Welfare Reform Bill

Lord Freud Excerpts

Wednesday 14th December 2011 Lords Chamber

[Lord McKenzie of Luton]

My Lords, we should be grateful to the noble Baronesses, Lady Meacher and Lady Grey-Thompson, for introducing this important issue on which we have all received representations. Quite a lot of numbers have been bandied around with particular reference to benefits, and I will be interested in the Minister’s response. As I understand it, in the current system the severe disability premium is paid to people, whether in or out of work, who receive at least middle-rate care, live on their own and do not have a carer. It is payable only as a means-tested benefit so it supports those with a severe disability who have a low income and face many extra costs as a result of living alone.

Alongside that is the disability element of the working tax credit, so under the present system someone who is entitled to DLA or has recently been receiving a long-term sickness benefit would be entitled to the disability element of working tax credit if they worked for at least 16 hours a week. That is where we start from. As we have heard, though, the proposed support for adults in the universal credit depends upon the gateway of the WCA. This is what will drive the new arrangements. The briefing that we have had says that only those with a level of impairment sufficient to be found not fit for work will receive any extra help. I am not totally clear whether in that context “not fit for work” means someone who would only be going to the support group or someone who was going to the WRAG as well. I think the Minister is shaking his head, or rather he is nodding to say that only those in the support group would receive that.

That creates the difficulties that have been spoken about. The changes would mean that someone who could self-propel a wheelchair 50 metres or was registered blind but could undertake a journey unaccompanied could be found fit for work or, presumably, for work-related activity. Of course no one would want to claim that such individuals could not be encouraged to work if they wanted to, but that does not mean that they do not face considerable disadvantage and cost compared with someone with no impairment. So if they are out of work but found fit for work they face the same conditionality as everyone else, but if they are in work, because the gateway for extra support within the universal credit is the WCA, someone who is found fit for work will receive no extra support in work. The juxtaposition of the present and the future is concerning.

I am sure that the Minister will have seen the briefing that we have had. It says that the following are some of the ways in which different groups will be affected. Those who are terminally ill or who develop a severe level of impairment and live on their own could be disadvantaged to a significant degree—by something like £50 a week. Someone who is entitled to a middle rate of the care component but found fit for work—for example, someone who is severely visually impaired—will in many cases be found fit for work. However, if they are living on their own and doing some work, they are likely to have considerable extra costs that are not met by the DLA or by PIP when it comes along. Currently, most would be entitled to at least the middle rate of the DLA care component and therefore the SDP.

Under the current system, a severely visually impaired person in the work-related activity group and living on their own earning £100 a week will be left with a disposable income of £188 a week plus their DLA, after housing costs are paid. Under the universal credit, the same person will be left with a disposable income of less than £100 a week plus whatever PIP is payable after housing costs. There are plenty of other examples and we have heard some of them today from the noble Baronesses. These sorts of disparities are quite disturbing. The Minister might say that these are quite specific and narrow examples of the full spectrum of people who are affected by this, but a serious issue has been raised here and we need to understand fully how people are being protected in comparison with the current system under the new world of the universal credit.

[Lord Freud]

My Lords, this amendment seeks to put an additional element into the amount of universal credit that is payable for those who are severely disabled and who have no one receiving either carer’s allowance or a carer’s premium for looking after them. In essence it seeks to recreate the current severe disability premium within universal credit. As such it would involve a significant increase in cost compared with the Government’s plans. That increase stands at £400 million, unless there were other readjustments. However, let us just take it at face value. At face value, it is unaffordable.

On Monday the House approved the Government’s plans to simplify the disability-related additions. Instead of the seven different components within the current system of benefits and tax credits for adults, and two further rates in child tax credits for disabled children, universal credit will just have two rates for both adults and children. By restructuring the rates in this way, we are not looking to make any savings. We are redistributing around £800 million of current spend without returning any savings at all to the Exchequer. The full amount will be reinvested by increasing the higher rate for more severely disabled people. In our policy briefing note we made it clear that there would be some phasing. I know that I owe the noble Lord, Lord McKenzie, a letter on that matter.

Once resources became fully available, we expected to be able to provide a higher rate, at around £77 a week. This is significantly higher than the current £32.35 payable as the support component within ESA: £44.65, to give the noble Baroness, Lady Meacher, the exact figure she was seeking. It will provide a much more meaningful amount to severely disabled people than the current patchwork of premiums, which gives some people more than others and makes it difficult for people to understand and obtain their full entitlement. I should make it clear that one of the features of the universal credit as a whole is that we are expecting a substantial amount of the gains to the poorer people to come from much better take-up. The simplicity of a system with automatic provision of everything that people are entitled to will mean that more people in this category are likely to be recipients and get what they deserve.

[Baroness Meacher]

It would be helpful if the Minister could explain whether there is any provision in the new system for child carers, where the mother might not be in the support group. You have to be very disabled, as I understand it, to be in the support group. Yet a mother might need her child to do an awful lot in the home: shopping and cooking and all the rest of it. Is there any provision for her?

[Lord Freud]

My Lords, I will come to that. What we are dealing with here is rather interesting, as we move from one system to the universal credit. We are dealing with the current system as it exists on paper, we are dealing with where we want to go in the universal credit, and then we are dealing with something in the middle, which is how things actually work on the ground. This is one of the areas in which things are working on the ground as they are not really meant to. It is simply not the role of the severe disability premium to provide money for young carers. Clearly young carers could be affected if they are providing support for a disabled parent who receives the severe disability premium. Under the current system, the youngster gets it because there is no adult in the house looking after them and they are not allowed to receive the carer’s premium. It is one of those things that has unintentionally fallen through the cracks. It was simply not intended as a support for young carers; it was designed to support severely disabled people who live alone.

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[Lord McKenzie of Luton]

My Lords, I speak initially to Amendment 26. The amendment takes us into the as-yet uncharted waters of in-work conditionality—waters into which my noble friend Lady Drake has at least dipped her toe.

The Bill introduces for the first time the requirement on claimants who already have a job to take action to secure more paid or better paid work. We understand the need, within a system that has no clear distinction between in-work and out-of-work benefits, to have some mechanism to ensure that people do not simply reduce their hours of work to take advantage of the more generous support for lower-hours jobs that universal credit provides, but there are a host of unanswered questions about how in-work conditionality will work. The amendment is intended to ensure that Parliament has an opportunity to review the arrangements once they have come into force.

We debated these questions at some length in Committee, and the Minister's response was basically, “We are thinking about this”, with some indication that he would not be in a huge hurry to introduce this element of the Bill. The most fundamental of those questions is: what exactly is taken to be work in the context of universal credit? When will the state judge that someone is doing enough to be free of the requirement to report on their activity to the jobcentre? Although we have some indication that single people with no caring responsibility or health issues will be expected to work for 35 hours a week, and couples in the same situation for 70 hours, we have no idea what flexibility will be given to those whose circumstances mean that that is not reasonable.

For example, what will happen if one partner of a couple decides to reduce their hours—perhaps to look after children? The way that the incentives are structured within universal credit may encourage many second earners to do just that. Will they then face a jobcentre penalty for not engaging in sufficient work?

It is also unclear exactly how the in-work conditionality provisions will impact on the employment relationship. How will it impact on the likelihood of employers offering somebody a part-time job if they know that the jobcentre will be encouraging them to leave their job for one with longer hours? We know that, despite today's employment figures, some unemployment was avoided at the start of the recession due to employers reducing people's working hours rather than making redundancies. Would they have been penalised for reducing hours in that way under the Bill? The in-work conditionality proposals will bring many more people into the orbit of Jobcentre Plus at a time when the agency is being asked to make challenging efficiency savings. Can the Minister outline what estimate he has made of the additional resource that will be needed to deliver conditionality for in-work claimants and whether he expects to be able to secure that?

In Committee we discussed the position of the work programme providers under these provisions. The Minister assured us that the fact that work programme providers must get somebody into work for 16 hours and keep them there for two years was not in conflict with the aim of this part of the Bill to ensure that somebody leaves a 16-hour job and goes into one that either pays more or has more hours of work each week. A review of this provision after a year will enable us to see whether the Minister’s confidence is justified.

Finally, we have had no equality impact assessment on this proposal. A review would enable us to assess its impact on different groups. As the proposal intends to assess whether somebody is fulfilling their in-work conditionality requirements by looking at how much they are earning rather than how many hours they are working, for those who earn more these requirements will obviously be easier to meet. I hardly need remind noble Lords of the substantial pay penalties faced by women, by people with disabilities and by certain ethnic groups. We will need to look carefully at whether people within these groups are significantly disadvantaged by these proposals.

This amendment in effect accepts the assurances that the Minister gave us in Committee that these matters are under consideration and simply asks him to report back to Parliament on how the proposals are operating in practice. I am sure that he will want to accept it, if only in order to be able to demonstrate that, as we all hope, this policy is achieving its intended aim of supporting people to move on in work.

I move on briefly to the contributions of my two colleagues. As well as talking about the very important issue of the focus on children being the driver of these provisions, the noble Baroness, Lady Drake, referred again to kinship carers. The amendment that she spoke to seeks to add kinship carers, carefully defined, and limited to the first year in which they are caring for a child, to the existing list of exemptions. When we debated this issue in Committee, my noble friend Lady Hayter said that she was able to rip up her speech given the willingness of the Minister to recognise this issue, suggesting that he was looking to address it. My noble friend, who has provided me with the text this evening, says that she is perfectly happy to rip up another one if the Minister can let us know the results of his deliberations and what these have been.

I will not repeat the powerful case made by my noble friend Lady Drake. As she emphasised, kinship carers can play a vitally important role, offering children in extremely vulnerable situations some family continuity and, in doing so, saving the state the considerable costs of taking a child into care—some £40,000 a year in independent foster care. The Who Cares? Trust has highlighted the difficult experiences of many children cared for by their parents, estimating that one-quarter will have lived with abuse, neglect and violence and one in four will have been deserted by their parents, often after drug and alcohol abuse. Sixteen per cent go to their grandparents after family breakdown, one in 10 after a parent’s illness—often mental illness—and one in 10 after the death of a parent.

Although the existing conditionality arrangements provide some protection to those caring for young children, with no conditionality until the child is one, and then work-focused interviews until the child is five, many of the children who move to live with kinship carers will be older than five, as older children—indeed, those over 12 years old—make up a higher proportion of those in kinship care than in the wider population. Despite not being babies, for obvious reasons they need pretty much full-time attention and care. They will be new family members when they arrive, yet, not being adopted, will have no equivalent recognition. They also usually arrive after some sort of trauma and are therefore likely to take time to settle down. The amendment my noble friend spoke to simply seeks to provide for those who take on the care of a related child a year in which they will not be asked to look for work. This will give those considering taking on this huge task some certainty about their income and security during this first year and a chance to focus on their care for the child. A year’s exemption from looking for work would give them time to manage the upheaval in their lives before starting to juggle work and care.

Our concern, expressed by my noble friend, is that, without this amendment, the Bill risks undermining families’ capacity to care for children and increases the likelihood of those arrangements breaking down. Unlike with formal adoption, there is no adjustment period for family carers, despite the needs of the children. Furthermore, carers often have to give up work as a condition of a placement. We are aware that, as my noble friend said, the Minister is sympathetic to this case and we look forward to hearing his response.

Finally, I should like to refer briefly to the contribution of my noble friend Lady Turner of Camden in relation to Amendment 23. As she explained, this amendment seeks to ensure that evidence from a health professional will be accepted as good reason for failing to attend a work-focused interview—a requirement that will, under the Bill, be placed primarily on lone parents with children aged between one and three. We hope that this will be a simple amendment to accept, as my noble friend has explained. In Committee, the Minister told us:

“We will not sanction claimants with limited capability for work, or those who have learning difficulties or mental health conditions, without first making every effort to contact them, their carer or healthcare professional to ensure that they have fully understood the requirement placed on them and had no good reason for failing to meet it”.—[Official Report, 1/11/11; col. GC 417.]

We hope that the Minister will be able to extend this to include those who provide their adviser with evidence that they have a health-related reason for failing to comply with the work-related requirement.

This amendment also enables us briefly to revisit the question that arose in Committee about the relationship between Jobcentre Plus advisers, Atos assessors and the healthcare professionals who deal with a claimant. It also enables us to ask the Minister again to clarify exactly what information is available to Jobcentre Plus and work programme advisers, who have to decide on the type of requirements to which the claimant should be subject. Will they have access to information about a claimant’s health and capability for work that has been uncovered during the assessment phase for employment and support allowance?

We want this whole scheme to work to help those who can be helped but not to waste advisers’ time, nor to bring the system into disrepute by demanding inappropriate behaviours of claimants where evidence of their health needs exists within the system. Therefore, we hope that the Government will feel able to accept my noble friend’s amendment.

[Lord Freud]

My Lords, this group of amendments contains a number of measures that align with our intentions, so we are apparently in agreement. Indeed, many are in line with current practice and we intend to carry them forward into universal credit. I shall take each of them in turn.

With regard to Amendment 23, we recognise that there may be medical reasons that prevent a claimant attending a work-focused interview. We do not need expressly to legislate for this to be recognised. If a claimant gives advance notice that he will be unable to make an appointment and has good reason for this, the interview can be rearranged. If a claimant fails to attend an interview, he will have a reasonable period of time to explain why. As part of that explanation, the claimant will be able to provide any relevant information, including any medical evidence. If the claimant has a good reason, then obviously no sanction will be imposed. This is essentially what happens already and it will continue.

I turn to Amendment 23A in the name of the noble Baroness, Lady Drake. I appreciate the sentiment behind the amendment and agree that it is important to balance the requirements placed on claimants with any childcare responsibilities they may have. Therefore, legislation will provide clear safeguards, ensuring that no claimant who is responsible for a child under five can be made to look for or take a job, and no claimant with a child under 13 will be required to look for a job that does not fit with their child’s school hours, including a reasonable allowance for travel time.

Advisers will have flexibility to tailor the requirements placed on claimants—including allowing limitations to the work that claimants must search and be available for—to take account of their circumstances and the needs of any children for whom they are responsible. Where the child is over 13, advisers will continue to have discretion to permit the claimant to limit their availability if the child’s needs make it necessary. We do not intend to make blanket rules for this age group in legislation, as the children’s maturity and need for parental supervision will vary widely. Therefore, although we agree with the spirit behind the amendment, we do not think it necessary.

On Amendment 25, we are now making provisions in the jobseeker’s allowance on domestic violence. The regulations giving effect to this policy will be subject to affirmative debate early next year as parliamentary time allows. The changes will take effect soon afterwards. The draft jobseeker’s regulations will provide that where a claimant has left the abuser because of violence or the threat of domestic violence, they will be treated as complying. This will be automatic whenever the claimant provides evidence of violence or the threat of violence and may be extended through existing domestic emergency provisions to up to 17 weeks, or to 24 weeks for claimants with childcare responsibilities. The amendment would allow an exemption from work-related requirements only while the threat continues. Our proposal recognises that claimants may need unconditional support for a period after the actual threat has receded.

[Baroness Lister of Burtersett]

We are very pleased to hear that. Can the noble Lord tell us what definition of domestic violence the Government have in mind? They are consulting at present on the question of domestic violence and I wonder what the implications are for this provision.

[Lord Freud]

I am going to have to write with a precise definition of domestic violence and the threat of domestic violence.

Turning to Amendment 26, we are all too well aware that in-work conditionality is a difficult and contentious area. In this debate and in Committee noble Lords raised a number of concerns and questions. I think that I have been open enough to admit that I do not have all of the answers to those questions right now, but I hope that I can provide some real reassurance by describing our planned approach. We are going to take some time to get this right, because it is a new area. I said in Committee that there may be a role for piloting and I can now be much clearer on that.

We have decided that when universal credit is launched we will not be imposing conditionality on claimants with income or earnings which would, broadly speaking, have taken them over the cut-off point for the current out-of-work benefits. So we are effectively continuing with the current system. Rather than a review, our approach will be to pilot the application of conditionality on claimants whose income is above this level. We will want to gather views on the sort of approaches that could be tested and I commit to publishing the details of these pilots. We will then reflect on the results of that process before adopting any national approach.

Finally, turning to Amendment 24A, I have listened very carefully to the feelings of noble Lords on this and again let me say that we are of one mind on this matter. Work is already under way, as I said in Committee, around how kinship carers should be treated for conditionality purposes. I agree that kinship carers who need a period of adjustment should be given time to return to a stable footing before being expected to meet work-related requirements and juggle conditionality with new caring responsibilities. Advisers will have discretion to lift temporarily the requirements on individual claimants where a child’s needs are such that the claimant must be able to provide full-time care. I repeat what I said in Committee. I recognise the potential for value and clarity in a legislative exemption from conditionality and we are carefully considering options for further provisions. The Bill provides scope for flexibility in this area and we have powers to make regulations as necessary. These things take time, but I can assure noble Lords that work is progressing. I am on this case. We are currently talking to the Department for Education—

[Baroness Drake]

I shall not miss any opportunity on this because I know that this important community will hang on the Minister’s every word—and I say that in the warmest sense. The Minister said that advisers would have the discretion to lift the conditionality and, at the same time, he repeated the reference to the value and clarity of legislation. If I may push him, is he saying that guidance and discretion around guidance are not of themselves sufficient to address this community?

[Lord Freud]

I think what I am saying is that you can take away the discretionary elements of support for this community, and that is already in the bag. I would like to add more to that, and that is what I mean when I say that there is value in legislative exemption. Then I move on to say that I am working on it. I am seeing some noble Lords who are familiar with government having a good giggle because they know exactly what is happening and they giggle with reality.

The way I have to express this—again, some noble Lords will recognise this better than others—is that doing more for this group may come at a cost, and we are operating in difficult financial times. I repeat that I have a real interest in this area, and when I am able to give firm answers, I will do so. This is a matter with which we will deal in regulations rather than in primary legislation. On that basis I urge the noble Baroness not to press her amendment.

[Baroness Turner of Camden]

My Lords, I thank the Minister for his response to my amendment on the requirement to attend work-focused interviews and for his promises. As for domestic violence, I did not get around to speaking to my amendment mainly because it was grouped with a number of other amendments and was not called. However, I am very obliged to the Minister for what he said about domestic violence. I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

My Lords, like the noble Baroness, Lady Morgan, I think the fact that this amendment is necessary comes as a surprise. When we started discussions of the Bill, it seemed that the issue of whether recipients of debilitating cancer treatment in the form of oral chemotherapy should be automatically exempted from requirements to look for work was being dealt with in a sensible manner by discussions between the cancer charities, cancer specialists and the Government. It is extremely disappointing to find that these discussions appear to have broken down. Disappointing for us, but extremely worrying for the many cancer patients anxious about what support they will be able to claim and how they will qualify for it when their main focus is living through and coping with some pretty debilitating—as we have heard—albeit wonderful, lifesaving treatments. The Government’s response to the second Harrington review states that its new proposals to ask everyone experiencing cancer treatment to go through the work capability assessment process,

“would increase the number of individuals being treated for cancer going into the Support Group”.

It also states that:

“They would also reduce the number of face-to-face assessments for people being treated for cancer as most assessments could be done on a paper basis, based on evidence presented by a GP or treating healthcare professional”.

While we welcome the acceptance of medical evidence, this proposal still puts cancer patients undergoing treatment through the uncertainty and stress of not knowing whether they will qualify for essential financial support or whether they will be expected to prepare for work while undergoing their treatment. With the proposals to time limit employment and support allowance for those in the work-related activity group, these assessments take on an added importance, since for many people they will determine when the clock starts ticking to the point when they will lose this contributory support altogether.

We do not think that anybody should be written off because they have cancer. We certainly do not think that no one with cancer will ever be able to work again. A brief glance behind me in your Lordships’ House is great testimony. This is not, however, what automatic entry into the support group means. We know that those in the support group can volunteer for access to the work programme and the support there to help them get back into employment. We imagine that the vast majority of those who have overcome their cancer will want to do just that. But for the Government to suggest that those receiving chemotherapy need to be tested to see whether they are really ill enough to avoid a conditionality regime, which we will remind the House was intended to put pressure on people to return to work, suggests that the Government somehow view all cancer patients as potentially taking advantage of the state. We are sure that that is not the Minister’s view and therefore hope that he will be able to accept the amendment.

[Lord Freud]

My Lords, this is obviously a very sensitive issue, and I want to start by saying that we are determined that the benefit system should support in a sensitive, fair and appropriate way people who are diagnosed with cancer and coping with it. I shall try to go through the argumentation here in as simple a way as I can.

First, we know that cancer and cancer treatment affects individuals very differently. That was one thing that the Macmillan evidence demonstrated. It shows that some people can continue working straight through their treatment, are capable of doing so and want to do so. On that evidence, we believe that automatically putting everyone undergoing certain cancer treatments into the support group is not the right way forward. Clearly, there is the example that the noble Baroness raised, the one in the Sunday Times, of Jenni Murray, who had a bad reaction, and one can only sympathise with that. Everyone in this Chamber will have friends or relatives who have gone through this experience and had a bad reaction. It is always painful. We are all thinking exactly the same thing; we are all thinking of someone we know who has gone through hell on this process. But when you talk to the experts, you get examples of someone—let us take a man—who has had testicular cancer and has recovered well from curative surgery and is now being treated with radiotherapy without any significant side effects. On this ruling, he would be automatically placed in the support group. That is a kind of counter-example, which half of us should be so lucky to have.

[Baroness Morgan of Drefelin]

When we look at the Macmillan recommendations, we can see that they take into account that people respond in a range of ways. In the recommendations that the charity made to the Harrington review, they came up with a lot of detail, and I could read it all out. No—I will not read it all out, but I could.

The point that I want to make is that a consensus process was gone through at the request of a government review. We could all pick out little bits of that wide range of opinion that we do not want to promote, but that was not what the charity did. It published it all, which now allows the Government to pick bits out that suit the argument. But the overall conclusion by the experts and the consensus statement was that, for the majority of cancer patients going through specific cancer treatments—and it is not all chemotherapy; we are not talking about long-term oral chemotherapy here—it is more likely than not that they would experience debilitating effects.

[Lord Freud]

Let me go through the argument and I will pause just before I sit down to let the noble Baroness come back on the process. We asked Professor Harrington and Macmillan to review the current descriptors to provide evidence as to whether they could be improved, and we are committed to acting on the evidence that they put forward. The evidence provided by Macmillan showed clearly that there is no longer a basis for differentiating between certain types of cancer treatment in the way that current regulations do. The evidence showed that all types of chemotherapy, including oral chemotherapy and certain radiotherapy, can be debilitating but it also showed that there can be considerable individual variation in the impact of the treatment on each person, and that work can be very important for some individuals with cancer.

I think that there were 16 medical professionals—the oncologists—who were consulted in depth in this evidence. I shall quote just one as an example, who said,

“I am somewhat against the concept of including all chemotherapy”,

in the support group,

“as it will clearly be inappropriate for some patients, risks stigmatising these patients in the workplace and may delay useful reintroduction to the workplace”.

A number of the experts consulted by Macmillan, and indeed Macmillan itself, volunteered evidence of the importance of work to an individual’s rehabilitation and emotional well-being. Indeed, in a recent publication, Macmillan said:

“Many people who are working when they are diagnosed with cancer would prefer to remain in work, or return to their job, during or after treatment”.

From this evidence, it is clear that while many people will not be able to work, some can and do. For them, it is an important part of coping with their diagnosis and treatment.

We want the work capability assessment to effectively reflect this new evidence based on what Macmillan, supported by Professor Harrington, has found. How it would work is that each individual would be assessed on a paper basis. The evidence required might be a note from the claimant’s GP or consultant, and where a claimant is unable to provide information an Atos healthcare professional will contact their GP or consultant to gather the information and ensure that they are not unnecessarily sent on a face-to-face assessment.

We have had a request to look at this evidence more widely, so we are in the process of asking Macmillan whether we can make this document more widely available. At the moment, Macmillan is seeking permission to do that. I hope that that actual evidence becomes more widely available for consideration. We believe that our proposals meet the spirit and intent of Macmillan’s assessment. If that were to be the case and we were to go ahead with those proposals—if your Lordships will bear with me, I will describe the process before we were to go ahead—there would be an increase in the number of people in the support group. About 10 per cent would move from the WRAG group to the support group, while there would be a reduction in the number of face-to-face assessments that individuals suffering from cancer would undergo.

Let me provide another example of how this will better support people by citing a woman who is being treated via oral chemotherapy and who is profoundly fatigued due to the treatment. Her GP confirms her diagnosis and symptoms. Currently, she may be invited for a face-to-face assessment; under the new proposals, she could be placed in the support group on a paper basis.

We are disappointed that Macmillan seems to be unable to support these proposals, which we have based on the evidence that it spent so much energy in collecting, and because we had hoped to introduce the proposals in April 2012. However, since we do not seem to have Macmillan’s support at this particular moment, we will now seek a wider range of views through an informal consultation. As part of this we will seek the views of individuals affected by cancer, their families and carers, healthcare practitioners and cancer specialists, as well as representative groups and other lobby groups. We want to ensure that the benefits system treats individuals with cancer in the most sensitive way.

I recognise the points raised today. We want to get the balance right, which is why, as a result of the evidence presented by Macmillan, we will launch the consultation on these proposals this Friday. It will be informal; it will last 12 weeks, ending on 9 March, and it will follow the advice in the government Code of Practice on Consultation. We will be looking, as I said, for a wide range of evidence, and will consider all the issues, including automatic entitlement, as well as looking at previous experience of cancer assessment in the benefit system.

I hope that that will reassure noble Lords that there will be a proper process which will aim to come out with an answer which gets the general support of this particular community, and I hope that many of them would be a temporary part of that community. The noble Baroness is getting to her feet; I will hover.

[Baroness Morgan of Drefelin]

I think that the Companion says that the Minister is able to respond on Report, so it is very nice of him to hover, but he can have a rest.

Obviously the automatic entitlement is set out in regulations; I think the powers are in the 2007 Act. It would be really helpful to understand what this paper basis will look like. Will it be possible for us to see what those regulations might look like? I cannot remember whether they are affirmative or not. I guess they probably are, but if they are not, then maybe they should be.

[Lord Freud]

Rather than go into detail now I would like to wait for the proper consultation. The document is coming out in two days; it will lay out the issues, the proposals and the background, and there will be a full opportunity for us to gather all those views and pull them together. With that reassurance that there is a real process going on to get agreement and to take everyone’s views, I hope that the noble Baroness feels that she can withdraw her amendment.

[Baroness Morgan of Drefelin]

My Lords, it is very late and I have only a couple of thousand words to get through. More seriously, the Minister has given me quite a lot to think about. Obviously, as this is only the first time that we have had a proper discussion about this, I will have to look at Hansard very carefully, and think about whether I need to come back to it. However, I appreciate the time that the House has given to this issue at this late hour, and I beg leave to withdraw the amendment.

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[Baroness Turner of Camden]

My Lords, I would like to speak very briefly to Amendment 36, which is in this group. This relates, again, to sanctions, and is an attempt to amend Clause 46, talking about high-level sanctions, which says that it is a failure sanctionable under this section if a claimant,

“through misconduct loses employment as an employed earner”.

Not all allegations of misconduct are accurate; sometimes the employee may claim that he is being discriminated against, or perhaps that he has blown the whistle on some unsafe practice and has not been guilty of misconduct. He therefore attempts to institute proceedings to try to demonstrate that the dismissal is unfair.

In such circumstances it seems that it is in line with employment rights if the employee is not sanctioned under this provision, because he has disputed whether or not his dismissal was fair, and has instituted appropriate proceedings. It is quite a simple amendment, designed to protect people’s employment rights, and I hope that the Minister will be prepared to look favourably upon it.

[Lord Freud]

My Lords, I will also try to be as brief as possible. We had a very good discussion on this area in Committee, and I can make clarifications which have been informed by some of that discussion. One of those clarifications is that we will limit the sanction amount to three years, so we will not have it compounding above that level.

The second relates to the parable of the prodigal son. From the argument of the noble Lord, Lord McKenzie, there has got to be a way back into the system. We are trying to change behaviour: where someone has come back and got a job for six months at his job goal level, we will take away his sanctions at that point. I thank noble Lords for the very informed debate that we had.

[Baroness Hollis of Heigham]

Did the noble Lord say that if the person got a job, after six months in the job the sanctions would be removed?

[Lord Freud]

Yes.

[Baroness Hollis of Heigham]

I do not think that is good enough. That means that coming back in and searching for the job—in other words, conforming to the sanctioning conditions—is not enough. He also has to be successful, which will depend on the lottery of what jobs are available, and so on. I would have thought that providing he is conforming to the work conditionality regime in searching for a job, that ought to be enough. You should not be able to punish him just because he lives in Merthyr Tydfil and the jobs are not there, whereas in central London they may be.

[Lord Freud]

My Lords, we thought about this matter very deeply and thought that it was very hard to genuinely measure compliance if there was not a hard result. We decided that the hard result was taking a job and holding that job for six months, and then we would take away the sanctions. That is where we are. It is a lot better than where we were.

[Baroness Hollis of Heigham]

But if that means that he was previously on JSA and HB as part of his universal credit, and he has now gone into low-paid work, so is getting a wage, then presumably if the sanctions still apply he would fail to get the housing element going into his universal credit, and he would not have enough to live on.

[Lord Freud]

No, my Lords, the sanction regime does not work like that. It takes away the equivalent amount of the JSA, so you keep getting your housing credit, but have this amount taken off, which will be a proportion of the total universal credit.

[Baroness Lister of Burtersett]

I am sorry to interrupt the Minister, but is he saying that the department is unable to measure compliance with work-seeking requirements? If that is the case, surely the whole basis of the sanction regime falls apart?

[Lord Freud]

I think I can safely say that we are not saying that. We are just saying that we want real proof of a change. The prodigal son must do more than turn up and warm his hands on the fire as the fatted calf is slaughtered. I am saying that he has to take a job and hold it for a minimum of six months.

[Baroness Hollis of Heigham]

Could the noble Lord perhaps move from the Old Testament to the New Testament?

[Lord Freud]

I thought it was the New Testament. It is definitely a New Testament matter. I am shocked that the noble Baroness—

[Baroness Hollis of Heigham]

I was a Methodist.

[Lord Freud]

I am utterly shocked. Let me keep going; the hour is late and I am forgetting what I am talking about very quickly.

Turning to Amendment 28, we will impose reasonable requirements, taking into account the claimant’s particular circumstances, including any health condition or disability. Universal credit claimants with a health condition or disability that limits their capability for work will not be required to look for work. There are specific safeguards in this area. Decision-makers must consider any relevant matter raised by the claimant when considering whether there is good reason for a failure.

[Baroness Meacher]

That was the issue in Committee. Does it have to be raised by the claimant?

[Lord Freud]

When I say “by the claimant”, it can be done on behalf of the claimant by someone else. There is a clear duty on decision-makers to watch out for vulnerable people. The request I am making of the noble Baroness is this: if we begin to introduce specific legislative provisions around such matters of detail, we will end up with a whole mound—

[Baroness Meacher]

I thank the Minister for giving way. What I am looking for is an assurance that, in regulations, the Minister will guarantee that officials will ensure for themselves that this person could perfectly reasonably comply with conditions. That is all I am looking for—an assurance.

[Lord Freud]

Can I leave it like this, without giving a hard commitment right now, on my feet? When we get to the regulations on this, I will look very hard at exactly what the protection is. I cannot offer any more now but I am sure we will debate this in the months to come. My main point here is that overall duties, rather than lots of specific ones, are the way to go.

Let me turn now to Amendment 36, which proposes an exemption from the sanction for losing employment due to misconduct where the claimant disputes that the dismissal is fair and has instituted proceedings—in other words, is taking a case to an employment tribunal. First, I assure noble Lords that the decision-making process around sanctions for misconduct is rigorous and rounded. We are proposing nothing in this Bill that changes the current process. Decision-makers will take all relevant matters into account when determining whether a sanction should apply, including evidence about whether claimants have left employment through misconduct or been unfairly dismissed. If a tribunal finds that there has been no misconduct by the claimant, this will be very compelling evidence. Where a decision-maker decides that there has been no misconduct, a sanction will not be applied.

However, we do not consider that there can be a blanket rule which says that, where a claimant has instituted proceedings for unfair dismissal, sanctions cannot be applied in that case. One of the reasons for this is that we want to avoid creating a perverse incentive for claimants to make claims to employment tribunals, which would put a burden straight on to employers for no fundamental reason. Decision-makers must have the flexibility to look at each case on its facts and to assess the strength of the evidence. I trust noble Lords will agree that this flexible, case-by-case approach is the right one.

The final amendment, which the noble Lord touched on right at the beginning, and which seemed like a game of tiddlywinks between us, is on targets. He knows what I am going to say—his side likes targets, we do not like targets—so I will say it, as it just keeps the night going. We will continue to collect this information to support our work. We need to know how many sanctions are being imposed, but collecting information is not the same as using it to target. It helps us to assess the consistency of approach in this area and to monitor and evaluate the impact of those sanctions, so that is what we are collecting.

On the basis of that rather rapid, somewhat biblical, summary I would ask noble Lords to withdraw or not move these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply. I thought we were going to have a quicker canter through these issues, and we may wish to return to at least one of them at Third Reading. In relation to the mitigation issue, I am obviously grateful for the Minister’s consideration of that and recognition that there is an issue to address. However, like my noble friend, I am a bit dismayed that the route to dealing with it is the six months—

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, my noble friend Lady Donaghy has made a very strong case, and I look forward to the Minister's response. What she said warmed the cockles of my heart. She referred to generally accepted accounting principles—the true and fair view—and it took me back to another life, but she raises a real issue: rather than having artificial rules for assessing what people are deemed to earn, is it not better to try to capture the actual profits and to target resources on those who seek to abuse the position? That seems a very straightforward matter.

My noble friend raises once more, as she did in Committee, the matter of bogus self-employment. We all know that that is a continuing issue. I have always believed that it rests particularly with HMRC, together with BIS and other departments of government, to make progress on that. It is primarily HMRC that could begin to make a real difference. She wrote reports for the Government, as did the Minister, on the construction sector, and health and safety in particular. There is bogus self-employment in that sector, so she is an expert on that matter. We support the thrust of her amendment.

[Lord Freud]

My Lords, when we discussed a similar amendment to this in Grand Committee, I explained that we intend to retain the existing practice in the benefit system whereby claimants can be treated as having income or capital in cases of deliberate deprivation. However, we believe that different issues arise in relation to self-employment. We think that it is right in principle to apply a minimum income floor to claimants who choose to be self-employed but whose earnings do not make them financially self-sufficient. I confirmed in Committee that the floor will not be based on the hours claimants work. We assume that claimants’ earnings are at a level that we would expect from claimants with similar circumstances in employed work.

Claimants will not be forced to take reduced benefit payments by accepting the minimum income floor. Self-employed claimants will have the choice in universal credit. Some will choose to continue solely with their existing activity with the expectation of increasing their earnings. They will accept the minimum income floor. Those who do not will need to satisfy conditionality requirements. The conditionality regime will aim to guide the claimant towards the most appropriate form of gainful work. For some claimants, this would combine their self-employed activity with part-time employed work. In other situations, the regime may very well encourage the self-employed to keep going in their self-employed efforts. We will need to build a quite sophisticated regime to manage this.

This approach differs from tax credits, which allow claimants to receive maximum support so long as they declare that they are working a minimum number of hours. However, in 2009-10, for example, around 60,000 of the households claiming tax credits that received some or all of their earnings from self-employment declared earnings of under £2,500 a year—less than £50 a week. While this is legitimate under current rules, we believe that some intervention to guide claimants towards increasing their income is justified in return for state support.

[Baroness Hollis of Heigham]

Can the Minister explain what he expects here? The old enterprise allowance scheme, which was very effective, used to give people a top-up of £40 a week to start a business, and as far as I recall this ran for up to two years to give people a chance to establish a small business. How long will someone be allowed to have low earnings while they try to build up a business, and how quickly will guidance from young people in Jobcentre Plus, who frankly have never tried to start a business, steer them back into sanction and conditionality?

[Lord Freud]

I do not automatically think that we will use the example of young people in Jobcentre Plus to deal with some of the more complicated issues here. We acknowledge that the real issue is that we need to create an environment that encourages entrepreneurship. We need to balance the exact rules about the interrelationship between the new enterprise allowance and the time that we will allow. I do not have the exact figures yet, as we are still currently elaborating them. We are looking through all the details of employment earnings. Clearly, the HMRC is expert in this area and we are working closely with it to develop our proposals. I must say to the noble Lord who said that it was a straightforward matter that on that basis he can come and help us to do it.

We are aiming to get the reporting requirements aligned as closely as possible with the tax system. However, in our view, it is reasonable for claimants to provide clear information on their income in return for state support. We are looking at a number of rules within the current benefit and tax credit systems to see what the most appropriate approach is for universal credit. We will then prepare regulations that will set out clearly the way in which earnings from self-employment will be assessed. This House will have the opportunity to debate those regulations in due course, and I think that that will be a fascinating discussion.

In today’s debate we should focus on principles. We clearly need to avoid requirements that will add unnecessary burdens, especially for people who are starting out in business—the people whom we really want to encourage. However, we cannot have a situation where people can be treated as being in full-time work for conditionality purposes, but because they declare no earnings they receive as much benefit as though they were not working at all. That is taking it to the absolute extreme. I hope that this explains why the Government cannot support Amendment 32 and that the noble Baroness will feel able to withdraw it. I know that we will be discussing this area again.

[Baroness Donaghy]

I thank the Minister for that response, and I look forward to seeing the regulations. However, I still have a concern and refer again to my example of a farmer who cannot move his livestock and is therefore getting no income. He is having to work harder than ever but will not be able to get a part-time job.

[Lord Freud]

My Lords, I forgot to say something. There are two areas where we need to get really smart. One is the start-up period and the other is when a business hits a problem. The questions there are how long the process should be and what one allows. That is another area that we are actively looking at.

[Baroness Donaghy]

I am reassured by that. I certainly agree with the Minister that this is a very complex area and, as I said in moving the amendment, it involves a very varied set of problems. I look forward to seeing the regulations and beg leave to withdraw the amendment.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, the noble Baroness has brought an important point to our attention. I have only two questions for the Minister. Can he explain the extent to which the current rules are going to be translated and taken up in universal credit? The position at the moment is that the compensation recovery scheme does not apply to criminal injuries compensation. Can the Minister say whether that would continue under universal credit?

[Lord Freud]

My Lords, Amendments 32A and 34A seek to use primary legislation to exclude criminal injuries compensation from the capital test for universal credit. The existing benefit system does not have a specific disregard for criminal injuries compensation. However, such payments will usually fall under the rules governing personal injury payments where they relate to physical or psychological injuries suffered by the claimant. As indicated in the illustrative draft regulations on capital and income, shared with noble Lords in September, we intend to replicate these personal injury payment provisions in the universal credit regulations. I hope that that answers the question of the noble Lord, Lord McKenzie.

Personal injury payments are disregarded in the current benefit system for a period of 52 weeks from the date that they are paid. Even after that period, remaining capital will continue to be disregarded if it is placed in a trust, as the noble Baroness, Lady Hollins, indicated. This rule allows us to distinguish the personal injuries payment from other savings. If the payment is not separated by placing it into a trust, it becomes increasingly difficult to identify the source of the capital as time goes by. Ultimately, any capital test must consider the balance in a claimant’s account, and over time it becomes impossible to say whether it is from one source or another unless it is held in a different form. That is the reason for the way that this is structured.

The current arrangements are long-standing, and we are not aware of significant practical problems with their use. In any case, the details of capital disregards are a matter we will address in the universal credit regulations. If there are particular problems, we will have a further opportunity to consider them when drafting regulations, and I will bear in mind the points the noble Baroness has made.

In answer to the question asked by the noble Lord, Lord McKenzie, I agree that the compensation recovery scheme does not apply to criminal injuries compensation.

I hope I have made clear why the Government cannot support Amendments 32A and 34A. I hope the noble Baroness will withdraw her amendment.

[Baroness Hollins]

Given the lateness of the hour, I will withdraw my amendment. I will study very carefully what the Minister said to make sure that I understand it. I think what he is basically saying is that it should be possible to protect that capital for 52 weeks, and I understand the point, but it is a little bit more complicated than that. I beg leave to withdraw the amendment.