Welfare Reform Bill

Baroness Lister of Burtersett Excerpts

Wednesday 23rd November 2011 Grand Committee

[Baroness Lister of Burtersett]

I know that I have already spoken once but I want to ask a question now rather than jump up while the Minister is speaking, because I do not think that we have covered it so far. It is about free school meals. I believe it has been made clear that free school meals as an in-kind benefit will not be taken into account as a benefit received for the cap. However, the Government are currently consulting through the Social Security Advisory Committee about how such passported benefits should be treated with the universal credit. Has the Social Security Advisory Committee been advised about what would happen if it were to recommend that free school meals should become part of universal credit cash payment? Would that bit be treated as separate so that it is not taken as part of the cap, as it would be if it were still paid in kind, or would it be treated as income for the cap? That could be quite an issue in determining whether noble Lords want to support payment in kind or in cash. If the Minister will cover that in his response, I shall be very grateful.

[Lord Northbourne]

My Lords, I shall not speak at any length because I was not able to be here for the previous day in Committee, but I am very concerned about the effect of the Government’s proposals on carers.

On paying rent to tenants rather than landlords, does the Minister know what the estimated fraud is at present? A few years ago I set down a Question in the House and it emerged that payment to landlords was causing fraud of about £2 billion a year, mainly because they put in applications for addresses that did not exist. If that is the case it slightly affects the statistics, and it must mean that paying to tenants would probably be more efficient.

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[Lord Freud]

By the time that I am able to set out these arrangements Committee Members will have a tight band in which to make a judgment. Although it will not be precise I hope that there will be a reasonable degree of precision to enable Members to reach key judgments.

As I confirmed on Monday, support for childcare—

[Baroness Lister of Burtersett]

The Minister seems to be moving off PIP. When we discussed PIP earlier I asked a question and the Minister said that it would be appropriate to discuss it as part of the benefit cap. I do not think that he has addressed the question. How many people does he estimate will be affected by the cap as a result of the PIP waiting period going up from three months to six months, and will he consider backdating entitlement for those who then become eligible for PIP?

[Lord Freud]

Yes, my Lords; that is an excellent question in this sense. I have made clear that we are looking at transitional arrangements, and I will look at precisely this issue of the timing with PIP in the light of those transitional arrangements as people move through. Clearly I have already committed to looking at the three months and the six months, so I have something of a three-handed chess operation to get through, but I hope to come back with the pieces in the right place—or, rather, although the pieces might be in position, they might not be in the right place as far as the noble Baroness is concerned. It will at least be a clear understanding of the position. I absolutely bear in mind the point that she has made.

The noble Baroness’s other question was on school meals. I am happy to commit that, however we restructure the provision of the passported benefit of school meals, it will remain outside the cap in the same way as childcare.

With regard to the kinship care amendment, we have already discussed and recognised in Committee the valuable role that kinship carers fulfil. I made a personal commitment, supported by the Secretary of State, to look at a range of issues affecting this group. I have already had a number of meetings with organisations that support kinship carers to help me better understand their priorities. These carers are able to receive support for the children in their care through the benefit system as, unlike approved foster carers, they have access to child benefit and child tax credit on the same basis as parents. Any payments they receive from the local authority will be disregarded. This parity of treatment with parents will be continued with the introduction of universal credit.

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[Baroness Lister of Burtersett]

My Lords, perhaps the Minister will say more about that. I do not know about other noble Lords but I am afraid that I do not find that enough. I understand the broader argument about the limits and, as the Minister knows, I disagree. There has been talk about a level playing field. Will he explain to the Committee how the Government justify the fact that child benefit is being taken into account on one side of the equation and not on the other when we know that all those families on median earnings are getting child benefit? That is what I do not understand. In the previous session, I think it was my noble friend Lady Hollis who referred to comparing apples and pears. We are not comparing like with like.

[Lord Freud]

My Lords, I acknowledge that we are not comparing like with like. We are looking at a sensible level at which to put the maximum benefit payment. The level that we are looking at is the equivalent of a household earning £35,000. I think that one can overelaborate the logic, which I will not attempt to do here.

Amendment 99AA, in the name of the noble Lord, Lord Best, would introduce a grace period. I accept that there will be occasions when changes occur that are beyond a household’s control. We have said that we are looking at what transitional arrangements might be appropriate. The arguments that I was laying around the PIP are equally applicable here.

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[Lord Freud]

I return to the principle. As I understand it, this is a principle with which the Opposition agree: that there should be a limit on the amount of benefit a household can obtain. We have set that limit at the equivalent of £35,000 of earnings before tax and national insurance.

[Baroness Lister of Burtersett]

I do not know whether the noble Lord, Lord Kirkwood—of wherever he is of—would comment, if he were here, but he spelt out a very powerful argument of principle about entitlement. I have not heard the noble Lord address that argument and, in his absence, I would be very grateful if he could do so.

[Baroness Hollis of Heigham]

Basically, the noble Lord is constructing universal credit based on meeting several different objectives and many of us support this very strongly. However, he then artificially reduces the amount that some people will get under the very structure he has set out to meet the objectives he has outlined. It is that inconsistency of a deliberate cut to an entitlement, constructed by himself through universal credit, that we find unacceptable—so far it has not been explained to us—particularly when some of the consequences may cost us more.

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[Lord Freud]

That is one of the areas of support. If we have about one-third of families who are subject to full conditionality and others subject to partial conditionality, by which we mean moving towards work over a period, a very substantial proportion of the group can be helped into the workplace.

[Baroness Lister of Burtersett]

Is the Minister really saying that it would be supporting, say, a lone mother who has a baby to, in effect, require her to take a job as the only way she can avoid the benefit cap or to move to an area where she does not know people and has not got the support network she needs for her baby? I cannot believe that that is what the Minister is saying.

[Lord Freud]

There is a combination there. Those are the choices that half of the low income working families need to take, although they are not even low income families—this is pretty high income. I am not specifying any more, but we will look at hard cases. I do not want to be “loaves and fishes” about hard cases either, which I know the noble Baroness would want to accuse me of, but those are the two areas relevant to that case study.

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[Baroness Lister of Burtersett]

My Lords, I support the two overlapping amendments, Amendments 102ZA and 102A, as well as Amendment 102B, to which I will not speak specifically. Clause 97 is the Groundhog Day clause. Back in the 1980s I helped to lead a charge against the then Conservative Government’s attempt to pay the family credit through the wage packet. I then helped to persuade the previous Government of the error of their ways when they proposed to pay working families’ tax credit through the wage packet. I was able to do this using JRF-funded research that I had just carried out with Jacky Goode and Clare Callender into the distribution of income within families in receipt of benefits. It demonstrated the importance of paying benefits for children to the mother, who was in all those families the parent with the main responsibility for the day-to-day care of the children. Indeed, once out-of-work families had migrated to child tax credit, we would have achieved that for out-of-work families as well as those in work.

It was with a heavy heart that I realised we were back to square one and having to persuade the Government of the day why it is so important to pay money for children direct to the parent who has the main responsibility for the day-to-day care of the children and for day-to-day budgeting. But this time the stakes are that much higher because so much is being wrapped up in the universal credit, particularly because, as Amendment 102ZA refers to, payment for housing costs are also at issue. We need to bear in mind here our earlier debate about the hazards of payment of rent as part of the universal credit.

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[Lord Freud]

However, in circumstances where a universal credit award is split, neither party will receive specific elements such as housing or childcare. They will each receive a proportion of the total award and decide for themselves how best to use the money. This adheres to one of the key principles of universal credit, which is that claimants must be responsible for their own budgeting.

In answer to the specific question from the noble Baroness, Lady Lister, contributory benefits will continue to be individualised entitlements, but we are looking at options for payment of benefit in cases where a household has entitlement to both contributory benefits and universal credit. It may be simpler to make a single payment of universal credit in that situation, but that is just one possible option and we have the power to cover different approaches.

We are, however, committed to ensuring that people can access support to manage their payment and help them budget effectively. This is likely to include access to nationally available advice and guidance, locally delivered targeted support and improved access to budgeting products.

Budgeting products, I know, mystify the noble Baroness. It is easy to think about universal credit and such areas in slightly Victorian terms. When we look at what universal credit is and the support mechanisms that are under it and wrap it up, we see that there are a huge number of options. I am actively looking at those and interested in encouraging access to what are popularly known as jam jar accounts. Those accounts allow partners to allocate part of their payment for specific purposes, particularly the ones that need to go to utility bills and rent. Such accounts incorporate direct debits and such things. There is a lot of work to be done in this area and I hope to be able to share that with noble Lords as we develop it.

We are talking to a lot of people about this. As well as to the banks and the financial services industry, we are talking to local authorities, housing associations and the voluntary sector about how to deliver this. I may have some more information about how this will start to work. I hope that it will break us out of what could be a 20-year debate into the opportunities offered by modern technology. I hope that I will be able to keep noble Lords updated.

[Baroness Lister of Burtersett]

Will the Minister be able to update us before we get to this on Report? I am sure that we will want to return to this on Report.

[Lord Freud]

I would like to. I have people working on this and we are beginning to think quite differently about how these issues can be addressed—what is universal credit, what is a banking product and where is the join. We must not forget that, at a simple level, a universal credit is a payment stream with budgeting advances. It does not take a lot of imagination to see how it could join up with a more formal banking product and we have to work out where the line is drawn.

Turning to Amendment 102B, I appreciate that the intention behind it is to demonstrate that the taper can be applied to individual elements within the overall universal credit award so that payment of—

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[Baroness Sherlock]

Before my noble friend responds, will the Minister explain one thing to the Committee? He has explained why he wants to make clear to a claimant household exactly what income is coming to it as a result of universal credit and the different components to help them understand that. Why does he then have a problem with separating payments as opposed to assessments?

[Baroness Lister of Burtersett]

To save the Minister jumping up and down, I asked him a specific question about monitoring the impact on the distribution of income within households which I would be grateful if he would answer. I do not think he answered it, although the reply has been so fragmented because of the Divisions that we may have missed it.

[Lord Freud]

On the first question, I think we should look at this rather differently. It is one payment to the household. On whether we can look at how the household can do different things with that payment, I am very happy to look at all the budgeting supporting mechanisms. I am actively looking at them, and I hope I will get some more information on that.

To be honest, I have not got on the top of my head the detail on the monitoring. We will be looking at it very closely when that comes in and will be devising a structure to do that. As noble Lords know, we are planning to have a very substantial research exercise around universal credit, mainly because it is an almost unique research laboratory opportunity in that we can capture in one place all the different behaviours. I am looking very closely at how we can get world-class research behind many aspects of the universal credit.

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Moved by

[Baroness Lister of Burtersett]

103ZZZA: Clause 102, Page 68, line 25, at end insert—
“(8) For the purposes of this section, “entitlement” means the amount that would have been awarded to the claimant had the claim been correctly represented and all relevant material facts disclosed for the period to which the overpayment applies.”

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[Baroness Lister of Burtersett]

In moving Amendment 103ZZZA I shall speak also in support of Amendment 103ZA tabled in the name of the noble Baroness, Lady Hollins, to which I have added my name. In fact, Amendment 103ZZZA has been designed with the help of the Child Poverty Action Group to complement and support Amendment 103ZA, and it is just an accident of drafting that it is being taken first. I shall therefore start by speaking to Amendment 103ZA, which also has the support of Carers 2000 and a large number of charities and churches. The purpose of the two amendments is to apply to universal credit the rules on recoverability of overpayments that reflect those currently applied to most benefits in regard to official errors that a claimant could not have known about and to provide for the offset of underlying entitlement from overpayments, a concept that I shall explain in a moment.

The current rules on the recoverability of overpayments that apply to most benefits provide for recovery where overpayments have arisen because of,

“misrepresentation or failure to disclose a material fact by a claimant or by any other person”.

This is a fair and just test which has been in place for many years and has been tried and tested in case law. Its purpose is to allow the recovery of an overpayment which arises as the result of a claimant’s actions or failures, whether innocent or fraudulent, but protects the claimant in a case where the overpayment arises because of official error by the benefit authorities. In other words, it sanctions recovery in the case of negligence by the claimant but offers protection in the case of negligence by the state. I believe that this is a fair and just balance which reflects the responsibilities of claimants to correctly notify their circumstances when claiming benefit and the benefit authorities to calculate correctly and pay awards based on the information available to them.

Clause 102 proposes to allow recovery in all cases regardless of culpability. I believe that this alters the balance of responsibilities and justice unfairly in favour of the state. It would mean, for example, that a claimant could be presented with a large bill for repayment amounting to thousands of pounds many years after an overpayment occurred, even though the overpayment was due entirely to the negligence of the benefit authorities. In return for providing accurate and up-to-date information, I believe that a claimant is entitled to the accurate calculation of payment of entitlement by the benefit authorities and that the state should bear any losses caused by its own negligence.

In the other place the Minister of State accepted that there are some real issues around whether vulnerable individuals can or cannot be aware of the error that takes place when overpayments are made without them realising it, and they only discover afterwards that they have incurred a substantial debt. We have to be careful and sensitive in that situation. He went on to say:

“The real question about the clause, however, is whether it is sensible to establish safeguards in primary legislation that apply absolutes to a situation and which effectively say, ‘You can never do anything’”.—[Official Report, Commons, Welfare Reform Bill Public Bill Committee, 19/5/11; col. 1018.]

That recognition of the sensitivity of this is welcome, but my answer to the Minister’s question in this instance is “yes”. The Government’s view however, is, of course, “no”. Although the Government appear to have recognised the justice of the case, they have done so only by indicating that they will provide for non-recovery in cases of official error in a code of practice on recovery. Can the Minister say whether that code of practice will be published, whether it will be made public, and exactly what it will cover?

I do not believe that a code of practice is sufficient, and I would argue that it is essential that provision is statutory so that an aggrieved claimant has the right of appeal against recoverability to an independent tribunal. The claimant should have a clear right rather than be vulnerable to discretionary decision-making. The Government have expressed their confidence that the introduction of universal credit will significantly reduce the scope for official error. If that is the case, the administrative burden of retaining protections for claimants unjustly prejudiced by official-error overpayments should be greatly reduced.

The system of automatic recoverability, perhaps supplemented by a non-statutory code of practice as proposed in Clause 102, mirrors the system which applied to tax credits. This system has blighted the administration of tax credits, caused widespread injustice and hardship and has been widely condemned in the media and in reports by the Parliamentary Ombudsman and the Select Committees in the other place. It has also resulted in thousands of complaints to MPs, the Revenue adjudicator and the ombudsman.

Amendment 103ZZZA provides for the offset of underlying entitlement when calculating overpayments. Underlying entitlement means the entitlement that would have been paid to the claimant had the claim been made correctly at the time. For example, an overpayment might arise if a claimant had separated from their partner and the claim continued to be paid as a couple claimed for several weeks after the date of separation. The claimant had not declared the change of circumstances immediately and had told their personal adviser that they were not aware that they needed to because they had hoped that the separation was temporary. I think that sometimes, in those circumstances, you do not really want to face up to what is happening. If the claim is cancelled from the date of the separation then the claimant must make a new claim. However, had they immediately declared the change then their claim would have been reassessed as a single claim, so it would have given rise to entitlement as a single claimant which could be offset against the overpayment as underlying entitlement. I am sorry that that is slightly complicated.

This mirrors the provision in the housing and council tax benefit regulations which ensures that only the true amount of excess entitlement is recovered. This provision is particularly needed in relation to universal credit because there is a requirement for the benefit to be claimed by either a single claimant or by both members of a couple, which, as is the case with tax credits, results in many notional overpayments when there is a change of status from single to joint claims and vice versa. The Revenue has belatedly recognised the need for the offset of underlying entitlement in such cases and introduced non-statutory provision for this from January 2010. This Bill gives the opportunity of providing for offsetting on a statutory basis, ensuring that it is applied fairly, openly and consistently.

It may be that it is intended to do this in regulations. I must apologise because I have seen the draft regulations only today. I have had a quick look at them and it seems that they are perhaps intended to do that. I am glad that the Minister is nodding but it would be even better if he put it formally on the record so that we know that that is the case. I am very happy that for once the Minister is nodding rather than shaking his head when I am speaking. There is another question that I hope the Minister will be nodding at as well. Can he assure the Committee that there will be a right of appeal to an independent tribunal in the case of a dispute as to whether an overpayment was caused by official error and should or should not be recovered; or—I do not see any nodding going on there—if there is no such right of appeal, how will a claimant be able to challenge a decision to recover an overpayment?

In conclusion, this might appear to be a rather techy amendment. However, the strong lobbying by a wide number of churches and charities signals its significance. The reason they are so concerned is in part because they believe it to be simply unfair that a claimant might have to pay for a mistake made by the state. They are also concerned because they know from their own work what this would mean in terms of hardship and possibly increased debt to moneylenders and loan sharks as claimants’ benefit was reduced below the statutory minimum. Heaven help them if they are also subject to capping. I hope the Minister will look favourably on a small but important amendment, which serves to protect the underlying rights of claimants. I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I support the case that the noble Baroness has made. I am particularly interested in the answer to the question about an independent appeal right in these circumstances. That would be very useful indeed and I hope that the Minister can confirm that that will be true.

I have four amendments in this group. They can be dealt with with reasonable dispatch but they deal with a very important issue that surrounds the whole question of amounts recoverable by deductions from earnings. During the Bill’s Commons stages the Government amended Clause 102 to add a new Section 71ZD(3)(e), which addresses the,

“level of earnings below which earnings must not be reduced”.

That is very welcome, as far as it goes, but I wonder whether the Minister could say a bit about whether any thought has been given to how that will be delivered and how that protection will be rolled out. That is important.

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[Baroness Lister of Burtersett]

My Lords, I will be very brief. I thank the various noble Lords who have contributed and really strengthened the case that was made. Readers of the Official Report may not be able to tell a joke when they see it—my noble friend was not supporting monthly payments, and we will be coming back to that on Report.

[Baroness Hayter of Kentish Town]

That is right.

[Baroness Lister of Burtersett]

I am very glad that the noble Lord has put on record that the question about underlying entitlement will be covered in the regulations. I am sorry that he is not prepared to put into statute the protection of claimants where it is the department that has made the mistake, not the individual. I am unhappy with so much discretion, and the noble Baroness, Lady Hollins, made that point. I am very pleased that the code of practice will be published in the form of a leaflet and that noble Lords will be able to see it before Report. I welcome that, and I welcome what I think the Minister said that there would the general right of appeal on overpayment questions. It is good to have that on the record. I beg leave to withdraw the amendment.

Amendment 103ZZZA withdrawn.