Welfare Reform Bill

Baroness Hollis of Heigham Excerpts

Monday 14th November 2011 Grand Committee

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the purpose of the government amendments in this group is to correct an omission in secondary legislation which was made to implement changes to the working tax credit withdrawal rate announced as part of the June 2010 Budget. I apologise for the fact that these amendments are required.

Any award of working tax credit or child tax credit is reduced or withdrawn by a prescribed rate for every pound of income that a claimant has above a specified threshold. One of the changes announced in my right honourable friend the Chancellor’s June 2010 Budget in relation to tax credits was to amend the withdrawal rate for both child tax credit and working tax credit. The intention for the tax year 2011-12 was that the withdrawal rate would be set at 41 per cent, so that for every pound of income above the threshold, the amount of tax credits payable would be reduced by 41p. HMRC accordingly amended the tax credits IT system and since 6 April 2011 has implemented the increase in the withdrawal rates for both working tax credits and child tax credits and thus has applied a withdrawal rate of 41 per cent in relation to both tax credits for 2011-12 awards. Although the secondary legislation was amended correctly for the child tax credit withdrawal rate, unfortunately the working tax credit withdrawal rate was not. This new clause will correct the technical omission and will ensure that the withdrawal rate for working tax credit from 6 April 2011 is 41 per cent and not 39 per cent.

Let me be very clear for the record. HMRC is paying claimants the right amount of money as announced in the June 2010 Budget. It is applying the 41 per withdrawal rate and has been since 6 April 2011. In practical terms, the implementation of this correction will not impact tax credit claimants as it simply aligns the legislation with the announced and currently effective practice. I beg to move.

[Baroness Hollis of Heigham]

Does that mean that as a result we have been paying people less than they were entitled to by law and are retrospectively correcting that?

[Lord Sassoon]

My Lords, claimants are being paid what they expected to be paid based on the announcement made by my right honourable friend the Chancellor in the June 2010 Budget. If the legislation goes uncorrected, HMRC will be paying at a rate that is not covered by the law, so it is necessary to amend the legislation to bring into alignment the law and what claimants expected to receive and are receiving.

[Baroness Hollis of Heigham]

So I think the answer to my question is yes. In other words, between April and December, HMRC has been withdrawing money at a taper that was not legitimised by legislation?

[Lord Sassoon]

My Lords, there are a lot of things where HMRC starts in practice, and the law, whether primary or secondary legislation, comes afterwards. If the law does not come in, adjustments will subsequently have to be made. The result of doing this now is that there will be no adjustments and people will have been paid what it was intended they be paid.

[Baroness Hollis of Heigham]

My Lords, I will not say that the noble Lord is wriggling—I am looking for a more courteous word—but it is something like that. He keeps saying, “If we didn’t do this, it would get worse”. That is quite right. However, will he not confirm that between April and December he has withdrawn money at a rate not approved, legitimised, permitted or allowed by legislation?

[Lord Sassoon]

Clearly—

[Baroness Hollis of Heigham]

Could we have a yes or no?

[Lord Sassoon]

As the law stands, HMRC is giving people less money than the law says that it should.

[Baroness Hollis of Heigham]

Thank you.

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[Lord Wigley]

My Lords, will the Minister confirm that people who had an entitlement under the law as it stood will be paid fully in accordance with the law as it stood, and that there is no question of a clawback coming through retrospective legislation?

[Baroness Hollis of Heigham]

It is worse than that. Money has been taken from people. The thrust of the noble Lord’s argument suggests that it should be repaid until it has been appropriately legitimised.

[Lord Sassoon]

It is certainly the case that if the law were not brought into line with what the Chancellor intended, at some point HMRC would have to make adjustments to the incorrect clawbacks that were calculated. We can discuss this for as long as we want. The fact is that there was a clear policy announcement. It should have gone through in the original statutory instrument—I think it was 2011/1035—and a claimant can at any stage ask for an appeal and ask to have their payments recalculated. However, clearly it would be pointless to do so if they expect that the amendment we are now debating will be agreed and will get the position back to where it ought to have been all along.

[Lord Sassoon]

The technical position is that what is paid during the year is only an interim award. Of course, HMRC seeks to pay all entitlements on a correct basis. However, the final calculation is done at the end of the tax year. Therefore, at the moment HMRC is quite properly paying what it believes will be the position once we get the legislation lined up with the original policy intention.

[Baroness Hollis of Heigham]

My Lords, if the tax system changes half way through the year, we do not say that it is retrospectively applied to the previous six months and rely on an end-of-year adjustment, which is what the noble Lord seems to be doing. He has illegally underpaid people for something like nine months. The fact that tax credits are done at the end of the year and as an adjustment is neither here nor there. For that period he has illegally underpaid and he cannot retrospectively go back and claim money from them which he was not entitled to do.

[Lord Sassoon]

My Lords, as I understand it that is not the position. The position for all taxpayers and claimants has to be finally calculated at the end of the year—and in many circumstances it can be done only then—because all sorts of circumstances may have changed. The issue is to get the legislation right in respect of this tax year. HMRC has calculated everything to date on the basis that there will be no further adjustments required at the end of the tax year once we get the legislation back into alignment with what was originally intended.

I appreciate the intention of noble Lords opposite to make hay out of this. It was a technical error in a statutory instrument that should not have happened. The amendment we are considering today is not to change anything midway through the year but to change the law with effect from 6 April 2011. There is going to be no unfairness and everything will be in line with exactly what my right honourable friend the Chancellor announced in the first place.

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[Baroness Hollis of Heigham]

He is of course speaking for the whole Government.

[Lord Sassoon]

My Lords, I always speak for the whole Government, of course. The first point is to re-emphasise that we are talking about an adjustment that will apply, as was always intended, from the beginning of this tax year—6 April 2011—so the issues of what happens to people whose circumstances change during the middle of the year are not relevant. The policy was announced as taking effect for the tax year 2011-12, which is precisely what the amendments are intended to achieve.

There is nothing magic about the amount of money and the juxtaposition. I know that June 2010 seems a while ago now but this was the emergency Budget in which we needed to do a number of things, not least set out a very clear plan to deal with the inherited deficit.

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[Lord Boswell of Aynho]

My Lords, will my noble friend reflect, in conjunction with our noble friend his colleague, that in a sense—I have enjoyed watching the passing scene on this matter—he has been rescued by the fact that the concept of income tax is a tax from year to year and has a defined period in which adjustments can be made? But I understand that under the universal credit, the payment period will be somewhat different and the ability to use that kind of argument, if there were a miscalculation of the taper rate in the future, would not be available? That is perhaps the moral that Ministers and officials will need to take into account in avoiding any slip-ups in the future.

[Baroness Hollis of Heigham]

My Lords, in the wording in proposed new subsection (2), all that comes close is in the regulations referring to capital being deemed to be income and income being deemed to be capital. Here we have something that has to be treated as being done is though it would have been done had it not been for the fact that it was not done. As a basis of legislation in future, I wonder whether the Minister would welcome such an approach from the Opposition.

[Lord Skelmersdale]

My Lords, the members of the opposition party have been waxing lyrical in this particular case. With all the experience of his advisers behind him, can my noble friend say whether such an accident—and an accident it most certainly is—ever occurred during the course of the last Labour Government?

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[Lord Freud]

My Lords, as the noble Lord knows, we have published the criteria and weightings but have not yet gone into any further definition of how the system might work in terms of thresholds. I will aim to bring some more definition around that by Report.

[Baroness Hollis of Heigham]

Could the noble Lord bring back not just definitions but examples? He talked about a “dynamic” version. I do not understand that, except that “dynamic” is a sexy word. Perhaps he could describe how the situation of somebody who is currently on middle-rate DLA would change under PIP.

[Lord Freud]

My Lords, I will be happy to produce case studies for Report.

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In relation to the amendments in this group, will the Minister clarify what consideration the Government have given to the needs of the third-level group of disabled people? Should they be excluded altogether from PIP? How will their vital support needs be met? The Opposition fully understand the need for reform. Static is rarely the right approach for any policy or mechanism. However, our problem is that it is impossible to assess the proposed reform with so little idea of who it will affect or how. We know that the department must have made assumptions about the characteristics of the groups that will be excluded. It will have made budgeting assumptions. Therefore, I would be grateful if the Minister would share those assumptions about the people who will drop out of eligibility after the move from three to two levels.

[Baroness Hollis of Heigham]

My Lords, I support my noble friend in her request. In order to have a sound evidence base, we are going to need stats about how the existing clients of DLA—if I can put it that way—will map on to the future ones proposed for PIP and the implications for carers. It is not a discrete thing: it has interactions with ESA; it has interactions with in-work conditionality; and it has interactions with other things, like housing benefit, extra rooms and the rest of it. It has tentacles right through the whole of the Bill.

I will make a serious proposal to the Minister. I will personally not be happy to go into a Report stage of this Bill unless we have had, at least three days before the first day of Report, all the information that we need on the proposed changes to DLA and the linking effect to carer’s allowance, because it interacts with so many other aspects of the Bill. I hope the Minister will agree that that is an acceptable position to hold.

[Lord Newton of Braintree]

My Lords, before the Minister replies, which I assume he is about to do, I will just chip in again. I do not have the up-to-date knowledge that the noble Baroness, Lady Hollis, has from her more recent experience as a social security Minister, but I did once again prick up my ears at the reference to carers. There is obviously a link between disability living allowance with its three rates and the payment of carer’s allowance. This is not something that I have focused on, but I would much appreciate a word from the Minister about what the effects of that might be. That would be on top of the 652,000, as I understand it, and could mean that some households suffer what in conventional jargon would be called a double-whammy. We need to know something about that.

[Baroness Hollis of Heigham]

I would add to the noble Lord’s very helpful intervention that if someone who is currently getting carer’s allowance finds themselves disqualified in future, they will come within the whole remit of in-work conditionality and all the other issues that affect this Bill. It is not just a one-off enclosed issue; it has tentacles or effects or implications right across the Bill.

[Lord Newton of Braintree]

I can understand that; that is where the noble Baroness is more up to date than I am. The Minister must be the most up to date of all.

[Lord Freud]

My Lords, I apologise that the information about the second draft criteria was not available earlier and I apologise for ruining a lot of weekends. What is the reason? We had a large volume of feedback to our informal consultation and we have made a significant amount of changes. It took some time—rather longer than we hoped—to work through it all. It is crucial that we get this right. One of the reasons—as noble Lords have pointed out already—is that there is a lot of sensitivity around this. If we put things out that are not right, we will create concerns where we should not. Misleading impressions here are very dangerous.

As I said, we aim to have the thresholds available for the Report stage of our consideration of this—not before the whole of the Report stage, but in good time for when we reach these matters at Report.

[Baroness Hollis of Heigham]

My Lords—if the noble Lord will allow me to intervene again—I am sorry, but that really will not do. Too much depends on how you align the two rates of disability allowance; the passporting of carer’s allowance will depend on it; and, in turn whole issues such as couple conditionality, in-work payments and the like will depend on that. We cannot deal with earlier sections of the Bill if we do not know what the implications of this are. It will not do to leave this until Report. We have to have it before we start the Report stage.

[Lord Freud]

My Lords, I regret to say that I am not in a position to say that we will have the implications for carers ready for Report as well as the threshold information, which is another roll-on. We will be discussing the carer’s element in a later amendment, so I shall deal with that more fully then. I am looking at the timings of the information that I have. There is a large amount of co-production going on in the development of PIP, where we are talking to disabled people and disabled groups. That is what is taking the time to get to where we need to get to.

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[Lord Freud]

Perhaps I could undertake to do that ahead of Wednesday’s sitting and go through what we are expecting to have when.

[Baroness Hollis of Heigham]

If the Minister were able to say, for example, that carer’s allowance will be attached to both rates, whatever they may turn out to be in terms of eligibility, some of our concerns would be removed. If he cannot say even that, I think half of Chapter 1, nearly all of Chapter 2 and quite a fair amount of Chapter 3 are affected by the passporting decision for carers.

[Lord Freud]

My Lords, I will give a full report on Wednesday, but I have already indicated where I am pretty sure we are. We are looking at passporting in a much wider way. We are having the SSAC report in January with its recommendations. There will undoubtedly be a lot of work around that. It would indeed be foolish to look at one aspect of passporting without taking the whole of passporting together. As noble Lords know, this is a framework Bill. There will be plenty of time to consider all these elements as we go through the regulations when we will be doing things in the fullest possible way. I imagine noble Lords in this Room will be taking a very full interest in all these aspects. Let me leave it that I will come back with the timetable at our next sitting.

These amendments seek to broaden the scope of PIP—I do not know whether my noble friend’s formulation of the personal disability costs payment has found favour, but I will stick with PIP, like the noble Baroness, Lady Hayter, for the purposes of this—by introducing an additional tier to the daily living component. When we consulted on the overall framework to personal independence payment, we stated our intention to move to a structure that has two components paid at two rates. We decided on this structure for three key reasons: to simplify the overall structure by reducing possible award outcomes from 11 to eight; to make it easier to understand and administer; and to ensure that it reflects the range of individual needs and provides appropriate levels of support.

We also made it clear that the overall design of personal independence payment is intended to ensure that the benefit is fairer, more transparent and focused on the individuals who are least able to live independently. It also provides an affordable and sustainable platform of provision for the future.

In responding to our consultations, most organisations said that they supported the move to broader definitions for both components as they were a better reflection of the real experience of disabled people’s daily lives. Our view, therefore, is that a daily living component paid at one of two rates will enable us to better reflect the impact of impairment on an individual’s ability to participate. I appreciate the concerns of the noble Baroness that people will receive lower levels or no support under our reforms and that her amendments are intended to prevent that. However, that fails to deal with one of our fundamental aims, which is to give more consideration to whom we prioritise for support.

The Government have been clear here. We intend to protect those who are most in need and will prioritise support for individuals whose impairment has most impact on their ability to participate. That aim, and the way in which we intend to deliver it through the new assessment criteria, may necessarily result in shifts in provision. Some people will receive more support under our proposals; some the same; and some less. This is not an exercise in simply making arbitrary cuts to existing provision; it is about refocusing benefit provision so that it reflects disability impairments and barriers to participation in the 21st century.

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[Lord Freud]

My Lords, let me start with the numbers. Large numbers are being thrown around about what is meant to be a 20 per cent cut. In practice, it is a cut from a projection because the benefit was rising very steeply, so measures were taken to get it under control. The whole caseload in 2009-10 was running at £3.1 million and now £3.2 million. In 2015-16 our projection is for it to run at more or less £3.1 million—£3.059 million. In terms of money, this is cash money. We are looking at a figure of £11.5 billion rising to £13.7 billion in 2015-16—and that is cash, not real. That was the projection we inherited and it is from that that we are cutting £1.3 billion. So from £13.6 billion we will take £1.3 billion, which will leave £12.3 billion.

[Baroness Hollis of Heigham]

I am very interested in this point and it is exactly what I want to press the Minister on. Earlier he said that this was irrespective of—net of, if you like—demographic changes. Is he still saying that that is true for these figures? Certainly, all my assumptions based on his impact analysis and all the rest of it, and from what most of us know about this, are that people are getting their DLA and carrying it through into older age, and there is increased eligibility for attendance allowance by virtue of people living longer. So what one really wants to know is where he thinks the extra cost is coming from and whether, rather like pension costs, it reflects what is happening demographically and does not show any “looseness” in the financial gateways to the benefit.

[Lord Freud]

My Lords, as I said earlier, the history of this is that only 30 per cent of the gain that we have seen in recent years has been due to demographics. The rest has been the result of a drive in demand. I do not think that there was any assumption of a huge change in expectation in the projection. I am sure that once she has gone through Hansard, the noble Baroness will work it out.

I shall take the question on transitional protection put by my noble friend Lord Newton that I failed to answer. He had to ask it again, and I apologise for that. We do not have any plans to introduce such protection for people who currently receive DLA and may not be entitled to PIP. While I accept that they may have been entitled to it for some time, it would be strange to continue to pay a benefit to people who no longer met the entitlement criteria. So there is no difference between this and the similar 2004-05 exercise where 12 per cent of people were found no longer to be entitled.

I turn now to the question raised by the noble Baroness, Lady Hollins, on the difficulty of working out what the assessments we published on Friday mean. That was an exercise in showing the weightings and how the criteria might work to prioritise relative need. We know that there are strong views on these relative weightings. That is why we have published them: so that we can now discuss and fine-tune them to the extent that we need to. As I said, we will be able to move on this when we come to these clauses on Report, having done the exercise and worked out what it means in terms of entitlement thresholds.

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[Baroness Wilkins]

I thank the noble Lord for that explanation. As the noble Baroness, Lady Campbell, said, it is the Government's stated aim that the new system should be underpinned by the social model. Ministers have insisted that the assessment process should recognise the disabling barriers that stand in the way of full and equal citizenship for people who need support to go about their daily lives. The Minister for Disabled People recently stated:

“Our vision is clear: we want to remove barriers to create opportunities for disabled people to be able to fulfil their potential and be fully participating members of society”.

I welcome the amended draft regulations that were published by the Government on Friday. They take into account some of the criticisms of the earlier draft. However, as the noble Baroness, Lady Campbell, said, this is only a start. There is still concern about whether the Government will be able to identify the needs of a broad range of people, including those who need to make greater use of utilities or who incur additional transport costs. The amendments will assist the Government's recognition of the need for the assessment process to recognise the impact of disabling barriers. They will reassure disabled people and their organisations that they have been listened to, and they will provide the clear principle on which the Government say they want the new assessment to be based.

DLA and its replacement, PIP—DCLP as we will now call it—were created in recognition of the fact that it is highly costly to live as a disabled person in today's society. It is not just impairment or illness that create costs but the environmental, economic and attitudinal barriers that often accompany such experiences. The Counting the Cost report by Scope and Demos clearly demonstrated that factors such as the suitability of housing, the accessibility of local transport links and whether an individual has already received other forms of support from friends and family will all contribute to their extra costs. Therefore, it is imperative that these factors are considered when designing the assessment for PIP or DCLP. Otherwise, as the noble Baroness, Lady Campbell, eloquently outlined, many disabled people across the country will fail to receive the most appropriate levels of support, and the new assessment process will not be fit for the Government's stated purpose.

[Baroness Hollis of Heigham]

My Lords, I was rather surprised to see that the amendment was felt to be needed. I had thought that the past 30 years would have made such an amendment redundant. Some time back, for just a few months and for reasons that I am ashamed to admit, I was in a wheelchair. Looking back, it is hard to say whether the difficulties I had were due to social or medical factors. What I am sure about is that an impairment easily becomes a disability if the environment is not supportive of that individual. That seems to make the difference.

What puzzled me until the noble Lord, Lord Addington, mentioned it was that we had not referred to the DDA. The whole point of the DDA was to set the medical impairment in a context which, through social, practical, emotional and moral reasons, did not serve to bar the person from full involvement in their lives. What we asked with the DDA was that employers and providers of goods and services should be required to make “reasonable” adjustments. This seemed a perfectly intelligent balance between the costs for small businesses and the rights of individuals not to face artificially induced and constructed barriers to their full social inclusion.

I remember going around the city and looking at our historic buildings, which we had been told by various people could not be made accessible for disabled people. On the contrary, the brilliant architect John Goldsmith, who was then over at the old DoE and was himself disabled, showed how we could ensure full access to buildings from museums to 18th century chapels for disabled people in wheelchairs and the like. In the process, mothers with buggies, pensioners loaded down with bags and a whole swathe of the community found that they had added access on the back of what we were doing nominally for disabled people. We opened up some of the most beautiful buildings of the City to perhaps a third of its population who had found barriers in their way. Without needing to get into a debate about social and medical because I cannot follow down those paths, I say to the Minister that I just do not see how you can separate the one from the other, because they interlock whether they be transport, housing, public access to buildings or whatever. Unless you have both sides of that equation, an impairment will continue to remain a disability—unnecessarily so—for far too many people.

[Baroness Grey-Thompson]

My Lords, I rise very briefly to support this amendment as my name is on it. Others have explained very clearly the need for these amendments. More specifically, I rise to support the noble Lord, Lord Wigley. The social model was a lifeline to me. My parents brought me up to believe that having an impairment was not my fault. I became a wheelchair user at the age of seven—some 35 years ago. I was brought up in the social model before there was even a name for it, but I also grew up in a world where there were loads of people who almost delighted in giving me the long list of things that I never could, or even should, do, such as go to the cinema, stay in a mainstream school, go to university, go to a sports club, or even, more recently, get married and have a baby. The social model outlines very clearly how disabled people can play their part in society. We should not take this for granted because it would be too easy to forget what the social model is.