Bereavement Benefits (Remedial) Order 2022

Baroness Sherlock Excerpts

Tuesday 17th January 2023 Grand Committee

[Baroness Brinton (LD)]

My Lords, I too start by thanking the Minister for his helpful explanation. I apologise for not being able to attend the briefing, but Monday mornings are a problem.

On balance, we on these Benches are as pleased as other speakers that this has now come to fruition. We are grateful for the work that the previous Minister, the noble Baroness, Lady Stedman-Scott, did on this. The example given by the noble Baroness, Lady Hayman, was extremely helpful, and the points raised by the noble Baroness, Lady Altmann, and the noble Lords, Lord Jones and Lord Davies, on some of the other implications, such as tax, are very interesting.

I am sorry that I will now get into some really difficult areas; I hope the Minister will bear with me. I appreciate that I am creating a scenario to which there may not be a speedy response, and I am more than happy to have a written reply. I am particularly interested in paragraphs 7.23 to 7.25 of the Explanatory Memorandum, which set out the determining hierarchy should there appear to be more than one claimant. It is very helpful.

In his introduction, the Minister talked about polyamory, but there are other circumstances as well, such as where people with caring responsibilities live under the same roof, which might include familial members who are not actually spouses but, in the event of the death of the parent—for this purpose I am assuming it is a sole parent who is dying—there are others who will take over responsibility for the children. I know that there has been some concern over multiple claims, and paragraphs 7.23 to 7.25 helpfully set out the priority order.

For me, the issue is much more about the JCHR’s proposal that this benefit should be identified as belonging to children. I am not sure it said it should be paid directly to the children, but because much of it is determined on the age of the children it is clearly designed to support extra costs for somebody with children who has lost a partner. For me, that is important, because I want to raise the issue of kinship carers.

I make a full declaration: I think that my husband and I counted as kinship carers 20 years ago when we became foster parents and then guardians, approved by the family courts, for our best friend. When she died, her children joined us. We had to navigate all the systems in place at that time, which included going to the family court and getting the residency order. That enabled us to claim child benefit for the children. I know that is now means tested, but I am talking about eligibility for child benefit.

The organisation Kinship consistently reports that family members who take on responsibility for children after a partner either has been unable to look after them or has died, as in this circumstance, have ended up having to leave their jobs, not being entitled to benefits and finding every barrier put in their way because they are not typical family carers. Even though they may have had to go through the fostering approval process, as we did, because the courts need to be satisfied that they are capable of looking after and taking responsibility for the children, they are not entitled to foster payments because they are regarded as kinship carers.

The “Emmerdale” actor Jay Kontzle, who was raised by his grandparents after his mother died when he was four, recently said he saw at first hand the way it affected their lives. His grandmother had to stop work and they both had to take on the very difficult task of looking after their orphaned grandchild. It is helpful that he has done that. Kinship surveys have shown that 45% of carers give up jobs and have found repeatedly that they were not eligible for support.

I am remembering my schoolgirl Latin. There is a word, “num”, which notoriously requires a negative answer. I think I expect a negative answer, but there is a real injustice here for this group of kinship carers, whose identification is confirmed by the courts and other benefits but who would not be eligible under these arrangements unless they were living in the same house. How long do they need to live in the house? I wonder whether the Minister can look at this. It may be that this is one of those special cases where there is nobody else who would obviously qualify but where it is needed, for the children and the life changes they will face, for the kinship carers to be considered eligible.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for his introduction to this remedial order and all noble Lords who have spoken. I always think that any debate that starts, “Let me give some context from 1925” is never going to be speedy, but let us work through what we have heard today.

Before I start, I congratulate the noble Baroness, Lady Hayman. It is always lovely to find that somebody who writes to a Member of the House of Lords is listened to, the issue is taken up and something happens. I congratulate her on her perseverance, as well as the former Minister, the noble Baroness, Lady Stedman-Scott, on her willingness to listen.

I would be very interested to hear answers to a number of the questions that have come up. Obviously, I am glad the Government are stepping forward to take the appropriate response to fulfil their legal obligations. We would not want in any way to stand in the way of this, but there are some important questions still to be asked about how it will work in practice, as my noble friend Lord Davies said.

First there is the question of how DWP will make decisions on whether someone was cohabiting with a partner who has died and therefore is eligible for support. As we have heard, DWP has established practices to decide whether someone is cohabiting. Many years ago, I ran a charity working with single parents, and the rumour mill was alive that the “two toothbrushes test” was the one deployed. Whether or not this was ever the case, the assumption is that in plenty of cases there was no formal evidence, such as a shared rent book or shared bills, yet people were held to be cohabiting when in fact they were being given benefits as a single parent.

There is no question that the DWP has ways of determining this. The noble Baroness, Lady Altmann, pointed out that it has always been able to do so. Indeed, ironically, widowed parent’s allowance was not given to someone who was cohabiting, but you lost it if you started cohabiting after you were bereaved. There obviously must have been some means for making this assessment.

My noble friend Lord Davies asked a really good question: will the criteria be the same for this as for other tests that are applied? If the Government could explain that, it would be really helpful. I would be very interested in the answer to the question raised by the noble Baroness, Lady Brinton, about the hierarchy and the breadth to which that is accepted.

The next thing I found myself wrestling with is the fact that WPA is an “overlapping benefit”, in the jargon, so presumably there will be some people who claimed another contributory benefit because, at the time, they were deemed not to be eligible for widowed parent’s allowance, yet they should have been and had they been entitled to WPA they might have been better off. Can the Minister tell us whether the previous benefit payment is off-set against the backdated WPA where this happens? If so, over what period are the payments?

As we have heard, the order has retrospective effect to the date of the McLaughlin judgment in 2018. My noble friend Lord Jones asked some very good questions about how many people will be affected and the global sum involved. To take that on a stage, can the Minister tell us the most that any one person could be due in backdated benefits? I want to know because of the point raised by the noble Baroness, Lady Altmann: if the sum is large enough for someone on modest means, they might want to husband it quite carefully, but if that is the case, they might have some left over when they go into the next financial year because it has been disregarded for only 12 months. If so, they could find themselves penalised and given less in means-tested benefits in the following year because they had this capital sum available. Will they be told that? How will they be warned that this could happen? The other side of the coin—the point made by the noble Baroness, Lady Altmann—is: if they decide to spend it all in the first 12 months, is there any danger that it then gets treated as notional capital because the rules on deprivation of capital hove into view? If the Minister could reassure us, that would be helpful.

The next question is on tax credits. I confess that I am quite confused on this. I was trying to listen to what the Minister said, but I did not quite catch it. Tax credits do not treat capital in the way universal credit does, so I am still not clear as to how any backdated lump-sum payment for WPA will be treated for those on tax credits. I think I heard the Minister say that a backdated payment will be assessed in the year of payment, not the year of entitlement. Can he confirm that? Could he possibly confirm to me now, before I carry on asking questions, whether that lump sum is treated as capital or as income for tax credit purposes? Maybe he could nod if it is capital or if it is income—I am trying to avoid having to intervene to ask the question again when he responds. If it is treated as capital and it is all treated in the year of payment, then it is disregarded and we do not have a problem; if it is treated as income, we do. In which case, can he explain what happens? What is it set against? Is it just the tax credit entitlement in year? Is there any effect from previous years? If this is the case, I assume there is no question of going back and reopening finalised previous tax credit awards. Is there any implication for previous years’ tax credit awards that are not yet “finalised”, in the jargon? Could that happen in any way?

Finally on this point, there is the question of the benefit cap. WPA and BSP both count towards the benefit cap, so it is obviously possible to imagine that a lump sum might take somebody over the benefit cap threshold when an annual entitlement would not have. Will this be affected by the benefit cap, or will the cap be applied retrospectively to previous years by attributing the relevant WPA to each year? What will happen there?

On the money front, there is the question of taxation. As we have heard, BSP is not taxable but WPA is, and in the year of entitlement rather than the year of payment. Therefore, if a lump sum is paid for backdated entitlement, tax is likely to be due on that. Like others, I read the very interesting briefing from the Low Incomes Tax Reform Group. It pointed out that the plan seems to be to pay lump sums gross rather than net of tax, so the obligation then rests on the claimant to pay the backdated tax. I think I heard the Minister say that the Government will flag these cases up to HMRC so that it knows to make an assessment for tax, and I think he said they will flag it up to the claimant so that they know the tax will be payable. Could he clarify that last point in particular? Will they be told what is payable and which tax year it applies to? Many of those people will not have an accountant or any way of understanding this, but they need to know how much of this lump sum to keep to give to the taxman down the line, rather than spending it and then finding themselves even worse off.

--- Later in debate ---

I suspect I have missed out on answering all the questions, but I will look at Hansard, as will my team, and will be sure to answer any questions I have not answered in letter form.

[Baroness Sherlock (Lab)]

I am grateful to the Minister and thank him for the answers he has been able to give. He was unable to answer questions from my noble friend and me about the treatment of the lump sums, which are extremely important. They are at the heart of the way this order will be operationalised. Given that, according to the order, it takes affect the day after it is made, can the Minister undertake to write as quickly as possible?

[Viscount Younger of Leckie (Con)]

The noble Baroness raises a very fair point. I will speak to the team and see what we can do to write a letter quickly covering all the points, not just that particular point.