Welfare Reform Bill

Lord Freud Excerpts

Monday 24th October 2011 Grand Committee

[Lord McKenzie of Luton]

My Lords, I support each of these amendments. Perhaps I could start with a reply that was given by Mr Chris Grayling to Stephen Timms in the other place about the cost of this. He said:

“It is estimated that this policy could save up to £100 million over this spending review. Because of the interaction with other changes to support pensioners, which are still being developed, we are not yet able”,

to produce,

“a firm estimate for a long run figure for savings”.—[Official Report, Commons, 18/10/11; col. 936W.]

Notwithstanding the fact that the Government have apparently argued in favour of this policy, because it brings working-age claimants within the conditionality regime, that is the thrust behind this as I understand it.

We heard from my noble friend Lady Drake and the noble Baroness, Lady Greengross, about the possible cost implications for individuals who would have been within the pension credit regime now being forced into the universal credit regime and the losses that could produce. There are not necessarily losses for everyone. Yet the original proposition in the White Paper, as I understand it, was for there to be a choice: that in these circumstances a couple could choose universal credit if they wanted to, or otherwise stay within the pension credit regime. This matter was raised in the other place and I do not think that a satisfactory answer was given for that change of policy which was, by and large, unannounced. A number of points arise. I think it has been confirmed that those who are already in receipt of pension credit when these provisions are introduced will not have to back out of it. Perhaps the Minister can confirm that, but what about if there is a change in circumstances for somebody in that position? If they were perhaps dipping in and out of pension credit because of the savings threshold—or for any other reason—and if they were in at one stage, would they be able to stay in?

My noble friend Lady Drake dealt with the impact of savings. You could have somebody who has just retired and who would have been within the pension credit regime, and maybe just taking a tax-free sum from their pension scheme, now being precluded from being within pension credit and forced out of universal credit as well. On that point, there is a provision in the Bill—I think it is Clause 64—which lays the groundwork for caps to be introduced on capital amounts within pension credit. I am not clear whether that is just to address the issue of housing benefit being attached to pension credit in the future, which has a capital limit attached to it, or to bring the generality of pension credit within the regime that is otherwise going to operate. Perhaps the Minister will take the opportunity to clarify matters on that.

We heard about the impact of passporting, particularly with pension credit currently being a full passport to housing benefit and council tax benefit. However, if in fact the working-age partner does not have to be subject to any conditionality because of a caring responsibility, or for any other reason—perhaps they are subject to no work-related requirements under the assessments that take place—why then would the Government still force that couple through universal credit? If the rationale of using the universal credit to bring people within conditionality falls away, why should those couples not then have the opportunity of remaining in pension credit if they choose? It does not make any sense to say, “We are doing this because we want people to be subjected to conditionality”. If the conditionality rules do not impose any work-related activity or requirement on those individuals, why should they not be able to remain in the pension credit regime?

As has been mentioned, this provision is discriminating against somebody not on their age but on the age of their partner, which is somewhat of a departure from previous policy. I hope that the Minister will address these issues. I fear that this is something which we will have to come back to at Report, because it cannot rest as it stands.

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

My Lords, Amendments 50A and 53 concern couples where one member is above qualifying age for pension credit, and the other below. The Bill provides that such couples will in future claim universal credit rather than pension credit. I should stress that this change will not affect couples already in receipt of pension credit. It will apply only to new cases. The effect will therefore build up slowly and existing cases will not be disturbed.

In response to the point made by the noble Lord, Lord McKenzie, we still need to decide how to deal with cases which move on and off pension credit in future. To pick up on the point made by the noble Baroness, Lady Drake, about the impact assessment, this shows the long-term effect, and not the immediate impact.

I am grateful to the noble Baroness, Lady Greengross, for clarifying that she is not opposed to this change of emphasis in principle. The rationale is that while one member of the couple may be over the qualifying age for pension credit, the other member of the couple is of working age. Since all people of working age who can work should be expected to do so and there are no work-related requirements associated with pension credit, it follows that universal credit is the appropriate benefit. I should stress that the work-related requirements would apply only to the working-age partner.

I am grateful to the noble Baroness, Lady Greengross, for also acknowledging that in some cases the more generous earnings rules in universal credit may mean that it is a more advantageous benefit than pension credit. The disregards and earnings tapers in universal credit will mean that if one or both of the couple does work, they will keep much more of their earnings than they would in pension credit where earnings over £10 a week are deducted pound for pound from the guarantee credit.

The issue is about the rate of universal credit and how this compares with pension credit. Noble Lords will be aware that the levels of support through pension credit are significantly higher than levels of current benefits for people of working age. This is due in particular to the way in which pension-age benefits have been uprated at a faster rate than working-age benefits in recent years.

[Lord Foulkes of Cumnock]

As usual I am not up to speed on everything. Could the noble Lord say exactly what he means in this context by “working age”?

[Lord Freud]

My Lords, I am not often baffled, but by “working age” I mean someone below the state pension age, which is moving currently. But that is a formal definition.

[Lord Foulkes of Cumnock]

I am grateful to the Minister. In other words, as the age of eligibility for a state pension increases, under the definition in this Bill “working age” will increase at the same time with it. Is that right?

[Lord Freud]

Yes, I can confirm to the noble Lord that that is absolutely what is happening here. Clearly, we have debated the changes in pension age. That is to do with the very welcome increase in longevity and the length of people’s healthy lives. Returning to the point, the noble Baroness’s amendment would deal with the difference between pension credit levels and universal credit levels by including an additional amount in universal credit where a claimant is over the state pension qualifying age. I understand the reasoning—and indeed there are currently pensioner premiums along these lines in income support and jobseeker’s allowance. In designing universal credit, however, we have not included any additions specifically for people over pension age. There are two main reasons for this.

First, we think that it could reduce the work incentives for the working-age partner if they are paid a higher rate of benefit simply because they have an older partner. We are already including additions for specific reasons such as caring, or limited capability for work, where people are likely to have longer durations on benefit. Clearly, we are raising some of those levels appreciably. If in a particular case these additions are not appropriate, there ought, in principle, to be as much scope for the working-age partner to work as in any other case, so it is not clear why a higher rate of benefit should be paid.

Secondly, as the noble Baronesses, Lady Drake and Lady Hollis, rightly pointed out, there is a significant programme of change under way for people over pension age. Following the Chancellor’s announcement in the Budget of 23 March, the Government published the Green Paper A State Pension for the 21st Century in April. That paper set out options for reforming the state pension system for future pensioners. In the light of the responses to the Green Paper, we are currently developing proposals for changing the state pension system and at the same time are considering how pension credit may need to change to best meet the needs of future pensioners under any reformed state pension. It would clearly be important to make sure that any arrangements for pensioners dovetail closely with universal credit to ensure a smooth interface and also to ensure that we deal fairly with couples where one person is over pension age and the other is under it. Until our thinking is further developed, we have only one side of the equation. We need both sides of the equation to consider this issue fully. I should just add that clearly once there is a migration on changing pensions the migration strategy into universal credit and the timing of how we take different groups into it will also be hugely relevant. That goes to the heart of the very perceptive question asked by the noble Baroness, Lady Hollis.

[Baroness Hollis of Heigham]

I am grateful for the Minister’s very full reply on that. He clearly anticipated the question coming up. When will he be in a position to tell the Committee about the two timetables? There is the universal credit timetable and people coming over to that and the new pension timetable. When will we be in a position to see? Frankly, if there is only a year or so’s difference between them, that raises a question mark about putting this extra weight on to the complexities of UC for a very short period before it is overtaken in turn by the changes to pensions, at least for the older partner in such a relationship. Can he give us some indication? I suspect that this is probably not worth doing.

[Lord Freud]

My Lords, I do not think I can give a precise time on this because there are quite a lot of moving parts at the moment. All I can do is assure the Committee that we really do have this issue front and centre if we have these two sets of changes. I hope I have explained how we are planning to proceed, and I ask the noble Baroness, Lady Greengross, to withdraw her amendment.

[Lord McKenzie of Luton]

Will the Minister follow up on two points? First, in a situation where the Secretary of State cannot impose the work-related requirement on a claimant because the claimant has limited capability for work and work-related activity, there is nothing in forcing people away from pension credit and into universal credit because the working-age partner is not going to be subject to conditionality in any event. What is the rationale then for preventing people being in pension credit? It seems to me that it falls away completely.

There is a separate question about the impact of capital. My noble friend Lady Drake made the point that currently there is a big difference between the capital rules in pension credit and the capital rules that will operate in universal credit, but there is a provision in the Bill that looks as though a capital limit will be introduced for state pension credit. I do not know whether it is intended that that capital limit will mirror the £6,000 and £16,000 limits that are going to operate generally. If it is, I am not sure that I had cottoned on to that fact before. Or is it simply to deal with the housing component that is obviously going to be brought in and will work alongside pension credit?

[Lord Freud]

I think that I am safe in confirming to the noble Lord that we are bringing in capital limits. They are related to the housing issue, although I think that my colleague Chris Grayling said that they will be at a substantially higher level than those for universal credit. The noble Lord also probed the issue of people where no work conditionality is imposed. Clearly, within universal credit, other additions are going on. It is not a straight comparison. Under universal credit, the other person is likely to have a series of additions as well, so the imbalance is nothing like as great as the simple one.

[Lord McKenzie of Luton]

I accept that point entirely. But under those circumstances why should the option not be available to people, to couples, to go into one or the other, which I think was the original proposition in the White Paper?

[Lord Freud]

That is the nub of the change. When we looked at it, we thought that the appropriate policy was to put everyone below working age in that category. On looking at the noble Lord’s question of why do it when there is not work conditionality, there we have support in universal credit through the additions and the ability to keep a rather simple set of definitions working. That is the rationale.

[Baroness Greengross]

I thank the Minister for responding. Obviously, I am disappointed because I think that it would work in a society where at the age of 55 one could just go and get a job, but we know that that is not the case. Unfortunately, there is a still a lot of discrimination and barriers to older people who try to get a job. More flexibility would be very welcome. I think that the noble Lord said that he cannot do more but that he is still looking to see if things can be improved for these couples. I have hopes that he will look at this again and try to improve on something that seems fairly minor but which would help a lot of people.

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[Lord Freud]

I am happy to send a letter around. We should deal with capital limits in its entirety when we come to Clause 74, which we may get to if we hurry along.

[Baroness Greengross]

My Lords, I apologise for the fact that I am about to chair a meeting on health and rather rudely have got to go. I hope that noble Lords will excuse me for rushing off to Millbank. I beg leave to withdraw the amendment.

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[Baroness Thomas of Winchester]

A long time ago, during the last welfare reform Bill, when the noble Lord, Lord McKenzie, was the Minister, I moved an amendment in favour of free school meals full stop. I think it was the highest kite I have ever flown. I was very much in favour of the benefits that it had. One of them is the startling fact that research has borne out that children concentrate far more in the afternoon if they have a good hot meal inside them, which may be the only meal of the day. This is an extremely important issue.

The other day I discovered that some boroughs are giving children free school meals in primary schools and I think that Suffolk is one of them, so good for it. I shall be interested to hear the Minister's reply.

[Lord Freud]

These amendments would provide a cash amount for school meals and health costs within the universal credit award as opposed to the current system of passported benefits, which are often given as a benefit in kind. Clearly, I understand that to be by way of a probe rather than a specific direction. This is a very complex area and I think all of us in this Committee Room have agreed today what these problems are. Defining entitlement to passported benefits is the responsibility of several government departments and the devolved Administrations. Entitlement and the value of benefits can vary by county or by area. My department is taking a keen interest in the work under way to consider passported benefits across the piece.

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[Lord Wigley]

I apologise very much to the Committee that my five-hour journey from Wales took six hours and that I was late in arriving. The Minister referred to a consultation with the devolved Administrations. Clearly, some of the criteria for passported benefits may vary within the responsibilities of those devolved Administrations. Will the report that he is referring to, and which he will be bringing forward shortly, cover that point in adequate depth to make sure that there is no falling between two stools?

[Lord Freud]

Yes. I thank the noble Lord for that question. I have specifically asked the SSAC to cover the point of working with devolved Administrations when it comes up with its recommendations so that will be incorporated in its original review, let alone in our subsequent review.

[Baroness Hayter of Kentish Town]

My Lords, having learnt last week that the Minister is not a bad man, this week we learn that spring comes after winter and before summer. I have discovered that my education is absolutely complete. We welcome very much the assurance that at the point when he gets the report, he will be looking at this firm of the view that passported benefits should not undermine the incentives to work in the rest of the Bill. It may be no surprise but it is nice to have that—and the acknowledgement of the importance of making sure that any such passported benefits are spent on what they are needed for. Of course, the comment that these will not count towards the benefit cap is particularly welcome. With that, I beg leave to withdraw this amendment.

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[Baroness Sherlock]

I want to intervene briefly to ask the Minister a couple of specific questions. There is very little to add to the speech made by my noble friend Lord Knight of Weymouth. The Minister should hope that this does not go badly because he may find that speech being quoted back at him. He has been warned, and very eloquently too.

I have huge sympathy for the Minister. As I have said before in this Committee, I was involved as a special adviser during the development of tax credits, and I watched Ministers seek and receive all assurances that it would be reasonable for a Minister in those circumstances to have. I would not for one moment suggest that the officials with whom they worked, all of whom I was hugely respectful of, did anything other than give the best assurances they could. However, until a system is up and running one never really knows how it will respond to the realities of the information within it, so we all know this is a risk.

I want to ask the Minister about what kind of assurances he has been seeking and receiving and, in particular, whether he has been getting any independent assurance on the development and management of this project. As I understand it, the DWP’s development of its system is going to be dependent on the revenue’s system. Has the Minister received any assurance from the Treasury that has enabled him to progress, given the interdependence of those two things? Has he received assurances from the Treasury or from HMRC, in particular, about the nature of their systems so that he can make plans on the back of them? Secondly, what assurance has he about whether his plans are robust enough? If he will not tell us what it is, what is the nature of the assurance that was sought and from whom was it sought? I am aware that by and large large-scale government projects of this nature often seek some kind of independent assurance, perhaps from an independent auditor, whether internally or externally procured. Can the Minister assure us that the department has been through that process and can he reassure us on the basis of the reassurance that he has been given?

Thirdly, I am interested in how plan B will work. I am very sorry to say that I cannot make the briefing on 3 November. That is a genuine disappointment on my part. I am in the anorak category as well. I am afraid I am engaged with a communities and victims panel looking at the impact of the riots, and that takes me elsewhere on that day. Can the Minister explain very briefly how plan B will work? For example, is it the intention that businesses will report real-time information manually monthly or that individuals will report? Is the assumption that the DWP part of the game, where it matches up the different packets of real-time information from different employers in relation to individuals or households, will be done automatically as it is now? How will that work? Is it the intention that the new child maintenance system will be dependent on the same HMRC real-time information system? If so, is there any priority about which of these projects gets first dibs on the HMRC data, should it come under pressure?

If the Minister can answer only one question, I am really interested in the assurance question, so he will save me getting up again. Finally, if there is reporting under plan B, has he been able to get advice on what additional pressure that will put on the system? I am conscious that automated systems often put on much less pressure than processing individually and manually entered data, whether from businesses or elsewhere. Is that something that has been factored in?

[Lord Freud]

My Lords, before I respond to the amendment, I want to deal with the issues about what universal credit does and some of its impacts because the noble Lord, Lord Knight, implied that it has a perverse impact on poverty when exactly the opposite is the case. The IFS noted that it is progressive and pointed out that the bottom two quintiles gain £11 and £10 per week respectively and that 80 per cent of the gainers are from those bottom two quintiles. In fact, its estimate is that child poverty will reduce by rather more than our estimate. Our estimate is 350,000 when the system is in; its estimate was 450,000.

I do not want to go over the economic stuff, otherwise we will stay here all day. I want to deal with this issue. I can assure noble Lords that as part of the work to build the universal credit system we are undertaking a level of testing fully commensurate with a programme of this scale. Prior to the main go-live date in October 2013, there will be significant levels of testing specifically focused on ensuring that the various components work effectively together, including realistic business testing. For this project, we are adopting the Agile method of development, which creates and tests working IT components at an early stage. We are actually testing them now, and I shall show them to Members who can attend on 3 November. Instead of building very big sections of the IT system slowly, we are building small pieces more quickly. We are confident that this approach will provide a stable and fully proven system that will allow us to successfully deliver universal credit. I assure my noble friend Lord Boswell that the system will be sized to cater for the worst case volumes and will be robustly tested for performance at peak times. But I do not believe that it is necessary to introduce the additional step of a formal report, with the additional cost to the taxpayer and inherent time delays this would entail.

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[Baroness Sherlock]

I thank the Minister for that. At the outset, obviously that kind of assurance will give confidence in the nature of the planning. Is he receiving independent assurance, as the programme goes on? The fact that he is, very unusually, a member of the programme board as a Minister, is certainly a sign of his own commitment to the project. It makes independent assurance even more important, because part of the point of independent assurance is to give an outside view in case those who are too close to the project may not see pitfalls as they develop.

[Lord Freud]

Yes, I am absolutely aware of that. The Major Projects Authority is looking at the process, and coming up in November or December is the next major independent look through the whole project. It is genuinely independent and quite a tough set of governance.

[Lord Knight of Weymouth]

I am grateful to the Minister. Can he tell us when those reviews will be published and whether they will continue to be published?

[Lord Freud]

The responsibility for those reviews is with the Cabinet Office. It is slightly hazy—I think that is the best word. They seem to get out, but I am not sure of the exact process. I take the point of that question and I will explore and report back to the Committee exactly how that information will be published. It may well be that we would look at extracts. Leave it with me. I take the point and will come back and say exactly how that information will be treated.

I want to clarify for the noble Lord, Lord Knight, his questions on costs because there are a lot of different figures flying around. One of the confusing things is that the figure of £2 billion has genuinely attached itself to two or three different parts of the project so it is easy to get confused. If you see £2 billion you think it is that £2 billion. The first £2 billion is all the costs associated with the implementation and operation of universal credit across the SR10 years, which is not just purely an IT investment. Some £1.5 billion of that is investment in systems, people, estates and other resources to allow the creation of the model. On top of that, there is another £0.5 billion for transitional and future running costs following the launch in October 2013. That £2 billion is a separate £2 billion to the net extra AME costs when it is all in operation compared with the current system. I apologise for the various £2 billions. There are some more running around but let us not get into those.

[Baroness Sherlock]

I am sorry, but I would like the Minister’s help in understanding which £2 billion the Public Accounts Committee was talking about in its report. It said,

“Approximately £628 million of the £2 billion set aside for Universal Credit is capital expenditure and a further £400 million is to cover the increased benefits … So less than half of the funds … will be available for staff costs”.

Is that the £2 billion that he was just talking about?

[Lord Freud]

Yes, that is the £2 billion of the implementation. The £628 million was within the £1.5 billion figure that I was talking about. I apologise for the confusion. There are a lot of figures. There are too many £2 billions. This is the oddest topic to joke about that I have ever come across, but there we are.

The noble Lord raised an issue about the complexity of universal credit in comparison with the ESA. This is a large project. There is no doubt about that. It breaks down to three different projects from the one that the noble Lord, Lord Knight, was talking about. The first is the universal credit administration platform. That is a DWP responsibility. That incorporates large elements that have already been developed, such as the payment accounting system. The next thing is the universal credit real-time earnings calculation and the payment and accounting system. That is basically the front end of the system and the rules engine behind it. Then there is the feed, which is the HMRC RTI system. You are looking almost at two components there: the supply of the information, which is being piloted—those pilots are getting going—and the data cleansing because, as the noble Lord rightly pointed out, getting the data through in a way that is readable and matchable is the key. Currently, the HMRC is working really hard on getting that right. It has got up to a data cleanse of 98.3 per cent and its aim is to push that higher and higher.

On data security, we will use our secure file transfer system, which is already in place between DWP and HMRC and is currently used for national insurance systems as well. We have recently had an independent assessment, which is an extra piece of independent scrutiny, undertaken by IBM on that technology plan. I should add on data sharing, as there was a question from my noble friend Lord German on data standards, that we are using the relevant information—the ISO standard. In fact, it is not a question of having it to be used for universal credit; we are already doing so and it is in place today.

We have a robust governance process with the Major Projects Authority. There is a commitment from me to keep noble Lords well informed on this matter, and I can make that commitment from a stronger position than most Lords Ministers because I am responsible for it. I make that commitment informally and I make it formally. The development can also be monitored by Select Committees in another place—the Work and Pensions Select Committee or the Public Accounts Committee—and they indeed look at it. All the structures are in place to ensure that the introduction of universal credit is properly scrutinised and on that basis I ask the noble Lord not to press this amendment.

[Lord Knight of Weymouth]

My Lords, in my view we have had a useful debate and I hope that others agree. Some helpful and important points were made. The noble Lord, Lord German, talked about the data daisy-chain. Clearly, I hope that he is one of those who will be able to attend at 11.30 am in Room 3A on 3 November to help us scrutinise this. The points that he made about bank accounts and financial inclusion are things that the Minister can take away and reflect on.

The point made by the noble Lord, Lord Boswell, about getting errors seen to quickly and easily—they will inevitably arise—is equally important. I was perhaps clumsily trying to make a point there in respect to the link with rising unemployment, although it is not perhaps directly relevant to universal credit beyond there being potentially more claimants and more volume. That may well not affect the systems but there may well be an increase in the individual cases of error that the system would have to deal with. The substantial worry in increased unemployment is of the capacity of the department itself to oversee the programme when it is distracted by having to deal with the recessionary impacts on it that I outlined. My noble friend Lady Sherlock's points about independent assurance went right to the heart of the issue.

I was reassured, as ever, by the Minister’s detail. The bit I am worried about is that that is what he is focusing on exclusively. I am trying to make the point that there are times when you need to rise above the detail and look at the overall environment in which this is being introduced, and to do your own health check on whether this is the right time—given the economic cycle—to introduce such an ambitious and important reform.

I am reassured by his informal and formal promises to keep this House up to date. In an ideal world, I would ask him, through a Written Ministerial Statement perhaps, to publish the major milestones of the project so that we could anticipate further Written Ministerial Statements in response to each of those milestones as they were reached so that we could have real transparency over the scrutiny. He said there is something hazy around the Major Projects Authority reviews being published and admitted that they tend to come out anyway, so when he looks at that, I hope he decides that, given that they are going to come out anyway, he might as well publish them, then he can take the credit for being an open and transparent Minister, rather than them having to dribble out. Finally, given the confusion around £2 billion and the succession of £2 billions, I would value a note from him to clarify how that works. My guess is that if he copied that to the Committee, it would be gratefully received. On that basis, I am happy to withdraw the amendment.

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[Baroness Meacher]

I rise to speak to Amendments 51CB, 51CC, 71C and 71D on behalf of the noble Lord, Lord Skelmersdale, who sends his apologies to the Committee because he cannot be in his place today. It is a little unusual for me to speak to amendments on behalf of a Conservative Peer, but it is a pleasure to do so.

Before I refer to the comments of the noble Lord on these amendments, I would like to support the comments of the noble Lord, Lord McKenzie, in relation to the claimant commitment and the importance of that containing the responsibilities of the Secretary of State as well as the responsibilities of the claimants themselves, and the importance of specialist Jobcentre Plus staff. I will also speak about those two points in the next group. The groups were together but now they are apart.

The noble Lord, Lord Skelmersdale, has given me his notes on these amendments, which I will try to reflect in my remarks. He says that we heard a lot on the Health and Social Care Bill about the myth that the Secretary of State for Health is in total control of the National Health Service. The situation is not very different in the DWP, is it, he asks. I emphasise the fact that the noble Lord said that because it is more interesting that he makes these comments than if I were to make them. We all know that, although technically it is the Secretary of State who is occasionally involved in tribunal and court cases, it is really one of his officers who does the work and occasionally is found to be at fault—or, says the noble Lord, in the case of the employment and support allowance, not so occasionally.

The noble Lord was alarmed to discover that for ESA alone, there have been around 518,000 fit-for-work decisions between October 2008, when it started, and November 2010. The rate of appeal was around 40 per cent and, in that percentage, 40 per cent were successful in their appeals. The reason for all those successful appeals is not solely the Atos computer; the desk officers and DWP staff generally share the blame, although perhaps not to the same extent. The noble Lord has, with difficulty, discovered the success rate of appeals against decisions relating to other benefits from April to August this year. They are 15 per cent for JSA and 27 per cent for income support. Those are probably the nearest thing we have to the universal credit arrangements in the Bill and they give us a guide to what we might expect, not least because the fault, if fault there is, will be with DWP staff rather than computers. This all brings us to the noble Lord’s amendments: it must be vitally important that staff are not only trained, which to some extent they are, but monitored as well. The 24th report of the Merits Committee also raises these issues.

I share those concerns of the noble Lord, Lord Skelmersdale, but perhaps I might add a few remarks of my own. I am aware that the Minister has been determined to reduce the appeals success rate and that he has in fact had some considerable success. If I understand it correctly, this has been in part as a result of introducing a review process, prior to appeal hearings, which has enabled errors to be picked up earlier. Perhaps the Minister can explain the average length of time between the initial decision and the review decision following an appeal, and how that average time gap compares with that between a benefit entitlement decision and an appeal hearing, as we had them before the reviews came into play—we still have them, of course. In other words, has the introduction of the review process significantly improved the position for claimants by providing a significantly earlier opportunity to have wrong decisions righted or overturned? Also, does the Minister know what proportion of successful appeals, whether at review or ultimate appeal hearing, apply to claimants with mental health problems?

[Lord Freud]

My Lords, the form and content of the claimant commitment is of the utmost importance and we are working hard to get it right. I hope that the illustrative claimant commitments provided to noble Lords have proved helpful in this regard. We are introducing the claimant commitment to improve compliance, bringing together in one place a clear statement of the requirements a claimant is expected to meet. What we need to bear in mind is that the claimant commitment is for every recipient of universal credit, many of whom will not be subject to work-related requirements. For these individuals the contents of the claimant commitment will be minimal, including the duty only to report relevant change of circumstances. In this case, the amendments we are discussing would not be relevant.

Even for claimants who have work-related requirements placed on them, certain requirements are simply not open to negotiation. A claimant in the “all work-related requirements” group must look and be available for work. A claimant in the “work-focused interviews only” group must attend work-focused interviews. These very basic requirements are not open to negotiation. When establishing the detail of requirements, for example, and the type of work that someone has to look for, I agree completely that there should be dialogue and consultation between the adviser and the claimant. This is not to say that we will not be tough on some jobseekers but, for the majority, we expect this to be done in co-operation. If a claimant is unhappy with specific requirements, they will be able to ask for another adviser to review them. This happens now under jobseeker’s allowance; there will be an appropriate review procedure under universal credit as well.

The basic work requirements, which are not negotiable—such as that the jobseeker must look for work—clearly would not and could not be the subject of such a review requested by a claimant. Similarly, in terms of the support we provide, we envisage there being a wide range of support available to help claimants prepare for and move into work. It is intended to meet the needs of individuals and target the right support at the right time. The issue raised by both the noble Earl, Lord Listowel, and the noble Lord, Lord McKenzie, of what we are doing for the hardest to help and on creaming and parking is one that we have endeavoured to answer in the structure of the work programme, where we are trying to deal with it by price differentiation.

We have minimum standards for prime providers. If they breach those it is treated as a breach of contract, so we do have some powerful tools. At the same time, we have much more active management provider performance than ever before, and to the extent that providers are under-performing, we will shift market share by claimant group to the best performing providers in each area. This means that claimants will be moved to where they are most likely to get the best support to help them deal with their particular barriers to work. These are systems that we have created within an overall black-box approach, which would clearly break down entirely if we then imported a series of regulations and requirements such as were implied by the noble Lord, Lord McKenzie.

[Lord Boswell of Aynho]

I am grateful to the noble Lord for the explanation he is giving. But in that context, while these decisions remain within the black box, can he give the Committee some assurance as to the extent to which they are inhibited by the law of contract, in respect of shifting the workload between different providers? If an issue develops about the level of remuneration—or level of difficulty against the remuneration—how much can he vire that within the contract? It is obviously desirable that he should be able to do these things, but equally providers need, I presume, some measure of stability and understanding.

[Lord Freud]

Yes. There are two or three issues wrapped up in that seemingly simple question around whether we got the differential pricing right when we set the contract terms up. The answer is that we do not know and we will not know. I doubt if they are completely perfect—that would be very surprising. But as we learn and get information, we will be able to adjust them. In practice, looking at the timescales of this, with the next set of contracts, which will be out in about five to seven years, you effectively have to start negotiating in four years’ time. By the time we have all the information on this, I suspect the reality is that it will not really be a question of changing existing contracts; it will go into the design of the next round. That is how it will happen in practice.

Let me now explain how much differentiation there really is, when you are looking at a regime for everyone. When you look at those who come off the system as jobseekers, half leave the benefit system within three months, and three-quarters within six months—the majority, to put it bluntly, with very little help from the state. So it would not be appropriate to offer support to all claimants early in their claim and, clearly, it would clearly be much too costly to do so. I am very comfortable in believing that those who have sat in my chair before me will be very aware of the dead weight issues of running that kind of system.

[Baroness Hollis of Heigham]

Does that mean that with the sharing of this insight, the Minister will therefore look more favourably at amendments trying to protect those who are temporarily caught in the housing benefit underoccupancy trap by virtue of suddenly losing a job?

[Lord Freud]

My Lords, I very much remember the debates we had last week. I am thinking very deeply about some of the observations made by noble Lords in this Committee, and I think that is probably as far as I should go today.

We operate in a world of finite resources, and we need to target them appropriately. Clearly, at the moment, we do not refer all claimants to the work programme until 12 months into their claim. We pull some further forward. So we need to ensure we continue to have flexibility to allocate resources in the most effective way.

The noble Lord, Lord McKenzie, asked what is happening to work-focused health-related assessments—WFHRAs. The suspension of the WFHRA allows us time to re-evaluate the assessment, particularly in the light of the new work programme, and to consider whether its operation can be improved better to support claimants or whether this support should continue to be provided in other ways. I do not propose to second-guess the outcome of that review or to place constraints on our ability to take the best course of action on that.

On training, we already have a system in place for the professional development and upskilling of advisers. This includes access to a learning framework endorsed by Edexcel, the UK’s largest qualification-awarding body, which will be updated to reflect changes in policy ahead of universal credit. We strongly believe that our advisers are up to the task of personalising requirements and support. We have some very experienced professionals in Jobcentre Plus and their decisions are supported by relevant training, tools and guidance. In a Jobcentre Plus customer survey carried out this year, 88 per cent of claimants reported that they were satisfied or very satisfied with their experience of Jobcentre Plus. The changes we are making in Jobcentre Plus are precisely intended to allow district managers and their advisory teams more freedom and autonomy rather than having to follow a tick-box, process-driven approach. It is critical that we maintain flexibility in legislation to tailor training and tools according to business need and developing strategy. For all the reasons outlined here, I urge the noble Earl to withdraw the amendment.

[Lord McKenzie of Luton]

I thank the Minister for his reply. I shall follow up on one or two points. I asked him if he would take us through the claimant journey at the moment, and he did that partially by saying that it is 12 months before claimants get into the work programme, although I am not sure whether that is right for everyone.

[Lord Freud]

I am sorry. I realise I did not answer that question fully. It is quite complicated, and it is probably easier to see on a graphic, which we have. I commit to making it available afterwards. I also realise that I failed to answer the series of questions asked by the noble Baroness, Lady Meacher, about the timing of the review process after the adjustments. It is pretty early days for those adjustments but, rather than detailing them again, I shall add them to the same letter and make that available.

[Lord McKenzie of Luton]

I thank the Minister for that. I revert to issues around the black box or the equivalent period before people are in the work programme. I was not arguing for lots of conditions other than, I guess, robust contractual conditions imposed upon providers, but providers within the flexibility that the black box gives them should be particularising in individual cases how they are going to support individuals. It is that that ought to be spelled out in some way.

[Lord Freud]

There is a genuine difference of approach with the work programme. I know that we agree that what we have done with it is evolutionary, and in some ways it is very evolutionary. We have learnt a lot from what has happened in the past decade. In particular, one of the things the work programme builds on is the employment zones, which were by far the best performing welfare-to-work programme in the past decade. That is the experience. The issue is that if you have a payment-by-results system, I strongly believe that it forces providers to provide an individualised service. What matters is that you get that one person in. I can say exactly what drove this insight for me, and it might have been someone from the Shaw Trust. They said to me, “If somebody needs these eight steps to get back into work, it is no good if you have a top-down system that says ‘these are the six things you have to do for everyone’. You can do those six things but that person who needed eight things will still not get into work”. That insight drove me towards payment by results as the model. If you want to get that person into work, you will need a particularised, individualised process to do that. You cannot legislate for that at the centre. It cannot be laid down. We must not put too many central requirements because it changes all the time. That is a difference of philosophy and the one that lies behind this issue.

[Lord McKenzie of Luton]

I do not think that we are apart on that issue. I am not arguing for six constraints to be placed on every provider which must be carried out in every case. The point is that if the black box enables eight steps to be provided in a particular case to get someone into work, that is fine, but why could not the provider simply ensure that those are set out for the claimant? What is so difficult in doing that so that the claimant has the reassurance of the journey that they will go through to get into work? There could be flexibility over that. It does not need to stay at those eight steps for ever. But if that is what the provider has concluded is needed to get someone into work, why should they not give an undertaking or commitment to the claims?

[Lord Freud]

My Lords, there is a simple answer to that. You start off on a journey thinking that there are eight steps, which you might write down. If it is a formalised process and you decide after three weeks that, “Actually, I do not need to do these two steps or I need to add another two”, you might change it. You might change it weekly, as people change. If we have an overformalised process, we just make that in management terms impossible and very expensive. I would resist it on those principles.

[Lord McKenzie of Luton]

I do not think that we are going to agree on this issue. But one is not arguing for rigidity: one is simply arguing for the fact that claimants ought to understand the process that they are being asked to go through. If some steps can be missed out or other steps added, that would be fine. No one is saying that that should not happen. Put simply, there should be some obligation as regards the claimants, who should know what is going on and what the provider is seeking to help and to support them with. Perhaps this is an issue on which we will not settle today and to which we will have to come back.

Part of the debate from the noble Baroness, Lady Meacher, who read the script of the noble Lord, Lord Skelmersdale, was about ESA. In a sense, it is a forerunner to the determinations that we are talking about because the categories that people find themselves in are a consequence of that WCA process. The claimant programme moves on from that, which I hope we will discuss in more depth later in our deliberations on Clause 38. On behalf of the noble Lord, the noble Baroness, Lady Meacher, made the point that Jobcentre Plus staff are well trained and highly qualified, which I accept entirely. We hope that providers would have robust training programmes. But what information from the WCA will they have before them when they are seeking to devise the individual programmes?

[Lord Freud]

The medical information in the WCA is sensitive and personal, which is gathered at an assessment. It informs benefit entitlement and does not provide comprehensive information about readiness or not. In practice, it is likely to be of limited use to advisers and, for that reason, is not shared.

--- Later in debate ---

[Baroness Meacher]

I very strongly support the comments of the noble Lord, Lord McKenzie, because it seems to me that we are talking about oiling the wheels and enabling the system to work. It seems to me that part of that is transparency to the claimant, which is the noble Lord's previous point, but also transparency for the provider. If I understood this right, the assessment and the clinical report on the claimants will not be provided to the provider, who then has to prepare all this activity to enable the person to return to work. If that is really so, I appeal to the Minister to take that back and think about it because I cannot see the system working.

[Lord Freud]

Let me clarify what information goes over. The former WCA is confidential and does not go over. How does the adviser build the revised requirements with the claimant? The evidence that he uses includes the claimant’s fit note, advice from Atos—not the former WCA, but some advice can go over—and other medical evidence. Those things come together to form the basis on which agreement is reached.

[Lord McKenzie of Luton]

My Lords, we have probably taken this as far as we can this afternoon. I would certainly like to read the record and reflect on it. We ended on a high note. The Minister made reference to a fit note, which is most welcome. There is a conundrum here which I do not think that we have bottomed out this afternoon. We propose to take it away and I imagine that we will wish to return to it on Report.

[Lord Freud]

There are quite a few moving parts to this. I have talked about the WFHRAs reviewing that and there is also a review coming out on the sickness absence regime in the not too distant future. There are areas that need to be brought together, which impact on this reasonably specifically.

[The Earl of Listowel]

I thank the noble Lord, Lord McKenzie of Luton, for his support and the Minister for his helpful reply. Clearly, he has a great depth of knowledge of this area and I am grateful to learn from him this afternoon. I have a couple of brief points to raise. I also have an aside which is that his black-box approach sounds very familiar, in terms of the young offender programme for National Grid and Transco, to which I referred. It was developed for National Grid and Transco by Dr Mary Harris, who is an astrophysicist by background. Her approach was very much testing and incrementally trying things out until she got a method that seemed to work very well for young people. Maybe there is some read-across there to what is being discussed this afternoon.

The Select Committee for the Department for Work and Pensions looked at the work programme, and although it welcomed it, it had this to say:

“However, there is a risk that creaming and parking may still take place under this model”—

the work programme model—

“since it remains open to providers to continue to focus on the easier to help participants within each customer group”.

Perhaps the Minister could write to me, or say now to the Committee, whether he is aware of that particular problem and what needs to be done within each of the tranches.

The second issue that I would like to raise with the Minister—and I would like to think more about this—is where he talks about attending being a fundamental requirement. One just has to attend if one is going to get anywhere through this process. I can imagine for some young people that even attending would be a big step to take. I do not want to push it too far, but if you have someone coming out of the criminal justice system who is very oppositional and who has complete distrust for authority of any kind, you might need to woo them a little bit before you can even get them in a meeting—but it would be well worth while wooing them in terms of the outcomes at the end. That is the first point; I will go back and think about the second.

[Lord Freud]

To save the department writing a letter, I actually think that “creaming and parking” is not desperately helpful, although I know that it is a very popular phrase. I shall explain exactly why. Within a black-box approach, if you are a provider you are clearly trying to spend your money on an outcome that will be successful. Our job is to ensure that we put the amounts of money into the right level. There will be people who are ready and worth while investing in and people for whom it is not the right time—you need to wait. There is quite a sophisticated judgment there, and you can get those judgments too crudely wrapped up with what are basically terms of abuse in “creaming and parking”. That is how I would respond to that, and I hope that that has saved us a letter.

[The Earl of Listowel]

I thank the Minister and beg leave to withdraw the amendment.

--- Later in debate ---

[The Earl of Listowel]

My Lords, I apologise. I should have put a couple of questions to the Minister. How will care leavers be treated in this system, and what additional support and flexibility might they expect to be shown? Perhaps he might prefer to write to me on those two points.

[Lord Freud]

Before I start on the amendment formally, it is worth making it crystal clear that the structure of the changes we have made bear in mind some of the real issues that we are talking about. I am particularly conscious of people with learning difficulties and fluctuating conditions, or a nest of other problems. I want to spend one minute on the design of the new welfare system, when it comes out like Aphrodite coming out of the sea near Paphos. The first point is the design of the work programme, where the rewards are not to get someone into a job and to keep them there, as it used to be, for 13 weeks. When you think about it, that is not what we want; we want someone to be in a long-term job. The structure, particularly for the hardest to help, is that the real rewards for the provider are when someone is in work for more than two years—it is two years and three months. You do not get someone into a job for two years and three months if it is inappropriate. That simply is not going to happen so when we are talking about the work programme, the incentive on the providers is to match people up with jobs that they can do in a way that the current system simply does not.

The second structural change that we are making, and which is really relevant in this area, is in how the universal credit works. By pulling together the two systems, the out-of-work benefits system and the in-work tax credit system, you do not have this desperate problem that we have today where if you take a risk and try to get a job and it did not work, you go back to go—and now try to get your benefits again. It is a nightmare but there have been bits of sticking plaster on it.

If you are in a fluctuating condition and this week you cannot work—let us say you have a job where there is a little flexibility—all that would happen would be that you would slide up the taper. Nothing would have changed in the nature of your benefit. There is just an adjustment in your universal credit payment and when you can work more, you get more. Those two things are big structural changes to bear in mind when we deal with these areas. They will help a lot because much of what people are rightly so concerned about are some of the incredible blocks that are in the current system and which make it so difficult for people to partake. It is why we have excluded so many people from having a full life, because in modern western society being part of the economy of the country is having a full life. They have been excluded and there is all the depression that results, so there are some really strong underlying changes that should help.

--- Later in debate ---

[Lord Wigley]

I am very grateful. Would the system that he is describing take on board the fact that the claimant may not be in a position to express, have the confidence to express, or know how to express the reasons that he or she cannot make that case? Therefore there is the need for access to professional advice.

[Lord Freud]

As I said in the previous debate, taking on board advice from a claimant’s own medical practitioner and other sources is part of the process here. To pick up the point raised by the noble Baroness, Lady Hollins, for claimants in the work preparation group, we intend to carry forward the current system of home visits to claimants with mental health problems to ensure we understand why they fail to comply. Of course, all sanction decisions can be referred to an independent tribunal, helping ensure we get it right. But equally, we intend to move away from extensive—and ultimately incomplete—lists and regulations. It is impractical for legislation to catch all the relevant matters that may arise in every single case of non-compliance, and the lengthy JSA regulations—which have matters that must and may be taken into account in determining whether a claimant has good reason—are not actually helpful for decision-makers or claimants.

To pick up the point from the noble Baronesses, Lady Meacher and Lady Hollins, on the work capability assessment, we do rely on the WCA and therefore Professor Harrington’s review is critical to help us get it right. Claimants should be placed only in a work preparation or a work-related requirements group where they are capable of meeting these very basic requirements. Once in those groups, clients will need to take account of their health condition. They are designed to take on board all the available evidence on that individual.

The noble Baroness, Lady Hollins, asked what happened with the Harrington review. As noble Lords know, we took on board the entirety of Malcolm Harrington’s first recommendations. The main thing was to empower decision makers to make the right decisions. In response to the question asked by the noble Baroness, Lady Meacher, we have introduced a mental health co-ordinator in each district who has an outward-facing role working with mental health services and an inward-facing role developing the knowledge and confidence of advisers. The other area of Professor Harrington’s advice that was taken up was on improving our communications so that claimants understand the process and the result and are able to add additional evidence if they need to. In response, we have also made improvements in mental health with mental function champions across the network at Atos. Professor Harrington is currently undertaking his second independent review. We are waiting for it, and we will then look very hard at what to do with those recommendations. We will take them very seriously.

Turning to Amendment 51E on work-focused health-related assessments, the noble Baroness, Lady Hollins, will know that these assessments have been suspended because they were not working as intended. We will re-evaluate, as I have already said. I have already offered to write to the noble Earl, Lord Listowel, on care leavers, and I will add that topic to that letter.

I do not want noble Lords to feel that I am being negative in this area, and it is over-easy to think that I am. I have valued the contributions noble Lords have made. I do not see these things as appropriate for the Bill, but I am clearly going to consider deeply the points that have been made today with the aim of applying them appropriately as we implement the system. I value what noble Lords have said. It resonates. We need to get it right. On that basis, I ask the noble Baroness to withdraw her amendment.

[Baroness Wilkins]

I totally take the fact that the Minister is setting out a system in which claimants should be confident that they are being helped and that that is the purpose of the system. However, does he accept that existing claimants have to overcome an enormous amount of negative experience because of the Atos system so there is an enormous mountain to climb?

[Lord Freud]

The noble Baroness, Lady Wilkins, makes a point, which we have actually discussed in the Chamber in the past. She knows my concern about this. I think that the Atos and WCA process is genuinely improving now, with the changes that have been made. A lot of the stories that we have are of the system as it was, unreformed. It is gradually improving. That is not to say that it is now perfect—that is not my claim. We are committed to getting the process right, and we inherited that process. I know the concerns that there are, seeing them at first hand in many cases. It is a terrible balance between abandoning people and saying, “You’re out of the economic life of this country” and then trying to pull them in in a coherent way. Getting that balance right, as all noble Lords here today understand, is complicated and a path that we are moving down. But I am determined that we will get to a position where we are doing it with the right balance.

[Baroness Hollins]

My Lords, I am grateful to the Minister for his response, particularly for saying that he is going to consider these amendments deeply as we move towards implementation. There were three things that the amendments were trying to do. One was to try to ensure that evidence from claimants’ own health professionals would be properly taken into account at an early enough stage to prevent some of the distress that is currently affecting some claimants. The second one was about reasonable adjustments, which are a requirement under the law but are perhaps not fully understood. It is about an individualised approach, is it not? The third one was ensuring that the impact of a health condition on a candidate’s ability to comply was properly assessed and understood. It is not about asking for a rigid list of things in the claimant commitment. What it is really about is asking for joined-up work between different departments with different responsibilities and joined-up care for people with health conditions with the NHS and the DWP. There is no reason why Jobcentre Plus staff and existing specialist NHS staff could not share some information for the benefit of the claimant, both at the assessment stage and during their progression into work, which is what we would all like to see.

Although decision makers are required to take information into account, there is evidence that they are not always doing that. Yes, of course people can appeal, but appeals are very distressing, not just for the individual but also for their families. These amendments were intended to make the system work better both for claimants, so that they are more likely to succeed, but also because it is much more satisfying for staff to work in a system that they know is working fairly. So I am hoping that the Minister will find a way to ensure that the spirit of the amendment is taken on board. I beg leave to withdraw the amendment.