on pension credit, and thereafter outside universal credit, will be by way of a housing credit. It is accepted that there will be a lot of detail to work through, but perhaps the Minister can give us an update on progress.
The system will also provide support for children via a similar route, where this is applicable for those on pension credit. This will often be in circumstances where grandparents have responsibility for their grandchildren. Assurance was given in the other place that the Bill does not need to make special provision for this, because existing powers are sufficient. We accept that position. Therefore, the prospect of there being three strands or components of payments in these circumstances will flow from the Bill.
The points that arise are as follows: will the basic housing allowance follow the local housing allowance regime as for universal credit claimants? Will the 30 per cent percentile, the local housing allowance caps and non-dependant deduction increases be applied to this regime? Will those on guaranteed credit be able to access support for mortgage interest? Is it envisaged that there will be a composite and interlocking calculation of the pension credit, housing and possible child credit components, or will these be calculated separately? What is envisaged in respect of tapers, and will these be aligned? What will this mean for direct payments to landlords? Do the Government envisage any arrangements for pensioners different from those for universal credit claimants? Can we hear what the proposals are for support for mortgage interest—both for those in receipt of pension credit and universal credit? We have an outstanding question on that. What does this mean for the treatment of capital? We previously discussed how these differ between housing benefit and pension credit systems. The former has the £16,000 cut-off and the latter has no maximum, but income is taken into account. Will these two regimes sit side by side, or will they be rationalised? If they are going to be rationalised, on what basis will that happen? What arrangements will operate for uprating purposes? Will CPI be applied to the housing component? What about the uprating of pension credit? I beg to move.
Lord Freud
We are looking very closely at the support for mortgage interest. I can let the Committee know that we are planning to consult on how we do that. Rather than include that point in the letter, I will make sure that noble Lords are informed when that consultation paper comes out.
Lord McKenzie of Luton
I am most grateful to the noble Lord for a number of detailed replies, with some follow-up, but can he just be a little more specific around the capital rules? From his answer, it was very unclear what is intended. We have two systems for housing benefit: we have the cut-off at £16,000, whereas for the pension credit we do not. I am not sure whether those two systems will sit side by side in the new arrangements, or whether there will be some common approach to capital, and whether that will adopt the pension credit approach or the current housing benefit approach.
Lord Freud
My Lords, it will go somewhere in between. It will be a capital limit as opposed to a tariff income approach, but it will be a higher capital limit than that for working-age claimants.
Lord McKenzie of Luton
As I understand it, that will operate for pension credit as well as the housing component.
Lord McKenzie of Luton
I am grateful for that—well, I am grateful for the answer, not necessarily the information. It is the lowest common denominator again. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, this is an interesting and challenging amendment and the debate has been deeply concerning. We have heard from the noble Baroness, Lady Grey-Thompson, that people are terrified and scared about facilities not being available; we have heard from my noble friend Lady Wilkins about the mistrust of the WCA and the profound mistrust of Atos and some challenging questions about how they are regulated; and we have heard from my noble friend Lord McAvoy and the noble Baroness, Lady Howe, about fluctuating conditions.
I understand that the system works at present by seeking to establish if someone has limited capability for work, and that this is determined by a range of descriptors which seek to establish how someone’s physical and mental health affects their functioning. Someone not reaching a sufficient points total would not be classified as having limited capability for work and would therefore—in essence by default—be deemed fit for work. The point was pressed that the assessment does not look at whether someone having not been deemed to have limited capability for work is therefore fit for work in any practical or coherent way. Actually, that gives food for thought. Somebody who has been deemed fit for work would seem to claim JSA and be subject to relevant conditionality and in the world of universal credit be subject to all work-related requirements. There have been ongoing debates about how appropriate the descriptors are and, perhaps more fundamentally, how they are applied in practice. We have certainly heard some of that today. This is of particular interest to us, because we were in government when the system was introduced; I remember all the policy staff and all the work that was done to introduce the ESA and the WCA. Given the fact that it is not working as it should, maybe the judgment was that it is not capable of working in any event, and that is of some concern.
The Harrington review has published its first considerations and the recommendations have been accepted. It is understood that the second review was completed in July and is still under consideration. Perhaps the Minister can give us an update.
A key question that the amendment poses is whether the WCA, properly applied, would mean that the outcome sought by Amendment 55C would inevitably follow, assuming that it was the outcome that was wanted. I think probably not. On making a judgment about somebody having limited capability for work, there is a prognosis also about how long they would remain so assessed—that is to say, a determination about when they would be fit for work. The noble Baroness, Lady Wilkins, again made this point. When making that determination, to what extent would those judgments reflect the criteria that this amendment seeks to set out? Again, I suspect not—but perhaps the Minister can help us by telling us the criteria applied when someone is making a judgment after a while whether somebody is fit to go back to work and fit for the JSA regime or the full work conditionality. Is it just the absence of failure of work-related activities requirements, or is it something more positive in trying to see what they are actually capable of and what the definition is of work? I am not being very clear on this issue, but my concern when I think about it—and I had not thought about it in this way before—is that the WCA assessment puts somebody in a category. If they fail, although fail is perhaps not the right term, they go by default into a category that assumes they are fit for work. Should that judgment inevitably follow from that process?
There is a sense of cliff edge about the system. On one side of it, there are full conditionalities and harsher sanctions, and the full work-related requirements; on the other side, there is lesser conditionality and requirements only in respect of work-related activity, no prospect of higher level sanctions and higher benefit levels. Of course, all of this rests on the judgment under the WCA, subject to reconsideration and appeals and so on. So much hinges not only on the descriptors and how they are set out and whether they are appropriate but on how they are applied. Universal credit does not particularly smooth that particular cliff edge, although it deals with other cliff edges about going in and out of work. But with regard to the analysis and judgment of where people sit in the categories, it does not particularly help. A lot of this is to do with the support that people should have.
Lord Wigley
I invite the noble Lord to comment on the relevance of assistance in work. If people are available to help someone who is disabled to undertake their work, it is possible for them to fulfil some of these requirements. If that person is not available, it is the failure of the state to make that person available that is creating the handicap for the person who is disabled. In applying the social definition, there could not be a clearer example than that.
Lord McKenzie of Luton
I very much agree with the noble Lord, Lord Wigley. He is absolutely right about that. I imagine that the Minister will reply that this is too narrow a definition of work but I do not want to anticipate what he wants to say. The more I think about it—this is not a formal Front-Bench view—the more I believe that we ought to be thinking about smoothing the path so that we do not have that cliff-edge, as we are doing away with cliff-edges for in-work and out-of-work benefits. Is there not something that we could do to create more of a continuum, so that these very difficult judgments would not have to be made?
Lord McKenzie of Luton
Indeed. Perhaps I may finish off with a question. I think that earlier in our deliberations we touched on what would happen if someone sought to challenge the WCA determination, as well as concerns about the fact that their benefit would be withheld during that process. I do not know whether the Minister has anything further to say on that. I think that there was an exchange in the Commons on which I had a note on a piece of paper, which I have lost, but it seemed to give some credence to press reports that people were being actively discouraged from going to appeal. If that were the case, it would be an absolute disgrace.
I think that there is great merit in the amendment. Like the noble Lord, Lord Wigley, and perhaps some other noble Lords, I would not accept it quite as it says. However, when someone says that a person should be in the WRAG group but they should be capable of coming out of it in three months or six months, there ought to be a test of what they would be capable of at that point and whether that would amount to work under this sort of description. I should be interested in the noble Lord’s comments on that.
Lord Freud
My Lords, I should start by making a point about the overall attitude of the Government to people who are disabled or who have difficult medical conditions. We are committed to unequivocal support for those people, and that is what the support group is about. There is extra funding for the group and we are absolutely determined to provide that support. In the midst of the concerns about particular things, and as we try to make sure that the gateway works and that we can find the people who really need our support, that fact can be lost. However, I want noble Lords in this Committee Room to be under no illusion that we want to support the people who need our support. I have already expressed my concern about the fear factor, which I find very disturbing. I also acknowledge that the press in this country sometimes writes articles that none of us in this room find appropriate. I certainly do not find them appropriate and my colleagues in the department find them deeply disturbing. We do not control the press, regrettably, and things are written that we do not like to see. However, I am pleased to put on the record where we stand.
We debate the WCA a lot. We have debated it in this Committee and elsewhere, but, if noble Lords will forgive me, on this occasion I want to try to keep the debate in the context of the Bill.
The work capability assessment uses a number of specific, measurable criteria, covering all types of disability and health conditions, to provide an assessment of whether an individual has limited capability for work. The assessment was designed to take account of chronic and fluctuating conditions. It is not intended to be a snapshot but looks at what someone can do reliably, repeatedly and safely. It takes account of the effects of pain and fatigue. The healthcare professionals conducting the assessment are fully trained in understanding fluctuating conditions. Claimants get a full opportunity to explain how their condition varies over time.
The criteria were developed in conjunction with disability experts, medical professionals and a significant number of disability representative groups. They focus on physical and mental function. Examples of criteria include whether someone can stand or sit for periods of time, their ability to lift and reach, how they learn new tasks and whether they have problems engaging socially. The criteria fully take account of the fluctuating nature of many conditions. The training and guidance for the assessment is clear that where an individual is unable to complete an activity repeatedly or reliably, they will score points against the relevant criteria.
Lord German
My Lords, I am not able to support the amendment in the format in which the noble Lord has presented it. The wording states that matters should be discussed with relevant Ministers. The problem is that there are relevant Ministers—the noble Lord will know some of the people I refer to—who would probably say, “I am not going to discuss this with you”, and that would be the end of the game. The amendment, of course, is about consultation.
I should like to make two additional points. Much of what is in this Bill requires action by local authorities which, as I have said before, cannot be undertaken by this Government and this Parliament. This means that the actions necessary to enact many parts of the Bill will be requirements on others.
There is also a two-way dialogue in this. Let us take, for example, the housing issue, which was debated in earlier clauses, and the need for appropriate housing stock and its reshaping to match the changes that are about to take place in housing benefit, and the underoccupancy rules in particular. This will mean that the Government will not have any control over the level of investment in housing stock, the shaping of it or even, in a sense, the policy that will drive it forward.
It is crucial that, in the one direction, if this policy is to be implemented, there is a successful negotiation, not only with Northern Ireland—about which we heard earlier—but with the other parts of the United Kingdom. However, if you look at it the other way round, you may find issues where the legislative competence may not exist at the moment to undertake all the tasks being given to the devolved Administrations. Has any consideration been given to the legislative consequences? It may mean consent Motions being passed in other Parliaments to give action to some of the work that is going on.
We have now a very complex arrangement in the United Kingdom. I have already declared my hand— I think that social security is one of the pieces of glue that holds the United Kingdom together—but to make it work we must work together, closely align ourselves and understand the competencies which are not with this Parliament. We need an update on where we are with the current level of negotiation with both Scotland and Wales, which I suspect is different at present.
Lord McKenzie of Luton
My Lords, we should thank the noble Lord, Lord Wigley, for reminding us of the scope there is in the Bill and the profound consequences that it may have, not only for the universal credit but for all the other parts that are before us today and will be before us in subsequent Committees. I thought the noble Lord, Lord German, was on the point of distinguishing between relevant Ministers and irrelevant Ministers, but he did not quite go there.
We saw today—I am afraid I did not see it all—some of the detailed work that has gone on in preparation for, certainly, a big part of what is in the Bill. However, the point has been made by both previous speakers that it is not only about DWP and England; there is lots of work for others to do, particularly local authorities, who are about to reel under the impact of the Localism Bill and all that Mr Pickles has sought to visit on them.
Questions were raised about new burdens and how they work. It is important that that is factored in and that there is fairness and equity in how these matters are rolled out.
I acknowledge receipt of the Low review. Unlike the noble Lord, Lord Wigley, I have not had a chance to read it yet or to quote from it, but it looks to be a particularly valuable document. I hope I have a chance to read it before we get to DLA later in the Bill.
Lord Freud
My Lords, I am also looking forward to reading the Low review but I have been listening with great intensity to everything said in this Committee today. Social security is a reserved matter, although it will clearly have a limited, tangential impact on areas of policy where the Welsh Assembly and Scottish Parliament have competence, the obvious examples being childcare and housing. It does not, however, include DLA, which was one of the issues raised by the noble Lord, Lord Wigley.
I can reassure noble Lords that we have held, and will continue to hold, regular discussions with Ministers in the devolved Administrations and their officials. We are committed to the smooth and successful implementation of universal credit. To achieve that we are working closely with devolved Administrations and relevant local authorities to help them identify and address the impact that the introduction of universal credit will have on any services that they deliver. We are doing so in line with devolution guidance. My department is continuing to work through the detailed design aspects of universal credit which will be covered in regulations. Throughout this process they will continue to have discussions with the devolved Administrations, as appropriate, on these provisions and on others in the Bill. I can assure the noble Lord, Lord Wigley, that whatever I am saying here is relevant to the whole of the Bill.
I am concerned that this amendment would introduce a new and unnecessary level of bureaucracy. My noble friend Lord German hinted at some of the problems that it would result in. In practice, that would hamper progress and potentially delay the introduction of universal credit, let alone other aspects of the Bill.
Lord McKenzie of Luton
My Lords, I shall speak also to our other amendments in this group, Amendments 55G, 56B and 69ZA. These amendments relate to the desirability of making a greater number of regulations under the Bill subject to the affirmative resolution procedure to facilitate better scrutiny of any changes that affect claimants and future claimants of the benefits system. In particular, future attempts by regulation to define the meaning of the terms “disabled”, “severely disabled” and “work” should be submitted to both Houses of Parliament for approval. There are several other amendments in this group, which I might speak or respond to after others have spoken to them. I beg to move.
Lord German
My Lords, I shall speak to the amendments in my name, Amendments 59, 61, 63, 64, 65, 66, 67, 68, 69, 70, 77, 96, 99, 101 and 106, and to whether Clause 47 should stand part of the Bill. It will not take a wizard to note that these recommendations are based on the report to this House of the Delegated Powers and Regulatory Reform Committee. Before I give a general perspective on why I have tabled these amendments and my response to individual amendments, I shall simply look at the rationale that runs through the Delegated Powers and Regulatory Reform Committee’s reasoning for these recommendations.
The first thing it says—and I think we all agree with this—is that this is a detailed and complex piece of legislation and that it needs to make provision for as wide a range of personal circumstances as is practicable, but it has a perceived need for adaptability. That is fundamental. It comments that this is a significant revision of social security means-tested benefits since at least 1986. It also comments on the way in which there has to be an opportunity for subsequent amendment and for views on the way in which this is being implemented. Clearly, as we all know, this is a skeleton Bill, and the regulations put the flesh on the bones. That is why it is very important that we get the arrangements right, particularly bearing in mind those key principles that I have just outlined.
The Government have accepted some of the amendments, so I will not dwell on them. They have accepted Amendment 59. Amendment 63 proposes the removal of claimants subject to no work-related requirements. This was an issue that came up earlier this afternoon. This amendment removes the requirement from the affirmative procedure only for the first set of regulations and later puts it back into affirmative every time it occurs. I notice that the Government have not yet responded to this amendment, and I hope that they will deal later with the question of whether it should be affirmative throughout. It falls into the category where we may wish subsequent amendments to be dealt with by the affirmative process because they have such a substantial impact on the clients who fall under these no work-related requirements.
Similarly, there is the issue of hardship, and I have done the same thing there. I have taken that from being affirmative for the first occasion only, and in a later amendment I suggest that it should be wholly affirmative. Amendment 65 proposes that the basic conditions be subject to the affirmative procedure throughout. These basic conditions set out by Section 4 and the regulations beyond it specify certain circumstances in which a person has been treated as having accepted the claimant commitment. The basic conditions are laid out in Section 4(1). These are the bare bones of universal credit and should be subject to the affirmative procedure because they are part of the fundamental structure of the Bill. These basic conditions may well change. There will be a requirement for some flexibility, knowing how the system will pan out over time. As the people who are going to be affected by this will be the more vulnerable, it seems to me that we should have an affirmative resolution for those regulations throughout.
On Amendment 66, the Delegated Powers Committee—whose report I read very carefully—said that if the Government could convince it that the negative procedure would satisfy it, that would be sufficient. In their response, the Government said that they would seek to reassure the committee that the negative procedure would be sufficient. I wait to be convinced, as I suppose do many other noble Lords. I am grateful that the Government have changed from a negative to a first-time affirmative procedure, but the amendment questions whether that is significant. I believe that the powers are significant, and the Delegated Powers Committee worried about the restrictions put on claimants and about whether they would be suitable for differing personal circumstances. The Bill and the documents that we already have seem to allude to using these measures in a positive way—something that I support—suggesting that restrictions on types of work will allow claimants to look for work in sectors in which they are interested or for hours that are appropriate for them. Quite clearly, it is an area with significant and changeable circumstances. If it is the view that the negative procedure should be used for routine matters, then, when these policies proceed, there should be an affirmative process.
Amendment 68 relates to the claimants who are subject to no work-related requirements. The Government said that they would make that subject to the affirmative procedure for the first regulations. Once again, the Regulatory Reform Committee asked whether the Government would confirm that there would be only minor adjustments after that first set, and I think that we might be content with that.
With Amendment 69, it is exactly the same process. The Government have put in the affirmative procedure for the first time. If they can assure us that the regulations set out in the first instance are unlikely to change a great deal thereafter, I think that that will be satisfactory as well.
Amendments 70 and 99 would remove the words “Scottish Ministers”. That would not only create equality between the rest of the country and Scotland but ensure that, because Scotland would be doing these regulations by affirmative procedure, the rest of the country would be doing them that way as well. I did not understand why it was not.
Clause 47 provides that regulations under Sections 6 and 7 of the Jobseekers Act 1995 should require only the negative procedure. As of now, they have the affirmative procedure, and the regulations concern claimant conditionality and the requirements for claimants to be available for and actively seeking work on which their jobseeker’s allowance is dependent. The predecessor committee that looked at the matter in 1995 for the Jobseekers Bill considered the provisions concerning availability for work and actively seeking work to be of fundamental importance to the Bill and recommended that regulations about them should require the affirmative procedure whenever made. The DWP memorandum on this topic says:
“Regulations such as this are generally advantageous to JSA claimants. The Department has increasingly found that having to use the affirmative procedure makes implementing the changes more onerous than it needs to be”.
Can the Minister say what “more onerous” means? Does it mean that you have to have open consultation, which seems to me important? The Government rejected the recommendation from the Delegated Powers Committee, saying that moving to the negative procedure was absolutely necessary. I think we would like to know a bit more about what was absolutely necessary.
With the introduction of universal credit, there are bound to be uncertainties that really should not be left to the negative procedure in this matter. Some changes are envisaged in the regulations using the negative procedure, meaning that the Secretary of State can restrict the conditions on a claimant so that they are searching for a job that they want or may not want or one that is near them or is paying well. The precedent set by the previous legislation in this area—in fact, all legislative matters in this area in the past—has required the affirmative procedure to be used for issues of this kind. I wonder whether the Minister can convince us that we need to move in a different direction.
The Government have accepted Amendments 77 and 96, while they have put down an amendment to the part of the Bill covered by Amendment 101, and they have also agreed to Amendment 106.
With a Bill of this magnitude, which has such importance for a great number of people, over the years to come we should be absolutely clear that we are going to have a fully transparent process to allow the debate to occur, not just this year or next year but for the length of time that this Bill survives before changes are made and whenever these matters become important to the public. We need to have that public debate, and I think that Parliament deserves the affirmative resolution in the areas that I have outlined.
Lord McKenzie of Luton
How does the noble Lord envisage definitions of avoidable complexity being built in to the legislation—by regulation, perhaps, or a bit of guidance here and there, or perhaps even something in primary legislation?
Lord Kirkwood of Kirkhope
I have no idea—it was a thought in my bath. I confessed that at the beginning. However, it is worth reflecting on. Of course the noble Lord is absolutely right—as soon you start thinking about it, you start putting in layers of complexity. I think a challenge to Ministers is not a bad idea, even if it was just on the wall or behind the desk—I would settle for that. I beg to move.
Lord Freud
My Lords, in some areas I broadly agree with the Delegated Powers and Regulatory Reform Committee’s suggestions, and the Government have brought forward amendments to make these changes. Where key principles are established the first time the powers are used, these amendments will make the regulations subject to the affirmative procedure in the first instance. As to Amendment 66, Clause 6(1)(a) allows for regulations to set out circumstances in which a claimant will not be entitled to universal credit even though they meet the conditions of entitlement. I am grateful for the opportunity to reassure the Committee that the negative procedure will afford Parliament adequate control over the use of this power.
As I set out during our debate on Clause 6, there will be a number of specific groups who will not be able to access universal credit. These may include certain prisoners and children leaving full-time care who remain the responsibility of the local authority where payment of universal credit would lead to duplication of provision. This will broadly reflect similar rules in current benefits.
Similarly, I would like to reassure noble Lords that it is appropriate for the regulations on hardship and claimants falling into the no work-related requirements group to be subject to the affirmative procedure only in the first instance. In both cases, our intention is that the initial set of regulations will clearly establish the key principles of the new system. We have already provided noble Lords with a draft of the regulations to be made under Clause 19(2)(d). We have also published a briefing note on the conditionality threshold. We have debated these matters at some length earlier in Committee. Once the system that we have set out is in place, it is unlikely that the regulations will change significantly, and I hope that is the assurance that my noble friend Lord German was looking for.
There are three areas where I am unable to accept the committee’s recommendations or the noble Lord’s amendments. First, the committee and the noble Lord have suggested that Clause 47 should be removed from the Bill. Clause 47 relates to the parliamentary procedure for regulations relating to the requirements on jobseeker’s allowance claimants to be actively seeking, and available for, work. These powers are currently subject to the affirmative procedure. The clause makes them subject to the negative procedure.
These powers were groundbreaking when first introduced in 1995, as the noble Lord pointed out. However, the House now has had more than 15 years experience of how these powers are used. There is a wide understanding of what the phrases “actively seeking” and “available for work” mean; in fact, it fundamentally underpins our active labour market approach. We believe that this experience means that it is now far more appropriate that this power is subject to the negative procedure. Their use is now well established and we have no intention of departing from that precedent.
Secondly, Clauses 33 and 89 allow for supplementary, incidental, transitional and consequential amendments to other legislation to be made through regulations. To pick up on the point that my noble friend made about the Scottish Government, who have powers under Clause 33 to make consequential amendments in their area of remit, they specifically requested that these regulations be made by affirmative procedure in the Scottish Parliament. This was the result of one of our helpful non-statutory discussions, which I am sure an FOI request will show in all its glory. Amendments 70 and 99 would make any regulations that amend primary legislation subject to the affirmative procedure.
It is likely that a large number of minor amendments to other legislation will be necessary as a result of the importance and scale of the changes that the Bill introduces. It is not unusual for some of these changes to be made through secondary legislation, and such consequential powers are usually subject to the negative procedure. Moving away from this precedent would take up a very significant amount of parliamentary time and could pose a risk to the timetables for both universal credit and personal independence payment. We therefore feel that the negative procedure remains appropriate.
Amendments 55E to 55G and 69ZA seek to make regulations that contain definitions of “disabled”, “severely disabled” or “work” subject to the affirmative resolution procedure. It inserts a new subsection into Clause 43 and consequential amendments to the terms where they arise in Clause 41. I can reassure the noble Lord that these amendments are not necessary. Clause 43(3) already provides that a wide range of regulations will be subject to the affirmative procedure the first time that the power is exercised. This includes the regulations to be made under Clause 12 providing for additional amounts that will include the definitions of the terms mentioned in the amendment. Noble Lords may recall that the illustrative draft regulations on elements provided to your Lordships already contain a draft definition of “disabled” and “severely disabled”.
Under Amendment 69ZA, the noble Lord seeks to significantly widen the scope of regulations subject to debate in both Houses, covering consequential amendments and changes to working age benefits and pension credit. It would be completely impractical for this House to debate the numerous consequential amendments being made to both primary and secondary legislation, and a poor use of parliamentary time. I have already explained why it is more appropriate that Clause 33 should remain subject to negative procedures, but none of the other provisions identified by this amendment was covered by the report of the Delegated Powers and Regulatory Reform Committee. We are therefore satisfied that the negative procedure is appropriate.
With regard to universal credit, I should also point out that all the regulations on entitlement, awards and claimant responsibilities will be in a single set of regulations. They will necessarily be affirmative in the first instance because if any regulations within a set are affirmative they all are. So, even if the Bill does not require the affirmative procedure for specific points, it will apply in practice.
Amendment 71 would introduce a different form of scrutiny for universal credit regulations requiring the Secretary of State to avoid creating any unnecessary complexity into the system. I strongly support the spirit of the amendment in the name of the noble Lord, Lord Kirkwood. A key aim of universal credit is to simplify the benefit system. Simplification is a publicly stated, fundamental principle that has guided the design of the new system. Any requirement for simplicity would have to be finely balanced against other considerations, such as affordability or easing the transition to work. I acknowledge that this is a probing amendment, but perhaps a duty to consider the simplicity of any changes, as suggested by the noble Lord, would be a better approach than that in the amendment. However, any Government would clearly have to be concerned about the detailed interpretation of simplicity, which, as the noble Lord, Lord McKenzie, took delight in pointing out, is a subjective term.
Nevertheless, I will look at this idea very closely. I can assure the noble Lord that we will put in place a number of non-legislative safeguards to protect universal credit from unnecessary complexity. These include governance processes to ensure simplification and consistency in policy design, and working with claimants to ensure that universal credit is simple to understand and administer.
Given these explanations, I urge noble Lords to withdraw or not move their amendments.
Lord McKenzie of Luton
My Lords, I am happy to do so. However, I should like to comment on the issue of avoidable complexity. The Minister said that he had to balance that against issues of affordability and ease in transition. I accept that, but you also have to strike a balance around issues of fairness. One of the problems of simplicity and standard systems is that they do not necessarily take account of some of the individual circumstances that have to be addressed. You see it perhaps more acutely in the tax system, but it applies equally to the benefits system. Although I clearly support getting things as simple and straightforward as they can be, fairness should also be one of the balancing factors. I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 9 months ago)
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Baroness Meacher
My Lords, I support Amendment 51EA moved by the noble Baroness, Lady Lister. I was impressed when the Minister mentioned in an earlier debate that providers of support to claimants will be rewarded financially if their clients find a job and remain in it for two years. That claimants should achieve long-term employment is clearly the objective of the Minister and the Government. I have no doubt that it is a fine objective. Certainly it is supported by me and, I am sure, by other noble Lords around the table. However, this clause seems to run absolutely in the opposite direction. It encourages claimants with young children to rush into a low-paid and probably insecure job rather than taking the opportunity to train and prepare themselves for long-term work.
Will the Minister explain the rationale behind the lack of protection for carers responsible for very young children aged five or six while they complete a training course up to level 3? Does he see the apparent inconsistency between the aim of placing people in long-term employment, which we all support, and incentivising them to take low-paid work rather than educate and train themselves in order to better their future? I will be interested to hear what he says about that.
My second point is about the unreliability as an employee of a primary carer of children who are in the first two years of school. Having had four children, I have strong recollections of the childhood illnesses they pick up in the early years: for example, a cold, an infection or German measles. If you have four children, it is not one lot of German measles but four, one after the other. Employment? Forget it. This is a serious point. The strain of working when your young children are starting school and picking up all those bugs has to be experienced to be fully understood. In education and training, one can catch up when life settles down and the kids go back to school. I know because I did it. I did an economics degree when I had three children under seven.
We know that the Minister is under enormous pressure to deliver cuts through Parliament, but perhaps this issue is worth fighting for in terms of the Government's own admirable priorities of encouraging claimants to undertake training in order to improve their long-term employment prospects for the future.
Lord McKenzie of Luton
My Lords, I will speak briefly in support of the thrust of the amendment. It raises issues about the right age at which full conditionality should apply, and perhaps takes us back to debates we had on another Bill. Perhaps today is not the occasion to revisit them. However, I am not sure that we have debated thus far in the Bill the basic conditions for accessing universal credit. This is predicated on the fact that somebody is within the system and subject to full conditionality. This is what the amendment seeks to ameliorate. One basic condition for accessing universal credit is that somebody should not be receiving education. I presume that that is meant to cover broadly the same arrangements as exist under JSA. Perhaps the Minister will clarify that.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we recognise the value of further education and training. In England, the Department for Education is committed to fully funding education and training for all young people up to the age of 19. Everyone aged 19 and over is eligible for fully funded provision to achieve basic literacy and numeracy as a minimum to the equivalent of five GCSEs at grades A* to C. This is funded by the Department for Business, Innovation and Skills.
Higher education, as noble Lords will be well aware, is funded through a system of loans and grants intended to cover the cost not just of courses but of living expenses. Typically, the benefit system does not allow students in full-time education to claim benefits. That is in recognition that such individuals have access to other forms of financial support, either through the education system itself or because they are living at home with their parents. However, the existing system recognises that there are some circumstances where additional financial support is necessary. In particular, in income support, certain young people, for example, those who are estranged from their parents or lone parents with a child under seven, may be entitled to benefit while studying. Students who are themselves parents can also claim child tax credits.
Under universal credit, we are looking to maintain the status quo. I hope that that gives some reassurance to the noble Lord.
“( ) With respect to claimants who have disabilities, the Secretary of State shall not impose any sanctions without first consulting a disability employment adviser.”
Lord McKenzie of Luton
My Lords, I beg to move Amendment 51FZB and speak to the other amendments in this group standing in my name and that of my noble friend Lady Hayter. I make it clear from the start that we accept the need for a sanctions regime to reinforce conditionality, but the issue, as ever, is the detail. These amendments cover four issues: the sanctions where a claimant is disabled; the amount of the sanction; the maximum length of a higher-level sanction; and targets. I wish to set this in context and seek to understand what is happening with regard to sanctions.
The Minister will be aware of earlier press reports which suggested that there had been a culture change in Jobcentre Plus, with a particular focus on tougher action on sanctions. Despite earlier denials by the Secretary of State, it was acknowledged by the DWP that instructions had been misinterpreted—a marvellous euphemism—and that there were no targets for staff to refer claimants for sanctions. A parliamentary Answer in May of this year elicited that from July to September 2010 there was a 42 per cent increase in the number of people sanctioned when compared with January to March 2010. Clearly, this is way in excess of any increase in the client caseload. Can the Minister please provide us with any more current data on what has happened since? If he cannot do that today, perhaps he will undertake to write to us. Will he give us an absolute assurance that targets for sanctions are not in operation, and that they will never feature in the world of the universal credit?
Moreover, what the earlier press report suggested, and, indeed, the DWP acknowledged, seemed to confirm that there may well be the prospect of creating a culture in which the emphasis on sanctions could prevail. So I ask, what is being done to ensure that this is not the case? Has the internal management reporting on sanctions changed in any way over this period? Although we should be cautious about interpreting press articles, a suggestion that vulnerable claimants could be tricked into falling foul of conditionality requirements, rather than supported in their work-related requirements, is at least cause for thought. I am aware that lots of training is undertaken in Jobcentre Plus but I am sure that the Minister will see the need to address these concerns. Perhaps he can summarise for us—I am sure that we have the data somewhere in the volumes of information that we have—the obligation on claimants to comply with conditionality requirements on an ongoing basis during the course of a sanction, whether it be higher, medium or lower level, and when such compliance mitigates the sanction. Is it only the lower level sanctions which can be terminated by re-engagement?
On the specifics of the amendment, the note circulated yesterday helpfully set out the answer to the question about the limit on sanctionable amounts. I thank the noble Lord for that. For claimants in receipt of the maximum amount, it will be fixed at the standard allowance amount. However, as set out in the note, for someone in receipt of income, that income has to be applied to support the housing and other elements before the standard allowance. The three-year sanction seems to be too long. It could mean that an individual is left only with their housing amount, and with housing benefit restrictions that might not meet even the rent level. That is not sustainable over a three-year period. The individual might have brought it on themselves, but how are they possibly to live? “Get a job” is not the answer if there are no jobs. With a one-year provision, as suggested in our amendment, we would be doubling the current JSA maximum in any event.
I acknowledge that our amendment requiring reference to a disability employment adviser before a disabled person is sanctioned might be more suited to Clause 27 than Clause 26 because the high-level sanctions are to apply only to those subjected to all work-related requirements. However, the points remain valid. If individuals are to have a big slice of their benefit removed for a period, it is important that they understand why; know what they have to do to comply with requirements; and be confident that the decision-makers understand the challenges they face continually or from time to time.
Finally, can the Minister confirm that the ability to sanction will not be contracted out to providers or to anyone else?
Lord Freud
My Lords, currently when a single JSA claimant is sanctioned we stop payment of the entire benefit, which is usually around £67 a week. Under the universal credit, sanctions will reduce the award rather than stop payment. The amount of the reduction will be set with reference to the standard allowance.
Lord McKenzie of Luton
If the Minister will permit me, is that not simply because the housing component is added in as part of the universal credit? The sanction would not apply to housing benefit currently, it is the core standard amount which is equivalent to the JSA amount.
Lord Freud
Yes, the noble Lord has got it precisely right and I am grateful to him for summarising it for me. Where a claimant is in receipt of the maximum amount of universal credit, that universal credit will not be reduced below any amount included in their maximum amount for housing, children, disability and so forth. However, where a claimant is earning money and has other earnings over the disregard levels, the sanctionable amount will be a fixed amount not dependent on the level of the award. In circumstances where a claimant’s award is less than their maximum amount because of earnings, a sanction could reduce universal credit to less than the additional amounts for children and housing included in it. That, I hope, is obvious from the numerical examples I shared with noble Lords yesterday. Claimants’ other income will offset such reductions.
Fundamentally, the sanctions regime is designed to do what it does currently, albeit within the universal credit structure. We want to create a clearer and stronger system which provides clarity about the consequences of non-compliance and a more effective deterrent against repeated non-compliance. I can confirm to the noble Lord, Lord McKenzie, that the sanction regime and a sanction decision will not be contracted out. Clause 29, headed, “Delegation and contracting out”, does not include sanctions.
Clause 26 provides for higher-level sanctions of up to three years for claimants subject to all work-related requirements who fail to meet their most important requirements such as accepting a job offer. Failures sanctionable under Clause 26 clearly damage a claimant’s employment prospects and it is right that we have strong sanctions in place to deter such behaviour. Amendment 51FZD seeks to limit the duration of higher-level sanctions to one year. I can assure the Committee that we expect that three-year sanctions will apply only to a very small proportion of claimants who have repeatedly breached their most important requirements and where earlier sanctions have not worked to change behaviour.
Lord Freud
I shall deal with the second point from the noble Baroness, Lady Sherlock, first. The point that noble Lords are concerned about is whether we are going to have any more private traffic-warden incentive systems—that is the issue. That is why noble Lords are concerned that we do not incentivise people to “clamp” claimants. I make an absolute assurance that we understand how unacceptable that is or would be, and we are determined that there will be no incentivisation in Jobcentre Plus to sanction. We have trained our advisers—the decision-makers, rather—to make these decisions in as neutral and considered a way as possible, in the interests of changing the behaviour of the individuals to make them do something that in the end will be of benefit to them. Getting them into a job is vital, and we are keeping the regime of conditionality. I make that assurance to noble Lords.
On the noble Baroness’s second question—or rather the first one, if I learn to count—we are able to vary the rate of recovery depending on personal circumstances so we would be able to take that into account and, conversely, courts would be able to take that into account.
Lord McKenzie of Luton
My Lords, I thank the Minister for his detailed response. I am comforted—indeed, I recognise some of the script—about the protections that are in the system to support disabled people, people with mental health problems and particularly those with fluctuating conditions; that has been a long-running theme in our debates over a number of years. I accept that the disability employment advisers are not necessarily the right people to do this, for so long as there is capacity in the system, it is part of the process.
I also accept what the Minister says about no targets or any other incentives to encourage sanctions, but we are entitled to a better explanation of what I understood the figures to be: last year the number of people sanctioned was 490,000, while now it is 760,000. Something is happening out there, is it not? The schedule that I have, which was a Parliamentary Answer that looked at the 40 per cent increase over that period—March 2010 to September 2010—is headed “Sanctions and Disallowance Decisions”, so the switch between sanctions and disallowance that the Minister prayed in aid does not seem to have affected that outcome. It is, in anyone’s language, quite a dramatic increase. We should remain very worried about that. I accept the point that my amendment in relation to people with disabilities was focused on Clause 26 but it is within Clause 27 that their work-related activity falls.
Could the Minister also take us through the various sanctions and say in respect of each what happens to conditionality while the sanction is being applied? Is there an ongoing obligation to comply? What is the sanction if you do not? In what circumstances can those sanctions be switched off—and which of them can be—by re-engagement and rejoining conditionality by individuals? Particularly for the longer sanctions, if there were no obligation to engage in conditionality over that period, what ramifications would that have for, for example, on the job programme? Could the Minister let us have his views on that?
I was going to raise the issue of the £25 additional possible deduction in relation to the next amendment on hardship payments and may revisit that. The Minister made reference to people’s rights of reconsideration and appeal. How would he judge the impact of the impending changes to legal aid cuts, where there will no support to go to an independent tribunal because legal aid for help in welfare benefits is being removed entirely? What compensating arrangements are proposed to address that quite vital withdrawal?
Lord Freud
First, one of the drivers of the increase in sanctions was the introduction and phased roll-out first of the jobseeker’s regime and then of flexible New Deal. In one way, we are looking at the history of some of the changes made by the last Government. Secondly, conditionality still applies through the sanctions regime.
Next, the noble Lord asked for a breakdown of the different sanctions regimes. That is rather complicated. I can send him a table of that, rather than going through it in great detail. The summary is that the lower-level sanctions switch off on compliance. Those are one-week to three-week sanctions—rather short by comparison with the higher-level sanctions. Those are essentially grouped around the more vulnerable people. They take those and when they start to comply the sanction comes off and there is a short period. I should remind your Lordships that the table I suggested is sitting there in front of the noble Lord. It is beautiful that he is so far ahead of me. I will not go through that in entire detail. I remember that it took a long time to assemble that table. I spent a lot of time on it.
On legal aid, the point is that one does not need legal issues to be debated here with all the paraphernalia of a legal case. These are practical, fact-finding tribunals where, in our view, one does not need that paraphernalia. It is not particularly helpful.
Lord McKenzie of Luton
Will the noble Lord accept that people in those circumstances may need advocacy, which is being withdrawn?
Lord Freud
My Lords, they may need advocacy but they can find supporters and bring them along. However, it is not a legal process; it is a fact-finding process.
Lord Freud
I think that I can give good news and bad news. There are two issues here. The first is the person who had a disguised problem which then emerges. We have a solution to that: if it emerges that there was good reason, the decision-maker can reverse the position. The bad news is that we do not have a position where, once someone recants, they are forgiven instantly.
Lord McKenzie of Luton
I thank my noble friends for raising additional issues, following on from our earlier debate. My noble friend Lady Hollis seems to have posed a fundamental question which, with respect, the Minister has not fully dealt with. The question was posed to be helpful to the Government, not to try to undermine what they are seeking to achieve.
To the noble Lord, Lord Boswell, I say that no one is talking about being a “softie” in all this. We are upfront; we recognise that sanctions have a role to play in reinforcing conditionality.
The issue about a small group of people who might be sanctioned for three years, with the withdrawal of their benefit unaffected whatever they do in terms of recanting, puts them in a desperate situation. It means that they will be further away from the workplace. I do not know whether they can volunteer or would be involved in the work programme—these are issues that we can pick up in due course—but I urge the Minister to reconsider around this issue because there is something that could benefit the Government in what they are trying to achieve.
Having said that to the Minister and suggested that he might frame his diagram and put it alongside the Pensions Bill that he got last night, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, this is a probing amendment in respect of hardship payments generally and issues around recoverability in particular. The draft regulations that have been provided to us indicate that hardship payments will be made where a universal credit payment has been sanctioned but where the award has been reduced below a certain level and the claimant can demonstrate that they are or will be in hardship as a consequence of the sanction. It is understood that the regulations will broadly replicate existing JSA regulations. Claimants will be required to continue to meet work-related requirements.
Under existing JSA arrangements, a person can qualify for hardship payments at the beginning of a period of a claim if a decision about eligibility is awaited. Will similar arrangements operate for universal credit? What happens where there is a couple claim but the couple splits up? Does the unrecovered amount attach to the claimant who was sanctioned? Further, when will recovery actually start?
I should have said that there is a key difference between the arrangements proposed for universal credit and the existing JSA regime in the plan to recover hardship payments from some claimants. The notes suggest that this will include everyone who is not in the “vulnerable” category. Is this still the intention? The Minister will be aware of the deep concern that this prospect has raised. It is planned that recovery will be based on existing legislation relating to the recovery of overpayments and payments on account. Will the Minister explain what these are? Using the model for recovery for those who have been overpaid for those who have been in receipt of just 60 per cent of the amount of the sanction reduction does not seem innately to fit well. Over what period or at what rate will the hardship payments be recovered? What if the recoveries themselves push claimants into hardship?
I shall repeat a question I put a moment ago. What happens where there is a couple-claim and the couple split up? Does the unrecovered amount attach to the claimant who was sanctioned? When will recoveries actually start—while the claimant is still in receipt of the hardship payment or after benefit is restored?
The Minister will recognise that to qualify for hardship payments, claimants have to be just that: in hardship, a few steps away from destitution. The Minister may well say that that would be of their own making, but we should not overlook the chaotic lives some people live, compounded for some by mental health and other fluctuating conditions. Too many claimants exist at the very margins of financial solvency, and recovering hardship payments could tip them over the edge.
I want to pick up on a point made by my noble friend Lady Sherlock a moment ago about the announcement of the increase in the amounts which can be recovered for fines to £25. What will be the relative claim in respect of these payments? Will the hardship payment recovery take precedence over these other amounts, and how will that be sorted out? Will the recovery of hardship payments reflect other deductions which are already being taken from benefits? I beg to move.
Lord Kirkwood of Kirkhope
My Lords, I am trying hard to say nothing from this end of the table because it is important to make progress. However, I too am very worried about the press reports that have coming since the summer. I said at the beginning of our first session in Committee that some of the language that was being used in relation to these issues and to benefit deductions was extremely worrying. It is getting more acute and more refined. I do not think the Minister can hide behind the defence that he tried to use, although it is absolutely accurate. Changes of this kind would come under the powers given to the courts because these things will be decided in court. But the latest BBC newswire I have seen on this issue described the Prime Minister, David Cameron, talking about benefit reductions for fines up to a maximum of £25 under universal credit. That came from a BBC report. If the Prime Minister has it in his heart and head that universal credit is going to be subject to what I calculate to be a 37 per cent reduction in the standard allowance, I do not think it is fair for this Committee, or indeed the House, to go through all these legislative proceedings, pass this Bill and give it Royal Assent, without some consideration of exactly what that means.
Now I have two complaints. First, as I said in the first day in Committee, a particular language is being used. The Prime Minister talked about the current maximum deduction of £5 as “much too soft”. Indeed, the Secretary of State is not absolved from some of these phrases which really target people on benefits. Of course, we are talking about people in the courts and who have committed crimes. We may even be talking about people who took part in riots—I am not sure about that. That has to be borne in mind and taken into consideration, but to remove up to 25 per cent of £67.50—the level that I understand is being set for the introduction of universal credit in 2013—is a massive reduction for anyone to contemplate. It will simply push people to the margins.
Secondly, what kind of benefits are we talking about? Are claimants to include state retirement pensioners who may find themselves in the courts? Are they contributory benefit claimants who may well have been paying in for all their lives to get that access? Under this new regime, are they likely to be subjected to a £25 benefit deduction? It is not sensible for the Committee or House to contemplate going into universal credit against the background of this being possible without serious consideration of what it is, in detail, that is in the mind of the Prime Minister or Secretary of State. I completely absolve the Minister of any of this stuff, but he must understand that it causes serious concern to people. I guess that this could be introduced by a change in regulations, late at night on a wet Thursday. Unless I get some pretty compelling, better evidence about the provenance of this idea, I will be there, wet on a Thursday, waiting for him. It is unimaginable that we should just pass these things willy-nilly because these benefit claimants riot and need 37 per cent of their entitlement reduced. It is unconscionable and we need a better explanation than the one we have at the moment.
Lord Freud
At the risk of being a little repetitious, I will try to summarise. Obviously, hardship payments are there to ensure that claimants and their dependants are not left in hardship as a consequence of a sanction. We do not want the existence of those payments to make people feel that they can ignore their responsibilities. That is why we are looking at what reform we can make to the current system. We will continue to provide the safety net for claimants and their children.
Lord McKenzie of Luton
My Lords, I welcome the Minister's response. I think it indicates some going slow on the issue, and that is the right course of action. The Minister said that there had to be a financial safety net for individuals. I certainly agree with that. If the financial safety net is 60 per cent of the basic amount, just under £40, I suggest that there is really no room to pursue any repayments of the hardship payment. The noble Lord's assertion that they would not start until after the sanction period had ended is to be welcomed, but that rather reinforces the point made by the noble Lord, Lord Kirkwood. It is all very well for the Prime Minister out in Australia to make great pronouncements about docking £25 from people's benefits. That is another example—we see too much of it from some members of this Government; although I certainly do not include the noble Lord in this—of using those sort of issues to get headlines and to berate people on benefits. That is deeply unpalatable.
Lord Freud
I cannot let the Prime Minister go undefended. He was emphasising the fact that unless a financial penalty for a crime actually hurts the person and has the impact of a punishment, it is not doing its job. He is concerned that the very modest rate of £5 a week is hardly an impact. Although I glow with delight at the separation that the noble Lord is trying to put between me and notional hard statements, I must say that the Prime Minister is clearly right in this matter.
Lord McKenzie of Luton
The noble Lord is secure in his position but, to be honest, he is anyway, given all the good work that he has done on the universal credit. Five pounds may not seem very much, but if, because you have been sanctioned, you are down to 40 quid a week or less, £5 will be very difficult to find; £25 impossible. We ought to have this debate at a much more mature level. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I support the very powerful case that my noble friend Lady Donaghy made, and what the noble Lord, Lord Wigley, said. The case of self-employment is clearly very substantial. My noble friend Lady Donaghy spoke about two issues: how the self-employed should be treated, and the problems of those who are not technically self-employed but who are treated as such. I confirm that my noble friend wrote a very important and powerful report that she presented to the DWP. It gave the Minister at the time a lot of food for thought, from which he has not totally recovered.
I will press the Minister on a couple of points that my noble friend raised. What will the process be for self-employment? Will it be based on the accounting profits of the business or on the tax profits? The noble Lord will be aware that they do not necessarily amount to the same thing in the same time period: for example, because of depreciation allowances for plant and machinery. How will that work? For example, if a start-up records a loss in year 1, that will be a zero rather than a minus for universal credit purposes—but does the minus get carried forward to year 2 to reduce year 2 profits? Generally it would be for tax purposes, but will it for universal credit purposes?
The period of assessment that will be taken into account—the reporting process for self-employment—clearly is a significant issue. I am very unclear about the plans, and in particular whether they will specify tax profits or profits computed for tax purposes. Obviously over time the two ought to align, but they will not necessarily align in the same period. How they are treated for universal credit purposes will be of significance.
Lord Freud
My Lords, after spending four years writing the Lex column, I am absolutely aware that I cannot answer the question of the noble Lord, Lord McKenzie, off the top of my head. The definition of profits is a knotty and complicated issue that he is absolutely right to focus on. We need to get it right after detailed consideration. Of course it is a long-standing policy that people should be treated as having income or capital in cases of deliberate deprivation. This will continue under universal credit. However, we also 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. Because universal credit is a benefit for people in and out of work, the issues around self-employment are different from the issues faced in the current system.
Lord Freud
My Lords, because universal credit is a benefit for people in and out of work, the issues of self-employment are different from those faced under the current system. We need to have clear rules—in particular, on when conditionality requirements do or do not apply to people who are working for themselves and so have a degree of control over their hours and earnings.
Clearly, we need to avoid requirements that will add unnecessary burdens, especially for people who are starting out in business, but we cannot have a situation where people can be treated as being in full-time work for the conditionality purpose but, because they declare no earnings, receive as much benefit as if they were not working at all.
I appreciate that noble Lords have many questions about the detailed rules on the treatment of self-employment income. This is a complex area and we are still working through all the details. The experts in this field are in HMRC and we are working closely with them to develop our proposals. I can confirm that the level of assumed earnings will not be based on the number of hours that the claimant works. Instead, we would assume that a claimant’s earnings are at the level we would expect of claimants with similar circumstances in employed work. In response to the question by the noble Baroness, Lady Donaghy, and the observation of the noble Lord, Lord Wigley, this includes whether they are disabled. As part of our work with HMRC we are considering the assessment of self-employed earnings. It will be important to determine which rules from the current benefit and tax credit systems give the most appropriate framework for universal credit.
The rules on the treatment of self-employed claimants will be set out in regulations and the Bill provides expressly that the regulations on the minimum income floor will be subject to the affirmative procedure in the first instance. The House will have the opportunity to scrutinise the details in this area at a future date.
With regard to the noble Baroness’s amendment, the wider application of notional income capital rules rightly considers whether the claimant has manipulated their income in order to become eligible for universal credit. We believe that different issues arise in relation to self-employment and it would not be right to limit the scope to assume a minimum income in this way. I hope this explanation will allow the noble Baroness to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I wonder if the Minister can help us further. In a situation where you have a start-up, where an individual sole trader is working all the hours there are to make a success of the business, doing all sorts of groundwork that often needs to be done, how is an assessment going to be made by the department that this is insufficient? What judgments are going to be made and how is that going to proceed?
Lord Freud
My Lords, the noble Lord makes a very important point and it is related to the point of the noble Baroness, Lady Donaghy. There are two areas where we will have to have specific rules. First, in the start-up phase, what are the rules for that and how long does one allow for it? Secondly, in the period when something goes badly wrong, when you have had a business going very well with profits and then you have a sudden collapse, what do you do about that period? That was the example that the noble Baroness, Lady Donaghy, raised. Those are two of the issues that we are looking at very closely and how to get that right.
One of the things we want to get out of this is the most business-friendly suite of support that we can put together. In this sense, working tax credit for the self-employed does become a support for entrepreneurial endeavour, tied with other support for new business such as the new enterprise allowance.
Lord McKenzie of Luton
I do not usually come to the Minister’s aid but if you have two people in business together, that would be a partnership and you would typically look at each person’s share of the profits and presumably aggregate those if they are part of the same household, not if they are in different households.
Lord Freud
My Lords, this is one area where a single earner disregard makes life rather easy. I hope that we will be congratulated on that structure.
Lord McKenzie of Luton
Can I just make one other point? It is wrong of us to press the Minister as I know that this is embryonic and a lot of work is going on. If the process is to be some early report in that has to be assessed against what is eventually a tax assessment or consistent with VAT accounts, that sort of presupposes that there has to be some look-back or process of adjustment—in a sense the tax credit-type arrangement, which is quite different from the real-time earnings for employed people. Does the noble Lord envisage that as part of the system?
Lord Freud
It is clear that we cannot use real-time information for the self-employed. It is another system. It will be much closer to the kind of reporting systems for tax credits in this area—and for that reason.
Pensions Bill
Lord McKenzie of Luton Excerpts(12 years, 9 months ago)
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Lord McKenzie of Luton
As an amendment to the Motion that the House do agree with the Commons in their Amendment 1, leave out from “House” to the end and insert, “do disagree with the Commons in their Amendment 1 and do propose Amendment 1B as an amendment in lieu and Amendments 1C and 1D as consequential amendments”.
““6th April 1955 to 5th May 1955 : 6th May 2020
6th May 1955 to 5th June 1955 : 6th July 2020
6th June 1955 to 5th July 1955 : 6th September 2020
6th July 1955 to 5th August 1955 : 6th November 2020
6th August 1955 to 5th September 1955 : 6th January 2021
6th September 1955 to 5th October 1955 : 6th March 2021
6th October 1955 to 5th November 1955 : 6th May 2021
6th November 1955 to 5th December 1955 : 6th July 2021
6th December 1955 to 5th January 1956 : 6th September 2021
6th January 1956 to 5th February 1956 : 6th November 2021
6th February 1956 to 5th March 1956 : 6th January 2022
6th March 1956 to 5th April 1956 : 6th March 2022””
Lord McKenzie of Luton
My Lords, I join the Minister and start by sending best wishes to Evelyn Arnold. We worked together, on and off, on pensions for at least a couple of years through some very interesting and challenging times. I thoroughly respect the expertise that she brought to that process and I wish her well in retirement.
The amendment gives us an opportunity, as the Minister identified, to revisit the changes to the state pension age, which we debated when considering the Bill. We can do this in the light of the Government’s amendments, which made some modest changes to what they originally proposed. Modest they may be, but it would be churlish not to give them at least a modest welcome and in doing so to pay tribute to all those who campaigned to press for changes to the original measures.
The position is as follows. Prior to the Bill, the state pension age for women was due to rise from 60 to 65 over the decade to 2020, so that it equalised with the state pension age for men. This was provided for by legislation in 1995 under the previous Government. The Pensions Act 2007 increased the state pension age for both men and women to 66 between 2024-26, to 67 between 2034-36, and to 68 between 2044-2046. There was political consensus around these measures. The Bill changed all this by equalising the state pension age earlier, in November 2018, and by completing the increase to age 66 for men and women by March 2020. As we discussed previously, these changes will have caused some 500,000 women to have their state pension age increased by more than one year, with approximately 300,000 experiencing an increase of 18 months or over.
Lord McKenzie of Luton
My Lords, I thank noble Lords who have contributed to the debate on my amendment. I will comment first on the Minister’s response.
I agree that there is broad agreement on the need to have changes to the state pension age that reflect changes to longevity, and that they must be sustainable. However, part of that judgment surely has to be the notice periods that people are given—that must be part of the equation. But otherwise, even taking account of that, we have a consensus on that issue.
The noble Lord responded to the noble Lord, Lord German, in respect of future changes to the pension system, and we still await that. The noble Lord, Lord German, tends to hide behind the prospects that come from that in defence of everything that the Government do. The noble Lord said that he was perplexed because this proposition has been defeated twice; he is absolutely right, it was defeated, and quite narrowly last time, but there is more joy in heaven and earth over a sinner who repents. Here is the Minister’s opportunity to do that.
My noble friend Lady Hollis made a telling point about the equality directive, if one listens to what the Minister said. She also made a point, for example, about higher rate tax relief. The noble Lord, Lord Boswell, I think, said that we wanted a medium-term strategy as well as a short-term deficit reduction strategy. I absolutely agree with that. Our proposition is that these issues of whether it is £30 billion or £20 billion should be very much part of that consideration of the medium-term strategy, together with issues such as the costs of tax relief, rather than to isolate and look at a juxtaposition of two propositions, to see if one has greater savings than the other, and therefore to condemn the one with the lesser savings.
I very much agree with my noble friend Lady Drake; we are not against raising the state pension age, nor against accelerating the time when that happens, but there are issues around the manner and timing of any change. The noble Baroness, Lady Howe, said that there was more to be done for the group of women we are considering here, particularly in view of their caring responsibilities, and I very much agree with that. The right reverend Prelate the Bishop of Bath and Wells said that this was an issue of fairness and a moral imperative, and that is absolutely the issue here. The noble Lord, Lord German, has argued that this is an issue of affordability—and of course, affordability is part of it—but does affordability always have to trump fairness? I would contend not, by this amendment.
The noble Lord, Lord German, referred to intergenerational issues. If we look at the impact assessment and the difference of the intergenerational factors between our proposition and the Government’s, there is very little difference between the two. The noble Lord referred to the noble Lord, Lord Turner, going “further and faster”; yes, but one of the propositions of the noble Lord, Lord Turner, was that proper notice should be given to people.
The noble Lord, Lord German, and the noble Baroness, Lady Greengross, acknowledged that the Government had moved—the term “compromise” was sprinkled around the debate. It does not seem an incredibly big compromise to remove just the period between 18 months and two years for those affected, and shift those people into the “up to 18 months” category. It is some movement, and I am sure that it will be welcomed by the beneficiaries, but it does not address the fundamental problem.
I do not think that we will not have a meeting of minds on this issue—the Minister has made his position clear—and I would like to test the opinion of the House on this matter.
Baroness Hollis of Heigham
My Lords, I support my noble friend, particularly on the issue of orphan assets and the situation of deferred pensioners. As the noble Baroness explained, most men will have up to eight job changes and women will have something like 11 job changes in their lifetime, particularly when they are younger. For example, women in modest jobs, such as hairdressing or in the service industry, may at some points be self-employed and at other times be employed by different employers. They could very well end up with a pot in NEST, or its equivalent, of some £20,000 to £25,000, and several small pots of £2,000 or £2,500 from previous employments. Those little pots are too small to be annuitised, but there is no way to transfer them into the larger pot of NEST, and they cannot be trivially commuted because the NEST pot is over the £18,000 ceiling. Could the noble Lord share with the House his thinking about what women, particularly, on very modest earnings with very modest savings but with a possible multiplicity of small pots so that they can neither annuitise nor aggregate not trivially commute, are expected to do? Can the Minister assure us that he is making arrangements so that, at least at the point of retirement, they will be able to bring those miscellaneous small pots with orphan assets into the NEST pot to ensure that they get the best possible outcome in retirement?
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of this group of amendments, the helpful background he has given us and his kind words. As the Minister said, the amendments focus on the auto-enrolment provisions, and we put on record our support for the Government’s commitment to take these forward. My noble friend Lady Drake asked the question that I was going to ask, about timing. Could the Minister confirm that it is on track? I do not know whether the Minister can update us on issues around self-certification arrangements, and whether any progress has been made, but maybe that is a matter for correspondence outside the debate.
We remain unhappy with some of the changes to the scheme introduced by the Bill, particularly the hike in the earnings threshold, but now, frankly, is the time to make progress. Turning to the specific amendments, there are just a few points. Amendment 3 deals with continuity of scheme membership and achieves this by requiring automatic re-enrolment to take effect from the day after the day on which the jobholder ceases to be an active member of a qualifying scheme. However, the alternative of allowing a period of time for re-enrolment is preserved whereby the Secretary of State can allow for that period. Given the “day after” requirement, when is the alternative approach likely to be invoked? A similar point arises in connection with Amendment 7.
We support the extended protections dealt with by Amendments 4 and 8. My noble friend Lady Drake has given her welcome to Amendment 11, which has my welcome as well. She talked authoritatively about how important this issue is and about the changes happening in the marketplace. That is therefore a particularly important amendment.
We have no problems with Amendment 12, which deals with a test scheme for certain types of defined benefit schemes, or with Amendments 13 and 14, which deal with certification of schemes where the main administration is within the EEA.
A clarification on protections of back payments for jobholders enrolled into workplace personal pension schemes obviously has our support, but perhaps the Minister could provide us with a little more detail about the scope of Amendment 17, which provides a regulation-making power to exempt employers from auto-enrolment duties where a person is a European employer. What assurances do we have that employers would not be able to organise in such a way as to bring themselves within those “European employer” provisions and therefore be outwith auto-enrolment? An assurance on that point would be helpful but, subject to anything arising from these points, we are content and will support these amendments.
Lord Freud
First, I thank noble Lords for their stamina in listening to this debate on a very technical set of amendments indeed. They are about making sure that the legislation works, as the devil is in the detail. I repeat my thanks for all the help and support that I have had across the House on some of that detail. The important principle underpinning these refinements to automatic enrolment is that we ensure that individuals are preparing and saving for their retirement. Automatic enrolment will mean that 5 million to 8 million people will start newly saving, or saving more. This is a positive move, on which I know there is consensus across the House.
Turning to the specific questions, I will start with timing, which was raised by the noble Baroness, Lady Drake. She asked when the new duty for employers will come in. I am happy to confirm that automatic enrolment will begin, as planned, next year. On self-certification, which was raised by the noble Lord, Lord McKenzie, we recently finished a formal consultation on draft regulations, which are on track to be in place for next year.
On the issue raised by the noble Baroness, Lady Drake, of the deferred member charge cap, we are extending a reserve power which we have to set a charge cap for pension schemes used for automatic enrolment. This reserve power is intended to be a safety net and to allow the Government to step in and protect all members of automatic enrolment schemes from inappropriate high charges. I am sure noble Lords will agree that it is not right that members are charged higher fees just because they move jobs. We remain vigilant about charges in the pensions industry. We see the market as broadly competitive at the moment, with the majority of workplace pension schemes having annual management charges of less than 1 per cent. We expect NEST and competitive forces to keep the downward pressure on charges but this power will enable us to intervene if necessary and make sure that members are not charged excessive fees. The stakeholder group Which? has strongly supported this amendment. I thank the noble Baroness for her support on this important issue and am confident that it will gain support across the House.
The noble Baronesses, Lady Drake and Lady Hollis, raised the issue of small pension pots, which perhaps goes slightly wider than this set of amendments and on which we spent a lot of time in Committee. On average, individuals will change employers 11 times during their working lives. DWP modelling suggests that after 2017 this will lead to in excess of 200,000 small pension pots of less than £2,000 being created each year. We want to ensure that people can get control of their pensions, build up a single substantive pot and be able to purchase a good annuity. In the interim government response to the call for evidence on regulatory differences that we have published, we have committed to setting out a decision on short-service refunds and addressing small pension pots. We know that this will be difficult, which is why need to work with employers, the pensions industry and consumer organisations on tackling this. For this reason, we intend to publish the full set of proposals in the autumn and to consult widely on possible options. These will include considering whether an individual’s pension pot could follow them from job to job as they move employers. The action for this would be behind the scenes and would require little action from the individual. Perhaps it is too early to say whether this will be possible, but this is an important issue, as the noble Baronesses pointed out, and one that we need to get right.
I turn to some of the more technical issues on which the noble Lord, Lord McKenzie, sought assurances. Continuity in automatic enrolment is covered by Amendments 3 and 7 to Clause 4. They create the default position that, in continuity of scheme membership cases—where an individual ceases to be a member of a qualifying scheme through no fault of their own—an employer must automatically re-enrol the jobholder from the day after the day on which they ceased to be a member of a qualifying scheme. The clause, as amended, still allows for a period to be prescribed during which the enrolment must occur. We do not intend to prescribe a period. This is purely a precaution in case it becomes clear that circumstances exist in which it is not possible for an employer to comply within the one-day timescale.
The noble Lord, Lord McKenzie, was also looking for an assurance on cross-border provision around Amendment 17. The amendment provides for a power to make regulations. It does not change our policy on automatic enrolment. If the power is exercised, the regulations will exclude a jobholder from automatic enrolment only if they are an individual in relation to whom their employer is a European employer, as set out in regulations under the 2004 Act. An employer is a European employer only if he has worker who, by virtue of his contract of employment, is sufficiently located in another EEA state for the social and labour laws relevant to the occupational pensions of that state to apply. The risk of a jobholder being in this position is relatively small. The definition does not cover workers who are posted to another EEA state for a limited period to work in that state for their UK-based employer.
Lord McKenzie of Luton
I think the Minister said that auto-enrolment was due to start on time next year? Could he confirm that the proposed and published timetable for staging will remain as it is?
Lord Freud
My Lords, yes, I can confirm that we currently plan to move along the timetable as set out.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 10 months ago)
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Lord McKenzie of Luton
My Lords, this is a probing amendment designed to focus on issues of in-work conditionality. We attach it to Clause 15, which is just on the “Work-focused interview requirement”, but it is intended to cover work preparation requirements as well as work search and work availability requirements.
The Minister will be aware that some of us were able to attend a briefing session with officials yesterday—I thank them for that. It is clear from that session that much of the thinking about in-work conditionality is at best embryonic, notwithstanding that we are being asked to give considerable powers to the Secretary of State in this primary legislation.
The proposition that conditionality should not stop when someone accesses work is not of itself unreasonable. The progression from a mini-job to a full-time job is to be encouraged for those whose health, family and caring commitments permit. How it will work in practice is what matters. We have only a few parameters at the moment. It is the express policy intent that conditionality will cease to apply for claimants without caring responsibilities or health conditions at a level of gross earnings equivalent to 35 hours per week at the national minimum wage, currently £212 per week, or £11,000 a year. Obviously, other things being equal, that would put someone within the tax and national insurance net and therefore into the higher tapers. Someone being paid twice the national minimum wage would have to work only 17 and a half hours per week; someone on lower pay twice that long. The threshold for an equivalent couple is double that for an individual, so the family income would need to be £22,000 before they escape conditionality.
It is not clear how well those parameters have yet filtered into the public consciousness. Perhaps the Minister can point us in the direction of the equality impact assessment which covered that issue. We welcome the fact that the Government have given some assurances about easements—for example, for lone parents with young children and for those with health challenges and caring responsibilities. There is also the flexibility promulgated for ways in which claimants can increase their earnings by supposedly increasing hours or pay, changing jobs or taking on a second job. That is nice in theory but likely to give rise to all sorts of practical problems.
The vagueness around the provisions, the extent to which providers or Jobcentre Plus staff will be making the determination, and the sources of capacity and training are a real worry. Affirmative regulations are all very well, but we know that they provide limited parliamentary oversight of what is a significant change.
A number of points arise: we know from the briefing that the ultimate requirement in terms of hours or overall remuneration will be included in the claimant commitment ab initio. How will this help those who wish to have a staged return to the job market? How will employers who are able to offer part-time work react to someone whose claimant commitment accepts that they are to achieve full-time work? It seems to me that this could damage their job prospects.
The test is apparently to be on gross earnings, so where does this leave, for example, employer pension contributions? These will be a significant feature, given auto-enrolment, which we know the Government are committed to introducing next year. What capacity will there be in the system to do the appropriate kinds of comparison? These will be complicated matters.
How will this work for the self-employed? What happens if the profits of the business are slower to materialise than hoped for, margins are squeezed beyond expectations, or the business operates in a fluctuating market? If it is a seasonal business, one can see the prospect of fill-in work, but on what analysis will Jobcentre Plus or providers seek to divert individuals from the sometimes painful process—particularly in the current economic climate—of building a profitable and sustainable business? What expertise will they be able to bring to bear?
Our discussions yesterday raised a number of issues about how the work programme fits with this, as well. There seems to be a potential conflict between work programme providers, which are remunerated by sustaining individuals in work for at least 16 hours per week, and in-work conditionality, which seeks to move people to 35 hours a week, if remunerated at the national minimum wage.
It is understood that there is scope to renegotiate outcomes with existing providers, but this could be a significant change of focus. What evaluation has been undertaken of the potential to renegotiate? Can the Minister tell us what discussions have taken place with the business community and, indeed, the TUC, on how this novel interaction with the labour market should proceed?
We acknowledge what the Government are seeking to achieve, but there appear to be so many unknowns—unless the Minister can give us comfort this afternoon—that it is difficult to accept that we should give the powers that the Government are seeking in this Bill. At the least, this looks to be a case for a sunset clause. I beg to move.
Lord Skelmersdale
My Lords, first of all, I should apologise to the Committee for not being here when it last discussed this Bill on Monday, and accord my grateful thanks to the noble Baroness, Lady Meacher, for speaking to some of my amendments in a large group which was somewhat precursored—I think that is the word—by the noble Lord, Lord McKenzie.
The noble Lord, in his speech to this probing amendment, asked a whole string of questions which I am not in any sense qualified to respond to. I am able to respond to the amendment, which leaves out,
“or more paid work or better-paid work”.
The object of the exercise, we all agree, is to get as many people as possible into work, through this system. The trouble is, if the words I have just quoted from lines 10 and 11 on page 7 of the Bill are left out, then once the claimant has got paid work that is the end of the Secretary of State’s responsibility.
What happens if the claimant decides that the hours he is doing are not sufficient for his needs, even with the universal credit? I accept there are the pension commitments and various other commitments that the noble Lord, Lord McKenzie, spoke about. Is the claimant going to go back to the provider or to Jobcentre Plus and ask how he is to increase his earnings? If so, there is very good reason to have these words remain in the Bill. The question—
Lord Skelmersdale
Can I just finish? The key question asked by the noble Lord, Lord McKenzie, is to what extent there will be bullying, by either the provider or the Jobcentre Plus officials. I hope to goodness that there will be none.
Lord McKenzie of Luton
The amendment, as I explained, was a probing amendment and was not of itself meant to be taken literally. It was the peg on which to hang the argument and this very important debate, which we should have. The noble Lord was musing about what would happen with claimants who wish voluntarily to increase their hours. There is nothing to stop them doing it, and we would all applaud that if they were able to, and to do so without further pressures on Jobcentre Plus or the providers. There is nothing wrong with that.
Lord Skelmersdale
No, my Lords. The reason I added my last sentence and prevented the noble Lord, Lord McKenzie, from rising to interrupt me was for the simple reason that the claimant may well need guidance and help in order to get the extra hours or money that he requires. Therefore, I am asking the Minister to what extent this is going to be driven by the claimant, or by the job provider, education or Jobcentre Plus. I said that I hoped it would be claimant-driven, and nothing else.
Lord Freud
As I say, that will depend on the particular circumstances of that family. That is the point I am endeavouring to make.
I would like to finish with the point about the cost to the claimant of being employed. That is an issue that we are going to pick up in later amendments so I will not go into it in great detail. However, we recognise the need to take account of those employment costs, and I will pick that up more generally later.
Lord McKenzie of Luton
My Lords, I thank the Minister for his responses to a lot of detailed questions. I will just touch upon the issue of the management of our affairs. As the noble Lord has said, the proximity of briefings to Committee sittings has not helped. The situation was not helped by accelerating our start in Committee. I accept the point made by the noble Lord, Lord Wigley, that putting amendments down late in the day does not help our deliberations. I suggest—and this will send shivers down the spine of usual channels—that we ought to defer next Tuesday’s sitting so we could spend the time getting on an even keel and perhaps get back to business as usual. I offer that to the Minister without any great expectation that he may be tempted by it.
I thank all noble Lords who have participated in this debate. The noble Lord, Lord Skelmersdale, posed the question of whether this would be claimant-driven or Jobcentre Plus- or provider-driven. I understand, and I think the Minister confirmed, that this goes into the claimant commitment right on day one. There might be a discussion around that but it is something that is very much going to be driven by Jobcentre Plus or the providers.
Lord McKenzie of Luton
My Lords, I was responding to the Minister’s reply and saying that I am sure we are all glad to hear that there is no intention to rush into these things. Perhaps I may say to the noble Lord, Lord Kirkwood—when he is in his place—
Lord McKenzie of Luton
It is always good to know that the noble Lord is behind me and I thank him for his kind words. I want just to say, on the nature of our debates, that we could have had a big debate around conditionality as a whole, but in Committee surely what we should be doing is going line by line through this legislation, challenging and probing it in order to try to understand its full intent. But even in itself, in-work conditionality is a new and big topic, as a number of noble Lords have said.
The key issue which has emerged is: what is the default position in respect of lone parents with children aged 13 or older? Certainly our understanding from the briefing is that the default position would be the 35 hours national minimum wage. If the noble Lord is now in a different position on that, or perhaps we have misunderstood it, it would be good if that is put clearly on the record. That would deal with the points made by my noble friends Lady Hollis and Lady Sherlock. However, in their different ways, my noble friends Lady Drake, Lady Lister and Lady Donaghy have pointed to the newness of and some of the risks and challenges posed by issues around capacity, how the discretion is going to be exercised and what it does to the employment relationship. We are in uncharted waters and these are issues of real concern.
In respect of using gross earnings, I did not object to this and I understand why that might be the basis on which it would be done. I said simply that where there are other features of someone’s employment terms, particularly employer pension contributions—someone might have lower pay but a good employer pension contribution—to try to force them away from those would not make any sense. I am sure that is not necessarily in the Minister’s mind, but those sorts of issues are associated with the capacity that is needed to make these evaluations. They would mark a departure for Jobcentre Plus and providers.
We remain concerned about providers. I understand that we may be close to negotiating the next round of contracts and that it can be addressed in those, but I think we would hang on to the point that, as it is currently structured, there is the potential for real conflict where providers are remunerated on getting people into work—at least 16 hours a week, I think—and keeping them in work. What in-work conditionality will do, if the noble Lord says it has to be done outside the work programme, is take people off that scheme, possibly before they have enabled the provider to earn their full remuneration for keeping them there long enough. It is those sorts of conflicts with which we have some difficulties.
I think that we have given this a good airing. I hope that we have put down a marker about our concerns, and certainly our concerns about taking up a framework for legislation. We know that this type of legislation inevitably has a framework basis to it, but with something so unformed and in many respects as vague as this, it is quite difficult for us to say that we will support it. That is why I return to my point that we may look for some sort of sunset provision here in order to see how it all works out in practice. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
I shall speak also to Amendments 51CEA and 51CDB. I start with the latter. This started out as a simple probing amendment, but the more we looked at it, the more we considered that it had wider implications. Clause 16 deals with work preparation requirements. A claimant can be subjected to work preparation requirements if they have limited capability for work. A limited capability for work is defined in Clause 38 and will be determined in accordance with regulations. For a start, can the Minister confirm that the regulations will reflect the work capability assessment as updated by the Harrington reviews? We will of course have an opportunity to discuss this in greater depth when we reach the clause, but for the present, our understanding is that universal credit will adopt existing and emerging criteria which, among other things, differentiate between those with limited capability for work and those with limited capability for work-related activity. The latter would currently fall into the support group for the purposes of ESA and not be subjected to work-related requirements of the universal credit by virtue of Clause 19. Those not falling into either category would currently fall within the scope of JSA and, for universal credit purposes, be subject to work search and work availability requirements. Claimants under the universal credit subject to work preparation requirements cannot be subject to any other work-related requirements—other than a work-focused interview, of course.
The issue we probe is the nature of work placements, of work experience and the extent to which that encompasses activity currently accepted as beyond work-related activity or work preparation and is equivalent to the world of work. In short, is the Bill extending what have hitherto been the boundaries of work-related activity? Clause 54 suggests that it does, as, for ESA purposes, it adds work placements and work experience to the definition of work-related activity in the Welfare Reform Act 2007. Why is that change proposed? The WCA process seeks to differentiate between those currently fit for work and those who are not but who can move closer to the labour market. Can the Minister give us more detail of what is encompassed within work placements and work experience and the essential difference between those and work itself? We are aware that mandatory full-time work experience was to be tested as a result of the provisions of the Welfare Reform Act 2009, but those provisions related to those required to meet the jobseeking conditions. Has any testing been done with those not subject to the JSA regime; and, if so, under which provisions? Is it envisaged that work placements and work experience will be time limited? If so, what time period is envisaged?
How will that operate within the work programme? Are providers currently precluded from imposing work placements and work experience on those not subject to the JSA regime? Does work placement for 16-plus hours a week which goes on to become a more permanent job count towards the outcome for which providers are remunerated? Can the Minister confirm that the same type of protection for, say, lone parents and those with caring responsibilities will be applied for work preparation requirements as for those who are subject to all work-related requirements?
What assurances can the Minister give that activity to meet work placement requirements will not squeeze out opportunities for claimants to attend skills assessments and to undertake training? What sort of quality assurances will be sought by Jobcentre Plus or providers in respect of those offering work placements and work experience, especially to avoid a constant churn of individuals in place of permanent paid jobs? I look forward to the Minister’s reply.
Having said that, I have not spoken to the other two amendments in this group—Amendments 51CDA and 51CEA. These are both probing amendments as well. As we have noted, Clause 16 is concerned with work preparation requirements and in individuals subject to such requirements if they have limited capability for work. The requirement is for them to undertake particular actions. Included in the actions that might be specified is “improving personal presentation”. It is presumed that this would encompass such activities as CV writing and presentation skills but we wonder if the Government have anything else in mind.
Clause 17 refers to “work search” and Clause 17(3)(c) lists as one of the actions which might be specified,
“creating and maintaining an online profile”.
The briefing pack indicates that this is to facilitate job matching and making applications. It says:
“We expect that the new IT systems underpinning Universal Credit will support effective monitoring of work search activity. We expect to establish an online portal where claimants can set up their own ‘profile’. The system will provide claimants with access to job vacancies (including jobs automatically matched to the claimant’s profile) and the ability to … search for work and we anticipate the system will provide advisers with information and updates as to what the claimant has done”.
What training will be available to support claimants who will be less adept at using this technology to ensure that they have equal access to job applications? I beg to move.
Lord Wigley
I shall speak briefly in relation to the third of the amendments that has been put forward to Clause 17—that about, on page 8,
“creating and maintaining an online profile”.
I can see the merits of having that available but it might become an imposition. Many people who may be looking for work would be scared stiff of that approach, particularly the older ones or those who have restricted abilities. To be imposing or suggesting that this is a requirement surely should not be written on to the face of a Bill. I would be glad to hear the Minister’s justification for it.
Lord Freud
My Lords, clearly there are circumstances where the main barrier to an individual getting work is an inability or reluctance to interface with online systems. They may need some pressure, because people sometimes do need pressure. We find that mandatory processes get much higher outputs that voluntary ones in many cases. In those circumstances, I can imagine that outright refusal could earn a sanction. However, it will not be used in circumstances where clearly it is not appropriate or where there is a genuine inability to use those services. On that basis, I urge the noble Lord to withdraw the amendment.
Lord McKenzie of Luton
I am grateful to the Minister for his explanation but I would like to press him on a few points. I share the concerns of the noble Lord, Lord Wigley, concerning the online profile. The Minister said that this would not be imposed on somebody, but if it is going to be such a valuable tool to help people into the labour market there is still the residual question of what support is going to be given to people who do not have the innate ability.
Lord Freud
At the risk of the noble Lord, Lord McKenzie, saying that we have not developed the whole system, I should say that it has not sprung, like Athena out of Zeus’s head, fully formed.
Lord McKenzie of Luton
I thank the Minister for that and I understand his explanation of personal presentation. However, I press him on issues of work experience and work placement, because I do not believe that he Minister dealt with the question I posed about Clause 54, where an amendment to the Welfare Reform Act 2007 states:
“The reference to activity in subsection (7) includes work experience or a work placement.”
That adds something to that description, which presumably is done for a purpose. We would all, I am sure, recognise the benefit of work experience and work placements; but the issue is the extent to which those people who have limited capability for work, but are capable of work-related activity, can be caused to undertake them. That would be a departure from the current position. Are those part of what ESA claimants can be encouraged to do? I am trying to understand what the distinction between those and work is. When we debated issues of work for benefits under, I think, the Welfare Reform Act 2009, we debated workfare and the benefits or otherwise of all of that—generally otherwise—and the extent to which that was close to or tied up with work placements and work experience. If those issues relate to those who are fit for work, that is one thing; but is there not a risk that, under this legislation, we are importing that into another group, after those people have gone through the WCA assessment? That is my concern.
Lord Freud
My Lords, clearly preparing for work shades across a number of aspects. Perhaps the most interesting area here is the way that some work providers in the work programme actually help people. One of provider actually sets up the whole experience of work in its own operation. The actual experience of work for people who are in the WRAG group, if it is properly controlled in terms of work experience and work placement—I know the noble Lord will have concerns on this—and does not become a work substitute, is part of the building-up for that person; just as developing some skills would be. That could be an immensely valuable stepping stone for people, and that is the stepping stone we are aiming to introduce in this legislation.
Lord McKenzie of Luton
I understand that point, and I think we share an understanding of the benefits of those sorts of arrangements. However, we are here introducing a term that has hitherto largely been attached to those who are in work, without any protections around it. In so far as work placements can effectively be the same as work—at least at one end of the spectrum—what is to stop providers putting people in the WRAG group through that process, and thereby effectively causing them to work, when the designation under the WCA is that they should not be in that group?
Lord Freud
My Lords, I cannot write in protections today but I give the assurance that this measure is intended to be a building block for the individual, not a substitute for work. I will think about how we can make that absolutely clear to offer comfort in that regard. I might be able to do that through a formal statement. I want noble Lords to be absolutely clear that this measure is a supportive element. It is not designed to be anything but supportive in allowing the claimant to take key steps to get back into the workplace.
Lord McKenzie of Luton
I thank the Minister for those comments and look forward to a fuller response on the protections later, as I remain concerned that we are opening a gate as regards people not being required to undertake work. This is effectively a step in that direction, if not in some instances a step into it. There are issues about how those protections might be organised. If we are going down the route of work placements, what assurances do we have in respect of providers of those work placements that they are not simply using this measure to churn staff and not do what they should do, which is to employ them properly in the first place? However, perhaps those issues can be dealt with further down the track, given that the Minister has given an undertaking to see how he can provide us with assurances in that regard. Having said that—
Lord Freud
Yes, soothe fears but also put this matter into context. We are essentially importing the existing arrangements, subject to the work experience issue that the noble Lord, Lord McKenzie, raised. We have drawn up an illustrative list. The noble Lord, Lord Wigley, referred to a draconian power. That is the structure that we have imported into this Bill. That structure has been debated thoroughly by many noble Lords in this Room over a number of Bills, so we are not trying to do anything dramatically new here, albeit with a nudge towards work experience. I said to the noble Lord, Lord McKenzie, that I would make absolutely clear what the protections are and how we intend to run the system. I think that the noble Lord, Lord Wigley, is looking at the whole thing as if it was a dramatically new and draconian way of doing things, but it is not. We are importing the existing methodology into the context of the universal credit.
Lord McKenzie of Luton
My noble friend says that it is all my fault; I am not sure I ever introduced anything like this, but perhaps she did.
The key issue here is that the requirements are not necessarily blanket impositions on individuals, and where they are particularly beneficial there is support for those who are not able, without that support, to benefit from them. Otherwise they could be excluded from some job opportunities.
We have given these amendments a good run through. I look forward to the follow-up from the Minister, but beg leave to withdraw.
“( ) The actions and time specified under subsections (2) and (3) shall be determined following consultation with the claimant, and shall take account of any activity already undertaken which contributes to gaining experience, skills and aptitude for work.”
Lord McKenzie of Luton
My Lords, I will be brief. The amendment is intended to ensure that actions taken by or on behalf of the Secretary of State relating to work preparation requirements are determined after consultation with the claimant, and take account of activity the claimant is already undertaking which contributes to gaining experience, skills and aptitude for work.
Reflecting on our deliberations at the last Committee sitting, I should stress that this should involve consultation. It does not have to be a process of agreement, although hopefully it would be. This has special relevance in relation to volunteering. For example, we have had material, as I am sure other noble Lords have, from an organisation called Catch22, which refers to its intensive volunteering programmes with young people. They contribute to preparing young people for work.
We acknowledge that Jobcentre Plus should not be required to take account of every pastime or whim of individual claimants, but structured programmes, such as the volunteering opportunities identified, appear helpful. It must be better to work with the grain of such activity. That is all that the amendment seeks to achieve. I beg to move.
Lord Freud
My Lords, work preparation requirements will be imposed only where it is appropriate in the circumstances of the claimant. This will always involve a discussion between an adviser and the claimant, to determine any barriers to work and the steps required to address them. Where a claimant has already taken steps to improve their experience, skills and aptitude for work, this will of course be reflected in the requirements placed on them.
We will ask claimants only to do things that we believe will make it more likely that they will move into work. Asking them to go on a course to gain skills that they already have, for example, would be a waste of the claimant’s time and, indeed, of our scarce resources. We therefore agree with the spirit of this amendment. We disagree on whether it is necessary to put it into primary legislation. We do not have provisions of this kind in legislation now, and, similarly, we do not think it appropriate for universal credit.
On the volunteering point, clearly we have expanded or enlarged the opportunity for work search claimants to volunteer, as long as it does not affect their ability to continue to search for work. I therefore urge the noble Lord to withdraw this amendment.
Lord McKenzie of Luton
I thank the Minister for his reply and will certainly withdraw the amendment. One point pressed on us was that if there is a recognition that volunteering programmes can be beneficial, perhaps that could be recognised by Jobcentre Plus in the other programmes that it is structuring for individuals. There have been suggestions that sometimes people slip out of volunteering programmes because they cannot keep the commitments, because they have work-focused interviews or other mandatory activity.
Lord Skelmersdale
My Lords, perhaps I might interrupt here as I am interested in volunteering, having been a volunteer in various fields myself, as I suspect most of us in this room have at one time or another. Volunteering strikes me as a way of getting work experience—not necessarily but it could be—and therefore is to be most definitely applauded.
Lord McKenzie of Luton
My Lords, I agree with that and I am sure that we all would. I suppose it depends a little bit on the precise programme and activity, but the point is not to lose that opportunity for individuals who are already undertaking it because Jobcentre Plus is imposing other requirements with clashing commitments, meaning that people have to drop out of the programmes. That was a particular point that was pressed on us. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I shall speak also to Amendments 51CEC and 51CEE in this group, which probe Clauses 17 and 18. These clauses cover claimants who are subject to all work-related requirements. Clause 17 deals with work search requirements, Clause 18 with work availability requirements. Clause 17 sets down actions which the Secretary of State can require of a claimant, and also limitations that can be placed on those actions. Such limitations can include restrictions to work in particular locations. Our amendment requires the limitations to specifically include,
“consideration of the length and expense of the claimant’s travel”.
A similar issue arises in respect of the work availability requirement.
As we discussed, the conditionality applies to those out of work and also to those in work. Our briefing note suggests that regulations will make the default position that claimants should look for work that is within one and a half hours’ travel time of their home. This makes a handy headline in the national press to show how tough the Government are on the growing numbers of unemployed. I understand also that it reflects arrangements under the existing JSA regime, after a period.
For a start, we contend that the limitations should have regard to cost as well as journey times and that this should be reflected in the regulations and spelled out in claimant commitments. One and a half hours each way is about the time of my journey to Westminster—oh, for the ministerial car—at a cost of more than £100 a week. Individuals on low pay with no long-term job security would not necessarily be in a position to get the cheapest tickets even if the best deals were readily discernible. Of course, the cost of travel from home to work has to be met out of taxed earnings. Journey times will not always be regular, especially in rural areas. They are not inevitably aligned with the hours of a job: five minutes extra at work can mean an hour’s wait for the next bus. It is understood that the Government recognise the need for flexibility in these matters but see the non-application of sanctions as the route to providing it. Is this correct and, thinking about it, is it an appropriate way to proceed?
We get an insight into how the Government are dealing with this by looking at the illustrative claimant commitment that has been provided to us. Jack Smith’s job goal is to be secure in work as a plumber, earning at least £8 an hour, full-time, within one and a half hours of his home. It also says that if he does not find this kind of work within eight weeks, his job goal will be reviewed and he may be required to widen it, and presumably widen his travel times as well. There is no recognition that cost could be an issue, but the prospects of widening the job goal are included in this illustrative claimant commitment.
Perhaps we may ask what the Government intend on this. It brings us to a wider point. The Government have argued the case for universal credit in terms of simplicity and demonstrably ensuring that people are better off in work. We recognise that it is difficult to have a system that inevitably has some national parameters, so our amendment is an individual underpin that ensures that no one can be made worse off under these provisions by taking up any particular paid work. Clearly, regulations would have to flesh out some definitions of “worse off”, but the calculation would have to encompass costs as well as income, particularly costs around childcare and caring. I beg to move.
Baroness Hollis of Heigham
My Lords, I support my noble friend in particular on Amendment 51CEC, which is about the cost of travel. Too often and too easily we assume a London model, with the Tube, regular bus services and so on; although even there, lone parents may find it difficult to access work in the way that they would like. However, in a county like Norfolk, where many villages have a bus service twice a day, you have a very different story. In Norfolk you have some of the lowest wage rates and some of the highest car ownership rates in the country; but those cars are battered, second-hand jalopies, which are taken by him to get to work, leaving her—usually—with the children and finding it very difficult to do anything except use a bicycle. The result is that it is very difficult for the second earner in a family, or—even more pertinently—a lone parent, to cope with travel to work if there is no job available for her in the local village.
We are expecting a lone parent to work 20 to 25 hours per week. She has two children, one of whom has to be delivered to a childminder and the other to the local school, but she has no transport apart from her feet. Finally, after that, she has somehow to get to a job of her own, and she has to do that again at 3 pm or 3.30 pm. It is almost impossible to find a job between those two hours in the locality, let alone further afield, given that she has to allow for her travel time. I remember one lone parent telling me that she calculated that the school bus picked up the children of the next-door village 40 minutes earlier than it picked up the children of her village; so she used to walk her child about two miles to the next-door village in order to put the child on the school bus, which would act as a form of childminder. That lone parent, with a great deal of ingenuity, managed to get to her job for its 9 am start. She was able to do so because the two villages were within walking distance of each other, but there is a real problem here. I think those of us who live in London or cities have no sense of just how isolated those villages can be.
However, the work requirement will apply to women, both lone parents and second earners, in a situation where there is no public transport, no private transport, a bicycle that you cannot actually take a small child on—let alone two children—except with some degree of difficulty and therefore there is only feet. I suggest to the Minister that it requires enormous juggling skill even to hold down a part-time job. Sometimes the jobcentre that the person has to travel to is not even in the whole of a rural district but may be 20, 30 or 40 miles away. I hope that jobcentre advisers will take all that into account when deciding what is reasonable for that lone parent or woman—and it is usually the woman who is the main child carer—in that situation. I ask the noble Lord to be sensitive to those issues, not because there is any lack of commitment but because of the sheer, simple, practical, logistical difficulties such women may face.
Lord Freud
My Lords, I was finishing my response to the noble Baroness, Lady Sherlock. We are fixing a broken system in structural terms so that the benefit system which currently does not reward work will now do so. There will be a consistent taper and more generous disregards, so this is a big move. One can overcomplicate it but that is a sterile debate which we do not need to go into.
I shall turn to the question raised by the noble Baroness, Lady Hollis, on the importance of how skilled Jobcentre Plus advisers are. This is an important point and one that the noble Baroness will have recognised from her time in the department. We are now positioning Jobcentre Plus advisory services as a profession with a clear career path, accredited learning and ongoing professional development while delivering to a set of standards recognised as best in class. The learning programme for Jobcentre Plus advisers is regularly updated to reflect changes in policy. This ensures that they have up to date skills to deal with any claimant interaction and supports them in making relevant and appropriate decisions in individual cases.
We are making sure that a range of supportive products, guidance, assessment tools and management frameworks are produced to assist understanding and aid delivery of a more personalised service. As I said the other day, the satisfaction of claimants is now running at 88 per cent, and clearly the objective is to get that figure as high as we possibly can.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply, and all noble Lords who participated in this short debate. I think he would have heard the issues about difficulties with travel and costs from my noble friend Lady Hollis, my noble friend Lady Sherlock, and the noble Lord, Lord Wigley. We take the point that these things need to be looked at on a case-by-case basis, and that there will be elements of discretion and judgment in that, but my noble friend Lady Hollis pressed on the issue of training. I do not know how hot the news is that the Minister has just given us, but the professionalisation of Jobcentre Plus is to be welcomed. Is he going to tell me that he started this a couple of years ago?
Lord McKenzie of Luton
It is a good move, because it is important. However, I do not think I can let the noble Lord get away with the constant assertion that the current system that they are seeking to replace by universal credit does not reflect the fact that work can pay. Overwhelmingly, is it not the case that it does? It may be that a very complicated calculation has to be gone through in order to prove it. I accept entirely that simplification of how to deal with the in-work, out-work issue is to be welcomed and is something we support. However, I do not think it is right to say that, overwhelmingly, work under the current system does not pay.
I would hang on to the point that if there is to be discretion in the system, then why is there not protection at the individual level so that someone cannot be forced to undertake work that would make them worse off? Is there going to be some reassurance at the individual level? There can be regulations which have appropriate caveats around timing issues; it is not beyond the wit of the Government to do that. In all of this change and uncertainty which still has to be resolved in many areas, would it not be reassuring to individuals that if it was clear that they would be worse off, they could not be forced down a path? That seems entirely reasonable to me.
Baroness Hollis of Heigham
I wonder if I could come in on this. I absolutely see the dilemma and I can quite understand why you may want someone to start in on something in the hope and expectation that a year down the line, that entry into low-paid work will have paid off. I put it to the noble Lord—I think he might be horrified by the possible complexity of it, but I have been looking at the additional material and trying to get my head around how disregards work—that the disregard is relatively modest for a single young person. I wonder, following the point made by my noble friend—I can see already that there may be too much downside to this and the arguments against it—whether the Minister could look at the issue of whether in such circumstances you could adjust the disregard to ensure that, even where it does not appear to pay, you could construct it so that at least someone is not worse off through working until the point at which the hoped-for job progression that we all want to see has taken them into the pathway. I would ask the Minister to take this away. It may be that this is too complicated, but making someone worse off is going to be hard to defend, is it not?
Lord McKenzie of Luton
The noble Lord makes a fair point and we will be perfectly happy to pick up the discussion on these issues when we debate the clause. However, the noble Lord for his part might like to recognise a couple of suggestions that have come forward. He might like to add them to the list of things that will be included in the pilots. In the mean time, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I shall speak also to the other two amendments in this group. They are straightforward probing amendments that refer to Clause 19, which is entitled:
“Claimants subject to no work-related requirements”.
We discussed previously that claimants would fall primarily in that section if they have limited capability for work or for work-related activity; if they have regular and substantial care responsibilities for a severely disabled person; or if they are responsible carers for children under the age of one. However, subsection (2)(d) provides for a situation where,
“the claimant is of a prescribed description”.
Subsection (3) goes on to say that:
“Regulations under subsection (2)(d) may in particular make provision”,
in respect of “hours worked”, “earnings or income”, and,
“the amount of universal credit payable”.
Subsection (4) states that regulations made under subsection (3) may,
“in the case of a claimant who is a member of the couple, make provision by reference to the claimant alone or by reference to the members of the couple together … make provision for estimating or calculating any matter for the purpose of the regulations”.
We have moved this amendment in light of the report of the Delegated Powers and Regulatory Reform Committee which said in respect of those powers:
“We do not regard the first time affirmative procedure as necessarily inappropriate but the House may wish to be satisfied by the Minister that the exercise of this power on the first occasion will sufficiently define the Government’s approach, and that subsequent uses of the power will make only minor adjustments”.
I shall focus particularly on the latter part of that statement. The Government’s response states that it is the intention of the Minister,
“that the key principles will be established on first use. In respect of 19(2)(d) we are providing draft regulations”—
I think we now have those—
“setting out the circumstances which would lead to a claimant being in the no-work related requirements group. In respect of 19(3) and (4), when the regulations are debated, we will be able to set out how the work-related threshold will be set”.
Therefore, we need to wait for that, although we touched on some of the issues earlier. Will the Minister take this opportunity to deal more fully with the request of the Delegated Powers and Regulatory Reform Committee, in particular the issue relating to subsequent uses of the power being focused only on minor adjustments? I beg to move.
Lord Freud
I thank my noble friend for that, although I think in practice paragraph (d) allows a Government not to impose conditionality. This measure protects the individual. Of course, I absolutely understand my noble friend’s suspicion that the measure might overrestrict what another Government might do, which would not favour getting people into work. I am sorry; that was meant to be a joke.
Let me come back to the matter in hand. Given that we expect the first use to set the principles and to remain broadly unchanged, I hope I can assure noble Lords that affirmative for the first use is appropriate. We have set out how we intend to use this power. We define a threshold, as we have set out in our note, and add in the additional groups, as in the draft regulations. I can assure the noble Lord, Lord McKenzie, that we do not expect significant changes to this. For this reason, I ask him to withdraw this particular amendment.
Lord McKenzie of Luton
I thank the Minister for that reply. As we discussed earlier, we understand the need for the sort of thresholds that are envisaged here, and why they are there. We also understand the need for scope for a further category of claimants who will be subject to no work-related requirements at all.
The noble Lord, Lord Skelmersdale, is right that this is a fairly broad power. I would not put it in quite the terms that the noble Lord does, and I am not sure why, if he envisages that there may be a different Government in the future, it might not be made up of people on this side of the Chamber, although perhaps that is a debate for another day.
This was raised because we wanted to focus on the issue that subsequent uses of the power will only make minor adjustments—since that was what the Delegated Powers and Regulatory Reform Committee were seeking in the noble Lord’s answer—particularly in relation to thresholds of hours-worked earnings, and the amount of universal credit payable. If the assurance is that it will only move in a minor way from the starting position, then it addresses precisely the issue that we were probing. On that basis, I beg leave to withdraw the amendment.
“( ) Regulations shall prescribe how these regulations would operate, and impact on members of a couple.”
Lord McKenzie of Luton
This is another set of amendments that are probing amendments only, and should be straightforward for the Minister. It may be easier for him to commit to write. The probe is about getting clarity on conditionality and couples. It relates to the whole hierarchy of the circumstances where there is no work-related requirement, there are work-focused interview requirements, work preparation, work search and work availability.
We understand that the principle is that each member of a couple will have an independent conditionality determined according to their circumstances, although there will be situations—for example, for couples with young children between the ages of five and 12—where couples can nominate a principal carer to be treated as a lone parent for conditionality purposes. That seems to be the situation as I understand it, even in circumstances where the one with the more onerous conditionality requirements can opt for that position. As we discussed earlier, this is notwithstanding that the joint income of the couple is taken into account; for example, in determining whether the conditionality threshold is reached. Sanctions will apply on an individual basis but obviously will be withheld from the couple claim.
There are doubtless all sorts of other nuances in this. I am just keen to get clarity on all of those things. If it is easier for the Minister to write, so be it but if he has got something there, that would be good. I beg to move.
Lord Freud
My Lords, given the time, rather than try to rush the next amendment, instead of writing I will go through the answers on this probing amendment.
As we increase support to make work pay, it is right that, where they are able, individual claimants do everything they reasonably can to find or prepare for work. In the current system, the support people can access and the requirements they have to meet depend to too great an extent on the benefit they or their partner claim. In the out-of-work benefits it is often the case that one member of a couple makes the claim and will be subject to conditionality. But their partner is not really considered and is not subject to any meaningful conditionality; for example, the partner of an ESA claimant may be fully capable of work but we do not ask them to take steps to find employment. Clearly this cannot be right.
Under universal credit we want to change this. We want to encourage and support all claimants who can work to take all reasonable steps to do so. Consequently, under universal credit conditionality will be applied to claimants on an individual basis. We will be able to ask each member of a couple, in a benefit unit that falls under the conditionality threshold, to meet work-related requirements. These will be tailored in line with their personal capability and circumstances. This includes taking account of any physical or mental conditions or caring responsibilities an individual may have.
Where a couple have children, they will be able to choose a nominated carer who will have access to the same limitations to requirements as a lone parent; for example, where the child is under five the nominated carer will fall into the group subject to a work-focused interview requirement only. Where they are work-ready, the other member of the couple will fall into the group subject to all work-related requirements and be expected to look and be available for work. As indicated in the policy briefing note published on work search and availability requirements, a couple may choose not to nominate, allowing scope for couples to share childcare and work responsibilities.
We are carefully considering the detail of how the nomination process will be implemented and, where necessary, we have scope to draft regulations. However, we do not believe any additional regulations are necessary to operate a conditionality regime where requirements are applied to claimants as individuals. To try and spell out in legislation all the permutations of different couples’ requirements would be complicated and inflexible. I hope I have explained the context of this adequately. If there are other issues, we can go to writing but I thought it was worth getting the core of this on the record. On this basis, I beg the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that response. I am happy to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 10 months ago)
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Lord McKenzie of Luton
My Lords, I support each of these amendments. Perhaps I could start with a reply that was given by Mr Chris Grayling to Stephen Timms in the other place about the cost of this. He said:
“It is estimated that this policy could save up to £100 million over this spending review. Because of the interaction with other changes to support pensioners, which are still being developed, we are not yet able”,
to produce,
“a firm estimate for a long run figure for savings”.—[Official Report, Commons, 18/10/11; col. 936W.]
Notwithstanding the fact that the Government have apparently argued in favour of this policy, because it brings working-age claimants within the conditionality regime, that is the thrust behind this as I understand it.
We heard from my noble friend Lady Drake and the noble Baroness, Lady Greengross, about the possible cost implications for individuals who would have been within the pension credit regime now being forced into the universal credit regime and the losses that could produce. There are not necessarily losses for everyone. Yet the original proposition in the White Paper, as I understand it, was for there to be a choice: that in these circumstances a couple could choose universal credit if they wanted to, or otherwise stay within the pension credit regime. This matter was raised in the other place and I do not think that a satisfactory answer was given for that change of policy which was, by and large, unannounced. A number of points arise. I think it has been confirmed that those who are already in receipt of pension credit when these provisions are introduced will not have to back out of it. Perhaps the Minister can confirm that, but what about if there is a change in circumstances for somebody in that position? If they were perhaps dipping in and out of pension credit because of the savings threshold—or for any other reason—and if they were in at one stage, would they be able to stay in?
My noble friend Lady Drake dealt with the impact of savings. You could have somebody who has just retired and who would have been within the pension credit regime, and maybe just taking a tax-free sum from their pension scheme, now being precluded from being within pension credit and forced out of universal credit as well. On that point, there is a provision in the Bill—I think it is Clause 64—which lays the groundwork for caps to be introduced on capital amounts within pension credit. I am not clear whether that is just to address the issue of housing benefit being attached to pension credit in the future, which has a capital limit attached to it, or to bring the generality of pension credit within the regime that is otherwise going to operate. Perhaps the Minister will take the opportunity to clarify matters on that.
We heard about the impact of passporting, particularly with pension credit currently being a full passport to housing benefit and council tax benefit. However, if in fact the working-age partner does not have to be subject to any conditionality because of a caring responsibility, or for any other reason—perhaps they are subject to no work-related requirements under the assessments that take place—why then would the Government still force that couple through universal credit? If the rationale of using the universal credit to bring people within conditionality falls away, why should those couples not then have the opportunity of remaining in pension credit if they choose? It does not make any sense to say, “We are doing this because we want people to be subjected to conditionality”. If the conditionality rules do not impose any work-related activity or requirement on those individuals, why should they not be able to remain in the pension credit regime?
As has been mentioned, this provision is discriminating against somebody not on their age but on the age of their partner, which is somewhat of a departure from previous policy. I hope that the Minister will address these issues. I fear that this is something which we will have to come back to at Report, because it cannot rest as it stands.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, Amendments 50A and 53 concern couples where one member is above qualifying age for pension credit, and the other below. The Bill provides that such couples will in future claim universal credit rather than pension credit. I should stress that this change will not affect couples already in receipt of pension credit. It will apply only to new cases. The effect will therefore build up slowly and existing cases will not be disturbed.
In response to the point made by the noble Lord, Lord McKenzie, we still need to decide how to deal with cases which move on and off pension credit in future. To pick up on the point made by the noble Baroness, Lady Drake, about the impact assessment, this shows the long-term effect, and not the immediate impact.
I am grateful to the noble Baroness, Lady Greengross, for clarifying that she is not opposed to this change of emphasis in principle. The rationale is that while one member of the couple may be over the qualifying age for pension credit, the other member of the couple is of working age. Since all people of working age who can work should be expected to do so and there are no work-related requirements associated with pension credit, it follows that universal credit is the appropriate benefit. I should stress that the work-related requirements would apply only to the working-age partner.
I am grateful to the noble Baroness, Lady Greengross, for also acknowledging that in some cases the more generous earnings rules in universal credit may mean that it is a more advantageous benefit than pension credit. The disregards and earnings tapers in universal credit will mean that if one or both of the couple does work, they will keep much more of their earnings than they would in pension credit where earnings over £10 a week are deducted pound for pound from the guarantee credit.
The issue is about the rate of universal credit and how this compares with pension credit. Noble Lords will be aware that the levels of support through pension credit are significantly higher than levels of current benefits for people of working age. This is due in particular to the way in which pension-age benefits have been uprated at a faster rate than working-age benefits in recent years.
Lord Freud
My Lords, I do not think I can give a precise time on this because there are quite a lot of moving parts at the moment. All I can do is assure the Committee that we really do have this issue front and centre if we have these two sets of changes. I hope I have explained how we are planning to proceed, and I ask the noble Baroness, Lady Greengross, to withdraw her amendment.
Lord McKenzie of Luton
Will the Minister follow up on two points? First, in a situation where the Secretary of State cannot impose the work-related requirement on a claimant because the claimant has limited capability for work and work-related activity, there is nothing in forcing people away from pension credit and into universal credit because the working-age partner is not going to be subject to conditionality in any event. What is the rationale then for preventing people being in pension credit? It seems to me that it falls away completely.
There is a separate question about the impact of capital. My noble friend Lady Drake made the point that currently there is a big difference between the capital rules in pension credit and the capital rules that will operate in universal credit, but there is a provision in the Bill that looks as though a capital limit will be introduced for state pension credit. I do not know whether it is intended that that capital limit will mirror the £6,000 and £16,000 limits that are going to operate generally. If it is, I am not sure that I had cottoned on to that fact before. Or is it simply to deal with the housing component that is obviously going to be brought in and will work alongside pension credit?
Lord Freud
I think that I am safe in confirming to the noble Lord that we are bringing in capital limits. They are related to the housing issue, although I think that my colleague Chris Grayling said that they will be at a substantially higher level than those for universal credit. The noble Lord also probed the issue of people where no work conditionality is imposed. Clearly, within universal credit, other additions are going on. It is not a straight comparison. Under universal credit, the other person is likely to have a series of additions as well, so the imbalance is nothing like as great as the simple one.
Lord McKenzie of Luton
I accept that point entirely. But under those circumstances why should the option not be available to people, to couples, to go into one or the other, which I think was the original proposition in the White Paper?
Lord Freud
That is the nub of the change. When we looked at it, we thought that the appropriate policy was to put everyone below working age in that category. On looking at the noble Lord’s question of why do it when there is not work conditionality, there we have support in universal credit through the additions and the ability to keep a rather simple set of definitions working. That is the rationale.
Baroness Greengross
I thank the Minister for responding. Obviously, I am disappointed because I think that it would work in a society where at the age of 55 one could just go and get a job, but we know that that is not the case. Unfortunately, there is a still a lot of discrimination and barriers to older people who try to get a job. More flexibility would be very welcome. I think that the noble Lord said that he cannot do more but that he is still looking to see if things can be improved for these couples. I have hopes that he will look at this again and try to improve on something that seems fairly minor but which would help a lot of people.
Lord McKenzie of Luton
Perhaps I may come back on a point with the Minister to make sure that I understood an answer to an earlier question. In relation to the proposed changes to capital limits for pension credit, did the noble Lord say that that would apply only—I am not sure how it would be worked out—to the housing component or that it will apply to the totality of the package?
Baroness Hollis of Heigham
While the Minister is consulting—because he spoke about the additions and so on—it would be very helpful if he could send a letter around giving worked examples of various pensioner couples, or a couple who bestride the pension credit line, indicating what the implications might be, including the cases that my noble friend mentioned. We could then see what it would be. I have no reason, obviously, to doubt the Minister’s word but it would be useful to know whether the discrepancy is £10 or £50.
The Deputy Chairman of Committees (Baroness Pitkeathley)
We have now had 14 minutes. The Committee should reconvene.
Lord McKenzie of Luton
My Lords, we have added our name to the noble Earl’s amendment and have Amendments 51CAC, 51CCA and 51EB in this group. These amendments relate to Clauses 13, 14 and 22, which refer to the introduction of the work-related requirements and the claimant commitment. The drivers of some of the work-related requirements or no-work-related requirements depend on whether the claimant has limited capability for work or work-related activities. These concepts are familiar to us from ESA deliberations and it is understood they are to be imported into the universal credit.
Lord McKenzie of Luton
My Lords, as I was saying, these amendments relate to Clauses 13, 14 and 22, the introduction of work-related requirements and the claimant commitment. The drivers of some of the work-related requirements, or indeed no work-related requirements, depend on whether the claimant has limited capability for work and/or work-related activities. These concepts are, of course, familiar to us from ESA deliberations, and are to be imported into universal credit under Clause 38. We will debate that in due course when we reach those clauses. The definitions are aligned to the provisions of Clause 12, and the additional amounts payable under that clause.
Amendment 51CAC seeks to ensure that the claimant commitment provided for by Clause 14 should be not only a record of a claimant’s responsibilities but a statement of the responsibilities of the Secretary of State with regard to the claimant. Amendment 51CCA is in similar vein and requires the claimant commitment to include a statement of the Secretary of State’s responsibilities and details of how the claimant can appeal the contents of the commitment. A similar proposition was advanced in the other place and received short shrift, but given the Minister’s clear commitment to transparency and to the universal credit actually changing attitudes, we are interested directly on these issues.
We had understood that there was a consensus around the proposition that welfare benefits systems should involve both rights and responsibilities for claimants. Those responsibilities clearly encompass compliance with work and work-related activity requirements and the rights obviously include, but are surely not limited to, receipt of relevant benefits. Much of the support for claimants will come via the work programme in which the Government are investing heavily and seem committed to providing personalised support to individuals. A black-box approach gives a framework for that flexibility, but not of itself individualised assurance to claimants. What contractual obligations will providers have to spell out for individual programmes and communicate this to the claimants? Although we accept that the incentivised payments structure will provide encouragement not to abandon the hardest to help—a point that the noble Earl, Lord Listowel, focused on—the obligation to be clear on what support would be provided should surely reinforce this. Of course, not all claimants will enter the work programme, or at least for a while, so there should be an obligation on Jobcentre Plus staff to particularise their side of the bargain.
It is fine having general customer charters, but they are no substitute for setting out what the Secretary of State will commit to in respect of individual claimants. Incidentally, could the Minister take this opportunity to take us briefly through the claimant journey, as it is now envisaged—those who will or will not enter the work programme and the related timescales for the claimant commitment? It is understood that the intent is that the claimant commitment would result from dialogue, although that does not necessarily mean total agreement in every case.
Amendment 51CCA would also have the claimant commitment set out information on how to challenge the contents of that commitment. The Minister in the other place indicated that appeals could arise only following sanctions for failure to comply and we will obviously be discussing those in due course. In respect of work search and availability requirements, the briefing note provided by the department indicated a right to object to what is proposed and an ability to have the position reviewed by another employment officer. However, that is stated not to apply to other requirements recorded in the claimant commitment. Why not?
The amendments yet to be spoken to by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Meacher, are concerned in an important way with those involved in drawing up the claimant commitment to make sure that they are appropriately trained. That must involve access to specialists to cover the multiplicity of situations that will be encountered, such as dealing with those with mental health conditions, fluctuating conditions and hidden disabilities, to name just some. Will the Minister remind us what information from the WCA or indeed the work-focused health-related assessment—he might update us on that because it was suspended for a while—will be before those who have responsibility for inputting into the claimant commitment? So far as the work programme is concerned, what contractual commitments do providers have in respect of training and how is that to be monitored?
These issues of claimant commitment are very important, but in the words of the noble Baroness, Lady Campbell, who is not with us today, we believe that co-production is an important issue. If there is to be real commitment for individuals, it should not be something that is imposed: the Secretary of State should have some ownership of it. I beg to move.
Baroness Meacher
I rise to speak to Amendments 51CB, 51CC, 71C and 71D on behalf of the noble Lord, Lord Skelmersdale, who sends his apologies to the Committee because he cannot be in his place today. It is a little unusual for me to speak to amendments on behalf of a Conservative Peer, but it is a pleasure to do so.
Before I refer to the comments of the noble Lord on these amendments, I would like to support the comments of the noble Lord, Lord McKenzie, in relation to the claimant commitment and the importance of that containing the responsibilities of the Secretary of State as well as the responsibilities of the claimants themselves, and the importance of specialist Jobcentre Plus staff. I will also speak about those two points in the next group. The groups were together but now they are apart.
The noble Lord, Lord Skelmersdale, has given me his notes on these amendments, which I will try to reflect in my remarks. He says that we heard a lot on the Health and Social Care Bill about the myth that the Secretary of State for Health is in total control of the National Health Service. The situation is not very different in the DWP, is it, he asks. I emphasise the fact that the noble Lord said that because it is more interesting that he makes these comments than if I were to make them. We all know that, although technically it is the Secretary of State who is occasionally involved in tribunal and court cases, it is really one of his officers who does the work and occasionally is found to be at fault—or, says the noble Lord, in the case of the employment and support allowance, not so occasionally.
The noble Lord was alarmed to discover that for ESA alone, there have been around 518,000 fit-for-work decisions between October 2008, when it started, and November 2010. The rate of appeal was around 40 per cent and, in that percentage, 40 per cent were successful in their appeals. The reason for all those successful appeals is not solely the Atos computer; the desk officers and DWP staff generally share the blame, although perhaps not to the same extent. The noble Lord has, with difficulty, discovered the success rate of appeals against decisions relating to other benefits from April to August this year. They are 15 per cent for JSA and 27 per cent for income support. Those are probably the nearest thing we have to the universal credit arrangements in the Bill and they give us a guide to what we might expect, not least because the fault, if fault there is, will be with DWP staff rather than computers. This all brings us to the noble Lord’s amendments: it must be vitally important that staff are not only trained, which to some extent they are, but monitored as well. The 24th report of the Merits Committee also raises these issues.
I share those concerns of the noble Lord, Lord Skelmersdale, but perhaps I might add a few remarks of my own. I am aware that the Minister has been determined to reduce the appeals success rate and that he has in fact had some considerable success. If I understand it correctly, this has been in part as a result of introducing a review process, prior to appeal hearings, which has enabled errors to be picked up earlier. Perhaps the Minister can explain the average length of time between the initial decision and the review decision following an appeal, and how that average time gap compares with that between a benefit entitlement decision and an appeal hearing, as we had them before the reviews came into play—we still have them, of course. In other words, has the introduction of the review process significantly improved the position for claimants by providing a significantly earlier opportunity to have wrong decisions righted or overturned? Also, does the Minister know what proportion of successful appeals, whether at review or ultimate appeal hearing, apply to claimants with mental health problems?
Lord Freud
My Lords, I very much remember the debates we had last week. I am thinking very deeply about some of the observations made by noble Lords in this Committee, and I think that is probably as far as I should go today.
We operate in a world of finite resources, and we need to target them appropriately. Clearly, at the moment, we do not refer all claimants to the work programme until 12 months into their claim. We pull some further forward. So we need to ensure we continue to have flexibility to allocate resources in the most effective way.
The noble Lord, Lord McKenzie, asked what is happening to work-focused health-related assessments—WFHRAs. The suspension of the WFHRA allows us time to re-evaluate the assessment, particularly in the light of the new work programme, and to consider whether its operation can be improved better to support claimants or whether this support should continue to be provided in other ways. I do not propose to second-guess the outcome of that review or to place constraints on our ability to take the best course of action on that.
On training, we already have a system in place for the professional development and upskilling of advisers. This includes access to a learning framework endorsed by Edexcel, the UK’s largest qualification-awarding body, which will be updated to reflect changes in policy ahead of universal credit. We strongly believe that our advisers are up to the task of personalising requirements and support. We have some very experienced professionals in Jobcentre Plus and their decisions are supported by relevant training, tools and guidance. In a Jobcentre Plus customer survey carried out this year, 88 per cent of claimants reported that they were satisfied or very satisfied with their experience of Jobcentre Plus. The changes we are making in Jobcentre Plus are precisely intended to allow district managers and their advisory teams more freedom and autonomy rather than having to follow a tick-box, process-driven approach. It is critical that we maintain flexibility in legislation to tailor training and tools according to business need and developing strategy. For all the reasons outlined here, I urge the noble Earl to withdraw the amendment.
Lord McKenzie of Luton
I thank the Minister for his reply. I shall follow up on one or two points. I asked him if he would take us through the claimant journey at the moment, and he did that partially by saying that it is 12 months before claimants get into the work programme, although I am not sure whether that is right for everyone.
Lord Freud
I am sorry. I realise I did not answer that question fully. It is quite complicated, and it is probably easier to see on a graphic, which we have. I commit to making it available afterwards. I also realise that I failed to answer the series of questions asked by the noble Baroness, Lady Meacher, about the timing of the review process after the adjustments. It is pretty early days for those adjustments but, rather than detailing them again, I shall add them to the same letter and make that available.
Lord McKenzie of Luton
I thank the Minister for that. I revert to issues around the black box or the equivalent period before people are in the work programme. I was not arguing for lots of conditions other than, I guess, robust contractual conditions imposed upon providers, but providers within the flexibility that the black box gives them should be particularising in individual cases how they are going to support individuals. It is that that ought to be spelled out in some way.
Lord Freud
There is a genuine difference of approach with the work programme. I know that we agree that what we have done with it is evolutionary, and in some ways it is very evolutionary. We have learnt a lot from what has happened in the past decade. In particular, one of the things the work programme builds on is the employment zones, which were by far the best performing welfare-to-work programme in the past decade. That is the experience. The issue is that if you have a payment-by-results system, I strongly believe that it forces providers to provide an individualised service. What matters is that you get that one person in. I can say exactly what drove this insight for me, and it might have been someone from the Shaw Trust. They said to me, “If somebody needs these eight steps to get back into work, it is no good if you have a top-down system that says ‘these are the six things you have to do for everyone’. You can do those six things but that person who needed eight things will still not get into work”. That insight drove me towards payment by results as the model. If you want to get that person into work, you will need a particularised, individualised process to do that. You cannot legislate for that at the centre. It cannot be laid down. We must not put too many central requirements because it changes all the time. That is a difference of philosophy and the one that lies behind this issue.
Lord McKenzie of Luton
I do not think that we are apart on that issue. I am not arguing for six constraints to be placed on every provider which must be carried out in every case. The point is that if the black box enables eight steps to be provided in a particular case to get someone into work, that is fine, but why could not the provider simply ensure that those are set out for the claimant? What is so difficult in doing that so that the claimant has the reassurance of the journey that they will go through to get into work? There could be flexibility over that. It does not need to stay at those eight steps for ever. But if that is what the provider has concluded is needed to get someone into work, why should they not give an undertaking or commitment to the claims?
Lord Freud
My Lords, there is a simple answer to that. You start off on a journey thinking that there are eight steps, which you might write down. If it is a formalised process and you decide after three weeks that, “Actually, I do not need to do these two steps or I need to add another two”, you might change it. You might change it weekly, as people change. If we have an overformalised process, we just make that in management terms impossible and very expensive. I would resist it on those principles.
Lord McKenzie of Luton
I do not think that we are going to agree on this issue. But one is not arguing for rigidity: one is simply arguing for the fact that claimants ought to understand the process that they are being asked to go through. If some steps can be missed out or other steps added, that would be fine. No one is saying that that should not happen. Put simply, there should be some obligation as regards the claimants, who should know what is going on and what the provider is seeking to help and to support them with. Perhaps this is an issue on which we will not settle today and to which we will have to come back.
Part of the debate from the noble Baroness, Lady Meacher, who read the script of the noble Lord, Lord Skelmersdale, was about ESA. In a sense, it is a forerunner to the determinations that we are talking about because the categories that people find themselves in are a consequence of that WCA process. The claimant programme moves on from that, which I hope we will discuss in more depth later in our deliberations on Clause 38. On behalf of the noble Lord, the noble Baroness, Lady Meacher, made the point that Jobcentre Plus staff are well trained and highly qualified, which I accept entirely. We hope that providers would have robust training programmes. But what information from the WCA will they have before them when they are seeking to devise the individual programmes?
Lord Freud
The medical information in the WCA is sensitive and personal, which is gathered at an assessment. It informs benefit entitlement and does not provide comprehensive information about readiness or not. In practice, it is likely to be of limited use to advisers and, for that reason, is not shared.
Lord McKenzie of Luton
I understand and I thank the Minister for that. You will see the point that I am trying to understand. There was that initial assessment, through the work capability assessment, which determines what category people end up in. There has been much challenge and discussion about whether that process is an appropriate one, whether Atos is fit for purpose, and so on, and that debate will continue. Once that has happened and people are categorised, then support has to be given to those individuals by the claimant commitment, written down or not, by the providers and/or by Jobcentre Plus. When one is looking at the expertise that is available from those providers or Jobcentre Plus, do they have to go through the process again to understand people who have fluctuating conditions, for example, which is one of the recurring issues of the categorisation in the first place? Do they have to relearn what Atos may have devised, I hope, correctly in that original designation? If not, how will they best serve those claimants, particularly those who are most challenged as regards the labour market?
Lord Freud
Let me clarify what information goes over. The former WCA is confidential and does not go over. How does the adviser build the revised requirements with the claimant? The evidence that he uses includes the claimant’s fit note, advice from Atos—not the former WCA, but some advice can go over—and other medical evidence. Those things come together to form the basis on which agreement is reached.
Lord McKenzie of Luton
My Lords, we have probably taken this as far as we can this afternoon. I would certainly like to read the record and reflect on it. We ended on a high note. The Minister made reference to a fit note, which is most welcome. There is a conundrum here which I do not think that we have bottomed out this afternoon. We propose to take it away and I imagine that we will wish to return to it on Report.
Lord Freud
There are quite a few moving parts to this. I have talked about the WFHRAs reviewing that and there is also a review coming out on the sickness absence regime in the not too distant future. There are areas that need to be brought together, which impact on this reasonably specifically.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“( ) Such an amount shall remain in payment in the event of the claimant lodging an appeal regarding any aspect of universal credit.”
Lord McKenzie of Luton
My Lords, I shall endeavour to speak up, George. I am not sure whether it is this camera that you want me to speak to.
This is by way of a probing amendment. It was prompted by an article in the Times of 14 October. The article suggested that people were to be denied their benefits if they appealed against the determination. That seemed to be in the context of the reassessment of incapacity benefit claimants, particularly those who were denied ESA— the work-related activity group— who could therefore qualify for jobseeker’s allowance. The article stated:
“Hundreds of thousands of welfare claimants face losing their benefits for months if they challenge a ruling that they are fit to work. Ministers are looking at removing payments during the appeals process in an attempt to slash the number of challenges that are threatening to derail the Government’s benefits reforms. The unprecedented move is being considered as one way to unclog the courts which are set to be inundated with appeals as the Government attempts to reduce the annual £7 billion incapacity benefit bill. A reassessment of all 1.6 million incapacity benefit claimants began in April, with ministers promising to move them on to a new system with narrower eligibility criteria for the sick and stricter requirements to find work. However, concerns over both the reliability of the test to find out whether people are ready for work and the scale of the project has prompted fears of a mountain of appeals. Judges have said privately that they could be facing 500,000 cases a year, some taking more than nine months to resolve”.
In view of the concerns that an article like that can generate, we consider it appropriate to give the Minister an early opportunity to set the record straight, and hopefully deny that that is the Government’s intent. To be clear, do the Government have any plans or otherwise contemplate, by amendment to this Bill or otherwise through regulation, the prospect of denying individuals their benefit should they appeal against a determination that denies them incapacity benefits or employment and support allowance?
At present, where there is an appeal against a decision not to include somebody in the work-related activity group, that causes benefit to be paid at the assessment period rate only, which is the JSA rate. Is this the type of arrangement which the Government are seeking to replicate, or are they proposing to go further and to deny benefit altogether? This raises wider issues which we shall come on to in subsequent clauses, but what conditionality would apply during the period when the appeal is outstanding? I hope that the Minister can set the record straight and clear on this. If he proposes to confirm that the article has some validity, we have some additional questions which we would pose to him. I will give him the opportunity to set the record straight and deny that this article identifies something which the Government propose to take forward. I beg to move.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the amendment is slightly different from the question posed, and I shall deal with the question posed. The changes to the current appeal system are being taken forward in this Bill, as expressed in Clauses 99 and 100, so we will have an opportunity to discuss those in that consideration. We are, in those clauses, looking to introduce a period of reconsideration, or a reconsideration process, prior to a full appeal. We can have further discussion at that point, but regardless of what an article in a newspaper might say, clearly the practical difference, if one was to be extended in the way described, is purely a difference of conditionality, because as the noble Lord, Lord McKenzie, pointed out, the actual payment rate of the assessment phase of ESA is the same as JSA. That article has put out a lot of misinformation.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister if he is saying that what is being contemplated in effect replicates what currently exists. When an appeal is outstanding, the assessment period rate, which I think is the JSA rate, applies. If that is what is going to be replicated in the new world, I understand that and can see that the article was misleading on that basis. Broader questions are raised, however, given that there is going to be a universal credit, components of which would in due course be held back during an appeal. If we are talking just about the work-related activity equivalent components, I can understand parity with the existing situation, but obviously other components will go into that, including housing issues. However, I am happy to leave that debate for when we reach Clauses 99 and 100, supposing that we do reach them at some stage in our deliberations. I think the Minister has dealt fairly with the principal concern that the article generated, and I beg leave to withdraw.
The Earl of Listowel
My Lords, I am sure that the Minister will be keen to reassure the Committee about the concerns raised, and I know that the Committee will want to hear those reassurances, so I shall be as brief as I can, but I am prompted by the eloquent speeches of the noble Lord, Lord German, and the noble Baroness, Lady Hayter—particularly the case histories that she presented—to think in particular of large sibling groups of children taken into care. We are often talking about large families, dysfunctional families, where the parent has a child who is taken away, then another child who is taken away and then another child who is taken away. It is often very important for those children that they stay together with their brothers and sisters. Of course that means that some foster carers need to have many rooms to provide that capacity. In the past, we have failed those children. It has been inconvenient to keep them together, so they have been separated.
I think of one now middle-aged woman who was separated from her five brothers and sisters when she was in care. She was so profoundly troubled by her experience that she set up a charity, Siblings Together, and now organises holiday schemes so that young children in care can spend at least their holidays together with their siblings. If they lose their parents, at least let them keep their brothers and sisters.
I do not want to pull too hard on the heartstrings, and I know that the Minister has met the Fostering Network. He has already provided reassurance on several of its concerns, so I am sure that he will be as helpful as he can on this issue as well, but I omitted to raise this earlier and I wanted to raise it with him before he replied.
Lord McKenzie of Luton
My Lords, it is with some trepidation that I speak in this debate having released, in the terms of the noble Lord, Lord Best, the battery of Baronesses from this side of the Committee. I am not sure that I am not better suited to sitting on the hill at a safe distance and watching all this from afar.
However, these are hugely important issues. One thing seems abundantly clear on the basis of this debate and the previous one: what is in the Bill simply cannot stand. We recognise the issue of underoccupation. As the noble Lord, Lord Best, said, part of that is dealt with by definition: the extra bedroom in itself is part of the solution. My noble friend Lord Whitty just made a powerful contribution about the need to look at this in the context of housing policy more generally: the provision of a range of new accommodation and the range of tenancies that we have. To use the mechanism of housing benefit as the sole lever to try to deal with the problem seems fundamentally flawed.
There seems to be an assumption behind that approach that someone who finds themselves in a position of underoccupation, as defined, is somehow doing it to cheat the state, to grab more from housing benefit that they might be entitled to. The reasons that people end up in an underoccupying position are varied. It could be that the kids are leaving home to go to university; it could be that a member of the household has undertaken the instructions of the noble Lord, Lord Tebbit, and got on their bike to find a job somewhere else; there could have been a death in the family. All sorts of reasons may underpin why people find themselves underoccupied, and I am not sure that that is reflected in the provisions.
I must stop agreeing with the noble Lord, Lord Best, but I agree that underoccupation is more of an issue among elderly people. I remember people from the patch that I represented on the council. One elderly woman occupied alone the three-bedroom house that she had occupied since she started a family. That is where her memories were. She could not get up the stairs and used to sleep in the front room. That is not a satisfactory outcome to her life or, indeed, to the use of housing stock. Means of dealing with that, such as local authorities having a scheme whereby they can help people to move by dealing with the practical issues of carpets, curtains, utilities and so on, would relieve some of the risks and tensions associated with moving house.
Lord Freud
My Lords, this has been a very good debate. I am not saying I have welcomed anything anyone has said, but I am saying the quality of the debate has been very high. I thank noble Lords for the great expertise they have brought to these issues. In response to the request of my noble friend Lord Kirkwood and the noble Lord, Lord McKenzie, I shall try to answer on each of these amendments and justify the idea that we can group them and get the right answers through. I am grateful for the indulgence of Committee members in allowing some big groups to come through, which should help us, but I aim to answer all of these issues.
To go back to the essential core point, housing support is a critical element of universal credit. It will help people pay their housing costs and help prevent homelessness. It will recognise that people need support across a range of different tenure types whether they live in the private rented sector, the social sector or whether they are owner occupiers. However, to repeat the point I made earlier, it also needs to be affordable to the taxpayer. My noble friend Lord German made the point about the increases in pure cash terms—it is up from £11 billion to £22 billion in a decade, which is 40 per cent in real terms—and that rise was going to continue if we did nothing.
The noble Lord, Lord McKenzie, asked why is it this community that is taking the £2 billion saving we are looking at. I remind Committee Members that the way we are designing many of these particular housing reductions is not directed wholly or even mostly at tenants. Clearly, we are looking for landlords to take the strain in the private sector—I am on record as saying that—although we expect other responses in the social area which I have gone through.
Lord McKenzie of Luton
I quoted the figure of £2 billion. I thought that figure was for several years and related to these underoccupancy provisions. Is that right or is it a broader range?
Lord Freud
No, the figure of £2 billion applies to the total saving by the end of the period in 2015 of all the benefit changes, and the particular change here is £0.5 billion per annum on the social sector from 2013-14.
Tackling housing benefit expenditure is vital to our combined efforts to reduce the economic deficit. The measures within Clause 68 will help to deliver significant savings affecting housing benefit claims for those living in both the private and social rented sector. Clause 11 will allow us to carry these measures through into universal credit.
Starting with Amendment 36 from my noble friend Lord Kirkwood and the noble Lord, Lord Kennedy, I confess that it surprises me because it appears to call for a return to something akin to the local reference rent. This was a system that was difficult for claimants to understand, led to delays as individual rent officer determinations were sought, and it was expensive. It needed an army of rent officers to carry out these case-specific determinations. It is not a system that I would willingly go back to. This amendment would also maintain the status quo for housing benefit in the social rented sector, ignoring a property size in relation to the size of the household. As I have set out, we must take control of housing benefit expenditure across both sectors, but this amendment would do neither. In fact, it would increase costs.
I turn to my noble friend’s point on CPI. We will discuss this in more detail in a later group. The CPI uprating will apply across the spending review period, and if it becomes apparent that LHA rates and rents are moving out of step, they can be reconsidered at that point.
Amendments 38 and 79 would exclude anyone from this measure who is disabled and lives in adapted accommodation. Unlike Amendment 48 in the name of the noble Baroness, Lady Hollis, this exemption would apply regardless of the extent of the adaptations that have been made. It would also exempt anyone in accommodation who is “particularly suited” to the needs of that person. These are extremely broad categories. We have already heard in some detail the issues surrounding claimants living in adapted and specially suited accommodation. The terms of the exemption suggested in these amendments are simply too broad brush. However, as I said in relation to Amendment 48, I want to return to this matter once we have considered it further.
Amendments 43 and 83 also touch on similar issues to those discussed in relation to Amendment 48. They would exempt claimants where there is no suitable alternative accommodation, which is classified in the amendment as social rented housing that is also within the claimant’s locality. We cannot contemplate such a wide-ranging exemption. It would be costly to administer and would no doubt apply to those who would, in fact, have paid the shortfall regardless.
On Amendments 39 and 80, we estimate that around 200,000 claimants, where only they or their partner receive disability living allowance, will potentially be affected by the size criteria measure. However, this figure does not include other members of the household such as children and non-dependants. An exemption is simply not affordable and may well include many cases for whom an exemption would not be necessary, while missing out other hard cases. To provide a blanket exemption where claimants and partners receive DLA would lead to a reduction in savings of approximately between £130 million and £140 million in 2013-14, and this amendment goes further even than that.
Amendment 48C and the peculiarly titled Amendment 86ZZZA would exclude all households where there is a disabled child and again reduce the savings significantly and provide too broad an exemption. In response to the point made by my noble friend Lord German about exemptions for people who require an extra room as a result of a medical condition, we are looking at ways to potentially limit the impact of these changes in a way that is effective and affordable. The most appropriate course of action for the tenant and landlord in such cases will vary, depending on the individual circumstances of the claimant and his or her household. They may choose, for example, to apply for a discretionary housing payment.
As for the point raised by the noble Baroness, Lady Campbell, on fluctuating health conditions, local authorities can and do use discretionary housing payments for precisely that purpose. I can inform her that we have worked with the Department of Health on the extra room for a non-resident carer, which will cover that point in the guidance we issue to local authorities.
Amendments 40, 41 and 81 are relevant to foster carers. Within universal credit, our intention is to ignore any fostering income and therefore not to include any foster children within the assessment unit. To do otherwise, by treating the child as a family member and the fostering allowance as income, could result in the family being considerably worse off, and as such act as a deterrent to fostering.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake
My Lords, in moving Amendment 22A I will also speak to Amendments 22E and 52A. Amendment 52A is a probing amendment to establish clarity on the treatment of capital—that is, the types of capital disregarded and for how long for the purposes of entitlement to universal credit. In Schedule 1 to the Bill, line 9 on page 107 refers to universal credit supplementary regulations, which may,
“specify circumstances in which a person is to be treated as having or not having capital or earned or unearned income”.
However, the schedule does not refer to such regards for limited time periods. We have received an initial illustrative set of regulations on the treatment of capital and it is clearly not a final version. I obviously recognise that this is work in progress. None the less, the Bill is before us and it is important to understand the Government’s intention.
Currently, there is a long list of items of capital that are exempted from the calculation of entitlement to means-tested benefits. In many instances, the exemptions are time limited. These range from the value of one’s home and personal possessions to tax rebates and training programme payments. It is not clear whether all these exemptions will continue under universal credit, a point that I noticed at the weekend was registered by the Institute for Fiscal Studies, although I recognise that the draft regulations have started to set these out. It is clear from the briefings we have received from the DWP team that there are gaps and further work to be done. For example, there is an acknowledgement that the treatment of capital where it is jointly held with another person who is not included in the claim still has to be addressed by the Government and a view taken.
This is a particularly important issue, because as a result of the proposed treatment of capital, some of those in work might consequently experience a reduction in their income. This is going to be of some significance for those in work because tax credits do not set a capital cut-off, although there is provision for income that is derived from that capital to be taken into account. Capital above £6,000 will be taken into account in universal credit. Furthermore, with the integration of the in-work and out-of-work benefit, the Government will be applying a tariff approach whereby capital is deemed to produce an income by applying certain rates.
On that basis, will the Minister say whether the current circumstances in which a person is treated as not having capital, including time-limited circumstances, will all continue under universal credit? I have a long list before me, having tried to do my homework, and I can see that there are several not covered in the illustrative list, including: certain payments made to disabled people; the refund of council tax liability; payment by social services; employment and training programme payments; and tax rebates, for future interest in most kinds of property. There are clearly some gaps, which I have already identified. Will the Minister also say when it is anticipated that the definitive regulations on the treatment of capital in universal credit will be available?
Amendments 22A and 22E address the desire to exclude amounts arising from the sale of primary residence from the claimant’s capital for the purposes of entitlement to universal credit for a period of 12 months. Under current rules, money received from selling a primary residence or from surrendering tenancy rights to a landlord is ignored as capital for a period of up to 22 weeks from the date of the sale. I recognise that the briefings we have received have advised us of the Government’s intention to continue this practice, but, in the absence of absolute clarity on the definitive set of rules, it is necessary to table amendments. Equally, however, I seek to extend those rules to allow the capital to be ignored for 12 months.
Under the current rules, capital held on the sale of a primary residence is disregarded for a period of 26 weeks. Clearly, however, already under the existing rules there is discretion to extend that. I am saying that rather than have discretion between 26 weeks and 12 months, a disregard for a period of 12 months should be allowed because selling a house is not easy, particularly in current circumstances. A geographic relocation may be involved, vendor behaviour may be difficult and surveyor problems may occur, and 26 weeks strikes me as a very small period for someone to manage the difficulties of selling and purchasing a new house. Hence, this clause seeks to extend the ability to disregard the capital from the sale of primary residence to a period of 12 months.
Lord McKenzie of Luton
My Lords, I speak in support of my noble friend’s amendment and to catch up on one or two points. We understand the need to merge two different systems of dealing with capital: the tax credit rules and the tariff rules in the benefit system at the moment. One question to the Minister is: why did the Government opt to do it that way round rather than the reverse way round? It could lead to complexities. Someone whose income swings around that £16,000 cut-off point could be in benefit or in the universal credit one day and out the next.
My second question is: can the Minister say something about the practicalities of how this is going to work? What is going to be the process for reporting capital, and how often will that have to be updated? Will it be on a six-monthly basis? Will there be a look back if the capital has changed during an assessment period, giving rise to adjustments to universal credits? I am picking away at some of the complexities around this, because we often promulgate universal credit on the basis that it is a simplified system, and we accept that in some respects it is. However, it still has attached to it these sorts of complexities from the changes in people’s lives. It would be good to know which of the existing exemptions will be carried forward into the new system.
The £16,000 cut-off point will penalise savers, making it harder for low-income working families to save. It will particularly penalise families with high tax credit awards such as high childcare costs or indeed disabled children. Therefore, we see this as a disincentive to save. I was going to ask whether this is wise when there are rumours about auto-enrolment being deferred, but I am advised that that is not now in the Government’s mind.
I was a little surprised in the briefings that we had from the department by comments about it being right that people should, over a period in some circumstances, disinvest their assets before wholly relying upon state support. However, the briefing note quotes in aid,
“earlier means-tested benefits including National Assistance required applicants to exhaust all or most of their savings (and to sell personal possessions regarded as unnecessary)”.
That has a resonance for many people, particularly on the left, and it is why, for a period, reference to means-tested benefits was a derogatory and hated term because it took you back to circumstances in which people knocked on the door, entered the front room and told you to sell every stick of furniture you had before you could rely on benefits. Reverting to references to national assistance and those practices is probably not going to be the most helpful way for the Government to sell this policy.
I support my noble friend on the one-year rule in relation to disposals of properties because the current market is extremely difficult, and even if individuals have the cash to make the purchase, people get caught up in chains and it is difficult for them to complete and sell on so that a satisfactory result can ensue. It is therefore very reasonable to request simply extending that period and that disposals from the sale of property are excluded from the calculation.
Baroness Turner of Camden
My Lords, I, too, support these amendments. I understand that this is a rather difficult question, but one can hardly pick up a magazine directed at older people without encountering articles urging people to save so that when they are older enough money will be available for them to be provided with social care. We do not yet know what the Government intend to do with the report that we have had on social care, but it could very well involve people having to have a lump sum available at a particular time. Quite obviously, it is in everybody’s interests to ensure that people have cover for when they are ill and require social care, particularly as the report includes a general recommendation that people are best off being looked after in their own home. You have to take account of these sorts of possibilities when assessing what is a reasonable amount of money to be regarded as suitable to be retained by the individual concerned when assessing the requirement for benefit.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this is one of three amendments about capital. I shall start by explaining our intentions for the capital rules and universal credit. I will then be able to be briefer on that context and background when we come to the next two groups. The rules for the current income-rated benefits will be carried forward into universal credit. We intend to limit eligibility for universal credit to claimants who have less than £16,000 of capital. Claimants may save up to £6,000 before there is any impact whatever on their entitlement to universal credit. If they have between £6,000 and £16,000, we would assume a tariff income from this capital. These rules ensure that support is focused on those who really need it rather than on people who have significant resources on which they can draw. This is an important principle, which is essential to ensure that the system remains affordable. As noble Lords have pointed out, there is a slightly opaque area here in the sense that capital can be deferred income and vice versa. It is important to have some rules around the appropriate capital.
In order to be fair to the taxpayer, we have assessed how much families typically save. While nearly one in three pensioner households have savings in excess of £16,000, only 13 per cent of households with a working age adult in them have this much savings. A typical working age household has only £300 in savings. On the point about importing the tax credit system to universal credit, the noble Lord, Lord McKenzie, asked why it is this way around. The answer is simply that it would be unaffordable.
The first group of amendments seek to amend the financial conditions for universal credit by requiring capital derived from the sale of the claimant’s primary home to be excluded from the calculation of capital for up to 12 months when held in a deposit or a prescribed account. However, it is already our intention to provide claimants who have capital from the recent sale of their main home with a significant level of protection. This is clear from the illustrative draft regulations on capital and income recently shared with Peers. The illustrative schedule on capital to be disregarded sets out our intentions on this point.
Capital from the sale of the claimant’s main home received within the previous 26 weeks will be disregarded, which is to be used for the purchase of their new home. That period may be extended where the decision-maker determines that it will be reasonable to do so in the circumstances of the case. An example would be where accommodation suitable for a disabled member of the family has not yet been found. We believe that this approach balances our duty to be fair to the claimant with the need to safeguard universal credit.
Turning to the power in Schedule 1 to treat a claimant as having or not having capital, this is simply taken in order to replicate the notional capital rules that existed in the current benefits system and that guard against claimants deliberately depriving themselves of capital. The exemptions for types of capital covered by the rules in the existing benefits system will be maintained. Some types of payments cited by the noble Baroness, Lady Drake, are classed as income. It is not necessary to add a specific power taken by Amendment 52A. As I have said, the illustrative draft regulations demonstrate that we already have the power to limit the time period for which claimants are treated as having or not having capital where we choose to do so. I hope that this account has clarified the Government’s proposals for protecting the capital of claimants who have recently sold their main home and therefore explains why we could not support Amendments 22A, 22E and 52A.
Lord McKenzie of Luton
Perhaps the noble Lord can help me a little on some of the practicalities of that. We are saying that the existing exemption operates when someone has disposed of their main residence and reapplies it within a 26-week period. Is it a requirement that it is wholly reapplied for the purchase of a property? My noble friend Lady Turner made a point about someone who wanted to save some of that because they were downsizing for carers. Is this looked at retrospectively? Will someone look after the event and see as a matter of fact that it was so applied and, if it was not, what the ramifications are for the application of the universal credit?
Lord Freud
Yes, my Lords. The way it works is that the amount of money that is being reserved for the purchase of a new house is the amount of capital that would be exempted. Other capital would not be exempted. We are currently working on the exact workings of the system and getting these regulations—the next iteration—right. Therefore, I am not currently in a position to lay down clearly, as the noble Lord rightly says, the practical applications and fine tuning of how we apply this. That will come at the appropriate time.
Lord McKenzie of Luton
My Lords, I have little to add to what my noble friend said about her amendment, which she moved comprehensively and quite brilliantly. Will the Minister confirm that ISA income is disregarded under existing arrangements for tax credits whereby the income, not the tariff, is looked at? If that is right, what is the read across to the new regime? Does that not reinforce my noble friend’s amendment?
The Earl of Listowel
My Lords, I was most grateful to the Minister for his previous reply and for the offer of detailed information on the question I asked him. Now I would like to ask him about child trust funds, and I hope I have the right hook on which to put this question. There has been some toing and froing about child trust funds, but thanks to the work of Paul Goggins MP and support cross-party, they have been reinstated for children in local authority care. The local authority will put in a sum, supported by the Government, for each year that a child is in care, I think. I am interested to know how that will be treated in this context. The Government have also moved away from providing money to parents for trust funds, but they are looking to find vehicles to encourage parents to put money for their children into these child trust funds. Again, I am interested to know how that particular vehicle will be treated in this context. I hope that is clear.
Lord Freud
My Lords, Amendments 22B and 22F would exclude from the calculation of capital any savings placed into an individual savings account or other prescribed accounts of a claimant who is in work, or who has been in work in the past 12 months, up to a maximum limit to be set no lower than £50,000. It begs a really very simple question: should the taxpayer support someone who has savings of £50,000? That is the question that is being asked here, and I think it is a question about amounts. The figures we are using were taken over from the existing benefits system, and they were raised a little over five years ago in April 2006. Those figures were doubled from £8,000 at the top to £16,000, and the starting rate from £3,000 to £6,000, so those figures do move around. I accept that determining what the right figure is here is not an exact science. Indeed, one of the things I am keen to have is a responsive system that starts to get research and understand judgments such as what the right figure is here.
I understand exactly the motivation of the two amendments, which is to encourage low-income workers to save. The argument comes down to how much we and the taxpayer can afford. I gave some figures when we debated the previous group of amendments. I will remind noble Lords that if we had an upper capital limit of £50,000, it would cost £90 million a year, which we simply do not have. Under our proposals, only when a claimant, or joint claimants, has £16,000 or more will the entitlement to universal credit cease; and only 13 per cent of households have this much in savings. That is why the figure is not as arbitrary as some noble Lords indicated.
I was asked a series of questions. I will have to add to my letter to the noble Earl, Lord Listowel, to get right the position of children leaving care. Clearly, a child's income and capital are wholly disregarded in the system. The noble Lord, Lord McKenzie, asked about the treatment of ISA interest. Universal credit will replicate the capital rules for means-tested benefits by using a tariff income. It is not possible to read across from the tax credit system. As noble Lords know, tariff income is not—and is not meant to be—the equivalent of the actual income that you might earn on that amount of capital. The figure includes an estimate of how much you should be prepared to run down your capital while you look for support from the state.
Lord McKenzie of Luton
Will the Minister confirm that tax credits and ISA income are not included but are exempt? Is that right or not?
Lord Freud
I will have to write to the noble Lord on ISA income in tax credits. I do not know the exact position. I hope that that explains why we cannot support Amendments 22B and 22F. I ask the noble Lord to withdraw his amendment.
Lord Freud
My Lords, Amendments 22C and 22D would exclude from the calculation of capital prescribed amounts saved for a deposit on the purchase of accommodation for personal use where the claimant is in work or has been in work in the previous 12 months. I can of course see the benefits of encouraging low-earning families to become homeowners, but at present these amendments would be difficult if not impossible to implement efficiently in practice. As the noble Baroness, Lady Drake, pre-empted my argumentation, I will not go into this in depth, but I must say that one would need both the provision of a savings vehicle, which would in effect be exclusively for the purchase of a house, as well as adequate numbers of people wanting to save in this particular way, for that market to work. I do not think there is any necessary block on creating a vehicle like that at some stage in the future, and it would be up to a Government to look at that in the future. Right now, given our constraints, I do not think we are in a position to do it. As noble Lords have heard and as the noble Baroness suggested, these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. I remind noble Lords that we have obtained an envelope of £4 billion per annum to give to people in receipt of universal credit. I am not netting it off against other changes, but that is what the universal credit does. Finding extra money for this, that and the other cannot be done just by a wave of the hand. It will be tough to get extra money for desirable things.
It is essential that we get the architecture of a structure that we can use to help and motivate people. If we cannot afford particular things or it would be desirable to develop particular processes, that is fine and we can do it, but right now we do not have those resources. For that core reason, I hope noble Lords will appreciate why we do not support these amendments, and I ask the noble Baroness to withdraw her amendment.
Lord McKenzie of Luton
The noble Lord may need to write to us to flesh out some detail about the £4 billion, a figure that he has used on several occasions. I accept that it is probably a gross figure and that there are some nettings off. Presumably the baseline for that is after taking account of the previous two Budgets and the spending review, and all the hits that occurred there.
Lord Freud
My Lords, I need not write to the noble Lord on this matter because I am trustful that the impact assessment that holds these figures will be on its way—
Lord McKenzie of Luton
My Lords, this is a straightforward and, I hope, brief probing amendment to Clause 6. This clause is concerned with restrictions on entitlement. There are three types of restrictions, two of which are time-related.
Clause 6(1)(c) deals with periods at the beginning of a period of claim, which presumably are supposed to reflect the waiting days applicable to some benefits. Of course, waiting days do not apply to housing benefit or generally to tax credits. Question one for the Minister is therefore how the waiting-day rules are to be applied under universal credit. Application to the universal credit would, as my noble friend Lady Hollis said, be adopting the lowest common denominator. You need, for example, to take account of the fact that rent has to be paid from day one if there are going to be waiting days before the claim becomes payable.
My second question is whether the same sort of exemptions from waiting days that operate currently—for example, in JSA, within 12 weeks of the cessation of another benefit claim—will apply to universal credit. Question three is what linking rules will apply so that the waiting days do not apply where universal credit is in operation previously. Perhaps we can understand the likely period involved in that. Of course, there are various back-dating rules that operate with a range of current benefits. How are these to be dealt with under universal credit?
My next question is: where waiting days are applicable under current arrangements—typically three days—are there any that are seven days, and how is this going to operate in the new world? Clause 6(1)(b) envisages entitlement being denied for up to seven days other than at the start of a period of claim. Perhaps we can have some examples of what the Minister has in mind.
It is understood that Clause 6(1)(a) may be used to exclude certain groups that remain the responsibility of the local authority: for example, prisoners and children leaving care. Can the Minister please confirm—or let us have a note if he is unable to do so today—that the type of exclusions contemplated for universal credit exclude access to all components of the benefits that are to be subsumed into the universal credit? I also draw the noble Lord’s attention to the Delegated Powers and Regulatory Reform Committee’s report on this issue, which says:
“Clause 6 provides for restrictions on entitlement that are left largely to negative regulations. The power in subsection (1)(a), which is subject to no constraint in the Bill, could affect entitlement very significantly. We draw it to the attention of the House so that the Minister may be invited to satisfy the House that the negative procedure affords adequate control over the exercise of the power. Unless the House is satisfied with the Minister's response, we recommend that the affirmative procedure should apply”.
I should be grateful if the noble Lord could also deal with that point. I beg to move.
Lord Freud
My Lords, I will speak to Amendments 23 and 24. Amendment 23 removes the power to make regulations for there to be no entitlement to universal credit in prescribed circumstances. Amendment 24 removes a power for regulations to be made for there to be exceptions to any limited entitlement or waiting day rules. It might be helpful if I indicate the types of circumstances in which we envisage these powers being used.
The regulation-making power in subsection 1(a) will provide that there is no entitlement to universal credit in certain cases where the usual conditions of entitlement are otherwise satisfied. As is the case now, a number of specified groups will not be able to access universal credit. These may include certain prisoners and children leaving full-time care who remain the responsibility of the local authority, where payment of universal credit would lead to duplication of provision. This may include people involved in trade disputes. Amendment 23 would prevent us being able to restrict entitlement to people in these circumstances. This would result in duplication of provision in some cases, which I am sure is not the intention.
I will address the questions of the noble Lord, Lord McKenzie, about waiting days, which constituted the main thrust of his comments. Housing benefit is dependent on entitlement to means-tested benefit, which involves waiting days—for example, jobseeker’s allowance or employment and support allowance. There is also a waiting period in practice for housing benefits. In addition, where benefits such as housing benefit are paid for in complete weeks, there is no provision for short claims of a few days. In practice, when we move from the application of waiting days in the reality of the universal credit world, there will be far fewer instances of this start-up arrangement because people will go on to universal credit for their entire application and will stay on it.
The noble Lord asked about linking rules. Our intention is that people will work their way off the system—that would be a very good outcome—but would remain effectively known to the system for another two years. So that is effectively how the linking rules would work: you would come back onto your taper on an automatic basis. I have not actually thought this through. I imagine—I will check carefully now—that waiting days will not apply when you are on the system and it will be a kind of run-on effective link. I will double-check that waiting days will not apply in those circumstances because my understanding currently is that there is a run-on and that is the same effective claim. So the whole concern around waiting days would be very much diminished. In fact, I am reassured almost instantly that the intention is not to have waiting days as people move on and off the system in those circumstances. As to the question of when Clause 6(1)(b) would apply if not at the start of the claim, it would apply to the entire claim if it covered less than seven days.
Amendment 24 would prevent us having exceptions if we make provision for waiting days or to prevent very short periods of entitlement. We envisage that regulations under Clause 6(3) might be used in a claimant’s favour: for example, where there is only a short break between periods of entitlement, a claimant may not have to serve waiting days before becoming entitled again. I am sorry that I am repeating that point. Although we have made several changes moving from negative to affirmative resolutions, on this one we propose to stay with negative ones. Given this explanation, I hope that noble Lords will not press their amendments.
Lord McKenzie of Luton
I am grateful to the Minister for that response on the issue of negative or affirmative, to which we may wish to return. In order to be clear, perhaps I may use the trade disputes issue as an example. Under current arrangements, there are certain trade disputes under which benefits can be withheld. Under the universal credit, there is an amalgam of benefits, including housing. As regards the sort of exemption that it is envisaged would apply under Clause 6, does it cover all the separate benefits that could give rise to similar exclusions now? For example, would housing being included in the universal credit still be subject to the same trade dispute rules, or will separate rules apply to that? That is not a very elegant way of phrasing the question.
Lord Freud
My Lords, our intention is to have it broadly the same. We have to work through the exact detail of the regulations but our intention is not to change the main thrust of that set of regulations.
Lord McKenzie of Luton
Specifically, if housing benefit were not currently subject to those rules, how would that be unpicked? Perhaps the answer is that it is.
Lord Freud
We would wrap them together in the universal credit but maintain the same regime for trading disputes. That would be the intention. Clearly, we have not written this regulation in detail and we will have a chance to look at it in some detail before we do.
Lord McKenzie of Luton
I am grateful again to the Minister. We should like to reflect and read the record on that issue, and it is something to which we may wish to return. In the mean time, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I support the amendment of my noble friend Lady Lister and congratulate her on an incredibly impressive first amendment. We look forward to many more. I hope that the Minister can see that we are here to help. He has heard not only the voice of experience today but particular proposals from my noble friend Lady Hollis to help him on housing benefit issues. I hope that this well of experience and good will will enable us to move forward on universal credit.
One thing that came across very clearly in the debate was the almost universal voice of experience, whether it was people’s own household experience or that of people such as my noble friend Lord McAvoy who worked with poor people and helped them claim their benefits in the existing maze of complexity. We have heard powerful voices warning of the risks of imposing on everyone the monthly payment basis, for all the reasons that have been heard.
There are particular issues for women. My noble friend Lady Lister said that it is largely mothers who manage poverty in the household. The noble Lord, Lord Kirkwood, was on the same page on that. Studies show that by and large the male member of the household is more likely to be responsible for monthly bills, whereas women tend to do the weekly shop. Therefore, women are potentially particularly disadvantaged by these proposals.
A lot of work has gone into producing real-time data from HMRC. That is at the heart of delivering the universal credit project. Obviously, that is predicated on the formula of monthly payments. As a practical matter, how difficult would it be either to flex on to fortnightly payments or for people to have a choice? I am surprised by those who argue against choice. We all accept the benefits of simplicity, for the reasons that we have debated and will continue to debate. However, a balance must be struck. Simplicity can shut out fairness in a range of circumstances. That is perhaps the dilemma that the Minister faces today.
I think it was the noble Lord, Lord Boswell, who said that it would be a pity if we got this wrong and in doing so undermined the prize of the universal credit, and I very much agree with that. I hope that the Minister will listen to all those who have spoken. The noble Earl, Lord Listowel, spoke about his particular experience of dealing with poor and disadvantaged, chaotic families, as did the noble Lord, Lord Kirkwood, and my noble friend Lady Sherlock. What would happen if one partner spent unwisely in that relationship? What would be the outcome, particularly for children? I hope that the Minister has heard a powerful message today and that it will genuinely influence him in looking at this again. If we want universal credit to work, this could be the key stumbling block.
Lord Freud
My Lords, I start by congratulating the noble Baroness, Lady Lister, on her first amendment, and I hope that she does not have too many like it. I was very impressed when she said that she was a conservative, which was obviously supported because my noble friend Lord Kirkwood called her his noble friend. Clearly we have some cross-dressing going on.
In the policy briefing note published on 12 September, we confirmed that the universal credit will be paid monthly. However, we do not intend to specify the payment frequency in primary legislation. As with all existing benefits, this will be dealt with in regulations made under the existing powers in the Social Security Administration Act 1992. That approach gave us the flexibility, for example, to increase payment periods from weekly to two-weekly for most out-of-work benefits. The amended provision would require the Government to pay universal credit more frequently than monthly. Amendment 27, for instance, goes on to provide that in some cases payments would be made twice monthly.
I need to make the point about the difference between assessment periods and payment periods, which is important to bear in mind. Currently, existing out-of-work benefits are made on an assessment period of a week, with a fortnightly payment cycle. That is fairly typical. The universal credit benefit represents a new approach focused clearly on work, which encourages out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life. The figures have already been used. Currently, 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year receive earnings monthly. In addition, monthly direct debits for household bills are often cheaper than more frequent billing options.
Many noble Lords raised the evidence base. As noble Lords know, we are conducting qualitative and quantitative research with claimants on many issues but particularly on the payment frequency issue. As some noble Lords have pointed out, on 7 October we published a report, Perceptions of welfare reform and Universal Credit. This outlines findings from research we conducted with claimants, the public, employers and staff in December 2010 and January 2011. There were critical findings in that piece of research that we are looking at with great attention.
I understand that many people on low incomes will be used to managing the fortnightly payment of benefits, and I am determined to ensure that there will be appropriate budgeting support to meet the needs of claimants. We want families to be able to manage their financial affairs in a manner that best reflects the demands of modern life, whether they are in work or out of work, and we are working with stakeholders and benefit experts to that end. We are setting up a series of demonstrator projects, as they are called, with housing associations and local authorities to look at how to structure the payment of rents to landlords. These demonstrator projects will look at a wide range of budgeting support. We need to make sure that budgeting advice and support is available for those who need it in order to help them manage the change.
We also need to consider those exceptional circumstances where more frequent payments will be required. To pick up the point made by the noble Baroness, Lady Campbell, people with mental health problems are an example of a group that may need an exceptional service. To pick up the point made by the noble Earl, Lord Listowel, where there is proven abuse or risk to other members of the family, one would have to look at the payment arrangements.
If you separate assessment from payment, the monthly assessment is intended to reduce the burden on claimants and reduce the risk of overpayments compared with a system where benefits are reassessed on a weekly basis, so there is a separation between the assessment period and the payment period. To pick up a question from my noble friend Lord Kirkwood on the impact assessment—
Baroness Hayter of Kentish Town
Some of my comments will not be appreciated but I thank the Minister for his response. Clearly, I have not received the same response as did my noble friend Lady Lister. I will take it back and think about it. She does not know when she is ahead. However, I am afraid that I have to express some regret. A lot of us have done a lot of work in preparing for the Bill although I am sure that we have done much less than the Minister. I blame my noble friend Lady Sherlock in that when I asked her what I should do she advised me to read everything that was said in the Commons. I thank her for that. What I found again and again were promises from Ministers in the other House that by the time the Bill reached Committee stage there the relevant information would be available. Again and again I am afraid I read that our friends in the other place found that that was not the case. They nevertheless were given absolute assurances that the relevant information would be available before the Bill reached Committee stage in this place. To have something published today concerning a debate that is taking place today is simply not good enough. We cannot work that way; “before” ought to mean before. Anything that is relevant to what we are talking about should be with us in time to enable us to read it and think about it.
I welcome the remarks about our being involved in the debates about how this process is going to work. I think that those remarks were probably genuine. However, that means that we have to have the relevant information available, especially as we are trying to discuss the Bill without a wonderful array of staff to help us.
I also regret the remarks about ESA, maternity allowance and earnings. The women who will be getting this who have been in work may simply not qualify for a statutory payment because they have changed employers. However, they could well have been working full time before that. In that sense it is not a benefit but something that they earned and are entitled to. Therefore, to treat it as unearned income—as if a sugar daddy had given it to them—would not be the right approach. It has been earned, albeit in a different way.
Similarly, the Minister did not respond to the question of whether ESA affected the self-employed. They are another group of people who have paid contributions into a system. If they then discover that what they get when they are possibly very seriously ill with cancer is seen not as something that they have earned but something from a very kindly Government, that will not be the right way to ensure that people see the system as enabling them to get something for what they have put in, which is what many of us want. I am sorry about that and I hope that, even if the Minister does not respond orally now, he will think about those groups of people, and in particular about women whose circumstances may have changed and who may have moved to a better job. On the whole it is young women who get pregnant. They may be moving up in a career and may have moved to a different employer and therefore may not qualify.
I have two further brief points. We are obviously delighted about any monitoring and assessment. If there is to be no formal review, I will have to accept that that is the best way of doing it. Nevertheless, it would be very nice if the Minister or his successor will bring those reports to the House, where they can be debated in the same way as we are able to now.
Finally, I accept that the Minister may not want to set a target rate for a taper. He said that perhaps 65 per cent was too high but that a future Government could perhaps do something about it. I look forward to sitting next to my noble friend Lord McKenzie when he is the Minister in a future Government—
Baroness Hayter of Kentish Town
—and can announce a different taper rate. With those comments, I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(12 years, 10 months ago)
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Lord McKenzie of Luton
My Lords, Amendment 2 seeks to attach a clear but succinct purpose to the universal credit; that is,
“to support work for those who can and provide security for those who cannot”.
Much of the focus of our discussion about the universal credit is on the former, helping people into work and closer to the labour market, but there is an obligation also to help those individuals and families for whom work is, for one reason or another, not currently reasonably practicable. We subscribe to the view of the importance of work in helping people out of poverty, in the development of their self-esteem and, as per Waddell and Burton, as being generally good for their health. This has the potential to translate at the macro level to the prospect of lower benefit costs, higher taxes and national insurance and, other things being equal, higher growth. That approach characterised the reforms, which I will call welfare reforms notwithstanding our discussion last Tuesday, of the previous Government and this Bill is a significant development of that trend. Of course, the Minister has been present in both of them.
Contrary to popular belief, it might be contended that receiving financial support from the state when unemployed and unable to work is harder now than at any time for 60 years—that is certainly the view of the Child Poverty Action Group—because the eligibility criteria for benefits have been heightened, benefits are more conditional on actively seeking work and there are tougher sanctions for non-compliance. Some of this happened on our watch as a Government and universal credit provisions go further and, in some respects, too far. We will discuss this when dealing with later clauses, but we support the concept of good and clear work incentives. We also support the requirement for those who can work to meet their obligations. There are some who need to rely on benefits and who do not lack the motivation to work, who see the benefits of work even with existing incentives. As we go through the Bill, we will seek to test that the new universal credit works for them also. These include those with caring responsibilities and health conditions, but also those who simply cannot get a job, be they from Bombardier, BAE systems, or, indeed, anywhere else.
It is worth reminding ourselves of what has gone before. If we look at the recent history of welfare reform, the Welfare Reform Act 2007 introduced the employment and support allowance and the personal capability test; the report of the noble Lord, Lord Freud, focused on the large-scale marketisation of employment services; in 2008 we saw the employment and support allowance introduced; we saw lone parents move off income support and onto jobseeker’s allowance and flexible New Deal pilots introduced to replace the New Deal 18-24 and New Deal 25+. The Welfare Reform Act 2009 established a structure for the future abolition of income support, the progression to work conditions for lone parents and partners of unemployed people, and the extension of work-related activity for employment and support allowance recipients. So hitherto an increasingly active regime has been developed. As I say, we support the concept of good and clear work incentives. We also support requirements for people to meet their obligations.
Of course, the “work first” approach is not the only model of support that countries have adopted. The “human capital development” approach would be claimed by some to be a more effective approach. The Minister often talks about universal credit as engendering a cultural change in attitudes towards work, and that is fine, but he will be aware that in some countries benefit conditionality is also being used to leverage non-employment related outcomes, such as health outcomes and child welfare outcomes. This happens in the US and Australia in particular. I understand that the Secretary of State has recently been on a trip down under. We see speculation in the press that Ministers are turning their minds to benefit sanctions, as the noble Lord, Lord Kirkwood, said on Tuesday, to address a range of other problems. Can we have some clarity on this today, and will the Minister confirm that there are no plans or intent to follow the Australian path and use conditionality for anything other than employment-related outcomes?
It would be extremely helpful when Ministers, including the Prime Minister, are discussing changes to conditionality that they do so in a measured way to avoid creating the impression that everyone on benefits is seeking to avoid work. In his speech to the Conservative Party conference, the Prime Minister said:
“For years you’ve been conned by governments. To keep the unemployment figures down, they’ve parked as many people as possible on the sick. Two and a half million, to be exact. Not officially unemployed, but claiming welfare, no questions asked”.
Nobody who has any knowledge of the benefits system could reasonably accept that as a fair representation of the situation in recent years. When we left Committee on Tuesday last week, there was a headline in the Evening Standard saying that people would have to travel for up to 90 minutes to take up work. Can the Minister say how conditionality is to be amended in this way? If everyone is to be better off in work, will this be before or after travel costs?
Of course, the universal credit is being developed in a period of rising unemployment. I do not propose to open the wider challenge to the Government on their growth strategy this afternoon, although we may drift into that, but we should use this opportunity to seek to understand how the “work first” approach of universal credit is being complemented by the work programme—the “black box approach”, which I believe is entirely appropriate.
Perhaps the Minister would take this opportunity to update us on the programme, particularly as we understand that providers are being sworn to secrecy about how it is all going. In the interests of transparency, perhaps the Minister could tell us directly how many individuals have been referred to the work programme to date, clarifying which of the eight categories they fall into. Can he also tell us a little about how the WCA and the role of Atos Healthcare are feeding into all of this? We are aware of the improvements to the WCA and Professor Harrington’s ongoing work. However, is it right that individuals are being referred to the work programme if the prognosis is that they will be fit for work in three months? Are we comfortable that the precision of “fit to work” within three months, six months or any other time period is within the competency of those making the assessment?
If this benefit is to work, it must work for all—this is very important. It must be free from stigma, and it must work in a fair yet firm way. I beg to move.
Baroness Wilkins
My Lords, I support the amendment, especially to say that it should benefit everybody. The simplification of benefits and plans to taper income to ensure disabled people who can work retain more of their income has been welcomed. However, there is very deep concern in the disability community that while some disabled people will gain under the universal credit, many will be made considerably worse off. In its current form, the Bill will dramatically increase disability poverty and leave many thousands of families lacking essential support.
At the moment, a disabled person receiving middle-rate disability living allowance who is found fit for work is eligible for the severe disability premium of £55 a week, whether they are working or not and if they live alone and do not have a carer. They may also be eligible in some circumstances for the disability premium of £29 per week as a single person and £41 per week for a couple, as well as the disability element of working tax credit, which is about £50 per week if they work for at least 16 hours per week. It is not unusual for someone to be eligible for middle-rate care, but to be found fit for work. For instance, it would apply to me because I can self-propel my manual wheelchair for 50 metres. Similarly, someone who is severely visually impaired from birth is quite likely to receive middle-rate care, but be found fit for work.
However, under the universal credit, the gateway for extra support for disability will not be through DLA—or in future PIP—it will be through the work capability assessment conducted by Atos for the employment and support allowance. Under the universal credit system, unless a disabled person is put in the work-related activity group or the support group, they will get no more extra help than someone who is not disabled. These people are still disabled. They still face all the extra costs of disability not met by DLA; for instance, the need for extra help with housework, extra heating, extra laundry, help with the garden if they are lucky enough to have one. We also know that disabled people are more likely to have lower earning power and to be unable to work full-time. Let us face it, in the current economic climate, few employers are going to choose to employ disabled people over the non-disabled, and yet those people are going to lose any extra help because the universal credit will be based on the extremely flawed Atos assessment.
Noble Lords will no doubt have been inundated with e-mails and letters about this as I have, demonstrating that Atos is routinely failing to identify disabled people’s needs. I am sure the Minister will remember from his visit last week to Hammersmith and Fulham Action on Disability a young woman with mental health difficulties. She had spent six years struggling to find help. She finally managed to get therapy about six months ago, and has been progressing well when she innocently attended her Atos assessment, not realising what she was up against. Atos found her fit for work. All her benefits were stopped as of last Friday and her mental state has been set back by months. She is now in debt for the first time and she is distraught.
I know the Minister is very concerned about disabled people’s fears. As he said on Second Reading:
“The most disturbing thing that I heard today was the concerns of many noble Lords about the anxiety of disabled people”. [Official Report, 13/09/11; col. 737.]
The noble Baronesses, Lady Murphy and Lady Gale, talked about how people were terrified or petrified, and that worries me more than anything I have heard. However, those fears are very justified unless this Bill is amended. I know we will come back to this many times during the course of the Committee, but will the Minister say what steps he is taking to ensure that disabled people’s fears are met? Is he considering the proposals by the Disability Benefits Consortium, for instance, to retain the severe disability premium? Does he recognise that the universal credit risks oversimplifying needs by providing for only one disregard which ignores some disabled people’s multiple levels of disadvantage? I hope he will reconsider.
Lord McKenzie of Luton
I thank the Minister for that detailed reply. Of course I will be withdrawing the amendment. I thank all noble Lords who have spoken in favour of it and even the noble Lord, Lord Newton, for occasionally being a loyalist. It would be helpful if he did not do it too often on my amendments. We will return in some detail to a lot of the issues that the amendment touches on over the weeks, if not months, ahead. I also accept that the precise wording of the amendment could be subject to challenge. If someone wants to offer an alternative, I am happy with that. It is an attempt to put something in which is trying to be indicative of what the universal credit is about, with the focus not only on work but also on support for those who are not opposed to moving closer to the labour market and, as the noble Lord, Lord Wigley, pointed out, for those who are very keen to get back into the labour market, but for whom there are no jobs.
A common feature of many noble Lords who contributed to the debate is about the WCA and concerns over how it is being used in the universal credit for access to the disability additions. I also raise the point about how I understand that it is being used in relation to the work programme. If there are concerns about how Atos is making assessments on whether somebody is fit for work, in the work-related activity group or the support group and is struggling to do that on a basis that people find acceptable, then the added precision that apparently it is being asked to provide about whether that person is going to be fit for work in three months or six months, which drives how some of them will enter the work programme, seems to me another dimension to what it is being asked to do and therefore somewhat worrying.
When we had a briefing from officials, I asked whether any of the appeals that had taken place were around that prognosis rather than the designation that was temporarily being visited on somebody. I am not quite sure what the answer to that is. If the work programme is a key part of helping people into work, which we agree is the intention of universal credit, how Atos or the work capability assessment features in that is of some importance. The noble Baroness, Lady Campbell, raised the concern that the current assessment processes have not been co-produced. We share some of the thinking about how the WCA has been developed. It was introduced under our legislation. A lot of effort went into focusing on it, just like the effort that is going into the assessment of DLA and PIP. But when it came to the practice of it, it turned out to be quite different. I accept that it is an evolving situation, but one can understand the fear that has been expressed today and how it represents the views of disabled people more generally about how this is featuring and working in the universal credit.
The Minister did not respond to the questions around the work programme. Would he like to do that now and give us an update on how it is progressing? That is particularly important at this juncture. The previous programmes we have talked about—my noble friend Lady Hollis mentioned some of their origins—by and large were developed in an economically vibrant situation where unemployment was reducing. We are not in that environment now.
Lord Freud
I can tell noble Lords that, regrettably, at this stage it is very early days. The noble Lord will be aware that it was launched on 10 June. I do not have any meaningful data to supply him. I am not sure when I will have some, but when I do, I will let the Committee know.
Lord McKenzie of Luton
Might I ask the Minister to use his best endeavours to see that we get that data soon?
Lord McKenzie of Luton
Perhaps I can press on one or two other matters. I was interested in the noble Lord’s response about conditionality being associated with work-related activity. I accept the assurance that in respect of this Bill, that is what the focus is, but am I right in getting the hint that there may be some wider plans following this Bill where that conditionality might be applied more generally, not just in a work-related context? Perhaps the Minister would like to say something more about that.
Lord Freud
I have no information on any plans in that area at present. This Bill is about conditionality for employment purposes, and I have no information on any other such plans.
Lord McKenzie of Luton
Perhaps the Minister will let us have some information as soon as it is available to him. We are going to return to many of these issues in our further deliberations on this Bill.
The issue of travel costs has been released. Perhaps the Minister might reflect on the assertion that people should now be prepared to routinely travel an hour and a half each way to take up possibly low-paid work and how that fits with someone being better off in work if the costs of that travel are not covered or dealt with in some way.
We also had a bit of an historical debate about what various Governments did. My noble friend Lady Hollis was very clear about what happened on our watch, and as I said, the Minister was involved in some of that. I accept the assertion of the noble Lord, Lord Newton, that under his watch he did not just sit there and let the number of people on incapacity benefit accumulate. On that basis we should be in agreement that the Prime Minister’s statement was wholly misleading. It is a political point, and noble Lords may think it is a cheap political point, but it matters when the most senior politician in the land is happy to use language and examples that are simply not true. The impact of this is to stigmatise people on benefits, and we should be deeply worried about that.
Lord Freud
Let me just make it absolutely clear what the Prime Minister was saying in the slightly more technical language that we understand in this Committee. The Prime Minister was making the point that we had created a series of inactive benefits onto which people were put and then left without any route back into the workplace. That was a dereliction of duty by Government. Our understanding has now transformed. We know that work is part of the solution for people with disabilities, not part of the problem. A key thing that we are trying to do in this Bill is to integrate the work process for people, whether they have disabilities—whoever they are. That is what the Prime Minister was saying. We are making an enormous effort to get people back into the workforce, and we are spending a lot of money—up to £14,000—on the people who are hardest to help, many of whom will have a disability. Underneath the political rhetoric, I think all noble Lords would agree with that sentiment.
Lord Freud
I think we had the discussion about Remploy yesterday, and I will not go on about it again today.
Lord McKenzie of Luton
My Lords, I would just remark that if that is what the Prime Minister was intending to say, his usual high command of the English language eluded him on that occasion. My noble friend Baroness Wilkins emphasised the fear that people have about this process and about the WCA. My noble friend Lady Hollis was quite right to refer to carers. In fact, my shorthand amendment was meant to encompass that and I entirely accept the point. I am increasingly concerned about the impact of this on young carers as well. The noble Lord, Lord Wigley, referred to support for work. He is right, it should not only be about supporting people linked to the labour market. It is a question of how we are going to increase growth and create jobs as well, which is a much wider debate.
My noble friend Lord Beecham made reference to the housing benefit changes and the impact that those will have on labour mobility. I think that the noble Lord referred to people not losing out from universal credit. When you look at the impact of universal credit and some other measures in the Bill, particularly the benefit cap and housing changes, I am not sure that that assertion would necessarily hold true. Having had a good start to proceedings today, we will revisit many of these issues.
The Earl of Listowel
I apologise for coming a little late to this debate, but there is an important point on which I would like some clarification. The Minister in his response said that we are trying to move from a complex system to a simpler one. That resonates with me, having listened to what Professor Eileen Munro has been trying to do with social work, where there was a very complex, bureaucratic system and they have tried to move to a more simple system. But they have discovered that the professional judgment of people at the front line becomes particularly important. The way they use their discretion becomes much more important, and listening to the noble Baronesses, Lady Wilkins and Lady Campbell, and the way in which some of these complex cases are being dealt with by people at the front line reminded me of what my noble friend Lady Meacher said about the importance of training people who work on the front line. It perhaps also reinforces the point I have made in the past about making the culture of the organisation in which people work sensitive to the needs of those who may be mentally ill or vulnerable, and who may respond very poorly to people who seem to be persecuting them in the way they are pursuing them. Have I understood that correctly or is the Minister referring to a different paradigm?
Lord McKenzie of Luton
I think we would all support the concept of a system that was simpler and more readily understood. It helps with take-up, which is the point that the Minister made; we accept that. As we go through the Bill we will examine in fact how simple we can make the system. People have complex and sometimes very chaotic lives. How easy it is to distil those issues into a very simple system and still maintain fairness is one of the challenges we face as we go through the Bill. I readily accept the need to provide full support for people, particularly those at the front line. In a sense, we have an interesting situation in which the work programme, the “black box” approach, gives a lot of discretion in that respect to those working at the front line, but at the same time we have a universal benefit which is more constrained and potentially more restricted. Having said all that, it is probably time to withdraw the amendment, at least for the moment.
Lord Wigley
My Lords, I hope I will not distress my noble friend Lord Foulkes unduly by supporting what he said. I preface my remarks by supposing that there will not have been the studies in the National Assembly in Cardiff that he was calling for in Edinburgh, but I will not castigate the Labour regime in Cardiff for not undertaking such studies. The point, however, is a material one. In the eight months that I have had the opportunity to speak in your Lordships’ House, I have realised that in many Bills—I think of the Police Reform and Social Responsibility Bill, the Localism Bill and the Public Bodies Bill—there are implications for the devolved Administrations as a result of changes in legislation here that do not always become apparent on first appearance.
In the context of the knock-on effects of this Bill, there will most certainly be implications for the housing sector because most of the responsibility for housing rests with the National Assembly, but housing benefit does not, and there is going to be interplay. There will be an impact in the realm of carers. The initiatives taken in Wales have not been quite as radical as some of the ones taken in Scotland, but none the less there is a bearing if the state takes certain responsibilities in Scotland, Wales and Northern Ireland that are not undertaken in England with regard to the support that is given. There has to be at least an understanding of how those two factors may work.
With regard to the opportunity for work and training, again responsibility will lie with the devolved Administrations. There needs to be an approach across government to legislation that is going through Westminster in general to take on board the knock-on effects. There needs to be a systematic approach to co-ordinating them. It may well be that your Lordships’ Chamber has a role to play in that.
The system of devolution that we have is unbalanced. I can well understand that that causes difficulties for those who are framing legislation in London when the interpretation and the interactions will be different from area to area. What has also become apparent to me is that in the context of matters that are totally non-devolved, there is still an implication for the National Assembly, and that in matters that are totally devolved, there is an implication here, from cross-border issues, from consequences of the Barnett formula and so on, where there is an interplay. Therefore in both areas one cannot just assume that there is a sealed border and there should not be a discussion.
I would have hoped that, in raising the issue at this stage—and it could be raised at any stage going through this Bill—there will be the approach of thinking “is there going to be any direct bearing with regard to the legislatures in Scotland, Wales and Northern Ireland?” If so, these can then be built in and assurances given at the appropriate time that they will be taken on board. That would be helpful for the progress of the Committee.
Lord McKenzie of Luton
I thank my noble friend Lord Foulkes for picking up the baton from the noble Lord, Lord Kirkwood, so that we have the chance to have the explanation of the points that were put by my noble friend and by the noble Lord, Lord Wigley. Doubtless the Minister will be able to tell us what consultation and engagement has taken place, but I think that the request is that it is not simply done at some formal stage, perhaps when policy is being formulated, but that we consider it as an integral part of our consideration of this Bill. If we can get nothing other than that from this amendment it will have been worthwhile preserving it for our brief debate.
Lord Freud
My Lords, I will deal with Amendment 3, which is the one noble Lords have concentrated on. Amendment 3 would introduce a requirement to consult the devolved Administrations before the introduction of universal credit. I must point out that social security is a reserved matter in Great Britain but the implementation of universal credit will have an impact on some matters of policy which are devolved, for example, housing, skills provision and childcare. For that reason, we are working closely with the devolved Administrations on the implementation of measures in the Bill and will continue to do so to ensure that the introduction of universal credit goes smoothly.
We have been discussing aspects of the Bill since well before its introduction during the latter part of 2010. The Secretary of State and I have had a number of meetings with Ministers in the devolved Administrations. A formal role has also been established for the Scottish, Welsh and Northern Irish Governments and for the Scottish and Welsh local authority associations on the universal credit senior stakeholder board. We have a concordat between DWP and the Scottish Government that sets out the commitment on communication and consultation; indeed, the Secretary of State met Scottish Ministers most recently a fortnight ago. I therefore hope that noble Lords will be reassured with regard to the concerns they have expressed. We are addressing these issues, we are consulting thoroughly, and on that basis—
Lord McKenzie of Luton
My Lords, I am not quite sure what was in the mind of the noble Lord, Lord Kirkwood, when he drafted the amendment. He may want to take the opportunity to enlighten us. But looking at the distinction between “awarded” and “paid”, our attention was drawn in particular to Schedule 1, paragraph 6. This paragraph enables an award of universal credit to be paid in whole or in part by means of provision of a voucher. Perhaps the Minister could expand on the intention behind this paragraph, and on the circumstances in which it might apply. I am aware, of course, that there are existing programmes where vouchers are used: in health, for example, for specs and contact lenses and for the Healthy Start food initiative. I know that the Minister has turned his mind to vouchers in the past. I think it was in connection with the sanctions regime on an earlier piece of legislation we were debating. Does this provision herald a new approach, or does it simply look to replicate existing arrangements? If so, what are they? I beg to move.
Lord Freud
My Lords, regarding the reference to vouchers in paragraph 6 that the noble Lord, Lord McKenzie, picked up—very sharp-eyed, as I would expect—we are looking at an option of paying childcare through vouchers. It is similar to some of the ways currently used by employers. It allows the flexibility of a parallel system with the employer system. I have to tell noble Lords that it is not the approach we are expecting to use. It is very much an option, but as I intimated earlier, we will announce our childcare proposals very soon.
On the voucher system, we have used the term “award” here because it is widely used across social security legislation and therefore makes a link to other legislation that provides for claims, payments and appeals. Changing the word would remove those links and require major changes in legislation across the piece. For that reason I ask for the amendment to be withdrawn.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for that explanation. I have no particular problem with the term “award”: it was just the passing reference to the use of vouchers. I took it from the Minister’s reply that it is only in relation to childcare that this is to be developed, and that does not look as though it is the front runner. We will know that soon. The only plea I would make is that if we go down the path of vouchers, we should do so sensitively. The prospect of stigmatising people who access facilities by paying cash or providing a DWP voucher has significant ramifications. It appears from what the Minister says that we will not have to face that in practice. On that basis, I beg leave to withdraw the amendment.
Lord Skelmersdale
My Lords, we have heard an enormous amount of words, some of them very persuasive, for this amendment. But I find myself remarkably schizophrenic about the whole thing. The noble Baroness, Lady Turner, put her finger on at least half my schizophrenia.
Universal credit is a cash sum. You get it in your bank account, through your giro, from the post office or wherever. Council tax benefit is exactly the opposite. It is a discount; you do not see the money. Therefore, I can see that it ought to be treated in a totally different way from universal credit. On the other hand, you cannot live in a house without paying council tax. This is where my schizophrenia comes in. From your lump sum of universal credit, you are going to pay your rent, and so on, but you have the likelihood of outgoings and you cannot from those outgoings separate out the council tax that you are also going to pay. I wonder whether my noble friend Lord Freud can solve this great dilemma that I have.
Lord McKenzie of Luton
My Lords, I will speak briefly on this issue in support of the amendment proposed by my noble friend Lady Hollis and the exceptionally powerful case made by her and by pretty much every other the noble Lord who has spoken on the issue. The noble Lord, Lord Skelmersdale, raised an interesting point about how you would extract the payment. My noble friend Lady Turner asked whether it was a rebate, a discount or quite what it was.
I recollect that she pressed us in Government on behalf of the Royal British Legion, who were campaigning to have the term rebate replacing the benefit. We all signed up to that at the time. I am not quite sure what progress was made. I think that it went to local authorities. However, I remember that there was a potential price tag of tens of millions of pounds to local authorities just for that one system change. These are not inexpensive projects that we are dealing with. I cannot believe that this is what the noble Lord or the DWP want. The noble Lord is an exceptionally logical person. He analyses things. The scale of the problems that the localisation of council tax would bring seems to me to be totally out of kilter with all of the work and analysis that has gone on in producing plans for the universal credit. As everyone has said, it undermines the universal credit—the benefits of the single taper in particular. With all the raft of issues about how people would understand what their position was, the simplicity of the system would fall away.
We had a meeting with officials. As ever they were very helpful. We explored this issue a little bit. My understanding is that it was not until March of this year that the department started to contact local authorities to get their minds around how it would work. To produce something in a Bill and develop a policy on an assumption that this component can be dealt with separately without any clear knowledge as to how that will work in practice seems unusually foolhardy. Again, I cannot believe that the Minister believes that this is the best way forward. There are lots of practical issues. We know lots of local authorities will have outsourced their arrangements in respect of housing and council tax benefits. You would have to break the costs involved in the multiplicity of contracts. I do not know if the Minister has any idea of what would be involved in that exercise.
What we are seeing here is what we have seen in the Localism Bill writ large. There have been a lot of instances where the Government and the Secretary of State have said that they want to devolve power and give more freedoms to local authorities, but have then realised the consequences and drawn those back with all sorts of regulation powers, which, as my noble friend Lady Hollis said, would have to be there if you were going to make any sort of sense of this proposal to have any sort of understanding of whether it is regional systems, which are common.
There is another component as well. It relates to the cut in the total amount available. I agree with the noble Lord, Lord German, that in a sense there are two issues: the financing and what cash sum is available, and how it should be dealt with. This Government have a record of imposing on local authorities and getting them to take the pain, the heat and the difficult decisions, and seeking to walk away scot free. We will see and debate what is going to happen with the social fund. That is another example—no duties on local authorities and no ring-fenced funding from it.
My noble friend Lady Hollis made a telling point. If our understanding is correct—and the Minister will doubtless confirm this—this is switching AME to DEL, the reverse of what I think the Minister himself negotiated so effectively when he was dealing with work programmes. It does not make any sense. I know that the Minister has to do his job. We have all been in the position of defending the indefensible before. However, I cannot believe that it is going to end up as currently proposed because it would seriously undermine the universal credit and all the good work that the Government are trying to do on that.
Lord Freud
My Lords, I am grateful to noble Lords for raising this series of amendments. Clearly a point of real substance has been discussed this afternoon. The group of amendments would have the effect of incorporating help with council tax for those on low incomes into universal credit and state pension credit.
Noble Lords will be aware that we are proposing to abolish council tax benefit and replace it with localised schemes of support to be set up and run by local authorities. The Department for Communities and Local Government is currently consulting on proposals for local schemes in England, as a number of noble Lords have pointed out. This approach will allow local authorities, who determine and administer this tax, to have a say in how the burden of paying for services is shared across their local community, taking account of local priorities.
The Government’s approach addresses concerns that have often been expressed about the complexity of council tax benefit and, particularly, that council tax support should not be part of the social security system at all. Nevertheless, in localising support, we need to ensure that the improved work incentives that universal credit will bring are not undermined in any way. We believe that the key principles required to incentivise work can be delivered through local schemes and therefore that localisation is the right approach.
Lord McKenzie of Luton
My Lords, this is a probing amendment, which would delete subsection (2), which states:
“Regulations may specify circumstances in which a member of a couple may make a claim as a single person”.
As I say, it is a probing amendment to seek some clarity as to the likely scope of such regulations. I accept that the Notes to the Bill refer to circumstances where one member of a couple does not have the right to reside in the UK and is not entitled, so the other member will be able to make a claim as a single person. My question is: what other circumstances might be envisaged? It is understood from the notes circulated that further work is ongoing in this regard, but perhaps the Minister can help us with the following questions. When, for example, a couple are in the process of separation or divorce, will they be treated as being a couple or two individuals? Under what circumstances will members of a couple be legally entitled to live separately and receive universal credit independently of each other? In particular, will there be any scope for individuals who are in an abusive relationship to receive universal credit independently of their partner?
These sorts of issues highlight how convoluted some people’s lives can be. There are circumstances where, under existing provisions, people are treated as no longer being a couple: for example, if either or both is in custody, has been released on temporary licence from prison or is a compulsory inpatient detained in hospital under mental health provisions. Those sorts of arrangements exist at the moment. Are they going to be built in to universal credit? In what other circumstances might a member of a couple claim as an individual? I beg to move.
Lord Freud
My Lords, to summarise, the general principle is that a couple should make a joint claim for universal credit to ensure that both members of the couple take responsibility for the claim and obtain support to find work, where appropriate. This principle is already established in jobseeker’s allowance for joint claims, and we are extending it to universal credit, so that both members of a couple will have equal opportunity to access the support.
As explained in the briefing material sent to Peers last week, there will be a fairly limited range of circumstances in which only one member of a couple is eligible for universal credit, such as the example that the noble Lord, Lord McKenzie, raised where a claimant’s partner is a person from abroad who has no right to reside here. However, there are other circumstances, such as when people are students and so forth, when they will not be eligible for benefit support.
This amendment would remove our ability to make these exemptions. I understand that it is a probing amendment implying a series of questions. We are currently developing detailed regulations on this. There is no intention to change some of the existing protections—the noble Lord mentioned people in custody and people detained in hospital. In the work we are doing, as we build a coherent single system, it is fascinating to see how many different definitions of the same thing there are scattered through the current system. One thing we are doing is trying to get a consistent definition. We have four meanings of the word “work”—or is it five? When you are writing a computer program in code, that kind of thing needs to be precise.
We are going to have to get the timing of when people separate and all that precisely right, and that is work in progress. We are aware of the issue. It is being addressed, and it will be much more coherent than it has been in the past for that reason. Therefore, I ask the noble Lord to withdraw this helpful probing amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that information. I am going to have to allocate a bit more of the weekend to catching up on all the briefing material that we have. I understand that there is no basic intent to change the current provisions. I am interested in the range of different definitions. The next group of amendments will touch on that a little as well. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I shall speak also to the other amendments in this group. Amendment 17 would make the minimum age for universal credit 16 rather than 18. This issue was raised in the other place but, despite assurances, we continue to hold the view that this matter should be reflected in primary legislation. Currently 16 and 17 year-olds are able to claim means-tested benefits if they are in a vulnerable group. Such groups include lone parents, carers, those estranged from parents and those with limited capability for work. They can claim JSA if they would otherwise face severe hardship. Housing benefit can be claimed to meet liability for rent, and they can claim working tax credit if they are responsible for a child or a have a disability.
There are two points that I wish to pursue with this first amendment. Given that there is a bit of a patchwork at the moment with separate benefits, can the Minister put on record what the rules will be under universal credit for 16 and 17 year-olds? Will all the strands of support available via one benefit or another under the existing patchwork of benefits and credits be available in universal credit, and what conditionality will apply? Why not at least encapsulate in primary legislation the prospect of 16 and 17 year-olds accessing universal credit? We accept that Clause 4(2) provides a route for overriding the provisions of Clause 4(1)(a), as does Clause 4(3), but why not have it the other way round and set the 16 and 17 year-old ages in primary legislation?
Amendment 18 is a probe, the purpose of which is to understand other circumstances in which regulations may provide for exceptions to the requirement to meet any of the basic conditions. Can the Minister help us on this? He may again say that this is buried in the mass of notes and draft regs that we have had delivered to us this week. If he does, we will catch up with him soon. Let us get it on the record here. Are there any parallel easements in current benefit and credit provisions that are not being carried forward?
Amendment 19 similarly probes the circumstances in which it is expected that the regulations in Clause 4(5) will be used. Current benefit provisions cover a range of conditions—namely, presently resident and ordinarily resident—and the basic conditions for universal credit require somebody to be in Great Britain. Will the Minister explain why this formulation has been adopted? What, if any, are the EU ramifications of this formulation? The UK has a number of social security treaties. Will they automatically cover universal credit or will there be a need for some renegotiation or changes to those treaties?
Finally, Amendment 20 is a probe to understand what the regulations may say about who is receiving education and who is not, and therefore who is entitled to universal credit and who is not. It is quite right that most students should rely on income from student support, family or work, but I hope that the Government will not remove entitlement from groups that currently have it. This is what the amendment seeks to put in the Bill. This is an example of where there are different rules for different benefits. Perhaps the Minister will accept that universal credit should be available for students who are parents, lone or otherwise; individual single foster parents; those who have disabilities or are vulnerable and therefore qualify because they are young or living away from parents through difficult circumstances or were previously in local authority care; and those who are refugees studying English. I think those are the current types of arrangements which enable benefits to be accessed. Perhaps the Minister can say the extent to which these will be replicated under the new system. I beg to move.
Lord Freud
My Lords, Amendments 18 and 19 seek to amend the basic conditions of entitlement to universal credit and would in effect limit our ability to provide for exceptions to those conditions. Amendment 20 would create a new regulation-making power to set out circumstances in which certain groups are to be treated as not receiving education: specifically, young people, parents and disabled students. Clause 4 sets out the basic conditions that must be met in order to be entitled to universal credit. These basic conditions are designed to be simple and easily understood, fitting together with the support for people in education and for older people through state pension credit. However, as I am sure noble Lords will agree, there are always exceptions to the general rule, and it has never been our intention that these basic conditions will be so prescriptive as to prevent certain groups of people being entitled to universal credit. In that sense, we are entirely in accordance with the sentiments just expressed by the noble Lord, Lord McAvoy.
Amendment 17 seeks to make universal credit adopt the principle that entitlement to support begins at 16 rather than at 18. We intend to maintain the current rules where 18 is the minimum age. This is consistent with the approach taken by the previous Administration, and we see no reason to change it. Equally, however, there are circumstances where people aged 16 or 17 should be entitled to universal credit in their own right. This includes people with responsibility for a child, disabled people and people estranged from their parents. Sixteen and 17 year-olds should be in education or training and not living on benefits. If we were to set the lower age limit to 16, we would send the wrong message to young people and their parents about the value of education and the strength of the family unit.
We will continue to support young people who find themselves in straitened and difficult circumstances through leaving care, family break-up or whatever, at the age of 16. We are not planning to change the rules for care leavers in any way. However, as a result of the last Government’s Children (Leaving Care) Act, care leavers cannot usually claim benefits until the age of 18. That is why the Bill makes provision in subsection (3) of this clause, and why I do not think that the amendment is necessary.
Amendment 18 seeks to remove the regulation-making powers that will allow us to provide for exceptions to the basic conditions. While we would still be able to specify some of them through other subsections of the clause, the amendment would limit our ability to make provision in all cases. I am sure that noble Lords will appreciate the importance of flexibility in these matters. The power can in any event be used only to extend eligibility, not restrict it.
Amendment 19 would remove subsection (5), which allows us to make regulations in respect of residence and presence. We have been clear that migrants will generally be able to claim universal credit only if they have a right to reside here and are habitually resident. This position has not changed—and was reiterated by the Secretary of State and Minister for Employment just last week. In the tough financial conditions we currently face, it is particularly important that UK taxpayers should not have to subsidise people with very tenuous links to this country. “In Great Britain” is the same formulation as in the primary legislation for income support. Nothing sinister is implied by the wording.
On the question of the noble Lord, Lord McKenzie, about the EU ramifications, we do not expect to have to renegotiate social security treaties, although he will be aware that there is considerable movement currently going on about export of benefits, which we are concerned about. Removing the powers in this subsection would also prevent us providing for circumstances in which a person can be treated as being in Great Britain although they are temporarily absent. Current provisions allow us, for example, to pay benefits to people who may have gone abroad for a short period of time to receive medical treatment for themselves or their children. They also, in the case of tax credits, ensure that service personnel and their families are not prevented from claiming because they have been posted overseas. We want to replicate this position within universal credit. The amendment would prevent us doing that. This is a valuable thing for us to be able to do: I am sure that that is not a contentious claim to make in this Committee.
Amendment 20 would require the Secretary of State to specify the circumstances in which certain groups will not be treated as receiving education. There is a long-standing principle that in general the benefits system should not be a source of financial support for those within the education system. Young people are primarily the responsibility of their parents until they leave school. Students in higher education have access to a comprehensive system of student loans and grants. However, there have always been exceptions to the general rule and, as the Minister for Employment made clear during debate in the other place—and I am happy to repeat here—the current boundaries that exist in relation to income-related benefits will not be redrawn.
We do not wish to widen the extent of support for those in education. Nor do we intend to remove support from those groups of young people and students who currently receive it under the current system, such as lone parents, disabled students and youngsters in non-advanced education who are living independently. The powers we need to do this are already contained in subsections (2) and (6)(b) of the clause. We do not need to make the extra provision that this amendment would provide.
I apologise if that was a lengthy summary of our position. I need to track back a little bit because I may have inadvertently misled noble Lords on the point of support for care leavers. I want to make absolutely clear with regard to care leavers that our support is constrained by the previous Government’s Children (Leaving Care) Act, which starts the clock for them at 18. I think that I inadvertently said 16 earlier and want to make sure that that is absolutely clear and on the record. With that explanation and assurance, I urge the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that explanation. As I hope I explained, these were probing amendments to get answers on the record.
I shall follow up on two points. On Amendment 17 concerning16 and 17 year-olds, there are currently different rules for different benefits. There is the JSA rule and rules for other means-tested benefits. For the latter, you must be in a vulnerable group: for JSA, you must be facing severe hardship. Given that we end up with just one benefit, universal credit—plus a bit of council tax—will all the easements for 16 and 17 year-olds be reflected in the universal credit, or only some of them? As I understand it—I am not sure that I have my mind fully round this—there is currently a patchwork of provision, and it is a question of seeing whether that is brought forward in its totality.
That is the first question. I will pose a second one as I see that the team are working hard at the back there. In relation to definitions around residence, I think that the noble Lord said that “in Great Britain” is used for income support. Certainly, the text that I have is that you must satisfy the “habitual residence” and “right to reside” tests and be “present in Great Britain”. I accept that there is nothing sinister in it, but I am trying to understand what “in Great Britain” actually means. Does it mean physically here, and that you have to remain physically in Great Britain throughout the period for which you are seeking to claim? What about periods abroad for whatever reason? It looks to me as though that is a change of formulation. It may just be an attempt to simplify the language, but I am a little mystified by it. Perhaps the Minister can help.
Lord Freud
Yes. On the first question about all the rules, our intention, from the policy principle area, is to reflect the current rules. I am hesitant to make an absolute commitment because I am conscious of our work to smooth them out, and there may be some wrinkles. Wrinkles do appear in this area, surprisingly. The main principle and direction will be to take them over in their entirety in the universal credit. Clearly, to the extent that there are wrinkles, when we get to regulations—in some time—we will end up discussing them. We will be able to look at that and discuss it at the appropriate time, but that is the general policy intention.
The expression “habitual residence” is the one used in secondary legislation. That reflects what the primary legislation says, which is “present in Great Britain”. That is the relationship. Clearly, “present in Great Britain” now has a case-law framework around it to define what it really means. Can you pop over to Calais for lunch and still be present in Great Britain?
Lord Freud
There are some very cheap fares now; £12 return on P&O, I think. So maybe even on JSA you can have the occasional treat. Joking apart, there is a context and an understanding. We are not planning to change that. Clearly, when one abandons those key words it has a lot of ripple effects, not least in the social security treaty network that we have.
Lord McKenzie of Luton
I am grateful to the Minister for each of those additional explanations. I understand the point about the terminology being primary and the secondary legislation having these other descriptions. Could I ask the noble Lord about this current debate on the exportability of benefits and their components? How, if at all, does he see the universal credit fitting in to that debate?
Lord Freud
We expect the universal credit to be treated as social assistance, which is within the rules, so we can keep a reasonable amount of control over it. This is something that is causing great concern to countries throughout Europe. The European Commission is taking infraction proceedings against us. Twenty members have expressed strong concern. Fourteen member states have joined the UK in calling for a debate on the matter with a view to amending EU social security rules as soon as possible. This is a live and changing issue but currently, as we understand it—nothing is locked down in this area—we have designed the universal credit in a way that it is protected from some of the exportability concerns. That is our intention.
Lord McKenzie of Luton
I am grateful to the Minister for those explanations. At some stage may we have a little note which sets out the existing benefits and components that are going to go in to universal credit and what the exportability issues and access by non-residents are? That would be helpful to us. We accept that this is a moveable feast, but a note based on our best understanding as of today?
Lord Freud
Having checked with my officials, I am happy to provide a letter summarising the position. I have had a reasonably recent brief on it, and although I cannot remember the detail, I will get the salient points circulated.
Lord McKenzie of Luton
I am grateful for that and for the other explanations we have received. I beg leave to withdraw the amendment.