Social Security (Jobseeker’s Allowance and Employment and Support Allowance) (Waiting Days) Amendment Regulations 2014

Baroness Lister of Burtersett Excerpts

Wednesday 19th November 2014 Grand Committee

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I am substantially discomfited by the fact that sitting on my right-hand side is the chairman of the Delegated Powers and Regulatory Reform Committee. Next week she is chairing a seminar on how we deal with these orders, and I hope that she does not mark me down too hard.

These regulations are not new to us, and we as a Grand Committee have been considerably assisted in their consideration by the work done, as always, by the scrutiny committee, which identified—rightly, I think—that these amendment regulations raise issues of policy interest to the House. I am also indebted to the Social Security Advisory Committee, which—again rightly, in my view—engaged in a formal consultation on these orders. I think that that was the right thing to do. I am sure that, like me, colleagues have been able to read the orders carefully; they repay careful study, and a consultation was proper.

In passing, I would say that it is disappointing that we got advance notice of these regulations in 2013—I think it was in the Budget, or perhaps the Autumn Statement—and that was repeated in the Budget Statement 2014, but these regulations required some consultation if the policymaking was going to be done carefully, and there was a whole fallow year following their announcement with a flourish—and I am getting more and more nervous about social security announcements that are made with a flourish in Budgets. So, that time in the year 2013-14 could have been used to look at some of these things.

The evidence that the SSAC has uncovered is invaluable in the consideration of this policy. Indeed, as the Explanatory Memorandum says, the estimated saving is some £50 million in fiscal year 2015-16, and the savings will diminish thereafter. I guess that that is because we approach the introduction of universal credit in 2017-18, and I shall come back later to that important moment. The Explanatory Memorandum mentions the calculations done by the department, and these are useful for reference. Paragraph 3.10 of the SSAC report says:

“The … analysis indicates that for 2015/16, the number of new claimants likely to be most at risk of suffering financial hardship are around 245,000 in JSA and 35,000 in ESA … The estimated average loss of benefit to each claimant from this policy change is £40 for JSA claimants and £50 for ESA claimants”.

That is very helpful to know. The point that I want to raise more than anything else is the hardship that will be experienced by that client group—the 35,000 people on ESA and the 245,000 on JSA. That is the point of discussing this here today.

I am opposed to these changes. If I thought I had any chance of getting a Division that would successfully annul them, I would have tried that. I am seriously considering doing so, depending on what support I can garner from colleagues if restrictions such as waiting days are put on universal credit as we approach 2017. These are savings dressed up. They are pretty mean-spirited and hit the most vulnerable. They again concentrate cuts on the working-age population and take no account whatever of the environment of the past four or five years. A policy of this kind, if it were to be applied eventually to universal credit, would be much worse.

I therefore support the SSAC’s recommendations and need to continue the analysis. I understand and am grateful for the extra work that the department has put in as a result of the request from the Social Security Advisory Committee. The case for exempting ESA was strongly made but resisted by the Government, which is a shame. The case that the SSAC made for promoting short-term benefit advances as a way of trying to alleviate some of the hardship was discarded in a rather offhand way by the Government. Members of the ESA and JSA client group who are most at risk in 2015 and beyond will have to rely on STBAs because they do not have any other options to plug gaps in benefit. I clearly support the idea from the SSAC that communications must be absolutely crystal clear regarding what is happening to the client group so that they can understand the position in advance and get their claims in early. The recommendations of the committee were all well founded. I was pleased that the Government accepted some, but not all, of them.

I want to say a word about context because I get the impression that the department does not pay enough attention to the payment regime. The system of paying benefits to low-income households who operate on a weekly or fortnightly cash basis underestimates problem that some of these delays and reductions will bring. I remember the good old days before 1998, as will other colleagues, when benefits were actually paid weekly and everyone knew where they were. That changed in 2009 to payments fortnightly in arrears, and in 2018 we are facing the cliff edge of universal credit paid monthly in arrears. I do not think that the department fully appreciates the significance of the change in the method of payment. I point out the obvious fact that Social Fund crisis loans are no longer available and there is an uncertain labour market in which people are much more quickly churning in and out of benefits and work.

Yesterday I was made aware of a publication by the Institute for Fiscal Studies which reminded me that over the past four years we have been taking, and will take, £20,000 million out of benefit expenditure in every year of this Parliament. That is a huge amount and the vast majority is being focused on working-age benefits. In a wider context, although I might be out of order in terms of this debate, we need to think clearly about how the cuts are shared across any future attempts to reduce social security spending, 50% of which is now spent on the retired cohort of our population.

I want to say a brief word about the eight vulnerable groups who have been identified. I am sure that the categories are not new to any of us. They include 18 to 24 year-olds, the homeless, disabled people and prisoners—who are of particular interest to me as a non-executive director of the Wise Group. We have a Routes Out of Prison programme which tries to mitigate the fact that we send prisoners out on a Thursday morning from Barlinnie prison with £46 in their hands and next to no other support. Issues such as those contained in the regulations will make their lives and futures worse. Concerns about the vulnerable groups identified by the SSAC are all well founded, and we need to watch the impact of these regulations on these eight categories very carefully.

I want to make two other points. The so-called list of investments that we now have access to as a result of this £50 million saving being recycled was first adverted to by the Chancellor as part of the 2013 spending review. They are things like upfront work search, English language requirements, weekly work search reviews and annual verification. I may be missing something, but I thought all this happened anyway. If it has not been happening since 2013, I will be disappointed. I do not see that we can demonstrate clearly that these savings are going to make any difference whatever, which folds back to the point that I made at the very beginning—that this is actually a dressed-up saving. It is the departmental expenditure limit that will get the benefit of this £50 million and next to nothing else. This is why I want to press the Minister about evaluation. There is an undertaking here in the Explanatory Memorandum which talks about looking at the results of these new investments and how beneficial they will be. I am very sceptical about that and would like to hear a little more about it.

The SSAC report says that the statement in the Explanatory Memorandum that there was likely to be “no impact” on business or charities is “implausible”. It is being very polite. Anybody who knows anything about the 245,000 and 35,000 people in the client groups that we are dealing with realises exactly how important charities are to people in that situation. I do not think that the department is living in the real world. It is a laughable statement. This will lead to payday loans and all that they bring, which is potentially deeply regrettable.

With the funding available to local authorities also being reduced, these regulations are bound to increase hardship. It may not involve millions of people, but it will affect those whom it does affect severely. I want the Government, in evaluating how these regulations are implemented, to have very careful regard to the consequences and the effects on these families. I want them in particular to reflect very carefully about bringing forward similar regulations when it comes to introducing universal credit later in the next Parliament. I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I thank the noble Lord, Lord Kirkwood of Kirkhope, for initiating this take note debate on a very important subject. I apologise if I repeat any of the points that he made, but they bear repetition because there has not been sufficient publicity about the implications of these important regulations. The SSAC, as we have heard, is very critical of them, especially of the lack of robust analysis of the costs and benefits. The impact assessment that the Government have produced in response is certainly an improvement. Whether it constitutes that robust analysis is another matter, but it does at least give us more information on those who are likely to be affected. I accept that it does give some credence to the original—unevidenced—claim that many affected would be,

“coming to benefits from relatively well paid jobs”,

as the lowest paid are more likely to have linked claims and therefore not be affected. Nevertheless, nearly two-fifths of JSA and three-fifths of ESA unlinked claims were from those earning less than £5,200.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

I thank noble Lords for their many helpful contributions to the debate. It is clear that this measure has generated a great deal of interest, not just within this House but outside among voluntary and public organisations, which have also presented their views to the Government. The principle behind this extension from three to seven waiting days is that benefits are not intended to provide financial support for very brief periods, for instance when someone is between jobs or during a short period of illness. This measure will generate savings of £125 million over five years. It is money that, as noble Lords have touched on, will be reinvested to help those most at risk of long-term welfare dependency. As noble Lords know, the measures will fund schemes including additional support for lone parents and improving literacy and numeracy skills.

To pick up the question from my noble friend Lady Thomas about any change in those estimates, they were based on departmental forecasts which themselves were based on OBR economic assumptions at the Autumn Statement 2013 and in Budget 2014 and there have not been any updates to this analysis since then, although we are, of course, awaiting another financial event quite shortly.

On the related question from my noble friend Lord Kirkwood and the noble Baroness, Lady Lister, about what and where these investments are, we are expanding on measures that are already in place. They will introduce more rigorous scrutiny on the hardest-to-help claimants. The English language provision is new and will ensure that claimants have the language skills for the workplace. Those methods should enable the claimants to enter the workplace sooner than they otherwise would, which means that they will be earning sooner and not receiving benefits.

[Baroness Lister of Burtersett]

Perhaps I may ask the noble Lord the question raised by SSAC. Is it likely that the people who are going to be adversely affected by this change will be the people who will be helped by these measures?

[Lord Freud]

Yes; I thought that I had made that clear—that the intention is to focus on the people with longer-term difficulties. So, yes, the intention is that it will be those people.

This measure means that many people who make a new claim for jobseeker’s allowance and ESA will see a reduction in their first benefit payment. However, we have measures in place through exemptions and the offer of advances and signposting advice to ensure that claimants who are most in need will continue to be protected.

I hope that I can pick up all the points that have been raised. On the point raised by my noble friends Lord Kirkwood and Lady Thomas on the exemption of ESA claimants, if there had been a differentiation between the two types of claimant there would have been a perverse incentive for people to self-certify sickness for a week and claim ESA rather than JSA in order to get an additional four days’ benefit. There is no evidence that ESA claimants are at greater risk of financial hardship than JSA claimants. Furthermore, to exempt ESA claimants to make that differentiation would be inconsistent with future proposals for universal credit, where our intention is that all ESA-type claimants will be placed in the all work-related requirements group and therefore subject to waiting days. Clearly, waiting days themselves have been a feature of ESA since its introduction in 2008. This measure has simply extended that existing provision for those who do not qualify for an exemption.

The point that my noble friend made about exempting vulnerable groups is clearly one into which we put a lot of consideration, particularly around care leavers, sufferers of domestic violence and ex-prisoners. Bluntly, they were exempted on grounds of practicability. It would have introduced an unworkable, three-tier system and these groups are already required to serve three waiting days, so the only other option would be a full exemption which would go beyond the scope of this change. Despite what my noble friend said about the UC provisions in this line, we are able to make an exemption for these groups in the UC-equivalent provisions. Perhaps that will leave my noble friend somewhat more relaxed about those.

--- Later in debate ---

The noble Baroness, Lady Lister, asked about the number of people, when they had their last payments and the state of their savings. Some 70% of JSA claimants are subject to waiting days, 30% having been exempted because of linking rules. Of that 70%, it is estimated that half have been in employment within three months prior to their claim and 30% are in a benefit with savings of greater than £100. For ESA claimants, 60% of whom are exempt, the equivalent figures are that around half of the other 40% were in paid employment immediately prior to their claim and 38% are estimated to be in a benefit with savings of greater than £100.

[Baroness Lister of Burtersett]

I am sorry to intervene on the Minister. I was not asking about savings, because that is in the public sphere. My question was whether there was any information about people who come out of work in debt or arrears?

[Lord Freud]

I was coming on to that. The noble Baroness asked a series of questions. We do not currently have the information on the proportion of people coming on to benefit who are likely to be in arrears or debt. I am not aware of any published analysis that would allow us to estimate this quickly. All noble Lords who spoke raised the question of short-term advances. SSAC recommended that communications about them should be strengthened.

--- Later in debate ---

[Lord Freud]

A number of noble Lords raised the communications issue around short-term benefit advances. We have taken the recommendation of the committee and issued communications to all staff to improve staff awareness of benefit advances and to remind them of the circumstances in which an advance can be considered.

On the point made by the noble Baroness, Lady Lister, on the report on food banks, I was not at today’s press conference but no one takes the decision to use a food bank lightly. The factors driving food-bank use are many and complex, as today’s report recognises. The report said:

“The immediate income crisis that predominantly led to food bank use was often one incident in a complex life story, in which several other factors had combined to leave people vulnerable and less able to cope with dramatic changes”.

[Baroness Lister of Burtersett]

I agree that we are talking about very difficult lives here, but it is very clear from this research, which is not a huge study but it is from a number of different places using a number of different methodologies, that benefit delays were a very important factor. Given that, does the noble Lord not accept that this measure could well make it worse?

[Lord Freud]

My Lords, I would be the last person to say that the current benefits system was easy to navigate. One of the things that has been driving the reform that we are introducing, universal credit, is the production of an in-work and out-of-work benefit that is easy to navigate. I started researching this area in some depth in 2006 and the irony is that benefit delays under the existing, rather complicated system have actually been improving. That is why I revert to the point that this is a complicated matter, as is acknowledged in today’s report and in other reports. That is the only point I want to make.

There was a series of questions on universal credit and the noble Baroness raised the point about TUC concerns about the length of time claimants have to wait for payments under universal credit. Clearly we have an advances process built in, but probably more important is the system that is now developing of universal support delivered locally, which is designed to work in the local community, both with councils and with voluntary organisations, to bring the support that is specifically required by vulnerable people. The estimated saving from increasing the waiting days in universal credit is £200 million per annum once it is fully rolled out, but this figure will be reviewed and updated with the Autumn Statement. I have talked about exemptions within universal credit.

The noble Lord, Lord McAvoy, asked about our consideration of whether we add waiting days to the assessment period in universal credit or whether we have partial periods of universal credit. We spent a great deal of time considering that issue. Universal credit is an in-work and out-of-work benefit, paid on a monthly basis. That monthly basis is designed to help households to budget on a monthly income and eases the transition from and back into paid work. The one-month assessment period is therefore central to universal credit, and the waiting days in universal credit are days of non-entitlement. I need to remind noble Lords that because universal credit is an in-work and out-of-work benefit, one might not experience waiting days anything like the same number of times as, especially if one is moving from low-paid work to being out of work, one is likely to be consistently on universal credit. That is one of the safety features of universal credit in this regard.

With that I think I have dealt with all the questions raised today and thank my noble friend—