National Employment Savings Trust (Amendment) Order 2013

Debate between Lord McKenzie of Luton and Lord German

Thursday 28th February 2013 Grand Committee

[Lord German]

My Lords, I have only one question in relation to the changes in this order. I suppose that I should declare an interest in that my wife works for a small charity which is seeking to become a member of NEST for its employees. However, I do not think that I really have an interest in the sense that I am relating my question to the technical change removing the requirement for the trustee to consider next of kin. Therefore, it is a general question rather than being specifically about me.

The Explanatory Memorandum talks about rules, with a small “r”, in England and Wales, Northern Ireland and Scotland, but further on it talks about doing something differently in accordance with Rules with a capital “R”. In terms of next of kin, what is being changed here in respect of those to whom payments should be made? Why is there a £5,000 limit on death benefits being transferred, and what Rules, with a capital “R”, will apply when the trustee looks at the question of those to whom they should pay sums of less than £5,000?

[Lord McKenzie of Luton]

My Lords, I thank the Minister for introducing this order and I say upfront that we will be supporting it. Perhaps I may revert to an item touched upon by the noble Lord, Lord German, which I was going to raise in our previous debate concerning people’s expectations of pensions, the importance of auto-enrolment and certainly the importance of NEST as a key component of that. When the Turner commission looked at the prospect of auto-enrolment and how employer pensions were to be organised in future, I think that the criteria around contribution levels and the band of earnings to which they applied were struck so that over a working lifetime the required level of replacement earnings would be produced. I am bound to say that with what has happened to the band of earnings, contribution levels have not shifted. I have not seen an update of that calculation and I do not know whether there is one—I think that it is an adjunct to this order—but if there is, it would be interesting to see it.

I have one or two questions in respect of some of the detail. We understand why the discretionary period to allow self-enrolling members to be accommodated is necessary, but can the Minister update us on the current elongated process for enrolment? I do not have that fully in my mind. What is the position of new self-enrolling members at the end of that period? Do they have an unfettered right to enrol? Perhaps we can use this occasion, given that NEST has been up and running for a little while now, although with regard to auto-enrolment larger employers are involved first, to find out whether we have any early numbers for the employers and employees who are enrolled.

We support the lifting of the obligation dealing with cross-border obligations and the other essentially technical amendments. I have a small point on terms and conditions. The Minister said that the proposed change would mean that self-enrolment individuals, as others, do not have to agree to members’ terms and conditions, so what is the purpose of those conditions? What relevance do they have? As for multiple jobs, again we support the change that has been outlined, but what is the position on multiple jobs within the same employer group? There is a maximum of 4,400 but, if that can be exceeded and there can be multiple jobs, are there any constraints if those multiple jobs are within the same group, possibly on a specifically organised basis to circumvent the limit?

With those few small inquiries, I say again that we support the order and are pleased to see that NEST is making progress.

Public Bodies (Child Maintenance and Enforcement Commission: Abolition and Transfer of Functions) Order 2012

Debate between Lord McKenzie of Luton and Lord German

Thursday 12th July 2012 Grand Committee

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of the order, which is to abolish CMEC and transfer its functions back to the DWP, where it will operate as a business unit within the department. As we have heard, CMEC has not been around for long; it was created by the 2008 Act but was an integral part of the reform of the CSA that broadly followed the recommendations of the Henshaw report. This was essentially the third attempt to make it fit for purpose after its flawed creation in 1991.

That third attempt—we have heard some of this from the Minister—included a simplified assessment system, based on gross income, to be provided directly by HMRC; an overriding objective to maximise the number of effective maintenance arrangements; the removal of the compulsion on benefit claimants to use the statutory system; the obligation to promote awareness of the importance of maintenance arrangements; the obligation to provide information and guidance to parents by the Child Maintenance Options service; new IT systems eventually facilitating the provision of just one statutory calculation system; and a range of strengthened enforcement powers. All this was placed under the control of CMEC, an NDPB and, unusually, a Crown one at that—there are only a couple in existence.

We acknowledge that the transfer of the CSA was not a popular decision among staff who were concerned about losing their Civil Service status, although terms and conditions were protected. Truth be told, it was not the only possible structure within which the CSA revamp could have taken place. At the time, though, it was seen as having the merit of being part of giving the CSA a fresh start and of having not only a dedicated operational management but dedicated board oversight to see that the range of objectives were progressed. This was seen as important for the efficiency of the fundamental assessment, collection and payment arrangements but also for the wider obligations of the promotion of child maintenance and the provision of information.

It is understood that the Government contend that each of the objectives of the revamp endure and that reverting to be a part of DWP will not change this; the Minister has pretty much confirmed that. It is contended that the abolition of CMEC will allow for greater ministerial accountability for child maintenance. Frankly, that is at best a marginal argument. It suggests that there are not clear lines of accountability between NDPBs and Ministers. These are generally through regular reporting but technically through the department’s framework agreement and, of course, through budget-setting. These provided a natural separation between operational matters and policy, and the oversight of the board was important in ensuring a balance of effort and resource going to the collection process and the support service.

The Minister will be aware that, as in the other place, we seek assurance that the removal of the explicit objective to maximise the number of effective maintenance arrangements does not mean that it will not remain the key objective. Can we understand what data will be routinely available to monitor whether this is so? There is a risk that this will get subsumed into broader issues around family policy with which we might entirely agree but where there is a loss of focus on this aspect.

Incidentally, I note that the order is to take effect soon. Would it not have been better to have any transfer at the end of a financial year? Will the Minister confirm that there are no adverse tax consequences of the transfer of property, rights and liabilities from CMEC to the DWP? Can we please have an update on the move towards a single statutory system of child maintenance? What is the latest timetable?

Specifically on the enforcement powers, can it be confirmed that the powers set out in the 2008 Act can be implemented equally as effectively by DWP as by CMEC? What is the timetable for bringing them all into effect?

We are not sure this move is necessary or the right one at this time but will not oppose it, although we will seek to keep up to date with progress under the new arrangements.

[Lord German]

My Lords, I come to this discussion with some background knowledge of bodies being taken “in house” under the previous and present Labour Administrations in Wales. Accountability is crucial. The question we should ask is whether a body has the right purpose. In this case, the purpose is correct, in that CMEC provides a determined service and does not require the same flexibility of operation or fleetness of foot as, for example, an economic development body might need in attracting new investment into one’s country. However, the question of accountability remains. Any change of this sort works only if it provides a better outcome for customers at the other end and in terms of the services being provided. Does my noble friend the Minister agree that having a phone number for complaints, when last year there were 23,000 complaints, would not be a helpful way for the Government to proceed? Asking in a year or two whether there had been a certain level of complaint about the service and whether it had improved as a result would be the way to judge whether this is the correct move.

Additional funding for voluntary agencies and third-sector organisations to support this work was announced during the passage of the Welfare Reform Act. How does my noble friend see that dovetailing with the in-house operation? Will it deal with the level of change being anticipated? What relationship is there to be between those third-sector organisations and the department?

One of the criteria that always worry customers is, “Is there somebody who I can call or who I can contact who is dealing with my case?”. Will there be someone in the in-house regime who holds the file for a particular customer so that the customer can know who they will be talking to if they wish to make contact?

It would be to the advantage of the in-house service if other parts of the DWP were to provide supportive services. We know that people call CMEC at present with a variety of problems. They are not purely financial but relate to other sorts of service and support. Some of them are to do with local authorities; some are to do with caring responsibilities; and some are to do with work and so on. Can my noble friend indicate what range of on-call services the department will be able to provide to the new in-house operation? For example, data held under the universal credit system might be made available to people working in the new part of the department, thereby making things quicker.

At family breakup, a complex web of issues faces parents. What will be the scope of advice and signposting in the new regime? Will a sympathetic ear be available? Will there be someone who can provide a range of signposts to different services or make the connections if some of them are within the department?

I return to the issue on which I started: accountability. There will now be accountability to Ministers, but that accountability will be tested by Parliament. Does my noble friend intend to produce an annual report or regular update on performance in this area of work, so that noble Lords might be able to test whether the regime has worked effectively? Clearly, this service has not worked effectively over the years since its creation. It has caused a great deal of heartache for a large number of people. The ambition is to improve but we need to be able to test that improvement, and I wonder in what ways that will happen, apart from the normal scrutiny of the Minister through questioning. Perhaps the Minister could lay before Parliament some of the issues that have been successfully achieved or otherwise in data form so that we can make that judgment.

Welfare Reform Bill

Debate between Lord McKenzie of Luton and Lord German

Tuesday 14th February 2012 Lords Chamber

[Lord German]

My Lords, before I raise a number of issues that the Minister considered on Report, I shall just say a word about some of the conversation that there has been on behavioural change in this debate. If we pause for a moment to think of the 1.8 million people on the waiting list for social housing and the number of empty rooms, and put the two together, there is something dysfunctional about our housing sector. We have people living in overcrowded conditions who are waiting for social housing. Around 700,000 of those people fall into the vulnerable categories.

Wherever I go, the answer is always to build more homes, which is obviously part of the solution. However, for as long as there is that dysfunction and a shortage of funding and land to build more housing on—and a resistance to building more housing in some rural areas—people will continue to extend that waiting list. It is important that we do not miss the opportunity to change that dysfunction in some way. That is part of the issue that is being addressed. However, there are difficulties over the transition and how it will affect people. It is not something that is done lightly; nor is it easy to do.

There are questions that I should like to pose to the Minister. In answer to me on 14 December, at col. 1302 of Hansard, on the additional £30 million that would be used for DHPs to make up for the difficulties faced by two specific groups, he said that it would, “assist around 40,000 cases”. Is that simply a division of the amount of money available by the numbers that are predicted, or is it a fundamental assessment of those who live in adapted accommodation or are foster carers? I know that many noble Lords have made significant contributions to the debate on foster carers, both in Committee and on Report. It is of great concern because it has a very wide impact. Therefore, is the amount of money that is being made available sufficient to cope not only with the existing flow of foster carers but with the additional numbers that we need in this country to satisfy a very broad demand?

The second issue that arises from the Minister’s statement on Report relates to the other group that will be assisted by the discretionary housing payments—disabled people who have significantly adapted accommodation. I recall that in Committee we talked about several examples of people who had had very expensive changes made to their accommodation at public expense. That public expense would be duplicated if they had to move to other accommodation. Will the Minister explain to the House what “significantly adapted accommodation” is? Is the definition to do with whether it would not be cash-worthwhile, or does it go beyond that and relate to the nature of the adaptation that has been made?

One issue relates to equipment. Some equipment for disability is very cumbersome, large and bulky and would not warrant being moved. It would probably have been built into accommodation. For example, does this apply to a home where a disabled person requires ground-floor accommodation and where the expense of building a ground-floor extension to a property means that there is an empty bedroom upstairs? Will we still require that sort of change?

This whole transition, which must be effected through regulations, will undoubtedly be the source of some detailed conversations about these matters. Therefore, will the Minister give us some indication of whether the DHP that will be applied will be sufficient to tackle the two specific groups in all circumstances; and what he expects to be able to afford to do in the transitional arrangements that he may bring forward in regulations?

[Lord McKenzie of Luton]

My Lords, the Government have moved in a number of ways on the issues that have been returned from the other place. Along the way, they have also accepted a number of other changes that were pressed on them by your Lordships’ House. However, the Bill remains unchanged in some of its most unacceptable provisions, not least of which are those relating to underoccupancy. That is why we support the amendment in lieu, which was moved with such precision and expertise by the noble Lord, Lord Best. As we have heard, the amendment is less ambitious than that previously accepted on Report, reflecting our obligation to take account of the financial strictures of the Government. However, the amendment is not cost-free and cannot be if it is to provide protection for hundreds of thousands of households that, on average, could see their income fall by £14 a week.

It is clear that, under the guise of addressing underoccupation, the Government seek to make further savings on housing benefit on top of the multiplicity of restrictions—the CPI uprating, the 30 per cent percentile, the rent and size caps and the shared-room rate—that are already in play. Savings from some of these are being made in parallel with the benefit cap. The Government’s stated aims for the underoccupation rules are to encourage greater mobility within the social rented sector; to make better use of the available social housing stock; to improve work incentives; and to curtail housing benefit expenditure. The amendment in lieu addresses each of these issues. It is clear that, should a suitable offer of accommodation be forthcoming, there is an expectation that an underoccupying tenant should take it up, whether or not they have only one spare bedroom or fall into any of the exemption categories listed. If they did not, the housing benefit reduction would ensue. What is suitable would have to be defined in regulations and would have to reflect the circumstances of the household, including its need for adapted property, transport links, access to support services and appropriate schooling.

However, there is no merit at all in an economic incentive to move to smaller properties when there are no smaller properties to which people can move. Therefore, the amendment provides that, with no suitable alternative offer, the underoccupation deductions—the room tax, in the terms of the noble Lord, Lord Best—would apply unless there was no more than one spare bedroom and one or more of the other exemption criteria applied. As for improving work incentives, this can surely have no application for those who have no work requirement placed upon them, for example because of a severe disability. These are people who the Government themselves recognise cannot work and should not be expected to work, so what is the purpose of an economic work incentive for them?

We know that disabled people face extra costs in their daily lives and that it is harder for them to take the hit of reduced housing benefit. Indeed, the Government have already recognised this in the benefit cap by exempting certain categories of individuals from loss of housing benefit or universal credit. These are the self same categories listed in paragraph (b) in the amendment, mainly those on DLA or PIP. War widows or war widowers are similarly included in the exemption to parallel the arrangements in the benefit cap—no more, no less. The noble Lord, Lord Best, referred to the sources of funding on offer to deal with foster caring. It is hoped that the Minister will be able to dispel any suggestion that the new money to which he referred is just being cynically recycled. The Government’s other solution is for people to take in paying lodgers. Perhaps the Minister can say what assessment has been made of this possibility.

We agree that underoccupation in the social housing sector should be addressed and clearly the lack of social housing and the need to build more is part of that, but it is clear that the Government do not see these provisions as a route to doing so. Their assumption is that most people will not move and will take the hit and that is how the Government will get their savings. These amendments would stop them getting those savings from the most disadvantaged in our country. We support them.

Welfare Reform Bill

Debate between Lord McKenzie of Luton and Lord German

Monday 12th December 2011 Lords Chamber

[Lord German]

My Lords, I do not intend to turn my back on what I said in Committee; in fact, I intend to repeat some of it, so I hope that noble Lords will bear with me. If you believe that council tax benefit is a universal benefit and part of the social security system, clearly you need to ensure that it is delivered everywhere within our country and on a uniform basis so that people will know the rules and the benefit they are going to get.

The noble Baroness, Lady Hollis, has talked about England, but I want to talk, as noble Lords know I frequently do, about the other parts of the United Kingdom that will also be affected by this. I start with a big question to the Minister. He wrote to me about this issue when I asked him how it would work in Wales and Scotland. I was told that the money would be given with a 10 per cent saving—that is a crucial sentence because we can reflect on that and on how we can manage the budget within a council tax benefit structure—and that the saving would be given to the devolved Administrations to enable them to bring forward their own arrangements for help with council tax.

The next sentence was about the powers that they would need to bring forward their own arrangements for help with council tax, and it says that these arrangements must fall within existing competence. This is a crucial question; if there is one thing that I know about, it is that the demand for competence is very important. Clearly it is not primary competence because it is not primary legislation that is being transferred, but executive devolution powers must be being given to both the Scottish Parliament and the Welsh Assembly to be able to achieve that. I would like to know which executive powers have been given, because both Scotland and Wales could refuse to have those powers, which would be a perfectly reasonable thing for them to do. If they think that this is not something that they can manage or want to do, they can refuse to take those competences.

Even if Scotland were to accept those powers, and I have made this point in Committee, I wonder what game we would be playing into in Scotland alone. Remember that the basis of the Scotland Bill that is before your Lordships’ House is that social security should not be devolved; it is part of the glue that holds the United Kingdom together. Say that you do not give the social security competence but you obviously give some competence to the Scottish Government. If you give them that money, my guess, and it is purely a guess, is that they will take the money, convert it by putting a bit of Alex Salmond paste on top of it and make it into a Scottish system. They will then use that as an argument to say, “If you think you want a social security system in Scotland but that we can’t cope with it, here we are, doing a better job than they are in England”. There is a danger to the unity of the United Kingdom in this matter, which is why we ought to consider very seriously what the effects of this change will be.

I am told that Clause 11 gives powers to take the competences back. There is no doubt that there is considerable anguish about this matter, but if you believe that it is a universal system, surely it makes sense to use the funding as part of the universal benefit but also to take the hit that has to come with the budget reduction. After all, if the DCLG is going to be able to allocate the money with the budget reduction, that budget reduction could just as easily be done by the DWP. Obviously it would not be a nice, friendly or comfortable process, but as with all levers you have not damaged the social security structure of this country at the same time.

My question to the Minister is this: if you are to retrieve these competences from Wales and Scotland, which competences are you retrieving, and where does Clause 11 give the power to the other place to bring back the powers into the social security structure? The most important feature that we have to decide here in your Lordships’ House is whether it is better placed, with the appropriate cut, inside the universal credit or inside a social security system for our country as a whole, or whether we wish absolutely and once and for all to abolish council tax credit and have what might be called a local support scheme in whatever the local authority can provide with the money that is provided for it if you cannot even call it a benefit.

I worry greatly about this prospect, and I ask my noble friend the Minister to reassure me that we can bring this back and to tell me how we can bring it back and how we get it back from Scotland and Wales.

[Lord McKenzie of Luton]

My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.

My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.

Welfare Reform Bill

Debate between Lord McKenzie of Luton and Lord German

Tuesday 8th November 2011 Grand Committee

[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.

Welfare Reform Bill

Debate between Lord McKenzie of Luton and Lord German

Thursday 3rd November 2011 Grand Committee

[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.

--- Later in debate ---

[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.

Pensions Bill [HL]

Debate between Lord McKenzie of Luton and Lord German

Wednesday 30th March 2011 Lords Chamber

[Lord German]

My Lords, I echo the noble Lord, Lord Boswell, and the noble Baroness, Lady Hollis, in saying that we look to the Minister to address the issue behind the amendment of the noble Baroness, Lady Greengross, which is that no woman’s pension age should be accelerated by more than 12 months. That is the issue that I raised in the earlier debate. It is a concern about equity. I hope that, in the architecture that the Minister may describe to us, he might find a way of answering that question. Whether it is this or some other architecture, as the noble Baroness, Lady Hollis, just said, is not the issue at stake here; it is about the intention. It is the intention to create that level of equity that is important.

Unfortunately, I have a question for the noble Baroness, Lady Greengross, when she comes to answer this debate. It is on a very technical point. This morning we took the liberty of plotting the dates in her amendment on a graph. Unfortunately, there were two kinks in the graph, which meant that it was not a straight line. I wonder whether, in the second line of the amendment, “August 2018” should not read “July 2018”; and, in the third line, whether “October 2018” should not read “September 2018”. That would produce a straight line. However, in the context of seeking agreement—and of the Government’s intention that no woman should wait more than 12 months, which I think was the intention behind the amendment—I hope that the Minister can give some support and succour to the amendment and the intention behind it.

[Lord McKenzie of Luton]

My Lords, I will be brief. Like others, I warmly congratulate the noble Baroness, Lady Greengross, on tabling this amendment, which addresses an issue of wide concern. It does not go as far as most of us would like; it raises the pension age to 66 one year earlier than we would want and one year later than the Government would want. However, apart from a couple of minor kinks, it smoothes the position so that nobody has to wait for more than 12 months. It is a considerable achievement to craft an amendment of that nature. We should be very grateful to the noble Baroness.

The issues are very much as they were previously. However, I would challenge the Minister. If the response was, “We like the look of this; we’ll try to bring something back, but we’ll do it in the other place”, then it would not be a particularly satisfactory one. The reality is that we stand a better chance of getting amendments through at this end than at the other end. What further information might the noble Lord and his team need to be able to produce an amendment now or at Third Reading? The noble Baroness seems to have given us a very good platform for moving forward.

I was not sure about the costing; the noble Lord, Lord Stoneham, said that it was £7 billion. I would guess, from the Government’s point of view, that that is certainly an improvement from where we were on it. If the noble Baroness was minded to press the amendment, we would certainly go into the Lobby to support it.

Social Security Benefits Up-rating Order 2011

Debate between Lord McKenzie of Luton and Lord German

Monday 14th March 2011 Lords Chamber

[Lord German]

My Lords, perhaps I may follow that speech by the noble Lord, Lord Beecham, by also declaring an interest. I am in receipt of my basic state pension and I suppose that I should be thanking the Minister for his announcement that I will be earning, on average, £15,000 or more during my lifetime. However, I am particularly grateful that the measure increasing pensions restores the link with earnings. For many of us here who have campaigned on platforms at election time, the issue of re-linking pensions to earnings has been asked for on virtually every occasion when there has been an audience of prospective and actual pensioners who were concerned that the link had been broken and wanted it to be restored. I am therefore deeply grateful that the triple lock will replace the double lock.

I shall come to the issue of RPI and CPI in a moment, but I should first say that the orders demonstrate that we need a less complex system. Noble Lords on the other side have said on several occasions that this is a weighty document containing many changes. That reflects the complexity of the arrangements in our benefits structure and the calculations that flow from it. I welcome the simplification that will occur when the Welfare Reform Bill is enacted.

However, I agree that my noble friend will have to respond to the question of whether these measures will satisfactorily protect the worst-off in our society. That is the test we must put before him. Some measures that are not in the orders will support particularly the long-term employed—the Work Programme, more apprenticeships, and the more rigorous, enlarged and targeted work experience programme that will produce dynamic changes and have an impact upon the take-up of benefits overall.

I turn to the CPI/RPI debate. It is clearly difficult to produce a set of proposals that will be understood by people who are not in this Chamber and who want to hear a simple explanation. Geometric and arithmetic means are not words that roll off the tongue as you sit talking after watching the evening news on television. It is difficult to understand the complexity unless you can understand what lies behind it. What I take from this is what I call the old Tesco/Waitrose test regarding upper and lower shelves, whereby when you make a substitution, you might move shop or shelf when choosing products, in order to make savings in your weekly bill. There is something in that, given that the former Prime Minister, when he was Chancellor, said that CPI is a better measure of substitution. That is a matter which the mathematicians are beginning to grapple with.

However, it is clear that when compared with the UK no country in the western world has such a statistical difference between the two indices. The majority of other countries use the CPI index, but why is there such a difference here between the two indices? We need to understand why, and that was what the Royal Statistical Society was attempting to do. It is not just about whether there is something wrong with using the CPI, but about why there is a gap between the two indices that does not occur elsewhere. That again relates to the way that the formula is constructed. As we know, the formula includes a difference of between 0.5 per cent and 0.8 per cent, and we need to understand that better in future.

Therefore, it is not a question of which is the better index, but of which is the right index. It is not that one is a good index and one is a bad index; we are looking for the right index which measures inflation and how prices are rising. It may well be that we have not got that right in the past and that we are now looking for a change. However, I note that the opposition party in the shape of its leader, and reinforced here tonight by the noble Lord, Lord McKenzie, is prepared to accept CPI as an interim but not a permanent measure. That means that there is a sense that they generally agree with the former Prime Minister that there is a role for this index, although they may disagree about its long-term purpose.

What we do know, as international comparisons tell us, is that CPI is a much more stable measure. I was interested to hear the remarks of the noble Lord, Lord Beecham, concerning the pension. One effect of the methodology used by the previous Government was that the pension rose by 75 pence a week. Of course, it is not reasonable for people to be told that prices have not risen appropriately in that period. We need a stable measure which reflects people’s understanding of how prices have risen during the year.

As we heard from the Minister, housing is reflected in CPI in terms of rent but not mortgages. Work is now being done to improve the involvement of house prices and housing measures within CPI, although we know that only 7 per cent of pensioners have a mortgage. It is important to reflect on the value of the basic state pension, to note that in future the triple lock will work to the benefit of pensioners, and, if I read the newspapers correctly, that the basic state pension will be uplifted even further, which will give people a basic entitlement in tier 1. I hope that that will occur.

[Lord McKenzie of Luton]

I hope that the noble Lord will forgive me for interrupting. I accept what he says about the triple lock on the basic state pension, but does he acknowledge that applying CPI to S2P on a long-term basis would reduce what would otherwise be payable?

[Lord German]

The basic pension is bigger than the additional pension. In the long run, the earnings link is worth 2 per cent more than prices, and CPI is 0.8 per cent less than RPI. Therefore, the increase in the basic state pension can be set against the change which will occur with CPI for S2P. It is very important to see the connection between the two. Of course, as the noble Lord, Lord McKenzie, will know, there is much talk in the ether about an improved single-tier pension, and I think that that will be the test. Not only would it benefit people through the measure that I have just described but in the future it might improve matters even more.

[Lord McKenzie of Luton]

I am sorry to interrupt the noble Lord again, but how would he factor into his assessment occupational pensions which, in terms of future indexation, could be subject to CPI rather than RPI?

[Lord German]

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

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

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

Pensions Bill [HL]

Debate between Lord McKenzie of Luton and Lord German

Thursday 3rd March 2011 Grand Committee

[Lord German]

My Lords, this is a relatively straightforward amendment to provide some certainty in a situation where an employee could have their auto-enrolment deferred more than once because they failed to reach the earnings threshold in one or more months in the three-month waiting period. Perhaps it might be sensible if I gave an example. A jobholder works for two months and their pay is above the threshold, but in month 3 their pay falls below the threshold. Then, when month 4 arrives and their pay perhaps goes back to being above the threshold, it is not clear whether that triggers a new three-month starting period or adds to the two months when it previously happened. Whether the waiting period begins again in month 4 or concludes is the key question here. Should the three months’ earnings be cumulative or consecutive?

This could be the case for many workers in the leisure and tourist industries where work is perhaps seasonal and in the catering trade where it is often related to the number of customers and people are called to work more or fewer hours according to the demand on their services. So a situation where people may not reach the threshold in one month but have reached it in the previous two months is not unlikely. It seems quite unfair if, as soon as they fall below, they have to start again. I remember somebody who formerly worked for me who then went off to train as a barrister and it took him many months to get his final qualification because he could not get to the number of dinners that he had to achieve in the right order. Every time he missed one, he had to start again from dinner number one. It seemed a strange mechanism and we do not want this archaic methodology in this Bill. I beg to move.

[Lord McKenzie of Luton]

My Lords, the noble Lord, Lord German, has raised an interesting point, which I hope the Minister can clarify. I assume that the situation is that, if you have got to month 3 and you do not have qualifying earnings, there is nothing at that point to trigger automatic enrolment. When you next have your qualifying earnings is presumably when you would be automatically enrolled. Certainly, if you had to start again, that would add injustice to something about which we are already not very happy.

[Lord Freud]

My Lords, I thank my noble friend Lord German for this amendment, which would restrict an employer to using one waiting period per worker and would ensure that automatic enrolment would take place once a worker’s earnings had reached the earnings threshold for three months, whether those three months were consecutive or not. Thus the single three-month waiting period could be accrued over a far longer period of time where the individual’s earnings fluctuate. I should take this opportunity to clarify for the noble Lord, Lord McKenzie, how it would actually work. If you had low earnings for the first two months and hit the target at the third month, you would be auto-enrolled. However, if you did not hit it in that third month, you would effectively be back to your dinner problem and have to start again. That is how it would work.

As I explained, Clause 6 introduces the concept of an optional waiting period into the automatic enrolment process. This is central to our commitment in this Bill to rebalance the administrative burdens on employers while ensuring workers’ access to pensions saving. The waiting period is designed to meet employers’ requirements by being simple and easy to understand and use. This is clearly crucial to its success. At the point at which the employer applies a waiting period, they will not be required to undertake a check on whether the worker is eligible for automatic enrolment. The employer must check eligibility at the end of the waiting period and we are keen to avoid them having to check it twice or more.

The waiting period consists of a single block of time, regardless of whether the individual’s eligibility for automatic enrolment fluctuates during that period. If the worker satisfies the automatic enrolment eligibility criteria at the end of the period, they will be enrolled into the employer’s scheme on that date. If not, the employer will monitor the worker’s status until they satisfy the eligibility criteria. At that point, the employer may apply a further waiting period if they wish. It need not be for the full three months.

We recognise my noble friend’s concern that workers with fluctuating earnings could miss out on pension saving due to the use of multiple waiting periods. While it is difficult to estimate the likelihood of this occurrence, our analysis suggests that few people are likely to have fluctuating earnings around the level that they traverse in and out of automatic enrolment eligibility. Are we, therefore, devising something very complicated for a problem that is pretty small, which is what our analysis suggests? It is also the case that, for those on sustained low earnings throughout their working life, state benefits can replace most income in retirement. Common sense suggests that it would not be rational to lever such people into private savings. It is important to remember that they will have the right to opt in at any point during the waiting period.

This amendment would add a substantial additional burden and complexity to the waiting period process and would not be easy for employers to understand and use. It would require the employer to monitor an individual’s automatic enrolment eligibility continuously throughout the waiting period and to keep a record of the period of eligibility accrued during the waiting period.

Employers requested the waiting period as an administrative easement. To make the process so burdensome would negate its value. At this stage, it is crucial that we get the reforms bedded in and that we ensure that employers find it easy to comply with these new duties. It is therefore critical that the processes are simple for employers to understand and use. In the absence of any persuasive evidence of a problem, we feel that it would not be right to introduce greater complexity and a significant burden to a process whose very purpose is to offer administrative easements to employers.

I offer noble Lords my assurance, however, that we are committed to fully evaluating the effects of the reforms and how they are delivered. As part of this, we intend to monitor employers’ use of waiting periods and the effects on workers’ savings. I urge the noble Lord to withdraw this amendment.

[Lord German]

My Lords, I am still a little confused over the explanation. I understand fully the point about somebody hitting the relevant target in the third month. However, my question was the other way round—where someone hits the target in months one and two but does not hit it in month three. In seasonal worker terms, this could happen if someone was picked up and employed in May, perhaps worked through May, June and July and found a bad—wet or something—August, for which they could not get the money in. The important issue is simplicity but also understanding. It may be that a three-month period applies, but it was not absolutely clear from the Minister’s reply when, once you have a first waiting period, the second test would occur. What if you fail to meet the criteria that he has just described in that first three-month period? You will then need to have another piece of information made available to the employee to say, “You have not quite done it but this is the way you go next”. It seems to become far more complex if you cannot have it in some way accumulatively worked out. I will obviously withdraw the amendment. However, I hope that the Minister will come back at some stage with some further explanation of the anomaly of the people who are in the position that I have described, in which they pass the threshold in months 1 and 3 but not in month 2, yet wish to maintain their position within the company.

[Lord McKenzie of Luton]

Before the noble Lord withdraws his amendment, I wish to follow up on that point. I was somewhat surprised by the answer that the Minister gave. There is a simpler process. Somebody becomes employed; they have their three-month waiting period and, at the end of the three months, you look to see whether they have qualifying earnings and need to be auto-enrolled. If they do not, presumably they are in the same position as everyone else who has been around for a long while—you continue to monitor them at an appropriate date to see whether they have qualifying earnings or if they have reached the age of 22. It will be the same for everyone. Is that not the simpler way to do it? I do not understand why there is the need to start the cycle again, which is what the Minister said. That seems to be fundamentally wrong and not the simplest route.

--- Later in debate ---

[Lord German]

My Lords, I want to say a brief word about Amendment 38, which is in the group. Clearly, the Johnson review looked at this issue and having weighed up both sides of the argument, recommended that the Government should proceed to legislate. The words of the recommendation were quite ambiguous. It said:

“We are therefore recommending that the Government legislate for the removal of the contributions cap in 2017”.

One could read that as recommending legislating in 2017 for removal of the contribution cap, or as recommending legislating now. Actually, the text of the Johnson review does use the word “now”—in other words, it should be part of this Bill—but because neither the Minister nor the Government are on record yet as saying why they have not chosen to follow that advice, it would be very helpful if this amendment could be probed in that manner.

[Lord McKenzie of Luton]

My Lords, perhaps I may comment briefly. I can see the thrust of my noble friend’s amendment. I remember that, when we debated the cap, we debated whether there should be an additional lifetime element as well. I think that, at one stage, we debated whether there could be a two or three-year period when one carried forward the unused amount. My recollection is that, other than the annual cap, which is as it now is, all that fell by the wayside, but the Minister may be able to update us on it.

It seems a good idea to me to be able to use the headroom in respect of unused bits, although I do not think there is anything that precludes someone who is, or might become, a member of NEST making a voluntary contribution up to the limit. The limit is not, as I understand it, an employee and an employer limit; there is a limit in respect of contributions for an individual. Certainly, for the reasons that my noble friend advances, if there were opportunities to use some headroom to get more into NEST, that would be good, so far as the removal of the cap supports the thrust of that. Again, given the consensus that was there and the existence of the cap, everything that has the potential to disturb that in the interim makes life a bit more difficult, although it would be good if it could go at the earliest opportunity.

Income-related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2010

Debate between Lord McKenzie of Luton and Lord German

Thursday 2nd December 2010 Lords Chamber

[Lord German]

My Lords, I am relatively new to this House; it has been five months now. I mistakenly thought that when a debate is called on a particular order, we debated that order and that if noble Lords wanted to debate another order, they would put a Motion down about it. I was obviously mistaken as it seems to be the way of this House that if you can find one word in the title of the order, you work on that, so I may regard it as a fairly open season. If somebody can explain that method and the way that this House works, I would be pleased to hear it.

It seems to me that we have an order before us which has nothing to do with most of the statements made by the noble Lord, Lord Knight. I understand both the concerns that he wishes to raise and that he wants to talk about the other orders. I wonder why the Motion is therefore not about another order but, be that as it may, I wish to raise one question and one issue about this order and, since it is open season, I would like to make about three or four remarks about the order to which the noble Lord, Lord Knight, has referred.

The first question is about this order. Quite clearly, the burden of applying a new cap on temporary accommodation owned by registered social landlords is going to mean a new burden for them. Social landlords may or may not have to readjust their own rental levels with the people from whom they are actually renting the accommodation in the first place. Has an impact assessment been done of that and do we know whether much work is to be done in that area? If so, how do the Government propose to recompense registered social landlords for the extra work that they have to do? Just as, in its system, if local government is having to do extra work one would expect the extra burdens upon it to be recompensed with some funding, is there an extra burden on registered social landlords as a result of this order and, if there is, how are the Government going to recompense them?

On the other order—to which the noble Lords, Lord Knight and Lord Best, both addressed their remarks, which was perfectly reasonable—I have a couple of remarks and questions about issues that need to be raised. First, the noble Lord, Lord Knight, referred to the Social Security Advisory Committee report: but was it not the case, as I believe, that that report was written in advance of the orders to which he referred being laid? Can the Minister tell us whether they have taken account of the views of the SSAC in the orders that were laid, in which case there is another debate to be had that might be overtaken by the events to which the noble Lord, Lord Knight, referred?

Secondly, is it not a fact that we refer to movement in the private rented sector as being something which, one almost gets the impression, is unusual? However, do the figures not show that 40 per cent of tenants in the private rented sector move within a year? There are reasons for that happening and there is evidence of it. Do they not also show that 70 per cent—a huge number—of all tenants in the private sector move within three years? Therefore, mobility in the private rented sector is not unusual—it happens—and I do not necessarily believe that we should be worried about it if it already happens and is already a feature of that sector.

My second point of concern is that the housing benefit changes are often seen through the prism of London. People understand that there is a particular problem in London, which I admit there is, but it is often viewed as representing what is happening in the whole country. There are many areas in this country where the cap will not impact in the way that it will in London. We need to be careful that we do not see the nature of all change through the prism of London alone. There are specific circumstances in London that need to be adjusted and taken into account, and undoubtedly that is a debate to be moved forward.

The fundamental question, to which the noble Lord, Lord Best, referred, concerns the partnership between those who pay the rent and those who receive it. The question is how those who receive the rent can be incentivised to reduce the amount they charge. That is fundamental because, although an equation has only two sides to it, this one has a third, which is the housing stock and the number of houses that are available for social housing. However, I think that that, too, is the subject of another debate. In the equation between those who pay the rent and those who receive it, how is it intended that landlords be incentivised to move to the new levels that the Government will be providing? Perhaps in his reply the Minister can outline some of the ways in which that might happen. If it does happen, it might take away some of the evidence from those who say that landlords will not alter and will not move.

[Lord McKenzie of Luton]

My Lords, given the hour and the potentially challenging journeys that some of us will have in getting home tonight, I intend to speak only briefly, especially as I have an invite this evening to Luton’s Best. It is an award ceremony for community excellence, which shows that we were ahead of the game before David Cameron thought of the big society.

Luton has a direct relevance to this debate—particularly to the contribution of the noble Lord, Lord Best—because, taking all these housing benefit changes in aggregate, Luton is being affected at the moment. I am told that there is block-booking of bed and breakfast accommodation in Luton by London boroughs in anticipation of what all these changes will mean, and that has ramifications not only in relation to rent levels locally but in relation to the whole range of services provided by, for example, the local authority. Therefore, I say to the noble Lord, Lord German, that even the cap on its own has a spillover effect on other boroughs. Of course, the cap may be a particular issue for London but the other range of issues—the 30th percentile and the CPI—could also in due course have profound effects right across the country.

I also say to the noble Lord, Lord German, that he was a little harsh on my noble friend Lord Knight, who I thought gave a brilliant speech. He was dealing with the context in which this order has to be applied, and it is affected very profoundly by the new environment in which we find ourselves. This order follows on from one that came into effect in April, introduced by our Government. It related, as we have heard, to changing the basis on which subsidy was paid to local authorities from what was called the threshold and cap system, from which local authorities used to generate good revenues by charging at one level but paying rents at a different level. I have no doubt that those surplus revenues were put to good use, but it is right that that was changed. Moreover, as my noble friend said, the extension of the changed subsidy arrangements to housing association leasing systems is in principle a sensible thing to do.

The Explanatory Note for the order states that,

“some other leased accommodation not currently affected”,

is to be included. I hope that the Minister will be able to say what is encompassed within that. It would also be good to know what the implications of these changes to the subsidy system will mean to the resources of RSLs. I do not think that a detailed impact assessment has been produced, but understanding the impact would be helpful.

We are considering these changes in a substantially changed environment so far as housing benefit is concerned, but I am sure that we will have an opportunity to debate that not only today but on numerous occasions to come. We are dealing with a situation where actual rents are paid by local authorities and are then reimbursed through the subsidy system. I was interested in what the noble Lord, Lord Best, said about the impact of all these housing benefit changes on rent levels. He asked whether they would force rents down in some circumstances or have impacts in other ways. One of the changes to be introduced under the housing benefit changes will be the switch in 2013 to uprate local housing allowances by reference to the consumer prices index rather than, as now, by reference to actual rent movements. That inevitably means that there will be a widening gap between actual rents and local housing allowance levels. If the arrangements proposed in the order are to continue at that time, it means that local authorities may be at risk of having to bear the increased shortfall. The noble Lord, Lord German, asked whether these increased burdens are going to be reimbursed by the Government, which is a highly relevant question. I thought that, so far as local government is concerned, the Government had signed up to fund any increased burdens, so I shall be interested to hear from the Minister on that point.

This is not only a question of the eventual switch to the CPI because the switch to the 30th percentile will lower the housing allowance on which the subsidy is to be paid, even though we are dealing with a situation where it is actual rents that are being disbursed by housing associations or councils. This is yet another example of the Government placing on local authorities the responsibility to deal with what are effectively cuts in the system. In a sense, local authorities are the third party in addition to the two already identified by the noble Lord, Lord Best.

I have one further point. The package of housing benefit cuts and reduced investment in social housing along with cutbacks in support for mortgage interest will inevitably lead to increased homelessness. There is no other conclusion that one could possibly reach. That will lead to greater recourse to temporary and bed and breakfast accommodation, and therefore wider applications of the order before us, along with an increasing share of the costs imposed on local authorities. I want to ask a question on one particular point. One of the recommendations made in the SSAC report was to ensure that definitions of,

“‘intentionally homeless’, and associated guidance, is revised so as to ensure the position of households that fall into arrears because of changes to housing benefit entitlements are not excluded from the scope of the homeless provisions”.

I have not had a chance to peruse this in great depth and thus get behind the recommendation, but if there is a risk of people not being able to continue with their current tenancy because the level of their housing benefit puts it beyond their financial means, one would expect them to fall squarely within the definition of those who are homeless and have to be supported by local authorities.

I shall close with those brief comments, but this is just the start of a long journey of debate we need to have around the whole range of housing benefit regulation changes which I believe are deeply damaging and very misguided.